Document ID: SEC-2011-1811-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2011-11-23T05:00Z

[Federal Register Volume 76, Number 226 (Wednesday, November 23, 2011)]
[Notices]
[Pages 72470-72472]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30192]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65769; File No. SR-BX-2011-074]

 Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Simplify the $1 Strike Price Interval Program

November 17, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on November 7, 2011, NASDAQ OMX BX, Inc. (the ``Exchange'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I and II below, which Items have been 
prepared by the Exchange. The Exchange has designated the proposed rule 
change as constituting a non-controversial rule change under Rule 19b-
4(f)(6) under the Act,\3\ which renders the proposal effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Chapter IV, Section 6 (Series of 
Options Contracts Open for Trading) of the Rules of the Boston Options 
Exchange Group, LLC (``BOX'') to simplify the $1 Strike Price Interval 
Program (``Program'').

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

[[Page 72471]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    This filing is based on a rule change submitted by the Chicago 
Board Options Exchange, Inc. (``CBOE'') previously approved by the 
Commission, and a rule change by the International Securities Exchange, 
LLC. (``ISE'') effective and operative upon its filing.\4\
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    \4\ See Securities Exchange Act Release Nos. 65383 (September 
22, 2011) 76 FR 60107 (September 28, 2011) (Order Approving SR-CBOE-
2011-040) and 65384 (September 22, 2011) 76 FR 60574 (September 29, 
2011) (SR-ISE-2011-059).
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    In 2004, the Commission issued an order permitting the 
establishment of the Program on BOX on a pilot basis.\5\ At that time, 
the underlying stock had to close at $20 on the previous trading day in 
order to qualify for the Program. The range of available $1 strike 
price intervals was limited to a range between $3 and $20 and no strike 
price was permitted that was greater than $5 from the underlying 
stock's closing price on the previous trading day. Series in $1 strike 
price intervals were not permitted within $0.50 an existing strike. In 
addition, BOX was limited to selecting five (5) classes and reciprocal 
listing was permitted. Furthermore, LEAPS in $1 strike price intervals 
were not permitted for classes selected to participate in the Program.
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    \5\ See Securities Exchange Act Release No. 49292 (February 20, 
2004) 69 FR 8993 (February 26, 2004) (SR-BSE-2004-01).
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    The pilot program has been renewed on BOX on a yearly basis and in 
2008, the Commission granted permanent approval of the Program.\6\ At 
that time, the Program was expanded to increase the upper limit of the 
permissible strike price range from $20 to $50. In addition, the number 
of class selections per exchange was increased from five (5) to ten 
(10). Since the Program was made permanent, the number of class 
selections per exchange has been increased from ten (10) classes to 55 
classes \7\ and subsequently increased from 55 classes to 150 
classes.\8\
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    \6\ See Securities Exchange Act Release No. 57302 (February 11, 
2008) 73 FR 8913 (February 15, 2008) (SR-BSE-2008-08).
    \7\ See Securities Exchange Act Release No. 59589 (March 17, 
2009) 74 FR 12408 (March 24, 2009) (SR-BX-2009-016).
    \8\ See Securities Exchange Act Release No. 62553 (July 22, 
2010) 75 FR 44826 (July 29, 2010) (SR-BX-2010-50).
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Amendments To Simplify Non-LEAPS Rule Text
    The most recent expansion of the Program was approved by the 
Commission in early 2011 and increased the number of $1 strike price 
intervals permitted within the $1 to $50 range.\9\ This expansion was a 
proposal of another exchange and the Exchange submitted its filing for 
competitive reasons. This expansion, however, has resulted in very 
lengthy rule text that is complicated and difficult to understand. BOX 
believes that the proposed changes to simplify the rule text of the 
Program will benefit market participants since the Program will be 
easier to understand and will maintain the expansions made to the 
Program in early 2011. Through the current proposal, the Exchange also 
hopes to make administration of the Program easier, e.g., system 
programming efforts. To simply the rules of the Program and, as a 
proactive attempt to mitigate any unintentional listing of improper 
strikes, the Exchange is proposing the following streamlining 
amendments:
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    \9\ See Securities Exchange Act Release No. 63774 (January 25, 
2011) 76 FR 5628 (February 1, 2011) (SR-BX-2011-06).
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     When the price of the underlying stock is equal to or less 
than $20, permit $1 strike price intervals with an exercise price up to 
100% above and 100% below the price of the underlying stock.
    [cir] However, the above restriction would not prohibit the listing 
of at least five (5) strike prices above and below the price of the 
underlying stock per expiration month in an option class.
    [cir] For example, if the price of the underlying stock is $2, BOX 
would be permitted to list the following series: $1, $2, $3, $4, $5, $6 
and $7.
     When the price of the underlying stock is greater than 
$20, permit $1 strike price intervals with an exercise price up to 50% 
above and 50% below the price of the underlying security up to $50.
     For the purpose of adding strikes under the Program, the 
``price of the underlying stock'' shall be measured in the same way as 
``the price of the underlying security'' is as set forth in Chapter IV, 
Section 6(b)(i) of the BOX Rules.
     Prohibit the listing of additional series in $1 strike 
price intervals if the underlying stock closes at or above $50 in its 
primary market and provide that additional series in $1 strike price 
intervals may not be added until the underlying stock closes again 
below $50.
Amendments To Simplify LEAPS Rule Text
    The early 2011 expansion of the Program permitted for some limited 
listing of LEAPS in $1 strike price intervals for classes that 
participate in the Program. The Exchange is proposing to maintain the 
expansion as to LEAPS, but simplify the language and provide examples 
of the simplified rule text. These changes are set forth subparagraph 
(v) to Supplementary Material .02(b).
    For stocks in the Program, BOX may list one $1 strike price 
interval between each standard $5 strike interval, with the $1 strike 
price interval being $2 above the standard strike for each interval 
above the price of the underlying stock, and $2 below the standard 
strike for each interval below the price of the underlying stock (``$2 
wings''). For example, if the price of the underlying stock is $24.50, 
BOX may list the following standard strikes in $5 intervals: $15, $20, 
$25, $30 and $35. Between these standard $5 strikes, BOX may list the 
following $2 wings: $18, $27 and $32.
    In addition, BOX may list the $1 strike price interval which is $2 
above the standard strike just below the underlying price at the time 
of listing. In the above example, since the standard strike just below 
the underlying price ($24.50) is $20, BOX may list a $22 strike. BOX 
may add additional long-term options series strikes as the price of the 
underlying stock moves, consistent with the OLPP.
Non-Substantive Amendments to Rule Text
    The early 2011 expansion of the Program prohibited the listing of 
$2.50 strike price intervals for classes that participate in the 
Program. This prohibition applies to non-LEAP and LEAPS. The Exchange 
proposes to maintain this prohibition and codify it in Supplementary 
Material .02(a) (Program Description).
    For ease of reference, the Exchange is proposing to add the 
headings ``$1 Strike Price Interval Program,'' ``Program Description,'' 
``Initial and Additional Series'' and ``LEAPS'' to Supplementary 
Material .02.
    The Exchange is proposing to more accurately reflect the nature of 
the Program and is proposing to make stylistic changes throughout 
Supplementary Material .02 by adding the phrase ``price interval.'' 
Lastly, the Exchange is making technical changes to Supplementary 
Material .02, e.g., replacing the words ``security'' and ``issue'' with 
the word ``stock.''
    The Exchange represents that it has the necessary systems capacity 
to support the increase in new options series that will result from the 
proposed streamlining changes to the Program.

[[Page 72472]]

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder and, in particular, the requirements of Section 
6(b) of the Act.\10\ Specifically, the Exchange believes the proposed 
rule change is consistent with the Section 6(b)(5) \11\ requirements 
that the rules of an exchange be designed to promote just and equitable 
principles of trade, to prevent fraudulent and manipulative acts, to 
remove impediments to and to perfect the mechanism for a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest. In particular, the proposed rule 
change seeks to reduce investor confusion and to simplify the 
provisions of the $1 Strike Price Interval Program.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not become operative for 30 days from the date on which it was filed, 
or such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
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    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission believes that waiver of the operative 
delay is consistent with the protection of investors and the public 
interest. The proposed rule change is substantially similar to $1 
Strike Price Program rules in place at other exchanges, so the 
Commission's action will allow the Exchange to implement these changes 
without undue delay. Therefore, the Commission designates the proposal 
operative upon filing.\14\
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    \14\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BX-2011-074 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BX-2011-074. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make publicly available. All 
submissions should refer to File Number SR-BX-2011-074 and should be 
submitted on or before December 14, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority. \15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-30192 Filed 11-22-11; 8:45 am]
BILLING CODE 8011-01-P