Document ID: SEC-2014-0003-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange, LLC
Posted Date: 2014-01-02T05:00Z

[Federal Register Volume 79, Number 1 (Thursday, January 2, 2014)]
[Notices]
[Pages 163-166]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-31371]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71189; File No. SR-BOX-2013-60]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to the Short Term Options Program

December 26, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

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(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on December 20, 2013, BOX Options Exchange LLC (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 self-regulatory organization. The Commission 
is publishing this notice to solicit comments on the proposed rule from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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 interpretive material to Rule 5050 
(Series of Options Contracts Open for Trading) and Rule 6090 (Terms of 
Index Options Contracts) to allow the Exchange to list five Short Term 
Option Series at one time, and to specify that new series of Short Term 
Option Series may be listed up to, and including on, the expiration 
date. The text of the proposed rule change is available from the 
principal office of the Exchange, at the Commission's Public Reference 
Room and also on the Exchange's Internet Web site at http://boxexchange.com.

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 self-regulatory organization 
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 self-regulatory organization 
has prepared summaries, set forth in Sections A, B, and C below, of the 
most significant aspects of such statements.

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

1. Purpose
    The Exchange proposes to amend IM-5050-6 to Rule 5050 (Series of 
Options Contracts Open for Trading) and IM-6090-2 to Rule 6090 (Terms 
of Index Options Contracts) to allow the Exchange to list five Short 
Term Option Series at one time, and to specify that new series of Short 
Term Option Series may be listed up to, and including on, the 
expiration date. This is a competitive filing that is based on a 
proposal recently submitted by the Chicago Board Options Exchange, Inc. 
(``CBOE'') and approved by the Commission.\3\
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    \3\ See Securities Exchange Act Release No. 71005 (December 6, 
2013), 78 FR 75395 (December 11, 2013) (SR-CBOE-2013-096) (Order 
Granting Approval of Proposed Rule Change).
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    Currently the Exchange's Rules allow it to list options in the 
Short Term Option (``STO'' or ``weekly'') Program ``on each of the next 
five consecutive Fridays that are business days.'' \4\ The filing which 
gave the Exchange authority to list five STO expirations specifically 
states that ``the total number of consecutive expirations will be five, 
including any existing monthly or quarterly expirations.'' \5\ The 
Exchange is now proposing to amend its rules so that the next five STOs 
may be listed at one time, not including the monthly or quarterly 
options. The Exchange is also proposing to codify an existing practice 
by adding language stating that strikes may be listed up until and on 
the day of expiration.
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    \4\ See IM-5050-6 to Rule 5050 and IM-6090-2 to Rule 6090.
    \5\ See Securities Exchange Act Release No. 68361 (December 5, 
2012), 77 FR 73729 (December 11, 2012) (Notice of Filing and 
Immediate Effectiveness of SR-BOX-2012-020 which was a rule filing 
based on approved filings submitted by NYSE Arca, Inc. and NYSE MKT, 
LLC).
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    As proposed, the Exchange will have the ability to list a total of 
five STO expirations and that count of five would not include monthly 
or quarterly option expirations. The Exchange notes that this proposal 
would restrict the five listed STOs to those closest to the STO opening 
date. For example, if a class of options has five STOs listed with 
expiration dates in July, the other two listed expiration dates may not 
be in December. The Exchange believes that allowing otherwise would 
undermine the purpose of the STO Program.
    As examples of how this would work in practice, consider a 
situation in which a quarterly option expires week 1 and a monthly 
option expires week 3 from now, the proposal would allow the following 
expirations: Week 1 quarterly option, week 2 weekly option, week 3 
monthly option, week 4 weekly option, week 5 weekly option, week 6 
weekly option, and week 7 weekly option.\6\ As another example, if a 
quarterly option expires week 3 and a monthly option expires week 5, 
the following expirations would be allowed: Week 1 weekly option, week 
2 weekly option, week 3 quarterly option, week 4 weekly option, week 5 
monthly option, week 6 weekly option, week 7 weekly option.
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    \6\ The proposal would not allow, for example, for nothing to be 
listed week 7 but week 8 a weekly option.
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    Next, the Exchange is proposing to add language to IM-5050-6(b)(4) 
and IM-6090-2(b)(4) to state that additional STO series may be added up 
to, and including on, the expiration date of the series.\7\ Currently, 
Exchange rules state that the Exchange may open up to 20 initial 
series, and up to 10 additional series, for each option class that 
participates in the STO Program.\8\ The Exchange's rules, however, are 
silent on when series may be added. In practice, however, the Exchange, 
along with the other exchanges, list additional series until the 
expiration day.\9\ The Exchange believes that codifying this practice 
will clarify authority that is not currently explicitly stated in its 
rules to add series up until the day of expiration. Given the short 
lifespan of STOs, the Exchange believes that the ability to list new 
series of options intraday is appropriate.
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    \7\ The Exchange is also proposing to add language stating that 
the proposed provisions in IM-5050-6 and IM-6090-2 will not 
contradict current provisions in the Exchange's Rules. More 
specifically, the proposed provisions would not contradict Rules 
5050(c) and 6090(c)(2) respectively. The Exchange believes this 
addition will eliminate any confusion about when additional series 
may be added in the STO Program in comparison to other Exchange 
listing programs.
    \8\ See IM-5050-6(b)(3) and (4) to Rule 5050, and IM-6090-
2(b)(3) and (4) to Rule 6090.
    \9\ The Exchange notes that the Options Clearing Corporation 
(``OCC'') has the ability to accommodate series in the STO Program 
added intraday.
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    The Exchange notes that the STO Program has been very well-received 
by market participants, in particular by retail investors. The Exchange 
believes that the current proposed revision to the STO Program will 
permit the Exchange to meet increased customer demand and provide 
market participants with the ability to hedge in a greater number of 
option classes and series. In addition, the proposed changes will 
codify an existing practice in the Exchange's rules.
 2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Securities Exchange Act of 1934 
(the ``Act''),\10\ in general, and Section 6(b)(5) of the Act,\11\ in 
particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, to remove 
impediments to and perfect the mechanism of a free and open market

[[Page 165]]

and a national market system, and, in general to protect investors and 
the public interest. Additionally, the Exchange believes the proposed 
rule change is consistent with the Section 6(b)(5) \12\ requirement 
that the rules of an exchange not be designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ Id.
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    In particular, the Exchange believes that expanding the STO Program 
will result in a continuing benefit to investors by giving them more 
flexibility to closely tailor their investment decisions. The Exchange 
also believes that expanding the STO Program will provide the investing 
public and other market participants with additional opportunities to 
hedge their investments, thus allowing these investors to better manage 
their risk exposure.
    With regard to the impact of this proposal on system capacity, the 
Exchange has analyzed its capacity and represents that it and the 
Options Price Reporting Authority (``OPRA'') have the necessary systems 
capacity to handle any potential additional traffic associated with 
this current amendment to the STO Program. The Exchange believes that 
its Participants will not have a capacity issue as a result of this 
proposal. The Exchange also represents that it does not believe this 
expansion will cause fragmentation of liquidity.

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. To the contrary, the Exchange 
believes the proposal is pro-competitive. In this regard and as 
indicated above, the Exchange notes that the rule change is being 
proposed as a competitive response to a filing submitted by the CBOE 
that was recently approved by the Commission.\13\ The Exchange believes 
that the proposed rule change is necessary to permit fair competition 
among the options exchanges with respect to STO Programs. Moreover, the 
Exchange believes this proposed rule change will benefit investors by 
providing additional methods to trade options on liquid securities, and 
by providing greater ability to mitigate risk in managing large 
portfolios. Specifically, the Exchange believes that investors would 
benefit from the introduction and availability of additional series for 
investment, and as an additional tool for hedging risk in highly liquid 
securities. For all the reasons stated, 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, and 
believes the proposed change will enhance competition.
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    \13\ See supra, note 3.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received comments on the 
proposed rule change.

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

    Because the proposed rule change does not (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6) 
thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Exchange stated that waiver of this requirement will 
promote fair competition among the exchanges by allowing the Exchange 
to list additional STO expirations in the same manner as the CBOE, and 
by clarifying that, like the CBOE, the Exchange may list new STO series 
up to, and including on, the expiration date. The Exchange also stated 
that it would be at a competitive disadvantage if it were not allowed 
to adopt the proposed rule changes contemporaneously with other 
exchanges. For these reasons, the Commission believes that waiving the 
30-day operative delay is consistent with the protection of investors 
and the public interest because it will allow the Exchange to remain 
competitive with other exchanges. Therefore, the Commission designates 
the proposed rule change to be operative upon filing.\16\
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    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

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-BOX-2013-60 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-BOX-2013-60. 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

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business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
the 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 available publicly. All submissions should refer to 
File Number SR-BOX-2013-60 and should be submitted on or before January 
23, 2014.
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    \17\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Lynn Powalski,
Deputy Secretary.
[FR Doc. 2013-31371 Filed 12-31-13; 8:45 am]
BILLING CODE 8011-01-P