Document ID: SEC-2010-1103-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2010-07-22T04:00Z

[Federal Register Volume 75, Number 140 (Thursday, July 22, 2010)]
[Notices]
[Pages 42792-42795]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-17851]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62505; File No. SR-BX-2010-047]

Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Establish a Short Term Option Program

July 15, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

[[Page 42793]]

(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on July 14, 2010, NASDAQ OMX BX, Inc. (the ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I and II below, which 
Items have been prepared by the Exchange. The Exchange filed the 
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and 
Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal effective 
upon filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 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 the Rules of the Boston Options 
Exchange Group, LLC (``BOX'') to permit the listing and trading of 
options series that expire one week after being opened for trading 
(``Short Term Option Program'' or ``STO Program''). The text of the 
proposed rule change is available from the Exchange's Web site at 
http://nasdaqomxbx.cchwallstreet.com/NASDAQOMXBX/Filings/, the 
principal office of the Exchange, on the Commission's Web site at 
http://www.sec.gov, and at the Commission's Public Reference Room.

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 purpose of this proposal is to amend the BOX Rules to establish 
a Short Term Option Program on the Exchange by proposing to add new 
Supplementary Material .07 to Chapter IV, Section 6 (Series of Options 
Open for Trading) and Supplementary Material .02 to Chapter XIV, 
Section 10 (Terms of Index Options Contracts) in order to list option 
series that expire one (1) week after being opened for trading. The 
Exchange also proposes to add the definition of Short Term Option 
Series to Chapter 1, Section 1(a) and Chapter XIV, Section 2.\5\ In 
addition, the Exchange proposes to make non-substantive changes to 
conform the language of Chapter IV, Section 6 and to renumber and 
reletter definitions in Chapter 1, Section 1(a) and Chapter XIV, 
Section 2.
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    \5\ Short Term Option Series is defined as: a series in an 
option class that is approved for listing and trading on BOX in 
which the series is opened for trading on any Thursday or Friday 
that is a business day and that expires on the Friday of the next 
business week. If a Thursday or Friday is not a business day, the 
series may be opened (or shall expire) on the first business day 
immediately prior to that Thursday or Friday, respectively.
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    The Commission approved the Short Term Option Program on behalf of 
the Chicago Board Options Exchange (``CBOE'') on a pilot basis in 2005 
and for permanent establishment in 2009.\6\ Thereafter, CBOE amended 
Rules 5.5 and 24.9 to permit opening Short Term Option Series not just 
on Friday but also on Thursday.\7\ Recently, the Commission approved 
\8\ a permanent Short Term Option Program on behalf of the NASDAQ OMX 
PHLX (``PHLX''); NASDAQ Options Market (``NOM''); NYSE Arca, Inc. 
(``NYSE Arca''); and NYSE Amex LLC (``NYSE Amex'').\9\ The Exchange's 
proposal is based directly on the Short Term Option Program in CBOE 
Rules 5.5 and 24.9; PHLX Rules 1012 and Rule 1101A; NOM Rules Chapter 
IV, Section 6 and Chapter XIV, Section 11; NYSE Arca Rules 5.19 and 
6.4; NYSE Amex Rules 903C and 903 and ISE Rules 504 and 2009.
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    \6\ CBOE refers to its short term option program as the 
``Weeklys Program.'' See Securities Exchange Act Release Nos. 52011 
(July 12, 2005), 70 FR 41451 (July 19, 2005) (SR-CBOE-2004-63) 
(Order Approving a Proposed Rule Change and Notice of Filing and 
Order Granting Accelerated Approval to Amendment No. 2 Thereto To 
List and Trade Short Term Option Series); 59824 (April 27, 2009), 74 
FR 20518 (May 4, 2009) (SR-CBOE-2009-018) (Order Approving Proposed 
Rule Change To Permanently Establish the Short Term Option Series 
Pilot Program).
    \7\ See Securities Exchange Act Release No. 62170 (May 25, 
2010), 75 FR 30889 (June 2, 2010) (SR-CBOE-2010-048) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Permit 
CBOE To Open Short Term Option Series on Thursdays).
    \8\ As noted above, all the text of Items I and II of this 
notice was prepared by the Exchange. The Commission notes, however, 
that it did not approve the proposed rule changes cited by the 
Exchange in this sentence. These proposals were filed under Section 
19(b)(3)(A) of the Act for immediate effectiveness and thus were not 
approved by the Commission.
    \9\ See Securities Exchange Act Release Nos. 62296 (June 15, 
2010), 75 FR 35115 (June 21, 2010) (SR-PHLX-2010-084) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change by 
NASDAQ OMX PHLX, Inc. To Establish a Short Term Option Program); 
62297 (June 15, 2010), 75 FR 35111 (June 21, 2010) (SR-NOM-2010-073) 
(Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change by The NASDAQ Stock Market LLC To Establish a Short Term 
Option Program); 62296 (June 15, 2010), 75 FR 35111 (June 21, 2010) 
(SR-Arca-2010-059) (Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change by NYSE Arca, Inc. to make permanent the One 
Week Option Series Pilot Program); 62296 (June 15, 2010), 75 FR 
35111 (June 21, 2010) (SR-Amex-2010-062) (Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change by NYSE Amex, LLC to 
make permanent the One Week Option Series Pilot Program).
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    Specifically, the Exchange proposes to establish a Short Term 
Option Program for non-index options (e.g., equity options and ETF 
options) in new Supplementary Material .07 to Chapter IV, Section 6; 
and for index options in new Supplementary Material .02 to Chapter XIV, 
Section 10. The Short Term Option Program will allow BOX to list and 
trade Short Term Option Series. Thus, after an option class has been 
approved for listing and trading on BOX, BOX may open for trading on 
any Thursday or Friday that is a business day (``Short Term Option 
Opening Date'') series of options on that class that expire on the 
Friday of the following business week that is a business day (``Short 
Term Option Expiration Date''). If the Exchange is not open for 
business on the respective Thursday or Friday, the Short Term Option 
Opening Date will be the first business day immediately prior to that 
respective Thursday or Friday. Similarly, if the Exchange is not open 
for business on the Friday of the following business week, the Short 
Term Option Expiration Date will be the first business day immediately 
prior to that Friday.\10\
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    \10\ See proposed Supplementary Material .07 to Chapter IV, 
Section 6 and Supplementary Material .02 to Chapter XIV, Section 10.
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    Under the STO Program, BOX may select up to five (5) approved 
option classes on which Short Term Option Series could be opened. BOX 
also may list Short Term Option Series on any option classes that are 
selected by other securities exchanges that employ a similar program 
under their respective rules.\11\
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    \11\ See proposed Supplementary Material .07(a) to Chapter IV, 
Section 6 and Supplementary Material .02(a) to Chapter XIV, Section 
10.
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    For each class selected for the STO Program, BOX may open up to 
twenty Short Term Option Series for each expiration date in that class, 
with approximately the same number of strike prices above and below the 
value of the underlying security or calculated index value at about the 
time that the

[[Page 42794]]

Short Term Option Series is opened. The interval between strike prices 
on Short Term Option Series shall be the same as the strike prices for 
series in that same option class that expire in accordance with the 
normal monthly expiration cycle.\12\ Any strike prices listed by BOX 
shall be within thirty percent (30%) above or below the current value 
of the underlying index.\13\
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    \12\ See proposed Supplementary Material .07(e) to Chapter IV, 
Section 6 and Supplementary Material .02(e) to Chapter XIV, Section 
10.
    \13\ See proposed Supplementary Material .07(c) to Chapter IV, 
Section 6 and Supplementary Material .02(c) to Chapter XIV, Section 
10.
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    If BOX opens less than twenty Short Term Option Series for a given 
expiration date, additional series may be opened for trading on BOX 
when deemed necessary to maintain an orderly market, to meet customer 
demand, or when the current value of the underlying security or index 
moves substantially from the previously listed exercise prices. The 
total number of series for a given expiration date, however, will not 
exceed twenty series. Any additional strike prices listed by the 
Exchange shall be within 30% above or below the current price of the 
underlying security. BOX may also open additional strike prices of 
Short Term Option Series that are more than 30% above or below the 
current price of the underlying security provided that demonstrated 
customer interest exists for such series, as expressed by 
institutional, corporate or individual customers or their brokers. 
Market Makers trading for their own account shall not be considered 
when determining customer interest under this provision. Moreover, the 
opening of the new Short Term Option Series shall not affect the series 
of options of the same class previously opened.\14\
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    \14\ See proposed Supplementary Material .07(d) to Chapter IV, 
Section 6 and Supplementary Material .02(d) to Chapter XIV, Section 
10.
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    The Short Term Option Program provides that no Short Term Option 
Series may expire in the same week in which monthly option series on 
the same class expire or, in the case of Quarterly Options Series, on 
an expiration that coincides with an expiration of Quarterly Options 
Series on the same class.\15\
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    \15\ See proposed Supplementary Material .07(b) to Chapter IV, 
Section 6 and Supplementary Material .02(b) to Chapter XIV, Section 
10. Moreover, the Exchange expects that Short Term Options Series 
will settle (e.g., in terms of A.M. or P.M.) in the same manner as 
do the monthly expiration series in the same option class.
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    With regard to the impact of this proposal on system capacity, BOX 
has analyzed its capacity and has represented to the Exchange that it 
and the Options Price Reporting Authority (``OPRA'') have the necessary 
systems capacity to handle the potential additional traffic associated 
with the listing and trading of options pursuant to the Short Term 
Option Program.
    Finally, the Exchange is proposing to make non-substantive changes 
to conform the language of Chapter IV, Section 6 (Series of Options 
Open for Trading). Specifically, the Exchange proposes to add language 
to clarify that Short Term Options Series procedures are similar to 
Quarterly Options Series procedures and will be treated differently 
than standard Options Series.
    The Exchange believes that the Short Term Option Program will 
provide investors with a flexible and valuable tool to manage risk 
exposure, minimize capital outlays, and be more responsive to the 
timing of events affecting the securities that underlie options 
contracts. The Exchange also believes that providing the flexibility to 
list all Short Term Option series (equity and index) on any Thursday or 
Friday will help implement the program more effectively and avoid 
investor confusion.
    The Commission has requested, and BOX has agreed for the purposes 
of this filing, to submit one (1) report to the Commission providing an 
analysis of the BOX Short Term Option Program (the ``Report'').\16\ The 
Report will cover the period from the date of effectiveness of the STO 
Program through the first quarter of 2011, and will describe the 
experience of BOX with the STO Program in respect of the options 
classes included by BOX in such program. The Report will be submitted 
by May 1, 2011, under separate cover and will seek confidential 
treatment under the Freedom of Information Act.
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    \16\ The Report would include the following: (1) Data and 
written analysis on the open interest and trading volume in the 
classes for which Short Term Option Series were opened; (2) an 
assessment of the appropriateness of the option classes selected for 
the STO Program; (3) an assessment of the impact of the STO Program 
on the capacity of BOX, OPRA, and market data vendors (to the extent 
data from market data vendors is available); (4) any capacity 
problems or other problems that arose during the operation of the 
STO Program and how BOX addressed such problems; (5) any complaints 
that the BOX or the Exchange received during the operation of the 
STO Program and how they were addressed; and (6) any additional 
information that would assist in assessing the operation of the STO 
Program.
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\17\ in general, and Section 
6(b)(5) of the Act,\18\ in particular, in that it is designed to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to and 
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, establishing a Short Term Option Program will provide 
investors with a flexible and valuable tool to manage risk exposure, 
minimize capital outlays, and be more responsive to the timing of 
events affecting the securities that underlie options contracts.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 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

    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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \19\ and Rule 19b-4(f)(6) thereunder.\20\ 
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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \21\ and Rule 19b-
4(f)(6) thereunder.\22\
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    \19\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \20\ 17 CFR 240.19b-4(f)(6).
    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 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 
Commission has waived the five-day pre-filing requirement in this 
case.

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[[Page 42795]]

    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 because the proposal is substantially similar to that of 
another exchange that was approved by the Commission.\23\ Therefore, 
the Commission designates the proposal operative upon filing.\24\
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    \23\ See Securities Exchange Act Release No. 59824 (April 27, 
2009), 74 FR 20518 (May 4, 2009) (SR-CBOE-2009-018).
    \24\ 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 may summarily abrogate 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-BX-2010-047 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-2010-047. This file 
number should be included on the subject line if e-mail 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 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-BX-2010-047 and should be 
submitted on or before August 12, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-17851 Filed 7-21-10; 8:45 am]
BILLING CODE 8010-01-P