Document ID: SEC-2012-1031-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange LLC
Posted Date: 2012-07-02T04:00Z

[Federal Register Volume 77, Number 127 (Monday, July 2, 2012)]
[Notices]
[Pages 39315-39317]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-16088]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67255; File No. SR-BOX-2012-009)]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposal To Extend a Pilot 
Program That Permits BOX to Have No Minimum Size Requirement for Orders 
Entered Into the Price Improvement Period

June 26, 2012.
    Pursuant to Section 19(b)(1) under the Securities Exchange Act of 
1934 (the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that on June 25, 2012, BOX Options Exchange LLC (the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``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 proposes to amend Interpretive 
Material to Rule 7150 (Price Improvement Period ``PIP'') to extend a 
pilot program that permits the Exchange to have no minimum size 
requirement for orders entered into the PIP (``PIP Pilot Program''). 
The text of the proposed rule change is available from the principal 
office of the Exchange, on the Exchange's Web site at http://boxexchange.com, at the Commission's Public Reference Room, and on the 
Commission's Web site at http://www.sec.gov.

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.

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

1. Purpose
    The purpose of the proposed rule change is to extend the PIP Pilot 
Program for twelve additional months. The PIP Pilot Program allows the 
Exchange to have no minimum size requirement for orders entered into 
the PIP.\4\ The Exchange has committed to provide certain data to the 
Commission during the PIP Pilot Program.\5\ The proposed rule change 
retains the text of IM-7150-1 to Rule 7150 and seeks to extend the 
operation of the PIP Pilot Program until July 18, 2013.
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    \4\ The Pilot Program is currently set to expire on July 18, 
2012. See Securities Exchange Act Release No. 66871 (April 27, 2012) 
77 FR 26323 (May 3, 2012) (File No.10-206, In the Matter of the 
Application of BOX Options Exchange LLC for Registration as a 
National Securities Exchange Findings, Opinion, and Order of the 
Commission).
    \5\ Id. at 26334.
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    The Exchange notes that the PIP Pilot Program guarantees 
Participants the right to trade with their customer orders that are 
less than 50 contracts. In particular, any order entered into the PIP 
is guaranteed an execution at the end of the auction at a price at 
least equal to the national best bid or offer. In further support of 
this proposed rule change, the Exchange will submit to the Commission 
monthly a PIP Pilot Program Report, offering detailed data from, and 
analysis of, the PIP Pilot Program.
    To aid the Commission in its evaluation of the PIP Pilot Program, 
the Exchange provides the following additional information each month: 
(1) The number of orders of 50 contracts or greater entered into the 
PIP auction; (2) The percentage of all orders of 50 contracts or 
greater sent to the Exchange that are entered into the PIP auction; (3) 
The spread in the option, at the time an order of 50 contracts or 
greater is submitted to the PIP auction; (4) The percentage of PIP 
trades executed at the National Best Bid or Offer (``NBBO'') plus $.01, 
plus $.02, plus $.03, etc.; and (5) The number of orders submitted by 
Order Flow Providers (``OFPs'') when the spread was at a particular 
increment (e.g., $.05, $.10, $.15, etc.). Also, relative to item 5 
above, for each spread, BOX provides the percentage of contracts in 
orders of fewer than 50 contracts submitted to the PIP that were traded

[[Page 39316]]

by: (a) The OFP that submitted the order to the PIP; (b) BOX Market 
Makers assigned to the class; (c) other BOX Participants; (d) Public 
Customer Orders (including Customer PIP Orders (``CPOs'')); and (e) 
unrelated orders (orders in standard increments entered during the 
PIP). Additionally, for each spread, BOX provides the percentage of 
contracts in orders of 50 contracts or greater submitted to the PIP 
that were traded by: (a) The OFP that submitted the order to the PIP; 
(b) BOX Market Makers assigned to the class; (c) other BOX 
Participants; (d) Public Customer Orders (including Customer PIP Orders 
(``CPOs'')); and (e) unrelated orders. Further, BOX provides, for the 
first and third Wednesday of each month, the: (a) Total number of PIP 
auctions on that date; (b) number of PIP auctions where the order 
submitted to the PIP was fewer than 50 contracts; (c) number of PIP 
auctions where the order submitted to the PIP was 50 contracts or 
greater; (d) number of PIP auctions where the number of Participants 
(excluding the Initiating Participant) was zero, one, two, three, four, 
etc. Finally, during the PIP Pilot, BOX provides information each month 
with respect to situations in which the PIP is terminated prematurely 
or a Market Order, Limit Order, or BOX-Top Order immediately execute 
with a PIP Order before the PIP's conclusion. The following information 
is provided: (1) The number of times that a Market Order, Limit Order, 
or BOX-Top Order in the same series on the same side of the market as 
the PIP Order prematurely terminated the PIP, and (a) the number of 
times such orders were entered by the same (or affiliated) firm that 
initiated the PIP that was terminated, and (b) the number of times such 
orders were entered by a firm (or an affiliate of such firm) that 
participated in the execution of the PIP Order; (2) For the orders 
addressed in each of 1(a) and 1(b) above, the percentage of PIP 
premature terminations due to the receipt, during the PIP, of a Market 
Order, Limit Order, or BOX-Top Order in the same series on the same 
side of the market as the PIP Order; and the average amount of price 
improvement provided to the PIP Order where the PIP is prematurely 
terminated; (3) The number of times that a Market Order, Limit Order, 
or BOX-Top Order in the same series on the opposite side of the market 
as the PIP Order immediately executed against the PIP Order, and (a) 
the number of times such orders were entered by the same (or 
affiliated) firm that initiated the PIP, and (b) the number of times 
such orders were entered by a firm (or an affiliate of such firm) that 
participated in the execution of the PIP Order; (4) For the orders 
addressed in each of 3(a) and 3(b) above, the percentage of PIP early 
executions due to the receipt, during the PIP, of a Market Order, Limit 
Order, or BOX-Top Order in the same series on the opposite side of the 
market as the PIP Order; and the average amount of price improvement 
provided to the PIP Order where the PIP Order is immediately executed; 
and (5) The average amount of price improvement provided to the PIP 
Order when the PIP runs for one hundred milliseconds.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\6\ in general, and Section 
6(b)(5) of the Act,\7\ 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. 
The Exchange believes that the data demonstrates that there is 
sufficient investor interest and demand to extend the PIP Pilot Program 
for an additional twelve months. The Exchange represents that the Pilot 
Program is designed to provide investors with real and significant 
price improvement regardless of the size of the order.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\ 
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 \10\ and Rule 19b-
4(f)(6)(iii) thereunder.\11\
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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6)(iii). 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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    A proposed rule change filed under Rule 19b-4(f)(6) \12\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii) \13\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange requested 
that the Commission waive the 30-day operative delay. The Exchange 
noted that such waiver will permit the PIP Pilot Program to continue 
without interruption.
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    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving operative delay as of July 18, 
2012 is consistent with the protection of investors and the public 
interest, as it will allow the pilot program to continue uninterrupted, 
thereby avoiding any potential investor confusion that could result 
from a temporary interruption in the pilot program. Further, the 
Commission notes that, because the filing was submitted for immediate 
effectiveness on June 25, 2012 the fact that the current rule provision 
does not expire until July 18, 2012 will afford interested parties the 
opportunity to comment on the proposal before the Exchange requires it 
to become operative. For this reason, the Commission designates the 
proposed rule change to be operative on July 18, 2012.\14\
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    \14\ For purposes only of waiving the 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

[[Page 39317]]

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 No. SR-BOX-2012-009 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 No. SR-BOX-2012-009. 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 available publicly. All 
submissions should refer to File No. SR-BOX-2012-009 and should be 
submitted on or before July 23, 2012.

    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. 2012-16088 Filed 6-29-12; 8:45 am]
BILLING CODE 8011-01-P