Document ID: SEC-2013-1291-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange LLC
Posted Date: 2013-07-16T04:00Z

[Federal Register Volume 78, Number 136 (Tuesday, July 16, 2013)]
[Notices]
[Pages 42577-42579]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-17013]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69965; File No. SR-BOX-2013-36]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change to 
Amend BOX Rule 3120 (Position Limits) and BOX Rule 3130 (Exemptions 
from Position Limits)

July 11, 2013.
    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 July 3, 2013, BOX Options Exchange LLC (``BOX'' or ``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 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.
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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 BOX Rule 3120 (Position Limits) and 
BOX Rule 3130 (Exemptions from Position Limits). 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.

[[Page 42578]]

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

1. Purpose
    On May 10, 2013 the Exchange began listing and trading options 
contracts overlying 1,000 SPDR[supreg] S&P 500[supreg] exchange-traded 
fund shares (``SPY''),\3\ or (``Jumbo SPY Options'').\4\ Whereas 
standard options contracts represent a deliverable of 100 shares of an 
underlying security, this product represents 1,000 SPY shares. Except 
for the difference in the number of deliverable shares, Jumbo SPY 
Options have the same terms and contract characteristics as regular-
sized options contracts (``standard options''), including exercise 
style. Accordingly, the Commission noted in the approval order that the 
Exchange's rules which apply to the trading of standard options would 
also apply to Jumbo SPY Options as well.\5\ The Exchange proposes to 
amend the BOX Rules to clarify that position limits and the equity 
hedge exemption will apply to Jumbo SPY Options.
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    \3\ ``SPDR[supreg],'' ``Standard & Poor's[supreg],'' 
``S&P[supreg],'' ``S&P 500[supreg],'' and ``Standard & Poor's 500'' 
are registered trademarks of Standard & Poor's Financial Services 
LLC. The SPY ETF represents ownership in the SPDR S&P 500 Trust, a 
unit investment trust that generally corresponds to the price and 
yield performance of the SPDR S&P 500 Index.
    \4\ See Securities Exchange Act Release No. 34-69511 (May 3, 
2013), 78 FR 27271 (May 9, 2013) (Order Approving SR-BOX-2013-06).
    \5\ Id.
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Position Limits
    Pursuant to proposed Interpretive Material to Rule 3120 (IM-3120-
4), positions in Jumbo SPY Options, as detailed in Rule 5050(e), shall 
be aggregated with positions in Mini SPY options and standard SPY 
options, with each Jumbo SPY Option counting as ten standard SPY option 
contracts or 100 Mini SPY option contracts. While there are no position 
limit requirements for Jumbo SPY, Mini SPY or standard SPY options,\6\ 
the Exchange believes this aggregation is appropriate due to the 
position limit reporting rules that continue to apply to all 
Participants.\7\
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    \6\ Position limits have been eliminated for options overlying 
SPY on a pilot basis. See Securities Exchange Act Release No. 34-
67936 (September 27, 2012), 77 FR 60491 (October 3, 2012) (SR-BOX-
2012-013).
    \7\ See BOX Rule 3150(b).
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    Further, hedge exemptions will apply pursuant to Rule 3130(b), 
which the Exchange proposes to revise to provide that 1000 (as opposed 
to 100) shares of the underlying security is the appropriate hedge for 
Jumbo Options and to make clear that the hedge exemptions apply to the 
position limits set forth in IM-3120-4.\8\ The Exchange notes that this 
filing is similar to proposals filed by BOX as part of the launch of 
``Mini Options,'' which are non-standard options contracts overlying 10 
shares of a security.\9\
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    \8\ Exchange Rule 3140 (Exercise Limits) refers to exercise 
limits that correspond to aggregate positions as described in Rule 
3120 (Position Limits). Today, the position limits established in a 
given option under Rule 3120 is also the exercise limit for such 
option. Thus, although the proposed rule change would not amend the 
text of Rule 3140 (Exercise Limits) itself, the proposed change to 
add IM-3120-4 would have a corresponding effect on the exercise 
limits.
    \9\ See Securities Exchange Act Release No. 34-68771 (January 
30, 2013), 78 FR 8208 (February 5, 2013) (Notice of Filing and 
Immediate Effectiveness of SR-BOX-2013-07).
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Quarterly Options
    The Exchange also proposes to clarify that Jumbo SPY Options are 
eligible for inclusion in the Quarterly Options Series (``QOS'') 
Program.\10\ The Program allows BOX to list and trade QOS, which expire 
at the close of business on the last business day of a calendar 
quarter. Under the Program, BOX may select up to five (5) currently 
listed exchange traded fund (``ETF'') or index option classes on which 
QOS may be opened. The Exchange may list series that expire at the end 
of the next consecutive four (4) calendar quarters, as well as the 
fourth quarter of the next calendar year.\11\
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    \10\ See Interpretive Material 4 to BOX Rule 5050.
    \11\ See BOX Rule 5050(e) which provides that the Exchange may 
list Jumbo SPY Options on all expirations applicable to standard SPY 
options.
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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''),\12\ in general, and Section 6(b)(5) of the Act,\13\ 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 and 
a national market system, and, in general to protect investors and the 
public interest. By submitting this proposal the Exchange is 
eliminating any potential confusion regarding Jumbo SPY Options, a new 
product listed and traded on the Exchange. The Exchange believes that 
the proposal will help avoid investor confusion by clarifying how the 
Exchange's position limit rules will apply to Jumbo SPY Options, Mini 
SPY Options and standard SPY options. Finally, the Exchange believes 
that it is appropriate to clarify that Jumbo SPY Options are eligible 
for the Quarterly Options Series Program. Doing so provides investors 
and other market participants with a more accurate understanding of the 
Exchange's rules regarding Jumbo SPY Options.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 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. Specifically, the Exchange 
believes that investors would benefit from the introduction and 
availability of Jumbo SPY Options by making options on large blocks of 
the SPY ETF more available as an investing tool, particularly for 
institutional investors. Trading in Jumbo SPY Options is entirely 
voluntary and Participants can determine if they would like to trade in 
this new product.

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 foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, 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 \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). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide the Commission 
with written notice of its 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 fulfilled this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to

[[Page 42579]]

designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange requests 
that the Commission waive the 30-day operative delay so that the 
proposed rule change may become operative immediately. The Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest.\16\ Trading in Jumbo 
SPY Options has already commenced and waiver of the operative delay 
will allow the Exchange to immediately implement its proposal. For 
these reasons, the Commission designates the proposed rule change as 
operative upon filing.
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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.

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-2013-36 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-2013-36. 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 
10:00 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 
shouldsubmit only information that you wish to make available publicly. 
All submissions should refer to File Number SR-BOX-2013-36 and should 
be submitted on or before August 6, 2013

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-17013 Filed 7-15-13; 8:45 am]
BILLING CODE 8011-01-P