Document ID: SEC-2013-0551-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange LLC
Posted Date: 2013-03-22T04:00Z

[Federal Register Volume 78, Number 56 (Friday, March 22, 2013)]
[Notices]
[Pages 17741-17743]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-06570]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69154; File No. SR-BOX-2013-14]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change To Permit 
the Minimum Price Variation for Mini Options To Be the Same as 
Permitted for Standard Options on the Same Underlying Security

March 15, 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 March 13, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend BOX Rules 5050 (Series of Options 
Contracts Open for Trading) and 7050 (Minimum Trading Increments) to 
permit the minimum trading increment for Mini Options to be the same as 
the minimum trading increment permitted for standard options on the 
same underlying security. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend BOX Rule 5050 (Series of Options 
Contracts Open for Trading) and 7050 (Minimum Trading Increments) to 
permit the minimum trading increment for Mini Options to be the same as 
the minimum trading increment permitted for standard options on the 
same underlying security. This is a competitive filing that is based on 
a proposal recently submitted by International Securities Exchange 
(``ISE'') and approved by the Commission.\3\
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 69124 (March 12, 
2013) (Order Approving SR-ISE-2013-08).
---------------------------------------------------------------------------

    The Exchange proposes to amend its rules to permit the minimum 
trading increment for Mini Options to be the same as the minimum 
trading increment permitted for standard options on the same underlying 
security. Mini Options overlie 10 equity or ETF shares, rather than the 
standard 100 shares.\4\ Mini Options are currently approved on the 
following five (5) underlying securities: SPDR S&P 500 ETF (``SPY''), 
Apple Inc. (``AAPL''), SPDR Gold Trust (``GLD''), Google Inc. 
(``GOOG''), and Amazon.com, Inc. (``AMZN''). Of the five securities on 
which Mini Options are permitted, four of them (SPY, AAPL, GLD and 
AMZN) participate in the Penny Pilot Program.\5\ Under the Penny Pilot 
Program, with the exception of three classes,\6\ the minimum price 
variation for all participating options classes is $0.01 for all 
quotations in options series that are quoted at less than $3 per 
contract and $0.05 for all quotations in options series that are quoted 
at $3 per contract or greater. Therefore, the minimum trading increment 
for AAPL, GLD, and AMZN is $0.01 for option series under $3 and $0.05 
for options quoted at $3 or greater, while the minimum trading 
increment for SPY, which is not subject to a price test, is $0.01 
across all option series. The Exchange notes that GOOG is not in the 
Penny Pilot Program and therefore, standard options in GOOG have a 
minimum increment of $0.05 and $0.10 per contract depending on the 
price at which the standard option on GOOG is quoted.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 68771 (January 30, 
2013), 78 FR 8208 (February 5, 2013) (Notice of Filing and Immediate 
Effectiveness of SR-BOX-2013-07). The Exchange expects to begin 
trading Mini Options on March 18, 2013.
    \5\ The Penny Pilot Program has been in effect on the Exchange 
since its inception in May 2012. See Securities Exchange Act Release 
Nos. 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), and 67328 (June 29, 2012) 77 
FR 40123 (July 6, 2012) (SR-BOX-2012-007). The Penny Pilot has been 
extended and is currently in place through June 30, 2013. See 
Securities Exchange Act Release No. 68425 (December 13, 2012), 77 FR 
75234 (December 19, 2012) (Approving SR-BOX-2012-021).
    \6\ The three classes are the Nasdaq-100 Index Tracking Stock 
(``QQQQ''), the SPDR S&P 500 ETF (``SPY'') and the iShares Russell 
2000 Index Fund (``IWM''). QQQQ, SPY and IWM are quoted in $0.01 
increments for all options series.
---------------------------------------------------------------------------

    This proposed rule change will permit the minimum trading increment 
for Mini Options to be identical to the minimum trading increment 
applicable to standard options on the same underlying security. The 
Exchange believes having different trading increments for Mini Options 
than those permitted for standard options on the same underlying 
security would be detrimental to the success of this new product 
offering and would also lead to investor confusion. The Exchange notes 
that the Commission approved Mini Options on SPY, AAPL, GLD, GOOG and 
AMZN because of their high price and current volume levels and because 
of the level of retail investor

[[Page 17742]]

participation in trading options on these underlying securities. Mini 
Options are a natural extension to the options overlying these 
securities and therefore should retain the most important 
characteristic, i.e., trading increments. The Exchange believes that by 
reducing the minimum trading increments for Mini Options, the proposed 
rule change will provide market participants with meaningful trading 
opportunities in this product. Further, quoting and trading in smaller 
increments will enable market participants to trade Mini Options with 
greater precision as to price. Providing these more refined increments 
will permit the Exchange's market makers the opportunity to provide 
better fills (meaning less spread than the current wider minimum 
increments rules allow) to customers. Therefore, the Exchange proposes 
to amend its rules to permit the listing and trading of Mini Options in 
the same increment permitted for standard options on the same 
underlying security.
    With this proposed rule change, although Mini Options would be 
trading in narrower increments, they would not be considered part of 
the Penny Pilot Program.
    The Exchange's proposal to quote and trade certain option classes 
that are outside of the Penny Pilot Program in $0.01 increments is not 
novel. Specifically, the Commission has permitted ISE to set the 
minimum increment for all Foreign Currency Options traded on the 
Exchange at $0.01 regardless of the price at which the option is 
quoted.\7\ The Commission has also previously approved a proposal by 
NASDAQ OMX PHLX, Inc. permitting that exchange to also trade its 
foreign currency options in $0.01 increments.\8\
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 57019 (December 20, 
2007), 72 FR 73937 (December 28, 2007) (Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Relating to Rule 
710, Minimum Trading Increments) (SR-ISE-2007-120).
    \8\ See Securities Exchange Act Release No. 56933 (December 7, 
2007), 72 FR 71185 (December 14, 2007) (Approving SR-PHLX-2007-70).
---------------------------------------------------------------------------

    In support of this proposed rule change, the Exchange proposes to 
amend BOX Rules 5050 and 7050. For BOX Rule 7050, the Exchange proposes 
to add new subsection (c) to provide that the minimum trading increment 
for Mini Options shall be determined in accordance with new subsection 
(d) to IM-5050-10 to BOX Rule 5050. Proposed subsection (d) to IM-5050-
10 provides that the minimum trading increment for Mini Options shall 
be the same as the minimum trading increment permitted for standard 
options on the same underlying security.
    With regard to the impact of this proposal on system capacity, the 
Exchange represents that it and the Options Price Reporting Authority 
have the necessary systems capacity to handle the potential additional 
traffic associated with this proposal. The Exchange does not believe 
that this increased traffic will become unmanageable since Mini Options 
are limited to a fixed number of underlying securities.
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''),\9\ in general, and Section 6(b)(5) of the Act,\10\ 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. In particular, the proposed rule change will assure 
that standard options and Mini Options on the same underlying security 
will trade in similar increments and therefore provide market 
participants meaningful trading opportunities and enable them to trade 
Mini Options with greater precision as to price. The Exchange also 
believes the proposed rule change will avoid investor confusion if both 
standard options and Mini Options on the same underlying security are 
permitted to trade in similar trading increments. The Exchange further 
believes that investors and other market participants will benefit from 
this proposed rule change because it proposes to clarify and establish 
the minimum trading increment for Mini Options prior to the 
commencement of trading. The Exchange believes that investors generally 
will be expecting the minimum trading increment for Mini Options to be 
the same as the minimum trading increment for standard options on the 
same underlying security. This proposed rule change will therefore 
lessen investor confusion because Mini Options and standard options on 
the same underlying security will have the same minimum trading 
increment.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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. 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 ISE that was recently 
approved by the Commission.\11\ The Exchange believes that the proposed 
rule change will in fact relieve any burden on, or otherwise promote, 
competition. Mini Options are currently approved for trading on 
multiple options exchanges and all of these exchanges will have the 
opportunity to establish minimum trading increment for Mini Options.
---------------------------------------------------------------------------

    \11\ See supra, note 3.
---------------------------------------------------------------------------

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 \12\ and Rule 19b-4(f)(6) 
thereunder.\13\
---------------------------------------------------------------------------

    \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 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.
---------------------------------------------------------------------------

    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 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 
coincide

[[Page 17743]]

with the anticipated launch of trading in Mini Options. The Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest.\14\ Waiver of the 
operative delay will allow the Exchange to implement its proposal 
consistent with the commencement of trading in Mini Options as 
scheduled and expected by members and other participants on March 18, 
2013. For these reasons, the Commission designates the proposed rule 
change as operative upon filing.
---------------------------------------------------------------------------

    \14\ 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).
---------------------------------------------------------------------------

    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-2013-14 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-2013-14. 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 should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BOX-2013-14 and should be 
submitted on or before April 12, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-06570 Filed 3-21-13; 8:45 am]
BILLING CODE 8011-01-P