Document ID: SEC-2008-0505-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Boston Stock Exchange, Inc.
Posted Date: 2008-04-02T04:00Z

[Federal Register: April 2, 2008 (Volume 73, Number 64)]
[Notices]               
[Page 18013-18015]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02ap08-104]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57566; File No. SR-BSE-2008-20]

 
Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the Implementation of Phase II of the Penny Pilot Program

 March 26, 2008.
    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 25, 2008, the Boston Stock Exchange, Inc. (``BSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been substantially prepared by the BSE. 
The Exchange has designated this proposal as one constituting a stated 
policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule under Section 
19(b)(3)(A)(i) of the Act \3\ and Rule 19b-4(f)(1) 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 change 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)(i).
    \4\ 17 CFR 240.19b-4(f)(1).
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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 Section 33 (Penny Pilot Program) of 
Chapter V of the Rules of the Boston Options Exchange (``BOX''). The 
proposed rule change will allow the Exchange to implement the second 
phase (``Phase II'') of a Commission-approved expansion of the Penny 
Pilot Program.\5\ The proposed rule change will also allow the Exchange 
to remove the current listing of the classes (``Penny Classes'') 
included in the Penny Pilot Program from Section 33, and will permit 
the Exchange to notify Participants of the classes included in the 
Penny Pilot Program via Regulatory Circular.
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    \5\ See Securities Exchange Act Release No. 56566 (September 27, 
2007), 72 FR 56400 (October 3, 2007) (SR-BSE-2007-40) (``Approval 
Order'').
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    The text of the proposed rule change and the Regulatory Circular 
are available on the Exchange's Web site (http://www.bostonstock.com ), 
at the BSE's principal office, 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 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 BSE 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 Penny Pilot Program began on January 26, 2007 and allowed for 
the trading of a limited number of option classes in penny 
increments.\6\ A

[[Page 18014]]

subsequent rule filing by the Exchange on September 27, 2007 initiated 
a two-phased expansion of the Penny Pilot Program.\7\ The first phase 
(``Phase I'') commenced on September 28, 2007, and with it added 
twenty-two (22) option classes to the Penny Pilot Program.\8\
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    \6\ See Securities Exchange Act Release No. 55155 (January 23, 
2007) 72 FR 4741 (February 1, 2007) (SR-BSE-2006-49) (``Original 
Pilot Approval Order''). The thirteen (13) option classes originally 
included in the Pilot were: iShares Russell 2000 (IWM), NASDAQ-100 
Index Tracking Stock (QQQQ), SemiConductor Holders Trust (SMH), 
General Electric Company (GE), Advanced Micro Devices, Inc. (AMD), 
Microsoft Corporation (MSFT), Intel Corporation (INTC), Caterpillar, 
Inc. (CAT), Whole Foods Market, Inc. (WFMI), Texas Instruments, Inc. 
(TXN), Flextronics International Ltd. (FLEX), Sun Microsystems, Inc. 
(JAVA), and Agilent Technologies, Inc. (A). The Penny Pilot Program 
was extended on July 24, 2007. See Securities Exchange Act Release 
No. 56149 (July 26, 2007), 72 FR 42450 (August 2, 2007) (SR-BSE-
2007-38).
    \7\ See Approval Order, supra note 5.
    \8\ The following classes were added to the Penny Pilot Program 
on September 28, 2007: SPY (SPDRs), AAPL (Apple, Inc.), MO (Altria 
Group Inc.), DNDN (Dendreon Corp.), AMGN (Amgen Inc.), YHOO (Yahoo! 
Inc.), QCOM (QUALCOMM Inc.), GM (General Motors Corporation), XLE 
(Energy Select Sector), DIA (DIAMONDS Trust, Series 1), OIH (Oil 
Service HOLDRS), NYX (NYSE Euronext, Inc.), CSCO (Cisco Systems, 
Inc.), XLF (Financial Select Sector SPDR), T (AT&T Inc.), C 
(Citigroup), AMZN (Amazon.com Inc.), MOT (Motorola Inc.), RIMM 
(Research in Motion Ltd.), FCX (Freeport-McMoRan Copper & Gold 
Inc.), COP (ConocoPhillips), and BMY (Bristol-Myers Squibb Co.). The 
most recent expansion of the Penny Pilot Program is set to expire on 
March 27, 2008, after which point the second phase of the expansion 
will commence and continue through March 27, 2009.
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    The Exchange now proposes to implement Phase II of the expansion on 
March 28, 2008. When Phase II is implemented the Exchange will add 
twenty-eight (28) of the most actively traded, multiply-listed option 
classes to the Penny Pilot Program. This will bring the total number of 
option classes quoted in pennies to sixty-three (63) (the original 
thirteen (13) classes, plus twenty-two (22) classes from Phase I of the 
expansion, plus the twenty-eight (28) additional option classes from 
Phase II of the expansion).
    The Exchange will distribute a complete list of the classes 
included in the Penny Pilot Program to Participants via Regulatory 
Circular. The Exchange believes that distributing a Regulatory Circular 
containing the current and additional Penny Classes is the best method 
of notifying and informing Participants of the additional classes that 
will be included in Phase II of the impending expansion. Further, 
circulation of the list of Penny Classes via Regulatory Circular will 
conform the Exchange's method of distribution of such information to 
that of other exchanges.\9\
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    \9\ See Supplemental Material to Rule 710 of the Rules of the 
International Securities Exchange, LLC (``ISE'').
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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,\10\ in general, and Section 
6(b)(5) of the Act,\11\ in particular, in that it will implement the 
second phase of an approved pilot program and permit the Exchange to 
notify Participants about the program via Regulatory Circular, and is 
designed to prevent fraudulent and manipulative acts, to promote just 
and equitable principles of trade, 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. 
Specifically, the proposal will result in a more efficient method by 
which the Exchange informs Participants of the classes included in the 
Penny Pilot Program.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 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 that is 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 proposed rule change has become effective pursuant to Section 
19(b)(3)(A)(i) of the Act \12\ and Rule 19b-4(f)(1) thereunder,\13\ 
because it constitutes a stated policy, practice, or interpretation 
with respect to the meaning, administration, or enforcement of an 
existing BOX rule. Specifically, the proposed rule change will allow 
the Exchange to implement Phase II of a Commission-approved expansion 
of the Penny Pilot Program. The proposed rule change will also allow 
the Exchange to modify the manner in which it will notify Participants 
of the classes contained in the Penny Pilot Program.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(i).
    \13\ 17 CFR 240.19b-4(f)(1).
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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.\14\
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    \14\ See 15 U.S.C. 78s(b)(3)(C).
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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-BSE-2008-20 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BSE-2008-20. 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 inspection and 
copying 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 BSE. 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-BSE-2008-20 and should be 
submitted on or before April 23, 2008.

[[Page 18015]]

    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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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-6731 Filed 4-1-08; 8:45 am]

BILLING CODE 8011-01-P