[Federal Register Volume 75, Number 140 (Thursday, July 22, 2010)]
[Notices]
[Pages 42792-42795]
From the Federal Register Online via the Government Publishing 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 [email protected]. 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