[Federal Register Volume 75, Number 145 (Thursday, July 29, 2010)]
[Notices]
[Pages 44826-44828]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-18572]
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SECURITIES AND EXCHANGE COMMISSION
Release No. 34-62553; File No. SR-BX-2010-050]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Expand
the $1 Strike Program on the Boston Options Exchange Facility
July 22, 2010.
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 19, 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 Chapter IV, Section 6 (Series of
Options Contracts Open for Trading) of the Rules of the Boston Options
Exchange Group, LLC (``BOX'') to expand the Exchange's $1 Strike Price
Program (the ``$1 Strike Program'' or ``Program'') to allow the
Exchange to select 150 individual stocks on which options may be listed
at $1 strike price intervals. The text of the proposed rule change is
available from the principal office of the Exchange, at the
Commission's Public Reference Room, on the Commission's Web site at
http://www.sec.gov, and also on the Exchange's Internet Web site at
http://nasdaqomxbx.cchwallstreet.com/NASDAQOMXBX/Filings/.
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 proposed rule change is to expand the $1 Strike
Program (the ``Program'').\5\ The $1 Strike Program currently allows
BOX to select a total of 55 individual stocks on which option series
may be listed at $1 strike price intervals. In order to be eligible for
selection into the Program, the underlying stock must close below $50
in its primary market on the previous trading day. If selected for the
Program, BOX may list strike prices at $1 intervals from $1 to $50, but
no $1 strike price may be listed that is greater than $5 from the
underlying stock's closing price in its primary market on the previous
day. BOX may also list $1 strikes on any other option class designated
by another securities exchange that employs a similar Program under
their respective rules. BOX may not list long-term option series
(``LEAPS'') \6\ at $1 strike price intervals for any class selected for
the Program, except as provided in Supplementary Material .02(c) to
Chapter IV, Section 6 of the BOX Rules.\7\ BOX is also restricted from
listing series with $1 intervals within $0.50 of an existing strike
price in the same series, except that strike prices of $2, $3, and $4
shall be permitted within $0.50 of an existing strike price for classes
also selected to participate in the $0.50 Strike Program.\8\
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\5\ The Commission approved the $1 Strike Price Program as a
pilot in February 2004. See Securities Exchange Act Release No.
49292 (Feb. 20, 2004), 69 FR 8993 (Feb. 26, 2004) (SR-BSE-2004-01).
The Program was subsequently extended. See Securities Exchange Act
Release No. 49806 (June 4, 2004), 69 FR 32640 (June 10, 2004) (SR-
BSE-2004-22) (extending the Program until June 5, 2005); Securities
Exchange Act Release No. 51778 (June 2, 2005), 70 FR 33562 (June 8,
2005) (SR-BSE-2005-18) (extending the Program until June 5, 2006);
Securities Exchange Act Release No. 53855 (May 24, 2006), 71 FR
30973 (May 31, 2006) (SR-BSE-2006-19) (extending the Program until
June 5, 2007); Securities Exchange Act Release No. 55684 (Apr. 30,
2007), 72 FR 26188 (May 8, 2007) (SR-BSE-2007-17) (extending the
Program until June 5, 2008). The Program was subsequently expanded
and permanently approved in 2008. See Securities Exchange Act
Release No. 57302 (Feb. 11, 2008), 73 FR 8913 (Feb. 15, 2008) (SR-
BSE-2008-08). The Pilot Program was last expanded in 2009. See
Securities Exchange Act Release No. 59589 (Mar. 17, 2009), 73 FR
8913 (Mar. 24, 2009) (SR-BSE-2009-16).
\6\ LEAPS are long-term options that have from twelve to thirty-
nine months from the time they are listed until expiration. See
Chapter IV, Section 8(a) Long-Term Equity Option Series
(LEAPS[reg]).
\7\ Supplementary Material .02(c) to Chapter IV, Section 6 of
the BOX Rules states that the Exchange may list $1 strike prices up
to $5 in LEAPS in up to 200 option classes in individual stocks. See
Securities Exchange Act Release No. 61041 (Nov. 20, 2009) 75 FR
62623 (Nov. 30, 2009) (SR-BSE-2009-073).
\8\ Regarding the $0.50 Strike Program, which allows $0.50
strike price intervals for options on stocks trading at or below
$3.00, see Supplementary Material .02 to Chapter IV, Section 6(a)
and Securities Exchange Act Release No. 60814 (Oct. 13, 2009), 74 FR
53535 (Oct. 19, 2009) (SR-BSE-2009-063). See also Securities
Exchange Act Release No. 61811 (Mar. 31, 2010), 75 FR 17802 (April
7, 2010) (SR-BSE-2010-025) (permitting concurrent listing of $3.50
and $4 strikes for classes in the $0.50 Strike and $1 Strike
Programs).
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[[Page 44827]]
The Exchange now proposes to expand the Program to allow BOX to
select a total of 150 individual stocks on which option series may be
listed at $1 strike price intervals. The existing restrictions on
listing $1 strikes would continue, i.e., no $1 strike price may be
listed that is greater than $5 from the underlying stock's closing
price in its primary market on the previous day, and BOX is restricted
from listing any series that would result in strike prices being $0.50
apart (unless an option class is selected to participate in both the $1
Strike Program and the $0.50 Strike Program).
As stated in the filings establishing BOX's Program and in
subsequent extensions and expansions of the Program,\9\ BOX believes
that $1 strike price intervals provide investors with greater
flexibility in the trading of equity options that overlie lower price
stocks by allowing investors to establish equity options positions that
are better tailored to meet their investment objectives.
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\9\ See supra note 5.
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BOX believes that market conditions have led to an increase in the
number of securities trading below $50 warranting the proposed
expansion of the $1 Strike Program.\10\ In addition, BOX notes that
this filing is based on rules of other options exchanges, such as,
NASDAQ OMX PHLX, Inc (``PHLX''), Chicago Board Options Exchange
(``CBOE''), International Securities Exchange, LLC (``ISE''), NYSE
Arca, Inc. (``NYSE Arca''), NYSE Amex LLC (``NYSE Amex''), and NASDAQ
Options Market (``NOM'').\11\ With regard to previous expansions of the
Program, the Commission has approved proposals from the options
exchanges that employ a $1 Strike Program in lockstep.
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\10\ See, e.g., Securities Exchange Act Release No. 59589 (Mar.
17, 2009), 73 FR 8913 (Mar. 24, 2009) (SR-BSE-2009-16) (referencing
the more than five-fold increase in the number of individual stocks
on which options may be listed at $1 intervals).
\11\ See Securities Exchange Act Release No. 62420 (June 30,
2010), 75 FR 39593 (July 9, 2010) (SR-Phlx-2010-72); Securities
Exchange Act Release No. 62443 (July 2, 2010), 75 FR 39608 (July 9,
2010) (SR-CBOE-2010-64); Securities Exchange Act Release No. 62442
(July 2, 2010), 75 FR 39597 (July 9, 2010) (SR-ISE-2010-64);
Securities Exchange Act Release No. 62450 (July 2, 2010), 75 FR
39712 (July 12, 2010) (SR-NYSEArca-2010-66); Securities Exchange Act
Release No. 62449 (July 2, 2010) (SR-NYSEAmex-2010-67); Securities
Exchange Act Release No. 62451 (July 6, 2010) (SR-NASDAQ-2010-83).
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The Exchange notes that, in addition to options classes that are
trading pursuant to the $1 strike programs of options exchanges, there
are also options trading at $1 strike intervals on BOX on over 95
exchange-traded fund shares (``ETFs'') and exchange-traded notes
(ETNs''),\12\ ETF and ETN options trading at $1 intervals have not,
however, negatively impacted the system capacity of BOX or OPRA.
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\12\ See Supplementary Material .01 to Chapter IV, Section 6 of
the BOX Rules (allowing $1 strike price intervals for ETF and ETN
options where the strike price is $200 or less).
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With regard to the impact of this proposal on system capacity, BOX
has analyzed its capacity and the Exchange represents that it and OPRA
have the necessary systems capacity to handle the potential additional
traffic associated with the listing and trading of an expanded number
of series in the $1 Strike Program.
BOX believes that the $1 Strike Program has provided investors with
greater trading opportunities and flexibility and the ability to more
closely tailor their investment and risk management strategies and
decisions to the movement of the underlying security. Furthermore, BOX
has not detected any material proliferation of illiquid options series
resulting from the narrower strike price intervals. For these reasons,
BOX requests an expansion of the current Program and the opportunity to
provide investors with additional strikes for investment, trading, and
risk management purposes.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act,\13\ in general, and Section
6(b)(5) of the Act,\14\ 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, the Exchange believes that expanding the current $1
Strike Program will result in a continuing benefit to investors by
giving them more flexibility to closely tailor their investment
decisions in a greater number of securities.
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\13\ 15 U.S.C. 78f(b).
\14\ 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
Because the foregoing proposed rule change does not significantly
affect the protection of investors or the public interest, does not
impose any significant burden on competition, and, by its terms, does
not become operative for 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \15\ and Rule 19b-
4(f)(6) thereunder.\16\
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 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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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 has been approved by the Commission.\17\
Therefore, the Commission designates the proposal operative upon
filing.\18\
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\17\ See Securities Exchange Act Release No. 62420 (June 30,
2010), 75 FR 39593 (July 9, 2010) (SR-Phlx-2010-72) (order approving
expansion of $1 strike program to 150 classes).
\18\ 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.
[[Page 44828]]
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-2010-050 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-2010-050. 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-2010-050 and should be
submitted on or before August 19, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-18572 Filed 7-28-10; 8:45 am]
BILLING CODE 8010-01-P