[Federal Register Volume 78, Number 56 (Friday, March 22, 2013)]
[Notices]
[Pages 17741-17743]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-06570]
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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.
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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 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\
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\3\ See Securities Exchange Act Release No. 69124 (March 12,
2013) (Order Approving SR-ISE-2013-08).
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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.
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\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.
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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\
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\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).
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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.
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\9\ 15 U.S.C. 78f(b).
\10\ 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. 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.
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\11\ See supra, note 3.
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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\
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\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.
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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 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.
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\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).
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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 [email protected]. 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\
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\15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-06570 Filed 3-21-13; 8:45 am]
BILLING CODE 8011-01-P