[Federal Register Volume 78, Number 150 (Monday, August 5, 2013)]
[Notices]
[Pages 47476-47478]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-18759]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70070; File No. SR-BOX-2013-037]
Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend BOX Rule 4170 (Options Communications)
July 30, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on July 15, 2013, BOX Options Exchange LLC
(``BOX'' or the ``Exchange'') filed with the Securities and Exchange
Commission (the ``Commission'') the proposed rule change as described
in Items I and II below, which Items have been substantially prepared
by the Exchange. 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 Rule 4170 (Options
Communications) to conform the rule to changes recently made by the
Financial Industry Regulatory Authority, Inc. (``FINRA'') to its
corresponding rule.\3\ 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
[[Page 47477]]
Exchange's Internet Web site at http://boxexchange.com.
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\3\ See Exchange Act Release No. 68650 (Jan. 14, 2013), 78 FR
4182 (Jan. 18, 2013) (Notice of Immediate Effectiveness of SR-FINRA-
2013-001).
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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 Exchange 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 Exchange proposed to update Exchange Rule 4170 (Options
Communications) to conform the rule to changes recently made by FINRA
to its corresponding rule.\4\ This filing is also based on a proposal
recently submitted by Chicago Board Options Exchange, Inc. (``CBOE'')
and approved by the Commission.\5\
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\4\ See Exchange Act Release No. 68650 (Jan. 14, 2013), 78 FR
4182 (Jan. 18, 2013) (Notice of Immediate Effectiveness of SR-FINRA-
2013-001). The Exchange also proposes certain changes in Rule 4170
to conform with aspects of the FINRA rule that predated the recent
FINRA amendment and were not changed by that amendment.
\5\ See Exchange Act Release No. 69807 (June 20, 2013), 78 FR
38423 (June 26, 2013) (Order Approving of SR-CBOE-2013-043).
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The proposed changes to BOX Rule 4170 (Options Communications) are
designed to alert Participants to their requirements with respect to
Options Communications while further regulating all communications for
compliance with BOX Rules and the Act.
First, the proposed rule change would amend BOX Rule 4170(a) to
reduce the number of defined categories of communication from six (in
the current rule) to three. The proposed three categories of
communications are: Retail communications, correspondence, and
institutional communications. Current definitions of ``sales
literature,'' ``advertisement,'' and ``independently prepared reprint''
are combined into a single category of ``retail communications.'' Thus,
the Exchange proposes to define ``retail communication'' as ``any
written (including electronic) communication that is distributed or
made available to more than 25 retail investors within any 30-calendar-
day period.'' The Exchange also proposes to update the definition of
``correspondence'' to ``any written (including electronic)
communication distributed or made available by a Participant to 25 or
fewer retail customers within any 30-calendar-day period.'' Finally,
the Exchange proposes to define, ``institutional communication'' to
include written (including electronic) communications that are
distributed or made available only to institutional investors.
Second, the Exchange proposes to amend Rule 4170(b), ``Approval by
Registered Options Principal'' to replace the phrase ``advertisements,
sales literature, and independently prepared reprints'' in Rule
4170(b)(i) with the new proposed term, ``retail communications.''
Under proposed Rule 4170(b)(ii), correspondence would ``need not be
approved by a Registered Options Principal prior to use'' but would be
subject to the supervision and review requirements of BOX Rule 4030.
The current rule requires principal approval of correspondence that is
distributed to 25 or more existing retail customers within a 30-
calendar-day period that makes any financial or investment
recommendation or otherwise promotes the product or service of a
Participant. Under proposed Rule 4170(b), such communications would be
considered retail communications and therefore would be subject to the
principal approval requirement. As such, the proposed change would not
substantively change the scope of options communications that would
require principal approval.
Third, the Exchange proposes to modify the required approvals of
``Institutional communications'' by adding that a Participant shall
``establish written procedures that are appropriate to its business,
size, structure, and customers for review by a Registered Options
Principal of institutional communications used by the Participant.''
Fourth, the Exchange proposes to amend Rule 4170(c) to replace the
phrase ``advertisements, sales literature, and independently prepared
reprints'' with the new proposed term, ``retail communications.'' The
Exchange also proposes to further exempt options disclosure documents
and prospectuses from Exchange review as other requirements apply to
these documents under the Securities Act of 1933 (the ``Securities
Act'').
Fifth, the Exchange proposes to specify in Rule 4170(d) that Order
Flow Providers (``OFP'') or associated persons may not use any options
communications that ``constitute a prospectus'' unless the
communications meet the requirements of the Securities Act. Finally,
the Exchange proposes to move and slightly modify Rule 4170(d) to state
that any statement made referring to ``potential opportunities or
advantages presented by options'' must also be accompanied by a
statement identifying the potential risks posed.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act,\6\ in general, and Section
6(b)(5) of the Act,\7\ 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.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5). Form 19b-4 as filed by BOX
inadvertently referred to Section 6(b)(4). This change was approved
per email by Lisa Fall of BOX, in an email from Kristen Tierney
(BOX) to Alicia Goldin (SEC) on July 29, 2013 (``July 29 email'').
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In particular, the Exchange believes the proposed rule changes will
help Participants that are also members of FINRA and/or CBOE to comply
with their obligations regarding options communications by better
aligning the Exchange's requirements with those of FINRA and CBOE.\8\
In addition, the Exchange believes that the proposed rule change will
help ensure that investors are protected from potentially false or
misleading communications with the public distributed by Participants.
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\8\ This statement was modified from the Form 19b-4 filed by
BOX, per the July 29 email, supra note 7.
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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 being proposed is
substantially similar to a filing submitted by the CBOE and recently
approved by the Commission.\9\ The Exchange believes that establishing
uniform rules regarding Options Communications will enable
[[Page 47478]]
Participants to more efficiently carry out their supervisory and other
compliance obligations.\10\
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\9\ See supra, note 5.
\10\ This statement was modified from the Form 19b-4 filed by
BOX, per the July 29 email, supra note 7.
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Specifically, the proposed rule change will merely bring clarity
and consistency to Exchange Rules. The Exchange does not believe the
proposed rule change will impose any burden on any intra-market
competition as it applies to all Participants. In addition, the
Exchange does not believe the proposed rule filing will bring any
unnecessary burden on inter-market competition as it is consistent with
the FINRA ``Options Communications'' rule.\11\
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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
BOX has filed the proposed rule change pursuant to Section
19(b)(3)(A) \12\ of the Act and Rule 19b-4(f)(6) thereunder.\13\
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 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 and Rule 19b-4(f)(6) thereunder.
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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 the Exchange 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 satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally
does not become operative for 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii) \15\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. BOX has asked the
Commission to waive the 30-day operative delay so that the proposal may
become operative immediately upon filing.
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest, as
it will it will ensure fair competition among the exchanges by allowing
the Exchange to conform with changes recently made by FINRA. For these
reasons, the Commission designates the proposed rule change to be
operative upon filing.\16\
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\16\ For purposes 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 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. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
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-2013-037 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-2013-037. 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, on official business days between
the hours of 10:00 a.m. and 3:00 p.m., located at 100 F Street NE.,
Washington, DC 20549. Copies of such 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-2013-037 and
should be submitted on or before August 26, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-18759 Filed 8-2-13; 8:45 am]
BILLING CODE 8011-01-P