[Federal Register Volume 78, Number 169 (Friday, August 30, 2013)]
[Notices]
[Pages 53797-53799]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-21230]
[[Page 53797]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70258; File No. SR-BX-2013-050]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Change
the Expiration Date For Most Option Contracts to the Third Friday of
the Expiration Month Instead of the Saturday Following the Third Friday
August 26, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on August 21, 2013, NASDAQ OMX PHLX LLC (``BX'' 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 prepared by the Exchange. 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.
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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 Exchange rules to change the
expiration date for most option contracts to the third Friday of the
expiration month instead of the Saturday following the third Friday.
The text of the proposed rule change is available at http://nasdaqomxbx.cchwallstreet.com/, at the Exchange'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 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 is proposing to change the expiration date for most
option contracts to the third Friday of the expiration month instead of
the Saturday following the third Friday. More specifically, the
Exchange is proposing to amend rule text referencing Saturday
expirations. The Exchange notes, however, that this change will apply
to all standard expiration contracts including those in which the rules
are silent on the expiration date. The Exchange is making this filing
to harmonize its rules in connection with a recently approved rule
filing made by The Options Clearing Corporation (``OCC'') which made
substantially similar changes.\3\ The Exchange believes that the
industry must remain consistent in expiration dates, and, thus, is
proposing to update its rules to remain consistent with those of OCC.
In addition, the Exchange understands that other exchanges have and
will be filing similar rules to effect this industry-wide
initiative.\4\
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\3\ See Securities Exchange Act Release No. 34-69772 (June 17,
2013), 78 FR 37645 (June 21, 2013) (order approving SR-OCC-2013-
004).
\4\ See Securities Exchange Act Release Nos. 70091 (August 1,
2013), 78 FR 48212 (August 7, 2013) (SR-CBOE-2013-073) and 69996
(July 17, 2013), 78 FR 44183 (July 23, 2013) (SR-MIAX-2013-32).
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Most option contracts (``standard expiration contracts'') currently
expire at the ``expiration time'' (11:59 p.m. Eastern Time) on the
Saturday following the third Friday of the specified expiration month
(the ``expiration date'').\5\ With this filing, the Exchange is
proposing to give advance notice to its members and member
organizations that the expiration date for standard expiration
contracts is changing to the third Friday of the expiration month.\6\
(The expiration time would continue to be 11:59 p.m. Eastern Time on
the expiration date.) The change would apply only to standard
expiration contracts expiring after February 1, 2015, and the Exchange,
similar to OCC, does not propose to change the expiration date for any
outstanding option contracts. The change will apply only to series of
option contracts opened for trading after the effective date of the OCC
rule change and having expiration dates later than February 1, 2015.
Option contracts having non-standard expiration dates (``non-standard
expiration contracts'') will be unaffected by this proposed rule
change, except that FLEX options having expiration dates later than
February 1, 2015 cannot expire on a Saturday unless they are specified
by OCC as grandfathered.\7\
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\5\ Examples of options with non-standard expiration contracts
include: Quarterly Equity and Exchange-Traded Fund Shares (``ETFs'')
Option Series (Chapter IV, Section 6, Commentary .04), Quarterly
Options Series for indexes (Chapter XIV, Section 11(g)), Short Term
Option Series (Chapter IV, Section 6, Commentary .07) and Short Term
Option Series for indexes (Chapter XIV, Section 11(h)).
\6\ The Exchange will provide notice to members and member
organizations regarding the anticipated change by issuing an Options
Trader Alert.
\7\ See note 5 supra.
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In order to provide a smooth transition to the Friday expiration
OCC has begun to move the expiration exercise procedures to Friday for
all standard expiration contracts even though the contracts would
continue to expire on Saturday.\8\ After February 1, 2015, virtually
all standard expiration contracts will actually expire on Friday. The
only standard expiration contracts that will expire on a Saturday after
February 1, 2015 are certain options that were listed prior to the
effectiveness of the OCC rule change, and a limited number of options
that may be listed prior to necessary systems changes of the options
exchanges, which are expected to be completed in August 2013. After
these systems changes are made, BX will not list any additional options
with Saturday expiration dates falling after February 1, 2015. BX
understands that the other exchanges are committed to the same listing
schedule.\9\
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\8\ See SR-OCC-2013-04.
\9\ See note 4 supra.
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The Exchange notes that OCC, industry groups, clearing members and
the other exchanges have been active participants in planning for the
transition to the Friday expiration.\10\ In March 2012, OCC began to
discuss moving standard contract expirations to Friday expiration dates
with industry groups, including two Securities Industry and Financial
Markets Association (``SIFMA'') committees, the Operations and
Technology Steering Committee and the Options Committee, and at two
major industry conferences, the SIFMA Operations Conference and the
Options Industry Conference.\11\ OCC also discussed the project with
the Intermarket Surveillance Group and at an OCC Operations Roundtable.
In each case, there was broad support for the initiative.\12\
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\10\ See note 8 supra.
\11\ Id.
\12\ Id.
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Certain option contracts have already been listed with Saturday
expiration dates as distant as December 2015
[[Page 53798]]
(which is the furthest out expiration as of the date of this filing).
Additionally, until BX completes certain systems enhancements in August
2013, it remains possible that additional option contracts may be
listed with Saturday expiration dates beyond February 1, 2015. For
these contracts, transitioning to a Friday expiration for newly listed
option contracts expiring after February 1, 2015 would create a
situation under which certain options with open interest would expire
on a Saturday while other options with open interest would expire on a
Friday in the same expiration month.
Clearing members have expressed a clear preference to not have a
mix of options with open interest that expire on different days in a
single month.\13\ Accordingly, OCC represented in its recently approved
filing that it will not issue and clear any new option contract with a
Friday expiration if existing option contracts of the same options
class expire on the Saturday following the third Friday of the same
month. However, Friday expiration processing will be in effect for
these Saturday expiration contracts. As with standard expiration
options during the transition period, exercise requests received after
Friday expiration processing is complete but before the Saturday
contract expiration time will continue to be processed without fines or
penalties.
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\13\ Id.
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Thus, the Exchange is proposing to update its rules to reflect the
above discussed change. More specifically, the Exchange is proposing to
add Section 2(p) to Chapter XIV, Index Rules to define ``expiration
date'' to be consistent with the revised OCC definition.\14\ Thus,
consistent with the OCC filing, the Exchange is proposing to add
language to these rules stating that any series expiring prior to
February 1, 2015 will have a Saturday expiration date while any series
expiring on or after February 1, 2015 will have a Friday expiration
date.\15\
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\14\ Id.
\15\ With the exception of expirations that were listed prior to
the effective date of the OCC filing and have open interest.
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The Exchange also is proposing to adopt changes to Chapter XIV,
Index Rules, Sections 11(a)(5) and 11(d) for consistency to reflect the
change in the expiration date definition. To the extent applicable to
the timeframes herein, the Exchange is also proposing, with this
filing, to replace any reference in the purpose section of any past
Exchange rule filings or alerts to any expiration date other than
Friday for a standard options contract with the new Friday standard.
Essentially, the Exchange is now proposing to replace any relevant
historic references to expiration dates to be replaced with the
proposed Friday expiration. As stated above, the Exchange believes the
proposed change will keep the Exchange consistent with the processing
at OCC and will enable the Exchange to give effect to the industry-wide
initiative. In addition, the Exchange understands that other exchanges
will be filing similar rules, thus creating a uniform expiration date
for standard options on listed classes.\16\
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\16\ See note 4 supra.
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The Exchange plans to release an Options Trader Alert to its
members and member organizations to inform them of this change prior to
the implementation of the rule.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\17\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \18\ requirements that the rules of an exchange be
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 regulating, clearing,
settling, processing information with respect to, and 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. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \19\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(5).
\19\ Id.
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In particular, the Exchange believes that keeping its rules
consistent with those of the industry will protect all participants in
the market by eliminating confusion. The proposed changes thus allow
for a more orderly market by allowing all options markets, including
the clearing agencies, to have the same expiration date for standard
options.
In addition, the proposed changes will foster cooperation and
coordination with persons engaged in regulating clearing, settling,
processing information with respect to, and facilitating transactions
in securities by aligning a pivotal part of the options processing to
be consistent industry wide. If the industry were to differ, investors
would suffer from confusion and be more vulnerable to violate different
exchange rules. The proposed changes do not permit unfair
discrimination between any members because they are applied to all
members equally. In the alternative, the Exchange believes that it
helps all members by keeping the Exchange consistent with OCC practices
and those of other Exchanges.
B. Self-Regulatory Organization's Statement on Burden on Competition
BX does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended. Specifically, the
Exchange does not believe the proposed rule change will impose a burden
on intramarket competition because it will be applied to all members
equally. In addition, the Exchange does not believe the proposed rule
change will impose any burden to intermarket competition because it
will be applied industry wide and apply to all market participants. The
proposed rule change is structured to enhance competition because the
shift from an expiration date of the Saturday following the third
Friday to the third Friday is anticipated to be adopted industry-wide
and will apply to all multiply listed classes. This in turn will allow
BX to compete more effectively with other exchanges making similar rule
changes.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received. The Exchange
notes, however, that a favorable comment was submitted to the OCC
filing.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing 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 after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to 19(b)(3)(A)
[[Page 53799]]
of the Act \20\ and Rule 19b-4(f)(6) \21\ thereunder.
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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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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-BX-2013-050 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-2013-050. 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 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 publicly available. All
submissions should refer to File Number SR-BX-2013-050 and should be
submitted on or before September 20, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-21230 Filed 8-29-13; 8:45 am]
BILLING CODE 8011-01-P