[Federal Register Volume 79, Number 94 (Thursday, May 15, 2014)]
[Notices]
[Pages 27963-27965]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-11160]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72143; File No. SR-BX-2014-025]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Extend
the Pilot Program Relating to the Elimination of SPY Position Limits
May 9, 2014.
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 May 8, 2014, NASDAQ OMX BX, Inc. (``BX'' or ``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 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 extend for another fourteen (14) month
time period the pilot program to eliminate position limits for options
on the SPDR[supreg] S&P 500[supreg] exchange-traded fund (``SPY ETF''
or ``SPY''),\3\ which list and trade under the symbol SPY (``SPY Pilot
Program'').
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\3\ ``SPDR[supreg],'' ``Standard & Poor's[supreg],''
``S&P[supreg],'' ``S&P 500[supreg],'' and ``Standard & Poor's 500''
are registered trademarks of Standard & Poor's Financial Services
LLC. The SPY ETF represents ownership in the SPDR S&P 500 Trust, a
unit investment trust that generally corresponds to the price and
yield performance of the SPDR S&P 500 Index.
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The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaqomxbx.cchwallstreet.com, at the principal
office of the Exchange, 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 purpose of the proposed rule change is to amend the
Supplementary Material at the end of Chapter III, Section 7 (Position
Limits) to extend the current pilot which expires on May 12, 2014 for
an additional fourteen (14) month time period to July 12, 2015
(``Extended Pilot''). This filing does not propose any substantive
changes to the SPY Pilot Program. In proposing to extend the SPY Pilot
Program, the Exchange reaffirms its consideration of several factors
that supported the original proposal of the SPY Pilot Program,
including (1) the availability of economically equivalent products and
their respective position limits; (2) the liquidity of the option and
the underlying security; (3) the market capitalization of the
underlying security and the related index; (4) the reporting of large
positions and requirements surrounding margin; and (5) the potential
for market on close volatility.
The Exchange submitted a report to the Commission on May 8, 2014,
which report reflects, during the time period from January 2014 through
April 2014, the trading of standardized SPY options with no position
limits for [sic] consistent with option exchange provisions.\4\ The
report is being prepared in the manner specified in BX's initial rule
filing establishing the SPY Pilot Program.\5\
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\4\ See Securities Exchange Act Release No. 71231 (January 2,
2014), 79 FR 1402 (January 8, 2014) (SR-FINRA-2013-55) (notice of
filing and immediate effectiveness of proposed rule change having
the effect of eliminating position limits on standardized options on
SPY).
\5\ See Securities Exchange Act Release No. 69179 (March 19,
2013), 78 FR 17952 (March 25, 2013) (SR-BX-2013-024).
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As with the original proposal to establish the SPY Pilot Program,
the Exchange represents that a SPY Pilot Report will be submitted
within thirty (30) days of the end of the first twelve (12) month time
period of the Extended Pilot and would analyze that period. The SPY
Pilot Report will detail the size and different types of strategies
employed with respect to positions established as a result of the
elimination of position limits in SPY. In addition, the report will
note whether any problems resulted due to the no limit approach and any
other information that may be useful in evaluating the effectiveness of
the Extended Pilot. The
[[Page 27964]]
SPY Pilot Report will compare the impact of the SPY Pilot Program, if
any, on the volumes of SPY options and the volatility in the price of
the underlying SPY shares, particularly at expiration during the
Extended Pilot. In preparing the report the Exchange will utilize
various data elements such as volume and open interest. In addition the
Exchange will make available to Commission staff data elements relating
to the effectiveness of the SPY Pilot Program.
Conditional on the findings in the SPY Pilot Report, the Exchange
will file with the Commission a proposal to extend the pilot program,
adopt the pilot program on a permanent basis or terminate the pilot. If
the SPY Pilot Program is not extended or adopted on a permanent basis
by the expiration of the Extended Pilot, the position limits for SPY
would revert to limits in effect at the commencement of the SPY Pilot
Program.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \6\ in general, and furthers the objectives of 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).
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The Exchange believes that the proposed rule change would be
beneficial to market participants, including market makers,
institutional investors and retail investors, by permitting them to
establish greater positions when pursuing their investment goals and
needs. The Exchange also believes that economically equivalent products
should be treated in an equivalent manner so as to avoid regulatory
arbitrage, especially with respect to position limits. Treating SPY and
SPX options differently by virtue of imposing different position limits
is inconsistent with the notion of promoting just and equitable
principles of trade and removing impediments to perfect the mechanisms
of a free and open market. At the same time, the Exchange believes that
the elimination of position limits for SPY options would not increase
market volatility or facilitate the ability to manipulate the market.
B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act. In this regard and as indicated below, the Exchange notes that
the rule change is being proposed as a competitive response to similar
filings by other options exchanges. The Exchange believes this proposed
rule change is necessary to permit fair competition among the options
exchanges and to establish uniform position limits for a multiply
listed options class.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
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, it has become effective pursuant to
Section 19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 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, 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) \10\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\11\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. The Exchange believes
that waiver of the 30-day operative delay is consistent with the
protection of investors and the public interest because it will permit
the SPY Pilot Program to continue without interruption. The Commission
believes that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest. Therefore, the
Commission hereby waives the 30-day operative delay and designates the
proposal operative upon filing.\12\
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\10\ 17 CFR 240.19b-4(f)(6).
\11\ 17 CFR 240.19b-4(f)(6)(iii).
\12\ 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 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 under
Section 19(b)(2)(B) of the Act \13\ to determine whether the proposed
rule change should be approved or disapproved.
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\13\ 15 U.S.C. 78s(b)(2)(B).
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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-2014-025 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-BX-2014-025. 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
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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-BX-2014-025 and should be
submitted on or before June 5, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-11160 Filed 5-14-14; 8:45 am]
BILLING CODE 8011-01-P