[Federal Register Volume 80, Number 21 (Monday, February 2, 2015)]
[Notices]
[Pages 5604-5606]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-01865]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74147; File No. SR-BX-2015-006]
Self-Regulatory Organizations; NASDAQ OMX BX; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change Regarding the
Short Term Option Series Program
January 27, 2015.
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 January 21, 2015, NASDAQ OMX BX, Inc. (``BX'' or 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 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 is proposing changes to amend Chapter IV, Section 6
(Series of Options Contracts Open for Trading) to introduce finer $.50
strike price intervals in non-index Short Term Options with strike
prices less than $100.
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. 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.
[[Page 5605]]
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 amend Chapter IV,
Section 6 governing the Short Term Option (``STO'') \3\ Series Program
to introduce finer strike price intervals for certain STOs. In
particular, the Exchange proposes to amend Chapter IV, Supplementary
Material .07(e) to Section 6 to extend $0.50 strike price intervals in
non-index options to STOs with strike prices less than $100 instead of
the current $75. This proposed change is intended to eliminate gapped
strikes between $75 and $100 that result from conflicting strike price
parameters under the STO Series Program and the $2.50 Strike Price
Program, as described in more detail below.
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\3\ STOs, also known as ``weekly options'' as well as ``Short
Term Options'', are series in an options class that are approved for
listing and trading on the Exchange in which the series are opened
for trading on any Thursday or Friday that is a business day and
that expire on the Friday of the next business week. If a Thursday
or Friday is not a business day, the series may be opened (or shall
expire) on the first business day immediately prior to that Thursday
or Friday, respectively. STOs are listed and traded pursuant to the
STO Series Program. For STO Series Program rules regarding non-index
options, see Chapter 1, Section 1(a)(60) and Chapter IV,
Supplementary Material .07 to Section 6. For STO Series Program
rules regarding index options, see Chapter XIV, Section 2(o) and
Chapter XIV, Section 11(h).
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This is a competitive filing that is based on a recent STO proposal
of the International Securities Exchange, LLC (``ISE'').\4\
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\4\ See Securities Exchange Act Release No. 73999 (January 6,
2015), 80 FR 1559 (January 12, 2015) (SR-ISE-2014-52) (order
approving).
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Under the Exchange's rules, the Exchange may list STOs in up to
fifty option classes in addition to option classes that are selected by
other securities exchanges that employ a similar program under their
respective rules.\5\ On any Thursday or Friday that is a business day,
the Exchange may list STO series in designated option classes that
expire at the close of business on each of the next five Fridays that
are business days and are not Fridays in which monthly or quarterly
options expire.\6\ These STO series trade in $0.50, $1, or $2.50 or
greater strike price intervals depending on the strike price and
whether the option trades in dollar increments in the related monthly
expiration.\7\ Specifically, STOs in non-index option classes admitted
to the STO Series Program currently trade in: (1) $0.50 or greater
intervals for strike prices less than $75, or for option classes that
trade in one dollar increments in the related monthly expiration
option; (2) $1 or greater intervals for strike prices that are between
$75 and $150; and (3) $2.50 or greater intervals for strike prices
above $150.\8\
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\5\ See Chapter IV, Supplementary Material .07(a) to Section 6.
\6\ See Chapter IV, Supplementary Material .07 to Section 6.
\7\ See Chapter IV, Supplementary Material .07(e) to Section 6.
\8\ Id.
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The Exchange also operates a $2.50 Strike Price Program that
permits the Exchange to select up to sixty options classes on
individual stocks to trade in $2.50 strike price intervals, in addition
to option classes selected by other securities exchanges that employ a
similar program under their respective rules.\9\ Monthly expiration
options in classes admitted to the $2.50 Strike Price Program trade in
$2.50 intervals where the strike price is (1) greater than $25 but less
than $50; or (2) between $50 and $100 if the strikes are no more than
$10 from the closing price of the underlying stock in its primary
market on the preceding day.\10\ These strike price parameters conflict
with strike prices allowed for STOs as dollar strikes between $75 and
$100 otherwise allowed under the STO Series Program may be within $0.50
of strikes listed pursuant to the $2.50 Strike Price Program. In order
to remedy this conflict, the Exchange proposes to extend the $0.50
strike price intervals currently allowed for STOs with strike prices
less than $75 to STOs with strike prices less than $100.
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\9\ See Chapter IV, Supplementary Material .03 to Section 6.
\10\ Id. For a definition of ``primary market'', see Chapter 1,
Section 1(a)(48).
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With this proposed change, STOs in non-index option classes will
trade in: (1) $0.50 or greater intervals for strike prices less than
$100, or for option classes that trade in one dollar increments in the
related monthly expiration option; (2) $1 or greater intervals for
strike prices that are between $100 and $150; and (3) $2.50 or greater
intervals for strike prices above $150.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder, including the
requirements of Section 6(b) of the Act.\11\ In particular, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \12\ requirements that the rules of an exchange be
designed to promote just and equitable principles of trade, to prevent
fraudulent and manipulative acts, to foster cooperation and
coordination with persons engaged in facilitating transactions in
securities, to remove impediments to and to perfect the mechanism for a
free and open market and a national market system, and, in general, to
protect investors and the public interest.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
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During the month prior to expiration, the Exchange is permitted to
list related monthly option contracts in the narrower strike price
intervals available for STO series.\13\ After transitioning to short
term strike price intervals, however, monthly options that trade in
$2.50 intervals between $50 and $100 under the $2.50 Strike Price
Program, trade with dollar strikes between $75 and $150. Due to the
overlap of $1 and $2.50 intervals, the Exchange cannot list certain
dollar strikes between $75 and $100 that conflict with the prior $2.50
strikes. For example, if the Exchange initially listed monthly options
on ABC with $75, $77.50, and $80 strikes, the Exchange could list the
$76 and $79 strikes when these transition to short term intervals. The
Exchange would not be permitted to list the $77 and $78 strikes,
however, as these are $0.50 away from the $77.50 strike already listed
on the Exchange. This creates gapped strikes between $75 and $100,
where investors are not able to trade otherwise allowable dollar
strikes on the Exchange. Similarly, these conflicting strike price
parameters create issues for investors who want to roll their positions
from monthly to weekly expirations. In the example above, for instance,
an investor that purchased a monthly ABC option with a $77.50 strike
price would not be able to roll that position into a later short term
expiration with the same strike price as that strike is unavailable
under current STO Series Program rules. Permitting $0.50 intervals for
STOs up to $100 would remedy both of these issues as strikes allowed
under the $2.50 Strike Price Program would not conflict with the finer
$0.50 strike price interval.
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\13\ See Chapter IV, Section 6(d).
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The STO Series Program has been well-received by market
participants and the Exchange believes that introducing finer strike
price intervals for STOs with strike prices between $75 and $100, and
thereby eliminating the gapped strikes described above, will benefit
these market participants by giving them more flexibility to closely
tailor their investment and hedging decisions.
With regard to the impact of this proposal on system capacity, the
[[Page 5606]]
Exchange has analyzed its capacity and represents that it and the
Options Price Reporting Authority (``OPRA'') have the necessary systems
capacity to handle any potential additional traffic associated with
this proposed rule change. The Exchange believes that its members will
not have a capacity issue as a result of this proposal. The Exchange
also represents that it does not believe this expansion will cause
fragmentation of liquidity.
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 that is not necessary or appropriate
in furtherance of the purposes of the Act. To the contrary, the
Exchange believes that the proposed rule change will result in
additional investment options and opportunities to achieve the
investment objectives of market participants seeking efficient trading
and hedging vehicles, to the benefit of investors, market participants,
and the marketplace in general.
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 for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6)
thereunder.\15\
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the 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.
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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 stated that waiver of this requirement will ensure
fair competition among exchanges by allowing the Exchange to open
additional series of individual stocks and ETF options in $.50 strike
price intervals up to $100 in the same manner as ISE. For this reason,
the Commission believes that the proposed rule change presents no novel
issues and that waiver of the 30-day operative delay is consistent with
the protection of investors and the public interest; and will allow the
Exchange to remain competitive with other exchanges. Therefore, the
Commission designates the proposed rule change to be operative upon
filing.\16\
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\16\ 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. 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-2015-006 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-2015-006. 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-BX-2015-006 and should be
submitted on or before February 23, 2015.
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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-01865 Filed 1-30-15; 8:45 am]
BILLING CODE 8011-01-P