Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Expand the $0.50 Strike Program, 67799-67801 [2010-27701]

Download as PDF Federal Register / Vol. 75, No. 212 / Wednesday, November 3, 2010 / Notices Customer and Professional orders routed from the Phlx XL II system. As with all fees, the Exchange may adjust these Routing Fees in response to competitive conditions by filing a new proposed rule change. While fee changes pursuant to this proposal are effective upon filing, the Exchange has designated these changes to be operative upon the effectiveness of SR–C2–2010–006. 2. Statutory Basis 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. 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. jlentini on DSKJ8SOYB1PROD with NOTICES III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.8 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 6 15 U.S.C. 78f(b). U.S.C. 78f(b)(4). 8 15 U.S.C. 78s(b)(3)(A)(ii). 7 15 19:21 Nov 02, 2010 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: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.9 Florence E. Harmon, Deputy Secretary. [FR Doc. 2010–27689 Filed 11–2–10; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–63206; File No. SR–BX– 2010–073] Electronic Comments The Exchange believes that its proposal to amend its Fee Schedule is consistent with Section 6(b) of the Act 6 in general, and furthers the objectives of Section 6(b)(4) of the Act 7 in particular, in that it is an equitable allocation of reasonable fees and other charges among Exchange members. The Exchange believes that these fees are reasonable because they seek to recoup costs that are incurred by the Exchange when routing Customer and Professional orders to C2 on behalf of its members. The Exchange also believes that the proposed fees to both Customers and Professionals are equitable because it will be uniformly applied to all Customers and Professionals. VerDate Mar<15>2010 whether the proposed rule should be approved or disapproved. 67799 • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–Phlx–2010–151 on the subject line. Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Expand the $0.50 Strike Program October 28, 2010. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 • Send paper comments in triplicate notice is hereby given that, on October to Elizabeth M. Murphy, Secretary, 27, 2010, NASDAQ OMX BX, Inc. (the Securities and Exchange Commission, ‘‘Exchange’’) filed with the Securities 100 F Street, NE., Washington, DC and Exchange Commission (the ‘‘Commission’’) the proposed rule 20549–1090. change as described in Items I and II All submissions should refer to File below, which Items have been prepared Number SR–Phlx–2010–151. This file by the Exchange. The Commission is number should be included on the publishing this notice to solicit subject line if e-mail is used. To help the comments on the proposed rule change Commission process and review your from interested persons. comments more efficiently, please use only one method. The Commission will I. Self-Regulatory Organization’s post all comments on the Commission’s Statement of the Terms of Substance of the Proposed Rule Change Internet website (https://www.sec.gov/ The Exchange proposes to amend rules/sro.shtml). Copies of the Chapter IV, Section 6 (Series of Options submission, all subsequent Contracts Open for Trading) of the Rules amendments, all written statements of the Boston Options Exchange Group, with respect to the proposed rule LLC (‘‘BOX’’), specifically BOX’s $0.50 change that are filed with the Strike Price Program (the ‘‘$0.50 Strike Commission, and all written Program’’ or ‘‘Program’’) 3 to: (i) Expand communications relating to the the $0.50 Strike Program for strike proposed rule change between the Commission and any person, other than prices below $1.00; (ii) extend the $0.50 Strike Program to strike prices that are those that may be withheld from the $5.50 or less; (iii) extend the prices of public in accordance with the the underlying security to at or below provisions of 5 U.S.C. 552, will be $5.00; and (iv) extend the number of available for website viewing and options classes to those overlying 20 printing in the Commission’s Public individual stocks. The text of the Reference Room. Copies of the filing proposed rule change is available from also will be available for inspection and the principal office of the Exchange, on copying at the principal office of the the Commission’s Web site at https:// Exchange. All comments received will www.sec.gov, at the Commission’s be posted without change; the Public Reference Room, and also on the Commission does not edit personal 9 17 CFR 200.30–3(a)(12). identifying information from 1 15 U.S.C. 78s(b)(1). submissions. You should submit only 2 17 CFR 240.19b–4. information that you wish to make 3 See Securities Exchange Act Release Nos. 60814 available publicly. All submissions (October 13, 2009), 74 FR 53535 (October 19, 2009) should refer to File Number SR–Phlx– (SR–BX–2009–63); and 61811 (March 31, 2010), 75 2010–151 and should be submitted on FR 17802 (April 7, 2010) (SR–BX–2010–25) (notice of filing and immediate effectiveness permitting or before November 24, 2010. Paper Comments concurrent listing of $3.50 and $4 strikes for classes in the $0.50 Strike and $1 Strike Programs). Jkt 223001 PO 00000 Frm 00118 Fmt 4703 Sfmt 4703 E:\FR\FM\03NON1.SGM 03NON1 67800 Federal Register / Vol. 75, No. 212 / Wednesday, November 3, 2010 / Notices Exchange’s Internet Web site at https:// nasdaqomxbx.cchwallstreet.com/ NASDAQOMXBX/Filings/. 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 Statutory Basis for, the Proposed Rule Change jlentini on DSKJ8SOYB1PROD with NOTICES 1. Purpose The purpose of this proposed rule change is to modify Chapter IV, Section 6, Supplementary Material .06 of the BOX Rules to expand the $0.50 Strike Program in order to provide investors with opportunities and strategies to minimize losses associated with owning a stock declining in price. The Exchange is proposing to establish strike price intervals of $0.50, beginning at $0.50 for certain options classes where the strike price is $5.50 or less and whose underlying security closed at or below $5.00 in its primary market on the previous trading day and which have national average daily volume that equals or exceeds 1,000 contracts per day as determined by The Options Clearing Corporation (‘‘OCC’’) during the preceding three calendar months. The Exchange also proposes to limit the listing of $0.50 strike prices to options classes overlying no more than 20 individual stocks as specifically designated by BOX. Currently, Chapter IV, Section 6, Supplementary Material .06 of the BOX Rules permits strike price intervals of $0.50 or greater beginning at $1.00 where the strike price for the class is $3.50 or less, but only for options classes whose underlying security closed at or below $3.00 in its primary market on the previous trading day and which have national average daily volume that equals or exceeds 1,000 contracts per day as determined by OCC during the preceding three calendar months. Further, the listing of $0.50 strike prices is limited to options classes overlying no more than 5 individual stocks as specifically designated by VerDate Mar<15>2010 19:21 Nov 02, 2010 Jkt 223001 BOX. BOX is currently restricted from listing series with $1 intervals within $0.50 of an existing strike price in the same series, except that strike prices of $2, $3, and $4 shall be permitted within $0.50 of an existing strike price for classes also selected to participate in the $0.50 Strike Program.4 The number of $0.50 strike options traded on BOX has continued to increase since the inception of the Program. There are now approximately 25 options classes in the $0.50 Strike Program and they are listed, and traded, across all options exchanges including BOX; two of which are classes chosen by BOX for the $0.50 Strike Program. This proposed rule change would expand $0.50 strike offerings to market participants, such as traders and retail investors, and thereby enhance their ability to tailor investing and hedging strategies and opportunities in a volatile market place. By way of example, suppose an investor wanted to invest in 5,000 shares of Sirius Satellite (‘‘SIRI’’) on July 13, 2010. The closing price for SIRI on that day was $ 0.9678. If the investor wanted to buy a call option as an alternative to purchasing the shares outright for about $4,800, the lowest strike price available was the $1 strike, an out-of-the-money option. However, if a $0.50 strike series had been available, the investor would have been able to control 5,000 shares by purchasing 50 exercisable in-the-money $0.50 strike call options. BOX notes that a 3-month SIRI call option with an implied volatility of 50 has a theoretical value of $0.47,5 or $47 per contract. Thus, by investing in options with a $0.50 strike price, the investor could have benefited from the same upside potential as the stock purchase, but at a cost of only $2,350 (50 contracts at $47 per contract). Similarly, if an investor wanted to hedge a position in SIRI stock with put options, the lowest available strike price at the time was $1, an in-the-money option. If a $0.50 strike series had been available, the investor could have used 50 out-of-the-money puts for a fraction of the cost of buying 50 put options with a $1 strike price. BOX believes that investors deserve the opportunity to hedge downside risk in stocks trading less than $1.00 in the same manner as investors have with stocks trading greater than $1.00. Increasing the threshold for the price of the underlying security from $3.00 to $5.00 and expanding the number of $0.50 strikes available for stocks priced 4 See Chapter IV, Section 6, Supplementary Material .02(b) referring to the $1 Strike Program. 5 Using a Black Scholes pricing model. PO 00000 Frm 00119 Fmt 4703 Sfmt 4703 under $5.00 further aids investors by offering opportunities to manage risk and execute a variety of option strategies to improve returns. For example, today an investor can enhance their yield by selling an out-of-themoney call. Using an example of an investor who wants to hedge Citigroup (‘‘C’’) which is trading at $4.24, that investor would be able to choose the $4.50 strike which is 6% out-of-themoney or the $5.00 strike which is 17.92% out-of-the- money, under this proposal. Today, this investor only has the latter choice. Beyond that, this investor today may choose the $6.00 strike which is 41% out-of-the-money and offers significantly less premium. Pursuant to this proposal, if this investor had a choice to hedge the position with a $5.50 strike option, the investor would have the opportunity to sell the option at only 29% out-of-themoney, as compared to 41%, and would improve her return by gaining more premium, while also benefiting from 29% of upside return in the underlying equity. By increasing the number of securities underlying options classes in the Program from 5 individual stocks to 20 individual stocks would allow BOX to offer investors additional opportunities to use the $0.50 Strike Program. BOX notes that $0.50 strikes have had no material impact on capacity. Further, BOX has observed the popularity of $0.50 strikes. Expanding the $0.50 Strike Program will allow investors to better enhance returns and manage risk because they are provided significantly greater flexibility in trading options that overlie lower priced stocks. Expanding the Program will also allow investors to establish equity options positions that are better tailored to meet their investment, trading and risk needs. The Exchange also proposes making a corresponding amendment to Chapter IV, Section 6, Supplementary Material .02(b) of the BOX Rules to add $5 and $6 to $1 Strike Program language that addresses listing series with $1 intervals within $0.50 of an existing strike price in the same series. Currently, and to account for the overlap with the $0.50 Strike Program, the following series are excluded from this prohibition: strike prices of $2, $3, and $4. BOX proposes to add $5 and $6 to that list to account for the proposal to expand the $0.50 Strike Program to strike prices of up to $5.50. Finally, the Exchange proposes to remove the following sentence: Additionally, for an option class selected for the $1 Strike Price Program, BOX may not list $1 Strike Prices on any series having greater than nine (9) E:\FR\FM\03NON1.SGM 03NON1 Federal Register / Vol. 75, No. 212 / Wednesday, November 3, 2010 / Notices months until expiration. This sentence should have been removed when the Exchange expanded the $1 Strike Price Program in a limited fashion to allow BOX to list new series in $1 intervals up to $5 in long-term option series in up to 200 option classes on individual stocks.6 2. Statutory Basis The Exchange believes that the proposal is consistent with the requirements of Section 6(b) of the Act,7 in general, and Section 6(b)(5) of the Act,8 in particular, in that it is designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts, to remove impediments to and perfect the mechanism for a free and open market and a national market system and, in general, to protect investors and the public interest. In particular, the Exchange believes that amending the current $0.50 Strike Program will result in a continuing benefit to investors by giving them more flexibility to closely tailor their investment decisions in a greater number of securities. Investors would be provided with an opportunity, which does not exist today, to minimize losses associated with declining stock prices. With the increase in actively traded, low-priced securities, BOX believes that amending the $0.50 Strike Program to allow a $0.50 strike interval below $1 for strike prices of $5.50 or less is necessary to provide investors additional opportunity to minimize and manage risk. 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. jlentini on DSKJ8SOYB1PROD with NOTICES 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 does not significantly affect the protection of investors or the public interest, does not impose any significant 6 See Securities Exchange Act Release No. 61041 (November 20, 2009), 74 FR 53535 (November 30, 2009) (SR–BX–2009–73). 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(5). VerDate Mar<15>2010 19:21 Nov 02, 2010 Jkt 223001 burden on competition, and, by its terms, does not 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 9 and Rule 19b– 4(f)(6) thereunder.10 The Exchange has requested that the Commission waive the 30-day operative delay. The Commission believes that waiver of the operative delay is consistent with the protection of investors and the public interest because the proposal is substantially similar to that of another exchange that has been approved by the Commission.11 Therefore, the Commission designates the proposal operative upon filing.12 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 67801 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–BX–2010–073. This file number should be included on the subject line if e-mail 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 (https://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 a.m. and 3 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– 2010–073 and should be submitted on or before November 24, 2010. • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–BX–2010–073 on the subject line. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Florence E. Harmon, Deputy Secretary. Paper Comments [FR Doc. 2010–27701 Filed 11–2–10; 8:45 am] • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, BILLING CODE 8011–01–P 9 15 U.S.C. 78s(b)(3)(A). 10 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires the Exchange to give the Commission written notice of the Exchange’s 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 Commission has waived the five-day prefiling requirement in this case. 11 See Securities Exchange Act Release No. 63132 (October 19, 2010), 75 FR 65541 (October 25, 2010) (SR–Phlx–2010–118) (order approving expansion of $0.50 Strike Price Program). 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). PO 00000 Frm 00120 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–63199; File No. SR– NASDAQ–2010–139] Self-Regulatory Organizations; NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Routing Fees October 27, 2010. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 13 17 E:\FR\FM\03NON1.SGM CFR 200.30–3(a)(12). 03NON1

Agencies

[Federal Register Volume 75, Number 212 (Wednesday, November 3, 2010)]
[Notices]
[Pages 67799-67801]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-27701]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63206; File No. SR-BX-2010-073]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Expand 
the $0.50 Strike Program

October 28, 2010.
    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 October 27, 2010, NASDAQ OMX BX, Inc. (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 prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
---------------------------------------------------------------------------

    \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 Chapter IV, Section 6 (Series of 
Options Contracts Open for Trading) of the Rules of the Boston Options 
Exchange Group, LLC (``BOX''), specifically BOX's $0.50 Strike Price 
Program (the ``$0.50 Strike Program'' or ``Program'') \3\ to: (i) 
Expand the $0.50 Strike Program for strike prices below $1.00; (ii) 
extend the $0.50 Strike Program to strike prices that are $5.50 or 
less; (iii) extend the prices of the underlying security to at or below 
$5.00; and (iv) extend the number of options classes to those overlying 
20 individual stocks. The text of the proposed rule change is available 
from the principal office of the Exchange, on the Commission's Web site 
at https://www.sec.gov, at the Commission's Public Reference Room, and 
also on the

[[Page 67800]]

Exchange's Internet Web site at https://nasdaqomxbx.cchwallstreet.com/NASDAQOMXBX/Filings/.
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    \3\ See Securities Exchange Act Release Nos. 60814 (October 13, 
2009), 74 FR 53535 (October 19, 2009) (SR-BX-2009-63); and 61811 
(March 31, 2010), 75 FR 17802 (April 7, 2010) (SR-BX-2010-25) 
(notice of filing and immediate effectiveness permitting concurrent 
listing of $3.50 and $4 strikes for classes in the $0.50 Strike and 
$1 Strike Programs).
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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 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this proposed rule change is to modify Chapter IV, 
Section 6, Supplementary Material .06 of the BOX Rules to expand the 
$0.50 Strike Program in order to provide investors with opportunities 
and strategies to minimize losses associated with owning a stock 
declining in price.
    The Exchange is proposing to establish strike price intervals of 
$0.50, beginning at $0.50 for certain options classes where the strike 
price is $5.50 or less and whose underlying security closed at or below 
$5.00 in its primary market on the previous trading day and which have 
national average daily volume that equals or exceeds 1,000 contracts 
per day as determined by The Options Clearing Corporation (``OCC'') 
during the preceding three calendar months. The Exchange also proposes 
to limit the listing of $0.50 strike prices to options classes 
overlying no more than 20 individual stocks as specifically designated 
by BOX.
    Currently, Chapter IV, Section 6, Supplementary Material .06 of the 
BOX Rules permits strike price intervals of $0.50 or greater beginning 
at $1.00 where the strike price for the class is $3.50 or less, but 
only for options classes whose underlying security closed at or below 
$3.00 in its primary market on the previous trading day and which have 
national average daily volume that equals or exceeds 1,000 contracts 
per day as determined by OCC during the preceding three calendar 
months. Further, the listing of $0.50 strike prices is limited to 
options classes overlying no more than 5 individual stocks as 
specifically designated by BOX. BOX is currently restricted from 
listing series with $1 intervals within $0.50 of an existing strike 
price in the same series, except that strike prices of $2, $3, and $4 
shall be permitted within $0.50 of an existing strike price for classes 
also selected to participate in the $0.50 Strike Program.\4\
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    \4\ See Chapter IV, Section 6, Supplementary Material .02(b) 
referring to the $1 Strike Program.
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    The number of $0.50 strike options traded on BOX has continued to 
increase since the inception of the Program. There are now 
approximately 25 options classes in the $0.50 Strike Program and they 
are listed, and traded, across all options exchanges including BOX; two 
of which are classes chosen by BOX for the $0.50 Strike Program. This 
proposed rule change would expand $0.50 strike offerings to market 
participants, such as traders and retail investors, and thereby enhance 
their ability to tailor investing and hedging strategies and 
opportunities in a volatile market place.
    By way of example, suppose an investor wanted to invest in 5,000 
shares of Sirius Satellite (``SIRI'') on July 13, 2010. The closing 
price for SIRI on that day was $ 0.9678. If the investor wanted to buy 
a call option as an alternative to purchasing the shares outright for 
about $4,800, the lowest strike price available was the $1 strike, an 
out-of-the-money option. However, if a $0.50 strike series had been 
available, the investor would have been able to control 5,000 shares by 
purchasing 50 exercisable in-the-money $0.50 strike call options. BOX 
notes that a 3-month SIRI call option with an implied volatility of 50 
has a theoretical value of $0.47,\5\ or $47 per contract. Thus, by 
investing in options with a $0.50 strike price, the investor could have 
benefited from the same upside potential as the stock purchase, but at 
a cost of only $2,350 (50 contracts at $47 per contract).
---------------------------------------------------------------------------

    \5\ Using a Black Scholes pricing model.
---------------------------------------------------------------------------

    Similarly, if an investor wanted to hedge a position in SIRI stock 
with put options, the lowest available strike price at the time was $1, 
an in-the-money option. If a $0.50 strike series had been available, 
the investor could have used 50 out-of-the-money puts for a fraction of 
the cost of buying 50 put options with a $1 strike price. BOX believes 
that investors deserve the opportunity to hedge downside risk in stocks 
trading less than $1.00 in the same manner as investors have with 
stocks trading greater than $1.00.
    Increasing the threshold for the price of the underlying security 
from $3.00 to $5.00 and expanding the number of $0.50 strikes available 
for stocks priced under $5.00 further aids investors by offering 
opportunities to manage risk and execute a variety of option strategies 
to improve returns. For example, today an investor can enhance their 
yield by selling an out-of-the-money call. Using an example of an 
investor who wants to hedge Citigroup (``C'') which is trading at 
$4.24, that investor would be able to choose the $4.50 strike which is 
6% out-of-the- money or the $5.00 strike which is 17.92% out-of-the- 
money, under this proposal. Today, this investor only has the latter 
choice. Beyond that, this investor today may choose the $6.00 strike 
which is 41% out-of-the-money and offers significantly less premium. 
Pursuant to this proposal, if this investor had a choice to hedge the 
position with a $5.50 strike option, the investor would have the 
opportunity to sell the option at only 29% out-of-the-money, as 
compared to 41%, and would improve her return by gaining more premium, 
while also benefiting from 29% of upside return in the underlying 
equity.
    By increasing the number of securities underlying options classes 
in the Program from 5 individual stocks to 20 individual stocks would 
allow BOX to offer investors additional opportunities to use the $0.50 
Strike Program. BOX notes that $0.50 strikes have had no material 
impact on capacity. Further, BOX has observed the popularity of $0.50 
strikes. Expanding the $0.50 Strike Program will allow investors to 
better enhance returns and manage risk because they are provided 
significantly greater flexibility in trading options that overlie lower 
priced stocks. Expanding the Program will also allow investors to 
establish equity options positions that are better tailored to meet 
their investment, trading and risk needs.
    The Exchange also proposes making a corresponding amendment to 
Chapter IV, Section 6, Supplementary Material .02(b) of the BOX Rules 
to add $5 and $6 to $1 Strike Program language that addresses listing 
series with $1 intervals within $0.50 of an existing strike price in 
the same series. Currently, and to account for the overlap with the 
$0.50 Strike Program, the following series are excluded from this 
prohibition: strike prices of $2, $3, and $4. BOX proposes to add $5 
and $6 to that list to account for the proposal to expand the $0.50 
Strike Program to strike prices of up to $5.50.
    Finally, the Exchange proposes to remove the following sentence: 
Additionally, for an option class selected for the $1 Strike Price 
Program, BOX may not list $1 Strike Prices on any series having greater 
than nine (9)

[[Page 67801]]

months until expiration. This sentence should have been removed when 
the Exchange expanded the $1 Strike Price Program in a limited fashion 
to allow BOX to list new series in $1 intervals up to $5 in long-term 
option series in up to 200 option classes on individual stocks.\6\
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    \6\ See Securities Exchange Act Release No. 61041 (November 20, 
2009), 74 FR 53535 (November 30, 2009) (SR-BX-2009-73).
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\7\ in general, and Section 
6(b)(5) of the Act,\8\ in particular, in that it is designed to promote 
just and equitable principles of trade, to prevent fraudulent and 
manipulative acts, to remove impediments to and perfect the mechanism 
for a free and open market and a national market system and, in 
general, to protect investors and the public interest. In particular, 
the Exchange believes that amending the current $0.50 Strike Program 
will result in a continuing benefit to investors by giving them more 
flexibility to closely tailor their investment decisions in a greater 
number of securities. Investors would be provided with an opportunity, 
which does not exist today, to minimize losses associated with 
declining stock prices. With the increase in actively traded, low-
priced securities, BOX believes that amending the $0.50 Strike Program 
to allow a $0.50 strike interval below $1 for strike prices of $5.50 or 
less is necessary to provide investors additional opportunity to 
minimize and manage risk.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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.

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 does not significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not 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 \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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 
Commission has waived the five-day prefiling requirement in this 
case.
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    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission believes that waiver of the operative 
delay is consistent with the protection of investors and the public 
interest because the proposal is substantially similar to that of 
another exchange that has been approved by the Commission.\11\ 
Therefore, the Commission designates the proposal operative upon 
filing.\12\
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    \11\ See Securities Exchange Act Release No. 63132 (October 19, 
2010), 75 FR 65541 (October 25, 2010) (SR-Phlx-2010-118) (order 
approving expansion of $0.50 Strike Price Program).
    \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.

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 (https://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-BX-2010-073 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-2010-073. This file 
number should be included on the subject line if e-mail 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 (https://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 
a.m. and 3 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-2010-073 and should be 
submitted on or before November 24, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-27701 Filed 11-2-10; 8:45 am]
BILLING CODE 8011-01-P
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