Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding the Listing of $1 Strike Prices on the Boston Options Exchange Facility, 5628-5630 [2011-2123]
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5628
Federal Register / Vol. 76, No. 21 / Tuesday, February 1, 2011 / Notices
srobinson on DSKHWCL6B1PROD with NOTICES
However, as the Exchange noted in its
proposal, due to the prohibition on $1
strike price intervals within $0.50 of an
existing strike price, the existence of
series with $2.50 interval strikes for
classes selected for the $1 Strike Price
Program could lead to discontinuities in
strike prices and a lack of parallel
strikes in different expiration months of
the same issue. For example, if a $12.50
strike series was open in a class selected
for the $1 Strike Price Program, the
Exchange would not be able to list series
with a $12 or $13 strike, potentially
resulting in sequence of strike prices at
irregular intervals (i.e., $10, $11, $12.50,
$14, and $15).
To replace these now-forbidden $2.50
interval strikes, the Exchange proposes
to allow the listing of one additional
series within each natural $5 interval, as
follows. The Exchange proposed to
permit the listing of a series with a
strike $2 above the $5-interval strike for
each such $5-interval strike above the
price of the underlying security at the
time of listing. Conversely, the
Exchange’s proposal would permit the
listing of a series with a strike $2 below
the $5-interval strike for each such $5interval strike below the price of the
underlying security at the time of
listing. For example, if the underlying
security was trading at $19, the
Exchange could list a $27 strike between
the $25 and the $30 strikes, and a $32
strike between the $30 and $35 strikes;
as well as a $13 strike between the $10
and $15 strikes, and an $8 strike
between the $10 and $15 strikes. The
Exchange also notes that each such
additional series may be listed only if
such listing is consistent with the
Options Listing Procedures Plan
(‘‘OLPP’’) Provisions in Rule 6.4A.7 The
foregoing provisions would apply to all
classes selected for the $1 Strike Price
Program, both with respect to standard
and long-term options. In addition,
since series with $1-interval strikes are
not permitted for most long-term
options, the proposal would allow the
Exchange to list the long-term strike that
is $2 above the $5-interval just below
the underlying price at the time of
listing. For example, if the underlying
stocks, provided the $1 intervals are not within
$0.50 of an existing series with a $2.50 strike price.
See Rule 6.4 Commentary .04(c). This provision
would not change under the current proposal.
7 Rule 6.4A codifies the limitation on strike price
ranges outlined in the OLPP, which, except in
limited circumstances, prohibits options series with
an exercise price more than 100% above or below
the price of the underlying security if that price is
$20 or less. If the price of the underlying security
is greater than $20, an exchange may not list new
options series with an exercise price more than
50% above or below the price of the underlying
security.
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security is trading at $21.25, this
provision would allow the Exchange to
add a $22 strike ($2 above the $20
strike) for the long-term option series.
In support of its proposal, the
Exchange stated that the proposed rule
change seeks to reduce investor
confusion resulting from discontinuous
strike prices that has arisen in the
operation of the $1 Strike Price Program,
by providing a consistent application of
strike price intervals for issues in the $1
Strike Price Program.
The Exchange further represented that
it has the necessary systems capacity to
support the potential increase in new
options series that will result from the
proposed changes to the $1 Strike Price
Program.
The Commission finds that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to a national securities
exchange.8 Specifically, the
Commission finds that the proposal is
consistent with Section 6(b)(5) of the
Act,9 which requires, among other
things, that the rules of a national
securities exchange be designed to
promote just and equitable principles of
trade, to prevent fraudulent and
manipulative acts and practices, 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.
As the Exchange notes, the proposal
is intended to reduce investor confusion
resulting from the operation of the $1
Strike Price Program by reducing the
occurrences of discontinuities in strike
prices and non-parallel strikes in
different expiration months of the same
issue. The Commission believes that the
proposal strikes a reasonable balance
between the Exchange’s desire to
accommodate market participants and
the need to avoid unnecessary
proliferation of options series and the
corresponding increase in quotes and
market fragmentation. The Commission
expects the Exchange to monitor the
trading and quotation volume associated
with the additional options series listed
as a result of this proposal and the effect
of these additional series on market
fragmentation and on the capacity of the
Exchange’s, OPRA’s, and vendors’
automated systems.
8 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
9 15 U.S.C. 78f(b)(5).
Frm 00070
Fmt 4703
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,10 that the
proposed rule change (SR–NYSEArca–
2010–106) be, and it hereby is,
approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–2115 Filed 1–31–11; 8:45 am]
III. Discussion
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In approving this proposal, the
Commission notes that Exchange has
represented that it has the necessary
systems capacity to support the
potential increase in new options series
that will result from the proposed
changes to the $1 Strike Price Program.
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–63774; File No. SR–BX–
2011–006]
Self-Regulatory Organizations;
NASDAQ OMX BX, Inc.; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change Regarding the
Listing of $1 Strike Prices on the
Boston Options Exchange Facility
January 25, 2011.
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, 2011, 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Rules of the Boston Options Exchange
Group, LLC (‘‘BOX’’) regarding the
listing of $1 strike prices. 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
Exchange’s Internet Web site at https://
10 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
11 17
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Federal Register / Vol. 76, No. 21 / Tuesday, February 1, 2011 / Notices
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
srobinson on DSKHWCL6B1PROD with NOTICES
1. Purpose
The Exchange proposes to amend
Supplementary Material .02 to Chapter
IV, Section 6 (Series of Options
Contracts Open for Trading) of the BOX
Trading Rules to improve the operation
of the $1 Strike Price Program.
Currently, the $1 Strike Price Program
only allows the listing of new $1 strikes
within $5 of the previous day’s closing
price. In certain circumstances this has
led to situations where there are no atthe-money $1 strikes for a day, despite
significant demand. For instance, on
November 15, 2010, the underlying
shares of Isilon Systems Inc. opened at
$33.83. It had closed the previous
trading day at $26.29. Options were
available in $1 intervals up to $31, but
because of the restriction to only listing
within $5 of the previous close, BOX
was not able to add $32, $33, $34, $36,
$37 or $38 strikes during the day.
The Exchange proposes that $1
interval strike prices be allowed to be
added immediately within $5 of the
official opening price in the primary
listing market. Thus, on any day, $1
Strike Program strikes may be added
within $5 of either the opening price or
the previous day’s closing price.
On occasion, the price movement in
the underlying security has been so
great that listing within $5 of either the
previous day’s closing price or the day’s
opening price will leave a gap in the
continuity of strike prices. For instance,
if an issue closes at $14 one day, and the
next day opens above $27, the $21 and
$22 strikes will be more than $5 from
either benchmark. The Exchange
proposes that any such discontinuity be
avoided by allowing the listing of all $1
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Strike Program strikes between the
closing price and the opening price.
Additionally, issues that are in the $1
Strike Price Program may currently have
$2.50 interval strike prices added that
are more than $5 from the underlying
price or are more than a nine months to
expiration (long-term options series). In
such cases, the listing of a $2.50 interval
strike may lead to discontinuities in
strike prices and also a lack of parallel
strikes in different expiration months of
the same issue. For instance, under the
current rules, BOX may list a $12.50
strike in a $1 Strike Program issue
where the underlying price is $24. This
allowance was provided to avoid too
large of an interval between the
standard strike prices of $10 and $15.
The unintended consequence, however,
is that if the underlying price should
decline to $16, BOX would not be able
to list a $12 or $13 strike. If the
underlying stayed near this level at
expiration, a new expiration month
would have the $12 and $13 strike but
not the $12.50, leading to a disparity in
strike intervals in different months of
the same option class. This has also led
to investor confusion, as they regularly
request the addition of inappropriate
strikes so as to roll a position from one
month to another at the same strike
level.
To avoid this problem, the Exchange
proposes to prohibit $2.50 interval
strikes below $50 in all $1 Strike Price
Program issues, including long term
option series. At each standard $5
increment strike more than $5 from the
price of the underlying security, BOX
proposes to list the strike $2 above the
standard strike for each interval above
the price of the underlying security, and
$2 below the standard strike, for each
interval below the price of the
underlying security, provided it meets
the Options Listing Procedures Plan
(‘‘OLPP’’) Provisions in Chapter IV,
Section 6(b) of the BOX Rules.3 For
instance, if the underlying security was
trading at $19, BOX could list, for each
month, the following strikes: $3, $5, $8,
$10, $13, $14, $15, $16, $17, $18, $19,
$20, $21, $22, $23, $24, $25, $27, $30,
$32, $35, and $37.
Instead of $2.50 strikes for long-term
options, the Exchange proposes to list
one long-term $1 Strike option series
strike in the interval between each
3 Chapter IV, Section 6(b) of the BOX Rules
codifies the limitation on strike price ranges
outlined in the OLPP, which, except in limited
circumstances, prohibits options series with an
exercise price more than 100% above or below the
price of the underlying security if that price is $20
or less. If the price of the underlying security is
greater than $20, BOX shall not list new options
series with an exercise price more than 50% above
or below the price of the underlying security.
PO 00000
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standard $5 strike, with the $1 Strike
being $2 above the standard strike price
for each interval above the price of the
underlying security, and $2 below the
standard strike price, for each interval
below the price of the underlying
security. In addition, BOX may list the
long-term $1 strike which is $2 above
the standard strike just below the
underlying price at the time of listing,
and may add additional long-term
options series strikes as the price of the
underlying security moves, consistent
with the OLPP. For instance, if the
underlying is trading at $21.25, longterm strikes could be listed at $15, $18,
$20, $22, $25, $27, and $30. If the
underlying subsequently moved to $22,
the $32 strike could be added. If the
underlying moved to $19.75, the $13,
$10, $8, and $5 strikes could be added.
The Exchange also proposes that
additional long-term option strikes may
not be listed within $1 of an existing
strike until less than nine months to
expiration.
Finally, the Exchange represents that
it has the necessary systems capacity to
support the small increase in new
options series that will result from these
changes to the $1 Strike Price Program.
2. Statutory Basis
The Exchange believes that this
proposed rule change is consistent with
Section 6(b) of the Securities Exchange
Act of 1934 (‘‘Act’’),4 in general, furthers
the objectives of Section 6(b)(5) of the
Act 5 in particular, in that it is designed
to prevent fraudulent and manipulative
acts and practices, promote just and
equitable principles of trade, 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. In particular, the
proposed rule change seeks to reduce
investor confusion and address issues
that have arisen in the operation of the
$1 Strike Price Program by providing a
consistent application of strike price
intervals for issues in the $1 Strike Price
Program. Moreover, the Exchange
believes the proposed rule change
would benefit investors by giving them
more flexibility to closely tailor their
investment decisions. While amending
the $1 Strike Program to allow
additional strike prices will generate
additional quote traffic, BOX does not
believe that this increased traffic will
result in a material proliferation of
additional series because it will affect a
limited number of classes and BOX does
4 15
5 15
E:\FR\FM\01FEN1.SGM
U.S.C. 78f(b).
U.S.C. 78(f)(b)(5).
01FEN1
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Federal Register / Vol. 76, No. 21 / Tuesday, February 1, 2011 / Notices
not believe that the additional price
points will result in fractured liquidity.
investors, or otherwise in furtherance of
the purposes of the Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
IV. Solicitation of Comments
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
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
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 6 and Rule 19b–
4(f)(6) thereunder.7
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.8
Therefore, the Commission designates
the proposal operative upon filing.9
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
6 15
U.S.C. 78s(b)(3)(A).
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.
8 See Securities Exchange Act Release No. 63773
(January 25, 2011) (SR–NYSEAmex–2010–109). See
also Securities Exchange Act Release No. 63770
(January 25, 2011) (SR–NYSEArca–2010–106).
9 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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15:05 Jan 31, 2011
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• 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–2011–006 on the
subject line.
Paper Comments
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–2123 Filed 1–31–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–63777; File No. SR–Phlx2010–157]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Order
Approving a Proposed Rule Change,
as Modified by Amendment Nos. 1 and
2, Relating to Complex Orders
January 26, 2011.
I. Introduction
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
On November 29, 2010, NASDAQ
OMX PHLX LLC (‘‘Phlx’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
All submissions should refer to File
19(b)(1) of the Securities Exchange Act
of 1934 (the ‘‘Act’’),1 and Rule 19b–
Number SR–BX–2011–006. This file
thereunder,2 a proposed rule change to
number should be included on the
subject line if e-mail is used. To help the amend the rules governing the trading of
Complex Orders on the Phlx’s electronic
Commission process and review your
options trading platform, Phlx XL II, to,
comments more efficiently, please use
only one method. The Commission will among other things: (i) Permit Complex
post all comments on the Commission’s Orders with up to six components,
including the underlying stock or
Internet Web site (https://www.sec.gov/
Exchange Traded Fund Share (‘‘ETF’’);
rules/sro.shtml). Copies of the
(ii) establish a Do Not Auction (‘‘DNA’’)
submission, all subsequent
designation for Complex Orders; (iii)
amendments, all written statements
add a definition of conforming ratio; (iv)
with respect to the proposed rule
provide priority rules for Complex
change that are filed with the
Orders traded on Phlx XL II; and (v)
Commission, and all written
provide for the communication of the
communications relating to the
stock or ETF component of a Complex
proposed rule change between the
Commission and any person, other than Order by the Exchange to Nasdaq
Options Services LLC (‘‘NOS’’), the
those that may be withheld from the
Phlx’s affiliated broker-dealer, for
public in accordance with the
execution. The Exchange filed
provisions of 5 U.S.C. 552, will be
Amendment No. 1 to the proposal on
available for Web site viewing and
December 6, 2010.3 The proposed rule
printing in the Commission’s Public
change, as modified by Amendment No.
Reference Room, 100 F Street, NE.,
1, was published for comment in the
Washington, DC 20549, on official
Federal Register on December 15,
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also 2010.4 The Exchange filed Amendment
No. 2 to the proposal on January 11,
will be available for inspection and
copying at the principal office of the
10 17 CFR 200.30–3(a)(12).
Exchange. All comments received will
1 15 U.S.C. 78s(b)(1).
be posted without change; the
2 17 CFR 240.19b–4.
Commission does not edit personal
3 Amendment No. 1 revises Phlx Rule 1080,
identifying information from
Commentary .08(a)(i), to indicate that member
submissions. You should submit only
organizations submitting Complex Orders with a
information that you wish to make
stock/ETF component represent that such orders
comply with the qualified contingent trade
available publicly. All submissions
exemption from Rule 611(a) of Regulation NMS
should refer to File Number SR–BX–
under the Exchange Act.
2011–006 and should be submitted on
4 See Securities Exchange Act Release No. 63509
or before February 22, 2011.
(December 9, 2010), 75 FR 78320 (‘‘Notice’’).
PO 00000
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Agencies
[Federal Register Volume 76, Number 21 (Tuesday, February 1, 2011)]
[Notices]
[Pages 5628-5630]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-2123]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63774; File No. SR-BX-2011-006]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Regarding
the Listing of $1 Strike Prices on the Boston Options Exchange Facility
January 25, 2011.
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, 2011, 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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Rules of the Boston Options
Exchange Group, LLC (``BOX'') regarding the listing of $1 strike
prices. 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 Exchange's Internet Web site at https://
[[Page 5629]]
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
1. Purpose
The Exchange proposes to amend Supplementary Material .02 to
Chapter IV, Section 6 (Series of Options Contracts Open for Trading) of
the BOX Trading Rules to improve the operation of the $1 Strike Price
Program.
Currently, the $1 Strike Price Program only allows the listing of
new $1 strikes within $5 of the previous day's closing price. In
certain circumstances this has led to situations where there are no at-
the-money $1 strikes for a day, despite significant demand. For
instance, on November 15, 2010, the underlying shares of Isilon Systems
Inc. opened at $33.83. It had closed the previous trading day at
$26.29. Options were available in $1 intervals up to $31, but because
of the restriction to only listing within $5 of the previous close, BOX
was not able to add $32, $33, $34, $36, $37 or $38 strikes during the
day.
The Exchange proposes that $1 interval strike prices be allowed to
be added immediately within $5 of the official opening price in the
primary listing market. Thus, on any day, $1 Strike Program strikes may
be added within $5 of either the opening price or the previous day's
closing price.
On occasion, the price movement in the underlying security has been
so great that listing within $5 of either the previous day's closing
price or the day's opening price will leave a gap in the continuity of
strike prices. For instance, if an issue closes at $14 one day, and the
next day opens above $27, the $21 and $22 strikes will be more than $5
from either benchmark. The Exchange proposes that any such
discontinuity be avoided by allowing the listing of all $1 Strike
Program strikes between the closing price and the opening price.
Additionally, issues that are in the $1 Strike Price Program may
currently have $2.50 interval strike prices added that are more than $5
from the underlying price or are more than a nine months to expiration
(long-term options series). In such cases, the listing of a $2.50
interval strike may lead to discontinuities in strike prices and also a
lack of parallel strikes in different expiration months of the same
issue. For instance, under the current rules, BOX may list a $12.50
strike in a $1 Strike Program issue where the underlying price is $24.
This allowance was provided to avoid too large of an interval between
the standard strike prices of $10 and $15. The unintended consequence,
however, is that if the underlying price should decline to $16, BOX
would not be able to list a $12 or $13 strike. If the underlying stayed
near this level at expiration, a new expiration month would have the
$12 and $13 strike but not the $12.50, leading to a disparity in strike
intervals in different months of the same option class. This has also
led to investor confusion, as they regularly request the addition of
inappropriate strikes so as to roll a position from one month to
another at the same strike level.
To avoid this problem, the Exchange proposes to prohibit $2.50
interval strikes below $50 in all $1 Strike Price Program issues,
including long term option series. At each standard $5 increment strike
more than $5 from the price of the underlying security, BOX proposes to
list the strike $2 above the standard strike for each interval above
the price of the underlying security, and $2 below the standard strike,
for each interval below the price of the underlying security, provided
it meets the Options Listing Procedures Plan (``OLPP'') Provisions in
Chapter IV, Section 6(b) of the BOX Rules.\3\ For instance, if the
underlying security was trading at $19, BOX could list, for each month,
the following strikes: $3, $5, $8, $10, $13, $14, $15, $16, $17, $18,
$19, $20, $21, $22, $23, $24, $25, $27, $30, $32, $35, and $37.
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\3\ Chapter IV, Section 6(b) of the BOX Rules codifies the
limitation on strike price ranges outlined in the OLPP, which,
except in limited circumstances, prohibits options series with an
exercise price more than 100% above or below the price of the
underlying security if that price is $20 or less. If the price of
the underlying security is greater than $20, BOX shall not list new
options series with an exercise price more than 50% above or below
the price of the underlying security.
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Instead of $2.50 strikes for long-term options, the Exchange
proposes to list one long-term $1 Strike option series strike in the
interval between each standard $5 strike, with the $1 Strike being $2
above the standard strike price for each interval above the price of
the underlying security, and $2 below the standard strike price, for
each interval below the price of the underlying security. In addition,
BOX may list the long-term $1 strike which is $2 above the standard
strike just below the underlying price at the time of listing, and may
add additional long-term options series strikes as the price of the
underlying security moves, consistent with the OLPP. For instance, if
the underlying is trading at $21.25, long-term strikes could be listed
at $15, $18, $20, $22, $25, $27, and $30. If the underlying
subsequently moved to $22, the $32 strike could be added. If the
underlying moved to $19.75, the $13, $10, $8, and $5 strikes could be
added.
The Exchange also proposes that additional long-term option strikes
may not be listed within $1 of an existing strike until less than nine
months to expiration.
Finally, the Exchange represents that it has the necessary systems
capacity to support the small increase in new options series that will
result from these changes to the $1 Strike Price Program.
2. Statutory Basis
The Exchange believes that this proposed rule change is consistent
with Section 6(b) of the Securities Exchange Act of 1934 (``Act''),\4\
in general, furthers the objectives of Section 6(b)(5) of the Act \5\
in particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, promote just and equitable principles
of trade, 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. In particular, the proposed rule
change seeks to reduce investor confusion and address issues that have
arisen in the operation of the $1 Strike Price Program by providing a
consistent application of strike price intervals for issues in the $1
Strike Price Program. Moreover, the Exchange believes the proposed rule
change would benefit investors by giving them more flexibility to
closely tailor their investment decisions. While amending the $1 Strike
Program to allow additional strike prices will generate additional
quote traffic, BOX does not believe that this increased traffic will
result in a material proliferation of additional series because it will
affect a limited number of classes and BOX does
[[Page 5630]]
not believe that the additional price points will result in fractured
liquidity.
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78(f)(b)(5).
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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.
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 \6\ and Rule 19b-
4(f)(6) thereunder.\7\
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\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 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.\8\
Therefore, the Commission designates the proposal operative upon
filing.\9\
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\8\ See Securities Exchange Act Release No. 63773 (January 25,
2011) (SR-NYSEAmex-2010-109). See also Securities Exchange Act
Release No. 63770 (January 25, 2011) (SR-NYSEArca-2010-106).
\9\ 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-2011-006 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-2011-006. 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-2011-006 and should be
submitted on or before February 22, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-2123 Filed 1-31-11; 8:45 am]
BILLING CODE 8011-01-P