Order Granting Application by BOX Options Exchange LLC for a Conditional Exemption Pursuant to Section 36(a) of the Exchange Act From Certain Requirements of Rules 6a-1 and 6a-2 Under the Exchange Act, 4845-4848 [2012-2021]
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Federal Register / Vol. 77, No. 20 / Tuesday, January 31, 2012 / Notices
rule change is consistent with Section
6(b)(5) of the Act,15 which requires,
among other things, that the rules of a
national securities exchange be
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, 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.
The Commission believes that the
limitation on automatic executions of
marketable complex orders against
individual leg market quotations for
options classes traded on CBOE’s
Hybrid 3.0 trading platform is consistent
with the Act. According to CBOE, the
limitation is designed to address an
operational issue that CBOE believes
could discourage market makers,
particularly Lead Market Makers, from
offering additional liquidity in the
individual series legs. This operational
issue may arise when a market maker
unintentionally trades with another
market maker or market participant via
COB or COA before the market maker’s
quote update(s) in the individual series
leg(s) is processed. By addressing an
operational issue that might discourage
market makers from offering additional
liquidity in the individual series legs,
the Commission believes that the
limitation on automatic executions of
marketable complex orders against
market makers’ quotations in the
individual series legs could benefit
investors by helping to increase
liquidity in the individual series legs. In
addition, the Commission notes that it
approved a proposal by the
International Securities Exchange, LLC
(‘‘ISE’’) that limits the automatic
execution of market makers’ complex
order quotations against bids and offers
in the individual series legs.16
Under CBOE Rule 6.53C,
Interpretation and Policy .10, a
marketable complex order may execute
automatically against individual orders
in the EBook, provided that the complex
order can be executed in full or in a
permissible ratio and the orders in the
EBook are priced equal to or better than
the individual quotes in the EBook.17
The Commission believes that this
requirement will prevent any leg of a
complex order from trading at a price
that is inferior to the best quote for the
series in the EBook. CBOE Rule 6.53,
Interpretation and Policy .01 provides,
15 15
U.S.C. 78f(b)(5).
Securities Exchange Act Release No. 65548
(October 13, 2011), 76 FR 64980 (October 19, 2011)
(order approving File No. SR–ISE–2011–39).
17 See CBOE Rule 6.53C, Interpretation and Policy
.10(b).
16 See
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further, that complex orders that are
marketable against each other will
execute automatically only if the
execution is at a net price that has
priority over the individual orders and
quotes in the EBook.18 The Commission
believes that this provision will
maintain the current requirements for a
complex order to obtain priority over
individual orders and quotes in the
EBook.
Under CBOE Rule 6.53C,
Interpretation and Policy .10, the
allocation of marketable complex orders
against orders in the EBook and against
other complex orders will be based on
the best net price(s), and multiple orders
at the same net price will be allocated
as provided in CBOE Rules 6.53C(c)
and/or (d), as applicable.19 Accordingly,
the proposal applies the requirements of
the existing COB and COA allocation
frameworks to determine how a
marketable complex order would be
allocated against individual orders in
the EBook and other complex orders at
the same net price.
Any part of a marketable complex
order that can be executed in full or in
a permissible ratio when it is routed to
COB or after being subject to a COA will
be executed automatically, and the part
of the order that cannot execute
automatically will route to PAR or to the
order entry firm’s booth.20 If the order
is not eligible to route to PAR, the
remaining balance will be cancelled.21
The Commission believes that these
provisions will advise market
participants of the treatment of
marketable complex orders that cannot
be executed in full or in a permissible
ratio by clearly describing the
processing of these orders.
A complex order resting in COB that
becomes marketable but cannot be
executed automatically in full or in a
permissible ratio will be subject to a
COA.22 The Commission believes that
subjecting such orders to a COA could
provide an opportunity for price
improvement and facilitate the
execution of marketable complex orders.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,23 that the
18 See CBOE Rule 6.53C, Interpretation and Policy
.10(b).
19 See CBOE Rule 6.53C, Interpretation and Policy
.10. CBOE Rule 6.53C(c) describes the operation of
the COB, and CBOE Rule 6.53C(d) describes the
operation of the COA.
20 See CBOE Rule 6.53C, Interpretation and Policy
.10(c).
21 See CBOE Rule 6.53C, Interpretation and Policy
.10(c).
22 See CBOE Rule 6.53C, Interpretation and Policy
.10(d).
23 15 U.S.C. 78s(b)(2).
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4845
proposed rule change (SR–CBOE–2011–
114) is approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–1987 Filed 1–30–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66241]
Order Granting Application by BOX
Options Exchange LLC for a
Conditional Exemption Pursuant to
Section 36(a) of the Exchange Act
From Certain Requirements of Rules
6a–1 and 6a–2 Under the Exchange Act
January 26, 2012.
I. Introduction
On December 19, 2011, BOX Options
Exchange LLC (the ‘‘Applicant’’)
submitted to the Securities and
Exchange Commission (‘‘Commission’’)
an application on Form 1 under the
Securities Exchange Act of 1934
(‘‘Exchange Act’’) to register as a
national securities exchange.1 In
addition, the Applicant, pursuant to
Rule 0–12 2 under the Exchange Act, has
requested an exemption under Section
36(a)(1) of the Exchange Act 3 from
certain requirements of Rules 6a-1(a)
and 6a–2 under the Exchange Act.4 This
order grants the Applicant’s request for
exemptive relief, subject to the
satisfaction of certain conditions, which
are outlined below.
24 17
CFR 200.30–3(a)(12).
December 28, 2011, the Applicant submitted
Amendment No. 1 to its Form 1 application.
Amendment No. 1, among other things, provides
the unconsolidated financial statements for certain
affiliates of the Applicant that are required in
Exhibit D to Form 1 but were not included in the
Applicant’s initial Form 1 application. In its initial
Form 1 application, the Applicant only submitted
consolidated financials for certain of these affiliates.
See Securities Exchange Act Release No. 66242
(January 26, 2012) (publishing for notice and
comment the Applicant’s Form 1 application, as
amended, to register as a national securities
exchange).
2 17 CFR 240.0–12.
3 15 U.S.C. 78mm(a)(1).
4 17 CFR 240.6a–1(a) and 6a–2. See letter from
Lisa J. Fall, General Counsel and Secretary, Boston
Options Exchange Group LLC, to Elizabeth Murphy,
Secretary, Commission, dated December 16, 2011
(‘‘Exemption Request’’).
1 On
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Federal Register / Vol. 77, No. 20 / Tuesday, January 31, 2012 / Notices
II. Application for Conditional
Exemption From Certain Requirements
of Exchange Act Rules 6a–1 and 6a–2
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A. Filing Requirements Under Exchange
Act Rule 6a–1(a)
Exchange Act Rule 6a–1(a) requires an
applicant for registration as a national
securities exchange to file an
application with the Commission on
Form 1. Exhibit C to Form 1 requires the
applicant to provide certain information
with respect to each of its subsidiaries
and affiliates.5 For purposes of Form 1,
an ‘‘affiliate’’ is ‘‘[a]ny person that,
directly or indirectly, controls, is under
common control with, or is controlled
by, the national securities exchange
* * * including any employees.’’ 6
Form 1 defines ‘‘control’’ as ‘‘[t]he
power, directly or indirectly, to direct
the management or policies of a
company, whether through ownership
of securities, by contract, or otherwise
* * * .’’ 7 Form 1 provides, further, that
any person that directly or indirectly
has the right to vote 25% or more of a
class of voting securities, or has the
power to sell or direct the sale of 25%
or more of a class of voting securities,
is presumed to control the entity.8
Exhibit D to Form 1 requires an
applicant for exchange registration to
provide unconsolidated financial
statements for the latest fiscal year for
each subsidiary or affiliate. Exhibit D
requires the financial statements to
include, at a minimum, a balance sheet
and an income statement with such
footnotes and other disclosures as are
necessary to avoid rendering the
financial statements misleading. Exhibit
D provides, in addition, that if any
affiliate or subsidiary of the applicant is
required by another Commission Rule to
submit annual financial statements, a
5 Specifically, Exhibit C requires the applicant to
provide, for each subsidiary or affiliate, and for any
entity that operates an electronic trading system
used to effect transactions on the exchange: (1) The
name and address of the organization; (2) the form
of organization; (3) the name of the state and statute
citation under which it is organized, and the date
of its incorporation in its present form; (4) a brief
description of the nature and extent of the
affiliation; (5) a brief description of the
organization’s business or function; (6) a copy of the
organization’s constitution; (7) a copy of the
organization’s articles of incorporation or
association, including all amendments; (8) a copy
of the organization’s by-laws or corresponding rules
or instruments; (9) the name and title of the
organization’s present officers, governors, members
of all standing committees, or persons performing
similar functions; and (10) an indication of whether
the business or organization ceased to be associated
with the applicant during the previous year, and a
brief statement of the reasons for termination of the
association.
6 Form 1 Instructions, Explanation of Terms, 17
CFR 249.1.
7 Id.
8 Id.
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statement to that effect, with a citation
to the other Commission rule, may be
provided in lieu of the financial
statements required in Exhibit D.
A Form 1 application is not
considered filed until all necessary
information, including financial
statements and other required
documents, have been furnished in the
proper form.9
B. Filing Requirements Under Exchange
Act Rule 6a–2
Exchange Act Rule 6a–2(a)(2) requires
a national securities exchange to update
the information provided in Exhibit C
within 10 days of any action that causes
the information provided in Exhibit C to
become inaccurate or incomplete. In
addition, Exchange Act Rule 6a–2(b)(1)
requires a national securities exchange
to file Exhibit D on or before June 30 of
each year, and Exchange Act Rule 6a–
2(c) requires a national securities
exchange to file Exhibit C every three
years.
C. Exemption Request
On December 19, 2011, the Applicant
requested that the Commission grant an
exemption under Section 36 of the
Exchange Act, subject to the conditions
set forth below, from the requirement
under Exchange Act Rule 6a–1 to file
the information requested in Exhibits C
and D to Form 1 for the ‘‘Foreign
Indirect Affiliates,’’ as defined below, of
the Applicant.10 In addition, the
Applicant requested an exemption,
subject to certain conditions, with
respect to the Foreign Indirect Affiliates
from the requirements under: (1)
Exchange Act Rule 6a–2(a)(2) to amend
Exhibit C within 10 days if the
information in Exhibit C becomes
inaccurate or incomplete; and (2)
Exchange Act Rule 6a–2(b)(1) and (c) to
file periodic updates to Exhibits C and
D.
MX US 2, Inc., a Delaware
corporation, would hold a 20% voting
interest and a 40% equity interest in the
Applicant. MX US 2, Inc. also would
hold a 53.83% interest in BOX Holdings
LLC, which would be the 100% owner
of BOX Market, which would own and
operate the Boston Options Exchange
options trading platform as a facility of
9 17
CFR 202.3(b)(2). See also 17 CFR 240.0–3(a).
Defective Form 1 applications ‘‘may be returned
with a request for correction or held until corrected
before being accepted as a filing.’’ See 17 CFR
202.3(b)(2). See also Securities Exchange Act
Release No. 40760 (Dec. 8, 1998), 63 FR 70844,
70881 (Dec. 22, 1998) (‘‘Regulation ATS Adopting
Release’’).
10 See Exemption Request, supra note 4.
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the Applicant.11 MX US 2, Inc. is a
wholly owned subsidiary of MX US 1,
Inc., a Delaware corporation. MX US 1,
Inc. is a wholly owned subsidiary of
Bourse de Montreal, Inc., a Canadian
corporation. Bourse de Montreal, Inc. is
a wholly owned subsidiary of TMX
Group, Inc., a Canadian corporation.
According to the Applicant, the parent
ownership structure of MX US 1, Inc. is
comprised entirely of foreign entities,
Bourse de Montreal, Inc. and TMX
Group, Inc. (the ‘‘Foreign Direct
Affiliates’’), which in turn own
interests, either directly or indirectly, of
25 percent or more in a number of other
foreign entities (the ‘‘Foreign Indirect
Affiliates’’).12
Because of the limited and indirect
nature of its connection to the Foreign
Indirect Affiliates, the Applicant
believes that the corporate and financial
information of the Foreign Indirect
Affiliates required by Exhibits C and D
of Form 1 would have little relevance to
the Commission’s review of the
Applicant’s Form 1 application or to the
Commission’s ongoing oversight of the
Applicant as a national securities
exchange if the Commission were to
approve the Applicant’s Form 1
application.13 In this regard, the
Exemption Request states that the
Foreign Indirect Affiliates have no
ability to influence the management,
policies, or finances of the Applicant
and no obligation to provide funding to,
or ability to materially affect the funding
of, the Applicant.14 The Exemption
Request also states that (1) the Foreign
Indirect Affiliates have no ownership
interest in the Applicant or in any of the
controlling shareholders of the
Applicant; and (2) there are no
commercial dealings between the
Applicant and the Foreign Indirect
Affiliates.15 Further, the Exemption
Request states that obtaining detailed
corporate and financial information
with respect to the Foreign Indirect
Affiliates (1) is unnecessary for the
protection of investors and the public
interest and (2) would be unduly
burdensome and inefficient because
these affiliates are located in foreign
jurisdictions and the disclosure of such
information could implicate foreign
information sharing restrictions in such
jurisdictions.16
11 MX US 2, Inc. currently holds a 53.83%
interest in the Boston Options Exchange Group,
LLC, a facility of NASDAQ OMX BX, Inc.
12 See Exemption Request, supra note 4, at 3–4.
13 Id. at 4.
14 Id.
15 Id.
16 Id. The Applicant also believes that providing
the information required by Exhibits C and D with
respect to the Foreign Indirect Affiliates could raise
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Federal Register / Vol. 77, No. 20 / Tuesday, January 31, 2012 / Notices
As a condition to the granting of
exemptive relief, the Applicant has
agreed to provide: (i) A listing of the
names of the Foreign Indirect Affiliates;
(ii) an organizational chart setting forth
the affiliation of the Foreign Indirect
Affiliates and the Foreign Direct
Affiliates and the Applicant; and (iii) in
Exhibit C of the Applicant’s Form 1
application, a description of the nature
of the Foreign Indirect Affiliates’
affiliation with the Foreign Direct
Affiliates and the Applicant. In
addition, as a condition to the granting
of exemptive relief from the
requirements of Exchange Act Rule 6a–
2(a)(2), 6a–2(b)(1), and 6a–2(c), as
described above, the Applicant has
agreed to provide amendments to the
information required under conditions
(i) through (iii) above on or before June
30th of each year. Further, the
Applicant notes that it will provide the
information required by Exhibits C and
D for all of its affiliates other than the
Foreign Indirect Affiliates, including the
Foreign Direct Affiliates.17
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III. Order Granting Conditional Section
36 Exemption
Section 6 of the Exchange Act 18 sets
forth a procedure for an exchange to
register as a national securities
exchange.19 Exchange Act Rule 6a–
1(a)20 requires an application for
registration as a national securities
exchange to be filed on Form 1 in
accordance with the instructions in
Form 1. A Form 1 application is not
considered filed until all necessary
information, including financial
statements and other required
documents, have been furnished in the
proper form.21 Exchange Act Rule 6a–2
establishes ongoing requirements to file
certain amendments to Form 1.
Section 36(a)(1) of the Exchange Act
provides that ‘‘the Commission, by rule,
regulation, or order, may conditionally
or unconditionally exempt any person,
security, or transaction, or any class or
classes of persons, securities, or
confidentiality concerns because many of the
Foreign Indirect Affiliates are not public
companies. Id.
17 See Exemption Request, supra note 4, at 4.
18 15 U.S.C. 78f.
19 Specifically, Section 6(a) of the Exchange Act
states that ‘‘[a]n exchange may be registered as a
national securities exchange * * * by filing with
the Commission an application for registration in
such form as the Commission, by rule, may
prescribe containing the rules of the exchange and
such other information and documents as the
Commission, by rule, may prescribe as necessary or
appropriate in the public interest or for the
protection of investors.’’ Section 6 of the Exchange
Act also sets forth various requirements to which
a national securities exchange is subject.
20 17 CFR 240.6a–1(a).
21 17 CFR 202.3(b)(2). See also supra note 9.
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transactions, from any provision or
provisions of [the Exchange Act] or of
any Rule or regulation thereunder, to
the extent that such exemption is
necessary or appropriate in the public
interest, and is consistent with the
protection of investors.’’22
For the reasons discussed below, the
Commission believes that it is
appropriate in the public interest and
consistent with the protection of
investors to exempt the Applicant from
the requirement under Exchange Act
Rule 6a–1 to provide the information
required in Exhibits C and D to Form 1
with respect to the Foreign Indirect
Affiliates, subject to the following
conditions:
(1) The Applicant must provide a list
of the names of the Foreign Indirect
Affiliates;
(2) The Applicant must provide an
organizational chart setting forth the
affiliation of the Foreign Indirect
Affiliates and the Foreign Direct
Affiliates and the Applicant; and
(3) As part of Exhibit C to the
Applicant’s Form 1 Application, the
Applicant must provide a description of
the nature of the affiliation between the
Foreign Indirect Affiliates and the
Foreign Direct Affiliates and the
Applicant.
The Commission believes, further,
that it is appropriate in the public
interest and consistent with the
protection of investors to exempt the
Applicant, with respect to the Foreign
Indirect Affiliates, from the
requirements under: (a) Exchange Act
Rule 6a–2(a)(2) to amend Exhibit C
within 10 days of any action that
renders the information in Exhibit C
inaccurate or incomplete; (b) Exchange
Act Rules 6a–2(c) to provide periodic
updates of Exhibit C; and (c) Exchange
Act Rules 6a–2(b)(1) to provide periodic
updates of Exhibit D, subject to the
condition that the Applicant provides
amendments to the information required
under conditions (1) through (3) above
on or before June 30th of each year.
As part of an application for exchange
registration, the information included in
Exhibits C and D is designed to help the
Commission make the determinations
required under Sections 6(b) and 19(a)
of the Exchange Act with respect to the
application. The updated Exhibit C and
D information required under Exchange
Act Rule 6a–2 is designed to help the
Commission exercise its oversight
responsibilities with respect to
registered national securities exchanges.
Specifically, Exhibit D is designed to
provide the Commission with
information concerning the financial
22 15
PO 00000
U.S.C. 78mm(a)(1).
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4847
status of an exchange and its affiliates
and subsidiaries,23 and Exhibit C
provides the Commission with the
names and organizational documents of
these affiliates and subsidiaries.24 Such
information is designed to help the
Commission determine whether an
applicant for exchange registration
would have the ability to carry out its
obligations under the Exchange Act, and
whether a registered national securities
exchange continues to have the ability
to carry out its obligations under the
Exchange Act.
Since the most recent amendments to
Form 1 in 1998,25 many registered
national securities exchanges that
previously were member-owned
organizations with few affiliated entities
have demutualized. Some of these
demutualized exchanges have been
consolidated under holding companies
with numerous affiliates that, in some
cases, have only a limited and indirect
connection to the registered national
securities exchange, with no ability to
influence the management or policies of
the registered exchange and no
obligation to fund, or to materially affect
the funding of, the registered exchange.
The Commission believes that, for these
affiliated entities, the information
required under Exhibits C and D would
have limited relevance to the
Commission’s review of an application
for exchange registration or to its
oversight of a registered exchange.
Based on the Applicant’s
representations, the indirect nature of
the relationship between the Applicant
and the Foreign Indirect Affiliates, and
the information that the Applicant will
provide with respect to the Foreign
Direct Affiliates and the Foreign Indirect
Affiliates, the Commission believes that
it will have sufficient information to
review the Applicant’s Form 1
application and to make the
determinations required under Sections
6(b) and 19(a) of the Exchange Act with
respect to its application for registration
as a national securities exchange.26 The
Commission believes, further, that it
would have the information necessary
23 See Securities Exchange Act Release No. 18843
(June 25, 1982), 47 FR 29259 (July 6, 1982)
(proposing amendments to Form 1); see also Form
1, 17 CFR 249.1, and supra Section II.A.
24 Form 1, 17 CFR 249.1. See also supra note 5.
25 See Regulation ATS Adopting Release, supra
note 9.
26 15 U.S.C. 78f(b) and 78s(a). Section 6(b) of the
Exchange Act enumerates certain determinations
that the Commission must make with respect to an
exchange before registering the exchange as a
national securities exchange. The Commission will
not register an exchange as a national securities
exchange unless it is satisfied that the exchange
meets these requirements. See Regulation ATS
Adopting Release, supra note 9, at IV.B.
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Federal Register / Vol. 77, No. 20 / Tuesday, January 31, 2012 / Notices
to oversee the Applicant’s activities as
a national securities exchange if the
Commission were to approve the
Applicant’s Form 1 application. In
particular, the Commission notes that
the Applicant has represented that it
would have no direct connection to the
Foreign Indirect Affiliates, that the
Foreign Indirect Affiliates would have
no ability to influence the management
or policies of the Applicant, and that the
Foreign Indirect Affiliates would have
no obligation to fund, or ability to
materially affect the funding of, the
Applicant. In addition, the Commission
notes that the Applicant represented
that: (1) The Foreign Indirect Affiliates
have no ownership interest in the
Applicant or in any of the controlling
equity holders of the Applicant; and (2)
there are no commercial dealings
between the Applicant and the Foreign
Indirect Affiliates.27 The Commission
also believes that, based on the
Applicant’s representations, it could be
burdensome for the Applicant to obtain
detailed corporate and financial
information with respect to the Foreign
Indirect Affiliates because these
affiliates are located in foreign
jurisdictions and the disclosure of such
information could implicate foreign
information sharing restrictions in such
jurisdictions.28
Given the limited and indirect
relationship between the Applicant and
the Foreign Indirect Affiliates and the
location of the Foreign Indirect
Affiliates in foreign jurisdictions, as
described above, the Commission
believes that the detailed corporate and
financial information required in
Exhibits C and D with respect to the
Foreign Indirect Affiliates is
unnecessary for the Commission’s
review of the Applicant’s Form 1
application and would be unnecessary
for the Commission’s oversight of the
Applicant as a registered national
securities exchange following any
Commission approval of its Form 1
application.
For the reasons discussed above, the
Commission finds that the conditional
exemptive relief requested by the
Applicant is appropriate in the public
interest and is consistent with the
protection of investors.
It is ordered, pursuant to Section 36
of the Exchange Act,29 and subject to the
conditions described above, that the
Applicant is exempt from the
requirements to: (1) include in its Form
1 application the information required
in Exhibits C and D to Form 1 with
Exemption Request, supra note 4, at 4.
id.
29 15 U.S.C. 78mm.
respect to the Foreign Indirect Affiliates;
and (2) with respect to the Foreign
Indirect Affiliates, update the
information in Exhibits C and D to Form
1 as required by Exchange Act Rules 6a–
2(a)(2), 6a–2(b)(1), and 6a–2(c).
By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012–2021 Filed 1–30–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66237; File No. SR–
NYSEAmex–2012–02]
Self-Regulatory Organizations; NYSE
Amex LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending NYSE Amex
Options Rule 902NY To Create a
Reserve Floor Market Maker Amex
Trading Permit
January 25, 2012.
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
24, 2012, NYSE Amex LLC (the
‘‘Exchange’’ or ‘‘NYSE Amex’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. 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
NYSE Amex Options Rule 902NY to
create a Reserve Floor Market Maker
Amex Trading Permit (‘‘Reserve ATP’’).
The text of the proposed rule change is
available at the Exchange, the
Commission’s Public Reference Room,
and www.nyse.com.
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 those statements may be examined at
27 See
28 See
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1 15
2 17
PO 00000
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CFR 240.19b–4.
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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 parts 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
NYSE Amex Options Rule 902NY to
create a Reserve ATP.
Under the current Fee Schedule, an
ATP Holder 3 acting as a Market Maker
must pay $5,000 per month per Amex
Trading Permit (‘‘ATP’’).4 In order to act
as a Floor Market Maker, an individual
must be specifically named on the
relevant Market Maker’s ATP. On some
occasions, a Floor Market Maker may be
absent from the floor due to illness or
other unexpected absence, in which
case the ATP Holder may wish to have
a Market Maker Authorized Trader 5
(‘‘MMAT’’) employee engage in open
outcry trading to cover for the absent
Floor Market Maker. However, at
present the ATP Holder cannot do so
unless the MMAT employee is
specifically named on the relevant ATP,
and it may not be economical for the
ATP Holder to maintain an additional
ATP to address such unexpected or
limited situations or to complete the
approval process for an additional ATP
in a timely way when a short-term need
arises. In such cases, the ATP Holder
must carry out its responsibilities with
fewer than the optimal number of Floor
Market Makers on the trading floor. For
example, currently under NYSE Amex
Rule 923NY, a total of four ATPs are
required to stream quotes electronically
into all option issues traded on the
Exchange. Additionally, each ATP can
have an individual named to act as a
Floor Market Maker in open outcry
trading on the Floor of the Exchange.
Thus, an ATP Holder with four ATPs
may stream quotes in every option issue
on the Exchange and have four
3 An ‘‘ATP Holder’’ is a natural person, sole
proprietorship, partnership, corporation, limited
liability company or other organization, in good
standing, that has been issued an Amex Trading
Permit. See NYSE Amex Rule 900.2NY(5).
4 The fee is calculated based on the maximum
number of ATPs held by the ATP Holder during the
calendar month.
5 A ‘‘Market Maker Authorized Trader’’ is an
authorized trader who performs market making
activities pursuant to Rule 920NY on behalf of an
ATP Holder registered as a Market Maker. See
NYSE Amex Rule 900.2NY(37). A Market Maker
Authorized Trader must meet the same registration
requirements as a Floor Market Maker before they
can be designated as a Market Maker Authorized
Trader. See NYSE Amex Rule 921.1NY.
E:\FR\FM\31JAN1.SGM
31JAN1
]]>Agencies
[Federal Register Volume 77, Number 20 (Tuesday, January 31, 2012)]
[Notices]
[Pages 4845-4848]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-2021]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66241]
Order Granting Application by BOX Options Exchange LLC for a
Conditional Exemption Pursuant to Section 36(a) of the Exchange Act
From Certain Requirements of Rules 6a-1 and 6a-2 Under the Exchange Act
January 26, 2012.
I. Introduction
On December 19, 2011, BOX Options Exchange LLC (the ``Applicant'')
submitted to the Securities and Exchange Commission (``Commission'') an
application on Form 1 under the Securities Exchange Act of 1934
(``Exchange Act'') to register as a national securities exchange.\1\ In
addition, the Applicant, pursuant to Rule 0-12 \2\ under the Exchange
Act, has requested an exemption under Section 36(a)(1) of the Exchange
Act \3\ from certain requirements of Rules 6a-1(a) and 6a-2 under the
Exchange Act.\4\ This order grants the Applicant's request for
exemptive relief, subject to the satisfaction of certain conditions,
which are outlined below.
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\1\ On December 28, 2011, the Applicant submitted Amendment No.
1 to its Form 1 application. Amendment No. 1, among other things,
provides the unconsolidated financial statements for certain
affiliates of the Applicant that are required in Exhibit D to Form 1
but were not included in the Applicant's initial Form 1 application.
In its initial Form 1 application, the Applicant only submitted
consolidated financials for certain of these affiliates. See
Securities Exchange Act Release No. 66242 (January 26, 2012)
(publishing for notice and comment the Applicant's Form 1
application, as amended, to register as a national securities
exchange).
\2\ 17 CFR 240.0-12.
\3\ 15 U.S.C. 78mm(a)(1).
\4\ 17 CFR 240.6a-1(a) and 6a-2. See letter from Lisa J. Fall,
General Counsel and Secretary, Boston Options Exchange Group LLC, to
Elizabeth Murphy, Secretary, Commission, dated December 16, 2011
(``Exemption Request'').
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[[Page 4846]]
II. Application for Conditional Exemption From Certain Requirements of
Exchange Act Rules 6a-1 and 6a-2
A. Filing Requirements Under Exchange Act Rule 6a-1(a)
Exchange Act Rule 6a-1(a) requires an applicant for registration as
a national securities exchange to file an application with the
Commission on Form 1. Exhibit C to Form 1 requires the applicant to
provide certain information with respect to each of its subsidiaries
and affiliates.\5\ For purposes of Form 1, an ``affiliate'' is ``[a]ny
person that, directly or indirectly, controls, is under common control
with, or is controlled by, the national securities exchange * * *
including any employees.'' \6\ Form 1 defines ``control'' as ``[t]he
power, directly or indirectly, to direct the management or policies of
a company, whether through ownership of securities, by contract, or
otherwise * * * .'' \7\ Form 1 provides, further, that any person that
directly or indirectly has the right to vote 25% or more of a class of
voting securities, or has the power to sell or direct the sale of 25%
or more of a class of voting securities, is presumed to control the
entity.\8\
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\5\ Specifically, Exhibit C requires the applicant to provide,
for each subsidiary or affiliate, and for any entity that operates
an electronic trading system used to effect transactions on the
exchange: (1) The name and address of the organization; (2) the form
of organization; (3) the name of the state and statute citation
under which it is organized, and the date of its incorporation in
its present form; (4) a brief description of the nature and extent
of the affiliation; (5) a brief description of the organization's
business or function; (6) a copy of the organization's constitution;
(7) a copy of the organization's articles of incorporation or
association, including all amendments; (8) a copy of the
organization's by-laws or corresponding rules or instruments; (9)
the name and title of the organization's present officers,
governors, members of all standing committees, or persons performing
similar functions; and (10) an indication of whether the business or
organization ceased to be associated with the applicant during the
previous year, and a brief statement of the reasons for termination
of the association.
\6\ Form 1 Instructions, Explanation of Terms, 17 CFR 249.1.
\7\ Id.
\8\ Id.
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Exhibit D to Form 1 requires an applicant for exchange registration
to provide unconsolidated financial statements for the latest fiscal
year for each subsidiary or affiliate. Exhibit D requires the financial
statements to include, at a minimum, a balance sheet and an income
statement with such footnotes and other disclosures as are necessary to
avoid rendering the financial statements misleading. Exhibit D
provides, in addition, that if any affiliate or subsidiary of the
applicant is required by another Commission Rule to submit annual
financial statements, a statement to that effect, with a citation to
the other Commission rule, may be provided in lieu of the financial
statements required in Exhibit D.
A Form 1 application is not considered filed until all necessary
information, including financial statements and other required
documents, have been furnished in the proper form.\9\
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\9\ 17 CFR 202.3(b)(2). See also 17 CFR 240.0-3(a). Defective
Form 1 applications ``may be returned with a request for correction
or held until corrected before being accepted as a filing.'' See 17
CFR 202.3(b)(2). See also Securities Exchange Act Release No. 40760
(Dec. 8, 1998), 63 FR 70844, 70881 (Dec. 22, 1998) (``Regulation ATS
Adopting Release'').
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B. Filing Requirements Under Exchange Act Rule 6a-2
Exchange Act Rule 6a-2(a)(2) requires a national securities
exchange to update the information provided in Exhibit C within 10 days
of any action that causes the information provided in Exhibit C to
become inaccurate or incomplete. In addition, Exchange Act Rule 6a-
2(b)(1) requires a national securities exchange to file Exhibit D on or
before June 30 of each year, and Exchange Act Rule 6a-2(c) requires a
national securities exchange to file Exhibit C every three years.
C. Exemption Request
On December 19, 2011, the Applicant requested that the Commission
grant an exemption under Section 36 of the Exchange Act, subject to the
conditions set forth below, from the requirement under Exchange Act
Rule 6a-1 to file the information requested in Exhibits C and D to Form
1 for the ``Foreign Indirect Affiliates,'' as defined below, of the
Applicant.\10\ In addition, the Applicant requested an exemption,
subject to certain conditions, with respect to the Foreign Indirect
Affiliates from the requirements under: (1) Exchange Act Rule 6a-
2(a)(2) to amend Exhibit C within 10 days if the information in Exhibit
C becomes inaccurate or incomplete; and (2) Exchange Act Rule 6a-
2(b)(1) and (c) to file periodic updates to Exhibits C and D.
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\10\ See Exemption Request, supra note 4.
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MX US 2, Inc., a Delaware corporation, would hold a 20% voting
interest and a 40% equity interest in the Applicant. MX US 2, Inc. also
would hold a 53.83% interest in BOX Holdings LLC, which would be the
100% owner of BOX Market, which would own and operate the Boston
Options Exchange options trading platform as a facility of the
Applicant.\11\ MX US 2, Inc. is a wholly owned subsidiary of MX US 1,
Inc., a Delaware corporation. MX US 1, Inc. is a wholly owned
subsidiary of Bourse de Montreal, Inc., a Canadian corporation. Bourse
de Montreal, Inc. is a wholly owned subsidiary of TMX Group, Inc., a
Canadian corporation. According to the Applicant, the parent ownership
structure of MX US 1, Inc. is comprised entirely of foreign entities,
Bourse de Montreal, Inc. and TMX Group, Inc. (the ``Foreign Direct
Affiliates''), which in turn own interests, either directly or
indirectly, of 25 percent or more in a number of other foreign entities
(the ``Foreign Indirect Affiliates'').\12\
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\11\ MX US 2, Inc. currently holds a 53.83% interest in the
Boston Options Exchange Group, LLC, a facility of NASDAQ OMX BX,
Inc.
\12\ See Exemption Request, supra note 4, at 3-4.
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Because of the limited and indirect nature of its connection to the
Foreign Indirect Affiliates, the Applicant believes that the corporate
and financial information of the Foreign Indirect Affiliates required
by Exhibits C and D of Form 1 would have little relevance to the
Commission's review of the Applicant's Form 1 application or to the
Commission's ongoing oversight of the Applicant as a national
securities exchange if the Commission were to approve the Applicant's
Form 1 application.\13\ In this regard, the Exemption Request states
that the Foreign Indirect Affiliates have no ability to influence the
management, policies, or finances of the Applicant and no obligation to
provide funding to, or ability to materially affect the funding of, the
Applicant.\14\ The Exemption Request also states that (1) the Foreign
Indirect Affiliates have no ownership interest in the Applicant or in
any of the controlling shareholders of the Applicant; and (2) there are
no commercial dealings between the Applicant and the Foreign Indirect
Affiliates.\15\ Further, the Exemption Request states that obtaining
detailed corporate and financial information with respect to the
Foreign Indirect Affiliates (1) is unnecessary for the protection of
investors and the public interest and (2) would be unduly burdensome
and inefficient because these affiliates are located in foreign
jurisdictions and the disclosure of such information could implicate
foreign information sharing restrictions in such jurisdictions.\16\
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\13\ Id. at 4.
\14\ Id.
\15\ Id.
\16\ Id. The Applicant also believes that providing the
information required by Exhibits C and D with respect to the Foreign
Indirect Affiliates could raise confidentiality concerns because
many of the Foreign Indirect Affiliates are not public companies.
Id.
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[[Page 4847]]
As a condition to the granting of exemptive relief, the Applicant
has agreed to provide: (i) A listing of the names of the Foreign
Indirect Affiliates; (ii) an organizational chart setting forth the
affiliation of the Foreign Indirect Affiliates and the Foreign Direct
Affiliates and the Applicant; and (iii) in Exhibit C of the Applicant's
Form 1 application, a description of the nature of the Foreign Indirect
Affiliates' affiliation with the Foreign Direct Affiliates and the
Applicant. In addition, as a condition to the granting of exemptive
relief from the requirements of Exchange Act Rule 6a-2(a)(2), 6a-
2(b)(1), and 6a-2(c), as described above, the Applicant has agreed to
provide amendments to the information required under conditions (i)
through (iii) above on or before June 30th of each year. Further, the
Applicant notes that it will provide the information required by
Exhibits C and D for all of its affiliates other than the Foreign
Indirect Affiliates, including the Foreign Direct Affiliates.\17\
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\17\ See Exemption Request, supra note 4, at 4.
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III. Order Granting Conditional Section 36 Exemption
Section 6 of the Exchange Act \18\ sets forth a procedure for an
exchange to register as a national securities exchange.\19\ Exchange
Act Rule 6a-1(a)\20\ requires an application for registration as a
national securities exchange to be filed on Form 1 in accordance with
the instructions in Form 1. A Form 1 application is not considered
filed until all necessary information, including financial statements
and other required documents, have been furnished in the proper
form.\21\ Exchange Act Rule 6a-2 establishes ongoing requirements to
file certain amendments to Form 1.
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\18\ 15 U.S.C. 78f.
\19\ Specifically, Section 6(a) of the Exchange Act states that
``[a]n exchange may be registered as a national securities exchange
* * * by filing with the Commission an application for registration
in such form as the Commission, by rule, may prescribe containing
the rules of the exchange and such other information and documents
as the Commission, by rule, may prescribe as necessary or
appropriate in the public interest or for the protection of
investors.'' Section 6 of the Exchange Act also sets forth various
requirements to which a national securities exchange is subject.
\20\ 17 CFR 240.6a-1(a).
\21\ 17 CFR 202.3(b)(2). See also supra note 9.
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Section 36(a)(1) of the Exchange Act provides that ``the
Commission, by rule, regulation, or order, may conditionally or
unconditionally exempt any person, security, or transaction, or any
class or classes of persons, securities, or transactions, from any
provision or provisions of [the Exchange Act] or of any Rule or
regulation thereunder, to the extent that such exemption is necessary
or appropriate in the public interest, and is consistent with the
protection of investors.''\22\
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\22\ 15 U.S.C. 78mm(a)(1).
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For the reasons discussed below, the Commission believes that it is
appropriate in the public interest and consistent with the protection
of investors to exempt the Applicant from the requirement under
Exchange Act Rule 6a-1 to provide the information required in Exhibits
C and D to Form 1 with respect to the Foreign Indirect Affiliates,
subject to the following conditions:
(1) The Applicant must provide a list of the names of the Foreign
Indirect Affiliates;
(2) The Applicant must provide an organizational chart setting
forth the affiliation of the Foreign Indirect Affiliates and the
Foreign Direct Affiliates and the Applicant; and
(3) As part of Exhibit C to the Applicant's Form 1 Application, the
Applicant must provide a description of the nature of the affiliation
between the Foreign Indirect Affiliates and the Foreign Direct
Affiliates and the Applicant.
The Commission believes, further, that it is appropriate in the
public interest and consistent with the protection of investors to
exempt the Applicant, with respect to the Foreign Indirect Affiliates,
from the requirements under: (a) Exchange Act Rule 6a-2(a)(2) to amend
Exhibit C within 10 days of any action that renders the information in
Exhibit C inaccurate or incomplete; (b) Exchange Act Rules 6a-2(c) to
provide periodic updates of Exhibit C; and (c) Exchange Act Rules 6a-
2(b)(1) to provide periodic updates of Exhibit D, subject to the
condition that the Applicant provides amendments to the information
required under conditions (1) through (3) above on or before June 30th
of each year.
As part of an application for exchange registration, the
information included in Exhibits C and D is designed to help the
Commission make the determinations required under Sections 6(b) and
19(a) of the Exchange Act with respect to the application. The updated
Exhibit C and D information required under Exchange Act Rule 6a-2 is
designed to help the Commission exercise its oversight responsibilities
with respect to registered national securities exchanges.
Specifically, Exhibit D is designed to provide the Commission with
information concerning the financial status of an exchange and its
affiliates and subsidiaries,\23\ and Exhibit C provides the Commission
with the names and organizational documents of these affiliates and
subsidiaries.\24\ Such information is designed to help the Commission
determine whether an applicant for exchange registration would have the
ability to carry out its obligations under the Exchange Act, and
whether a registered national securities exchange continues to have the
ability to carry out its obligations under the Exchange Act.
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\23\ See Securities Exchange Act Release No. 18843 (June 25,
1982), 47 FR 29259 (July 6, 1982) (proposing amendments to Form 1);
see also Form 1, 17 CFR 249.1, and supra Section II.A.
\24\ Form 1, 17 CFR 249.1. See also supra note 5.
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Since the most recent amendments to Form 1 in 1998,\25\ many
registered national securities exchanges that previously were member-
owned organizations with few affiliated entities have demutualized.
Some of these demutualized exchanges have been consolidated under
holding companies with numerous affiliates that, in some cases, have
only a limited and indirect connection to the registered national
securities exchange, with no ability to influence the management or
policies of the registered exchange and no obligation to fund, or to
materially affect the funding of, the registered exchange. The
Commission believes that, for these affiliated entities, the
information required under Exhibits C and D would have limited
relevance to the Commission's review of an application for exchange
registration or to its oversight of a registered exchange.
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\25\ See Regulation ATS Adopting Release, supra note 9.
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Based on the Applicant's representations, the indirect nature of
the relationship between the Applicant and the Foreign Indirect
Affiliates, and the information that the Applicant will provide with
respect to the Foreign Direct Affiliates and the Foreign Indirect
Affiliates, the Commission believes that it will have sufficient
information to review the Applicant's Form 1 application and to make
the determinations required under Sections 6(b) and 19(a) of the
Exchange Act with respect to its application for registration as a
national securities exchange.\26\ The Commission believes, further,
that it would have the information necessary
[[Page 4848]]
to oversee the Applicant's activities as a national securities exchange
if the Commission were to approve the Applicant's Form 1 application.
In particular, the Commission notes that the Applicant has represented
that it would have no direct connection to the Foreign Indirect
Affiliates, that the Foreign Indirect Affiliates would have no ability
to influence the management or policies of the Applicant, and that the
Foreign Indirect Affiliates would have no obligation to fund, or
ability to materially affect the funding of, the Applicant. In
addition, the Commission notes that the Applicant represented that: (1)
The Foreign Indirect Affiliates have no ownership interest in the
Applicant or in any of the controlling equity holders of the Applicant;
and (2) there are no commercial dealings between the Applicant and the
Foreign Indirect Affiliates.\27\ The Commission also believes that,
based on the Applicant's representations, it could be burdensome for
the Applicant to obtain detailed corporate and financial information
with respect to the Foreign Indirect Affiliates because these
affiliates are located in foreign jurisdictions and the disclosure of
such information could implicate foreign information sharing
restrictions in such jurisdictions.\28\
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\26\ 15 U.S.C. 78f(b) and 78s(a). Section 6(b) of the Exchange
Act enumerates certain determinations that the Commission must make
with respect to an exchange before registering the exchange as a
national securities exchange. The Commission will not register an
exchange as a national securities exchange unless it is satisfied
that the exchange meets these requirements. See Regulation ATS
Adopting Release, supra note 9, at IV.B.
\27\ See Exemption Request, supra note 4, at 4.
\28\ See id.
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Given the limited and indirect relationship between the Applicant
and the Foreign Indirect Affiliates and the location of the Foreign
Indirect Affiliates in foreign jurisdictions, as described above, the
Commission believes that the detailed corporate and financial
information required in Exhibits C and D with respect to the Foreign
Indirect Affiliates is unnecessary for the Commission's review of the
Applicant's Form 1 application and would be unnecessary for the
Commission's oversight of the Applicant as a registered national
securities exchange following any Commission approval of its Form 1
application.
For the reasons discussed above, the Commission finds that the
conditional exemptive relief requested by the Applicant is appropriate
in the public interest and is consistent with the protection of
investors.
It is ordered, pursuant to Section 36 of the Exchange Act,\29\ and
subject to the conditions described above, that the Applicant is exempt
from the requirements to: (1) include in its Form 1 application the
information required in Exhibits C and D to Form 1 with respect to the
Foreign Indirect Affiliates; and (2) with respect to the Foreign
Indirect Affiliates, update the information in Exhibits C and D to Form
1 as required by Exchange Act Rules 6a-2(a)(2), 6a-2(b)(1), and 6a-
2(c).
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\29\ 15 U.S.C. 78mm.
By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-2021 Filed 1-30-12; 8:45 am]
BILLING CODE 8011-01-P
