Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Mini Options, 6391-6394 [2013-01930]
Download as PDF
<![CDATA[
Federal Register / Vol. 78, No. 20 / Wednesday, January 30, 2013 / Notices
filing. The Exchange believes that a
waiver of this period is appropriate as
the proposal is designed to provide
transparency of how the Trigger Price
will be determined for Exchange listed
securities that did not have a closing
transaction at the Exchange due to a
systems or technical issue. According to
the Exchange, the waiver of the
operative delay will allow the
participants on the Exchange to benefit
from a permanent rule to determine the
Trigger Price in situations where a
systems or technical issue prevents a
closing price during regular trading.
The Commission hereby grants the 30day operative delay request.15 The
Commission believes that waiver of the
30-day operative delay is appropriate as
the proposal provides clarity of how the
Exchange, as a listing market,
determines how the Trigger Price will
be calculated if trading is interrupted on
the Exchange because of a systems or
technical issue and is not restored
during the trading day. The Commission
also believes a waiver of the 30-day
operative delay is consistent with the
protection of investors and the public
interest and, therefore, the Commission
designates the proposal operative upon
filing.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 16 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Number SR–NYSE–2013–03 on the
subject line.
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
[Release No. 34–68719; File No. SR–BX–
2013–006]
• 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–NYSE–2013–03. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (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 20549–1090. Copies of
the filing will also be available for Web
site viewing and printing at the NYSE’s
principal office and on its Internet Web
site at www.nyse.com. 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–NYSE–
2013–03 and should be submitted on or
before February 20, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Kevin M. O’Neill,
Deputy Secretary.
Electronic Comments
mstockstill on DSK4VPTVN1PROD with
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:
BILLING CODE 8011–01–P
[FR Doc. 2013–01933 Filed 1–29–13; 8:45 am]
VerDate Mar<15>2010
20:43 Jan 29, 2013
Jkt 229001
Self-Regulatory Organizations;
NASDAQ OMX BX, Inc.; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change Relating to
Mini Options
January 24, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (‘‘Act’’
or ‘‘Exchange Act’’),1 and Rule 19b–4
thereunder,2 notice is hereby given that
on January 16, 2013, NASDAQ OMX
BX, Inc. (‘‘BX’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘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 list and
trade option contracts overlying 10
shares of a security (‘‘Mini Options’’).
The text of the proposed rule change
is available on the Exchange’s Web site
at https://
nasdaqomxbx.cchwallstreet.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml ); or
• Send an email to rulecomments@sec.gov. Please include File
15 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule change’s impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
16 15 U.S.C. 78s(b)(2)(B).
6391
1. Purpose
The purpose of the proposed rule
change is to amend Chapter IV, Section
6 (Series of Options Contracts Open for
1 15
17 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00103
Fmt 4703
Sfmt 4703
2 17
E:\FR\FM\30JAN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
30JAN1
6392
Federal Register / Vol. 78, No. 20 / Wednesday, January 30, 2013 / Notices
Trading) and Chapter VI, Section 4
(Meaning of Premium Quotes and
Orders) to list and trade Mini Options
overlying five (5) high-priced securities
for which the standard contract
overlying the same security exhibits
significant liquidity. Specifically, the
Exchange proposes to list Mini Options
on SPDR S&P 500 (‘‘SPY’’), Apple, Inc.
(‘‘AAPL’’), SPDR Gold Trust (‘‘GLD’’),
Google Inc. (‘‘GOOG’’) and Amazon.com
Inc. (‘‘AMZN’’).3 The Exchange believes
that this proposal would allow investors
to select among options on various highpriced and actively traded securities,
each with a unit of trading ten times
lower than that of the regular-sized
options contracts, or 10 shares, similar
to other options exchanges. In addition,
the Exchange proposes a technical
amendment to Chapter III, Section 7
(Position Limits) to make the rule text
consistent.
For example, with Apple Inc.
(‘‘AAPL’’) trading at $605.85 on March
21, 2012, ($60,585 for 100 shares
underlying a standard contract), the 605
level call expiring on March 23 was
trading at $7.65. The cost of the
standard contract overlying 100 shares
would be $765, which is substantially
higher in notional terms than the
average equity option price of $250.89.4
Proportionately equivalent mini-options
contracts on AAPL would provide
investors with the ability to manage and
hedge their portfolio risk on their
underlying investment, at a price of
$76.50 per contract. In addition,
investors who hold a position in AAPL
at less than the round lot size would
still be able to avail themselves of
options to manage their portfolio risk.
For example, the holder of 50 shares of
AAPL could write covered calls for five
mini-options contracts. The table below
demonstrates the proposed differences
between a mini-options contract and a
standard contract with a strike price of
$125 per share and a bid or offer of
$3.20 per share:
Standard
Share Deliverable Upon Exercise ......................................................................................................................................
Strike Price .........................................................................................................................................................................
Bid/Offer .............................................................................................................................................................................
Premium Multiplier .............................................................................................................................................................
Total Value of Deliverable .................................................................................................................................................
Total Value of Contract ......................................................................................................................................................
Mini
100 shares
125
3.20
$100
$12,500
$320
10 shares.
125.
3.20.
$10.
$1,250.
$32.
mstockstill on DSK4VPTVN1PROD with
The Exchange currently lists and
trades standardized option contracts on
a number of equities and ExchangeTraded Funds (‘‘ETFs’’) each with a unit
of trading of 100 shares. Except for the
difference in the deliverable of shares,
the proposed Mini Options would have
the same terms and contract
characteristics as regular-sized equity
and ETF options, including exercise
style. All existing Exchange rules
applicable to options on equities and
ETFs would apply to Mini Options.
With respect to position 5 and exercise
limits, the applicable position and
exercise limits applicable to BX Options
Participants are those limits permitted
by another options exchange.6 Further,
hedge exemptions will apply to BX
Option Participants if such exemption is
permitted by another exchange and that
exchange’s rules apply to the BX Option
Participant pursuant to Chapter III,
Section 8.7
Also, of note, NYSE Arca, Inc.
(‘‘NYSE Arca’’) lists and trades option
contracts overlying a number of shares
other than 100.8 Moreover, the concept
of listing and trading parallel options
products of reduced values and sizes on
the same underlying security is not
novel. For example, parallel product
pairs on a full-value and reduced-value
basis are currently listed on the S&P 500
Index (‘‘SPX’’ and ‘‘XSP,’’ respectively),
the Nasdaq 100 Index (‘‘NDX’’ and
‘‘MNX,’’ respectively) and the Russell
2000 Index (‘‘RUT’’ and ‘‘RMN,’’
respectively).
The Exchange believes that the
proposal to list Mini Options will not
lead to investor confusion. There are
two important distinctions between
Mini Options and regular-sized options
that are designed to ease the likelihood
of any investor confusion. First, the
premium multiplier for the proposed
Mini Options will be 10, rather than
100, to reflect the smaller unit of
trading. To reflect this change, the
Exchange proposes to add language to
Chapter VI, Section 4(a)(i) which notes
that bids and offers for an option
contract overlying 10 shares would be
expressed in terms of dollars per 1/10th
part of the total value of the contract.
Thus, an offer of ‘‘.50’’ shall represent
an offer of $5.00 on an option contract
having a unit of trading consisting of 10
shares. Second, the Exchange intends to
designate Mini Options with different
trading symbols than those designated
for the regular-sized contract. For
example, while the trading symbol for
regular option contracts for Apple, Inc.
is AAPL, the Exchange proposes to
adopt AAPL7 as the trading symbol for
Mini Options on that same security.
The Exchange proposes to add rule
text to Supplementary Material to
Chapter IV, Section 6 to reflect that after
an option class on a stock, ExchangeTraded Fund Share, Trust Issued
Receipt, Exchange Traded Note, and
other Index Linked Security with a 100
share deliverable has been approved for
listing and trading on the Exchange,
series of option contracts with a 10
share deliverable on that stock,
Exchange-Traded Fund Share, Trust
Issued Receipt, Exchange Traded Note,
and other Index Linked Security may be
listed for all expirations opened for
trading on the Exchange. Also, the
Exchange is amending Supplementary
Material to Chapter IV, Section 6 to
reflect that strike prices for Mini
Options shall be set at the same level as
for regular options. For example, a call
series strike price to deliver 10 shares of
stock at $125 per share has a total
deliverable value of $1,250, and the
strike price will be set at 125. Further,
3 These issues were selected because they are
priced greater than $100 and are among the most
actively traded issues, in that the standard contract
exhibits average daily volume (‘‘ADV’’) over the
previous three calendar months of at least 45,000
contracts, excluding LEAPS and FLEX series. The
Exchange notes that any expansion of the program
would require that a subsequent proposed rule
change be submitted to the Commission.
4 A high priced underlying security may have
relatively expensive options, because a low
percentage move in the share price may mean a
large movement in the options in terms of absolute
dollars. Average non-FLEX equity option premium
per contract January 1—December 31, 2011. See
https://www.theocc.com/webapps/monthly-volumereports?reportClass=equity.
5 Position limits applicable to a regular-sized
option contract would also apply to the Mini
Options on the same underlying security, with 10
Mini Option contracts counting as one regular-sized
contract. Positions in both the regular-sized option
contract and Mini Options on the same security will
be combined for purposes of calculating positions.
6 See Chapter III, Sections 7 (Position Limits) and
9 (Exercise Limits).
7 See Chapter III, Section 8 (Exemptions from
Position Limits).
8 See Securities Exchange Act Release No. 44025
(February 28, 2001) 66 FR 13986 (March 8, 2001)
(approving SR–PCX–01–12).
VerDate Mar<15>2010
20:43 Jan 29, 2013
Jkt 229001
PO 00000
Frm 00104
Fmt 4703
Sfmt 4703
E:\FR\FM\30JAN1.SGM
30JAN1
mstockstill on DSK4VPTVN1PROD with
Federal Register / Vol. 78, No. 20 / Wednesday, January 30, 2013 / Notices
the Exchange proposes to add rule text
to Supplementary Material to Chapter
IV, Section 6 to not permit the listing of
additional series of Mini Options if the
underlying is trading at $90 or less to
limit the number of strikes once the
underlying is no longer a high priced
security. The Exchange proposes a
$90.01 minimum for continued
qualification so that additional series of
Mini Options that correspond to
standard strikes may be added even
though the underlying has fallen
slightly below the initial qualification
standard. In addition, the underlying
security must be trading above $90 for
five consecutive days before the listing
of Mini Option contracts in a new
expiration month. This restriction will
allow the Exchange to list strikes in
Mini Options without disruption when
a new expiration month is added even
if the underlying has had a minor
decline in price. The same trading rules
applicable to existing equity and ETF
options would apply, including Market
Maker obligations, to Mini Options.9
The Exchange notes that by listing the
same strike price for Mini Options as for
regular options, the Exchange seeks to
keep intact the long-standing
relationship between the underlying
security and an option strike price thus
allowing investors to intuitively grasp
the option’s value, i.e., option is in the
money, at the money or out of the
money. The Exchange believes that by
not changing anything but the
multiplier and the option symbol, as
discussed above, retail investors will be
able to grasp the distinction between
regular option contracts and Mini
Options. The Exchange notes that The
Options Clearing Corporation (‘‘the
OCC’’) Symbology is structured for
contracts that have a deliverable of other
than 100 shares to be designated with a
numeric added to the standard trading
symbol. Further, the Exchange believes
that the contract characteristics of Mini
Options are consistent with the terms of
the Options Disclosure Document.
With regard to the impact of this
proposal on system capacity, the
Exchange has analyzed its capacity and
represents that it and the Options Price
Reporting Authority (‘‘OPRA’’) have the
necessary systems capacity to handle
the potential additional traffic
associated with the listing and trading
of Mini Options. The Exchange has
further discussed the proposed listing
and trading of Mini Options with the
OCC, which has represented that it is
able to accommodate the proposal. In
addition, the Exchange would file a
proposed rule change to adopt
9 See
Chapter VII, Section 6(d).
VerDate Mar<15>2010
20:43 Jan 29, 2013
Jkt 229001
transaction fees specific to Mini Options
for listing and trading Mini Options.
The current options pricing in Chapter
XV would not apply to Mini Options.
The Exchange is also proposing to
amend Chapter III, Section 7 (Position
Limits) to add parentheses to certain
subsections for consistency with other
NASDAQ [sic] Rules. These filings are
[sic] similar to filings by NYSE Arca,
Inc. (‘‘NYSE Arca’’) and the
International Securities Exchange LLC
(‘‘ISE’’) to list and trade options
contracts overlying 10 shares of certain
securities.10
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the
Exchange Act,11 in general, and with
Section 6(b)(5) of the Exchange Act,12 in
particular, in that the proposal is
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 Exchange believes that investors
would benefit from the introduction and
availability of Mini Options by making
options on high priced securities more
readily available as an investing tool at
more affordable prices, particularly for
average retail investors, who otherwise
may not be able to participate in trading
options on high priced securities. The
Exchange intends to adopt a different
trading symbol to distinguish Mini
Options from its currently listed option
contracts and therefore, eliminate
investor confusion with respect to
product distinction. Moreover, the
proposed rule change is designed to
protect investors and the public interest
by providing investors with an
enhanced tool to reduce risk in high
priced securities. In particular, Mini
Options would provide retail customers
who invest in SPY, AAPL, GLD, GOOG
and AMZN in lots of less than 100
shares with a means of protecting their
investments that is currently only
available to those who have positions of
100 shares or more. Further, the
proposed rule change is limited to just
five high priced securities to ensure that
only securities that have significant
10 See Securities Exchange Act Release No. 67948
(September 28, 2012), 77 FR 60735 (October 4,
2012) (SR–NYSEArca–2012–64) (SR–ISE–2012–58).
NYSE Arca and ISE received approval to list and
trade options contracts overlying 10 shares of
certain securities.
11 15 U.S.C. 78f.
12 15 U.S.C. 78f(b)(5).
PO 00000
Frm 00105
Fmt 4703
Sfmt 4703
6393
options liquidity and therefore,
customer demand, are selected to have
Mini Options listed on them.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the rule change will impose any burden
on competition not necessary or
appropriate in furtherance of the
purposes of the Act. In this regard and
as indicated above, the Exchange notes
that the rule change is being proposed
as a competitive response to recently
approved NYSE Arca and ISE filings.
The Exchange believes this proposed
rule change is necessary to permit fair
competition among the options
exchanges.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change: (1) Does not significantly affect
the protection of investors or the public
interest; (2) does not impose any
significant burden on competition; and
(3) by its terms does not become
operative for 30 days after the date of
this filing, or such shorter time as the
Commission may designate if consistent
with the protection of investors and the
public interest, the proposed rule
change has become effective pursuant to
Section 19(b)(3)(A) of the Act 13 and
Rule 19b–4(f)(6) thereunder.14
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative for 30 days after the
date of filing. However, Rule 19b–
4(f)(6)(iii) permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange requests that the Commission
waive the 30-day operative delay so that
it can list and trade the proposed mini
options as soon as it is able.15 The
13 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
provide the Commission with written notice of its
intent to file the proposed rule change, along with
a brief description and text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission. The
Exchange has fulfilled this requirement.
15 The Commission notes that the Exchange’s
current options pricing will not apply to the trading
of Mini Options, and the Exchange will not
14 17
E:\FR\FM\30JAN1.SGM
Continued
30JAN1
6394
Federal Register / Vol. 78, No. 20 / Wednesday, January 30, 2013 / Notices
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest.16 The Commission notes
the proposal is substantively identical to
proposals that were recently approved
by the Commission, and does not raise
any new regulatory issues.17 For these
reasons, the Commission designates the
proposed rule change as operative upon
filing.
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 email to rulecomments@sec.gov. Please include File
Number SR–BX–2013–006 on the
subject line.
mstockstill on DSK4VPTVN1PROD with
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–2013–006. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml ). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
commence trading of Mini Options until transaction
fees specific to Mini Options have been filed with
the Commission.
16 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
17 See Securities Exchange Act Release No. 67948
(September 28, 2012), 77 FR 60735 (October 4,
2012) (SR–NYSEArca–2012–64 and SR–ISE–2012–
58).
VerDate Mar<15>2010
20:43 Jan 29, 2013
Jkt 229001
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–BX–
2013–006 and should be submitted on
or before February 20, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–01930 Filed 1–29–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68714; File No. SR–EDGA–
2013–01]
Self-Regulatory Organizations; EDGA
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to Fees for
EdgeBook AttributedSM
January 23, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b-4 thereunder,2
notice is hereby given that on January
15, 2013 EDGA Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGA’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
18 17
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
PO 00000
Frm 00106
Fmt 4703
Sfmt 4703
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to (i) charge
Members 3 and non-Members fees for
internal and external distribution of
EdgeBook AttributedSM, the Exchange’s
attributed book feed, and (ii) offer a new
incentive program for Members that
choose to attribute orders on the
Exchange (the ‘‘Edge Attribution
Incentive Program’’). All of the changes
described herein are applicable to EDGA
Members and non-Members, except for
the Edge Attribution Incentive Program,
which is applicable only to EDGA
Members. The text of the proposed rule
change is available on the Exchange’s
Internet Web site at
www.directedge.com, at the Exchange’s
principal office, and at the Public
Reference Room of the Commission.
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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
In SR–EDGA–2011–19,4 the Exchange
made available the EDGA Book Feed
(‘‘EdgeBook Depth ASM’’) to Members
and non-Members. EdgeBook Depth
ASM is a data feed that contains all
orders for securities trading on the
Exchange, including all displayed
orders for listed securities trading on
EDGA, order executions, order
cancellations, order modifications, order
identification numbers and
administrative messages. EdgeBook
Depth ASM offers real-time data, thereby
allowing Member firms to more
accurately price their orders based on
EDGA’s view of the depth of book
information. It also provides Members
the ability to track their own orders
from order entry to execution. It is
3 As
defined in Rule 1.5(n).
Securities Exchange Act Release No. 64792
(July 1, 2011), 76 FR 39959 (July 7, 2011) (SR–
EDGA–2011–19).
4 See
E:\FR\FM\30JAN1.SGM
30JAN1
]]>Agencies
[Federal Register Volume 78, Number 20 (Wednesday, January 30, 2013)]
[Notices]
[Pages 6391-6394]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-01930]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68719; File No. SR-BX-2013-006]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Mini Options
January 24, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on January 16, 2013, NASDAQ OMX BX, Inc. (``BX''
or ``Exchange'') filed with the Securities and Exchange Commission
(``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 list and trade option contracts overlying
10 shares of a security (``Mini Options'').
The text of the proposed rule change is available on the Exchange's
Web site at https://nasdaqomxbx.cchwallstreet.com, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend Chapter IV,
Section 6 (Series of Options Contracts Open for
[[Page 6392]]
Trading) and Chapter VI, Section 4 (Meaning of Premium Quotes and
Orders) to list and trade Mini Options overlying five (5) high-priced
securities for which the standard contract overlying the same security
exhibits significant liquidity. Specifically, the Exchange proposes to
list Mini Options on SPDR S&P 500 (``SPY''), Apple, Inc. (``AAPL''),
SPDR Gold Trust (``GLD''), Google Inc. (``GOOG'') and Amazon.com Inc.
(``AMZN'').\3\ The Exchange believes that this proposal would allow
investors to select among options on various high-priced and actively
traded securities, each with a unit of trading ten times lower than
that of the regular-sized options contracts, or 10 shares, similar to
other options exchanges. In addition, the Exchange proposes a technical
amendment to Chapter III, Section 7 (Position Limits) to make the rule
text consistent.
---------------------------------------------------------------------------
\3\ These issues were selected because they are priced greater
than $100 and are among the most actively traded issues, in that the
standard contract exhibits average daily volume (``ADV'') over the
previous three calendar months of at least 45,000 contracts,
excluding LEAPS and FLEX series. The Exchange notes that any
expansion of the program would require that a subsequent proposed
rule change be submitted to the Commission.
---------------------------------------------------------------------------
For example, with Apple Inc. (``AAPL'') trading at $605.85 on March
21, 2012, ($60,585 for 100 shares underlying a standard contract), the
605 level call expiring on March 23 was trading at $7.65. The cost of
the standard contract overlying 100 shares would be $765, which is
substantially higher in notional terms than the average equity option
price of $250.89.\4\ Proportionately equivalent mini-options contracts
on AAPL would provide investors with the ability to manage and hedge
their portfolio risk on their underlying investment, at a price of
$76.50 per contract. In addition, investors who hold a position in AAPL
at less than the round lot size would still be able to avail themselves
of options to manage their portfolio risk. For example, the holder of
50 shares of AAPL could write covered calls for five mini-options
contracts. The table below demonstrates the proposed differences
between a mini-options contract and a standard contract with a strike
price of $125 per share and a bid or offer of $3.20 per share:
---------------------------------------------------------------------------
\4\ A high priced underlying security may have relatively
expensive options, because a low percentage move in the share price
may mean a large movement in the options in terms of absolute
dollars. Average non-FLEX equity option premium per contract January
1--December 31, 2011. See https://www.theocc.com/webapps/monthly-volume-reports?reportClass=equity.
------------------------------------------------------------------------
Standard Mini
------------------------------------------------------------------------
Share Deliverable Upon Exercise. 100 shares 10 shares.
Strike Price.................... 125 125.
Bid/Offer....................... 3.20 3.20.
Premium Multiplier.............. $100 $10.
Total Value of Deliverable...... $12,500 $1,250.
Total Value of Contract......... $320 $32.
------------------------------------------------------------------------
The Exchange currently lists and trades standardized option
contracts on a number of equities and Exchange-Traded Funds (``ETFs'')
each with a unit of trading of 100 shares. Except for the difference in
the deliverable of shares, the proposed Mini Options would have the
same terms and contract characteristics as regular-sized equity and ETF
options, including exercise style. All existing Exchange rules
applicable to options on equities and ETFs would apply to Mini Options.
With respect to position \5\ and exercise limits, the applicable
position and exercise limits applicable to BX Options Participants are
those limits permitted by another options exchange.\6\ Further, hedge
exemptions will apply to BX Option Participants if such exemption is
permitted by another exchange and that exchange's rules apply to the BX
Option Participant pursuant to Chapter III, Section 8.\7\
---------------------------------------------------------------------------
\5\ Position limits applicable to a regular-sized option
contract would also apply to the Mini Options on the same underlying
security, with 10 Mini Option contracts counting as one regular-
sized contract. Positions in both the regular-sized option contract
and Mini Options on the same security will be combined for purposes
of calculating positions.
\6\ See Chapter III, Sections 7 (Position Limits) and 9
(Exercise Limits).
\7\ See Chapter III, Section 8 (Exemptions from Position
Limits).
---------------------------------------------------------------------------
Also, of note, NYSE Arca, Inc. (``NYSE Arca'') lists and trades
option contracts overlying a number of shares other than 100.\8\
Moreover, the concept of listing and trading parallel options products
of reduced values and sizes on the same underlying security is not
novel. For example, parallel product pairs on a full-value and reduced-
value basis are currently listed on the S&P 500 Index (``SPX'' and
``XSP,'' respectively), the Nasdaq 100 Index (``NDX'' and ``MNX,''
respectively) and the Russell 2000 Index (``RUT'' and ``RMN,''
respectively).
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 44025 (February 28,
2001) 66 FR 13986 (March 8, 2001) (approving SR-PCX-01-12).
---------------------------------------------------------------------------
The Exchange believes that the proposal to list Mini Options will
not lead to investor confusion. There are two important distinctions
between Mini Options and regular-sized options that are designed to
ease the likelihood of any investor confusion. First, the premium
multiplier for the proposed Mini Options will be 10, rather than 100,
to reflect the smaller unit of trading. To reflect this change, the
Exchange proposes to add language to Chapter VI, Section 4(a)(i) which
notes that bids and offers for an option contract overlying 10 shares
would be expressed in terms of dollars per 1/10th part of the total
value of the contract. Thus, an offer of ``.50'' shall represent an
offer of $5.00 on an option contract having a unit of trading
consisting of 10 shares. Second, the Exchange intends to designate Mini
Options with different trading symbols than those designated for the
regular-sized contract. For example, while the trading symbol for
regular option contracts for Apple, Inc. is AAPL, the Exchange proposes
to adopt AAPL7 as the trading symbol for Mini Options on that same
security.
The Exchange proposes to add rule text to Supplementary Material to
Chapter IV, Section 6 to reflect that after an option class on a stock,
Exchange-Traded Fund Share, Trust Issued Receipt, Exchange Traded Note,
and other Index Linked Security with a 100 share deliverable has been
approved for listing and trading on the Exchange, series of option
contracts with a 10 share deliverable on that stock, Exchange-Traded
Fund Share, Trust Issued Receipt, Exchange Traded Note, and other Index
Linked Security may be listed for all expirations opened for trading on
the Exchange. Also, the Exchange is amending Supplementary Material to
Chapter IV, Section 6 to reflect that strike prices for Mini Options
shall be set at the same level as for regular options. For example, a
call series strike price to deliver 10 shares of stock at $125 per
share has a total deliverable value of $1,250, and the strike price
will be set at 125. Further,
[[Page 6393]]
the Exchange proposes to add rule text to Supplementary Material to
Chapter IV, Section 6 to not permit the listing of additional series of
Mini Options if the underlying is trading at $90 or less to limit the
number of strikes once the underlying is no longer a high priced
security. The Exchange proposes a $90.01 minimum for continued
qualification so that additional series of Mini Options that correspond
to standard strikes may be added even though the underlying has fallen
slightly below the initial qualification standard. In addition, the
underlying security must be trading above $90 for five consecutive days
before the listing of Mini Option contracts in a new expiration month.
This restriction will allow the Exchange to list strikes in Mini
Options without disruption when a new expiration month is added even if
the underlying has had a minor decline in price. The same trading rules
applicable to existing equity and ETF options would apply, including
Market Maker obligations, to Mini Options.\9\
---------------------------------------------------------------------------
\9\ See Chapter VII, Section 6(d).
---------------------------------------------------------------------------
The Exchange notes that by listing the same strike price for Mini
Options as for regular options, the Exchange seeks to keep intact the
long-standing relationship between the underlying security and an
option strike price thus allowing investors to intuitively grasp the
option's value, i.e., option is in the money, at the money or out of
the money. The Exchange believes that by not changing anything but the
multiplier and the option symbol, as discussed above, retail investors
will be able to grasp the distinction between regular option contracts
and Mini Options. The Exchange notes that The Options Clearing
Corporation (``the OCC'') Symbology is structured for contracts that
have a deliverable of other than 100 shares to be designated with a
numeric added to the standard trading symbol. Further, the Exchange
believes that the contract characteristics of Mini Options are
consistent with the terms of the Options Disclosure Document.
With regard to the impact of this proposal on system capacity, the
Exchange has analyzed its capacity and represents that it and the
Options Price Reporting Authority (``OPRA'') have the necessary systems
capacity to handle the potential additional traffic associated with the
listing and trading of Mini Options. The Exchange has further discussed
the proposed listing and trading of Mini Options with the OCC, which
has represented that it is able to accommodate the proposal. In
addition, the Exchange would file a proposed rule change to adopt
transaction fees specific to Mini Options for listing and trading Mini
Options. The current options pricing in Chapter XV would not apply to
Mini Options.
The Exchange is also proposing to amend Chapter III, Section 7
(Position Limits) to add parentheses to certain subsections for
consistency with other NASDAQ [sic] Rules. These filings are [sic]
similar to filings by NYSE Arca, Inc. (``NYSE Arca'') and the
International Securities Exchange LLC (``ISE'') to list and trade
options contracts overlying 10 shares of certain securities.\10\
---------------------------------------------------------------------------
\10\ See Securities Exchange Act Release No. 67948 (September
28, 2012), 77 FR 60735 (October 4, 2012) (SR-NYSEArca-2012-64) (SR-
ISE-2012-58). NYSE Arca and ISE received approval to list and trade
options contracts overlying 10 shares of certain securities.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Exchange Act,\11\ in general,
and with Section 6(b)(5) of the Exchange Act,\12\ in particular, in
that the proposal is 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.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78f.
\12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that investors would benefit from the
introduction and availability of Mini Options by making options on high
priced securities more readily available as an investing tool at more
affordable prices, particularly for average retail investors, who
otherwise may not be able to participate in trading options on high
priced securities. The Exchange intends to adopt a different trading
symbol to distinguish Mini Options from its currently listed option
contracts and therefore, eliminate investor confusion with respect to
product distinction. Moreover, the proposed rule change is designed to
protect investors and the public interest by providing investors with
an enhanced tool to reduce risk in high priced securities. In
particular, Mini Options would provide retail customers who invest in
SPY, AAPL, GLD, GOOG and AMZN in lots of less than 100 shares with a
means of protecting their investments that is currently only available
to those who have positions of 100 shares or more. Further, the
proposed rule change is limited to just five high priced securities to
ensure that only securities that have significant options liquidity and
therefore, customer demand, are selected to have Mini Options listed on
them.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the rule change will impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act. In this regard and as indicated above, the
Exchange notes that the rule change is being proposed as a competitive
response to recently approved NYSE Arca and ISE filings. The Exchange
believes this proposed rule change is necessary to permit fair
competition among the options exchanges.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change: (1) Does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
and (3) by its terms does not become operative for 30 days after the
date of this filing, or such shorter time as the Commission may
designate if consistent with the protection of investors and the public
interest, the proposed rule change has become effective pursuant to
Section 19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6)
thereunder.\14\
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to provide the Commission
with written notice of its intent to file the proposed rule change,
along with a brief description and text of the proposed rule change,
at least five business days prior to the date of filing of the
proposed rule change, or such shorter time as designated by the
Commission. The Exchange has fulfilled this requirement.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of filing. However,
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter
time if such action is consistent with the protection of investors and
the public interest. The Exchange requests that the Commission waive
the 30-day operative delay so that it can list and trade the proposed
mini options as soon as it is able.\15\ The
[[Page 6394]]
Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public
interest.\16\ The Commission notes the proposal is substantively
identical to proposals that were recently approved by the Commission,
and does not raise any new regulatory issues.\17\ For these reasons,
the Commission designates the proposed rule change as operative upon
filing.
---------------------------------------------------------------------------
\15\ The Commission notes that the Exchange's current options
pricing will not apply to the trading of Mini Options, and the
Exchange will not commence trading of Mini Options until transaction
fees specific to Mini Options have been filed with the Commission.
\16\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\17\ See Securities Exchange Act Release No. 67948 (September
28, 2012), 77 FR 60735 (October 4, 2012) (SR-NYSEArca-2012-64 and
SR-ISE-2012-58).
---------------------------------------------------------------------------
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 email to rule-comments@sec.gov. Please include
File Number SR-BX-2013-006 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-2013-006. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (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 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-BX-2013-006 and should be
submitted on or before February 20, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
---------------------------------------------------------------------------
\18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-01930 Filed 1-29-13; 8:45 am]
BILLING CODE 8011-01-P
