Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing of Proposed Rule Change To Clarify How the Exchange Will Treat a Market Maker's Quoting Obligations When the Underlying Equity Security Enters a Limit State or Straddle State, 16749-16750 [2013-06088]

Download as PDF Federal Register / Vol. 78, No. 52 / Monday, March 18, 2013 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–69109; File No. SR–BOX– 2013–13] Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing of Proposed Rule Change To Clarify How the Exchange Will Treat a Market Maker’s Quoting Obligations When the Underlying Equity Security Enters a Limit State or Straddle State March 11, 2013. 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 March 8, 2013, BOX Options Exchange LLC (‘‘BOX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 7080 to clarify how the Exchange will treat a Market Maker’s quoting obligations when the underlying equity security enters a Limit State or Straddle State. The text of the proposed rule change is available from the principal office of the Exchange, at the Commission’s Public Reference Room and also on the Exchange’s Internet Web site at https://boxexchange.com. pmangrum on DSK3VPTVN1PROD with NOTICES 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. 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Mar<14>2013 15:16 Mar 15, 2013 Jkt 229001 A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose Previously, the Commission approved a National Market System Plan to Address Extraordinary Market Volatility across the equities markets (as amended, the ‘‘Plan’’). The purpose of this proposed rule change is to implement joint industry principles across the options exchanges to address the implementation of the Plan. In particular, this proposed rule change will address how the Exchange will treat Market Maker quoting obligations for the options classes to which it is appointed when the underlying equity security enters a Limit State or Straddle State, as those terms are defined within the Plan. Specifically, the Exchange proposes to amend IM–7080–1 (Trading Conditions During Limit State or Straddle State) to provide that if the underlying security has entered a Limit State or Straddle State, the time in these States shall not count for purposes of calculating whether a Market Maker is fulfilling his obligations for continuous quotes under BOX Rule 8050(e). The Limit Up-Limit Down Plan is designed to prevent executions from occurring outside of dynamic price bands disseminated to the public by the single plan processor as defined in the Limit Up-Limit Down Plan. Under the Plan, a Limit State will be declared if the national best offer equals the lower price band and does not cross the national best bid, or the national best bid equals the upper price band and does not cross the national best offer. A Straddle State is when the national best bid (offer) is below (above) the lower (upper) price band and the security is not in a Limit State, and trading in that security deviates from normal trading characteristics such that declaring a trading pause would support the Plan’s goal to address extraordinary market volatility. Accordingly, when the underlying security is in a Limit State or Straddle State, there will not be a reliable price for the security to serve as a benchmark for the price of the related option. Under BOX Rule 8050(e), the Exchange requires Market Makers to enter continuous bids and offers for the options series to which it is registered for at least 60% of the time that the classes in which the Market Maker is registered are open for trading. While, in theory, the liquidity provided by requiring Market Makers to continue to quote during a Limit or Straddle State PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 16749 could help to stabilize a volatile market, without a reliable benchmark for pricing an option, Market Makers would likely respond to the uncertainty by entering very wide quotes, which would not provide any additional stability and could potentially lead to additional uncertainty. As such, the Exchange is proposing to specify that an underlying security’s Limit State or Straddle State time shall not count for purposes of calculating whether a Market Maker is fulfilling its obligations for continuous quotes under Rule 8050(e). This means that when a Limit State or Straddle State occurs, the total time that the underlying security is in the one of these States shall not be considered as part of the trading day for purposes of calculating the requirement that a Market Maker must post valid quotes at least 60% of the time the classes are open for trading. The Exchange believes that this relief will help to maintain a fair and efficient marketplace for the execution of options. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act in general, and furthers the objectives of Section 6(b)(5) of the Act in particular, in that it is designed 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. Specifically, the Exchange believes that the proposal is designed to help maintain fair and orderly markets by imposing certain modified conditions during times of uncertainty regarding the price of the underlying security due to extraordinary market volatility in such underlying security. The Exchange believes that excluding an underlying security’s Limit State or Straddle State time for purposes of calculating whether a Market Maker is fulfilling his obligations for continuous quotes will help to prevent executions that might occur at prices that have not been reliably formed. Further, the proposed changes will allow Market Makers to enter orders only where the Market Maker is confident in the price of the option, rather than on a continuous basis in all series in which the Market Maker is registered, which the Exchange believes will help to minimize uncertainty during a volatile market. The Exchange also believes that these changes will help to incentivize participants registered with BOX as Market Makers to continue to act as Market Makers, rather than potentially causing Market Makers to deregister. E:\FR\FM\18MRN1.SGM 18MRN1 16750 Federal Register / Vol. 78, No. 52 / Monday, March 18, 2013 / Notices The Exchange also believes that this change will help to protect all investors from executions at prices that are not based on a reliable benchmark for the price of an option during times of significant volatility, and thus, believes the proposal to be consistent with the protection of investors and the public interest. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. To the contrary, the Exchange believes that other options exchanges are proposing to modify a market maker’s quoting obligations when the underlying security is subject to a Limit State or Straddle State in connection with the Limit Up-Limit Down Plan consistent with the Exchange’s handling proposed by this filing. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. pmangrum on DSK3VPTVN1PROD with NOTICES 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: No. SR–BOX–2013–13 on the subject line. SECURITIES AND EXCHANGE COMMISSION Paper Comments [Release No. 34–69121; File No. SR–BATS– 2013–014] • 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 No. SR–BOX–2013–13. 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 such 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 No. SR–BOX–2013– 13 and should be submitted on or before April 2, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.3 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–06088 Filed 3–15–13; 8:45 am] BILLING CODE 8011–01–P Electronic Comments 15:16 Mar 15, 2013 March 12, 2013. 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 February 27, 2013, BATS Exchange, Inc. (‘‘BATS’’ 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 Exchange has designated this proposal as a ‘‘noncontroversial’’ proposed rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f)(6)(iii) thereunder,4 which renders it effective upon filing with the Commission. 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 filed a proposal for the BATS Options Market (‘‘BATS Options’’) to amend Rule 21.1 in connection with the upcoming operation of the Plan to Address Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS under the Act (the ‘‘Limit Up-Limit Down Plan’’ or ‘‘Plan’’).5 The text of the proposed rule change is available at the Exchange’s Web site at https://www.batstrading.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 1 15 • 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 VerDate Mar<14>2013 Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the Operation of Market Orders for BATS Options Jkt 229001 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(6)(iii). 5 See Securities Exchange Act Release No. 67091 (May 31, 2012), 77 FR 33498 (June 6, 2012) (the ‘‘Limit Up-Limit Down Release’’). 2 17 3 PO 00000 17 CFR 200.30–3(a)(12). Frm 00104 Fmt 4703 Sfmt 4703 E:\FR\FM\18MRN1.SGM 18MRN1

Agencies

[Federal Register Volume 78, Number 52 (Monday, March 18, 2013)]
[Notices]
[Pages 16749-16750]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-06088]



[[Page 16749]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69109; File No. SR-BOX-2013-13]


Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing of Proposed Rule Change To Clarify How the Exchange Will 
Treat a Market Maker's Quoting Obligations When the Underlying Equity 
Security Enters a Limit State or Straddle State

March 11, 2013.
    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 March 8, 2013, BOX Options Exchange LLC (``BOX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I, II, 
and II below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 7080 to clarify how the 
Exchange will treat a Market Maker's quoting obligations when the 
underlying equity security enters a Limit State or Straddle State. The 
text of the proposed rule change is available from the principal office 
of the Exchange, at the Commission's Public Reference Room and also on 
the Exchange's Internet Web site at https://boxexchange.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 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
    Previously, the Commission approved a National Market System Plan 
to Address Extraordinary Market Volatility across the equities markets 
(as amended, the ``Plan''). The purpose of this proposed rule change is 
to implement joint industry principles across the options exchanges to 
address the implementation of the Plan. In particular, this proposed 
rule change will address how the Exchange will treat Market Maker 
quoting obligations for the options classes to which it is appointed 
when the underlying equity security enters a Limit State or Straddle 
State, as those terms are defined within the Plan.
    Specifically, the Exchange proposes to amend IM-7080-1 (Trading 
Conditions During Limit State or Straddle State) to provide that if the 
underlying security has entered a Limit State or Straddle State, the 
time in these States shall not count for purposes of calculating 
whether a Market Maker is fulfilling his obligations for continuous 
quotes under BOX Rule 8050(e).
    The Limit Up-Limit Down Plan is designed to prevent executions from 
occurring outside of dynamic price bands disseminated to the public by 
the single plan processor as defined in the Limit Up-Limit Down Plan. 
Under the Plan, a Limit State will be declared if the national best 
offer equals the lower price band and does not cross the national best 
bid, or the national best bid equals the upper price band and does not 
cross the national best offer. A Straddle State is when the national 
best bid (offer) is below (above) the lower (upper) price band and the 
security is not in a Limit State, and trading in that security deviates 
from normal trading characteristics such that declaring a trading pause 
would support the Plan's goal to address extraordinary market 
volatility. Accordingly, when the underlying security is in a Limit 
State or Straddle State, there will not be a reliable price for the 
security to serve as a benchmark for the price of the related option.
    Under BOX Rule 8050(e), the Exchange requires Market Makers to 
enter continuous bids and offers for the options series to which it is 
registered for at least 60% of the time that the classes in which the 
Market Maker is registered are open for trading. While, in theory, the 
liquidity provided by requiring Market Makers to continue to quote 
during a Limit or Straddle State could help to stabilize a volatile 
market, without a reliable benchmark for pricing an option, Market 
Makers would likely respond to the uncertainty by entering very wide 
quotes, which would not provide any additional stability and could 
potentially lead to additional uncertainty. As such, the Exchange is 
proposing to specify that an underlying security's Limit State or 
Straddle State time shall not count for purposes of calculating whether 
a Market Maker is fulfilling its obligations for continuous quotes 
under Rule 8050(e). This means that when a Limit State or Straddle 
State occurs, the total time that the underlying security is in the one 
of these States shall not be considered as part of the trading day for 
purposes of calculating the requirement that a Market Maker must post 
valid quotes at least 60% of the time the classes are open for trading. 
The Exchange believes that this relief will help to maintain a fair and 
efficient marketplace for the execution of options.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act in general, and furthers the objectives of Section 
6(b)(5) of the Act in particular, in that it is designed 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. 
Specifically, the Exchange believes that the proposal is designed to 
help maintain fair and orderly markets by imposing certain modified 
conditions during times of uncertainty regarding the price of the 
underlying security due to extraordinary market volatility in such 
underlying security.
    The Exchange believes that excluding an underlying security's Limit 
State or Straddle State time for purposes of calculating whether a 
Market Maker is fulfilling his obligations for continuous quotes will 
help to prevent executions that might occur at prices that have not 
been reliably formed. Further, the proposed changes will allow Market 
Makers to enter orders only where the Market Maker is confident in the 
price of the option, rather than on a continuous basis in all series in 
which the Market Maker is registered, which the Exchange believes will 
help to minimize uncertainty during a volatile market. The Exchange 
also believes that these changes will help to incentivize participants 
registered with BOX as Market Makers to continue to act as Market 
Makers, rather than potentially causing Market Makers to deregister.

[[Page 16750]]

The Exchange also believes that this change will help to protect all 
investors from executions at prices that are not based on a reliable 
benchmark for the price of an option during times of significant 
volatility, and thus, believes the proposal to be consistent with the 
protection of investors and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. To the contrary, the Exchange 
believes that other options exchanges are proposing to modify a market 
maker's quoting obligations when the underlying security is subject to 
a Limit State or Straddle State in connection with the Limit Up-Limit 
Down Plan consistent with the Exchange's handling proposed by this 
filing.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File No. SR-BOX-2013-13 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 No. SR-BOX-2013-13. 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 such 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 No. SR-BOX-2013-13 and should be 
submitted on or before April 2, 2013.
---------------------------------------------------------------------------

    \3\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\3\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-06088 Filed 3-15-13; 8:45 am]
BILLING CODE 8011-01-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.