Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend BOX Rules 5050, 7050, and 7240, 28692-28695 [2013-11523]
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28692
Federal Register / Vol. 78, No. 94 / Wednesday, May 15, 2013 / 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:
• 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–Phlx–2013–48 on the
subject line.
Paper Comments
TKELLEY on DSK3SPTVN1PROD with NOTICES
• 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–Phlx–2013–48. 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 Number SR-Phlx2013–48 and should be submitted on or
before June 5, 2013.
17:16 May 14, 2013
[FR Doc. 2013–11519 Filed 5–14–13; 8:45 am]
Jkt 229001
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
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
VerDate Mar<15>2010
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Kevin M. O’Neill,
Deputy Secretary.
[Release No. 34–69551; File No. SR–BOX–
2013–25]
Self-Regulatory Organizations; BOX
Options Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend BOX
Rules 5050, 7050, and 7240
May 9, 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 May 8,
2013, BOX Options Exchange LLC
(‘‘BOX’’ 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 amend
BOX Rules 5050(e) (Jumbo SPY
Options), 7050 (Minimum Trading
Increments) and 7240 (Complex Orders).
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
27 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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1. Purpose
The Exchange received approval to
list and trade option contracts overlying
1,000 shares of the SPDR® S&P® 500
Exchange-Traded Fund (‘‘SPY’’) 3 or
(‘‘Jumbo SPY Options’’).4 Whereas
standard options contracts represent a
deliverable of 100 shares of an
underlying security, this product
represents 1,000 SPY shares. Except for
the difference in the number of
deliverable shares, Jumbo SPY Options
have the same terms and contract
characteristics as regular-sized options
contracts (‘‘standard options’’),
including exercise style. Accordingly,
the Commission noted in the approval
order that the Exchange’s rules that
apply to the trading of standard options
would apply to Jumbo SPY Options as
well.5 Prior to the launch of these nonstandard contracts, the Exchange
proposes to amend the BOX Rules to (1)
Permit the minimum trading increment
for Jumbo SPY Options to be the same
as the minimum trading increment
permitted for standard SPY options, (2)
codify the minimum contract threshold
requirement for the execution of Jumbo
SPY Options in the Exchange’s
Facilitation and Solicitation Auctions,
(3) provide that while Participants may
execute complex orders involving
Jumbo SPY Options, if any leg of a
complex order is a Jumbo SPY Option,
all options legs of such orders must also
be Jumbo SPY Options 6 and (4) clarify
the eligibility of Jumbo SPY Options in
the Price Improvement Period ‘‘PIP’’, as
well as the market maker appointments
and quoting obligations for Jumbo SPY
Options. The Exchange notes that this
filing is based on similar proposals filed
by BOX as part of the launch of ‘‘Mini
Options,’’ which are non-standard
option contracts overlying 10 shares of
a security.7
3 ‘‘SPDR®,’’ ‘‘Standard & Poor’s®,’’ ‘‘S&P®,’’ ‘‘S&P
500®,’’ and ‘‘Standard & Poor’s 500’’ are registered
trademarks of Standard & Poor’s Financial Services
LLC. The SPY ETF represents ownership in the
SPDR S&P 500 Trust, a unit investment trust that
generally corresponds to the price and yield
performance of the SPDR S&P 500 Index.
4 See Securities Exchange Act Release No. 69511
(May 03, 2013), 78 FR 27271 (May 9, 2013) (Order
Approving SR–BOX–2013–06).
5 Id.
6 Id.
7 See Securities Exchange Act Release Nos. 69154
(March 15, 2013), 78 FR 17741 (March 22, 2013)
(Notice of Filing and Immediate Effectiveness of
SR–BOX–2013–14); 69240 (March 26, 2013), 78 FR
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TKELLEY on DSK3SPTVN1PROD with NOTICES
Minimum Price Variation
First, the Exchange proposes to
amend BOX Rule 5050(e) (Jumbo SPY
Options) and 7050 (Minimum Trading
Increments) to permit the minimum
trading increment for Jumbo SPY to be
the same as the minimum trading
increment permitted for standard SPY
options.
Currently, the Exchange is only
approved to list Jumbo SPY Options and
standard SPY options are part of the
Exchange’s Penny Pilot Program.8
Under the Penny Pilot Program, with
the exception of three classes,9 the
minimum price variation for all
participating options classes is $0.01 for
all quotations in options series that are
quoted at less than $3 per contract and
$0.05 for all quotations in options series
that are quoted at $3 per contract or
greater. The minimum trading
increment for standard SPY options,
which is not subject to a price test, is
$0.01 across all option series. In the
absence of the Penny Pilot Program the
minimum price increment would be
$0.05 for quotations in options series
that were quoted at less than $3 per
contract and $0.10 for quotations in
options series that were quoted at $3 per
contract or greater.
This proposed rule change will permit
the minimum trading increment for
Jumbo SPY to be identical to the
minimum trading increment applicable
to standard options on SPY. The
Exchange believes having different
trading increments for Jumbo SPY than
those permitted for standard options on
SPY would be detrimental to the
success of this new product offering and
would also lead to investor confusion.
The Exchange notes that in limiting
Jumbo options to only Jumbo SPY
Options; the Exchange selected an
underlying security with a high price
and extremely liquid options market.
19562 (April 1, 2013) (Notice of Filing and
Immediate Effectiveness of SR–BOX–2013–18) and
69512 (May 3, 2013) (Notice of Filing and
Immediate Effectiveness of SR–BOX–2013–23).
8 The Penny Pilot Program has been in effect on
the Exchange since its inception in May 2012. See
Securities Exchange Act Release Nos. 66871 (April
27, 2012) 77 FR 26323 (May 3, 2012) (File No. 10–
206, In the Matter of the Application of BOX
Options Exchange LLC for Registration as a
National Securities Exchange Findings, Opinion,
and Order of the Commission), and 67328 (June 29,
2012) 77 FR 40123 (July 6, 2012) (SR–BOX–2012–
007). The Penny Pilot has been extended and is
currently in place through June 30, 2013. See
Securities Exchange Act Release No. 68425
(December 13, 2012), 77 FR 75234 (December 19,
2012) (Notice of Filing and Immediate Effectiveness
of SR–BOX–2012–021).
9 The three classes are the Nasdaq-100 Index
Tracking Stock (‘‘QQQQ’’), the SPDR S&P 500 ETF
(‘‘SPY’’) and the iShares Russell 2000 Index Fund
(‘‘IWM’’). QQQQ, SPY and IWM are quoted in $0.01
increments for all options series.
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Jumbo SPY Options are a natural
extension to the options overlying SPY
and therefore should retain the most
important characteristic, i.e., trading
increments. The Exchange believes that
by reducing the minimum trading
increments for Jumbo SPY Options to
$0.01, the proposed rule change will
provide market participants with
meaningful trading opportunities in this
product. Further, quoting and trading in
$0.01 increments will enable market
participants to trade Jumbo SPY Options
with greater precision as to price.
Providing these more refined
increments will permit the Exchange’s
Market Makers the opportunity to
provide better fills (meaning less spread
than the current wider minimum
increments rules allow) to customers.
Therefore, the Exchange proposes to
amend its rules to permit the listing and
trading of Jumbo SPY Options [sic]
$0.01 increments, the same increment
permitted for standard options on SPY.
However, the Exchange notes even
though this proposed rule change would
permit the trading of Jumbo SPY
Options in narrower increments, they
would not be considered part of the
Penny Pilot Program.
The Exchange’s proposal to quote and
trade certain option classes that are
outside of the Penny Pilot Program in
$0.01 increments is not novel.
Specifically, the Commission recently
permitted BOX and other exchanges to
set the minimum price variation for
Mini Option as the same as standard
options on the same underlying
security.10
In support of this proposed rule
change, the Exchange proposes to
amend BOX Rules 7050 and 5050(e). In
Rule 7050, the Exchange proposes to
add new subsection (d) to provide that
the minimum trading increment for
Jumbo SPY Options shall be determined
in accordance with new subsection (4)
to Rule 5050(e). Proposed subsection (4)
to Rule 5050(e) will provide that the
minimum trading increment for Jumbo
SPY Options shall be the same as the
minimum trading increment permitted
for standard options on SPY.
With regard to the impact of this
proposal on system capacity, the
Exchange represents that it and the
Options Price Reporting Authority have
the necessary systems capacity to
handle the potential additional traffic
associated with this proposal. The
Exchange does not believe that this
increased traffic will become
unmanageable since Jumbo SPY Options
are limited to a single underlying
security.
Facilitation and Solicitation Auctions
The Exchange proposes to amend
Rule 5050(e) (Jumbo SPY Options) to
codify the minimum contract threshold
requirement for the execution of Jumbo
SPY Options in the Exchange’s
Facilitation and Solicitation Auctions.
The Facilitation Auction is a process by
which an OFP can attempt to execute a
transaction wherein the OFP seeks to
facilitate a block-size order it represents
as agent (‘‘Agency Order’’), and/or a
transaction wherein the OFP solicited
interest to execute against an Agency
Order. OFPs must be willing to execute
the entire size of Agency Orders entered
into the Facilitation Auction through
the submission of a contra ‘‘Facilitation
Order’’.11 Block-size orders are orders
for fifty (50) or more contracts.12 The
Solicitation Auction is a process by
which an OFP can attempt to execute
orders of 500 or more contracts it
represents as agent (the ‘‘Agency
Order’’) against contra orders that it has
solicited (‘‘Solicited Order’’).13 Each
Agency Order entered into the
Solicitation Auction shall be all-ornone. The minimum contract threshold
required for the Facilitation Auction
and the Solicitation Auction applies to
option contracts that overlie 100 shares
and therefore does not currently apply
to Jumbo options.
The Exchange proposes to add a new
subsection (5) to Rule 5050(e) to adjust
the minimum contract threshold for
executing Jumbo SPY Options in the
Facilitation Auction and Solicitation
Auction to 1/10th their current
requirement. Thus, Jumbo SPY Options
executed in the Facilitation Auction
must be for five (5) or more Jumbo
option contracts, and Jumbo SPY
Options executed in the Solicitation
Auction must be for fifty (50) or more
Jumbo Option contracts.
The Exchange believes it is
appropriate to adjust the minimum
contract threshold for Jumbo SPY
Options so they are equivalent (same
number of underlying securities) to the
minimum contract threshold required
for standard options that are executed in
the Facilitation and Solicitation
Auctions. The Exchange believes that
adjusting the minimum contract
threshold will remove any confusion on
the part of market participants that want
to use these Exchange functionalities to
execute Jumbo SPY Options.
Complex Orders
The Exchange proposes to amend
Rule 7240 (Complex Orders) to provide
11 See
BOX Rule 7270(a).
IM–7270–2.
13 See BOX Rule 7270(b).
12 See
10 See
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Federal Register / Vol. 78, No. 94 / Wednesday, May 15, 2013 / Notices
that while Participants may execute
Complex Orders involving Jumbo SPY
Options, if any leg of a complex order
is a Jumbo SPY Option, all options legs
of such orders must also be in Jumbo
SPY Option.14
Other
The Exchange represents that Market
Maker appointments for Jumbo SPY
Options will be done in compliance
with existing Exchange rules.15 The
Exchange also proposes to clarify that
for Market Maker quoting obligation
purposes Jumbo SPY Options will not
be combined with standard SPY
options. In addition, Jumbo SPY
Options will be eligible to trade on the
Exchange’s PIP auction.
2. Statutory Basis
The Exchange believes that the
proposal is consistent with the
requirements of Section 6(b) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),16 in general, and Section 6(b)(5)
of the Act,17 in particular, in that it is
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities, 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.
TKELLEY on DSK3SPTVN1PROD with NOTICES
Minimum Price Variation
In particular, the proposed rule
change will assure that Mini, Jumbo and
standard SPY options will trade in
similar increments, providing market
participants meaningful trading
opportunities and enabling them to
trade Jumbo SPY Options with greater
precision as to price. The Exchange also
believes that allowing Mini, standard
and Jumbo SPY options to trade in
similar increments will avoid investor
confusion. The Exchange further
believes that investors and other market
participants will benefit from this
proposed rule change because it clarifies
and establishes the minimum trading
increment for Jumbo SPY Options prior
to the commencement of trading. The
Exchange believes that investors
generally will be expecting the
minimum trading increment for Jumbo
14 See Securities Exchange Act Release No. 69419
(April 19, 2013), 78 FR 24449 (April 25, 2013)
(Approval Order of SR–BOX–2013–01). The
Exchange launched its Complex Order Book on May
3, 2013.
15 See BOX Rule 8030(a).
16 15 U.S.C. 78f(b).
17 15 U.S.C. 78f(b)(5).
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SPY Options to be the same as the
minimum trading increment for Mini
and standard options on SPY. This
proposed rule change will therefore
lessen investor confusion because
Jumbo SPY Options, Mini and standard
SPY options will all have the same
minimum trading increment.
Facilitation Auction and Solicitation
Auction
The proposed rule change will assure
that standard options and Jumbo
Options on the same underlying
security will have an equivalent
minimum contract threshold for the
execution of orders in the Exchange’s
Facilitation Auction and Solicitation
Auction. The Exchange believes the
proposed rule change will avoid
investor confusion because in the
absence of this proposal, the minimum
contract threshold for executing Jumbo
SPY Options in either the Facilitation
Auction or the Solicitation Auction
would not be equivalent than [sic] that
for standard options (i.e., different
number of underlying securities). The
Exchange does not intend for Jumbo
SPY Options and standard options to
have different minimum contract
threshold requirements for its various
auctions executed on the Exchange. The
Exchange further believes that investors
and other market participants will
benefit from this proposed rule change
because it clarifies and establishes the
minimum contract threshold for
executing Jumbo SPY Options in the
Facilitation and Solicitation Auctions.
The Exchange believes that investors
generally will be expecting the
minimum contract threshold for Jumbo
SPY Options to be equivalent to the
minimum contract threshold for
standard SPY options. This proposed
rule change will therefore lessen
investor confusion.
Complex Orders
The Exchange believes that investors
and other market participants would
benefit from the current proposal to
amend the Complex Orders rules
because it provides that market
participants may take advantage of
legitimate investment strategies and
execute complex orders involving
Jumbo SPY Options. Additionally, the
Exchange believes the proposed rule
change will help avoid investor
confusion, by providing how Jumbo
SPY Options will trade as compared to
standard options with respect to
Complex Orders.
The Exchange’s proposal to permit
Jumbo SPY Options to trade as Complex
Orders provided the strategy does not
combine Jumbo SPY Options and
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standard SPY options serves to maintain
the permissible ratios that are applicable
to Complex Orders by separating the
trading of standard option Complex
Orders and Jumbo SPY Option Complex
Orders.
Finally, the Exchange believes that
the proposed rule change is not
designed to permit unfair
discrimination among market
participants as all market participants
may participate in complex orders
involving Jumbo SPY Options.
Other
The Exchange believes that it is
appropriate to clarify how Jumbo SPY
Options will be treated for purposes of
a Market Maker’s assignment and
quoting obligations, as well as if this
new product is eligible to trade on the
PIP auction. Doing so provides investors
and other market participants with a
clear and accurate understanding of the
Exchange’s rules regarding Jumbo SPY
Options. By submitting this proposal the
Exchange is eliminating any potential
confusion about how Jumbo SPY
Options will be listed and traded. In
particular, the Exchange believes that
allowing Jumbo SPY Options to be
eligible for the PIP auction may increase
the frequency with which Options
Participants initiate a PIP Order, which
may result in greater opportunity for
price improvement for customers.
Further, the Exchange believes it is
appropriate for Market Maker
assignments in Jumbo SPY Options to
be in compliance with existing
Exchange rules, and to not combine
Jumbo SPY Options with standard SPY
options in determining Market Maker
quoting obligations. This is the same
approach that the Exchange took to Mini
Options and doing this will lessen
investor confusion on this new product.
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. Specifically,
the Exchange believes that investors
would benefit from the introduction and
availability of Jumbo SPY by making
options on large blocks of the SPY ETF
more available as an investing tool,
particularly for institutional investors.
Trading in Jumbo SPY Options is
entirely voluntary and Participants can
determine if they would like to trade in
this new product. The Exchange
believes this proposed rule change is
necessary to establish uniform rules
regarding minimum trading increments,
minimum contract thresholds, and
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complex orders for the listing and
trading of Jumbo SPY Options, a new
options product. This proposal is also
designed to promote investor certainty
by clarifying if Jumbo SPY Options will
be able to trade on the PIP, as well as
the assignment and quoting obligations
for Jumbo SPY Options.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has neither solicited
nor received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change: (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 18 and
Rule 19b–4(f)(6) thereunder.19
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
the proposed rule change may become
operative before the anticipated launch
of trading in Jumbo SPY Options. The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest.20 Waiver of the
operative delay will allow the Exchange
to implement its proposal consistent
with the anticipated commencement of
trading in Jumbo SPY Options on May
10, 2013. For these reasons, the
18 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.
20 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).
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19 17
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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.
28695
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–BOX–
2013–25 and should be submitted on or
before June 5, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Kevin M. O’Neill,
Deputy Secretary.
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:
[FR Doc. 2013–11523 Filed 5–14–13; 8:45 am]
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–BOX–2013–25 on the
subject line.
Self-Regulatory Organizations; BATS
Y-Exchange, Inc.; Notice of Filing of a
Proposed Rule Change To Amend and
Restate the Amended and Restated ByLaws of BATS Y-Exchange, Inc.
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–BOX–2013–25. 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
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69541; File No. SR–BYX–
2013–013]
May 8, 2013.
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 April 29,
2013, BATS Y-Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BYX’’) 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 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 the Substance
of the Proposed Rule Change
The Exchange filed a proposal to
amend the by-laws of the Exchange.
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
statements may be examined at the
21 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\15MYN1.SGM
15MYN1
Agencies
[Federal Register Volume 78, Number 94 (Wednesday, May 15, 2013)]
[Notices]
[Pages 28692-28695]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-11523]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69551; File No. SR-BOX-2013-25]
Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing and Immediate Effectiveness of Proposed Rule Change To Amend
BOX Rules 5050, 7050, and 7240
May 9, 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 May 8, 2013, BOX Options Exchange LLC (``BOX'' 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend BOX Rules 5050(e) (Jumbo SPY
Options), 7050 (Minimum Trading Increments) and 7240 (Complex Orders).
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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange received approval to list and trade option contracts
overlying 1,000 shares of the SPDR[supreg] S&P[supreg] 500 Exchange-
Traded Fund (``SPY'') \3\ or (``Jumbo SPY Options'').\4\ Whereas
standard options contracts represent a deliverable of 100 shares of an
underlying security, this product represents 1,000 SPY shares. Except
for the difference in the number of deliverable shares, Jumbo SPY
Options have the same terms and contract characteristics as regular-
sized options contracts (``standard options''), including exercise
style. Accordingly, the Commission noted in the approval order that the
Exchange's rules that apply to the trading of standard options would
apply to Jumbo SPY Options as well.\5\ Prior to the launch of these
non-standard contracts, the Exchange proposes to amend the BOX Rules to
(1) Permit the minimum trading increment for Jumbo SPY Options to be
the same as the minimum trading increment permitted for standard SPY
options, (2) codify the minimum contract threshold requirement for the
execution of Jumbo SPY Options in the Exchange's Facilitation and
Solicitation Auctions, (3) provide that while Participants may execute
complex orders involving Jumbo SPY Options, if any leg of a complex
order is a Jumbo SPY Option, all options legs of such orders must also
be Jumbo SPY Options \6\ and (4) clarify the eligibility of Jumbo SPY
Options in the Price Improvement Period ``PIP'', as well as the market
maker appointments and quoting obligations for Jumbo SPY Options. The
Exchange notes that this filing is based on similar proposals filed by
BOX as part of the launch of ``Mini Options,'' which are non-standard
option contracts overlying 10 shares of a security.\7\
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\3\ ``SPDR[supreg],'' ``Standard & Poor's[supreg],''
``S&P[supreg],'' ``S&P 500[supreg],'' and ``Standard & Poor's 500''
are registered trademarks of Standard & Poor's Financial Services
LLC. The SPY ETF represents ownership in the SPDR S&P 500 Trust, a
unit investment trust that generally corresponds to the price and
yield performance of the SPDR S&P 500 Index.
\4\ See Securities Exchange Act Release No. 69511 (May 03,
2013), 78 FR 27271 (May 9, 2013) (Order Approving SR-BOX-2013-06).
\5\ Id.
\6\ Id.
\7\ See Securities Exchange Act Release Nos. 69154 (March 15,
2013), 78 FR 17741 (March 22, 2013) (Notice of Filing and Immediate
Effectiveness of SR-BOX-2013-14); 69240 (March 26, 2013), 78 FR
19562 (April 1, 2013) (Notice of Filing and Immediate Effectiveness
of SR-BOX-2013-18) and 69512 (May 3, 2013) (Notice of Filing and
Immediate Effectiveness of SR-BOX-2013-23).
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[[Page 28693]]
Minimum Price Variation
First, the Exchange proposes to amend BOX Rule 5050(e) (Jumbo SPY
Options) and 7050 (Minimum Trading Increments) to permit the minimum
trading increment for Jumbo SPY to be the same as the minimum trading
increment permitted for standard SPY options.
Currently, the Exchange is only approved to list Jumbo SPY Options
and standard SPY options are part of the Exchange's Penny Pilot
Program.\8\ Under the Penny Pilot Program, with the exception of three
classes,\9\ the minimum price variation for all participating options
classes is $0.01 for all quotations in options series that are quoted
at less than $3 per contract and $0.05 for all quotations in options
series that are quoted at $3 per contract or greater. The minimum
trading increment for standard SPY options, which is not subject to a
price test, is $0.01 across all option series. In the absence of the
Penny Pilot Program the minimum price increment would be $0.05 for
quotations in options series that were quoted at less than $3 per
contract and $0.10 for quotations in options series that were quoted at
$3 per contract or greater.
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\8\ The Penny Pilot Program has been in effect on the Exchange
since its inception in May 2012. See Securities Exchange Act Release
Nos. 66871 (April 27, 2012) 77 FR 26323 (May 3, 2012) (File No. 10-
206, In the Matter of the Application of BOX Options Exchange LLC
for Registration as a National Securities Exchange Findings,
Opinion, and Order of the Commission), and 67328 (June 29, 2012) 77
FR 40123 (July 6, 2012) (SR-BOX-2012-007). The Penny Pilot has been
extended and is currently in place through June 30, 2013. See
Securities Exchange Act Release No. 68425 (December 13, 2012), 77 FR
75234 (December 19, 2012) (Notice of Filing and Immediate
Effectiveness of SR-BOX-2012-021).
\9\ The three classes are the Nasdaq-100 Index Tracking Stock
(``QQQQ''), the SPDR S&P 500 ETF (``SPY'') and the iShares Russell
2000 Index Fund (``IWM''). QQQQ, SPY and IWM are quoted in $0.01
increments for all options series.
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This proposed rule change will permit the minimum trading increment
for Jumbo SPY to be identical to the minimum trading increment
applicable to standard options on SPY. The Exchange believes having
different trading increments for Jumbo SPY than those permitted for
standard options on SPY would be detrimental to the success of this new
product offering and would also lead to investor confusion.
The Exchange notes that in limiting Jumbo options to only Jumbo SPY
Options; the Exchange selected an underlying security with a high price
and extremely liquid options market. Jumbo SPY Options are a natural
extension to the options overlying SPY and therefore should retain the
most important characteristic, i.e., trading increments. The Exchange
believes that by reducing the minimum trading increments for Jumbo SPY
Options to $0.01, the proposed rule change will provide market
participants with meaningful trading opportunities in this product.
Further, quoting and trading in $0.01 increments will enable market
participants to trade Jumbo SPY Options with greater precision as to
price. Providing these more refined increments will permit the
Exchange's Market Makers the opportunity to provide better fills
(meaning less spread than the current wider minimum increments rules
allow) to customers. Therefore, the Exchange proposes to amend its
rules to permit the listing and trading of Jumbo SPY Options [sic]
$0.01 increments, the same increment permitted for standard options on
SPY. However, the Exchange notes even though this proposed rule change
would permit the trading of Jumbo SPY Options in narrower increments,
they would not be considered part of the Penny Pilot Program.
The Exchange's proposal to quote and trade certain option classes
that are outside of the Penny Pilot Program in $0.01 increments is not
novel. Specifically, the Commission recently permitted BOX and other
exchanges to set the minimum price variation for Mini Option as the
same as standard options on the same underlying security.\10\
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\10\ See supra, notes 4 and 6 [sic].
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In support of this proposed rule change, the Exchange proposes to
amend BOX Rules 7050 and 5050(e). In Rule 7050, the Exchange proposes
to add new subsection (d) to provide that the minimum trading increment
for Jumbo SPY Options shall be determined in accordance with new
subsection (4) to Rule 5050(e). Proposed subsection (4) to Rule 5050(e)
will provide that the minimum trading increment for Jumbo SPY Options
shall be the same as the minimum trading increment permitted for
standard options on SPY.
With regard to the impact of this proposal on system capacity, the
Exchange represents that it and the Options Price Reporting Authority
have the necessary systems capacity to handle the potential additional
traffic associated with this proposal. The Exchange does not believe
that this increased traffic will become unmanageable since Jumbo SPY
Options are limited to a single underlying security.
Facilitation and Solicitation Auctions
The Exchange proposes to amend Rule 5050(e) (Jumbo SPY Options) to
codify the minimum contract threshold requirement for the execution of
Jumbo SPY Options in the Exchange's Facilitation and Solicitation
Auctions. The Facilitation Auction is a process by which an OFP can
attempt to execute a transaction wherein the OFP seeks to facilitate a
block-size order it represents as agent (``Agency Order''), and/or a
transaction wherein the OFP solicited interest to execute against an
Agency Order. OFPs must be willing to execute the entire size of Agency
Orders entered into the Facilitation Auction through the submission of
a contra ``Facilitation Order''.\11\ Block-size orders are orders for
fifty (50) or more contracts.\12\ The Solicitation Auction is a process
by which an OFP can attempt to execute orders of 500 or more contracts
it represents as agent (the ``Agency Order'') against contra orders
that it has solicited (``Solicited Order'').\13\ Each Agency Order
entered into the Solicitation Auction shall be all-or-none. The minimum
contract threshold required for the Facilitation Auction and the
Solicitation Auction applies to option contracts that overlie 100
shares and therefore does not currently apply to Jumbo options.
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\11\ See BOX Rule 7270(a).
\12\ See IM-7270-2.
\13\ See BOX Rule 7270(b).
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The Exchange proposes to add a new subsection (5) to Rule 5050(e)
to adjust the minimum contract threshold for executing Jumbo SPY
Options in the Facilitation Auction and Solicitation Auction to 1/10th
their current requirement. Thus, Jumbo SPY Options executed in the
Facilitation Auction must be for five (5) or more Jumbo option
contracts, and Jumbo SPY Options executed in the Solicitation Auction
must be for fifty (50) or more Jumbo Option contracts.
The Exchange believes it is appropriate to adjust the minimum
contract threshold for Jumbo SPY Options so they are equivalent (same
number of underlying securities) to the minimum contract threshold
required for standard options that are executed in the Facilitation and
Solicitation Auctions. The Exchange believes that adjusting the minimum
contract threshold will remove any confusion on the part of market
participants that want to use these Exchange functionalities to execute
Jumbo SPY Options.
Complex Orders
The Exchange proposes to amend Rule 7240 (Complex Orders) to
provide
[[Page 28694]]
that while Participants may execute Complex Orders involving Jumbo SPY
Options, if any leg of a complex order is a Jumbo SPY Option, all
options legs of such orders must also be in Jumbo SPY Option.\14\
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\14\ See Securities Exchange Act Release No. 69419 (April 19,
2013), 78 FR 24449 (April 25, 2013) (Approval Order of SR-BOX-2013-
01). The Exchange launched its Complex Order Book on May 3, 2013.
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Other
The Exchange represents that Market Maker appointments for Jumbo
SPY Options will be done in compliance with existing Exchange
rules.\15\ The Exchange also proposes to clarify that for Market Maker
quoting obligation purposes Jumbo SPY Options will not be combined with
standard SPY options. In addition, Jumbo SPY Options will be eligible
to trade on the Exchange's PIP auction.
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\15\ See BOX Rule 8030(a).
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2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Securities Exchange Act of 1934
(the ``Act''),\16\ in general, and Section 6(b)(5) of the Act,\17\ in
particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, 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.
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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
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Minimum Price Variation
In particular, the proposed rule change will assure that Mini,
Jumbo and standard SPY options will trade in similar increments,
providing market participants meaningful trading opportunities and
enabling them to trade Jumbo SPY Options with greater precision as to
price. The Exchange also believes that allowing Mini, standard and
Jumbo SPY options to trade in similar increments will avoid investor
confusion. The Exchange further believes that investors and other
market participants will benefit from this proposed rule change because
it clarifies and establishes the minimum trading increment for Jumbo
SPY Options prior to the commencement of trading. The Exchange believes
that investors generally will be expecting the minimum trading
increment for Jumbo SPY Options to be the same as the minimum trading
increment for Mini and standard options on SPY. This proposed rule
change will therefore lessen investor confusion because Jumbo SPY
Options, Mini and standard SPY options will all have the same minimum
trading increment.
Facilitation Auction and Solicitation Auction
The proposed rule change will assure that standard options and
Jumbo Options on the same underlying security will have an equivalent
minimum contract threshold for the execution of orders in the
Exchange's Facilitation Auction and Solicitation Auction. The Exchange
believes the proposed rule change will avoid investor confusion because
in the absence of this proposal, the minimum contract threshold for
executing Jumbo SPY Options in either the Facilitation Auction or the
Solicitation Auction would not be equivalent than [sic] that for
standard options (i.e., different number of underlying securities). The
Exchange does not intend for Jumbo SPY Options and standard options to
have different minimum contract threshold requirements for its various
auctions executed on the Exchange. The Exchange further believes that
investors and other market participants will benefit from this proposed
rule change because it clarifies and establishes the minimum contract
threshold for executing Jumbo SPY Options in the Facilitation and
Solicitation Auctions. The Exchange believes that investors generally
will be expecting the minimum contract threshold for Jumbo SPY Options
to be equivalent to the minimum contract threshold for standard SPY
options. This proposed rule change will therefore lessen investor
confusion.
Complex Orders
The Exchange believes that investors and other market participants
would benefit from the current proposal to amend the Complex Orders
rules because it provides that market participants may take advantage
of legitimate investment strategies and execute complex orders
involving Jumbo SPY Options. Additionally, the Exchange believes the
proposed rule change will help avoid investor confusion, by providing
how Jumbo SPY Options will trade as compared to standard options with
respect to Complex Orders.
The Exchange's proposal to permit Jumbo SPY Options to trade as
Complex Orders provided the strategy does not combine Jumbo SPY Options
and standard SPY options serves to maintain the permissible ratios that
are applicable to Complex Orders by separating the trading of standard
option Complex Orders and Jumbo SPY Option Complex Orders.
Finally, the Exchange believes that the proposed rule change is not
designed to permit unfair discrimination among market participants as
all market participants may participate in complex orders involving
Jumbo SPY Options.
Other
The Exchange believes that it is appropriate to clarify how Jumbo
SPY Options will be treated for purposes of a Market Maker's assignment
and quoting obligations, as well as if this new product is eligible to
trade on the PIP auction. Doing so provides investors and other market
participants with a clear and accurate understanding of the Exchange's
rules regarding Jumbo SPY Options. By submitting this proposal the
Exchange is eliminating any potential confusion about how Jumbo SPY
Options will be listed and traded. In particular, the Exchange believes
that allowing Jumbo SPY Options to be eligible for the PIP auction may
increase the frequency with which Options Participants initiate a PIP
Order, which may result in greater opportunity for price improvement
for customers. Further, the Exchange believes it is appropriate for
Market Maker assignments in Jumbo SPY Options to be in compliance with
existing Exchange rules, and to not combine Jumbo SPY Options with
standard SPY options in determining Market Maker quoting obligations.
This is the same approach that the Exchange took to Mini Options and
doing this will lessen investor confusion on this new product.
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. Specifically, the Exchange
believes that investors would benefit from the introduction and
availability of Jumbo SPY by making options on large blocks of the SPY
ETF more available as an investing tool, particularly for institutional
investors. Trading in Jumbo SPY Options is entirely voluntary and
Participants can determine if they would like to trade in this new
product. The Exchange believes this proposed rule change is necessary
to establish uniform rules regarding minimum trading increments,
minimum contract thresholds, and
[[Page 28695]]
complex orders for the listing and trading of Jumbo SPY Options, a new
options product. This proposal is also designed to promote investor
certainty by clarifying if Jumbo SPY Options will be able to trade on
the PIP, as well as the assignment and quoting obligations for Jumbo
SPY Options.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change: (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 \18\ and Rule 19b-4(f)(6)
thereunder.\19\
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 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.
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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 the proposed rule change may become
operative before the anticipated launch of trading in Jumbo SPY
Options. The Commission believes that waiving the 30-day operative
delay is consistent with the protection of investors and the public
interest.\20\ Waiver of the operative delay will allow the Exchange to
implement its proposal consistent with the anticipated commencement of
trading in Jumbo SPY Options on May 10, 2013. For these reasons, the
Commission designates the proposed rule change as operative upon
filing.
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\20\ 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).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BOX-2013-25 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-BOX-2013-25. 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-BOX-2013-25 and should be
submitted on or before June 5, 2013.
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\21\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-11523 Filed 5-14-13; 8:45 am]
BILLING CODE 8011-01-P