Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding the Quarterly Options Series Program, 26280-26283 [2014-10385]

Download as PDF 26280 Federal Register / Vol. 79, No. 88 / Wednesday, May 7, 2014 / Notices pmangrum on DSK3VPTVN1PROD with NOTICES many currently do or have announced plans to do so, including but not limited to the Exchange; NYSE MKT LLC; CBOE; C2 Options Exchange, Incorporated; International Securities Exchange, LLC; NASDAQ; Phlx; BX; BATS Exchange, Inc. (‘‘BATS’’); and Miami International Securities Exchange LLC. Because market data users can thus find suitable substitutes for most proprietary market data products,22 a market that overprices its market data products stands a high risk that users may substitute another source of market data information for its own. In addition to the competition and price discipline described above, the market for proprietary data products is also highly contestable because market entry is rapid, inexpensive, and profitable. The history of electronic trading is replete with examples of entrants that swiftly grew into some of the largest electronic trading platforms and proprietary data producers: Archipelago, Bloomberg Tradebook, Island, RediBook, Attain, TrackECN, BATS, and Direct Edge. Two new options exchanges have been approved by the SEC in the last two years alone.23 In establishing the proposed fees, the Exchange considered the competitiveness of the market for proprietary options data and all of the implications of that competition. The Exchange believes that it has considered all relevant factors and has not considered irrelevant factors in order to establish fair, reasonable, and not unreasonably discriminatory fees and an equitable allocation of fees among all users. The existence of numerous alternatives to the Exchange’s products, including proprietary data from other sources, ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when vendors and subscribers can elect these alternatives or choose not to purchase a specific proprietary data product if its cost to purchase is not justified by the returns any particular vendor or subscriber would achieve through the purchase. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A) 24 of the Act and subparagraph (f)(2) of Rule 19b–4 25 thereunder, because it establishes a due, fee, or other charge imposed by the Exchange. 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) 26 of the Act to determine whether the proposed rule change should be approved or 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 Number SR– NYSEARCA–2014–51 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEARCA–2014–51. 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 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(2). 26 15 U.S.C. 78s(b)(2)(B). 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 Section, 100 F Street NE., Washington, DC 20549–1090, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing will also be available for inspection and copying 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– NYSEARCA–2014–51 and should be submitted on or before May 28, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.27 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–10388 Filed 5–6–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–72069; File No. SR–BX– 2014–023] Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding the Quarterly Options Series Program May 1, 2014. 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 April 25, 2014, 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 BX proposes a rule change to amend Chapter IV (Securities Traded on BX 24 15 supra note 18. 23 See supra note 21. VerDate Mar<15>2010 15:11 May 06, 2014 Jkt 232001 27 17 25 17 22 See 1 15 PO 00000 Frm 00082 Fmt 4703 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. Sfmt 4703 E:\FR\FM\07MYN1.SGM 07MYN1 Federal Register / Vol. 79, No. 88 / Wednesday, May 7, 2014 / Notices Options), Supplementary Material .04(c) to Section 6 (Series of Options Contracts Open for Trading) of the BX Options Market in order to modify the Quarterly Options Series (‘‘QOS’’) Program to eliminate the cap on the number of additional series that may be listed per expiration month for each QOS in exchange-traded fund (‘‘ETF’’) options. The text of the proposed rule change is attached hereto as Exhibit 5. The text of the proposed rule change is available from BX’s Web site at https://nasdaqomxbx.cchwallstreet.com, at BX’s principal office, 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 pmangrum on DSK3VPTVN1PROD with NOTICES 1. Purpose The purpose of this filing is to amend Chapter IV, Supplementary Material .04(c) to Section 6 to modify the QOS Program to eliminate the cap on the number of additional series that may be listed per expiration month for each QOS in ETF options. This filing does not propose any substantive changes to the QOS Program. The Exchange is proposing to amend its Chapter IV, Supplementary Material .04(c) to Section 6 to align its rules with those of other options exchanges that do not have a cap on the number of additional series that may be listed per expiration month for each QOS in ETF options.3 As set out in Supplementary Material .04 to Section 6, the Exchange may list 3 See Securities Exchange Act Release No. 71080 (December 16, 2013), 78 FR 77191 (December 20, 2103) (notice of filing and immediate effectiveness of SR–CBOE–2013–125) (the ‘‘CBOE Filing’’). See also Securities Exchange Act Release Nos. 70854 (November 13, 2013), 78 FR 69465 (November 19, 2103) (notice of filing and immediate effectiveness of SR–NYSEMKT–2013–90); and 70855 (November 13, 2013), 78 FR 69493 (November 19, 2013) (notice of filing and immediate effectiveness of SR– NYSEArca–2013–120) (collectively, the ‘‘NYSE Filings’’). VerDate Mar<15>2010 15:11 May 06, 2014 Jkt 232001 QOS up to five currently listed options classes that are either index options or options on ETFs. The Exchange may also list QOS on any option classes that are selected by other securities exchanges that employ a similar program under their respective rules. Currently, for each QOS in ETF options that has been initially listed on the Exchange, the Exchange may list up to 60 additional series per expiration month. The Exchange now proposes to delete the 60 additional series cap. The Exchange notes that its proposal would also make the treatment of additional QOS series in ETF options consistent with the treatment of additional QOS series in stock index options.4 While these QOS Programs are similar, the QOS Program in stock index options does not place a cap on the number of additional series that the Exchange may list per expiration month for each QOS in index options. Elimination of the cap set forth in Supplementary Material .04(c) to Section 6, therefore, would result in similar regulatory treatment in respect of additional series in ETF options and additional series in index options. The Exchange also notes that it is not subject to the same series limitations for other programs including options series with weekly expirations.5 The Exchange believes the elimination of the cap would also help market participants meet their investment objective by providing expanded opportunities to roll ETF options into later quarters. Because of the current cap, however, the Exchange may not be able to list the appropriate 4 See Chapter XIV, Section 11(g), which governs the QOS for index options. 5 Chapter IV, Supplementary Material .07 to Section 6, for example, governs the Exchange’s Short Term Options (‘‘STOs’’, which are also known as ‘‘Weeklys’’) Series Program. Supplementary Material .07 sets a maximum number of thirty (30) currently listed strikes on which Short Term Option Series may be opened. The Exchange also may list Short Term Option Series on any option classes that are selected by other securities exchanges that employ a similar program under their respective rules. If the Exchange opens less than twenty (20) Short Term Option Series, additional series may be opened for trading on the Exchange when the Exchange deems it necessary to maintain an orderly market, to meet customer demand or when the market price of the underlying security moves substantially from the exercise price or prices of the series already opened. Any additional strike prices listed by the Exchange shall be within thirty percent (30%) above or below the current price of the underlying security. The Exchange may also open additional strike prices of Short Term Option Series that are more than 30% above or below the current price of the underlying security provided that demonstrated customer interest exists for such series, as expressed by institutional, corporate or individual customers or their brokers (Market-Makers trading for their own account shall not be considered when determining customer interest under this provision). PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 26281 series to do so. Elimination of the cap would allow the Exchange to meet the investment needs of market participants in such situations. Elimination of the cap would also allow the Exchange to react to moving markets by adding appropriate strike prices closer to the underlying security. The Exchange believes that the proposed change would provide market participants with the ability to better tailor their trading to meet their investment objectives, including hedging securities positions, by permitting the Exchange to list additional QOS in ETF options that meet such objectives. With regard to the impact of this proposal on system capacity, the Exchange represents that it and the Options Price Reporting Authority (‘‘OPRA’’) have the necessary systems capacity to handle any potential additional traffic associated with this current amendment to the QOS Program. The Exchange believes that its members will not have a capacity issue as a result of this proposal. The Exchange also represents that it does not believe this expansion will cause fragmentation to liquidity. To help ensure that only active options series are listed, the Exchange has in place procedures to delist inactive series. Chapter IV, Supplementary Material .04 to Section 6 requires the Exchange to review, on a monthly basis, the QOS Program series that are outside a range of five (5) strikes above and five (5) strikes below the current price of the underlying ETF, and delist series with no open interest in both the put and the call series having: (a) A strike higher than the highest strike price with open interest in the put and/or call series for a given expiration month; or (b) a strike lower than the lowest strike price with open interest in the put and/or call series for a given expiration month.6 The Exchange believes this provision helps to maintain capacity to handle quote traffic. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.7 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 8 requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and 6 Chapter IV, Supplementary Material .04(f) to Section 6. 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(5). E:\FR\FM\07MYN1.SGM 07MYN1 26282 Federal Register / Vol. 79, No. 88 / Wednesday, May 7, 2014 / Notices practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and 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. In particular, the Exchange believes that the proposed rule change is designed to remove impediments to and perfect the mechanism of a free and open market because it will expand the investment options available to investors and will allow for more efficient risk management. The Exchange believes that removing the cap on the number of QOS in ETF options permitted to be listed on the Exchange will result in a continuing benefit to investors by giving them more flexibility to closely tailor their investment and hedging decisions to their needs, and, therefore, the proposal is designed to protect investors and the public interest. In addition, the elimination of the cap will, as discussed, make the treatment of additional QOS series in ETF options consistent with most options exchanges, and consistent with the treatment of additional QOS series in index options on the Exchange, thus resulting in similar regulatory treatment for similar option products. With regard to the impact of this proposal on system capacity, the Exchange has noted that it and OPRA have the necessary systems capacity to handle any potential additional traffic associated with this current amendment to the QOS Program. The Exchange believes that its members will not have a capacity issue as a result of this proposal. The Exchange also represents that it does not believe this expansion will cause fragmentation to liquidity. pmangrum on DSK3VPTVN1PROD with NOTICES 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 the proposed rule change will relieve any burden on, and in fact will promote, competition. The elimination of the cap on additional series in the QOS program will benefit investors by providing more flexibility to more closely tailor their investment and hedging decisions. VerDate Mar<15>2010 15:11 May 06, 2014 Jkt 232001 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the proposed rule change does not (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 9 and Rule 19b–4(f)(6) thereunder.10 The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Exchange stated that waiver of this requirement will allow the Exchange to compete with other options exchanges proposing similar changes without putting the Exchange at a competitive disadvantage. The Exchange also stated that the proposal protects investors and is in the public interest because it fosters competition by allowing the QOS Program to increase on more than one exchange. For these reasons, the Commission believes that the proposed rule change presents no novel issues and that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest; and will allow the Exchange to remain competitive with other exchanges. Therefore, the Commission designates the proposed rule change to be operative upon filing.11 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if 9 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). As required under Rule 19b–4(f)(6)(iii), the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and the 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. 11 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). 10 17 PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 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 to determine whether the proposed rule should be approved or 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 Number SR– BX–2014–023 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–BX–2014–023. 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– E:\FR\FM\07MYN1.SGM 07MYN1 Federal Register / Vol. 79, No. 88 / Wednesday, May 7, 2014 / Notices 2014–023 and should be submitted on or before May 28, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–10385 Filed 5–6–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–72077; File No. SR– NASDAQ–2014–035] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change Relating to the Listing and Trading of the Shares of the AdvisorShares Sunrise Global Multi-Strategy ETF of AdvisorShares Trust May 1, 2014. 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 April 22, 2014, The NASDAQ Stock Market LLC (‘‘Nasdaq’’ or the ‘‘Exchange’’) 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 Nasdaq. 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 Nasdaq proposes to list and trade the shares of the AdvisorShares Sunrise Global Multi-Strategy ETF (the ‘‘Fund’’) of the AdvisorShares Trust (the ‘‘Trust’’) under Nasdaq Rule 5735 (‘‘Managed Fund Shares’’).3 The shares of the Fund 12 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 The Commission approved Nasdaq Rule 5735 in Securities Exchange Act Release No. 57962 (June 13, 2008) 73 FR 35175 (June 20, 2008) (SR– NASDAQ–2008–039). There are already multiple actively-managed funds listed on the Exchange; see Securities Exchange Act Release No. 66489 (February 29, 2012), 77 FR 13379 (March 6, 2012) (SR–NASDAQ–2012–004) (order approving listing and trading of WisdomTree Emerging Markets Corporate Bond Fund). Additionally, the Commission has previously approved the listing and trading of a number of actively-managed WisdomTree funds on NYSE Arca, Inc. pursuant to Rule 8.600 of that exchange. See, e.g., Securities Exchange Act Release No. 64643 (June 10, 2011), 76 FR 35062 (June 15, 2011) (SR–NYSEArca–2011–21) (order approving listing and trading of WisdomTree Global Real Return Fund). The Exchange believes the proposed rule change raises no significant pmangrum on DSK3VPTVN1PROD with NOTICES 1 15 VerDate Mar<15>2010 15:11 May 06, 2014 Jkt 232001 are collectively referred to herein as the ‘‘Shares.’’ The text of the proposed rule change is available at https:// nasdaq.cchwallstreet.com/, at Nasdaq’s principal office, 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, Nasdaq included statements concerning the purpose of, and basis for, the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. Nasdaq has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to list and trade the Shares of the Fund under Nasdaq Rule 5735, which governs the listing and trading of Managed Fund Shares 4 on the Exchange. The Fund will be an actively managed exchange-traded fund (‘‘ETF’’). The Shares will be offered by the Trust, which was established as a Delaware statutory trust on July 30, 2007.5 The Trust is registered with the Commission as an investment company and has filed a registration statement on Form N–1A issues not previously addressed in those prior Commission orders. 4 A Managed Fund Share is a security that represents an interest in an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1) (the ‘‘1940 Act’’) organized as an open-end investment company or similar entity that invests in a portfolio of securities selected by its investment adviser consistent with its investment objectives and policies. In contrast, an open-end investment company that issues Index Fund Shares, listed and traded on the Exchange under Nasdaq Rule 5705, seeks to provide investment results that correspond generally to the price and yield performance of a specific foreign or domestic stock index, fixed income securities index or combination thereof. 5 The Commission has issued an order granting certain exemptive relief to the Trust under the 1940 Act (the ‘‘Exemptive Order’’). See Investment Company Act Release No. 28822 (July 20, 2009) (File No. 812–13677). In compliance with Nasdaq Rule 5735(b)(5), which applies to Managed Fund Shares based on an international or global portfolio, the Trust’s application for exemptive relief under the 1940 Act states that the Fund will comply with the federal securities laws in accepting securities for deposits and satisfying redemptions with redemption securities, including that the securities accepted for deposits and the securities used to satisfy redemption requests are sold in transactions that would be exempt from registration under the Securities Act of 1933 (15 U.S.C. 77a). PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 26283 (‘‘Registration Statement’’) with the Commission.6 The Fund is a series of the Trust. AdvisorShares Investments, LLC will be the investment adviser (‘‘Adviser’’) to the Fund. Sunrise Capital Partners LLC will be the investment sub-adviser (‘‘Sub-Adviser’’) to the Fund. Foreside Fund Services, LLC (the ‘‘Distributor’’) will be the principal underwriter and distributor of the Fund’s Shares. The Bank of New York Mellon (‘‘BNY Mellon’’) will act as the administrator, accounting agent, custodian, and transfer agent to the Fund. Paragraph (g) of Rule 5735 provides that if the investment adviser to the investment company issuing Managed Fund Shares is affiliated with a brokerdealer, such investment adviser shall erect a ‘‘fire wall’’ between the investment adviser and the brokerdealer with respect to access to information concerning the composition and/or changes to such investment company portfolio.7 In addition, paragraph (g) further requires that personnel who make decisions on the open-end fund’s portfolio composition must be subject to procedures designed to prevent the use and dissemination of material, non-public information regarding the open-end fund’s portfolio. Rule 5735(g) is similar to Nasdaq Rule 5705(b)(5)(A)(i); however, paragraph (g) in connection with the establishment of a ‘‘fire wall’’ between the investment adviser and the broker-dealer reflects the applicable open-end fund’s 6 See Registration Statement on Form N–1A for the Trust filed on October 9, 2013 (File Nos. 333– 157876 and 811–22110). The descriptions of the Fund and the Shares contained herein are based, in part, on information in the Registration Statement. 7 An investment adviser to an open-end fund is required to be registered under the Investment Advisers Act of 1940 (the ‘‘Advisers Act’’). As a result, the Adviser and its related personnel are subject to the provisions of Rule 204A–1 under the Advisers Act relating to codes of ethics. This Rule requires investment advisers to adopt a code of ethics that reflects the fiduciary nature of the relationship to clients as well as compliance with other applicable securities laws. Accordingly, procedures designed to prevent the communication and misuse of non-public information by an investment adviser must be consistent with Rule 204A–1 under the Advisers Act. In addition, Rule 206(4)–7 under the Advisers Act makes it unlawful for an investment adviser to provide investment advice to clients unless such investment adviser has (i) adopted and implemented written policies and procedures reasonably designed to prevent violation, by the investment adviser and its supervised persons, of the Advisers Act and the Commission rules adopted thereunder; (ii) implemented, at a minimum, an annual review regarding the adequacy of the policies and procedures established pursuant to subparagraph (i) above and the effectiveness of their implementation; and (iii) designated an individual (who is a supervised person) responsible for administering the policies and procedures adopted under subparagraph (i) above. E:\FR\FM\07MYN1.SGM 07MYN1

Agencies

[Federal Register Volume 79, Number 88 (Wednesday, May 7, 2014)]
[Notices]
[Pages 26280-26283]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-10385]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72069; File No. SR-BX-2014-023]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Regarding 
the Quarterly Options Series Program

May 1, 2014.
    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 April 25, 2014, 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    BX proposes a rule change to amend Chapter IV (Securities Traded on 
BX

[[Page 26281]]

Options), Supplementary Material .04(c) to Section 6 (Series of Options 
Contracts Open for Trading) of the BX Options Market in order to modify 
the Quarterly Options Series (``QOS'') Program to eliminate the cap on 
the number of additional series that may be listed per expiration month 
for each QOS in exchange-traded fund (``ETF'') options.
    The text of the proposed rule change is attached hereto as Exhibit 
5.
    The text of the proposed rule change is available from BX's Web 
site at https://nasdaqomxbx.cchwallstreet.com, at BX's principal office, 
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 this filing is to amend Chapter IV, Supplementary 
Material .04(c) to Section 6 to modify the QOS Program to eliminate the 
cap on the number of additional series that may be listed per 
expiration month for each QOS in ETF options. This filing does not 
propose any substantive changes to the QOS Program.
    The Exchange is proposing to amend its Chapter IV, Supplementary 
Material .04(c) to Section 6 to align its rules with those of other 
options exchanges that do not have a cap on the number of additional 
series that may be listed per expiration month for each QOS in ETF 
options.\3\
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 71080 (December 16, 
2013), 78 FR 77191 (December 20, 2103) (notice of filing and 
immediate effectiveness of SR-CBOE-2013-125) (the ``CBOE Filing''). 
See also Securities Exchange Act Release Nos. 70854 (November 13, 
2013), 78 FR 69465 (November 19, 2103) (notice of filing and 
immediate effectiveness of SR-NYSEMKT-2013-90); and 70855 (November 
13, 2013), 78 FR 69493 (November 19, 2013) (notice of filing and 
immediate effectiveness of SR-NYSEArca-2013-120) (collectively, the 
``NYSE Filings'').
---------------------------------------------------------------------------

    As set out in Supplementary Material .04 to Section 6, the Exchange 
may list QOS up to five currently listed options classes that are 
either index options or options on ETFs. The Exchange may also list QOS 
on any option classes that are selected by other securities exchanges 
that employ a similar program under their respective rules. Currently, 
for each QOS in ETF options that has been initially listed on the 
Exchange, the Exchange may list up to 60 additional series per 
expiration month. The Exchange now proposes to delete the 60 additional 
series cap.
    The Exchange notes that its proposal would also make the treatment 
of additional QOS series in ETF options consistent with the treatment 
of additional QOS series in stock index options.\4\ While these QOS 
Programs are similar, the QOS Program in stock index options does not 
place a cap on the number of additional series that the Exchange may 
list per expiration month for each QOS in index options. Elimination of 
the cap set forth in Supplementary Material .04(c) to Section 6, 
therefore, would result in similar regulatory treatment in respect of 
additional series in ETF options and additional series in index 
options. The Exchange also notes that it is not subject to the same 
series limitations for other programs including options series with 
weekly expirations.\5\
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    \4\ See Chapter XIV, Section 11(g), which governs the QOS for 
index options.
    \5\ Chapter IV, Supplementary Material .07 to Section 6, for 
example, governs the Exchange's Short Term Options (``STOs'', which 
are also known as ``Weeklys'') Series Program. Supplementary 
Material .07 sets a maximum number of thirty (30) currently listed 
strikes on which Short Term Option Series may be opened. The 
Exchange also may list Short Term Option Series on any option 
classes that are selected by other securities exchanges that employ 
a similar program under their respective rules. If the Exchange 
opens less than twenty (20) Short Term Option Series, additional 
series may be opened for trading on the Exchange when the Exchange 
deems it necessary to maintain an orderly market, to meet customer 
demand or when the market price of the underlying security moves 
substantially from the exercise price or prices of the series 
already opened. Any additional strike prices listed by the Exchange 
shall be within thirty percent (30%) above or below the current 
price of the underlying security. The Exchange may also open 
additional strike prices of Short Term Option Series that are more 
than 30% above or below the current price of the underlying security 
provided that demonstrated customer interest exists for such series, 
as expressed by institutional, corporate or individual customers or 
their brokers (Market-Makers trading for their own account shall not 
be considered when determining customer interest under this 
provision).
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    The Exchange believes the elimination of the cap would also help 
market participants meet their investment objective by providing 
expanded opportunities to roll ETF options into later quarters. Because 
of the current cap, however, the Exchange may not be able to list the 
appropriate series to do so. Elimination of the cap would allow the 
Exchange to meet the investment needs of market participants in such 
situations. Elimination of the cap would also allow the Exchange to 
react to moving markets by adding appropriate strike prices closer to 
the underlying security. The Exchange believes that the proposed change 
would provide market participants with the ability to better tailor 
their trading to meet their investment objectives, including hedging 
securities positions, by permitting the Exchange to list additional QOS 
in ETF options that meet such objectives. With regard to the impact of 
this proposal on system capacity, the Exchange represents that it and 
the Options Price Reporting Authority (``OPRA'') have the necessary 
systems capacity to handle any potential additional traffic associated 
with this current amendment to the QOS Program. The Exchange believes 
that its members will not have a capacity issue as a result of this 
proposal. The Exchange also represents that it does not believe this 
expansion will cause fragmentation to liquidity.
    To help ensure that only active options series are listed, the 
Exchange has in place procedures to delist inactive series. Chapter IV, 
Supplementary Material .04 to Section 6 requires the Exchange to 
review, on a monthly basis, the QOS Program series that are outside a 
range of five (5) strikes above and five (5) strikes below the current 
price of the underlying ETF, and delist series with no open interest in 
both the put and the call series having: (a) A strike higher than the 
highest strike price with open interest in the put and/or call series 
for a given expiration month; or (b) a strike lower than the lowest 
strike price with open interest in the put and/or call series for a 
given expiration month.\6\ The Exchange believes this provision helps 
to maintain capacity to handle quote traffic.
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    \6\ Chapter IV, Supplementary Material .04(f) to Section 6.
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 2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\7\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \8\ requirements that the rules of 
an exchange be designed to prevent fraudulent and manipulative acts and

[[Page 26282]]

practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
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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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes that the proposed rule change 
is designed to remove impediments to and perfect the mechanism of a 
free and open market because it will expand the investment options 
available to investors and will allow for more efficient risk 
management. The Exchange believes that removing the cap on the number 
of QOS in ETF options permitted to be listed on the Exchange will 
result in a continuing benefit to investors by giving them more 
flexibility to closely tailor their investment and hedging decisions to 
their needs, and, therefore, the proposal is designed to protect 
investors and the public interest. In addition, the elimination of the 
cap will, as discussed, make the treatment of additional QOS series in 
ETF options consistent with most options exchanges, and consistent with 
the treatment of additional QOS series in index options on the 
Exchange, thus resulting in similar regulatory treatment for similar 
option products.
    With regard to the impact of this proposal on system capacity, the 
Exchange has noted that it and OPRA have the necessary systems capacity 
to handle any potential additional traffic associated with this current 
amendment to the QOS Program. The Exchange believes that its members 
will not have a capacity issue as a result of this proposal. The 
Exchange also represents that it does not believe this expansion will 
cause fragmentation to liquidity.

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 the proposed rule change will relieve any burden on, and 
in fact will promote, competition. The elimination of the cap on 
additional series in the QOS program will benefit investors by 
providing more flexibility to more closely tailor their investment and 
hedging decisions.

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

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any written comments from members or other interested parties.

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

    Because the proposed rule change does not (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) 
thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Exchange stated that waiver of this requirement will allow 
the Exchange to compete with other options exchanges proposing similar 
changes without putting the Exchange at a competitive disadvantage. The 
Exchange also stated that the proposal protects investors and is in the 
public interest because it fosters competition by allowing the QOS 
Program to increase on more than one exchange. For these reasons, the 
Commission believes that the proposed rule change presents no novel 
issues and that waiver of the 30-day operative delay is consistent with 
the protection of investors and the public interest; and will allow the 
Exchange to remain competitive with other exchanges. Therefore, the 
Commission designates the proposed rule change to be operative upon 
filing.\11\
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    \11\ 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).
---------------------------------------------------------------------------

    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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or 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 Number SR-BX-2014-023 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-BX-2014-023. 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-

[[Page 26283]]

2014-023 and should be submitted on or before May 28, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-10385 Filed 5-6-14; 8:45 am]
BILLING CODE 8011-01-P
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