Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change To Establish a Pilot Program, as Modified by Amendment No. 1, To List and Trade Options Settling to the RealVolTM, 26966-26970 [2015-11275]

Download as PDF 26966 Federal Register / Vol. 80, No. 90 / Monday, May 11, 2015 / Notices competition to sell proprietary data products and for order flow, as well as 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 the attendant fees are not justified by the returns that any particular vendor or data recipient would achieve through the purchase (the returns on use being a particularly important aspect of non-display uses of proprietary data). 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) 10 of the Act and subparagraph (f)(2) of Rule 19b–4 11 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) 12 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: tkelley on DSK3SPTVN1PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or 10 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(2). 12 15 U.S.C. 78s(b)(2)(B). • Send an email to rulecomments@sec.gov. Please include File Number SR–NYSEARCA–2015–37 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEARCA–2015–37. 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 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–2015–37 and should be submitted on or before June 1, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Jill M. Peterson, Assistant Secretary. [FR Doc. 2015–11276 Filed 5–8–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meeting Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that 11 17 VerDate Sep<11>2014 17:00 May 08, 2015 the Securities and Exchange Commission Equity Market Structure Advisory Committee will hold a public meeting on Wednesday, May 13, 2015, in the Multipurpose Room, LL–006 at the Commission’s headquarters, 100 F Street NE., Washington, DC. The meeting will begin at 9:30 a.m. (EDT) and will be open to the public. Seating will be on a first-come, firstserved basis. Doors will be open at 9:00 a.m. Visitors will be subject to security checks. The meeting will be webcast on the Commission’s Web site at www.sec.gov. On April 23, 2015, the Commission published notice of the Committee meeting (Release No. 34–74793), indicating that the meeting is open to the public and inviting the public to submit written comments to the Committee. This Sunshine Act notice is being issued because a majority of the Commission may attend the meeting. The agenda for the meeting will focus on Rule 611 of SEC Regulation NMS. For further information, please contact the Office of the Secretary at (202) 551–5400. Dated: May 6, 2015. Brent J. Fields, Secretary. [FR Doc. 2015–11365 Filed 5–7–15; 11:15 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–74876; File No. SR–BOX– 2015–06] Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change To Establish a Pilot Program, as Modified by Amendment No. 1, To List and Trade Options Settling to the RealVolTM SPY Index May 5, 2015. I. Introduction On January 21, 2015, the BOX Options Exchange LLC (the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade P.M.-settled options settling to the RealVolTM SPY Index (‘‘Index’’). The proposed rule change was published for comment in the Federal Register on February 5, 1 15 13 17 Jkt 235001 PO 00000 CFR 200.30–3(a)(12). Frm 00078 Fmt 4703 Sfmt 4703 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. E:\FR\FM\11MYN1.SGM 11MYN1 Federal Register / Vol. 80, No. 90 / Monday, May 11, 2015 / Notices 2015.3 On March 18, 2015, pursuant to Section 19(b)(2) of the Act,4 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.5 On April 9, 2015, the Exchange filed Amendment No. 1 to the proposed rule change.6 The Commission received one comment letter on the proposed rule change.7 This Order grants approval of the proposed rule change, as modified by Amendment No. 1, on an accelerated basis for a twelve-month pilot period. tkelley on DSK3SPTVN1PROD with NOTICES II. Description of the Proposed Rule Change The Exchange proposes to list and trade, on a pilot basis, P.M.-settled, cash-settled, European-style options settling to the Index (proposed symbol VOLS 8), for a pilot period of twelve months (‘‘Pilot Program’’). The Index measures the daily realized volatility 9 of the SPDR S&P 500 Exchange-Traded Fund (‘‘SPY’’),10 based on a 21-trading day rolling realized volatility of the daily closing price of SPY. The Index is calculated using a methodology developed by The VolX Group Corporation (‘‘VolX’’),11 and will be calculated and maintained by a third party calculation agent acting on behalf of VolX. The Index will be updated on each trading day after the close of trading of SPY.12 Although the Index is 3 See Securities Exchange Act Release No. 74178 (January 30, 2015), 80 FR 6558 (February 5, 2015) (‘‘Notice’’). 4 15 U.S.C. 78s(b)(2). 5 See Securities Exchange Act Release No. 74526 (March 18, 2015), 80 FR 15653 (March 24, 2015). The Commission designated a longer period within which to take action on the proposed rule change and designated May 6, 2015, as the date by which it should approve, disapprove, or institute proceedings to determine whether to disapprove the proposed rule change. 6 See Amendment No. 1; see also infra notes 14– 18 and accompanying text. 7 See letter from John O’Connell, Financial Integration, to Commission, dated February 8, 2015 (‘‘O’Connell Letter’’). 8 Options settling to the Index are hereafter referred to as VOLS. 9 The Exchange states that realized volatility is the ‘‘actual volatility,’’ ‘‘statistical volatility,’’ or ‘‘asset volatility’’ that the underlying asset has displayed over a specific period. See Notice, supra note 3, at 6559. 10 According to the Exchange, SPY has historically been the largest and most activelytraded exchange-traded fund in the United States as measured by its assets under management and the value of shares traded. See id. 11 See id. (describing in more detail the calculation methodology for the Index). 12 According to the Exchange, if the current published value of SPY is not available, because of a market disruption event where the market cannot open and there is no closing price for SPY, for example, the Index will continue to be calculated VerDate Sep<11>2014 17:00 May 08, 2015 Jkt 235001 based only on daily closing values of SPY, a real-time version of the Index that is based on the current SPY price will be calculated during the trading day and disseminated at least every 15 seconds during the trading day to market data vendors. This real-time version will provide an estimate of the Index at the close.13 The Exchange states that values of the Index also will be disseminated to market information vendors such as Bloomberg and Thomson Reuters. In the event the Index ceases to be maintained or calculated, the Exchange will not list any additional series for trading and will limit all transactions in such options to closing transactions only for the purpose of maintaining a fair and orderly market and protecting investors. The Exchange proposes that its standard trading hours for index options (9:30 a.m. to 4:15 p.m., Eastern time) will apply to VOLS. Standard VOLS will expire on the third Friday of each month. Trading in expiring VOLS will normally cease at 4:15 p.m. (Eastern time) on the business day of expiration, or, in the case of an option contract expiring on a day that is not a business day, on the last business day before its expiration. The exercise and settlement value will be calculated based on the Index value at the close of the last business day of trading, which is ultimately based on the closing price of SPY on the last business day of trading, for its final input value. The exercisesettlement amount is equal to the difference between the settlement value and the exercise price of the option, multiplied by $100. Exercise will result in the delivery of cash on the business day following expiration. The Exchange proposes to adopt minimum trading increments for VOLS to be $0.05 for series trading below $3, and $0.10 for series trading at or above $3. The Exchange also proposes to set the minimum strike price interval at $0.50 strike price (or greater) intervals for VOLS where the strike price is less than $75; $1 strike price (or greater) intervals where the strike price is $200 or less; and $5 strike price (or greater) intervals where the strike price is greater than $200. Amendment No. 1 corrects an inaccurate statement in the Notice and disseminated. The calculation of the Index will compensate for the missing day’s returns by lowering the value of ‘‘n’’ in the formula by the number of days that there is no closing price for SPY. See id. 13 The Exchange represents that after the market close, the real-time formula and the formula used calculate to the Index will have exactly the same value. See id. at 6559–6560 (describing in more detail the calculation of the real-time version of the Index). PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 26967 regarding the exercise price range limitations for new series of index options.14 Under the Exchange’s rules, when new series of index options with a new expiration date are opened for trading, or when additional series of index options in an existing expiration date are opened for trading, as the current value of the underlying index moves substantially from the exercise prices of series already opened, the exercise prices of such new or additional series shall be reasonably related to the current value of the underlying index at the time such series are first opened for trading.15 The term ‘‘reasonably related to the current index value of the underlying index’’ means that the exercise price is within 30% of the current index value, as defined in BOX Rule 6090(c)(4).16 In the Notice, the Exchange stated that it proposed to eliminate, for VOLS, the range limitation in BOX Rule 6090(c)(3) requiring the exercise prices of new or additional series of index options to be reasonably related to the current value of the underlying index at the time such series are first opened for trading. The Notice erroneously stated that the Exchange’s proposal to permit exercise prices without a range limitation would be identical to those adopted by the Chicago Board Options Exchange, Incorporated (‘‘CBOE’’) for options on the CBOE Volatility Index (‘‘VIX’’).17 Amendment No. 1 provides that the exercise price ranges for VOLS will be subject to the exercise price range limitations under BOX Rule 6090(c)(3).18 The Exchange states that its rules provide that index option contracts may expire at three-month intervals or in consecutive months.19 The Exchange proposes to list VOLS in six consecutive expiration months.20 In addition, longterm option series having up to 180 months to expiration 21 and Short Term Option Series 22 in VOLS may also be 14 See Amendment No. 1. BOX Rule 6090(c)(3). 16 See Notice, supra note 3, at 6560. 17 See id. 18 Amendment No. 1 also modifies Exhibit 5 by striking from the proposed text of BOX Rule 6090(c)(7) an erroneous reference to BOX Rules 6090(c)(3) and (c)(4). See Amendment No. 1. 19 See Notice, supra, note 3, at 6560; BOX Rule 6090(a)(3). 20 For example, the Exchange states that six monthly expirations from January through June may be listed. This is consistent with BOX Rule 6090(a)(3), which permits the Exchange to list up to six expiration months at any one time. See Notice, supra note 3, at 6560. 21 See BOX Rule 6090(b)(1). 22 See IM–6090–2 to BOX Rule 6090. The Exchange states that it may open Short Term Option Series for trading on any Thursday or Friday that 15 See E:\FR\FM\11MYN1.SGM Continued 11MYN1 26968 Federal Register / Vol. 80, No. 90 / Monday, May 11, 2015 / Notices tkelley on DSK3SPTVN1PROD with NOTICES listed and traded.23 VOLS will be quoted and traded in U.S. dollars.24 The Exchange believes that the Index is a broad-based index, as that term is defined in BOX Rule 6010(j).25 The Exchange proposes that there shall be no position or exercise limits for VOLS, and also proposes to apply margin requirements for the purchase and sale of VOLS that are identical to the margin requirements adopted by CBOE for options on the VIX.26 In addition, the Exchange proposes that the trading of options on the Index will be subject to the same rules that currently govern the trading of Exchange index options, including sales practice rules and trading rules.27 Trading of VOLS will also be subject to the trading halt procedures applicable to other index options traded on the Exchange.28 Further, Section 4000 of the Exchange’s rules, which is designed to protect public customer trading, will apply to trading in VOLS. The Exchange believes that because the Index will settle using published quotes for SPY and there are currently no position limits for SPY options, it is appropriate not to impose position or exercise limits for VOLS. The Exchange notes that because the size of the market underlying SPY options is so large, it should dispel concerns regarding market manipulation. The Exchange believes that the same reasoning applies to VOLS since the value of VOLS is derived from the realized volatility of SPY. The Exchange also notes that VIX options are not subject to any position or exercise limits.29 The Exchange represents that it has an adequate is a business day and that expire on each of the next five Fridays that are business days and are not Fridays in which monthly options series or quarterly options series expire. See Notice, supra note 3, at 6561; see also IM–6090–2(a) to BOX Rule 6090. The Exchange states that the interval between strike prices on Short Term Options Series may be $0.50 or greater where the strike price is less than $75, and $1 or greater where the strike price is between $75 and $150. During the month prior to expiration of an index option class that is selected for the Short Term Option Series Program, the strike price intervals for the related non-Short Term Option shall be the same as the strike price intervals for the Short Term Option. See Notice, supra note 3, at 6561; see also IM–6090–2(b)(5) to BOX Rule 6090. 23 See Notice, supra note 3, at 6559. 24 See BOX Rule 6090(a)(1). 25 BOX Rule 6010(j) defines the term ‘‘broadbased index’’ as an index designed to be representative of a stock market as a whole or a range of companies in unrelated industries. 26 The Exchange has proposed to amend BOX Rule 10120 (Margin Requirements) to make clear that the margin requirements for VOLS will be identical to those adopted by CBOE for options on the VIX. See CBOE Rule 12.3. 27 See Notice, supra note 3, at 6561. 28 Id. at 6560; see also BOX Rule 6080(c). 29 See Notice, supra note 3, at 6560–6561. VerDate Sep<11>2014 17:00 May 08, 2015 Jkt 235001 surveillance program in place for the VOLS product and intends to apply to it the same program procedures that it applies to the Exchange’s other options products.30 The Exchange states that its surveillance procedures will allow the Exchange to adequately surveil for any potential manipulation in the trading of VOLS. The Exchange states that, in its normal course of surveillance, it will monitor for any potential manipulation of the Index settlement value according to the Exchange’s current procedures. In addition, the Exchange notes that it is a member of the Intermarket Surveillance Group, through which it can coordinate surveillance and investigative information sharing in the stock and options markets with all of the U.S. registered stock and options markets. The Exchange also represents that it has the necessary system capacity to support additional quotations and messages that will result from the listing and trading of VOLS.31 The Exchange proposes that proposed rule change to list and trade VOLS be approved on a pilot basis for a period of twelve months. As part of the Pilot Program, the Exchange committed to submit a pilot program report to the Commission two months prior to the expiration date of the pilot program (the ‘‘annual report’’).32 The annual report would include an analysis of volume, open interest, and trading patterns. The analysis would examine trading in VOLS as well as trading in SPY. In addition, for series that exceed certain minimum open interest parameters, the annual report would provide an analysis of index price volatility and SPY trading activity. In addition to the annual report, the Exchange committed to provide the Commission with periodic interim reports while the pilot is in effect that would contain some, but not all, of the information contained in the annual report (‘‘interim reports’’). In its filing, BOX notes that it would provide the annual and interim reports to the Commission on a confidential basis.33 III. Discussion and Commission Findings After careful consideration of the proposal, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange,34 and, in particular, the 30 See id. at 6561. 31 Id. 32 Id. at 6561–6562. at 6562. 34 In approving this proposed rule change, the Commission has considered the proposed rule’s 33 Id. PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 requirements of Section 6 of the Act.35 Specifically, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,36 which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. In particular, the Commission believes that the proposed VOLS options product provides investors with an additional trading and hedging mechanism. Further, as noted above, the Commission received one comment letter in support of the proposal and endorsed the usefulness of the VOLS products for these purposes. The comment letter stated, ‘‘[t]hese options will be extremely helpful for hedging index option exposure, equity portfolios, and as a risk-management tool for hedge fund managers.’’ 37 In addition, the Commission believes that the proposal will allow BOX to conduct a limited and carefully monitored pilot for the listing and trading of VOLS, as proposed. The Commission believes that the Exchange’s proposal to impose no position or exercise limits on VOLS is appropriate and consistent with the Act. The Commission also believes that the proposed strike price intervals are consistent with the Act. $0.50 or greater strikes for VOLS where the strike price is less than $75, $1 or greater strike price intervals for VOLS where the strike price is $200 or less, and $5 or greater strike price intervals for VOLS when the strike price is greater than $200 should provide investors with added flexibility in the trading of VOLS options and will further the public interest by allowing investors to establish positions that are better tailored to meet their investment objectives. Moreover, the Commission notes that, under the Exchange’s rules, the strike prices of new or additional series of VOLs shall be reasonably related to—i.e., within 30% of—the current value of the underlying index at the time such series are first opened for trading.38 The Commission also notes that the Exchange has represented that it has the necessary system capacity to impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 35 15 U.S.C. 78f. 36 15 U.S.C. 78f(b)(5). 37 See O’Connell Letter, supra note 7, at 1. 38 See BOX Rule 6090(c)(3) and (c)(4). E:\FR\FM\11MYN1.SGM 11MYN1 tkelley on DSK3SPTVN1PROD with NOTICES Federal Register / Vol. 80, No. 90 / Monday, May 11, 2015 / Notices handle the additional quotations and messages associated with the listing and trading of VOLS.39 The Commission also believes that it is consistent with the Act to apply margin requirements to the proposed VOLS product that are identical to the margin requirements adopted by the CBOE for options on the VIX. The Exchange has represented that BOX options participants and their associated persons are bound by the initial and maintenance margin requirements of either the CBOE or the New York Stock Exchange, pursuant to BOX Rule 10120.40 As the CBOE VIX measures the expected volatility of the S&P 500 Index, the Commission believes it is acceptable to apply the same margin requirements applying to VIX options to VOLS, which are options on an index measuring the realized volatility of SPY. The Commission further believes that the Exchange’s proposed minimum trading increment, series openings, and other aspects of the proposed rule change are appropriate and consistent with the Act. In the Commission’s order approving the listing and trading of P.M.-settled options on the S&P 500 Index on CBOE,41 the Commission noted that the potential impact on the market at expiration for the underlying component stocks for a P.M.-settled, cash-settled index option remained unclear, given past experience with the impact of P.M. settlement of cash-settled index derivatives on the underlying cash markets and the enhanced closing procedures that are now in use at the primary equity markets.42 To assist the Commission in assessing any potential impact of a P.M.-settled VOLS product on the options markets as well as the underlying cash equities markets, BOX will be required to submit data to the Commission as a condition of Commission approval of the VOLS product on a pilot basis. The Commission believes that BOX’s proposed twelve-month pilot, together with the data and analysis that BOX should provide to the Commission, should allow BOX and the Commission to monitor for and assess any potential for adverse market effects. Specifically, the data and analysis should assist the Commission in evaluating the effect of allowing P.M. settlement for VOLS on SPY. BOX’s proposed twelve-month pilot will enable the Commission to collect current data to assess and monitor for any potential for impact on the markets. In particular, the data collected from BOX’s Pilot Program will help inform the Commission’s consideration of whether the pilot should be modified, discontinued, extended, or permanently approved. The Pilot Program information should help the Commission assess the impact on the markets and determine whether other changes are necessary. Furthermore, the Exchange’s ongoing analysis of the pilot should help it monitor any potential risks from large P.M.-settled positions and take appropriate action on a timely basis if warranted. As a national securities exchange, the Exchange is required, under Section 6(b)(1) of the Act,43 to enforce compliance by its members and persons associated with its members with the provisions of the Act, Commission rules and regulations thereunder, and its own rules. In this regard, the Commission notes that trading of VOLS will be subject to the same rules that currently govern the trading of other index options on the Exchange.44 In addition, as noted above, the Exchange has asserted that the Index settlement value is not susceptible to manipulation.45 Moreover, the Exchange has represented that it has an adequate surveillance program in place for options traded on the Index, and will monitor for any potential manipulation of the Index settlement value according to its current surveillance procedures.46 In approving the proposed listing and trading of the Index options, the Commission has also relied on BOX’s representation that it has the necessary system capacity to support the new options series that will result from this proposal.47 Accordingly, for the reasons stated above, the Commission finds good cause, pursuant to Section 19(b)(2) 48 of the Act, for approving the Exchange’s proposal, as modified by Amendment No. 1, prior to the 30th day after the date of publication of the notice in the Federal Register. 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. 39 See 43 15 40 Id. 44 See Notice, supra note 3, at 6561. at 6560. 41 See Securities Exchange Act Release No. 68888 (February 8, 2013), 78 FR 10668 (February 14, 2013). 42 Id. at 10669. VerDate Sep<11>2014 17:00 May 08, 2015 Jkt 235001 U.S.C. 78f(b)(1). supra note 27 and accompanying text. 45 See Notice, supra note 3, at 6561. 46 Id. 47 Id. 48 15 U.S.C. 78s(b)(2). PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 26969 Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–BOX–2015–06 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–BOX–2015–06. 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 will also 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– 2015–06 and should be submitted on or before June 1, 2015. V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,49 that the proposed rule change (SR–BOX–2015– 06), as modified by Amendment No. 1, be, and hereby is, approved on an accelerated basis for a twelve-month pilot period set to expire on May 6, 2016. 49 15 E:\FR\FM\11MYN1.SGM U.S.C. 78s(b)(2). 11MYN1 26970 Federal Register / Vol. 80, No. 90 / Monday, May 11, 2015 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.50 Jill M. Peterson, Assistant Secretary. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change [FR Doc. 2015–11275 Filed 5–8–15; 8:45 am] 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. BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–74873; File No. SR– NASDAQ–2015–044] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Listing and Trading of the Shares of the First Trust High Income ETF, a Series of First Trust Exchange-Traded Fund VI May 5, 2015. 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 24, 2015, 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 and II below, which Items have been prepared by Nasdaq. The Exchange has designated the proposed rule change as constituting a non-controversial rule change under Rule 19b–4(f)(6) under the Act,3 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. tkelley on DSK3SPTVN1PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes a rule change with respect to the First Trust High Income ETF (the ‘‘Fund’’) of First Trust Exchange-Traded Fund VI (the ‘‘Trust’’), the shares of which have been approved by the Commission for listing and trading under NASDAQ Rule 5735 (‘‘Managed Fund Shares’’). The shares of the Fund 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. 50 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 17 CFR 240.19b–4(f)(6). 1 15 VerDate Sep<11>2014 17:00 May 08, 2015 Jkt 235001 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to reflect changes to the means of achieving the Fund’s investment objectives. The Commission has approved the listing and trading of Shares under NASDAQ Rule 5735, which governs the listing and trading of Managed Fund Shares on the Exchange.4 The Exchange believes the proposed rule change reflects no significant issues not previously addressed in the Prior Release. The Fund is an actively managed exchangetraded fund (‘‘ETF’’). The Shares are offered by the Trust, which was organized as a Massachusetts business trust on June 4, 2012. The Trust, which is registered with the Commission as an investment company, has filed a registration statement on Form N–1A (‘‘Registration Statement’’) relating to the Fund with the Commission.5 First Trust Advisors L.P. (‘‘First Trust 4 The Commission approved NASDAQ Rule 5735 (formerly NASDAQ Rule 4420(o)) in Securities Exchange Act Release No. 57962 (June 13, 2008), 73 FR 35175 (June 20, 2008) (SR–NASDAQ–2008–039). The Commission previously approved the listing and trading of the Shares of the Fund. See Securities Exchange Act Release No. 70829 (November 7, 2013), 78 FR 68482 (November 14, 2013) (SR–NASDAQ–2013–122) (‘‘Prior Order’’). See also Securities Exchange Act Release No. 70460 (September 20, 2013), 78 FR 59402 (September 26, 2013) (SR–NASDAQ–2013–122) (‘‘Prior Notice,’’ and together with the Prior Order, the ‘‘Prior Release’’). The Fund and the Shares are currently in compliance with the requirements set forth in the Prior Release. 5 See Post-Effective Amendment No. 51 to Registration Statement on Form N–1A for the Trust, dated January 21, 2015 (File Nos. 333–182308 and 811–22717). The descriptions of the Shares and the Fund contained herein are based, in part, on information in the Registration Statement. In addition, the Commission has issued an order, upon which the Trust may rely, granting certain exemptive relief under the Investment Company Act of 1940 (the ‘‘1940 Act’’). See Investment Company Act Release No. 28468 (October 27, 2008) (File No. 812–13477). PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 Advisors’’) is the investment adviser (‘‘Adviser’’) to the Fund. The Prior Release provided that the Fund’s primary investment objective would be to provide current income and that its secondary investment objective would be to provide capital appreciation. Further, the Prior Notice provided that the Fund would pursue its objectives by investing in large-cap U.S. exchange-traded equity securities and by utilizing an ‘‘option strategy’’ consisting of writing (selling) exchangetraded covered call options on the Standard & Poor’s 500 Index (the ‘‘Index’’). The Exchange now proposes two modifications to the description of the measures utilized by the Adviser to implement the Fund’s investment objectives. As described in further detail below, these pertain to the following: (1) The Fund’s investment primarily in large-cap U.S. exchange-traded equity securities; and (2) the permissible terms to expiration for the U.S. exchangetraded covered call options written (sold) by the Fund. These modifications are being proposed to enhance the Adviser’s flexibility in pursuing the Fund’s investment objectives. However, the equity securities in which the Fund would invest and the options which the Fund would write would continue to be limited to U.S. exchange-traded securities and options, respectively. The Adviser represents that there would be no change to the Fund’s investment objectives. Except as provided herein, all other facts presented and representations made in the Prior Release would remain unchanged. The Fund and the Shares would continue to comply with all initial and continued listing requirements under NASDAQ Rule 5735. The Fund’s Investments Primarily in Large-Cap U.S. Exchange-Traded Equity Securities The Prior Release stated that in pursuing its investment objectives, under normal market conditions,6 the 6 According to the Prior Release, the term ‘‘under normal market conditions’’ as used therein included, but was not limited to, the absence of adverse market, economic, political or other conditions, including extreme volatility or trading halts in the securities markets or the financial markets generally; operational issues causing dissemination of inaccurate market information; or force majeure type events such as systems failure, natural or man-made disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance. The Prior Release also provided that in periods of extreme market disturbance, the Fund may take temporary defensive positions, by overweighting its portfolio in cash/cash-like instruments; however, to the extent possible, the Adviser would continue to seek to achieve the Fund’s investment objectives. E:\FR\FM\11MYN1.SGM 11MYN1

Agencies

[Federal Register Volume 80, Number 90 (Monday, May 11, 2015)]
[Notices]
[Pages 26966-26970]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-11275]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74876; File No. SR-BOX-2015-06]


Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing of Amendment No. 1 and Order Granting Accelerated Approval of 
a Proposed Rule Change To Establish a Pilot Program, as Modified by 
Amendment No. 1, To List and Trade Options Settling to the 
RealVolTM SPY Index

May 5, 2015.

I. Introduction

    On January 21, 2015, the BOX Options Exchange LLC (the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade P.M.-settled options settling to 
the RealVolTM SPY Index (``Index''). The proposed rule 
change was published for comment in the Federal Register on February 5,

[[Page 26967]]

2015.\3\ On March 18, 2015, pursuant to Section 19(b)(2) of the Act,\4\ 
the Commission designated a longer period within which to approve the 
proposed rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether to disapprove the proposed rule 
change.\5\ On April 9, 2015, the Exchange filed Amendment No. 1 to the 
proposed rule change.\6\ The Commission received one comment letter on 
the proposed rule change.\7\ This Order grants approval of the proposed 
rule change, as modified by Amendment No. 1, on an accelerated basis 
for a twelve-month pilot period.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 74178 (January 30, 
2015), 80 FR 6558 (February 5, 2015) (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 74526 (March 18, 
2015), 80 FR 15653 (March 24, 2015). The Commission designated a 
longer period within which to take action on the proposed rule 
change and designated May 6, 2015, as the date by which it should 
approve, disapprove, or institute proceedings to determine whether 
to disapprove the proposed rule change.
    \6\ See Amendment No. 1; see also infra notes 14-18 and 
accompanying text.
    \7\ See letter from John O'Connell, Financial Integration, to 
Commission, dated February 8, 2015 (``O'Connell Letter'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    The Exchange proposes to list and trade, on a pilot basis, P.M.-
settled, cash-settled, European-style options settling to the Index 
(proposed symbol VOLS \8\), for a pilot period of twelve months 
(``Pilot Program''). The Index measures the daily realized volatility 
\9\ of the SPDR S&P 500 Exchange-Traded Fund (``SPY''),\10\ based on a 
21-trading day rolling realized volatility of the daily closing price 
of SPY.
---------------------------------------------------------------------------

    \8\ Options settling to the Index are hereafter referred to as 
VOLS.
    \9\ The Exchange states that realized volatility is the ``actual 
volatility,'' ``statistical volatility,'' or ``asset volatility'' 
that the underlying asset has displayed over a specific period. See 
Notice, supra note 3, at 6559.
    \10\ According to the Exchange, SPY has historically been the 
largest and most actively-traded exchange-traded fund in the United 
States as measured by its assets under management and the value of 
shares traded. See id.
---------------------------------------------------------------------------

    The Index is calculated using a methodology developed by The VolX 
Group Corporation (``VolX''),\11\ and will be calculated and maintained 
by a third party calculation agent acting on behalf of VolX. The Index 
will be updated on each trading day after the close of trading of 
SPY.\12\ Although the Index is based only on daily closing values of 
SPY, a real-time version of the Index that is based on the current SPY 
price will be calculated during the trading day and disseminated at 
least every 15 seconds during the trading day to market data vendors. 
This real-time version will provide an estimate of the Index at the 
close.\13\ The Exchange states that values of the Index also will be 
disseminated to market information vendors such as Bloomberg and 
Thomson Reuters. In the event the Index ceases to be maintained or 
calculated, the Exchange will not list any additional series for 
trading and will limit all transactions in such options to closing 
transactions only for the purpose of maintaining a fair and orderly 
market and protecting investors.
---------------------------------------------------------------------------

    \11\ See id. (describing in more detail the calculation 
methodology for the Index).
    \12\ According to the Exchange, if the current published value 
of SPY is not available, because of a market disruption event where 
the market cannot open and there is no closing price for SPY, for 
example, the Index will continue to be calculated and disseminated. 
The calculation of the Index will compensate for the missing day's 
returns by lowering the value of ``n'' in the formula by the number 
of days that there is no closing price for SPY. See id.
    \13\ The Exchange represents that after the market close, the 
real-time formula and the formula used calculate to the Index will 
have exactly the same value. See id. at 6559-6560 (describing in 
more detail the calculation of the real-time version of the Index).
---------------------------------------------------------------------------

    The Exchange proposes that its standard trading hours for index 
options (9:30 a.m. to 4:15 p.m., Eastern time) will apply to VOLS. 
Standard VOLS will expire on the third Friday of each month. Trading in 
expiring VOLS will normally cease at 4:15 p.m. (Eastern time) on the 
business day of expiration, or, in the case of an option contract 
expiring on a day that is not a business day, on the last business day 
before its expiration. The exercise and settlement value will be 
calculated based on the Index value at the close of the last business 
day of trading, which is ultimately based on the closing price of SPY 
on the last business day of trading, for its final input value. The 
exercise-settlement amount is equal to the difference between the 
settlement value and the exercise price of the option, multiplied by 
$100. Exercise will result in the delivery of cash on the business day 
following expiration.
    The Exchange proposes to adopt minimum trading increments for VOLS 
to be $0.05 for series trading below $3, and $0.10 for series trading 
at or above $3. The Exchange also proposes to set the minimum strike 
price interval at $0.50 strike price (or greater) intervals for VOLS 
where the strike price is less than $75; $1 strike price (or greater) 
intervals where the strike price is $200 or less; and $5 strike price 
(or greater) intervals where the strike price is greater than $200.
    Amendment No. 1 corrects an inaccurate statement in the Notice 
regarding the exercise price range limitations for new series of index 
options.\14\ Under the Exchange's rules, when new series of index 
options with a new expiration date are opened for trading, or when 
additional series of index options in an existing expiration date are 
opened for trading, as the current value of the underlying index moves 
substantially from the exercise prices of series already opened, the 
exercise prices of such new or additional series shall be reasonably 
related to the current value of the underlying index at the time such 
series are first opened for trading.\15\ The term ``reasonably related 
to the current index value of the underlying index'' means that the 
exercise price is within 30% of the current index value, as defined in 
BOX Rule 6090(c)(4).\16\ In the Notice, the Exchange stated that it 
proposed to eliminate, for VOLS, the range limitation in BOX Rule 
6090(c)(3) requiring the exercise prices of new or additional series of 
index options to be reasonably related to the current value of the 
underlying index at the time such series are first opened for trading. 
The Notice erroneously stated that the Exchange's proposal to permit 
exercise prices without a range limitation would be identical to those 
adopted by the Chicago Board Options Exchange, Incorporated (``CBOE'') 
for options on the CBOE Volatility Index (``VIX'').\17\ Amendment No. 1 
provides that the exercise price ranges for VOLS will be subject to the 
exercise price range limitations under BOX Rule 6090(c)(3).\18\
---------------------------------------------------------------------------

    \14\ See Amendment No. 1.
    \15\ See BOX Rule 6090(c)(3).
    \16\ See Notice, supra note 3, at 6560.
    \17\ See id.
    \18\ Amendment No. 1 also modifies Exhibit 5 by striking from 
the proposed text of BOX Rule 6090(c)(7) an erroneous reference to 
BOX Rules 6090(c)(3) and (c)(4). See Amendment No. 1.
---------------------------------------------------------------------------

    The Exchange states that its rules provide that index option 
contracts may expire at three-month intervals or in consecutive 
months.\19\ The Exchange proposes to list VOLS in six consecutive 
expiration months.\20\ In addition, long-term option series having up 
to 180 months to expiration \21\ and Short Term Option Series \22\ in 
VOLS may also be

[[Page 26968]]

listed and traded.\23\ VOLS will be quoted and traded in U.S. 
dollars.\24\
---------------------------------------------------------------------------

    \19\ See Notice, supra, note 3, at 6560; BOX Rule 6090(a)(3).
    \20\ For example, the Exchange states that six monthly 
expirations from January through June may be listed. This is 
consistent with BOX Rule 6090(a)(3), which permits the Exchange to 
list up to six expiration months at any one time. See Notice, supra 
note 3, at 6560.
    \21\ See BOX Rule 6090(b)(1).
    \22\ See IM-6090-2 to BOX Rule 6090. The Exchange states that it 
may open Short Term Option Series for trading on any Thursday or 
Friday that is a business day and that expire on each of the next 
five Fridays that are business days and are not Fridays in which 
monthly options series or quarterly options series expire. See 
Notice, supra note 3, at 6561; see also IM-6090-2(a) to BOX Rule 
6090. The Exchange states that the interval between strike prices on 
Short Term Options Series may be $0.50 or greater where the strike 
price is less than $75, and $1 or greater where the strike price is 
between $75 and $150. During the month prior to expiration of an 
index option class that is selected for the Short Term Option Series 
Program, the strike price intervals for the related non-Short Term 
Option shall be the same as the strike price intervals for the Short 
Term Option. See Notice, supra note 3, at 6561; see also IM-6090-
2(b)(5) to BOX Rule 6090.
    \23\ See Notice, supra note 3, at 6559.
    \24\ See BOX Rule 6090(a)(1).
---------------------------------------------------------------------------

    The Exchange believes that the Index is a broad-based index, as 
that term is defined in BOX Rule 6010(j).\25\ The Exchange proposes 
that there shall be no position or exercise limits for VOLS, and also 
proposes to apply margin requirements for the purchase and sale of VOLS 
that are identical to the margin requirements adopted by CBOE for 
options on the VIX.\26\
---------------------------------------------------------------------------

    \25\ BOX Rule 6010(j) defines the term ``broad-based index'' as 
an index designed to be representative of a stock market as a whole 
or a range of companies in unrelated industries.
    \26\ The Exchange has proposed to amend BOX Rule 10120 (Margin 
Requirements) to make clear that the margin requirements for VOLS 
will be identical to those adopted by CBOE for options on the VIX. 
See CBOE Rule 12.3.
---------------------------------------------------------------------------

    In addition, the Exchange proposes that the trading of options on 
the Index will be subject to the same rules that currently govern the 
trading of Exchange index options, including sales practice rules and 
trading rules.\27\ Trading of VOLS will also be subject to the trading 
halt procedures applicable to other index options traded on the 
Exchange.\28\ Further, Section 4000 of the Exchange's rules, which is 
designed to protect public customer trading, will apply to trading in 
VOLS.
---------------------------------------------------------------------------

    \27\ See Notice, supra note 3, at 6561.
    \28\ Id. at 6560; see also BOX Rule 6080(c).
---------------------------------------------------------------------------

    The Exchange believes that because the Index will settle using 
published quotes for SPY and there are currently no position limits for 
SPY options, it is appropriate not to impose position or exercise 
limits for VOLS. The Exchange notes that because the size of the market 
underlying SPY options is so large, it should dispel concerns regarding 
market manipulation. The Exchange believes that the same reasoning 
applies to VOLS since the value of VOLS is derived from the realized 
volatility of SPY. The Exchange also notes that VIX options are not 
subject to any position or exercise limits.\29\ The Exchange represents 
that it has an adequate surveillance program in place for the VOLS 
product and intends to apply to it the same program procedures that it 
applies to the Exchange's other options products.\30\ The Exchange 
states that its surveillance procedures will allow the Exchange to 
adequately surveil for any potential manipulation in the trading of 
VOLS. The Exchange states that, in its normal course of surveillance, 
it will monitor for any potential manipulation of the Index settlement 
value according to the Exchange's current procedures. In addition, the 
Exchange notes that it is a member of the Intermarket Surveillance 
Group, through which it can coordinate surveillance and investigative 
information sharing in the stock and options markets with all of the 
U.S. registered stock and options markets. The Exchange also represents 
that it has the necessary system capacity to support additional 
quotations and messages that will result from the listing and trading 
of VOLS.\31\
---------------------------------------------------------------------------

    \29\ See Notice, supra note 3, at 6560-6561.
    \30\ See id. at 6561.
    \31\ Id.
---------------------------------------------------------------------------

    The Exchange proposes that proposed rule change to list and trade 
VOLS be approved on a pilot basis for a period of twelve months. As 
part of the Pilot Program, the Exchange committed to submit a pilot 
program report to the Commission two months prior to the expiration 
date of the pilot program (the ``annual report'').\32\ The annual 
report would include an analysis of volume, open interest, and trading 
patterns. The analysis would examine trading in VOLS as well as trading 
in SPY. In addition, for series that exceed certain minimum open 
interest parameters, the annual report would provide an analysis of 
index price volatility and SPY trading activity. In addition to the 
annual report, the Exchange committed to provide the Commission with 
periodic interim reports while the pilot is in effect that would 
contain some, but not all, of the information contained in the annual 
report (``interim reports''). In its filing, BOX notes that it would 
provide the annual and interim reports to the Commission on a 
confidential basis.\33\
---------------------------------------------------------------------------

    \32\ Id. at 6561-6562.
    \33\ Id. at 6562.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    After careful consideration of the proposal, the Commission finds 
that the proposed rule change is consistent with the requirements of 
the Act and the rules and regulations thereunder applicable to a 
national securities exchange,\34\ and, in particular, the requirements 
of Section 6 of the Act.\35\ Specifically, the Commission finds that 
the proposed rule change is consistent with Section 6(b)(5) of the 
Act,\36\ which requires, among other things, that the rules of a 
national securities exchange be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system and, in general, 
to protect investors and the public interest. In particular, the 
Commission believes that the proposed VOLS options product provides 
investors with an additional trading and hedging mechanism. Further, as 
noted above, the Commission received one comment letter in support of 
the proposal and endorsed the usefulness of the VOLS products for these 
purposes. The comment letter stated, ``[t]hese options will be 
extremely helpful for hedging index option exposure, equity portfolios, 
and as a risk-management tool for hedge fund managers.'' \37\ In 
addition, the Commission believes that the proposal will allow BOX to 
conduct a limited and carefully monitored pilot for the listing and 
trading of VOLS, as proposed.
---------------------------------------------------------------------------

    \34\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \35\ 15 U.S.C. 78f.
    \36\ 15 U.S.C. 78f(b)(5).
    \37\ See O'Connell Letter, supra note 7, at 1.
---------------------------------------------------------------------------

    The Commission believes that the Exchange's proposal to impose no 
position or exercise limits on VOLS is appropriate and consistent with 
the Act. The Commission also believes that the proposed strike price 
intervals are consistent with the Act. $0.50 or greater strikes for 
VOLS where the strike price is less than $75, $1 or greater strike 
price intervals for VOLS where the strike price is $200 or less, and $5 
or greater strike price intervals for VOLS when the strike price is 
greater than $200 should provide investors with added flexibility in 
the trading of VOLS options and will further the public interest by 
allowing investors to establish positions that are better tailored to 
meet their investment objectives. Moreover, the Commission notes that, 
under the Exchange's rules, the strike prices of new or additional 
series of VOLs shall be reasonably related to--i.e., within 30% of--the 
current value of the underlying index at the time such series are first 
opened for trading.\38\ The Commission also notes that the Exchange has 
represented that it has the necessary system capacity to

[[Page 26969]]

handle the additional quotations and messages associated with the 
listing and trading of VOLS.\39\
---------------------------------------------------------------------------

    \38\ See BOX Rule 6090(c)(3) and (c)(4).
    \39\ See Notice, supra note 3, at 6561.
---------------------------------------------------------------------------

    The Commission also believes that it is consistent with the Act to 
apply margin requirements to the proposed VOLS product that are 
identical to the margin requirements adopted by the CBOE for options on 
the VIX. The Exchange has represented that BOX options participants and 
their associated persons are bound by the initial and maintenance 
margin requirements of either the CBOE or the New York Stock Exchange, 
pursuant to BOX Rule 10120.\40\ As the CBOE VIX measures the expected 
volatility of the S&P 500 Index, the Commission believes it is 
acceptable to apply the same margin requirements applying to VIX 
options to VOLS, which are options on an index measuring the realized 
volatility of SPY. The Commission further believes that the Exchange's 
proposed minimum trading increment, series openings, and other aspects 
of the proposed rule change are appropriate and consistent with the 
Act.
---------------------------------------------------------------------------

    \40\ Id. at 6560.
---------------------------------------------------------------------------

    In the Commission's order approving the listing and trading of 
P.M.-settled options on the S&P 500 Index on CBOE,\41\ the Commission 
noted that the potential impact on the market at expiration for the 
underlying component stocks for a P.M.-settled, cash-settled index 
option remained unclear, given past experience with the impact of P.M. 
settlement of cash-settled index derivatives on the underlying cash 
markets and the enhanced closing procedures that are now in use at the 
primary equity markets.\42\ To assist the Commission in assessing any 
potential impact of a P.M.-settled VOLS product on the options markets 
as well as the underlying cash equities markets, BOX will be required 
to submit data to the Commission as a condition of Commission approval 
of the VOLS product on a pilot basis. The Commission believes that 
BOX's proposed twelve-month pilot, together with the data and analysis 
that BOX should provide to the Commission, should allow BOX and the 
Commission to monitor for and assess any potential for adverse market 
effects. Specifically, the data and analysis should assist the 
Commission in evaluating the effect of allowing P.M. settlement for 
VOLS on SPY.
---------------------------------------------------------------------------

    \41\ See Securities Exchange Act Release No. 68888 (February 8, 
2013), 78 FR 10668 (February 14, 2013).
    \42\ Id. at 10669.
---------------------------------------------------------------------------

    BOX's proposed twelve-month pilot will enable the Commission to 
collect current data to assess and monitor for any potential for impact 
on the markets. In particular, the data collected from BOX's Pilot 
Program will help inform the Commission's consideration of whether the 
pilot should be modified, discontinued, extended, or permanently 
approved. The Pilot Program information should help the Commission 
assess the impact on the markets and determine whether other changes 
are necessary. Furthermore, the Exchange's ongoing analysis of the 
pilot should help it monitor any potential risks from large P.M.-
settled positions and take appropriate action on a timely basis if 
warranted.
    As a national securities exchange, the Exchange is required, under 
Section 6(b)(1) of the Act,\43\ to enforce compliance by its members 
and persons associated with its members with the provisions of the Act, 
Commission rules and regulations thereunder, and its own rules. In this 
regard, the Commission notes that trading of VOLS will be subject to 
the same rules that currently govern the trading of other index options 
on the Exchange.\44\ In addition, as noted above, the Exchange has 
asserted that the Index settlement value is not susceptible to 
manipulation.\45\ Moreover, the Exchange has represented that it has an 
adequate surveillance program in place for options traded on the Index, 
and will monitor for any potential manipulation of the Index settlement 
value according to its current surveillance procedures.\46\ In 
approving the proposed listing and trading of the Index options, the 
Commission has also relied on BOX's representation that it has the 
necessary system capacity to support the new options series that will 
result from this proposal.\47\
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78f(b)(1).
    \44\ See supra note 27 and accompanying text.
    \45\ See Notice, supra note 3, at 6561.
    \46\ Id.
    \47\ Id.
---------------------------------------------------------------------------

    Accordingly, for the reasons stated above, the Commission finds 
good cause, pursuant to Section 19(b)(2) \48\ of the Act, for approving 
the Exchange's proposal, as modified by Amendment No. 1, prior to the 
30th day after the date of publication of the notice in the Federal 
Register.
---------------------------------------------------------------------------

    \48\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

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-2015-06 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BOX-2015-06. 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 will also 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-2015-06 and should be 
submitted on or before June 1, 2015.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\49\ that the proposed rule change (SR-BOX-2015-06), as modified by 
Amendment No. 1, be, and hereby is, approved on an accelerated basis 
for a twelve-month pilot period set to expire on May 6, 2016.
---------------------------------------------------------------------------

    \49\ 15 U.S.C. 78s(b)(2).


[[Page 26970]]


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

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\50\
---------------------------------------------------------------------------

    \50\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-11275 Filed 5-8-15; 8:45 am]
 BILLING CODE 8011-01-P
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