Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Chapter VI, Section 5 To Extend the Penny Pilot Program, 87639-87641 [2016-29041]

Download as PDF Federal Register / Vol. 81, No. 233 / Monday, December 5, 2016 / Notices information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the agency’s estimate of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. Please direct your written comments to Pamela Dyson, Director/Chief Information Officer, Securities and Exchange Commission, C/O Remi Pavlik-Simon, 100 F Street NE., Washington, DC 20549; or send an email to: PRA_Mailbox@sec.gov. Dated: November 22, 2016. Robert W. Errett, Deputy Secretary. [FR Doc. 2016–29085 Filed 12–2–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79420; File No. SR–BX– 2016–062] Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Chapter VI, Section 5 To Extend the Penny Pilot Program November 29, 2016. sradovich on DSK3GMQ082PROD with NOTICES 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 November 16, 2016, NASDAQ BX, Inc. (‘‘BX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Chapter VI, Section 5 (Minimum U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 19:12 Dec 02, 2016 NASDAQ BX Rules Options Rules * * * * * Chapter VI Trading Systems * * * * * Sec. 5 Minimum Increments (a) The Board may establish minimum quoting increments for options contracts traded on BX Options. Such minimum increments established by the Board will be designated as a stated policy, practice, or interpretation with respect to the administration of this Section within the meaning of Section 19 of the Exchange Act and will be filed with the SEC as a rule change for effectiveness upon filing. Until such time as the Board makes a change in the increments, the following principles shall apply: (1)–(2) No Change. (3) For a pilot period scheduled to expire on [December 31, 2016] June 30, 2017 or the date of permanent approval, if earlier, if the options series is trading pursuant to the Penny Pilot program one (1) cent if the options series is trading at less than $3.00, five (5) cents if the options series is trading at $3.00 or higher, unless for QQQQs, SPY and IWM where the minimum quoting increment will be one cent for all series regardless of price. A list of such options shall be communicated to membership via an Options Trader Alert (‘‘OTA’’) posted on the Exchange’s Web site. The Exchange may replace any pilot issues that have been delisted with the next most actively traded multiply listed options classes that are not yet included in the pilot, based on trading activity in the previous six months. The replacement issues may be added to the pilot on the second trading day following [July 1, 2016] January 1, 2017. (4) No Change. (b) No Change. * * * * * The text of the proposed rule change is also available on the Exchange’s Web 3 References herein to Chapter and Series refer to rules of the BX Options Market (‘‘BX Options’’), unless otherwise noted. 1 15 VerDate Sep<11>2014 Increments),3 to extend through June 30, 2017 or the date of permanent approval, if earlier, the Penny Pilot Program in options classes in certain issues (‘‘Penny Pilot’’ or ‘‘Pilot’’), and to change the date when delisted classes may be replaced in the Penny Pilot. The text of the proposed rule change is set forth below. Proposed new language is italicized and deleted text is in brackets. Jkt 241001 PO 00000 Frm 00110 Fmt 4703 Sfmt 4703 87639 site at http:// nasdaqomxbx.cchwallstreet.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this filing is to amend Chapter VI, Section 5, to extend the Penny Pilot through June 30, 2017 or the date of permanent approval, if earlier,4 and to change the date when delisted classes may be replaced in the Penny Pilot. The Exchange believes that extending the Penny Pilot will allow for further analysis of the Penny Pilot and a determination of how the program should be structured in the future. Under the Penny Pilot, the minimum price variation for all participating options classes, except for the Nasdaq100 Index Tracking Stock (‘‘QQQQ’’), the SPDR S&P 500 Exchange Traded Fund (‘‘SPY’’) and the iShares Russell 2000 Index Fund (‘‘IWM’’), is $0.01 for all quotations in options series that are quoted at less than $3 per contract and $0.05 for all quotations in options series that are quoted at $3 per contract or greater. QQQQ, SPY and IWM are quoted in $0.01 increments for all options series. The Penny Pilot is currently scheduled to expire on December 31, 2016. The Exchange proposes to extend the time period of the Penny Pilot through June 30, 2017 or the date of permanent approval, if earlier, and to provide a revised date for adding replacement issues to the Penny Pilot. The Exchange proposes that any Penny Pilot Program issues that have been delisted may be 4 The options exchanges in the U.S. that have pilot programs similar to the Penny Pilot (together ‘‘pilot programs’’) are currently working on a proposal for permanent approval of the respective pilot programs. E:\FR\FM\05DEN1.SGM 05DEN1 87640 Federal Register / Vol. 81, No. 233 / Monday, December 5, 2016 / Notices replaced on the second trading day following January 1, 2017. The replacement issues will be selected based on trading activity in the previous six months.5 This filing does not propose any substantive changes to the Penny Pilot Program; all classes currently participating in the Penny Pilot will remain the same and all minimum increments will remain unchanged. The Exchange believes the benefits to public customers and other market participants who will be able to express their true prices to buy and sell options have been demonstrated to outweigh the potential increase in quote traffic. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,6 in general, and furthers the objectives of Section 6(b)(5) of the Act,7 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and 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 proposed rule change, which extends the Penny Pilot for an additional six months through June 30, 2017 or the date of permanent approval, if earlier, and changes the date for replacing Penny Pilot issues that were delisted to the second trading day following January 1, 2017, will enable public customers and other market participants to express their true prices to buy and sell options for the benefit of all market participants. This is consistent with the Act. sradovich on DSK3GMQ082PROD 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 5 The replacement issues will be announced to the Exchange’s membership via an Options Trader Alert (OTA) posted on the Exchange’s Web site. Penny Pilot replacement issues will be selected based on trading activity in the previous six months, as is the case today. The replacement issues would be identified based on The Options Clearing Corporation’s trading volume data. For example, for the January replacement, trading volume from May 30, 2016 through November 30, 2016 would be analyzed. The month immediately preceding the replacement issues’ addition to the Pilot Program (i.e., December) would not be used for purposes of the six-month analysis. 6 15 U.S.C. 78f(b). 7 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 19:12 Dec 02, 2016 Jkt 241001 of the purposes of the Act. To the contrary, this proposal is procompetitive because it allows Penny Pilot issues to continue trading on the Exchange. Moreover, the Exchange believes that the proposed rule change will allow for further analysis of the Pilot and a determination of how the Pilot should be structured in the future; and will serve to promote regulatory clarity and consistency, thereby reducing burdens on the marketplace and facilitating investor protection. The Pilot is an industry-wide initiative supported by all other option exchanges. The Exchange believes that extending the Pilot will allow for continued competition between market participants on the Exchange trading similar products as their counterparts on other exchanges, while at the same time allowing the Exchange to continue to compete for order flow with other exchanges in option issues trading as part of the Pilot. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change 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, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act 8 and subparagraph (f)(6) of Rule 19b–4 thereunder.9 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: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings 8 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 9 17 PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 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 (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– BX–2016–062 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–2016–062. 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 (http://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–2016–062 and should be submitted on or before December 27, 2016. E:\FR\FM\05DEN1.SGM 05DEN1 Federal Register / Vol. 81, No. 233 / Monday, December 5, 2016 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–29041 Filed 12–2–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79423; File No. SR–CBOE– 2016–078] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Relating to Disaster Recovery November 29, 2016. 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 November 16, 2016, Chicago Board Options Exchange, Incorporated (‘‘CBOE’’ 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 the Exchange. On November 28, 2016, the Exchange filed Amendment No. 1 to the proposal.3 The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment No. 1, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 6.18 relating to disaster recovery. The text of the proposed rule change is available on the Exchange’s Web site (http://www.cboe.com/AboutCBOE/ CBOELegalRegulatoryHome.aspx), at the Exchange’s Office of the Secretary, 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 sradovich on DSK3GMQ082PROD with NOTICES In its filing with the Commission, the Exchange included statements 10 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 In Amendment No. 1, the Exchange provided in new footnote 11 additional explanation about how its business continuity and disaster recovery plans are reasonably designed to achieve two-hour resumption of trading systems essential to conducting business on the Exchange. 1 15 VerDate Sep<11>2014 19:12 Dec 02, 2016 Jkt 241001 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose Background The Exchange adopted Rule 6.18 in 2006 for the limited purpose of providing alternative means of operation in the event of a physical disaster. In particular, Rule 6.18, as originally adopted, was intended to deal with trading floor closures, providing for the operation of a ‘‘Disaster Recovery Facility’’ (‘‘DRF’’) in the event that a disaster or other unusual circumstance rendered the trading floor inoperable.4 Under original Rule 6.18, if the Exchange were forced to halt trading due to a disaster or other physical impairment of its trading floor, the Exchange and its members 5 could operate remotely in a screen-based only environment from the DRF while the trading floor was unavailable. While operating from the DRF, open outcry trading would be suspended. In 2012, Rule 6.18 was amended in connection with the Exchange’s relocation of its primary data center to the East Coast and the consequent conversion of its former primary data center to a back-up data center in Chicago.6 Specifically, Rule 6.18 was amended to address other situations in which the primary data center could continue to operate despite the trading floor being rendered inoperable or in which the back-up data center might be 4 See Securities Exchange Act Release No. 54171 (July 19, 2006), 71 FR 42427 (July 26, 2006) (Order Approving Proposed Rule Change and Amendment No. 1 Thereto Regarding a Disaster Recovery Facility) (SR–CBOE–2006–001). 5 Prior to its demutualization in 2010, the Exchange was a member-owned organization. See Securities Exchange Act Release No. 62382 (June 25, 2010), 75 FR 38164 (July 1, 2010) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Conforming Changes in Connection With Demutualization) (SR–CBOE– 2010–058). Individuals and organizations that may trade on CBOE are now referred to as Trading Permit Holders (‘‘TPHs’’). 6 See Securities Exchange Act Release No. 68301 (November 27, 2012), 77 FR 71650 (December 3, 2012) (Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change To Amend CBOE Rule 6.18 Concerning the Exchange’s Disaster Recovery Facility) (SR–CBOE–2012–111). PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 87641 used despite the trading floor being operational. Specifically, as amended, Rule 6.18 provided that in the event that the Exchange were forced to switch operations to the back-up data center, the Exchange’s trading floor could still be used and that in the event that the trading floor were inoperable, the Exchange could still operate using a floorless configuration or screen-based only environment on the Exchange’s primary data center. References to the DRF and other irrelevant portions of the original rule were eliminated or replaced with references to Exchange’s primary and back-up data centers as appropriate. In 2015, Rule 6.18 was again amended to add greater detail to the Exchange’s disaster recovery rules and harmonize the disaster recovery rules with newly implemented disaster recovery-related regulatory imperatives of Regulation Systems Compliance and Integrity (‘‘Regulation SCI’’), which superseded and replaced the SEC’s voluntary Automation Review Policy.7 In doing so, the Exchange made certain changes to Rule 6.18 to provide additional details regarding the Exchange’s backup trading systems, business continuity and disaster recovery plans, and testing and update its disaster recovery rules to ensure consistency with Regulation SCI. The Exchange now proposes to make additional changes to its disaster recovery rules to provide the Exchange authority to take additional steps necessary to preserve the Exchange’s ability to conduct business in the event that the Exchange’s data centers become inoperable or otherwise unavailable for use due to a significant systems failure, disaster or other unusual circumstances and make clear in the Rules the intermediary steps that the Exchange may take to disable certain systems and users’ connectivity while continuing to operate its primary data center. The Exchange believes this authority serves the interests of all investors and the general public, because it helps the Exchange ensure its continuous operation and ability to maintain fair and orderly markets in the event of a 7 See Securities Exchange Act Release No. 76203 (October 20, 2015), 80 FR 65258 (October 26, 2015) (Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Disaster Recovery) (SR–CBOE–2015–088); see also Securities Exchange Act Release No. 73639 (November 19, 2014), 79 FR at 72252 (December 5, 2014) (Regulation Systems Compliance and Integrity) (File No. S7–01–13); Securities Exchange Act Release No. 27445 (November 16, 1989), 54 FR 48703 (November 24, 1989) (Automated Systems of Self-Regulatory Organizations) (File No. S7–29–89); Securities Exchange Act Release No. 29185 (May 9, 1991), 56 FR 22490 (May 15, 1991) (Automated Systems of Self-Regulatory Organizations) (File No. S7–12–91). E:\FR\FM\05DEN1.SGM 05DEN1

Agencies

[Federal Register Volume 81, Number 233 (Monday, December 5, 2016)]
[Notices]
[Pages 87639-87641]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-29041]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79420; File No. SR-BX-2016-062]


Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Chapter 
VI, Section 5 To Extend the Penny Pilot Program

November 29, 2016.
    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 November 16, 2016, NASDAQ BX, Inc. (``BX'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I, II, and III below, 
which Items have been prepared by the Exchange. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Chapter VI, Section 5 (Minimum 
Increments),\3\ to extend through June 30, 2017 or the date of 
permanent approval, if earlier, the Penny Pilot Program in options 
classes in certain issues (``Penny Pilot'' or ``Pilot''), and to change 
the date when delisted classes may be replaced in the Penny Pilot.
---------------------------------------------------------------------------

    \3\ References herein to Chapter and Series refer to rules of 
the BX Options Market (``BX Options''), unless otherwise noted.
---------------------------------------------------------------------------

    The text of the proposed rule change is set forth below.
    Proposed new language is italicized and deleted text is in 
brackets.

NASDAQ BX Rules

Options Rules

* * * * *

Chapter VI Trading Systems

* * * * *

Sec. 5 Minimum Increments

    (a) The Board may establish minimum quoting increments for options 
contracts traded on BX Options. Such minimum increments established by 
the Board will be designated as a stated policy, practice, or 
interpretation with respect to the administration of this Section 
within the meaning of Section 19 of the Exchange Act and will be filed 
with the SEC as a rule change for effectiveness upon filing. Until such 
time as the Board makes a change in the increments, the following 
principles shall apply:
    (1)-(2) No Change.
    (3) For a pilot period scheduled to expire on [December 31, 2016] 
June 30, 2017 or the date of permanent approval, if earlier, if the 
options series is trading pursuant to the Penny Pilot program one (1) 
cent if the options series is trading at less than $3.00, five (5) 
cents if the options series is trading at $3.00 or higher, unless for 
QQQQs, SPY and IWM where the minimum quoting increment will be one cent 
for all series regardless of price. A list of such options shall be 
communicated to membership via an Options Trader Alert (``OTA'') posted 
on the Exchange's Web site.
    The Exchange may replace any pilot issues that have been delisted 
with the next most actively traded multiply listed options classes that 
are not yet included in the pilot, based on trading activity in the 
previous six months. The replacement issues may be added to the pilot 
on the second trading day following [July 1, 2016] January 1, 2017.
    (4) No Change.
    (b) No Change.
* * * * *
    The text of the proposed rule change is also available on the 
Exchange's Web site at http://nasdaqomxbx.cchwallstreet.com, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to amend Chapter VI, Section 5, to 
extend the Penny Pilot through June 30, 2017 or the date of permanent 
approval, if earlier,\4\ and to change the date when delisted classes 
may be replaced in the Penny Pilot. The Exchange believes that 
extending the Penny Pilot will allow for further analysis of the Penny 
Pilot and a determination of how the program should be structured in 
the future.
---------------------------------------------------------------------------

    \4\ The options exchanges in the U.S. that have pilot programs 
similar to the Penny Pilot (together ``pilot programs'') are 
currently working on a proposal for permanent approval of the 
respective pilot programs.
---------------------------------------------------------------------------

    Under the Penny Pilot, the minimum price variation for all 
participating options classes, except for the Nasdaq-100 Index Tracking 
Stock (``QQQQ''), the SPDR S&P 500 Exchange Traded Fund (``SPY'') and 
the iShares Russell 2000 Index Fund (``IWM''), is $0.01 for all 
quotations in options series that are quoted at less than $3 per 
contract and $0.05 for all quotations in options series that are quoted 
at $3 per contract or greater. QQQQ, SPY and IWM are quoted in $0.01 
increments for all options series. The Penny Pilot is currently 
scheduled to expire on December 31, 2016.
    The Exchange proposes to extend the time period of the Penny Pilot 
through June 30, 2017 or the date of permanent approval, if earlier, 
and to provide a revised date for adding replacement issues to the 
Penny Pilot. The Exchange proposes that any Penny Pilot Program issues 
that have been delisted may be

[[Page 87640]]

replaced on the second trading day following January 1, 2017. The 
replacement issues will be selected based on trading activity in the 
previous six months.\5\
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    \5\ The replacement issues will be announced to the Exchange's 
membership via an Options Trader Alert (OTA) posted on the 
Exchange's Web site. Penny Pilot replacement issues will be selected 
based on trading activity in the previous six months, as is the case 
today. The replacement issues would be identified based on The 
Options Clearing Corporation's trading volume data. For example, for 
the January replacement, trading volume from May 30, 2016 through 
November 30, 2016 would be analyzed. The month immediately preceding 
the replacement issues' addition to the Pilot Program (i.e., 
December) would not be used for purposes of the six-month analysis.
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    This filing does not propose any substantive changes to the Penny 
Pilot Program; all classes currently participating in the Penny Pilot 
will remain the same and all minimum increments will remain unchanged. 
The Exchange believes the benefits to public customers and other market 
participants who will be able to express their true prices to buy and 
sell options have been demonstrated to outweigh the potential increase 
in quote traffic.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\7\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, and 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.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In particular, the proposed rule change, which extends the Penny 
Pilot for an additional six months through June 30, 2017 or the date of 
permanent approval, if earlier, and changes the date for replacing 
Penny Pilot issues that were delisted to the second trading day 
following January 1, 2017, will enable public customers and other 
market participants to express their true prices to buy and sell 
options for the benefit of all market participants. This is consistent 
with the Act.

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, this proposal 
is pro-competitive because it allows Penny Pilot issues to continue 
trading on the Exchange.
    Moreover, the Exchange believes that the proposed rule change will 
allow for further analysis of the Pilot and a determination of how the 
Pilot should be structured in the future; and will serve to promote 
regulatory clarity and consistency, thereby reducing burdens on the 
marketplace and facilitating investor protection.
    The Pilot is an industry-wide initiative supported by all other 
option exchanges. The Exchange believes that extending the Pilot will 
allow for continued competition between market participants on the 
Exchange trading similar products as their counterparts on other 
exchanges, while at the same time allowing the Exchange to continue to 
compete for order flow with other exchanges in option issues trading as 
part of the Pilot.

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change 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, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \8\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BX-2016-062 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-2016-062. 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 (http://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-2016-062 and 
should be submitted on or before December 27, 2016.


[[Page 87641]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-29041 Filed 12-2-16; 8:45 am]
 BILLING CODE 8011-01-P