Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Expand the Short Term Option Series Program, 7279-7282 [2018-03306]

Download as PDF Federal Register / Vol. 83, No. 34 / Tuesday, February 20, 2018 / Notices CONTACT PERSON FOR MORE INFORMATION: For further information and to ascertain what, if any, matters have been added, deleted or postponed; please contact Brent J. Fields from the Office of the Secretary at (202) 551–5400. Dated: February 14, 2018. Brent J. Fields, Secretary. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change [FR Doc. 2018–03467 Filed 2–15–18; 11:15 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82697; File No. SR–BOX– 2018–07] Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Expand the Short Term Option Series Program February 13, 2018. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that, on February 8, 2018, BOX Options Exchange LLC (‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. sradovich on DSK3GMQ082PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend BOX Rule 100(a)(65) and IM–5050–6 to expand the Short Term Option Series Program (‘‘Program’’) to permit the listing and trading of options series with Monday expirations that are listed pursuant to the Program, including options on the SPDR S&P 500 ETF Trust (‘‘SPY’’). The text of the proposed rule change is available from the principal office of the Exchange, at the Commission’s Public Reference Room and also on the Exchange’s internet website at https://boxoptions.com. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 17:55 Feb 16, 2018 1. Purpose The Exchange proposes to amend Rule 100(a)(65) and IM–5050–6 to expand the Short Term Option Series Program (‘‘Program’’) to permit the listing and trading of options series with Monday expirations that are listed pursuant to the Program, including options on the SPDR S&P 500 ETF Trust (‘‘SPY’’). This is a competitive filing that is based on a proposal recently submitted by Nasdaq PHLX LLC (‘‘Phlx’’) and approved by the Commission.3 As set forth in Rule 100(a)(65), a Short Term Option Series is a series in an option class that is approved for listing and trading on the Exchange in which the series is opened for trading on any Tuesday, Wednesday, Thursday or Friday that is a business day and that expires on the Wednesday or Friday of the next business week. The Exchange is now proposing to amend Rule 100(a)(65) to permit the listing of options series that expire on Mondays. Specifically, the Exchange is proposing that it may open for trading series of options on any Monday that is a business day and that expires on the Monday of the next business week. The Exchange is also proposing to list Monday expirations series on Fridays that precede the expiration Monday by one business week plus one business day. Since Rule 100(a)(65) already provides for the listing of short term option series on Fridays, the Exchange is not modifying this provision to allow for Friday listing of Monday expiration series. However, the Exchange is amending Rule 100(a)(65) to clarify that, in the case of a series that is listed on a Friday and expires on a Monday, that series must be listed one business week and one business day prior to that expiration (i.e., two Fridays prior to expiration). As part of this proposal, the Exchange is also amending Rule 100(a)(65) to address the expiration of Monday expiration series when the Monday is 3 See Securities Exchange Act Release No. 82611 (February 1, 2018), 83 FR 5473 (February 7, 2018) (Order Approving SR–Phlx–2017–103). 1 15 VerDate Sep<11>2014 and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. Jkt 244001 PO 00000 Frm 00144 Fmt 4703 Sfmt 4703 7279 not a business day. In that case, the rule will provide that the series shall expire on the first business day immediately following that Monday. This procedure differs from the expiration date of Wednesday expiration series that are scheduled to expire on a holiday. In that case, the Wednesday expiration series shall expire on the first business day immediately prior to that Wednesday, e.g., Tuesday of that week.4 However, the Exchange believes that it is preferable to require Monday expiration series in this scenario to expire on the Tuesday of that week rather than the previous business day, e.g., the previous Friday, since the Tuesday is closer in time to the scheduled expiration date of the series than the previous Friday, and therefore may be more representative of anticipated market conditions. The Exchange also notes that Cboe Exchange, Inc. (‘‘Cboe’’) uses the same procedure for options on the S&P 500 index (‘‘SPX’’) with Monday expirations that listed pursuant to its Nonstandard Expirations Pilot Program and that are scheduled to expire on a holiday.5 The Exchange also proposes to make corresponding changes to IM–5050–6, which sets forth the requirements for SPY options that are listed pursuant to the Short Term Options Series Program, to permit Monday SPY expirations (‘‘Monday SPY Expirations’’). Accordingly, the Exchange proposes to amend IM–5050–6(d) to state that, with respect to Monday SPY Expirations, the Exchange may open for trading on any Friday or Monday that is a business day series of options on the SPY to expire on any Monday of the month that is a business day and is not a Monday in which Quarterly Options Series expire, provided that Monday SPY Expirations that are listed on a Friday must be listed at least one business week and one business day prior to the expiration. BOX may list up to five consecutive Monday SPY Expirations at one time; the Exchange may have no more than a total of five Monday SPY Expirations.6 The Exchange will also clarify that, as with Wednesday SPY Expirations, 4 See BOX Rule 100(a)(65). CBOE Rule 24.9(e)(1) (‘‘If the Exchange is not open for business on a respective Monday, the normally Monday expiring Weekly Expirations will expire on the following business day. If the Exchange is not open for business on a respective Wednesday or Friday, the normally Wednesday or Friday expiring Weekly Expirations will expire on the previous business day.’’) 6 Proposed IM–5050–6(a) states that the Exchange may have no more than a total of five Short Term Option Expiration Dates, however the Exchange notes that this does not include any Monday or Wednesday SPY Expirations as provided in paragraph (c) and proposed paragraph (d) of IM– 5050–6. 5 See E:\FR\FM\20FEN1.SGM 20FEN1 sradovich on DSK3GMQ082PROD with NOTICES 7280 Federal Register / Vol. 83, No. 34 / Tuesday, February 20, 2018 / Notices Monday SPY Expirations will be subject to the provisions of this Rule. The interval between strike prices for the proposed Monday SPY Expirations will be the same as those for the current Short Term Option Series for Wednesday and Friday SPY Expirations. Specifically, the Monday SPY Expirations will have a $0.50 strike interval minimum. As is the case with other options series listed pursuant to the Program, the Monday SPY Expiration series will be P.M.-settled. Currently, for each option class eligible for participation in the Program, the Exchange is limited to opening thirty (30) series for each expiration date for the specific class. The thirty (30) series restriction does not include series that are open by other securities exchanges under their respective short term option rules; the Exchange may list these additional series that are listed by other exchanges.7 This thirty (30) series restriction shall apply to Monday SPY Expiration series as well. In addition, the Exchange will be able to list series that are listed by other exchanges, assuming they file similar rules with the Commission to list SPY options expiring on Mondays. Finally, the Exchange is amending IM–5050–6(b)(2), which addresses the listing of Short Term Options Series that expire in the same week as monthly or quarterly options series. Currently, that rule states that no Short Term Option Series may expire in the same week in which monthly option series on the same class expire (with the exception of Wednesday SPY Expirations) or, in the case of Quarterly Options Series, on an expiration that coincides with an expiration of Quarterly Option Series on the same class. As with Wednesday SPY Expirations, the Exchange is proposing to permit Monday SPY Expirations to expire in the same week as monthly options series on the same class. The Exchange believes that it is reasonable to extend this exemption to Monday SPY Expirations because Monday SPY Expirations and standard monthly options will not expire on the same trading day, as standard monthly options expire on Fridays. Additionally, the Exchange believes that not listing Monday SPY Expirations for one week every month because there was a monthly SPY expiration on the Friday of that week would create investor confusion. Relatedly, BOX is also amending IM– 5050–6(b)(2) to clarify that Monday and Wednesday SPY Expirations may expire in the same week as monthly option series in the same class expire, but that 7 See IM–5050–6(b). VerDate Sep<11>2014 17:55 Feb 16, 2018 Jkt 244001 no Short Term Option Series may expire on the same day as an expiration of Quarterly Option Series on the same class. This change will make that provision more consistent with the existing language in IM–5050–6 that prohibits Wednesday SPY Expirations from expiring on a Wednesday in which Quarterly Options Series expire. The Exchange does not believe that any market disruptions will be encountered with the introduction of P.M.-settled Monday expirations. The Exchange has the necessary capacity and surveillance programs in place to support and properly monitor trading in the proposed Monday expiration series, including Monday SPY Expirations. The Exchange currently trades P.M.-settled Short Term Option Series that expire almost every Wednesday and Friday, which provide market participants a tool to hedge special events and to reduce the premium cost of buying protection. The Exchange notes that it has been listing Wednesday expirations pursuant to Rule 100(a)(65) and IM– 5050–6 since 2016.8 With the exception of Monday expiration series that are scheduled to expire on a holiday, the Exchange does not believe that there are any material differences between Monday expirations and Wednesday or Friday expirations for Short Term Option Series. The Exchange seeks to introduce Monday expirations to, among other things, expand hedging tools available to market participants and to continue the reduction of the premium cost of buying protection. The Exchange believes that Monday expirations, similar to Wednesday and Friday expirations, will allow market participants to purchase an option based on their timing as needed and allow them to tailor their investment and hedging needs more effectively. While other exchanges do not currently list Monday SPY Expirations, the Exchange notes that other exchanges currently permit Monday expirations for other options. For example, Cboe lists options on the SPX with a Monday expiration as part of its Nonstandard Expirations Pilot Program.9 2. Statutory Basis The Exchange believes that the proposal is consistent with the 8 See Securities Exchange Act Release No. 78668 (August 24, 2016), 81 FR 59696 (August 30, 2016) (SR–BOX–2016–28). 9 See CBOE Rule 24.9(e)(1) (‘‘The Exchange may open for trading Weekly Expirations on any broadbased index eligible for standard options trading to expire on any Monday, Wednesday, or Friday (other than the third Friday-of-the month or days that coincide with an EOM expiration.’’). PO 00000 Frm 00145 Fmt 4703 Sfmt 4703 requirements of Section 6(b) of the Securities Exchange Act of 1934 (the ‘‘Act’’),10 in general, and Section 6(b)(5) of the Act,11 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest. In particular, the Exchange believes the Short Term Option Series Program has been successful to date and that Monday expirations, including Monday SPY Expirations, simply expand the ability of investors to hedge risk against market movements stemming from economic releases or market events that occur throughout the month in the same way that the Short Term Option Series Program has expanded the landscape of hedging. Similarly, the Exchange believes Monday expirations, including Monday SPY Expirations, should create greater trading and hedging opportunities and flexibility, and will provide customers with the ability to tailor their investment objectives more effectively. While other exchanges do not currently list Monday SPY Expirations, the Exchange notes that Cboe currently permits Monday expirations for other options with a weekly expiration, such as options on the SPX. With the exception of Monday expiration series that are scheduled to expire on a holiday, the Exchange does not believe that there are any material differences between Monday expirations, including Monday SPY expirations, and Wednesday or Friday expirations, including Wednesday and Friday SPY Expirations, for Short Term Option Series. The Exchange notes that it has been listing Wednesday expirations pursuant to Rule 100(a)(65) and IM–5050–6 since 2016. The Exchange believes that it is consistent with the Act to treat Monday expiration series that expire on a holiday differently than Wednesday or Friday expiration series, since the proposed treatment for Monday expiration series will result in an expiration date that is closer in time to the scheduled expiration date of the series, and therefore may be more representative of anticipated market conditions. The Exchange also notes that Cboe uses the same procedure for SPX options with 10 15 11 15 E:\FR\FM\20FEN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(5). 20FEN1 Federal Register / Vol. 83, No. 34 / Tuesday, February 20, 2018 / Notices sradovich on DSK3GMQ082PROD with NOTICES Monday expirations that are listed pursuant to its Nonstandard Expiration Pilot Program and that are scheduled to expire on a holiday. Given the similarities between Monday SPY Expiration series and Wednesday and Friday SPY Expiration series, the Exchange believes that applying the provisions in IM–5050–6 that currently apply to Wednesday SPY Expirations to Monday SPY Expirations is justified. For example, the Exchange believes that allowing Monday SPY Expirations and monthly SPY expirations in the same week will benefit investors and minimize investor confusion by providing Monday SPY Expirations in a continuous and uniform manner. The Exchange also believes that is appropriate to amend IM–5050–6(b)(2) to clarify that no Short Term Option Series may expire on the same day as an expiration of Quarterly Option Series on the same class. This change will make that provision more consistent with the existing language in IM–5050–6 that prohibits Wednesday SPY Expirations from expiring on a Wednesday in which Quarterly Options Series expire. Finally, the Exchange represents that it has an adequate surveillance program in place to detect manipulative trading in Monday expirations, including Monday SPY Expirations, in the same way that it monitors trading in the current Short Term Option Series. The Exchange also represents that it has the necessary systems capacity to support the new options series. 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. In this regard and as indicated above, the Exchange notes that the rule change is being proposed as a competitive response to a filing submitted by Phlx that was recently approved by the Commission.12 The Exchange notes that having Monday expirations is not a novel proposal, as Cboe currently lists and trades shortterm SPX options with a Monday expiration. The Exchange does not believe the proposal will impose any burden on intra-market competition, as all market participants will be treated in the same manner under this proposal. Additionally, the Exchange does not believe the proposal will impose any burden on inter-market competition, as nothing prevents the other options exchanges from proposing similar rules 12 See supra note 3. VerDate Sep<11>2014 17:55 Feb 16, 2018 Jkt 244001 to list and trade short-term options series with Monday expirations. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 13 and Rule 19b–4(f)(6) thereunder.14 A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative for 30 days from the date of filing. However, Rule 19b– 4(f)(6)(iii)15 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission notes that it recently approved Phlx’s substantially similar proposal to list and trade Monday SPY Expirations.16 The Exchange has stated that waiver of the operative delay will allow the Exchange to list and trade Monday SPY Expirations as soon as possible, and therefore, promote competition among the option exchanges. For these reasons, the Commission believes that the proposed rule change presents no novel issues and that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest, and will allow the Exchange to remain competitive with other exchanges. Therefore, the Commission hereby waives the 30-day operative delay and designates the proposal effective upon 13 15 U.S.C. 78s(b)(3)(A). 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 intention 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. 15 17 CFR 240.19b–4(f)(6)(iii). 16 See supra note 3. 14 17 PO 00000 Frm 00146 Fmt 4703 Sfmt 4703 7281 filing.17 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– BOX–2018–07 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–2018–07. 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 website (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 website 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 17 For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). E:\FR\FM\20FEN1.SGM 20FEN1 7282 Federal Register / Vol. 83, No. 34 / Tuesday, February 20, 2018 / Notices inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–BOX–2018–07 and should be submitted on or before March 9, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–03306 Filed 2–16–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82706; File No. SR–NYSE– 2018–08] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Price List for Equity Transactions in Stocks With a Per Share Stock Price of $1.00 or More To Introduce a New Market at-the-Close and Limit at-theClose Tier 3 February 13, 2018. sradovich on DSK3GMQ082PROD with NOTICES Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on February 1, 2018, New York Stock Exchange LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the selfregulatory organization. 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 its Price List for equity transactions in stocks with a per share stock price of $1.00 or more to introduce a new market at-the-close (‘‘MOC’’) and limit at-theclose (‘‘LOC’’) Tier 3. The proposed rule change is available on the Exchange’s 18 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. VerDate Sep<11>2014 17:55 Feb 16, 2018 Jkt 244001 website at www.nyse.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 self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those 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 parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its Price List to introduce a new MOC/LOC Tier 3. The proposed change would only apply to fees and credits in transactions in securities priced $1.00 or more. The Exchange proposes to implement this change to its Price List effective February 1, 2018. Currently, for MOC/LOC Tier 1, the Exchange currently charges $0.0004 per share for MOC orders and $0.0007 per share for LOC orders from any member organization in the prior three billing months executing (1) an ADV of MOC activity on the NYSE of at least 0.45% of NYSE CADV, (2) an ADV of total close activity (MOC/LOC and executions at the close) on the NYSE of at least 0.7% of NYSE CADV, and (3) whose MOC activity comprised at least 35% of the member organization’s total close activity (MOC/LOC and other executions at the close). For MOC/LOC Tier 2, the Exchange currently charges $0.0005 per share for MOC orders and $0.0008 per share for LOC orders from any member organization in the prior three billing months executing (1) an ADV of MOC activity on the NYSE of at least 0.35% of NYSE CADV, (2) an ADV of total close activity (MOC/LOC and other executions at the close) on the NYSE of at least 0.525% of NYSE CADV, and (3) whose MOC activity comprised at least 35% of the member organization’s total close activity (MOC/ LOC and other executions at the close). The Exchange proposes a third tier for MOC and LOC orders that would charge $0.0008 per share for MOC orders and PO 00000 Frm 00147 Fmt 4703 Sfmt 4703 $0.0009 per share for LOC orders from any member organization executing in the current billing month (1) an ADV of MOC activity on the NYSE of at least 0.25% of NYSE (Tape A) CADV, (2) an ADV of the member organization’s total close activity (MOC/LOC and other executions at the close) on the NYSE of at least 0.35% of NYSE (Tape A) CADV, and (3) whose MOC activity comprised at least 35% of the member organization’s total close activity (MOC/ LOC and other executions at the close). The rates and requirements for MOC/ LOC Tiers 1 and 2 would remain the same. * * * * * The proposed change is not otherwise intended to address any other issues, and the Exchange is not aware of any problems that member organizations would have in complying with the proposed change. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,4 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,5 in particular, because it provides for the equitable allocation of reasonable dues, fees, and other charges among its members, issuers and other persons using its facilities and does not unfairly discriminate between customers, issuers, brokers or dealers. The Exchange believes that the proposed fee change for certain executions at the close are reasonable. The Exchange’s closing auction is a recognized industry benchmark,6 and member organizations receive a substantial benefit from the Exchange in obtaining high levels of executions at the Exchange’s closing price on a daily basis. The Exchange believes that offering a new fee tier for member organizations that execute in a current month an ADV of MOC activity on the NYSE of at least 0.25% of NYSE (Tape A) CADV, an ADV of the member organization’s total close activity (MOC/LOC and other executions at the close) on the NYSE of at least 0.35% of NYSE (Tape A) CADV, and whose MOC activity comprised at least 35% of the member organization’s total close activity (MOC/LOC and other executions at the close) is reasonable and not unfairly discriminatory because the proposed change would encourage greater marketable and other liquidity at 4 15 U.S.C. 78f(b). U.S.C. 78f(b)(4) & (5). 6 For example, the pricing and valuation of certain indices, funds, and derivative products require primary market prints. 5 15 E:\FR\FM\20FEN1.SGM 20FEN1

Agencies

[Federal Register Volume 83, Number 34 (Tuesday, February 20, 2018)]
[Notices]
[Pages 7279-7282]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-03306]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82697; File No. SR-BOX-2018-07]


Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change To Expand 
the Short Term Option Series Program

February 13, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on February 8, 2018, BOX Options Exchange LLC (``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend BOX Rule 100(a)(65) and IM-5050-6 to 
expand the Short Term Option Series Program (``Program'') to permit the 
listing and trading of options series with Monday expirations that are 
listed pursuant to the Program, including options on the SPDR S&P 500 
ETF Trust (``SPY''). The text of the proposed rule change is available 
from the principal office of the Exchange, at the Commission's Public 
Reference Room and also on the Exchange's internet website at https://boxoptions.com.

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

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

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

1. Purpose
    The Exchange proposes to amend Rule 100(a)(65) and IM-5050-6 to 
expand the Short Term Option Series Program (``Program'') to permit the 
listing and trading of options series with Monday expirations that are 
listed pursuant to the Program, including options on the SPDR S&P 500 
ETF Trust (``SPY''). This is a competitive filing that is based on a 
proposal recently submitted by Nasdaq PHLX LLC (``Phlx'') and approved 
by the Commission.\3\
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    \3\ See Securities Exchange Act Release No. 82611 (February 1, 
2018), 83 FR 5473 (February 7, 2018) (Order Approving SR-Phlx-2017-
103).
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    As set forth in Rule 100(a)(65), a Short Term Option Series is a 
series in an option class that is approved for listing and trading on 
the Exchange in which the series is opened for trading on any Tuesday, 
Wednesday, Thursday or Friday that is a business day and that expires 
on the Wednesday or Friday of the next business week. The Exchange is 
now proposing to amend Rule 100(a)(65) to permit the listing of options 
series that expire on Mondays. Specifically, the Exchange is proposing 
that it may open for trading series of options on any Monday that is a 
business day and that expires on the Monday of the next business week. 
The Exchange is also proposing to list Monday expirations series on 
Fridays that precede the expiration Monday by one business week plus 
one business day. Since Rule 100(a)(65) already provides for the 
listing of short term option series on Fridays, the Exchange is not 
modifying this provision to allow for Friday listing of Monday 
expiration series. However, the Exchange is amending Rule 100(a)(65) to 
clarify that, in the case of a series that is listed on a Friday and 
expires on a Monday, that series must be listed one business week and 
one business day prior to that expiration (i.e., two Fridays prior to 
expiration).
    As part of this proposal, the Exchange is also amending Rule 
100(a)(65) to address the expiration of Monday expiration series when 
the Monday is not a business day. In that case, the rule will provide 
that the series shall expire on the first business day immediately 
following that Monday. This procedure differs from the expiration date 
of Wednesday expiration series that are scheduled to expire on a 
holiday. In that case, the Wednesday expiration series shall expire on 
the first business day immediately prior to that Wednesday, e.g., 
Tuesday of that week.\4\ However, the Exchange believes that it is 
preferable to require Monday expiration series in this scenario to 
expire on the Tuesday of that week rather than the previous business 
day, e.g., the previous Friday, since the Tuesday is closer in time to 
the scheduled expiration date of the series than the previous Friday, 
and therefore may be more representative of anticipated market 
conditions. The Exchange also notes that Cboe Exchange, Inc. (``Cboe'') 
uses the same procedure for options on the S&P 500 index (``SPX'') with 
Monday expirations that listed pursuant to its Nonstandard Expirations 
Pilot Program and that are scheduled to expire on a holiday.\5\
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    \4\ See BOX Rule 100(a)(65).
    \5\ See CBOE Rule 24.9(e)(1) (``If the Exchange is not open for 
business on a respective Monday, the normally Monday expiring Weekly 
Expirations will expire on the following business day. If the 
Exchange is not open for business on a respective Wednesday or 
Friday, the normally Wednesday or Friday expiring Weekly Expirations 
will expire on the previous business day.'')
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    The Exchange also proposes to make corresponding changes to IM-
5050-6, which sets forth the requirements for SPY options that are 
listed pursuant to the Short Term Options Series Program, to permit 
Monday SPY expirations (``Monday SPY Expirations''). Accordingly, the 
Exchange proposes to amend IM-5050-6(d) to state that, with respect to 
Monday SPY Expirations, the Exchange may open for trading on any Friday 
or Monday that is a business day series of options on the SPY to expire 
on any Monday of the month that is a business day and is not a Monday 
in which Quarterly Options Series expire, provided that Monday SPY 
Expirations that are listed on a Friday must be listed at least one 
business week and one business day prior to the expiration. BOX may 
list up to five consecutive Monday SPY Expirations at one time; the 
Exchange may have no more than a total of five Monday SPY 
Expirations.\6\ The Exchange will also clarify that, as with Wednesday 
SPY Expirations,

[[Page 7280]]

Monday SPY Expirations will be subject to the provisions of this Rule.
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    \6\ Proposed IM-5050-6(a) states that the Exchange may have no 
more than a total of five Short Term Option Expiration Dates, 
however the Exchange notes that this does not include any Monday or 
Wednesday SPY Expirations as provided in paragraph (c) and proposed 
paragraph (d) of IM-5050-6.
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    The interval between strike prices for the proposed Monday SPY 
Expirations will be the same as those for the current Short Term Option 
Series for Wednesday and Friday SPY Expirations. Specifically, the 
Monday SPY Expirations will have a $0.50 strike interval minimum. As is 
the case with other options series listed pursuant to the Program, the 
Monday SPY Expiration series will be P.M.-settled.
    Currently, for each option class eligible for participation in the 
Program, the Exchange is limited to opening thirty (30) series for each 
expiration date for the specific class. The thirty (30) series 
restriction does not include series that are open by other securities 
exchanges under their respective short term option rules; the Exchange 
may list these additional series that are listed by other exchanges.\7\ 
This thirty (30) series restriction shall apply to Monday SPY 
Expiration series as well. In addition, the Exchange will be able to 
list series that are listed by other exchanges, assuming they file 
similar rules with the Commission to list SPY options expiring on 
Mondays.
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    \7\ See IM-5050-6(b).
---------------------------------------------------------------------------

    Finally, the Exchange is amending IM-5050-6(b)(2), which addresses 
the listing of Short Term Options Series that expire in the same week 
as monthly or quarterly options series. Currently, that rule states 
that no Short Term Option Series may expire in the same week in which 
monthly option series on the same class expire (with the exception of 
Wednesday SPY Expirations) or, in the case of Quarterly Options Series, 
on an expiration that coincides with an expiration of Quarterly Option 
Series on the same class. As with Wednesday SPY Expirations, the 
Exchange is proposing to permit Monday SPY Expirations to expire in the 
same week as monthly options series on the same class. The Exchange 
believes that it is reasonable to extend this exemption to Monday SPY 
Expirations because Monday SPY Expirations and standard monthly options 
will not expire on the same trading day, as standard monthly options 
expire on Fridays. Additionally, the Exchange believes that not listing 
Monday SPY Expirations for one week every month because there was a 
monthly SPY expiration on the Friday of that week would create investor 
confusion.
    Relatedly, BOX is also amending IM-5050-6(b)(2) to clarify that 
Monday and Wednesday SPY Expirations may expire in the same week as 
monthly option series in the same class expire, but that no Short Term 
Option Series may expire on the same day as an expiration of Quarterly 
Option Series on the same class. This change will make that provision 
more consistent with the existing language in IM-5050-6 that prohibits 
Wednesday SPY Expirations from expiring on a Wednesday in which 
Quarterly Options Series expire.
    The Exchange does not believe that any market disruptions will be 
encountered with the introduction of P.M.-settled Monday expirations. 
The Exchange has the necessary capacity and surveillance programs in 
place to support and properly monitor trading in the proposed Monday 
expiration series, including Monday SPY Expirations. The Exchange 
currently trades P.M.-settled Short Term Option Series that expire 
almost every Wednesday and Friday, which provide market participants a 
tool to hedge special events and to reduce the premium cost of buying 
protection. The Exchange notes that it has been listing Wednesday 
expirations pursuant to Rule 100(a)(65) and IM-5050-6 since 2016.\8\ 
With the exception of Monday expiration series that are scheduled to 
expire on a holiday, the Exchange does not believe that there are any 
material differences between Monday expirations and Wednesday or Friday 
expirations for Short Term Option Series.
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release No. 78668 (August 24, 
2016), 81 FR 59696 (August 30, 2016) (SR-BOX-2016-28).
---------------------------------------------------------------------------

    The Exchange seeks to introduce Monday expirations to, among other 
things, expand hedging tools available to market participants and to 
continue the reduction of the premium cost of buying protection. The 
Exchange believes that Monday expirations, similar to Wednesday and 
Friday expirations, will allow market participants to purchase an 
option based on their timing as needed and allow them to tailor their 
investment and hedging needs more effectively.
    While other exchanges do not currently list Monday SPY Expirations, 
the Exchange notes that other exchanges currently permit Monday 
expirations for other options. For example, Cboe lists options on the 
SPX with a Monday expiration as part of its Nonstandard Expirations 
Pilot Program.\9\
---------------------------------------------------------------------------

    \9\ See CBOE Rule 24.9(e)(1) (``The Exchange may open for 
trading Weekly Expirations on any broad-based index eligible for 
standard options trading to expire on any Monday, Wednesday, or 
Friday (other than the third Friday-of-the month or days that 
coincide with an EOM expiration.'').
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Securities Exchange Act of 1934 
(the ``Act''),\10\ in general, and Section 6(b)(5) of the Act,\11\ in 
particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general to protect investors and the 
public interest.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In particular, the Exchange believes the Short Term Option Series 
Program has been successful to date and that Monday expirations, 
including Monday SPY Expirations, simply expand the ability of 
investors to hedge risk against market movements stemming from economic 
releases or market events that occur throughout the month in the same 
way that the Short Term Option Series Program has expanded the 
landscape of hedging. Similarly, the Exchange believes Monday 
expirations, including Monday SPY Expirations, should create greater 
trading and hedging opportunities and flexibility, and will provide 
customers with the ability to tailor their investment objectives more 
effectively. While other exchanges do not currently list Monday SPY 
Expirations, the Exchange notes that Cboe currently permits Monday 
expirations for other options with a weekly expiration, such as options 
on the SPX.
    With the exception of Monday expiration series that are scheduled 
to expire on a holiday, the Exchange does not believe that there are 
any material differences between Monday expirations, including Monday 
SPY expirations, and Wednesday or Friday expirations, including 
Wednesday and Friday SPY Expirations, for Short Term Option Series. The 
Exchange notes that it has been listing Wednesday expirations pursuant 
to Rule 100(a)(65) and IM-5050-6 since 2016. The Exchange believes that 
it is consistent with the Act to treat Monday expiration series that 
expire on a holiday differently than Wednesday or Friday expiration 
series, since the proposed treatment for Monday expiration series will 
result in an expiration date that is closer in time to the scheduled 
expiration date of the series, and therefore may be more representative 
of anticipated market conditions. The Exchange also notes that Cboe 
uses the same procedure for SPX options with

[[Page 7281]]

Monday expirations that are listed pursuant to its Nonstandard 
Expiration Pilot Program and that are scheduled to expire on a holiday.
    Given the similarities between Monday SPY Expiration series and 
Wednesday and Friday SPY Expiration series, the Exchange believes that 
applying the provisions in IM-5050-6 that currently apply to Wednesday 
SPY Expirations to Monday SPY Expirations is justified. For example, 
the Exchange believes that allowing Monday SPY Expirations and monthly 
SPY expirations in the same week will benefit investors and minimize 
investor confusion by providing Monday SPY Expirations in a continuous 
and uniform manner. The Exchange also believes that is appropriate to 
amend IM-5050-6(b)(2) to clarify that no Short Term Option Series may 
expire on the same day as an expiration of Quarterly Option Series on 
the same class. This change will make that provision more consistent 
with the existing language in IM-5050-6 that prohibits Wednesday SPY 
Expirations from expiring on a Wednesday in which Quarterly Options 
Series expire.
    Finally, the Exchange represents that it has an adequate 
surveillance program in place to detect manipulative trading in Monday 
expirations, including Monday SPY Expirations, in the same way that it 
monitors trading in the current Short Term Option Series. The Exchange 
also represents that it has the necessary systems capacity to support 
the new options series.

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. In this regard and as indicated 
above, the Exchange notes that the rule change is being proposed as a 
competitive response to a filing submitted by Phlx that was recently 
approved by the Commission.\12\ The Exchange notes that having Monday 
expirations is not a novel proposal, as Cboe currently lists and trades 
short-term SPX options with a Monday expiration. The Exchange does not 
believe the proposal will impose any burden on intra-market 
competition, as all market participants will be treated in the same 
manner under this proposal. Additionally, the Exchange does not believe 
the proposal will impose any burden on inter-market competition, as 
nothing prevents the other options exchanges from proposing similar 
rules to list and trade short-term options series with Monday 
expirations.
---------------------------------------------------------------------------

    \12\ See supra note 3.
---------------------------------------------------------------------------

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

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

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\13\ and Rule 19b-4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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 intention 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.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days from the date of filing. However, Rule 
19b-4(f)(6)(iii)\15\ permits the Commission to designate a shorter time 
if such action is consistent with the protection of investors and the 
public interest. The Exchange has asked the Commission to waive the 30-
day operative delay so that the proposal may become operative 
immediately upon filing. The Commission notes that it recently approved 
Phlx's substantially similar proposal to list and trade Monday SPY 
Expirations.\16\ The Exchange has stated that waiver of the operative 
delay will allow the Exchange to list and trade Monday SPY Expirations 
as soon as possible, and therefore, promote competition among the 
option exchanges. For these reasons, the Commission believes that the 
proposed rule change presents no novel issues and that waiver of the 
30-day operative delay is consistent with the protection of investors 
and the public interest, and will allow the Exchange to remain 
competitive with other exchanges. Therefore, the Commission hereby 
waives the 30-day operative delay and designates the proposal effective 
upon filing.\17\ At any time within 60 days of the filing of the 
proposed rule change, the Commission summarily may temporarily suspend 
such rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act. If 
the Commission takes such action, the Commission shall institute 
proceedings to determine whether the proposed rule should be approved 
or disapproved.
---------------------------------------------------------------------------

    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ See supra note 3.
    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

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 [email protected]. Please include 
File Number SR-BOX-2018-07 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-2018-07. 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 website (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 website 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

[[Page 7282]]

inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BOX-2018-07 and should be 
submitted on or before March 9, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-03306 Filed 2-16-18; 8:45 am]
 BILLING CODE 8011-01-P
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