81 FR 43325 - Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 7260 by Extending the Penny Pilot Program Through December 31, 2016

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 127 (July 1, 2016)

[Federal Register Volume 81, Number 127 (Friday, July 1, 2016)]
[Notices]
[Pages 43325-43326]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-15712]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78172; File No. SR-BOX-2016-24]


Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend Rule 7260 by Extending the Penny Pilot Program Through December 
31, 2016

June 28, 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 June 13, 2016, BOX Options Exchange LLC (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 the self-regulatory organization. The Commission 
is publishing this notice to solicit comments on the proposed rule 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 Rule 7260 by extending the Penny 
Pilot Program through December 31, 2016. The text of the proposed rule 
change is available from the principal office of the Exchange, at the 
Commission's Public Reference Room and also on the Exchange's Internet 
Web site at http://boxexchange.com.

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

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

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

1. Purpose
    The Exchange proposes to extend the effective time period of the 
Penny Pilot Program that is currently scheduled to expire on June 30, 
2016, until December 31, 2016.\3\ The Penny Pilot Program permits 
certain classes to be quoted in penny increments. The minimum price 
variation for all classes included in the Penny Pilot Program, except 
for PowerShares QQQ Trust (``QQQQ'')[supreg], SPDR S&P 500 Exchange 
Traded Funds (``SPY''), and iShares Russell 2000 Index Funds (``IWM''), 
will continue to be $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 will continue to be quoted in $0.01 increments for all 
options series.
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    \3\ The Penny Pilot Program has been in effect on the Exchange 
since its inception in May 2012. See Securities Exchange Act Release 
Nos. 66871 (April 27, 2012), 77 FR 26323 (May 3, 2012) (File No. 10-
206, In the Matter of the Application of BOX Options Exchange LLC 
for Registration as a National Securities Exchange Findings, 
Opinion, and Order of the Commission), 67328 (June 29, 2012), 77 FR 
40123 (July 6, 2012) (SR-BOX-2012-007), 68425 (December 13, 2012), 
77 FR 75234 (December 19, 2013) (SR-BOX-2012-021), 69789 (June 18, 
2013), 78 FR 37854 (June 24, 2013) (SR-BOX-2013-31), 71056 (December 
12, 2013), 78 FR 76691 (December 18, 2013) (SR-BOX-2013-56), 72348 
(June 9, 2014), 79 FR 33976 (June 13, 2014) (SR-BOX-2014-17), 73822 
(December 11, 2014), 79 FR 75606 (December 18, 2014) (SR-BOX-2014-
29), and 75295 (June 25, 2015), 80 FR 37690 (July 1, 2015) (SR-BOX-
2015-23). The extension of the effective date and the revision of 
the date to replace issues that have been delisted are the only 
changes to the Penny Pilot Program being proposed at this time.
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    The Exchange may replace, on a semi-annual basis, any Pilot Program 
classes that have been delisted on the second trading day following 
July 1, 2016. The Exchange notes that the replacement classes will be 
selected based on trading activity for the six month period beginning 
December 1, 2015 and ending May 31, 2016 for the July 2016 
replacements. The Exchange will employ the same parameters to 
prospective replacement classes as approved and applicable under the 
Pilot Program, including excluding high-priced underlying securities. 
The Exchange will distribute a Regulatory Circular notifying 
Participants which replacement classes shall be included in the Penny 
Pilot Program.
    BOX is specifically authorized to act jointly with the other 
options exchanges participating in the Pilot Program in identifying any 
replacement class.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of section 6(b) of the Act,\4\ in general, and section 
6(b)(5) of the Act,\5\ 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 protect investors 
and the public interest.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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    In particular, the proposed rule change, which extends the Penny 
Pilot until December 31, 2016 and changes the dates for replacing Penny 
Pilot issues that were delisted to the second trading day following 
July 1, 2016, 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

[[Page 43326]]

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

    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

    The Exchange has filed the proposed rule change pursuant to section 
19(b)(3)(A)(iii) of the Act \6\ and Rule 19b-4(f)(6) thereunder.\7\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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    \6\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \7\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \8\ normally 
does not become operative prior to 30 days after the date of the 
filing.\9\ However, pursuant to Rule 19b-4(f)(6)(iii), the Commission 
may 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 believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because doing so will 
allow the Pilot Program to continue without interruption in a manner 
that is consistent with the Commission's prior approval of the 
extension and expansion of the Pilot Program and will allow the 
Exchange and the Commission additional time to analyze the impact of 
the Pilot Program.\10\ Accordingly, the Commission designates the 
proposed rule change as operative upon filing with the Commission.\11\
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    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this pre-filing requirement.
    \10\ See Securities Exchange Act Release No. 61061 (November 24, 
2009), 74 FR 62857 (December 1, 2009) (SR-NYSEArca-2009-44). See 
also supra note 3.
    \11\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of 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) of the Act to determine whether the proposed rule 
change should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-BOX-2016-24 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-BOX-2016-24. 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 20549-1090 on official business days between the hours 
of 10:00 a.m. and 3:00 p.m. Copies of the filing will also be available 
for inspection and copying at the 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-2016-24 and should be 
submitted on or before July 22, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-15712 Filed 6-30-16; 8:45 am]
BILLING CODE 8011-01-P