81 FR 45346 - Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing of Proposed Rule Change To Expand the Short Term Option Series Program To Allow Wednesday Expirations for SPY Options

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 134 (July 13, 2016)

[Federal Register Volume 81, Number 134 (Wednesday, July 13, 2016)]
[Notices]
[Pages 45346-45348]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-16484]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78243; File No. SR-BOX-2016-28]


Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing of Proposed Rule Change To Expand the Short Term Option 
Series Program To Allow Wednesday Expirations for SPY Options

July 7, 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 30, 2016, BOX Options Exchange LLC (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 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 IM-5050-6 to Rule 5050 to allow the 
listing and trading of options with Wednesday expirations. 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 expand the Short Term Option Series 
Program outlined in IM-5050-6 to Rule 5050 to allow the listing and 
trading of options with Wednesday expirations.
    Currently, under the Short Term Option Series Program, which was 
initiated in 2010,\3\ the Exchange may open for trading on any Thursday 
or Friday that is a business day series of options on that class that 
expire on each of the next five Fridays, provided that such Friday is 
not a Friday in which monthly options series or Quarterly Options 
Series expire (``Short Term Option Series''). The Exchange is now 
proposing to amend its rule to permit the listing of options expiring 
on Wednesdays. Specifically, BOX is proposing that it may open for 
trading on any Tuesday or Wednesday that is a business day, series of 
options on the SPDR S&P 500 ETF Trust (SPY) to expire on any Wednesday 
of the month that is a business day and is not a Wednesday in which 
Quarterly Options Series expire (``Wednesday SPY Expirations'').\4\ The 
proposed Wednesday SPY Expiration series will be similar to the current 
Short Term Option Series, with certain exceptions, as explained in 
greater detail below. The Exchange notes that having Wednesday 
expirations is not a novel proposal. Specifically, the Chicago Board 
Options Exchange, Incorporated (``CBOE'') recently received approval to 
list Wednesday expirations for broad-based indexes.\5\
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    \3\ See Securities Exchange Act Release No. 62505 (July 15, 
2010), 75 FR 42792 (July 22, 2010) (Notice of Filing and Immediate 
Effectiveness of SR-BX-2010-047).
    \4\ See Proposed IM-5050-6(c) to Rule 5050.
    \5\ See Securities Exchange Act Release No. 76909 (January 14, 
2016), 81 FR 3512 (January 21, 2016) (Order Approving SR-CBOE-2015-
106).
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    In regards to Wednesday SPY Expirations, the Exchange is proposing 
to remove the current restriction preventing BOX from listing Short 
Term Option Series that expire in the same week in which monthly option 
series in the same class expire. Specifically, the Exchange will be 
allowed to list Wednesday SPY Expirations in the same week in which 
monthly option series in SPY expire. The current restriction to 
prohibit the expiration of monthly and Short Term Option Series from 
expiring on the same trading day is reasonable to avoid investor 
confusion. This confusion will not apply with Wednesday SPY Expirations 
and standard monthly options because they will not expire on the same 
trading day, as standard monthly options do not expire on Wednesdays. 
Additionally, it would lead to investor confusion if Wednesday SPY 
Expirations were not listed for one week every month because there was 
a monthly SPY expiration on the Friday of that week.
    Under the proposed Wednesday SPY Expirations, BOX may list up to 
five consecutive Wednesday SPY Expirations at one time. The Exchange 
may have no more than a total of five Wednesday SPY Expirations listed. 
This is the same listing procedure as Short Term Option Series that 
expire on Fridays. The Exchange is also proposing to clarify that the 
five series limit in the current Short Term Option Series Program Rule 
will not include any Wednesday SPY Expirations.\6\ This means, under 
the proposal, the Exchange would be allowed to list five Short Term 
Option Series expirations for SPY expiring on Friday under the current 
rule and five Wednesday SPY Expirations. The interval between strike 
prices for the proposed Wednesday SPY Expirations will be the same as 
those for the current Short Term Option Series. Specifically, the 
Wednesday SPY

[[Page 45347]]

Expirations will have $0.50 strike intervals.
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    \6\ See proposed changes to IM-5050-6(a) to Rule 5050.
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    Currently, for each Short Term Option Expiration Date,\7\ 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; BOX may list these additional 
series that are listed by other exchanges.\8\ The thirty (30) series 
restriction shall apply to Wednesday 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 Wednesdays.
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    \7\ BOX may open for trading on any Thursday or Friday that is a 
business day series of options on that class that expire on each of 
the next five Fridays that are business days and are not Fridays in 
which monthly options series or Quarterly Options Series expire 
(``Short Term Option Expiration Dates''). See IM-5050-6(a).
    \8\ See IM-5050-6(b)(1) to Rule 5050.
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    As is the case with current Short Term Option Series, the Wednesday 
SPY Expiration series will be P.M.-settled. The Exchange does not 
believe that any market disruptions will be encountered with the 
introduction of P.M.-settled Wednesday SPY Expirations. The Exchange 
currently trades P.M.-settled Short Term Option Series that expire 
almost every Friday, which provide market participants a tool to hedge 
special events and to reduce the premium cost of buying protection. The 
Exchange seeks to introduce Wednesday SPY 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 Wednesday expirations, similar to Friday 
expirations, would 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.
    The Exchange is also amending the definition of Short Term Option 
Series to make clear that it includes Wednesday expirations. 
Specifically, the Exchange is amending the definition to expand Short 
Term Option Series to those listed on any Tuesday or Wednesday and that 
expire on the Wednesday of the next business week. If a Tuesday or 
Wednesday is not a business day, the series may be opened (or shall 
expire) on the first business day immediately prior to that Tuesday or 
Wednesday.
    The Exchange believes that the introduction of Wednesday SPY 
Expirations will provide investors with a flexible and valuable tool to 
manage risk exposure, minimize capital outlays, and be more responsive 
to the timing of events affecting the industry.
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''),\9\ in general, and Section 6(b)(5) of the Act,\10\ 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.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes the Short Term Option Series 
Program has been successful to date and that Wednesday 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 Wednesday SPY Expirations should create greater trading and 
hedging opportunities and flexibility, and provide customers with the 
ability to more closely tailor their investment objectives. The 
Exchange believes that allowing Wednesday SPY Expirations and monthly 
SPY expirations in the same week will benefit investors and minimize 
investor confusion by providing Wednesday SPY Expirations in a 
continuous and uniform manner.
    Finally, the Exchange represents that it has an adequate 
surveillance program in place to detect manipulative trading in 
Wednesday SPY Expirations in the same way 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. The Exchange notes that having 
Wednesday expirations is not a novel proposal.\11\ The Exchange does 
not believe the proposal will impose any burden on intramarket 
competition, as all market participants will be treated in the same 
manner as existing Short Term Option Series. Additionally, the Exchange 
does not believe the proposal will impose any burden on intermarket 
competition, as nothing prevents the other options exchanges from 
proposing similar rules to those that the Exchange is currently 
proposing.
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    \11\ See supra, note 5.
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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 Actio

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be 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-2016-28 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-2016-28. This file 
number should be included on the subject line if email is used. To help 
the

[[Page 45348]]

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 such filing will also be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BOX-2016-28 and should be 
submitted on or before August 3, 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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Brent J. Fields,
Secretary.
[FR Doc. 2016-16484 Filed 7-12-16; 8:45 am]
 BILLING CODE 8011-01-P