
[Federal Register Volume 79, Number 94 (Thursday, May 15, 2014)]
[Notices]
[Pages 27963-27965]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-11160]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72143; File No. SR-BX-2014-025]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Extend 
the Pilot Program Relating to the Elimination of SPY Position Limits

May 9, 2014.
    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 May 8, 2014, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``SEC'' or ``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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend for another fourteen (14) month 
time period the pilot program to eliminate position limits for options 
on the SPDR[supreg] S&P 500[supreg] exchange-traded fund (``SPY ETF'' 
or ``SPY''),\3\ which list and trade under the symbol SPY (``SPY Pilot 
Program'').
---------------------------------------------------------------------------

    \3\ ``SPDR[supreg],'' ``Standard & Poor's[supreg],'' 
``S&P[supreg],'' ``S&P 500[supreg],'' and ``Standard & Poor's 500'' 
are registered trademarks of Standard & Poor's Financial Services 
LLC. The SPY ETF represents ownership in the SPDR S&P 500 Trust, a 
unit investment trust that generally corresponds to the price and 
yield performance of the SPDR S&P 500 Index.
---------------------------------------------------------------------------

    The text of the proposed rule change is 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 the proposed rule change is to amend the 
Supplementary Material at the end of Chapter III, Section 7 (Position 
Limits) to extend the current pilot which expires on May 12, 2014 for 
an additional fourteen (14) month time period to July 12, 2015 
(``Extended Pilot''). This filing does not propose any substantive 
changes to the SPY Pilot Program. In proposing to extend the SPY Pilot 
Program, the Exchange reaffirms its consideration of several factors 
that supported the original proposal of the SPY Pilot Program, 
including (1) the availability of economically equivalent products and 
their respective position limits; (2) the liquidity of the option and 
the underlying security; (3) the market capitalization of the 
underlying security and the related index; (4) the reporting of large 
positions and requirements surrounding margin; and (5) the potential 
for market on close volatility.
    The Exchange submitted a report to the Commission on May 8, 2014, 
which report reflects, during the time period from January 2014 through 
April 2014, the trading of standardized SPY options with no position 
limits for [sic] consistent with option exchange provisions.\4\ The 
report is being prepared in the manner specified in BX's initial rule 
filing establishing the SPY Pilot Program.\5\
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 71231 (January 2, 
2014), 79 FR 1402 (January 8, 2014) (SR-FINRA-2013-55) (notice of 
filing and immediate effectiveness of proposed rule change having 
the effect of eliminating position limits on standardized options on 
SPY).
    \5\ See Securities Exchange Act Release No. 69179 (March 19, 
2013), 78 FR 17952 (March 25, 2013) (SR-BX-2013-024).
---------------------------------------------------------------------------

    As with the original proposal to establish the SPY Pilot Program, 
the Exchange represents that a SPY Pilot Report will be submitted 
within thirty (30) days of the end of the first twelve (12) month time 
period of the Extended Pilot and would analyze that period. The SPY 
Pilot Report will detail the size and different types of strategies 
employed with respect to positions established as a result of the 
elimination of position limits in SPY. In addition, the report will 
note whether any problems resulted due to the no limit approach and any 
other information that may be useful in evaluating the effectiveness of 
the Extended Pilot. The

[[Page 27964]]

SPY Pilot Report will compare the impact of the SPY Pilot Program, if 
any, on the volumes of SPY options and the volatility in the price of 
the underlying SPY shares, particularly at expiration during the 
Extended Pilot. In preparing the report the Exchange will utilize 
various data elements such as volume and open interest. In addition the 
Exchange will make available to Commission staff data elements relating 
to the effectiveness of the SPY Pilot Program.
    Conditional on the findings in the SPY Pilot Report, the Exchange 
will file with the Commission a proposal to extend the pilot program, 
adopt the pilot program on a permanent basis or terminate the pilot. If 
the SPY Pilot Program is not extended or adopted on a permanent basis 
by the expiration of the Extended Pilot, the position limits for SPY 
would revert to limits in effect at the commencement of the SPY Pilot 
Program.
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, 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).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change would be 
beneficial to market participants, including market makers, 
institutional investors and retail investors, by permitting them to 
establish greater positions when pursuing their investment goals and 
needs. The Exchange also believes that economically equivalent products 
should be treated in an equivalent manner so as to avoid regulatory 
arbitrage, especially with respect to position limits. Treating SPY and 
SPX options differently by virtue of imposing different position limits 
is inconsistent with the notion of promoting just and equitable 
principles of trade and removing impediments to perfect the mechanisms 
of a free and open market. At the same time, the Exchange believes that 
the elimination of position limits for SPY options would not increase 
market volatility or facilitate the ability to manipulate the market.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. In this regard and as indicated below, the Exchange notes that 
the rule change is being proposed as a competitive response to similar 
filings by other options exchanges. The Exchange believes this proposed 
rule change is necessary to permit fair competition among the options 
exchanges and to establish uniform position limits for a multiply 
listed options class.

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 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, it has become effective pursuant to 
Section 19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A).
    \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, along 
with a brief description and 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 requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \10\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\11\ 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 Exchange believes 
that waiver of the 30-day operative delay is consistent with the 
protection of investors and the public interest because it will permit 
the SPY Pilot Program to continue without interruption. The Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest. Therefore, the 
Commission hereby waives the 30-day operative delay and designates the 
proposal operative upon filing.\12\
---------------------------------------------------------------------------

    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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 under 
Section 19(b)(2)(B) of the Act \13\ to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-2014-025 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-2014-025. 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

[[Page 27965]]

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-2014-025 and should be 
submitted on or before June 5, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-11160 Filed 5-14-14; 8:45 am]
BILLING CODE 8011-01-P


