
[Federal Register Volume 80, Number 24 (Thursday, February 5, 2015)]
[Notices]
[Pages 6558-6563]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-02250]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74178; File No. SR-BOX-2015-06]


Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing of Proposed Rule Change To Amend Its Rules for the Listing 
and Trading on the Exchange of Options Settling to the RealVolTM SPY 
Index (``Index'')

January 30, 2015.
    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 January 21, 2015, 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 Rules 6010, 6040, 6090, and 10120 to 
allow for the listing and trading on the Exchange of options settling 
to the RealVolTM SPY Index (``Index''). 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 amend its rules to provide for the listing 
and trading on the Exchange of options settling to the 
RealVolTM SPY Index (``Index''). The Index measures the 
realized volatility of the SPDR[supreg] S&P 500[supreg] Exchange Traded 
Fund (ETF) (this security is known by its symbol ``SPY''). At 
settlement, the Index is based on the daily closing values of SPY, over 
the previous 21 trading days, as calculated by the RealVol Daily 
Formula, and promulgated by The VolX Group Corporation 
(``VolX[supreg]''). Options on the Index (proposed symbol ``VOLS'') 
will be P.M. cash-settled and will have

[[Page 6559]]

European-style exercise provisions. In addition to standard expiration 
contracts, Short Term Option (``STO'' or ``weekly'') Series \3\ and 
long-term option series \4\ in VOLS may also be traded.
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    \3\ After an option class has been approved for listing and 
trading on the Exchange, 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 the Friday of the following business week that 
is a business day. See IM-6090-2 to Rule 6090.
    \4\ See Rule 6090(b)(1). Long term options series have up to 180 
months to expiration.
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Index Design and Composition
    The calculation of the Index is based on the methodology developed 
by VolX, a company that develops propriety [sic] indices based on 
realized volatility of the underlying asset. The Exchange is only 
proposing to list options that settle to the Index at this time; 
however, the methodology can be used to create indices based on the 
realized volatility of any underlying asset. SPY, historically, has 
been the largest and most actively traded ETF in the United States as 
measured by its assets under management and the value of shares traded.
    The Index will be calculated and maintained by a third-party 
calculation agent acting on behalf of VolX. The Index measures the 
daily (i.e., close-to-close) realized volatility of SPY. The Index is 
based on a 21-trading-day rolling realized volatility of the daily 
closing price of the SPY. Realized volatility is the ``actual 
volatility,'' ``statistical volatility,'' or ``asset volatility'' that 
the underlying asset has displayed over a specific period. The term 
``realized volatility'' is very closely related to ``standard 
deviation.'' Realized volatility is a specific form of standard 
deviation. If one were to use daily returns of an underlying (instead 
of actual prices) and annualize the results, standard deviation becomes 
realized volatility. The Index uses a modified version of the standard 
deviation formula.
[GRAPHIC] [TIFF OMITTED] TN05FE15.000


Where:

 Vol = realized volatility
 n = number of trading days in a period
 Rt = continuously compounded daily returns as 
calculated by the formula:

[GRAPHIC] [TIFF OMITTED] TN05FE15.001


Where:

 Ln = natural logarithm
 Pt = Underlying Reference Price at time t
 Pt-1 = Underlying Reference Price at the time 
period immediately preceding time t

    Compared to the normal standard deviation formula, the standard 
deviation formula used to calculate the Index sets the mean return to 
zero in order to provide a measure of movement regardless of direction, 
instead of movement about a trend. Doing so makes hedging easier for 
options traders and corresponds to the formula used for variance swaps 
and volatility swaps in the over-the-counter market. In addition, the 
formula for the Index sets the annualization factor to a constant. A 
constant annualization value of 252 represents the number of trading 
days in a typical year in the U.S. Because of the vagaries of the 
calendar in any particular year and/or the holiday schedules in any 
particular country, the actual number of trading days may be slightly 
higher or lower than 252. However, it is preferable to have one 
approximate constant than to have a variety of exact values. ``Degrees 
of freedom'' is a term in statistics used to extrapolate from a sample 
of data to the entire dataset. Since the intent is to provide the exact 
realized volatility over a specific period and not to extrapolate that 
sample dataset to the entire history of trading, the formula sets the 
degrees of freedom to zero. Finally, the result is typically a value 
less than 1.00. The result is then multiplied by 100 in order to bring 
the values to a more intuitive ``dollars and cents'' construct. For 
example, the realized volatility of an equity index may be 0.20. Often, 
traders will quote this number as 20%, and the formula would 
disseminate the index value as 20.00.
    The SPDR[supreg] S&P 500[supreg] ETF is the largest and most 
actively traded ETF in the U.S.\5\ According to State Street Global 
Advisor, the Trustee of SPY, as of January 16, 2015 the total net 
assets of SPY were approximately $194.8 billion; the weighted average 
market capitalization of the portfolio components was approximately 
$129 billion; and the largest market capitalization was approximately 
$630 billion (Apple Inc., ticker: AAPL).\6\ For the three months ending 
January 16, 2015, the average daily volume in SPY shares was 125 
million, and the average value of shares traded was $25.3 billion.\7\ 
For the same period, the average daily volume in SPY options was 
approximately 2.7 million contracts.\8\
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    \5\ The SPDR[supreg] S&P 500[supreg] ETF holds up to 500 
securities listed on U.S. securities exchanges.
    \6\ See https://www.spdrs.com/product/fund.seam?ticker=SPY.
    \7\ Calculated using data from Yahoo as of January 16, 2015.
    \8\ Calculated using data from The Options Clearing Corp. as of 
January 16, 2015.
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Index Calculation and Maintenance

    As noted above, the Index will be maintained and calculated by a 
calculation agent acting on behalf of VolX. The level of the Index will 
reflect the current 21-day realized volatility of SPY. The Index will 
be updated on each trading day after the close of trading of SPY. If 
the current published value of SPY is not available, because of a 
market disruption event where the market cannot open and there is no 
closing price for SPY, for example, the Index will continue to be 
calculated and disseminated. The calculation of the Index will 
compensate for the missing day's returns by lowering the value of ``n'' 
in the formula by the number of days that there is no closing price for 
SPY.
    As mentioned above, the Index that VOLS will settle to is based 
only on daily closing values of SPY. However, a real-time version based 
on the current SPY price will also be calculated and disseminated 
during the trading day. The real-time version will generally be 
disseminated at least every 15 seconds to market data vendors during 
the trading day. The real-time version will provide an estimate of the 
Index at the close. The real-time version is calculated by taking the 
current day's closing price for SPY before the close of trading (day 
22) and weighting it by the proportion of time through the current 
trading day, then using the remaining weight for the first closing 
price of SPY (day 1). In essence, the first day of the

[[Page 6560]]

period (22 trading days prior to the current day) and the last day of 
the period (the current trading day) will have a weight of 100% in 
total, while the days in between will have a weight of 100% each. In 
this way, the 22 returns will be weighted as if there are only 21 
returns and the Index will, therefore, be updating throughout the day 
as the current SPY price changes. The Exchange notes that after the 
market close the real-time formula and the formula used to calculate 
the Index will have exactly the same value.
    Values of the Index will also be disseminated to market information 
vendors such as Bloomberg and ThomsonReuters [sic]. In the event the 
Index ceases to be maintained or calculated, the Exchange will not list 
any additional series for trading and will limit all transactions in 
such options to closing transactions only for the purpose of 
maintaining a fair and orderly market and protecting investors.
Exercise and Settlement Value
    Standard options on the Index will expire on the third Friday of 
each month.\9\ Trading in expiring options on the Index will normally 
cease at 4:15 p.m. (Eastern time) on the business day of expiration, 
or, in the case of an option contract expiring on a day that is not a 
business day, on the last business day before its expiration. The 
exercise and settlement value will be calculated based on the Index 
value at the close of the last business day of trading, which is 
ultimately based on the closing price of SPY on the last business day 
of trading, for its final input value. The exercise-settlement amount 
is equal to the difference between the settlement value and the 
exercise price of the option, multiplied by $100. Exercise will result 
in the delivery of cash on the business day following expiration.
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    \9\ Standard options expiring prior to February 1, 2015 will 
expire on the Saturday immediately following the third Friday of the 
expiration month of such option contract. See Securities Exchange 
Act Release No. 70488 (September 24, 2013), 78 FR 59998 (September 
30, 2013) (Notice of Filing SR-BOX-2013-45).
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    The following are certain value characteristics of the Index: (i) 
The initial index value was 12.91 on March 2, 1993 (21 trading days 
after the SPY security was listed for trading); (ii) the index value on 
September 30, 2014 was 9.16; (iii) the lowest index value since 
inception was 5.14 and occurred on August 31, 1995; and (iv) the 
highest index value since inception was 91.25 and occurred on October 
28, 2008.\10\
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    \10\ Calculated using data from Yahoo.com as of October 1, 2014.
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Contract Specifications
    The contract specifications for VOLS are set forth in Exhibit 3-1. 
The Index is a broad-based index, as defined in Rule 6010(j). VOLS are 
European-style and P.M. cash-settled. The Exchange's standard trading 
hours for index options (9:30 a.m. to 4:15 p.m., Eastern time) will 
apply to VOLS. With respect to margin requirements \11\ for VOLS, the 
Exchange proposes to apply margin requirements for the purchase and 
sale of VOLS that are identical to the margin requirements adopted by 
the CBOE for the CBOE Volatility Index. In order to avoid confusion, 
the Exchange is proposing to amend Rule 10120 to make clear that the 
margin requirements for VOLS will be identical to those adopted by CBOE 
for the CBOE Volatility Index.\12\
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    \11\ Options Participants and associated persons are bound by 
the initial and maintenance margin requirements of either the 
Chicago Board Options Exchange, Incorporated (``CBOE'') or the New 
York Stock Exchange. See Rule 10120.
    \12\ See CBOE Rule 12.3.
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    The trading of VOLS will be subject to the trading halt procedures 
applicable to other index options traded on the Exchange.\13\ VOLS will 
be quoted and traded in U.S. dollars.\14\ Accordingly, all Exchange and 
Options Clearing Corporation members shall be able to accommodate 
trading, clearance, and settlement of VOLS without alteration.
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    \13\ See Rule 6080(c).
    \14\ See Rule 6090(a)(1).
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    The Exchange is proposing to establish a strike price setting 
regime for VOLS similar to what is permitted for CBOE Volatility Index 
(``VIX'') options.\15\ The Exchange proposes to permit $0.50 strike 
price (or greater) intervals for VOLS where the strike price is less 
than $75. Fifty cent strike price (or greater) intervals are currently 
permitted for VIX options where the strike price is less than $75.\16\ 
Next, the Exchange proposes to permit $1 strike price (or greater) 
intervals for VOLS where the strike price is $200 or less. The Exchange 
notes that $1 strike price (or greater) intervals where the strike 
price is $200 or less are permitted for VIX options pursuant to CBOE 
Rule 24.9.01(l). Finally, the Exchange proposes to permit $5 strike 
price (or greater) intervals for VOLS when the strike price is greater 
than $200. The Exchange notes that $5 strike price (or greater) 
intervals where the strike price is more than $200 are permitted for 
VIX options pursuant to CBOE Rule 24.9.01(l). The Exchange believes 
that these more granular strike price intervals will provide investors 
with greater flexibility by allowing them to establish positions that 
are better tailored to meet their investment objectives.
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    \15\ See proposed Rule 6090(c)(7) permitting the described 
strike price interval setting regime.
    \16\ VIX options are used to calculate the CBOE VVIX index (aka 
``VIX of VIX'' index). Because VIX options are used to calculate a 
volatility index, $0.50 strike price intervals are permitted for VIX 
options where the strike price is less than $75. See CBOE Rule 
24.9.12.
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    Currently, when new series of index options with a new expiration 
date are opened for trading, or when additional series of index options 
in an existing expiration date are opened for trading as the current 
value of the underlying index moves substantially from the exercise 
prices of series already opened, the exercise prices of such new or 
additional series shall be reasonably related to the current value of 
the underlying index at the time such series are first opened for 
trading.\17\ The Exchange, however, proposes to eliminate this range 
limitation that will limit the number of strikes that may be listed in 
VOLS. The Exchange's proposal to set minimum strike price intervals 
without a range limitation is identical to strike price intervals 
adopted by CBOE for the VIX.\18\
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    \17\ See Rule 6090(c)(3). The term ``reasonably related to the 
current index value of the underlying index'' means that the 
exercise price is within thirty percent (30%) of the current index 
value, as defined in Rule 6090(c)(4).
    \18\ See Securities Exchange Act Release No. 63155 (October 21, 
2010), 75 FR 66402 (October 28, 2010) (SR-CBOE-2010-096).
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    In accordance with Rule 7050, The Exchange also proposes to adopt 
minimum trading increments for options on the Index to be $0.05 for 
series trading below $3, and $0.10 for series trading at or above $3.
    The Exchange's rules provide that index option contracts may expire 
at three (3)-month intervals or in consecutive months.\19\ The Exchange 
may list up to six (6) expiration months at any one time, but will not 
list index options that expire more than twelve (12) months out. The 
Exchange proposes to list VOLS in the six consecutive expiration 
months. For example, six monthly expirations from January through June 
may be listed.\20\
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    \19\ See Rule 6090(a)(3).
    \20\ Id.
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    The Exchange proposes that there shall be no position or exercise 
limits for VOLS. As noted above, the Index will settle using published 
quotes from its corresponding security, specifically SPY. Given that 
there are currently no position limits for SPY options,\21\ the 
Exchange believes it is appropriate for

[[Page 6561]]

there to be no position or exercise limits for VOLS. Because the size 
of the market underlying SPY is so large, the Exchange believes that 
this should dispel any concerns regarding market manipulation. By 
extension, the Exchange believes that the same reasoning applies to 
VOLS since the value of VOLS is derived from the realized volatility of 
SPY. The Exchange notes that options on CBOE's Volatility Index are 
also not subject to any position or exercise limits.\22\
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    \21\ See Securities Exchange Act Release No. 67936 (September 
27, 2012), 77 FR 60491 (October 3, 2012) (Notice of Filing and 
Immediate Effectiveness of SR-BOX-2012-013).
    \22\ See Securities Exchange Act Release No. 54019 (June 20, 
2006), 71 FR 36569 (June 27, 2006) (SR-CBOE-2006-55). Additionally, 
the Exchange notes there are currently a number of actively-traded 
broad-based index options, i.e., DJX, NDX, SPX, that are also not 
subject to any position or exercise limits.
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    The trading of VOLS shall be subject to the same rules that 
presently govern the trading of Exchange index options, including sales 
practice rules, and trading rules. As mentioned above, the margin 
requirements shall be the same as those adopted by CBOE for the CBOE 
Volatility Index. Further, pursuant to IM-6090-2 to Rule 6090, the 
Exchange may also list Short Term Option Series on the Index. After an 
option class has been approved for listing and trading on the Exchange, 
the Exchange may open Short Term Option Series for trading on any 
Thursday or Friday that is a business day and 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. The 
interval between strike prices on Short Term Options Series may be 
$0.50 or greater where the strike price is less than $75, and $1 or 
greater where the strike price is between $75 and $150.\23\ During the 
month prior to expiration of an index option class that is selected for 
the Short Term Option Series Program, the strike price intervals for 
the related non-Short Term Option shall be the same as the strike price 
intervals for the Short Term Option.
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    \23\ See IM-6090-2(b)(5) to Rule 6090.
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    Section 4000 of the Exchange's rules is designed to protect public 
customer trading and shall apply to trading in VOLS. Specifically, 
Rules 4020(a) and (b) prohibit Order Flow Providers (``OFP'') \24\ from 
accepting a Public Customer order to purchase or write an option, 
including VOLS, unless such customer's account has been approved in 
writing by a designated Options Principal of the OFP. Additionally, 
Rule 4040 regarding suitability is designed to ensure that options, 
including VOLS, are sold only to customers capable of evaluating and 
bearing the risks associated with trading in this instrument. Further, 
Rule 4050 permits OFPs to exercise discretionary power with respect to 
trading options, including VOLS, in a Public Customer's account only if 
the OFP has received prior written authorization from the customer and 
the account has been accepted in writing by a designated Options 
Principal. Finally, Rule 4030, Supervision of Accounts, Rule 4060, 
Confirmation to Public Customers, and Rule 4100, Delivery of Current 
Options Disclosure Documents and Prospectus, will also apply to trading 
in VOLS.
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    \24\ See Rule 100(a)(45). The terms ``Order Flow Provider'' or 
``OFP'' mean those Options Participants representing as agent 
Customer Orders on BOX and those non-Market Maker Participants 
conducting proprietary trading.
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Surveillance and Capacity
    The Exchange has an adequate surveillance program in place for VOLS 
and intends to apply those same program procedures that it applies to 
the Exchange's other options products. Index products and their 
respective symbols are integrated into the Exchange's existing 
surveillance system architecture and are thus subject to the relevant 
surveillance processes. This is true for both surveillance system 
processing and manual processes that support the Exchange's 
surveillance program. Additionally, the Exchange is also a member of 
the Intermarket Surveillance Group (``ISG'') under the Intermarket 
Surveillance Group Agreement dated June 20, 1994. The members of the 
ISG include all of the U.S. registered stock and options markets: NYSE 
MKT LLC, NYSE Arca, Inc., BATS Exchange, Inc., NASDAQ OMX BX, Chicago 
Board Options Exchange, Inc., Chicago Stock Exchange, Inc., Financial 
Industry Regulatory Authority, NASDAQ Stock Market LLC, National Stock 
Exchange, Inc., the New York Stock Exchange LLC, and NASDAQ OMX PHLX, 
Inc. The ISG members work together to coordinate surveillance and 
investigative information sharing in the stock and options markets.
    Per the proposed rule change, the Index will be settled using a 
calculation based on the daily closing prices of the SPY. The Exchange 
believes that manipulating the settlement value will be difficult based 
on the size of the market for SPY shares. The vast liquidity of SPY 
shares ensures a multitude of market participants at any given 
time.\25\ Due to the high level of participation among market makers 
that can enter quotes in SPY shares, the Exchange believes it would be 
very difficult for a single participant to alter the closing price in 
any significant way without exposing the would-be manipulator to 
regulatory scrutiny and financial costs. In addition, since the Index 
is based on 21 trading days of data, any manipulation in a single 
closing value of SPY should have a muted impact on the Index.
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    \25\ SPY share volume as of June 20, 2013 was approximately 137 
million shares per day. See supra note 5 [sic].
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    The Exchange reiterates that it is unlikely that the Index 
settlement value could be manipulated. Nonetheless, the Exchange, in 
its normal course of surveillance, will monitor for any potential 
manipulation of the Index settlement value according to the Exchange's 
current procedures.
    The Exchange believes that the surveillance procedures currently in 
place will allow the Exchange to adequately surveil for any potential 
manipulation in the trading of VOLS.
    The Exchange represents that it has the necessary system capacity 
to support additional quotations and messages that will result from the 
listing and trading of VOLS.
Pilot Program
    As proposed, the proposal would become effective on a pilot program 
basis for a period of twelve months. If the Exchange were to propose an 
extension of the program or should the Exchange propose to make the 
program permanent, then the Exchange would submit a filing proposing 
such amendments to the program. The Exchange notes that any positions 
established under the pilot would not be impacted by the expiration of 
the pilot. For example, a position in a VOLS series that expires beyond 
the conclusion of the pilot period could be established during the 12-
month pilot. If the pilot program were not extended, then the position 
could continue to exist. However, the Exchange notes that any further 
trading in the series would be restricted to transactions where at 
least one side of the trade is a closing transaction.
    The Exchange proposes to submit a pilot program report to the 
Securities and Exchange Commission (the ``Commission'') two months 
prior to the expiration date of the Pilot Program (the ``annual 
report''). The annual report would contain an analysis of volume, open 
interest, and trading patterns. The analysis would examine trading in 
the proposed option product as well as trading in SPY. In addition, for 
series that exceed certain minimum open interest parameters, the annual 
report would provide analysis of index price volatility and SPY trading 
activity. In addition to the annual report, the

[[Page 6562]]

Exchange would provide the Commission with periodic interim reports 
while the pilot is in effect that would contain some, but not all, of 
the information contained in the annual report. The annual report would 
be provided to the Commission on a confidential basis.
    The annual report would contain the following volume and open 
interest data:
    (1) Monthly volume aggregated for all trades;
    (2) monthly volume aggregated by expiration date;
    (3) monthly volume for each individual series;
    (4) month-end open interest aggregated for all series;
    (5) month-end open interest for all series aggregated by expiration 
date; and
    (6) month-end open interest for each individual series.
    In addition to the annual report, the Exchange would provide the 
Commission with interim reports of the information listed in Items (1) 
through (6) above periodically as required by the Commission while the 
pilot is in effect. These interim reports would also be provided on a 
confidential basis.
    In addition, the annual report would contain the following analysis 
of trading patterns in VOLS series in the pilot:
    (1) A time series analysis of open interest; and
    (2) an analysis of the distribution of trade sizes.
    Also, for series that exceed certain minimum parameters, the annual 
report would contain the following analysis related to index price 
changes and SPY trading volume at the close on expiration Fridays:
    (1) A comparison of index price changes at the close of trading on 
a given expiration Friday with comparable price changes from a control 
sample. The data would include a calculation of percentage price 
changes for various time intervals and compare that information to the 
respective control sample. Raw percentage price change data as well as 
percentage price change data normalized for prevailing market 
volatility, as measured by the Chicago Board Options Exchange, 
Incorporated (``CBOE'') Volatility Index (VIX), would be provided; and
    (2) a calculation of trading volume for a sample set of SPY 
representing an upper limit on trading that could be attributable to 
expiring in-the-money series. The data would include a comparison of 
the calculated volume for SPY in the sample set to the average daily 
trading volumes of SPY over a sample period.
    The minimum open interest parameters, control sample, time 
intervals, and sample periods would be determined by the Exchange and 
the Commission.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \26\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \27\ in particular, in that it is designed to 
promote just and equitable principles of trade, 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 in that it will permit options trading in the 
Index pursuant to rules designed to prevent fraudulent and manipulative 
acts and practices and promote just and equitable principles of trade. 
The Exchange believes the proposed rule change will further the 
Exchange's goal of introducing new and innovative products to the 
marketplace. The Exchange believes that listing VOLS will provide an 
opportunity for investors to hedge, or speculate on, the market risk 
associated with changes in realized volatility.
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    \26\ 15 U.S.C. 78f(b).
    \27\ 15 U.S.C. 78f(b)(5).
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    Volatility-focused products have become more prominent over the 
past few years, and in a number of different formats and types, 
including ETFs, exchange-traded notes, exchange-traded options, and 
exchange-traded futures. Such products offer investors the opportunity 
to manage their volatility risks associated with an underlying asset 
class. Currently, most of the products focus on underlying equity 
indexes or equity-based portfolios. The Exchange proposes to introduce 
a cash-settled options contract on a new volatility index, which 
focuses on the volatility of the daily closing price of the SPY. SPY is 
the largest and most liquid ETF in the United States, and the most 
actively traded equity option product. The Exchange believes that 
because the Index is derived from published SPY prices, and given the 
immense liquidity found in the individual portfolio components of SPY, 
the concern that the Index will be subject to market manipulation is 
greatly reduced. In addition, because the Index comprises 21 days of 
SPY closing prices, the potential for manipulation is reduced even 
further. Therefore, the Exchange believes that the proposed rule change 
to list options on the Index is appropriate.
    The Exchange further notes that Rules that apply to the trading of 
other index options currently traded on the Exchange would also apply 
to the trading of VOLS. Additionally, the trading of VOLS would be 
subject to, among others, Exchange Rules governing margin requirements 
and trading halt procedures.
    Finally, the Exchange represents that it has an adequate 
surveillance program in place to detect manipulative trading in VOLS. 
The Exchange also represents that it has the necessary systems capacity 
to support the new options series. And as stated in the filing, the 
Exchange has rules in place designed to protect public customer 
trading.

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 the 
proposed rule change will facilitate the listing and trading of a novel 
index option product that will enhance competition among market 
participants, to the benefit of investors and the marketplace.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate 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:

[[Page 6563]]

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-BOX-2015-06 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-2015-06. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of 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-2015-06 and should be 
submitted on or before February 26, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-02250 Filed 2-4-15; 8:45 am]
BILLING CODE 8011-01-P


