Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend Chapter V, Section 20 (Obvious and Catastrophic Errors) of the Rules of the Boston Options Exchange Group, LLC (“BOX”) to amend the definition of theoretical price. 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
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.
The Exchange is proposing a change to Chapter V, Section 20 (Obvious and Catastrophic Errors). An obvious error occurs when the execution price of a transaction is above or below the Theoretical Price for the series by a specified amount. The Exchange recently submitted an immediately effective rule change to amend the definition of Theoretical Price.
The rule change proposed in BX–2011–086 was immediately effective upon filing, but not operative for 30 days. As such, it is not yet operative. The goal of the rule change in BX–2011–086 was to improve the BOX process for addressing potentially erroneous trades to the benefit of all BOX market participants. While proposing the rule change, BOX discussed BX–2011–086 with several BOX Options Participants, and has continued these discussions following the effective date of the proposal. Based on these discussions with its Participants, BOX, after considering the potential impact of the change on BOX market participants and the liquidity on BOX, believes there is sufficient reason to reverse the rule change proposed in BX–2011–086. In addition, BOX will continue analyzing potential refinements to the BOX process for addressing potentially erroneous trades.
As such, the Exchange is proposing to amend the definition of Theoretical Price so that when the series is traded on at least one other options exchange, the Theoretical Price will be the “National Best Bid with respect to an erroneous sell transaction, and National Best Offer with respect to an erroneous buy transaction, just prior to the trade in question.” Alternatively, if there are no quotes for comparison, the Theoretical Price will continue to be determined by the MRC. This proposed rule change would reverse the effective rule change identified in note 1 [sic] and amend this provision of the BOX Rules so that the Theoretical Price continues to be the National Best Bid or Offer.
This proposed rule change is designed to provide the personnel of the MRC (
Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5)
The Exchange believes that using the NBBO as the Theoretical Price will maintain an objective approach in determining obvious errors that is consistent with other options exchanges. The Exchange believes that continuing to use an objective standard when making adjustment decisions would benefit investors and market participants that are members of multiple exchanges participating in a national market system. The Exchange, after considering the potential impact of the rule change proposed in BX–2011–086 on BOX market participants and the liquidity on BOX, believes continuing to use its current process for evaluating potentially erroneous trades is appropriate for BOX. As such, the Exchange believes that its process for rendering and reviewing trade adjustment determinations is consistent with the Act, and with the maintenance of a fair and orderly market and the protection of investors and the public interest.
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 has neither solicited nor received comments on the proposed rule change.
Because the proposed rule change: (i) Does not significantly affect the protection of investors or the public interest; (ii) does not impose any significant burden on competition; and (iii) does not become operative for 30 days after the date of the filing, 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
A proposed rule change filed under 19b–4(f)(6) normally does not become operative prior to 30 days after the date of filing. However, Rule 19b–4(f)(6)(iii)
The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest, because such waiver would allow the Exchange to immediately revert back to the definition of “Theoretical Price” that was in place prior to the recent proposed rule change, BX–2011–086,
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.
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090.
All submissions should refer to File Number SR–BX–2012–006 and should be submitted on or before February 23, 2012.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.