[Federal Register Volume 75, Number 89 (Monday, May 10, 2010)]
[Notices]
[Pages 25899-25901]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-10956]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62023; File No. SR-CBOE-2010-039]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Trade Options on S&P 500 Annual Dividend Index With an
Applied Scaling Factor of 1
May 3, 2010.
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 April 28, 2010, the Chicago Board Options Exchange, Incorporated
(``Exchange'' or ``CBOE'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described
[[Page 25900]]
in Items I and II below, which Items have been prepared by the
Exchange. The Exchange filed the proposal as a ``non-controversial''
proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act
\3\ and Rule 19b-4(f)(6) thereunder.\4\ The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
CBOE proposes to trade options on the S&P 500 Annual Dividend Index
with an applied scaling factor of 1. The Exchange is not proposing any
rule text changes. The rule proposal is available on the Exchange's Web
site (http://www.cboe.org/legal), at the Exchange's Office of the
Secretary 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 Securities and Exchange Commission previously approved CBOE's
proposed rule change, as modified Amendment No. 1, to list and trade
cash-settled options that overlie the S&P 500 Dividend Index.\5\ In the
filing, the Exchange stated that the S&P 500 Dividend Index is reported
in absolute numbers (e.g., 3, 5, 7) and that the Exchange would apply a
scaling factor of 10 to the underlying index. The Exchange proposed the
use of the scaling factor in the original filing because it was
premised on the S&P 500 Dividend Index representing the accumulated ex-
dividend amounts of all S&P 500 Index components over a specified
quarterly accrual period. The use of a scaling factor was intended to
increase the size of the underlying index value because it was expected
to be a relatively low value.
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\5\ See Securities Exchange Act Release No. 61136 (December 10,
2009), 74 FR 66711 (December 16, 2009) (SR-CBOE-2009-022). The S&P
500 Dividend Index represents the accumulated ex-dividend amounts of
all S&P 500 Index component securities over a specified accrual
period. Each day Standard & Poor's calculates the aggregate daily
dividend totals for the S&P 500 Index component securities, which
are summed over any given calendar quarter and are the basis of the
S&P 500 Dividend index. On any given day, the index dividend is
calculated as the total dividend value for all constituents of the
S&P 500 Index divided by the S&P 500 Index divisor. The total
dividend value is calculated as the sum of dividends per share
multiplied by the shares outstanding for all constituents of the S&P
500 Index that are trading ``ex-dividend'' on that day.
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In Amendment No. 1, the Exchange proposed to permit varying terms
for the accrual period (e.g., quarterly, semi-annually, annually). To
date, the Exchange has only designated a quarterly accrual period for
S&P 500 Dividend Index options. Beginning May 25, 2010, the Exchange
plans to list options on the S&P 500 Annual Dividend Index, an index
with a designated annual accrual period.\6\ The Exchange plans to list
options with a single expiration for each year (e.g., Dec. 2010, Dec.
2011).\7\ In the recent past, the final index value (at expiration) has
ranged from the low 20s up to the upper 20s. The final value on
December 18, 2009 was 22.81. Because the duration of an annual accrual
period results in the underlying index value being higher than for
lesser duration accrual periods, the Exchange proposes to apply a
scaling factor of 1 to the underlying annual index. During each
business day, CBOE will disseminate the underlying S&P 500 Annual
Dividend Index value with the applied scaling factor of 1 through the
Options Price Reporting Authority (``OPRA'') and/or one or more major
market data vendors.
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\6\ The Exchange will assign separate trading symbols to options
overlying an index with a designated annual accrual period to
distinguish them from options overlying an index with a designated
quarterly accrual period.
\7\ Standard & Poor's has created and now calculates the S&P 500
Annual Dividend Index.
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The use of a scaling factor of 10 was described in the purpose
section of the filing and in the contract specifications that were
submitted as Exhibit 3; therefore, the Exchange is not proposing any
new or revised rule text to affect this change. Exhibit 3 presents
revised contract specifications for S&P 500 Annual Dividend Index
options.
2. Statutory Basis
The Exchange believes this rule proposal is consistent with the Act
and the rules and regulations under the Act applicable to a national
securities exchange and, in particular, the requirements of Section
6(b) of the Act.\8\ Specifically, the Exchange believes that the
proposed rule change is consistent with the Section 6(b)(5) Act \9\
requirements that the rules of an exchange be designed to promote just
and equitable principles of trade, to prevent fraudulent and
manipulative acts and, in general, to protect investors and the public
interest. In particular, the proposed rule change seeks to permit the
Exchange to apply a scaling factor of 1 to options on the S&P 500
Annual Dividend Index, an index with a designated annual accrual
period, since the duration of an annual accrual period results in the
underlying index value being higher than for lesser duration accrual
periods.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE 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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
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 \10\ and
Rule 19b-4(f)(6) thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii)
under the Act, the Exchange is required 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.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
[[Page 25901]]
Act \12\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \13\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay to
allow the Exchange to begin listing options overlying the S&P 500
Annual Dividend Index beginning on Tuesday, May 25, 2010.
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\12\ 17 CFR 240.19b-4(f)(6).
\13\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that acceleration of the operative date is
consistent with the protection of investors and the public interest
because the Commission has previously considered and approved the
listing of options on the S&P 500 Annual Dividend Index and the current
proposal raises no new regulatory issues. Acceleration of the operative
date will allow the Exchange to list options on the S&P 500 Annual
Dividend Index on May 25, 2010, thereby providing investors with an
additional investment tool and greater flexibility in meeting their
investment objectives without delay. For these reasons, the Commission
designates that the proposed rule change become operative on May 25,
2010.\14\
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\14\ 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. 15 U.S.C. 78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate the 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.
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 e-mail to [email protected]. Please include
File No. SR-CBOE-2010-039 on the subject line.
Paper Comments
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 No. SR-CBOE-2010-039. This file
number should be included on the subject line if e-mail 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
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of the CBOE. 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 No. SR-CBOE-2010-039 and should be
submitted on or before June 1, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-10956 Filed 5-7-10; 8:45 am]
BILLING CODE 8010-01-P