[Federal Register Volume 75, Number 102 (Thursday, May 27, 2010)]
[Notices]
[Page 29787]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-12693]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62141; File No. SR-CBOE-2010-036]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Granting Accelerated Approval of Proposed Rule
Change To Permit $1 Strikes for Options on Trust Issued Receipts
May 20, 2010.
I. Introduction
On April 13, 2010, the Chicago Board Options Exchange, Incorporated
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to permit $1 strikes for options
on Trust Issued Receipts. The proposed rule change was published for
comment in the Federal Register on April 23, 2010.\3\ The Commission
received no comment letters on the proposal. This order approves the
proposed rule change on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 61935 (April 16, 2010),
75 FR 21373 (``Notice'').
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II. Description of the Proposal
CBOE has proposed to amend Rule 5.5, Series of Option Contracts
Open for Trading, by adding new Interpretation and Policy .17 that
would allow the Exchange to list options on the Trust Issued Receipts
(``TIRs''), including HOLding Company Depository ReceiptS (``HOLDRS''),
as defined under Interpretation and Policy .07 to Rule 5.3, in $1 or
greater strike price intervals, where the strike price is $200 or less
and $5 or greater where the strike price is greater than $200 (TIRs and
HOLDRS are hereafter collectively referred to as TIRs).\4\ The proposed
strike price intervals for options on TIRs are consistent with the
strike price intervals currently permitted for options on exchange-
traded funds (``ETFs'').\5\
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\4\ As more fully explained in the Notice, HOLDRS are a type of
TIR. Currently, the strike price intervals for options on TIRs are
as follows: (1) $2.50 or greater where the strike price is $25.00 or
less; (2) $5.00 or greater where the strike price is greater than
$25.00; and (3) $10.00 or greater where the strike price is greater
than $200. See CBOE Rule 5.5.01(c)-(e).
\5\ See Interpretation and Policy .08 to Rule 5.5. See also
Securities Exchange Act Release No. 46507 (September 17, 2002), 67
FR 60266 (September 25, 2002) (permitting list of options on ETFs at
$1 strike price intervals) (SR-CBOE-2002-54).
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In support of its proposal, CBOE stated that it believes the
marketplace and investors will be expecting options on TIRs to trade in
a similar manner to options on ETFs because TIRs have characteristics
similar to ETFs.\6\ Accordingly, the Exchange asserts that the
rationale for permitting $1 strikes for ETF options equally applies to
permitting $1 strikes for options on TIRs and that investors will be
better served if $1 strike price intervals are available for options on
TIRs (where the strike price is less than $200).
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\6\ See Notice, supra note 3, for CBOE's explanation of how TIRS
are similar to ETFs.
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CBOE further stated that it has analyzed its capacity and
represents that it believes the Exchange and the Options Price
Reporting Authority have the necessary systems capacity to handle the
additional traffic associated with the listing and trading of $1
strikes (where the strike price is less than $200) for options on TIRs.
III. Discussion
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange.\7\
Specifically, the Commission finds that the proposal is consistent with
Section 6(b)(5) of the Act,\8\ which requires, among other things, that
the rules of a national securities exchange be 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.
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\7\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\8\ 15 U.S.C. 78f(b)(5).
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The Commission notes that the proposed strike price intervals for
options on TIRS are consistent with the strike price intervals
currently permitted for options on ETFs.\9\ Accordingly, the proposal
should provide consistency and predictability for investors who may
view these products as serving similar investment functions in the
marketplace to ETFs and may provide investors with greater flexibility
in achieving their investment objectives.
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\9\ See supra note 5.
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In addition, the Commission notes that CBOE has represented that it
believes the Exchange and the Options Price Reporting Authority CBOE
and the Options Price Reporting Authority have the necessary systems
capacity to handle the additional traffic associated with the listing
and trading of $1 strikes for options on TIRS.
The Commission finds good cause, pursuant to Section 19(b)(2) of
the Act,\10\ for approving the proposal prior to the thirtieth day
after the date of publication of the Notice in the Federal Register.
The Commission notes that it recently approved similar changes to
strike price intervals for options on Index-Linked Securities for the
Exchange.\11\ The Commission also notes that it has not received any
comments regarding this proposal. The Commission believes that the
proposed changes to strike price intervals for options on TIRs do not
raise any novel regulatory issues and accelerating approval of this
proposal should benefit investors by creating consistency and
predictability for investors who may view these products as serving
similar investment functions in the marketplace to ETFs and greater
flexibility in achieving their investment objectives.
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\10\ 15 U.S.C. 78s(b)(2).
\11\ See Securities Exchange Act Release No. 61696 (March 12,
2010), 75 FR 13174 (March 18, 2010) (SR-CBOE-2010-005).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\12\ that the proposed rule change (SR-CBOE-2010-036) be, and
hereby is, approved on an accelerated basis.
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\12\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-12693 Filed 5-26-10; 8:45 am]
BILLING CODE 8010-01-P