[Federal Register Volume 75, Number 116 (Thursday, June 17, 2010)]
[Notices]
[Pages 34509-34510]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-14606]
[[Page 34509]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62272; File No. SR-CBOE-2010-055]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Related to Individual Equity Options Overlying Stocks
Subject to Trading Pauses Due to Extraordinary Market Volatility
June 10, 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 June 10, 2010, Chicago Board Options Exchange, Incorporated (the
``Exchange'' or ``CBOE'') 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 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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The CBOE is proposing to amend its trading procedures on a pilot
basis for individual equity options overlying certain stocks. The text
of the proposed rule change is available on the Exchange's Web site
(http://www.cboe.org/Legal), at the Exchange's Office of the Secretary,
at the Commission, and on the Commission's Web site at http://www.sec.gov.
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 those 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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The primary listing markets for U.S. stocks are in the process of
amending their rules so that they may, from time to time, issue a
trading pause for an individual stock if the price of such stock moves
10% or more from a sale in a preceding five-minute period. The Exchange
is proposing the rule change described below in consultation with U.S.
listing markets and the Commission staff to provide for uniform market-
wide trading pause standards for certain individual stocks that
experience rapid price movement and for individual equity options
overlying those stocks.\5\
---------------------------------------------------------------------------
\5\ The Exchange has separately proposed a rule change for CBOE
Stock Exchange, the CBOE's stock trading facility (``CBSX''), to
provide for uniform market-wide trading pause standards for
individual stocks in the S&P 500 Index traded on CBSX. Securities
Exchange Act Release No. 62132 (May 19, 2010), 75 FR 28847 (May 24,
2010) (SR-CBOE-2010-047).
---------------------------------------------------------------------------
The Exchange proposes to add a new Interpretation and Policy .06 to
Rule 6.3, Trading Halts, to provide that CBOE would halt trading in the
options on a Circuit Breaker Stock, as defined below, when the primary
listing market for such stock issues a trading pause. CBOE would resume
trading in the options once trading has resumed on the primary listing
market in the underlying Circuit Breaker Stock. If, however, trading
has not resumed on the primary listing market in the underlying Circuit
Breaker Stock after ten minutes have passed since the individual stock
trading pause message has been received from the responsible single
plan processor, CBOE may resume trading in the options if at least one
other market has resumed trading in the stock.
The proposed rule would apply to trading pauses issued by primary
listing markets in ``Circuit Breaker Stocks.'' Specifically, on a pilot
basis, set to end on December 10, 2010, Circuit Breaker Stocks would
mean the stocks included in the S&P 500 Index and such other eligible
underlying stocks as may be designated for inclusion in the pilot from
time to time by the stock markets. Thus, proposed Interpretation and
Policy .06 to Rule 6.3 would be in effect with respect to individual
equity options overlying stocks in the S&P 500 Index and individual
equity options overlying such other eligible underlying stocks as may
be designated for inclusion in the pilot.
Upon receipt of a trading pause message from the single plan
processor responsible for consolidation of information for the stock,
the Exchange would automatically implement a trading halt in the
overlying options traded on the Exchange. During the halt, the Exchange
would maintain existing orders in the Book, continue accepting orders,
and process cancels. In this regard the Exchange notes that, consistent
with its existing rotation processes, the Exchange would accept
opening-only orders during the halt, any unfilled portion of which
would automatically cancel upon conclusion of the reopen.
Upon reopening, a rotation shall be held in the options on CBOE in
accordance with Rule 6.2B, Hybrid Opening System (``HOSS''), unless the
Exchange concludes that a different method of reopening is appropriate
under the circumstances, including but not limited to, no rotation, an
abbreviated rotation or any other variation in the manner of the
rotation.
Lastly, nothing in the proposed Rule shall be construed to limit
the ability of the Exchange to halt or suspend trading in any security
or securities traded on the Exchange pursuant to any other Exchange
rule or policy.
2. Statutory Basis
The rule change proposed in this submission is consistent with the
requirements of the Act and the rules and regulations thereunder that
are applicable to a national securities exchange, and, in particular,
with the requirements of Section 6(b) of the Act.\6\ In particular, the
proposed change is consistent with Section 6(b)(5) of the Act,\7\
because it would promote just and equitable principles of trade, remove
impediments to, and perfect the mechanism of, a free and open market
and a national market system, and, in general, protect investors and
the public interest. The proposed rule change is also designed to
support the principles of Section 11A(a)(1) \8\ of the Act in that it
seeks to assure fair competition among brokers and dealers and among
exchange markets. The Exchange believes that the proposed rule meets
these requirements in that it promotes transparency and uniformity
across markets concerning decisions to pause trading in a stock and the
individual equity options overlying that stock
[[Page 34510]]
when there are significant price movements.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
\8\ 15 U.S.C. 78k-1(a)(1).
---------------------------------------------------------------------------
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
The Exchange neither solicited nor received comments on the
proposal.
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, provided that the self-regulatory
organization has given the Commission written notice of its intent to
file 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 proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6) thereunder.\10\
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6). The Commission notes that the
Exchange has met this requirement.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of filing.\11\ However,
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter
time if such action is consistent with the protection of investors and
the public interest. The Exchange requested that the Commission waive
the 30-day operative delay, as specified in Rule 19b-4(f)(6)(iii),\12\
which would make the rule change effective and operative upon filing.
The Commission approved filings from the exchanges and the Financial
Industry Regulatory Authority to institute a single stock trading pause
for equity securities that experience a 10% change in price during a
five minute period.\13\ The Commission believes that waiving the 30-day
operative delay is consistent with the protection of investors and the
public interest because it will allow CBOE to halt trading for
individual equity options at the same time that the primary listing
market implements the pilot for eligible underlying stocks.\14\
---------------------------------------------------------------------------
\11\ 17 CFR 240.19b-4(f)(6).
\12\ 17 CFR 240.19b-4(f)(6)(iii).
\13\ See Securities Exchange Act Release Nos. 62251 and 62252
(June 10, 2010).
\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. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of such proposed rule
change, the Commission may summarily abrogate 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.
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 Number SR-CBOE-2010-055 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2010-055. 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 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 publicly available. All
submissions should refer to File Number SR-CBOE-2010-055 and should be
submitted on or before July 8, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
---------------------------------------------------------------------------
\15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-14606 Filed 6-16-10; 8:45 am]
BILLING CODE 8010-01-P