[Federal Register Volume 75, Number 211 (Tuesday, November 2, 2010)]
[Notices]
[Pages 67419-67421]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-27586]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63185; File No. SR-CBOE-2010-097]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Establish a Pilot Program To List Series With Additional
Expiration Months for Each Class of Options Opened for Trading on the
Exchange
October 27, 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 October 26, 2010, the Chicago Board Options Exchange,
Incorporated (``CBOE'' or the ``Exchange'') filed with the Securities
and Exchange Commission (the ``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.
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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 Substance
of the Proposed Rule Change
CBOE proposes to amend its rules to adopt a pilot program to list
additional expiration months for each class of options opened for
trading on the Exchange. The text of the rule proposal is available on
the Exchange's Web site (http://www.cboe.org/legal), at the Exchange's
principal office, 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 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 Exchange proposes to amend its rules to adopt a pilot program
to list additional expiration months for each class of options opened
for trading on the Exchange. Pursuant to Interpretation and Policy .03
to Rule 5.5, the Exchange currently opens four expiration months for
each class of options open for trading on the Exchange: the first two
being the two nearest months, regardless of the quarterly cycle on
which that class trades; the third and fourth being the next two months
of the quarterly cycle previously designated by the Exchange for that
specific class. For example, if the Exchange listed, in late April, a
new stock option on a January-April--July-October quarterly cycle, the
Exchange would list the two nearest term months (May and June) and the
next two expiration months of the cycle (July and October). When the
May series expires, the Exchange would add January series. When the
June series expires, the Exchange would add August series as the next
month, and would not add April.
The Exchange believes that there is market demand for a greater
number of expiration months. The Exchange therefore proposes to adopt a
pilot program pursuant to which it will list up to an additional two
expiration months, for a total of six expiration months for each class
of options open for trading on the Exchange.\5\ The proposal will
become effective on a pilot basis for a period of twelve months to
commence on the next full month after approval is received to establish
the pilot program. Under the proposal, the additional months listed
pursuant to the pilot program will result in four consecutive
expiration months plus two months from the quarterly cycle. For
example, for option classes in the January cycle that have expiration
months of June, July, October, and January, the Exchange would
additionally list the August and September series. For option classes
in the February quarterly cycle that have expiration months of October,
November, February and May, the
[[Page 67420]]
Exchange would additionally list the December and January series. Under
the proposal, no additional LEAP series will be created.
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\5\ CBOE does not believe that Rule 5.5.03 limits the maximum
number of expiration months that may be listed. Rule 5.5(a) and
5.5(c) provide CBOE with the flexibility to add additional
expiration months, which the Exchange has previously done. By
establishing the pilot program proposed in this filing, CBOE is not
limited to its existing ability.
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The Exchange seeks to limit the proposed rule change to 20 actively
traded options classes. By limiting the pilot to a small number of
classes, the Exchange will be able to gauge interest in the pilot while
limiting any additional demands on system resources. CBOE estimates
that this pilot could add up to six or seven percent to current quote
traffic, although changes in market maker quoting behavior will likely
reduce that increase by up to half. The Exchange believes that a
limited pilot is a prudent step to determine actual market demand for
additional expiration months.
If the Exchange were to propose an extension or an expansion of the
pilot program, or should the Exchange propose to make the pilot program
permanent, CBOE will submit, along with any filing proposing such
amendments to the pilot program, a pilot program report (``Report'')
that will provide an analysis of the pilot program covering the first
nine months of the pilot program and shall submit the Report to the
Commission at least sixty (60) days prior to the expiration date of the
pilot program. The Report will include, at a minimum: (1) Data and
written analysis on the open interest and trading volume in the classes
for which additional expiration months were opened; (2) an assessment
of the appropriateness of the option classes selected for the pilot
program; (3) an assessment of the impact of the pilot program on the
capacity on CBOE, OPRA and on market data vendors (to the extent data
from market data vendors is available); (4) any capacity problems or
other problems that arose during the operation of the pilot program and
how CBOE addressed such problems; (5) any complaints that CBOE received
during the operation of the pilot program and how CBOE addressed them;
and (6) any additional information that would assist the Commission in
assessing the operation of the pilot program.
Finally, the Exchange represents that it has the necessary systems
capacity to support new options series that will result from the
introduction of additional expiration months listed pursuant to this
proposed rule change.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act \6\ and the rules and regulations thereunder and, in
particular, the requirements of Section 6(b) of the Act.\7\
Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \8\ requirements that the rules of
an exchange be designed to promote just and equitable principles of
trade, to prevent fraudulent and manipulative acts, to remove
impediments to and to perfect the mechanism for a free and open market
and a national market system, and, in general, to protect investors and
the public interest. In particular, the Exchange believes listing
additional near-term expiration months will offer investors more
variety in trading options series that were previously not available.
The Exchange believes this proposed rule change will also generate
additional volume in these option classes without significantly taxing
system resources.
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\6\ 15 U.S.C. 78s(b)(1).
\7\ 15 U.S.C. 78f(b).
\8\ 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 foregoing proposed rule change does not significantly
affect the protection of investors or the public interest, does not
impose any significant burden on competition, and, by its terms, does
not become operative for 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's 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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The Exchange has requested that the Commission waive the 30-day
operative delay. The Commission believes that waiver of the operative
delay is consistent with the protection of investors and the public
interest because the proposal is substantially similar to that of
another exchange that has been approved by the Commission.\11\
Therefore, the Commission designates the proposal operative upon
filing.\12\
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\11\ See Securities Exchange Act Release No. 63104 (October 14,
2010), 75 FR 64773 (October 20, 2010) (SR-ISE-2010-91) (order
approving Additional Expiration Months Pilot Program).
\12\ 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).
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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.
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-2010-097 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 Number SR-CBOE-2010-097. 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
[[Page 67421]]
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 the 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 available publicly. All
submissions should refer to File Number SR-CBOE-2010-097 and should be
submitted on or before November 23, 2010.
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. 2010-27586 Filed 11-1-10; 8:45 am]
BILLING CODE 8011-01-P