[Federal Register Volume 75, Number 45 (Tuesday, March 9, 2010)]
[Notices]
[Pages 10853-10855]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-4910]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61628; File No. SR-CBOE-2010-019]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Related to Multi-Class Broad Based Index Option Spread
Orders
March 2, 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 February 18, 2010, the Chicago Board Options Exchange, Incorporated
(``Exchange'' or ``CBOE'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, II, and III 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\ which renders the proposal
effective upon filing with the Commission. 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
The Exchange is proposing to amend its rule related to multi-class
broad-based index option spreads to include options on index-linked
securities (also known as exchange-traded notes (``ETNs'')) within the
definition of an eligible ``broad-based index option.'' 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 and at
the Commission.
[[Page 10854]]
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 Commission has approved CBOE's and other option exchanges'
proposals to enable the listing and trading of options on ETNs.\5\
Options trading has not commenced to date and is contingent upon the
Commission's approval of The Options Clearing Corporation's (``OCC'')
proposed supplement to the Options Disclosure Document (``ODD'') that
will provide disclosure regarding options on index-linked
securities.\6\
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\5\ See e.g., Securities Exchange Act Release Nos. 58204 (July
22, 2008), 73 FR 43807 (July 28, 2008) (approving SR-CBOE-2008-64);
58203 (July 22, 2008), 73 FR 43812 (July 28, 2008) (approving SR-
NYSEArca-2008-57); 58985 (November 10, 2008), 73 FR 72538 (November
28, 2008) (approving SR-ISE-2008-86).
\6\ OCC previously received Commission approval to clear options
based on Index-Linked Securities. See Securities Exchange Act
Release No. 60872 (October 23, 2009), 74 FR 55878 (October 29, 2009)
(SR-OCC-2009-14).
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Prior to the commencement of trading options on ETNs, the Exchange
is proposing to amend CBOE Rule 24.19, Multi-Class Broad-Based Index
Option Spread Orders, to include options on ETNs within the definition
of an eligible ``broad-based index option'' that may be subject to the
multi-class spread trading procedures outlined in Rule 24.19.\7\
Specifically, the definition of an eligible broad-based index option
for purposes of Rule 24.19 will be amended to include an option on an
ETN derived from a broad-based index that is determined by the Exchange
to create an appropriate hedge with any other broad-based index option
under Rule 24.19. This change to include ETNs is the same as an
existing provision in the rule that provides that options on Units
(also known as exchange-traded funds (``ETFs'')) that are derived from
broad-based indices that are determined by the Exchange to create an
appropriate hedge with any other broad-based index option may be
subject to the multi-class spread trading procedures.\8\
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\7\ Rule 24.19 sets for a procedure for trading multi-class
spread orders for eligible broad-based index option classes. For
purposes of Rule 24.19 only, the term ``broad-based index option''
means ``(i) options on the Mini-NDX Index (MNX), Nasdaq-100 Index
(NDX), S&P 100 Index (OEX and XEO), iShares S&P 100 Index Fund
(OEF), Nasdaq-100 Tracking Stock (QQQ), and S&P 500 Index (SPX); and
(ii) any other broad-based index option or option on exchange-traded
fund shares derived from a broad-based index that is determined by
the Exchange to create an appropriate hedge with any other Broad-
Based Index Option under this Rule 24.19.'' See Rule 24.19(a)(1).
\8\ The Exchange is also proposing a non-substantive change to
the text of Rule 24.19(a)(1) to include a cross-reference to Units
(another term for ETFs), which is defined under Interpretation and
Policy .06 to CBOE Rule 5.3.
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Without discounting the differences between ETFs and ETNs, the
Exchange seeks to extend the trading conventions applicable to options
on ETFs to options on ETNs. CBOE contends that the inclusion of options
on ETNs within the broad-based index option definition for purposes of
the multi-class broad-based index option spread trading procedures is
consistent with what is currently permitted for options on ETFs.\9\
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\9\ Id.
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2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5)\10\ that an exchange have rules that
are designed to promote just and equitable principles of trade, and to
remove impediments to and 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 proposed rule
change seeks to extend the application of the multi-class broad-based
index option spread trading procedures under CBOE Rule 24.19 to ETNs in
a manner that is consistent with what is currently permitted for ETFs.
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\10\ 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
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 foregoing rule does not (i) significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, 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 \11\ and Rule 19b-4(f)(6)
thereunder.\12\ 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.
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6).
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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-2010-019 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-2010-019. 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/
[[Page 10855]]
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
available publicly. All submissions should refer to File Number SR-
CBOE-2010-019 and should be submitted on or before March 30, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
Florence E. Harmon,
Deputy Secretary.
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\13\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2010-4910 Filed 3-8-10; 8:45 am]
BILLING CODE 8011-01-P