[Federal Register Volume 75, Number 52 (Thursday, March 18, 2010)]
[Notices]
[Page 13174]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-5917]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61696; File No. SR-CBOE-2010-005]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Approving Proposed Rule Change To Establish Strike
Price Intervals and Trading Hours for Options on Index-Linked
Securities
March 12, 2010.
I. Introduction
On January 27, 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 establish strike price
intervals and trading hours for Index-Linked Securities. The proposed
rule change was published for comment in the Federal Register on
February 8, 2010.\3\ The Commission received no comment letters on the
proposal. This order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 61466 (February 2,
2010), 75 FR 6243.
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II. Description of the Proposal
Prior to the commencement of trading options on Index-Linked
Securities (also known as exchange-traded notes (``ETN'')), CBOE has
proposed to establish strike price intervals and trading hours for
these new products. The Commission has approved CBOE's and other option
exchanges' proposals to enable the listing and trading of options on
Index-Linked Securities.\4\
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\4\ 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).
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$1 Strikes for ETN Options
CBOE's proposal would extend the trading conventions applicable to
options on exchange-traded funds (``ETFs'') to options on Index-Linked
Securities. Specifically, under the proposed rule change, strike price
intervals of $1 will be permitted where the strike price is less than
$200. Where the strike price is greater than $200, $5 strikes will be
permitted. These proposed changes are reflected by the proposed
addition of new Interpretation and Policy .09 to Rule 5.5. The proposed
strike price intervals for options on Index-Linked Securities are
consistent with the strike price intervals currently permitted for
options on ETFs.\5\
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\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 ETN options to trade in a
similar manner to options on ETFs. Strike prices for ETF options are
permitted in $1 or greater intervals where the strike price is $200 or
less and $5 or greater where the strike price is greater than $200.\6\
Accordingly, the Exchange asserts that the rationale for permitting $1
strikes for ETF options equally applies to permitting $1 strikes for
ETN options and that investors will be better served if $1 strike price
intervals are available for ETN options (where the strike price is less
than $200).
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\6\ See id.
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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 ETN options.
Trading Hours for ETN Options
Similar to the trading hours for ETF options, the Exchange's
proposal also would amend Interpretation and Policy .03 to Rule 6.1 by:
(1) Adding new subparagraph (b) to provide that options on Index-Linked
Securities, as defined under Interpretation and Policy .13 to Rule 5.3,
may be traded on the Exchange until 3:15 p.m. each business day; and
(2) making a technical change to Interpretation and Policy .03 to Rule
6.1.
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 Index-Linked Securities 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 Index-Linked Securities.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-CBOE-2010-005) be, and
hereby is, approved.
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\10\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-5917 Filed 3-17-10; 8:45 am]
BILLING CODE 8011-01-P