[Federal Register Volume 75, Number 78 (Friday, April 23, 2010)]
[Notices]
[Pages 21373-21375]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-9457]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61935; File No. SR-CBOE-2010-036]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Proposed Rule Change To Permit $1 Strikes for
Options on Trust Issued Receipts
April 16, 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 April 13, 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, II, and III below, which Items have been prepared by the
Exchange.
[[Page 21374]]
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.
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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 Rule 5.5 to allow the Exchange to list
options on Trust Issued Receipts in $1 strike price intervals. The text
of the rule proposal 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.
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 purpose of the proposed rule change is 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.\3\
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\3\ HOLDRS are a type of Trust Issued Receipt and the current
proposal would permit $1 strikes for options on HOLDRS (where the
strike price is less than $200).
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Currently, the strike price intervals for options 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.\4\
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\4\ See CBOE Rule 5.5.01(c)-(e). See also Securities Exchange
Act Release No. 43043 (July 17, 2000), 65 FR 46520 (July 28, 2000)
(SR-CBOE-2010-36) (approval order for options on TIRs).
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The Exchange is seeking to permit $1 strikes for options on TIRs
(where the strike price is less than $200) because TIRs have
characteristics similar to exchange-traded funds (``ETFs'').
Specifically, TIRs are exchange-listed securities representing
beneficial ownership of the specific deposited securities represented
by the receipts. They are negotiable receipts issued by a trust
representing securities of issuers that have been deposited and held on
behalf of the holders of the TIRs. TIRs, which trade in round-lots of
100, and multiples thereof, may be issued after their initial offering
through a deposit with the trustee of the required number of shares of
common stock of the underlying issuers. This characteristic of TIRs is
similar to that of ETFs which also may be created on any business day
upon receipt of the requisite securities or other investment assets
comprising a creation unit. The trust only issues receipts upon the
deposit of the shares of the underlying securities that are represented
by a round-lot of 100 receipts. Likewise, the trust will cancel, and an
investor may obtain, hold, trade or surrender TIRs in a round-lot and
round-lot multiples of 100 receipts.
CBOE believes the marketplace and investors expect options on TIRs
to trade in a similar manner to ETF options. 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.\5\ Accordingly, the Exchange believes that the rationale for
permitting $1 strikes for ETF options equally applies to permitting $1
strikes for options on TIRs and the Exchange believes 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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\5\ See CBOE Rule 5.5.08 (permitting $1 strikes for options on
Units covered under Interpretation and Policy .06 to Rule 5.3, which
are also known as ETF options).
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CBOE 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.
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 by allowing the Exchange to list options on TIRs at
$1 strike price intervals.
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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
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
A. By order approve such proposed rule change, or
B. Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, 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-2010-036 on the subject line.
[[Page 21375]]
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-2010-036. 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 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 offices 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-2010-036, and
should be submitted on or before May 10, 2010.
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\9\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-9457 Filed 4-22-10; 8:45 am]
BILLING CODE 8011-01-P