[Federal Register Volume 76, Number 71 (Wednesday, April 13, 2011)]
[Notices]
[Pages 20771-20773]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-8804]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64243; File No. SR-CBOE-2011-038]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Regarding Close of Trading Hours for Expiring End of Week
and End of Month Expirations
April 7, 2011.
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 6, 2011, 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 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 the
Substance of the Proposed Rule Change
CBOE proposes to amend Rule 24.9 to change the close of trading
hours from 3:15 p.m. (Chicago time) to 3 p.m. (Chicago time) on the
last day of trading in expiring End-of-Week and End-of Month
Expirations. 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's Public Reference Room.
[[Page 20772]]
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 Exchange 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 these 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 aspects 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 Rule 24.9 to change the close of
trading hours from 3:15 p.m. (Chicago time) to 3 p.m. (Chicago time) on
the last day of trading in expiring End-of-Week Expirations and End-of-
Month Expirations. On September 14, 2010, the Securities and Exchange
Commission (``Commission'') approved the implementation of a pilot
program that permits P.M.-settled options on broad-based indexes to
expire on (a) any Friday of the month, other than the third Friday-of-
the-month (``End-of-Week Expirations'' or ``EOWs'') and (b) the last
trading day of the month (``End-of-Month Expirations'' or ``EOMs'').\5\
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\5\ See Securities Exchange Act Release No. 34-62911 (September
14, 2010), 75 FR 57539 (September 21, 2010) (SR-CBOE-2009-075).
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EOWs and EOMs are treated the same as traditional options on the
same underlying index that expire on the Saturday following the third
Friday of the month; provided, however, that EOWs and EOMs are P.M.-
settled.\6\ EOWs and EOMs are subject to the same rules that currently
govern the trading of traditional index options, including sales
practice rules, margin requirements, and floor trading procedures.
Contract terms for EOWs and EOMs are similar to regular index options,
with one general exception: The exercise settlement value is based on
the index value derived from the closing prices of component stocks.\7\
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\6\ See CBOE Rule 24.9(e).
\7\ See supra note 5.
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Generally, EOWs and EOMs are priced in the market based on
corresponding futures values. On the last day of trading, the closing
prices of the component stocks (which are used to derive the exercise
settlement value) are known at 3 p.m. (Chicago time) (or soon after)
when the equity markets close. Despite the fact that the exercise
settlement value is fixed at or soon after 3 p.m. (Chicago time),
trading in expiring EOWs and EOMs continues, however, for an additional
fifteen minutes until 3:15 p.m. (Chicago time) and are not priced on
corresponding futures values, but rather the known cash value. At the
same time, the prices of non-expiring EOW and EOM series continue to
move and be priced in response to changes in corresponding futures
prices.
Because of the potential pricing divergence that could occur
between 3:00 and 3:15 pm on the final trading day in expiring EOWs and
EOMs (e.g., switch from pricing off of futures to cash), the Exchange
believes that, in order to mitigate potential investor confusion, it is
appropriate to cease trading in expiring EOWs and EOMs at 3 p.m. on the
last day of trading. The proposed change to the close of trading hours
will apply to all outstanding expiring EOW and EOM Expirations listed
on or before the effective date of this proposal and to all EOWs and
EOMs listed thereafter under the EOW/EOM Pilot Program.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act \8\ and the rules and regulations thereunder and, in
particular, the requirements of Section 6(b) of the Act.\9\
Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \10\ 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. Preventing continued trading on a product after
the exercise settlement value has been fixed eliminates potential
confusion and thereby protects investors and the public interest.
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\8\ 15 U.S.C. 78s(b)(1).
\9\ 15 U.S.C. 78f(b).
\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
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 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,\11\ the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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\11\ The Exchange has satisfied this requirement.
\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of such 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 No. SR-CBOE-2011-038 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
[[Page 20773]]
20549-1090. All submissions should refer to File No. SR-CBOE-2011-038.
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
CBOE. 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 No. SR-CBOE-
2011-038 and should be submitted on or before May 4, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8804 Filed 4-12-11; 8:45 am]
BILLING CODE 8011-01-P