[Federal Register Volume 73, Number 216 (Thursday, November 6, 2008)]
[Notices]
[Pages 66085-66086]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-26481]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58890; File No. SR-CBOE-2008-98]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Increase the Maximum Term for FLEX Options
October 30, 2008.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on October 24, 2008, the Chicago Board Options Exchange,
Incorporated (``Exchange'' or ``CBOE'') 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
The Exchange proposes to amend Rules 24A.4 and 24B.4 to increase
the maximum term for Flexible Exchange Options (``FLEX Options'') \5\
to fifteen years. The text of the proposed rule change is available on
the Exchange's Web site (http://www.cboe.org/Legal), at the Office of
the Secretary, CBOE and at the Commission.
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\5\ FLEX Options provide investors with the ability to customize
basic option features including size, expiration date, exercise
style, and certain exercise prices.
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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 increase the maximum
term for FLEX Options. Currently, the term for a FLEX Options varies
based upon the type of underlying. For example, for FLEX Equity
Options, the maximum term is currently 3 years, provided a member may
request a longer term to a maximum of 5 years (and upon assessment by
the FLEX Official that sufficient liquidity exists, such request will
be granted). For FLEX Index Options, the maximum term is currently 5
years, provided a member may request a longer term to a maximum of 10
years (and upon assessment by the FLEX Official that sufficient
liquidity exists, such request will be granted).\6\ For FLEX Credit
Options, the maximum term is currently 10.25 years.\7\
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\6\ See Rules 24A.4(a)(4)(i) and 24B.4(a)(5)(i).
\7\ See Rule 29.18.
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We are proposing to increase the maximum term for all FLEX Options
to fifteen years and to eliminate the requirement that a FLEX Official
make a liquidity assessment. The changes are being proposed to simplify
the process and in response to numerous member requests that we expand
the maximum term in order to accommodate their desire to bring trades
that are otherwise conducted in the over-the-counter (``OTC'') market
to an exchange environment. Though we want to accommodate these
requests, we are not able to do so under the existing term limitations
imposed in our rules.
CBOE believes that expanding the eligible term for FLEX Options as
proposed is important and necessary to the Exchange's efforts to create
a product and market that provides members and investors interested in
FLEX-type options with an improved but comparable alternative to the
OTC market in customized options, which can take on contract
characteristics similar FLEX Options but are not subject to the same
maximum term restriction. By expanding the eligible term for FLEX
Options, market participants will now have greater flexibility in
determining whether to execute their customized options in an exchange
environment or in the OTC market. CBOE believes market participants
benefit from being able to trade these customized options in an
exchange environment in several ways, including, but not limited to the
following: (1) Enhanced efficiency in initiating and closing out
positions; (2) increased market transparency; and (3) heightened
contra-party creditworthiness due to the role of The Options Clearing
Corporation (``OCC'') as issuer and guarantor of FLEX Options. Finally,
the Exchange has confirmed with the OCC that OCC can configure its
systems to support FLEX Options that have a maximum expiration of
fifteen years.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act \8\ and the rules and regulations under the Act applicable to
national securities exchanges 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. The proposed
rule change will provide members and investors with additional
opportunities to trade customized options in an exchange environment,
and investors will benefit as a result.
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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.
[[Page 66086]]
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: (1)
Significantly affect the protection of investors or the public
interest; (2) impose any significant burden on competition; and (3)
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, it 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). In addition, when filing a proposed
rule change pursuant to Rule 19b-4(f)(6) under the Act, an Exchange
is required to give the Commission written notice of its 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 provided such
notice to the Commission.
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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 rule-comments@sec.gov. Please include
File Number SR-CBOE-2008-98 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2008-98. 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 inspection and
copying 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 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 Number SR-CBOE-2008-98 and should be
submitted on or before November 28, 2008.
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,
Acting Secretary.
[FR Doc. E8-26481 Filed 11-5-08; 8:45 am]
BILLING CODE 8011-01-P