[Federal Register Volume 76, Number 213 (Thursday, November 3, 2011)]
[Notices]
[Pages 68239-68240]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-28513]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65659; File No. SR-CBOE-2011-098]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Related to FLEX Options
October 31, 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 October 17, 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, II, and III below, which Items have been prepared
by the Exchange. The Exchange has designated the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 19(b)(3)(A) 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).
\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 certain rules pertaining to
Flexible Exchange Options (``FLEX Options''). 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.
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 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
FLEX Options provide investors with the ability to customize basic
option features including size, expiration date, exercise style, and
certain exercise prices (referred to as ``variable terms'').\5\ For
example, FLEX Options can have an expiration date that is any business
day (specified as to day, month and year) with a maximum term of
fifteen years.\6\ The rules governing the trading of FLEX Options on
the FLEX Request for Quote (``RFQ'') System platform are generally
contained in Chapter XXIVA. The rules governing the trading of FLEX
Options on the FLEX Hybrid Trading System platform are generally
contained in Chapter XXIVB. Within each Chapter, the provisions
pertaining to the variable terms of FLEX Options are generally
contained in Rules 24A.4 and 24B.4.
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\5\ FLEX Options can be FLEX Index Options or FLEX Equity
Options. In addition, other products are permitted to be traded
pursuant to the FLEX trading procedures. For example, credit options
are eligible for trading as FLEX Options pursuant to the FLEX rules
in Chapters XXIVA and XXIVB. See CBOE Rules 24A.1(e) and (f),
24A.4(b)(1) and (c)(1), 24B.1(f) and (g), 24B.4(b)(1) and (c)(1),
and 28.17.
\6\ See Rule 24A.4(a)(2)(iv) and (a)(4)(i), and Rule
24B.4(a)(2)(iv) and (a)(5)(i).
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The purpose of this proposed rule change is to reorganize and amend
certain Exchange Rules pertaining to FLEX Options to provide within
Chapters XXIVA and XXIVB that a new series of FLEX Options may be
established on any business day prior to the expiration date. The
adding of new FLEX Equity Options series on any business day prior to
the expiration date is already addressed in Rule 5.5 of Chapter V of
the Exchange Rules.\7\ In an effort to make reading and understanding
the FLEX Option provisions easier, the Exchange is proposing to move
this new series add provision from Rule 5.5 of Chapter V to Rules 24A.4
and 24B.4 of Chapters XXIVA and XXIVB, respectively. In addition, the
Exchange is proposing to apply the provision to all FLEX Options (not
just FLEX Equity Options).\8\ Previously the rules did not clearly
address the applicability of any such provision to other FLEX Options.
However, it has been the Exchange's practice to permit other FLEX
Options to be listed any business day prior to the expiration date.
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\7\ Rule 5.5 generally sets forth provisions pertaining to
series of options that may be open for trading on the Exchange and
generally pertains to option contracts that are not FLEX Options.
However, Rule 5.5.04 currently provides as follows: ``New series of
options on an individual stock may be added until the beginning of
the month in which the option contract will expire. Due to unusual
market conditions, the Exchange, in its discretion, may add new
series of options on an individual stock until five business days
prior to expiration. Notwithstanding the foregoing, a new series of
FLEX Equity Options, as defined in and subject to the provisions of
Chapter XXIVA or XXIVB of the Rules, may be added on any business
day prior to the expiration date.''
\8\ Specifically, the Exchange is proposing to delete the
following sentence from Rule 5.5.04: ``Notwithstanding the
foregoing, a new series of FLEX Equity Options, as defined in and
subject to the provisions of Chapter XXIVA or XXIVB of the Rules,
may be added on any business day prior to the expiration date.''
And, the Exchange is proposing to add the following sentence to both
Rule 24A.4(a)(1) and 24B.4(a)(1): ``A new series of FLEX Options may
be established on any business day prior to the expiration date as
provided for in this Rule [24A.4 or 24B.4, as applicable].''
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The Exchange believes that reorganizing and amending the rules in
the manner proposed should make it easier to read and understand the
FLEX Options provisions. The Exchange also believes that it should
provide additional clarity and avoid any confusion on the applicability
of the new series add provision to any and all FLEX Options in a manner
that is consistent with the existing provision for FLEX Equity Options.
[[Page 68240]]
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the Act
\9\ in general and furthers the objectives of Section 6(b)(5) of the
Act \10\ in particular in that it should promote just and equitable
principles of trade, serve to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and
protect investors and the public interest. In particular, the Exchange
believes that reorganizing and amending the rules in the manner
proposed should make it easier to read and understand the FLEX Options
provisions. The Exchange also believes that it should provide
additional clarity and avoid any confusion on the applicability of the
new series add provision to any and all FLEX Options in a manner that
is consistent with the existing provision for FLEX Equity Options.
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\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 that is 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 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.
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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 email to [email protected]. Please include
File Number SR-CBOE-2011-098 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-2011-098. This file
number should be included on the subject line if email 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 the 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-2011-098 and should be
submitted on or before November 25, 2011.
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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-28513 Filed 11-2-11; 8:45 am]
BILLING CODE 8011-01-P