[Federal Register Volume 77, Number 108 (Tuesday, June 5, 2012)]
[Notices]
[Pages 33259-33261]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-13532]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67078; File No. SR-CBOE-2012-051]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Related to FLEX Options
May 30, 2012.
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 May 23, 2012, 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 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 provide for additional time to
implement new system enhancements for trading Flexible Exchange Options
(``FLEX Options'') \5\ that were the subject of another rule change
filing that was recently approved. 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's Public
Reference Room.
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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. 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. The rules governing the trading
of FLEX Options on the FLEX Request for Quote (``RFQ'') System
platform (which is limited to open outcry trading only) are
contained in Chapter XXIVA. The rules governing the trading of FLEX
Options on the FLEX Hybrid Trading System platform (which combines
both open outcry and electronic trading) are contained in Chapter
XXIVB. The Exchange notes that, currently, all FLEX Options are
traded on the FLEX Hybrid Trading System platform.
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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 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
On February 7, 2012, the Exchange received approval of a rule
change filing, SR-CBOE-2011-122, which amended certain rules pertaining
to the electronic trading of FLEX Options on the Exchange's FLEX Hybrid
Trading System platform (the ``FLEX System'' or ``System'').\6\ In that
filing, the Exchange indicated that it is in the process of enhancing
the FLEX System in order to further integrate it with the Exchange's
existing technology platform utilized for Non-FLEX trading. In
conjunction with the enhancement, the filing made some modifications to
the existing electronic trading processes utilized on the FLEX System
platform. The filing made other amendments to eliminate certain
European-Capped style settlement and currency provisions with the FLEX
rules that pertain to both electronic and open outcry trading. The
filing also indicated that the Exchange planned to announce to its
Trading Permit Holders (``TPHs'') via Regulatory Circular an
implementation schedule for transitioning from the existing technology
platform to the new technology platform once the rollout schedule is
finalized. The filing indicated that the Exchange intended to begin
implementation by no later than March 30, 2012, with the specific
implementation schedule to be announced via Regulatory Circular, as
stated above. The Exchange intended to transition a few classes at a
time and anticipated full implementation within approximately one to
three weeks of the initial transition. Finally, in the event
[[Page 33260]]
that implementation did not begin by March 30, 2012, the Exchange
represented that it would file a proposed rule change to establish the
revised time period.
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\6\ Securities Exchange Act No. 66348 (February 7, 2012), 77 FR
8304 (February 14, 2012) (SR-CBOE-2011-122 Approval Order).
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The Exchange thereafter submitted another rule change filing, SR-
CBOE-2012-033, which provided in relevant part for additional time to
implement the new system enhancements for trading FLEX Options.\7\ In
particular, rather than March 30, 2012, that rule change filing revised
the implementation schedule such that the Exchange would begin
implementation by no later than April 30, 2012, with the specific
implementation schedule to be announced via Regulatory Circular. The
Exchange still intended to transition a few classes at a time and
anticipated full implementation within approximately one to three weeks
of the initial transition.
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\7\ Securities Exchange Act Release No. 66769 (April 6, 2012),
77 FR 22012 (April 12, 2012) (SR-CBOE-2012-033 Notice of Filing and
Immediate Effectiveness). Besides extending the implementation
schedule, the rule change filing also contained certain amendments
to the rules for trading FLEX Options.
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The purpose of this instant rule change filing is to again provide
for additional time to implement the new system enhancements for
trading FLEX Options. While the Exchange did begin the initial rollout
of the enhancements on April 24, 2012, the Exchange will not have the
full implementation completed within the approximated three week
transaction period. However, the Exchange believes that full
implementation will be completed within the next several weeks.
Therefore, the Exchange is submitting this rule change filing to advise
that it anticipates the rollout of the new system enhancements will be
fully implemented by June 29, 2012. Consistent with the prior rule
change filings, the Exchange will announce the specific implementation
schedule via Regulatory Circular and, in the event the implementation
is not completed by June 29, 2012, the Exchange represents that it will
file another proposed rule change to establish the revised time period.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) of the Act \8\ in general and furthers the objectives of
Section 6(b)(5) of the Act \9\ 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 the use of FLEX Options provides
CBOE TPHs and investors with additional tools to trade customized
options in an exchange environment \10\ and greater opportunities to
manage risk. The Exchange believes that the enhancements to the FLEX
System adopted under rule change filing SR-CBOE-2011-122 should serve
to further those objectives and encourage use of FLEX Options by
enhancing and simplifying the existing processes and integrating the
FLEX System with the Exchange's existing technology platform for Non-
FLEX trading, which should make the FLEX System more efficient and
effective and easier for users to understand. The Exchange believes
that the provision for additional time to rollout the system
enhancements will allow the Exchange to implement the enhancements in a
fair and orderly manner.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ FLEX Options provide TPHs and investors with an improved
but comparable alternative to the over-the-counter (``OTC'') market
in customized options, which can take on contract characteristics
similar to FLEX Options but are not subject to the same
restrictions. The Exchange believes that making these changes will
make the FLEX Hybrid Trading System an even more attractive
alternative when market participants consider 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 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 as issuer and
guarantor of FLEX Options.
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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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
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, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\13\
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\11\ 15 U.S.C. 78s(b)(3)(A)(iii).
\12\ 17 CFR 240.19b-4(f)(6).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's 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 has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\15\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest.
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
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The Exchange has requested that the Commission waive the 30-day
operative delay. The Commission believes that waiver of the operative
delay is consistent with the protection of investors and the public
interest because such waiver will allow CBOE to revise its
implementation schedule for the new system enhancements. The new
schedule will provide adequate time for a fair and orderly
implementation of the enhancements. Therefore, the Commission
designates the proposal operative upon filing.\16\
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\16\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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:
[[Page 33261]]
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-2012-051 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-2012-051. 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
10:00 a.m. and 3:00 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-2012-051 and should be
submitted on or before June 26, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-13532 Filed 6-4-12; 8:45 am]
BILLING CODE 8011-01-P