[Federal Register Volume 77, Number 225 (Wednesday, November 21, 2012)]
[Notices]
[Pages 69908-69910]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-28262]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68242; File No. SR-CBOE-2012-110]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend the Weekly Options Program
November 15, 2012.
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 November 9, 2012, the 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 and II below, which Items have been prepared by
the Exchange. 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 CBOE Rules 5.5(d) and 24.9(a)(2)(A) to
expand the number of expirations available under the Short Term Option
Series Program (``Weeklys Program'' or ``Weekly option''), to allow for
the Exchange to delist any Weekly option series that do not have open
interest and to expand the number of series per class permitted in
Weekly options under limited circumstances. 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.
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
This is a competitive filing that is based on a recently approved
filings submitted by NYSE Arca, Inc. (``NYSE Arca'') and NYSE MKT, LLC
(``NYSE MKT'').\3\
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\3\ See Securities Exchange Act Release Nos. 68190 (November 8,
2012) (order approving SR-NYSEArca-2012-95) (``NYSE Arca filing'')
and 68191 (November 8, 2012) (order approving SR-NYSEMKT-2012-42)
(``NYSE MKT filing'').
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The purpose of this proposal is to amend CBOE Rules 5.5(d) and
24.9(a)(2)(A) to provide for the ability to open up to five consecutive
expirations under the Short Term Option Series Program (``Weeklys
Program'' or ``Weekly options'') for trading on the Exchange, to allow
for the Exchange to delist any Weekly option series that does not have
open interest and to expand the number of series per class permitted in
Weekly options under limited circumstances when there are no series at
least 10% but not more than 30% away from the current price/value of
the underlying security/index.\4\
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\4\ On July 12, 2005, the Commission approved the Weeklys
Program on a pilot basis. See Securities Exchange Act Release No.
52011 (July 12, 2005), 70 FR 41451 (July 19, 2005) (SR-CBOE-2004-
63). The Weeklys Program was made permanent on April 27, 2009. See
Securities Exchange Act Release No. 59824 (April 27, 2009), 74 FR
20518 (May 4, 2009) (SR-CBOE-2009-018).
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Currently, the Exchange may select up to thirty (30) currently
listed option classes on which options may be opened in the Weeklys
Program and the Exchange may also match any option classes that are
selected by other securities exchanges that employ a similar program
under their respective rules.\5\ For each option class eligible for
participation in the Weeklys Program, the Exchange may open up to
thirty (30) Weekly option series for each expiration date in that
class.
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\5\ See CBOE Rules 5.5(d)(1) and 24.9(a)(2)(A)(i).
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This proposal seeks to allow the Exchange to open Weekly option
series for up to five (5) consecutive week expirations. The Exchange
intends to add a maximum of five (5) consecutive week expirations under
the Weeklys Program; however, it will not add a Weekly option
expiration in the same week that a monthly option series expires or, in
the case of Quarterly Option Series (``QOS'') or Quarterly Index
Expirations (``QIXs''), on an expiration that coincides with an
expiration of QOS or QIXs on the same class. In other words, the total
number of consecutive expirations will be five
[[Page 69909]]
(5), including any existing monthly or quarterly expirations.\6\ This
change is being proposed notwithstanding the current cap of 30 series
per class under the Weeklys Program.
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\6\ For example, if quarterly options expire week 1 and monthly
options expire week 3 from now, the proposal would allow the
following expirations: week 1 quarterly option, week 2 Weekly
option, week 3 monthly option, week 4 Weekly option, and week 5
Weekly option. If quarterly options expire week 3 and monthly
options expire week 5, the following expirations would be allowed:
week 1 Weekly option, week 2 Weekly option, week 3 quarterly option,
week 4 Weekly option, and week 5 monthly option.
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The Exchange notes that the Weeklys Program has been well-received
by market participants, in particular by retail investors. The Exchange
believes that the current proposed revision to the Weeklys Program will
permit the Exchange to meet increased customer demand and provide
market participants with the ability to hedge in a greater number of
option classes and series.
With regard to the impact of this proposal on system capacity, the
Exchange has analyzed its capacity and represents that it and the
Options Price Reporting Authority have the necessary systems capacity
to handle the potential additional traffic associated with trading of
an expanded number of expirations that participate in the Weeklys
Program.
In addition, to provide for circumstances where the underlying
security or index has moved such that there are no series that are at
least 10% above or below the current price or value of the underlying
security or index, the Exchange is proposing to add new subparagraphs
(6) and (vi) to CBOE Rules 5.5(d) and 24.9(a)(2)(A), respectively, to
provide that the Exchange would delist series with no open interest in
both the call and the put series having a: (i) strike higher than the
highest price with open interest in the put and/or call series for a
given expiration week; and (ii) strike lower than the lowest strike
price with open interest in the put and/or the call series for a given
expiration week, so as to list series that are at least 10% but not
more than 30% above or below the current price or value of the
underlying security or index. Further, in the event that all existing
series have open interest and there are no series at least 10% above or
below the current price or value of the underlying security or index,
the Exchange may list additional series, in excess of the 30 series per
class allowed currently under CBOE Rules 5.5(d)(1) and
24.9(a)(2)(A)(i), that are at least 10% and not more than 30% above or
below the current price or value of the underlying security or index.
The Exchange believes that it is important to allow investors to
roll existing option positions and to ensure that there are always
series at least 10% but not more than 30% above or below the current
price or value of the underlying security or index will allow investors
the flexibility they need to roll existing positions.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange 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.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that expanding the Weeklys Program will
result in a continuing benefit to investors by giving them more
flexibility to closely tailor their investment decisions and hedging
decisions in a greater number of securities. The Exchange also believes
that expanding the Weeklys Program will provide the investing public
and other market participants with additional opportunities to hedge
their investment thus allowing these investors to better manage their
risk exposure. While the expansion of the Weeklys Program will generate
additional quote traffic, the Exchange does not believe that this
increased traffic will become unmanageable since the proposal remains
limited to a fixed number of expirations. The Exchange believes that
the ability to delist series with no open interest in both the call and
the put series will benefit investors by devoting the current cap in
the number of series to those series that are more closely tailored to
the investment decisions and hedging decisions of investors.
B. Self-Regulatory Organization's Statement on Burden on Competition
This proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act. In this regard and as indicated above, the Exchange notes that
proposal is a competitive filing. CBOE believes this proposed rule
change is necessary to permit fair competition among the options
exchanges.
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 significantly
affect the protection of investors or the public interest, does not
impose any significant burden on competition, and, by its terms, does
not become operative for 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 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
Commission has waived this requirement in this case.
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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 the proposal is substantially similar to those of
other exchanges that have been approved by the Commission and permit
such exchanges to open up to five consecutive expirations under their
respective Short Term Option Series Programs as well as allow for the
exchanges to delist any Weekly option series that do not have open
interest and expand the number of series per class permitted in Weekly
options under limited circumstances.\11\ Therefore, the Commission
designates the proposal operative upon filing.\12\
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\11\ See supra note 3.
\12\ 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 the 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.
[[Page 69910]]
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-2012-110 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-2012-110. 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-2012-110 and should be
submitted on or before December 12, 2012.
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. 2012-28262 Filed 11-20-12; 8:45 am]
BILLING CODE 8011-01-P