[Federal Register Volume 78, Number 123 (Wednesday, June 26, 2013)]
[Notices]
[Pages 38423-38424]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-15224]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69807; File No. SR-CBOE-2013-043]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Approving a Proposed Rule Change Relating to
Exchange Rule 9.21
June 20, 2013.
I. Introduction
On April 25, 2013, Chicago Board Options Exchange, Incorporated
(the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') a proposed rule change pursuant to Section
19(b)(1) \1\ of the Securities Exchange Act of 1934 (the ``Exchange
Act''), and Rule 19b-4 thereunder.\2\ The proposed rule change was
published for comment in the Federal Register on May 14, 2013.\3\ The
Commission received no comments on the proposal. This order approves
the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 69535 (May 14,
2013), 78 FR 28262 (May 14, 2013) (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposal
The Exchange proposed to update Exchange Rule 9.21, ``Options
Communications,'' to conform with changes recently made by the
Financial Industry Regulatory Authority, Inc. (``FINRA'') to its
corresponding rule.\4\ The proposed changes to Exchange Rule 9.21 are
designed to alert Trading Permit Holders (``TPHs'') to their
requirements with respect to Options Communications while further
regulating all communications for compliance with Exchange Rules and
the Securities Exchange Act of 1934 (the ``Act'').
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 68650 (January 14,
2013), 78 FR 4182 (January 18, 2013) (Notice of Immediate
Effectiveness of SR-FINRA-2013-001). The Exchange also proposed
certain changes in Rule 9.21 to conform with aspects of the FINRA
rule that predated the recent FINRA amendment and were not changed
by that amendment.
---------------------------------------------------------------------------
First, the proposed rule change amends Exchange Rule 9.21(a) to
reduce the number of defined categories of communication from six (in
the current rule) to three. The proposed three categories of
communications are: Retail communications, correspondence, and
institutional communications. Current definitions of ``sales
literature,'' ``advertisement,'' and ``independently prepared reprint''
are combined into a single category of ``retail communications.'' Thus,
the Exchange proposed to define ``retail communication'' as ``any
written (including electronic) communication that is distributed or
made available to more than 25 retail investors within any 30 calendar-
day period.'' The Exchange also proposed to update the definition of
``correspondence'' to ``any written (including electronic)
communication distributed or made available by a Trading Permit Holder
to 25 or fewer retail customers within any 30 calendar-day period.''
Finally, the Exchange proposed to define ``institutional
communication'' to include written
[[Page 38424]]
(including electronic) communications that are distributed or made
available only to institutional investors.
Second, the Exchange proposed to amend Rule 9.21(b), ``Approval by
Registered Options Principal'', to replace the phrase ``advertisements,
sales literature, and independently prepared reprints'' in Rule
9.21(b)(i) with the new proposed term, ``retail communications.''
Under proposed rule 9.21(b)(ii), correspondence would ``need not be
approved by a Registered Options Principal prior to use'' but would be
subject to the supervision and review requirements of Exchange Rule
9.8. The Exchange proposed to delete the requirement for principal
approval of correspondence that is distributed to 25 or more existing
retail customers within a 30 calendar-day period that makes any
financial or investment recommendation or otherwise promotes the
product or service of a TPH. Under the proposed Rule 9.21(b), such
communications would be considered retail communications and therefore
would be subject to the principal approval requirement. As such, the
proposed change would not substantively change the scope of options
communications that would require principal approval.
Third, the Exchange proposed to modify the required approvals of
``Institutional communications'' by adding that a TPH shall ``establish
written procedures that are appropriate to its business, size,
structure, and customers for review by a Registered Options Principal
of institutional communications used by the Trading Permit Holder or
TPH organization.''
Fourth, the Exchange proposed to amend Rule 9.21(c) to replace the
phrase ``advertisements, sales literature, and independently prepared
reprints'' with the new proposed term ``retail communications.'' The
Exchange also proposed to further exempt options disclosure documents
and prospectuses from Exchange review as other requirements apply to
these documents under the Securities Act of 1933.
Fifth, the Exchange proposed to specify in Rule 9.21(d) that TPHs
may not use any options communications that ``constitute a prospectus''
unless the communications meet the requirements of the Securities Act
of 1933. Finally, the Exchange proposed to move and slightly modify
Rule 9.21(d) to state that any statement made referring to ``potential
opportunities or advantages presented by options'' must also be
accompanied by a statement identifying the potential risks posed.
III. Discussion
As noted above, the Commission received no comments on the proposed
rule change. The Commission has carefully reviewed the proposed rule
change and finds that it is generally consistent with the Act and the
rules and regulations thereunder applicable to the Exchange \5\ and, in
particular, the requirements of Section 6(b) of the Act.\6\
Specifically, the Commission finds the proposed rule change is
consistent with Section 6(b)(5) of the Act,\7\ which requires that the
rules of a national securities exchange, among other things, be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Commission believes the proposed rule change is consistent with
Section 6(b)(5) of the Act,\8\ which requires that the rules of an
exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\5\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition and
capital formation. See 15 U.S.C. 78c(f).
\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
\8\ Id.
---------------------------------------------------------------------------
In particular, the Commission believes that the proposed rule
change will help TPHs that are also members of FINRA to comply with
their obligations regarding options communications by better aligning
the Exchange's requirements with those of FINRA. In addition, the
Commission believes that the proposed rule change will help protect
investors from potentially false or misleading communications with the
public distributed by Exchange TPHs.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\9\ that the proposed rule change (SR-69535) be, and hereby is,
approved.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
---------------------------------------------------------------------------
\10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-15224 Filed 6-25-13; 8:45 am]
BILLING CODE 8011-01-P