[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62858-62860]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24676]
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SECURITIES AND EXCHANGE COMMISSION
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing of a Proposed Rule Change and Amendment
No. 1 Thereto Relating to the Short Term Option Series Program
[Release No. 34-70685; File No. SR-CBOE-2013-096]
October 15, 2013. Pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
[[Page 62859]]
thereunder,\2\ notice is hereby given that on October 2, 2013, Chicago
Board Options Exchange, Incorporated (``CBOE'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I and II, below, which
Items have been prepared by the Exchange. On October 15, 2013, the
Exchange filed Amendment No. 1 to the proposal.\3\ The Commission is
publishing this notice to solicit comments on the proposed rule change,
as modified by Amendment No. 1 thereto, from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, the Exchange proposed to delete the
phrase ``for each series'' in the proposed rule text for Rule 5.5(d)
located on page three of the 19b-4 and page 19 of the Exhibit 5 of
the original filing and in the proposed rule text for Rule
24.9(a)(2)(A) located on page four of the 19b-4 and page 20 of the
Exhibit 5 of the original filing.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange is proposing to amend Exchange Rules 5.5(d) and
24.9(a)(2)(A) to allow the Exchange to list five Short Term Option
Series at one time and to specify that new series of Short Term Option
Series may be listed up to, and including on, the expiration date. The
text of the proposed rule change is available on the Exchange's Web
site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 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 the
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 these 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 aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to amend Exchange Rules 5.5(d) and
24.9(a)(2)(A). Currently the Exchange's Rules allow for the Exchange to
list options in the Short Term Option Series Program (``Weeklys
Program'' or ``Weekly option'') ``on each of the next five consecutive
Fridays that are business days.'' \4\ The filing which gave the
Exchange authority to list five Weekly option expirations specifically
states that ``the total number of consecutive expirations will be five
(5), including any existing monthly or quarterly expirations'' for the
Weeklys Program.\5\ The Exchange is now proposing to make explicit that
the next five Weekly options may listed at one time, not including the
monthly or quarterly options. The Exchange is also proposing to codify
an existing practice by adding language stating that strikes may be
listed up until and on the day of expiration.
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\4\ See Exchange Rules 5.5(d) and 24.9(a)(2)(A).
\5\ See Securities Exchange Act Release No. 68242 (November 15,
2012), 77 FR 69908 (November 21, 2012) (notice of SR-CBOE-2012-110
which was a rule filing based on based on an approved filings
submitted by NYSE Arca, Inc. (``NYSE Arca'') and NYSE MKT, LLC
(``NYSE MKT'')).
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As proposed, the Exchange will have the ability to list a total of
five Weeklys and that count of five would not include monthly or
quarterly option expirations. The Exchange notes that this proposal
would restrict the five listed Weeklys to those closest to the Short
Term Option Opening Date. For example, if a class of options has five
Weeklys listed with expiration dates in July, the other two listed
expiration dates may not be in December. The Exchange believes that
allowing otherwise would undermine the purpose of the Short Term Option
Program.
As examples of how this would work in practice, consider a
situation in which a quarterly option expires week 1 and a monthly
option 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, week 5 Weekly option, week 6
Weekly option, and week 7 Weekly option.\6\ As another example, if a
quarterly option expires week 3 and a monthly option expires week 5,
the following expirations would be allowed: week 1 Weekly option, week
2 Weekly option, week 3 quarterly option, week 4 Weekly option, week 5
monthly option, week 6 Weekly option, week 7 Weekly option.\7\
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\6\ The proposal would not allow, for example, for nothing to be
listed week 7 but week 8 a Weekly option.
\7\ Id.
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Next, the Exchange is proposing to add language to Rules 5.5(d) and
24.9(a)(2)(A) to state that additional series of Weekly options may be
added up to, and including on, the expiration date of the series.\8\
Currently, Exchange rules state that the Exchange ``may open up to 20
initial series for each option class that participates in the Short
Term Option Series Program'' and ``up to 10 additional series for each
option class that participates in the Short Term Option Series
Program'' however the Exchange's rules are silent on when series may be
added.\9\ In practice, however, the Exchange, along with the other
exchanges, list additional series until the expiration day.\10\ The
Exchange believes that codifying this provision will clearly state
authority which is not currently explicitly stated to add series up
until the day of expiration which is in the current rules. In addition,
given the short lifespan of Weeklys, the Exchange believes that the
ability to list new series of options intraday is appropriate.
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\8\ The Exchange is also proposing to add language stating that
the proposed provisions in Rules 5.5(d)(4) and 24.9(a)(2)(A)(iv)
will not contradict current provisions in CBOE Rules. More
specifically, the proposed provisions would not contradict 5.5.04
and 24.9.01(c) respectively. The Exchange believes this addition
will eliminate any confusion about when additional series may be
added in the Weeklys Program in comparison to other Exchange listing
programs.
\9\ See Exchange Rules 5.5(d)(3), 5.5.(d)(4),
24.9(a)(2)(A)(iii), and 24.9(a)(2)(A)(iv).
\10\ The Exchange notes that the Options Clearing Corporation
(``OCC'') has the ability to accommodate series in the Weeklys
Program added intraday.
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The Exchange notes that the Weeklys Program has been very 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. In addition, the proposed changes
will codify an existing practice in the Exchange's rules.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\11\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \12\ requirements that the rules of an exchange 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,
[[Page 62860]]
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 Exchange
believes the proposed rule change is consistent with the Section
6(b)(5) \13\ requirement that the rules of an exchange not be designed
to permit unfair discrimination between customers, issuers, brokers, or
dealers.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
\13\ Id.
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In particular, 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.
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 (``OPRA'') have the necessary systems
capacity to handle any potential additional traffic associated with
this current amendment to the Weeklys Program. The Exchange believes
that its TPHs will not have a capacity issue as a result of this
proposal. The Exchange also represents that it does not believe this
expansion will cause fragmentation to liquidity.
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. The Exchange believes this
proposed rule change will benefit investors by providing additional
methods to trade options on the liquid securities, and providing
greater ability to mitigate risk in managing large portfolios.
Specifically, the Exchange believes that investors would benefit from
the introduction and availability of additional series by more series
available as an investing tool. The Exchange also believes the proposed
changes will provide investors with an additional tool for hedging risk
in highly liquid securities. For all the reasons stated, the Exchange
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, and believes the proposed change will enhance
competition.
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
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission shall: (a) By order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be disapproved.
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-2013-096 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-2013-096. 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 on
official business days between the hours of 10:00 a.m. and 3:00 p.m.
Copies of such filing also will be available for inspection and copying
at the principal offices 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-2013-096, and should be submitted
on or before November 12, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24676 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P