[Federal Register Volume 78, Number 238 (Wednesday, December 11, 2013)]
[Notices]
[Pages 75395-75396]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-29551]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71005; File No. SR-CBOE-2013-096]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Granting Approval of Proposed Rule Change, as
Modified by Amendment No. 1, Relating to the Short Term Option Series
Program
December 6, 2013.
I. Introduction
On October 2, 2013, Chicago Board Options Exchange, Incorporated
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend Exchange Rules 5.5(d)
and 24.9(a)(2)(A) to make certain modifications to the Exchange's Short
Term Option Series Program (``Weeklys Program''). The proposed rule
change was published for comment in the Federal Register on October 22,
2013.\3\ The Commission received no comment letters on the proposal.
This order approves the proposed rule change, as modified by Amendment
No. 1.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 70685 (October 15,
2013), 78 FR 62858 (``Notice''). The Commission notes that on
October 15, 2013, the Exchange submitted Amendment No. 1 to the
proposed rule change to make certain amendments that removed the
phrase ``for each series'' from the proposed rule language relating
to Short Term Option Expiration Dates.
---------------------------------------------------------------------------
II. Description of the Proposal
The Exchange proposed to amend Exchange Rules 5.5(d) and
24.9(a)(2)(A) to: (i) Allow for the Exchange to list options in the
Weeklys Progam (``Weekly options'') on each of the next five Fridays
that are business days and are not Fridays in which monthly options
series or quarterly options series expire (``Short Term Option
Expiration Dates'') at one time; and (ii) state that additional series
of Weekly options may be listed up to, and including on, the day of
expiration.
The proposed rule change would give the Exchange the ability to
list a total of five Weekly options expirations at one time, not
including monthly or quarterly option expirations. Currently, the
Exchange's rules provide that the Exchange may open for trading on any
Thursday or Friday that is a business day (``Short Term Option Opening
Date'') options expiring ``on each of the next five consecutive Fridays
that are business days.'' \4\ Because a Friday expiration may coincide
with an existing expiration of a monthly or quarterly series of an
option in the same class as the Weekly options series, the current
requirement that the Fridays be consecutive may mean that the Exchange
cannot open five Short Term Option Expiration Dates because of existing
monthly or quarterly expirations. The proposed rule change would allow
the Exchange to open the five Weekly options expirations closest to the
Short Term Option Opening Date, not including monthly or quarterly
option expirations.
---------------------------------------------------------------------------
\4\ See Exchange Rules 5.5(d) and 24.9(a)(2)(A).
---------------------------------------------------------------------------
The proposed rule change also adds 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.\5\
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.'' \6\ However, the Exchange's rules are silent on when series
may be added. Therefore, the Exchange is proposing to add language
stating that additional Weekly options series may be added up to and on
the day of expiration.
---------------------------------------------------------------------------
\5\ The Exchange also proposed 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 stated that it 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.
\6\ See Exchange Rules 5.5(d)(3), 5.5.(d)(4),
24.9(a)(2)(A)(iii), and 24.9(a)(2)(A)(iv).
---------------------------------------------------------------------------
The Exchange asserts that the proposed revisions 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.\7\ In addition, the Exchange
stated that it believes that, given the short lifespan of Weekly
options, the ability to list new series of options intraday is
appropriate.\8\
---------------------------------------------------------------------------
\7\ See Notice, supra note 3 at 62859.
\8\ See id.
---------------------------------------------------------------------------
III. Discussion and Commission Findings
After careful review of the proposed rule change, the Commission
finds that the proposed rule change is consistent with the requirements
of the Act and the rules and regulations thereunder applicable to a
national securities
[[Page 75396]]
exchange.\9\ Specifically, the Commission finds that the proposal is
consistent with Section 6(b)(5) of the Act,\10\ which requires, among
other things, that the rules of a national securities exchange be
designed to promote just and equitable principles of trade, to prevent
fraudulent and manipulative acts, 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. The
Commission believes that the proposed change may provide the investing
public and other market participants with greater flexibility to
closely tailor their investment and hedging decisions in a greater
number of option series, thus allowing investors to better manage their
risk exposure.
---------------------------------------------------------------------------
\9\ In approving this proposed rule change, the Commission
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
In approving this proposal, the Commission notes that the Exchange
has represented that it and the Options Price Reporting Authority
(``OPRA'') have the necessary systems capacity to handle the potential
additional traffic associated with the Exchange's proposed amendments
to the Weeklys Program.\11\ That Commission also notes that the
Exchange represented that the Options Clearing Corporation (``OCC'')
has the ability to accommodate series in the Weeklys Program added
intraday.\12\ The Commission expects the Exchange to monitor the
frequency of additional series listed as a result of this proposal and
record the reasons therefor, and monitor the trading volume associated
with the additional options series listed as a result of this proposal
and the effect of these additional series on market fragmentation and
on the capacity of the Exchange's, OPRA's, OCC's, and vendors'
automated systems.
---------------------------------------------------------------------------
\11\ See Notice, supra note 3 at 62860.
\12\ See id. at 62859, n. 10.
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\13\ that the proposed rule change, as modified by Amendment No. 1
(SR-CBOE-2013-096), be, and it hereby is, approved.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
---------------------------------------------------------------------------
\14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29551 Filed 12-10-13; 8:45 am]
BILLING CODE 8011-01-P