[Federal Register Volume 79, Number 66 (Monday, April 7, 2014)]
[Notices]
[Pages 19139-19141]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-07633]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71836; File No. SR-CBOE-2014-027]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Renew an Existing Pilot Program
April 1, 2014.
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 March 25, 2014, Chicago Board Options Exchange, Incorporated
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange
Commission (the ``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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to renew an existing pilot program until
November 3, 2014. Under the existing pilot program, the Exchange is
permitted to list P.M.-settled options on broad-based indexes that
expire on: (a) Any Friday of the month, other than the third Friday-of-
the-month (``End of Week Expirations'' or ``EOWs''), and (b) the last
trading day of the month (``End of Month Expirations'' or ``EOMs'').
The text of the proposed rule change is provided below. (additions are
italicized; deletions are [bracketed])
* * * * *
Chicago Board Options Exchange, Incorporated
Rules
* * * * *
Rule 24.9. Terms of Index Option Contracts
(a)-(d) No change.
(e) End of Week/End of Month Expirations Pilot Program (``EOW/
EOM Pilot Program'')
(1) End of Week (``EOW'') Expirations. The Exchange may open for
trading EOWs on any broad-based index eligible for regular options
trading to expire on any Friday of the month, other than the third
Friday-of-the-month. EOWs shall be subject to all provisions of this
Rule and treated the same as options on the same underlying index
that expire on either the Saturday following the third Friday of the
month, for series expiring prior to February 1, 2015, or on the
third Friday of the expiration month, for series expiring on or
after February 1, 2015; provided, however, that EOWs shall be P.M.-
settled.
(2) End of Month (``EOM'') Expirations. The Exchange may open
for trading EOMs on any broad-based index eligible for regular
options trading to expire on last trading day of the month. EOMs
shall be subject to all provisions of this Rule and treated the same
as options on the same underlying index that expire on either the
Saturday following the third Friday of the month, for series
expiring prior to February 1, 2015, or on the third Friday of the
expiration month, for series expiring on or after February 1, 2015;
provided, however, that EOMs shall be P.M.-settled.
(3) Duration of EOW/EOM Pilot Program. The EOW/EOM Pilot Program
shall be through [April 14, 2014] November 3, 2014.
(4) EOW/EOM Trading Hours on the Last Trading Day. On the last
trading day, transactions in expiring EOWs and EOMs may be effected
on the Exchange between the hours of 8:30 a.m. (Chicago time) and
3:00 p.m. (Chicago time). This subsection (4) applies to all
outstanding expiring EOW and EOM Expirations listed on or before May
6, 2011 and all EOWs and EOMs listed thereafter under the EOW/EOM
Pilot Program.
. . . Interpretations and Policies:
.01-.14 No change
* * * * *
The text of the proposed rule change is also 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.
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 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.
[[Page 19140]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On September 14, 2010, the Commission approved a CBOE proposal to
establish a pilot program under which the Exchange is permitted to list
P.M.-settled options on broad-based indexes to expire on (a) any Friday
of the month, other than the third Friday-of-the-month, and (b) the
last trading day of the month.\3\ Under the terms of the End of Week/
End of Month Expirations Pilot Program (``Program''), EOWs and EOMs are
permitted on any broad-based index that is eligible for regular options
trading. EOWs and EOMs are cash-settled and have European-style
exercise. The proposal became effective on a pilot basis for a period
of fourteen months that commenced on the next full month after approval
was received to establish the Program \4\ and was subsequently
extended.\5\ The Program is scheduled to expire on April 14, 2014. The
Exchange believes that the Program has been successful and well
received by its Trading Permit Holders and the investing public during
that the time that it has been in operation. The Exchange hereby
proposes to extend the Program until November 3, 2014. This proposal
does not request any other changes to the Program.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 62911 (September 14,
2010), 75 FR 57539 (September 21, 2010) (order approving SR-CBOE-
2009-075).
\4\ Id.
\5\ See Securities Exchange Act Release No. 65741 (November 14,
2011), 76 FR 72016 (November 21, 2011) (immediately effective rule
change extending the Program through February 14, 2013). See also
Securities Exchange Act Release No. 68933 (February 14, 2013), 78 FR
12374 (February 22, 2013) (immediately effective rule change
extending the Program through April 14, 2014).
---------------------------------------------------------------------------
Pursuant to the order approving the establishment of the Program,
two months prior to the conclusion of the pilot period, CBOE is
required to submit an annual report to the Commission, which addresses
the following areas: Analysis of Volume & Open Interest, Monthly
Analysis of EOW & EOM Trading Patterns and Provisional Analysis of
Index Price Volatility. The Exchange has submitted, under separate
cover, the annual report in connection with the present proposed rule
change. Confidential treatment under the Freedom of Information Act is
requested regarding the annual report.
If, in the future, the Exchange proposes an additional extension of
the Program, or should the Exchange propose to make the Program
permanent (which the Exchange currently intends to do), the Exchange
will submit an annual report (addressing the same areas referenced
above and consistent with the order approving the establishment of the
Program) to the Commission at least two months prior to the expiration
date of the Program. The annual report will be provided to the
Commission on a confidential basis. Any positions established under the
Program will not be impacted by the expiration of the Program.
The Exchange believes there is sufficient investor interest and
demand in the Program to warrant its extension. The Exchange believes
that the Program has provided investors with additional means of
managing their risk exposures and carrying out their investment
objectives. Furthermore, the Exchange has not experienced any adverse
market effects with respect to the Program.
The Exchange believes that the proposed extension of the Program
will not have an adverse impact on capacity.
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.\6\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \7\ 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, processing information with respect to, and facilitation
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) \8\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
\8\ Id.
---------------------------------------------------------------------------
In particular, the Exchange believes that the Program has been
successful to date and states that it has not encountered any problems
with the Program. The proposed rule change allows for an extension of
the Program for the benefit of market participants. Additionally, the
Exchange believes that there is demand for the expirations offered
under the Program and believes that that EOWs and EOMs will continue to
provide the investing public and other market participants increased
opportunities to better manage their risk exposure.
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. Specifically, the Exchange
believes that, by extending the expiration of the Program, the proposed
rule change will allow for further analysis of the Program and a
determination of how the Program shall be structured in the future. In
doing so, the proposed rule change will also serve to promote
regulatory clarity and consistency, thereby reducing burdens on the
marketplace and facilitating investor protection.
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
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 for 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 \9\ and Rule 19b-
4(f)(6)(iii) thereunder.\10\
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the 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 asked the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. The Commission believes that waiving the 30-day operative delay
is consistent with the protection of investors and the public interest,
as it will allow the pilot program to continue
[[Page 19141]]
uninterrupted, thereby avoiding investor confusion that could result
from a temporary interruption in the pilot program. For this reason,
the Commission designates the proposed rule change to be operative upon
filing.\11\
---------------------------------------------------------------------------
\11\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
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.
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-2014-027 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2014-027. 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 at 100 F Street NE., Washington,
DC 20549-1090 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 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-2014-027, and should be
submitted on or before April 28, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
---------------------------------------------------------------------------
\12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-07633 Filed 4-4-14; 8:45 am]
BILLING CODE 8011-01-P