[Federal Register Volume 76, Number 245 (Wednesday, December 21, 2011)]
[Notices]
[Pages 79250-79252]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-32604]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65972; File No. SR-CBOE-2011-125]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Expand the Weeklys Program
December 15, 2011.
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 December 13, 2011, the Chicago Board Options Exchange, Incorporated
(``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 Exchange filed the proposal as a ``non-controversial'' proposed
rule change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and
Rule 19b-4(f)(6) thereunder.\4\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
CBOE proposes to amend Rules 5.5 and 24.9 to increase the number of
option classes on which Short Term Options Series (``Weekly options'')
may be opened in the Exchange's Short Term Option Series Program
(``Weeklys Program'') from 25 to 30 classes. 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.
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
The purpose of this proposed rule change is to amend Rules 5.5 and
24.9 by increasing the number of option classes on which Weekly options
may be opened in the Exchange's Weeklys Program.\5\ Currently, the
Exchange may select up to 25 currently listed option classes on which
Weekly options may be opened in the Weeklys Program. The Exchange is
proposing to increase this to a total of 30 classes on which Weekly
options may be opened for trading. This is a competitive filing and is
based on recently approved filings submitted by The NASDAQ Stock Market
LLC for the NASDAQ Options Market (``NOM'') and NASDAQ OMX PHLX, Inc.
(``PHLX'').\6\
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\5\ 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).
\6\ See Securities Exchange Act Release Nos. 65775 (November 17,
2011), 76 FR 72476 (November 23, 2011) (SR-NASDAQ-2011-138) and
65776 (November 17, 2011), 76 FR 72482 (November 23, 2011) (SR-PHLX-
2011-131).
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On November 17, 2011, CBOE amended its Weeklys Program by
increasing the number of strikes that may be listed per class (from 20
to 30) that participates in the Weeklys Program,\7\ and by increasing
the number of classes (from 15 to 25) that are eligible to participate
in CBOE's Weeklys Program.\8\ On that same day, NOM and PHLX each
increased the number of classes that are eligible to participate in
their Weeklys Programs from 15 classes to 30 classes. As a result, CBOE
is competitively disadvantaged since it operates a substantially
similar Weeklys Program as NOM and PHLX but is limited to selecting
only 25 classes that may participate in CBOE Weeklys Program (whereas
PHLX and NOM may each select 30 classes).\9\
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\7\ See Securities Exchange Act Release No. 65772 (November 17,
2011), 76 FR 72484 (November 23, 2011) (SR-CBOE-2011-086).
\8\ See Securities Exchange Act Release No. 65774 (November 17,
2011), 76 FR 72488 (November 23, 2011) (SR-CBOE-2011-108).
\9\ CBOE is permitted to list Weekly options ``on any option
classes that are selected by other securities exchanges that employ
a similar program under their respective rules.'' See CBOE Rule
5.5(d)(1) and 24.9(a)(2)(A)(i).
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The Exchange is not proposing any changes to these additional
Weeklys
[[Page 79251]]
Program limitations other than to increase from 25 to 30 the number of
option classes that may participate in the Weeklys Program.
The Exchange notes that the Weeklys Program has been well-received
by market participants, in particular by retail investors. The Exchange
believes a modest increase to the number of classes that may
participate in the Weeklys Program, such as the one proposed in this
rule filing, 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.
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 the potential additional traffic associated with
trading of an expanded number of classes that participate in the
Weeklys Program.
The proposed increase to the number of classes eligible to
participate in the Weeklys Program is required for competitive purposes
as well as to ensure consistency and uniformity among the competing
options exchanges that have adopted similar Weeklys Programs.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) \10\ of the Act and the rules and regulations under
the Act, in general, and furthers the objectives of Section
6(b)(5),\11\ in particular, in that it is 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 facilitating transactions in securities, and to
remove impediments to and perfect the mechanisms of a free and open
market and a national market system, and, in general, to protect
investors and the public interest. 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 classes.
Further, the Exchange does not believe that the proposal will result in
a material proliferation of additional series because the number of
series per class also remains limited, and the Exchange does not
believe that the additional price points will result in fractured
liquidity.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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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 not necessary or appropriate in furtherance of
the purposes of the Act. In this regard and as indicated above, the
Exchange notes that the rule change is being proposed as a competitive
response to existing NOM and PHLX rules. CBOE believes this proposed
rule change is necessary to permit fair competition among the options
exchanges with respect to their short term options programs.
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 \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 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 the five-day prefiling 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 that of
another exchange that has been approved by the Commission.\14\
Therefore, the Commission designates the proposal operative upon
filing.\15\
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\14\ See supra note 6.
\15\ 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.
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-2011-125 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-2011-125. 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
[[Page 79252]]
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 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-2011-125 and should be
submitted on or before January 11, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-32604 Filed 12-20-11; 8:45 am]
BILLING CODE 8011-01-P