Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change Relating to Volatility Indexes, 10086-10088 [E6-2767]

Download as PDF 10086 Federal Register / Vol. 71, No. 39 / Tuesday, February 28, 2006 / Notices advised the Exchange that it has negotiated with a payment accepting firm to pay for the firm’s order flow. Included in this general administrative support, the Exchange tracks the number of qualified orders sent by a payment accepting firm, bills specialists and ROTs through their clearing firms and issues payments to payment accepting firms to reflect the collection and payment of the marketing fee. The Exchange rebates to specialists and ROTs, on a quarterly basis, the amount of marketing fees collected that have not been paid to order flow providers. The Exchange further states that the specialists are solely responsible, but are not required, to negotiate payment for order flow agreements with payment accepting firms and are responsible for any arrangements made with the payment accepting firms. The specialists will use the funds that are collected from a particular post on the Exchange to market for those specific products traded at that particular post on the Exchange. So long as it is within the above described parameters, the specific terms governing the orders that qualify for payment and the amount of any payments are determined by the specialists in their discretion. The Exchange asserts that the proposal is equitable as required by Section 6(b)(4) of the Act.8 In connection with the revision to the equity options marketing fee, the Exchange notes that increasing the fee from $0.40 to $0.75 per contract (except for SPDR options, which will continue to remain subject to the current fee level of $1.00 per contract) and limiting assessment to the electronic executions of customer orders from payment accepting firms is reasonable given the competitive pressure to attract options order flow. In addition, the Exchange submits that those trading crowds that benefit from a payment for order flow arrangement negotiated by the specialist should contribute to the success of the particular products. Accordingly, the Exchange believes that the proposal is an equitable allocation of reasonable fees among Exchange members. 2. Statutory Basis wwhite on PROD1PC65 with NOTICES The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,9 in general, and furthers the objectives of Section 8 Section 6(b)(4) of the Act, 15 U.S.C. 78f(b)(4), states that the rules of a national securities exchange provide for the equitable allocation of reasonable dues, fees and other charges among its members and issuers and other persons using its facilities. 9 15 U.S.C. 78f(b). VerDate Aug<31>2005 17:06 Feb 27, 2006 Jkt 208001 6(b)(4),10 in particular, in that it is designed to provide for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using facilities. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange believes that the proposed rule change will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received comments on the proposed rule change. The Amex has not received any unsolicited written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing proposed rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act,11 and paragraph (f)(2) of Rule 19b–4 thereunder 12 because it establishes or changes a due, fee, or other charge. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate 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 e-mail to rulecomments@sec.gov. Please include File Number SR–Amex–2006–15 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, U.S.C. 78f(b)(4). U.S.C. 78s(b)(3)(A)(ii). 12 17 CFR 240.19b–4(f)(2). 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–Amex–2006–15. This file number should be included on the subject line if e-mail 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 inspection and copying in the Commission’s Public Reference Room. Copies of such filing also will be available for inspection and copying at the Amex. 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–Amex– 2006–15 and should be submitted on or before March 21, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.13 Nancy M. Morris, Secretary. [FR Doc. E6–2752 Filed 2–27–06; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–53342; File No. SR–CBOE– 2006–08] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change Relating to Volatility Indexes February 21, 2006. 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 January 20, 2006, the Chicago Board Options Exchange, Incorporated (‘‘CBOE’’ or 10 15 13 17 11 15 1 15 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. E:\FR\FM\28FEN1.SGM 28FEN1 Federal Register / Vol. 71, No. 39 / Tuesday, February 28, 2006 / Notices ‘‘Exchange’’) 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 CBOE. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change CBOE proposes to revise the manner in which the expiration dates for each volatility-based index is determined. The description of this proposed rule filing is available for viewing on CBOE’s Web site (http://www.cboe.com), at the CBOE’s Office of the Secretary, and at the Commission’s public reference room. 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 CBOE 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 CBOE 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 Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this rule filing is to revise the methodology for determining the expiration dates for options on certain volatility-based indexes that are approved for listing and trading on the Exchange. The Commission previously approved for the Exchange to list and trade options and increased-value options on certain volatility-based securities indexes; specifically, the CBOE Volatility Index (‘‘VIX’’), the CBOE Nasdaq 100 Volatility Index (‘‘VXN’’), and the CBOE Dow Jones Industrial Average Volatility Index (‘‘VXD’’) (collectively ‘‘volatility indexes).3 Each volatility index, wwhite on PROD1PC65 with NOTICES 3 See Securities Exchange Act Release No. 49563 (April 14, 2004); 69 FR 21589 (April 21, 2004) (order approving SR–CBOE–2003–40, which allowed CBOE to trade options on the VIX, VXN, and VXD); see also Securities Exchange Act Release No. 49698 (May 13, 2004); 69 FR 29152 (May 20, 2004) (order approving SR–CBOE–2004–09, which allowed CBOE to trade increased-value options on the VIX, VXN, and VXD). VerDate Aug<31>2005 17:06 Feb 27, 2006 Jkt 208001 generally, uses the quotes of certain index option series (such as the S&P 500 index) to derive a measure of the volatility of the U.S. equity market. The volatility indexes provide investors with up-to-the-minute market estimates of expected volatility by extracting implied volatilities from real-time index option quotes. All volatility index options contracts were originally designed to expire on the Wednesday immediately prior to the third Friday of the month that immediately precedes the month in which the options used in the calculation of that index expire. This method was chosen to provide an exercise schedule that is similar to the manner in which most other option contracts expire (i.e., the third Friday of the month). Under this method, during any rolling twelve month period, in four of those twelve months, options on any volatility index would not expire exactly thirty days prior to the expiration of the options on the index on which that volatility index is based. To illustrate, under the current methodology, an option on the March 2006 VXN would expire on Wednesday, March 16, 2006 because that is the Wednesday immediately prior to the third Friday of March 2006. However, March 16, 2006 is 37 days prior to the date on which options on the Nasdaq 100 Index (‘‘NDX’’) expire. CBOE proposes to revise the methodology by having all volatility index options expire on the ‘‘Wednesday that is thirty days prior to the third Friday of the calendar month immediately following the expiring month.’’ This revised approach will provide consistency in the expiration of options on all volatility indexes by ensuring that every volatility index option will expire exactly thirty days prior to the date on which the index that the volatility index is based.4 To illustrate how this new methodology will work using the March 2006 VXN example above, the April 2006 NDX option will expire on Friday, April 21, 2006 and the March 2006 VXN option would expire on Wednesday March 22, 2006, which is exactly 30 days prior to the expiration of the NDX April options. Even though the March 2006 VXN option does not expire during the normal expiration week for all other 4 CBOE states that the revised expiration date calculation methodology for options on certain volatility indexes is consistent with the way in which expiration dates for futures on volatility indexes are calculated. Telephone conversation between James Flynn, Attorney, CBOE, and Florence Harmon, Senior Special Counsel, and Geoffrey Pemble, Special Counsel, Division of Market Regulation, Commission, on February 9, 2006. PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 10087 options, the Exchange believes it is more important that the volatility index options expire consistent with the 30day volatility measurement period. The Exchange represents that it will provide public disclosures and notifications to its members and the investing public of this change.5 The Exchange states that this proposal does not affect the rule text of any existing Exchange rule.6 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act 7 and the rules and regulations under the Act applicable to a national securities exchange and, in particular, the requirements of Section 6(b) of the Act.8 Specifically, the Exchange believes the proposed rule change is consistent with the requirements of Section 6(b)(5) of Act 9 that the rules of an exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts and, in general, to protect investors and the public interest. 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. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither received nor solicited written comments on the proposal. III. 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: 5 CBOE will issue an information circular to its members to notify them of the changes to the options expiration date calculation methodology contained in this proposed rule change. Telephone conversation between James Flynn, Attorney, CBOE, and Florence Harmon, Senior Special Counsel, and Geoffrey Pemble, Special Counsel, Division of Market Regulation, Commission, on February 9, 2006. 6 The original rule filing that allowed CBOE to list volatility-based index options included an exhibit attached to the rule filing, which provided, among other contract characteristics, a description of how the expiration date would be determined. That description was not included in the rule text. See note 1, supra. 7 15 U.S.C. 78a et seq. 8 15 U.S.C. 78(f)(b). 9 15 U.S.C. 78f(b)(5). E:\FR\FM\28FEN1.SGM 28FEN1 10088 Federal Register / Vol. 71, No. 39 / Tuesday, February 28, 2006 / Notices 6(b)(5) of the Act,11 which requires, among other things, that the rules of a • Use the Commission’s Internet national securities exchange be comment form (http://www.sec.gov/ designed to prevent fraudulent and rules/sro.shtml); or manipulative acts and practices, to • Send an e-mail to rulepromote just and equitable principles of comments@sec.gov. Please include File trade, to remove impediments to and Number SR–CBOE–2006–08 on the perfect the mechanism of a free and subject line. open market and a national market system and, in general, to protect Paper Comments investors and the public interest. • Send paper comments in triplicate The Commission believes that CBOE’s to Nancy M. Morris, Secretary, proposal to revise the methodology for Securities and Exchange Commission, determining the expiration dates for 100 F Street, NE., Washington, DC options on certain volatility-based 20549–1090. indexes so that such options expire on All submissions should refer to File the ‘‘Wednesday that is thirty days prior Number SR–CBOE–2006–08. This file to the third Friday of the calendar number should be included on the month immediately following the subject line if e-mail is used. To help the expiring month’’ is appropriate. As Commission process and review your noted by CBOE above, this revised comments more efficiently, please use approach will provide consistency in only one method. The Commission will the expiration of options on all volatility post all comments on the Commission’s indexes by ensuring that every volatility Internet Web site (http://www.sec.gov/ index option will expire exactly thirty rules/sro.shtml). Copies of the days prior to the date on which the submission, all subsequent index that the volatility index is based, amendments, all written statements rather than the prior approach under with respect to the proposed rule which such options would not expire change that are filed with the exactly thirty days prior to the Commission, and all written expiration of the options on the index communications relating to the on which that volatility index is based proposed rule change between the in four of the months in any rolling Commission and any person, other than twelve-month period. those that may be withheld from the The Exchange has requested public in accordance with the accelerated approval of the proposed provisions of 5 U.S.C. 552, will be rule change.12 The Commission finds available for inspection and copying in good cause for approving the proposed the Commission’s Public Reference rule change prior to the 30th day after Room. Copies of such filing also will be the date of publication of the notice of available for inspection and copying at filing in the Federal Register. The the principal office of the CBOE. All proposal is intended to ensure comments received will be posted consistency in expiration dates for without change; the Commission does options on all volatility indexes not edit personal identifying approved for listing and trading on information from submissions. You CBOE with the expiration of the options should submit only information that on the underlying indexes. The you wish to make available publicly. All Commission does not believe that the submissions should refer to File Exchange’s proposal raises any novel Number SR–CBOE–2006–08 and should regulatory issues. Therefore, the be submitted on or before March 21, Commission finds good cause, 2006. consistent with Section 19(b)(2) of the Act,13 to approve the proposed rule IV. Commission’s Findings and Order change, as amended, on an accelerated Granting Accelerated Approval of the basis. Proposed Rule Change wwhite on PROD1PC65 with NOTICES Electronic Comments After careful review, 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 exchange.10 In particular, the Commission finds that the proposed rule change is consistent with Section 10 In approving this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). VerDate Aug<31>2005 17:06 Feb 27, 2006 Jkt 208001 V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,14 that the proposed rule change (SR–CBOE–2006– 11 15 U.S.C. 78f(b)(5). conversation between James Flynn, Attorney, CBOE, and Florence Harmon, Senior Special Counsel, and Geoffrey Pemble, Special Counsel, Division of Market Regulation, Commission, on February 9, 2006. 13 15 U.S.C. 78s(b)(2). 14 Id. 12 Telephone PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 08) is hereby approved on an accelerated basis. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.15 Nancy M. Morris, Secretary. [FR Doc. E6–2767 Filed 2–27–06; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–53329; File No. SR–ISE– 2006–05] Self-Regulatory Organizations; International Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change and Amendment No. 1 Thereto Relating to Fee Changes February 16, 2006. 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 January 20, 2006, the International Securities Exchange, Inc. (‘‘ISE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which items have been prepared by ISE. On February 9, 2006, ISE submitted Amendment No. 1 to the proposed rule change.3 ISE has designated the proposed rule change as one establishing or changing a due, fee, or other charge, pursuant to Section 19(b)(3)(A)(ii) of the Act4 and Rule 19b– 4(f)(2) thereunder,5 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change ISE is proposing to amend its Schedule of Fees to establish fees for 15 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 In Amendment No. 1, the Exchange revised its Schedule of Fees to clarify ambiguities and correct misstatements therein, and discussed those changes in the purpose section of the proposal. Specifically, in Amendment No. 1, the Exchange removed the misstatement that a $0.10 surcharge is applied to all Premium Products (as defined herein) and instead provided a list of the specific Premium Products that are subject to the surcharge. Amendment No. 1 also clarified that the fee pilot program expiring on July 31, 2006 applies exclusively to Linkage orders. 4 15 U.S.C. 78s(b)(3)(A)(ii). 5 17 CFR 240.19b–4(f)(2). 1 15 E:\FR\FM\28FEN1.SGM 28FEN1

Agencies

[Federal Register Volume 71, Number 39 (Tuesday, February 28, 2006)]
[Notices]
[Pages 10086-10088]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-2767]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53342; File No. SR-CBOE-2006-08]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Order Granting Accelerated Approval 
of Proposed Rule Change Relating to Volatility Indexes

February 21, 2006.
    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 January 20, 2006, the Chicago Board Options Exchange, Incorporated 
(``CBOE'' or

[[Page 10087]]

``Exchange'') 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 CBOE. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CBOE proposes to revise the manner in which the expiration dates 
for each volatility-based index is determined. The description of this 
proposed rule filing is available for viewing on CBOE's Web site 
(http://www.cboe.com), at the CBOE's Office of the Secretary, and at 
the Commission's public reference room.

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 CBOE 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 CBOE 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this rule filing is to revise the methodology for 
determining the expiration dates for options on certain volatility-
based indexes that are approved for listing and trading on the 
Exchange. The Commission previously approved for the Exchange to list 
and trade options and increased-value options on certain volatility-
based securities indexes; specifically, the CBOE Volatility Index 
(``VIX''), the CBOE Nasdaq 100[supreg] Volatility Index (``VXN''), and 
the CBOE Dow Jones Industrial Average[supreg] Volatility Index 
(``VXD'') (collectively ``volatility indexes).\3\ Each volatility 
index, generally, uses the quotes of certain index option series (such 
as the S&P 500 index) to derive a measure of the volatility of the U.S. 
equity market. The volatility indexes provide investors with up-to-the-
minute market estimates of expected volatility by extracting implied 
volatilities from real-time index option quotes.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 49563 (April 14, 
2004); 69 FR 21589 (April 21, 2004) (order approving SR-CBOE-2003-
40, which allowed CBOE to trade options on the VIX, VXN, and VXD); 
see also Securities Exchange Act Release No. 49698 (May 13, 2004); 
69 FR 29152 (May 20, 2004) (order approving SR-CBOE-2004-09, which 
allowed CBOE to trade increased-value options on the VIX, VXN, and 
VXD).
---------------------------------------------------------------------------

    All volatility index options contracts were originally designed to 
expire on the Wednesday immediately prior to the third Friday of the 
month that immediately precedes the month in which the options used in 
the calculation of that index expire. This method was chosen to provide 
an exercise schedule that is similar to the manner in which most other 
option contracts expire (i.e., the third Friday of the month). Under 
this method, during any rolling twelve month period, in four of those 
twelve months, options on any volatility index would not expire exactly 
thirty days prior to the expiration of the options on the index on 
which that volatility index is based. To illustrate, under the current 
methodology, an option on the March 2006 VXN would expire on Wednesday, 
March 16, 2006 because that is the Wednesday immediately prior to the 
third Friday of March 2006. However, March 16, 2006 is 37 days prior to 
the date on which options on the Nasdaq 100 Index (``NDX'') expire.
    CBOE proposes to revise the methodology by having all volatility 
index options expire on the ``Wednesday that is thirty days prior to 
the third Friday of the calendar month immediately following the 
expiring month.'' This revised approach will provide consistency in the 
expiration of options on all volatility indexes by ensuring that every 
volatility index option will expire exactly thirty days prior to the 
date on which the index that the volatility index is based.\4\ To 
illustrate how this new methodology will work using the March 2006 VXN 
example above, the April 2006 NDX option will expire on Friday, April 
21, 2006 and the March 2006 VXN option would expire on Wednesday March 
22, 2006, which is exactly 30 days prior to the expiration of the NDX 
April options. Even though the March 2006 VXN option does not expire 
during the normal expiration week for all other options, the Exchange 
believes it is more important that the volatility index options expire 
consistent with the 30-day volatility measurement period.
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    \4\ CBOE states that the revised expiration date calculation 
methodology for options on certain volatility indexes is consistent 
with the way in which expiration dates for futures on volatility 
indexes are calculated. Telephone conversation between James Flynn, 
Attorney, CBOE, and Florence Harmon, Senior Special Counsel, and 
Geoffrey Pemble, Special Counsel, Division of Market Regulation, 
Commission, on February 9, 2006.
---------------------------------------------------------------------------

    The Exchange represents that it will provide public disclosures and 
notifications to its members and the investing public of this 
change.\5\ The Exchange states that this proposal does not affect the 
rule text of any existing Exchange rule.\6\
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    \5\ CBOE will issue an information circular to its members to 
notify them of the changes to the options expiration date 
calculation methodology contained in this proposed rule change. 
Telephone conversation between James Flynn, Attorney, CBOE, and 
Florence Harmon, Senior Special Counsel, and Geoffrey Pemble, 
Special Counsel, Division of Market Regulation, Commission, on 
February 9, 2006.
    \6\ The original rule filing that allowed CBOE to list 
volatility-based index options included an exhibit attached to the 
rule filing, which provided, among other contract characteristics, a 
description of how the expiration date would be determined. That 
description was not included in the rule text. See note 1, supra.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act \7\ and the rules and regulations under the Act applicable to a 
national securities exchange and, in particular, the requirements of 
Section 6(b) of the Act.\8\ Specifically, the Exchange believes the 
proposed rule change is consistent with the requirements of Section 
6(b)(5) of Act \9\ that the rules of an exchange be designed to promote 
just and equitable principles of trade, to prevent fraudulent and 
manipulative acts and, in general, to protect investors and the public 
interest.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78a et seq.
    \8\ 15 U.S.C. 78(f)(b).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither received nor solicited written comments on the 
proposal.

III. 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:

[[Page 10088]]

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2006-08 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2006-08. This file 
number should be included on the subject line if e-mail 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 inspection and 
copying in the Commission's Public Reference Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the CBOE. 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-2006-08 and should be submitted on or before March 
21, 2006.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    After careful review, 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 
exchange.\10\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\11\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, 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.
---------------------------------------------------------------------------

    \10\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission believes that CBOE's proposal to revise the 
methodology for determining the expiration dates for options on certain 
volatility-based indexes so that such options expire on the ``Wednesday 
that is thirty days prior to the third Friday of the calendar month 
immediately following the expiring month'' is appropriate. As noted by 
CBOE above, this revised approach will provide consistency in the 
expiration of options on all volatility indexes by ensuring that every 
volatility index option will expire exactly thirty days prior to the 
date on which the index that the volatility index is based, rather than 
the prior approach under which such options would not expire exactly 
thirty days prior to the expiration of the options on the index on 
which that volatility index is based in four of the months in any 
rolling twelve-month period.
    The Exchange has requested accelerated approval of the proposed 
rule change.\12\ The Commission finds good cause for approving the 
proposed rule change prior to the 30th day after the date of 
publication of the notice of filing in the Federal Register. The 
proposal is intended to ensure consistency in expiration dates for 
options on all volatility indexes approved for listing and trading on 
CBOE with the expiration of the options on the underlying indexes. The 
Commission does not believe that the Exchange's proposal raises any 
novel regulatory issues. Therefore, the Commission finds good cause, 
consistent with Section 19(b)(2) of the Act,\13\ to approve the 
proposed rule change, as amended, on an accelerated basis.
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    \12\ Telephone conversation between James Flynn, Attorney, CBOE, 
and Florence Harmon, Senior Special Counsel, and Geoffrey Pemble, 
Special Counsel, Division of Market Regulation, Commission, on 
February 9, 2006.
    \13\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change (SR-CBOE-2006-08) is hereby 
approved on an accelerated basis.
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    \14\ Id.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-2767 Filed 2-27-06; 8:45 am]
BILLING CODE 8010-01-P