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]
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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).
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17:06 Feb 27, 2006
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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 (https://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 (https://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.
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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 (https://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,
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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).
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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
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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).
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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 (https://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 (https://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).
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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
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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
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]]>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]
-----------------------------------------------------------------------
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.
---------------------------------------------------------------------------
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
(https://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.
---------------------------------------------------------------------------
\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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
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\7\ 15 U.S.C. 78a et seq.
\8\ 15 U.S.C. 78(f)(b).
\9\ 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.
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 (https://
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 (https://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.
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\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).
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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
