Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Change the Permissible Exercise Price and Premium Calculations for FLEX Equity Options, 59690-59692 [E8-23926]
Download as PDF
<![CDATA[
59690
Federal Register / Vol. 73, No. 197 / Thursday, October 9, 2008 / Notices
increase will go into effect on the
Operative Date. In addition the Price
List will be revised to include the
monthly rate charged for services that
are billed on a monthly rather than
annual basis. Reference to the
Membership Certificate fee of $20.00
will be eliminated since the Exchange
will no longer issue such certificates.
3. The Price List section on Booth
Rental and Order Pads is revised and
updated to eliminate the references to (i)
Order Pads since there is no fee
indicated for order pads in that section;
and (ii) the Booth Rental fees no longer
in effect.
4. The Price List section on Members
Fees is revised to (i) change the name of
the section to 86 Trinity Permit Holder
Fees; (ii) eliminate Membership Dues;
(iii) eliminate Initiation Fees, except for
the Application Processing Fee and the
$45 fee for use of the Exchange’s inhouse fingerprinting service; (iv) change
the name of the subsection Membership
Fees to 86 Trinity Permit Holder Fees
and waive the Limited Trading Permits
(‘‘LTP’’) fee for those LTP holders who
become 86 Trinity Permit Holders after
the Transaction closes8 The LTP Fee is
billed at the beginning of each quarter,
therefore, if the Transaction closes in
the middle of a quarter, waiver of the fee
will be effective at the beginning of the
next quarter and will not be applied
retroactively; (v) eliminate the
Qualifying Maintenance fee charged to
Interim Members; and (vi) eliminate
obsolete notes.
5. The Price List section on
Registration and IDC Fees is being
revised to replace NASD with FINRA.
References throughout the Price List
to Amex or ASE will be revised to NYSE
Alternext U.S. or Exchange where
appropriate.
(2) Statutory Basis
The Exchange believes that the
proposed fee change is consistent with
Section 6(b)(4) of the 1934 Act 9
regarding the equitable allocation of
reasonable dues, fees and other charges
among exchange members and other
persons using exchange facilities. In
particular the Exchange is revising its
Price List to be in effect during the
transition period after the closing of its
Transaction with NYSE Euronext. Most
of the fees currently in place on the
sroberts on PROD1PC70 with NOTICES
8 As
discussed in proposed rule change SR–Amex
2008–62, during the transition period physical and
electronic access to NYSE Alternext US’s trading
facilities will only be made available to individuals
that obtain an 86 Trinity Permit, thus the access a
LTP holder had prior to the Transaction will be
cancelleld and for continued access such former
LTP holder may obtain an 86 Trinity Permit.
9 15 U.S.C. 78f(b)(4).
VerDate Aug<31>2005
21:01 Oct 08, 2008
Jkt 217001
Amex will remain in effect after the
closing of the Transaction and
throughout the transition period,
however, certain member fees are being
waived for the transition period to help
off-set costs it is anticipated members
will incur when transitioning their
operations to NYSE Alternext’s new
trading facilities.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The proposed rule change does not
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the 1934
Act.
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
The foregoing rule change has become
effective immediately pursuant to
Section 19(b)(3)(A)(ii) of the Act 10 and
Rule 19b–4(f)(2) 11 thereunder. At any
time within 60 days of the filing of such
proposed rule change, the Commission
may summarily abrogate such rule
change if it appears to the Commission
that such action is necessary of
appropriate in the public interest, for
the protection of investors, or otherwise
in the furtherance of the purposes of the
Securities Exchange Act of 1934.
IV. Solicitation of Comments
All submissions should refer to File
Number SR–Amex–2008–73. 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, 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–Amex–
2008–73 and should be submitted on or
before October 30, 2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority. 12
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–23925 Filed 10–8–08; 8:45 am]
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:
BILLING CODE 8011–01–P
Electronic Comments
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Change the
Permissible Exercise Price and
Premium Calculations for FLEX Equity
Options
• 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–2008–73 on the
subject line.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58718; File No. SR–CBOE–
2008–102]
October 2, 2008.
Paper Comments:
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549–1090.
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
12 17
10 15
U.S.C. 78s(b)(3)(A)(ii).
11 17 CFR 240.19b–4(f)(2).
PO 00000
Frm 00095
Fmt 4703
Sfmt 4703
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\09OCN1.SGM
09OCN1
Federal Register / Vol. 73, No. 197 / Thursday, October 9, 2008 / Notices
September 30, 2008, the Chicago Board
Options Exchange, Incorporated
(‘‘Exchange’’ or ‘‘CBOE’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Exchange filed the proposal as a ‘‘noncontroversial’’ 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rules 24A.4 and 24B.4 to change the
permissible exercise price and premium
calculations for FLEX Equity Options.5
The text of the proposed rule change is
available on the Exchange’s Web site
(https://www.cboe.org/Legal), at the
Exchange’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
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
sroberts on PROD1PC70 with NOTICES
Currently, our rules provide that
FLEX Equity Options exercise prices
and premiums may be stated in dollar
amount or percentage of the price of the
underlying security, rounded to the
nearest minimum tick (which may be as
small as $0.01) or, in the case of exercise
prices, to the nearest one-eighth of a
3 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
5 FLEX Equity Options provide investors with the
ability to customize basic option features including
size, expiration date, exercise style, and certain
exercise prices.
4 17
VerDate Aug<31>2005
21:01 Oct 08, 2008
Jkt 217001
dollar or $0.10.6 The purpose of this
rule change is to revise the permissible
exercise price and premium calculations
for FLEX Equity Options to be more
aligned with the permissible
calculations for FLEX Index Options.7
Under the proposed rule:
• Exercise prices and premiums for
FLEX Equity Options may be stated in
a dollar amount, which is the same as
the current rule allows.
• Exercise prices and premiums may
also be stated in a percentage of the
price of the underlying security at the
time of the trade, which is the same as
the current rule allows, or as of the open
or close of trading on the Exchange on
the trade date. Providing the flexibility
to use a percentage based on the open
or close of the underlying security is
consistent with our FLEX Index Option
rules, which permit exercise prices to be
specified in terms of a percentage of the
index value calculated as of the open or
close of trading on the Exchange on the
trade date.8
• Exercise prices and premiums may
also be stated in a method for fixing
such a number at the time a FLEX
Request for Quote or FLEX Order is
traded. For example, the exercise price
and premium for a FLEX Equity Option
might be based on the volume-weighted
average price (‘‘VWAP’’) of the
underlying for the trade day. Providing
the flexibility to determine a particular
method for fixing the exercise prices or
premiums at the time of a trade is
consistent with our FLEX Index Option
rules, which permit exercise prices to be
specified in terms of a method for fixing
such a number at the time of a trade.9
We are also proposing to update the
rounding formula for FLEX Equity
Option exercises. As indicated above,
the existing rules provide that the
exercise price will be rounded to the
nearest minimum increment, one-eighth
of a dollar or $0.10. We are proposing
to change the $0.10 parameter to instead
be a decimal increment determined by
the Exchange on a class-by-class basis,
provided the increment cannot be
smaller than $0.01. This change will
provide the Exchange with more
flexibility to determine to make a
smaller increment available. We note
that the minimum increment for each
FLEX Equity Option is determined by
the Exchange on a class-by-class basis
6 See Rules 24A.4(c)(2), 24A.5(f), 24B.4(c)(2) and
24B.5(e).
7 FLEX Index Options are options on specified
underlying indexes and, like FLEX Equity Options,
provide investors with the ability to customize
basic option features including size, expiration
date, exercise style, and certain exercise prices.
8 See Rules 24A.4(b)(2)(i)(c) and 24B.4(b)(2)(i)(c).
9 See Rules 24A.4(b)(2)(i)(b) and 24B.4(b)(2)(i)(b).
PO 00000
Frm 00096
Fmt 4703
Sfmt 4703
59691
and can be as small as $0.01.10 As a
result, having an exercise price in a
$0.01 increment is already permissible
under our rules in those FLEX Equity
Option classes where the minimum
increment is $0.01.
The Exchange believes that expanding
the permissible exercise price and
premium calculations is important and
necessary to the Exchange’s efforts to
create a product and market that
provides members and investors
interested in FLEX-type options with an
improved but comparable alternative to
the over-the-counter (‘‘OTC’’) market in
customized options, which can take on
contract characteristics similar to FLEX
Equity Options but are not subject to the
same restrictions. By expanding the
permissible calculations for FLEX
Equity Options, market participants will
now have greater flexibility in
determining whether to execute their
customized options in an exchange
environment or in the OTC market.
CBOE believes market participants
benefit from being able to trade these
customized options in an exchange
environment in several ways, including,
but not limited to the following: (1)
Enhanced efficiency in initiating and
closing out positions; (2) increased
market transparency; and (3) heightened
contra-party creditworthiness due to the
role of The Options Clearing
Corporation as issuer and guarantor of
FLEX Equity Options.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
‘‘Act’’) 11 and the rules and regulations
under the Act applicable to national
securities exchanges and, in particular,
the requirements of Section 6(b) of the
Act.12 Specifically, the Exchange
believes the proposed rule change is
consistent with the Section 6(b)(5) 13
requirements that the rules of an
exchange be designed to promote just
and equitable principles of trade, to
prevent fraudulent and manipulative
acts, to remove impediments to and to
perfect the mechanism for a free and
open market and a national market
system, and, in general, to protect
investors and the public interest. The
proposed rule change will provide more
flexibility to calculate exercise prices
and premiums for FLEX Equity Options
in a manner that is consistent with the
calculations for FLEX Index Options,
which should provide members and
10 See
Rules 24A.5(f) and 24B.5(e).
U.S.C. 78s(b)(1).
12 15 U.S.C. 78f(b).
13 15 U.S.C. 78f(b)(5).
11 15
E:\FR\FM\09OCN1.SGM
09OCN1
59692
Federal Register / Vol. 73, No. 197 / Thursday, October 9, 2008 / Notices
investors interested in FLEX Equity
Options with additional opportunities
to trade customized options in an
exchange environment, and investors
will benefit as a result.
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 solicited nor
received comments on the proposal.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing rule 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, provided that the selfregulatory organization has given the
Commission written notice of its intent
to file 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 proposed rule change
has become effective pursuant to
Section 19(b)(3)(A) of the Act 14 and
Rule 19b-4(f)(6) thereunder.15 At any
time within 60 days of the filing of such
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.
sroberts on PROD1PC70 with NOTICES
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:
14 15
15 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
VerDate Aug<31>2005
21:01 Oct 08, 2008
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–CBOE–2008–102 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–2008–102. 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, 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 will also be available
for inspection and copying at the
principal office of the self-regulatory
organization. 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–
2008–102 and should be submitted on
or before October 30, 2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–23926 Filed 10–8–08; 8:45 am]
BILLING CODE 8011–01–P
16 17
Jkt 217001
PO 00000
CFR 200.30–3(a)(12).
Frm 00097
Fmt 4703
Sfmt 4703
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58719; File No. SR–CBOE–
2008–103]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Permit Electronic
Indicative FLEX Quotes
October 2, 2008.
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
September 30, 2008, the Chicago Board
Options Exchange, Incorporated (
‘‘Exchange’’ or ‘‘CBOE’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Exchange filed the proposal as a ‘‘noncontroversial’’ 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
rules related to Flexible Exchange
Options (‘‘FLEX Options’’) 5 in order to
adopt provisions codifying certain
electronic Indicative FLEX Quote
functionality. The text of the proposed
rule change is available on the
Exchange’s Web site (https://
www.cboe.org/Legal), at the Exchange’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
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.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
5 FLEX Options provide investors with the ability
to customize basic option features including size,
expiration date, exercise style, and certain exercise
prices.
2 17
E:\FR\FM\09OCN1.SGM
09OCN1
]]>Agencies
[Federal Register Volume 73, Number 197 (Thursday, October 9, 2008)]
[Notices]
[Pages 59690-59692]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-23926]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58718; File No. SR-CBOE-2008-102]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Change the Permissible Exercise Price and Premium
Calculations for FLEX Equity Options
October 2, 2008.
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
[[Page 59691]]
September 30, 2008, the Chicago Board Options Exchange, Incorporated
(``Exchange'' or ``CBOE'') filed with the Securities and Exchange
Commission (the ``Commission'') the proposed rule change as described
in Items I, II, and III 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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rules 24A.4 and 24B.4 to change the
permissible exercise price and premium calculations for FLEX Equity
Options.\5\ The text of the proposed rule change is available on the
Exchange's Web site (https://www.cboe.org/Legal), at the Exchange's
Office of the Secretary and at the Commission's Public Reference Room.
---------------------------------------------------------------------------
\5\ FLEX Equity Options provide investors with the ability to
customize basic option features including size, expiration date,
exercise style, and certain exercise prices.
---------------------------------------------------------------------------
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
Currently, our rules provide that FLEX Equity Options exercise
prices and premiums may be stated in dollar amount or percentage of the
price of the underlying security, rounded to the nearest minimum tick
(which may be as small as $0.01) or, in the case of exercise prices, to
the nearest one-eighth of a dollar or $0.10.\6\ The purpose of this
rule change is to revise the permissible exercise price and premium
calculations for FLEX Equity Options to be more aligned with the
permissible calculations for FLEX Index Options.\7\ Under the proposed
rule:
---------------------------------------------------------------------------
\6\ See Rules 24A.4(c)(2), 24A.5(f), 24B.4(c)(2) and 24B.5(e).
\7\ FLEX Index Options are options on specified underlying
indexes and, like FLEX Equity Options, provide investors with the
ability to customize basic option features including size,
expiration date, exercise style, and certain exercise prices.
---------------------------------------------------------------------------
Exercise prices and premiums for FLEX Equity Options may
be stated in a dollar amount, which is the same as the current rule
allows.
Exercise prices and premiums may also be stated in a
percentage of the price of the underlying security at the time of the
trade, which is the same as the current rule allows, or as of the open
or close of trading on the Exchange on the trade date. Providing the
flexibility to use a percentage based on the open or close of the
underlying security is consistent with our FLEX Index Option rules,
which permit exercise prices to be specified in terms of a percentage
of the index value calculated as of the open or close of trading on the
Exchange on the trade date.\8\
---------------------------------------------------------------------------
\8\ See Rules 24A.4(b)(2)(i)(c) and 24B.4(b)(2)(i)(c).
---------------------------------------------------------------------------
Exercise prices and premiums may also be stated in a
method for fixing such a number at the time a FLEX Request for Quote or
FLEX Order is traded. For example, the exercise price and premium for a
FLEX Equity Option might be based on the volume-weighted average price
(``VWAP'') of the underlying for the trade day. Providing the
flexibility to determine a particular method for fixing the exercise
prices or premiums at the time of a trade is consistent with our FLEX
Index Option rules, which permit exercise prices to be specified in
terms of a method for fixing such a number at the time of a trade.\9\
---------------------------------------------------------------------------
\9\ See Rules 24A.4(b)(2)(i)(b) and 24B.4(b)(2)(i)(b).
---------------------------------------------------------------------------
We are also proposing to update the rounding formula for FLEX
Equity Option exercises. As indicated above, the existing rules provide
that the exercise price will be rounded to the nearest minimum
increment, one-eighth of a dollar or $0.10. We are proposing to change
the $0.10 parameter to instead be a decimal increment determined by the
Exchange on a class-by-class basis, provided the increment cannot be
smaller than $0.01. This change will provide the Exchange with more
flexibility to determine to make a smaller increment available. We note
that the minimum increment for each FLEX Equity Option is determined by
the Exchange on a class-by-class basis and can be as small as
$0.01.\10\ As a result, having an exercise price in a $0.01 increment
is already permissible under our rules in those FLEX Equity Option
classes where the minimum increment is $0.01.
---------------------------------------------------------------------------
\10\ See Rules 24A.5(f) and 24B.5(e).
---------------------------------------------------------------------------
The Exchange believes that expanding the permissible exercise price
and premium calculations is important and necessary to the Exchange's
efforts to create a product and market that provides members and
investors interested in FLEX-type options with an improved but
comparable alternative to the over-the-counter (``OTC'') market in
customized options, which can take on contract characteristics similar
to FLEX Equity Options but are not subject to the same restrictions. By
expanding the permissible calculations for FLEX Equity Options, market
participants will now have greater flexibility in determining whether
to execute their customized options in an exchange environment or in
the OTC market. CBOE believes market participants benefit from being
able to trade these customized options in an exchange environment in
several ways, including, but not limited to the following: (1) Enhanced
efficiency in initiating and closing out positions; (2) increased
market transparency; and (3) heightened contra-party creditworthiness
due to the role of The Options Clearing Corporation as issuer and
guarantor of FLEX Equity Options.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') \11\ and the rules
and regulations under the Act applicable to national securities
exchanges and, in particular, the requirements of Section 6(b) of the
Act.\12\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \13\ requirements that the rules
of an exchange be designed to promote just and equitable principles of
trade, to prevent fraudulent and manipulative acts, to remove
impediments to and to perfect the mechanism for a free and open market
and a national market system, and, in general, to protect investors and
the public interest. The proposed rule change will provide more
flexibility to calculate exercise prices and premiums for FLEX Equity
Options in a manner that is consistent with the calculations for FLEX
Index Options, which should provide members and
[[Page 59692]]
investors interested in FLEX Equity Options with additional
opportunities to trade customized options in an exchange environment,
and investors will benefit as a result.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78s(b)(1).
\12\ 15 U.S.C. 78f(b).
\13\ 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 solicited nor received comments on the
proposal.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing rule 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, provided that the self-regulatory organization
has given the Commission written notice of its intent to file 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 proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6)
thereunder.\15\ At any time within 60 days of the filing of such
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.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
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 rule-comments@sec.gov. Please include
File Number SR-CBOE-2008-102 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-2008-102. 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, 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 will also be available for
inspection and copying at the principal office of the self-regulatory
organization. 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-2008-102 and should be submitted on or before October 30, 2008.
For the Commission, by the Division of Trading and Markets, pursuant
to delegated authority.\16\
---------------------------------------------------------------------------
\16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-23926 Filed 10-8-08; 8:45 am]
BILLING CODE 8011-01-P
