Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Increase the Maximum Term for FLEX Options, 66085-66086 [E8-26481]

Download as PDF Federal Register / Vol. 73, No. 216 / Thursday, November 6, 2008 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Florence E. Harmon, Acting Secretary. [FR Doc. E8–26443 Filed 11–5–08; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–58890; File No. SR–CBOE– 2008–98] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Increase the Maximum Term for FLEX Options October 30, 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 October 24, 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 and II below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ‘‘non-controversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons 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 increase the maximum term for Flexible Exchange Options (‘‘FLEX Options’’) 5 to fifteen years. The text of the proposed rule change is available on the Exchange’s Web site (https://www.cboe.org/Legal), at the Office of the Secretary, CBOE and at the Commission. sroberts on PROD1PC70 with NOTICES 10 17 CFR 200.30–3(a)(12). 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). 5 FLEX Options provide investors with the ability to customize basic option features including size, expiration date, exercise style, and certain exercise prices. VerDate Aug<31>2005 19:11 Nov 05, 2008 Jkt 217001 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to increase the maximum term for FLEX Options. Currently, the term for a FLEX Options varies based upon the type of underlying. For example, for FLEX Equity Options, the maximum term is currently 3 years, provided a member may request a longer term to a maximum of 5 years (and upon assessment by the FLEX Official that sufficient liquidity exists, such request will be granted). For FLEX Index Options, the maximum term is currently 5 years, provided a member may request a longer term to a maximum of 10 years (and upon assessment by the FLEX Official that sufficient liquidity exists, such request will be granted).6 For FLEX Credit Options, the maximum term is currently 10.25 years.7 We are proposing to increase the maximum term for all FLEX Options to fifteen years and to eliminate the requirement that a FLEX Official make a liquidity assessment. The changes are being proposed to simplify the process and in response to numerous member requests that we expand the maximum term in order to accommodate their desire to bring trades that are otherwise conducted in the over-the-counter (‘‘OTC’’) market to an exchange environment. Though we want to accommodate these requests, we are not able to do so under the existing term limitations imposed in our rules. CBOE believes that expanding the eligible term for FLEX Options as proposed 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 OTC market in customized options, which can take on contract characteristics similar FLEX Options but are not subject to the same maximum term restriction. By expanding the eligible term for FLEX 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 (‘‘OCC’’) as issuer and guarantor of FLEX Options. Finally, the Exchange has confirmed with the OCC that OCC can configure its systems to support FLEX Options that have a maximum expiration of fifteen years. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act 8 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.9 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 10 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 members and investors 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. 8 15 6 See Rules 24A.4(a)(4)(i) and 24B.4(a)(5)(i). 7 See Rule 29.18. PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 66085 U.S.C. 78s(b)(1). U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(5). 9 15 E:\FR\FM\06NON1.SGM 06NON1 66086 Federal Register / Vol. 73, No. 216 / Thursday, November 6, 2008 / Notices C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (1) Significantly affect the protection of investors or the public interest; (2) impose any significant burden on competition; and (3) 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, it has become effective pursuant to Section 19(b)(3)(A) of the Act 11 and Rule 19b– 4(f)(6) thereunder.12 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. 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 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 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–2008–98 and should be submitted on or before November 28, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Florence E. Harmon, Acting Secretary. [FR Doc. E8–26481 Filed 11–5–08; 8:45 am] • 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–2008–98 on the subject line. BILLING CODE 8011–01–P Paper Comments Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving a Proposed Rule Change Amending the Codes of Arbitration Procedure To Establish Procedures for Arbitrators To Follow When Considering Requests for Expungement Relief • 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–2008–98. This file 11 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, when filing a proposed rule change pursuant to Rule 19b– 4(f)(6) under the Act, an Exchange is required to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange provided such notice to the Commission. sroberts on PROD1PC70 with NOTICES 12 17 VerDate Aug<31>2005 19:11 Nov 05, 2008 Jkt 217001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–58886; File No. SR–FINRA– 2008–010] October 30, 2008. I. Introduction On March 13, 2008, the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the Securities and Exchange Commission (‘‘Commission’’ 13 17 PO 00000 CFR 200.30–3(a)(12). Frm 00077 Fmt 4703 Sfmt 4703 or ‘‘SEC’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to adopt Rule 12805 of the Code of Arbitration Procedure for Customer Disputes (‘‘Customer Code’’) and Rule 13805 of the Code of Arbitration Procedure for Industry Disputes (‘‘Industry Code’’) to establish procedures that arbitrators must follow when considering requests for expungement relief under Rule 2130. The proposed rule change was published in the Federal Register on April 3, 2008.3 The Commission received eleven comment letters on the proposed rule change.4 FINRA responded to the comments on June 11, 2008.5 The Commission received an additional letter from one commenter in furtherance of its original comments.6 On September 3, 2008, FINRA submitted a second response to comments.7 This order approves the proposed rule change. 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 57572 (March 27, 2008), 73 FR 18308 (April 3, 2008) (the ‘‘Notice’’). 4 See letters to Nancy M. Morris, Secretary, Commission, from Seth E. Lipner, Professor of Law, Bernard M. Baruch College, CUNY, and Member Deutsch Lipner, dated April 8, 2008 (‘‘Lipner letter’’); Steven B. Caruso, Maddox Hargett Caruso, P.C., dated April 8, 2008 (‘‘Caruso letter’’); Jill Gross, Director, Pace University, Investor Rights Clinic, and Teresa Milano, dated April 15, 2008 (‘‘Gross and Milano letter’’); Raghavan Sathianathan, dated April 17, 2008 (‘‘Sathianathan letter’’); William A. Jacobson, Associate Clinical Professor, Director, Cornell Securities Law Clinic, Cornell Law School and Arthur A. Andersen III, dated April 23, 2008 (‘‘Cornell I letter’’); Barbara Black, Charles Hartsock Professor of Law, director of Corporate Law Center, University of Cincinnati dated April 24, 2008 (‘‘Black letter’’); Karen Tyler, President, North American Securities Administrators Association, North Dakota Securities Commissioner, dated April 24, 2008 (‘‘NASAA letter’’); Scott R. Shewan, Born, Pape Shewan, LLP, dated April 24, 2008 (‘‘Shewan letter’’); Barry D. Estell, dated May 7, 2008 (‘‘Estell letter’’), Brian N. Smiley, Smiley Bishop Porter LLP, dated May 8, 2008 (‘‘Smiley letter’’); and Laurence S. Schultz, President, Public Investors Arbitration Bar Association, dated May 16, 2008 (‘‘PIABA letter’’). 5 See letter to Nancy M. Morris, Secretary, Commission, from Margo A. Hassan, Counsel, FINRA, dated June 11, 2008 (‘‘First Response’’). 6 See letter to Nancy M. Morris, Secretary, Commission, from William A. Jacobsen, Associate Clinical Professor, Director, Cornell Securities Law Clinic, Cornell Law School, dated June 17, 2008 (‘‘Cornell II letter’’). 7 See letter to Florence Harmon, Deputy Secretary [sic], Commission, from Margo A. Hassan, dated September 3, 2008 (‘‘Second Response’’). 2 17 E:\FR\FM\06NON1.SGM 06NON1

Agencies

[Federal Register Volume 73, Number 216 (Thursday, November 6, 2008)]
[Notices]
[Pages 66085-66086]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-26481]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58890; File No. SR-CBOE-2008-98]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Increase the Maximum Term for FLEX Options

October 30, 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 October 24, 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 and II below, which Items have been prepared by 
the Exchange. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons
---------------------------------------------------------------------------

    \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 increase 
the maximum term for Flexible Exchange Options (``FLEX Options'') \5\ 
to fifteen years. The text of the proposed rule change is available on 
the Exchange's Web site (https://www.cboe.org/Legal), at the Office of 
the Secretary, CBOE and at the Commission.
---------------------------------------------------------------------------

    \5\ FLEX 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
    The purpose of the proposed rule change is to increase the maximum 
term for FLEX Options. Currently, the term for a FLEX Options varies 
based upon the type of underlying. For example, for FLEX Equity 
Options, the maximum term is currently 3 years, provided a member may 
request a longer term to a maximum of 5 years (and upon assessment by 
the FLEX Official that sufficient liquidity exists, such request will 
be granted). For FLEX Index Options, the maximum term is currently 5 
years, provided a member may request a longer term to a maximum of 10 
years (and upon assessment by the FLEX Official that sufficient 
liquidity exists, such request will be granted).\6\ For FLEX Credit 
Options, the maximum term is currently 10.25 years.\7\
---------------------------------------------------------------------------

    \6\ See Rules 24A.4(a)(4)(i) and 24B.4(a)(5)(i).
    \7\ See Rule 29.18.
---------------------------------------------------------------------------

    We are proposing to increase the maximum term for all FLEX Options 
to fifteen years and to eliminate the requirement that a FLEX Official 
make a liquidity assessment. The changes are being proposed to simplify 
the process and in response to numerous member requests that we expand 
the maximum term in order to accommodate their desire to bring trades 
that are otherwise conducted in the over-the-counter (``OTC'') market 
to an exchange environment. Though we want to accommodate these 
requests, we are not able to do so under the existing term limitations 
imposed in our rules.
    CBOE believes that expanding the eligible term for FLEX Options as 
proposed 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 
OTC market in customized options, which can take on contract 
characteristics similar FLEX Options but are not subject to the same 
maximum term restriction. By expanding the eligible term for FLEX 
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 (``OCC'') as issuer and guarantor of FLEX Options. Finally, 
the Exchange has confirmed with the OCC that OCC can configure its 
systems to support FLEX Options that have a maximum expiration of 
fifteen years.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act \8\ 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.\9\ Specifically, the Exchange believes the 
proposed rule change is consistent with the Section 6(b)(5) \10\ 
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 members and investors with additional 
opportunities to trade customized options in an exchange environment, 
and investors will benefit as a result.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(1).
    \9\ 15 U.S.C. 78f(b).
    \10\ 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.

[[Page 66086]]

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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (1) 
Significantly affect the protection of investors or the public 
interest; (2) impose any significant burden on competition; and (3) 
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, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6) thereunder.\12\ 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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). In addition, when filing a proposed 
rule change pursuant to Rule 19b-4(f)(6) under the Act, an Exchange 
is required to give the Commission written notice of its intent to 
file the proposed rule change, along with a brief description and 
text of the proposed rule change, at least five business days prior 
to the date of filing of the proposed rule change, or such shorter 
time as designated by the Commission. The Exchange provided such 
notice to the Commission.
---------------------------------------------------------------------------

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-2008-98 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-2008-98. 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 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-2008-98 and should be 
submitted on or before November 28, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-26481 Filed 11-5-08; 8:45 am]
BILLING CODE 8011-01-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.