Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to Trades for Less Than $1, 31828-31830 [2010-13438]

Download as PDF 31828 Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Notices srobinson on DSKHWCL6B1PROD with NOTICES options contract equivalent of the net delta of such positions for a each account that holds an index option position subject to the delta hedging exemption in excess of the levels specified in 24.4 (and Rule 24.4A, in the case of industry index options).21 Each member relying on the exemption would be required to retain, and undertake reasonable efforts to ensure that its non-member affiliates or customers relying on the exemption retain, a list of the options, securities, and other instruments underlying each option position net delta calculation reported to the Exchange; and to produce such information to the Exchange upon request.22 In addition, the options positions of a non-member relying on the exemption would be required to be carried by a member with which it is affiliated.23 The Exchange will announce the operative date of the proposed rule change in a regulatory circular to be published no later than 60 days after Commission approval. The operative date shall be no later than 30 days after publication of the regulatory circular. The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange.24 In particular, the Commission believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,25 which requires, among other things, that CBOE rules 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. In approving the Equity Exemption, the Commission noted its previous statement in support of recognizing options positions hedged on a delta neutral basis as properly exempted from position limits.26 The Commission affiliates or trading units and the entity has designated in writing in advance the affiliates or trading units that are to be considered separate and distinct from each other. 21 See proposed Rule 24.4.05(F). See also supra note 12. 22 See proposed Rule 24.4.05(G). 23 See proposed Rule 24.4.05(E)(2). 24 In approving this rule, the Commission notes that it has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 25 15 U.S.C. 78f(b)(5). 26 See Securities Exchange Act Release No. 40594 (October 23, 1998), 63 FR 59362, 59380 (November 3, 1998) (File No. S7–30–97) (adopting rules relating to OTC derivatives dealers), cited in Exemption Approval Order, supra note 7. VerDate Mar<15>2010 16:01 Jun 03, 2010 Jkt 220001 believes that it is appropriate and consistent with the Act to expand the Equity Exemption to allow the use of correlated instruments in determining whether an ETF options position is delta neutral. The Commission further believes that it is appropriate and consistent with the Act to establish a delta based index options hedge exemption from position limits. Finally, the Commission believes that it is reasonable for CBOE to exempt Exchange Market-Makers and DPMs using the OCC Model from the reporting requirements of the Equity Exemption, and not to include them as subject to the reporting requirements of the Index Exemption, because the Exchange can access the information through the Exchange’s market surveillance systems. It is therefore ordered, pursuant to Section 19(b)(2) of the Act,27 that the proposed rule change (SR–CBOE–2010– 021), as modified by Amendment No. 1, be, and it hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.28 Florence E. Harmon, Deputy Secretary. [FR Doc. 2010–13439 Filed 6–3–10; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–62192; File No. SR–CBOE– 2010–052] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to Trades for Less Than $1 May 28, 2010. 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 May 27, 2010, 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 27 15 U.S.C. 78s(b)(2). 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). 28 17 PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 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 is proposing to extend its program that allows transactions to take place at a price that is below $1 per option contract until June 1, 2011. 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, on the Commission’s Web site at https:// www.sec.gov, 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 An ‘‘accommodation’’ or ‘‘cabinet’’ trade refers to trades in listed options on the Exchange that are worthless or not actively traded. Cabinet trading is generally conducted in accordance with the Exchange Rules, except as provided in Exchange Rule 6.54, Accommodation Liquidations (Cabinet Trades), which sets forth specific procedures for engaging in cabinet trades. Rule 6.54 currently provides for cabinet transactions to occur via open outcry at a cabinet price of $1 per option contract in any options series open for trading in the Exchange, except that the Rule is not applicable to trading in option classes participating in the Penny Pilot Program. Under the procedures, bids and offers (whether opening or closing a position) at a price of $1 per option contract may be represented in the trading crowd by a Floor Broker or by a Market-Maker or provided in response to a request by a PAR Official/OBO, a Floor Broker or a Market-Maker, but 4 17 E:\FR\FM\04JNN1.SGM CFR 240.19b–4(f)(6). 04JNN1 Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Notices srobinson on DSKHWCL6B1PROD with NOTICES must yield priority to all resting orders in the PAR Official/OBO cabinet book (which resting cabinet book orders may be closing only). So long as both the buyer and the seller yield to orders resting in the cabinet book, opening cabinet bids can trade with opening cabinet offers at $1 per option contract. The Exchange has temporarily amended the procedures through June 1, 2010 to allow transactions to take place in open outcry at a price of at least $0 but less than $1 per option contract.5 These lower priced transactions are traded pursuant to the same procedures applicable to $1 cabinet trades, except that (i) bids and offers for opening transactions are only permitted to accommodate closing transactions in order to limit use of the procedure to liquidations of existing positions, and (ii) the procedures are also available for trading in option classes participating in the Penny Pilot Program.6 The Exchange believes that allowing a price of at least $0 but less than $1 better accommodates the closing of options positions in series that are worthless or not actively traded, particularly due to recent market conditions which have resulted in a significant number of series being outof-the-money. For example, a market participant might have a long position in a call series with a strike price of $100 and the underlying stock might now be trading at $30. In such an instance, there might not otherwise be a market for that person to close-out the position even at the $1 cabinet price (e.g., the series might be quoted no bid).7 5 See Securities Exchange Act Release Nos. 59188 (December 30, 2008), 74 FR 480 (January 6, 2009) (SR–CBOE–2008–133) (adopting the amended procedures on a temporary basis through January 30, 2009), 59331 (January 30, 2009), 74 FR 6333 (February 6, 2009) (extending the amended procedures on a temporary basis through May 29, 2009), and 60020 (June 1, 2009), 74 FR 27220 (June 8, 2009) (SR–CBOE–2009–034) (extending the amended procedures on a temporary basis through June 1, 2010). 6 Currently the $1 cabinet trading procedures are limited to options classes traded in $0.05 or $0.10 standard increment. The $1 cabinet trading procedures are not available in Penny Pilot Program classes because in those classes an option series can trade in a standard increment as low as $0.01 per share (or $1.00 per option contract with a 100 share multiplier). Because the temporary procedures allow trading below $0.01 per share (or $1.00 per option contract with a 100 share multiplier), the procedures are available for all classes, including those classes participating in the Penny Pilot Program. 7 As with other accommodation liquidations under Rule 6.54, transactions that occur for less than $1 are not be disseminated to the public on the consolidated tape. In addition, as with other accommodation liquidations under Rule 6.54, the transactions are exempt from the Consolidated Options Audit Trail (‘‘COATS’’) requirements of Exchange Rule 6.24, Required Order Information. However, the Exchange maintains quotation, order VerDate Mar<15>2010 16:01 Jun 03, 2010 Jkt 220001 The purpose of the instant rule change is to extend the operation of these temporary procedures through June 1, 2011, so that the procedures can continue without interruption while CBOE considers whether to seek permanent approval of the temporary procedures. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act 8 and the rules and regulations thereunder 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 Exchange believes that allowing for liquidations at a price less than $1 per option contract better facilitates the closing of options positions that are worthless or not actively trading. 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. and transaction information for the transactions in the same format as the COATS data is maintained. In this regard, all transactions for less than $1 must be reported to the Exchange following the close of each business day. The rule also provides that transactions for less than $1 will be reported for clearing utilizing forms, formats and procedures established by the Exchange from time to time. In this regard, the Exchange initially intends to have clearing firms directly report the transactions to The Options Clearing Corporation (‘‘OCC’’) using OCC’s position adjustment/transfer procedures. This manner of reporting transactions for clearing is similar to the procedure that CBOE currently employees for on-floor position transfer packages executed pursuant to Exchange Rule 6.49A, Transfer of Positions. 8 15 U.S.C. 78s(b)(1). 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(5). PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 31829 III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed 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 11 and Rule 19b–4(f)(6) thereunder.12 Under Rule 19b–4(f)(6) of the Act,13 a proposal does not become operative for 30 days after the date of its filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the 30-day operative date so that the pilot may continue without interruption while the Exchange considers whether to seek permanent approval of the temporary procedures. The Exchange believes that waiver of the operative delay will continue to allow for the orderly closing of option positions that are worthless or not actively traded. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest, and thus designates the proposal as operative upon filing.14 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, 11 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). Rule 19b–4(f)(6)(iii) requires the self-regulatory organization to submit to 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 has satisfied this requirement. 13 Id. 14 For purposes only of waiving the operative date of this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). See also 17 CFR 200.30–3(a)(59). 12 17 E:\FR\FM\04JNN1.SGM 04JNN1 31830 Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Notices 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–CBOE–2010–052 on the subject line. Paper Comments For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Florence E. Harmon, Deputy Secretary. [FR Doc. 2010–13438 Filed 6–3–10; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–62194; File No. SR–Phlx– 2010–48] Self-Regulatory Organizations; Order Approving Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating to Market Data Fees May 28, 2010. I. Introduction On April 6, 2010, NASDAQ OMX PHLX, Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule All submissions should refer to File change to establish fees for a data Number SR–CBOE–2010–052. This file product, Top of Phlx Options Plus number should be included on the Orders (‘‘TOPO Plus Orders’’ or ‘‘TOPO subject line if e-mail is used. To help the Plus’’), which currently provides Commission process and review your disseminated Exchange top-of-market comments more efficiently, please use data (including orders, quotes and only one method. The Commission will trades), together with all information post all comments on the Commission’s that is included in the Exchange’s Internet Web site (https://www.sec.gov/ Specialized Order Feed (‘‘SOF’’). The rules/sro.shtml). Copies of the proposed rule change was published for submission, all subsequent comment in the Federal Register on amendments, all written statements April 16, 2010.3 The Commission with respect to the proposed rule received three comment letters on the change that are filed with the proposed rule change.4 The Exchange Commission, and all written submitted one letter in response to these communications relating to the comment letters.5 proposed rule change between the This order approves the proposed rule Commission and any person, other than change. those that may be withheld from the public in accordance with the 15 17 CFR 200.30–3(a)(12). provisions of 5 U.S.C. 552, will be 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. available for Web site viewing and 3 See Securities Exchange Act Release No. 61878 printing in the Commission’s Public (April 8, 2010), 75 FR 20023 (April 16, 2010) Reference Room, 100 F Street, NE., (‘‘Notice’’). Washington, DC 20549, on official 4 See Letter from Lawrence Lempert, Bullock business days between the hours of 10 Trading, LP, Michael Waber, Fairview Trading a.m. and 3 p.m. Copies of the filing also Corp., Andy Yang, Cutler Group, LP, Theodore Raven, TSR Associates, LLC, and Tim Lobach, will be available for inspection and Keystone Trading Partners to Mary Schapiro, copying at the principal office of the Chairman, Commission, dated May 3, 2010 Exchange. All comments received will (‘‘Lempert Letter’’) and Letter from Robert Sullivan, be posted without change; the Empire Options Corporation to Mary Schapiro, Chairman, Commission, received May 3, 2010 Commission does not edit personal (‘‘Sullivan Letter’’). See also Letter from Michael identifying information from Waber, Fairview Trading, Inc., to Elizabeth M. submissions. You should submit only Murphy, Secretary, Commission, dated May 23, information that you wish to make 2010 (‘‘Waber Letter’’) (responding to the Phlx Letter, infra note 5). available publicly. All submissions 5 See Letter from Richard S. Rudolph, Assistant should refer to File Number SR–CBOE– General Counsel, NASDAQ OMX PHLX, Inc. to 2010–052 and should be submitted on Elizabeth M. Murphy, Secretary, Commission, dated or before June 25, 2010. May 13, 2010 (‘‘Phlx Letter’’). srobinson on DSKHWCL6B1PROD with NOTICES • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. VerDate Mar<15>2010 16:01 Jun 03, 2010 Jkt 220001 PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 II. Description of the Proposed Rule Change In June 2009, the Exchange launched Phlx XL II, an electronic trading platform on which all options on the Exchange are currently traded.6 In conjunction with the launch and rollout of the Phlx XL II system, the Exchange developed the Top of Phlx Options direct data feed (‘‘TOPO’’),7 which provides to subscribers the Exchange’s best bid and offer position, with aggregate size, based on displayable order and quoting interest on the Phlx XL II system. In October 2009, the Exchange made the TOPO Plus Orders data feed available to all market participants for free.8 According to the Exchange, TOPO Plus Orders provides disseminated Exchange top-of-market data (including orders, quotes and trades) together with all information that is included in SOF, the Exchange’s real-time full limit order book data feed. When it established TOPO Plus Orders, the Exchange stated that it planned to submit a proposed rule change to the Commission in order to implement fees for the use of TOPO Plus Orders. SOF is currently available to any Exchange quoting participant (i.e., specialists, Streaming Quote Traders, and Remote Streaming Quote Traders (collectively, ‘‘users’’)) and is available to users on an issue-by-issue basis at the user’s request. A user does not have to be assigned in an issue for the Exchange to provide SOF to such user in that issue. The SOF provides real-time information to keep track of the single order book(s), single and complex orders, complex strategy and Live Auction for all symbols for which the user is configured. Users may be configured for one or more symbols. SOF provides real-time data for the entire book to its users. It is a compilation of limit order data resident in the Exchange’s limit order book for options traded on the Exchange that the Exchange provides through a real-time data feed. The Exchange updates SOF information upon receipt of each displayed limit order. For every limit 6 See Securities Exchange Act Release No. 59995 (May 28, 2009), 74 FR 26750 (June 3, 2009) (SR– Phlx–2009–32). 7 See Securities Exchange Act Release No. 60459 (August 7, 2009), 74 FR 41466 (August 17, 2009) (SR–Phlx–2009–54). The Exchange represents that the data contained in the TOPO data feed is identical to the data sent to the processor for the Options Price Regulatory Authority (‘‘OPRA’’), and the TOPO and OPRA data leave the Phlx XL II system at the same time. 8 See Securities Exchange Act Release No. 60877 (October 26, 2009), 74 FR 56255 (October 30, 2009) (SR–Phlx–2009–92). E:\FR\FM\04JNN1.SGM 04JNN1

Agencies

[Federal Register Volume 75, Number 107 (Friday, June 4, 2010)]
[Notices]
[Pages 31828-31830]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-13438]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62192; File No. SR-CBOE-2010-052]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Related to Trades for Less Than $1

May 28, 2010.
    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 May 27, 2010, 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 is proposing to extend its program that allows 
transactions to take place at a price that is below $1 per option 
contract until June 1, 2011. 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, on the Commission's Web site at 
https://www.sec.gov, 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
    An ``accommodation'' or ``cabinet'' trade refers to trades in 
listed options on the Exchange that are worthless or not actively 
traded. Cabinet trading is generally conducted in accordance with the 
Exchange Rules, except as provided in Exchange Rule 6.54, Accommodation 
Liquidations (Cabinet Trades), which sets forth specific procedures for 
engaging in cabinet trades. Rule 6.54 currently provides for cabinet 
transactions to occur via open outcry at a cabinet price of $1 per 
option contract in any options series open for trading in the Exchange, 
except that the Rule is not applicable to trading in option classes 
participating in the Penny Pilot Program. Under the procedures, bids 
and offers (whether opening or closing a position) at a price of $1 per 
option contract may be represented in the trading crowd by a Floor 
Broker or by a Market-Maker or provided in response to a request by a 
PAR Official/OBO, a Floor Broker or a Market-Maker, but

[[Page 31829]]

must yield priority to all resting orders in the PAR Official/OBO 
cabinet book (which resting cabinet book orders may be closing only). 
So long as both the buyer and the seller yield to orders resting in the 
cabinet book, opening cabinet bids can trade with opening cabinet 
offers at $1 per option contract.
    The Exchange has temporarily amended the procedures through June 1, 
2010 to allow transactions to take place in open outcry at a price of 
at least $0 but less than $1 per option contract.\5\ These lower priced 
transactions are traded pursuant to the same procedures applicable to 
$1 cabinet trades, except that (i) bids and offers for opening 
transactions are only permitted to accommodate closing transactions in 
order to limit use of the procedure to liquidations of existing 
positions, and (ii) the procedures are also available for trading in 
option classes participating in the Penny Pilot Program.\6\ The 
Exchange believes that allowing a price of at least $0 but less than $1 
better accommodates the closing of options positions in series that are 
worthless or not actively traded, particularly due to recent market 
conditions which have resulted in a significant number of series being 
out-of-the-money. For example, a market participant might have a long 
position in a call series with a strike price of $100 and the 
underlying stock might now be trading at $30. In such an instance, 
there might not otherwise be a market for that person to close-out the 
position even at the $1 cabinet price (e.g., the series might be quoted 
no bid).\7\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release Nos. 59188 (December 30, 
2008), 74 FR 480 (January 6, 2009) (SR-CBOE-2008-133) (adopting the 
amended procedures on a temporary basis through January 30, 2009), 
59331 (January 30, 2009), 74 FR 6333 (February 6, 2009) (extending 
the amended procedures on a temporary basis through May 29, 2009), 
and 60020 (June 1, 2009), 74 FR 27220 (June 8, 2009) (SR-CBOE-2009-
034) (extending the amended procedures on a temporary basis through 
June 1, 2010).
    \6\ Currently the $1 cabinet trading procedures are limited to 
options classes traded in $0.05 or $0.10 standard increment. The $1 
cabinet trading procedures are not available in Penny Pilot Program 
classes because in those classes an option series can trade in a 
standard increment as low as $0.01 per share (or $1.00 per option 
contract with a 100 share multiplier). Because the temporary 
procedures allow trading below $0.01 per share (or $1.00 per option 
contract with a 100 share multiplier), the procedures are available 
for all classes, including those classes participating in the Penny 
Pilot Program.
    \7\ As with other accommodation liquidations under Rule 6.54, 
transactions that occur for less than $1 are not be disseminated to 
the public on the consolidated tape. In addition, as with other 
accommodation liquidations under Rule 6.54, the transactions are 
exempt from the Consolidated Options Audit Trail (``COATS'') 
requirements of Exchange Rule 6.24, Required Order Information. 
However, the Exchange maintains quotation, order and transaction 
information for the transactions in the same format as the COATS 
data is maintained. In this regard, all transactions for less than 
$1 must be reported to the Exchange following the close of each 
business day. The rule also provides that transactions for less than 
$1 will be reported for clearing utilizing forms, formats and 
procedures established by the Exchange from time to time. In this 
regard, the Exchange initially intends to have clearing firms 
directly report the transactions to The Options Clearing Corporation 
(``OCC'') using OCC's position adjustment/transfer procedures. This 
manner of reporting transactions for clearing is similar to the 
procedure that CBOE currently employees for on-floor position 
transfer packages executed pursuant to Exchange Rule 6.49A, Transfer 
of Positions.
---------------------------------------------------------------------------

    The purpose of the instant rule change is to extend the operation 
of these temporary procedures through June 1, 2011, so that the 
procedures can continue without interruption while CBOE considers 
whether to seek permanent approval of the temporary procedures.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act \8\ and the rules and regulations thereunder 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 Exchange believes that allowing for 
liquidations at a price less than $1 per option contract better 
facilitates the closing of options positions that are worthless or not 
actively trading.
---------------------------------------------------------------------------

    \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.

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 proposed 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 \11\ and Rule 19b-
4(f)(6) thereunder.\12\
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). Rule 19b-4(f)(6)(iii) requires the 
self-regulatory organization to submit to 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 has satisfied this requirement.
---------------------------------------------------------------------------

    Under Rule 19b-4(f)(6) of the Act,\13\ a proposal does not become 
operative for 30 days after the date of its filing, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interest. The Exchange has requested that 
the Commission waive the 30-day operative date so that the pilot may 
continue without interruption while the Exchange considers whether to 
seek permanent approval of the temporary procedures. The Exchange 
believes that waiver of the operative delay will continue to allow for 
the orderly closing of option positions that are worthless or not 
actively traded. The Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest, and thus designates the proposal as operative upon 
filing.\14\
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    \13\ Id.
    \14\ For purposes only of waiving the operative date of this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f). See also 17 CFR 200.30-3(a)(59).
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    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,

[[Page 31830]]

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 rule-comments@sec.gov. Please include 
File Number SR-CBOE-2010-052 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2010-052. 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 Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CBOE-2010-052 and should be 
submitted on or before June 25, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-13438 Filed 6-3-10; 8:45 am]
BILLING CODE 8010-01-P
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