Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Proposed Rule Change, as Modified by Amendment Nos. 1 and 2, To Establish a Pilot Program to List P.M.-Settled End of Week and End of Month Expirations for Options on Broad-Based Indexes, 49010-49013 [2010-19853]

Download as PDF 49010 Federal Register / Vol. 75, No. 155 / Thursday, August 12, 2010 / Notices 23 FINRA shall not have any Regulatory Responsibilities regarding the CHX rule to the extent it does not contain an exception for time and price discretion. 24 FINRA shall not have any Regulatory Responsibilities regarding maintaining books and records in conformity with CHX rules. IV. Date of Effectiveness of the Proposed Plan and Timing for Commission Action Pursuant to Section 17(d)(1) of the Act 25 and Rule 17d–2 thereunder,26 after September 2, 2010, the Commission may, by written notice, declare the plan submitted by FINRA and CHX, File No. 4–274, to be effective if the Commission finds that the plan is necessary or appropriate in the public interest and for the protection of investors, to foster cooperation and coordination among self-regulatory organizations, or to remove impediments to and foster the development of the national market system and a national system for the clearance and settlement of securities transactions and in conformity with the factors set forth in Section 17(d) of the Act. V. Solicitation of Comments In order to assist the Commission in determining whether to approve the proposed 17d–2 Plan and to relieve CHX of the responsibilities which would be assigned to FINRA, interested persons are invited to submit written data, views, and arguments concerning the foregoing. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/other.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number 4–274 on the subject line. jlentini on DSKJ8SOYB1PROD with NOTICES Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number 4–274. 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/ other.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed plan that are filed with the Commission, and all written communications relating to the proposed plan 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, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the plan also will be available for inspection and copying at the principal offices of CHX and FINRA. 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 4–274 and should be submitted on or before September 2, 2010. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.27 Florence E. Harmon, Deputy Secretary. [FR Doc. 2010–19852 Filed 8–11–10; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–62658; File No. SR–CBOE– 2009–075] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Proposed Rule Change, as Modified by Amendment Nos. 1 and 2, To Establish a Pilot Program to List P.M.-Settled End of Week and End of Month Expirations for Options on Broad-Based Indexes August 5, 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 October 14, 2009, 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. On May 3, 2010, the Exchange filed Amendment 1 to the CFR 200.30–3(a)(34). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. proposed rule change, and on July 30, 2010, the Exchange filed Amendment 2 to the proposed rule change.3 The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment Nos. 1 and 2, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change CBOE requests approval to establish a pilot program that would permit P.M.settled options on broad-based indexes that expire on: (a) Any Friday of the month, other than the third Friday-ofthe-month (‘‘End of Week Expirations’’), and (b) the last trading day of the month (‘‘End of Month Expirations’’). The text of the rule proposal 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose Amendment 2 replaces Amendment 1 and the original filing in their entireties. The purpose of Amendment 2 is to broaden the definition of End of Week Expirations to include any Friday of the month, other than the third Friday-ofthe-month. The purpose of this filing is to establish a pilot program that would permit P.M.-settled options on broadbased indexes to expire on (a) any Friday of the month, other than the third Friday-of-the-month (‘‘End of Week Expirations’’ or ‘‘EOWs’’), and (b) the last trading day of the month (‘‘End 27 17 25 15 U.S.C. 78q(d)(1). 26 17 CFR 240.17d–2. VerDate Mar<15>2010 16:22 Aug 11, 2010 1 15 Jkt 220001 PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 3 Amendment 2 replaces Amendment 1 and the original filing in their entireties. E:\FR\FM\12AUN1.SGM 12AUN1 Federal Register / Vol. 75, No. 155 / Thursday, August 12, 2010 / Notices jlentini on DSKJ8SOYB1PROD with NOTICES of Month Expirations’’ or ‘‘EOMs’’).4 For example, if EOWs and EOMs were currently listed, the expiration dates for October 2010 would be: October 1 (EOW), October 8 (EOW), October 15 (standard), October 22 (EOW) and October 29 (EOM).5 Under the End of Week/End of Month Expirations Pilot Program (‘‘Program’’), EOWs and EOMs will be permitted on any broad-based index that is eligible for regular options trading. EOWs and EOMs will be cashsettled and have European-style exercise. The proposal will become effective on a pilot basis for a period fourteen months to commence on the next full month after approval is received to establish the Program. If the Exchange were to propose an extension of the Program or should the Exchange to propose to make the Program permanent, then the Exchange would submit a filing proposing such amendments to the Program. Any positions established under the Program would not be impacted by the expiration of the Pilot. For example, if the Exchange lists an EOW or EOM expiration that expires after the Program expires (and is not extended) then those positions would continue to exist. However, any further trading in those series would be restricted to transactions where at least one side of the trade is a closing transaction.6 To implement the Pilot as described above, the Exchange is proposing to add new subparagraph (e) to Rule 24.9 to expressly provide the Exchange with the ability to list P.M.-settled EOWs and EOMs on broad-based indexes eligible for options trading. The amendment to Rule 24.9 will also set forth that the duration of the Program will be effective for a period of fourteen months from the next full month from approval. EOMs and EOWs will be subject to the same rules that currently govern the trading of traditional index options, including sales practice rules, margin requirements, and floor trading procedures. Contract terms for EOWs and EOMs will be similar to regular index options, with one general exception: the exercise settlement value will be based on the index value derived from the closing prices of component stocks. 4 If the last trading day of the month is a Friday, the Exchange will list an End of Month expiration series and not an End of Week expiration. 5 See Rule 24.9(a)(2) for specific rule governing the expiration months that may be listed for index options. CBOE does not intend to list EOWs or EOMs that would expire on Exchange holidays. 6 The Exchange intends to address this point in a circular to members should the Exchange receive approval to establish the Program. VerDate Mar<15>2010 16:22 Aug 11, 2010 Jkt 220001 Since EOWs and EOMs will be a new type of series and not a new class, the Exchange proposes that EOWs and EOMs on the same broad-based index (e.g., of the same class) shall be aggregated for position limits (if any) and any applicable reporting and other requirements.7 The Exchange is proposing to add ‘‘EOWs’’ and ‘‘EOMs’’ to Rule 24.4(b) to reflect the aggregation requirement. This proposed aggregation is consistent the aggregation requirements for other types of option series (e.g., QOS, QIXs) that are listed on the Exchange and which do not expire on the customary ‘‘third Saturday.8’’ Annual Program Report: As part of the Program, the Exchange will submit a Program report to the Securities and Exchange Commission (‘‘Commission’’) at least two months prior to the expiration date of the Program (the ‘‘annual report’’). As described below, the annual report will contain an analysis of volume, open interest and trading patterns. In addition, for series that exceed certain minimum open interest parameters, the annual report would provide analysis of index price volatility and, if needed, share trading activity. The annual report will be provided to the Commission on a confidential basis. Analysis of Volume and Open Interest: For EOW and EOM series, the annual report will contain the following volume and open interest data for each broad-based index overlying EOW and EOM options: (1) Monthly volume aggregated for all EOW and EOM series, (2) Volume in EOW and EOM series aggregated by expiration date, (3) Month-end open interest aggregated for all EOW and EOM series, (4) Month-end open interest for EOM series aggregated by expiration date and week-ending open interest for EOW series aggregated by expiration date, (5) Ratio of monthly aggregate volume in EOW and EOM series to total monthly class volume, and (6) Ratio of month-end open interest in EOM series to total month-end class 7 See e.g., Rule 4.13, Reports Related to Position Limits and Interpretation and Policy .03 to Rule 24.4 which sets forth the reporting requirements for certain broad-based indexes that do not have position limits. 8 As will be discussed in detail below, the Exchange trades structured quarterly and short term options. FLEX Options do not become fungible with subsequently introduced Non-FLEX structured quarterly and short term options. See Securities Exchange Act Release No. 59675 (April 1, 2009), 74 FR 15794 (April 7, 2009) (SR–OCC–2009–05). Because of the similarities between EOW and EOM expirations and existing structured quarterly and short term options, FLEX Options will similarly not become fungible with EOW and EOM expirations listed for trading. PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 49011 open interest and ratio of week-ending open interest in EOW series to total week-ending open interest. In addition, the annual report will contain the information noted above for standard Expiration Friday, AM-settled series, if applicable 9, for the period covered in the pilot report as well as for the six-month period prior to the initiation of the pilot. Upon request by the SEC, CBOE will provide a data file containing: (1) EOW and EOM option volume data aggregated by series, and (2) EOW week-ending open interest for expiring series and EOM month-end open interest for expiring series. Monthly Analysis of EOW & EOM Trading Patterns: In the annual report, CBOE also proposes to identify EOW and EOM trading patterns by undertaking a time series analysis of open interest in EOW and EOM series aggregated by expiration date compared to open interest in near-term standard Expiration Friday A.M.-settled series in order to determine whether users are shifting positions from standard series to EOW and EOM series. Declining open interest in standard series accompanied by rising open interest in EOW and EOM series would suggest that users are shifting positions. Provisional Analysis of Index Price Volatility and Share Trading Activity: For each EOW and EOM Expiration that has open interest that exceeds certain minimum thresholds, the annual report will contain the following analysis related to index price changes and, if needed, underlying share trading volume at the close on expiration dates: (1) A comparison of index price changes at the close of trading on a given expiration date with comparable price changes from a control sample. The data will include a calculation of percentage price changes for various time intervals and compare that information to the respective control sample. Raw percentage price change data as well as percentage price change data normalized for prevailing market volatility, as measured by the CBOE Volatility Index (‘‘VIX’’), will be provided; and (2) if needed, a calculation of share volume for a sample set of the component securities representing an upper limit on share trading that could be attributable to expiring in-the-money EOW and EOM expirations. The data, if needed, will include a comparison of the calculated share volume for securities in the sample set to the 9 Standard OEX & XEO option series are P.M.settled. E:\FR\FM\12AUN1.SGM 12AUN1 49012 Federal Register / Vol. 75, No. 155 / Thursday, August 12, 2010 / Notices jlentini on DSKJ8SOYB1PROD with NOTICES average daily trading volumes of those securities over a sample period. The minimum open interest parameters, control sample, time intervals, method for selecting the component securities, and sample periods will be determined by the Exchange and the Commission. Discussion: In support of this proposal, the Exchange states that it trades other types of series and FLEX Options 10 that expire on different days than regular options and in some cases have P.M.settlement. For example, since 1993 the Exchange has traded Quarterly Index Expirations (‘‘QIXs’’) that are cashsettled options on certain broad-based indexes which expire on the first business day of the month following the end of a calendar quarter and are P.M.settled.11 The Exchange also trades Quarterly Option Series (‘‘QOS’’) that overlie exchange traded funds (‘‘ETFs’’) or indexes which expire at the close of business on the last business day of a calendar quarter and are P.M.-settled.12 The Exchange has experience with these special dated options and has not observed any market disruptions resulting from the P.M.-settlement feature of these options. The Exchange does not believe that any market disruptions will be encountered with the introduction of P.M.-settlement EOM expirations, which will effectively permit the Exchange to fill in the remaining eight calendar months with series that expire on the last trading day of the month. The Exchange trades Short Term Option Series that may overlie any security approved for listing and trading on the Exchange and which are opened for trading on any Friday that is a business day and that expire on the next Friday that is a business day.13 These existing Short Term Option Series, however, are A.M.-settled and only have a contract duration of a single week. The Exchange seeks to introduce P.M.settled EOW expirations to provide market participants with a tool to hedge special events and to reduce the premium cost of buying protection. Currently, the Exchange believes that market participants may be paying for more protection than needed if they are seeking to hedge weekend or special event risk that occurs. The Exchange 10 See Securities Exchange Act Release No. 61439 (January 28, 2010), 75 FR 5831 (February 4, 2010) (SR–CBOE–2009–087) (order approving rule change to establish a pilot program to modify FLEX option exercise settlement values and minimum value sizes). 11 See Rule 24.9(c). 12 See Rules 5.5(e) and 24.9(a)(2)(B). 13 See Rules 5.5(d) and 24.9(a)(2)(A). VerDate Mar<15>2010 16:22 Aug 11, 2010 Jkt 220001 believes that an EOW expiration would allow market participants to purchase an option based on their needed timing and allow them to tailor their investment or hedging needs more effectively. In addition, because P.M.settlement permits trading throughout the day on the day the contract expires, the Exchange believes this feature will permit market participants to more effectively manage overnight risk and trade out of their positions up until the time the contract settles. Finally, the Exchange considers this proposal to be a competitive rule filing. Specifically, a futures exchange has the ability to list options on broad-based index futures that expire on the first and second Fridays of the month. In addition, the same futures exchange lists end-of-month options on broadbased index futures that expire on the last trading day of the month.14 As a result, that futures exchange is able to provide four expirations for each month for certain broad-based indexes, on which CBOE similarly trades security options.15 The Exchange believes that the introduction of EOW and EOM expirations will enable the Exchange to compete more effectively with the futures markets. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act16 and the rules and regulations thereunder and, in particular, the requirements of Section 6(b) of the Act.17 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5)18 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 interest [sic], by expanding the ability of investors to hedge risks against market movements stemming from economic releases or market events that occur throughout the month. Accordingly, the Exchange believes that EOWs and EOMs should create greater trading and hedging opportunities and flexibility, and provide customers with the ability 14 The options have European-style exercise and at expiration settle into a futures contract. 15 Those indexes are the S&P 500 Index (‘‘SPX’’) and the Mini-SPX Index. 16 15 U.S.C. 78s(b)(1). 17 15 U.S.C. 78f(b). 18 15 U.S.C. 78f(b)(5). PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 to more closely tailor their investment objectives. 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 Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove the proposed rule change, or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. 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 No. SR–CBOE–2009–075 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 No. SR–CBOE–2009–075. 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/ E:\FR\FM\12AUN1.SGM 12AUN1 49013 Federal Register / Vol. 75, No. 155 / Thursday, August 12, 2010 / Notices 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 such filing also will be available for inspection and copying at the principal office of 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 No. SR–CBOE–2009–075 and should be submitted on or before September 2, 2010. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 Florence E. Harmon, Deputy Secretary. [FR Doc. 2010–19853 Filed 8–11–10; 8:45 am] BILLING CODE 8010–01–P SOCIAL SECURITY ADMINISTRATION Agency Information Collection Activities: Proposed Request and Comment Request The Social Security Administration (SSA) publishes a list of information collection packages requiring clearance by the Office of Management and Budget (OMB) in compliance with Public Law (Pub. L.) 104–13, the Paperwork Reduction Act of 1995, effective October 1, 1995. This notice includes revisions and extensions of OMB-approved information collections and a new information collection. SSA is soliciting comments on the accuracy of the agency’s burden estimate; the need for the information; its practical utility; ways to enhance its quality, utility, and clarity; and ways to minimize burden on respondents, including the use of automated collection techniques or other forms of information technology. Mail, e-mail, or fax your comments and recommendations on the information collection(s) to the OMB Desk Officer and SSA Reports Clearance Officer to the following addresses or fax numbers. (OMB) Office of Management and Budget, Attn: Desk Officer for SSA. Fax: 202–395–6974. E-mail address: OIRA_Submission@omb.eop.gov. (SSA) Social Security Administration, DCBFM, Attn: Reports Clearance Officer, 1333 Annex Building, 6401 Security Blvd., Baltimore, MD 21235. Fax: 410–965–6400. E-mail address: OPLM.RCO@ssa.gov. I. The information collections below are pending at SSA. SSA will submit them to OMB within 60 days from the date of this notice. To be sure we consider your comments, we must receive them no later than October 12, 2010. Individuals can obtain copies of the collection instruments by calling the SSA Reports Clearance Officer at 410– 965–8783 or by writing to the above email address. 1. Benefit Offset National Demonstration—0960–NEW. SSA is undertaking the Benefit Offset National Demonstration (BOND), a demonstration and evaluation of policy changes and services in the Social Security Disability Insurance (SSDI) program, to obtain strong evidence about the effectiveness of potential solutions that would improve the historically very low rate of return to work among SSDI beneficiaries. Under current law, Social Security beneficiaries lose their SSDI benefit if they have earnings and/or work activity above the threshold of Number of respondents jlentini on DSKJ8SOYB1PROD with NOTICES Survey Frequency of response Substantial Gainful Activity (SGA) after completing the Trial Work Period and two-month grace period. The benefitoffset component of this demonstration will reduce benefits by $1 for every $2 in earnings above the BOND threshold, gradually reducing benefits as earnings increase. The experimental design for BOND will test a benefit offset alone and in conjunction with enhanced work incentives counseling. The central research questions include: • What is the effect of the benefit offset alone on employment and other outcomes? • What is the effect of the benefit offset in combination with enhanced work incentives counseling on employment and other outcomes? The proposed public survey data collections will have four components: An impact study, a cost-benefit analysis, a participation analysis, and a process study. The data collections are a primary source for data to measure the effects of a more generous benefit offset and the provision of enhanced work incentives counseling on SSDI beneficiaries’ work efforts and earnings. Ultimately, these data will provide information for researchers, policy analysts, policy makers and the United States Congress on a wide range of program areas. The effects of BOND on the well-being of SSDI beneficiaries could manifest in many dimensions and could be relevant to an array of other public programs. This project offers the first opportunity to obtain reliable measures of these effects based on a nationally representative sample. The long-term indirect benefits of this research are likely to be substantial. Respondents are SSDI beneficiaries, and concurrent SSDI and Supplemental Security Income (SSI) recipients whom we randomly assign to the study (Stage 1), and SSDI beneficiaries who agree to participate in the study (Stage 2). Type of Request: Request for a new information collection. Number of responses Average burden per response (minutes) Total annual burden (hours) Baseline Survey ................................................................... Interim Survey ...................................................................... Stage 1 36-month Survey .................................................... Stage 2 36-month Survey .................................................... Key Informant Interviews ..................................................... Stage 2 Participant Focus Groups ...................................... 12,600 10,080 8,000 10,080 100 600 1 1 1 1 7 1 12,600 10,080 8,000 10,080 700 600 41 29 49 60 60 90 8,610 4,872 6,533 10,080 700 900 Totals ............................................................................ 41,460 ........................ 42,060 ........................ 31,695 19 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 16:22 Aug 11, 2010 Jkt 220001 PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 E:\FR\FM\12AUN1.SGM 12AUN1

Agencies

[Federal Register Volume 75, Number 155 (Thursday, August 12, 2010)]
[Notices]
[Pages 49010-49013]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-19853]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62658; File No. SR-CBOE-2009-075]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Proposed Rule Change, as Modified by Amendment 
Nos. 1 and 2, To Establish a Pilot Program to List P.M.-Settled End of 
Week and End of Month Expirations for Options on Broad-Based Indexes

 August 5, 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 October 14, 2009, 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. On May 3, 2010, the Exchange filed Amendment 1 to the 
proposed rule change, and on July 30, 2010, the Exchange filed 
Amendment 2 to the proposed rule change.\3\ The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as modified by Amendment Nos. 1 and 2, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment 2 replaces Amendment 1 and the original filing in 
their entireties.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CBOE requests approval to establish a pilot program that would 
permit P.M.-settled options on broad-based indexes that expire on: (a) 
Any Friday of the month, other than the third Friday-of-the-month 
(``End of Week Expirations''), and (b) the last trading day of the 
month (``End of Month Expirations''). The text of the rule proposal 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Amendment 2 replaces Amendment 1 and the original filing in their 
entireties. The purpose of Amendment 2 is to broaden the definition of 
End of Week Expirations to include any Friday of the month, other than 
the third Friday-of-the-month.
    The purpose of this filing is to establish a pilot program that 
would permit P.M.-settled options on broad-based indexes to expire on 
(a) any Friday of the month, other than the third Friday-of-the-month 
(``End of Week Expirations'' or ``EOWs''), and (b) the last trading day 
of the month (``End

[[Page 49011]]

of Month Expirations'' or ``EOMs'').\4\ For example, if EOWs and EOMs 
were currently listed, the expiration dates for October 2010 would be: 
October 1 (EOW), October 8 (EOW), October 15 (standard), October 22 
(EOW) and October 29 (EOM).\5\ Under the End of Week/End of Month 
Expirations Pilot Program (``Program''), EOWs and EOMs will be 
permitted on any broad-based index that is eligible for regular options 
trading. EOWs and EOMs will be cash-settled and have European-style 
exercise.
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    \4\ If the last trading day of the month is a Friday, the 
Exchange will list an End of Month expiration series and not an End 
of Week expiration.
    \5\ See Rule 24.9(a)(2) for specific rule governing the 
expiration months that may be listed for index options. CBOE does 
not intend to list EOWs or EOMs that would expire on Exchange 
holidays.
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    The proposal will become effective on a pilot basis for a period 
fourteen months to commence on the next full month after approval is 
received to establish the Program. If the Exchange were to propose an 
extension of the Program or should the Exchange to propose to make the 
Program permanent, then the Exchange would submit a filing proposing 
such amendments to the Program. Any positions established under the 
Program would not be impacted by the expiration of the Pilot. For 
example, if the Exchange lists an EOW or EOM expiration that expires 
after the Program expires (and is not extended) then those positions 
would continue to exist. However, any further trading in those series 
would be restricted to transactions where at least one side of the 
trade is a closing transaction.\6\
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    \6\ The Exchange intends to address this point in a circular to 
members should the Exchange receive approval to establish the 
Program.
---------------------------------------------------------------------------

    To implement the Pilot as described above, the Exchange is 
proposing to add new subparagraph (e) to Rule 24.9 to expressly provide 
the Exchange with the ability to list P.M.-settled EOWs and EOMs on 
broad-based indexes eligible for options trading. The amendment to Rule 
24.9 will also set forth that the duration of the Program will be 
effective for a period of fourteen months from the next full month from 
approval.
    EOMs and EOWs will be subject to the same rules that currently 
govern the trading of traditional index options, including sales 
practice rules, margin requirements, and floor trading procedures. 
Contract terms for EOWs and EOMs will be similar to regular index 
options, with one general exception: the exercise settlement value will 
be based on the index value derived from the closing prices of 
component stocks.
    Since EOWs and EOMs will be a new type of series and not a new 
class, the Exchange proposes that EOWs and EOMs on the same broad-based 
index (e.g., of the same class) shall be aggregated for position limits 
(if any) and any applicable reporting and other requirements.\7\ The 
Exchange is proposing to add ``EOWs'' and ``EOMs'' to Rule 24.4(b) to 
reflect the aggregation requirement. This proposed aggregation is 
consistent the aggregation requirements for other types of option 
series (e.g., QOS, QIXs) that are listed on the Exchange and which do 
not expire on the customary ``third Saturday.\8\''
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    \7\ See e.g., Rule 4.13, Reports Related to Position Limits and 
Interpretation and Policy .03 to Rule 24.4 which sets forth the 
reporting requirements for certain broad-based indexes that do not 
have position limits.
    \8\ As will be discussed in detail below, the Exchange trades 
structured quarterly and short term options. FLEX Options do not 
become fungible with subsequently introduced Non-FLEX structured 
quarterly and short term options. See Securities Exchange Act 
Release No. 59675 (April 1, 2009), 74 FR 15794 (April 7, 2009) (SR-
OCC-2009-05). Because of the similarities between EOW and EOM 
expirations and existing structured quarterly and short term 
options, FLEX Options will similarly not become fungible with EOW 
and EOM expirations listed for trading.
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    Annual Program Report:
    As part of the Program, the Exchange will submit a Program report 
to the Securities and Exchange Commission (``Commission'') at least two 
months prior to the expiration date of the Program (the ``annual 
report''). As described below, the annual report will contain an 
analysis of volume, open interest and trading patterns. In addition, 
for series that exceed certain minimum open interest parameters, the 
annual report would provide analysis of index price volatility and, if 
needed, share trading activity. The annual report will be provided to 
the Commission on a confidential basis.
    Analysis of Volume and Open Interest:
    For EOW and EOM series, the annual report will contain the 
following volume and open interest data for each broad-based index 
overlying EOW and EOM options:
    (1) Monthly volume aggregated for all EOW and EOM series,
    (2) Volume in EOW and EOM series aggregated by expiration date,
    (3) Month-end open interest aggregated for all EOW and EOM series,
    (4) Month-end open interest for EOM series aggregated by expiration 
date and week-ending open interest for EOW series aggregated by 
expiration date,
    (5) Ratio of monthly aggregate volume in EOW and EOM series to 
total monthly class volume, and
    (6) Ratio of month-end open interest in EOM series to total month-
end class open interest and ratio of week-ending open interest in EOW 
series to total week-ending open interest.
    In addition, the annual report will contain the information noted 
above for standard Expiration Friday, AM-settled series, if applicable 
\9\, for the period covered in the pilot report as well as for the six-
month period prior to the initiation of the pilot.
---------------------------------------------------------------------------

    \9\ Standard OEX & XEO option series are P.M.-settled.
---------------------------------------------------------------------------

    Upon request by the SEC, CBOE will provide a data file containing: 
(1) EOW and EOM option volume data aggregated by series, and (2) EOW 
week-ending open interest for expiring series and EOM month-end open 
interest for expiring series.
    Monthly Analysis of EOW & EOM Trading Patterns:
    In the annual report, CBOE also proposes to identify EOW and EOM 
trading patterns by undertaking a time series analysis of open interest 
in EOW and EOM series aggregated by expiration date compared to open 
interest in near-term standard Expiration Friday A.M.-settled series in 
order to determine whether users are shifting positions from standard 
series to EOW and EOM series. Declining open interest in standard 
series accompanied by rising open interest in EOW and EOM series would 
suggest that users are shifting positions.
    Provisional Analysis of Index Price Volatility and Share Trading 
Activity:
    For each EOW and EOM Expiration that has open interest that exceeds 
certain minimum thresholds, the annual report will contain the 
following analysis related to index price changes and, if needed, 
underlying share trading volume at the close on expiration dates:
    (1) A comparison of index price changes at the close of trading on 
a given expiration date with comparable price changes from a control 
sample. The data will include a calculation of percentage price changes 
for various time intervals and compare that information to the 
respective control sample. Raw percentage price change data as well as 
percentage price change data normalized for prevailing market 
volatility, as measured by the CBOE Volatility Index (``VIX''), will be 
provided; and
    (2) if needed, a calculation of share volume for a sample set of 
the component securities representing an upper limit on share trading 
that could be attributable to expiring in-the-money EOW and EOM 
expirations. The data, if needed, will include a comparison of the 
calculated share volume for securities in the sample set to the

[[Page 49012]]

average daily trading volumes of those securities over a sample period.
    The minimum open interest parameters, control sample, time 
intervals, method for selecting the component securities, and sample 
periods will be determined by the Exchange and the Commission.
    Discussion:
    In support of this proposal, the Exchange states that it trades 
other types of series and FLEX Options \10\ that expire on different 
days than regular options and in some cases have P.M.-settlement. For 
example, since 1993 the Exchange has traded Quarterly Index Expirations 
(``QIXs'') that are cash-settled options on certain broad-based indexes 
which expire on the first business day of the month following the end 
of a calendar quarter and are P.M.-settled.\11\ The Exchange also 
trades Quarterly Option Series (``QOS'') that overlie exchange traded 
funds (``ETFs'') or indexes which expire at the close of business on 
the last business day of a calendar quarter and are P.M.-settled.\12\ 
The Exchange has experience with these special dated options and has 
not observed any market disruptions resulting from the P.M.-settlement 
feature of these options. The Exchange does not believe that any market 
disruptions will be encountered with the introduction of P.M.-
settlement EOM expirations, which will effectively permit the Exchange 
to fill in the remaining eight calendar months with series that expire 
on the last trading day of the month.
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    \10\ See Securities Exchange Act Release No. 61439 (January 28, 
2010), 75 FR 5831 (February 4, 2010) (SR-CBOE-2009-087) (order 
approving rule change to establish a pilot program to modify FLEX 
option exercise settlement values and minimum value sizes).
    \11\ See Rule 24.9(c).
    \12\ See Rules 5.5(e) and 24.9(a)(2)(B).
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    The Exchange trades Short Term Option Series that may overlie any 
security approved for listing and trading on the Exchange and which are 
opened for trading on any Friday that is a business day and that expire 
on the next Friday that is a business day.\13\ These existing Short 
Term Option Series, however, are A.M.-settled and only have a contract 
duration of a single week. The Exchange seeks to introduce P.M.-settled 
EOW expirations to provide market participants with a tool to hedge 
special events and to reduce the premium cost of buying protection. 
Currently, the Exchange believes that market participants may be paying 
for more protection than needed if they are seeking to hedge weekend or 
special event risk that occurs. The Exchange believes that an EOW 
expiration would allow market participants to purchase an option based 
on their needed timing and allow them to tailor their investment or 
hedging needs more effectively. In addition, because P.M.-settlement 
permits trading throughout the day on the day the contract expires, the 
Exchange believes this feature will permit market participants to more 
effectively manage overnight risk and trade out of their positions up 
until the time the contract settles.
---------------------------------------------------------------------------

    \13\ See Rules 5.5(d) and 24.9(a)(2)(A).
---------------------------------------------------------------------------

    Finally, the Exchange considers this proposal to be a competitive 
rule filing. Specifically, a futures exchange has the ability to list 
options on broad-based index futures that expire on the first and 
second Fridays of the month. In addition, the same futures exchange 
lists end-of-month options on broad-based index futures that expire on 
the last trading day of the month.\14\ As a result, that futures 
exchange is able to provide four expirations for each month for certain 
broad-based indexes, on which CBOE similarly trades security 
options.\15\ The Exchange believes that the introduction of EOW and EOM 
expirations will enable the Exchange to compete more effectively with 
the futures markets.
---------------------------------------------------------------------------

    \14\ The options have European-style exercise and at expiration 
settle into a futures contract.
    \15\ Those indexes are the S&P 500 Index (``SPX'') and the Mini-
SPX Index.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act\16\ and the rules and regulations thereunder and, in 
particular, the requirements of Section 6(b) of the Act.\17\ 
Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5)\18\ 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 interest [sic], by expanding the ability of 
investors to hedge risks against market movements stemming from 
economic releases or market events that occur throughout the month. 
Accordingly, the Exchange believes that EOWs and EOMs should create 
greater trading and hedging opportunities and flexibility, and provide 
customers with the ability to more closely tailor their investment 
objectives.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(1).
    \17\ 15 U.S.C. 78f(b).
    \18\ 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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 No. SR-CBOE-2009-075 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 No. SR-CBOE-2009-075. 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/

[[Page 49013]]

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 such filing also will be 
available for inspection and copying at the principal office of 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 No. SR-CBOE-2009-075 and 
should be submitted on or before September 2, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-19853 Filed 8-11-10; 8:45 am]
BILLING CODE 8010-01-P
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