Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Permit Certain FLEX Options To Trade Under the FLEX Trading Procedures for a Limited Time on a Closing Only Basis, 56147-56150 [2010-22947]
Download as PDF
<![CDATA[
Federal Register / Vol. 75, No. 178 / Wednesday, September 15, 2010 / Notices
September 9, 2010 to: Sam Feola, Permit
No. 2011–008.
NATIONAL SCIENCE FOUNDATION
Notice of Permits Issued Under the
Antarctic Conservation Act of 1978
AGENCY:
Nadene G. Kennedy,
Permit Officer.
National Science Foundation.
Notice of permits issued under
the Antarctic Conservation of 1978,
Public Law 95–541.
ACTION:
The National Science
Foundation (NSF) is required to publish
notice of permits issued under the
Antarctic Conservation Act of 1978.
This is the required notice.
SUMMARY:
FOR FURTHER INFORMATION CONTACT:
Nadene G. Kennedy, Permit Office,
Office of Polar Programs, Rm. 755,
National Science Foundation, 4201
Wilson Boulevard, Arlington, VA 22230.
On August
3, 2010, the National Science
Foundation published a notice in the
Federal Register of permit applications
received. Permits were issued on
September 9, 2010 to:
SUPPLEMENTARY INFORMATION:
Sam
Sam
Sam
Sam
Sam
Sam
Sam
Feola
Feola
Feola
Feola
Feola
Feola
Feola
...............
...............
...............
...............
...............
...............
...............
Permit
Permit
Permit
Permit
Permit
Permit
Permit
No.
No.
No.
No.
No.
No.
No.
2011–009.
2011–010.
2011–011.
2011–012.
2011–013.
2011–014.
2011–015.
Nadene G. Kennedy,
Permit Officer.
[FR Doc. 2010–22924 Filed 9–14–10; 8:45 am]
BILLING CODE 7555–01–P
NATIONAL SCIENCE FOUNDATION
Notice of Permits Issued Under the
Antarctic Conservation Act of 1978
AGENCY:
National Science Foundation.
Notice of permits issued under
the Antarctic Conservation of 1978,
Public Law 95–541.
ACTION:
The National Science
Foundation (NSF) is required to publish
notice of permits issued under the
Antarctic Conservation Act of 1978.
This is the required notice.
SUMMARY:
srobinson on DSKHWCL6B1PROD with NOTICES
FOR FURTHER INFORMATION CONTACT:
Nadene G. Kennedy, Permit Office,
Office of Polar Programs, Rm. 755,
National Science Foundation, 4201
Wilson Boulevard, Arlington, VA 22230.
On July
28, 2010, the National Science
Foundation published a notice in the
Federal Register of a permit application
received. A permit was issued on
SUPPLEMENTARY INFORMATION:
VerDate Mar<15>2010
18:57 Sep 14, 2010
Jkt 220001
[FR Doc. 2010–22925 Filed 9–14–10; 8:45 am]
BILLING CODE 7555–01–P
U.S. OFFICE OF PERSONNEL
MANAGEMENT
Announcement of Public Meeting
Transcript and Comment Period
U.S. Office of Personnel
Management.
ACTION: Notice of transcript and public
comment.
AGENCY:
The Office of Personnel
Management held a public hearing on
June 25, 2010, on issues concerning
pathways to Federal jobs for students
and recent graduates. The transcript
from the hearing is now available at
https://www.chcoc.gov/documents/
DisplayDocument.aspx
?PublicDocID=195. Members of the
public are welcome to provide any
further comments on issues raised at the
hearing.
DATES: Members of the public wishing
to submit written statements must
submit such statements by September
29, 2010.
ADDRESSES: Send written statements to
Ms. Angela Bailey, Deputy Associate
Director for Recruitment and Diversity,
1900 E Street, NW., Room 6500,
Washington, DC 20415 or
hiringevent@opm.gov.
FOR FURTHER INFORMATION CONTACT: Ms.
Juanita Wheeler. She can be reached on
202–606–2660 or at
Juanita.Wheeler@opm.gov.
SUMMARY:
On May
11, 2010, President Obama issued a
Memorandum for the Heads of
Executive Departments and Agencies in
which he stated that ‘‘the Federal
Government must recruit and hire
highly qualified employees and public
service should be a career of choice for
the most talented Americans.’’ This
public meeting was one phase of that
initiative.
The purpose of this meeting was (1)
to hear and consider views on whether
normal, competitive hiring is an
effective avenue for bringing recent
college graduates into the Federal
workforce and, if so, why that is the
case; (2) to ascertain from those who
believe that it is not effective, whether
this presents a problem for the Federal
Government that is sufficiently
significant to warrant action or changes
SUPPLEMENTARY INFORMATION:
PO 00000
Frm 00097
Fmt 4703
Sfmt 4703
56147
to policy; and (3) if action or changes in
policy are warranted, to determine what
change should be effected and by
whom. The transcripts from that public
hearing are now available at https://
www.chcoc.gov/documents/
DisplayDocument.aspx
?PublicDocID=195. Members of the
public are invited to provide any further
comments they wish addressing the
three issues presented above, and, in
particular, to respond to comments
made at the hearing. You may submit
your written comments to Ms. Angela
Bailey, Deputy Associate Director for
Recruitment and Diversity, on or before
September 29, 2010, to the address
listed above. Please limit your
statements to no more than five pages.
All written statements and oral
presentations will become part of the
record of proceedings and deliberations.
U.S. Office of Personnel Management.
John Berry,
Director.
[FR Doc. 2010–22909 Filed 9–14–10; 8:45 am]
BILLING CODE 6325–39–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62870; File No. SR–CBOE–
2010–078]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Permit Certain FLEX
Options To Trade Under the FLEX
Trading Procedures for a Limited Time
on a Closing Only Basis
September 8, 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 August
30, 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 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 amend
certain CBOE rules pertaining to
1 15
2 17
E:\FR\FM\15SEN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
15SEN1
56148
Federal Register / Vol. 75, No. 178 / Wednesday, September 15, 2010 / Notices
Flexible Exchange (‘‘FLEX’’) Options to
permit certain FLEX Options to
continue to trade under the FLEX
trading procedures for a limited time.
The text of the proposed rule change is
available on the Exchange’s Web site
(https://www.cboe.org/Legal), on the
Commission’s Web site at https://
www.sec.gov; at the Exchange’s Office of
the Secretary and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of
and basis for the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in Sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
srobinson on DSKHWCL6B1PROD with NOTICES
1. Purpose
The purpose of this filing is to allow
certain FLEX Options, which are
identical in all terms to a Non-FLEX
Option, to continue to trade using the
FLEX trading procedures for the balance
of the trading day on which the NonFLEX Option is added as an intra-day
add.
The Exchange recently adopted rule
changes to allow FLEX Options to
expire on or within two business days
of a third-Friday-of-the-month
expiration (‘‘Expiration FLEX
Options’’).3 Such FLEX Options could
have either an American-, European-, or
European-Capped-style exercise. Among
other things, the rule change also
provided that Expiration FLEX Options
will be permitted before (but not after)
Non-FLEX Options with identical terms
are listed. Once and if an option series
is listed for trading as a Non-FLEX
Option series, (i) all existing open
positions established under the FLEX
trading procedures shall be fully
fungible with transactions in the
respective Non-FLEX Option series, and
(ii) any further trading in the series
would be as Non-FLEX Options subject
3 See Securities Exchange Act Release No. 59417
(February 18, 2009), 74 FR 8591 (February 25, 2009)
(SR–CBOE–2008–115).
VerDate Mar<15>2010
18:57 Sep 14, 2010
Jkt 220001
to the Non-FLEX trading procedures and
rules.
The Options Clearing Corporation
(‘‘OCC’’) became concerned that, in
certain circumstances, in the event a
Non-FLEX Option is listed with
identical terms to an existing FLEX
Option, OCC could not net the positions
in the contracts until the next business
day. If the Non-FLEX Option were listed
intra-day, and an investor with a
position in the FLEX Option attempted
to close the position using the NonFLEX Option, the investor would be
technically long in one contract and
short in the other contract. This would
expose the investor to assignment risk
until the next day despite having
offsetting positions.
The limited circumstances are:
• The Non-FLEX Option is listed
intra-day.
• The FLEX contract is for Americanstyle exercise.
• All other terms are identical and the
contracts are otherwise fungible.
The risk does not occur in expiration
Friday FLEX Option positions during
the five days prior to expiration, as no
new Non-FLEX Option series may be
listed within five days of expiration. It
also does not exist for FLEX Option
positions that will be identical to NonFLEX series to be added after expiration,
as those new series are added
‘‘overnight’’ and OCC will convert the
FLEX position to the Non-FLEX Option
series at the time the Non-FLEX series
is created. In addition, it does not exist
for FLEX Options positions that have a
European-Capped-style exercise, as
there are no Non-FLEX EuropeanCapped-style options currently traded
on CBOE. Further, it does not exist for
most FLEX Index Options listed on
CBOE, as most Non-FLEX Index options
currently traded on CBOE are Europeanstyle exercise, and thus the Non-FLEX
Index Options cannot be exercised on
the day the series is listed. The only
exception is Non-FLEX, American-style
options on the S&P 100 (OEX).
As an example, suppose underlying
issue XYZ, trading around $25 per
share, has options listed on the March
cycle, and in February an investor
wishes to buy just-out-of-the-money call
options that expire in May. Since the
Non-FLEX May Options will not be
listed until after the March expiration,
the investor enters a FLEX Option order
in February to buy 250 Call 30 options
expiring on the third Friday of May. If,
as expected, the Non-FLEX May 30 call
options are listed on the Monday after
March expiration, the investor’s open
FLEX position will be converted by OCC
over the weekend following March
expiration to the Non-FLEX series.
PO 00000
Frm 00098
Fmt 4703
Sfmt 4703
However, if XYZ stock should decline
between the time of the FLEX
transaction and March expiration, the
May 30 calls may not be added after
March expiration. If that were to occur,
the May 30 calls may be added
sometime later. Suppose the Exchange
receives a request to add the May 30
calls on the morning of the Wednesday
after expiration, and the Exchange lists
them immediately. The investor with
the FLEX position may then decide it is
an opportune time to close his position.
Under the current rules, the investor
would be required to close the position
by entering a sell order in the new NonFLEX Option series. However, when the
Non-FLEX transaction is reported to
OCC, the investor is considered short in
the Non-FLEX Option series, and is still
long in the FLEX Option. OCC cannot
aggregate the FLEX positions into the
Non-FLEX series until after exercise and
assignment processing. If a buyer in the
new Non-FLEX series were to exercise
the options, the original investor who
had attempted to close the FLEX
position with an offsetting Non-FLEX
trade would be at risk of being assigned
on the technically short Non-FLEX
position.
Because of this risk, OCC will not
clear an American-style expiration
Friday FLEX option. The Exchange has
spoken with OCC and OCC has agreed
that allowing an option position in a
FLEX contract to be closed using a FLEX
Option in such circumstances will
mitigate the risk.
The assignment risk does not exist if
the Non-FLEX Option is to be added the
next trading day. In situations where
OCC is aware that a series will be added
overnight, they can convert the FLEX
position to a Non-FLEX position before
the next trading day. However, OCC
cannot guarantee that an identical NonFLEX series will not be added intra-day,
and thus will not clear such Americanstyle FLEX Options.
CBOE is proposing a limited
exception to the requirement that the
trading in such options be under the
Non-FLEX trading procedures. The
Exchange proposes that, in the event a
Non-FLEX Option is listed intra-day, a
FLEX Option position with identical
terms could be closed under the FLEX
trading procedures, but only for the
balance of the trading day on which the
series is added. Under the proposed rule
change, both sides of the FLEX
transaction would have to be closing
only positions.
This change will allow a FLEX Option
to be traded in such a manner to
mitigate assignment risk.
A FLEX Post Official (also referred to
in the rules as simply a ‘‘FLEX
E:\FR\FM\15SEN1.SGM
15SEN1
srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 75, No. 178 / Wednesday, September 15, 2010 / Notices
Official’’) 4 has the regulatory
responsibility for reviewing the
conformity of FLEX trades to the terms
and specifications contained in Rule
24A.4 or 24B.4, as applicable. In the
event a Non-FLEX series, having the
same terms as an existing expiration
Friday FLEX Option, is listed intra-day,
the FLEX Official will review any
subsequent FLEX transactions in that
series and verify that the transaction is
being executed for the purpose of
closing out an existing FLEX position.
In addition:
• With respect to FLEX trades
occurring on the Chapter XXIVA FLEX
trading platform, should such trading
platform be used by the Exchange,5 the
FLEX Official will not disseminate a
FLEX Request for Quote for any order
representing a FLEX series having the
same terms as a Non-FLEX series, unless
such FLEX Order is a closing order (and
it is the day the Non-FLEX series has
been added). Additionally, if the FLEX
Official were to disseminate a FLEX
Request for Quotes for a closing order
representing a FLEX series having the
same terms as a Non-FLEX series, the
FLEX Official would only accept
response quotes and orders that were
closing out an existing FLEX position.
• With respect to FLEX trades
occurring on the Chapter XXIVB FLEX
trading platform, the FLEX Official will
make an announcement that the FLEX
series is now restricted to closing
transactions; a FLEX Request for Quotes
may not be disseminated for any order
representing a FLEX series having the
same terms as a Non-FLEX series, unless
such FLEX Order is a closing order (and
it is the day the Non-FLEX series has
been added); and only responses that
were closing out an existing FLEX
position would be permitted. Any
transactions that occur that do not
conform to these requirements would be
nullified by the FLEX Official pursuant
to Rule 24B.14.
The CBOE Department of Regulation
reviews FLEX trading activity, and, in
the event a Non-FLEX series with the
same terms as an expiration Friday
FLEX option is listed intra-day, will
review any subsequent FLEX
transactions in the series to verify that
they are closing a position.
4 FLEX Officials are Exchange employees or
independent contractors designated pursuant to
Rule 24A.12 or 24B.14.
5 Currently CBOE’s Chapter XXIVA FLEX trading
platform is not utilized by the Exchange. Instead,
all FLEX Options are currently traded on CBOE’s
Chapter XXIVB FLEX trading platform.
VerDate Mar<15>2010
18:57 Sep 14, 2010
Jkt 220001
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the Act 6
and the rules and regulations
thereunder and, in particular, the
requirements of Section 6(b) of the Act.7
Specifically, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 8 in that it is 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, by giving CBOE Trading
Permit Holders and investors additional
tools to trade customized options in an
exchange environment while allowing a
FLEX position to be traded in such a
manner as to mitigate inadvertent
assignment risk.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
CBOE does not believe that the
proposed rule change will impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange neither solicited nor
received comments on the proposal.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing rule does not (i)
significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
for 30 days from the date on which it
was filed, or such shorter time as the
Commission may designate if consistent
with the protection of investors and the
public interest, provided that the selfregulatory organization has given the
Commission written notice of its intent
to file the proposed rule change at least
five business days prior to the date of
filing of the proposed rule change or
such shorter time as designated by the
Commission, the proposed rule change
has become effective pursuant to
Section 19(b)(3)(A) of the Act 9 and Rule
19b–4(f)(6) thereunder.10
6 15
U.S.C. 78s(b)(1).
U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(5).
9 15 U.S.C. 78s(b)(3)(A).
10 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires that a self-regulatory
7 15
PO 00000
Frm 00099
Fmt 4703
Sfmt 4703
56149
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),11 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing.
The Commission notes that the
proposed rule change is substantially
similar to a proposed rule change
previously submitted by NYSE Arca
which was published for notice and
comment in the Federal Register.12 The
Commission notes that it did not receive
any comments on the NYSE Arca
proposal, and does not believe the
CBOE’s proposal raises any new or
novel issues. Further, as noted above,
because of the inadvertent assignment
risk, market participants could not trade
previously approved American style
FLEX Options expiring on Expiration
Friday.13 The proposal seeks to mitigate
such assignment risks by limiting
certain FLEX transactions to closing
only, thereby allowing the trading of
previously approved FLEX Options. For
these reasons, the Commission believes
that waiver of the 30-day operative
delay is consistent with the protection
of investors and the public interest and
therefore, designates the proposed rule
change operative upon filing.14
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend 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
organization 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 filing of the proposed rule change, or
such shorter time as designated by the Commission.
The Commission notes that the Exchange has
satisfied this requirement.
11 17 CFR 240.19b–4(f)(6)(iii).
12 See Securities Exchange Act Release No. 62321
(June 17, 2010), 75 FR 36130 (June 24, 2010) (SR–
NYSEArca–2010–46).
13 See supra note 5.
14 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
E:\FR\FM\15SEN1.SGM
15SEN1
56150
Federal Register / Vol. 75, No. 178 / Wednesday, September 15, 2010 / Notices
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62867; File No. SR–Phlx–
2010–122]
• 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–2010–078 on the
subject line.
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Clarify What
Information Must Be Entered Into the
Exchange’s Options Floor Broker
Management System
Paper Comments
September 8, 2010.
• 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–2010–078. 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 such 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 No. SR–CBOE–
2010–078 and should be submitted on
or before October 6, 2010
srobinson on DSKHWCL6B1PROD with NOTICES
Electronic Comments
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1, and Rule 19b–4 2 thereunder,
notice is hereby given that on
September 2, 2010, NASDAQ OMX
PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010–22947 Filed 9–14–10; 8:45 am]
BILLING CODE 8010–01–P
15 17
CFR 200.30–3(a)(12).
VerDate Mar<15>2010
18:57 Sep 14, 2010
Jkt 220001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing with the
Commission a proposal to amend Phlx
Rule 1063 (Responsibilities of Floor
Brokers) and Phlx Options Procedure
Advice C–2 (Options Floor Broker
Management System) 3 to clarify what
information must be entered into the
Exchange’s Options Floor Broker
Management System.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaqomxphlx
.cchwallstreet.com/
NASDAQOMXPHLX/Filings/, at the
principal office of the Exchange, 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
Exchange included statements
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Options Floor Procedure Advices (‘‘OFPAs’’ or
‘‘Advices’’) generally correspond to Exchange rules.
OFPA C–2 is a corresponding Advice to Rule 1063,
which deals, in part, with the Options Floor Broker
Management System and is part of the Exchange’s
minor rule plan (‘‘MRP’’ or ‘‘Minor Rule Plan’’). The
Exchange’s Minor Rule Plan consists of Advices
with preset fines, pursuant to Rule 19d–1(c) under
the Act. 17 CFR 240.19d–1(c). See Securities
Exchange Act Release No. 50997 (January 7, 2005),
70 FR 2444 (January 13, 2005) (SR–Phlx–2003–40)
(approval order establishing Floor Broker
Management System in OFPA C–2 and Rule 1063).
2 17
PO 00000
Frm 00100
Fmt 4703
Sfmt 4703
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this proposal is to
amend Phlx Rule 1063 and Options
Floor Procedure Advice C–2 to clarify
that information entered into the
Exchange’s Options Floor Broker
Management System must include order
receipt time.
The Exchange’s Options Floor Broker
Management System (‘‘FBMS’’) 4 was
designed to establish an electronic audit
trail for equity, equity index and U.S.
dollar-settled foreign currency options 5
orders represented by Floor Brokers 6 on
the Exchange.7 The Options Floor
Broker Management System is found in
Rule 1063(e) and corresponding Advice
C–2 and states that either a Floor Broker
or an employee of a Floor Broker has to
record all options orders represented by
such Floor Broker onto the electronic
FBMS (as described in Rule 1080,
4 Rule 1080, Commentary .06 states, in relevant
part: The Options Floor Broker Management System
is a component of AUTOM designed to enable Floor
Brokers and/or their employees to enter, route and
report transactions stemming from options orders
received on the Exchange. The Options Floor
Broker Management System also is designed to
establish an electronic audit trail for options orders
represented and executed by Floor Brokers on the
Exchange, such that the audit trial provides an
accurate, time-sequenced record of electronic and
other orders, quotations and transactions on the
Exchange, beginning with the receipt of an order by
the Exchange, and further documenting the life of
the order through the process of execution, partial
execution, or cancellation of that order. Rule
1080(a) states, in relevant part: AUTOM is the
Exchange’s electronic order delivery and reporting
system, which provides for the automatic entry and
routing of Exchange-listed equity options, index
options and U.S. dollar-settled foreign currency
options orders to the Exchange trading floor.
5 U.S. dollar-settled foreign currency options
traded on the Exchange are also known as World
Currency Options (‘‘WCO’’) or Foreign Currency
Options (‘‘FCO’’).
6 Floor Broker is defined in Rule 1060 as: An
individual who is registered with the Exchange for
the purpose, while on the Options Floor, of
accepting and executing options orders received
from members and member organizations.
7 See Securities Exchange Act Release No. 50997
(January 7, 2005), 70 FR 2444 (January 13, 2005)
(SR–Phlx–2003–40) (approval order establishing
FBMS in Rule 1063 and OFPA C–2, and adding
definition of FBMS in Commentary .06 to Rule
1080).
E:\FR\FM\15SEN1.SGM
15SEN1
]]>Agencies
[Federal Register Volume 75, Number 178 (Wednesday, September 15, 2010)]
[Notices]
[Pages 56147-56150]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-22947]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62870; File No. SR-CBOE-2010-078]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Permit Certain FLEX Options To Trade Under the FLEX
Trading Procedures for a Limited Time on a Closing Only Basis
September 8, 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 August 30, 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 Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposing to amend certain CBOE rules pertaining to
[[Page 56148]]
Flexible Exchange (``FLEX'') Options to permit certain FLEX Options to
continue to trade under the FLEX trading procedures for a limited time.
The text of the proposed rule change is available on the Exchange's Web
site (https://www.cboe.org/Legal), on the Commission's Web site at
https://www.sec.gov; at the Exchange's Office of the Secretary and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of and basis for the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in Sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to allow certain FLEX Options, which
are identical in all terms to a Non-FLEX Option, to continue to trade
using the FLEX trading procedures for the balance of the trading day on
which the Non-FLEX Option is added as an intra-day add.
The Exchange recently adopted rule changes to allow FLEX Options to
expire on or within two business days of a third-Friday-of-the-month
expiration (``Expiration FLEX Options'').\3\ Such FLEX Options could
have either an American-, European-, or European-Capped-style exercise.
Among other things, the rule change also provided that Expiration FLEX
Options will be permitted before (but not after) Non-FLEX Options with
identical terms are listed. Once and if an option series is listed for
trading as a Non-FLEX Option series, (i) all existing open positions
established under the FLEX trading procedures shall be fully fungible
with transactions in the respective Non-FLEX Option series, and (ii)
any further trading in the series would be as Non-FLEX Options subject
to the Non-FLEX trading procedures and rules.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 59417 (February 18,
2009), 74 FR 8591 (February 25, 2009) (SR-CBOE-2008-115).
---------------------------------------------------------------------------
The Options Clearing Corporation (``OCC'') became concerned that,
in certain circumstances, in the event a Non-FLEX Option is listed with
identical terms to an existing FLEX Option, OCC could not net the
positions in the contracts until the next business day. If the Non-FLEX
Option were listed intra-day, and an investor with a position in the
FLEX Option attempted to close the position using the Non-FLEX Option,
the investor would be technically long in one contract and short in the
other contract. This would expose the investor to assignment risk until
the next day despite having offsetting positions.
The limited circumstances are:
The Non-FLEX Option is listed intra-day.
The FLEX contract is for American-style exercise.
All other terms are identical and the contracts are
otherwise fungible.
The risk does not occur in expiration Friday FLEX Option positions
during the five days prior to expiration, as no new Non-FLEX Option
series may be listed within five days of expiration. It also does not
exist for FLEX Option positions that will be identical to Non-FLEX
series to be added after expiration, as those new series are added
``overnight'' and OCC will convert the FLEX position to the Non-FLEX
Option series at the time the Non-FLEX series is created. In addition,
it does not exist for FLEX Options positions that have a European-
Capped-style exercise, as there are no Non-FLEX European-Capped-style
options currently traded on CBOE. Further, it does not exist for most
FLEX Index Options listed on CBOE, as most Non-FLEX Index options
currently traded on CBOE are European-style exercise, and thus the Non-
FLEX Index Options cannot be exercised on the day the series is listed.
The only exception is Non-FLEX, American-style options on the S&P 100
(OEX).
As an example, suppose underlying issue XYZ, trading around $25 per
share, has options listed on the March cycle, and in February an
investor wishes to buy just-out-of-the-money call options that expire
in May. Since the Non-FLEX May Options will not be listed until after
the March expiration, the investor enters a FLEX Option order in
February to buy 250 Call 30 options expiring on the third Friday of
May. If, as expected, the Non-FLEX May 30 call options are listed on
the Monday after March expiration, the investor's open FLEX position
will be converted by OCC over the weekend following March expiration to
the Non-FLEX series.
However, if XYZ stock should decline between the time of the FLEX
transaction and March expiration, the May 30 calls may not be added
after March expiration. If that were to occur, the May 30 calls may be
added sometime later. Suppose the Exchange receives a request to add
the May 30 calls on the morning of the Wednesday after expiration, and
the Exchange lists them immediately. The investor with the FLEX
position may then decide it is an opportune time to close his position.
Under the current rules, the investor would be required to close
the position by entering a sell order in the new Non-FLEX Option
series. However, when the Non-FLEX transaction is reported to OCC, the
investor is considered short in the Non-FLEX Option series, and is
still long in the FLEX Option. OCC cannot aggregate the FLEX positions
into the Non-FLEX series until after exercise and assignment
processing. If a buyer in the new Non-FLEX series were to exercise the
options, the original investor who had attempted to close the FLEX
position with an offsetting Non-FLEX trade would be at risk of being
assigned on the technically short Non-FLEX position.
Because of this risk, OCC will not clear an American-style
expiration Friday FLEX option. The Exchange has spoken with OCC and OCC
has agreed that allowing an option position in a FLEX contract to be
closed using a FLEX Option in such circumstances will mitigate the
risk.
The assignment risk does not exist if the Non-FLEX Option is to be
added the next trading day. In situations where OCC is aware that a
series will be added overnight, they can convert the FLEX position to a
Non-FLEX position before the next trading day. However, OCC cannot
guarantee that an identical Non-FLEX series will not be added intra-
day, and thus will not clear such American-style FLEX Options.
CBOE is proposing a limited exception to the requirement that the
trading in such options be under the Non-FLEX trading procedures. The
Exchange proposes that, in the event a Non-FLEX Option is listed intra-
day, a FLEX Option position with identical terms could be closed under
the FLEX trading procedures, but only for the balance of the trading
day on which the series is added. Under the proposed rule change, both
sides of the FLEX transaction would have to be closing only positions.
This change will allow a FLEX Option to be traded in such a manner
to mitigate assignment risk.
A FLEX Post Official (also referred to in the rules as simply a
``FLEX
[[Page 56149]]
Official'') \4\ has the regulatory responsibility for reviewing the
conformity of FLEX trades to the terms and specifications contained in
Rule 24A.4 or 24B.4, as applicable. In the event a Non-FLEX series,
having the same terms as an existing expiration Friday FLEX Option, is
listed intra-day, the FLEX Official will review any subsequent FLEX
transactions in that series and verify that the transaction is being
executed for the purpose of closing out an existing FLEX position. In
addition:
---------------------------------------------------------------------------
\4\ FLEX Officials are Exchange employees or independent
contractors designated pursuant to Rule 24A.12 or 24B.14.
---------------------------------------------------------------------------
With respect to FLEX trades occurring on the Chapter XXIVA
FLEX trading platform, should such trading platform be used by the
Exchange,\5\ the FLEX Official will not disseminate a FLEX Request for
Quote for any order representing a FLEX series having the same terms as
a Non-FLEX series, unless such FLEX Order is a closing order (and it is
the day the Non-FLEX series has been added). Additionally, if the FLEX
Official were to disseminate a FLEX Request for Quotes for a closing
order representing a FLEX series having the same terms as a Non-FLEX
series, the FLEX Official would only accept response quotes and orders
that were closing out an existing FLEX position.
---------------------------------------------------------------------------
\5\ Currently CBOE's Chapter XXIVA FLEX trading platform is not
utilized by the Exchange. Instead, all FLEX Options are currently
traded on CBOE's Chapter XXIVB FLEX trading platform.
---------------------------------------------------------------------------
With respect to FLEX trades occurring on the Chapter XXIVB
FLEX trading platform, the FLEX Official will make an announcement that
the FLEX series is now restricted to closing transactions; a FLEX
Request for Quotes may not be disseminated for any order representing a
FLEX series having the same terms as a Non-FLEX series, unless such
FLEX Order is a closing order (and it is the day the Non-FLEX series
has been added); and only responses that were closing out an existing
FLEX position would be permitted. Any transactions that occur that do
not conform to these requirements would be nullified by the FLEX
Official pursuant to Rule 24B.14.
The CBOE Department of Regulation reviews FLEX trading activity,
and, in the event a Non-FLEX series with the same terms as an
expiration Friday FLEX option is listed intra-day, will review any
subsequent FLEX transactions in the series to verify that they are
closing a position.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act \6\ and the rules and regulations thereunder and, in
particular, the requirements of Section 6(b) of the Act.\7\
Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \8\ in that it is 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, by giving
CBOE Trading Permit Holders and investors additional tools to trade
customized options in an exchange environment while allowing a FLEX
position to be traded in such a manner as to mitigate inadvertent
assignment risk.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78s(b)(1).
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE does not believe that the proposed rule change will impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange neither solicited nor received comments on the
proposal.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing rule does not (i) significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate if consistent with the protection of investors
and the public interest, provided that the self-regulatory organization
has given the Commission written notice of its intent to file the
proposed rule change at least five business days prior to the date of
filing of the proposed rule change or such shorter time as designated
by the Commission, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6)
thereunder.\10\
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires that a self-regulatory organization 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 filing of the
proposed rule change, or such shorter time as designated by the
Commission. The Commission notes that the Exchange has satisfied
this requirement.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative prior to 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\11\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing.
---------------------------------------------------------------------------
\11\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
The Commission notes that the proposed rule change is substantially
similar to a proposed rule change previously submitted by NYSE Arca
which was published for notice and comment in the Federal Register.\12\
The Commission notes that it did not receive any comments on the NYSE
Arca proposal, and does not believe the CBOE's proposal raises any new
or novel issues. Further, as noted above, because of the inadvertent
assignment risk, market participants could not trade previously
approved American style FLEX Options expiring on Expiration Friday.\13\
The proposal seeks to mitigate such assignment risks by limiting
certain FLEX transactions to closing only, thereby allowing the trading
of previously approved FLEX Options. For these reasons, the Commission
believes that waiver of the 30-day operative delay is consistent with
the protection of investors and the public interest and therefore,
designates the proposed rule change operative upon filing.\14\
---------------------------------------------------------------------------
\12\ See Securities Exchange Act Release No. 62321 (June 17,
2010), 75 FR 36130 (June 24, 2010) (SR-NYSEArca-2010-46).
\13\ See supra note 5.
\14\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend 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
[[Page 56150]]
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-2010-078 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-2010-078. 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 such 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 No. SR-CBOE-2010-078 and should be
submitted on or before October 6, 2010
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
---------------------------------------------------------------------------
\15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-22947 Filed 9-14-10; 8:45 am]
BILLING CODE 8010-01-P
