Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Approving 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, 57539-57540 [2010-23455]

Download as PDF Federal Register / Vol. 75, No. 182 / Tuesday, September 21, 2010 / Notices SMALL BUSINESS ADMINISTRATION [Disaster Declaration # 12314 and # 12315] Wisconsin Disaster # WI–00025 U.S. Small Business Administration. ACTION: Notice. AGENCY: (Catalog of Federal Domestic Assistance Numbers 59002 and 59008) This is a notice of an Administrative declaration of a disaster for the State of Wisconsin dated 09/13/ 2010. Incident: Severe Storms and Flooding. Incident Period: 08/10/2010 through 08/14/2010. DATES: Effective Date: 09/13/2010. Physical Loan Application Deadline Date: 11/12/2010. Economic Injury (EIDL) Loan Application Deadline Date: 06/13/2011. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the Administrator’s disaster declaration, applications for disaster loans may be filed at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: Primary Counties: Saint Croix. Contiguous Counties: Wisconsin: Barron, Dunn, Pierce, Polk. Minnesota: Washington. The Interest Rates are: SUMMARY: srobinson on DSKHWCL6B1PROD with NOTICES Percent For Physical Damage: Homeowners With Credit Available Elsewhere ...................... Homeowners Without Credit Available Elsewhere .............. Businesses With Credit Available Elsewhere ...................... Businesses Without Credit Available Elsewhere .............. Non-Profit Organizations With Credit Available Elsewhere ... Non-Profit Organizations Without Credit Available Elsewhere ..................................... For Economic Injury: Businesses & Small Agricultural Cooperatives Without Credit Available Elsewhere .............. Non-Profit Organizations Without Credit Available Elsewhere The number assigned to this disaster for physical damage is 12314 B and for economic injury is 12315 0. The States which received an EIDL Declaration # are Wisconsin; Minnesota. 5.000 2.500 6.000 4.000 3.625 3.000 4.000 3.000 Dated: September 13, 2010. Karen G. Mills, Administrator. [FR Doc. 2010–23533 Filed 9–20–10; 8:45 am] BILLING CODE 8025–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #12290 and #12291] 19:02 Sep 20, 2010 Jkt 220001 OFFICE OF SCIENCE & TECHNOLOGY POLICY U.S. National Climate Assessment Objectives, Proposed Topics, and Next Steps Correction In notice document 2010–22229 beginning on page 54403 in the issue of Tuesday, September 7, 2010 make the following correction: On page 54403 under the SUMMARY section, in the second column, in the tenth through eleventh lines, the Web site is corrected to read as ‘‘(https:// globalchange.gov/what-we-do/ assessment/notices)’’. [FR Doc. C1–2010–22229 Filed 9–20–10; 8:45 am] Illinois Disaster Number IL–00025 U.S. Small Business Administration. BILLING CODE 1505–01–D?≤ AGENCY: ACTION: SECURITIES AND EXCHANGE COMMISSION Amendment 1. This is an amendment of the Presidential declaration of a major disaster for the State of Illinois (FEMA– 1935–DR), dated 08/19/2010. Incident: Severe Storms and Flooding. Incident Period: 07/19/2010 and continuing through 08/07/2010. SUMMARY: Effective Date: 09/13/2010. Physical Loan Application Deadline Date: 10/18/2010. EIDL Loan Application Deadline Date: 05/19/2011. DATES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155/ ADDRESSES: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. FOR FURTHER INFORMATION CONTACT: The notice of the President’s major disaster declaration for the State of Illinois, dated 08/19/2010 is hereby amended to re-establish the incident period for this disaster as beginning 07/19/2010 and continuing through 08/07/2010. All other information in the original declaration remains unchanged. SUPPLEMENTARY INFORMATION: (Catalog of Federal Domestic Assistance Numbers 59002 and 59008) James E. Rivera, Associate Administrator for Disaster Assistance. [FR Doc. 2010–23532 Filed 9–20–10; 8:45 am] BILLING CODE 8025–01–P VerDate Mar<15>2010 57539 PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 [Release No. 34–62911; File No. SR–CBOE– 2009–075] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Approving 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 BroadBased Indexes September 14, 2010. On October 14, 2009, the Chicago Board Options Exchange, Incorporated (‘‘Exchange’’ or ‘‘CBOE’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 a proposed rule change to establish a pilot program that would permit p.m.-settled options on broadbased indexes expiring on any Friday of the month, other than the third Friday of the month, as well as the last trading day of the month. 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.2 The proposed rule change was published for comment in the Federal Register on August 12, 2010.3 The Commission received no comment letters on the 1 15 U.S.C. 78s(b)(1). 2 replaced 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. 3 See Securities Exchange Act Release No. 62658 (August 5, 2010), 75 FR 49009 (‘‘Notice’’). 2 Amendment E:\FR\FM\21SEN1.SGM 21SEN1 57540 Federal Register / Vol. 75, No. 182 / Tuesday, September 21, 2010 / Notices srobinson on DSKHWCL6B1PROD with NOTICES proposed rule change. This order approves the proposed rule change. The Exchange is proposing 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 4 (‘‘End of Week Expirations’’ or ‘‘EOWs’’), and (b) the last trading day of the month (‘‘End of Month Expirations’’ or ‘‘EOMs’’).5 Under the End of Week/End of Month Expirations Pilot Program (‘‘Pilot’’), 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, and 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, except the exercise settlement value will be based on the index value derived from the closing prices of component stocks. 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.6 The duration of the Pilot will be effective for a period of fourteen months from the next full month from approval.7 Currently, the vast majority of options in the standardized options markets are a.m.-settled.8 In light of historic 4 A third Friday of the month expiration is generally referred to as ‘‘Expiration Friday.’’ 5 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). 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. 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 See e.g., CBOE 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. 7 Any positions established under the Pilot would not be impacted by the expiration of the Pilot. If an EOW or EOM expiration expires after the Pilot expires, 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. The Exchange would address this point in a circular to members. See Notice, supra note 3, 75 FR 49011. 8 In the 1980s, the options and futures markets began moving from closing-price to opening price settlement procedures for stock index options and futures as a result of increased market and price volatility in underlying component stocks due to the unwinding of arbitrage-related positions at the close on expiration Friday. VerDate Mar<15>2010 19:02 Sep 20, 2010 Jkt 220001 Commission concerns about expanding p.m. settlement, CBOE has represented that, at least two months prior to the expiration of the Pilot, it will provide the Commission with an annual report analyzing EOW and EOM volume, open interest, and trading patterns.9 In addition, for series that exceed specific minimum open interest parameters, the annual report will provide an analysis of index price volatility and, if needed, underlying share trading volume.10 The annual report will be provided to the Commission on a confidential basis.11 The Commission has carefully reviewed CBOE’s proposed rule change and finds that it is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange,12 and, in particular, Section 6(b)(5) of the Act,13 which requires that an exchange have rules designed to promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national market system, and to protect investors and the public interest, to allow CBOE to conduct limited, and carefully monitored, pilots as proposed. The Commission has had concerns about the adverse effects and impact of p.m. settlement upon market volatility and the operation of fair and orderly markets on the underlying cash market at or near the close of trading. Only in limited instances has the Commission previously approved p.m. settlement for cash-settled options. In 1993, the Commission approved CBOE’s listing of p.m.-settled, cash-settled options on certain broad-based indexes expiring on the first business day of the month following the end of each calendar quarter (‘‘Quarterly Index 9 The annual report would also contain information and analyses of standard Expiration Friday, a.m.-settled series, if applicable, for the period covered in the pilot report as well as for the six-month period prior to the initiation of the pilot. See Notice, supra note 3, 75 FR at 49011. 10 For each EOW and EOM Expiration that has open interest that exceeds certain minimum thresholds, the annual report will contain a comparison of index price changes at the close of trading on a given expiration date with comparable price changes from a control sample; and 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. 11 CBOE will also provide to the Commission upon request 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. 12 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 13 15 U.S.C. 78f(b)(5). PO 00000 Frm 00104 Fmt 4703 Sfmt 9990 Expirations’’).14 In 2006, the Commission approved, on a pilot basis, CBOE’s listing of p.m.-settled index options expiring on the last business day of a calendar quarter (‘‘Quarterly Options Series’’).15 In 2010, the Commission approved CBOE’s listing of p.m.-settled FLEX options on a pilot basis.16 The Commission believes that it is appropriate to approve the proposal on a pilot basis. CBOE’s proposed fourteen month Pilot will allow for both the Exchange and the Commission to monitor the potential for adverse market effects. In particular, the Commission notes that CBOE will provide the Commission with the annual report analyzing volume and open interest of EOWs and EOMs, will also contain information and analysis of EOW and EOM trading patterns, and index price volatility and share trading activity for series that exceed minimum parameters. This information will enable the Commission to evaluate whether allowing p.m. settlement for EOW and EOMs will result in increased market and price volatility in the underlying component stocks. The p.m. settlement Pilot information should help the Commission assess the impact on the markets and determine whether other changes are necessary. Furthermore, the Exchange’s ongoing analysis of the Pilot should help it monitor any potential risks from large p.m.-settled positions and take appropriate action if warranted. It is therefore ordered, pursuant to Section 19(b)(2) of the Act,17 that the proposed rule change (SR–CBOE–2009– 075), as modified by Amendment Nos. 1 and 2, be, and hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Florence E. Harmon, Deputy Secretary. [FR Doc. 2010–23455 Filed 9–20–10; 8:45 am] BILLING CODE 8010–01–P 14 See Securities Exchange Act Release No. 31800 (February 1, 1993), 58 FR 7274 (February 5, 1993). 15 See Securities Exchange Act Release No. 54123 (July 11, 2006), 71 FR 40558 (July 17, 2006). 16 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). 17 15 U.S.C. 78s(b)(2). 18 17 CFR 200.30–3(a)(12). E:\FR\FM\21SEN1.SGM 21SEN1

Agencies

[Federal Register Volume 75, Number 182 (Tuesday, September 21, 2010)]
[Notices]
[Pages 57539-57540]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-23455]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62911; File No. SR-CBOE-2009-075]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Approving 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

September 14, 2010.
    On October 14, 2009, the Chicago Board Options Exchange, 
Incorporated (``Exchange'' or ``CBOE'') filed with the Securities and 
Exchange Commission (the ``Commission''), pursuant to Section 19(b)(1) 
of the Securities Exchange Act of 1934 (``Act''),\1\ a proposed rule 
change to establish a pilot program that would permit p.m.-settled 
options on broad-based indexes expiring on any Friday of the month, 
other than the third Friday of the month, as well as the last trading 
day of the month. 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.\2\ The proposed rule change 
was published for comment in the Federal Register on August 12, 
2010.\3\ The Commission received no comment letters on the

[[Page 57540]]

proposed rule change. This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Amendment 2 replaced 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.
    \3\ See Securities Exchange Act Release No. 62658 (August 5, 
2010), 75 FR 49009 (``Notice'').
---------------------------------------------------------------------------

    The Exchange is proposing 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 \4\ 
(``End of Week Expirations'' or ``EOWs''), and (b) the last trading day 
of the month (``End of Month Expirations'' or ``EOMs'').\5\ Under the 
End of Week/End of Month Expirations Pilot Program (``Pilot''), 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, and 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, except the exercise settlement value will be based on 
the index value derived from the closing prices of component stocks. 
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.\6\ The duration of the Pilot will be 
effective for a period of fourteen months from the next full month from 
approval.\7\
---------------------------------------------------------------------------

    \4\ A third Friday of the month expiration is generally referred 
to as ``Expiration Friday.''
    \5\ 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). 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. 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\ See e.g., CBOE 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.
    \7\ Any positions established under the Pilot would not be 
impacted by the expiration of the Pilot. If an EOW or EOM expiration 
expires after the Pilot expires, 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. The Exchange would address this point in a 
circular to members. See Notice, supra note 3, 75 FR 49011.
---------------------------------------------------------------------------

    Currently, the vast majority of options in the standardized options 
markets are a.m.-settled.\8\ In light of historic Commission concerns 
about expanding p.m. settlement, CBOE has represented that, at least 
two months prior to the expiration of the Pilot, it will provide the 
Commission with an annual report analyzing EOW and EOM volume, open 
interest, and trading patterns.\9\ In addition, for series that exceed 
specific minimum open interest parameters, the annual report will 
provide an analysis of index price volatility and, if needed, 
underlying share trading volume.\10\ The annual report will be provided 
to the Commission on a confidential basis.\11\
---------------------------------------------------------------------------

    \8\ In the 1980s, the options and futures markets began moving 
from closing-price to opening price settlement procedures for stock 
index options and futures as a result of increased market and price 
volatility in underlying component stocks due to the unwinding of 
arbitrage-related positions at the close on expiration Friday.
    \9\ The annual report would also contain information and 
analyses of standard Expiration Friday, a.m.-settled series, if 
applicable, for the period covered in the pilot report as well as 
for the six-month period prior to the initiation of the pilot. See 
Notice, supra note 3, 75 FR at 49011.
    \10\ For each EOW and EOM Expiration that has open interest that 
exceeds certain minimum thresholds, the annual report will contain a 
comparison of index price changes at the close of trading on a given 
expiration date with comparable price changes from a control sample; 
and 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.
    \11\ CBOE will also provide to the Commission upon request 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.
---------------------------------------------------------------------------

    The Commission has carefully reviewed CBOE's proposed rule change 
and finds that it is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange,\12\ and, in particular, Section 6(b)(5) of the 
Act,\13\ which requires that an exchange have rules designed to promote 
just and equitable principles of trade, remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and to protect investors and the public interest, to allow CBOE 
to conduct limited, and carefully monitored, pilots as proposed.
---------------------------------------------------------------------------

    \12\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission has had concerns about the adverse effects and 
impact of p.m. settlement upon market volatility and the operation of 
fair and orderly markets on the underlying cash market at or near the 
close of trading. Only in limited instances has the Commission 
previously approved p.m. settlement for cash-settled options. In 1993, 
the Commission approved CBOE's listing of p.m.-settled, cash-settled 
options on certain broad-based indexes expiring on the first business 
day of the month following the end of each calendar quarter 
(``Quarterly Index Expirations'').\14\ In 2006, the Commission 
approved, on a pilot basis, CBOE's listing of p.m.-settled index 
options expiring on the last business day of a calendar quarter 
(``Quarterly Options Series'').\15\ In 2010, the Commission approved 
CBOE's listing of p.m.-settled FLEX options on a pilot basis.\16\
---------------------------------------------------------------------------

    \14\ See Securities Exchange Act Release No. 31800 (February 1, 
1993), 58 FR 7274 (February 5, 1993).
    \15\ See Securities Exchange Act Release No. 54123 (July 11, 
2006), 71 FR 40558 (July 17, 2006).
    \16\ 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).
---------------------------------------------------------------------------

    The Commission believes that it is appropriate to approve the 
proposal on a pilot basis. CBOE's proposed fourteen month Pilot will 
allow for both the Exchange and the Commission to monitor the potential 
for adverse market effects. In particular, the Commission notes that 
CBOE will provide the Commission with the annual report analyzing 
volume and open interest of EOWs and EOMs, will also contain 
information and analysis of EOW and EOM trading patterns, and index 
price volatility and share trading activity for series that exceed 
minimum parameters. This information will enable the Commission to 
evaluate whether allowing p.m. settlement for EOW and EOMs will result 
in increased market and price volatility in the underlying component 
stocks.
    The p.m. settlement Pilot information should help the Commission 
assess the impact on the markets and determine whether other changes 
are necessary. Furthermore, the Exchange's ongoing analysis of the 
Pilot should help it monitor any potential risks from large p.m.-
settled positions and take appropriate action if warranted.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\17\ that the proposed rule change (SR-CBOE-2009-075), as modified 
by Amendment Nos. 1 and 2, be, and hereby is, approved.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-23455 Filed 9-20-10; 8:45 am]
BILLING CODE 8010-01-P
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