Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change To Amend Certain Rules Pertaining to Credit Options, 62167-62169 [2010-25251]
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Federal Register / Vol. 75, No. 194 / Thursday, October 7, 2010 / Notices
been prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
through PIXL must comply with this
condition of the Rule.44
IV. Conclusion
For the foregoing reasons, the
Commission finds that the proposed
rule change, as amended, is consistent
with the Act and the rules and
regulations thereunder applicable to a
national securities exchange, and, in
particular, with Section 6(b)(5) of the
Act.45
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,46 that the
proposed rule change (SR–Phlx–2010–
108) is approved, except that (1)
paragraphs (n)(i)(A)(2), (n)(i)(B)(2),
(n)(ii)(B)(4), and (n)(ii)(D) of Phlx Rule
1080 are approved on a pilot basis until
August 31, 2011; and (2) there shall be
no minimum size requirement for orders
entered into the PIXL for a pilot period
expiring on August 31, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.47
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–25252 Filed 10–6–10; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–63026; File No. SR–CBOE–
2010–046]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing of a
Proposed Rule Change To Amend
Certain Rules Pertaining to Credit
Options
October 1, 2010.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 20, 2010, the Chicago Board
Options Exchange, Incorporated
(‘‘CBOE’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
44 See
Phlx 11(a) Letter, supra note 32.
U.S.C. 78f(b)(5). In connection with the
issuance of this approval order, neither the
Commission nor its staff is granting any exemptive
or no-action relief from the requirements of Rule
10b–0 under the Act. 17 CFR 240.10b–10.
Accordingly, a broker-dealer executing a customer
order through the PIXL auction will need to comply
with all applicable requirements of that Rule.
46 15 U.S.C. 78s(b)(2).
47 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
CBOE proposes to amend certain rules
pertaining to Credit Options. The text of
the rule proposal is available on the
Exchange’s Web site (https://
www.cboe.org/legal), at the Exchange’s
principal office, 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 Exchange received approval to
list and trade Credit Default Options
and Credit Default Basket Options
(collectively ‘‘Credit Options’’) in 2007,
and is planning to re-launch these
products.3 In connection with the
Exchange’s planned re-launching of
Credit Options, the Exchange will be
introducing contracts that have a payout
that is less than $100,000.4 In addition,
the Exchange would like to: (1) Change
the quoting convention for Credit
Default Options, (2) change the
minimum price variation for Credit
Option, and (3) designate a single
applicable Credit Event for Credit
Options.
Quoting Convention and Minimum
Price Variation Changes
When CBOE launched Credit Default
Options, the Exchange designated the
3 See Securities Exchange Act Release Nos.
55871(June 6, 2007), 72 FR 32372 (June 12, 2007)
(SR–CBOE–2006–84); 56275 (August 17, 2007), 72
FR 47097 (August 22, 2007).
4 See Securities Exchange Act Release No. 56380
(September 10, 2007), 72 FR 52948 (September 17,
2007) (SR–CBOE–2007–105) (immediately effective
filing pertaining to contract multiplier for Credit
Default Options).
PO 00000
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62167
cash settlement amount to be $100,000,
which was equal to an exercise
settlement value of $100 multiplied by
a contract multiplier of 1,000 (which
was specified by the Exchange at
listing).5 Because the exercise
settlement value is currently fixed by
rule at $100,6 bids and offers for
contracts are expressed in amounts
ranging from $0 (no bid) to $100. The
range of bids and offers is not hard
coded into CBOE’s rules and is a
function of pricing options that have a
fixed payout.7 To arrive at the total
amount a bid or offer represents per
contract, the bid or offer is multiplied
by the contract multiplier. For example,
if a Credit Default Option has a cash
settlement amount of $100,000 ($100 ×
1,000), bids of $0.05, $45.15 and $67.50
equate to premium amounts of $50,
$45,150 and $67,500, respectively.
CBOE proposes to change the quoting
conventions for Credit Default Options
by permitting the exercise settlement
value to be an amount determined by
the Exchange on a class-by-class basis
and that would be equal to $1 or $100,
or a value between those values. By
permitting the Exchange to vary the
exercise settlement value, the range of
bids and offers would vary in tandem.
For example, if the Exchange sets the
exercise settlement value at $10, bids
and offers for that contract would range
from $0 (no bid) to $10, and the total
premium amount would be determined
by multiplying the bid or offer by the
contract multiplier.
In addition, by permitting the
Exchange to set the exercise settlement
value on a class-by-class basis, the
Exchange would be able to list a
contract having a cash settlement
amount that could be arrived at in
different ways. For example, for a Credit
Default Option with a cash settlement
amount of $1,000, the Exchange could:
(1) Set the exercise settlement value at
$1 with a contract multiplier of $1,000,
(2) set the exercise settlement value at
$10 with a contract multiplier of 100, (3)
set the exercise settlement value at $100
with a contract multiplier of 10, or (4)
set the exercise settlement value at
$1,000 with a contract multiplier of 1.
The Exchange notes that it will not list
more than one Credit Default Option
contract with a cash settlement amount
5 The Exchange may vary the particular contract
multiplier on a class-by-class basis within a range
of 1 to 1,000. See 29.1(a).
6 See Rule 29.1(a)(i).
7 The Exchange notes that with a fixed exercise
settlement value of $100, any quote above $100
(e.g., $150) would not make economic sense since
it would represent a premium cost ($150 × 1,000 =
$150,000) that exceeds than [sic] the exercise
settlement amount of the contract ($100 × 1,000 =
$100,000).
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62168
Federal Register / Vol. 75, No. 194 / Thursday, October 7, 2010 / Notices
jdjones on DSK8KYBLC1PROD with NOTICES
arrived at in difference [sic] ways.8 The
Exchange notes that it has the discretion
to set the exercise settlement value for
binary options on a class-by-class and is
seeking to introduce that same
flexibility to Credit Default Options.9
The Exchange is also proposing to
change the minimum price variation
(‘‘MPV’’) for Credit Default Options.
Currently, the MPV for bids and offers
on both simple and complex orders for
Credit Options is fixed at $0.05.10
Similar to binary options, the Exchange
would like to build in the flexibility to
establish the MPV on a class-by-class
basis at an increment not less then
$0.01.11 The ability to designate $0.01 as
the MPV would permit more pricing
points than is currently allowed and
would allow for more granular pricing
points when lower exercise settlement
values are designated. The Exchange
believes that the introduction of more
pricing points creates tighter spreads
between quotes, which in turn benefits
investors. For example, if the Exchange
designates the exercise settlement value
as $1 bids and offers for that contract
would range from $0 (no bid) to $1 and
only 20 price points would be available
since the MPV is $0.05 ($0.05, $0.10,
etc.). If the MPV is $0.01 and the
designated exercise settlement value is
$1, there would be 100 price points
available for quoting. The Exchange
notes that it has the discretion to
establish the MPV on a class-by-class
basis for binary options and believes
that permitting more price points for
options having a lower exercise
settlement value will benefit market
participants.
Designation of Single Credit Event
Change
Currently, CBOE Rules 29.2,
Designation of Credit Default Options,
and 29.2A, Designation of Credit Default
Basket Option Contracts, provide that a
failure-to-pay default will always be a
designated Credit Event for Credit
Options. In addition, the Exchange may
designate other event(s) of default and/
or restructuring as Credit Events. The
Exchange believes that there may be a
market for Credit Options that specify a
single Credit Event (e.g., bankruptcy as
defined in accordance with the terms of
the Relevant Obligation(s)) and is
therefore proposing to provide the
Exchange with the ability to designate a
single Credit Event. To make this
8 See e-mail from Jennifer L. Klebes, Senior
Attorney, CBOE, to Jennifer Dodd, Special Counsel,
and Andrew Madar, Special Counsel, Commission,
dated September 27, 2010.
9 See Rule 22.1(e).
10 See Rule 29.14(b).
11 See Rule 22.13(b).
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14:42 Oct 06, 2010
Jkt 223001
change, the Exchange is proposing
revisions to Rules 29.2(a) and
29.2A(a)(6) respectively.
Technical Change
The Exchange is also proposing to
make a technical, non-substantive
change to Rule 29.3.
Capacity
CBOE has analyzed its capacity and
represents that it believes the Exchange
and the Options Price Reporting
Authority have the necessary systems
capacity to handle the additional traffic
associated with the ability to designate
$0.01 as the MPV for Credit Options.
The Exchange does not believe that this
change will lead to a proliferation of
quotes and notes that the change will
affect one series [sic] a product and not
multiple series (i.e., various strikes)
since Credit Options do not have strikes.
2. Statutory Basis
The Exchange believes this rule
proposal is consistent with the Act and
the rules and regulations under the Act
applicable to a national securities
exchange and, in particular, the
requirements of Section 6(b) of the
Act.12 Specifically, the Exchange
believes that the proposed rule change
is consistent with the Section 6(b)(5)
Act 13 requirements that the rules of an
exchange be designed to promote just
and equitable principles of trade, to
prevent fraudulent and manipulative
acts and, in general, to protect investors
and the public interest, and thereby will
provide investors with additional tools
to hedge risk and tailor their investment
needs.
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
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
12 15
13 15
PO 00000
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00073
Fmt 4703
Sfmt 4703
as the Commission may designate up to
90 days of such date 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
such 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
Number SR–CBOE–2010–046 on the
subject line.
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 SR–CBOE–2010–046. 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
E:\FR\FM\07OCN1.SGM
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Federal Register / Vol. 75, No. 194 / Thursday, October 7, 2010 / Notices
identifying information from
submissions. You should submit only
information that you wish to make
publicly available. All submissions
should refer to File Number SR–CBOE–
2010–046 and should be submitted on
or before October 28, 2010.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–25251 Filed 10–6–10; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF STATE
[Public Notice: 7195]
Bureau of Educational and Cultural
Affairs (ECA) Request for Grant
Proposals: Study of the United States
Institutes for Student Leaders on U.S.
History and Government
Announcement Type: New
Cooperative Agreement.
Funding Opportunity Number: ECA/
A/E/USS–11–10.
Catalog of Federal Domestic
Assistance Number: 19.009.
Key Dates: July–August, 2011 and
January, February, 2012.
Application Deadline: December 3,
2010.
Executive Summary: The Branch for
the Study of the United States, Office of
Academic Exchange Programs, Bureau
of Educational and Cultural Affairs
(ECA), invites proposal submissions for
the design and implementation of six (6)
Study of the U.S. Institutes for Student
Leaders on U.S. History and
Government, pending the availability of
funds. Participants will be drawn from
countries throughout Central and South
America and the Caribbean. Three
institutes will be conducted entirely in
Spanish, and the remaining three in
English. Each academic institute will be
five weeks in duration, including a oneweek integrated study tour.
jdjones on DSK8KYBLC1PROD with NOTICES
I. Funding Opportunity Description
Authority
Overall grant making authority for
this program is contained in the Mutual
Educational and Cultural Exchange Act
of 1961, Public Law 87–256, as
amended, also known as the FulbrightHays Act. The purpose of the Act is ‘‘to
enable the Government of the United
States to increase mutual understanding
between the people of the United States
and the people of other countries* * *
to strengthen the ties which unite us
14 17
CFR 200.30–3(a)(12).
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17:22 Oct 06, 2010
Jkt 223001
with other nations by demonstrating the
educational and cultural interests,
developments, and achievements of the
people of the United States and other
nations * * * and thus to assist in the
development of friendly, sympathetic
and peaceful relations between the
United States and the other countries of
the world.’’ The funding authority for
the program above is provided through
legislation.
Purpose: All ECA programs seek to
increase mutual understanding between
the people of the United States and the
people of other countries. The Study of
the U.S. Institutes for Student Leaders
on U.S. History and Government
provide a group of undergraduate
students, who have little to no prior
experience in the U.S., with an
introduction to U.S. history,
government, society, and culture. In
addition to this core American Studies
component, students will participate in
seminars, workshops, and activities to
strengthen their leadership skills.
Participants will also engage in
volunteer activities and learn about
civic engagement as a core American
value. Throughout the course of the
institutes, participants will interact with
American peers in the classroom,
community, and through a weekend
long home-stay experience.
This award will support up to 120
undergraduate participants. Three
institutes for twenty participants each
will take place in Summer 2011 while
an additional three institutes will take
place in Winter 2012. Please refer to the
Project Objectives, Goals, and
Implementation (POGI) document for
programmatic details.
Please note: This award will be in the form
of a cooperative agreement. In a cooperative
agreement, ECA is substantially involved in
the management and oversight of the
institute. Please refer to the statement of
work in the POGI to see the division of
responsibilities between the recipient
institution and the Program Office.
II. Award Information
Type of Award: Cooperative
Agreement. ECA’s level of involvement
in this program is listed under number
1 above.
Fiscal Year Funds: FY 2011.
Approximate Total Funding:
$1,440,000.
Approximate Number of Awards:
One.
Approximate Average Award:
$1,440,000.
Anticipated Award Date: Pending
availability of funds, February 2011.
Anticipated Project Completion Date:
February, 2012.
PO 00000
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62169
Additional Information: Pending
successful implementation of this
program and the availability of funds in
subsequent fiscal years, it is ECA’s
intent to renew this cooperative
agreement for two additional fiscal
years, before openly competing it again.
III. Eligibility Information
III.1. Eligible applicants: The Bureau
is seeking detailed proposals from
accredited post-secondary U.S.
institutions (community colleges, liberal
arts colleges, public and private
universities), consortia of organizations,
and/or from public and private nonprofit organizations meeting the
eligibility requirements outlined below.
The Bureau intends to issue one
award and is seeking proposals from
organizations with the ability to
administer, support, and oversee the six
academic institutes. Recipient
organizations may be public or private
organizations that provide sub-awards
to up to six institutions of higher
education to implement the institutes.
Or, higher education institutions may
apply to administer and implement the
institutes working with branch
campuses, other colleges in a
consortium, or partnering with any
other institution of higher education.
Institutions of higher education may
host no more than one institute at a time
(for up to 20 students), but may host up
to two institutes per year (e.g. a summer
and a winter institute); this policy is to
advance the Bureau’s goals of diversity
and increased mutual understanding,
and to provide more individualized
attention to participants.
The recipient organization will serve
as the lead organization and will be
responsible for the oversight of all six
institutes and must appoint a project
director who will be the main point of
contact and liaison with ECA.
III.2. Cost Sharing or Matching Funds:
There is no minimum or maximum
percentage required for this
competition. However, the Bureau
encourages applicants to provide
maximum levels of cost sharing and
funding in support of its programs.
When cost sharing is offered, it is
understood and agreed that the
applicant must provide the amount of
cost sharing as stipulated in its proposal
and later included in an approved
agreement. Cost sharing may be in the
form of allowable direct or indirect
costs. For accountability, you must
maintain written records to support all
costs which are claimed as your
contribution, as well as costs to be paid
by the Federal government. Such
records are subject to audit. The basis
for determining the value of cash and
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]]>Agencies
[Federal Register Volume 75, Number 194 (Thursday, October 7, 2010)]
[Notices]
[Pages 62167-62169]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-25251]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63026; File No. SR-CBOE-2010-046]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing of a Proposed Rule Change To Amend
Certain Rules Pertaining to Credit Options
October 1, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on September 20, 2010, the Chicago Board Options Exchange, Incorporated
(``CBOE'' or the ``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.
---------------------------------------------------------------------------
\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
CBOE proposes to amend certain rules pertaining to Credit Options.
The text of the rule proposal is available on the Exchange's Web site
(https://www.cboe.org/legal), at the Exchange's principal office, 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 Exchange received approval to list and trade Credit Default
Options and Credit Default Basket Options (collectively ``Credit
Options'') in 2007, and is planning to re-launch these products.\3\ In
connection with the Exchange's planned re-launching of Credit Options,
the Exchange will be introducing contracts that have a payout that is
less than $100,000.\4\ In addition, the Exchange would like to: (1)
Change the quoting convention for Credit Default Options, (2) change
the minimum price variation for Credit Option, and (3) designate a
single applicable Credit Event for Credit Options.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release Nos. 55871(June 6,
2007), 72 FR 32372 (June 12, 2007) (SR-CBOE-2006-84); 56275 (August
17, 2007), 72 FR 47097 (August 22, 2007).
\4\ See Securities Exchange Act Release No. 56380 (September 10,
2007), 72 FR 52948 (September 17, 2007) (SR-CBOE-2007-105)
(immediately effective filing pertaining to contract multiplier for
Credit Default Options).
---------------------------------------------------------------------------
Quoting Convention and Minimum Price Variation Changes
When CBOE launched Credit Default Options, the Exchange designated
the cash settlement amount to be $100,000, which was equal to an
exercise settlement value of $100 multiplied by a contract multiplier
of 1,000 (which was specified by the Exchange at listing).\5\ Because
the exercise settlement value is currently fixed by rule at $100,\6\
bids and offers for contracts are expressed in amounts ranging from $0
(no bid) to $100. The range of bids and offers is not hard coded into
CBOE's rules and is a function of pricing options that have a fixed
payout.\7\ To arrive at the total amount a bid or offer represents per
contract, the bid or offer is multiplied by the contract multiplier.
For example, if a Credit Default Option has a cash settlement amount of
$100,000 ($100 x 1,000), bids of $0.05, $45.15 and $67.50 equate to
premium amounts of $50, $45,150 and $67,500, respectively.
---------------------------------------------------------------------------
\5\ The Exchange may vary the particular contract multiplier on
a class-by-class basis within a range of 1 to 1,000. See 29.1(a).
\6\ See Rule 29.1(a)(i).
\7\ The Exchange notes that with a fixed exercise settlement
value of $100, any quote above $100 (e.g., $150) would not make
economic sense since it would represent a premium cost ($150 x 1,000
= $150,000) that exceeds than [sic] the exercise settlement amount
of the contract ($100 x 1,000 = $100,000).
---------------------------------------------------------------------------
CBOE proposes to change the quoting conventions for Credit Default
Options by permitting the exercise settlement value to be an amount
determined by the Exchange on a class-by-class basis and that would be
equal to $1 or $100, or a value between those values. By permitting the
Exchange to vary the exercise settlement value, the range of bids and
offers would vary in tandem. For example, if the Exchange sets the
exercise settlement value at $10, bids and offers for that contract
would range from $0 (no bid) to $10, and the total premium amount would
be determined by multiplying the bid or offer by the contract
multiplier.
In addition, by permitting the Exchange to set the exercise
settlement value on a class-by-class basis, the Exchange would be able
to list a contract having a cash settlement amount that could be
arrived at in different ways. For example, for a Credit Default Option
with a cash settlement amount of $1,000, the Exchange could: (1) Set
the exercise settlement value at $1 with a contract multiplier of
$1,000, (2) set the exercise settlement value at $10 with a contract
multiplier of 100, (3) set the exercise settlement value at $100 with a
contract multiplier of 10, or (4) set the exercise settlement value at
$1,000 with a contract multiplier of 1. The Exchange notes that it will
not list more than one Credit Default Option contract with a cash
settlement amount
[[Page 62168]]
arrived at in difference [sic] ways.\8\ The Exchange notes that it has
the discretion to set the exercise settlement value for binary options
on a class-by-class and is seeking to introduce that same flexibility
to Credit Default Options.\9\
---------------------------------------------------------------------------
\8\ See e-mail from Jennifer L. Klebes, Senior Attorney, CBOE,
to Jennifer Dodd, Special Counsel, and Andrew Madar, Special
Counsel, Commission, dated September 27, 2010.
\9\ See Rule 22.1(e).
---------------------------------------------------------------------------
The Exchange is also proposing to change the minimum price
variation (``MPV'') for Credit Default Options. Currently, the MPV for
bids and offers on both simple and complex orders for Credit Options is
fixed at $0.05.\10\ Similar to binary options, the Exchange would like
to build in the flexibility to establish the MPV on a class-by-class
basis at an increment not less then $0.01.\11\ The ability to designate
$0.01 as the MPV would permit more pricing points than is currently
allowed and would allow for more granular pricing points when lower
exercise settlement values are designated. The Exchange believes that
the introduction of more pricing points creates tighter spreads between
quotes, which in turn benefits investors. For example, if the Exchange
designates the exercise settlement value as $1 bids and offers for that
contract would range from $0 (no bid) to $1 and only 20 price points
would be available since the MPV is $0.05 ($0.05, $0.10, etc.). If the
MPV is $0.01 and the designated exercise settlement value is $1, there
would be 100 price points available for quoting. The Exchange notes
that it has the discretion to establish the MPV on a class-by-class
basis for binary options and believes that permitting more price points
for options having a lower exercise settlement value will benefit
market participants.
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\10\ See Rule 29.14(b).
\11\ See Rule 22.13(b).
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Designation of Single Credit Event Change
Currently, CBOE Rules 29.2, Designation of Credit Default Options,
and 29.2A, Designation of Credit Default Basket Option Contracts,
provide that a failure-to-pay default will always be a designated
Credit Event for Credit Options. In addition, the Exchange may
designate other event(s) of default and/or restructuring as Credit
Events. The Exchange believes that there may be a market for Credit
Options that specify a single Credit Event (e.g., bankruptcy as defined
in accordance with the terms of the Relevant Obligation(s)) and is
therefore proposing to provide the Exchange with the ability to
designate a single Credit Event. To make this change, the Exchange is
proposing revisions to Rules 29.2(a) and 29.2A(a)(6) respectively.
Technical Change
The Exchange is also proposing to make a technical, non-substantive
change to Rule 29.3.
Capacity
CBOE has analyzed its capacity and represents that it believes the
Exchange and the Options Price Reporting Authority have the necessary
systems capacity to handle the additional traffic associated with the
ability to designate $0.01 as the MPV for Credit Options. The Exchange
does not believe that this change will lead to a proliferation of
quotes and notes that the change will affect one series [sic] a product
and not multiple series (i.e., various strikes) since Credit Options do
not have strikes.
2. Statutory Basis
The Exchange believes this rule proposal is consistent with the Act
and the rules and regulations under the Act applicable to a national
securities exchange and, in particular, the requirements of Section
6(b) of the Act.\12\ Specifically, the Exchange believes that the
proposed rule change is consistent with the Section 6(b)(5) Act \13\
requirements that the rules of an exchange be designed to promote just
and equitable principles of trade, to prevent fraudulent and
manipulative acts and, in general, to protect investors and the public
interest, and thereby will provide investors with additional tools to
hedge risk and tailor their investment needs.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
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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
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date 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 such 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 Number SR-CBOE-2010-046 on the subject line.
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 SR-CBOE-2010-046. 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
[[Page 62169]]
identifying information from submissions. You should submit only
information that you wish to make publicly available. All submissions
should refer to File Number SR-CBOE-2010-046 and should be submitted on
or before October 28, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-25251 Filed 10-6-10; 8:45 am]
BILLING CODE 8011-01-P
