Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Expand the Range of Strike Price Intervals for VIX Options, 66402-66404 [2010-27232]

Download as PDF 66402 Federal Register / Vol. 75, No. 208 / Thursday, October 28, 2010 / Notices add C2 as a Sponsor of the OLPP. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Description and Purpose of the Amendment The current Sponsors of the OLPP are BATS, BOX, CBOE, ISE, NYSE Amex, NYSE Arca, OCC, Phlx and Nasdaq. The proposed amendment to the OLPP would add C2 as a Sponsor of the OLPP. A national securities exchange may become a Sponsor if it satisfies the requirement of Section 7 of the OLPP. Specifically an Eligible Exchange 4 may become a Sponsor of the OLPP by: (i) Executing a copy of the OLPP, as then in effect; (ii) providing each current Plan Sponsor with a copy of such executed Plan; and (iii) effecting an amendment to the OLPP, as specified in Section 7(ii) of the OLPP. Section 7(ii) of the OLPP sets forth the process by which an Eligible Exchange may effect an amendment to the OLPP. Specifically, an Eligible Exchange must: (a) Execute a copy of the OLPP with the only change being the addition of the new sponsor’s name in Section 8 of the OLPP; and (b) submit the executed OLPP to the Commission. The OLPP then provides that such an amendment will be effective at the later of either the amendment being approved by the Commission or otherwise becoming effective pursuant to Section 11A of the Act. C2 has submitted a signed copy of the OLPP to the Commission in accordance with the procedures set forth in the OLPP regarding new Plan Sponsors. II. Effectiveness of the Proposed Linkage Plan Amendment The foregoing proposed OLPP amendment has become effective pursuant to Rule 608(c)(3)(iii) 5 because it involves solely technical or ministerial matters. At any time within sixty days of the filing of this amendment, the Commission may summarily abrogate the amendment and require that it be refiled pursuant to paragraphs (b)(1) of Rule 608,6 if it appears to the Commission that such emcdonald on DSK2BSOYB1PROD with NOTICES 4 The OLPP defines an ‘‘Eligible Exchange’’ as a national securities exchange registered with the Commission pursuant to Section 6(a) of the Exchange Act, 15 U.S.C. 78f(a), that (1) has effective rules for the trading of options contracts issued and cleared by the OCC approved in accordance with the provisions of the Exchange Act and the rules and regulations thereunder and (2) is a party to the Plan for Reporting Consolidated Options Last Sale Reports and Quotation Information (the ‘‘OPRA Plan’’). C2 has represented that it has met both the requirements for being considered an Eligible Exchange. 5 17 CFR 242.608(b)(3)(iii). 6 17 CFR 242.608(b)(1). VerDate Mar<15>2010 16:13 Oct 27, 2010 Jkt 223001 action is necessary or appropriate in the public interest, for the protection of investors or the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanisms of, a national market system or otherwise in furtherance of the purposes of the Act. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.7 Florence E. Harmon, Deputy Secretary. [FR Doc. 2010–27241 Filed 10–27–10; 8:45 am] BILLING CODE 8011–01–P III. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed amendment 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 4–443 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 4–443. 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 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 C2’s principal office. 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. 4–443 and should be submitted on or before November 18, 2010. PO 00000 Frm 00056 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–63155; File No. SR–CBOE– 2010–096] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Expand the Range of Strike Price Intervals for VIX Options October 21, 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 October 19, 2010, the Chicago Board Options Exchange, Incorporated (‘‘CBOE’’or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ‘‘non-controversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change CBOE proposes to amend Rule 24.9.01(e), Terms of Index Option Contracts, to expand the range of strike price intervals for options on the CBOE Volatility Index (‘‘VIX’’). 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 7 17 CFR 200.30–3(a)(29). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(6). 1 15 E:\FR\FM\28OCN1.SGM 28OCN1 Federal Register / Vol. 75, No. 208 / Thursday, October 28, 2010 / Notices 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. emcdonald on DSK2BSOYB1PROD with NOTICES A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this rule filing is to amend Rule 24.9.01(e), Terms of Index Option Contracts, to expand the range of strike price intervals for options on the CBOE Volatility Index (‘‘VIX’’). Currently, Rule 24.9.01(e) permits the Exchange to list series at $1 or greater strike price intervals for each VIX expiration. Dollar strikes for VIX options, however, are centered around a limited range based on VIX futures prices. Specifically, the Exchange may open up to five option series above and five option series below the current index level, which is based on VIX futures prices. As the current index level moves, the Exchange may open additional series within the same range (i.e., five above/below). This filing proposes to eliminate the band that limits the number of $1 strikes that may be listed in VIX options. In support of this modification, the Commission has already addressed the policy issue raised by this filing, i.e., broader range of $1 strikes for vehicles to trade S&P 500 volatility, and the Commission has already approved $1 strikes for VIX options.5 The Exchange notes since the strike setting parameters for VIX options were first established, other products have been introduced that compete with VIX options, but do not have similar strike adding restrictions. For example, $1 or greater strike price intervals (where the strike price is less then $200) are permitted for options on the iPath S&P 500 VIX ShortTerm Futures Index ETN (‘‘VXX’’) and on the iPath S&P 500 VIX Mid-Term Futures Index ETN (‘‘VXZ’’). VXX and VXZ are exchange traded notes that ‘‘are linked to the performance of an underlying index that is designed to provide investors with exposure to one or more maturities of futures contracts on the VIX Index, 5 See Securities Exchange Act Release Nos. 61696 (March 12, 2010), 75 FR 13174 (March 18, 2010) (SR–CBOE–2010–005) (order approving $1 strikes for options on index-linked securities) and No. 54192 (July 21, 2006), 71 FR 43251 (July 31, 2006) (SR–CBOE–2006–27) (order approving $1 strikes for VIX options). VerDate Mar<15>2010 16:13 Oct 27, 2010 Jkt 223001 which reflect implied volatility of the S&P 500 Index at various points along the volatility forward curve.’’ 6 The futures contracts on the VIX level that the VXX and VXZ notes are linked to are listed for trading on the CBOE Futures Exchange, LLC (‘‘CFE’’). VIX options traded on CBOE overlie the same index on which CFE lists futures contracts. As a result, options on VIX, VXX and VXZ are competing listed vehicles to trade volatility and market participants may use the products interchangeably. In addition, CFE launched Weekly Options on VIX futures on September 28, 2010, and $0.50 or greater strike price intervals are permitted. CBOE notes that the Commission has previously permitted similar $1 strike setting regimes for other index options that compete with physically-settled options. Specifically, $1 strikes are permitted for options on the MiniRussell 2000 Index (‘‘RMN’’) 7 and for options on the iShares Russell 2000 Index Fund (‘‘IWM’’).8 Similarly, $1 strikes are permitted for options on the Mini S&P 500 Index (‘‘Mini SPX’’) 9 and for options on the Standard and Poor’s Depositary Receipts Trust (‘‘SPY’’).10 In addition, the Exchange states that it has received requests to add strikes so that market participants may be able to ‘‘roll’’ expiring positions; that is, trade out of an expiring VIX option with a certain strike and re-establish a new position in the next month’s VIX option with the same strike. Because the strike setting regime for volatility index options is tied to futures prices, certain strikes may not be available for listing, thus creating the situation in which rolling cannot be accomplished. In order to be able to compete effectively and provide market participants with products that can be used to hedge other products already trading in the market, CBOE believes that untying the addition of $1 or greater strikes to the ‘‘current index level’’ will provide investors with greater flexibility by allowing them to establish positions that are better tailored to meet their investment objectives. Capacity CBOE has analyzed its capacity and represents that it believes the Exchange and the Options Price Reporting Authority have the necessary systems 66403 capacity to handle the additional traffic associated with the expanded range of strike price intervals for VIX options. 2. Statutory Basis Because the current proposed is limited to VIX options for which $1 strikes are already permitted and because the series could be added without presenting capacity problems, the Exchange believes the rule proposal is consistent with the Securities Exchange Act of 1934 (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.11 Specifically, the Exchange believes that the proposed rule change is consistent with the Section 6(b)(5) Act 12 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. 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 Because the foregoing proposed rule does not (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 13 and Rule 19b–4(f)(6) thereunder.14 At any time within 60 11 15 6 See Pricing Supplement to the Barclay’s iPath Prospectus, dated August 31, 2010, at PS–1, which is available at: https://ipathetn.com/pdf/vixprospectus.pdf. 7 See Rule 24.9.01(k). 8 See Rule 5.5.06. 9 See Rule 24.9.11. 10 See Rule 5.5.06. PO 00000 Frm 00057 Fmt 4703 Sfmt 4703 U.S.C. 78f(b). U.S.C. 78f(b)(5). 13 15 U.S.C. 78s(b)(3)(A). 14 17 CFR 240.19b–4(f)(6). In addition, Rule 19b4(f)(6)(iii) requires the Exchange to give the Commission written notice of the Exchange’s intent to file the proposed rule change, along with a brief description and text of the proposed rule change, 12 15 E:\FR\FM\28OCN1.SGM Continued 28OCN1 66404 Federal Register / Vol. 75, No. 208 / Thursday, October 28, 2010 / Notices 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. Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–CBOE– 2010–096 and should be submitted on or before November 18, 2010. IV. Solicitation of Comments For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Florence E. Harmon, Deputy Secretary. 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–2010–096 on the subject line. emcdonald on DSK2BSOYB1PROD with NOTICES 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–2010–096. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. VerDate Mar<15>2010 16:13 Oct 27, 2010 Jkt 223001 [FR Doc. 2010–27232 Filed 10–27–10; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–63164; File No. SR–C2– 2010–005] Self-Regulatory Organizations; C2 Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify Rule 6.12 October 22, 2010. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on October 14, 2010, C2 Options Exchange, Incorporated (‘‘Exchange’’ or ‘‘C2’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to modify the wording of Rule 6.12 relating to the C2 matching algorithm. The text of the proposed rule change is available on the Exchange’s Web site (https:// www.cboe.org/Legal), at the Exchange’s Office of the Secretary, at the Commission’s Public Reference Room, and on the Commission’s Web site at https://www.sec.gov. 15 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(6). 1 15 PO 00000 Frm 00058 Fmt 4703 Sfmt 4703 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, C2 included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose In 2009, C2 was registered as a national securities exchange under Section 6 of the Exchange Act.5 C2 has yet to commence trading options, however a launch is anticipated in October 2010. The central purpose of this filing is to streamline Rule 6.12 relating to order execution and priority. Currently Rule 6.12 allows C2 to select a base matching algorithm and subsequently overlay certain priorities over the selected base algorithm. There are currently two base algorithms: pricetime (often referred to as first in, first out or FIFO) in which trading interest at a given price point is ranked based on time priority, and pro-rata in which trading interest at a given price point is ranked based on the size of each order/ quote at that price. The priority overlays allowed under Rule 6.12 are public customer priority (priority to nonbroker-dealer orders), trade participation right priority (priority, up to a designated percentage, for qualifying Preferred Market-Makers), and market turner priority (priority, up to a designated percentage, for participants that are first to improve the market price on C2). C2 seeks to simplify Rule 6.12 to allow for 3 choices of matching algorithms: price-time, pro-rata, and price-time with first priority going to public customers and second priority pursuant to the trade participation right. The first two of these options are unchanged. C2 believes that adding the third, which is achievable under existing C2 Rule 6.12 and which is the intended algorithm of choice for the C2 launch, makes C2 matching rules clearer for C2 users. Thus, the filing is not in 5 See Exchange Act Release No. 61152 (Dec. 10, 2009), 74 FR 66699 (Dec. 16, 2009). E:\FR\FM\28OCN1.SGM 28OCN1

Agencies

[Federal Register Volume 75, Number 208 (Thursday, October 28, 2010)]
[Notices]
[Pages 66402-66404]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-27232]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63155; File No. SR-CBOE-2010-096]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Expand the Range of Strike Price Intervals for VIX 
Options

October 21, 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 October 19, 2010, the Chicago Board Options Exchange, 
Incorporated (``CBOE''or the ``Exchange'') filed with the Securities 
and Exchange Commission (``SEC'' or ``Commission'') the proposed rule 
change as described in Items I and II below, which Items have been 
prepared by the Exchange. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CBOE proposes to amend Rule 24.9.01(e), Terms of Index Option 
Contracts, to expand the range of strike price intervals for options on 
the CBOE Volatility Index (``VIX''). 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

[[Page 66403]]

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 rule filing is to amend Rule 24.9.01(e), Terms 
of Index Option Contracts, to expand the range of strike price 
intervals for options on the CBOE Volatility Index (``VIX''). 
Currently, Rule 24.9.01(e) permits the Exchange to list series at $1 or 
greater strike price intervals for each VIX expiration. Dollar strikes 
for VIX options, however, are centered around a limited range based on 
VIX futures prices. Specifically, the Exchange may open up to five 
option series above and five option series below the current index 
level, which is based on VIX futures prices. As the current index level 
moves, the Exchange may open additional series within the same range 
(i.e., five above/below). This filing proposes to eliminate the band 
that limits the number of $1 strikes that may be listed in VIX options.
    In support of this modification, the Commission has already 
addressed the policy issue raised by this filing, i.e., broader range 
of $1 strikes for vehicles to trade S&P 500 volatility, and the 
Commission has already approved $1 strikes for VIX options.\5\ The 
Exchange notes since the strike setting parameters for VIX options were 
first established, other products have been introduced that compete 
with VIX options, but do not have similar strike adding restrictions. 
For example, $1 or greater strike price intervals (where the strike 
price is less then $200) are permitted for options on the iPath S&P 500 
VIX Short-Term Futures Index ETN (``VXX'') and on the iPath S&P 500 VIX 
Mid-Term Futures Index ETN (``VXZ'').
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release Nos. 61696 (March 12, 
2010), 75 FR 13174 (March 18, 2010) (SR-CBOE-2010-005) (order 
approving $1 strikes for options on index-linked securities) and No. 
54192 (July 21, 2006), 71 FR 43251 (July 31, 2006) (SR-CBOE-2006-27) 
(order approving $1 strikes for VIX options).
---------------------------------------------------------------------------

    VXX and VXZ are exchange traded notes that ``are linked to the 
performance of an underlying index that is designed to provide 
investors with exposure to one or more maturities of futures contracts 
on the VIX Index, which reflect implied volatility of the S&P 500 Index 
at various points along the volatility forward curve.'' \6\ The futures 
contracts on the VIX level that the VXX and VXZ notes are linked to are 
listed for trading on the CBOE Futures Exchange, LLC (``CFE''). VIX 
options traded on CBOE overlie the same index on which CFE lists 
futures contracts. As a result, options on VIX, VXX and VXZ are 
competing listed vehicles to trade volatility and market participants 
may use the products interchangeably. In addition, CFE launched Weekly 
Options on VIX futures on September 28, 2010, and $0.50 or greater 
strike price intervals are permitted.
---------------------------------------------------------------------------

    \6\ See Pricing Supplement to the Barclay's iPath Prospectus, 
dated August 31, 2010, at PS-1, which is available at: https://ipathetn.com/pdf/vix-prospectus.pdf.
---------------------------------------------------------------------------

    CBOE notes that the Commission has previously permitted similar $1 
strike setting regimes for other index options that compete with 
physically-settled options. Specifically, $1 strikes are permitted for 
options on the Mini-Russell 2000 Index (``RMN'') \7\ and for options on 
the iShares Russell 2000 Index Fund (``IWM'').\8\ Similarly, $1 strikes 
are permitted for options on the Mini S&P 500 Index (``Mini SPX'') \9\ 
and for options on the Standard and Poor's Depositary Receipts Trust 
(``SPY'').\10\
---------------------------------------------------------------------------

    \7\ See Rule 24.9.01(k).
    \8\ See Rule 5.5.06.
    \9\ See Rule 24.9.11.
    \10\ See Rule 5.5.06.
---------------------------------------------------------------------------

    In addition, the Exchange states that it has received requests to 
add strikes so that market participants may be able to ``roll'' 
expiring positions; that is, trade out of an expiring VIX option with a 
certain strike and re-establish a new position in the next month's VIX 
option with the same strike. Because the strike setting regime for 
volatility index options is tied to futures prices, certain strikes may 
not be available for listing, thus creating the situation in which 
rolling cannot be accomplished.
    In order to be able to compete effectively and provide market 
participants with products that can be used to hedge other products 
already trading in the market, CBOE believes that untying the addition 
of $1 or greater strikes to the ``current index level'' will provide 
investors with greater flexibility by allowing them to establish 
positions that are better tailored to meet their investment objectives.

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 
expanded range of strike price intervals for VIX options.
2. Statutory Basis
    Because the current proposed is limited to VIX options for which $1 
strikes are already permitted and because the series could be added 
without presenting capacity problems, the Exchange believes the rule 
proposal is consistent with the Securities Exchange Act of 1934 (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.\11\ Specifically, the Exchange believes that 
the proposed rule change is consistent with the Section 6(b)(5) Act 
\12\ 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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 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

    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

    Because the foregoing proposed rule does not (i) significantly 
affect the protection of investors or the public interest; (ii) impose 
any significant burden on competition; and (iii) become operative for 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6) thereunder.\14\ At any time within 60

[[Page 66404]]

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.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
---------------------------------------------------------------------------

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-2010-096 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-2010-096. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CBOE-2010-096 and should be 
submitted on or before November 18, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-27232 Filed 10-27-10; 8:45 am]
BILLING CODE 8011-01-P
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