Self-Regulatory Organizations; CBOE Futures Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Listing and Trading CBOE Gold ETF Volatility Index Security Futures, 18818-18821 [2011-7981]

Download as PDF 18818 Federal Register / Vol. 76, No. 65 / Tuesday, April 5, 2011 / Notices (‘‘Program’’) from between $50 and $75 to between $50 and $100, provided the $2.50 strike price intervals are no more than $10 from the closing price of the underlying stock in the primary market. The Exchange also proposed to increase the number of option classes on individual stocks, from 46 to 60, that it may select for the Program.4 In support of its proposal, Phlx stated that $2.50 strike intervals above $75 would afford investors the ability to more closely tailor investment strategies to the precise movement of the underlying security. The Exchange also stated that the number of option classes in the Program has not expanded since 1998, although increasingly more companies have completed initial public offerings since 1998 and significantly more options classes are trading now as compared to 1998. The Exchange stated that the increase would allow it to accommodate investor requests for $2.50 strikes in additional options classes. Finally, Phlx stated that it analyzed its capacity, and represented that the Exchange and the Options Price Reporting Authority have the necessary systems capacity to handle the potential additional traffic that would result from expanding the Program. III. Discussion srobinson on DSKHWCL6B1PROD with NOTICES The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.5 Specifically, the Commission finds that the proposal is consistent with Section 6(b)(5) of the Act,6 which requires, among other things, that the rules of a national securities exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Commission believes that the proposal strikes a reasonable balance between the Exchange’s desire to offer a wider array of investment opportunities and the need to avoid unnecessary 4 In addition, the $2.50 Strike Price Program also permits the Exchange to list any option class with $2.50 strike intervals that is included in the $2.50 Strike Price Program of another exchange. See Phlx Rule 1012, Commentary .05(b). 5 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). 6 15 U.S.C. 78f(b)(5). VerDate Mar<15>2010 15:18 Apr 04, 2011 Jkt 223001 proliferation of options series and the corresponding increase in quotes and market fragmentation. The Commission expects the Exchange to monitor the trading volume associated with the additional options series listed as a result of this proposal and the effect of these additional series on market fragmentation and on the capacity of the Exchange’s, OPRA’s, and vendors’ automated systems. In addition, the Commission notes that Phlx has represented that it believes the Exchange and the Options Price Reporting Authority have the necessary systems capacity to handle the additional traffic associated with the newly permitted listings. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,7 that the proposed rule change (SR–Phlx–2011– 15) be, and it hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8 Cathy H. Ahn, Deputy Secretary. [FR Doc. 2011–8054 Filed 4–4–11; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64153; File No. SR–CFE– 2011–002] Self-Regulatory Organizations; CBOE Futures Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Listing and Trading CBOE Gold ETF Volatility Index Security Futures March 30, 2011. Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 (‘‘Act’’),1 notice is hereby given that on March 18, 2011, CBOE Futures Exchange, LLC. (‘‘CFE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change described in Items I, II, and III below, which Items have been prepared by CFE. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. CFE also filed this proposed rule change concurrently with the Commodity Futures Trading Commission (‘‘CFTC’’). CFE filed a written certification with the CFTC under Section 5c(c) of the 7 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(7). 8 17 PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 Commodity Exchange Act (‘‘CEA’’) 2 on March 18, 2011. I. Self-Regulatory Organization’s Description of the Proposed Rule Change The Exchange proposes to amend its rules to permit the Exchange to list and trade the Gold ETF Volatility Index (‘‘GVZ’’) security futures contract. The text of the proposed rule change is available on the Exchange’s Web site at https://www.cfe.cboe.com, on the Commission’s Web site at https:// www.sec.gov, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, CFE 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 these statements may be examined at the places specified in Item IV below. CFE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this proposed rule change is to permit the Exchange to list and trade security futures on the CBOE Gold ETF Volatility Index (‘‘GVZ’’ or ‘‘GVZ Index’’). Chicago Board Options Exchange, Incorporated (‘‘CBOE’’) received approval from the SEC to list and trade GVZ options.3 Consistent with the Joint Order issued by the SEC and the CFTC dated November 19, 2009 (Securities Exchange Act Release No. 61027) (‘‘Joint Order’’),4 the GVZ Index may underlie a security futures contract since the GVZ Index is eligible to underlie options traded on a national securities exchange. Index Design and Calculation The calculation of GVZ is based on the VIX methodology applied to options on the SPDR Gold Trust (‘‘GLD’’). The 27 U.S.C. 7a–2(c). Securities Exchange Act Release No. 62139 (May 19, 2010) 75 FR 29597 (May 26, 2010) (order approving proposal to list and trade GVZ options on CBOE). 4 74 FR 61380 (November 24, 2009). See also CFE Policy and Procedure VIII E. (Eligibility for Listing Security Futures on Securities Approved for Options Trading). 3 See E:\FR\FM\05APN1.SGM 05APN1 Federal Register / Vol. 76, No. 65 / Tuesday, April 5, 2011 / Notices srobinson on DSKHWCL6B1PROD with NOTICES index was introduced by CBOE on August 1, 2008 and has been disseminated in real-time on every trading day since that time.5 GVZ is an up-to-the-minute market estimate of the expected volatility of GLD calculated by using real-time bid/ask quotes of GLD options listed on Chicago Board Options Exchange, Incorporated. GVZ uses nearby and second nearby options with at least 8 days left to expiration and then weights them to yield a constant, 30-day measure of the expected (implied) volatility. For each contract month, CBOE will determine the at-the-money strike price. The Exchange will then select the atthe-money and out-of-the money series with non-zero bid prices and determine the midpoint of the bid-ask quote for each of these series. The midpoint quote of each series is then weighted so that the further away that series is from the at-the-money strike, the less weight that is accorded to the quote. Then, to compute the index level, CBOE will calculate a volatility measure for the nearby options and then for the second nearby options. This is done using the weighted mid-point of the prevailing bid-ask quotes for all included option series with the same expiration date. These volatility measures are then interpolated to arrive at a single, constant 30-day measure of volatility. CBOE will compute values for the GVZ Index underlying security futures on a real-time basis throughout each trading day, from 8:30 a.m. until 3 p.m. (CT). GVZ Index levels will be calculated by CBOE and disseminated at 15-second intervals to major market data vendors. Security Futures Trading The contract multiplier for each GVZ futures contract will be $1,000.00. For example, a contract size of one GVZ futures contract would be $18,950 if the GVZ Index level were 18.95 (18.95 x $1,000.00). The Exchange may list for trading up to nine near-term serial months and up to five additional months on the February quarterly cycle for the GVZ futures contract. The minimum fluctuation of the GVZ futures contract will be 0.05 index points, which has a value of $50.00, except that the individual legs and net prices of spread trades in the GVZ futures contract may be in increments of 0.01 index points, which has a value of $10.00. The trading days for GVZ futures contracts shall be the same trading days of GLD options, as those days are determined by CBOE. The 5 CBOE maintains a micro-site for GVZ options at: https://www.cboe.com/gvz. VerDate Mar<15>2010 15:18 Apr 04, 2011 Jkt 223001 trading hours for GVZ contracts will be from 8:30 a.m. Chicago time to 3 p.m. Exhibit 3 presents contract specifications for GVZ futures. Position Limits The generic formula that is used to calculate position limit levels for cash settled Narrow-Based Stock Index Futures set forth in CFE Rule 1901(e) shall not apply to GVZ futures because that formula is premised upon an index that is comprised of stocks. As discussed above, the index components of GVZ are GLD options listed on CBOE. Accordingly, the Exchange is proposing to establish position limit levels for GVZ security futures at levels comparable to those previously established and approved for GVZ options trading by the SEC. Because GVZ futures will have different position limits than under the generic formula for cash settled NarrowBased Stock Index Futures and for ease of reference of the provisions applicable to GVZ futures by CFE market participants, CFE proposes to have a separate contract specification rule chapter for GVZ futures in CFE Rule Chapter 16. Specifically, GVZ futures will be subject to position limits under CFE Rule 412 (Position Limits). A person may not own or control: (1) More than 5,000 contracts net long or net short in all GVZ futures contracts combined; (2) more than 3,000 contracts net long or net short in the expiring GVZ futures contract month; and (3) more than 1,350 contracts net long or net short in the expiring GVZ futures contract held during the last five (5) trading days for the expiring GVZ futures contract month.6 For the purposes of this rule, the positions of all accounts directly or indirectly owned or controlled by a person or persons, and the positions of all accounts of a person or persons acting pursuant to an expressed or implied agreement or understanding shall be cumulated. The proposed GVZ position limits shall not apply to 6 CFE notes that the proposed 5,000/3,000 position limit levels are equivalent to those established for security options trading on the GVZ Index (50,000/30,000) when scaled to reflect the larger size of the futures contract in relation to the options contract. See Securities Exchange Release No. 62139 (May 19, 2010), 75 FR 29597 (May 26, 2010) (SEC order approving listing and trading of GVZ options, including GVZ option position limits). See also chart to CBOE Rule 24.4(a). Similarly, the proposed 1,350 position limit level complies with the provisions of § 41.25(a)(i) of the regulations promulgated by the CFTC under the CEA. This provision requires the Exchange to adopt a net position limit of no greater than 13,500 (100share) contracts applicable to positions held during the last five days of trading of an expiring contract month, and the proposed 1,350 position limit is equivalent to this level when scaled to reflect the $1,000 contract multiplier for GVZ futures. PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 18819 positions that are subject to a position limit exemption meeting the requirements of CFTC Regulations and CFE Rules. The minimum reportable level for GVZ futures will be 200 contracts. Exercise and Settlement The final settlement date for a GVZ futures contract shall be on the third Friday of the expiring futures contract month. If the third Friday of the expiring month is a CBOE holiday, the final settlement date for the expiring contract shall be the CBOE business day immediately preceding the third Friday. Trading on the GVZ futures contract will terminate on the business day immediately preceding the final settlement date of the GVZ futures contract for the relevant spot month. When the last trading day is moved because of a CFE holiday, the last trading day for an expiring GVZ futures contract will be the day immediately preceding the last regularly-scheduled trading day. The final-settlement value for GVZ futures shall be a Special Opening Quotation (‘‘SOQ’’) of the GVZ Index calculated from the sequence of opening prices of a single strip of GLD options expiring 30 days after the settlement date. The opening price for any series in which there is no trade shall be the average of that option’s bid price and ask price as determined at the opening of trading. Exercise will result in delivery of cash on the business day following expiration. The final settlement value will be rounded to the nearest $0.01. Settlement of GVZ futures contracts will result in the delivery of a cash settlement amount on the business day immediately following the final settlement date. The cash settlement amount on the final settlement date shall be the final mark to market amount against the final settlement price of the GVZ futures contract multiplied by $1,000.00. If the final settlement value is not available or the normal settlement procedure cannot be utilized due to a trading disruption or other unusual circumstance, the final settlement value will be determined in accordance with the rules and bylaws of The Options Clearing Corporation (‘‘OCC’’’). Eligibility and Maintenance Criteria for GVZ Futures Pursuant to Exchange Policy and Procedure VIII E. (Eligibility for Listing Security Futures on Securities Approved for Options Trading), the Exchange may list securities futures on GVZ because GVZ is eligible to underlie E:\FR\FM\05APN1.SGM 05APN1 18820 Federal Register / Vol. 76, No. 65 / Tuesday, April 5, 2011 / Notices options traded on a national securities exchange. GVZ security futures shall remain eligible for listing and trading on the Exchange so long as GVZ remains eligible to underlie options traded on a national securities exchange. If at any time GVZ no longer remains eligible to underlie options traded on a national securities exchange, GVZ shall be ineligible to underlie security futures and the Exchange will not open any additional GVZ futures contracts for trading until GVZ becomes eligible again to underlie options traded on a national securities exchange. srobinson on DSKHWCL6B1PROD with NOTICES Block Trades Block trades in the GVZ futures contract will be permitted. Pursuant to CFE Rule 415(a)(i), the minimum Block Trade quantity for the GVZ futures contract will be 200 contracts if there is only one leg involved in the trade.7 If the Block Trade is executed as a spread order, one leg must meet the minimum Block Trade quantity for the GVZ futures contract and the other leg(s) must have a contract size that is reasonably related to the leg meeting the minimum Block Trade quantity. If the Block Trade is executed as a transaction with legs in multiple contract months and all legs of the Block Trade are exclusively for the purchase or exclusively for the sale of GVZ futures contracts (a ‘‘strip’’), the minimum Block Trade quantity for the strip will be 300 contracts and each leg of the strip will be required to have a minimum size of 100 contracts. The minimum price increment for a Block Trade in the GVZ futures contract will be 0.01 index points. No natural person associated with a Trading Privilege Holder or Authorized Trader that has knowledge of a pending Block Trade of such Trading Privilege Holder or Authorized Trader, or a Customer thereof in the GVZ future on the Exchange, may enter an Order or execute a transaction, whether for his or her own account or, if applicable, for the account of a Customer over which he or she has control, for or in the GVZ Future to which such Block Trade relates until after (i) such Block Trade has been reported to and published by the Exchange and (ii) any additional time period from time to time prescribed by the Exchange in its block trading procedures or contract specifications has expired. 7 CFE Rule 415 sets forth the conditions that must be met if Block Trades are permitted by the rules governing a contract. VerDate Mar<15>2010 15:18 Apr 04, 2011 Jkt 223001 Exchange of Contract for Related Position Transactions Exchange of Contract for Related Position (‘‘ECRP’’) transactions, as set forth in CFE Rule 414, in the GVZ futures contract will be permitted. Any Exchange of Contract for Related Position transaction must satisfy the requirements of Rule 414.8 The minimum price increment for an ECRP involving the GVZ futures contract will be 0.01 index points. Margin The customer margin requirements for GVZ futures will be governed by CFE Rule 517 (Customer Margin Requirements for Contracts That Are Security Futures). 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) 9 of the Securities Exchange Act (the ‘‘Act’’), in general, and furthers the objectives of Section 6(b)(5) 10 in particular in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system, and thereby will provide investors with the ability to use security futures to gain exposure to or hedge risk associated with GLD volatility. B. Self-Regulatory Organization’s Statement on Burden on Competition CFE 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 The proposed rule change has become effective on March 25, 2011. At any time within 60 days of the date of effectiveness of the proposed rule 8 CFE Rule 414 sets forth the conditions that must be met if ECRP transactions are permitted by the rules governing a contract. 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(5). PO 00000 Frm 00108 Fmt 4703 Sfmt 4703 change, the Commission, after consultation with the CFTC, may summarily abrogate the proposed rule change and require that the proposed rule change be refiled in accordance with the provisions of Section 19(b)(1) of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule 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–CFE–2011–002 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–CFE–2011–002. 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–CFE– E:\FR\FM\05APN1.SGM 05APN1 Federal Register / Vol. 76, No. 65 / Tuesday, April 5, 2011 / Notices 2011–002 and should be submitted on or before April 25, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Cathy H. Ahn, Deputy Secretary. [FR Doc. 2011–7981 Filed 4–4–11; 8:45 am] BILLING CODE 8011–01–P Frequency: On Occasion. SBA Form Numbers: 2410, 2411, 2412. Description of Respondents: Small Businesses that have experienced a physical or economic disaster in a federally declared disaster. Responses: 984. Annual Burden: 543. Jacqueline White, Chief, Administrative Information Branch. SMALL BUSINESS ADMINISTRATION [FR Doc. 2011–8092 Filed 4–4–11; 8:45 am] Reporting and Recordkeeping Requirements Under OMB Review BILLING CODE 8025–01–P AGENCY: Small Business Administration. Notice of reporting requirements submitted for OMB review. SMALL BUSINESS ADMINISTRATION ACTION: [License No. 05/05–0293] Under the provisions of the Paperwork Reduction Act (44 U.S.C. Chapter 35), agencies are required to submit proposed reporting and recordkeeping requirements to OMB for review and approval, and to publish a notice in the Federal Register notifying the public that the agency has made such a submission. DATES: Submit comments on or before May 5, 2011. If you intend to comment but cannot prepare comments promptly, please advise the OMB Reviewer and the Agency Clearance Officer before the deadline. Copies: Request for clearance (OMB 83–1), supporting statement, and other documents submitted to OMB for review may be obtained from the Agency Clearance Officer. ADDRESSES: Address all comments concerning this notice to: Agency Clearance Officer, Jacqueline White, Small Business Administration, 409 3rd Street, SW., 5th Floor, Washington, DC 20416; and OMB Reviewer, Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Washington, DC 20503. FOR FURTHER INFORMATION CONTACT: Jacqueline White, Agency Clearance Officer, (202) 205–7044. SUPPLEMENTARY INFORMATION: Title: Guaranteed Disaster Assistance Program Payment Reporting. Frequency: On Occasion. SBA Form Number: N/A. Description of Respondents: Small Businesses that have experienced a physical or economic disaster in a federally declared disaster. Responses: 5,580. Annual Burden: 467. Title: Immediate Disaster Assistance Loan Program Application and Eligibility Data. srobinson on DSKHWCL6B1PROD with NOTICES SUMMARY: Convergent Capital Partners II, L.P.; Notice Seeking Exemption Under Section 312 of the Small Business Investment Act, Conflicts of Interest Notice is hereby given that Convergent Capital Partners II, L.P., 505 North Highway 169, Suite 245, Minneapolis, MN 55441, a Federal Licensee under the Small Business Investment Act of 1958, as amended (‘‘the Act’’), in connection with the financing of a small concern, has sought an exemption under Section 312 of the Act and Section 107.730, Financings which Constitute Conflicts of Interest of the Small Business Administration (‘‘SBA’’) Rules and Regulations (13 CFR 107). Convergent Capital Partners II, L.P., proposes to provide debt financing to Key Health Group, Inc., 30699 Russell Ranch Road #170, Westlake Village, CA 91362–7315. The financing is contemplated to provide capital that contributes to the growth and overall sound financing of the Key Health Group, Inc. The financing is brought within the purview of § 107.730(a)(1) and § 107.730(a)(4) of the Regulations because Convergent Capital Partners II, L.P.’s financing will discharge an obligation owed to Convergent Capital Partners I, L.P., which is considered an Associate and because Convergent Capital Partners I, L.P., has a potential equity interest in Key Health Group, Inc. of greater than ten percent. Notice is hereby given that any interested person may submit written comments on the transaction to the Associate Administrator for Investment and Innovation, U.S. Small Business Administration, 409 Third Street, SW., Washington, DC 20416. Sean J. Greene, Associate Administrator for Investment. [FR Doc. 2011–8091 Filed 4–4–11; 8:45 am] 11 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 15:18 Apr 04, 2011 BILLING CODE 8025–01–P Jkt 223001 PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 18821 SMALL BUSINESS ADMINISTRATION Interest Rates The Small Business Administration publishes an interest rate called the optional ‘‘peg’’ rate (13 CFR 120.214) on a quarterly basis. This rate is a weighted average cost of money to the government for maturities similar to the average SBA direct loan. This rate may be used as a base rate for guaranteed fluctuating interest rate SBA loans. This rate will be 3.750 (33⁄4) percent for the April–June quarter of FY 2011. Pursuant to 13 CFR 120.921(b), the maximum legal interest rate for any third party lender’s commercial loan which funds any portion of the cost of a 504 project (see 13 CFR 120.801) shall be 6% over the New York Prime rate or, if that exceeds the maximum interest rate permitted by the constitution or laws of a given State, the maximum interest rate will be the rate permitted by the constitution or laws of the given State. Walter C. Intlekofer, Acting Director, Office of Financial Assistance. [FR Doc. 2011–8093 Filed 4–4–11; 8:45 am] BILLING CODE P DEPARTMENT OF STATE [Public Notice 7408] Persons and Entities on Whom Sanctions Have Been Imposed Under the Iran Sanctions Act of 1996 Department of State. Notice. AGENCY: ACTION: The Secretary of State has determined that Belarusneft has engaged in a sanctionable investment described in section 5(a)(1) of the Iran Sanctions Act of 1996 (ISA) (50 U.S.C. 1701 note) and that certain sanctions should be imposed as a result. DATES: Effective April 5, 2011. FOR FURTHER INFORMATION CONTACT: On general issues: Brian Breuhaus, Office of Terrorism Finance and Economic Sanctions Policy, Department of State, Telephone: (202) 647–5763. For U.S. Government procurement ban issues: Kimberly Triplett, Office of the Procurement Executive, Department of State, Telephone: (703) 875–4079. SUPPLEMENTARY INFORMATION: Pursuant to the authority delegated to the Secretary of State in the Presidential Memorandum of November 21, 1996, 61 FR 64249 (the ‘‘Delegation Memorandum’’), the Secretary has determined that Belarusneft has engaged SUMMARY: E:\FR\FM\05APN1.SGM 05APN1

Agencies

[Federal Register Volume 76, Number 65 (Tuesday, April 5, 2011)]
[Notices]
[Pages 18818-18821]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-7981]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64153; File No. SR-CFE-2011-002]


Self-Regulatory Organizations; CBOE Futures Exchange, LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to Listing and Trading CBOE Gold ETF Volatility Index Security 
Futures

March 30, 2011.
    Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on March 18, 2011, CBOE 
Futures Exchange, LLC. (``CFE'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change described in Items I, II, and III below, which 
Items have been prepared by CFE. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons. CFE also filed this proposed rule change concurrently with the 
Commodity Futures Trading Commission (``CFTC''). CFE filed a written 
certification with the CFTC under Section 5c(c) of the Commodity 
Exchange Act (``CEA'') \2\ on March 18, 2011.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 7 U.S.C. 7a-2(c).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Description of the Proposed Rule 
Change

    The Exchange proposes to amend its rules to permit the Exchange to 
list and trade the Gold ETF Volatility Index (``GVZ'') security futures 
contract. The text of the proposed rule change is available on the 
Exchange's Web site at https://www.cfe.cboe.com, on the Commission's Web 
site at https://www.sec.gov, at the principal office of the Exchange, 
and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, CFE 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 these statements may be examined at the places specified in 
Item IV below. CFE has prepared summaries, set forth in Sections A, B, 
and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this proposed rule change is to permit the Exchange 
to list and trade security futures on the CBOE Gold ETF Volatility 
Index (``GVZ'' or ``GVZ Index''). Chicago Board Options Exchange, 
Incorporated (``CBOE'') received approval from the SEC to list and 
trade GVZ options.\3\ Consistent with the Joint Order issued by the SEC 
and the CFTC dated November 19, 2009 (Securities Exchange Act Release 
No. 61027) (``Joint Order''),\4\ the GVZ Index may underlie a security 
futures contract since the GVZ Index is eligible to underlie options 
traded on a national securities exchange.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 62139 (May 19, 2010) 
75 FR 29597 (May 26, 2010) (order approving proposal to list and 
trade GVZ options on CBOE).
    \4\ 74 FR 61380 (November 24, 2009). See also CFE Policy and 
Procedure VIII E. (Eligibility for Listing Security Futures on 
Securities Approved for Options Trading).
---------------------------------------------------------------------------

Index Design and Calculation
    The calculation of GVZ is based on the VIX methodology applied to 
options on the SPDR Gold Trust (``GLD''). The

[[Page 18819]]

index was introduced by CBOE on August 1, 2008 and has been 
disseminated in real-time on every trading day since that time.\5\ GVZ 
is an up-to-the-minute market estimate of the expected volatility of 
GLD calculated by using real-time bid/ask quotes of GLD options listed 
on Chicago Board Options Exchange, Incorporated. GVZ uses nearby and 
second nearby options with at least 8 days left to expiration and then 
weights them to yield a constant, 30-day measure of the expected 
(implied) volatility.
---------------------------------------------------------------------------

    \5\ CBOE maintains a micro-site for GVZ options at: https://www.cboe.com/gvz.
---------------------------------------------------------------------------

    For each contract month, CBOE will determine the at-the-money 
strike price. The Exchange will then select the at-the-money and out-
of-the money series with non-zero bid prices and determine the midpoint 
of the bid-ask quote for each of these series. The midpoint quote of 
each series is then weighted so that the further away that series is 
from the at-the-money strike, the less weight that is accorded to the 
quote. Then, to compute the index level, CBOE will calculate a 
volatility measure for the nearby options and then for the second 
nearby options. This is done using the weighted mid-point of the 
prevailing bid-ask quotes for all included option series with the same 
expiration date. These volatility measures are then interpolated to 
arrive at a single, constant 30-day measure of volatility.
    CBOE will compute values for the GVZ Index underlying security 
futures on a real-time basis throughout each trading day, from 8:30 
a.m. until 3 p.m. (CT). GVZ Index levels will be calculated by CBOE and 
disseminated at 15-second intervals to major market data vendors.
Security Futures Trading
    The contract multiplier for each GVZ futures contract will be 
$1,000.00. For example, a contract size of one GVZ futures contract 
would be $18,950 if the GVZ Index level were 18.95 (18.95 x $1,000.00). 
The Exchange may list for trading up to nine near-term serial months 
and up to five additional months on the February quarterly cycle for 
the GVZ futures contract. The minimum fluctuation of the GVZ futures 
contract will be 0.05 index points, which has a value of $50.00, except 
that the individual legs and net prices of spread trades in the GVZ 
futures contract may be in increments of 0.01 index points, which has a 
value of $10.00. The trading days for GVZ futures contracts shall be 
the same trading days of GLD options, as those days are determined by 
CBOE. The trading hours for GVZ contracts will be from 8:30 a.m. 
Chicago time to 3 p.m.
    Exhibit 3 presents contract specifications for GVZ futures.
Position Limits
    The generic formula that is used to calculate position limit levels 
for cash settled Narrow-Based Stock Index Futures set forth in CFE Rule 
1901(e) shall not apply to GVZ futures because that formula is premised 
upon an index that is comprised of stocks. As discussed above, the 
index components of GVZ are GLD options listed on CBOE. Accordingly, 
the Exchange is proposing to establish position limit levels for GVZ 
security futures at levels comparable to those previously established 
and approved for GVZ options trading by the SEC. Because GVZ futures 
will have different position limits than under the generic formula for 
cash settled Narrow-Based Stock Index Futures and for ease of reference 
of the provisions applicable to GVZ futures by CFE market participants, 
CFE proposes to have a separate contract specification rule chapter for 
GVZ futures in CFE Rule Chapter 16.
    Specifically, GVZ futures will be subject to position limits under 
CFE Rule 412 (Position Limits). A person may not own or control: (1) 
More than 5,000 contracts net long or net short in all GVZ futures 
contracts combined; (2) more than 3,000 contracts net long or net short 
in the expiring GVZ futures contract month; and (3) more than 1,350 
contracts net long or net short in the expiring GVZ futures contract 
held during the last five (5) trading days for the expiring GVZ futures 
contract month.\6\ For the purposes of this rule, the positions of all 
accounts directly or indirectly owned or controlled by a person or 
persons, and the positions of all accounts of a person or persons 
acting pursuant to an expressed or implied agreement or understanding 
shall be cumulated. The proposed GVZ position limits shall not apply to 
positions that are subject to a position limit exemption meeting the 
requirements of CFTC Regulations and CFE Rules. The minimum reportable 
level for GVZ futures will be 200 contracts.
---------------------------------------------------------------------------

    \6\ CFE notes that the proposed 5,000/3,000 position limit 
levels are equivalent to those established for security options 
trading on the GVZ Index (50,000/30,000) when scaled to reflect the 
larger size of the futures contract in relation to the options 
contract. See Securities Exchange Release No. 62139 (May 19, 2010), 
75 FR 29597 (May 26, 2010) (SEC order approving listing and trading 
of GVZ options, including GVZ option position limits). See also 
chart to CBOE Rule 24.4(a). Similarly, the proposed 1,350 position 
limit level complies with the provisions of Sec.  41.25(a)(i) of the 
regulations promulgated by the CFTC under the CEA. This provision 
requires the Exchange to adopt a net position limit of no greater 
than 13,500 (100-share) contracts applicable to positions held 
during the last five days of trading of an expiring contract month, 
and the proposed 1,350 position limit is equivalent to this level 
when scaled to reflect the $1,000 contract multiplier for GVZ 
futures.
---------------------------------------------------------------------------

Exercise and Settlement
    The final settlement date for a GVZ futures contract shall be on 
the third Friday of the expiring futures contract month. If the third 
Friday of the expiring month is a CBOE holiday, the final settlement 
date for the expiring contract shall be the CBOE business day 
immediately preceding the third Friday. Trading on the GVZ futures 
contract will terminate on the business day immediately preceding the 
final settlement date of the GVZ futures contract for the relevant spot 
month. When the last trading day is moved because of a CFE holiday, the 
last trading day for an expiring GVZ futures contract will be the day 
immediately preceding the last regularly-scheduled trading day.
    The final-settlement value for GVZ futures shall be a Special 
Opening Quotation (``SOQ'') of the GVZ Index calculated from the 
sequence of opening prices of a single strip of GLD options expiring 30 
days after the settlement date. The opening price for any series in 
which there is no trade shall be the average of that option's bid price 
and ask price as determined at the opening of trading. Exercise will 
result in delivery of cash on the business day following expiration. 
The final settlement value will be rounded to the nearest $0.01.
    Settlement of GVZ futures contracts will result in the delivery of 
a cash settlement amount on the business day immediately following the 
final settlement date. The cash settlement amount on the final 
settlement date shall be the final mark to market amount against the 
final settlement price of the GVZ futures contract multiplied by 
$1,000.00.
    If the final settlement value is not available or the normal 
settlement procedure cannot be utilized due to a trading disruption or 
other unusual circumstance, the final settlement value will be 
determined in accordance with the rules and bylaws of The Options 
Clearing Corporation (``OCC''').
Eligibility and Maintenance Criteria for GVZ Futures
    Pursuant to Exchange Policy and Procedure VIII E. (Eligibility for 
Listing Security Futures on Securities Approved for Options Trading), 
the Exchange may list securities futures on GVZ because GVZ is eligible 
to underlie

[[Page 18820]]

options traded on a national securities exchange. GVZ security futures 
shall remain eligible for listing and trading on the Exchange so long 
as GVZ remains eligible to underlie options traded on a national 
securities exchange. If at any time GVZ no longer remains eligible to 
underlie options traded on a national securities exchange, GVZ shall be 
ineligible to underlie security futures and the Exchange will not open 
any additional GVZ futures contracts for trading until GVZ becomes 
eligible again to underlie options traded on a national securities 
exchange.
Block Trades
    Block trades in the GVZ futures contract will be permitted. 
Pursuant to CFE Rule 415(a)(i), the minimum Block Trade quantity for 
the GVZ futures contract will be 200 contracts if there is only one leg 
involved in the trade.\7\ If the Block Trade is executed as a spread 
order, one leg must meet the minimum Block Trade quantity for the GVZ 
futures contract and the other leg(s) must have a contract size that is 
reasonably related to the leg meeting the minimum Block Trade quantity. 
If the Block Trade is executed as a transaction with legs in multiple 
contract months and all legs of the Block Trade are exclusively for the 
purchase or exclusively for the sale of GVZ futures contracts (a 
``strip''), the minimum Block Trade quantity for the strip will be 300 
contracts and each leg of the strip will be required to have a minimum 
size of 100 contracts. The minimum price increment for a Block Trade in 
the GVZ futures contract will be 0.01 index points.
---------------------------------------------------------------------------

    \7\ CFE Rule 415 sets forth the conditions that must be met if 
Block Trades are permitted by the rules governing a contract.
---------------------------------------------------------------------------

    No natural person associated with a Trading Privilege Holder or 
Authorized Trader that has knowledge of a pending Block Trade of such 
Trading Privilege Holder or Authorized Trader, or a Customer thereof in 
the GVZ future on the Exchange, may enter an Order or execute a 
transaction, whether for his or her own account or, if applicable, for 
the account of a Customer over which he or she has control, for or in 
the GVZ Future to which such Block Trade relates until after (i) such 
Block Trade has been reported to and published by the Exchange and (ii) 
any additional time period from time to time prescribed by the Exchange 
in its block trading procedures or contract specifications has expired.
Exchange of Contract for Related Position Transactions
    Exchange of Contract for Related Position (``ECRP'') transactions, 
as set forth in CFE Rule 414, in the GVZ futures contract will be 
permitted. Any Exchange of Contract for Related Position transaction 
must satisfy the requirements of Rule 414.\8\ The minimum price 
increment for an ECRP involving the GVZ futures contract will be 0.01 
index points.
---------------------------------------------------------------------------

    \8\ CFE Rule 414 sets forth the conditions that must be met if 
ECRP transactions are permitted by the rules governing a contract.
---------------------------------------------------------------------------

Margin
    The customer margin requirements for GVZ futures will be governed 
by CFE Rule 517 (Customer Margin Requirements for Contracts That Are 
Security Futures).
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) \9\ of the Securities Exchange Act (the ``Act''), in 
general, and furthers the objectives of Section 6(b)(5) \10\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and thereby will provide investors 
with the ability to use security futures to gain exposure to or hedge 
risk associated with GLD volatility.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    CFE 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

    The proposed rule change has become effective on March 25, 2011.
    At any time within 60 days of the date of effectiveness of the 
proposed rule change, the Commission, after consultation with the CFTC, 
may summarily abrogate the proposed rule change and require that the 
proposed rule change be refiled in accordance with the provisions of 
Section 19(b)(1) of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
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-CFE-2011-002 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-CFE-2011-002. 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-CFE-

[[Page 18821]]

2011-002 and should be submitted on or before April 25, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-7981 Filed 4-4-11; 8:45 am]
BILLING CODE 8011-01-P
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