Self-Regulatory Organizations; C2 Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Close Trading at 3 p.m. Chicago Time on the Last Day of Trading of Expiring P.M.-Settled S&P 500 Options, 67510-67512 [2011-28227]
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Federal Register / Vol. 76, No. 211 / Tuesday, November 1, 2011 / Notices
in other market centers, which would
include the OTC marketplace, subject to
the rules of the appropriate selfregulatory organization (‘‘SRO’’).9
III. Discussion
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.10 Specifically, the
Commission finds that the proposal is
consistent with Section 6(b)(5) of the
Act,11 in that it is designed to promote
just and equitable principles of trade, to
foster cooperation and coordination
with persons engaged in facilitating
transaction in securities, to remove
impediments and perfect the
mechanisms of a free and open market,
and, in general, to protect investors and
the public interest.
The Commission notes that, due to
the elimination of the Validated Cross
functionality, an Institutional Broker
can only execute an order on the
Exchange by submitting an order into
the Matching System, which is the
means all other Exchange participants
execute orders on the Exchange.12 The
Commission believes that it is
appropriate and consistent with the Act
for Institutional Brokers to no longer be
deemed to be a participant operating on
the Exchange, and that a customer order
received by an Institutional Broker
should not be deemed to be on the
Exchange unless and until such order is
entered into the Matching System.
Allowing an Institutional Broker to
execute transactions other than on the
Exchange and eliminating the
requirement to clear the Matching
System before sending customer orders
to other trading centers, should permit
an Institutional Broker to more
effectively compete with other brokerdealers and serve the interests of their
customers and investors.13
IV. Conclusion
srobinson on DSK4SPTVN1PROD with NOTICES
It Is Therefore Ordered, pursuant to
Section 19(b)(2) of the Act,14 that the
9 Currently, the SRO for the OTC marketplace is
FINRA.
10 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).
11 15 U.S.C. 78f(b)(5).
12 See supra note 6.
13 The Commission notes that it approved
separately changes to CHX’s rules governing the
clearing of Institutional Brokers’ transactions
effected other than on CHX. See Securities
Exchange Act Release No. 65615 (October 24, 2011)
(SR–CHX–2010–17).
14 15 U.S.C. 78s(b)(2).
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proposed rule change (SR–CHX–2011–
29) be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2011–28228 Filed 10–31–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65630; File No. SR–C2–
2011–030]
Self-Regulatory Organizations; C2
Options Exchange, Incorporated;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Close Trading at 3 p.m.
Chicago Time on the Last Day of
Trading of Expiring P.M.-Settled S&P
500 Options
October 26, 2011.
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
17, 2011, the C2 Options Exchange,
Incorporated (the ‘‘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 the Substance
of the Proposed Rule Change
Prior to the commencement of the
listing and trading on C2 of Standard &
Poor’s 500 Index (‘‘S&P 500’’) options
with third-Friday-of-the-month
(‘‘Expiration Friday’’) expiration dates
for which the exercise settlement value
will be based on the index value derived
from the closing prices of component
securities (‘‘PM-settled’’),5 the Exchange
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).
5 Listing and trading of P.M.-settled S&P 500
options has already commenced, but the Exchange
intends to have this change in place prior to the
first Expiration Friday for such products. See email
from Jeff Dritz, Attorney, C2, to Sara Hawkins,
1 15
PO 00000
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proposes to close trading at 3 p.m.
Chicago time (all times referenced
herein to be Chicago time) on the last
day of trading of expiring P.M.-settled
S&P 500 options. Non-expiring P.M.settled S&P 500 options will continue to
trade until 3:15 p.m. 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, and at the
Commission.
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
On September 2, 2011, the
Commission approved a rule change
filed by the Exchange to permit, on a
pilot basis, the listing and trading on C2
of PM-settled S&P 500 options.6 The
Exchange now proposes, prior to the
commencement of trading of such
products, to close trading at 3 p.m. on
the last day of trading of expiring P.M.settled S&P 500 options. Non-expiring
P.M.-settled S&P 500 options will
continue to trade until 3:15 p.m.
The S&P 500 is a capitalizationweighted index of 500 stocks from a
broad range of industries. The
component stocks are weighted
according to the total market value of
their outstanding shares. The impact of
a component’s price change is
proportional to the issue’s total market
share value, which is the share price
times the number of shares outstanding.
These are summed for all 500 stocks and
divided by a predetermined base value.
The base value for the S&P 500 is
adjusted to reflect changes in
capitalization resulting from, among
Special Counsel, Division of Trading and Markets,
Commission on October 20, 2011.
6 See Securities Exchange Act Release No. 34–
65256 (September 2, 2011), 76 FR 55969 (September
9, 2011) (SR–C2–2011–008).
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Federal Register / Vol. 76, No. 211 / Tuesday, November 1, 2011 / Notices
other things, mergers, acquisitions,
stock rights, and substitutions.7
PM-settled S&P 500 options will have
a $100 multiplier, and the minimum
trading increment would be $0.05 for
options trading below $3.00 and $0.10
for all other series. Strike price intervals
will be set no less than 5 points apart.
Expiration processing would occur on
Saturday following the Expiration
Friday. The product will have
European-style exercise, and because it
is based on the S&P 500 index, there
will be no position limits.8
PM-settled S&P 500 options will be
priced in the market based on
corresponding futures values. The
primary listing markets for the
component securities that comprise the
S&P 500 close trading in those securities
at 3 p.m. The primary listing exchanges
for the component securities
disseminate an official closing price of
the component securities, which is used
by S&P to calculate the exercise
settlement value of the S&P 500. C2
believes that, under normal trading
circumstances, the primary listing
markets have sufficient bandwidth to
prevent any data queuing that would
cause any trades that are executed prior
to the closing time from being reported
after 3 p.m. Despite the fact that the
exercise settlement value will be fixed
at or soon after 3 p.m., trading in
expiring PM-settled S&P 500 options
would continue, under current rules, for
an additional fifteen minutes until
3:15 p.m. and will not be priced on
corresponding futures values, but rather
the known cash value. At the same time,
the prices of non-expiring PM-settled
S&P 500 options series will continue to
move and be priced in response to
changes in corresponding futures prices.
A potential pricing divergence could
occur between 3 and 3:15 p.m. on the
final trading day in expiring PM-settled
S&P 500 options (e.g., switch from
pricing off of futures to cash). Further,
in a wholly electronic marketplace, the
switch from pricing off of futures to
cash can be a difficult and risky
switchover for liquidity providers. As a
result, without closing expiring
contracts at 3 p.m., it is foreseeable that
market-makers would react by widening
spreads in order compensate for the
additional risk. Therefore, the Exchange
believes that, in order to mitigate
potential investor confusion and the
potential for increased costs to
investors, it is appropriate to cease
trading in expiring PM-settled S&P 500
options contracts at 3 p.m. The
Exchange does not believe that the
7 See
supra note 6.
8 See supra note 6.
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proposed change will impact volatility
on the underlying cash market at the
close on Expiration Friday.
The proposed change is identical in
nature to two effective rule changes
filed by Chicago Board Options
Exchange, Incorporated (‘‘CBOE’’).9 In
those filings, CBOE changed the close of
trading hours from 3:15 p.m. to 3 p.m.
on the last day of trading in expiring
End-of-Week (‘‘EOW’’), End-of-Month
(‘‘EOM’’) and Quarterly Index (‘‘QIX’’)
Expirations.10 In the current situation,
the Exchange merely proposes to apply
the precedent established regarding
those PM-settled products to expiring
PM-settled S&P 500 options contracts.
Given the fact that the Commission
approved the listing and trading of PMsettled S&P 500 options on a pilot basis
and that such pilot program is
scheduled to end on November 2, 2012,
the rule change proposed herein would
also terminate on November 2, 2012
(unless the pilot period for the listing
and trading of PM-settled S&P 500
options were to be extended or the
program made permanent).
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the Act 11
and the rules and regulations
thereunder and, in particular, the
requirements of Section 6(b) of the
Act.12 Specifically, the Exchange
believes the proposed rule change is
consistent with the Section 6(b)(5) 13
requirements that the rules of an
exchange be designed to promote just
and equitable principles of trade, to
prevent fraudulent and manipulative
acts, to remove impediments to and to
perfect the mechanism for a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
Preventing continued trading on a
product after the exercise settlement
value has been fixed eliminates
potential confusion and thereby protects
investors and the public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
C2 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.
9 See Securities Exchange Act Release No. 34–
64243 (April 7, 2011), 75 FR 20771 (April 13, 2011)
(SR–CBOE–2011–038) and Securities Exchange Act
Release No. 34–59676 (April 1, 2009), 74 FR 16018
(April 8, 2009) (SR–CBOE–2009–020).
10 See supra note 9.
11 15 U.S.C. 78s(b)(1).
12 15 U.S.C. 78f(b).
13 15 U.S.C. 78f(b)(5).
PO 00000
Frm 00110
Fmt 4703
Sfmt 4703
67511
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,
provided that the self-regulatory
organization has given the Commission
written notice of its intent to file the
proposed rule change at least five
business days prior to the date of filing
of the proposed rule change or such
shorter time as designated by the
Commission,14 the proposed rule
change has become effective pursuant to
Section 19(b)(3)(A) of the Act 15 and
Rule 19b–4(f)(6) thereunder.16
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
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 email to rulecomments@sec.gov. Please include File
No. SR–C2–2011–030 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
14 The
Exchange has satisfied this requirement.
U.S.C. 78s(b)(3)(A).
16 17 CFR 240.19b–4(f)(6).
15 15
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Federal Register / Vol. 76, No. 211 / Tuesday, November 1, 2011 / Notices
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File No.
SR–C2–2011–030. This file number
should be included on the subject line
if email 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 C2.
All comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File No.
SR–C2–2011–030 and should be
submitted on or before November 22,
2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2011–28227 Filed 10–31–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
srobinson on DSK4SPTVN1PROD with NOTICES
[Release No. 34–65637; File No. SR–CME–
2011–12]
Self-Regulatory Organizations;
Chicago Mercantile Exchange, Inc.;
Notice of Filing and Order Granting
Accelerated Approval of Proposed
Rule Change To Expand Its OTC FX
Swaps Clearing Offering
October 26, 2011.
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
17, 2011, the Chicago Mercantile
Exchange Inc. (‘‘CME’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change described in Items I and II
below, which items have been prepared
primarily by CME. The Commission is
publishing this Notice and Order to
solicit comments on the proposed rule
change from interested persons and to
approve the proposed rule change on an
accelerated basis.
I. Self-Regulatory Organization’s
Statement of Terms of Substance of the
Proposed Rule Change
The proposed rule changes amend
current CME rules to expand its clearedonly, foreign currency (‘‘FX’’) swaps
offering to support the introduction of
(1) Twenty-six new foreign FX currency
derivatives for over-the counter (‘‘OTC’’)
cash settlement; and (2) eleven new FX
non-deliverable forward transaction
currency pairs for traditional, OTC cash
settlement. Both types of new FX
derivatives products will be offered as
cleared-only products.
The text of the proposed rule change
is available on CME’s Web site at
https://www.cmegroup.com, at the
principal office of CME, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of Purpose of, and Statutory
Basis for, the Proposed Rule Change
In its filing with the Commission,
CME included statements concerning
the purpose 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 III below. CME 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 Purpose of, and Statutory
Basis for, the Proposed Rule Change
CME currently offers clearing for
certain U.S. Dollar/Chilean Peso (‘‘USD/
CLP’’) spot, forward and swap contracts
that are executed between two
counterparties on an over-the-counter
(‘‘OTC’’) basis. These products,
described in CME Rule 274H, are listed
for clearing-only; after two
counterparties submit qualifying
transactions to CME, the transactions
are novated to the CME Clearing House.
For purposes of CME Rules, the
1 15
17 17
CFR 200.30–3(a)(12).
VerDate Mar<15>2010
17:04 Oct 31, 2011
2 17
Jkt 226001
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00111
Fmt 4703
Sfmt 4703
minimum-fluctuations currency is the
Chilean peso and the clearing-unit
currency is the U.S. dollar.
CME’s proposed rule changes are
intended to amend certain rules to
support the introduction of additional
cleared-only OTC foreign currency
derivatives. More specifically, the
proposed filing would add: (1) Twentysix new foreign exchange (‘‘FX’’)
currency derivatives for over-the
counter (‘‘OTC’’) cash settlement; and
(2) eleven new FX non-deliverable
forward (‘‘NDF’’) transaction currency
pairs for traditional, OTC cash
settlement. As mentioned above, both
categories of new FX derivatives
products will be offered as cleared-only
products.
The twenty-six new FX pairs are
branded as CME WM/Reuters spot,
forward and swap products. They
include the following currency pairs:
GBP/USD; USD/CAD; USD/JPY; USD/
CHF; AUD/USD; USD/MXN; NZD/USD;
USD/ZAR; EUR/USD; USD/NOK; USD/
SEK; USD/CZK; USD/HUF; USD/PLN;
USD/ILS; USD/TRY; USD/DKK; EUR/
GBP; EUR/JPY; EUR/CHF; AUD/JPY;
CAD/JPY; EUR/AUD; USD/HKD; USD/
SGD; and USD/THB. Although the
twenty-six new OTC CME WM/Reuters
currency pairs are capable of being
physically deliverable, they may also be
cash settled in U.S. dollars to the OTC
FX benchmark WM/Reuters London FX
Closing Spot Rate (4 p.m. London time).
The eleven new NDF FX pairs are
very similar to CME’s current USD/CLP
product. These cash-settled OTC
products will include the following
currency pairs: USD/BRL; USD/RMB;
USD/RUB; USD/COP; USD/PEN; USD/
KRW; USD/INR; USD/MYR; USD/IDR;
USD/TWD; and USD/PHP. Like the
current CME USD/CLP product, the
USD versus BRL, RMB, RUB, COP, PEN,
KRW, INR, MYR, IDR, TWD and PHP
products are offered as NDF-style
contracts financially or cash settled in
U.S. dollars with positions held in
clearing at the original trade price
marked to the applicable standard OTC
NDF settlement rate option (many are
central bank determined/sanctioned
rates). For example, final settlements for
USD/BRL spot transactions are
concluded based on the difference
between (1) The spot exchange rate of
Brazilian real per U.S. dollar ‘‘Central
Bank of Brazil PTAX offered rate’’ as
reported for the valid value date for cash
settlement by Banco Central do Brasil
for the formal exchange market, and (2)
the original trade price for each
transaction, and (3) the result divided
by the BRL per USD spot exchange rate
to convert notional BRLs to USDs. Cash
settlement of cleared only transactions
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]]>Agencies
[Federal Register Volume 76, Number 211 (Tuesday, November 1, 2011)]
[Notices]
[Pages 67510-67512]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-28227]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65630; File No. SR-C2-2011-030]
Self-Regulatory Organizations; C2 Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Close Trading at 3 p.m. Chicago Time on the
Last Day of Trading of Expiring P.M.-Settled S&P 500 Options
October 26, 2011.
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 17, 2011, the C2 Options Exchange, Incorporated (the
``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 ``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 the
Substance of the Proposed Rule Change
Prior to the commencement of the listing and trading on C2 of
Standard & Poor's 500 Index (``S&P 500'') options with third-Friday-of-
the-month (``Expiration Friday'') expiration dates for which the
exercise settlement value will be based on the index value derived from
the closing prices of component securities (``PM-settled''),\5\ the
Exchange proposes to close trading at 3 p.m. Chicago time (all times
referenced herein to be Chicago time) on the last day of trading of
expiring P.M.-settled S&P 500 options. Non-expiring P.M.-settled S&P
500 options will continue to trade until 3:15 p.m. 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, and at
the Commission.
---------------------------------------------------------------------------
\5\ Listing and trading of P.M.-settled S&P 500 options has
already commenced, but the Exchange intends to have this change in
place prior to the first Expiration Friday for such products. See
email from Jeff Dritz, Attorney, C2, to Sara Hawkins, Special
Counsel, Division of Trading and Markets, Commission on October 20,
2011.
---------------------------------------------------------------------------
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
On September 2, 2011, the Commission approved a rule change filed
by the Exchange to permit, on a pilot basis, the listing and trading on
C2 of PM-settled S&P 500 options.\6\ The Exchange now proposes, prior
to the commencement of trading of such products, to close trading at 3
p.m. on the last day of trading of expiring P.M.-settled S&P 500
options. Non-expiring P.M.-settled S&P 500 options will continue to
trade until 3:15 p.m.
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 34-65256 (September
2, 2011), 76 FR 55969 (September 9, 2011) (SR-C2-2011-008).
---------------------------------------------------------------------------
The S&P 500 is a capitalization-weighted index of 500 stocks from a
broad range of industries. The component stocks are weighted according
to the total market value of their outstanding shares. The impact of a
component's price change is proportional to the issue's total market
share value, which is the share price times the number of shares
outstanding. These are summed for all 500 stocks and divided by a
predetermined base value. The base value for the S&P 500 is adjusted to
reflect changes in capitalization resulting from, among
[[Page 67511]]
other things, mergers, acquisitions, stock rights, and
substitutions.\7\
---------------------------------------------------------------------------
\7\ See supra note 6.
---------------------------------------------------------------------------
PM-settled S&P 500 options will have a $100 multiplier, and the
minimum trading increment would be $0.05 for options trading below
$3.00 and $0.10 for all other series. Strike price intervals will be
set no less than 5 points apart. Expiration processing would occur on
Saturday following the Expiration Friday. The product will have
European-style exercise, and because it is based on the S&P 500 index,
there will be no position limits.\8\
---------------------------------------------------------------------------
\8\ See supra note 6.
---------------------------------------------------------------------------
PM-settled S&P 500 options will be priced in the market based on
corresponding futures values. The primary listing markets for the
component securities that comprise the S&P 500 close trading in those
securities at 3 p.m. The primary listing exchanges for the component
securities disseminate an official closing price of the component
securities, which is used by S&P to calculate the exercise settlement
value of the S&P 500. C2 believes that, under normal trading
circumstances, the primary listing markets have sufficient bandwidth to
prevent any data queuing that would cause any trades that are executed
prior to the closing time from being reported after 3 p.m. Despite the
fact that the exercise settlement value will be fixed at or soon after
3 p.m., trading in expiring PM-settled S&P 500 options would continue,
under current rules, for an additional fifteen minutes until 3:15 p.m.
and will not be priced on corresponding futures values, but rather the
known cash value. At the same time, the prices of non-expiring PM-
settled S&P 500 options series will continue to move and be priced in
response to changes in corresponding futures prices.
A potential pricing divergence could occur between 3 and 3:15 p.m.
on the final trading day in expiring PM-settled S&P 500 options (e.g.,
switch from pricing off of futures to cash). Further, in a wholly
electronic marketplace, the switch from pricing off of futures to cash
can be a difficult and risky switchover for liquidity providers. As a
result, without closing expiring contracts at 3 p.m., it is foreseeable
that market-makers would react by widening spreads in order compensate
for the additional risk. Therefore, the Exchange believes that, in
order to mitigate potential investor confusion and the potential for
increased costs to investors, it is appropriate to cease trading in
expiring PM-settled S&P 500 options contracts at 3 p.m. The Exchange
does not believe that the proposed change will impact volatility on the
underlying cash market at the close on Expiration Friday.
The proposed change is identical in nature to two effective rule
changes filed by Chicago Board Options Exchange, Incorporated
(``CBOE'').\9\ In those filings, CBOE changed the close of trading
hours from 3:15 p.m. to 3 p.m. on the last day of trading in expiring
End-of-Week (``EOW''), End-of-Month (``EOM'') and Quarterly Index
(``QIX'') Expirations.\10\ In the current situation, the Exchange
merely proposes to apply the precedent established regarding those PM-
settled products to expiring PM-settled S&P 500 options contracts.
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\9\ See Securities Exchange Act Release No. 34-64243 (April 7,
2011), 75 FR 20771 (April 13, 2011) (SR-CBOE-2011-038) and
Securities Exchange Act Release No. 34-59676 (April 1, 2009), 74 FR
16018 (April 8, 2009) (SR-CBOE-2009-020).
\10\ See supra note 9.
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Given the fact that the Commission approved the listing and trading
of PM-settled S&P 500 options on a pilot basis and that such pilot
program is scheduled to end on November 2, 2012, the rule change
proposed herein would also terminate on November 2, 2012 (unless the
pilot period for the listing and trading of PM-settled S&P 500 options
were to be extended or the program made permanent).
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act \11\ and the rules and regulations thereunder and, in
particular, the requirements of Section 6(b) of the Act.\12\
Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \13\ requirements that the rules of
an exchange be designed to promote just and equitable principles of
trade, to prevent fraudulent and manipulative acts, to remove
impediments to and to perfect the mechanism for a free and open market
and a national market system, and, in general, to protect investors and
the public interest. Preventing continued trading on a product after
the exercise settlement value has been fixed eliminates potential
confusion and thereby protects investors and the public interest.
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\11\ 15 U.S.C. 78s(b)(1).
\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
C2 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, provided that the self-regulatory
organization has given the Commission written notice of its intent to
file the proposed rule change at least five business days prior to the
date of filing of the proposed rule change or such shorter time as
designated by the Commission,\14\ the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \15\ and Rule 19b-
4(f)(6) thereunder.\16\
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\14\ The Exchange has satisfied this requirement.
\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
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 email to rule-comments@sec.gov. Please include
File No. SR-C2-2011-030 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission,
[[Page 67512]]
100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File No. SR-C2-2011-030. This file
number should be included on the subject line if email 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 C2. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File No. SR-C2-2011-030 and should be
submitted on or before November 22, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-28227 Filed 10-31-11; 8:45 am]
BILLING CODE 8011-01-P
