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]

Download as PDF 67510 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). VerDate Mar<15>2010 17:04 Oct 31, 2011 Jkt 226001 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 Frm 00109 Fmt 4703 Sfmt 4703 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 (http:// 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). E:\FR\FM\01NON1.SGM 01NON1 srobinson on DSK4SPTVN1PROD with NOTICES 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. VerDate Mar<15>2010 17:04 Oct 31, 2011 Jkt 226001 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 (http://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 E:\FR\FM\01NON1.SGM 01NON1 67512 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 (http://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 http://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 E:\FR\FM\01NON1.SGM 01NON1

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]


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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 (http://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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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

    \11\ 15 U.S.C. 78s(b)(1).
    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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 (http://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 (http://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