Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to Trades for Less Than $1, 35095-35097 [2012-14191]

Download as PDF Federal Register / Vol. 77, No. 113 / Tuesday, June 12, 2012 / Notices 2012–75 and should be submitted on or before July 3, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–14189 Filed 6–11–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–67144; File No. SR–CBOE– 2012–053] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to Trades for Less Than $1 June 6, 2012. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on June 1, 2012, the Chicago Board Options Exchange, Incorporated (‘‘Exchange’’ or ‘‘CBOE’’) 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 has designated the proposal as a ‘‘non-controversial’’ proposed rule change pursuant to Section 19(b)(3)(A) 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. srobinson on DSK4SPTVN1PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is proposing to extend its program that allows transactions to take place at a price that is below $1 per option contract through June 28, 2013. The text of the proposed rule change is available on the Exchange’s Web site (www.cboe.org/Legal), at the Exchange’s Office of the Secretary and at the Commission’s Public Reference Room. 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). 4 17 CFR 240.19b–4(f)(6). 1 15 22:42 Jun 11, 2012 In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose An ‘‘accommodation’’ or ‘‘cabinet’’ trade refers to trades in listed options on the Exchange that are worthless or not actively traded. Cabinet trading is generally conducted in accordance with the Exchange Rules, except as provided in Exchange Rule 6.54, Accommodation Liquidations (Cabinet Trades), which sets forth specific procedures for engaging in cabinet trades. Rule 6.54 currently provides for cabinet transactions to occur via open outcry at a cabinet price of $1 per option contract in any options series open for trading in the Exchange, except that the Rule is not applicable to trading in option classes participating in the Penny Pilot Program. Under the procedures, bids and offers (whether opening or closing a position) at a price of $1 per option contract may be represented in the trading crowd by a Floor Broker or by a Market-Maker or provided in response to a request by a PAR Official/OBO, a Floor Broker or a Market-Maker, but must yield priority to all resting orders in the PAR Official/OBO cabinet book (which resting cabinet book orders may be closing only). So long as both the buyer and the seller yield to orders resting in the cabinet book, opening cabinet bids can trade with opening cabinet offers at $1 per option contract. The Exchange has temporarily amended the procedures through June 29, 2012 to allow transactions to take place in open outcry at a price of at least $0 but less than $1 per option contract.5 5 See Securities Exchange Act Release Nos. 59188 (December 30, 2008), 74 FR 480 (January 6, 2009)(SR–CBOE–2008–133)(adopting the amended procedures on a temporary basis through January 30, 2009), 59331 (January 30, 2009), 74 FR 6333 (February 6, 2009)(extending the amended procedures on a temporary basis through May 29, 2009), 60020 (June 1, 2009), 74 FR 27220 (June 8, 11 17 VerDate Mar<15>2010 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change Jkt 226001 PO 00000 Frm 00163 Fmt 4703 Sfmt 4703 35095 These lower priced transactions are traded pursuant to the same procedures applicable to $1 cabinet trades, except that (i) bids and offers for opening transactions are only permitted to accommodate closing transactions in order to limit use of the procedure to liquidations of existing positions, and (ii) the procedures are also available for trading in option classes participating in the Penny Pilot Program.6 The Exchange believes that allowing a price of at least $0 but less than $1 better accommodates the closing of options positions in series that are worthless or not actively traded, particularly due to market conditions which may result in a significant number of series being out-of-themoney. For example, a market participant might have a long position in a call series with a strike price of $100 and the underlying stock might now be trading at $30. In such an instance, there might not otherwise be a market for that person to close-out the position even at the $1 cabinet price (e.g., the series might be quoted no bid).7 2009)(SR–CBOE–2009–034)(extending the amended procedures on a temporary basis through June 1, 2010), 62192 (May 28, 2010), 75 FR 31828 (June 4, 2010)(SR–CBOE–2010–052)(extending the amended procedures on a temporary basis through June 1, 2011); 64403 (May 4, 2011), 76 FR 27110 (May 10, 2011)(SR–CBOE–2011–048)(extending the amended procedures on a temporary basis through December 30, 2011); and 65872 (December 2, 2011), 76 FR 76788 (December 8, 2011)(SR–CBOE–2011– 113)(extending the amended procedures on a temporary basis through June 29, 2012). 6 Currently the $1 cabinet trading procedures are limited to options classes traded in $0.05 or $0.10 standard increment. The $1 cabinet trading procedures are not available in Penny Pilot Program classes because in those classes an option series can trade in a standard increment as low as $0.01 per share (or $1.00 per option contract with a 100 share multiplier). Because the temporary procedures allow trading below $0.01 per share (or $1.00 per option contract with a 100 share multiplier), the procedures are available for all classes, including those classes participating in the Penny Pilot Program. 7 As with other accommodation liquidations under Rule 6.54, transactions that occur for less than $1 are not be disseminated to the public on the consolidated tape. In addition, as with other accommodation liquidations under Rule 6.54, the transactions are exempt from the Consolidated Options Audit Trail (‘‘COATS’’) requirements of Exchange Rule 6.24, Required Order Information. However, the Exchange maintains quotation, order and transaction information for the transactions in the same format as the COATS data is maintained. In this regard, all transactions for less than $1 must be reported to the Exchange following the close of each business day. The rule also provides that transactions for less than $1 will be reported for clearing utilizing forms, formats and procedures established by the Exchange from time to time. In this regard, the Exchange initially intends to have clearing firms directly report the transactions to The Options Clearing Corporation (‘‘OCC’’) using OCC’s position adjustment/transfer procedures. This manner of reporting transactions for clearing is similar to the procedure that CBOE currently E:\FR\FM\12JNN1.SGM Continued 12JNN1 35096 Federal Register / Vol. 77, No. 113 / Tuesday, June 12, 2012 / Notices The purpose of the instant rule change is to extend the operation of these temporary procedures through June 28, 2013, so that the procedures can continue without interruption while CBOE considers whether to seek permanent approval of the temporary procedures. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act 8 and the rules and regulations thereunder and, in particular, the requirements of Section 6(b) of the Act.9 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 10 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. The Exchange believes that allowing for liquidations at a price less than $1 per option contract better facilitates the closing of options positions that are worthless or not actively trading. Further, the Exchange believes the proposal is consistent with the Act because the proposed extension is of appropriate length to allow the Exchange and the Commission to continue to assess the impact of the Exchange’s authority to allow transactions to take place in open outcry at a price of at least $0 but less than $1 per option in accordance with its attendant obligations and conditions, including the process for submitting such transactions to OCC for clearing. B. Self-Regulatory Organization’s Statement on Burden on Competition CBOE does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. srobinson on DSK4SPTVN1PROD with NOTICES C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposal. employs for on-floor position transfer packages executed pursuant to Exchange Rule 6.49A, Transfer of Positions. 8 15 U.S.C. 78s(b)(1). 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(5). VerDate Mar<15>2010 22:42 Jun 11, 2012 Jkt 226001 III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 11 and Rule 19b–4(f)(6) thereunder.12 Because the proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 13 and Rule 19b–4(f)(6)(iii) thereunder.14 A proposed rule change filed under Rule 19b–4(f)(6) 15 normally does not become operative for 30 days after the date of filing. However, pursuant to Rule 19b–4(f)(6)(iii) 16 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the pilot may continue without interruption while the Exchange considers whether to seek permanent approval of the temporary procedures. The Exchange also believes that acceleration of the operative date so that the program can continue without interruption is consistent with the protection of investors and the public interest because it will allow the orderly closing of option positions that are worthless or not actively traded. The Commission believes that waiving operative delay as of June 29, 2012 is consistent with the protection of investors and the public interest, as it will allow the pilot program to continue uninterrupted, thereby avoiding any potential investor confusion that could result from a temporary interruption in the pilot program. Further, the Commission notes that, because the filing was submitted for immediate effectiveness on June 1, the fact that the 11 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 13 15 U.S.C. 78s(b)(3)(A). 14 17 CFR 240.19b–4(f)(6)(iii). In addition, Rule 19b–4(f)(6)(iii) requires the Exchange to give the Commission written notice of the Exchange’s intent to file the proposed rule change along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 15 17 CFR 240.19b–4(f)(6). 16 17 CFR 240.19b–4(f)(6)(iii). 12 17 PO 00000 Frm 00164 Fmt 4703 Sfmt 4703 current rule provision does not expire until June 29th will afford interested parties the opportunity to comment on the proposal before the Exchange requires it to become operative. For this reason, the Commission designates the proposed rule change to be operative on June 29, 2012.17 At any time within 60 days of the filing of the 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–CBOE–2012–053 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 No. SR–CBOE–2012–053. 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 17 For purposes only of waiving the operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). E:\FR\FM\12JNN1.SGM 12JNN1 Federal Register / Vol. 77, No. 113 / Tuesday, June 12, 2012 / Notices printing in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR–CBOE– 2012–053 and should be submitted on or before July 3, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–14191 Filed 6–11–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–67145; File No. SR– NYSEArca–2012–34] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of Proposed Rule Change To List and Trade the Huntington US Equity Rotation Strategy ETF and Huntington EcoLogical Strategy ETF Under NYSE Arca Equities Rule 8.600 June 6, 2012. srobinson on DSK4SPTVN1PROD with NOTICES I. Introduction On April 12, 2012, NYSE Arca, Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade shares (‘‘Shares’’) of the Huntington US Equity Rotation Strategy ETF and Huntington EcoLogical Strategy ETF (each, a ‘‘Fund’’ and collectively, ‘‘Funds’’) under NYSE Arca Equities Rule 8.600. The proposed rule change was published for comment in the Federal Register on April 27, 2012.3 The Commission received no comments on the proposal. This order grants approval of the proposed rule change. 18 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 66846 (April 23, 2012), 77 FR 25218 (‘‘Notice’’). 1 15 VerDate Mar<15>2010 22:42 Jun 11, 2012 Jkt 226001 II. Description of the Proposed Rule Change The Exchange proposes to list and trade the Shares of the Funds pursuant to NYSE Arca Equities Rule 8.600, which governs the listing and trading of Managed Fund Shares on the Exchange. The Funds will be actively managed exchange-traded funds. The Shares of each Fund will be offered by Huntington Strategy Shares (‘‘Trust’’), a Delaware statutory trust registered with the Commission as an open-end management investment company.4 Huntington Asset Advisors, Inc. (‘‘Adviser’’) is the investment adviser of each Fund and will manage the investment portfolios of the Funds. SEI Investments Distribution Co. (‘‘Distributor’’) is the principal underwriter and distributor of the Funds’ Shares. Citibank, N.A. is the custodian for the Funds. The Exchange represents that the Adviser is affiliated with two broker-dealers and has implemented a fire wall with respect to each affiliated broker-dealer regarding access to information concerning the composition and/or changes to a Fund portfolio.5 Huntington US Equity Rotation Strategy ETF The Fund’s investment objective is to seek capital appreciation. Under normal 4 The Trust is registered under the Investment Company Act of 1940 (‘‘1940 Act’’). On April 6, 2012, the Trust filed with the Commission an amendment to the Trust’s Registration Statement on Form N–1A under the Securities Act of 1933 and under the 1940 Act relating to the Funds (File Nos. 333–170750 and 811–22497) (‘‘Registration Statement’’). In addition, the Exchange represented in the Notice that the Trust had also filed an Amended and Restated Application for an Order under Section 6(c) of the 1940 Act for exemptions from various provisions of the 1940 Act and rules thereunder (File No. 812–13785), dated April 3, 2012 (‘‘Exemptive Application’’). See Investment Company Act Release No. 30032 (April 10, 2012). In the Notice, the Exchange stated that the Shares would not be listed on the Exchange until an order (‘‘Exemptive Order’’) under the 1940 Act has been issued by the Commission with respect to the Exemptive Application. The Commission notes that it has issued an Exemptive Order granting certain exemptive relief to the Trust, Adviser, and Distributor under the 1940 Act. See Investment Company Act Release No. 30061 (May 8, 2012) (File No. 812–13785). The Exchange represents that investments made by the Funds will comply with the conditions set forth in the Exemptive Order. 5 See Commentary .06 to NYSE Arca Equities Rule 8.600. The Exchange represents that, in the event (a) the Adviser becomes newly affiliated with a broker-dealer, or (b) any new adviser or subadviser becomes affiliated with a broker-dealer, it will implement a fire wall with respect to such broker-dealer regarding access to information concerning the composition and/or changes to the portfolio, and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such portfolio. PO 00000 Frm 00165 Fmt 4703 Sfmt 4703 35097 conditions,6 the Fund will invest at least 80% of its net assets in the exchange-listed common stocks of select companies organized in the U.S. and included in the S&P Composite 1500® (‘‘Companies’’). The S&P Composite 1500 is a combination of the following indices: the S&P 500®; the S&P MidCap 400®; and the S&P SmallCap 600®. The Fund will invest in Companies within each of the large-cap, mid-cap, and small-cap U.S. equity market segments (each a ‘‘Market Segment’’). The largecap segment is represented by companies comprising the S&P 500, the mid-cap segment is represented by companies comprising the S&P MidCap 400, and the small-cap segment is represented by the companies comprising the S&P SmallCap 600. The Fund will also invest in Companies operating in each of the ten sectors represented in the S&P Composite 1500. A sector is a large grouping of companies operating within the market that share similar characteristics. The ten sectors comprising the S&P Composite 1500 are: utilities, consumer staples, information technology, healthcare, financials, energy, consumer discretionary, materials, industrials, and telecommunication services (‘‘Sectors’’). As market conditions change, the Fund intends to rotate the investment focus of the Fund so as to overweight its portfolio in Companies comprising those Market Segments and Sectors that the Adviser believes offer the greatest potential for capital appreciation in the given market environment and underweight its portfolio in those Market Segments and Sectors that the Adviser believes offer the least potential for capital appreciation in that same market environment (as described in more detail below). If the Fund’s portfolio allocation to a particular Market Segment or Sector exceeds that Market Segment’s or Sector’s current weighting in the S&P Composite 1500, the Fund will be ‘‘overweighting’’ that Market Segment or Sector. Similarly, if the Fund’s portfolio allocation to a specific Market Segment or Sector is less than that Market Segment’s or Sector’s current weighting in the S&P Composite 1500, then the Fund will be ‘‘underweighting’’ that Market Segment or Sector. The Adviser believes that 6 The term ‘‘under normal conditions’’ includes, but is not limited to, the absence of extreme volatility or trading halts in the equity markets or the financial markets generally; operational issues causing dissemination of inaccurate market information; or force majeure type events such as systems failure, natural or man-made disaster, act of God, armed conflict, act of terrorism, riot or labor disruption, or any similar intervening circumstance. E:\FR\FM\12JNN1.SGM 12JNN1

Agencies

[Federal Register Volume 77, Number 113 (Tuesday, June 12, 2012)]
[Notices]
[Pages 35095-35097]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14191]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67144; File No. SR-CBOE-2012-053]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Related to Trades for Less Than $1

June 6, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on June 1, 2012, the Chicago Board Options Exchange, Incorporated 
(``Exchange'' or ``CBOE'') 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 has designated the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 19(b)(3)(A) 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to extend its program that allows 
transactions to take place at a price that is below $1 per option 
contract through June 28, 2013. The text of the proposed rule change is 
available on the Exchange's Web site (www.cboe.org/Legal), at the 
Exchange's Office of the Secretary and at the Commission's Public 
Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of those statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant parts of such 
statements.

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

1. Purpose
    An ``accommodation'' or ``cabinet'' trade refers to trades in 
listed options on the Exchange that are worthless or not actively 
traded. Cabinet trading is generally conducted in accordance with the 
Exchange Rules, except as provided in Exchange Rule 6.54, Accommodation 
Liquidations (Cabinet Trades), which sets forth specific procedures for 
engaging in cabinet trades. Rule 6.54 currently provides for cabinet 
transactions to occur via open outcry at a cabinet price of $1 per 
option contract in any options series open for trading in the Exchange, 
except that the Rule is not applicable to trading in option classes 
participating in the Penny Pilot Program. Under the procedures, bids 
and offers (whether opening or closing a position) at a price of $1 per 
option contract may be represented in the trading crowd by a Floor 
Broker or by a Market-Maker or provided in response to a request by a 
PAR Official/OBO, a Floor Broker or a Market-Maker, but must yield 
priority to all resting orders in the PAR Official/OBO cabinet book 
(which resting cabinet book orders may be closing only). So long as 
both the buyer and the seller yield to orders resting in the cabinet 
book, opening cabinet bids can trade with opening cabinet offers at $1 
per option contract.
    The Exchange has temporarily amended the procedures through June 
29, 2012 to allow transactions to take place in open outcry at a price 
of at least $0 but less than $1 per option contract.\5\ These lower 
priced transactions are traded pursuant to the same procedures 
applicable to $1 cabinet trades, except that (i) bids and offers for 
opening transactions are only permitted to accommodate closing 
transactions in order to limit use of the procedure to liquidations of 
existing positions, and (ii) the procedures are also available for 
trading in option classes participating in the Penny Pilot Program.\6\ 
The Exchange believes that allowing a price of at least $0 but less 
than $1 better accommodates the closing of options positions in series 
that are worthless or not actively traded, particularly due to market 
conditions which may result in a significant number of series being 
out-of-the-money. For example, a market participant might have a long 
position in a call series with a strike price of $100 and the 
underlying stock might now be trading at $30. In such an instance, 
there might not otherwise be a market for that person to close-out the 
position even at the $1 cabinet price (e.g., the series might be quoted 
no bid).\7\
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    \5\ See Securities Exchange Act Release Nos. 59188 (December 30, 
2008), 74 FR 480 (January 6, 2009)(SR-CBOE-2008-133)(adopting the 
amended procedures on a temporary basis through January 30, 2009), 
59331 (January 30, 2009), 74 FR 6333 (February 6, 2009)(extending 
the amended procedures on a temporary basis through May 29, 2009), 
60020 (June 1, 2009), 74 FR 27220 (June 8, 2009)(SR-CBOE-2009-
034)(extending the amended procedures on a temporary basis through 
June 1, 2010), 62192 (May 28, 2010), 75 FR 31828 (June 4, 2010)(SR-
CBOE-2010-052)(extending the amended procedures on a temporary basis 
through June 1, 2011); 64403 (May 4, 2011), 76 FR 27110 (May 10, 
2011)(SR-CBOE-2011-048)(extending the amended procedures on a 
temporary basis through December 30, 2011); and 65872 (December 2, 
2011), 76 FR 76788 (December 8, 2011)(SR-CBOE-2011-113)(extending 
the amended procedures on a temporary basis through June 29, 2012).
    \6\ Currently the $1 cabinet trading procedures are limited to 
options classes traded in $0.05 or $0.10 standard increment. The $1 
cabinet trading procedures are not available in Penny Pilot Program 
classes because in those classes an option series can trade in a 
standard increment as low as $0.01 per share (or $1.00 per option 
contract with a 100 share multiplier). Because the temporary 
procedures allow trading below $0.01 per share (or $1.00 per option 
contract with a 100 share multiplier), the procedures are available 
for all classes, including those classes participating in the Penny 
Pilot Program.
    \7\ As with other accommodation liquidations under Rule 6.54, 
transactions that occur for less than $1 are not be disseminated to 
the public on the consolidated tape. In addition, as with other 
accommodation liquidations under Rule 6.54, the transactions are 
exempt from the Consolidated Options Audit Trail (``COATS'') 
requirements of Exchange Rule 6.24, Required Order Information. 
However, the Exchange maintains quotation, order and transaction 
information for the transactions in the same format as the COATS 
data is maintained. In this regard, all transactions for less than 
$1 must be reported to the Exchange following the close of each 
business day. The rule also provides that transactions for less than 
$1 will be reported for clearing utilizing forms, formats and 
procedures established by the Exchange from time to time. In this 
regard, the Exchange initially intends to have clearing firms 
directly report the transactions to The Options Clearing Corporation 
(``OCC'') using OCC's position adjustment/transfer procedures. This 
manner of reporting transactions for clearing is similar to the 
procedure that CBOE currently employs for on-floor position transfer 
packages executed pursuant to Exchange Rule 6.49A, Transfer of 
Positions.

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[[Page 35096]]

    The purpose of the instant rule change is to extend the operation 
of these temporary procedures through June 28, 2013, so that the 
procedures can continue without interruption while CBOE considers 
whether to seek permanent approval of the temporary procedures.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act \8\ and the rules and regulations thereunder and, in 
particular, the requirements of Section 6(b) of the Act.\9\ 
Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \10\ 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. The Exchange believes that allowing for 
liquidations at a price less than $1 per option contract better 
facilitates the closing of options positions that are worthless or not 
actively trading. Further, the Exchange believes the proposal is 
consistent with the Act because the proposed extension is of 
appropriate length to allow the Exchange and the Commission to continue 
to assess the impact of the Exchange's authority to allow transactions 
to take place in open outcry at a price of at least $0 but less than $1 
per option in accordance with its attendant obligations and conditions, 
including the process for submitting such transactions to OCC for 
clearing.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(1).
    \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

    CBOE does not believe that the proposed rule change will impose any 
burden on competition that is 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

    The Exchange neither solicited nor received comments on the 
proposal.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6)(iii) thereunder.\14\
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    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the Exchange to give the Commission written 
notice of the Exchange's intent to file the proposed rule change 
along with a brief description and text of the proposed rule change, 
at least five business days prior to the date of filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii) \16\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the pilot 
may continue without interruption while the Exchange considers whether 
to seek permanent approval of the temporary procedures. The Exchange 
also believes that acceleration of the operative date so that the 
program can continue without interruption is consistent with the 
protection of investors and the public interest because it will allow 
the orderly closing of option positions that are worthless or not 
actively traded.
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving operative delay as of June 29, 
2012 is consistent with the protection of investors and the public 
interest, as it will allow the pilot program to continue uninterrupted, 
thereby avoiding any potential investor confusion that could result 
from a temporary interruption in the pilot program. Further, the 
Commission notes that, because the filing was submitted for immediate 
effectiveness on June 1, the fact that the current rule provision does 
not expire until June 29th will afford interested parties the 
opportunity to comment on the proposal before the Exchange requires it 
to become operative. For this reason, the Commission designates the 
proposed rule change to be operative on June 29, 2012.\17\
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    \17\ For purposes only of waiving the operative delay, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
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    At any time within 60 days of the filing of the 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-CBOE-2012-053 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 No. SR-CBOE-2012-053. 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

[[Page 35097]]

printing in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File No. SR-CBOE-2012-053 and should be 
submitted on or before July 3, 2012.
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    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14191 Filed 6-11-12; 8:45 am]
BILLING CODE 8011-01-P
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