Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Granting Approval of Proposed Rule Change To Increase the Maximum Term for LEAPS to Fifteen Years, 67723-67724 [2012-27510]
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Federal Register / Vol. 77, No. 219 / Tuesday, November 13, 2012 / Notices
violations as minor rule violations, and
requested that it be relieved of the
prompt reporting requirements
regarding such violations, provided it
gives notice of such violations to the
Commission on a quarterly basis.
The Exchange proposes to include in
its MRVP the procedures and violations
currently included in Exchange Rule
12140 (‘‘Imposition of Fines for Minor
Rule Violations’’).5
According to the Exchange’s proposed
MRVP, under Rule 12140, the Exchange
may impose a fine (not to exceed
$2,500) on a member or an associated
person with respect to any rule violation
listed in Rule 12140(d). The Exchange
shall serve the person against whom a
fine is imposed with a written statement
setting forth the rule or rules violated,
the act or omission constituting each
such violation, the fine imposed for
each such violation, and the date by
which such fine shall be paid, such
determination becomes final or such
determination must be contested. If the
person against whom the fine is
imposed pays the fine, such payment
shall be deemed to be a waiver of such
person’s right to a disciplinary
proceeding and any review of the matter
under the Exchange Rules. Any person
against whom a fine is imposed may
contest the Exchange’s determination by
filing with the Exchange a written
answer, at which point the matter shall
become a disciplinary proceeding.
The Exchange proposes that, as set
forth in Exchange Rule 12140(d),
violations of the following rules would
be appropriate for disposition under the
MRVP: Rule 3120 (Position Limits);
Rule 10030 (Focus Reports); Rule 10040
(Requests for Trade Data); Rules 7110(a),
7150(d)–(f), and 8050(a)–(d) (Order
Entry); Rule 8040(a)(7) (Quotation
Parameters); Rule 8050(e) (Continuous
Quotes); Rule 3180 (Mandatory Systems
Testing); Rules 2020, 2040, and 2050
related to failure to timely file
amendments to Form U4, Form U5, and
Form BD; Rule 9000(c)–(e), (g) and (h)
(Contrary Exercise Advice); Rule 15020
(Locked and Crossed Markets); Rule
8030(e) (Market Maker Assigned
Activity); Rule 8050(c)(2)–(4) (Request
for Quote); and Rule 15010(a) (TradeThrough).6
srobinson on DSK4SPTVN1PROD with
5 On
April 27, 2012, the Exchange’s application
for registration as a national securities exchange,
including the rules governing the Exchange, was
approved. See Securities Exchange Act Release No.
66871 (April 27, 2012), 77 FR 26323 (May 3, 2012)
(File No. 10–206).
6 The Commission notes that the list of violations
set forth in this notice corrects certain rule
reference errors that are presently in Exchange Rule
12140. The Exchange has informed Commission
staff that it will submit a rule filing to correct such
errors.
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67723
Upon approval of the plan, the
Exchange will provide the Commission
a quarterly report of actions taken on
minor rule violations under the plan.
The quarterly report will include,
among other things: the Exchange’s
internal file number for the case, the
name of the individual and/or
organization, the nature of the violation,
the specific rule provision violated, the
sanction imposed, the number of times
the rule violation has occurred, and the
date of disposition.7
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File No. 4–
655 and should be submitted on or
before December 4, 2012.
I. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the Exchange’s
proposed MRVP, including whether the
proposed MRVP is consistent with the
Act. Comments may be submitted by
any of the following methods:
Pursuant to Section 19(d)(1) of the Act
and Rule 19d–1(c)(2) thereunder,8 after
December 4, 2012, the Commission may,
by order, declare the Exchange’s
proposed MRVP effective if the plan is
consistent with the public interest, the
protection of investors, or otherwise in
furtherance of the purposes of the Act.
The Commission in its order may
restrict the categories of violations to be
designated as minor rule violations and
may impose any other terms or
conditions to the proposed MRVP, File
No. 4–655, and to the period of its
effectiveness, which the Commission
deems necessary or appropriate in the
public interest, for the protection of
investors or otherwise in furtherance of
the purposes of the Act.
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. 4–655 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.
4–655. 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 MRVP that
are filed with the Commission, and all
written communications relating to the
proposed MRVP 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
10:00 a.m. and 3:00 p.m. Copies of the
proposed MRVP also will be available
for inspection and copying at the
principal office of the Exchange. All
7 The Exchange attached a sample form of the
quarterly report with its submission to the
Commission.
PO 00000
Frm 00097
Fmt 4703
Sfmt 4703
II. Date of Effectiveness of the Proposed
Minor Rule Violation Plan and Timing
for Commission Action
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–27527 Filed 11–9–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68164; File No. SR–CBOE–
2012–071]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Order Granting Approval
of Proposed Rule Change To Increase
the Maximum Term for LEAPS to
Fifteen Years
November 6, 2012.
I. Introduction
On July 24, 2012, the Chicago Board
Options Exchange, Incorporated
(‘‘Exchange’’ or ‘‘CBOE’’) 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
8 15
U.S.C. 78s(d)(1); 17 CFR 240.19d–1(c)(2).
CFR 200.30–3(a)(44).
1 15 U.S.C. 78s(b)(1).
9 17
E:\FR\FM\13NON1.SGM
13NON1
67724
Federal Register / Vol. 77, No. 219 / Tuesday, November 13, 2012 / Notices
thereunder,2 a proposed rule change to
increase the maximum term for LongTerm Equity Options Series (‘‘LEAPS’’)
to fifteen years. The proposed rule
change was published for comment in
the Federal Register on August 10,
2012.3 A designation of a longer period
for Commission action was published in
the Federal Register on September 25,
2012.4 The Commission received one
comment on the proposed rule change.5
On September 6, 2012, CBOE responded
to the comment letter.6 This order
approves the proposed rule change.
II. Description of the Proposal
Currently, the maximum term for
equity and interest rate LEAPS is 36
months (three years) and the maximum
term for index LEAPS is 60 months (five
years). CBOE proposes to amend CBOE
Rules 5.8, 23.5(b) and 24.9(b) to increase
the maximum term for all LEAPS to 180
months (fifteen years).7 CBOE notes that
similar fifteen year maximum terms
exist for FLEX Options.8
CBOE states that expanding the
eligible term for all LEAPS to fifteen
years would allow the Exchange to offer
products in an exchange-traded
environment that could compete with
comparable over-the counter (‘‘OTC’’)
products. According to CBOE, it has
received numerous requests from
market participants that currently enter
into OTC positions that have longerdated expirations than are currently
available on CBOE to list LEAPS with
longer dated expirations on the
Exchange. CBOE represents that it has
confirmed that the OCC can configure
its systems to support LEAPS that have
a maximum term of fifteen years.
III. Discussion and Commission
Findings
After careful review, 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
2 17
CFR 240.19b–4.
Securities Exchange Act Release No. 67600
(August 6, 2012), 77 FR 47890 (‘‘Notice’’).
4 See Securities Exchange Act Release No. 67892
(September 19, 2012), 77 FR 59029.
5 See letter to Elizabeth M. Murphy, Secretary,
Commission, from Christopher Nagy, President,
KOR Trading LLC, dated August 17, 2012 (‘‘KOR
Letter’’).
6 See letter to Elizabeth M. Murphy, Secretary,
Commission, from Jenny Klebes-Golding, Senior
Attorney, CBOE, dated September 6, 2012 (‘‘CBOE
Letter’’).
7 CBOE also proposes to make technical, nonsubstantive changes to CBOE Rules 5.8 and 24.9 to
delete ‘‘®’’ symbols.
8 See Securities Exchange Act Release No. 58890
(October 30, 2008), 73 FR 66085 (November 6, 2008)
and CBOE Rules 24A.4(a)(2)(iv) and 24B.4(a)(2)(iv).
srobinson on DSK4SPTVN1PROD with
3 See
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17:08 Nov 09, 2012
Jkt 229001
securities exchange.9 Specifically, the
Commission finds that the proposal is
consistent with Section 6(b)(5) of the
Act,10 which requires, among other
things, that the rules of a national
securities exchange be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
KOR suggests that CBOE’s proposal
lacks data evidencing actual interest in
extended LEAPS terms.11 With regard to
interest in the proposed product, CBOE
responds that its proposal is geared
toward an unmet demand of
institutional investors, and was
prompted by numerous requests from
market participants, such as insurance
companies offering equity-linked
variable annuities, that have typically
turned to OTC dealers to trade options
with longer-dated expirations.12 CBOE
also states that it believes that
additional institutional demand for
longer-dated LEAPS (such as, for
example, S&P 500 Index options) would
come from sell-side firms hedging
longer-dated OTC instruments (such as,
for example, S&P variance).13 Further,
CBOE states that virtually all of the
firms it queried suggested that the ideal
maturity for hedging trading activity
exceeds the 10-year mark and that it
seeks to offer various maturities
(particularly in S&P 500 Index options)
out to fifteen years in order to provide
a more robust and flexible market for
longer-dated options.
KOR also expresses concern that the
proposal does not specify classes to
which the proposal would apply and
that the proposal could unduly burden
the market through its potential impact
on quote traffic and the costs associated
with disseminating and maintaining the
data for longer-termed LEAPS.14 CBOE
states that it does not currently know all
of the specific classes for which there
will be future market demand for
longer-dated LEAPS, and thus it is
unable to identify such classes at this
time.15 CBOE notes, however, that S&P
500 Index options are one of the classes
that it anticipates would underlie
9 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).
10 15 U.S.C. 78f(b)(5).
11 See KOR Letter, supra note 5.
12 See CBOE Letter, supra note 6.
13 Id.
14 See KOR Letter, supra note 5.
15 See CBOE Letter, supra note 6.
PO 00000
Frm 00098
Fmt 4703
Sfmt 4703
longer-dated LEAPS.16 CBOE also states
that it does not expect there to be a
significant increase to quote traffic
because CBOE anticipates listing longerdated LEAPS in response to specific
market demand and does not expect to
significantly populate expirations.17 In
addition, CBOE notes that certain
liquidity providers are not subject to
quoting obligations for LEAPS, which
will assist with quote traffic
mitigation.18
Given CBOE’s representation that
there is demand for options with longerdated expirations from institutional
investors who are currently trading such
options in the OTC market,19 the
Commission believes that the proposal
is reasonably designed to provide such
investors with additional means of
hedging equity portfolios from longterm market risk with an exchangetraded standardized security, thereby
facilitating transactions in options and
contributing to the protection of
investors and the maintenance of fair
and orderly markets. The Commission
notes that fifteen-year expirations are
already permitted for non-standardized
FLEX Options.20 In addition, the
Commission notes the Exchange’s
representation that it does not anticipate
a significant increase in quote traffic.21
Accordingly, for the reasons discussed
above, the Commission believes that the
proposed rule change is consistent with
the Act.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,22 that the
proposed rule change (SR–CBOE–2012–
071) be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–27510 Filed 11–9–12; 8:45 am]
BILLING CODE 8011–01–P
SOCIAL SECURITY ADMINISTRATION
[Docket No. SSA–2012–0058]
Rescission of Social Security
Acquiescence Ruling 05–1(9)
AGENCY:
Social Security Administration.
16 Id.
17 Id.
18 Id.
19 See
Notice; see also CBOE Letter, supra note 6.
supra note 8.
21 See CBOE Letter, supra note 6.
22 15 U.S.C. 78s(b)(2).
23 17 CFR 200.30–3(a)(12).
20 See
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]]>Agencies
[Federal Register Volume 77, Number 219 (Tuesday, November 13, 2012)]
[Notices]
[Pages 67723-67724]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-27510]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68164; File No. SR-CBOE-2012-071]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Granting Approval of Proposed Rule Change To
Increase the Maximum Term for LEAPS to Fifteen Years
November 6, 2012.
I. Introduction
On July 24, 2012, the Chicago Board Options Exchange, Incorporated
(``Exchange'' or ``CBOE'') 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
[[Page 67724]]
thereunder,\2\ a proposed rule change to increase the maximum term for
Long-Term Equity Options Series (``LEAPS'') to fifteen years. The
proposed rule change was published for comment in the Federal Register
on August 10, 2012.\3\ A designation of a longer period for Commission
action was published in the Federal Register on September 25, 2012.\4\
The Commission received one comment on the proposed rule change.\5\ On
September 6, 2012, CBOE responded to the comment letter.\6\ This order
approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 67600 (August 6,
2012), 77 FR 47890 (``Notice'').
\4\ See Securities Exchange Act Release No. 67892 (September 19,
2012), 77 FR 59029.
\5\ See letter to Elizabeth M. Murphy, Secretary, Commission,
from Christopher Nagy, President, KOR Trading LLC, dated August 17,
2012 (``KOR Letter'').
\6\ See letter to Elizabeth M. Murphy, Secretary, Commission,
from Jenny Klebes-Golding, Senior Attorney, CBOE, dated September 6,
2012 (``CBOE Letter'').
---------------------------------------------------------------------------
II. Description of the Proposal
Currently, the maximum term for equity and interest rate LEAPS is
36 months (three years) and the maximum term for index LEAPS is 60
months (five years). CBOE proposes to amend CBOE Rules 5.8, 23.5(b) and
24.9(b) to increase the maximum term for all LEAPS to 180 months
(fifteen years).\7\ CBOE notes that similar fifteen year maximum terms
exist for FLEX Options.\8\
---------------------------------------------------------------------------
\7\ CBOE also proposes to make technical, non-substantive
changes to CBOE Rules 5.8 and 24.9 to delete ``[supreg]'' symbols.
\8\ See Securities Exchange Act Release No. 58890 (October 30,
2008), 73 FR 66085 (November 6, 2008) and CBOE Rules 24A.4(a)(2)(iv)
and 24B.4(a)(2)(iv).
---------------------------------------------------------------------------
CBOE states that expanding the eligible term for all LEAPS to
fifteen years would allow the Exchange to offer products in an
exchange-traded environment that could compete with comparable over-the
counter (``OTC'') products. According to CBOE, it has received numerous
requests from market participants that currently enter into OTC
positions that have longer-dated expirations than are currently
available on CBOE to list LEAPS with longer dated expirations on the
Exchange. CBOE represents that it has confirmed that the OCC can
configure its systems to support LEAPS that have a maximum term of
fifteen years.
III. Discussion and Commission Findings
After careful review, 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.\9\
Specifically, the Commission finds that the proposal is consistent with
Section 6(b)(5) of the Act,\10\ which requires, among other things,
that the rules of a national securities exchange be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest.
---------------------------------------------------------------------------
\9\ 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).
\10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
KOR suggests that CBOE's proposal lacks data evidencing actual
interest in extended LEAPS terms.\11\ With regard to interest in the
proposed product, CBOE responds that its proposal is geared toward an
unmet demand of institutional investors, and was prompted by numerous
requests from market participants, such as insurance companies offering
equity-linked variable annuities, that have typically turned to OTC
dealers to trade options with longer-dated expirations.\12\ CBOE also
states that it believes that additional institutional demand for
longer-dated LEAPS (such as, for example, S&P 500 Index options) would
come from sell-side firms hedging longer-dated OTC instruments (such
as, for example, S&P variance).\13\ Further, CBOE states that virtually
all of the firms it queried suggested that the ideal maturity for
hedging trading activity exceeds the 10-year mark and that it seeks to
offer various maturities (particularly in S&P 500 Index options) out to
fifteen years in order to provide a more robust and flexible market for
longer-dated options.
---------------------------------------------------------------------------
\11\ See KOR Letter, supra note 5.
\12\ See CBOE Letter, supra note 6.
\13\ Id.
---------------------------------------------------------------------------
KOR also expresses concern that the proposal does not specify
classes to which the proposal would apply and that the proposal could
unduly burden the market through its potential impact on quote traffic
and the costs associated with disseminating and maintaining the data
for longer-termed LEAPS.\14\ CBOE states that it does not currently
know all of the specific classes for which there will be future market
demand for longer-dated LEAPS, and thus it is unable to identify such
classes at this time.\15\ CBOE notes, however, that S&P 500 Index
options are one of the classes that it anticipates would underlie
longer-dated LEAPS.\16\ CBOE also states that it does not expect there
to be a significant increase to quote traffic because CBOE anticipates
listing longer-dated LEAPS in response to specific market demand and
does not expect to significantly populate expirations.\17\ In addition,
CBOE notes that certain liquidity providers are not subject to quoting
obligations for LEAPS, which will assist with quote traffic
mitigation.\18\
---------------------------------------------------------------------------
\14\ See KOR Letter, supra note 5.
\15\ See CBOE Letter, supra note 6.
\16\ Id.
\17\ Id.
\18\ Id.
---------------------------------------------------------------------------
Given CBOE's representation that there is demand for options with
longer-dated expirations from institutional investors who are currently
trading such options in the OTC market,\19\ the Commission believes
that the proposal is reasonably designed to provide such investors with
additional means of hedging equity portfolios from long-term market
risk with an exchange-traded standardized security, thereby
facilitating transactions in options and contributing to the protection
of investors and the maintenance of fair and orderly markets. The
Commission notes that fifteen-year expirations are already permitted
for non-standardized FLEX Options.\20\ In addition, the Commission
notes the Exchange's representation that it does not anticipate a
significant increase in quote traffic.\21\ Accordingly, for the reasons
discussed above, the Commission believes that the proposed rule change
is consistent with the Act.
---------------------------------------------------------------------------
\19\ See Notice; see also CBOE Letter, supra note 6.
\20\ See supra note 8.
\21\ See CBOE Letter, supra note 6.
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\22\ that the proposed rule change (SR-CBOE-2012-071) be, and it
hereby is, approved.
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
---------------------------------------------------------------------------
\23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-27510 Filed 11-9-12; 8:45 am]
BILLING CODE 8011-01-P
