Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Weekly Options Program, 69908-69910 [2012-28262]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 77, Number 225 (Wednesday, November 21, 2012)]
[Notices]
[Pages 69908-69910]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-28262]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68242; File No. SR-CBOE-2012-110]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend the Weekly Options Program

November 15, 2012.
    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 November 9, 2012, the Chicago Board Options Exchange, 
Incorporated (the ``Exchange'' or ``CBOE'') filed with the Securities 
and Exchange Commission (``Commission'') the proposed rule change as 
described in Items I and II below, which Items have been prepared by 
the Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CBOE proposes to amend CBOE Rules 5.5(d) and 24.9(a)(2)(A) to 
expand the number of expirations available under the Short Term Option 
Series Program (``Weeklys Program'' or ``Weekly option''), to allow for 
the Exchange to delist any Weekly option series that do not have open 
interest and to expand the number of series per class permitted in 
Weekly options under limited circumstances. The text of the proposed 
rule change is available on the Exchange's Web site (https://www.cboe.org/legal), at the Exchange's Office of the Secretary, and at 
the Commission'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 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
    This is a competitive filing that is based on a recently approved 
filings submitted by NYSE Arca, Inc. (``NYSE Arca'') and NYSE MKT, LLC 
(``NYSE MKT'').\3\
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    \3\ See Securities Exchange Act Release Nos. 68190 (November 8, 
2012) (order approving SR-NYSEArca-2012-95) (``NYSE Arca filing'') 
and 68191 (November 8, 2012) (order approving SR-NYSEMKT-2012-42) 
(``NYSE MKT filing'').
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    The purpose of this proposal is to amend CBOE Rules 5.5(d) and 
24.9(a)(2)(A) to provide for the ability to open up to five consecutive 
expirations under the Short Term Option Series Program (``Weeklys 
Program'' or ``Weekly options'') for trading on the Exchange, to allow 
for the Exchange to delist any Weekly option series that does not have 
open interest and to expand the number of series per class permitted in 
Weekly options under limited circumstances when there are no series at 
least 10% but not more than 30% away from the current price/value of 
the underlying security/index.\4\
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    \4\ On July 12, 2005, the Commission approved the Weeklys 
Program on a pilot basis. See Securities Exchange Act Release No. 
52011 (July 12, 2005), 70 FR 41451 (July 19, 2005) (SR-CBOE-2004-
63). The Weeklys Program was made permanent on April 27, 2009. See 
Securities Exchange Act Release No. 59824 (April 27, 2009), 74 FR 
20518 (May 4, 2009) (SR-CBOE-2009-018).
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    Currently, the Exchange may select up to thirty (30) currently 
listed option classes on which options may be opened in the Weeklys 
Program and the Exchange may also match any option classes that are 
selected by other securities exchanges that employ a similar program 
under their respective rules.\5\ For each option class eligible for 
participation in the Weeklys Program, the Exchange may open up to 
thirty (30) Weekly option series for each expiration date in that 
class.
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    \5\ See CBOE Rules 5.5(d)(1) and 24.9(a)(2)(A)(i).
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    This proposal seeks to allow the Exchange to open Weekly option 
series for up to five (5) consecutive week expirations. The Exchange 
intends to add a maximum of five (5) consecutive week expirations under 
the Weeklys Program; however, it will not add a Weekly option 
expiration in the same week that a monthly option series expires or, in 
the case of Quarterly Option Series (``QOS'') or Quarterly Index 
Expirations (``QIXs''), on an expiration that coincides with an 
expiration of QOS or QIXs on the same class. In other words, the total 
number of consecutive expirations will be five

[[Page 69909]]

(5), including any existing monthly or quarterly expirations.\6\ This 
change is being proposed notwithstanding the current cap of 30 series 
per class under the Weeklys Program.
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    \6\ For example, if quarterly options expire week 1 and monthly 
options expire week 3 from now, the proposal would allow the 
following expirations: week 1 quarterly option, week 2 Weekly 
option, week 3 monthly option, week 4 Weekly option, and week 5 
Weekly option. If quarterly options expire week 3 and monthly 
options expire week 5, the following expirations would be allowed: 
week 1 Weekly option, week 2 Weekly option, week 3 quarterly option, 
week 4 Weekly option, and week 5 monthly option.
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    The Exchange notes that the Weeklys Program has been well-received 
by market participants, in particular by retail investors. The Exchange 
believes that the current proposed revision to the Weeklys Program will 
permit the Exchange to meet increased customer demand and provide 
market participants with the ability to hedge in a greater number of 
option classes and series.
    With regard to the impact of this proposal on system capacity, the 
Exchange has analyzed its capacity and represents that it and the 
Options Price Reporting Authority have the necessary systems capacity 
to handle the potential additional traffic associated with trading of 
an expanded number of expirations that participate in the Weeklys 
Program.
    In addition, to provide for circumstances where the underlying 
security or index has moved such that there are no series that are at 
least 10% above or below the current price or value of the underlying 
security or index, the Exchange is proposing to add new subparagraphs 
(6) and (vi) to CBOE Rules 5.5(d) and 24.9(a)(2)(A), respectively, to 
provide that the Exchange would delist series with no open interest in 
both the call and the put series having a: (i) strike higher than the 
highest price with open interest in the put and/or call series for a 
given expiration week; and (ii) strike lower than the lowest strike 
price with open interest in the put and/or the call series for a given 
expiration week, so as to list series that are at least 10% but not 
more than 30% above or below the current price or value of the 
underlying security or index. Further, in the event that all existing 
series have open interest and there are no series at least 10% above or 
below the current price or value of the underlying security or index, 
the Exchange may list additional series, in excess of the 30 series per 
class allowed currently under CBOE Rules 5.5(d)(1) and 
24.9(a)(2)(A)(i), that are at least 10% and not more than 30% above or 
below the current price or value of the underlying security or index.
    The Exchange believes that it is important to allow investors to 
roll existing option positions and to ensure that there are always 
series at least 10% but not more than 30% above or below the current 
price or value of the underlying security or index will allow investors 
the flexibility they need to roll existing positions.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\7\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \8\ 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.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that expanding the Weeklys Program will 
result in a continuing benefit to investors by giving them more 
flexibility to closely tailor their investment decisions and hedging 
decisions in a greater number of securities. The Exchange also believes 
that expanding the Weeklys Program will provide the investing public 
and other market participants with additional opportunities to hedge 
their investment thus allowing these investors to better manage their 
risk exposure. While the expansion of the Weeklys Program will generate 
additional quote traffic, the Exchange does not believe that this 
increased traffic will become unmanageable since the proposal remains 
limited to a fixed number of expirations. The Exchange believes that 
the ability to delist series with no open interest in both the call and 
the put series will benefit investors by devoting the current cap in 
the number of series to those series that are more closely tailored to 
the investment decisions and hedging decisions of investors.

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

    This proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. In this regard and as indicated above, the Exchange notes that 
proposal is a competitive filing. CBOE believes this proposed rule 
change is necessary to permit fair competition among the options 
exchanges.

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 change does not significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not become operative for 30 days from the date on which it was filed, 
or such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). 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 
Commission has waived this requirement in this case.
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    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission believes that waiver of the operative 
delay is consistent with the protection of investors and the public 
interest because the proposal is substantially similar to those of 
other exchanges that have been approved by the Commission and permit 
such exchanges to open up to five consecutive expirations under their 
respective Short Term Option Series Programs as well as allow for the 
exchanges to delist any Weekly option series that do not have open 
interest and expand the number of series per class permitted in Weekly 
options under limited circumstances.\11\ Therefore, the Commission 
designates the proposal operative upon filing.\12\
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    \11\ See supra note 3.
    \12\ For purposes only of waiving the 30-day 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.

[[Page 69910]]

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 Number SR-CBOE-2012-110 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2012-110. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CBOE-2012-110 and should be 
submitted on or before December 12, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-28262 Filed 11-20-12; 8:45 am]
BILLING CODE 8011-01-P