Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Complex Orders and Mini-Options, 19059-19062 [2013-07222]
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Federal Register / Vol. 78, No. 60 / Thursday, March 28, 2013 / Notices
guaranty fund, has been revised to
conform to the new termination
provisions in Rule 918. Former Rule
1104, which addresses the use of
guaranty fund contributions, has been
redesignated as Rule 1103. Other
conforming changes have been made in
parts 12 and 15 of the Rules, as well.
ii. Statutory Basis
ICE Clear Europe believes that the
proposed rule changes are consistent
with the requirements of Section 17A 4
of the Act and the regulations
thereunder applicable to it, in
particular, that the rules of a clearing
agency be designed to promote the
prompt and accurate clearance and
settlement of securities transactions
and, to the extent applicable, derivatives
agreements, contracts, and transactions,
as well as to assure the safeguarding of
securities and funds which are in the
custody or control of the clearing agency
or for which it is responsible.5 ICE Clear
Europe has developed the new
resolution and recovery procedures in
response to issues raised by the Bank of
England as overseer of its payment
arrangements, and following extensive
consultation with the Bank of England,
the Financial Services Authority, and
Clearing Members. Specifically, ICE
Clear Europe believes that the proposed
rule changes will enhance its stability
following the default of one or more
Clearing Members, and will reduce the
risk of its failure or insolvency. The
revisions will, in particular, facilitate
the orderly wind-down or termination
of contracts affected by a default, and
will minimize the effect on other
categories of contracts, for which
clearing should be able to continue.
Further, ICE Clear Europe, as a clearing
house for multiple products, also
believes that the changes will reduce the
risk of a systemic problem in one
cleared market causing contagion or
creating risks for other cleared markets.
The amendments also provide clearer
limitations on the liability of Clearing
Members for assessments following
defaults, and a clearer procedure for
termination of Clearing Membership.
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
ICE Clear Europe does not believe the
proposed rule changes would have any
impact, or impose any burden, on
competition.
4 15
U.S.C. 78q–1.
5 15 U.S.C. 78q–1(b)(3)(F).
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
ICE Clear Europe has solicited written
comments relating to the proposed rule
change, but has not received any written
comments to date. ICE Clear Europe will
notify the Commission of any written
comments received by ICE Clear Europe.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding, or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) by order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
changes are 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
Number SR–ICEEU–2013–05 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–ICEEU–2013–05. 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 of submission. 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
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19059
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 Section, 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
filings will also be available for
inspection and copying at ICE Clear
Europe’s principal office and on ICE
Clear Europe’s Web site at https://
www.theice.com/publicdocs/
regulatory_filings/
ICEU_SEC_030613.pdf.
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–ICEEU–2013–05 and
should be submitted on or before April
18, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–07177 Filed 3–27–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69220; File No. SR–CBOE–
2013–040]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating to Complex
Orders and Mini-Options
March 22, 2013.
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 March 22,
2013, Chicago Board Options Exchange,
Incorporated (the ‘‘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 Commission is
publishing this notice to solicit
6 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 78, No. 60 / Thursday, March 28, 2013 / Notices
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
The Exchange proposes to amend its
rules related to complex orders. The text
of the proposed rule change is also
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
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 these
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 aspects of such
statements.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
CBOE recently amended its rules to
allow for the listing of mini-options on
SPDR S&P 500 (‘‘SPY’’), Apple, Inc.
(‘‘AAPL’’), SPDR Gold Trust (‘‘GLD’’),
Google Inc. (‘‘GOOG’’) and Amazon.com
Inc. (‘‘AMZN’’).3 Mini-option trading
commenced on March 18, 2013.
Whereas standard option contracts
represent a deliverable of 100 shares of
an underlying security, mini-options
contracts represent a deliverable of 10
shares. Except for the difference in the
number of deliverable shares, minioptions have the same terms and
contract characteristics as regular-sized
equity and ETF options, including
exercise style. Accordingly, the
Exchange noted in its original minioption filing that Exchange rules that
apply to the trading of standard option
contracts would apply to mini-option
contracts as well.4 The Exchange
proposes to amend Rule 6.53C (Complex
Orders on the Hybrid System) and Rule
6.80 (Definitions) to provide that for the
3 See Securities Exchange Act Release No. 68656
(January 15, 2013), 78 FR 4526 (January 22, 2013)
(Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change to List and Trade Option
Contracts Overlying 10 Shares of Certain Securities)
(SR–CBOE–2013–001).
4 Id.
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purpose of applying the permissible
ratios to complex orders comprised of
both mini-option contracts and standard
option contracts, ten (10) mini option
contracts will represent one (1) standard
option contract.
By way of background, CBOE Rule
6.53C governs Complex Orders on the
Hybrid System and CBOE Rule 6.80 lists
definitions applicable to intermarket
linkage.
Particularly, ‘‘complex order’’ in Rule
6.53C(a)(1) and ‘‘complex trade’’ in Rule
6.80(4)(i) (collectively referred to as
‘‘complex orders’’) 5 is defined as any
order involving the execution of two or
more different options series in the
same underlying security occurring at or
near the same time in a ratio that is
equal to or greater than one-to-three
(.333) and less than or equal to three-toone (3.00).
The Exchange notes that the
abovementioned permissible ratios were
established to ensure that only complex
orders that seek to achieve legitimate
investment strategies are afforded
certain benefits. Particularly, since
compliance with trade-through rules
may impede a market participant’s
ability to achieve the legitimate
investment strategies that complex
orders facilitate, an exception from the
prohibition on trade-throughs is
provided for any transaction that was
effected as a portion of a legitimate
complex order. Requiring a meaningful
relationship between the different legs
of a complex order prevents market
participants from taking advantage of
these orders to circumvent the
otherwise applicable trade-through rules
(e.g., preventing the execution of a
complex order where one leg consists of
100 standard options (i.e., 10,000
shares) and another leg consists of only
1 standard option (i.e., 100 shares).
The Exchange acknowledges that in
accordance with the provisions of Rule
6.53C(a)(1) and Rule 6.80(4)(i), one leg
of a complex order may consist of minioption contract(s) and the other leg of
the order may consist of standard option
contract(s), so long as the underlying
security is the same and the transaction
does not violate the permissible ratios
set forth in the rules (i.e., ratio greater
or equal to one-to-three or less or equal
to three-to-one). The Exchange notes the
definition of a complex order in Rule
6.53C and Rule 6.80 was drafted at a
time in which only option contracts
with a deliverable of 100 shares was
contemplated. Therefore, the rules do
not address how the permissible ratios
5 The definitions of ‘‘complex order’’ in Rule
6.53C(a)(1) and ‘‘complex trade’’ in Rule 6.80(4)(i)
are substantially identical.
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would be scaled in the event an option
with a non-standard deliverable
becomes available for trading.
Accordingly, the Exchange proposes to
amend the definition of ‘‘complex
orders’’ in Rule 6.53C(a)(1) and Rule
6.80(4)(i) to specify that for the purpose
of applying the aforementioned ratios to
complex orders comprised of minioption contracts and standard option
contracts, ten (10) mini option contracts
will represent one (1) standard option
contract. Moreover, the Exchange seeks
to clarify that these permissible ratios
represent the total number of shares of
the underlying stock in the mini-option
leg to the total number of shares of the
underlying stock in the standard option
leg. An example of a permissible
complex order involving mini-options
and standard options would be an order
in which leg one consists of thirty (30)
mini-options (i.e., 300 shares) and leg
two consists of one (1) standard option
(i.e., 100 shares) in the same underlying
security (i.e., a ratio equal to 3.0).
Another example of a permissible
complex order would be an order in
which leg one consists of ten (10) minioptions (i.e., 100 shares) and leg two
consists of one (1) standard option (i.e.,
100 shares) in the same underlying
security (i.e., a ratio equal to one-toone). The proposed clarification will
reduce potential confusion for investors
when trading mini-options. The
proposed change also ensures that the
principle behind the permissible ratios
(i.e., to provide a meaningful
relationship between the legs of
complex orders) is maintained for minioptions.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the Act
and the rules and regulations
thereunder, including the requirements
of Section 6(b) of the Act.6 In particular,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 7 requirements that the rules of
an exchange be designed to promote just
and equitable principles of trade, to
prevent fraudulent and manipulative
acts, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities, 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.
Specifically, the Exchange believes
that investors and market participants
benefit from being permitted to execute
6 15
7 15
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U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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Federal Register / Vol. 78, No. 60 / Thursday, March 28, 2013 / Notices
complex orders in mini-options because
it allows them to take advantage of
legitimate investment strategies. Also,
the Exchange believes the proposed rule
change will avoid investor confusion if
both standard options and mini-options
on the same underlying security are
permitted to trade as complex orders.
The Exchange further believes that
specifying that for the purpose of
applying the permissible ratios to
complex orders comprised of minioption contracts and standard option
contracts, ten (10) mini option contracts
will represent one (1) standard option
contract would lessen investor and
marketplace confusion. Particularly, the
Exchange believes that the absence of
such an amendment could lead to
investor confusion about how complex
orders involving mini-option contracts
trade. Also, maintaining the permissible
ratios that are applicable to standard
options in proportion for mini-options
ensures that the principle behind the
permissible ratios (i.e., to provide a
meaningful relationship between the
legs of complex orders) is maintained
for mini-options, which promotes just
and equitable principles of trade.
Finally, the Exchange believes that
the proposed rule change is designed to
not permit unfair discrimination among
market participants as all market
participants may participate in complex
orders involving mini-options.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
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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.
Specifically, since mini-options are
permitted on multiply-listed classes,
other exchanges that have received
approval to trade mini-options will have
the opportunity to similarly amend their
complex order rules to clarify and
accommodate complex orders in minioption classes. Moreover, because all
Trading Permit Holders may participate
in complex orders involving minioptions, the rule change does not permit
unfair discrimination and does not
impose a burden on Trading Permit
Holders.
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 proposed
rule change.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing 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 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) 8 of the
Act and Rule 19b–4(f)(6) 9 thereunder.
A proposed rule change filed under
Rule 19b–4(f)(6) of the Act 10 normally
does not become operative prior to 30
days after the date of the filing.
However, pursuant to Rule 19b–
4(f)(6)(iii) of the Act,11 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has requested the Commission
to waive the 30-day operative delay so
that the proposal may become operative
immediately upon filing. In January
2013, the Exchange filed a proposed
rule change to amend its rules to list
and trade certain mini-options contracts
on the Exchange, and represented in
that filing that the Exchange’s rules that
apply to the trading of standard options
contracts would apply to mini-options
contracts.12 The Exchange believes that
waiver of the 30-day operative delay is
consistent with the protection of
investors and the public interest
because such waiver would minimize
confusion among market participants
about how complex orders and stockoptions orders involving mini-options
contracts will trade.13
The Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest. Such
waiver would allow the Exchange to
implement the proposed rule change
immediately, thereby mitigating
potential investor confusion as to how
complex orders and stock options orders
involving mini-options contracts will
trade. For this reason, the Commission
hereby waives the 30-day operative
8 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of the filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
10 17 CFR 240.19b–4(f)(6).
11 17 CFR 240.19b–4(f)(6)(iii).
12 See supra note 3.
13 See SR–CBOE–2013–040, Item 7.
9 17
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19061
delay and designates the proposed rule
change to be operative upon filing with
the Commission.14
The Exchange represented that it
began trading in mini-options contracts
on March 18, 2013. The Commission
notes that this proposed rule change
was filed on March 22, 2013, and,
therefore, pursuant to Rule 19b–4(f)(6),
waiver of the 30-day operative delay
renders this proposed rule change
effective upon the day that it was filed,
March 22, 2013.
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. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
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
Number SR–CBOE–2013–040 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–2013–040. 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
14 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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Federal Register / Vol. 78, No. 60 / Thursday, March 28, 2013 / Notices
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 20549–1090, 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 Number SR–CBOE–
2013–040, and should be submitted on
or before April 18, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Kevin M. O’Neill,
Deputy Secretary.
object to be included in the exhibition
‘‘Hans Richter: Encounters,’’ imported
from abroad for temporary exhibition
within the United States, is of cultural
significance. The additional object is
imported pursuant to a loan agreement
with the foreign owner or custodian. I
also determine that the exhibition or
display of the additional exhibit object
at The Los Angeles County Museum of
Art in Los Angeles, California from on
or about May 5, 2013, until on or about
September 2, 2013, and at possible
additional exhibitions or venues yet to
be determined, is in the national
interest. I have ordered that Public
Notice of these Determinations be
published in the Federal Register.
FOR FURTHER INFORMATION CONTACT: For
further information, including a list of
the exhibit objects that includes this
additional object, contact Ona M. Hahs,
Attorney-Adviser, Office of the Legal
Adviser, U.S. Department of State
(telephone: 202–632–6473). The mailing
address is U.S. Department of State, SA–
5, L/PD, Fifth Floor (Suite 5H03),
Washington, DC 20522–0505.
[FR Doc. 2013–07222 Filed 3–27–13; 8:45 am]
Dated: March 21, 2013.
Adam Ereli,
Principal Deputy Assistant Secretary, Bureau
of Educational and Cultural Affairs,
Department of State.
BILLING CODE 8011–01–P
[FR Doc. 2013–07256 Filed 3–27–13; 8:45 am]
BILLING CODE 4710–05–P
DEPARTMENT OF STATE
DEPARTMENT OF STATE
[Public Notice 8261]
[Public Notice 8260]
Culturally Significant Objects Imported
for Exhibition Determinations: ‘‘Hans
Richter: Encounters’’
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ACTION:
Notice, correction.
SUMMARY: On March 12, 2013, notice
was published on page 15802 of the
Federal Register (volume 78, number
48) of determinations made by the
Department of State pertaining to the
exhibit ‘‘Hans Richter: Encounters.’’ The
referenced notice is corrected to
accommodate an additional object to be
included in the exhibition. Pursuant to
the authority vested in me by the Act of
October 19, 1965 (79 Stat. 985; 22 U.S.C.
2459), Executive Order 12047 of March
27, 1978, the Foreign Affairs Reform and
Restructuring Act of 1998 (112 Stat.
2681, et seq.; 22 U.S.C. 6501 note, et
seq.), Delegation of Authority No. 234 of
October 1, 1999, and Delegation of
Authority No. 236–3 of August 28, 2000
(and, as appropriate, Delegation of
Authority No. 257 of April 15, 2003), I
hereby determine that the additional
15 17
CFR 200.30–3(a)(12).
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U.S. Department of State Advisory
Committee on Private International
Law (ACPIL): Public Meeting on
Electronic Commerce
The Office of the Assistant Legal
Adviser for Private International Law,
Department of State, gives notice of a
public meeting to discuss a Note by the
Secretariat of the United Nations
Commission on International Trade Law
(UNCITRAL) containing draft provisions
on electronic transferable records. The
public meeting will take place on
Tuesday, April 30, 2013 from 10 a.m.
until 2 p.m. EDT in Room 1107 of the
Department of State’s Harry S Truman
Building. This is not a meeting of the
full Advisory Committee.
In response to a request from the 46th
Session of UNCITRAL’s Working Group
IV (electronic commerce), the
UNCITRAL Secretariat has prepared
draft provisions on electronic
transferable records, which are
presented for discussion purposes in the
form of a model law. The draft
provisions will be made available as
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Working Paper 122 on the UNCITRAL
Web site, in the list of documents
provided for the 47th Session of
Working Group IV and will be available
via the following link: (https://
www.uncitral.org/uncitral/en/
commission/working_groups/
4Electronic_Commerce.html). This
Working Paper will be discussed May
13–17, 2013, at the 47th Session of
Working Group IV.
The purpose of the public meeting is
to obtain the views of concerned
stakeholders on these topics in advance
of the meeting of Working Group IV.
Prior to the public meeting, we will
send out—to all those who indicate that
they intend to attend the meeting or
participate by telephone, or who
otherwise wish to comment—the
documents prepared for this meeting.
Those who cannot attend but wish to
comment are welcome to do so by email
to Michael Coffee at coffeems@state.gov.
Time and Place: The meeting will
take place in Room 1107 of the
Department’s Harry S Truman Building,
2201 C Street NW., Washington, DC
20520 from 10 a.m. until 2 p.m. EDT.
Participants should plan to arrive by
9:30 a.m. for visitor screening. If you are
unable to attend the public meeting and
would like to participate from a remote
location, teleconferencing will be
available.
Public Participation: This meeting is
open to the public, subject to the
capacity of the meeting room. Please
provide your full name and contact
information if you are planning on
attending in person. Access to the
building is strictly controlled. For preclearance purposes, those planning to
attend should phone Tricia Smeltzer
(202–776–8423) or Niesha Toms (202–
776–8420) and provide your full name,
address, date of birth, citizenship,
driver’s license or passport number, and
email address. This will greatly
facilitate entry into the building.
Participants will be met inside the
diplomatic entrance at C Street and,
once badges are obtained, escorted to
the meeting room. A member of the
public needing reasonable
accommodation should advise Ms.
Smeltzer or Ms. Toms not later than
April 23, 2013. Requests made after that
date will be considered, but might not
be able to be fulfilled. If you would like
to participate by telephone, please
contact Ms. Smeltzer or Ms. Toms to
obtain the call-in number and other
information.
Data from the public is requested
pursuant to Public Law 99–399
(Omnibus Diplomatic Security and
Antiterrorism Act of 1986), as amended;
Public Law 107–56 (USA PATRIOT
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[Federal Register Volume 78, Number 60 (Thursday, March 28, 2013)]
[Notices]
[Pages 19059-19062]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-07222]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69220; File No. SR-CBOE-2013-040]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to Complex Orders and Mini-Options
March 22, 2013.
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 March 22, 2013, Chicago Board Options Exchange, Incorporated
(the ``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 Commission is publishing this notice to solicit
[[Page 19060]]
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 the
Substance of the Proposed Rule Change
The Exchange proposes to amend its rules related to complex orders.
The text of the proposed rule change is also 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 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 these 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 aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
CBOE recently amended its rules to allow for the listing of mini-
options on SPDR S&P 500 (``SPY''), Apple, Inc. (``AAPL''), SPDR Gold
Trust (``GLD''), Google Inc. (``GOOG'') and Amazon.com Inc.
(``AMZN'').\3\ Mini-option trading commenced on March 18, 2013. Whereas
standard option contracts represent a deliverable of 100 shares of an
underlying security, mini-options contracts represent a deliverable of
10 shares. Except for the difference in the number of deliverable
shares, mini-options have the same terms and contract characteristics
as regular-sized equity and ETF options, including exercise style.
Accordingly, the Exchange noted in its original mini-option filing that
Exchange rules that apply to the trading of standard option contracts
would apply to mini-option contracts as well.\4\ The Exchange proposes
to amend Rule 6.53C (Complex Orders on the Hybrid System) and Rule 6.80
(Definitions) to provide that for the purpose of applying the
permissible ratios to complex orders comprised of both mini-option
contracts and standard option contracts, ten (10) mini option contracts
will represent one (1) standard option contract.
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\3\ See Securities Exchange Act Release No. 68656 (January 15,
2013), 78 FR 4526 (January 22, 2013) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change to List and Trade Option
Contracts Overlying 10 Shares of Certain Securities) (SR-CBOE-2013-
001).
\4\ Id.
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By way of background, CBOE Rule 6.53C governs Complex Orders on the
Hybrid System and CBOE Rule 6.80 lists definitions applicable to
intermarket linkage.
Particularly, ``complex order'' in Rule 6.53C(a)(1) and ``complex
trade'' in Rule 6.80(4)(i) (collectively referred to as ``complex
orders'') \5\ is defined as any order involving the execution of two or
more different options series in the same underlying security occurring
at or near the same time in a ratio that is equal to or greater than
one-to-three (.333) and less than or equal to three-to-one (3.00).
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\5\ The definitions of ``complex order'' in Rule 6.53C(a)(1) and
``complex trade'' in Rule 6.80(4)(i) are substantially identical.
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The Exchange notes that the abovementioned permissible ratios were
established to ensure that only complex orders that seek to achieve
legitimate investment strategies are afforded certain benefits.
Particularly, since compliance with trade-through rules may impede a
market participant's ability to achieve the legitimate investment
strategies that complex orders facilitate, an exception from the
prohibition on trade-throughs is provided for any transaction that was
effected as a portion of a legitimate complex order. Requiring a
meaningful relationship between the different legs of a complex order
prevents market participants from taking advantage of these orders to
circumvent the otherwise applicable trade-through rules (e.g.,
preventing the execution of a complex order where one leg consists of
100 standard options (i.e., 10,000 shares) and another leg consists of
only 1 standard option (i.e., 100 shares).
The Exchange acknowledges that in accordance with the provisions of
Rule 6.53C(a)(1) and Rule 6.80(4)(i), one leg of a complex order may
consist of mini-option contract(s) and the other leg of the order may
consist of standard option contract(s), so long as the underlying
security is the same and the transaction does not violate the
permissible ratios set forth in the rules (i.e., ratio greater or equal
to one-to-three or less or equal to three-to-one). The Exchange notes
the definition of a complex order in Rule 6.53C and Rule 6.80 was
drafted at a time in which only option contracts with a deliverable of
100 shares was contemplated. Therefore, the rules do not address how
the permissible ratios would be scaled in the event an option with a
non-standard deliverable becomes available for trading. Accordingly,
the Exchange proposes to amend the definition of ``complex orders'' in
Rule 6.53C(a)(1) and Rule 6.80(4)(i) to specify that for the purpose of
applying the aforementioned ratios to complex orders comprised of mini-
option contracts and standard option contracts, ten (10) mini option
contracts will represent one (1) standard option contract. Moreover,
the Exchange seeks to clarify that these permissible ratios represent
the total number of shares of the underlying stock in the mini-option
leg to the total number of shares of the underlying stock in the
standard option leg. An example of a permissible complex order
involving mini-options and standard options would be an order in which
leg one consists of thirty (30) mini-options (i.e., 300 shares) and leg
two consists of one (1) standard option (i.e., 100 shares) in the same
underlying security (i.e., a ratio equal to 3.0). Another example of a
permissible complex order would be an order in which leg one consists
of ten (10) mini-options (i.e., 100 shares) and leg two consists of one
(1) standard option (i.e., 100 shares) in the same underlying security
(i.e., a ratio equal to one-to-one). The proposed clarification will
reduce potential confusion for investors when trading mini-options. The
proposed change also ensures that the principle behind the permissible
ratios (i.e., to provide a meaningful relationship between the legs of
complex orders) is maintained for mini-options.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder, including the
requirements of Section 6(b) of the Act.\6\ In particular, the Exchange
believes the proposed rule change is consistent with the Section
6(b)(5) \7\ requirements that the rules of an exchange be designed to
promote just and equitable principles of trade, to prevent fraudulent
and manipulative acts, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, 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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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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Specifically, the Exchange believes that investors and market
participants benefit from being permitted to execute
[[Page 19061]]
complex orders in mini-options because it allows them to take advantage
of legitimate investment strategies. Also, the Exchange believes the
proposed rule change will avoid investor confusion if both standard
options and mini-options on the same underlying security are permitted
to trade as complex orders. The Exchange further believes that
specifying that for the purpose of applying the permissible ratios to
complex orders comprised of mini-option contracts and standard option
contracts, ten (10) mini option contracts will represent one (1)
standard option contract would lessen investor and marketplace
confusion. Particularly, the Exchange believes that the absence of such
an amendment could lead to investor confusion about how complex orders
involving mini-option contracts trade. Also, maintaining the
permissible ratios that are applicable to standard options in
proportion for mini-options ensures that the principle behind the
permissible ratios (i.e., to provide a meaningful relationship between
the legs of complex orders) is maintained for mini-options, which
promotes just and equitable principles of trade.
Finally, the Exchange believes that the proposed rule change is
designed to not permit unfair discrimination among market participants
as all market participants may participate in complex orders involving
mini-options.
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. Specifically, since mini-options are permitted on multiply-
listed classes, other exchanges that have received approval to trade
mini-options will have the opportunity to similarly amend their complex
order rules to clarify and accommodate complex orders in mini-option
classes. Moreover, because all Trading Permit Holders may participate
in complex orders involving mini-options, the rule change does not
permit unfair discrimination and does not impose a burden on Trading
Permit Holders.
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
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:
(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, it has
become effective pursuant to Section 19(b)(3)(A) \8\ of the Act and
Rule 19b-4(f)(6) \9\ thereunder.
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of the 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) of the Act \10\
normally does not become operative prior to 30 days after the date of
the filing. However, pursuant to Rule 19b-4(f)(6)(iii) of the Act,\11\
the Commission may designate a shorter time if such action is
consistent with the protection of investors and the public interest.
The Exchange has requested the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. In January 2013, the Exchange filed a proposed rule change to
amend its rules to list and trade certain mini-options contracts on the
Exchange, and represented in that filing that the Exchange's rules that
apply to the trading of standard options contracts would apply to mini-
options contracts.\12\ The Exchange believes that waiver of the 30-day
operative delay is consistent with the protection of investors and the
public interest because such waiver would minimize confusion among
market participants about how complex orders and stock-options orders
involving mini-options contracts will trade.\13\
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\10\ 17 CFR 240.19b-4(f)(6).
\11\ 17 CFR 240.19b-4(f)(6)(iii).
\12\ See supra note 3.
\13\ See SR-CBOE-2013-040, Item 7.
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The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
Such waiver would allow the Exchange to implement the proposed rule
change immediately, thereby mitigating potential investor confusion as
to how complex orders and stock options orders involving mini-options
contracts will trade. For this reason, the Commission hereby waives the
30-day operative delay and designates the proposed rule change to be
operative upon filing with the Commission.\14\
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\14\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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The Exchange represented that it began trading in mini-options
contracts on March 18, 2013. The Commission notes that this proposed
rule change was filed on March 22, 2013, and, therefore, pursuant to
Rule 19b-4(f)(6), waiver of the 30-day operative delay renders this
proposed rule change effective upon the day that it was filed, March
22, 2013.
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. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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-2013-040 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-2013-040. 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
[[Page 19062]]
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 20549-1090, 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 Number SR-CBOE-2013-040, and should be
submitted on or before April 18, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-07222 Filed 3-27-13; 8:45 am]
BILLING CODE 8011-01-P
