Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Options Exercise Procedures, 37822-37825 [2014-15477]
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Federal Register / Vol. 79, No. 127 / Wednesday, July 2, 2014 / Notices
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. In this regard
and as indicated above, the Exchange
notes that the rule change is being
proposed as a competitive response to a
filing submitted by ISE.21 The Exchange
believes that the proposed rule change
is necessary to permit fair competition
among the options exchanges with
respect to STO Programs. The Exchange
believes that the proposed rule change
will result in additional investment
options and opportunities to achieve the
investment objectives of market
participants seeking efficient trading
and hedging vehicles, to the benefit of
investors, market participants, and the
marketplace in general. Specifically, the
Exchange believes that investors will
benefit from the availability of strike
price intervals in standard expiration
contracts that match the intervals
currently permitted for short term
options with a similar time to
expiration.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has 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 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, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 22 and Rule 19b–4(f)(6)
thereunder.23
The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
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21 See
supra note 3.
U.S.C. 78s(b)(3)(A).
23 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
deems this requirement to have been met.
22 15
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filing. The Exchange stated that waiver
of this requirement will permit fair
competition among the options
exchanges with respect to STO
Programs. For this reason, the
Commission believes that the proposed
rule change presents no novel issues
and that waiver of the 30-day operative
delay is consistent with the protection
of investors and the public interest; and
will allow the Exchange to remain
competitive with other exchanges.
Therefore, the Commission designates
the proposed rule change to be operative
upon filing.24
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. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
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–
BOX–2014–18 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BOX–2014–18. 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
24 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).
PO 00000
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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–BOX–
2014–18 and should be submitted on or
before July 23, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–15476 Filed 7–1–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72484; File No. SR–FINRA–
2014–027]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating to Options
Exercise Procedures
June 26, 2014.
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 June 17,
2014, Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
and III below, which Items have been
prepared by FINRA. FINRA has
designated the proposed rule change as
constituting a ‘‘non-controversial’’ rule
change under paragraph (f)(6) of Rule
19b–4 under the Act,3 which renders
the proposal effective upon receipt of
25 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6).
1 15
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Federal Register / Vol. 79, No. 127 / Wednesday, July 2, 2014 / Notices
this filing by the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to amend FINRA
Rule 2360(b)(23) regarding procedures
for expiring standardized equity options
to harmonize its rules with the rules of
The Options Clearing Corporation
(‘‘OCC’’) and the options exchanges
regarding the change to the expiration
date for most standardized option
contracts to the third Friday of the
expiration month instead of the
Saturday following the third Friday.
Below is the text of the proposed rule
change. Proposed new language is in
italics; proposed deletions are in
brackets.
*
*
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2000. DUTIES AND CONFLICTS
*
*
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2300. SPECIAL PRODUCTS
*
*
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2360. Options
(a) No Change.
(b) Requirements
(1) through (22) No Change.
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(23) Tendering Procedures for Exercise
of Options
(A) Exercise of Options Contracts
(i) No Change.
(ii) Special procedures apply to the
exercise of standardized equity options
on the business day of their expiration,
or, in the case of standardized equity
options expiring on a day that is not a
business day, on the last business day
before their expiration (‘‘expiring
options’’). Unless waived by The
Options Clearing Corporation, expiring
standardized equity options are subject
to the Exercise-by-Exception (‘‘Ex-byEx’’) procedure under The Options
Clearing Corporation Rule 805. This
Rule provides that, unless contrary
instructions are given, standardized
equity option contracts that are in-themoney by specified amounts shall be
automatically exercised. In addition to
The Options Clearing Corporation rules,
the following FINRA requirements
apply with respect to expiring
standardized equity options. Option
holders desiring to exercise or not
exercise expiring standardized equity
options must either:
a. through b. No Change.
(iii) Exercise cut-off time. Option
holders have until 5:30 p.m. Eastern
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Time (‘‘ET’’) on the business day of
expiration, or, in the case of a
standardized equity option expiring on
a day that is not a business day, on the
business day immediately prior to the
expiration date to make a final exercise
decision to exercise or not exercise an
expiring option. Members may not
accept exercise instructions for
customer or non-customer accounts
after 5:30 p.m. ET.
(iv) through (vii) No Change.
(viii) In the event a national options
exchange or The Options Clearing
Corporation provides advance notice on
or before 5:30 p.m. ET on the business
day immediately prior to the business
day of expiration, or, in the case of a
standardized equity option expiring on
a day that is not a business day, the
business day immediately prior to the
last business day before the expiration
date, indicating that a modified time for
the close of trading in standardized
equity options on such business day of
expiration, or, in the case of a
standardized option expiring on a day
that is not a business day, such last
business day before expiration will
occur, then the deadline for an option
holder to make a final decision to
exercise or not exercise an expiring
option shall be 1 hour 30 minutes
following the time announced for the
close of trading on that day instead of
the 5:30 p.m. ET deadline found in
subparagraph (iii) above. However,
members have until 7:30 p.m. ET to
deliver a Contrary Exercise Advice or
Advice Cancel to the places specified in
subparagraphs (iv)a. through d. above
for customer accounts and noncustomer accounts where such member
firm employs an electronic submission
procedure with time stamp for the
submission of exercise instructions. For
non-customer accounts, members that
do not employ an electronic procedure
with time stamp for the submission of
exercise instructions are required to
manually deliver a Contrary Exercise
Advice or Advice Cancel within 1 hour
and 30 minutes following the time
announced for the close of trading on
that day instead of the 5:30 p.m. ET
deadline found in subparagraph (iv)
above.
(ix) through (xi) No Change.
(B) through (D) No Change.
(24) No Change.
(c) No Change.
• • • Supplementary Material:
—————
.01 through .03 No Change.
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37823
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
FINRA 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. FINRA 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
Most option contracts (‘‘Standard
Expiration Contracts’’) currently expire
on the Saturday following the third
Friday of the specified expiration month
(‘‘expiration date’’). However, the OCC
is streamlining its options expiration
procedures to change the expiration
date for most option contracts to the
third Friday of the expiration month
instead of the Saturday following the
third Friday.4 The OCC rule change
applies only to Standard Expiration
Contracts expiring after February 1,
2015. After February 1, 2015, virtually
all Standard Expiration Contracts will
expire on Friday.5 In order to start the
transition to Friday night expiration
processing, the OCC began on June 21,
2013, to move the expiration exercise
process to Friday for all Standard
Expiration Contracts even though the
contracts will continue to expire on
Saturday.
The rules of the options exchanges 6
and FINRA Rule 2360(b)(23) 7 set forth
4 See Securities Exchange Act Release No. 69772
(June 17, 2013), 78 FR 37645 (June 21, 2013) (Order
Approving File No. SR–OCC–2013–04).
5 The only Standard Expiration Contracts that
will expire on a Saturday after February 1, 2015
will be certain options that were listed prior to the
effectiveness of the OCC rule change, and a limited
number of options that may be listed prior to
necessary systems’ changes of the options
exchanges. The exchanges agreed that once these
systems’ changes are made they will not open for
trading any new series of options contracts with
Saturday expiration dates falling after February 1,
2015.
6 See ISE Rule 1100; BOX Rule 9000; PHLX Rule
1042; NYSE Arca Options Rule 6.24; NYSE MKT
Rule 980; CBOE Rule 11.1; BX Chapter VIII Section
1; NASDAQ Chapter VIII Section 1; BATS Rule
23.1; and MIAX Rule 700 (each an ‘‘options
exchange’’).
7 The provisions of FINRA Rule 2360(b)(23) apply
only to members that are not also members of the
exchange on which the standardized option is
traded (so called ‘‘access’’ members) in order to
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Federal Register / Vol. 79, No. 127 / Wednesday, July 2, 2014 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
special procedures that apply to the
exercise of expiring options.8 The
options exchanges have amended their
rules to remain consistent with the OCC
amendments.9 Accordingly, FINRA
proposes to similarly amend Rule
2360(b)(23) to address the OCC
amendments.
Specifically, FINRA proposes to
amend Rule 2360(b)(23)(A)(ii) to
provide that special procedures apply to
the exercise of standardized equity
options on the business day of their
expiration (i.e. for Friday expirations),
or, in the case of standardized equity
options expiring on a day that is not a
business day, on the last business day
before their expiration (as is currently
the case for Saturday expirations).
FINRA also proposes to amend Rule
2360(b)(23)(A)(iii) regarding the exercise
cut-off time. Option holders have until
5:30 p.m. Eastern Time (‘‘ET’’) 10 on the
business day of expiration (i.e., for
Friday expiration), or, in the case of a
subject such firms and customers of such firms to
the same requirements for options exercise
procedures as customers that are members of an
options exchange.
8 The procedures provide that an option holder
with an expiring standardized equity option may:
(1) take no action and allow automatic exercise
determinations to be made in accordance with the
OCC exercise by exception (‘‘Ex-by-Ex’’) procedures
(whereby an option will be automatically exercised
if the option contract is in the money by a requisite
amount) or (2) submit a Contrary Exercise Advice
(‘‘CEA’’) (or Expiring Exercise Declaration (‘‘EED’’)
as referenced in the OCC rules) to communicate an
option holder’s intent not to exercise an option that
would be automatically exercised under the OCC’s
Ex-by-Ex procedures or to exercise an option that
would not be automatically exercised under the
OCC’s Ex-by-Ex procedures.
9 See the options exchanges’ filings to conform to
the OCC amendments in Securities Exchange Act
Release No. 70372 (September 11, 2013), 78 FR
57186 (September 17, 2013) (Notice of Filing and
Immediate Effectiveness of File No. SR–
NYSEARCA–2013–88); Securities Exchange Act
Release No. 70373 (September 11, 2013), 78 FR
57198 (September 17, 2013) (Notice of Filing and
Immediate Effectiveness of File No. SR–NYSEMKT–
2013–73); Securities Exchange Act Release No.
70745 (October 23, 2013), 78 FR 64559 (October 29,
2013) (Notice of Filing and Immediate Effectiveness
of File No. SR–PHLX–2013–104); Securities
Exchange Act Release No. 70747 (October 23, 2013),
78 FR 64556 (October 29, 2013) (Notice of Filing
and Immediate Effectiveness of File No. SR–
NASDAQ–2013–133); Securities Exchange Act
Release No. 70746 (October 23, 2013), 78 FR 64563
(October 29, 2013) (Notice of Filing and Immediate
Effectiveness of File No. SR–BX–2013–055);
Securities Exchange Act Release No. 69996 (July 17,
2013), 78 FR 44183 (July 23, 2013) (Notice of Filing
and Immediate Effectiveness of File No. SR–MIAX–
2013–32); Securities Exchange Act Release No.
70488 (September 24, 2013), 78 FR 59998
(September 30, 2013) (Notice of Filing and
Immediate Effectiveness of File No. SR–BOX–2013–
45) and Securities Exchange Act Release No. 70900
(November 19, 2013), 78 FR 70382 (November 25,
2013) (Notice of Filing and Immediate Effectiveness
of File No. SR–ISE–2013–58).
10 The time of day for the exercise cut-off (i.e.,
5:30 p.m. ET) is unchanged from the current
requirements.
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standardized equity option expiring on
a day that is not a business day, on the
business day immediately prior to the
expiration date (as is currently the case
for Saturday expirations) to make a final
exercise decision to exercise or not
exercise an expiring option.
Finally, FINRA proposes to amend
Rule 2360(b)(23)(A)(viii) to specify in
the event a national options exchange or
the OCC provides advance notice on or
before 5:30 p.m. ET on the business day
immediately prior to the business day of
expiration (i.e., Thursday for Friday
expirations), or in the case of a
standardized equity option expiring on
a day that is not a business day, the
business day immediately prior to the
last business day before the expiration
date (i.e., Thursday for Saturday
expirations as is the case today),
indicating that a modified time for the
close of trading in standardized equity
options on such business day of
expiration (i.e., Friday for Friday
expirations), or in the case of an
standardized option expiring on a day
that is not a business day, such last
business day before expiration will
occur (i.e., Friday for Saturday
expirations), then the deadline for an
option holder to make a final decision
to exercise or not exercise an expiring
option shall be 1 hour 30 minutes
following the time announced for the
close of trading on that day. FINRA
believes that keeping its rules consistent
with those of the industry will protect
all market participants in the market by
eliminating confusion.
FINRA has filed the proposed rule
change for immediate effectiveness. The
implementation date will be 30 days
after the date of filing, June 17, 2014.
2. Statutory Basis
FINRA believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Act,11 which
requires, among other things, that
FINRA rules must be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, and, in
general, to protect investors and the
public interest. FINRA believes that the
proposed rule change will promote
consistent regulation by harmonizing
FINRA’s rules with those of the options
exchanges as such rules have been
amended to comply with recent
amendments by OCC. FINRA believes
that keeping its rules consistent with
those of the industry will protect all
participants in the market by
eliminating confusion.
PO 00000
11 15
U.S.C. 78o–3(b)(6).
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
FINRA does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. FINRA
believes that the proposed rule change
will promote consistent regulation by
harmonizing FINRA’s rules with those
of the options exchanges and OCC and
will apply equally to all members with
expiring standardized equity options.
FINRA does not believe that the
proposed rule change will impose a
burden on competition because it will
be applied to all members equally. In
addition, FINRA does not believe the
proposed rule change will impose a
burden on competition because it will
be applied industry-wide, apply to all
market participants and is designed to
allow the OCC to streamline the
expiration process.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
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) of the Act 12 and Rule 19b–
4(f)(6) thereunder.13
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. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
12 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, 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. FINRA has
satisfied this requirement.
13 17
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Federal Register / Vol. 79, No. 127 / Wednesday, July 2, 2014 / Notices
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:
[FR Doc. 2014–15477 Filed 7–1–14; 8:45 am]
BILLING CODE 8011–01–P
• 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–
FINRA–2014–027 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–FINRA–2014–027. 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 FINRA. 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–FINRA–
2014–027 and should be submitted on
or before July 23, 2014.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[Release No. 34–72482; File No. SR–CBOE–
2014–051]
1. Purpose
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating to Strike
Settings for Mini-S&P 500 Index
Options
June 26, 2014.
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 June 25,
2014, 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 selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Interpretation and Policy .11 to Rule
24.9 (Terms of Index Options Contracts)
by modifying the strike setting regime
for Mini-S&P 500 Index (‘‘XSP’’)
options.
The text of the proposed rule change
is available on the Exchange’s Web site
(https://www.cboe.com/AboutCBOE/
CBOELegalRegulatoryHome.aspx), 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
14 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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17:49 Jul 01, 2014
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.
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
mstockstill on DSK4VPTVN1PROD with NOTICES
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Kevin M. O’Neill,
Deputy Secretary.
37825
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The Exchange proposes to amend
Interpretation and Policy .11 to Rule
24.9 (‘‘Interpretation and Policy .11’’) by
modifying the strike setting regime for
Mini-S&P 500 Index (‘‘XSP’’) options.
Specifically, the Exchange is proposing
to more closely align: (1) The permitted
strike prices in XSP options with scaled
corresponding strikes in full value S&P
500 Index (‘‘SPX’’) options; and (2) the
exercise price range limitations for XSP
options with the exercise price range
limitations for equity and exchange
traded fund (‘‘ETF’’) options. Through
this filing, the Exchange hopes to make
XSP options easier for investors to use
and more tailored to their investment
needs.
Over two decades ago, CBOE
introduced XSP options in order to
allow smaller-scale investors to gain
broad exposure to the SPX options
market and hedge S&P 500 Index cash
positions.3 XSP options are reduced
value options that are equal to 1/10th of
the value of the S&P 500 Index and have
a multiplier of $100. For example, if the
S&P 500 Index is at 1932.56, the XSP
Index would have a value of 193.26 and
the notional value of an XSP option
would be $19,326. As the Commission
noted in the XSP option Approval
Order,
reduced-value SPX options may benefit
investors by providing them with a relatively
low-cost means to hedge their portfolios. The
Commission also believes that the lower cost
of the reduced-value SPX options should
allow investors to hedge their portfolios with
a smaller outlay of capital and may facilitate
participation in the market for SPX options,
which should, in turn, help to maintain the
depth and liquidity of the market for SPX
options, thereby protecting investors and the
public interest.4
As the Commission anticipated, XSP
options provide retail investors with the
benefit of trading the broad market in a
manageably sized contract.
3 See Securities Exchange Act Release No. 32893
(September 14, 1993), 58 FR 49070 (September 21,
1993) (Order approving listing of reduced-value
options on the Standard & Poor’s 500 Stock Index)
(SR–CBOE–93–12).
4 58 FR at 49071.
E:\FR\FM\02JYN1.SGM
02JYN1
]]>Agencies
[Federal Register Volume 79, Number 127 (Wednesday, July 2, 2014)]
[Notices]
[Pages 37822-37825]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-15477]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72484; File No. SR-FINRA-2014-027]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to Options Exercise Procedures
June 26, 2014.
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 June 17, 2014, Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by FINRA. FINRA has
designated the proposed rule change as constituting a ``non-
controversial'' rule change under paragraph (f)(6) of Rule 19b-4 under
the Act,\3\ which renders the proposal effective upon receipt of
[[Page 37823]]
this filing by the Commission. 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\ 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
FINRA is proposing to amend FINRA Rule 2360(b)(23) regarding
procedures for expiring standardized equity options to harmonize its
rules with the rules of The Options Clearing Corporation (``OCC'') and
the options exchanges regarding the change to the expiration date for
most standardized option contracts to the third Friday of the
expiration month instead of the Saturday following the third Friday.
Below is the text of the proposed rule change. Proposed new
language is in italics; proposed deletions are in brackets.
* * * * *
2000. DUTIES AND CONFLICTS
* * * * *
2300. SPECIAL PRODUCTS
* * * * *
2360. Options
(a) No Change.
(b) Requirements
(1) through (22) No Change.
(23) Tendering Procedures for Exercise of Options
(A) Exercise of Options Contracts
(i) No Change.
(ii) Special procedures apply to the exercise of standardized
equity options on the business day of their expiration, or, in the case
of standardized equity options expiring on a day that is not a business
day, on the last business day before their expiration (``expiring
options''). Unless waived by The Options Clearing Corporation, expiring
standardized equity options are subject to the Exercise-by-Exception
(``Ex-by-Ex'') procedure under The Options Clearing Corporation Rule
805. This Rule provides that, unless contrary instructions are given,
standardized equity option contracts that are in-the-money by specified
amounts shall be automatically exercised. In addition to The Options
Clearing Corporation rules, the following FINRA requirements apply with
respect to expiring standardized equity options. Option holders
desiring to exercise or not exercise expiring standardized equity
options must either:
a. through b. No Change.
(iii) Exercise cut-off time. Option holders have until 5:30 p.m.
Eastern Time (``ET'') on the business day of expiration, or, in the
case of a standardized equity option expiring on a day that is not a
business day, on the business day immediately prior to the expiration
date to make a final exercise decision to exercise or not exercise an
expiring option. Members may not accept exercise instructions for
customer or non-customer accounts after 5:30 p.m. ET.
(iv) through (vii) No Change.
(viii) In the event a national options exchange or The Options
Clearing Corporation provides advance notice on or before 5:30 p.m. ET
on the business day immediately prior to the business day of
expiration, or, in the case of a standardized equity option expiring on
a day that is not a business day, the business day immediately prior to
the last business day before the expiration date, indicating that a
modified time for the close of trading in standardized equity options
on such business day of expiration, or, in the case of a standardized
option expiring on a day that is not a business day, such last business
day before expiration will occur, then the deadline for an option
holder to make a final decision to exercise or not exercise an expiring
option shall be 1 hour 30 minutes following the time announced for the
close of trading on that day instead of the 5:30 p.m. ET deadline found
in subparagraph (iii) above. However, members have until 7:30 p.m. ET
to deliver a Contrary Exercise Advice or Advice Cancel to the places
specified in subparagraphs (iv)a. through d. above for customer
accounts and non-customer accounts where such member firm employs an
electronic submission procedure with time stamp for the submission of
exercise instructions. For non-customer accounts, members that do not
employ an electronic procedure with time stamp for the submission of
exercise instructions are required to manually deliver a Contrary
Exercise Advice or Advice Cancel within 1 hour and 30 minutes following
the time announced for the close of trading on that day instead of the
5:30 p.m. ET deadline found in subparagraph (iv) above.
(ix) through (xi) No Change.
(B) through (D) No Change.
(24) No Change.
(c) No Change.
Supplementary Material: ----------
.01 through .03 No Change.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FINRA 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. FINRA 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
Most option contracts (``Standard Expiration Contracts'') currently
expire on the Saturday following the third Friday of the specified
expiration month (``expiration date''). However, the OCC is
streamlining its options expiration procedures to change the expiration
date for most option contracts to the third Friday of the expiration
month instead of the Saturday following the third Friday.\4\ The OCC
rule change applies only to Standard Expiration Contracts expiring
after February 1, 2015. After February 1, 2015, virtually all Standard
Expiration Contracts will expire on Friday.\5\ In order to start the
transition to Friday night expiration processing, the OCC began on June
21, 2013, to move the expiration exercise process to Friday for all
Standard Expiration Contracts even though the contracts will continue
to expire on Saturday.
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\4\ See Securities Exchange Act Release No. 69772 (June 17,
2013), 78 FR 37645 (June 21, 2013) (Order Approving File No. SR-OCC-
2013-04).
\5\ The only Standard Expiration Contracts that will expire on a
Saturday after February 1, 2015 will be certain options that were
listed prior to the effectiveness of the OCC rule change, and a
limited number of options that may be listed prior to necessary
systems' changes of the options exchanges. The exchanges agreed that
once these systems' changes are made they will not open for trading
any new series of options contracts with Saturday expiration dates
falling after February 1, 2015.
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The rules of the options exchanges \6\ and FINRA Rule 2360(b)(23)
\7\ set forth
[[Page 37824]]
special procedures that apply to the exercise of expiring options.\8\
The options exchanges have amended their rules to remain consistent
with the OCC amendments.\9\ Accordingly, FINRA proposes to similarly
amend Rule 2360(b)(23) to address the OCC amendments.
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\6\ See ISE Rule 1100; BOX Rule 9000; PHLX Rule 1042; NYSE Arca
Options Rule 6.24; NYSE MKT Rule 980; CBOE Rule 11.1; BX Chapter
VIII Section 1; NASDAQ Chapter VIII Section 1; BATS Rule 23.1; and
MIAX Rule 700 (each an ``options exchange'').
\7\ The provisions of FINRA Rule 2360(b)(23) apply only to
members that are not also members of the exchange on which the
standardized option is traded (so called ``access'' members) in
order to subject such firms and customers of such firms to the same
requirements for options exercise procedures as customers that are
members of an options exchange.
\8\ The procedures provide that an option holder with an
expiring standardized equity option may: (1) take no action and
allow automatic exercise determinations to be made in accordance
with the OCC exercise by exception (``Ex-by-Ex'') procedures
(whereby an option will be automatically exercised if the option
contract is in the money by a requisite amount) or (2) submit a
Contrary Exercise Advice (``CEA'') (or Expiring Exercise Declaration
(``EED'') as referenced in the OCC rules) to communicate an option
holder's intent not to exercise an option that would be
automatically exercised under the OCC's Ex-by-Ex procedures or to
exercise an option that would not be automatically exercised under
the OCC's Ex-by-Ex procedures.
\9\ See the options exchanges' filings to conform to the OCC
amendments in Securities Exchange Act Release No. 70372 (September
11, 2013), 78 FR 57186 (September 17, 2013) (Notice of Filing and
Immediate Effectiveness of File No. SR-NYSEARCA-2013-88); Securities
Exchange Act Release No. 70373 (September 11, 2013), 78 FR 57198
(September 17, 2013) (Notice of Filing and Immediate Effectiveness
of File No. SR-NYSEMKT-2013-73); Securities Exchange Act Release No.
70745 (October 23, 2013), 78 FR 64559 (October 29, 2013) (Notice of
Filing and Immediate Effectiveness of File No. SR-PHLX-2013-104);
Securities Exchange Act Release No. 70747 (October 23, 2013), 78 FR
64556 (October 29, 2013) (Notice of Filing and Immediate
Effectiveness of File No. SR-NASDAQ-2013-133); Securities Exchange
Act Release No. 70746 (October 23, 2013), 78 FR 64563 (October 29,
2013) (Notice of Filing and Immediate Effectiveness of File No. SR-
BX-2013-055); Securities Exchange Act Release No. 69996 (July 17,
2013), 78 FR 44183 (July 23, 2013) (Notice of Filing and Immediate
Effectiveness of File No. SR-MIAX-2013-32); Securities Exchange Act
Release No. 70488 (September 24, 2013), 78 FR 59998 (September 30,
2013) (Notice of Filing and Immediate Effectiveness of File No. SR-
BOX-2013-45) and Securities Exchange Act Release No. 70900 (November
19, 2013), 78 FR 70382 (November 25, 2013) (Notice of Filing and
Immediate Effectiveness of File No. SR-ISE-2013-58).
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Specifically, FINRA proposes to amend Rule 2360(b)(23)(A)(ii) to
provide that special procedures apply to the exercise of standardized
equity options on the business day of their expiration (i.e. for Friday
expirations), or, in the case of standardized equity options expiring
on a day that is not a business day, on the last business day before
their expiration (as is currently the case for Saturday expirations).
FINRA also proposes to amend Rule 2360(b)(23)(A)(iii) regarding the
exercise cut-off time. Option holders have until 5:30 p.m. Eastern Time
(``ET'') \10\ on the business day of expiration (i.e., for Friday
expiration), or, in the case of a standardized equity option expiring
on a day that is not a business day, on the business day immediately
prior to the expiration date (as is currently the case for Saturday
expirations) to make a final exercise decision to exercise or not
exercise an expiring option.
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\10\ The time of day for the exercise cut-off (i.e., 5:30 p.m.
ET) is unchanged from the current requirements.
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Finally, FINRA proposes to amend Rule 2360(b)(23)(A)(viii) to
specify in the event a national options exchange or the OCC provides
advance notice on or before 5:30 p.m. ET on the business day
immediately prior to the business day of expiration (i.e., Thursday for
Friday expirations), or in the case of a standardized equity option
expiring on a day that is not a business day, the business day
immediately prior to the last business day before the expiration date
(i.e., Thursday for Saturday expirations as is the case today),
indicating that a modified time for the close of trading in
standardized equity options on such business day of expiration (i.e.,
Friday for Friday expirations), or in the case of an standardized
option expiring on a day that is not a business day, such last business
day before expiration will occur (i.e., Friday for Saturday
expirations), then the deadline for an option holder to make a final
decision to exercise or not exercise an expiring option shall be 1 hour
30 minutes following the time announced for the close of trading on
that day. FINRA believes that keeping its rules consistent with those
of the industry will protect all market participants in the market by
eliminating confusion.
FINRA has filed the proposed rule change for immediate
effectiveness. The implementation date will be 30 days after the date
of filing, June 17, 2014.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\11\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. FINRA believes that the proposed rule change will
promote consistent regulation by harmonizing FINRA's rules with those
of the options exchanges as such rules have been amended to comply with
recent amendments by OCC. FINRA believes that keeping its rules
consistent with those of the industry will protect all participants in
the market by eliminating confusion.
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\11\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. FINRA believes that the
proposed rule change will promote consistent regulation by harmonizing
FINRA's rules with those of the options exchanges and OCC and will
apply equally to all members with expiring standardized equity options.
FINRA does not believe that the proposed rule change will impose a
burden on competition because it will be applied to all members
equally. In addition, FINRA does not believe the proposed rule change
will impose a burden on competition because it will be applied
industry-wide, apply to all market participants and is designed to
allow the OCC to streamline the expiration process.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
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) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 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, 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.
FINRA has satisfied this requirement.
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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. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
[[Page 37825]]
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-FINRA-2014-027 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2014-027. 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 FINRA. 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-FINRA-2014-027 and should be
submitted on or before July 23, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-15477 Filed 7-1-14; 8:45 am]
BILLING CODE 8011-01-P
