Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating To Amending Rules Governing the Short Term Option Series Program, 39447-39450 [2014-16098]
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Federal Register / Vol. 79, No. 132 / Thursday, July 10, 2014 / Notices
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Global Market to the Global Select
Market.
2. Statutory Basis
NASDAQ believes that the proposed
rule change is consistent with the
provisions of Section 6 of the Act,7 in
general and with Section 6(b)(5) of the
Act,8 in particular in that it is designed
to prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, and facilitating transactions
in securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest. The
proposed rule change is designed to
eliminate the annual review of
companies for transfer from the Global
Market to the Global Select Market,
which NASDAQ believes is an
unnecessary process. This would
remove an unnecessary burden on
NASDAQ staff. However, given the ease
of the automated application process, it
would continue to be simple for
qualified companies to request review at
any time, and without cost. Qualified
companies that apply could transfer
immediately upon confirmation by
NASDAQ staff that the company meets
the listing requirements. NASDAQ
recognizes that companies will have to
monitor whether they qualify for
transfer, rather than rely upon
NASDAQ’s automatic review. However,
on balance, NASDAQ does not believe
that this burden is significant enough to
warrant continuing the automatic
transfer process.
mstockstill on DSK4VPTVN1PROD with NOTICES
B. Self-Regulatory Organization’s
Statement on Burden on Competition
NASDAQ 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, as amended.
The proposed rule change would simply
require an eligible company to initiate
the transfer from the Global Market to
the Global Select Market, which will
result in no additional burden on
competition between NASDAQ and
other exchanges.
7 15
U.S.C. 78f.
8 15 U.S.C. 78f(b)(5).
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Written comments were neither
solicited nor received.
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 (i)
as the Commission may designate up to
90 days of such date 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
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
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–
NASDAQ–2014–067 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–NASDAQ–2014–067. 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
Frm 00084
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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–
NASDAQ–2014–067 and should be
submitted on or before July 31, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014–16097 Filed 7–9–14; 8:45 am]
BILLING CODE 8011–01–P
IV. Solicitation of Comments
PO 00000
39447
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72539; File No. SR–CBOE–
2014–052]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating To Amending
Rules Governing the Short Term
Option Series Program
July 3, 2014.
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 July 2,
2014, 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
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
The Exchange proposes to amend its
rules governing the Short Term Option
Series Program to introduce finer strike
price intervals for standard expiration
9 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. 79, No. 132 / Thursday, July 10, 2014 / Notices
contracts in option classes that also
have short term options listed on them
(‘‘related non-short term 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
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
The Exchange is proposing to amend
its rules governing the Short Term
Option Series (‘‘Weeklys’’) Program to
introduce finer strike price intervals for
standard expiration contracts in related
non-short term options. In particular,
the Exchange is proposing to amend its
rules to permit the listing of related nonshort term options during the month
prior to expiration in the same strike
price intervals as allowed for short term
option series.
Under CBOE’s current rules, the
Exchange may list Weeklys in up to fifty
option classes,3 including equity and
index option classes,4 in addition to
option classes that are selected by other
securities exchanges that employ a
similar program under their respective
rules. For each of these option classes,
the Exchange may list five short term
option expiration dates at any given
time, not counting monthly or quarterly
expirations.5 Specifically, on any
Thursday or Friday that is a business
day, the Exchange may list short term
option series in designated option
classes that expire at the close of
business on each of the next five Fridays
that are business days and are not
Fridays in which monthly or quarterly
3 See
Exchange Rule 5.5(d)(1).
See also Exchange Rule 24.9(a)(2)(A)(i).
5 See Exchange Rule 5.5(d); Exchange Rule
24.9(a)(2)(A).
4 Id.
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options expire.6 These short term option
series, which can be several weeks or
more from expiration, may be listed in
strike price intervals of $0.50, $1, or
$2.50, with the finer strike price
intervals being offered for lower priced
securities, and for options that trade in
the Exchange’s dollar strike program.7
More specifically, the Exchange may list
Weeklys in $0.50 intervals for strike
prices less than $75, or for option
classes that trade in one dollar
increments in the related non-short term
option, $1 intervals for strike prices that
are between $75 and $150, and $2.50
intervals for strike prices above $150.8
The Exchange may also list standard
expiration contracts, which are listed in
accordance with the regular monthly
expiration cycle. These standard
expiration contracts must be listed in
wider strike price intervals of $2.50, $5,
or $10,9 though the Exchange also
operates strike price programs, such as
the dollar strike program mentioned
above,10 that allow the Exchange to list
a limited number of option classes in
finer strike price intervals. In general,
the Exchange must list standard
expiration contracts in $2.50 intervals
for strike prices of $25 or less, $5
intervals for strike prices greater than
$25, and $10 intervals for strike prices
greater than $200.11 During the week
prior to expiration only, the Exchange is
permitted to list related non-short term
option contracts in the narrower strike
price intervals available for short term
option series.12 Since this exception to
the standard strike price interval is
available only during the week prior to
expiration, however, standard
expiration contracts regularly trade at
significantly wider intervals than their
weekly counterparts, as illustrated
below.
For example, assume ABC is trading
at $56.54 and the monthly expiration
contract is three weeks to expiration.
Assume also that CBOE has listed all
6 Id.
7 See Exchange Rule 5.5(d)(5); Exchange Rule
24.9(a)(2)(A)(v).
8 Id. Strike price intervals of $2.50 are only
available for non-index options. Short term index
option contracts are subject to the same strike price
intervals as non-short term options for strike prices
above $150. See Securities Exchange Act Release
No. 71079 (December 16, 2013), 78 FR 77188
(December 20, 2013) (SR–CBOE–2013–121).
9 See Exchange Rule 5.5.01.
10 See Exchange Rule 5.5(.01)(a), which allows
CBOE to designate up to 150 option classes on
individual classes on individual stocks to be traded
in $1 strike price intervals where the strike price
is between $50 and $1. See also Exchange Rule
5.5(.01)(b) ($0.50 Strike Program) and Exchange
Rule 5.5(.01)(c) ($2.50 Strike Program).
11 See Exchange Rule 5.5.01.
12 See Exchange Rule 5.5(d)(6); Exchange Rule
24.9(a)(2)(A)(vi).
PO 00000
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available short term option expirations
and thus has short term option series
listed on ABC for weeks one, two, four,
five, and six. Each of the five weekly
ABC expiration dates can be listed with
strike prices in $0.50 intervals,
including, for example, the $56.50 atthe-money strike. Because the monthly
expiration contract has three weeks to
expiration, however, the near-themoney strikes must be listed in $5
intervals unless those options are
eligible for one of the Exchange’s other
strike price programs. In this instance,
that would mean that investors would
be limited to choosing, for example,
between $55 and $60 strike prices
instead of the $56.50 at-the-money
strike available for Weeklys. This is the
case even though contracts on the same
option class that expire both several
weeks before and several weeks after the
monthly expiration are eligible for finer
strike price intervals. Under the
proposed rule change, the Exchange
would be permitted to list the related
non-short term option on ABC, which is
less than a month to expiration, in the
same strike price intervals as allowed
for short term option series. Thus, the
Exchange would be able to list, and
investors would be able to trade, all
expirations described above with the
same uniform $0.50 strike price interval.
As proposed, the Exchange would be
permitted to begin listing the monthly
expiration contract in these narrower
intervals at any time during the month
prior to expiration, which begins on the
first trading day after the prior month’s
expiration date, subject to the
provisions of other Exchange rules. For
example, since the April 2014 monthly
option expired on Saturday, April 19,
the proposed rule change would allow
the Exchange to list the May 2014
monthly option in short term option
intervals starting Monday, April 21.
CBOE believes that introducing
consistent strike price intervals for
Weeklys and related non-short term
options during the month prior to
expiration will benefit investors by
giving them more flexibility to closely
tailor their investment decisions. The
Exchange also believes that the
proposed rule change will provide the
investing public and other market
participants with additional
opportunities to hedge their
investments, thus allowing these
investors to better manage their risk
exposure.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
‘‘Act’’) and the rules and regulations
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thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.13 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 14 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 15 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
As noted above, standard expiration
options currently trade in wider
intervals than their weekly counterparts,
except during the week prior to
expiration. This creates a situation
where contracts on the same option
class that expire both several weeks
before and several weeks after the
standard expiration are eligible to trade
in strike price intervals that the
standard expiration contract is not.
When the Exchange originally filed to
list related non-short term options in the
same intervals as Weeklys in the same
option class during the week prior to
expiration,16 the Exchange was limited
to listing one short term option
expiration date at a time. Thus, there
was no inconsistency between standard
expiration contracts, which traded in
finer intervals in the week prior to
expiration, and Weeklys, which were
only listed on the week prior to
expiration. The Short Term Option
Series Program has since grown in
response to customer demand, and the
Exchange is now permitted to list up to
five short term option expiration dates
in addition to standard expiration
options.17 There is continuing strong
customer demand to have the ability to
execute hedging and trading strategies
in the finer strike price intervals
available in Weeklys, and the Exchange
believes that the proposed rule change
13 15
14 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
15 Id.
16 See Securities Exchange Act Release No. 68074
(October 19, 2012), 77 FR 65241 (October 25, 2012)
(SR–CBOE–2012–092).
17 See Securities Exchange Act Release No. 71005
(December 6, 2013), 78 FR 75395 (December 11,
2013) (SR–CBOE–2013–96).
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will increase market efficiency by
harmonizing strike price intervals for
contracts that are close to expiration,
whether those contracts happen to be
listed pursuant to weekly or monthly
expiration cycles.
The Exchange notes that, in addition
to listing standard expiration contracts
in short term option intervals during the
expiration week, it already operates
several programs that allow for strike
price intervals for standard expiration
contracts that range from $0.50 to
$2.50.18 The Exchange believes that
each of these programs has been
successful but notes that limitations on
the number of option classes that may
be selected for each of these programs
means that many standard expiration
contracts must still be listed in wider
intervals than their short term option
counterparts. For example, the $0.50
strike price program, which offers the
narrowest strike price interval, only
permits the Exchange to designate up to
20 option classes to trade in $0.50
intervals in addition to option classes
selected by other exchanges that employ
a similar program.19 Thus, the proposed
rules are necessary to fill the gap
between strike price intervals allowed
for Weeklys and related non-short term
options. The Exchange believes that the
proposed rule change, like the other
strike price programs currently offered
by the Exchange, will benefit investors
by giving them more flexibility to
closely tailor their investment and
hedging decisions.
With regard to the impact of this
proposal on system capacity, the
Exchange has analyzed its capacity and
represents that it and the Options Price
Reporting Authority (‘‘OPRA’’) have the
necessary systems capacity to handle
any potential additional traffic
associated with the proposed rule
change. The Exchange believes that its
members will not have capacity issues
as a result of this proposal. The
Exchange also represents that it does not
believe that this expansion will cause
fragmentation of liquidity.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
CBOE does not believe that the
proposed rule change will impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. To the
contrary, 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
PO 00000
18 See
19 See
supra note 8.
Exchange Rule 5.5(.01)(b).
Frm 00086
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39449
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, and from the
clarification regarding the listing of
additional series during the week of
expiration.
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 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 20 and Rule 19b–4(f)(6)
thereunder.21
The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Exchange stated that waiver
of this requirement would allow the
Exchange to compete with other
exchanges proposing similar changes
without putting the Exchange at a
competitive disadvantage. The
Exchange also stated that the proposal
would foster competition by allowing
finer strike price intervals for standard
expiration contracts in related non-short
term options to occur at more than one
exchange. For these reasons, 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.
20 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). As required under Rule
19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change, along with a brief
description and the 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.
21 17
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Federal Register / Vol. 79, No. 132 / Thursday, July 10, 2014 / Notices
Therefore, the Commission designates
the proposed rule change to be operative
upon filing.22
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:
mstockstill on DSK4VPTVN1PROD with NOTICES
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–2014–052 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–CBOE–2014–052. 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
22 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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business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–CBOE–
2014–052 and should be submitted on
or before July 31, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014–16098 Filed 7–9–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72533; File No. SR–EDGA–
2014–15]
Self-Regulatory Organizations; EDGA
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to Amendments
To the EDGA Exchange, Inc. Fee
Schedule
July 3, 2014.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 30,
2014, EDGA Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGA’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which items have been prepared
by the self-regulatory organization. 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
The Exchange proposes to amend its
fees and rebates applicable to Members 3
of the Exchange pursuant to EDGA Rule
15.1(a) and (c) (‘‘Fee Schedule’’) to
decrease the fee for orders yielding Flag
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The term ‘‘Member’’ is defined as ‘‘any
registered broker or dealer, or any person associated
with a registered broker or dealer, that has been
admitted to membership in the Exchange. A
Member will have the status of a ‘‘member’’ of the
Exchange as that term is defined in Section 3(a)(3)
of the Act.’’ See Exchange Rule 1.5(n).
PO 00000
23 17
K, which routes to NASDAQ OMX PSX
(‘‘PSX’’) using ROUC or ROUE routing
strategies. The text of the proposed rule
change is available on the Exchange’s
Internet Web site at
www.directedge.com, at the Exchange’s
principal office, and at the Public
Reference Room of the Commission.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of these statements may be examined at
the places specified in Item IV below.
The self-regulatory organization 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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
Fee Schedule to decrease the fee for
orders yielding Flag K, which routes to
PSX using ROUC or ROUE routing
strategies. In securities priced at or
above $1.00, the Exchange currently
assesses a fee of $0.0030 per share for
Members’ orders that yield Flag K. The
Exchange proposes to amend its Fee
Schedule to decrease this fee to $0.0026
per share from $0.0030 per share. The
proposed change represents a pass
through of the rate that Direct Edge ECN
LLC (d/b/a DE Route) (‘‘DE Route’’), the
Exchange’s affiliated routing brokerdealer, is charged for routing orders to
PSX when it does not qualify for a
volume tiered reduced fee. The
proposed change is in response to PSX’s
July 2014 fee change where PSX
decreased the fee to remove liquidity via
routable order types it charges its
customers, from a fee of $0.0030 per
share to a fee of $0.0026 per share.4
When DE Route routes to PSX, it will
now be charged a standard rate of
$0.0026 per share.5 DE Route will pass
through this rate on PSX to the
Exchange and the Exchange, in turn,
will pass through this rate to its
1 15
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Sfmt 4703
4 See PSX, Equity Trader Alert 2014–45,
Modifications to PSX Pricing Effective July 1, 2014,
dated June 26, 2014, available at https://
www.nasdaqtrader.com/
TraderNews.aspx?id=ETA2014–45.
5 The Exchange notes that to the extent DE Route
does or does not achieve any volume tiered reduced
fee on PSX, its rate for Flag K will not change.
E:\FR\FM\10JYN1.SGM
10JYN1
]]>Agencies
[Federal Register Volume 79, Number 132 (Thursday, July 10, 2014)]
[Notices]
[Pages 39447-39450]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-16098]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72539; File No. SR-CBOE-2014-052]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating To Amending Rules Governing the Short
Term Option Series Program
July 3, 2014.
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 July 2, 2014, 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 comments
on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its rules governing the Short Term
Option Series Program to introduce finer strike price intervals for
standard expiration
[[Page 39448]]
contracts in option classes that also have short term options listed on
them (``related non-short term 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 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
The Exchange is proposing to amend its rules governing the Short
Term Option Series (``Weeklys'') Program to introduce finer strike
price intervals for standard expiration contracts in related non-short
term options. In particular, the Exchange is proposing to amend its
rules to permit the listing of related non-short term options during
the month prior to expiration in the same strike price intervals as
allowed for short term option series.
Under CBOE's current rules, the Exchange may list Weeklys in up to
fifty option classes,\3\ including equity and index option classes,\4\
in addition to option classes that are selected by other securities
exchanges that employ a similar program under their respective rules.
For each of these option classes, the Exchange may list five short term
option expiration dates at any given time, not counting monthly or
quarterly expirations.\5\ Specifically, on any Thursday or Friday that
is a business day, the Exchange may list short term option series in
designated option classes that expire at the close of business on each
of the next five Fridays that are business days and are not Fridays in
which monthly or quarterly options expire.\6\ These short term option
series, which can be several weeks or more from expiration, may be
listed in strike price intervals of $0.50, $1, or $2.50, with the finer
strike price intervals being offered for lower priced securities, and
for options that trade in the Exchange's dollar strike program.\7\ More
specifically, the Exchange may list Weeklys in $0.50 intervals for
strike prices less than $75, or for option classes that trade in one
dollar increments in the related non-short term option, $1 intervals
for strike prices that are between $75 and $150, and $2.50 intervals
for strike prices above $150.\8\
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\3\ See Exchange Rule 5.5(d)(1).
\4\ Id. See also Exchange Rule 24.9(a)(2)(A)(i).
\5\ See Exchange Rule 5.5(d); Exchange Rule 24.9(a)(2)(A).
\6\ Id.
\7\ See Exchange Rule 5.5(d)(5); Exchange Rule 24.9(a)(2)(A)(v).
\8\ Id. Strike price intervals of $2.50 are only available for
non-index options. Short term index option contracts are subject to
the same strike price intervals as non-short term options for strike
prices above $150. See Securities Exchange Act Release No. 71079
(December 16, 2013), 78 FR 77188 (December 20, 2013) (SR-CBOE-2013-
121).
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The Exchange may also list standard expiration contracts, which are
listed in accordance with the regular monthly expiration cycle. These
standard expiration contracts must be listed in wider strike price
intervals of $2.50, $5, or $10,\9\ though the Exchange also operates
strike price programs, such as the dollar strike program mentioned
above,\10\ that allow the Exchange to list a limited number of option
classes in finer strike price intervals. In general, the Exchange must
list standard expiration contracts in $2.50 intervals for strike prices
of $25 or less, $5 intervals for strike prices greater than $25, and
$10 intervals for strike prices greater than $200.\11\ During the week
prior to expiration only, the Exchange is permitted to list related
non-short term option contracts in the narrower strike price intervals
available for short term option series.\12\ Since this exception to the
standard strike price interval is available only during the week prior
to expiration, however, standard expiration contracts regularly trade
at significantly wider intervals than their weekly counterparts, as
illustrated below.
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\9\ See Exchange Rule 5.5.01.
\10\ See Exchange Rule 5.5(.01)(a), which allows CBOE to
designate up to 150 option classes on individual classes on
individual stocks to be traded in $1 strike price intervals where
the strike price is between $50 and $1. See also Exchange Rule
5.5(.01)(b) ($0.50 Strike Program) and Exchange Rule 5.5(.01)(c)
($2.50 Strike Program).
\11\ See Exchange Rule 5.5.01.
\12\ See Exchange Rule 5.5(d)(6); Exchange Rule
24.9(a)(2)(A)(vi).
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For example, assume ABC is trading at $56.54 and the monthly
expiration contract is three weeks to expiration. Assume also that CBOE
has listed all available short term option expirations and thus has
short term option series listed on ABC for weeks one, two, four, five,
and six. Each of the five weekly ABC expiration dates can be listed
with strike prices in $0.50 intervals, including, for example, the
$56.50 at-the-money strike. Because the monthly expiration contract has
three weeks to expiration, however, the near-the-money strikes must be
listed in $5 intervals unless those options are eligible for one of the
Exchange's other strike price programs. In this instance, that would
mean that investors would be limited to choosing, for example, between
$55 and $60 strike prices instead of the $56.50 at-the-money strike
available for Weeklys. This is the case even though contracts on the
same option class that expire both several weeks before and several
weeks after the monthly expiration are eligible for finer strike price
intervals. Under the proposed rule change, the Exchange would be
permitted to list the related non-short term option on ABC, which is
less than a month to expiration, in the same strike price intervals as
allowed for short term option series. Thus, the Exchange would be able
to list, and investors would be able to trade, all expirations
described above with the same uniform $0.50 strike price interval.
As proposed, the Exchange would be permitted to begin listing the
monthly expiration contract in these narrower intervals at any time
during the month prior to expiration, which begins on the first trading
day after the prior month's expiration date, subject to the provisions
of other Exchange rules. For example, since the April 2014 monthly
option expired on Saturday, April 19, the proposed rule change would
allow the Exchange to list the May 2014 monthly option in short term
option intervals starting Monday, April 21.
CBOE believes that introducing consistent strike price intervals
for Weeklys and related non-short term options during the month prior
to expiration will benefit investors by giving them more flexibility to
closely tailor their investment decisions. The Exchange also believes
that the proposed rule change will provide the investing public and
other market participants with additional opportunities to hedge their
investments, thus allowing these investors to better manage their risk
exposure.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations
[[Page 39449]]
thereunder applicable to the Exchange and, in particular, the
requirements of Section 6(b) of the Act.\13\ Specifically, the Exchange
believes the proposed rule change is consistent with the Section
6(b)(5) \14\ requirements that the rules of an exchange be designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. Additionally, the Exchange
believes the proposed rule change is consistent with the Section
6(b)(5) \15\ requirement that the rules of an exchange not be designed
to permit unfair discrimination between customers, issuers, brokers, or
dealers.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
\15\ Id.
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As noted above, standard expiration options currently trade in
wider intervals than their weekly counterparts, except during the week
prior to expiration. This creates a situation where contracts on the
same option class that expire both several weeks before and several
weeks after the standard expiration are eligible to trade in strike
price intervals that the standard expiration contract is not. When the
Exchange originally filed to list related non-short term options in the
same intervals as Weeklys in the same option class during the week
prior to expiration,\16\ the Exchange was limited to listing one short
term option expiration date at a time. Thus, there was no inconsistency
between standard expiration contracts, which traded in finer intervals
in the week prior to expiration, and Weeklys, which were only listed on
the week prior to expiration. The Short Term Option Series Program has
since grown in response to customer demand, and the Exchange is now
permitted to list up to five short term option expiration dates in
addition to standard expiration options.\17\ There is continuing strong
customer demand to have the ability to execute hedging and trading
strategies in the finer strike price intervals available in Weeklys,
and the Exchange believes that the proposed rule change will increase
market efficiency by harmonizing strike price intervals for contracts
that are close to expiration, whether those contracts happen to be
listed pursuant to weekly or monthly expiration cycles.
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\16\ See Securities Exchange Act Release No. 68074 (October 19,
2012), 77 FR 65241 (October 25, 2012) (SR-CBOE-2012-092).
\17\ See Securities Exchange Act Release No. 71005 (December 6,
2013), 78 FR 75395 (December 11, 2013) (SR-CBOE-2013-96).
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The Exchange notes that, in addition to listing standard expiration
contracts in short term option intervals during the expiration week, it
already operates several programs that allow for strike price intervals
for standard expiration contracts that range from $0.50 to $2.50.\18\
The Exchange believes that each of these programs has been successful
but notes that limitations on the number of option classes that may be
selected for each of these programs means that many standard expiration
contracts must still be listed in wider intervals than their short term
option counterparts. For example, the $0.50 strike price program, which
offers the narrowest strike price interval, only permits the Exchange
to designate up to 20 option classes to trade in $0.50 intervals in
addition to option classes selected by other exchanges that employ a
similar program.\19\ Thus, the proposed rules are necessary to fill the
gap between strike price intervals allowed for Weeklys and related non-
short term options. The Exchange believes that the proposed rule
change, like the other strike price programs currently offered by the
Exchange, will benefit investors by giving them more flexibility to
closely tailor their investment and hedging decisions.
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\18\ See supra note 8.
\19\ See Exchange Rule 5.5(.01)(b).
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With regard to the impact of this proposal on system capacity, the
Exchange has analyzed its capacity and represents that it and the
Options Price Reporting Authority (``OPRA'') have the necessary systems
capacity to handle any potential additional traffic associated with the
proposed rule change. The Exchange believes that its members will not
have capacity issues as a result of this proposal. The Exchange also
represents that it does not believe that this expansion will cause
fragmentation of liquidity.
B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE does not believe that the proposed rule change will impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. To the contrary, 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, and
from the clarification regarding the listing of additional series
during the week of expiration.
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 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 \20\ and Rule 19b-4(f)(6)
thereunder.\21\
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the 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.
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The Exchange has asked the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. The Exchange stated that waiver of this requirement would allow
the Exchange to compete with other exchanges proposing similar changes
without putting the Exchange at a competitive disadvantage. The
Exchange also stated that the proposal would foster competition by
allowing finer strike price intervals for standard expiration contracts
in related non-short term options to occur at more than one exchange.
For these reasons, 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.
[[Page 39450]]
Therefore, the Commission designates the proposed rule change to be
operative upon filing.\22\
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\22\ 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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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-CBOE-2014-052 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-CBOE-2014-052. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for Web site viewing and printing in
the Commission's Public Reference Room, 100 F Street NE., Washington,
DC 20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-CBOE-2014-052 and should be
submitted on or before July 31, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014-16098 Filed 7-9-14; 8:45 am]
BILLING CODE 8011-01-P
