Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of Proposed Rule Change To List and Trade Options on the MSCI EAFE Index and on the MSCI Emerging Markets Index, 12675-12680 [2015-05477]
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Federal Register / Vol. 80, No. 46 / Tuesday, March 10, 2015 / Notices
specifically, the Exchange does not
believe that the proposed rule changes
will impose any [sic] intramarket
competition because it [sic] will be
applicable to all TPHs trading on the
Exchange trading floor. In addition, the
Exchange does not believe the proposed
changes will impose any intermarket
burden because the Exchange trading
floor will operate in a similar manner
only with more relevant equipment and
communication requirements.
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
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the Exchange consents, the Commission
will:
A. By order approve or disapprove
such proposed rule change, or
B. institute proceedings to determine
whether the proposed rule change
should be disapproved.
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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. In
particular, the Commission invites
comment on CBOE’s proposal to no
longer require a member to obtain prior
approval from CBOE before using a new
communication device on the CBOE
floor and instead adopt the open-ended
approach in proposed paragraph (c) of
Rule 6.23 under which a member would
be permitted to use any communication
device unless specifically otherwise
prohibited and would not be required to
seek Exchange approval or otherwise
register the communication devices
with the Exchange in advance of using
them on the CBOE floor. Comments may
be submitted by any of the following
methods:
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2015–022 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
[Release No. 34–74430; File No. SR–CBOE–
2015–023]
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CBOE–2015–022. 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 such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–CBOE–
2015–022, and should be submitted on
or before March 31, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Brent J. Fields,
Secretary.
[FR Doc. 2015–05484 Filed 3–9–15; 8:45 am]
BILLING CODE 8011–01–P
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
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12675
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing of
Proposed Rule Change To List and
Trade Options on the MSCI EAFE Index
and on the MSCI Emerging Markets
Index
March 4, 2015.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’ or ‘‘Exchange Act’’),1 and Rule
19b–4 thereunder,2 notice is hereby
given that on February 26, 2015, the
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, II, and
III 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
CBOE proposes to list and trade
options that overlie the MSCI EAFE
Index and the MSCI Emerging Markets
Index (‘‘EAFE options’’ and ‘‘EM
options’’). EAFE and EM options would
be P.M., cash-settled contracts with
European-style exercise. 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.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of
and basis for the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
1 15
25 17
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CFR 200.30–3(a)(12).
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2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 80, No. 46 / Tuesday, March 10, 2015 / Notices
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this proposed rule
change is to permit the Exchange to list
and trade options that overlie the MSCI
EAFE Index and the MSCI Emerging
Markets Index (‘‘EAFE options’’ and
‘‘EM options’’). EAFE and EM options
would be P.M., cash-settled contracts
with European-style exercise.3
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MSCI EAFE Index Design, Methodology
and Dissemination
The MSCI EAFE Index (Europe,
Australasia, Far East) is a free, [sic]
float-adjusted market capitalization
index that is designed to measure the
equity market performance of developed
markets, excluding the U.S. & Canada.
The MSCI EAFE Index consists of the
following 21 developed market country
indexes: Australia, Austria, Belgium,
Denmark, Finland, France, Germany,
Hong Kong, Ireland, Israel, Italy, Japan,
the Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden,
Switzerland, and the United Kingdom.
The MSCI EAFE Index consists of large
and midcap components, has 910
constituents and ‘‘covers approximately
85% of the free float-adjusted market
capitalization in each country.’’ 4
The MSCI EAFE Index was launched
on December 31, 1969 and is calculated
by MSCI Inc. (‘‘MSCI’’), which is a
provider of investment support tools.
The MSCI EAFE Index is calculated in
U.S. dollars on a real-time basis from
the open of the first market on which
the components are traded to the closing
of the last marked [sic] on which the
components are traded. The
methodology used to calculate the MSCI
EAFE Index is similar to the
methodology used to calculate the value
of other benchmark marketcapitalization weighted indexes.
Specifically, the MSCI EAFE Index is
based on the MSCI Global Investable
Market Indexes (‘‘GIMI’’) Methodology.5
3 CBOE’s proposed rule change is substantially
similar to approved filings made by NASDAQ OMX
Phlx (‘‘Phlx’’) in 2011 and 2012 to list and trade EM
and EAFE options, respectively. See Securities
Exchange Act Release Nos. 66420 (February 17,
2012), 77 FR 11177 (February 24, 2012) (approving
SR–Phlx–2011–179 to list EM options) and 66861
(April 26, 2012), 77 FR 26056 (May 2, 2012)
(approving SR–Phlx–2012–28 to list EAFE options).
4 See MSCI EAFE Index fact sheet (dated
December 31, 2014) located at: https://
www.msci.com/resources/factsheets/index_fact_
sheet/msci-eafe-index-usd-price.pdf.
5 Summary and comprehensive information about
the GIMI methodology may be reviewed at:
https://www.msci.com/products/indexes/size/all_
cap/methodology.html.
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The level of the MSCI EAFE Index
reflects the free float-adjusted market
value of the component stocks relative
to a particular base date and is
computed by dividing the total market
value of the companies in the MSCI
EAFE Index by the index divisor.
The MSCI EAFE Index is monitored
and maintained by MSCI. Adjustments
to the MSCI EAFE Index are made on a
daily basis with respect to corporate
events and dividends. MSCI reviews the
MSCI EAFE Index quarterly (February,
May, August and November) ‘‘with the
objective of reflecting change in the
underlying equity markets in a timely
manner, while limiting undue index
turnover. During the May and November
reviews, the [MSCI EAFE Index] is
rebalanced and the large and mid
capitalization cutoff points are
recalculated.’’ 6
Real-time data is distributed
approximately every 15 seconds while
the index is being calculated using
MSCI’s real-time calculation engine to
Bloomberg L.P. (‘‘Bloomberg’’), FactSet
Research Systems, Inc. (‘‘FactSet’’) and
Thomson Reuters (‘‘Reuters’’). End of
day data is distributed daily to clients
through MSCI as well as through major
quotation vendors, including
Bloomberg, FactSet, and Reuters.
The Exchange notes that the iShares
MSCI EAFE exchange traded fund
(‘‘ETF’’) is an actively traded product.
CBOE also lists options overlying that
ETF (‘‘EFA options’’) and those options
are actively traded as well. MSCI EAFE
Mini Index (‘‘EAFE’’) futures contracts
are listed for trading on the
Intercontinental Exchange, Inc. (‘‘ICE’’) 7
and other derivatives contracts on the
MSCI EAFE Index are listed for trading
in Europe.
EM Index Design and Calculation
The MSCI EM Index is a free floatadjusted market capitalization index
that is designed to measure equity
market performance of emerging
markets. The MSCI EM Index consists of
the following 23 emerging market
country indexes: Brazil, Chile, China,
Colombia, Czech Republic, Egypt,
Greece, Hungary, India, Indonesia,
Korea, Malaysia, Mexico, Peru,
Philippines, Poland, Qatar, Russia,
South Africa, Taiwan, Thailand, Turkey
and United Arab Emirates. The MSCI
EM Index consists of large and midcap
components, has 834 constituents and
‘‘covers approximately 85% of the free
6 See MSCI EAFE Index fact sheet (dated
December 31, 2014) located at: https://
www.msci.com/resources/factsheets/index_fact_
sheet/msci-eafe-index-usd-price.pdf.
7 See EAFE futures contract specifications located
at: https://globalderivatives.nyx.com/node/10864.
PO 00000
Frm 00060
Fmt 4703
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float-adjusted market capitalization in
each country.’’ 8
The MSCI EM Index was launched on
June 30, 1988 and is calculated by
MSCI. The MSCI EM Index is calculated
in U.S. dollars on a real-time basis from
the open of the first market on which
the components are traded to the closing
of the last marked [sic] on which the
components are traded. The
methodology used to calculate the MSCI
EM Index is similar to the methodology
used to calculate the value of other
benchmark market-capitalization
weighted indexes. Specifically, the
MSCI EM Index is based on the MSCI
GIMI Methodology.9 The level of the
MSCI EM Index reflects the free floatadjusted market value of the component
stocks relative to a particular base date
and is computed by dividing the total
market value of the companies in the
MSCI EM Index by the index divisor.
The MSCI EM Index is monitored and
maintained by MSCI. Adjustments to
the MSCI EM Index are made on a daily
basis with respect to corporate events
and dividends. MSCI reviews the MSCI
EM Index quarterly (February, May,
August and November) ‘‘with the
objective of reflecting change in the
underlying equity markets in a timely
manner, while limiting undue index
turnover. During the May and November
reviews, the [MSCI EM Index] is
rebalanced and the large and mid
capitalization cutoff points are
recalculated.’’ 10
Real-time data is distributed
approximately every 15 seconds using
MSCI’s real-time calculation engine to
Bloomberg, FactSet and Reuters. End of
day data is distributed daily to clients
through MSCI as well as through major
quotation vendors, including
Bloomberg, FactSet, and Reuters.
The Exchange notes that the iShares
MSCI Emerging Markets ETF is an
actively traded product. CBOE also lists
options overlying that ETF (‘‘EEM
options’’) and those options are actively
traded as well. MSCI Emerging Markets
Mini Index (‘‘EM’’) futures contracts are
listed for trading on ICE 11 and other
8 See MSCI EM Index fact sheet (dated December
31, 2014) located at: https://www.msci.com/
resources/factsheets/index_fact_sheet/msciemerging-markets-index-usd-price.pdf.
9 Summary and comprehensive information about
the GIMI methodology may be reviewed at:
https://www.msci.com/products/indexes/size/all_
cap/methodology.html.
10 See MSCI EM Index fact sheet (dated December
31, 2014) located at: https://www.msci.com/
resources/factsheets/index_fact_sheet/msciemerging-markets-index-usd-price.pdf.
11 See EM futures contract specifications located
at: https://globalderivatives.nyx.com/node/10846.
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Federal Register / Vol. 80, No. 46 / Tuesday, March 10, 2015 / Notices
derivatives contracts on the MSCI EM
Index are listed for trading in Europe.
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Initial and Maintenance Listing Criteria
The MSCI EAFE Index and MSCI EM
Index each meet the definition of a
broad-based index as set forth in Rule
24.1(i)(1).12 In addition, the Exchange
proposes to create specific initial and
maintenance listing criteria for options
on the MSCI EAFE Index and on the
MSCI EM Index. Specifically, the
Exchange proposes to add new
Interpretation and Policy .01(a) to Rule
24.2, Designation of the Index, to
provide that he [sic] Exchange may
trade EAFE and EM options if each of
the following conditions is satisfied: (1)
The index is broad-based, as defined in
Rule 24.1(i)(1); (2) Options on the index
are designated as P.M.-settled index
options; (3) The index is capitalizationweighted, price-weighted, modified
capitalization-weighted or equal dollarweighted; (4) The index consists of 500
or more component securities; (5) All of
the component securities of the index
will have a market capitalization of
greater than $100 million; (6) No single
component security accounts for more
than fifteen percent (15%) of the weight
of the index, and the five highest
weighted component securities in the
index do not, in the aggregate, account
for more than fifty percent (50%) of the
weight of the index; (7) Non-U.S.
component securities (stocks or ADRs)
that are not subject to comprehensive
surveillance agreements do not, in the
aggregate, represent more than: (i)
Twenty percent (20%) of the weight of
the EAFE Index, and (ii) twenty-two and
a half percent (22.5%) of the weight of
the EM Index; (8) During the time
options on the index are traded on the
Exchange, the current index value is
widely disseminated at least once every
fifteen (15) seconds by one or more
major market data vendors. However,
the Exchange may continue to trade
EAFE options after trading in all
component securities has closed for the
day and the index level is no longer
widely disseminated at least once every
fifteen (15) seconds by one or more
major market data vendors, provided
that EAFE futures contracts are trading
and prices for those contracts may be
used as a proxy for the current index
value; (9) The Exchange reasonably
believes it has adequate system capacity
to support the trading of options on the
index, based on a calculation of the
Exchange’s current Independent System
12 Rule 24.2(i)(1) [sic] defines a broad-based index
to mean an index designed to representative [sic]
of a stock market as a whole or of a range of
companies in unrelated industries.
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Capacity Advisor (ISCA) allocation and
the number of new messages per second
expected to be generated by options on
such index; and (10) The Exchange has
written surveillance procedures in place
with respect to surveillance of trading of
options on the index.
Additionally, the Exchange proposes
to add new Interpretation and Policy
.01(b) to Rule 24.2, Designation of the
Index, to set forth the following
maintenance listing standards for
options on the MSCI EAFE Index and on
the MSCI EM Index: (1) The conditions
set forth in subparagraphs .01(a)(1), (2),
(3), (4), (7), (8), (9) and (10) must
continue to be satisfied. The conditions
set forth in subparagraphs .01(a)(5) and
(6) must be satisfied only as of the first
day of January and July in each year;
and (2) the total number of component
securities in the index may not increase
or decrease by more than thirty-five
percent (35%) from the number of
component securities in the index at the
time of its initial listing. In the event a
class of index options listed on the
Exchange fails to satisfy the
maintenance listing standards set forth
herein, the Exchange shall not open for
trading any additional series of options
of that class unless the continued listing
of that class of index options has been
approved by the Commission under
Section 19(b)(2) of the Exchange Act.
The Exchange believes that P.M.
settlement is appropriate for EAFE and
EM options due to the natures of these
indexes that encompass multiple
markets around the world. As to the
MSCI EAFE Index, the components
open with the start of trading in certain
parts of Asia at approximately 5:00 p.m.
(Chicago time) (prior day) and close
with the end of trading in Europe at
approximately 11:30 a.m. (Chicago time)
(next day) as closing prices from Ireland
are accounting [sic] for in the closing
calculation. The closing MSCI EAFE
Index level is distributed by MSCI
between approximately 1:00 p.m. and
2:00 p.m. (Chicago time) each trading
day.
As a result, there will not be a current
MSCI EAFE Index level calculated and
disseminated during a portion of the
time during which EAFE options would
be traded (from approximately 11:30
a.m. (Chicago time) to 3:15 p.m.
(Chicago time)).13 However, the EAFE
futures contract that trades on ICE will
be trading during this time period.14
13 The trading hours for multiply listed EFA
options are from 8:30 a.m. (Chicago time) to 3:15
p.m. (Chicago time). See EFA Options Product
Specifications located at: https://www.cboe.com/
micro/efa/specifications.aspx.
14 The trading hours for EAFE futures are from
6:16 p.m. (Chicago time) to 4:00 p.m. (Chicago time)
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12677
The Exchange believes that the EAFE
futures prices would be a proxy for the
current MSCI EAFE Index level.
Therefore, the Exchange believes that
EAFE options should be permitted to
trade after trading in all component
securities has closed for the day and the
index level is no longer widely
disseminated at least once every fifteen
(15) seconds by one or more major
market data vendors, provided that
EAFE futures contracts are trading and
prices for those contracts may be used
as a proxy for the current index value.
As to the MSCI EM index, the
components open with the start of
trading in certain parts of Asia at
approximately 6:00 p.m. (Chicago time)
(prior day) and close with the end of
trading in Mexico and Peru at
approximately 3:30 p.m. (Chicago time)
(next day) as closing prices from Brazil,
Chile, Peru and Mexico, including late
prices, are accounted for in the closing
calculation. The closing MSCI EM Index
level is distributed at approximately
5:00 p.m. (Chicago time) each trading
day.15
Because the MSCI EAFE Index and on
[sic] the MSCI EM Index each has a
large number of component securities,
representative of many countries, the
Exchange believes that the initial listing
requirements are appropriate to trade
options on this index [sic]. In addition,
similar to other broad based indexes, the
Exchange proposes various maintenance
requirements, which require continual
compliance and periodic compliance.
Options Trading
Generally, the proposed trading rules
for EAFE and EM options would be the
same except for their respective trading
hours, which the Exchange will describe
separately below. Exhibit 3 presents
contract specifications for EAFE and EM
options.
The contract multiplier for EAFE and
EM options would be $100. EAFE and
EM options would be quoted in index
points and one point would equal $100.
The minimum tick size for series trading
below $3 would be 0.05 ($5.00) and
above $3 will be 0.10 ($10.00).
Initially, the Exchange would initially
list in-, at- and out-of-the-money strike
prices. Additional series may be opened
the following day, Sunday through Friday. See
MSCI EAFE Mini Index Future Contract
specifications located at: https://
globalderivatives.nyx.com/node/10864.
15 Late prices indicate that while the last real-time
stock tick come [sic] in at approximately 3:00 p.m.
(Chicago time), the MSCI EM Index will stay open
for a few minutes longer to allow any late price
information to be obtained. At approximately 3:30
p.m. (Chicago time), the final foreign currency rates
are applied and the last real-time MSCI EM Index
value is disseminated.
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Federal Register / Vol. 80, No. 46 / Tuesday, March 10, 2015 / Notices
for trading as the underlying index level
moves up or down.16 The minimum
strike price interval for EAFE and EM
series would be 2.5 points if the strike
price is less than 200. When the strike
price is 200 or above, strike price
intervals would be no less than 5
points.17 New series would be permitted
to be added up to the fifth business day
prior to expiration.18
The Exchange would be permitted to
list up to twelve near-term expiration
months.19 The Exchange would also be
permitted to list up to ten expirations in
Long-Term Index Option Series
(‘‘LEAPS’’) on the EAFE and EM
indexes and those indexes would be
eligible for all other expirations
permitted for other broad-based indexes,
e.g., End of Week/End of Month
Expirations, Short Term Option Series
and Quarterly Option Series.20
The trading hours for EAFE options
would be from 8:30 a.m. (Chicago time)
to 3:15 p.m. (Chicago time), except that
trading in expiring EAFE options would
end at 10:00 a.m. (Chicago time) on their
expiration date. The Exchange is
proposing that EAFE options trade only
during a portion of the day on their
expiration date to align the trading
hours of expiring EAFE options with
expiring EAFE futures. EAFE futures
trade on ICE and stop trading at 10:00
a.m. (Chicago time) on the third Friday
of the futures contract month.21
The trading hours for EM options
would be from 8:30 a.m. to 3:15 p.m.
(Chicago time).
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Exercise and Settlement
The proposed EAFE and EM options
would expire on the third Friday of the
expiring month. Trading in expiring
16 See Rules 24.9(c) [sic] and 24.9.04. These rules
set forth the criteria for listing additional series of
the same class as the current value of the
underlying index moves. Generally, additional
series must be ‘‘reasonably related’’ to the current
index value, which means that strike prices must
be within 30% of the current index value. Series
exceeding the 30% range may be listed based on
demonstrated customer interest.
17 See proposed amendments to Rule 24.9.01(a)
adding EAFE and EM as classes eligible for 2.5
point minimum strikes if the strike price is below
200.
18 See Rule 24.9.01(c).
19 See proposed amendments to Rule 24.9(a)(2).
The Exchange is proposing to allow the listing of
up to twelve expiration months at any one time for
EAFE and EM options.
20 See, e.g., Rules 24.9(b) (LEAPS), 24.9(e) (End of
Week/End of Month Expirations), 24.9(a)(2)(A)
(Short Term Option Series) and 24.9(a)(2)(B)
(Quarterly Option Series).
21 See EAFE futures contract specifications
located at: https://globalderivatives.nyx.com/node/
10864. See also Securities Exchange Act Release
No. 67070 [sic] (May 29, 2012), 77 FR 33013 (June
4, 2012) (Notice of SR-Phlx-2012–67 to close the
trading of expiring EAFE options at 10:00 a.m.
(Chicago time) on their expiration date).
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EAFE options would cease at 10:00 a.m.
(Chicago time) on their expiration date
and trading in expiring EM options
would cease at 3:15 p.m. (Chicago time)
on their expiration date. When the last
trading day/expiration date is moved
because of an Exchange holiday or
closure, the last trading day/expiration
date for expiring options would be the
immediately preceding business day.
Exercise would result in delivery of
cash on the business day following
expiration. EAFE and EM options would
be P.M.-settled. The exercise settlement
value would be the official closing
values of the MSCI EAFE Index and the
MSCI EM Index as reported by MSCI on
the last trading day of the expiring
contract.22
The exercise settlement amount
would be equal to the difference
between the exercise-settlement value
and the exercise price of the option,
multiplied by the contract multiplier
($100).
If the exercise settlement value is not
available or the normal settlement
procedure cannot be utilized due to a
trading disruption or other unusual
circumstance, the settlement value
would be determined in accordance
with the rules and bylaws of The
Options Clearing Corporation
(‘‘OCC’’).23
Position and Exercise Limits
The Exchange proposes to apply the
default position limits for broad-based
index options to EAFE and EM options.
Specifically, the chart set forth in Rule
24.4(a), Position Limits for Broad-Based
Index Options, provides that the
positions limits applicable to ‘‘other
broad-based indexes’’ is 25,000
contracts (standard limit/on the same
side of the market) and 15,000 contracts
(near-term limit). Pursuant to Rule 24.5,
Exercise Limits, the exercise limits for
EAFE and EM options would be
equivalent to the position limits for
EAFE and EM options. All position
limit hedge exemptions would apply.
Margin
The Exchange proposes that EAFE
and EM options be margined as ‘‘broadbased index’’ options, and under CBOE
rules, especially, Rule 12.3(c)(5)(A), the
margin requirement for a short put or
call shall be 100% of the current market
value of the contract plus 15% of the
22 See proposed amendment to Rule 24.1.01(a)
[sic] to identify MSCI Inc. as the Reporting
Authority for the MSCI EAFE Index (EAFE) and the
MSCI Emerging Markets Index (EM). As the
designated Reporting Authority for each of these
indexes, the disclaimers set forth in Rule 24.14
(Disclaimers) would apply to MSCI Inc.
23 See Rule 24.7.
PO 00000
Frm 00062
Fmt 4703
Sfmt 4703
‘‘product of the current index group
value and the applicable index
multiplier,’’ reduced by any out-of-themoney amount. There would be a
minimum margin requirement of 100%
of the current market value of the
contract plus: 10% of the aggregate put
exercise price amount in the case of
puts, and 10% of the product of the
current index group value and the
applicable index multiplier in the case
of calls. Additional margin may be
required pursuant to Rules 12.3(h) and
12.10 (Margin Required is Minimum).
Exchange Rules Applicable
Except as modified herein, the rules
in Chapters I through XIX, XXIV,
XXIVA, and XXIVB would equally
apply to EAFE and EM options. EAFE
and EM options would be subject to the
same rules that currently govern other
CBOE index options, including sales
practice rules,24 margin requirements 25
and trading rules.26
The Exchange hereby designates
EAFE and EM options as eligible for
trading as Flexible Exchange Options as
provided for in Chapters XXIVA
(Flexible Exchange Options) and XXIVB
(FLEX Hybrid Trading System).27
Surveillance and Capacity
The Exchange represents that is [sic]
has an adequate surveillance program in
place for EAFE and EM options and
intends to use the same surveillance
procedures currently utilized for each of
the Exchange’s other index options to
monitor trading in EAFE and EM
options.
The Exchange is a member of the
Intermarket Surveillance Group (‘‘ISG’’),
which ‘‘covers major self-regulatory
bodies across the world.’’ ‘‘The purpose
of the ISG is to provide a framework for
the sharing of information and the
coordination of regulatory efforts among
exchanges trading securities and related
products to address potential
intermarket manipulations and trading
abuses. The ISG plays a crucial role in
24 See Chapter IX (Doing Business with the
Public).
25 See Chapter XII (Margins).
26 See, e.g., Chapters IV (Business Conduct), VI
(Doing Business on the Trading Floor), Chapter VIII
(Market-Makers, Trading Crowds and Modified
Trading Systems) and Chapter XXIV (Index
Options).
27 See proposed amendments to Rules 24A.7,
Position Limits and Reporting Requirements, and
24B.7, Position Limits and Reporting Requirements,
providing that the position limits for FLEX Index
options on the MSCI EAFE Index and on the MSCI
Emerging Market [sic] Index would be equal to the
position limits for Non-FLEX options on those
indexes. Per existing Rules 24A.8, Exercise Limits,
and 24B.8, Exercise Limits, the exercise limits for
FLEX EAFE and EM option would be equivalent to
the position limits for FLEX EAFE and EM options.
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mstockstill on DSK4VPTVN1PROD with NOTICES
information sharing among markets that
trade securities, options on securities,
security futures products, and futures
and options on broad-based security
indexes.’’ A list identifying the current
ISG members is available at: https://
www.isgportal.org/home.html.
The Exchange is also an affiliate
member of the International
Organization of Securities Commissions
(‘‘IOSCO’’), which has members from
over 100 different countries. Each of the
countries from which there is a
component security in the [sic] both the
MSCI EAFE and MSCI EM Indexes is a
member of IOSCO.28 A list identifying
the current ordinary IOSCO members is
available at: https://www.iosco.org/
about/
?subsection=membership&memid=1.
Finally, the Exchange has entered into
various comprehensive surveillance
agreements (‘‘CSAs’’) and/or
Memoranda of Understanding with
various stock exchanges. Given the
capitalization of the EAFE and EM
Indexes and the deep and liquid
markets for the securities underlying
these Indexes, the concerns for market
manipulation and/or disruption in the
underlying markets are greatly reduced.
The Exchange notes that the EFA and
EM ETFs are actively traded products.
CBOE also lists options overlying those
ETFS (EFA and EEM options) and those
options are actively traded as well.
CBOE has analyzed its capacity and
represents that it believes the Exchange
and the Options Price Reporting
Authority (‘‘OPRA’’) have the necessary
systems capacity to handle the
additional traffic associated with the
listing of new series that would result
from the introduction of EAFE and EM
options. Because the proposal is limited
to two new classes, the Exchange
believes that the additional traffic that
would be generated from the
introduction of EAFE and EM options
would be manageable.
28 There are three categories of IOSCO members:
ordinary, associate and affiliate. In general, the
ordinary members (124) are the national securities
commissions in their respective jurisdictions.
Associate members (12) are usually agencies or
branches of government, other than the principal
national securities regulator in their respective
jurisdictions that have some regulatory competence
over securities markets, or intergovernmental
international organizations and other international
standard-setting bodies, such as the IMF and the
World Bank, with a mission related to either the
development or the regulation of securities markets.
Affiliate members (62) are self-regulatory
organizations, stock exchanges, financial market
infrastructures, investor protection funds and
compensation funds, and other bodies with an
appropriate interest in securities regulation. See
IOSCO Fact Sheet located at: https://www.iosco.org/
about/pdf/IOSCO-Fact-Sheet.pdf.
VerDate Sep<11>2014
17:53 Mar 09, 2015
Jkt 235001
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
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.29 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 30 requirements that the rules of
an exchange be designed to promote just
and equitable principles of trade, to
prevent fraudulent and manipulative
acts, to remove impediments to and to
perfect the mechanism for a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
The Exchange believes that the
proposed rule change will further the
Exchange’s goal of introducing new and
innovative products to the marketplace.
Currently, the Exchange believes that
there is unmet market demand for
exchange-listed security options listed
on these two popular cash indexes.
(CBOE understands that Phlx no longer
lists EAFE and EM options). As
described above, the iShares MSCI
EAFE ETF and iShares MSCI Emerging
Markets ETF are actively traded
products, as are the options on those
ETFs. EAFE and EM futures are listed
for trading on ICE. In addition, other
derivatives contracts on the MSCI EAFE
Index and the MSCI EM Index are listed
for trading in Europe. As a result, CBOE
believes that EAFE and EM options are
designed to provide different and
additional opportunities for investors to
hedge or speculate on the market risk on
the MSCI EAFE Index and the MSCI EM
Index by listing an option directly on
these indexes.
The Exchanges believes that both the
MSCI EAFE Index and the MSCI EM
Index are not easily susceptible to
manipulation. Both indexes are broadbased indexes and have high market
capitalizations. The MSCI EAFE Index
is comprised of 910 component stocks
and no single component comprises
more than 5% of the index, making it
not easily subject to market
manipulation. Similarly, the MSCI EM
Index is comprised of 834 components
stocks and no single component
comprises more than 3% to 5% of the
index, making it not easily subject to
market manipulation.
Additionally, the iShares MSCI EAFE
and iShares MSCI Emerging Markets
ETFs are actively traded products, as are
options on those ETFs. Because both
29 15
30 15
PO 00000
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00063
Fmt 4703
Sfmt 4703
12679
indexes have large numbers of
component securities, are representative
of many countries and trade a large
volume with respect to ETFs and
options on those ETFs, the Exchange
believes that the initial listing
requirements are appropriate to trade
options on these indexes. In addition,
similar to other broad-based indexes,
the Exchange proposes to adopt various
maintenance criteria, which would
require continual compliance and
periodic compliance.
EAFE and EM options would be
subject to the same rules that currently
govern other CBOE index options,
including sales practice rules,31 margin
requirements 32 and trading rules.33 The
Exchange would apply the same default
position limits for broad-based index
options to EAFE and EM options.
Specifically, the applicable position
limits would be 25,000 contracts
(standard limit/on the same side of the
market) and 15,000 contracts (near-term
limit). The exercise limits for EAFE and
EM options would be equivalent to the
position limits for EAFE and EM
options. These same position and
exercise limits would apply to FLEX
trading. All position limit hedge
exemptions would apply. The Exchange
would apply existing index option
margin requirements for the purchase
and sale of EAFE and EM options.
The Exchange represents that is [sic]
has an adequate surveillance program in
place for EAFE and EM options. The
Exchange also represents that it has the
necessary systems capacity to support
the new option series.
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 not necessary or
appropriate in furtherance of the
purposes of the Act. Specifically, CBOE
believes that the introduction of new
cash index options will enhance
competition among market participants
and will provide a new type of options
to compete with domestic products such
as EFA and EEM options, EAFE and EM
futures and European-traded derivatives
on the MSCI EAFE Index and the MSCI
EM Index to the benefit of investors and
the marketplace.
31 See Chapter IX (Doing Business with the
Public).
32 See Chapter XII (Margins).
33 See, e.g., Chapters IV (Business Conduct), VI
(Doing Business on the Trading Floor), Chapter VIII
(Market-Makers, Trading Crowds and Modified
Trading Systems) and Chapter XXIV (Index
Options).
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Federal Register / Vol. 80, No. 46 / Tuesday, March 10, 2015 / Notices
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the Exchange consents, the Commission
will:
A. by order approve or disapprove
such proposed rule change, or
B. institute proceedings to determine
whether the proposed rule change
should be disapproved.
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–2015–023 on the subject line.
mstockstill on DSK4VPTVN1PROD with NOTICES
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–2015–023. 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
17:53 Mar 09, 2015
Jkt 235001
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.34
Brent J. Fields,
Secretary.
[FR Doc. 2015–05477 Filed 3–9–15; 8:45 am]
BILLING CODE 8011–01–P
IV. Solicitation of Comments
VerDate Sep<11>2014
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 such
filing also will be available for
inspection and copying at the principal
office of the CBOE. 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–
2015–023 and should be submitted on
or before March 31, 2015.
SECURITIES AND EXCHANGE
COMMISSION
[File No. 500–1]
Order of Suspension of Trading; In the
Matter of Aspire International, Inc.,
Border Management, Inc., and
Landmark Energy Enterprises, Inc.
March 5, 2015.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Aspire
International, Inc. because it has not
filed any periodic reports since the
period ended December 31, 2010.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Border
Management, Inc. because it has not
filed any periodic reports since the
period ended September 30, 2011.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Landmark
Energy Enterprises, Inc. because it has
not filed any periodic reports since the
period ended July 31, 2012.
The Commission is of the opinion that
the public interest and the protection of
investors require a suspension of trading
in the securities of the above-listed
companies.
Therefore, it is ordered, pursuant to
Section 12(k) of the Securities Exchange
Act of 1934, that trading in the
securities of the above-listed companies
is suspended for the period from 9:30
a.m. EST on March 5, 2015, through
11:59 p.m. EDT on March 18, 2015.
By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015–05516 Filed 3–6–15; 11:15 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74422; File No SR–CBOE–
2015–020]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Its Fees
Schedule To Adopt Fees for Extended
Trading Hours
March 4, 2015.
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 February
18, 2015, 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, II, and
III 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 adopt fees
for its Extended Trading Hours session.
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
1 15
34 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00064
Fmt 4703
Sfmt 4703
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
E:\FR\FM\10MRN1.SGM
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]]>Agencies
[Federal Register Volume 80, Number 46 (Tuesday, March 10, 2015)]
[Notices]
[Pages 12675-12680]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-05477]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74430; File No. SR-CBOE-2015-023]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing of Proposed Rule Change To List and
Trade Options on the MSCI EAFE Index and on the MSCI Emerging Markets
Index
March 4, 2015.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\
notice is hereby given that on February 26, 2015, the 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, II, and III 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
CBOE proposes to list and trade options that overlie the MSCI EAFE
Index and the MSCI Emerging Markets Index (``EAFE options'' and ``EM
options''). EAFE and EM options would be P.M., cash-settled contracts
with European-style exercise. 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.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of and basis for the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
[[Page 12676]]
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this proposed rule change is to permit the Exchange
to list and trade options that overlie the MSCI EAFE Index and the MSCI
Emerging Markets Index (``EAFE options'' and ``EM options''). EAFE and
EM options would be P.M., cash-settled contracts with European-style
exercise.\3\
---------------------------------------------------------------------------
\3\ CBOE's proposed rule change is substantially similar to
approved filings made by NASDAQ OMX Phlx (``Phlx'') in 2011 and 2012
to list and trade EM and EAFE options, respectively. See Securities
Exchange Act Release Nos. 66420 (February 17, 2012), 77 FR 11177
(February 24, 2012) (approving SR-Phlx-2011-179 to list EM options)
and 66861 (April 26, 2012), 77 FR 26056 (May 2, 2012) (approving SR-
Phlx-2012-28 to list EAFE options).
---------------------------------------------------------------------------
MSCI EAFE Index Design, Methodology and Dissemination
The MSCI EAFE Index (Europe, Australasia, Far East) is a free,
[sic] float-adjusted market capitalization index that is designed to
measure the equity market performance of developed markets, excluding
the U.S. & Canada. The MSCI EAFE Index consists of the following 21
developed market country indexes: Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the
Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, and the United Kingdom. The MSCI EAFE Index consists of
large and midcap components, has 910 constituents and ``covers
approximately 85% of the free float-adjusted market capitalization in
each country.'' \4\
---------------------------------------------------------------------------
\4\ See MSCI EAFE Index fact sheet (dated December 31, 2014)
located at: https://www.msci.com/resources/factsheets/index_fact_sheet/msci-eafe-index-usd-price.pdf.
---------------------------------------------------------------------------
The MSCI EAFE Index was launched on December 31, 1969 and is
calculated by MSCI Inc. (``MSCI''), which is a provider of investment
support tools. The MSCI EAFE Index is calculated in U.S. dollars on a
real-time basis from the open of the first market on which the
components are traded to the closing of the last marked [sic] on which
the components are traded. The methodology used to calculate the MSCI
EAFE Index is similar to the methodology used to calculate the value of
other benchmark market-capitalization weighted indexes. Specifically,
the MSCI EAFE Index is based on the MSCI Global Investable Market
Indexes (``GIMI'') Methodology.\5\ The level of the MSCI EAFE Index
reflects the free float-adjusted market value of the component stocks
relative to a particular base date and is computed by dividing the
total market value of the companies in the MSCI EAFE Index by the index
divisor.
---------------------------------------------------------------------------
\5\ Summary and comprehensive information about the GIMI
methodology may be reviewed at: https://www.msci.com/products/indexes/size/all_cap/methodology.html.
---------------------------------------------------------------------------
The MSCI EAFE Index is monitored and maintained by MSCI.
Adjustments to the MSCI EAFE Index are made on a daily basis with
respect to corporate events and dividends. MSCI reviews the MSCI EAFE
Index quarterly (February, May, August and November) ``with the
objective of reflecting change in the underlying equity markets in a
timely manner, while limiting undue index turnover. During the May and
November reviews, the [MSCI EAFE Index] is rebalanced and the large and
mid capitalization cutoff points are recalculated.'' \6\
---------------------------------------------------------------------------
\6\ See MSCI EAFE Index fact sheet (dated December 31, 2014)
located at: https://www.msci.com/resources/factsheets/index_fact_sheet/msci-eafe-index-usd-price.pdf.
---------------------------------------------------------------------------
Real-time data is distributed approximately every 15 seconds while
the index is being calculated using MSCI's real-time calculation engine
to Bloomberg L.P. (``Bloomberg''), FactSet Research Systems, Inc.
(``FactSet'') and Thomson Reuters (``Reuters''). End of day data is
distributed daily to clients through MSCI as well as through major
quotation vendors, including Bloomberg, FactSet, and Reuters.
The Exchange notes that the iShares MSCI EAFE exchange traded fund
(``ETF'') is an actively traded product. CBOE also lists options
overlying that ETF (``EFA options'') and those options are actively
traded as well. MSCI EAFE Mini Index (``EAFE'') futures contracts are
listed for trading on the Intercontinental Exchange, Inc. (``ICE'') \7\
and other derivatives contracts on the MSCI EAFE Index are listed for
trading in Europe.
---------------------------------------------------------------------------
\7\ See EAFE futures contract specifications located at: https://globalderivatives.nyx.com/node/10864.
---------------------------------------------------------------------------
EM Index Design and Calculation
The MSCI EM Index is a free float-adjusted market capitalization
index that is designed to measure equity market performance of emerging
markets. The MSCI EM Index consists of the following 23 emerging market
country indexes: Brazil, Chile, China, Colombia, Czech Republic, Egypt,
Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru,
Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand,
Turkey and United Arab Emirates. The MSCI EM Index consists of large
and midcap components, has 834 constituents and ``covers approximately
85% of the free float-adjusted market capitalization in each country.''
\8\
---------------------------------------------------------------------------
\8\ See MSCI EM Index fact sheet (dated December 31, 2014)
located at: https://www.msci.com/resources/factsheets/index_fact_sheet/msci-emerging-markets-index-usd-price.pdf.
---------------------------------------------------------------------------
The MSCI EM Index was launched on June 30, 1988 and is calculated
by MSCI. The MSCI EM Index is calculated in U.S. dollars on a real-time
basis from the open of the first market on which the components are
traded to the closing of the last marked [sic] on which the components
are traded. The methodology used to calculate the MSCI EM Index is
similar to the methodology used to calculate the value of other
benchmark market-capitalization weighted indexes. Specifically, the
MSCI EM Index is based on the MSCI GIMI Methodology.\9\ The level of
the MSCI EM Index reflects the free float-adjusted market value of the
component stocks relative to a particular base date and is computed by
dividing the total market value of the companies in the MSCI EM Index
by the index divisor.
---------------------------------------------------------------------------
\9\ Summary and comprehensive information about the GIMI
methodology may be reviewed at: https://www.msci.com/products/indexes/size/all_cap/methodology.html.
---------------------------------------------------------------------------
The MSCI EM Index is monitored and maintained by MSCI. Adjustments
to the MSCI EM Index are made on a daily basis with respect to
corporate events and dividends. MSCI reviews the MSCI EM Index
quarterly (February, May, August and November) ``with the objective of
reflecting change in the underlying equity markets in a timely manner,
while limiting undue index turnover. During the May and November
reviews, the [MSCI EM Index] is rebalanced and the large and mid
capitalization cutoff points are recalculated.'' \10\
---------------------------------------------------------------------------
\10\ See MSCI EM Index fact sheet (dated December 31, 2014)
located at: https://www.msci.com/resources/factsheets/index_fact_sheet/msci-emerging-markets-index-usd-price.pdf.
---------------------------------------------------------------------------
Real-time data is distributed approximately every 15 seconds using
MSCI's real-time calculation engine to Bloomberg, FactSet and Reuters.
End of day data is distributed daily to clients through MSCI as well as
through major quotation vendors, including Bloomberg, FactSet, and
Reuters.
The Exchange notes that the iShares MSCI Emerging Markets ETF is an
actively traded product. CBOE also lists options overlying that ETF
(``EEM options'') and those options are actively traded as well. MSCI
Emerging Markets Mini Index (``EM'') futures contracts are listed for
trading on ICE \11\ and other
[[Page 12677]]
derivatives contracts on the MSCI EM Index are listed for trading in
Europe.
---------------------------------------------------------------------------
\11\ See EM futures contract specifications located at: https://globalderivatives.nyx.com/node/10846.
---------------------------------------------------------------------------
Initial and Maintenance Listing Criteria
The MSCI EAFE Index and MSCI EM Index each meet the definition of a
broad-based index as set forth in Rule 24.1(i)(1).\12\ In addition, the
Exchange proposes to create specific initial and maintenance listing
criteria for options on the MSCI EAFE Index and on the MSCI EM Index.
Specifically, the Exchange proposes to add new Interpretation and
Policy .01(a) to Rule 24.2, Designation of the Index, to provide that
he [sic] Exchange may trade EAFE and EM options if each of the
following conditions is satisfied: (1) The index is broad-based, as
defined in Rule 24.1(i)(1); (2) Options on the index are designated as
P.M.-settled index options; (3) The index is capitalization-weighted,
price-weighted, modified capitalization-weighted or equal dollar-
weighted; (4) The index consists of 500 or more component securities;
(5) All of the component securities of the index will have a market
capitalization of greater than $100 million; (6) No single component
security accounts for more than fifteen percent (15%) of the weight of
the index, and the five highest weighted component securities in the
index do not, in the aggregate, account for more than fifty percent
(50%) of the weight of the index; (7) Non-U.S. component securities
(stocks or ADRs) that are not subject to comprehensive surveillance
agreements do not, in the aggregate, represent more than: (i) Twenty
percent (20%) of the weight of the EAFE Index, and (ii) twenty-two and
a half percent (22.5%) of the weight of the EM Index; (8) During the
time options on the index are traded on the Exchange, the current index
value is widely disseminated at least once every fifteen (15) seconds
by one or more major market data vendors. However, the Exchange may
continue to trade EAFE options after trading in all component
securities has closed for the day and the index level is no longer
widely disseminated at least once every fifteen (15) seconds by one or
more major market data vendors, provided that EAFE futures contracts
are trading and prices for those contracts may be used as a proxy for
the current index value; (9) The Exchange reasonably believes it has
adequate system capacity to support the trading of options on the
index, based on a calculation of the Exchange's current Independent
System Capacity Advisor (ISCA) allocation and the number of new
messages per second expected to be generated by options on such index;
and (10) The Exchange has written surveillance procedures in place with
respect to surveillance of trading of options on the index.
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\12\ Rule 24.2(i)(1) [sic] defines a broad-based index to mean
an index designed to representative [sic] of a stock market as a
whole or of a range of companies in unrelated industries.
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Additionally, the Exchange proposes to add new Interpretation and
Policy .01(b) to Rule 24.2, Designation of the Index, to set forth the
following maintenance listing standards for options on the MSCI EAFE
Index and on the MSCI EM Index: (1) The conditions set forth in
subparagraphs .01(a)(1), (2), (3), (4), (7), (8), (9) and (10) must
continue to be satisfied. The conditions set forth in subparagraphs
.01(a)(5) and (6) must be satisfied only as of the first day of January
and July in each year; and (2) the total number of component securities
in the index may not increase or decrease by more than thirty-five
percent (35%) from the number of component securities in the index at
the time of its initial listing. In the event a class of index options
listed on the Exchange fails to satisfy the maintenance listing
standards set forth herein, the Exchange shall not open for trading any
additional series of options of that class unless the continued listing
of that class of index options has been approved by the Commission
under Section 19(b)(2) of the Exchange Act.
The Exchange believes that P.M. settlement is appropriate for EAFE
and EM options due to the natures of these indexes that encompass
multiple markets around the world. As to the MSCI EAFE Index, the
components open with the start of trading in certain parts of Asia at
approximately 5:00 p.m. (Chicago time) (prior day) and close with the
end of trading in Europe at approximately 11:30 a.m. (Chicago time)
(next day) as closing prices from Ireland are accounting [sic] for in
the closing calculation. The closing MSCI EAFE Index level is
distributed by MSCI between approximately 1:00 p.m. and 2:00 p.m.
(Chicago time) each trading day.
As a result, there will not be a current MSCI EAFE Index level
calculated and disseminated during a portion of the time during which
EAFE options would be traded (from approximately 11:30 a.m. (Chicago
time) to 3:15 p.m. (Chicago time)).\13\ However, the EAFE futures
contract that trades on ICE will be trading during this time
period.\14\ The Exchange believes that the EAFE futures prices would be
a proxy for the current MSCI EAFE Index level. Therefore, the Exchange
believes that EAFE options should be permitted to trade after trading
in all component securities has closed for the day and the index level
is no longer widely disseminated at least once every fifteen (15)
seconds by one or more major market data vendors, provided that EAFE
futures contracts are trading and prices for those contracts may be
used as a proxy for the current index value.
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\13\ The trading hours for multiply listed EFA options are from
8:30 a.m. (Chicago time) to 3:15 p.m. (Chicago time). See EFA
Options Product Specifications located at: https://www.cboe.com/micro/efa/specifications.aspx.
\14\ The trading hours for EAFE futures are from 6:16 p.m.
(Chicago time) to 4:00 p.m. (Chicago time) the following day, Sunday
through Friday. See MSCI EAFE Mini Index Future Contract
specifications located at: https://globalderivatives.nyx.com/node/10864.
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As to the MSCI EM index, the components open with the start of
trading in certain parts of Asia at approximately 6:00 p.m. (Chicago
time) (prior day) and close with the end of trading in Mexico and Peru
at approximately 3:30 p.m. (Chicago time) (next day) as closing prices
from Brazil, Chile, Peru and Mexico, including late prices, are
accounted for in the closing calculation. The closing MSCI EM Index
level is distributed at approximately 5:00 p.m. (Chicago time) each
trading day.\15\
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\15\ Late prices indicate that while the last real-time stock
tick come [sic] in at approximately 3:00 p.m. (Chicago time), the
MSCI EM Index will stay open for a few minutes longer to allow any
late price information to be obtained. At approximately 3:30 p.m.
(Chicago time), the final foreign currency rates are applied and the
last real-time MSCI EM Index value is disseminated.
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Because the MSCI EAFE Index and on [sic] the MSCI EM Index each has
a large number of component securities, representative of many
countries, the Exchange believes that the initial listing requirements
are appropriate to trade options on this index [sic]. In addition,
similar to other broad based indexes, the Exchange proposes various
maintenance requirements, which require continual compliance and
periodic compliance.
Options Trading
Generally, the proposed trading rules for EAFE and EM options would
be the same except for their respective trading hours, which the
Exchange will describe separately below. Exhibit 3 presents contract
specifications for EAFE and EM options.
The contract multiplier for EAFE and EM options would be $100. EAFE
and EM options would be quoted in index points and one point would
equal $100. The minimum tick size for series trading below $3 would be
0.05 ($5.00) and above $3 will be 0.10 ($10.00).
Initially, the Exchange would initially list in-, at- and out-of-
the-money strike prices. Additional series may be opened
[[Page 12678]]
for trading as the underlying index level moves up or down.\16\ The
minimum strike price interval for EAFE and EM series would be 2.5
points if the strike price is less than 200. When the strike price is
200 or above, strike price intervals would be no less than 5
points.\17\ New series would be permitted to be added up to the fifth
business day prior to expiration.\18\
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\16\ See Rules 24.9(c) [sic] and 24.9.04. These rules set forth
the criteria for listing additional series of the same class as the
current value of the underlying index moves. Generally, additional
series must be ``reasonably related'' to the current index value,
which means that strike prices must be within 30% of the current
index value. Series exceeding the 30% range may be listed based on
demonstrated customer interest.
\17\ See proposed amendments to Rule 24.9.01(a) adding EAFE and
EM as classes eligible for 2.5 point minimum strikes if the strike
price is below 200.
\18\ See Rule 24.9.01(c).
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The Exchange would be permitted to list up to twelve near-term
expiration months.\19\ The Exchange would also be permitted to list up
to ten expirations in Long-Term Index Option Series (``LEAPS'') on the
EAFE and EM indexes and those indexes would be eligible for all other
expirations permitted for other broad-based indexes, e.g., End of Week/
End of Month Expirations, Short Term Option Series and Quarterly Option
Series.\20\
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\19\ See proposed amendments to Rule 24.9(a)(2). The Exchange is
proposing to allow the listing of up to twelve expiration months at
any one time for EAFE and EM options.
\20\ See, e.g., Rules 24.9(b) (LEAPS), 24.9(e) (End of Week/End
of Month Expirations), 24.9(a)(2)(A) (Short Term Option Series) and
24.9(a)(2)(B) (Quarterly Option Series).
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The trading hours for EAFE options would be from 8:30 a.m. (Chicago
time) to 3:15 p.m. (Chicago time), except that trading in expiring EAFE
options would end at 10:00 a.m. (Chicago time) on their expiration
date. The Exchange is proposing that EAFE options trade only during a
portion of the day on their expiration date to align the trading hours
of expiring EAFE options with expiring EAFE futures. EAFE futures trade
on ICE and stop trading at 10:00 a.m. (Chicago time) on the third
Friday of the futures contract month.\21\
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\21\ See EAFE futures contract specifications located at:
https://globalderivatives.nyx.com/node/10864. See also Securities
Exchange Act Release No. 67070 [sic] (May 29, 2012), 77 FR 33013
(June 4, 2012) (Notice of SR-Phlx-2012-67 to close the trading of
expiring EAFE options at 10:00 a.m. (Chicago time) on their
expiration date).
---------------------------------------------------------------------------
The trading hours for EM options would be from 8:30 a.m. to 3:15
p.m. (Chicago time).
Exercise and Settlement
The proposed EAFE and EM options would expire on the third Friday
of the expiring month. Trading in expiring EAFE options would cease at
10:00 a.m. (Chicago time) on their expiration date and trading in
expiring EM options would cease at 3:15 p.m. (Chicago time) on their
expiration date. When the last trading day/expiration date is moved
because of an Exchange holiday or closure, the last trading day/
expiration date for expiring options would be the immediately preceding
business day.
Exercise would result in delivery of cash on the business day
following expiration. EAFE and EM options would be P.M.-settled. The
exercise settlement value would be the official closing values of the
MSCI EAFE Index and the MSCI EM Index as reported by MSCI on the last
trading day of the expiring contract.\22\
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\22\ See proposed amendment to Rule 24.1.01(a) [sic] to identify
MSCI Inc. as the Reporting Authority for the MSCI EAFE Index (EAFE)
and the MSCI Emerging Markets Index (EM). As the designated
Reporting Authority for each of these indexes, the disclaimers set
forth in Rule 24.14 (Disclaimers) would apply to MSCI Inc.
---------------------------------------------------------------------------
The exercise settlement amount would be equal to the difference
between the exercise-settlement value and the exercise price of the
option, multiplied by the contract multiplier ($100).
If the exercise settlement value is not available or the normal
settlement procedure cannot be utilized due to a trading disruption or
other unusual circumstance, the settlement value would be determined in
accordance with the rules and bylaws of The Options Clearing
Corporation (``OCC'').\23\
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\23\ See Rule 24.7.
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Position and Exercise Limits
The Exchange proposes to apply the default position limits for
broad-based index options to EAFE and EM options. Specifically, the
chart set forth in Rule 24.4(a), Position Limits for Broad-Based Index
Options, provides that the positions limits applicable to ``other
broad-based indexes'' is 25,000 contracts (standard limit/on the same
side of the market) and 15,000 contracts (near-term limit). Pursuant to
Rule 24.5, Exercise Limits, the exercise limits for EAFE and EM options
would be equivalent to the position limits for EAFE and EM options. All
position limit hedge exemptions would apply.
Margin
The Exchange proposes that EAFE and EM options be margined as
``broad-based index'' options, and under CBOE rules, especially, Rule
12.3(c)(5)(A), the margin requirement for a short put or call shall be
100% of the current market value of the contract plus 15% of the
``product of the current index group value and the applicable index
multiplier,'' reduced by any out-of-the-money amount. There would be a
minimum margin requirement of 100% of the current market value of the
contract plus: 10% of the aggregate put exercise price amount in the
case of puts, and 10% of the product of the current index group value
and the applicable index multiplier in the case of calls. Additional
margin may be required pursuant to Rules 12.3(h) and 12.10 (Margin
Required is Minimum).
Exchange Rules Applicable
Except as modified herein, the rules in Chapters I through XIX,
XXIV, XXIVA, and XXIVB would equally apply to EAFE and EM options. EAFE
and EM options would be subject to the same rules that currently govern
other CBOE index options, including sales practice rules,\24\ margin
requirements \25\ and trading rules.\26\
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\24\ See Chapter IX (Doing Business with the Public).
\25\ See Chapter XII (Margins).
\26\ See, e.g., Chapters IV (Business Conduct), VI (Doing
Business on the Trading Floor), Chapter VIII (Market-Makers, Trading
Crowds and Modified Trading Systems) and Chapter XXIV (Index
Options).
---------------------------------------------------------------------------
The Exchange hereby designates EAFE and EM options as eligible for
trading as Flexible Exchange Options as provided for in Chapters XXIVA
(Flexible Exchange Options) and XXIVB (FLEX Hybrid Trading System).\27\
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\27\ See proposed amendments to Rules 24A.7, Position Limits and
Reporting Requirements, and 24B.7, Position Limits and Reporting
Requirements, providing that the position limits for FLEX Index
options on the MSCI EAFE Index and on the MSCI Emerging Market [sic]
Index would be equal to the position limits for Non-FLEX options on
those indexes. Per existing Rules 24A.8, Exercise Limits, and 24B.8,
Exercise Limits, the exercise limits for FLEX EAFE and EM option
would be equivalent to the position limits for FLEX EAFE and EM
options.
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Surveillance and Capacity
The Exchange represents that is [sic] has an adequate surveillance
program in place for EAFE and EM options and intends to use the same
surveillance procedures currently utilized for each of the Exchange's
other index options to monitor trading in EAFE and EM options.
The Exchange is a member of the Intermarket Surveillance Group
(``ISG''), which ``covers major self-regulatory bodies across the
world.'' ``The purpose of the ISG is to provide a framework for the
sharing of information and the coordination of regulatory efforts among
exchanges trading securities and related products to address potential
intermarket manipulations and trading abuses. The ISG plays a crucial
role in
[[Page 12679]]
information sharing among markets that trade securities, options on
securities, security futures products, and futures and options on
broad-based security indexes.'' A list identifying the current ISG
members is available at: https://www.isgportal.org/home.html.
The Exchange is also an affiliate member of the International
Organization of Securities Commissions (``IOSCO''), which has members
from over 100 different countries. Each of the countries from which
there is a component security in the [sic] both the MSCI EAFE and MSCI
EM Indexes is a member of IOSCO.\28\ A list identifying the current
ordinary IOSCO members is available at: https://www.iosco.org/about/?subsection=membership&memid=1. Finally, the Exchange has entered into
various comprehensive surveillance agreements (``CSAs'') and/or
Memoranda of Understanding with various stock exchanges. Given the
capitalization of the EAFE and EM Indexes and the deep and liquid
markets for the securities underlying these Indexes, the concerns for
market manipulation and/or disruption in the underlying markets are
greatly reduced.
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\28\ There are three categories of IOSCO members: ordinary,
associate and affiliate. In general, the ordinary members (124) are
the national securities commissions in their respective
jurisdictions. Associate members (12) are usually agencies or
branches of government, other than the principal national securities
regulator in their respective jurisdictions that have some
regulatory competence over securities markets, or intergovernmental
international organizations and other international standard-setting
bodies, such as the IMF and the World Bank, with a mission related
to either the development or the regulation of securities markets.
Affiliate members (62) are self-regulatory organizations, stock
exchanges, financial market infrastructures, investor protection
funds and compensation funds, and other bodies with an appropriate
interest in securities regulation. See IOSCO Fact Sheet located at:
https://www.iosco.org/about/pdf/IOSCO-Fact-Sheet.pdf.
---------------------------------------------------------------------------
The Exchange notes that the EFA and EM ETFs are actively traded
products. CBOE also lists options overlying those ETFS (EFA and EEM
options) and those options are actively traded as well.
CBOE has analyzed its capacity and represents that it believes the
Exchange and the Options Price Reporting Authority (``OPRA'') have the
necessary systems capacity to handle the additional traffic associated
with the listing of new series that would result from the introduction
of EAFE and EM options. Because the proposal is limited to two new
classes, the Exchange believes that the additional traffic that would
be generated from the introduction of EAFE and EM options would be
manageable.
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 thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\29\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \30\ requirements that the rules of an exchange be
designed to promote just and equitable principles of trade, to prevent
fraudulent and manipulative acts, to remove impediments to and to
perfect the mechanism for a free and open market and a national market
system, and, in general, to protect investors and the public interest.
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\29\ 15 U.S.C. 78f(b).
\30\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change will further
the Exchange's goal of introducing new and innovative products to the
marketplace. Currently, the Exchange believes that there is unmet
market demand for exchange-listed security options listed on these two
popular cash indexes. (CBOE understands that Phlx no longer lists EAFE
and EM options). As described above, the iShares MSCI EAFE ETF and
iShares MSCI Emerging Markets ETF are actively traded products, as are
the options on those ETFs. EAFE and EM futures are listed for trading
on ICE. In addition, other derivatives contracts on the MSCI EAFE Index
and the MSCI EM Index are listed for trading in Europe. As a result,
CBOE believes that EAFE and EM options are designed to provide
different and additional opportunities for investors to hedge or
speculate on the market risk on the MSCI EAFE Index and the MSCI EM
Index by listing an option directly on these indexes.
The Exchanges believes that both the MSCI EAFE Index and the MSCI
EM Index are not easily susceptible to manipulation. Both indexes are
broad-based indexes and have high market capitalizations. The MSCI EAFE
Index is comprised of 910 component stocks and no single component
comprises more than 5% of the index, making it not easily subject to
market manipulation. Similarly, the MSCI EM Index is comprised of 834
components stocks and no single component comprises more than 3% to 5%
of the index, making it not easily subject to market manipulation.
Additionally, the iShares MSCI EAFE and iShares MSCI Emerging
Markets ETFs are actively traded products, as are options on those
ETFs. Because both indexes have large numbers of component securities,
are representative of many countries and trade a large volume with
respect to ETFs and options on those ETFs, the Exchange believes that
the initial listing requirements are appropriate to trade options on
these indexes. In addition, similar to other broad-based indexes, the
Exchange proposes to adopt various maintenance criteria, which would
require continual compliance and periodic compliance.
EAFE and EM options would be subject to the same rules that
currently govern other CBOE index options, including sales practice
rules,\31\ margin requirements \32\ and trading rules.\33\ The Exchange
would apply the same default position limits for broad-based index
options to EAFE and EM options. Specifically, the applicable position
limits would be 25,000 contracts (standard limit/on the same side of
the market) and 15,000 contracts (near-term limit). The exercise limits
for EAFE and EM options would be equivalent to the position limits for
EAFE and EM options. These same position and exercise limits would
apply to FLEX trading. All position limit hedge exemptions would apply.
The Exchange would apply existing index option margin requirements for
the purchase and sale of EAFE and EM options.
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\31\ See Chapter IX (Doing Business with the Public).
\32\ See Chapter XII (Margins).
\33\ See, e.g., Chapters IV (Business Conduct), VI (Doing
Business on the Trading Floor), Chapter VIII (Market-Makers, Trading
Crowds and Modified Trading Systems) and Chapter XXIV (Index
Options).
---------------------------------------------------------------------------
The Exchange represents that is [sic] has an adequate surveillance
program in place for EAFE and EM options. The Exchange also represents
that it has the necessary systems capacity to support the new option
series.
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 not necessary or appropriate in furtherance of
the purposes of the Act. Specifically, CBOE believes that the
introduction of new cash index options will enhance competition among
market participants and will provide a new type of options to compete
with domestic products such as EFA and EEM options, EAFE and EM futures
and European-traded derivatives on the MSCI EAFE Index and the MSCI EM
Index to the benefit of investors and the marketplace.
[[Page 12680]]
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
A. by order approve or disapprove such proposed rule change, or
B. institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
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-2015-023 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-2015-023. 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 such filing also will be available
for inspection and copying at the principal office of the CBOE. 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-2015-023 and should be
submitted on or before March 31, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
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\34\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-05477 Filed 3-9-15; 8:45 am]
BILLING CODE 8011-01-P
