Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change To List and Trade Options That Overlie a Reduced Value of the FTSE 100 Index, 69751-69755 [2015-28516]
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Federal Register / Vol. 80, No. 217 / Tuesday, November 10, 2015 / Notices
order handling and execution, order
routing, and regulatory compliance
obligations, if and when NSX receives
the necessary regulatory approval to
recommence trading.10 For this reason,
the Commission hereby waives the 30day operative delay requirement and
designates the proposed rule change as
operative upon filing.11
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 12 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
asabaliauskas on DSK5VPTVN1PROD 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–
NYSEMKT–2015–84 on the subject line.
Paper Comments
• 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–NYSEMKT–2015–84. 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
10 In granting this waiver, the Commission does
not express an opinion on whether or not NSX will
receive regulatory approval to recommence trading.
11 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
12 15 U.S.C. 78s(b)(2)(B).
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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
offices 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–
NYSEMKT–2015–84, and should be
submitted on or before December 1,
2015.13
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.
Brent J. Fields,
Secretary.
[FR Doc. 2015–28509 Filed 11–9–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76353; File No. SR–CBOE–
2015–100]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing of a
Proposed Rule Change To List and
Trade Options That Overlie a Reduced
Value of the FTSE 100 Index
November 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 October
30, 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.
13 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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69751
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is proposing to amend
its rules to list and trade options that
overlie a reduced value of the FTSE 100
Index.
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 purpose of this proposed rule
change is to permit the Exchange to list
and trade options that overlie the FTSE
100 Index (‘‘FTSE 100 options’’). FTSE
100 options would be A.M., cash-settled
contracts with European-style exercise.
FTSE 100 Index Design, Methodology
and Dissemination
The FTSE 100 Index is a free floatadjusted market capitalization index
that is designed to measure the
performance of the 100 largest
companies traded on the London Stock
Exchange and valued in the British
pound (‘‘GBP’’).3 The Exchange notes
that the Commission previously
approved for the Exchange,
International Securities Exchange
(‘‘ISE’’), and NYSE Arca, Inc. (‘‘NYSE
3 The FTSE 100 Index is a market-capitalization
weighted index of UK-listed blue chip companies
which is valued on the British pound. The index
is part of the FTSE UK Series and is designed to
measure the performance of the 100 largest
companies traded on the London Stock Exchange
that pass screening for size and liquidity. FTSE 100
constituents are all traded on the London Stock
Exchange’s SETS trading system. See FTSE 100
Index fact sheet (dated August 31, 2015) located at:
https://www.ftse.com/Analytics/FactSheets/Home/
DownloadSingleIssue?issueName=UKX.
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Arca’’) to list reduced value index
options on the FTSE 100 Index.4
Although the Exchange previously
received approval to list FTSE 100
Index options, the Exchange is taking
the opportunity to amend its rules to,
among other things, specifically identify
the listing criteria applicable to FTSE
100 options.
The FTSE 100 Index was launched on
January 3, 1984, and is calculated by
FTSE International Limited (‘‘FTSE’’),
which is a provider of investment
support tools. The FTSE 100 Index is
calculated and published on a real-time
basis in British pounds during U.K. and
U.S. trading hours: from 2:00–10:30 a.m.
(Chicago time) the real-time index is
calculated using real time prices of the
securities. At 10:30 a.m. (Chicago time)
the real time index closes using the
closing prices from the London Stock
Exchange. Thus, between 10:30 a.m. and
3:15 p.m. (Chicago time) the FTSE 100
Index level is a static value that market
participants can access via data vendors.
The methodology used to calculate
the FTSE 100 Index is similar to the
methodology used to calculate the value
of other benchmark marketcapitalization weighted indexes.
Specifically, the FTSE 100 Index is
governed by the Ground Rules for the
FTSE UK Index Series.5 The level of the
FTSE 100 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
FTSE 100 Index by the index divisor.
The FTSE 100 Index is monitored and
maintained by FTSE. Adjustments to the
FTSE 100 Index could be made on a
daily basis with respect to corporate
events and dividends. FTSE reviews the
FTSE 100 Index quarterly (March, June,
September and December) according to
rules for inserting and deleting
companies that ‘‘are designed to provide
stability in the selection of constituents
of the FTSE UK Index Series while
ensuring that the Indexes continue to be
representative of the market by
including or excluding those companies
which have risen or fallen
significantly.’’ 6
4 See Securities Exchange Act Release No. 29722
(September 23, 1991), 56 FR 49807 (October 1,
1991) (order approving SR–CBOE–91–07);
Securities Exchange Act Release No. 53484 (March
14, 2006) 71 FR 14268 (March 21, 2006) (order
approving SR–ISE–2005–25); and Securities
Exchange Act Release No. 58008 (June 24, 2008) 73
FR 36945 (June 30, 2008) (order approving SR–
NYSEArca-2008–61).
5 Summary and comprehensive information about
the FTSE 100 Index methodology may be reviewed
at: https://www.ftse.com/products/downloads/
FTSE_UK_Index_Series.pdf?78.
6 See id.
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Real-time data is distributed at least
every 15 seconds while the index is
being calculated using FTSE’s real-time
calculation engine to Bloomberg L.P.
(‘‘Bloomberg’’), Thomson Reuters
(‘‘Reuters’’) and other major vendors.
End of day data is distributed daily to
clients through FTSE as well as through
major quotation vendors, including
Bloomberg and Reuters.
The Exchange proposes to base
trading in options on a fraction of the
full size of the FTSE 100 Index. In
particular, the Exchange proposes to list
FTSE 100 options that are based on one
one-tenth of the value of the FTSE 100
Index. The Exchange believes that
listing options on the reduced value of
the index will attract a greater source of
customer business than if options were
based on the full value of the FTSE 100
Index. The Exchange further believes
that listing options on a reduced value
of the index will provide an opportunity
for investors to hedge, or speculate on,
the market risk associated with the
stocks comprising the FTSE 100 Index.
Additionally, by reducing the value of
the FTSE 100 Index, investors will be
able to use this trading vehicle while
extending a smaller outlay of capital.
The Exchange believes this should
attract additional investors, and, in turn,
create a more active and liquid trading
environment.
Initial and Maintenance Listing Criteria
The FTSE 100 Index meets the
definition of a broad-based index as set
forth in Rule 24.1(i)(1).7 In addition, the
Exchange proposes to create specific
initial and maintenance listing criteria
for options on the FTSE 100 Index.
Specifically, the Exchange proposes to
add new Interpretation and Policy .02(a)
to Rule 24.2, Designation of the Index,
to provide that the Exchange may trade
FTSE 100 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 A.M.-settled index
options; (3) The index is capitalizationweighted, price-weighted, modified
capitalization-weighted or equal dollarweighted; (4) The index consists of 90
or more component securities; (5) Each
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
7 Rule 24.1(i)(1) defines a broad-based index to
mean an index designed to be representative of a
stock market as a whole or of a range of companies
in unrelated industries.
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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 twenty
percent (20%) of the weight of the FTSE
100 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
FTSE 100 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 FTSE 100 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.
Additionally, the Exchange proposes
to add new Interpretation and Policy
.02(b) to Rule 24.2, Designation of the
Index, to set forth the following
maintenance listing standards for
options on the FTSE 100 Index: (1) The
conditions set forth in subparagraphs
.02(a) (1), (2), (3), (4), (7), (8), (9) and
(10) must continue to be satisfied. The
conditions set forth in subparagraphs
.02(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
ten percent (10%) 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 A.M.
settlement is appropriate for FTSE 100
options due to the nature of the index
that encompasses the U.K. market. The
components of the FTSE 100 Index open
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Federal Register / Vol. 80, No. 217 / Tuesday, November 10, 2015 / Notices
with the start of trading on the London
Stock Exchange at approximately 2:00
a.m. (Chicago time) and close with the
end of trading on the London Stock
Exchange at approximately 10:30 a.m.
(Chicago time). As noted above, from
2:00–10:30 a.m. (Chicago time) the FTSE
100 Index level is calculated using real
time prices of the securities. At 10:30
a.m. (Chicago time) the real time index
closes using the closing prices from the
London Stock Exchange. Thus, between
10:30 a.m. and 3:15 p.m. (Chicago time)
the FTSE 100 Index level is a static
value that market participants can
access via data vendors.
As a result, the FTSE 100 Index level
will not be calculated using real time
prices of the constituent securities
during a portion of the day when
options are trading, specifically between
10:30 a.m. and 3:15 p.m. (Chicago
time).8 However, the futures contracts
based on the FTSE 100 Index that trade
on CME will be trading during this time
period.9 The Exchange believes that the
FTSE 100 futures prices would be a
proxy for the current FTSE 100 Index
level. Therefore, the Exchange believes
that FTSE 100 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 FTSE 100 futures contracts are
trading and prices for those contracts
may be used as a proxy for the current
index value.
Because the FTSE 100 Index is
comprised of 100 of the largest
companies traded on the London Stock
Exchange, the Exchange believes that
the initial listing requirements are
appropriate to trade options on this
index. In addition, similar to other
broad based indexes, the Exchange
proposes various maintenance
requirements, which require continual
compliance and periodic compliance.
asabaliauskas on DSK5VPTVN1PROD with NOTICES
Options Trading
Exhibit 3 presents contract
specifications for FTSE 100 options.
The contract multiplier for FTSE 100
options would be $100. FTSE 100
8 The trading hours for FTSE 100 options are from
8:30 a.m. (Chicago time) to 3:15 p.m. (Chicago
time).
9 The trading hours for E-Mini FTSE 100 Index
futures are from 5:00 p.m. (Chicago time) to 4:00
p.m. (Chicago time) the following day, Sunday
through Friday. See E-Mini FTSE 100 Index Future
Contract specifications located at: https://
www.cmegroup.com/education/files/e-mini-ftse100-index-futures.pdf. CME lists E-mini FTSE 100
Index futures denominated in GBP and USD. The
Exchange believes that either futures contract—GBP
or USD—would be a sufficient proxy for FTSE 100
options.
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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 at
or above $3 will be 0.10 ($10.00).
Initially, the Exchange would list in, at- and out-of-the-money strike prices.
Additional series may be opened for
trading as the underlying index level
moves up or down.10 The minimum
strike price interval for FTSE 100
options 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.11 New series would be permitted
to be added up to the fifth business day
prior to expiration.12
The Exchange would be permitted to
list up to twelve near-term expiration
months.13 The Exchange would also be
permitted to list up to ten expirations in
Long-Term Index Option Series
(‘‘LEAPS’’) on the FTSE 100 Index and
the index would be eligible for all other
expirations permitted for other broadbased index options, e.g., End of Week/
End of Month Expirations, Short Term
Option Series and Quarterly Option
Series.14
The trading hours for FTSE 100
options would be from 8:30 a.m.
(Chicago time) to 3:15 p.m. (Chicago
time).15
The proposed FTSE 100 options
would expire on the third Friday of the
expiring month.16 Trading in expiring
FTSE 100 options would cease at 3:15
p.m. (Chicago time) one business day
prior (usually a Thursday) to the day on
which the exercise-settlement value is
calculated (usually a Friday). When the
last trading day/expiration date is
10 See Rules 24.9(d) 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.
11 See proposed amendments to Rule 24.9.01(a)
adding FTSE 100 options as a class eligible for 2.5
point minimum strike intervals if the strike price
is below 200.
12 See Rule 24.9.01(c).
13 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
FTSE 100 options.
14 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).
15 See Rule 24.6.
16 See proposed Rule 24.9(a)(3)(listing the
reduced value FTSE 100 Index as a European-style
index option approved for trading on the
Exchange).
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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. FTSE 100 options would be
A.M.-settled, in that the expiring
contract would cease trading on the
business day (usually a Thursday)
before the expiration date (generally a
Friday).17 The exercise settlement value
would be one-tenth (1/10th) of the FTSE
100 Index calculated via an intra-day
auction on the London Stock Exchange
that is held on the morning of the
expiration date (generally a Friday).18
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’’).19
Position and Exercise Limits
Exercise and Settlement
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69753
The Exchange proposes to apply the
default position limits for broad-based
index options to FTSE 100 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
FTSE 100 options would be equivalent
to the position limits for FTSE 100
options. All position limit hedge
exemptions would apply.
17 See proposed amendment to Rule 24.1.01 to
identify FTSE International Limited as the
Reporting Authority for the FTSE 100 Index. As the
designated Reporting Authority for the index, the
disclaimers set forth in Rule 24.14 (Disclaimers)
would apply to FTSE International Limited.
18 See proposed amendment to Rule 24.9(a)(4) to
specify that for FTSE 100 options the current index
value at expiration is based on intra-day auction
prices of the underlying securities on the last
trading day. The last day of trading continues to be
the business day preceding the last day of trading
in the underlying securities prior to expiration
because the business day preceding the last day of
trading in the underlying securities is (generally)
Thursday Chicago time and the last day of trading
in the underlying securities is (generally) Friday
Chicago time.
19 See Rule 24.7.
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Margin
The Exchange proposes that FTSE 100
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-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).
The Exchange believes that FTSE 100
options are an eligible product for
portfolio margining under CBOE Rule
12.4. Accordingly, the Exchange
proposes that FTSE 100 options be
allowed in portfolio margin accounts.
CBOE proposes that the FTSE 100 Index
be treated as a high-capitalization,
broad-based index and that a new
Product Group be established in which
to house a FTSE 100 Index Class Group.
This new Product Group would be
referred to as the ‘‘United Kingdom
Indexes Product Group. The assumed
market moves utilized for the new
Product Group would be ¥8%/+6%,
with a 100% offset of gains and losses
between products in the same Class
Group. With respect to a percentage
offset between Class Groups within the
United Kingdom Indexes Product
Group, none would be specified at this
time given that the FTSE 100 Index
would be the only Class Group.20
asabaliauskas on DSK5VPTVN1PROD with NOTICES
Exchange Rules Applicable
Except as modified herein, the rules
in Chapters I through XIX, XXIV,
XXIVA, and XXIVB would equally
apply to FTSE 100 options. FTSE 100
options would be subject to the same
rules that currently govern other CBOE
index options, including sales practice
rules,21 margin requirements 22 and
trading rules.23
20 A table detailing the currently existing portfolio
margining Product Groups and their component
class groups can be found at https://
www.optionsclearing.com/components/docs/riskmanagement/cpm/cpm_parameters.pd.
21 See Chapter IX (Doing Business with the
Public).
22 See Chapter XII (Margins).
23 See e.g., Chapters IV (Business Conduct), VI
(Doing Business on the Exchange Floor), Chapter
VIII (Market-Makers, Trading Crowds and Modified
Trading Systems) and Chapter XXIV (Index
Options).
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The Exchange hereby designates FTSE
100 options as eligible for trading as
Flexible Exchange Options as provided
for in Chapters XXIVA (Flexible
Exchange Options) and XXIVB (FLEX
Hybrid Trading System).24
Surveillance and Capacity
The Exchange represents that is has
an adequate surveillance program in
place for FTSE 100 options and intends
to use the same surveillance procedures
currently utilized for each of the
Exchange’s other index options to
monitor trading in FTSE 100 options.
The Exchange is a member of the
Intermarket Surveillance Group (‘‘ISG’’),
which ‘‘is comprised of an international
group of exchanges, market centers, and
market regulators.’’ 25 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
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. The United
Kingdom’s Financial Conduct
Authority, the regulator of the market on
which the constituent securities trade, is
also a member of IOSCO.26 A list
24 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 FTSE 100 Index would be equal to
the position limits for Non-FLEX options on the
index. Per existing Rules 24A.8, Exercise Limits,
and 24B.8, Exercise Limits, the exercise limits for
FLEX FTSE 100 options would be equivalent to the
position limits for FLEX FTSE 100 options.
25 See Intermarket Surveillance Group Web site,
available at https://www.isgportal.org/home.html.
26 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 (17) 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 (64) 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
PO 00000
Frm 00123
Fmt 4703
Sfmt 4703
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, including the
London Stock Exchange. Given the
capitalization of the FTSE 100 Index
and the deep and liquid markets for the
securities underlying this Index, the
concerns for market manipulation and/
or disruption in the underlying markets
are greatly reduced.
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 FTSE 100
options. Because the proposal is limited
to one new class, the Exchange believes
that the additional traffic that would be
generated from the introduction of FTSE
100 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.27 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 28 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 this popular cash index. As
described above, E-Mini FTSE 100
Index futures are listed for trading on
CME. In addition, other derivatives
contracts on the FTSE 100 Index are
listed for trading in Europe (e.g., Borsa
Italiana).29 As a result, CBOE believes
IOSCO Fact Sheet located at: https://www.iosco.org/
about/pdf/IOSCO-Fact-Sheet.pdf.
27 15 U.S.C. 78f(b).
28 15 U.S.C. 78f(b)(5).
29 See Fact Sheet for FTSE 100 Mini-Futures
traded on the Borsa Italiana, available at https://
E:\FR\FM\10NON1.SGM
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Federal Register / Vol. 80, No. 217 / Tuesday, November 10, 2015 / Notices
asabaliauskas on DSK5VPTVN1PROD with NOTICES
that FTSE 100 options are designed to
provide different and additional
opportunities for investors to hedge or
speculate on the market risk on the
FTSE 100 Index by listing an option
directly on the FTSE 100 Index.
The Exchanges believes that the FTSE
100 Index is not easily susceptible to
manipulation. The index is a broadbased index and has high market
capitalizations. The FTSE 100 Index is
comprised of 100 of the largest
companies traded on the London Stock
Exchange and no single component
comprises more than 10% of the index,
making it not easily subject to market
manipulation.
Additionally, because the index has
100 of the largest and most liquid stocks
listed on the London Stock Exchange,
the Exchange believes that the initial
listing requirements are appropriate to
trade options on the index. In addition,
similar to other broad-based indexes,
the Exchange proposes to adopt various
maintenance criteria, which would
require continual compliance and
periodic compliance.
FTSE 100 options would be subject to
the same rules that currently govern
other CBOE index options, including
sales practice rules,30 margin
requirements 31 and trading rules.32 The
Exchange would apply the same default
position limits for broad-based index
options to FTSE 100 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 limit for FTSE 100
options would be equivalent to the
position limit for FTSE 100 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 FTSE 100 options.
The Exchange represents that it has an
adequate surveillance program in place
for FTSE 100 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 FTSE 100 futures and
European-traded derivatives on the
FTSE 100 Index to the benefit of
investors and the marketplace.
www.lseg.com/sites/default/files/content/
documents/%E2%80%A2LSEG_ITA_Products_
Factsheet_v10.pdf.
30 See Chapter IX (Doing Business with the
Public).
31 See Chapter XII (Margins).
32 See e.g., Chapters IV (Business Conduct), VI
(Doing Business on the Exchange Floor), Chapter
VIII (Market-Makers, Trading Crowds and Modified
Trading Systems) and Chapter XXIV (Index
Options).
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±100. This file
number should be included on the
subject line if email is used. To help the
VerDate Sep<11>2014
19:41 Nov 09, 2015
Jkt 238001
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 rulecomments@sec.gov. Please include File
Number SR–CBOE–2015–100 on the
subject line.
PO 00000
Frm 00124
Fmt 4703
Sfmt 4703
69755
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–
2015–100 and should be submitted on
or before December 1, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.33
Brent J. Fields,
Secretary.
[FR Doc. 2015–28516 Filed 11–9–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76344; File No. SR–
NASDAQ–2015–115]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Modify
Chapter XV, Entitled ‘‘Options
Pricing,’’ at Section 2 Governing
Pricing for NASDAQ Members
November 4, 2015.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
22, 2015, The NASDAQ Stock Market
LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
33 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\10NON1.SGM
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]]>Agencies
[Federal Register Volume 80, Number 217 (Tuesday, November 10, 2015)]
[Notices]
[Pages 69751-69755]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-28516]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76353; File No. SR-CBOE-2015-100]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing of a Proposed Rule Change To List and
Trade Options That Overlie a Reduced Value of the FTSE 100 Index
November 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 October 30, 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.
---------------------------------------------------------------------------
\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
The Exchange is proposing to amend its rules to list and trade
options that overlie a reduced value of the FTSE 100 Index.
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 purpose of this proposed rule change is to permit the Exchange
to list and trade options that overlie the FTSE 100 Index (``FTSE 100
options''). FTSE 100 options would be A.M., cash-settled contracts with
European-style exercise.
FTSE 100 Index Design, Methodology and Dissemination
The FTSE 100 Index is a free float-adjusted market capitalization
index that is designed to measure the performance of the 100 largest
companies traded on the London Stock Exchange and valued in the British
pound (``GBP'').\3\ The Exchange notes that the Commission previously
approved for the Exchange, International Securities Exchange (``ISE''),
and NYSE Arca, Inc. (``NYSE
[[Page 69752]]
Arca'') to list reduced value index options on the FTSE 100 Index.\4\
Although the Exchange previously received approval to list FTSE 100
Index options, the Exchange is taking the opportunity to amend its
rules to, among other things, specifically identify the listing
criteria applicable to FTSE 100 options.
---------------------------------------------------------------------------
\3\ The FTSE 100 Index is a market-capitalization weighted index
of UK-listed blue chip companies which is valued on the British
pound. The index is part of the FTSE UK Series and is designed to
measure the performance of the 100 largest companies traded on the
London Stock Exchange that pass screening for size and liquidity.
FTSE 100 constituents are all traded on the London Stock Exchange's
SETS trading system. See FTSE 100 Index fact sheet (dated August 31,
2015) located at: https://www.ftse.com/Analytics/FactSheets/Home/DownloadSingleIssue?issueName=UKX.
\4\ See Securities Exchange Act Release No. 29722 (September 23,
1991), 56 FR 49807 (October 1, 1991) (order approving SR-CBOE-91-
07); Securities Exchange Act Release No. 53484 (March 14, 2006) 71
FR 14268 (March 21, 2006) (order approving SR-ISE-2005-25); and
Securities Exchange Act Release No. 58008 (June 24, 2008) 73 FR
36945 (June 30, 2008) (order approving SR-NYSEArca-2008-61).
---------------------------------------------------------------------------
The FTSE 100 Index was launched on January 3, 1984, and is
calculated by FTSE International Limited (``FTSE''), which is a
provider of investment support tools. The FTSE 100 Index is calculated
and published on a real-time basis in British pounds during U.K. and
U.S. trading hours: from 2:00-10:30 a.m. (Chicago time) the real-time
index is calculated using real time prices of the securities. At 10:30
a.m. (Chicago time) the real time index closes using the closing prices
from the London Stock Exchange. Thus, between 10:30 a.m. and 3:15 p.m.
(Chicago time) the FTSE 100 Index level is a static value that market
participants can access via data vendors.
The methodology used to calculate the FTSE 100 Index is similar to
the methodology used to calculate the value of other benchmark market-
capitalization weighted indexes. Specifically, the FTSE 100 Index is
governed by the Ground Rules for the FTSE UK Index Series.\5\ The level
of the FTSE 100 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 FTSE 100
Index by the index divisor.
---------------------------------------------------------------------------
\5\ Summary and comprehensive information about the FTSE 100
Index methodology may be reviewed at: https://www.ftse.com/products/downloads/FTSE_UK_Index_Series.pdf?78.
---------------------------------------------------------------------------
The FTSE 100 Index is monitored and maintained by FTSE. Adjustments
to the FTSE 100 Index could be made on a daily basis with respect to
corporate events and dividends. FTSE reviews the FTSE 100 Index
quarterly (March, June, September and December) according to rules for
inserting and deleting companies that ``are designed to provide
stability in the selection of constituents of the FTSE UK Index Series
while ensuring that the Indexes continue to be representative of the
market by including or excluding those companies which have risen or
fallen significantly.'' \6\
---------------------------------------------------------------------------
\6\ See id.
---------------------------------------------------------------------------
Real-time data is distributed at least every 15 seconds while the
index is being calculated using FTSE's real-time calculation engine to
Bloomberg L.P. (``Bloomberg''), Thomson Reuters (``Reuters'') and other
major vendors. End of day data is distributed daily to clients through
FTSE as well as through major quotation vendors, including Bloomberg
and Reuters.
The Exchange proposes to base trading in options on a fraction of
the full size of the FTSE 100 Index. In particular, the Exchange
proposes to list FTSE 100 options that are based on one one-tenth of
the value of the FTSE 100 Index. The Exchange believes that listing
options on the reduced value of the index will attract a greater source
of customer business than if options were based on the full value of
the FTSE 100 Index. The Exchange further believes that listing options
on a reduced value of the index will provide an opportunity for
investors to hedge, or speculate on, the market risk associated with
the stocks comprising the FTSE 100 Index. Additionally, by reducing the
value of the FTSE 100 Index, investors will be able to use this trading
vehicle while extending a smaller outlay of capital. The Exchange
believes this should attract additional investors, and, in turn, create
a more active and liquid trading environment.
Initial and Maintenance Listing Criteria
The FTSE 100 Index meets the definition of a broad-based index as
set forth in Rule 24.1(i)(1).\7\ In addition, the Exchange proposes to
create specific initial and maintenance listing criteria for options on
the FTSE 100 Index. Specifically, the Exchange proposes to add new
Interpretation and Policy .02(a) to Rule 24.2, Designation of the
Index, to provide that the Exchange may trade FTSE 100 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 A.M.-settled index options; (3) The index is capitalization-
weighted, price-weighted, modified capitalization-weighted or equal
dollar-weighted; (4) The index consists of 90 or more component
securities; (5) Each 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
twenty percent (20%) of the weight of the FTSE 100 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 FTSE 100 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 FTSE 100 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.
---------------------------------------------------------------------------
\7\ Rule 24.1(i)(1) defines a broad-based index to mean an index
designed to be representative of a stock market as a whole or of a
range of companies in unrelated industries.
---------------------------------------------------------------------------
Additionally, the Exchange proposes to add new Interpretation and
Policy .02(b) to Rule 24.2, Designation of the Index, to set forth the
following maintenance listing standards for options on the FTSE 100
Index: (1) The conditions set forth in subparagraphs .02(a) (1), (2),
(3), (4), (7), (8), (9) and (10) must continue to be satisfied. The
conditions set forth in subparagraphs .02(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 ten percent (10%) 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 A.M. settlement is appropriate for FTSE
100 options due to the nature of the index that encompasses the U.K.
market. The components of the FTSE 100 Index open
[[Page 69753]]
with the start of trading on the London Stock Exchange at approximately
2:00 a.m. (Chicago time) and close with the end of trading on the
London Stock Exchange at approximately 10:30 a.m. (Chicago time). As
noted above, from 2:00-10:30 a.m. (Chicago time) the FTSE 100 Index
level is calculated using real time prices of the securities. At 10:30
a.m. (Chicago time) the real time index closes using the closing prices
from the London Stock Exchange. Thus, between 10:30 a.m. and 3:15 p.m.
(Chicago time) the FTSE 100 Index level is a static value that market
participants can access via data vendors.
As a result, the FTSE 100 Index level will not be calculated using
real time prices of the constituent securities during a portion of the
day when options are trading, specifically between 10:30 a.m. and 3:15
p.m. (Chicago time).\8\ However, the futures contracts based on the
FTSE 100 Index that trade on CME will be trading during this time
period.\9\ The Exchange believes that the FTSE 100 futures prices would
be a proxy for the current FTSE 100 Index level. Therefore, the
Exchange believes that FTSE 100 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 FTSE 100 futures contracts are trading and prices for those
contracts may be used as a proxy for the current index value.
---------------------------------------------------------------------------
\8\ The trading hours for FTSE 100 options are from 8:30 a.m.
(Chicago time) to 3:15 p.m. (Chicago time).
\9\ The trading hours for E-Mini FTSE 100 Index futures are from
5:00 p.m. (Chicago time) to 4:00 p.m. (Chicago time) the following
day, Sunday through Friday. See E-Mini FTSE 100 Index Future
Contract specifications located at: https://www.cmegroup.com/education/files/e-mini-ftse-100-index-futures.pdf. CME lists E-mini
FTSE 100 Index futures denominated in GBP and USD. The Exchange
believes that either futures contract--GBP or USD--would be a
sufficient proxy for FTSE 100 options.
---------------------------------------------------------------------------
Because the FTSE 100 Index is comprised of 100 of the largest
companies traded on the London Stock Exchange, the Exchange believes
that the initial listing requirements are appropriate to trade options
on this index. In addition, similar to other broad based indexes, the
Exchange proposes various maintenance requirements, which require
continual compliance and periodic compliance.
Options Trading
Exhibit 3 presents contract specifications for FTSE 100 options.
The contract multiplier for FTSE 100 options would be $100. FTSE
100 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 at or above $3 will be 0.10 ($10.00).
Initially, the Exchange would list in-, at- and out-of-the-money
strike prices. Additional series may be opened for trading as the
underlying index level moves up or down.\10\ The minimum strike price
interval for FTSE 100 options 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.\11\ New series would be
permitted to be added up to the fifth business day prior to
expiration.\12\
---------------------------------------------------------------------------
\10\ See Rules 24.9(d) 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.
\11\ See proposed amendments to Rule 24.9.01(a) adding FTSE 100
options as a class eligible for 2.5 point minimum strike intervals
if the strike price is below 200.
\12\ See Rule 24.9.01(c).
---------------------------------------------------------------------------
The Exchange would be permitted to list up to twelve near-term
expiration months.\13\ The Exchange would also be permitted to list up
to ten expirations in Long-Term Index Option Series (``LEAPS'') on the
FTSE 100 Index and the index would be eligible for all other
expirations permitted for other broad-based index options, e.g., End of
Week/End of Month Expirations, Short Term Option Series and Quarterly
Option Series.\14\
---------------------------------------------------------------------------
\13\ 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 FTSE 100 options.
\14\ 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).
---------------------------------------------------------------------------
The trading hours for FTSE 100 options would be from 8:30 a.m.
(Chicago time) to 3:15 p.m. (Chicago time).\15\
---------------------------------------------------------------------------
\15\ See Rule 24.6.
---------------------------------------------------------------------------
Exercise and Settlement
The proposed FTSE 100 options would expire on the third Friday of
the expiring month.\16\ Trading in expiring FTSE 100 options would
cease at 3:15 p.m. (Chicago time) one business day prior (usually a
Thursday) to the day on which the exercise-settlement value is
calculated (usually a Friday). 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.
---------------------------------------------------------------------------
\16\ See proposed Rule 24.9(a)(3)(listing the reduced value FTSE
100 Index as a European-style index option approved for trading on
the Exchange).
---------------------------------------------------------------------------
Exercise would result in delivery of cash on the business day
following expiration. FTSE 100 options would be A.M.-settled, in that
the expiring contract would cease trading on the business day (usually
a Thursday) before the expiration date (generally a Friday).\17\ The
exercise settlement value would be one-tenth (1/10th) of the FTSE 100
Index calculated via an intra-day auction on the London Stock Exchange
that is held on the morning of the expiration date (generally a
Friday).\18\
---------------------------------------------------------------------------
\17\ See proposed amendment to Rule 24.1.01 to identify FTSE
International Limited as the Reporting Authority for the FTSE 100
Index. As the designated Reporting Authority for the index, the
disclaimers set forth in Rule 24.14 (Disclaimers) would apply to
FTSE International Limited.
\18\ See proposed amendment to Rule 24.9(a)(4) to specify that
for FTSE 100 options the current index value at expiration is based
on intra-day auction prices of the underlying securities on the last
trading day. The last day of trading continues to be the business
day preceding the last day of trading in the underlying securities
prior to expiration because the business day preceding the last day
of trading in the underlying securities is (generally) Thursday
Chicago time and the last day of trading in the underlying
securities is (generally) Friday Chicago time.
---------------------------------------------------------------------------
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'').\19\
---------------------------------------------------------------------------
\19\ See Rule 24.7.
---------------------------------------------------------------------------
Position and Exercise Limits
The Exchange proposes to apply the default position limits for
broad-based index options to FTSE 100 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 FTSE 100 options
would be equivalent to the position limits for FTSE 100 options. All
position limit hedge exemptions would apply.
[[Page 69754]]
Margin
The Exchange proposes that FTSE 100 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).
The Exchange believes that FTSE 100 options are an eligible product
for portfolio margining under CBOE Rule 12.4. Accordingly, the Exchange
proposes that FTSE 100 options be allowed in portfolio margin accounts.
CBOE proposes that the FTSE 100 Index be treated as a high-
capitalization, broad-based index and that a new Product Group be
established in which to house a FTSE 100 Index Class Group. This new
Product Group would be referred to as the ``United Kingdom Indexes
Product Group. The assumed market moves utilized for the new Product
Group would be -8%/+6%, with a 100% offset of gains and losses between
products in the same Class Group. With respect to a percentage offset
between Class Groups within the United Kingdom Indexes Product Group,
none would be specified at this time given that the FTSE 100 Index
would be the only Class Group.\20\
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\20\ A table detailing the currently existing portfolio
margining Product Groups and their component class groups can be
found at https://www.optionsclearing.com/components/docs/risk-management/cpm/cpm_parameters.pd.
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Exchange Rules Applicable
Except as modified herein, the rules in Chapters I through XIX,
XXIV, XXIVA, and XXIVB would equally apply to FTSE 100 options. FTSE
100 options would be subject to the same rules that currently govern
other CBOE index options, including sales practice rules,\21\ margin
requirements \22\ and trading rules.\23\
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\21\ See Chapter IX (Doing Business with the Public).
\22\ See Chapter XII (Margins).
\23\ See e.g., Chapters IV (Business Conduct), VI (Doing
Business on the Exchange Floor), Chapter VIII (Market-Makers,
Trading Crowds and Modified Trading Systems) and Chapter XXIV (Index
Options).
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The Exchange hereby designates FTSE 100 options as eligible for
trading as Flexible Exchange Options as provided for in Chapters XXIVA
(Flexible Exchange Options) and XXIVB (FLEX Hybrid Trading System).\24\
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\24\ 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 FTSE 100 Index would be equal to the position limits
for Non-FLEX options on the index. Per existing Rules 24A.8,
Exercise Limits, and 24B.8, Exercise Limits, the exercise limits for
FLEX FTSE 100 options would be equivalent to the position limits for
FLEX FTSE 100 options.
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Surveillance and Capacity
The Exchange represents that is has an adequate surveillance
program in place for FTSE 100 options and intends to use the same
surveillance procedures currently utilized for each of the Exchange's
other index options to monitor trading in FTSE 100 options.
The Exchange is a member of the Intermarket Surveillance Group
(``ISG''), which ``is comprised of an international group of exchanges,
market centers, and market regulators.'' \25\ 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 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.
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\25\ See Intermarket Surveillance Group Web site, available at
https://www.isgportal.org/home.html.
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The Exchange is also an affiliate member of the International
Organization of Securities Commissions (``IOSCO''), which has members
from over 100 different countries. The United Kingdom's Financial
Conduct Authority, the regulator of the market on which the constituent
securities trade, is also a member of IOSCO.\26\ 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, including the
London Stock Exchange. Given the capitalization of the FTSE 100 Index
and the deep and liquid markets for the securities underlying this
Index, the concerns for market manipulation and/or disruption in the
underlying markets are greatly reduced.
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\26\ 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 (17) 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 (64) 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.
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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 FTSE 100 options. Because the proposal is limited to one new class,
the Exchange believes that the additional traffic that would be
generated from the introduction of FTSE 100 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.\27\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \28\ 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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\27\ 15 U.S.C. 78f(b).
\28\ 15 U.S.C. 78f(b)(5).
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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 this
popular cash index. As described above, E-Mini FTSE 100 Index futures
are listed for trading on CME. In addition, other derivatives contracts
on the FTSE 100 Index are listed for trading in Europe (e.g., Borsa
Italiana).\29\ As a result, CBOE believes
[[Page 69755]]
that FTSE 100 options are designed to provide different and additional
opportunities for investors to hedge or speculate on the market risk on
the FTSE 100 Index by listing an option directly on the FTSE 100 Index.
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\29\ See Fact Sheet for FTSE 100 Mini-Futures traded on the
Borsa Italiana, available at https://www.lseg.com/sites/default/files/content/documents/%E2%80%A2LSEG_ITA_Products_Factsheet_v10.pdf.
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The Exchanges believes that the FTSE 100 Index is not easily
susceptible to manipulation. The index is a broad-based index and has
high market capitalizations. The FTSE 100 Index is comprised of 100 of
the largest companies traded on the London Stock Exchange and no single
component comprises more than 10% of the index, making it not easily
subject to market manipulation.
Additionally, because the index has 100 of the largest and most
liquid stocks listed on the London Stock Exchange, the Exchange
believes that the initial listing requirements are appropriate to trade
options on the index. In addition, similar to other broad-based
indexes, the Exchange proposes to adopt various maintenance criteria,
which would require continual compliance and periodic compliance.
FTSE 100 options would be subject to the same rules that currently
govern other CBOE index options, including sales practice rules,\30\
margin requirements \31\ and trading rules.\32\ The Exchange would
apply the same default position limits for broad-based index options to
FTSE 100 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 limit for FTSE 100
options would be equivalent to the position limit for FTSE 100 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 FTSE 100 options.
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\30\ See Chapter IX (Doing Business with the Public).
\31\ See Chapter XII (Margins).
\32\ See e.g., Chapters IV (Business Conduct), VI (Doing
Business on the Exchange Floor), Chapter VIII (Market-Makers,
Trading Crowds and Modified Trading Systems) and Chapter XXIV (Index
Options).
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The Exchange represents that it has an adequate surveillance
program in place for FTSE 100 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 FTSE 100 futures and European-traded derivatives on the FTSE 100
Index to the benefit of investors and the marketplace.
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-2015-100 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-2015-100. 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-2015-100 and should be
submitted on or before December 1, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
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\33\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-28516 Filed 11-9-15; 8:45 am]
BILLING CODE 8011-01-P
