Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change Related to Options That Overlie the MSCI EAFE Index and the MSCI Emerging Markets Index, 13429-13433 [2016-05587]

Download as PDF Federal Register / Vol. 81, No. 49 / Monday, March 14, 2016 / Notices waiving the 30-day operative delay is consistent with the protection of investors and the public interest as it will allow dealers to immediately begin providing more accurate price and yield data to the MSRB, which reflects the actual frequency of interest payments. Accordingly, the Commission hereby waives the 30-day operative delay specified in Rule 19b-4(f)(6)(iii) and designates the proposed rule change to be operative upon filing.20 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 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: jstallworth on DSK7TPTVN1PROD 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– MSRB–2016–03 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549. All submissions should refer to File Number SR–MSRB–2016–03. 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 20 For the purpose of waiving the 30-day operative delay for this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). VerDate Sep<11>2014 14:27 Mar 11, 2016 Jkt 238001 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 MSRB. 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–MSRB– 2016–03 and should be submitted on or before April 4,2016. For the Commission, pursuant to delegated authority.21 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–05586 Filed 3–11–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–77320; File No. SR– NASDAQ–2016–002] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Designation of a Longer Period for Commission Action on Proposed Rule Change to List and Trade Shares of the First Trust Municipal High Income ETF March 8, 2016. On January 6, 2016, The NASDAQ Stock Market LLC (‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade shares of the First Trust Municipal High Income ETF under Nasdaq Rule 5735. The proposed rule change was published for comment in the Federal Register on January 27, 2016.3 The Commission has not received any comments on the proposal. Section 19(b)(2) of the Act 4 provides that within 45 days of the publication of notice of the filing of a proposed rule change, or within such longer period up to 90 days as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding, or as to which the 21 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 76944 (Jan. 21, 2016), 81 FR 4712. 4 15 U.S.C. 78s(b)(2). self-regulatory organization consents, the Commission shall either approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether the proposed rule change should be disapproved. The 45th day after publication of the notice for this proposed rule change is March 12, 2016. The Commission is extending this 45day time period. The Commission finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider this proposed rule change. Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,5 designates April 26, 2016, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change (File No. SR–NASDAQ–2016–002) For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.6 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–05588 Filed 3–11–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–77319; File No. SR–CBOE– 2016–016] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change Related to Options That Overlie the MSCI EAFE Index and the MSCI Emerging Markets Index March 8, 2016. 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 29, 2016, Chicago Board Options Exchange, Incorporated (the ‘‘Exchange’’ or ‘‘CBOE’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons and, for the 1 15 PO 00000 Frm 00120 Fmt 4703 Sfmt 4703 13429 5 Id. 6 17 CFR 200.30–3(a)(31). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\14MRN1.SGM 14MRN1 13430 Federal Register / Vol. 81, No. 49 / Monday, March 14, 2016 / Notices reasons discussed below, is approving the proposal on an accelerated basis. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange seeks to amend the listing criteria for options that overlie the MSCI EAFE Index and the MSCI Emerging Markets Index (‘‘EAFE options’’ and ‘‘EM options’’). The text of the proposed rule change is available on the Exchange’s Web site (https:// www.cboe.com/AboutCBOE/ CBOELegalRegulatoryHome.aspx), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item III below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. jstallworth on DSK7TPTVN1PROD with NOTICES A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On April 8, 2015, the Commission approved CBOE’s proposal to list and trade options on the MSCI EAFE Index (‘‘EAFE Index’’) and the MSCI Emerging Markets Index (‘‘EM Index’’).3 Rule 24.2.01(a) sets forth the initial listing standards for EAFE and EM options. Rule 24.2.01(b) sets forth the maintenance listing standards for EAFE and EM options. All of the maintenance listing requirements set forth in Rule 24.2.01(b) are met except for the requirement that the initial listing standard of Rule 24.2.01(a)(7) continues to be met. Rule 24.2.01(a)(7) currently states that Non-U.S. component securities (stocks or ADRs) that are not subject to comprehensive surveillance agreements (‘‘CSAs’’) 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. Due to unforeseen 3 See Securities Exchange Act Release No. 74681 (April 8, 2015), 80 FR 20032 (April 14, 2015) (approving SR–CBOE–2015–023). VerDate Sep<11>2014 14:27 Mar 11, 2016 Jkt 238001 circumstances, as described below, the EAFE and EM Indexes no longer meet this requirement; thus, the Exchange is seeking to amend Rule 24.2.01(a)(7) (criteria ‘‘No. 7’’) to raise the CSA percentage for the EAFE and EM Indexes by five percent (5%). EAFE Index The 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 EAFE Index consists of large and midcap components, has 928 constituents and ‘‘covers approximately 85% of the free float-adjusted market capitalization in each country.’’ 4 In order for EAFE options to meet listing criteria No. 7, the Exchange relied on Intermarket Surveillance Group (‘‘ISG’’) 5 membership 6 as well as several CSAs 7 that the Exchange has entered into with relevant stock exchanges. One of the CSAs that the Exchange relied upon was the CSA with the Association of Swiss Exchanges (the ‘‘Association’’), which is the predecessor to SIX Swiss Exchange (‘‘SIX Swiss’’). However, CBOE was recently informed by SIX Swiss that the Association’s activities have ceased and that SIX Swiss was unable to find evidence of a transfer of the CSA to SIX Swiss. The Exchange has been in contact with SIX Swiss in an attempt to enter into a new CSA, but the Exchange has thus far been unable to execute a new CSA with SIX Swiss. The component securities of the EAFE Index that trade on SIX Swiss represent approximately 9.5% of the weight of the EAFE Index. When relying on the CSA 4 See EAFE Index fact sheet (dated January 29, 2016) located at: https://www.msci.com/resources/ factsheets/index_fact_sheet/msci-eafe-index-usdprice.pdf. 5 The ISG ‘‘is comprised of an international group of exchanges, market centers, and market regulators.’’ See Intermarket Surveillance Group Web site, available at https://www.isgportal.org/ home.html. 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. 6 The component securities that represent a majority of the weight of the EAFE and EM Indexes are traded on exchanges that are members of ISG. 7 For the EAFE and EM Indexes, the CSAs are in the form of Memorandum of Understanding (‘‘MOUs’’) or information sharing agreements. PO 00000 Frm 00121 Fmt 4703 Sfmt 4703 with the Association, the non-U.S. component securities (stocks or ADRs) that are not subject to CSAs do not, in the aggregate, represent more than 20% of the weight of the EAFE Index. Currently, without relying on the CSA with the Association, the non-U.S. component securities (stocks or ADRs) that are not subject to CSAs do not, in the aggregate, represent more than approximately 24.5% of the weight of the EAFE Index. Thus, the Exchange is seeking to amend listing criteria No. 7 for EAFE options to raise the percentage of non-U.S. component securities that do not need to be subject to CSAs from twenty percent (20%) to twenty-five percent (25%). The Exchange represents that raising the percent will not have an adverse impact on the Exchange’s surveillance program. The Exchange represents that it will still have an adequate surveillance program in place for EAFE options and will continue to use the same surveillance procedures currently utilized for each of the Exchange’s other index options to monitor trading in EAFE options. Furthermore, the EAFE Index is a broad-based index with 928 constituents. The component stocks of the EAFE Index have a market capitalization of 11,444,154.78 (USD Millions) with an average market capitalization per constituent of 12,332.06 (USD Millions). Additionally, the component stocks have an average daily volume of over 5 billion with an average daily volume per constituent of over 5 million. Also, the largest constituent in the EAFE Index currently only accounts for 2.04% of the weight of the EAFE Index. Given the high number of constituents and capitalization of the EAFE Index 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. EM Index The 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 EM Index consists of large and midcap components, has 837 constituents and ‘‘covers approximately 85% of the free float-adjusted market capitalization in each country.’’ 8 8 See EM Index fact sheet (dated January 29, 2016) located at: https://www.msci.com/resources/ E:\FR\FM\14MRN1.SGM 14MRN1 Federal Register / Vol. 81, No. 49 / Monday, March 14, 2016 / Notices jstallworth on DSK7TPTVN1PROD with NOTICES In order for EM options to meet listing criteria No. 7, the Exchange relied on ISG membership as well as several CSAs that have been entered into with relevant stock exchanges. One of the CSAs that the Exchange relied upon was the CSA with Bolsa de Valores de Sao Paulo (‘‘BOVESPA’’), which is the predecessor to Bolsa de Valores Mercadorias e Futuros (‘‘BM&FBOVESPA’’). However, CBOE was recently informed by BM&FBOVESPA that a Brazilian law prevents BM&FBOVESPA from providing information to CBOE under the CSA. The component securities of the EM Index that trade on BM&FBOVESPA represent approximately 5.5% of the weight of the EM Index. When relying on the CSA with BOVESPA the non-U.S. component securities (stocks or ADRs) that are not subject to CSAs do not, in the aggregate, represent more than approximately 22.5% of the weight of the EM Index. Currently, without relying on the CSA with BOVESPA, the non-U.S. component securities (stocks or ADRs) that are not subject to CSAs do not, in the aggregate, represent more than approximately 24.5% of the weight of the EM Index. Thus, the Exchange is seeking to amend listing criteria No. 7 for EM options to raise the percentage of non-U.S. component securities that do not need to be subject to CSAs from twenty-two and a half percent (22.5%) to twenty-seven and a half percent (27.5%).9 The Exchange represents that raising the percent will not have an adverse impact on the Exchange’s surveillance program. The Exchange represents that it will still have an adequate surveillance program in place for EM options and will continue to use the same surveillance procedures currently utilized for each of the Exchange’s other index options to monitor trading in EM options. Furthermore, the EM Index is a broadbased index with 837 constituents. The component stocks of the EM Index have a market capitalization of 3,219,779.13 (USD Millions) and average market capitalization per constituent of 3,846.81 (USD Millions). Additionally, the component stocks have an average daily volume of over 25 billion with an average daily volume per constituent of over 30 million. Also, the largest constituent in the EM Index currently only accounts for 3.29% of the weight of the EM Index. Given the high number of constituents and capitalization of the EM Index 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. Conclusion EAFE and EM options are currently listed for trading on CBOE. The Exchange generally adds new series after an expiration, which allows trading to commence in the new series on the first trading day after the expiration date. The Exchange currently lists EAFE and EM options that expire in February, March, April, June, September, and December. Additional series, specifically EAFE and EM options that expire in May, are scheduled to be added after expiration on March 18, 2016, which will allow trading to commence in the additional series on the next trading day of March 21, 2016. Without this amendment, EAFE and EM options cannot meet the continuing listing criteria of Rule 24.2.01(b), specifically criteria No. 7, which will prevent the Exchange from adding the EAFE and EM options that expire in May.10 The inability to add the EAFE and EM options that expire in May would be a detriment to market participants seeking to hedge positions in exchange-traded funds (‘‘ETFs’’) based on the EAFE and EM indexes (‘‘EFA’’ and ‘‘EEM,’’ respectively), options on EFA and EEM, EAFE and EM futures, and European-traded derivatives on the EAFE and EM Indexes. Additionally, to the extent market participants want to roll a position in EAFE and EM options that expire in April to a position that expires in May, they will be prevented from doing so without this amendment. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder, including the requirements of Section 6(b) of the Act.11 In particular, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 12 requirements that 10 Rule factsheets/index_fact_sheet/msci-emergingmarkets-index-usd-price.pdf. 9 The Exchange notes that the iShares MSCI Emerging Markets ETF (‘‘EEM’’), which is also based on the EM Index, is only required to have 50% of the component securities subject to CSAs. See Securities Exchange Act Release No. 53824 (May 17, 2006), 71 FR 30003 (May 24, 2006) (SR– Amex–2006–43). VerDate Sep<11>2014 14:27 Mar 11, 2016 Jkt 238001 24.2.01(b)(2) states that ‘‘[i]n 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.’’ 11 15 U.S.C. 78f(b). 12 15 U.S.C. 78f(b)(5). PO 00000 Frm 00122 Fmt 4703 Sfmt 4703 13431 the rules of an exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and to perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. In particular, the Exchange believes that both the EAFE Index and the EM Index are not easily susceptible to manipulation. Both indexes are broadbased indexes and have high market capitalizations. The EAFE Index is comprised of 928 component stocks, the component stocks have a market capitalization of 11,444,154.78 (USD Millions) and average daily volume of over 5 billion, and no single component comprises more than 3.5% [sic] of the index, making it not easily subject to market manipulation. Similarly, the EM Index is comprised of 837 component stocks, the component stocks have a market capitalization of 3,219,779.13 (USD Millions) and average daily volume of over 25 billion, and no single component comprises more than 3.5% of the index, making it not easily subject to market manipulation. The purpose of a CSA is to allow the Exchange to investigate manipulation if it were to occur on a foreign exchange at which one of the component securities trades. However, as described above, the EAFE and EM Indexes are unlikely to be susceptible to manipulation; thus, raising the CSA percentage for the EAFE and EM Indexes by only five percent (5%) is unlikely to affect the Exchange’s ability to investigate 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 revised listing requirements are appropriate to trade options on these indexes. The Exchange also represents that it has an adequate surveillance program in place for EAFE and EM options. B. Self-Regulatory Organization’s Statement on Burden on Competition This proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Specifically, CBOE believes the proposed rule change will allow the continued listing and trading of EAFE E:\FR\FM\14MRN1.SGM 14MRN1 13432 Federal Register / Vol. 81, No. 49 / Monday, March 14, 2016 / Notices and EM options, which enhances competition among market participants and provides different types of options to compete with domestic products such as EFA and EMM [sic], which seek to track the EAFE and EM Indexes, respectively, EFA and EEM options, EAFE and EM futures and Europeantraded derivatives on the EAFE Index and the EM Index to the benefit of investors and the marketplace. For all the reasons stated above, the Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act, and believes the proposed change will enhance competition among similar products. 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. 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: jstallworth on DSK7TPTVN1PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CBOE–2016–016 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–CBOE–2016–016. 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 VerDate Sep<11>2014 14:27 Mar 11, 2016 Jkt 238001 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– 2016–016, and should be submitted on or before April 4, 2016. IV. Commission’s Findings and Order Granting Accelerated Approval of Proposed Rule Change After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.13 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,14 which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. In order to list options on the EAFE and EM indexes, CBOE Rule 24.2.01(a)(7) requires that any non-U.S. component securities that are not subject to CSAs must 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. The Exchange proposes to raise the percentage of non-U.S. component securities that do not need to be subject to CSAs to twenty-five percent (25%) for the EAFE Index and twenty-seven and a half percent (27.5%) for the EM Index. The Exchange stated 13 15 U.S.C. 78f(b). In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 14 15 U.S.C. 78f(b)(5). PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 that both indexes are broad-based indexes, have high market capitalizations, and have components with high trading volume. Given the high number of constituents and the overall high capitalization of the EAFE and EM Indexes and the deep and liquid markets for the securities underlying these indexes, the Exchange believes that the concerns for market manipulation or disruption in the underlying markets are greatly reduced. Therefore, the Exchange believes that a five percent increase would not likely impact its ability to investigate manipulation in these products. Additionally, in its filing, the Exchange represented that it will maintain an adequate surveillance program for EAFE and EM options and will continue to use the same surveillance procedures currently utilized for each of the Exchange’s other index options to monitor trading in these products. Based on these representations, the Commission believes the modest increase in the applicable percentages of non-U.S. component securities that do not need to be subject to CSA requirements is not likely to have a material effect on CBOE’s ability to surveil for potential manipulation in EAFE and EM options. Therefore, the Commission believes that approval of this proposal is appropriate. The Exchange has requested that the Commission find good cause for approving the proposed rule change prior to the 30th day after publication of the notice thereof in the Federal Register. The Exchange stated that accelerated approval of its proposal will allow CBOE to add new series of EAFE and EM options that expire in May (which would be listed after the March expiration). The Exchange believes that the inability to add additional series in EAFE and EM options would be a detriment to market participants seeking to hedge positions in EFA and EEM, options on EFA and EEM, EAFE and EM futures, and European-traded derivatives on the EAFE and EM Indexes. Additionally, the Exchange stated that, without accelerated approval of its proposal, market participants would be unable to roll a position in EAFE and EM options that expires in April to a position that expires in May. The Commission believes that good cause exists for accelerated approval of the proposed rule change because it raises no novel issues and the modest increase in the applicable percentages of non-U.S. component securities that do not need to be subject to CSA requirements is not likely to impose a material change in E:\FR\FM\14MRN1.SGM 14MRN1 Federal Register / Vol. 81, No. 49 / Monday, March 14, 2016 / Notices CBOE’s ability to surveil for potential manipulation in EAFE and EM options or adversely affect market participants. The Commission further believes that approval of this proposal on an accelerated basis should benefit investors by creating, without undue delay, additional competition in the market for these and similar products. Accordingly, the Commission finds good cause, pursuant to Section 19(b)(2) of the Act,15 to approve the proposed rule change prior to the 30th day after the date of publication of the notice of filing thereof in the Federal Register. V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,16 that the proposed rule change (SR–CBOE–2016– 016) be, and hereby is, approved on an accelerated basis. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–05587 Filed 3–11–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–77323; File No. 4–443] Joint Industry Plan; Notice of Filing and Immediate Effectiveness of Amendment to the Plan for the Purpose of Developing and Implementing Procedures Designed To Facilitate the Listing and Trading of Standardized Options To Add ISE Mercury, LLC as a Plan Sponsor March 8, 2016. Pursuant to Section 11A(a)(3) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 608 thereunder,2 notice is hereby given that on February 11, 2016, ISE Mercury, LLC (‘‘ISE Mercury’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) an amendment to the Plan for the Purpose of Developing and Implementing Procedures Designed to Facilitate the Listing and Trading of Standardized Options (‘‘OLPP’’).3 The 15 15 U.S.C. 78s(b)(2). U.S.C. 78s(b)(2). 17 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78k–1(a)(3). 2 17 CFR 242.608. 3 On July 6, 2001, the Commission approved the OLPP, which was proposed by the American Stock Exchange LLC (‘‘Amex’’), Chicago Board Options Exchange, Incorporated (‘‘CBOE’’), International Securities Exchange LLC (‘‘ISE’’), Options Clearing Corporation (‘‘OCC’’), Philadelphia Stock Exchange, Inc. (‘‘Phlx’’), and Pacific Exchange, Inc. (n/k/a jstallworth on DSK7TPTVN1PROD with NOTICES 16 15 VerDate Sep<11>2014 14:27 Mar 11, 2016 Jkt 238001 amendment adds ISE Mercury as a Sponsor 4 of the OLPP. The Commission is publishing this notice to solicit comments on the amendment from interested persons. I. Description and Purpose of the Amendment The OLPP establishes procedures designed to facilitate the listing and trading of standardized options contracts on the options exchanges. The amendment to the OLPP adds ISE Mercury as a Sponsor. The other OLPP Sponsors are Amex, BATS, BOX, BX, CBOE, C2, EDGX, ISE, MIAX, Nasdaq, NYSE Arca, OCC, Phlx, and Topaz. ISE Mercury has submitted an executed copy of the OLPP to the Commission in accordance with the procedures set forth in the OLPP regarding new Sponsors. Section 7 of the OLPP provides for the entry of new Sponsors to the OLPP. Specifically, Section 7 of the OLPP provides that an Eligible Exchange 5 may become a Sponsor of the OLPP by: (i) Executing a copy of the OLPP, as then in effect; (ii) providing each current Sponsor with a copy of such executed OLPP; and (iii) effecting ‘‘NYSE Arca’’). See Securities Exchange Act Release No. 44521, 66 FR 36809 (July 13, 2001). See also Securities Exchange Act Release Nos. 49199 (February 5, 2004), 69 FR 7030 (February 12, 2004) (adding Boston Stock Exchange, Inc. as a Sponsor to the OLPP); 57546 (March 21, 2008), 73 FR 16393 (March 27, 2008) (adding Nasdaq Stock Market, LLC (‘‘Nasdaq’’) as a Sponsor to the OLPP); 61528 (February 17, 2010), 75 FR 8415 (February 24, 2010) (adding BATS Exchange, Inc. (‘‘BATS’’) as a Sponsor to the OLPP); 63162 (October 22, 2010), 75 FR 66401 (October 28, 2010) (adding C2 Options Exchange Incorporated (‘‘C2’’) as a sponsor to the OLPP); 66952 (May 9, 2012), 77 FR 28641 (May 15, 2012) (adding BOX Options Exchange LLC (‘‘BOX’’) as a Sponsor to the OLPP); 67327 (June 29, 2012), 77 FR 40125 (July 6, 2012) (adding Nasdaq OMX BX, Inc. (‘‘BX’’) as a Sponsor to the OLPP); 70765 (October 28, 2013), 78 FR 65739 (November 1, 2013) (adding Topaz Exchange, LLC as a Sponsor to the OLPP (‘‘Topaz’’); 70764 (October 28, 2013), 78 FR 65733 (November 1, 2013) (adding Miami International Securities Exchange, LLC (‘‘MIAX’’) as a Sponsor to the OLPP); and 76822 (January 1, 2016), 81 FR 1251 (January 11, 2016) (adding EDGX Exchange, Inc. (‘‘EDGX’’) as a Sponsor to the OLPP). 4 A ‘‘Sponsor’’ is an Eligible Exchange whose participation in the OLPP has become effective pursuant to Section 7 of the Plan. 5 The OLPP defines an ‘‘Eligible Exchange’’ as a national securities exchange registered with the Commission pursuant to Section 6(a) of the Exchange Act, 15 U.S.C. 78f(a), that (1) has effective rules for the trading of options contracts issued and cleared by the OCC approved in accordance with the provisions of the Exchange Act and the rules and regulations thereunder and (2) is a party to the Plan for Reporting Consolidated Options Last Sale Reports and Quotation Information (the ‘‘OPRA Plan’’). ISE Mercury has represented that it has met both the requirements for being considered an Eligible Exchange. See letter from Michael Simon, Secretary, ISE, to Brent J. Fields, Secretary, Commission, dated February 9, 2016. PO 00000 Frm 00124 Fmt 4703 Sfmt 4703 13433 an amendment to the OLPP, as specified in Section 7(ii) of the OLPP. Section 7(ii) of the OLPP sets forth the process by which an Eligible Exchange may effect an amendment to the OLPP. Specifically, an Eligible Exchange must: (a) Execute a copy of the OLPP with the only change being the addition of the new Sponsor’s name in Section 8 of the OLPP; 6 and (b) submit the executed OLPP to the Commission. The OLPP then provides that such an amendment will be effective when the amendment is approved by the Commission or otherwise becomes effective pursuant to Section 11A of the Act and Rule 608 thereunder. II. Effectiveness of the OLPP Amendment The foregoing OLPP amendment has become effective pursuant to Rule 608(b)(3)(iii) 7 because it involves solely technical or ministerial matters. At any time within sixty days of the filing of this amendment, the Commission may summarily abrogate the amendment and require that it be refiled pursuant to paragraph (a)(1) of Rule 608,8 if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors or the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanisms of, a national market system or otherwise in furtherance of the purposes of the Act. III. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the amendment 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 4–443 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 4–443. This file number should be included on the subject line if email is used. To help the Commission 6 The Commission notes that the list of Sponsors is set forth in Section 9 of the OLPP. 7 17 CFR 242.608(b)(3)(iii). 8 17 CFR 242.608(a)(1). E:\FR\FM\14MRN1.SGM 14MRN1

Agencies

[Federal Register Volume 81, Number 49 (Monday, March 14, 2016)]
[Notices]
[Pages 13429-13433]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-05587]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77319; File No. SR-CBOE-2016-016]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Order Granting Accelerated Approval 
of a Proposed Rule Change Related to Options That Overlie the MSCI EAFE 
Index and the MSCI Emerging Markets Index

March 8, 2016.
    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 29, 2016, Chicago Board Options Exchange, 
Incorporated (the ``Exchange'' or ``CBOE'') filed with the Securities 
and Exchange Commission (the ``Commission'') the proposed rule change 
as described in Items I and II below, which Items have been prepared by 
the Exchange. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons and, for 
the

[[Page 13430]]

reasons discussed below, is approving the proposal on an accelerated 
basis.
---------------------------------------------------------------------------

    \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 seeks to amend the listing criteria for options that 
overlie the MSCI EAFE Index and the MSCI Emerging Markets Index (``EAFE 
options'' and ``EM options''). The text of the proposed rule change is 
available on the Exchange's Web site (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the 
Secretary, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III 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
    On April 8, 2015, the Commission approved CBOE's proposal to list 
and trade options on the MSCI EAFE Index (``EAFE Index'') and the MSCI 
Emerging Markets Index (``EM Index'').\3\ Rule 24.2.01(a) sets forth 
the initial listing standards for EAFE and EM options. Rule 24.2.01(b) 
sets forth the maintenance listing standards for EAFE and EM options. 
All of the maintenance listing requirements set forth in Rule 
24.2.01(b) are met except for the requirement that the initial listing 
standard of Rule 24.2.01(a)(7) continues to be met. Rule 24.2.01(a)(7) 
currently states that Non-U.S. component securities (stocks or ADRs) 
that are not subject to comprehensive surveillance agreements 
(``CSAs'') 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. Due to unforeseen 
circumstances, as described below, the EAFE and EM Indexes no longer 
meet this requirement; thus, the Exchange is seeking to amend Rule 
24.2.01(a)(7) (criteria ``No. 7'') to raise the CSA percentage for the 
EAFE and EM Indexes by five percent (5%).
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 74681 (April 8, 
2015), 80 FR 20032 (April 14, 2015) (approving SR-CBOE-2015-023).
---------------------------------------------------------------------------

EAFE Index
    The 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 EAFE Index consists of large and midcap 
components, has 928 constituents and ``covers approximately 85% of the 
free float-adjusted market capitalization in each country.'' \4\
---------------------------------------------------------------------------

    \4\ See EAFE Index fact sheet (dated January 29, 2016) located 
at: https://www.msci.com/resources/factsheets/index_fact_sheet/msci-eafe-index-usd-price.pdf.
---------------------------------------------------------------------------

    In order for EAFE options to meet listing criteria No. 7, the 
Exchange relied on Intermarket Surveillance Group (``ISG'') \5\ 
membership \6\ as well as several CSAs \7\ that the Exchange has 
entered into with relevant stock exchanges. One of the CSAs that the 
Exchange relied upon was the CSA with the Association of Swiss 
Exchanges (the ``Association''), which is the predecessor to SIX Swiss 
Exchange (``SIX Swiss''). However, CBOE was recently informed by SIX 
Swiss that the Association's activities have ceased and that SIX Swiss 
was unable to find evidence of a transfer of the CSA to SIX Swiss. The 
Exchange has been in contact with SIX Swiss in an attempt to enter into 
a new CSA, but the Exchange has thus far been unable to execute a new 
CSA with SIX Swiss. The component securities of the EAFE Index that 
trade on SIX Swiss represent approximately 9.5% of the weight of the 
EAFE Index. When relying on the CSA with the Association, the non-U.S. 
component securities (stocks or ADRs) that are not subject to CSAs do 
not, in the aggregate, represent more than 20% of the weight of the 
EAFE Index. Currently, without relying on the CSA with the Association, 
the non-U.S. component securities (stocks or ADRs) that are not subject 
to CSAs do not, in the aggregate, represent more than approximately 
24.5% of the weight of the EAFE Index. Thus, the Exchange is seeking to 
amend listing criteria No. 7 for EAFE options to raise the percentage 
of non-U.S. component securities that do not need to be subject to CSAs 
from twenty percent (20%) to twenty-five percent (25%).
---------------------------------------------------------------------------

    \5\ The ISG ``is comprised of an international group of 
exchanges, market centers, and market regulators.'' See Intermarket 
Surveillance Group Web site, available at https://www.isgportal.org/home.html. 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.
    \6\ The component securities that represent a majority of the 
weight of the EAFE and EM Indexes are traded on exchanges that are 
members of ISG.
    \7\ For the EAFE and EM Indexes, the CSAs are in the form of 
Memorandum of Understanding (``MOUs'') or information sharing 
agreements.
---------------------------------------------------------------------------

    The Exchange represents that raising the percent will not have an 
adverse impact on the Exchange's surveillance program. The Exchange 
represents that it will still have an adequate surveillance program in 
place for EAFE options and will continue to use the same surveillance 
procedures currently utilized for each of the Exchange's other index 
options to monitor trading in EAFE options.
    Furthermore, the EAFE Index is a broad-based index with 928 
constituents. The component stocks of the EAFE Index have a market 
capitalization of 11,444,154.78 (USD Millions) with an average market 
capitalization per constituent of 12,332.06 (USD Millions). 
Additionally, the component stocks have an average daily volume of over 
5 billion with an average daily volume per constituent of over 5 
million. Also, the largest constituent in the EAFE Index currently only 
accounts for 2.04% of the weight of the EAFE Index. Given the high 
number of constituents and capitalization of the EAFE Index 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.
EM Index
    The 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 EM Index consists of large and midcap 
components, has 837 constituents and ``covers approximately 85% of the 
free float-adjusted market capitalization in each country.'' \8\
---------------------------------------------------------------------------

    \8\ See EM Index fact sheet (dated January 29, 2016) located at: 
https://www.msci.com/resources/factsheets/index_fact_sheet/msci-emerging-markets-index-usd-price.pdf.

---------------------------------------------------------------------------

[[Page 13431]]

    In order for EM options to meet listing criteria No. 7, the 
Exchange relied on ISG membership as well as several CSAs that have 
been entered into with relevant stock exchanges. One of the CSAs that 
the Exchange relied upon was the CSA with Bolsa de Valores de Sao Paulo 
(``BOVESPA''), which is the predecessor to Bolsa de Valores Mercadorias 
e Futuros (``BM&FBOVESPA''). However, CBOE was recently informed by 
BM&FBOVESPA that a Brazilian law prevents BM&FBOVESPA from providing 
information to CBOE under the CSA. The component securities of the EM 
Index that trade on BM&FBOVESPA represent approximately 5.5% of the 
weight of the EM Index. When relying on the CSA with BOVESPA the non-
U.S. component securities (stocks or ADRs) that are not subject to CSAs 
do not, in the aggregate, represent more than approximately 22.5% of 
the weight of the EM Index. Currently, without relying on the CSA with 
BOVESPA, the non-U.S. component securities (stocks or ADRs) that are 
not subject to CSAs do not, in the aggregate, represent more than 
approximately 24.5% of the weight of the EM Index. Thus, the Exchange 
is seeking to amend listing criteria No. 7 for EM options to raise the 
percentage of non-U.S. component securities that do not need to be 
subject to CSAs from twenty-two and a half percent (22.5%) to twenty-
seven and a half percent (27.5%).\9\
---------------------------------------------------------------------------

    \9\ The Exchange notes that the iShares MSCI Emerging Markets 
ETF (``EEM''), which is also based on the EM Index, is only required 
to have 50% of the component securities subject to CSAs. See 
Securities Exchange Act Release No. 53824 (May 17, 2006), 71 FR 
30003 (May 24, 2006) (SR-Amex-2006-43).
---------------------------------------------------------------------------

    The Exchange represents that raising the percent will not have an 
adverse impact on the Exchange's surveillance program. The Exchange 
represents that it will still have an adequate surveillance program in 
place for EM options and will continue to use the same surveillance 
procedures currently utilized for each of the Exchange's other index 
options to monitor trading in EM options.
    Furthermore, the EM Index is a broad-based index with 837 
constituents. The component stocks of the EM Index have a market 
capitalization of 3,219,779.13 (USD Millions) and average market 
capitalization per constituent of 3,846.81 (USD Millions). 
Additionally, the component stocks have an average daily volume of over 
25 billion with an average daily volume per constituent of over 30 
million. Also, the largest constituent in the EM Index currently only 
accounts for 3.29% of the weight of the EM Index. Given the high number 
of constituents and capitalization of the EM Index 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.
Conclusion
    EAFE and EM options are currently listed for trading on CBOE. The 
Exchange generally adds new series after an expiration, which allows 
trading to commence in the new series on the first trading day after 
the expiration date. The Exchange currently lists EAFE and EM options 
that expire in February, March, April, June, September, and December. 
Additional series, specifically EAFE and EM options that expire in May, 
are scheduled to be added after expiration on March 18, 2016, which 
will allow trading to commence in the additional series on the next 
trading day of March 21, 2016. Without this amendment, EAFE and EM 
options cannot meet the continuing listing criteria of Rule 24.2.01(b), 
specifically criteria No. 7, which will prevent the Exchange from 
adding the EAFE and EM options that expire in May.\10\ The inability to 
add the EAFE and EM options that expire in May would be a detriment to 
market participants seeking to hedge positions in exchange-traded funds 
(``ETFs'') based on the EAFE and EM indexes (``EFA'' and ``EEM,'' 
respectively), options on EFA and EEM, EAFE and EM futures, and 
European-traded derivatives on the EAFE and EM Indexes. Additionally, 
to the extent market participants want to roll a position in EAFE and 
EM options that expire in April to a position that expires in May, they 
will be prevented from doing so without this amendment.
---------------------------------------------------------------------------

    \10\ Rule 24.2.01(b)(2) states that ``[i]n 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.''
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder, including the 
requirements of Section 6(b) of the Act.\11\ In particular, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \12\ requirements that the rules of an exchange be 
designed to promote just and equitable principles of trade, to prevent 
fraudulent and manipulative acts, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and to perfect the mechanism for a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In particular, the Exchange believes that both the EAFE Index and 
the EM Index are not easily susceptible to manipulation. Both indexes 
are broad-based indexes and have high market capitalizations. The EAFE 
Index is comprised of 928 component stocks, the component stocks have a 
market capitalization of 11,444,154.78 (USD Millions) and average daily 
volume of over 5 billion, and no single component comprises more than 
3.5% [sic] of the index, making it not easily subject to market 
manipulation. Similarly, the EM Index is comprised of 837 component 
stocks, the component stocks have a market capitalization of 
3,219,779.13 (USD Millions) and average daily volume of over 25 
billion, and no single component comprises more than 3.5% of the index, 
making it not easily subject to market manipulation. The purpose of a 
CSA is to allow the Exchange to investigate manipulation if it were to 
occur on a foreign exchange at which one of the component securities 
trades. However, as described above, the EAFE and EM Indexes are 
unlikely to be susceptible to manipulation; thus, raising the CSA 
percentage for the EAFE and EM Indexes by only five percent (5%) is 
unlikely to affect the Exchange's ability to investigate 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 revised listing requirements are appropriate to trade options on 
these indexes. The Exchange also represents that it has an adequate 
surveillance program in place for EAFE and EM options.

B. Self-Regulatory Organization's Statement on Burden on Competition

    This proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. Specifically, CBOE believes the proposed rule change will 
allow the continued listing and trading of EAFE

[[Page 13432]]

and EM options, which enhances competition among market participants 
and provides different types of options to compete with domestic 
products such as EFA and EMM [sic], which seek to track the EAFE and EM 
Indexes, respectively, EFA and EEM options, EAFE and EM futures and 
European-traded derivatives on the EAFE Index and the EM Index to the 
benefit of investors and the marketplace. For all the reasons stated 
above, the Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act, and believes the proposed 
change will enhance competition among similar products.

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. 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-2016-016 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-CBOE-2016-016. 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-2016-016, and should be 
submitted on or before April 4, 2016.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\13\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\14\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b). In approving this proposed rule change, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In order to list options on the EAFE and EM indexes, CBOE Rule 
24.2.01(a)(7) requires that any non-U.S. component securities that are 
not subject to CSAs must 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. 
The Exchange proposes to raise the percentage of non-U.S. component 
securities that do not need to be subject to CSAs to twenty-five 
percent (25%) for the EAFE Index and twenty-seven and a half percent 
(27.5%) for the EM Index. The Exchange stated that both indexes are 
broad-based indexes, have high market capitalizations, and have 
components with high trading volume. Given the high number of 
constituents and the overall high capitalization of the EAFE and EM 
Indexes and the deep and liquid markets for the securities underlying 
these indexes, the Exchange believes that the concerns for market 
manipulation or disruption in the underlying markets are greatly 
reduced. Therefore, the Exchange believes that a five percent increase 
would not likely impact its ability to investigate manipulation in 
these products. Additionally, in its filing, the Exchange represented 
that it will maintain an adequate surveillance program for EAFE and EM 
options and will continue to use the same surveillance procedures 
currently utilized for each of the Exchange's other index options to 
monitor trading in these products. Based on these representations, the 
Commission believes the modest increase in the applicable percentages 
of non-U.S. component securities that do not need to be subject to CSA 
requirements is not likely to have a material effect on CBOE's ability 
to surveil for potential manipulation in EAFE and EM options. 
Therefore, the Commission believes that approval of this proposal is 
appropriate.
    The Exchange has requested that the Commission find good cause for 
approving the proposed rule change prior to the 30th day after 
publication of the notice thereof in the Federal Register. The Exchange 
stated that accelerated approval of its proposal will allow CBOE to add 
new series of EAFE and EM options that expire in May (which would be 
listed after the March expiration). The Exchange believes that the 
inability to add additional series in EAFE and EM options would be a 
detriment to market participants seeking to hedge positions in EFA and 
EEM, options on EFA and EEM, EAFE and EM futures, and European-traded 
derivatives on the EAFE and EM Indexes. Additionally, the Exchange 
stated that, without accelerated approval of its proposal, market 
participants would be unable to roll a position in EAFE and EM options 
that expires in April to a position that expires in May. The Commission 
believes that good cause exists for accelerated approval of the 
proposed rule change because it raises no novel issues and the modest 
increase in the applicable percentages of non-U.S. component securities 
that do not need to be subject to CSA requirements is not likely to 
impose a material change in

[[Page 13433]]

CBOE's ability to surveil for potential manipulation in EAFE and EM 
options or adversely affect market participants. The Commission further 
believes that approval of this proposal on an accelerated basis should 
benefit investors by creating, without undue delay, additional 
competition in the market for these and similar products. Accordingly, 
the Commission finds good cause, pursuant to Section 19(b)(2) of the 
Act,\15\ to approve the proposed rule change prior to the 30th day 
after the date of publication of the notice of filing thereof in the 
Federal Register.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the proposed rule change (SR-CBOE-2016-016) be, and 
hereby is, approved on an accelerated basis.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-05587 Filed 3-11-16; 8:45 am]
 BILLING CODE 8011-01-P
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