Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to FLEX Options Pilot Program, 26857-26861 [2016-10436]
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Federal Register / Vol. 81, No. 86 / Wednesday, May 4, 2016 / Notices
SECURITIES AND EXCHANGE
COMMISSION
Submission for OMB Review;
Comment Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE., Washington, DC
20549–2736.
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Extension:
Rule 19d–1, SEC File No. 270–242, OMB
Control No. 3235–0206.
Notice is hereby given that pursuant
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(44 U.S.C. 3501 et seq.) (‘‘PRA’’), the
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total burden of approximately 2,250
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This figure is based on eighteen
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Therefore, it is estimated that the
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respondents is approximately $227,250
(18 respondents × 250 responses per
respondent × 0.5 hours per response ×
$101 per hour).
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DC 20549, or by sending an email to:
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be submitted to OMB within 30 days of
this notice.
Dated: April 28, 2016.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–10364 Filed 5–3–16; 8:45 am]
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26857
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77742; File No. SR–CBOE–
2016–032]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating to FLEX Options
Pilot Program
April 29, 2016.
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 April 15,
2016, Chicago Board Options Exchange,
Incorporated (the ‘‘Exchange’’ or
‘‘CBOE’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I and II below, which Items
have been prepared by the Exchange.
The Exchange filed the proposal as a
‘‘non-controversial’’ proposed rule
change pursuant to Section
19(b)(3)(A)(iii) of the Act 3 and Rule
19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to extend the
operation of its Flexible Exchange
Options (‘‘FLEX Options’’) pilot
program through May 3, 2017.5 The text
of the proposed rule change is provided
below.
(additions are italicized; deletions are
[bracketed])
*
*
*
*
*
Chicago Board Options Exchange,
Incorporated Rules
*
*
*
*
*
Rule 24A.4. Terms of FLEX Options
No change.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
5 FLEX Options provide investors with the ability
to customize basic option features including size,
expiration date, exercise style, and certain exercise
prices. FLEX Options can be FLEX Index Options
or FLEX Equity Options. In addition, other products
are permitted to be traded pursuant to the FLEX
trading procedures. For example, credit options are
eligible for trading as FLEX Options pursuant to the
FLEX rules in Chapters XXIVA and XXIVB. See
CBOE Rules 24A.1(e) and (f), 24A.4(b)(1) and (c)(1),
24B.1(f) and (g), 24B.4(b)(1) and (c)(1), and 29.18.
The rules governing the trading of FLEX Options on
the FLEX Request for Quote (‘‘RFQ’’) System
platform are contained in Chapter XXIVA. The rules
governing the trading of FLEX Options on the FLEX
Hybrid Trading System platform are contained in
Chapter XXIVB.
2 17
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. . . Interpretations and Policies:
.01 FLEX Index Option PM Settlements
Pilot Program: Notwithstanding
subparagraph (a)(2)(iv) above, for a
pilot period ending the earlier of May
3, 201[6]7 or the date on which the
pilot program is approved on a
permanent basis, a FLEX Index
Option that expires on an Expiration
Friday may have any exercise
settlement value that is permissible
pursuant to subparagraph (b)(3)
above.
.02 No change.
*
*
*
*
*
Rule 24B.4. Terms of FLEX Options
No change.
. . . Interpretations and Policies:
.01 FLEX Index Option PM Settlements
Pilot Program: Notwithstanding
subparagraph (a)(2)(iv) above, for a
pilot period ending the earlier of May
3, 201[6]7 or the date on which the
pilot program is approved on a
permanent basis, a FLEX Index
Option that expires on an Expiration
Friday may have any exercise
settlement value that is permissible
pursuant to subparagraph (b)(3)
above.
.02 No change.
*
*
*
*
*
The text of the proposed rule change
is also 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
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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
On January 28, 2010, the Exchange
received approval of a rule change that,
among other things, established a pilot
program regarding permissible exercise
settlement values for FLEX Index
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Options.6 The Exchange has extended
the pilot period five times, which is
currently set to expire on the earlier of
May 3, 2016 or the date on which the
pilot program is approved on a
permanent basis.7 The purpose of this
rule change filing is to extend the pilot
program through the earlier of May 3,
2017 or the date on which the pilot
program is approved on a permanent
basis. This filing simply seeks to extend
the operation of the pilot program and
does not propose any substantive
changes to the pilot program.
Under Rules 24A.4, Terms of FLEX
Options, and 24B.4, Terms of FLEX
Options, a FLEX Option may expire on
any business day specified as to day,
month and year, not to exceed a
maximum term of fifteen years. In
addition, the exercise settlement value
for a FLEX Index Option can be
specified as the index value determined
by reference to the reported level of the
index as derived from the opening or
closing prices of the component
securities (‘‘a.m. settlement’’ or ‘‘p.m.
settlement,’’ respectively) or as a
specified average, provided that the
average index value must conform to the
averaging parameters established by the
6 Securities Exchange Act Release No. 61439
(January 28, 2010), 75 FR 5831 (February 4, 2010)
(SR–CBOE–2009–087) (‘‘Approval Order’’). The
initial pilot period was set to expire on March 28,
2011, which date was added to the rules in 2010.
See Securities Exchange Act Release No. 61676
(March 9, 2010), 75 FR 13191 (March 18, 2010) (SR–
CBOE–2010–026).
7 See Securities Exchange Act Release Nos. 64110
(March 23 [sic], 2011), 76 FR 17463 (March 29,
2011) (SR–CBOE–2011–024) (extending the pilot
program through the earlier of March 30, 2012 or
the date on which the pilot program is approved on
the permanent basis); 66701 (March 30, 2012), 77
FR 20673 (April 5, 2012) (SR–CBOE–2012–027)
(extending the pilot through the earlier of
November 2, 2012 or the date on which the pilot
program is approved on a permanent basis); 68145
(November 2, 2012), 77 FR 67044 (November 8,
2012) (SR–CBOE–2012–102) (extending the pilot
program through the earlier of November 2, 2013 or
the date on which the pilot program is approved on
a permanent basis); 70752 (October 24, 2013), 78 FR
65023 (October 30, 2013) (SR–CBOE–2013–099)
(extending the pilot program through the earlier of
November 3, 2014 or the date on which the pilot
program is approved on a permanent basis); and
73460 (October 29, 2014), 79 FR 65464 (November
4, 2014) (SR–CBOE–2014–080) (extending the pilot
program through the earlier of May 3, 2016 or the
date on which the pilot program is approved on a
permanent basis). At the same time the permissible
exercise settlement values pilot was established for
FLEX Index Options, the Exchange also established
a pilot program eliminating the minimum value size
requirements for all FLEX Options. See Approval
Order, supra note 2 [sic]. The pilot program
eliminating the minimum value size requirements
was extended twice pursuant to the same rule
filings that extended the permissible exercise
settlement values (for the same extended periods)
and was approved on a permanent basis in a
separate rule change filing. See id. and Securities
Exchange Act Release No. 67624 (August 8, 2012),
77 FR 48580 (August 14, 2012) (SR–CBOE–2012–
040).
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Exchange.8 However, prior to the
initiation of the exercise settlement
values pilot, only a.m. settlements were
permitted if a FLEX Index Option
expired on, or within two business days
of, a third Friday-of-the-month
expiration (‘‘Expiration Friday’’).9
Under the exercise settlement values
pilot, this restriction on p.m. and
specified average price settlements in
FLEX Index Options was eliminated.10
The exercise settlement values pilot is
currently set to expire on the earlier of
May 3, 2016 or the date on which the
pilot program is approved on a
permanent basis.
CBOE is proposing to extend the pilot
program through the earlier of May 3,
2017 or the date on which the pilot
program is approved on a permanent
basis. CBOE believes the pilot program
has been successful and well received
by its Trading Permit Holders and the
investing public for the period that it
has been in operation as a pilot. In
support of the proposed extension of the
pilot program, and as required by the
pilot program’s Approval Order, the
Exchange has submitted to the
Securities and Exchange Commission
(the ‘‘Commission’’) pilot program
reports regarding the pilot, which detail
the Exchange’s experience with the
program. Specifically, the Exchange
provided the Commission with annual
reports analyzing volume and open
interest for each broad-based FLEX
Index Options class overlying an
Expiration Friday, p.m.-settled FLEX
Index Options series.11 The annual
reports also contained information and
analysis of FLEX Index Options trading
8 See Rules 24A.4(b)(3) and 24B.4(b)(3); see also
Securities Exchange Act Release No. 31920
(February 24, 1993), 58 FR 12280 (March 3, 1993)
(SR–CBOE–92–017). The Exchange has determined
to limit the averaging parameters to three
alternatives: The average of the opening and closing
index values on the expiration date; the average of
intra-day high and low index values on the
expiration date; and the average of the opening,
closing, and intra-day high and low index values on
the expiration date. Any changes to the averaging
parameters established by the Exchange would be
announced to Trading Permit Holders via circular.
9 For example, prior to the pilot, the exercise
settlement value of a FLEX Index Option that
expires on the Tuesday before Expiration Friday
could have an a.m., p.m. or specified average
settlement. However, the exercise settlement value
of a FLEX Index Option that expires on the
Wednesday before Expiration Friday could only
have an a.m. settlement.
10 No change was necessary or requested with
respect to FLEX Equity Options. Regardless of the
expiration date, FLEX Equity Options are settled by
physical delivery of the underlying.
11 The annual reports also contained certain pilot
period and pre-pilot period analyses of volume and
open interest for Expiration Friday, a.m.-settled
FLEX Index series and Expiration Friday Non-FLEX
Index series overlying the same index as an
Expiration Friday, p.m.-settled FLEX Index option.
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patterns. The Exchange also provided
the Commission, on a periodic basis,
interim reports of volume and open
interest. In providing the pilot reports to
the Commission, the Exchange has
requested confidential treatment of the
pilot reports under the Freedom of
Information Act (‘‘FOIA’’).12 The
confidentiality of the pilot reports is
subject to the provisions of FOIA.
The Exchange believes there is
sufficient investor interest and demand
in the pilot program to warrant its
extension. The Exchange believes that,
for the period that the pilot has been in
operation, the program has provided
investors with additional means of
managing their risk exposures and
carrying out their investment objectives.
Furthermore, the Exchange believes that
it has not experienced any adverse
market effects with respect to the pilot
program, including any adverse market
volatility effects that might occur as a
result of large FLEX exercises in FLEX
Option series that expire near NonFLEX expirations and use a p.m.
settlement (as discussed below).
In that regard, based on the
Exchange’s experience in trading FLEX
Options to date and over the pilot
period, CBOE continues to believe that
the restrictions on exercise settlement
values are no longer necessary to
insulate Non-FLEX expirations from the
potential adverse market impacts of
FLEX expirations.13 To the contrary,
12 5
U.S.C. 552.
further support, the Exchange also notes that
the p.m. and specified average price settlements are
already permitted for FLEX Index Options on any
other business day except on, or within two
business days of, Expiration Friday. The Exchange
is not aware of any market disruptions or problems
caused by the use of these settlement methodologies
on these expiration dates (or on the expiration dates
addressed under the pilot program). The Exchange
is also not aware of any market disruptions or
problems caused by the use of customized options
in the over-the-counter (‘‘OTC’’) markets that expire
on or near Expiration Friday and have a p.m. or
specified average exercise settlement value. In
addition, the Exchange believes the reasons for
limiting expirations to a.m. settlement, which is
something the SEC has imposed since the early
1990s for Non-FLEX Options, revolved around a
concern about expiration pressure on the New York
Stock Exchange (‘‘NYSE’’) at the close that are no
longer relevant in today’s market. Today, the
Exchange believes stock exchanges are able to better
handle volume. There are multiple primary listing
and unlisted trading privilege (‘‘UTP’’) markets, and
trading is dispersed among several exchanges and
alternative trading systems. In addition, the
Exchange believes that surveillance techniques are
much more robust and automated. In the early
1990s, it was also thought by some that opening
procedures allow more time to attract contra-side
interest to reduce imbalances. The Exchange
believes, however, that today, order flow is
predominantly electronic and the ability to smooth
out openings and closes is greatly reduced (e.g.,
market-on-close procedures work just as well as
openings). Also, other markets, such as the
NASDAQ Stock Exchange, do not have the same
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CBOE believes that the restriction
actually places the Exchange at a
competitive disadvantage to its OTC
counterparts in the market for
customized options, and unnecessarily
limits market participants’ ability to
trade in an exchange environment that
offers the added benefits of
transparency, price discovery, liquidity,
and financial stability.
The Exchange also notes that certain
position limit, aggregation and exercise
limit requirements continue to apply to
FLEX Index Options in accordance with
Rules 24A.7, Position Limits and
Reporting Requirements, 24A.8,
Exercise Limits, 24B.7, Position Limits
and Reporting Requirements, and 24B.8,
Exercise Limits. Additionally, all FLEX
Options remain subject to the position
reporting requirements in paragraph (a)
of CBOE Rule 4.13, Reports Related to
Position Limits.14 Moreover, the
Exchange and its Trading Permit Holder
organizations each have the authority,
pursuant to CBOE Rule 12.10, Margin
Required is Minimum, to impose
additional margin as deemed advisable.
CBOE continues to believe these
existing safeguards serve sufficiently to
help monitor open interest in FLEX
Option series and significantly reduce
any risk of adverse market effects that
might occur as a result of large FLEX
exercises in FLEX Option series that
type of pre-opening imbalance disseminations as
NYSE, so many stocks are not subject to the same
procedures on Expiration Friday. In addition, the
Exchange believes that NYSE has reduced the
required time a specialist has to wait after
disseminating a pre-opening indication. So, in this
respect, the Exchange believes there is less time to
react in the opening than in the close. Moreover, to
the extent there may be a risk of adverse market
effects attributable to p.m. settled options (or
certain average price settled options related to the
closing price) that would otherwise be traded in a
non-transparent fashion in the OTC market, the
Exchange continues to believe that such risk would
be lessened by making these customized options
eligible for trading in an exchange environment
because of the added transparency, price discovery,
liquidity, and financial stability available.
14 CBOE Rule 4.13(a) provides that ‘‘[i]n a manner
and form prescribed by the Exchange, each Trading
Permit Holder shall report to the Exchange, the
name, address, and social security or tax
identification number of any customer who, acting
alone, or in concert with others, on the previous
business day maintained aggregate long or short
positions on the same side of the market of 200 or
more contracts of any single class of option
contracts dealt in on the Exchange. The report shall
indicate for each such class of options, the number
of option contracts comprising each such position
and, in the case of short positions, whether covered
or uncovered.’’ For purposes of Rule 4.13, the term
‘‘customer’’ in respect of any Trading Permit Holder
includes ‘‘the Trading Permit Holder, any general
or special partner of the Trading Permit Holder, any
officer or director of the Trading Permit Holder, or
any participant, as such, in any joint, group or
syndicate account with the Trading Permit Holder
or with any partner, officer or director thereof.’’
Rule 4.13(d).
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26859
expire near Non-FLEX expirations and
use a p.m. settlement.
CBOE is also cognizant of the OTC
market, in which similar restrictions on
exercise settlement values do not apply.
CBOE continues to believe that the pilot
program is appropriate and reasonable
and provides market participants with
additional flexibility in determining
whether to execute their customized
options in an exchange environment or
in the OTC market. CBOE continues to
believe that market participants benefit
from being able to trade these
customized options in an exchange
environment in several ways, including,
but not limited to, enhanced efficiency
in initiating and closing out positions,
increased market transparency, and
heightened contra-party
creditworthiness due to the role of the
Options Clearing Corporation as issuer
and guarantor of FLEX Options.
If, in the future, the Exchange
proposes an additional extension of the
pilot program, or should the Exchange
propose to make the pilot program
permanent, the Exchange will submit,
along with any filing proposing such
amendments to the pilot program, an
annual report (addressing the same
areas referenced above and consistent
with the pilot program’s Approval
Order) to the Commission at least two
months prior to the expiration date of
the program. The Exchange will also
continue, on a periodic basis, to submit
interim reports of volume and open
interest consistent with the terms of the
exercise settlement values pilot program
as described in the pilot program’s
Approval Order. All such pilot reports
would continue to be provided by the
Exchange along with a request for
confidential treatment under FOIA.15 As
noted in the pilot program’s Approval
Order, any positions established under
the pilot program would not be
impacted by the expiration of the pilot
program.16
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the Act
15 See supra note 7 [sic] and surrounding
discussion. If the Exchange seeks permanent
approval of the pilot program, the Exchange
recognizes that certain information in the pilot
reports may need to be made available on a public
basis.
16 For example, a position in a p.m.-settled FLEX
Index Option series that expires on Expiration
Friday in January 2018 could be established during
the exercise settlement values pilot. If the pilot
program were not extended (or made permanent),
then the position could continue to exist. However,
the Exchange notes that any further trading in the
series would be restricted to transactions where at
least one side of the trade is a closing transaction.
See Approval Order at footnotes 9 and 10, supra
note 2 [sic].
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and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.17 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 18 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 19 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
that the proposed extension of the pilot
program, which permits additional
exercise settlement values, would
provide greater opportunities for
investors to manage risk through the use
of FLEX Options. Further, the Exchange
believes that it has not experienced any
adverse effects from the operation of the
pilot program, including any adverse
market volatility effects that might occur
as a result of large FLEX exercises in
FLEX Option series that expire near
Non-FLEX expirations and use a p.m.
settlement. The Exchange also believes
that the extension of the exercise
settlement values pilot does not raise
any unique regulatory concerns. In
particular, although p.m. settlements
may raise questions with the
Commission, the Exchange believes
that, based on the Exchange’s
experience in trading FLEX Options to
date and over the pilot period, market
impact and investor protection concerns
will not be raised by this rule change.
The Exchange also believes that the
proposed rule change would continue to
provide Trading Permit Holders and
investors with additional opportunities
to trade customized options in an
exchange environment (which offers the
added benefits of transparency, price
discovery, liquidity, and financial
stability as compared to the over-thecounter market) and subject to
exchange-based rules, and investors
would benefit as a result.
17 15
18 15
19 Id.
18:44 May 03, 2016
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change
does not (i) significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 20 and Rule 19b–4(f)(6)
thereunder.21
20 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires the Exchange to give the
Commission written notice of its intent to file the
proposed rule change, along with a brief description
21 17
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
CBOE does not believe that the
proposed rule change will impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes there is sufficient
investor interest and demand in the
pilot program to warrant its extension.
The Exchange believes that, for the
period that the pilot has been in
operation, the program has provided
investors with additional means of
managing their risk exposures and
carrying out their investment objectives.
Furthermore, the Exchange believes that
it has not experienced any adverse
market effects with respect to the pilot
program, including any adverse market
volatility effects that might occur as a
result of large FLEX exercises in FLEX
Option series that expire near Non-Flex
expirations and use a p.m. settlement.
CBOE believes that the restriction
actually places the Exchange at a
competitive disadvantage to its OTC
counterparts in the market for
customized options, and unnecessarily
limits market participants’ ability to
trade in an exchange environment that
offers the added benefits of
transparency, price discovery, liquidity,
and financial stability. Therefore, the
Exchange does not believe that the
proposed rule change will impose any
burden on competition.
Jkt 238001
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A proposed rule change filed under
Rule 19b–4(f)(6) 22 normally does not
become operative for 30 days after the
date of filing. However, pursuant to
Rule 19b–4(f)(6)(iii),23 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has requested that the
Commission waive the 30-day operative
delay so that the proposal may become
operative immediately upon filing. The
Exchange states that such waiver will
allow the Exchange to extend the pilot
program prior to its expiration on May
3, 2016, and maintain the status quo,
thereby reducing market disruption.
The Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest. Waiver
of the operative delay will allow the
Exchange to extend the pilot program
prior to its expiration on May 3, 2016,
which will ensure that the program
continues to operate uninterrupted.
Therefore, the Commission hereby
waives the 30-day operative delay and
designates the proposed rule change to
be operative upon filing with the
Commission.24
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
and text of the proposed rule change, at least five
business days prior to the date of filing of the
proposed rule change, or such shorter time as
designated by the Commission. The Exchange has
satisfied this requirement.
22 17 CFR 240.19b–4(f)(6).
23 17 CFR 240.19b–4(f)(6)(iii).
24 For purposes only of waiving the 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).
E:\FR\FM\04MYN1.SGM
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Federal Register / Vol. 81, No. 86 / Wednesday, May 4, 2016 / Notices
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2016–032 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–2016–032. 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–
2016–032 and should be submitted on
or before May 25, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–10436 Filed 5–3–16; 8:45 am]
BILLING CODE 8011–01–P
asabaliauskas on DSK3SPTVN1PROD with NOTICES
SMALL BUSINESS ADMINISTRATION
Announcement of Growth Accelerator
Fund Competition
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
25 17
CFR 200.30–3(a)(12) and (59).
VerDate Sep<11>2014
18:44 May 03, 2016
Jkt 238001
The U.S. Small Business
Administration (SBA) announces the
2016 Growth Accelerator Fund
Competition, pursuant to the America
Competes Act, to identify the nation’s
most innovative accelerators and similar
organizations and award them cash
prizes they may use to fund their
operations costs and allow them to bring
startup companies to scale and new
ideas to life.
DATES: The submission period for
entries begins 12:00 p.m. EDT, May 2,
2016 and ends June 3, 2016 at 11:59
p.m. EDT. Winners will be announced
no later than August 24, 2016.
FOR FURTHER INFORMATION CONTACT:
Nareg Sagherian, Office of Investment
and Innovation, U.S. Small Business
Administration, 409 Third Street SW.,
6th Floor Washington, DC 20416, (202)
205–7576, accelerators@sba.gov.
SUPPLEMENTARY INFORMATION:
SUMMARY:
Competition Details
1. Subject of Competition: The SBA is
seeking to identify the nation’s most
innovative and promising small
business accelerators and incubators in
order to infuse them with additional
resource capital that ultimately
stimulates the growth and development
of startups from within the
entrepreneurial communities they serve.
For the purposes of this competition,
Growth Accelerators include
accelerators, incubators, co-working
startup communities, shared tinkerspaces or other models to accomplish
similar goals. Regardless of the specific
model employed, Growth Accelerators
focus on helping entrepreneurs and
their startups speed the launch, growth
and scale of their businesses. A broad
set of models used to support start-ups
will better serve the entire
entrepreneurial ecosystem. Whether an
accelerator is industry focused,
technology focused, product centric,
cohort based or more long term, all are
valuable players in the nation’s highgrowth entrepreneurial ecosystem that
ultimately creates jobs.
2. Eligibility Rules for Participating in
the Competition: This Competition is
open only to private entities, such as
corporations or non-profit organizations
that are incorporated in and maintain a
primary place of business in the United
States. Entities that have an outstanding,
unresolved financial obligation to, or
that are currently suspended or
debarred by, the federal government are
not eligible for this Competition.
Federal, state, local and tribal agencies
are also not eligible for this
Competition. Additionally, participants
in this Competition must utilize models
PO 00000
Frm 00089
Fmt 4703
Sfmt 4703
26861
of operation that include most, if not all,
of the following elements:
• Selective process to choose
participating startups.
• Regular networking opportunities
offered to startups.
• Introductions to customers,
partners, suppliers, advisory boards and
other players.
• High-growth and tech-driven
startup mentorship and
commercialization assistance.
• Shared working environments
focused on building a strong startup
community.
• Resource sharing and co-working
arrangements for startups.
• Opportunities to pitch ideas and
startups to investors along with other
capital formation avenues to startups.
• Small amounts of angel money,
seed capital or structured loans to
startups.
• Service to underserved
communities, such as women, veterans,
and economically disadvantaged
individuals.
3. Registration Process for
Participants: Competition participants
must submit their 2016 Growth
Accelerator Fund applications online
using the link designated for that
purpose on challenge.gov, either by
filtering search criteria to ‘‘Small
Business Administration’’ or going to
sba.gov/accelerators, where the link will
be posted. In addition to the basic
details collected in that short
application form, contestants must also
complete and submit via challenge.gov
a deck, similar to one that would be
used in a pitch competition, which must
address all of the items identified
below:
Mission and Vision
• What is your accelerator’s mission
in one sentence?
• What specific elements make your
accelerator model stand out?
• What experiences prepare your
team for this?
Impact
• What gaps does or will your
accelerator fill?
• What are the specifics of your
model and how it will accomplish the
above?
• For existing accelerators, what has
been your success/metrics so far?
• For existing accelerators, please
explain your overall statistics of the
start-up life cycle?
Implementation
• What is your plan for the prize
money if you win?
• If you are an existing accelerator
using the funds to scale up, provide
E:\FR\FM\04MYN1.SGM
04MYN1
]]>Agencies
[Federal Register Volume 81, Number 86 (Wednesday, May 4, 2016)]
[Notices]
[Pages 26857-26861]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-10436]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77742; File No. SR-CBOE-2016-032]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to FLEX Options Pilot Program
April 29, 2016.
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 April 15, 2016, Chicago Board Options Exchange, Incorporated (the
``Exchange'' or ``CBOE'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
The Exchange filed the proposal as a ``non-controversial'' proposed
rule change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and
Rule 19b-4(f)(6) thereunder.\4\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to extend the operation of its Flexible
Exchange Options (``FLEX Options'') pilot program through May 3,
2017.\5\ The text of the proposed rule change is provided below.
---------------------------------------------------------------------------
\5\ FLEX Options provide investors with the ability to customize
basic option features including size, expiration date, exercise
style, and certain exercise prices. FLEX Options can be FLEX Index
Options or FLEX Equity Options. In addition, other products are
permitted to be traded pursuant to the FLEX trading procedures. For
example, credit options are eligible for trading as FLEX Options
pursuant to the FLEX rules in Chapters XXIVA and XXIVB. See CBOE
Rules 24A.1(e) and (f), 24A.4(b)(1) and (c)(1), 24B.1(f) and (g),
24B.4(b)(1) and (c)(1), and 29.18. The rules governing the trading
of FLEX Options on the FLEX Request for Quote (``RFQ'') System
platform are contained in Chapter XXIVA. The rules governing the
trading of FLEX Options on the FLEX Hybrid Trading System platform
are contained in Chapter XXIVB.
(additions are italicized; deletions are [bracketed])
* * * * *
Chicago Board Options Exchange, Incorporated Rules
* * * * *
Rule 24A.4. Terms of FLEX Options
No change.
[[Page 26858]]
. . . Interpretations and Policies:
.01 FLEX Index Option PM Settlements Pilot Program: Notwithstanding
subparagraph (a)(2)(iv) above, for a pilot period ending the earlier of
May 3, 201[6]7 or the date on which the pilot program is approved on a
permanent basis, a FLEX Index Option that expires on an Expiration
Friday may have any exercise settlement value that is permissible
pursuant to subparagraph (b)(3) above.
.02 No change.
* * * * *
Rule 24B.4. Terms of FLEX Options
No change.
. . . Interpretations and Policies:
.01 FLEX Index Option PM Settlements Pilot Program: Notwithstanding
subparagraph (a)(2)(iv) above, for a pilot period ending the earlier of
May 3, 201[6]7 or the date on which the pilot program is approved on a
permanent basis, a FLEX Index Option that expires on an Expiration
Friday may have any exercise settlement value that is permissible
pursuant to subparagraph (b)(3) above.
.02 No change.
* * * * *
The text of the proposed rule change is also 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
On January 28, 2010, the Exchange received approval of a rule
change that, among other things, established a pilot program regarding
permissible exercise settlement values for FLEX Index Options.\6\ The
Exchange has extended the pilot period five times, which is currently
set to expire on the earlier of May 3, 2016 or the date on which the
pilot program is approved on a permanent basis.\7\ The purpose of this
rule change filing is to extend the pilot program through the earlier
of May 3, 2017 or the date on which the pilot program is approved on a
permanent basis. This filing simply seeks to extend the operation of
the pilot program and does not propose any substantive changes to the
pilot program.
---------------------------------------------------------------------------
\6\ Securities Exchange Act Release No. 61439 (January 28,
2010), 75 FR 5831 (February 4, 2010) (SR-CBOE-2009-087) (``Approval
Order''). The initial pilot period was set to expire on March 28,
2011, which date was added to the rules in 2010. See Securities
Exchange Act Release No. 61676 (March 9, 2010), 75 FR 13191 (March
18, 2010) (SR-CBOE-2010-026).
\7\ See Securities Exchange Act Release Nos. 64110 (March 23
[sic], 2011), 76 FR 17463 (March 29, 2011) (SR-CBOE-2011-024)
(extending the pilot program through the earlier of March 30, 2012
or the date on which the pilot program is approved on the permanent
basis); 66701 (March 30, 2012), 77 FR 20673 (April 5, 2012) (SR-
CBOE-2012-027) (extending the pilot through the earlier of November
2, 2012 or the date on which the pilot program is approved on a
permanent basis); 68145 (November 2, 2012), 77 FR 67044 (November 8,
2012) (SR-CBOE-2012-102) (extending the pilot program through the
earlier of November 2, 2013 or the date on which the pilot program
is approved on a permanent basis); 70752 (October 24, 2013), 78 FR
65023 (October 30, 2013) (SR-CBOE-2013-099) (extending the pilot
program through the earlier of November 3, 2014 or the date on which
the pilot program is approved on a permanent basis); and 73460
(October 29, 2014), 79 FR 65464 (November 4, 2014) (SR-CBOE-2014-
080) (extending the pilot program through the earlier of May 3, 2016
or the date on which the pilot program is approved on a permanent
basis). At the same time the permissible exercise settlement values
pilot was established for FLEX Index Options, the Exchange also
established a pilot program eliminating the minimum value size
requirements for all FLEX Options. See Approval Order, supra note 2
[sic]. The pilot program eliminating the minimum value size
requirements was extended twice pursuant to the same rule filings
that extended the permissible exercise settlement values (for the
same extended periods) and was approved on a permanent basis in a
separate rule change filing. See id. and Securities Exchange Act
Release No. 67624 (August 8, 2012), 77 FR 48580 (August 14, 2012)
(SR-CBOE-2012-040).
---------------------------------------------------------------------------
Under Rules 24A.4, Terms of FLEX Options, and 24B.4, Terms of FLEX
Options, a FLEX Option may expire on any business day specified as to
day, month and year, not to exceed a maximum term of fifteen years. In
addition, the exercise settlement value for a FLEX Index Option can be
specified as the index value determined by reference to the reported
level of the index as derived from the opening or closing prices of the
component securities (``a.m. settlement'' or ``p.m. settlement,''
respectively) or as a specified average, provided that the average
index value must conform to the averaging parameters established by the
Exchange.\8\ However, prior to the initiation of the exercise
settlement values pilot, only a.m. settlements were permitted if a FLEX
Index Option expired on, or within two business days of, a third
Friday-of-the-month expiration (``Expiration Friday'').\9\
---------------------------------------------------------------------------
\8\ See Rules 24A.4(b)(3) and 24B.4(b)(3); see also Securities
Exchange Act Release No. 31920 (February 24, 1993), 58 FR 12280
(March 3, 1993) (SR-CBOE-92-017). The Exchange has determined to
limit the averaging parameters to three alternatives: The average of
the opening and closing index values on the expiration date; the
average of intra-day high and low index values on the expiration
date; and the average of the opening, closing, and intra-day high
and low index values on the expiration date. Any changes to the
averaging parameters established by the Exchange would be announced
to Trading Permit Holders via circular.
\9\ For example, prior to the pilot, the exercise settlement
value of a FLEX Index Option that expires on the Tuesday before
Expiration Friday could have an a.m., p.m. or specified average
settlement. However, the exercise settlement value of a FLEX Index
Option that expires on the Wednesday before Expiration Friday could
only have an a.m. settlement.
---------------------------------------------------------------------------
Under the exercise settlement values pilot, this restriction on
p.m. and specified average price settlements in FLEX Index Options was
eliminated.\10\ The exercise settlement values pilot is currently set
to expire on the earlier of May 3, 2016 or the date on which the pilot
program is approved on a permanent basis.
---------------------------------------------------------------------------
\10\ No change was necessary or requested with respect to FLEX
Equity Options. Regardless of the expiration date, FLEX Equity
Options are settled by physical delivery of the underlying.
---------------------------------------------------------------------------
CBOE is proposing to extend the pilot program through the earlier
of May 3, 2017 or the date on which the pilot program is approved on a
permanent basis. CBOE believes the pilot program has been successful
and well received by its Trading Permit Holders and the investing
public for the period that it has been in operation as a pilot. In
support of the proposed extension of the pilot program, and as required
by the pilot program's Approval Order, the Exchange has submitted to
the Securities and Exchange Commission (the ``Commission'') pilot
program reports regarding the pilot, which detail the Exchange's
experience with the program. Specifically, the Exchange provided the
Commission with annual reports analyzing volume and open interest for
each broad-based FLEX Index Options class overlying an Expiration
Friday, p.m.-settled FLEX Index Options series.\11\ The annual reports
also contained information and analysis of FLEX Index Options trading
[[Page 26859]]
patterns. The Exchange also provided the Commission, on a periodic
basis, interim reports of volume and open interest. In providing the
pilot reports to the Commission, the Exchange has requested
confidential treatment of the pilot reports under the Freedom of
Information Act (``FOIA'').\12\ The confidentiality of the pilot
reports is subject to the provisions of FOIA.
---------------------------------------------------------------------------
\11\ The annual reports also contained certain pilot period and
pre-pilot period analyses of volume and open interest for Expiration
Friday, a.m.-settled FLEX Index series and Expiration Friday Non-
FLEX Index series overlying the same index as an Expiration Friday,
p.m.-settled FLEX Index option.
\12\ 5 U.S.C. 552.
---------------------------------------------------------------------------
The Exchange believes there is sufficient investor interest and
demand in the pilot program to warrant its extension. The Exchange
believes that, for the period that the pilot has been in operation, the
program has provided investors with additional means of managing their
risk exposures and carrying out their investment objectives.
Furthermore, the Exchange believes that it has not experienced any
adverse market effects with respect to the pilot program, including any
adverse market volatility effects that might occur as a result of large
FLEX exercises in FLEX Option series that expire near Non-FLEX
expirations and use a p.m. settlement (as discussed below).
In that regard, based on the Exchange's experience in trading FLEX
Options to date and over the pilot period, CBOE continues to believe
that the restrictions on exercise settlement values are no longer
necessary to insulate Non-FLEX expirations from the potential adverse
market impacts of FLEX expirations.\13\ To the contrary, CBOE believes
that the restriction actually places the Exchange at a competitive
disadvantage to its OTC counterparts in the market for customized
options, and unnecessarily limits market participants' ability to trade
in an exchange environment that offers the added benefits of
transparency, price discovery, liquidity, and financial stability.
---------------------------------------------------------------------------
\13\ In further support, the Exchange also notes that the p.m.
and specified average price settlements are already permitted for
FLEX Index Options on any other business day except on, or within
two business days of, Expiration Friday. The Exchange is not aware
of any market disruptions or problems caused by the use of these
settlement methodologies on these expiration dates (or on the
expiration dates addressed under the pilot program). The Exchange is
also not aware of any market disruptions or problems caused by the
use of customized options in the over-the-counter (``OTC'') markets
that expire on or near Expiration Friday and have a p.m. or
specified average exercise settlement value. In addition, the
Exchange believes the reasons for limiting expirations to a.m.
settlement, which is something the SEC has imposed since the early
1990s for Non-FLEX Options, revolved around a concern about
expiration pressure on the New York Stock Exchange (``NYSE'') at the
close that are no longer relevant in today's market. Today, the
Exchange believes stock exchanges are able to better handle volume.
There are multiple primary listing and unlisted trading privilege
(``UTP'') markets, and trading is dispersed among several exchanges
and alternative trading systems. In addition, the Exchange believes
that surveillance techniques are much more robust and automated. In
the early 1990s, it was also thought by some that opening procedures
allow more time to attract contra-side interest to reduce
imbalances. The Exchange believes, however, that today, order flow
is predominantly electronic and the ability to smooth out openings
and closes is greatly reduced (e.g., market-on-close procedures work
just as well as openings). Also, other markets, such as the NASDAQ
Stock Exchange, do not have the same type of pre-opening imbalance
disseminations as NYSE, so many stocks are not subject to the same
procedures on Expiration Friday. In addition, the Exchange believes
that NYSE has reduced the required time a specialist has to wait
after disseminating a pre-opening indication. So, in this respect,
the Exchange believes there is less time to react in the opening
than in the close. Moreover, to the extent there may be a risk of
adverse market effects attributable to p.m. settled options (or
certain average price settled options related to the closing price)
that would otherwise be traded in a non-transparent fashion in the
OTC market, the Exchange continues to believe that such risk would
be lessened by making these customized options eligible for trading
in an exchange environment because of the added transparency, price
discovery, liquidity, and financial stability available.
---------------------------------------------------------------------------
The Exchange also notes that certain position limit, aggregation
and exercise limit requirements continue to apply to FLEX Index Options
in accordance with Rules 24A.7, Position Limits and Reporting
Requirements, 24A.8, Exercise Limits, 24B.7, Position Limits and
Reporting Requirements, and 24B.8, Exercise Limits. Additionally, all
FLEX Options remain subject to the position reporting requirements in
paragraph (a) of CBOE Rule 4.13, Reports Related to Position
Limits.\14\ Moreover, the Exchange and its Trading Permit Holder
organizations each have the authority, pursuant to CBOE Rule 12.10,
Margin Required is Minimum, to impose additional margin as deemed
advisable. CBOE continues to believe these existing safeguards serve
sufficiently to help monitor open interest in FLEX Option series and
significantly reduce any risk of adverse market effects that might
occur as a result of large FLEX exercises in FLEX Option series that
expire near Non-FLEX expirations and use a p.m. settlement.
---------------------------------------------------------------------------
\14\ CBOE Rule 4.13(a) provides that ``[i]n a manner and form
prescribed by the Exchange, each Trading Permit Holder shall report
to the Exchange, the name, address, and social security or tax
identification number of any customer who, acting alone, or in
concert with others, on the previous business day maintained
aggregate long or short positions on the same side of the market of
200 or more contracts of any single class of option contracts dealt
in on the Exchange. The report shall indicate for each such class of
options, the number of option contracts comprising each such
position and, in the case of short positions, whether covered or
uncovered.'' For purposes of Rule 4.13, the term ``customer'' in
respect of any Trading Permit Holder includes ``the Trading Permit
Holder, any general or special partner of the Trading Permit Holder,
any officer or director of the Trading Permit Holder, or any
participant, as such, in any joint, group or syndicate account with
the Trading Permit Holder or with any partner, officer or director
thereof.'' Rule 4.13(d).
---------------------------------------------------------------------------
CBOE is also cognizant of the OTC market, in which similar
restrictions on exercise settlement values do not apply. CBOE continues
to believe that the pilot program is appropriate and reasonable and
provides market participants with additional flexibility in determining
whether to execute their customized options in an exchange environment
or in the OTC market. CBOE continues to believe that market
participants benefit from being able to trade these customized options
in an exchange environment in several ways, including, but not limited
to, enhanced efficiency in initiating and closing out positions,
increased market transparency, and heightened contra-party
creditworthiness due to the role of the Options Clearing Corporation as
issuer and guarantor of FLEX Options.
If, in the future, the Exchange proposes an additional extension of
the pilot program, or should the Exchange propose to make the pilot
program permanent, the Exchange will submit, along with any filing
proposing such amendments to the pilot program, an annual report
(addressing the same areas referenced above and consistent with the
pilot program's Approval Order) to the Commission at least two months
prior to the expiration date of the program. The Exchange will also
continue, on a periodic basis, to submit interim reports of volume and
open interest consistent with the terms of the exercise settlement
values pilot program as described in the pilot program's Approval
Order. All such pilot reports would continue to be provided by the
Exchange along with a request for confidential treatment under
FOIA.\15\ As noted in the pilot program's Approval Order, any positions
established under the pilot program would not be impacted by the
expiration of the pilot program.\16\
---------------------------------------------------------------------------
\15\ See supra note 7 [sic] and surrounding discussion. If the
Exchange seeks permanent approval of the pilot program, the Exchange
recognizes that certain information in the pilot reports may need to
be made available on a public basis.
\16\ For example, a position in a p.m.-settled FLEX Index Option
series that expires on Expiration Friday in January 2018 could be
established during the exercise settlement values pilot. If the
pilot program were not extended (or made permanent), then the
position could continue to exist. However, the Exchange notes that
any further trading in the series would be restricted to
transactions where at least one side of the trade is a closing
transaction. See Approval Order at footnotes 9 and 10, supra note 2
[sic].
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act
[[Page 26860]]
and the rules and regulations thereunder applicable to the Exchange
and, in particular, the requirements of Section 6(b) of the Act.\17\
Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \18\ requirements that the rules of
an exchange be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \19\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(5).
\19\ Id.
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In particular, the Exchange believes that the proposed extension of
the pilot program, which permits additional exercise settlement values,
would provide greater opportunities for investors to manage risk
through the use of FLEX Options. Further, the Exchange believes that it
has not experienced any adverse effects from the operation of the pilot
program, including any adverse market volatility effects that might
occur as a result of large FLEX exercises in FLEX Option series that
expire near Non-FLEX expirations and use a p.m. settlement. The
Exchange also believes that the extension of the exercise settlement
values pilot does not raise any unique regulatory concerns. In
particular, although p.m. settlements may raise questions with the
Commission, the Exchange believes that, based on the Exchange's
experience in trading FLEX Options to date and over the pilot period,
market impact and investor protection concerns will not be raised by
this rule change. The Exchange also believes that the proposed rule
change would continue to provide Trading Permit Holders and investors
with additional opportunities to trade customized options in an
exchange environment (which offers the added benefits of transparency,
price discovery, liquidity, and financial stability as compared to the
over-the-counter market) and subject to exchange-based rules, and
investors would benefit as a result.
B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE does not believe that the proposed rule change will impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange believes there is
sufficient investor interest and demand in the pilot program to warrant
its extension. The Exchange believes that, for the period that the
pilot has been in operation, the program has provided investors with
additional means of managing their risk exposures and carrying out
their investment objectives. Furthermore, the Exchange believes that it
has not experienced any adverse market effects with respect to the
pilot program, including any adverse market volatility effects that
might occur as a result of large FLEX exercises in FLEX Option series
that expire near Non-Flex expirations and use a p.m. settlement. CBOE
believes that the restriction actually places the Exchange at a
competitive disadvantage to its OTC counterparts in the market for
customized options, and unnecessarily limits market participants'
ability to trade in an exchange environment that offers the added
benefits of transparency, price discovery, liquidity, and financial
stability. Therefore, the Exchange does not believe that the proposed
rule change will impose any burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change does not (i) significantly affect
the protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate if consistent with the protection of investors
and the public interest, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \20\ and Rule 19b-4(f)(6)
thereunder.\21\
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires the Exchange to give the Commission written notice of its
intent to file the proposed rule change, along with a brief
description and text of the proposed rule change, at least five
business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \22\ normally
does not become operative for 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\23\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has
requested that the Commission waive the 30-day operative delay so that
the proposal may become operative immediately upon filing. The Exchange
states that such waiver will allow the Exchange to extend the pilot
program prior to its expiration on May 3, 2016, and maintain the status
quo, thereby reducing market disruption.
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\22\ 17 CFR 240.19b-4(f)(6).
\23\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
Waiver of the operative delay will allow the Exchange to extend the
pilot program prior to its expiration on May 3, 2016, which will ensure
that the program continues to operate uninterrupted. Therefore, the
Commission hereby waives the 30-day operative delay and designates the
proposed rule change to be operative upon filing with the
Commission.\24\
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\24\ For purposes only of waiving the 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).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
[[Page 26861]]
Send an email to rule-comments@sec.gov. Please include
File Number SR-CBOE-2016-032 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-2016-032. 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-2016-032 and should be
submitted on or before May 25, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12) and (59).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-10436 Filed 5-3-16; 8:45 am]
BILLING CODE 8011-01-P
