Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To List and Trade S&P Select Sector Index Options, 48858-48861 [2017-22754]
Download as PDF
<![CDATA[
48858
Federal Register / Vol. 82, No. 202 / Friday, October 20, 2017 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81883; File Nos. SR–DTC–
2017–005; SR–FICC–2017–009; SR–NSCC–
2017–006]
Self-Regulatory Organizations; The
Depository Trust Company; Fixed
Income Clearing Corporation; National
Securities Clearing Corporation;
Notice of Designation of Longer Period
for Commission Action on
Proceedings To Determine Whether To
Approve or Disapprove Proposed Rule
Changes, as Modified by Amendments
No. 1, To Adopt the Clearing Agency
Stress Testing Framework (Market
Risk)
October 16, 2017.
On April 7, 2017, The Depository
Trust Company (‘‘DTC’’), Fixed Income
Clearing Corporation (‘‘FICC’’), and
National Securities Clearing Corporation
(‘‘NSCC,’’ each a ‘‘Clearing Agency,’’
and collectively, the ‘‘Clearing
Agencies’’), filed with the Securities and
Exchange Commission (‘‘Commission’’)
proposed rule changes SR–DTC–2017–
005, SR–FICC–2017–009, and SR–
NSCC–2017–006, respectively, pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder.2
The proposed rule changes were
published for comment in the Federal
Register on April 25, 2017.3 On June 7,
2017, the Commission designated a
longer period for Commission Action on
the proposed rule changes.4 On July 19,
2017, the Clearing Agencies each filed
Amendment No. 1 to their respective
proposed rule changes (hereinafter,
‘‘Proposed Rule Changes’’). On July 24,
2017, the Commission published a
notice in the Federal Register of filing
Amendments No. 1 and order instituting
proceedings under Section 19(b)(2)(B)(i)
of the Act 5 to determine whether to
approve or disapprove the Proposed
Rule Changes.6 The Commission did not
receive any comment letters on the
Proposed Rule Changes.
Section 19(b)(2)(B)(ii) of the Act
provides that, after initiating
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 80485
(April 19, 2017), 82 FR 19131 (April 25, 2017) (SR–
DTC–2017–005; SR–FICC–2017–009; SR–NSCC–
2017–006).
4 See Securities Exchange Act Release No. 80876
(June 7, 2017), 82 FR 27091 (June 13, 2017) (SR–
DTC–2017–005; SR–FICC–2017–009; SR–NSCC–
2017–006).
5 15 U.S.C. 78s(b)(2)(B)(i).
6 See Securities Exchange Act Release No. 81192
(July 24, 2017), 82 FR 35245 (July 28, 2017) (SR–
DTC–2017–005; SR–FICC–2017–009; SR–NSCC–
2017–006).
srobinson on DSKBC5CHB2PROD with NOTICES
2 17
VerDate Sep<11>2014
16:22 Oct 19, 2017
Jkt 244001
proceedings, the Commission shall issue
an order approving or disapproving the
proposed rule change not later than 180
days after the date of publication of
notice of filing of the proposed rule
change.7 The Commission may,
however, extend the period for issuing
an order approving or disapproving the
proposed rule change by not more than
60 days if the Commission determines
that a longer period is appropriate and
publishes the reasons for such
determination.8
The 180th day after publication of the
notice for the Proposed Rule Changes in
the Federal Register is October 22,
2017. The Commission finds it
appropriate to designate a longer period
within which to issue an order
approving or disapproving the Proposed
Rule Changes so that it has sufficient
time to consider the Proposed Rule
Changes. Accordingly, the Commission,
pursuant to Section 19(b)(2)(B)(ii) of the
Act,9 designates December 21, 2017 as
the date by which the Commission shall
either approve or disapprove proposed
rule changes SR–DTC–2017–005, SR–
FICC–2017–009, and SR–NSCC–2017–
006, as amended.
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.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Eduardo A. Aleman,
Assistant Secretary.
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.
[FR Doc. 2017–22758 Filed 10–19–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81879; File No. SR–CBOE–
2017–065]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To List and Trade S&P
Select Sector Index Options
October 16, 2017.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
4, 2017, 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
7 15
U.S.C. 78s(b)(2)(B)(ii).
8 Id.
10 17
CFR 200.30–3(a)(57).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
Frm 00073
The Exchange is proposing to amend
certain rules in connection with listing
S&P Select Sector Indexes under generic
narrow-based listing standards.
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
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this proposed rule
change is to amend certain rules in
connection with the Exchange’s plans to
list and trade ten S&P Select Sector
Index options.
Each S&P Select Sector Index
represents the performance of
companies that are components of the
Standard & Poor’s 500 Index (‘‘S&P
500’’) within one of the following
sectors (each of which is referred to as
a ‘‘S&P Select Sector Index’’):
3 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
5 These symbols represent the index. The
corresponding option symbols are SIXM, SIXE,
SIXT, SIXV, SIXU, SIXR, SIXI, SIXY, SIXB, and
SIXRE, respectively.
4 17
9 Id.
PO 00000
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Fmt 4703
Sfmt 4703
E:\FR\FM\20OCN1.SGM
20OCN1
Federal Register / Vol. 82, No. 202 / Friday, October 20, 2017 / Notices
(5) in a capitalization-weighted index
or a modified capitalization-weighted
index, the lesser of the five highest
Financial ............... IXM
66 weighted component securities in the
Energy .................. IXE
32
index or the highest weighted
Technology ........... IXT
72
Health Care .......... IXV
61 component securities in the index that
Utilities .................. IXU
28 in the aggregate represent at least 30%
Consumer Staples IXR
35 of the total number of component
Industrials ............. IXI
68 securities in the index each have had an
Consumer DiscreIXY
85 average monthly trading volume of at
tionary.
least 2,000,000 shares over the past six
Materials ............... IXB
26 months;
Real Estate ........... IXRE
32
(6) no single component security
represents more than 25% of the weight
Each constituent of a Select Sector
of the index, and the five highest
Index is a constituent of the S&P 500,
weighted component securities in the
and each Select Sector index is a
index do not in the aggregate account
subindex of the S&P 500. S&P Dow
for more than 50% (60% for an index
6 assigns constituents to a
Jones Indices
consisting of fewer than 25 component
S&P Select Sector Index based on the
securities) of the weight of the index;
constituent’s classification under a
(7) component securities that account
global industry classification standard.
for at least 90% of the weight of the
S&P Dow Jones Indices monitors and
index and at least 80% of the total
maintains each Select Sector Index and
rebalances each S&P Select Sector Index number of component securities in the
index satisfy the requirements of Rule
quarterly.
5.3 applicable to individual underlying
Initial and Maintenance Listing Criteria
securities;
(8) all component securities are
Each S&P Select Sector Index meets
‘‘reported securities’’ as defined in Rule
the definition of a narrow-based index
11A a3–1 under the Exchange Act;
as set forth in Rule 24.1(i)(2) (an index
designed to be representative of a
(9) non-U.S. component securities
particular industry or a group of related (stocks or ADRs) that are not subject to
industries and include indices having
comprehensive surveillance agreements
component securities that are all
do not in the aggregate represent more
headquartered within a single country).
than 20% of the weight of the index;
Additionally, each S&P Select Sector
(10) the current underlying index
Index option satisfies the initial listing
value will be reported at least once
criteria of a narrow-based index, as set
every fifteen seconds during the time
forth in Rule 24.2(b):
the index options are traded on the
(1) Options will be A.M.-settled;
Exchange;
(2) the index is capitalization(11) an equal dollar-weighted index
weighted, price-weighted, equal dollarwill be rebalanced at least once every
weighted, or modified capitalizationcalendar quarter; and
weighted, and consists of ten or more
(12) if an underlying index is
component securities (the S&P Select
maintained by a broker-dealer, the index
Sector Indexes are modified
is calculated by a third party who is not
capitalization-weighted);
a broker-dealer, and the broker-dealer
(3) each component security has a
has erected a ‘‘Chinese Wall’’ around its
market capitalization of at least $75
personnel who have access to
million, except that for each of the
information concerning changes in and
lowest weighted component securities
adjustments to the index.
in the index that in the aggregate
The S&P Select Sector Index options
account for no more than 10% of the
will be subject to the maintenance
weight of the index, the market
listing standards set forth in Rule
capitalization is at least $50 million;
24.2(c):
(4) trading volume of each component
(1) The conditions stated in (1), (3),
security has been at least one million
(6), (7), (8), (9), (10), (11) and (12) above
shares for each of the last six months,
must continue to be satisfied, provided
except that for each of the lowest
that the conditions stated in (6) above
weighted component securities in the
must be satisfied only as of the first day
index that in the aggregate account for
of January and July in each year;
no more than 10% of the weight of the
(2) the total number of component
index, trading volume has been at least
securities in the index may not increase
500,000 shares for each of the last six
or decrease by more than 331⁄3% from
months;
the number of component securities in
the index at the time of its initial listing,
6 S&P Dow Jones Indices is the reporting authority
and in no event may be less than nine
for the S&P Select Sector Indexes. See proposed
Rule 24.1, Interpretation and Policy .01.
component securities;
srobinson on DSKBC5CHB2PROD with NOTICES
Sector
VerDate Sep<11>2014
Symbol 5
16:22 Oct 19, 2017
Number of
components
Jkt 244001
PO 00000
Frm 00074
Fmt 4703
Sfmt 4703
48859
(3) trading volume of each component
security in the index must be at least
500,000 shares for each of the last six
months, except that for each of the
lowest weighted component securities
in the index that in the aggregate
account for no more than 10% of the
weight of the index, trading volume
must be at least 400,000 shares for each
of the last six months; and
(4) in a capitalization-weighted index
or a modified capitalization-weighted
index, the lesser of the five highest
weighted component securities in the
index or the highest weighted
component securities in the index that
in the aggregate represent at least 30%
of the total number of stocks in the
index each have had an average
monthly trading volume of at least
1,000,000 shares over the past six
months.7
Expiration Months, Settlement, and
Exercise Style
Consistent with existing rules for
certain index options, the Exchange will
allow up to twelve near-term expiration
months.8 The Exchange elects to have
the ability to list up to twelve near-term
expiration months, as that is the same
amount the Rules permit for options on
the S&P 500 (‘‘SPX options’’). The S&P
Select Sector Indexes, in the aggregate,
consist of the same components as the
S&P 500, as discussed above. Because of
the relation [sic] between the S&P Select
Sector Indexes and the S&P 500, which
will likely result in market participants’
investment and hedging strategies
consisting of options over both, the
Exchange believes it is appropriate to
permit the same number of monthly
expirations for S&P Select Sector Index
options as SPX options.
The S&P Select Sector Index options
will be A.M., cash-settled contracts with
European-style exercise.9 A.M.settlement is consistent with the generic
listing criteria for industry-based
indexes 10 (as well as broad-based
indexes 11), and thus it is common for
7 As is the case with other index options
authorized for listing and trading on CBOE, in the
event a S&P Select Sector Index fails to satisfy the
maintenance listing standards, the Exchange will
not open for trading any additional series of options
of that class unless such failure is determined by
the Exchange not to be significant and the
Commission concurs in that determination, or
unless the continued listing of that class of index
options has been approved by the Securities and
Exchange Commission (the ‘‘Commission’’) under
Section 19(b)(2) of the Securities and Exchange Act
(the ‘‘Act’’).
8 See proposed Rule 24.9(a)(2).
9 See proposed Rule 24.9(a)(3)(cxiv) through
(cxxiii).
10 See Rule 24.2(b)(1).
11 See Rule 24.2(f)(2).
E:\FR\FM\20OCN1.SGM
20OCN1
48860
Federal Register / Vol. 82, No. 202 / Friday, October 20, 2017 / Notices
index options to be A.M.-settled. The
Exchange proposes to amend Rule
24.9(a)(4) to add the S&P Select Sector
Index options to the list of other A.M.settled options. Standard third-Friday
SPX options are A.M.-settled. Europeanstyle exercise is consistent with many
index options, as set forth in Rule
24.9(a)(3). Standard third-Friday SPX
options are A.M.-settled with Europeanstyle exercise. The Exchange proposes
to amend Rule 24.9(a)(3) to add S&P
Select Sector Index options to the list of
other European-style index options.
Because of the relation between the S&P
Select Sector Indexes and the S&P 500,
which will likely result in market
participants’ investment and hedging
strategies consisting of options over
both, the Exchange believes it is
appropriate to list S&P Select Sector
Index options with the same settlement
and exercise style as SPX options.
Appointment Costs
The Exchange proposes a MarketMaker appointment cost of .001 for each
S&P Select Sector Index option, and
each will have a Market-Maker
appointment cost of .001.12 The
Exchange determines appointment costs
of Tier AA classes based on several
factors, including, but not limited to,
competitive forces and trading volume.
The Exchange believes the proposed
initial appointment cost for each S&P
Select Sector Index option will foster
competition by incentivizing MarketMakers to obtain an appointment in
these newly listed options, which may
increase liquidity in the new classes.
Capacity
srobinson on DSKBC5CHB2PROD with NOTICES
CBOE has analyzed its capacity and
represents that it believes the Exchange
and OPRA have the necessary systems
capacity to handle the additional traffic
associated with the listing of new series
that would result from the introduction
of S&P Select Sector Index options up
to the proposed number of possible
expirations. Because the proposal is
limited to ten classes, the Exchange
believes any additional traffic that
would be generated from the
introduction of S&P Select Sector Index
options would be manageable.
12 See proposed Rule 8.3(c)(i). S&P Select Sector
Index Options will be in Tier AA (as are other S&P
index options). While the appointment costs of Tier
AA classes are not subject to quarterly rebalancing
under Rule 8.3(c)(iv), the Exchange regularly
reviews the appointment costs of Tier AA classes
to ensure that they continue to be appropriate. The
Exchange determines appointment costs of Tier AA
classes based on several factors, including, but not
limited to, competitive forces and trading volume.
VerDate Sep<11>2014
16:22 Oct 19, 2017
Jkt 244001
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
‘‘Act’’) and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.13 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 14 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 15 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
that the proposed rule change will
further the Exchange’s goal of
introducing new and innovative
products to the marketplace. Currently,
the Exchange believes that there is
unmet market demand for exchangelisted security options listed on these
ten popular cash indexes. Sector SPDRs
and E-mini S&P Select Sector future
products are listed and traded on other
exchanges. As a result, CBOE believes
that S&P Select Sector Index options are
designed to provide different and
additional opportunities for investors to
hedge or speculate on the market risk
associated with the S&P Select Sector
Indexes by listing an option directly on
these indexes.
The S&P Select Sector Index options
satisfy the initial listing standards for
narrow-based indexes in the Exchange’s
current rules. The proposed rule change
merely adds the S&P Select Sector
Indexes to the table regarding reporting
authorities for indexes, to the rule
regarding number of permissible
expirations, to the list of European-style
exercise index options, and to the list of
A.M.-settled index options. These
changes are consistent [sic] existing
rules and index options currently
authorized and listed for trading on the
Exchange. The Exchange notes, with
respect to these changes, standard third13 15
14 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
15 Id.
PO 00000
Frm 00075
Fmt 4703
Sfmt 4703
Friday SPX options (which overly the
S&P 500, which consist of the same
components as the S&P Select Sector
Indexes in the aggregate) currently have
the same reporting authority, the same
number of permissible expirations, the
same settlement, and the same exercise
style. The Exchange has observed no
trading or capacity issues in SPX trading
given the number of permissible
expirations, a.m. settlement, and
European-style exercise. Because of the
relation between the S&P Select Sector
Indexes and the S&P 500, which will
likely result in market participants’
investment and hedging strategies
consisting of options over both, the
Exchange believes it is appropriate to
have the same number of expiration,
settlement, and exercise style for both.
The Exchange also represents that it has
the necessary systems capacity to
support the new option series given
these proposed specifications.
The Exchange believes the proposed
initial low appointment cost for each
S&P Select Sector Index option
promotes competition and efficiency by
incentivizing more Market-Makers to
obtain an appointment in the newly
listed classes. The Exchange believes
this may result in liquidity and
competitive pricing in these classes,
which ultimately benefits investors. The
proposed rule change does not result in
unfair discrimination, as the
appointment cost will apply to all
Market-Makers in these classes.
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. S&P Select
Sector Indexes satisfy initial listing
standards set forth in the Rules, and the
proposed number of expirations,
settlement, and exercise style are
consistent with current rules applicable
to index options, including standard
third-Friday SPX options. Because of
the relation [sic] between the S&P Select
Sector Indexes and the S&P 500, which
will likely result in market participants’
investment and hedging strategies
consisting of options over both, the
Exchange believes it is appropriate to
have the same number of expirations,
settlement, and exercise style for both
options. S&P Select Sector Index
options will provide investors with
different and additional opportunities to
hedge or speculate on the market
associated with the S&P Select Sector
indexes.
The Exchange believes the proposed
initial low appointment cost for each
E:\FR\FM\20OCN1.SGM
20OCN1
Federal Register / Vol. 82, No. 202 / Friday, October 20, 2017 / Notices
S&P Select Sector Index option
promotes competition and efficiency by
incentivizing more Market-Makers to
obtain an appointment in the newly
listed classes. The Exchange believes
this may result in liquidity and
competitive pricing in these classes,
which ultimately benefits investors. The
proposed rule change does not result in
unfair discrimination, as the
appointment cost will apply to all
Market-Makers in these classes.
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 foregoing proposed rule
change does not:
A. Significantly affect the protection
of investors or the public interest;
B. impose any significant burden on
competition; and
C. become operative for 30 days from
the date on which it was filed, or such
shorter time as the Commission may
designate, it has become effective
pursuant to Section 19(b)(3)(A) of the
Act 16 and Rule 19b–4(f)(6) 17
thereunder.18 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 will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
srobinson on DSKBC5CHB2PROD with NOTICES
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:
16 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
18 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
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.
17 17
VerDate Sep<11>2014
16:22 Oct 19, 2017
Jkt 244001
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–2017–065 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–2017–065. 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–
2017–065 and should be submitted on
or before November 13, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–22754 Filed 10–19–17; 8:45 am]
BILLING CODE 8011–01–P
19 17
PO 00000
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81876; File No. SR–
BatsBZX–2017–53]
Self-Regulatory Organizations; Bats
BZX Exchange, Inc.; Order Granting
Approval of a Proposed Rule Change
To List and Trade Shares of the
WisdomTree CBOE Russell 2000
PutWrite Strategy Fund, a Series of the
WisdomTree Trust, Under Rule
14.11(c)(3) (Index Fund Shares)
October 16, 2017.
I. Introduction
On August 18, 2017, Bats BZX
Exchange, Inc. (‘‘Exchange’’ or ‘‘BZX’’)
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
(‘‘Shares’’) of the WisdomTree CBOE
Russell 2000 PutWrite Strategy Fund
(‘‘Fund’’). The proposed rule change
was published for comment in the
Federal Register on September 7, 2017.3
The Commission has received no
comments on the proposal. This order
approves the proposed rule change.
II. Exchange’s Description of the
Proposed Rule Change
The Exchange proposes to list and
trade Shares of the Fund under Rule
14.11(c), which governs the listing and
trading of Index Fund Shares on the
Exchange. The Fund will be an indexbased exchange-traded fund (‘‘ETF’’).
The Shares will be offered by the
WisdomTree Trust (‘‘Trust’’), which is
registered with the Commission as an
investment company and has filed a
registration statement on Form N–1A
(‘‘Registration Statement’’) with the
Commission on behalf of the Fund.4
The Fund will seek investment results
that track the price and yield
performance, before fees and expenses,
of the CBOE Russell 2000 PutWrite
Index (‘‘Index’’), which was developed
and is maintained by the Chicago Board
Options Exchange, Inc. (‘‘CBOE’’ or
‘‘Index Provider’’).5 The Index consists
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 81510
(Aug. 31, 2017), 82 FR 42399 (‘‘Notice’’).
4 See Post-Effective Amendment No. 595 to
Registration Statement on Form N–1A for the Trust,
dated July 27, 2017 (File Nos. 333–132380 and 811–
21864).
5 According to the Exchange, none of the Trust,
WisdomTree Asset Management, Inc. (‘‘Adviser’’),
Mellon Capital Management (‘‘Sub-Adviser’’), State
Street Bank and Trust Company (administrator,
2 17
CFR 200.30–3(a)(12).
Frm 00076
Fmt 4703
Sfmt 4703
48861
Continued
E:\FR\FM\20OCN1.SGM
20OCN1
]]>Agencies
[Federal Register Volume 82, Number 202 (Friday, October 20, 2017)]
[Notices]
[Pages 48858-48861]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-22754]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81879; File No. SR-CBOE-2017-065]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To List and Trade S&P Select Sector Index Options
October 16, 2017.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on October 4, 2017, 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 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 is proposing to amend certain rules in connection with
listing S&P Select Sector Indexes under generic narrow-based listing
standards.
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
The purpose of this proposed rule change is to amend certain rules
in connection with the Exchange's plans to list and trade ten S&P
Select Sector Index options.
Each S&P Select Sector Index represents the performance of
companies that are components of the Standard & Poor's 500 Index (``S&P
500'') within one of the following sectors (each of which is referred
to as a ``S&P Select Sector Index''):
---------------------------------------------------------------------------
\5\ These symbols represent the index. The corresponding option
symbols are SIXM, SIXE, SIXT, SIXV, SIXU, SIXR, SIXI, SIXY, SIXB,
and SIXRE, respectively.
[[Page 48859]]
------------------------------------------------------------------------
Number of
Sector Symbol \5\ components
------------------------------------------------------------------------
Financial............................ IXM 66
Energy............................... IXE 32
Technology........................... IXT 72
Health Care.......................... IXV 61
Utilities............................ IXU 28
Consumer Staples..................... IXR 35
Industrials.......................... IXI 68
Consumer Discretionary............... IXY 85
Materials............................ IXB 26
Real Estate.......................... IXRE 32
------------------------------------------------------------------------
Each constituent of a Select Sector Index is a constituent of the
S&P 500, and each Select Sector index is a subindex of the S&P 500. S&P
Dow Jones Indices \6\ assigns constituents to a S&P Select Sector Index
based on the constituent's classification under a global industry
classification standard. S&P Dow Jones Indices monitors and maintains
each Select Sector Index and rebalances each S&P Select Sector Index
quarterly.
---------------------------------------------------------------------------
\6\ S&P Dow Jones Indices is the reporting authority for the S&P
Select Sector Indexes. See proposed Rule 24.1, Interpretation and
Policy .01.
---------------------------------------------------------------------------
Initial and Maintenance Listing Criteria
Each S&P Select Sector Index meets the definition of a narrow-based
index as set forth in Rule 24.1(i)(2) (an index designed to be
representative of a particular industry or a group of related
industries and include indices having component securities that are all
headquartered within a single country). Additionally, each S&P Select
Sector Index option satisfies the initial listing criteria of a narrow-
based index, as set forth in Rule 24.2(b):
(1) Options will be A.M.-settled;
(2) the index is capitalization-weighted, price-weighted, equal
dollar-weighted, or modified capitalization-weighted, and consists of
ten or more component securities (the S&P Select Sector Indexes are
modified capitalization-weighted);
(3) each component security has a market capitalization of at least
$75 million, except that for each of the lowest weighted component
securities in the index that in the aggregate account for no more than
10% of the weight of the index, the market capitalization is at least
$50 million;
(4) trading volume of each component security has been at least one
million shares for each of the last six months, except that for each of
the lowest weighted component securities in the index that in the
aggregate account for no more than 10% of the weight of the index,
trading volume has been at least 500,000 shares for each of the last
six months;
(5) in a capitalization-weighted index or a modified
capitalization-weighted index, the lesser of the five highest weighted
component securities in the index or the highest weighted component
securities in the index that in the aggregate represent at least 30% of
the total number of component securities in the index each have had an
average monthly trading volume of at least 2,000,000 shares over the
past six months;
(6) no single component security represents more than 25% of the
weight of the index, and the five highest weighted component securities
in the index do not in the aggregate account for more than 50% (60% for
an index consisting of fewer than 25 component securities) of the
weight of the index;
(7) component securities that account for at least 90% of the
weight of the index and at least 80% of the total number of component
securities in the index satisfy the requirements of Rule 5.3 applicable
to individual underlying securities;
(8) all component securities are ``reported securities'' as defined
in Rule 11A a3-1 under the Exchange Act;
(9) non-U.S. component securities (stocks or ADRs) that are not
subject to comprehensive surveillance agreements do not in the
aggregate represent more than 20% of the weight of the index;
(10) the current underlying index value will be reported at least
once every fifteen seconds during the time the index options are traded
on the Exchange;
(11) an equal dollar-weighted index will be rebalanced at least
once every calendar quarter; and
(12) if an underlying index is maintained by a broker-dealer, the
index is calculated by a third party who is not a broker-dealer, and
the broker-dealer has erected a ``Chinese Wall'' around its personnel
who have access to information concerning changes in and adjustments to
the index.
The S&P Select Sector Index options will be subject to the
maintenance listing standards set forth in Rule 24.2(c):
(1) The conditions stated in (1), (3), (6), (7), (8), (9), (10),
(11) and (12) above must continue to be satisfied, provided that the
conditions stated in (6) above must be satisfied only as of the first
day of January and July in each year;
(2) the total number of component securities in the index may not
increase or decrease by more than 33\1/3\% from the number of component
securities in the index at the time of its initial listing, and in no
event may be less than nine component securities;
(3) trading volume of each component security in the index must be
at least 500,000 shares for each of the last six months, except that
for each of the lowest weighted component securities in the index that
in the aggregate account for no more than 10% of the weight of the
index, trading volume must be at least 400,000 shares for each of the
last six months; and
(4) in a capitalization-weighted index or a modified
capitalization-weighted index, the lesser of the five highest weighted
component securities in the index or the highest weighted component
securities in the index that in the aggregate represent at least 30% of
the total number of stocks in the index each have had an average
monthly trading volume of at least 1,000,000 shares over the past six
months.\7\
---------------------------------------------------------------------------
\7\ As is the case with other index options authorized for
listing and trading on CBOE, in the event a S&P Select Sector Index
fails to satisfy the maintenance listing standards, the Exchange
will not open for trading any additional series of options of that
class unless such failure is determined by the Exchange not to be
significant and the Commission concurs in that determination, or
unless the continued listing of that class of index options has been
approved by the Securities and Exchange Commission (the
``Commission'') under Section 19(b)(2) of the Securities and
Exchange Act (the ``Act'').
---------------------------------------------------------------------------
Expiration Months, Settlement, and Exercise Style
Consistent with existing rules for certain index options, the
Exchange will allow up to twelve near-term expiration months.\8\ The
Exchange elects to have the ability to list up to twelve near-term
expiration months, as that is the same amount the Rules permit for
options on the S&P 500 (``SPX options''). The S&P Select Sector
Indexes, in the aggregate, consist of the same components as the S&P
500, as discussed above. Because of the relation [sic] between the S&P
Select Sector Indexes and the S&P 500, which will likely result in
market participants' investment and hedging strategies consisting of
options over both, the Exchange believes it is appropriate to permit
the same number of monthly expirations for S&P Select Sector Index
options as SPX options.
---------------------------------------------------------------------------
\8\ See proposed Rule 24.9(a)(2).
---------------------------------------------------------------------------
The S&P Select Sector Index options will be A.M., cash-settled
contracts with European-style exercise.\9\ A.M.-settlement is
consistent with the generic listing criteria for industry-based indexes
\10\ (as well as broad-based indexes \11\), and thus it is common for
[[Page 48860]]
index options to be A.M.-settled. The Exchange proposes to amend Rule
24.9(a)(4) to add the S&P Select Sector Index options to the list of
other A.M.-settled options. Standard third-Friday SPX options are A.M.-
settled. European-style exercise is consistent with many index options,
as set forth in Rule 24.9(a)(3). Standard third-Friday SPX options are
A.M.-settled with European-style exercise. The Exchange proposes to
amend Rule 24.9(a)(3) to add S&P Select Sector Index options to the
list of other European-style index options. Because of the relation
between the S&P Select Sector Indexes and the S&P 500, which will
likely result in market participants' investment and hedging strategies
consisting of options over both, the Exchange believes it is
appropriate to list S&P Select Sector Index options with the same
settlement and exercise style as SPX options.
---------------------------------------------------------------------------
\9\ See proposed Rule 24.9(a)(3)(cxiv) through (cxxiii).
\10\ See Rule 24.2(b)(1).
\11\ See Rule 24.2(f)(2).
---------------------------------------------------------------------------
Appointment Costs
The Exchange proposes a Market-Maker appointment cost of .001 for
each S&P Select Sector Index option, and each will have a Market-Maker
appointment cost of .001.\12\ The Exchange determines appointment costs
of Tier AA classes based on several factors, including, but not limited
to, competitive forces and trading volume. The Exchange believes the
proposed initial appointment cost for each S&P Select Sector Index
option will foster competition by incentivizing Market-Makers to obtain
an appointment in these newly listed options, which may increase
liquidity in the new classes.
---------------------------------------------------------------------------
\12\ See proposed Rule 8.3(c)(i). S&P Select Sector Index
Options will be in Tier AA (as are other S&P index options). While
the appointment costs of Tier AA classes are not subject to
quarterly rebalancing under Rule 8.3(c)(iv), the Exchange regularly
reviews the appointment costs of Tier AA classes to ensure that they
continue to be appropriate. The Exchange determines appointment
costs of Tier AA classes based on several factors, including, but
not limited to, competitive forces and trading volume.
---------------------------------------------------------------------------
Capacity
CBOE has analyzed its capacity and represents that it believes the
Exchange and OPRA have the necessary systems capacity to handle the
additional traffic associated with the listing of new series that would
result from the introduction of S&P Select Sector Index options up to
the proposed number of possible expirations. Because the proposal is
limited to ten classes, the Exchange believes any additional traffic
that would be generated from the introduction of S&P Select Sector
Index options would be manageable.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\13\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \14\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \15\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
\15\ Id.
---------------------------------------------------------------------------
In particular, the Exchange believes that the proposed rule change
will further the Exchange's goal of introducing new and innovative
products to the marketplace. Currently, the Exchange believes that
there is unmet market demand for exchange-listed security options
listed on these ten popular cash indexes. Sector SPDRs and E-mini S&P
Select Sector future products are listed and traded on other exchanges.
As a result, CBOE believes that S&P Select Sector Index options are
designed to provide different and additional opportunities for
investors to hedge or speculate on the market risk associated with the
S&P Select Sector Indexes by listing an option directly on these
indexes.
The S&P Select Sector Index options satisfy the initial listing
standards for narrow-based indexes in the Exchange's current rules. The
proposed rule change merely adds the S&P Select Sector Indexes to the
table regarding reporting authorities for indexes, to the rule
regarding number of permissible expirations, to the list of European-
style exercise index options, and to the list of A.M.-settled index
options. These changes are consistent [sic] existing rules and index
options currently authorized and listed for trading on the Exchange.
The Exchange notes, with respect to these changes, standard third-
Friday SPX options (which overly the S&P 500, which consist of the same
components as the S&P Select Sector Indexes in the aggregate) currently
have the same reporting authority, the same number of permissible
expirations, the same settlement, and the same exercise style. The
Exchange has observed no trading or capacity issues in SPX trading
given the number of permissible expirations, a.m. settlement, and
European-style exercise. Because of the relation between the S&P Select
Sector Indexes and the S&P 500, which will likely result in market
participants' investment and hedging strategies consisting of options
over both, the Exchange believes it is appropriate to have the same
number of expiration, settlement, and exercise style for both. The
Exchange also represents that it has the necessary systems capacity to
support the new option series given these proposed specifications.
The Exchange believes the proposed initial low appointment cost for
each S&P Select Sector Index option promotes competition and efficiency
by incentivizing more Market-Makers to obtain an appointment in the
newly listed classes. The Exchange believes this may result in
liquidity and competitive pricing in these classes, which ultimately
benefits investors. The proposed rule change does not result in unfair
discrimination, as the appointment cost will apply to all Market-Makers
in these classes.
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. S&P Select Sector Indexes
satisfy initial listing standards set forth in the Rules, and the
proposed number of expirations, settlement, and exercise style are
consistent with current rules applicable to index options, including
standard third-Friday SPX options. Because of the relation [sic]
between the S&P Select Sector Indexes and the S&P 500, which will
likely result in market participants' investment and hedging strategies
consisting of options over both, the Exchange believes it is
appropriate to have the same number of expirations, settlement, and
exercise style for both options. S&P Select Sector Index options will
provide investors with different and additional opportunities to hedge
or speculate on the market associated with the S&P Select Sector
indexes.
The Exchange believes the proposed initial low appointment cost for
each
[[Page 48861]]
S&P Select Sector Index option promotes competition and efficiency by
incentivizing more Market-Makers to obtain an appointment in the newly
listed classes. The Exchange believes this may result in liquidity and
competitive pricing in these classes, which ultimately benefits
investors. The proposed rule change does not result in unfair
discrimination, as the appointment cost will apply to all Market-Makers
in these classes.
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 foregoing proposed rule change does not:
A. Significantly affect the protection of investors or the public
interest;
B. impose any significant burden on competition; and
C. become operative for 30 days from the date on which it was
filed, or such shorter time as the Commission may designate, it has
become effective pursuant to Section 19(b)(3)(A) of the Act \16\ and
Rule 19b-4(f)(6) \17\ thereunder.\18\ 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 will institute proceedings to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 240.19b-4(f)(6).
\18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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.
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-CBOE-2017-065 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-2017-065. 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-2017-065 and should be
submitted on or before November 13, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
---------------------------------------------------------------------------
\19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-22754 Filed 10-19-17; 8:45 am]
BILLING CODE 8011-01-P
