2158 Federal Register / Vol. 76, No. 8 / Wednesday, January 12, 2011 / Notices 

8 15 U.S.C. 78s(b)(3)(A). 

9 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires the Exchange to give the 

Commission written notice of the Exchange’s 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. 

10See Securities Exchange Act Release No. 63654 

(January 6, 2011) (SR–Phlx–2010–158) (order 

approving establishment of a $5 Strike Price 

Program). 

11For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

12 17 CFR 200.30–3(a)(12). 

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). 

5 Interpretation and Policy .01(d) permits strike 

intervals of $2.50 or greater where the strike price 

is $25 or less and Interpretation and Policy .01(c) 

19(b)(3)(A) of the Act 8 and Rule 19b– 

4(f)(6) thereunder.9

The Exchange has requested that the 

Commission waive the 30-day operative 

delay. The Commission believes that 

waiver of the operative delay is 

consistent with the protection of 

investors and the public interest 

because the proposal is substantially 

similar to that of another exchange that 

has been approved by the 

Commission.10 Therefore, the 

Commission designates the proposal 

operative upon filing.11

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NASDAQ–2011–001 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR– NASDAQ–2011–001. This 

file number should be included on the 

subject line if e-mail 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 (http://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 

a.m. and 3 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 SRNASDAQ–2011–001 and should be 

submitted on or before February 2, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–438 Filed 1–11–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63651; File No. SR–CBOE– 

2011–002] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change to Establish a $5 Strike 

Price Program 

January 6, 2011. 

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 January 

3, 2011, the Chicago Board Options 

Exchange, Incorporated (‘‘CBOE’’or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘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 

CBOE proposes to amend 

Interpretation and Policy .01 to Rule 5.5 

to allow CBOE to list and trade series in 

intervals of $5 or greater where the 

strike price is more than $200 in up to 

five option classes on individual stocks. 

The text of the rule proposal is available 

on the Exchange’s Web site (http:// 

www.cboe.org/legal), at the Exchange’s 

principal office, 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 

self-regulatory organization included 

statements concerning the purpose of 

and basis for the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant parts of such 

statements. 

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 modify Interpretation and 

Policy .01 to Rule 5.5 to allow the 

Exchange to list and trade series in 

intervals of $5 or greater where the 

strike price is more than $200 in up to 

five option classes on individual stocks 

(‘‘$5 Strike Price Program’’) to provide 

investors and traders with additional 

opportunities and strategies to hedge 

high priced securities. 

Currently, Interpretation and Policy 

.01(e) to Rule 5.5 permits strike price 

intervals of $10 or greater where the 

strike price is greater than $200.5 The 

mstockstill on DSKH9S0YB1PROD with NOTICES

Federal Register / Vol. 76, No. 8 / Wednesday, January 12, 2011 / Notices 2159 

permits strike price intervals of $5 or greater where 

the strike price is greater than $25. 

6The prices listed in this example are 

assumptions and not based on actual prices. The 

assumptions are made for illustrative purposes only 

using the stock price as a hypothetical. 

7The prices listed in this example are 

assumptions and not based on actual prices. The 

assumptions are made for illustrative purposes only 

using the stock price as a hypothetical. 

8 15 U.S.C. 78s(b)(1). 

9 15 U.S.C. 78f(b). 

10 15 U.S.C. 78f(b)(5). 

11 15 U.S.C. 78s(b)(3)(A). 

12 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires the Exchange to give the 

Commission written notice of the Exchange’s 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. 

13See Securities Exchange Act Release No. 63654 

(January 6, 2011) (SR–Phlx–2010–158) (order 

approving establishment of a $5 Strike Price 

Program). 

14For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

Exchange is proposing to add the 

proposed $5 Strike Program as an 

exception to the $10 or greater program 

language in Rule 5.5.01(e). The proposal 

would allow the Exchange to list series 

in intervals of $5 or greater where the 

strike price is more than $200 in up to 

five option classes on individual stocks. 

The Exchange specifically proposes to 

create new subparagraph (f) to Rule 

5.5.01 to provide: 

The Exchange may list series in intervals 

of $5 or greater where the strike price is more 

than $200 in up to five (5) option classes on 

individual stocks. 

The Exchange believes the $5 Strike 

Price Program would offer investors a 

greater selection of strike prices at a 

lower cost. For example, if an investor 

wanted to purchase an option with an 

expiration of approximately one month, 

a $5 strike interval could offer a wider 

choice of strike prices, which may result 

in reduced outlays in order to purchase 

the option. By way of illustration, using 

Google, Inc. (‘‘GOOG’’) as an example, if 

GOOG were trading at $610 6 with 

approximately one month remaining 

until expiration, the front month (one 

month remaining) at-the-money call 

option (the 610 strike) might trade at 

approximately $17.50 and the next 

highest available strike (the 620 strike) 

might trade at approximately $13.00. By 

offering a 615 strike, an investor would 

be able to trade a GOOG front month 

call option at approximately $15.25, 

thus providing an additional choice at a 

different price point. 

Similarly, if an investor wanted to 

hedge exposure to an underlying stock 

position by selling call options, the 

investor may choose an option term 

with two months remaining until 

expiration. An additional $5 strike 

interval could offer additional and 

varying yields to the investor. For 

example if Apple, Inc. (‘‘AAPL’’) were 

trading at $310 7 with approximately 

two months remaining until expiration, 

the second month (two months 

remaining) at-the-money call option (the 

310 strike) might trade at approximately 

$14.50 and the next highest available 

strike (the 320) strike might trade at 

$9.90. If at expiration the price of AAPL 

closed at $310, the 310 strike call would 

have yielded a return of 4.68% and the 

320 strike call would have yielded a 

return of 3.19% over the holding period. 

If the 315 strike call were available, that 

series might be priced at approximately 

$12.10 (a yield of 3.90% over the 

holding period) and would have had a 

lower risk of having the underlying 

stock called away at expiration than that 

of the 310 strike call. 

With regard to the impact of this 

proposal on system capacity, the 

Exchange has analyzed its capacity and 

represents that it and the Options Price 

Reporting Authority have the necessary 

systems capacity to handle the potential 

additional traffic associated with the 

listing and trading of classes on 

individual stocks $5 Strike Price 

Program. The proposed $5 Strike Price 

Program would provide investors 

increased opportunities to improve 

returns and manage risk in the trading 

of equity options that overlie high 

priced stocks. In addition, the proposed 

$5 Strike Price Program would allow 

investors to establish equity options 

positions that are better tailored to meet 

their investment, trading and risk 

management requirements. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the Act 8

and the rules and regulations 

thereunder and, in particular, the 

requirements of Section 6(b) of the Act.9

Specifically, the Exchange believes the 

proposed rule change is consistent with 

the Section 6(b)(5) 10 requirements that 

the rules of an exchange be designed to 

promote just and equitable principles of 

trade, to prevent fraudulent and 

manipulative acts, to remove 

impediments to and to perfect the 

mechanism for a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. The Exchange believes 

the $5 Strike Price Program proposal 

will provide the investing public and 

other market participants increased 

opportunities because a $5 series in 

high priced stocks will provide market 

participants additional opportunities to 

hedge high priced securities. This will 

allow investors to better manage their 

risk exposure, and the Exchange 

believes the proposed $5 Strike Price 

Program would benefit investors by 

giving them more flexibility to closely 

tailor their investment decisions in a 

greater number of securities. While the 

$5 Strike Price Program will generate 

additional quote traffic, the Exchange 

does not believe that this increased 

traffic will become unmanageable since 

the proposal is limited to a fixed 

number of classes. Further, the 

Exchange does not believe that the 

proposal will result in a material 

proliferation of additional series 

because it is limited to a fixed number 

of classes and the Exchange does not 

believe that the additional price points 

will result in fractured liquidity. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

CBOE does not believe that the 

proposed rule change will impose any 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not significantly affect the 

protection of investors or the public 

interest, does not impose any significant 

burden on competition, and, by its 

terms, does not 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 11 and Rule 19b– 

4(f)(6) thereunder.12

The Exchange has requested that the 

Commission waive the 30-day operative 

delay. The Commission believes that 

waiver of the operative delay is 

consistent with the protection of 

investors and the public interest 

because the proposal is substantially 

similar to that of another exchange that 

has been approved by the 

Commission.13 Therefore, the 

Commission designates the proposal 

operative upon filing.14

mstockstill on DSKH9S0YB1PROD with NOTICES

2160 Federal Register / Vol. 76, No. 8 / Wednesday, January 12, 2011 / Notices 

15 17 CFR 200.30–3(a)(12). 

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). 

5See SR–CBOE–2011–002. 

6See Rules 5.5(d)(1) and 24.9(a)(2)(A)(i), which 

permit the Exchange to select five option classes to 

participate in the Short Term Option Series 

Program and to also list Short Term Option Series 

on any option classes that are selected by other 

securities exchanges that employ a similar program 

under their rules. See also Rules 5.5(e)(1) and 

24.9(a)(2)(B)(i), which permit the Exchange to select 

five option classes to participate in the Quarterly 

Option Series Program and to also list Quarterly 

Option Series on any option classes that are 

selected by other securities exchanges that employ 

a similar program under their rules. Reciprocity 

provisions also exist for the $2.50 Strike Program, 

the $1 Strike Program and the $0.50 Strike Program. 

See Rules 5.5.01(a), 5.5.05(a) and 5.5.01(b). 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–CBOE–2011–002 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–CBOE–2011–002. This file 

number should be included on the 

subject line if e-mail 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 (http://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 

a.m. and 3 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– 

2011–002 and should be submitted on 

or before February 2, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–439 Filed 1–11–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63656; File No. SR–CBOE– 

2011–003] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Clarify Reciprocal 

Listing Respecting a $5 Strike Program 

for Stock Options 

January 6, 2011. 

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 January 4, 

2011, the Chicago Board Options 

Exchange, Incorporated (‘‘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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

CBOE proposes to clarify that the 

Exchange may list $5 strike prices on 

any other option classes designated by 

other securities exchanges that employ 

a $5 Strike Program. The text of the rule 

proposal is available on the Exchange’s 

Web site (http://www.cboe.org/legal), 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 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of these statements may be examined at 

the places specified in Item IV below. 

The self-regulatory organization 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 

Recently, the Exchange proposed to 

adopt a $5 Strike Program (by modifying 

Interpretation and Policy .01 to Rule 

5.5), which will allow the Exchange to 

list and trade series in intervals of $5 or 

greater where the strike price is more 

than $200 in up to five (5) option classes 

on individual stocks (‘‘$5 Strike 

Program’’).5 The purpose of this 

proposed rule change is to amend the 

text of Rule 5.5.01 to clarify that the 

Exchange may list $5 strike prices on 

any other option classes designated by 

other securities exchanges that employ 

a $5 Strike Program. 

The Exchange has several strike 

setting programs that permit the 

Exchange to choose a fixed number of 

classes to participate in the programs. 

For each of these programs, the 

Exchange’s rules also expressly set forth 

reciprocity provisions.6 In other words, 

the Exchange is permitted to list series 

for classes that are selected by other 

securities exchanges that employ similar 

programs under their respective rules. 

While the recent proposal to establish 

the $5 Strike Program did not 

specifically address a reciprocity 

provision, the Exchange’s existing strike 

setting programs demonstrate the intent 

mstockstill on DSKH9S0YB1PROD with NOTICES