Federal Register / Vol. 75, No. 228 / Monday, November 29, 2010 / Notices 73153 

18For the 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. 78(c)(f). 

19 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). 

4 17 CFR 240.19b–4(f)(6)(iii). 

does not raise any new regulatory 

issues.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 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 (http://www.sec.gov/ 

rules/sro.shtml); or 

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

Number SR–Phlx–2010–156 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–Phlx–2010–156. 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 such filing 

also will be available for inspection and 

copying at the principal office of the 

Exchange. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–Phlx– 

2010–156 and should be submitted on 

or before December 20, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–29907 Filed 11–26–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63359; File No. SR–BATS– 

2010–033] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change by BATS Exchange, Inc. 

to Modify the Minor Rule Violation Plan 

for BATS Options 

November 22, 2010. 

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 November 

18, 2010, BATS Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BATS’’) 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 has 

designated this proposal as a ‘‘noncontroversial’’ proposed rule change 

pursuant to Section 19(b)(3)(A) of the 

Act 3 and Rule 19b–4(f)(6)(iii) 

thereunder,4 which renders it effective 

upon filing with the Commission. 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 is proposing to amend 

BATS Rule 25.3, entitled ‘‘Penalty for 

Minor Rule Violations’’, to expand the 

list of violations eligible for disposition 

under the Exchange’s Minor Rule 

Violation Plan (‘‘MRVP’’) as it relates to 

the equity options platform operated by 

the Exchange (‘‘BATS Options’’). 

The text of the proposed rule change 

is available at the Exchange’s Web site 

at http://www.batstrading.com, at the 

principal office of the Exchange, on the 

Commission’s Web site at http:// 

www.sec.gov 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 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 the proposed rule 

change is to amend Rule 25.3, entitled 

‘‘Penalty for Minor Rule Violations’’, to 

expand the list of violations eligible for 

disposition under the Exchange’s Minor 

Rule Violation Plan (‘‘MRVP’’) as it 

relates to options in order to improve 

the consistency of the Exchange’s MRVP 

with other options exchanges. All 

options exchanges have entered into a 

plan pursuant to Rule 17d–2 of the Act 

(the ‘‘Plan’’) under which the exchanges 

have agreed to allocate regulatory 

responsibility for certain rules common 

to all options exchanges, which Plan is 

administered by a committee known as 

the Options Surveillance Group (the 

‘‘OSG’’). Adding the proposed rules to 

the MRVP makes the Exchange’s MRVP 

more consistent with the minor rule 

violation plans of other self-regulatory 

organizations, including with respect to 

rules that are classified as common rules 

pursuant to the Plan (the ‘‘OSG 17d–2’’). 

The Exchange believes that its MRVP 

with respect to violations of rules that 

are common rules pursuant to the OSG 

17d–2 should be consistent with the 

other options exchanges that are parties 

to the OSG 17d–2. 

Consistent with the goal of improved 

consistency between the Exchange’s 

mstockstill on DSKH9S0YB1PROD with NOTICES

73154 Federal Register / Vol. 75, No. 228 / Monday, November 29, 2010 / Notices 

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

6 15 U.S.C. 78f(b)(5). 

7 15 U.S.C. 78s(b)(3)(A). 

8 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 Commission notes that the 

Exchange satisfied this five-day pre-filing 

requirement. 

MRVP and the MRVPs of other options 

exchanges, the proposed additions 

include Rules 18.9, 18.10, 23.1(a) 

through (k), 23.1(l), and 24.4, each of 

which is described below. 

• Rule 18.9 provides that no Options 

Member may directly or indirectly 

exceed exercise limits established by the 

Chicago Board Options Exchange, BATS 

Options, or another exchange, as the 

limits apply to options trading on BATS 

Options. 

• Rule 18.10 provides the 

requirements for accurately reporting 

position and account information to the 

Exchange. 

• Rule 23.1(a) through (k) relates to 

expiring exercise declarations and the 

timely submission of ‘‘Advice Cancel’’ or 

exercise instruction relating to the 

exercise or non-exercise of non-cashsettled equity options. 

• Rule 23.1(l) relates to the failure to 

submit an Exercise Advice; the 

submission of an advice and no 

subsequent exercise; the submission of 

an Exercise Advice after the designated 

cut-off time; the submission of an 

Exercise Advice for an amount different 

than the amount exercised; and the 

time-stamping of an advice or exercise 

instruction memorandum prior to 

purchasing contracts. 

• Lastly, Rule 24.4 covers requests by 

the Exchange for submission of trade 

data. 

The proposed changes would allow 

the Exchange to impose a fine of at least 

$500 per violation of the above-listed 

rules, with a maximum fine amount of 

$5,000. By promptly imposing a 

meaningful financial penalty for such 

violations, the MRVP focuses on 

correcting conduct before it gives rise to 

more serious enforcement action. The 

MRVP provides a reasonable means of 

addressing rule violations that do not 

necessarily rise to the level of requiring 

formal disciplinary proceedings, while 

also providing a greater flexibility in 

handling certain violations. Adopting a 

provision that would allow the 

Exchange to sanction violators under 

the MRVP by no means minimizes the 

importance of compliance with these 

rules. The Exchange believes that the 

violation of any of its rules is a serious 

matter. The addition of a sanction under 

the MRVP simply serves to add an 

additional method for disciplining 

violators of the additional rules. The 

Exchange will continue to conduct 

surveillance with due diligence and 

make its determination, on a case by 

case basis, whether a violation of these 

additional rules should be subject to 

formal disciplinary proceedings. 

In addition to the changes proposed 

above, the Exchange proposes to modify 

its MRVP sanction for a violation of 

Exchange position limit rules (Rule 

18.7) in order to conform to the 

sanctions imposed by a majority of other 

options exchanges. The Exchange’s 

current MRVP sanction for violations of 

position limits differs depending on 

whether a violation occurs in an 

Options Member’s account or a 

customer account, a distinction not 

present in the rules of most other 

options exchanges. Furthermore, the 

Exchange’s current MRVP sanction for 

violations of position limits is based on 

a per contract amount, whereas most 

options exchanges would impose a flat 

amount as the fine. Consistent with the 

other changes proposed above, the 

Exchange believes that conforming 

changes are appropriate, especially due 

to the fact that position limit rules are 

subject to the OSG 17d–2. 

Finally, the Exchange also proposes 

modifying the headings of the sub-parts 

in its existing Rule 25.3 to correct 

typographical errors. Specifically, in 

each heading the ‘‘Number of 

Cumulative Violations Within One 

Period’’ and ‘‘Fine Amount’’ language is 

currently commingled into one heading. 

2. Statutory Basis 

Approval of the rule change proposed 

in this submission is consistent with the 

requirements of the Act and the rules 

and regulations thereunder that are 

applicable to a national securities 

exchange, and, in particular, with the 

requirements of Section 6(b) of the Act.5

In particular, the proposed change is 

consistent with Section 6(b)(5) of the 

Act,6 because it would promote just and 

equitable principles of trade, remove 

impediments to, and perfect the 

mechanism of, a free and open market 

and a national market system, and, in 

general, protect investors and the public 

interest, by giving the Exchange the 

ability to promptly impose a meaningful 

financial penalty for such violations 

before there is a need for more serious 

enforcement action. The Exchange 

believes that the proposed rule meets 

these requirements in that it promotes 

transparency and uniformity across 

markets concerning enforcement of 

common rules contained in the OSG 

17d–2. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change imposes 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 has neither solicited 

nor received written 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: (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, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 7 and Rule 19b– 

4(f)(6)(iii) thereunder.8

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 proposal 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 

No. SR–BATS–2010–033 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 No. 

SR–BATS–2010–033. This file number 

should be included on the subject line 

mstockstill on DSKH9S0YB1PROD with NOTICES

Federal Register / Vol. 75, No. 228 / Monday, November 29, 2010 / Notices 73155 

9 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 63026 

(October 1, 2010), 75 FR 62167 (‘‘Notice’’). 

4Credit Options include Credit Default Options 

and Credit Default Basket Options. Credit Default 

Options are cash-settled binary options that are 

automatically exercised upon the occurrence of 

specified credit events or expire worthless. See 

CBOE Rule 29.1(b); Securities Exchange Act Release 

No. 55871 (June 6, 2007), 72 FR 32372 (June 12, 

2007) (SR–CBOE–2006–84) (order approving 

CBOE’s proposed rules to list and trade Credit 

Default Options). Credit Default Basket Options are 

cash-settled binary options based on a basket of at 

least two reference entities. See CBOE Rule 29.1(h); 

Securities Exchange Act Release No. 56275 (August 

17, 2007), 72 FR 47097 (August 22, 2007) (SR– 

CBOE–2007–26) (order approving CBOE’s proposed 

rules to list and trade Credit Default Basket 

Options). 

5The Exchange has represented that it will not 

list more than one Credit Default Option contract 

with a cash settlement amount arrived at in 

different ways. See Notice at note 8 and 

accompanying text. 

6See CBOE Rules 29.2 and 29.2A. 7 In approving this proposed rule change, the 

Commission notes that it has considered the 

proposed rule’s impact on efficiency, competition, 

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

8 15 U.S.C. 78f(b)(5). 

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 such filing 

also will be available for inspection and 

copying at the principal office of the 

Exchange. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File No. SR–BATS– 

2010–033 and should be submitted on 

or before December 20, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–29895 Filed 11–26–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63352; File No. SR–CBOE– 

2010–046] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Order Granting Approval 

of Proposed Rule Change To Amend 

Certain Rules Pertaining to Credit 

Options 

November 19, 2010. 

I. Introduction 

On September 20, 2010, the Chicago 

Board Options Exchange, Incorporated 

(‘‘CBOE’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

amend its rules relating to Credit 

Options. The proposed rule change was 

published for comment in the Federal 

Register on October 7, 2010.3 The 

Commission received no comments on 

the proposal. This order approves the 

proposed rule change. 

II. Description of the Proposal 

The Exchange proposes to amend its 

rules governing Credit Options 4 to make 

three substantive changes. First, CBOE 

proposes to permit the Exchange to fix 

the exercise settlement value for Credit 

Default Options, on a class-by-class 

basis, at $1 or $100, or at a value 

between those two points. Currently, the 

exercise settlement value is fixed at 

$100. Since the cash settlement amount 

for Credit Default Options is the product 

of the exercise settlement value 

multiplied by a contract multiplier that 

may be fixed by the Exchange on a 

class-by-class basis within a range of 

1 to 1,000, this change will enable the 

Exchange to list a Credit Default Option 

contact with a cash settlement amount 

that could be arrived at in different 

ways.5 Second, the proposal would 

permit the Exchange to establish the 

minimum price variation (‘‘MPV’’) for all 

Credit Options, which is currently 

$0.05, on a class-by-class basis, at an 

increment no less than $0.01, which 

would permit more pricing points, such 

as when lower exercise settlement 

values are designated. Third, the 

proposal would give the Exchange 

authority to list Credit Options that 

contemplate only a single credit event. 

Currently, CBOE rules for Credit 

Options enumerate several potential 

credit events, the occurrence of any one 

of which could allow the Credit Option 

to be exercised. For example, a failureto-pay default will always be a 

designated credit event for each class, 

and the Exchange may, on a class-byclass basis, specify other events of 

default or a restructuring.6 The 

Exchange proposes to amend its rules to 

permit it to list Credit Options 

designating a single credit event, such 

as a failure-to-pay default, another event 

of default, or a restructuring. The 

Exchange also proposes to make a 

technical, non-substantive change to 

one of its rules governing Credit 

Options, Rule 29.3. 

III. Discussion and Commission’s 

Findings 

After careful consideration, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.7 In 

particular, the Commission finds that 

the proposed rule change is consistent 

with the requirements of Section 6(b)(5) 

of the Act,8 which requires, among other 

things, that the Exchange’s rules 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. 

The Commission believes that the 

proposal to authorize the Exchange to 

list Credit Options that contemplate 

only a single credit event is consistent 

with the Act. In addition, the 

Commission believes that the proposal 

to allow the Exchange flexibility to fix 

the exercise settlement value for Credit 

Default Options within a range of $1 to 

$100 is consistent with the Act. With 

this change, the Exchange could list a 

contract with a cash settlement value of 

$10,000 with a multiplier of 1,000 and 

an exercise settlement amount of $10, or 

with a multiplier of 100 and an exercise 

settlement amount of $100. There could 

be concerns if the Exchange were to 

seek to list Credit Default Options 

having the same cash settlement value 

but with different combinations of 

multiplier and cash settlement amount. 

mstockstill on DSKH9S0YB1PROD with NOTICES