Federal Register / Vol. 74, No. 165 / Thursday, August 27, 2009 / Notices 43739 

22See NYSE Amex Rule 980NY(b). 

23See NYSE Amex Rule 980NY(c)(i). 

24See NYSE Amex Rule 980NY, Commentary .02. 

25See NYSE Amex Rule 963NY(d). The 

Commission notes that the proposed rules 

governing the handling of Stock/option Orders are 

substantially similar to rules adopted by the 

Chicago Board Options Exchange, Incorporated, 

which the Commission reviewed previously. See 

CBOE Rule 6.53C, Commentary .06. See also 

Securities Exchange Act Release Nos. 56903 

(December 5, 2007), 72 FR 70356 (December 11, 

2007) (File No. SR–CBOE–2007–68) (order 

approving rules relating to the electronic handling 

and execution of stock-option orders); and 59585 

(March 17, 2009), 74 FR 12416 (March 24, 2009) 

(File No. SR–CBOE–2009–017) (notice of filing and 

immediate effectiveness of rules allowing 

conversions and reversals to be routed to the 

electronic complex order book). 

26 15 U.S.C. 78s(b)(2). 

27 15 U.S.C. 78s(b)(2). 

28 17 CFR 200.30–3(a)(12). 

perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. 

As discussed above, all NYSE Amex 

market participants will be able to view 

Electronic Complex Orders in the 

Consolidated Book and submit 

Electronic Complex Orders to the CME 

to trade against orders in the 

Consolidated Book. Accordingly, the 

Commission believes that the proposal 

could increase the transparency of 

Electronic Complex Orders and 

facilitate their execution. 

The proposal provides customer 

Electronic Complex Orders with priority 

over non-customer Electronic Complex 

Orders at the same price,22 and also 

preserves the priority of customer orders 

in the individual leg markets. In this 

regard, if individual customer orders in 

the Consolidated Book can execute an 

incoming Electronic Complex Order in 

full, or in a permissible ratio, at the 

same total net debit or credit as an 

Electronic Complex Order in the 

Consolidated Book, the individual 

customer orders will have priority.23

Further, when an Electronic Complex 

Order is executed, the price of at least 

one leg of the order must trade at a price 

that is better than the corresponding 

price of all customer bids or offers in the 

Consolidated Book for that series by at 

least one standard trading increment.24

The Commission believes that it is 

reasonable and consistent with the Act 

for NYSE Amex not to provide a 

guaranteed allocation to Specialists, as 

described above, because Specialists do 

not have quoting obligations for 

complex strategies. 

Finally, the Commission believes that 

the proposal could facilitate the 

execution of stock-option orders on the 

Amex by providing for the electronic 

handling and execution of these orders, 

which currently must be handled 

manually. The Commission notes that 

proposal provides for the execution of 

stock-option orders submitted to the 

CME in a manner that is consistent with 

the Amex’s existing priority rules for 

stock-option orders, which provide the 

options leg of a stock-option order with 

priority over bids (offers) in the trading 

crowd at the same price, but not over 

public customer orders in the 

Consolidated Book.25 Accordingly, the 

Commission finds that the NYSE Amex 

rules concerning the execution of Stock/ 

option Orders submitted to the CME are 

consistent with the Act. 

IV. Accelerated Approval of Proposed 

Rule Change, as Modified by 

Amendment No. 1 

The Commission finds good cause to 

approve the proposed rule change, as 

modified by Amendment No. 1, prior to 

the thirtieth day after publication for 

comment in the Federal Register. 

Amendment No. 1, which inserts a 

reference to ‘‘quotes’’ that was omitted 

erroneously and replaces an incorrect 

cross-reference in the proposed rule 

text, help to clarify the proposed rule 

change and do not differ materially from 

the proposal as published in the Federal 

Register on July 19, 2009. Accordingly, 

the Commission finds good cause, 

consistent with Section 19(b)(2) of the 

Act,26 to approve the proposed rule 

change, as modified by Amendment No. 

1, on an accelerated basis. 

V. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning Amendment No. 

1, including whether Amendment No. 1 

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–NYSEAmex–2009–42 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–NYSEAmex–2009–42. 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 inspection and copying 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–NYSEAmex–2009–42 and 

should be submitted on or before 

September 17, 2009. 

VI. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,27 that the 

proposed rule change (SR–NYSEAmex– 

2009–42), as modified by Amendment 

No. 1, is approved on an accelerated 

basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.28

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–20654 Filed 8–26–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60556; File No. SR–CBOE– 

2009–061] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Clarify the Definition 

of ‘‘Narrow-Based Index’’ 

August 21, 2009. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

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43740 Federal Register / Vol. 74, No. 165 / Thursday, August 27, 2009 / Notices 

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 Exchange Act Release No. 60150 (June 19, 

2009), 74 FR 30658 (June 26, 2009) (SR–Phlx–2009– 

35). 

6Broad-based (or market) and micro narrowbased indices, which are not at issue in this filing, 

are defined in Rule 24.1(i)(1) and 24.1(i)(3). 

7The International Securities Exchange and 

PHLX have the same ability pursuant to their own 

rules. 

8These include the index is capitalizationweighted, price-weighted, modified capitalizationweighted or equal dollar-weighted, and consists of 

ten or more component securities; 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; and 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. See Rule 24.2(b)(1)–(12) 

or all of the conditions [sic]. 

9See Chapter XXIV (index options trading rules). 

See also Chapters I through XIX (general options 

trading rules). 

10See id. The trading rules include, among other 

things, position limits, exercise limits and terms of 

options contracts (Rules 24.4A, 24.5 and 24.9). See 

also Securities Exchange Act Release No. 4052 (July 

18, 2000), 65 FR 45805 (July 25, 2000) (SR–CBOE– 

00–16) (order approving narrow-based index 

options position limit increase to 18,000, 24,000 

and 31,500 contracts). 

11 15 U.S.C. 78f(b)(1). [sic] 

12 15 U.S.C. 78f(b). 

13 15 U.S.C. 78f(b)(5). 

‘‘Act’’) 1 and Rule 19b–4 2 thereunder, 

notice is hereby given that on August 

18, 2009, 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 amend Rule 

24.1(i)(2) by clarifying the definition of 

‘‘industry index’’ and ‘‘narrow-basedindex’’ to include indices having 

component securities that are all 

headquartered within a single country. 

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. 

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 

This proposed rule change is based on 

a filing previously submitted by 

NASDAQ OMX PHLX, Inc (‘‘PHLX’’) 

that was effective on filing.5

CBOE proposes to amend Rule 

24.1(i)(2), which defines the terms 

‘‘industry index’’ and ‘‘narrow-based 

index’’ to mean ‘‘an index designed to 

be representative of a particular 

industry or a group of related 

industries,’’ to also accommodate an 

index having component securities that 

are all headquartered within a single 

country to be listed as a narrow-based 

index pursuant to Exchange rules. This 

would enable options based on an 

index, including companies all 

headquartered within a single country, 

to be rightfully considered as a generic 

narrow-based index for purposes of 

listing on the Exchange and trading. 

The listing and trading of index 

options on the Exchange is generally 

conditioned on the ability to meet the 

rule requirements for narrow-based, 

micro-narrow based and broad based 

indices.6 More particularly regarding 

narrow-based indices, Rule 24.2(b) 

states that the Exchange may trade 

options on an underlying index 

pursuant to Rule 19b–4(e) of the Act 7

where all of the conditions noted are 

satisfied.8 Indeed, the Exchange has, 

and continues to, list and trade options 

on narrow-based indices based on 

industries or a group of related 

industries that are located within 

various countries. These options are 

traded pursuant to the Exchange’s index 

option trading rules.9

With the Exchange’s interpretation of 

Rule 24.1(i)(2) as discussed herein, the 

Exchange proposes to list and trade 

options, pursuant to Rule 24.2(b), on an 

index(es) that has component securities, 

which are all headquartered within a 

single country. The Exchange represents 

that, in all other material aspects, the 

underlying narrow-based index would 

be required to satisfy all other 

requirements for generic listing and 

trading pursuant to Rule 24.2(b) and 

options on such indices would be 

traded pursuant to the Exchange’s 

trading rules.10 The proposed rule 

change simply seeks to clarify that the 

generic listing and trading standards 

would cover an index that otherwise 

qualifies as a ‘‘narrow-based index,’’ 

with the exception that the component 

securities of the index are all 

headquartered within a single country. 

The Exchange represents that its 

existing surveillance procedures 

applicable to trading in options will be 

adequate to properly monitor the 

trading in options on these narrowbased indices. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the Act 11

and the rules and regulations 

thereunder and, in particular, the 

requirements of Section 6(b) of the 

Act.12 Specifically, the Exchange 

believes the proposed rule change is 

consistent with the Section 6(b)(5) 13

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 by 

clarifying the term ‘‘narrow-based 

index’’ also accommodates an index 

having component securities that are all 

headquartered within a single country. 

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. 

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Federal Register / Vol. 74, No. 165 / Thursday, August 27, 2009 / Notices 43741 

14 15 U.S.C. 78s(b)(3)(A). 

15 17 CFR 240.19b–4(f)(6). CBOE has satisfied the 

five business-day prefiling requirement. 

16 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. 60271 

(July 9, 2009), 74 FR 34842. 

4Rule 4.12 establishes exercise limits for an 

option at the same level as the option’s position 

limit under Rule 4.11. 

5The term ‘‘delta neutral’’ is defined in Rule 

4.11.04(c)(A) as referring to an equity option 

position that is hedged, in accordance with a 

permitted pricing model, by a position in the 

underlying security or one or more instruments 

relating to the underlying security, for the purpose 

of offsetting the risk that the value of the option 

position will change with incremental changes in 

the price of the security underlying the option 

position. 

6Under Rule 4.11.04(c)(C), ‘‘permitted pricing 

model’’ for purposes of the Exemption is a pricing 

model: (1) Maintained and operated by the OCC 

(‘‘OCC Model’’); (2) maintained and used by a 

member or its non-member affiliate subject to 

consolidated supervision by the Commission 

pursuant to Appendix E of Rule 15c3–1, 17 CFR 

240.15c3–1, under the Act; (3) maintained and used 

by a financial holding company (‘‘FHC’’) or a 

company treated as an FHC under the Bank Holding 

Company Act of 1956, or its affiliate subject to 

consolidated holding company group supervision; 

(4) maintained and used by a Commissionregistered OTC derivatives dealer; or (5) used by a 

national bank under the National Bank Act. See 

Rule 4.11.04(c)(C). 

7See Securities Exchange Act Release No. 56970 

(December 14, 2007), 72 FR 72428 (December 20, 

2007) (SR–CBOE–2007–99) (‘‘Exemption Approval 

Order’’). 

8 ‘‘Net delta’’ means, at any time, the number of 

shares (either long or short) required to offset the 

risk that the value of an equity option position will 

change with incremental changes in the price of the 

security underlying the option position. ‘‘Options 

contract equivalent of the net delta’’ means the net 

delta divided by the number of shares underlying 

the options contract. See Rule 4.11.04(c)(B). 

9The Commission notes that CBOE Rule 4.11.04 

provides for multiple, independent hedge 

exemptions. Of course, to the extent that a position 

is used to hedge for the purpose of one exemption 

from position limit requirements, such as the delta 

Continued 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

does not (i) significantly affect the 

protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate if 

consistent with the protection of 

investors and the public interest, 

provided that the self-regulatory 

organization has given 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 proposed rule change 

has become effective pursuant to 

Section 19(b)(3)(A) of the Act 14 and 

Rule 19b–4(f)(6) thereunder.15 At any 

time within 60 days of the filing of such 

proposed rule change, the Commission 

may summarily abrogate 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–2009–061 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–2009–061. 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 inspection and copying 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 publicly available. All 

submissions should refer to File 

Number SR–CBOE–2009–061 and 

should be submitted on or before 

September 17, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–20656 Filed 8–26–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60555; File No. SR–CBOE– 

2009–039] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Order Approving 

Proposed Rule Change, as Modified by 

Amendment No. 1, To Extend the Delta 

Hedging Exemption From Equity 

Options Position Limits to Customers 

August 21, 2009. 

On June 19, 2009, the Chicago Board 

Options Exchange, Incorporated 

(‘‘Exchange’’ or ‘‘CBOE’’) 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 

extend the delta hedging exemption 

from equity option position limits to 

positions of customers who hedge those 

positions in accordance with a pricing 

model maintained and operated by The 

Options Clearing Corporation (‘‘OCC’’). 

On July 8, 2009, CBOE filed 

Amendment No. 1 to the proposed rule 

change. The proposed rule change was 

published for comment in the Federal 

Register on July 17, 2009.3 The 

Commission received no comment 

letters on the proposal. This order 

approves the proposed rule change, as 

modified by Amendment No. 1. 

In December 2007, the Commission 

approved a CBOE proposal to create an 

exemption from position and exercise 

limits 4 applicable to equity options 

(stock options and options on exchangetraded funds) for positions held by 

CBOE members and certain nonmember affiliates that are ‘‘delta 

neutral’’ 5 under a ‘‘permitted pricing 

model’’ 6 (‘‘Exemption’’).7 When a 

position is not delta neutral, only the 

option contract equivalent of the net 

delta 8 of the position remains subject to 

the position limits in Rule 4.11.9

mstockstill on DSKH9S0YB1PROD with NOTICES