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

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43742 Federal Register / Vol. 74, No. 165 / Thursday, August 27, 2009 / Notices 

hedge exemption, such position cannot be used to 

take advantage of another exemption from position 

limit requirements. See Exemption Approval Order, 

supra note 7, at note 11. 10Rule 4.13 requires, among other things, that 

members report to the Exchange aggregate long or 

short positions on the same side of the market of 

200 or more contracts of any single class of options 

contracts dealt in on the Exchange. 11See Rule 4.11.04(c)(D), which provides, under 

certain conditions, that the net delta of an options 

position held by an entity entitled to rely on the 

exemption could be calculated without regard to 

positions in or relating to the security underlying 

the option position held by an affiliated entity or 

another trading unit within the same entity, 

provided that, among other things, no control 

relationship exists between such affiliates or trading 

units and the entity has designated in writing in 

advance the affiliates or trading units that are to be 

considered separate and distinct from each other. 

12See Rule 4.11.04(c)(F). 

13See Rule 4.11.04(c)(G). 

14 In approving this rule, 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). 

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

16See Securities Exchange Act Release No. 40594 

(October 23, 1998), 63 FR 59362, 59380 (November 

3, 1998) (File No. S7–30–97) (adopting rules 

relating to OTC derivatives dealers), cited in 

Exemption Approval Order, supra note 7. 

17 15 U.S.C. 78s(b)(2). 

18 17 CFR 200.30–3(a)(12). 

CBOE now proposes to amend Rule 

4.11.04(c) to extend the Exemption to 

positions of customers of members. 

Under the proposal, to avail themselves 

of the Exemption, such customers 

would be able to hedge their positions 

only in accordance with the OCC 

Model. 

In connection with this amendment, 

CBOE proposes to add new 

subparagraph (4) to Rule 4.11.04(c)(E) to 

set forth the obligations of a member 

carrying an account that includes an 

equity option position for a customer 

who intends to rely on the Exemption. 

Specifically, the member would be 

required to obtain from the customer a 

written certification to the Exchange 

that the customer is using the OCC 

Model. In addition, the member would 

be required to obtain from the customer 

a written statement confirming that such 

customer: (a) Is relying on the 

Exemption; (b) will use only the OCC 

Model for purposes of calculating the 

net delta of the customer’s option 

positions for purposes of the Exemption; 

(c) will promptly notify the member if 

the customer ceases to rely on the 

Exemption; and (d) in connection with 

using the OCC Model, has duly 

executed and delivered to the Exchange 

such documents as the Exchange may 

require to be executed and delivered to 

the Exchange as a condition to reliance 

on the Exemption. 

As under the current Exemption, each 

member that holds or carries an account 

that relies on the Exemption is required 

to report, in accordance with Rule 

4.13,10 all equity option positions 

(including those that are delta neutral) 

that are reportable under that rule, and 

also is required to report on its own 

behalf or on behalf of a designated 

aggregation unit 11 the net delta and the 

options contract equivalent of the net 

delta of such positions for each account 

that holds an equity option position 

subject to the delta hedging exemption 

in excess of the levels specified in Rule 

4.11.12 Members carrying a customer 

account that relies on the Exemption 

would be subject to this requirement. 

In addition, the Exchange proposes to 

amend Rule 4.11.04(c)(G) governing 

records so that it extends to members 

carrying customer accounts. Each 

member relying on the Exemption 

would be required to retain, and 

undertake reasonable efforts to ensure 

that its customers relying on the 

Exemption retain, a list of the options, 

securities, and other instruments 

underlying each option position net 

delta calculation reported to the 

Exchange; and to produce such 

information to the Exchange upon 

request.13

The Commission finds that the 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder that 

are applicable to a national securities 

exchange.14 In particular, the 

Commission believes that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,15 which requires, 

among other things, that CBOE rules be 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, 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. 

In approving the current Exemption, 

the Commission noted its previous 

statement in support of recognizing 

options positions hedged on a delta 

neutral basis as properly exempted from 

position limits.16 The Commission 

believes that it is appropriate and 

consistent with the Act to extend the 

current Exemption to customers. 

The Commission notes that the 

Exchange has added provisions to Rule 

4.11.04(c)(E)(4), specifically with 

respect to customers that seek to rely on 

the Exemption, that obligate members 

carrying accounts for those customers to 

obtain from them certain certifications 

and assurances as described above, 

including a written statement to the 

Exchange that the customer has duly 

executed and delivered to the member 

such documents as the Exchange may 

require to be executed and delivered to 

it. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,17 that the 

proposed rule change (SR–CBOE–2009– 

039), as modified by Amendment No. 1, 

be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–20655 Filed 8–26–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Public Law 94–409, that 

the Securities and Exchange 

Commission will hold a Joint Open 

Meeting with the Commodity Futures 

Trading Commission to seek input from 

the public on harmonization of market 

regulation on September 2, 2009 from 9 

a.m. until 5 p.m. at the CFTC and on 

September 3, 2009 from 9 a.m. until 

12:30 p.m. at the SEC. 

The Joint Open Meeting will take 

place on September 2, 2009 at the 

CFTC’s headquarters at Three Lafayette 

Centre, 1155 21st Street, NW., Lobby 

Level Hearing Room (Room 1000), 

Washington, DC 20581 and on 

September 3, 2009 at the SEC’s 

headquarters at 100 F Street, NE., 

Auditorium (Room L–002), Washington, 

DC 20549. The Joint Open Meeting will 

be open to the public with seating on a 

first-come, first-served basis. Visitors 

will be subject to security checks. 

Discussion topics at the Joint Open 

Meeting will include the regulation of 

exchanges and markets; the regulation 

of intermediaries; the regulation of 

clearance and settlement; enforcement; 

and the regulation of investment funds. 

For further information, please contact: 

The Office of the Secretary at (202) 551– 

5400. 

Dated: August 25, 2009. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. E9–20843 Filed 8–25–09; 4:15 pm] 

BILLING CODE 8010–01–P 

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