12238 Federal Register / Vol. 72, No. 50 / Thursday, March 15, 2007 / Notices 

47 15 U.S.C. 78s(b)(2). 

48 15 U.S.C. 78s(b)(2). 

49 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. 54643 

(October 23, 2006), 71 FR 63367 (‘‘Notice’’). 

4 In Amendment No. 2, the Exchange represented 

that CBOE Futures Exchange, LLC (‘‘CFE’’) does not 

currently list and trade RVX futures. The Exchange 

further represented that it will not list for trading 

RVX options until RVX futures have begun trading 

on CFE. 

5The Exchange represented in its filing that the 

RVX is calculated in the same manner as other 

volatility indexes (e.g., the CBOE Volatility Index 

(‘‘VIX’’)), upon which options have been based and 

previously approved by the Commission. A more 

detailed explanation of the method used to 

calculate VIX may be found on CBOE’s Web site at 

the following internet address: http:// 

www.cboe.com/micro/vix/vixwhite.pdf. 

that Amendments No. 2 and 3 do not 

make any substantial changes to the 

proposal. Thus, the Commission finds 

good cause, consistent with Section 

19(b)(2) of the Act,47 to grant accelerated 

approval of the proposed rule change, as 

amended. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments regarding Amendments No. 2 

and 3, including whether Amendments 

No. 2 and 3 are 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–Amex–2006–118 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

Station Place, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–Amex–2006–118. 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. Copies of such filing also will be 

available for inspection and copying at 

the principal office of Amex. 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–Amex–2006–118 and 

should be submitted on or before April 

5, 2007. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,48 that the 

proposed rule change (SR–Amex–2006–

118), as amended, be, and hereby is, 

approved on an accelerated basis. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.49

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–4747 Filed 3–14–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55425; File No. SR–CBOE–

2006–73] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing of 

Amendment No. 2 and Order Granting 

Accelerated Approval of Proposed 

Rule Change as amended, to Amend 

Certain of its Rules to Provide for the 

Listing and Trading of Options on the 

CBOE Russell 2000 Volatility Indexsm

(‘‘RVXsm’’) 

March 8, 2007. 

I. Introduction 

On August 31, 2006, the Chicago 

Board Options Exchange, Incorporated 

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

Securities and Exchange Commission 

(‘‘Commission’’) a proposed rule 

change, pursuant to Section 19(b)(1) of 

the Securities Exchange Act of 1934 

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

amend certain of its rules to provide for 

the listing and trading of options on the 

CBOE Russell 2000 Volatility Indexsm

(‘‘RVXsm’’). On October 20, 2006, CBOE 

filed Amendment No. 1 to the proposed 

rule change. The proposed rule change, 

as modified by Amendment No. 1, was 

published for comment in the Federal 

Register on October 30, 2006.3 The 

Commission received no comments on 

the proposal. On February 26, 2007, 

CBOE filed Amendment No. 2 to the 

proposed rule change.4 This order 

provides notice of Amendment No. 2 to 

the proposed rule change and approves 

the proposed rule change as amended. 

II. Description of the Proposal 

The Exchange seeks to list and trade 

cash-settled, European-style options on 

the RVX. The index is calculated using 

real-time Russell 2000 Index (‘‘RUT’’) 

option bid/ask quotes. RVX uses nearby 

and second nearby RUT options with at 

least 8 days left to expiration and then 

weights them to yield a constant, 30-day 

measure of the expected volatility of the 

RUT. 

For each contract month, CBOE will 

determine the at-the-money strike price. 

It will then select the at-the-money and 

out-of-the money series with non-zero 

bid prices and determine the midpoint 

of the bid-ask quote for each of these 

series. The midpoint quote of each 

series is then weighted so that the 

further away that series is from the atthe-money strike, the less weight that is 

accorded to the quote. Then, to compute 

the index level, CBOE will calculate a 

volatility measure for the nearby options 

and then for the second nearby options. 

This is done using the weighted midpoint of the prevailing bid-ask quotes 

for all included option series with the 

same expiration date. These volatility 

measures are then interpolated to arrive 

at a single, constant 30-day measure of 

volatility.5

CBOE will compute the index on a 

real-time basis throughout each trading 

day, from 8:30 a.m. until 3:15 p.m. CST. 

Volatility index levels will be calculated 

by CBOE and disseminated at 15-second 

intervals to market information vendors 

via the Options Price Reporting 

Authority (‘‘OPRA’’). 

Because of the generally limited range 

in which RVX has fluctuated, the 

Exchange proposes to list series at $1.00 

or greater strike price intervals for each 

expiration on up to 5 RVX option series 

above and 5 RVX option series below 

the current index level. Additional 

series at $1.00 or greater strike price 

intervals could be listed for each 

expiration as the current index level of 

RVX moves from the exercise price of 

the RVX options series that already have 

been opened for trading on the 

Exchange in order to maintain at least 

5 RVX option series above and 5 RVX 

option series below the current index 

level. 


rmajette on PROD1PC67 with NOTICES
Federal Register / Vol. 72, No. 50 / Thursday, March 15, 2007 / Notices 12239 

6 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. 15 U.S.C. 78c(f). 

7 15 U.S.C. 78f. 

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

9See Securities Exchange Act Release No. 31382 

(October 30, 1992), 57 FR 52802 (November 5, 1992) 

(SR–CBOE–92–02). 10See Notice supra note 3. 

11 15 U.S.C. 78s(b)(2). 

12 17 CFR 200.30–3(a)(12). 

Additionally, the Exchange proposes 

that it would not list series with $1.00 

intervals within $0.50 of an existing 

$2.50 strike price with the same 

expiration month (e.g., if there is an 

existing $12.50 strike, the Exchange 

would not list a $12.00 or $13.00 strike). 

The interval between strike prices for 

RVX long-term option series 

(‘‘LEAPs(r)’’) will continue to be no less 

than $2.50. 

III. Discussion 

After careful review, the Commission 

finds that CBOE’s proposal to permit 

trading in options based on the RVX is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange 6 and, in particular, 

the requirements of Section 6 of the 

Act 7 and the rules and regulations 

thereunder. The Commission believes 

that CBOE’s proposal gives options 

investors the ability to make an 

additional investment choice in a 

manner consistent with the 

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

Act.8 The Commission further believes 

that trading options on this volatility 

index provides investors with an 

important trading and hedging 

mechanism. 

The Commission finds that it is 

consistent with the Act for CBOE to 

apply its rules for trading of broad-based 

index options to RVX. The Commission 

believes that because this volatility 

index is composed of options on an 

index which the Commission has 

previously determined is appropriate to 

treat as broad-based for purposes of 

CBOE’s rules,9 it is appropriate to apply 

to the RVX options the position limits, 

exercise limits and margin requirements 

that apply to CBOE’s component index 

options. 

The Commission also notes CBOE’s 

representation that it has adequate 

surveillance procedures in place to 

monitor for manipulation of the RVX 

options. In addition, the Commission 

notes that the Exchange will use the 

same surveillance procedures currently 

utilized for each of the Exchange’s other 

index options to monitor trading in 

options on the RVX and that CBOE 

believes that these surveillance 

procedures are adequate to monitor the 

trading of options on the RVX. For 

surveillance purposes, the Exchange 

will have complete access to 

information regarding trading activity in 

the pertinent underlying securities. 

As explained by CBOE, the RVX 

fluctuates in a narrow range, and the 

Commission believes that the 

implementation of $1 strike price 

intervals in the RVX option product, 

within the parameters detailed in 

CBOE’s proposal, is appropriate. The 

Commission also finds that CBOE’s 

trading rules and other product 

specifications are consistent with the 

Act. Because the exercise of these 

options will be cash-settled, RVX 

options will be A.M.-settled on the 

business day following expiration, in a 

manner that will deter manipulation. 

The Commission also notes CBOE’s 

representations that it possesses the 

necessary systems capacity to support 

new series that would result from the 

introduction of RVX options and that 

CBOE also has been informed that 

OPRA has the capacity to support such 

new series. 

The Commission finds good cause to 

approve the proposed rule change, as 

modified by Amendment Nos. 1 and 2 

before the 30th day after the date of 

publication of notice of filing of 

Amendment No. 2 in the Federal 

Register. In Amendment No. 2, the 

Exchange represented that CBOE 

Futures Exchange, LLC (‘‘CFE’’) does 

not currently list and trade RVX futures 

and that the Exchange will not list for 

trading RVX options until RVX futures 

have begun trading on CFE. The 

Commission believes that this clarifying 

language is necessary because the 

Exchange plans to use RVX futures 

prices as a proxy for ‘‘implied forward’’

RVX levels.10

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change as amended 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–2006–73 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

Station Place, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–CBOE–2006–73. 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. 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–CBOE–2006–73 and should 

be submitted on or before April 5, 2007. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,11 that the 

proposed rule change (SR–CBOE–2006–

73), as amended, be, and hereby is, 

approved on an accelerated basis. 

For the Commission, by the Division 

of Market Regulation, pursuant to 

delegated authority.12

Nancy M. Morris, 

Secretary. 

[FR Doc. E7–4758 Filed 3–14–07; 8:45 am] 

BILLING CODE 8010–01–P 


rmajette on PROD1PC67 with NOTICES