[Federal Register Volume 75, Number 25 (Monday, February 8, 2010)]
[Notices]
[Pages 6243-6245]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-2632]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61466; File No. SR-CBOE-2010-005]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of Proposed Rule Change, and Amendment 
No. 1 Thereto, To Establish Strike Price Intervals and Trading Hours 
for Options on Index-Linked Securities

February 2, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on January 27, 2010, Chicago Board Options 
Exchange, Incorporated (``CBOE'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I, II, and III below, which Items have 
been prepared by the Exchange. On February 2, 2010, CBOE filed 
Amendment No. 1 to the proposed rule change. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Prior to the commencement of trading options on Index-Linked 
Securities, CBOE proposes to establish strike price intervals and 
trading hours for these new products. The text of the proposed rule 
change is available on CBOE's Web site at (http://www.cboe.org/legal), 
on the Commission's Web site at http://www.sec.gov, at CBOE, 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.

[[Page 6244]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Prior to the commencement of trading options on Index-Linked 
Securities (also known as exchange-traded notes (``ETN'')), the 
Exchange is proposing to establish strike price intervals and trading 
hours for these new products.
    The Commission has approved CBOE's and other option exchanges' 
proposals to enable the listing and trading of options on Index-Linked 
Securities.\3\ Options trading has not commenced to date and is 
contingent upon the Commission's approval of The Options Clearing 
Corporation's (``OCC'') proposed supplement to the Options Disclosure 
Document (``ODD'') that will provide disclosure regarding options on 
Index-Linked Securities.\4\
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    \3\ See e.g., Securities Exchange Act Release Nos. 58204 (July 
22, 2008), 73 FR 43807 (July 28, 2008) (approving SR-CBOE-2008-64); 
58203 (July 22, 2008), 73 FR 43812 (July 28, 2008) (approving SR-
NYSEArca-2008-57); 58985 (November 10, 2008), 73 FR 72538 (November 
28, 2008) (approving SR-ISE-2008-86).
    \4\ OCC previously received Commission approval to clear options 
based on Index-Linked Securities. See Securities Exchange Act 
Release No. 60872 (October 23, 2009), 74 FR 55878 (October 29, 2009) 
(SR-OCC-2009-14).
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$1 Strikes for ETN Options
    Prior to the commencement of trading options on Index-Linked 
Securities, the Exchange is proposing to establish that strike price 
intervals of $1 will be permitted where the strike price is less than 
$200. Where the strike price is greater than $200, $5 strikes will be 
permitted. These proposed changes are reflected by the proposed 
addition of new Interpretation and Policy .09 to Rule 5.5.
    Without discounting the differences between exchange-traded funds 
(``ETFs'') and Index-Linked Securities, the Exchange seeks to extend 
the trading conventions applicable to options on ETFs to options on 
Index-Linked Securities. CBOE contends that the proposed strike price 
intervals for options on Index-Linked Securities are consistent with 
the strike price intervals currently permitted for options on ETFs.\5\ 
The Exchange believes that $1 strike price intervals for options on 
Index-Linked Securities will provide investors with greater flexibility 
by allowed [sic] them to establish positions that are better tailored 
to meet their investment objectives.
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    \5\ See Interpretation and Policy .08 to Rule 5.5. See also 
Securities Exchange Act Release No. 46507 (September 17, 2007), 67 
FR 60266 (September 25, 2002) (permitting list of options on ETFs at 
$1 strike price intervals) (SR-CBOE-2002-54).
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    The Exchange states that it is seeking to establish $1 strikes for 
ETN options (where the strike price is less than $200) because CBOE 
believes the marketplace and investors will be expecting ETN options to 
trade in a similar manner to options on exchange-traded funds 
(``ETFs'').\6\ Strike prices for ETF options are permitted in $1 or 
greater intervals where the strike price is $200 or less and $5 or 
greater where the strike price is greater than $200.\7\ Accordingly, 
the Exchange believes that the rationale for permitting $1 strikes for 
ETF options equally applies to permitting $1 strikes for ETN options 
and the Exchange believes that investors will be better served if $1 
strike price intervals are available for ETN options (where the strike 
price is less than $200).\8\
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    \6\ See Amendment No. 1.
    \7\ See supra note 5.
    \8\ See Amendment No. 1.
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    CBOE has analyzed its capacity and represents that it believes the 
Exchange and the Options Price Reporting Authority have the necessary 
systems capacity to handle the additional traffic associated with the 
listing and trading of $1 strikes (where the strike price is less than 
$200) for ETN options.\9\
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    \9\ See Id.
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Trading Hours for ETN Options
    Similar to the trading hours for ETF options, the Exchange proposes 
to amend Interpretation and Policy .03 to Rule 6.1 by adding new 
subparagraph (b) to provide that options on Index-Linked Securities, as 
defined under Interpretation and Policy .13 to Rule 5.3, may be traded 
on the Exchange until 3:15 p.m. each business day. The Exchange is also 
proposing to make a technical change to Interpretation and Policy .03 
to Rule 6.1.
    It is expected that other options exchanges that have adopted rules 
providing for the listing and trade of options on Index-Linked 
Securities will submit similar proposals.
2. Statutory Basis
    Because the Exchange believes that the current rule proposal will 
lessen investor confusion by having strike price intervals and trading 
hours established prior to the commencement of trading in options on 
Index-Linked Securities, the Exchange believes the rule proposal is 
consistent with the Act and the rules and regulations under the Act 
applicable to a national securities exchange and, in particular, the 
requirements of Section 6(b) of the Act.\10\ Specifically, the Exchange 
believes that the proposed rule change is consistent with the Section 
6(b)(5) Act \11\ requirements that the rules of an exchange be designed 
to promote just and equitable principles of trade, to prevent 
fraudulent and manipulative acts and, in general, to protect investors 
and the public interest.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comment

    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

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an e-mail to <a href="/cdn-cgi/l/email-protection#9eecebf2fbb3fdf1f3f3fbf0eaeddeedfbfdb0f9f1e8"><span class="__cf_email__" data-cfemail="1765627b723a74787a7a727963645764727439707861">[email protected]</span></a>. Please include 
File No. SR-CBOE-2010-005 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.


[[Page 6245]]


All submissions should refer to File Number SR-CBOE-2010-005. 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, 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-CBOE-2010-005 and should be submitted on or before 
February 23, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-2632 Filed 2-5-10; 8:45 am]
BILLING CODE 8011-01-P


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