Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Notices 67419 

15 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)(iii). 

4 17 CFR 240.19b–4(f)(6). 

5CBOE does not believe that Rule 5.5.03 limits 

the maximum number of expiration months that 

may be listed. Rule 5.5(a) and 5.5(c) provide CBOE 

with the flexibility to add additional expiration 

months, which the Exchange has previously done. 

By establishing the pilot program proposed in this 

filing, CBOE is not limited to its existing ability. 

Number SR–CBOE–2010–095 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–2010–095. 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 

CBOE. 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- 2010–095 and 

should be submitted on or before 

November 23, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–27588 Filed 11–1–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63185; File No. SR–CBOE– 

2010–097] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Establish a Pilot 

Program To List Series With Additional 

Expiration Months for Each Class of 

Options Opened for Trading on the 

Exchange 

October 27, 2010. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that, on October 

26, 2010, the Chicago Board Options 

Exchange, Incorporated (‘‘CBOE’’ or the 

‘‘Exchange’’) 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 its rules to 

adopt a pilot program to list additional 

expiration months for each class of 

options opened for trading on the 

Exchange. The text of the rule proposal 

is available on the Exchange’s Web site 

(http://www.cboe.org/legal), at the 

Exchange’s principal office, 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. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend its 

rules to adopt a pilot program to list 

additional expiration months for each 

class of options opened for trading on 

the Exchange. Pursuant to Interpretation 

and Policy .03 to Rule 5.5, the Exchange 

currently opens four expiration months 

for each class of options open for 

trading on the Exchange: the first two 

being the two nearest months, regardless 

of the quarterly cycle on which that 

class trades; the third and fourth being 

the next two months of the quarterly 

cycle previously designated by the 

Exchange for that specific class. For 

example, if the Exchange listed, in late 

April, a new stock option on a January– 

April—July–October quarterly cycle, the 

Exchange would list the two nearest 

term months (May and June) and the 

next two expiration months of the cycle 

(July and October). When the May series 

expires, the Exchange would add 

January series. When the June series 

expires, the Exchange would add 

August series as the next month, and 

would not add April. 

The Exchange believes that there is 

market demand for a greater number of 

expiration months. The Exchange 

therefore proposes to adopt a pilot 

program pursuant to which it will list 

up to an additional two expiration 

months, for a total of six expiration 

months for each class of options open 

for trading on the Exchange.5 The 

proposal will become effective on a 

pilot basis for a period of twelve months 

to commence on the next full month 

after approval is received to establish 

the pilot program. Under the proposal, 

the additional months listed pursuant to 

the pilot program will result in four 

consecutive expiration months plus two 

months from the quarterly cycle. For 

example, for option classes in the 

January cycle that have expiration 

months of June, July, October, and 

January, the Exchange would 

additionally list the August and 

September series. For option classes in 

the February quarterly cycle that have 

expiration months of October, 

November, February and May, the 


hsrobinson on DSK69SOYB1PROD with NOTICES
67420 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Notices 

6 15 U.S.C. 78s(b)(1). 

7 15 U.S.C. 78f(b). 

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

9 15 U.S.C. 78s(b)(3)(A). 

10 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires the Exchange to give the 

Commission written notice of the Exchange’s intent 

to file the proposed rule change, along with a brief 

description and text of 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 Exchange 

has satisfied this requirement. 

11See Securities Exchange Act Release No. 63104 

(October 14, 2010), 75 FR 64773 (October 20, 2010) 

(SR–ISE–2010–91) (order approving Additional 

Expiration Months Pilot Program). 

12For 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. 78c(f). 

Exchange would additionally list the 

December and January series. Under the 

proposal, no additional LEAP series will 

be created. 

The Exchange seeks to limit the 

proposed rule change to 20 actively 

traded options classes. By limiting the 

pilot to a small number of classes, the 

Exchange will be able to gauge interest 

in the pilot while limiting any 

additional demands on system 

resources. CBOE estimates that this pilot 

could add up to six or seven percent to 

current quote traffic, although changes 

in market maker quoting behavior will 

likely reduce that increase by up to half. 

The Exchange believes that a limited 

pilot is a prudent step to determine 

actual market demand for additional 

expiration months. 

If the Exchange were to propose an 

extension or an expansion of the pilot 

program, or should the Exchange 

propose to make the pilot program 

permanent, CBOE will submit, along 

with any filing proposing such 

amendments to the pilot program, a 

pilot program report (‘‘Report’’) that will 

provide an analysis of the pilot program 

covering the first nine months of the 

pilot program and shall submit the 

Report to the Commission at least sixty 

(60) days prior to the expiration date of 

the pilot program. The Report will 

include, at a minimum: (1) Data and 

written analysis on the open interest 

and trading volume in the classes for 

which additional expiration months 

were opened; (2) an assessment of the 

appropriateness of the option classes 

selected for the pilot program; (3) an 

assessment of the impact of the pilot 

program on the capacity on CBOE, 

OPRA and on market data vendors (to 

the extent data from market data 

vendors is available); (4) any capacity 

problems or other problems that arose 

during the operation of the pilot 

program and how CBOE addressed such 

problems; (5) any complaints that CBOE 

received during the operation of the 

pilot program and how CBOE addressed 

them; and (6) any additional 

information that would assist the 

Commission in assessing the operation 

of the pilot program. 

Finally, the Exchange represents that 

it has the necessary systems capacity to 

support new options series that will 

result from the introduction of 

additional expiration months listed 

pursuant to this proposed rule change. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the Act 6

and the rules and regulations 

thereunder and, in particular, the 

requirements of Section 6(b) of the Act.7

Specifically, the Exchange believes the 

proposed rule change is consistent with 

the Section 6(b)(5) 8 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. In particular, the 

Exchange believes listing additional 

near-term expiration months will offer 

investors more variety in trading 

options series that were previously not 

available. The Exchange believes this 

proposed rule change will also generate 

additional volume in these option 

classes without significantly taxing 

system resources. 

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 

Because the foregoing proposed rule 

change does not significantly affect the 

protection of investors or the public 

interest, does not impose any significant 

burden on competition, and, by its 

terms, does not 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 9 and Rule 19b– 

4(f)(6) thereunder.10

The Exchange has requested that the 

Commission waive the 30-day operative 

delay. The Commission believes that 

waiver of the operative delay is 

consistent with the protection of 

investors and the public interest 

because the proposal is substantially 

similar to that of another exchange that 

has been approved by the 

Commission.11 Therefore, the 

Commission designates the proposal 

operative upon filing.12

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 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–2010–097 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–2010–097. 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 


hsrobinson on DSK69SOYB1PROD with NOTICES
Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Notices 67421 

13 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. 62927 

(September 17, 2010), 75 FR 58004. 

4See FINRA By-Laws, Schedule A, § 1(b). In 

addition to the TAF, the other member regulatory 

fees are the Gross Income Assessment and the 

Personnel Assessment. See id. §§ 1(c), (d). 

5See Securities Exchange Act Release No. 50485 

(October 1, 2004), 69 FR 60445 (October 8, 2004) 

(SR–NASD–2003–201). 

6See FINRA By-Laws, Schedule A, § 1(b)(1). 

7See FINRA By-Laws, Schedule A, § 1(b)(2). 

8FINRA By-Laws, Schedule A, § 1(b)(2)(K). See 

Securities Exchange Act Release No. 47946 (May 

30, 2003), 68 FR 34021 (June 6, 2003) (SR–NASD– 

2002–148). 

9 17 CFR 240.17d–2. 

10See Securities Exchange Act Release No. 46800 

(November 8, 2002), 67 FR 69774 (November 19, 

2002). 

11Transactions in over-the-counter 

(‘‘conventional’’) options are exempted from the 

TAF with respect to all FINRA members. See 

FINRA By-Laws, Schedule A, § 1(b)(2)(H). 

12See, e.g., Securities Exchange Act Release No. 

47577 (March 26, 2003), 68 FR 16109 (April 2, 

2003) (SR–PCX–2003–03) (PCX rule filing 

establishing a DOEA fee). 

13See Securities Exchange Act Release No. 57987 

(June 18, 2008), 73 FR 36156 (June 25, 2008). 

14Following the consolidation of National 

Association of Securities Dealers (‘‘NASD’’) and 

NYSE member regulation operations in 2007, 

FINRA announced that it serves as the DOEA for 

all FINRA member firms. See Regulatory Notice 08– 

37 (July 2008). 

15At the time FINRA (then NASD) proposed the 

exemption in Amendment No. 4 to SR–NASD– 

2002–148, it noted that ‘‘NASD does not believe it 

is precluded from seeking further amendments to 

the TAF with respect to the reduction or 

elimination of the proposed exemption * * * in the 

event of a change of factors surrounding its sales 

practice and other regulatory responsibilities.’’ 

Letter from Barbara Z. Sweeney, SVP and Corporate 

Secretary, NASD, to Katherine A. England, 

Assistant Director, Division of Trading and Markets, 

Commission, dated May 19, 2003. 

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 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–CBOE– 

2010–097 and should be submitted on 

or before November 23, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–27586 Filed 11–1–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63196; File No. SR–FINRA– 

2010–046] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving 

Proposed Rule Change To Remove the 

Exemption From the Trading Activity 

Fee for Transactions in Exchange 

Listed Options Effected by a Member 

When FINRA Is Not the Designated 

Options Examining Authority for That 

Member 

October 27, 2010. 

I. Introduction 

On September 7, 2010, Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) 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 ByLaws to remove the exemption from the 

trading activity fee (‘‘TAF’’) for 

transactions in exchange listed options 

effected by a member when FINRA is 

not the designated options examining 

authority (‘‘DOEA’’) for that member. 

The proposed rule change was 

published for comment in the Federal 

Register on September 23, 2010.3 The 

Commission received no comment 

letters on the proposal. This order 

approves the proposed rule change. 

II. Description of the Proposed Rule 

Change 

In its proposal, FINRA sought to 

amend Section 1(b) of Schedule A to the 

FINRA By-Laws to remove the 

exemption from the TAF for 

transactions in exchange listed options 

effected by a member for whom FINRA 

is not the DOEA. The TAF is one of 

three member regulatory fees FINRA 

uses to fund its member regulation 

activities.4 Because the TAF funds 

FINRA’s member regulation functions, it 

is intended to apply to transactions in 

a way that corresponds to FINRA’s 

regulatory responsibilities.5 In general, 

the TAF is assessed for the sale of all 

exchange registered securities wherever 

executed (except debt securities that are 

not TRACE-eligible), over-the-counter 

equity securities, security futures, 

TRACE–Eligible Securities (provided 

that the transaction is a Reportable 

TRACE Transaction), and all municipal 

securities subject to the reporting 

requirements of the Municipal 

Securities Rulemaking Board.6 The TAF 

rules also include numerous exemptions 

for certain types of transactions.7

In 2003, FINRA exempted from the 

TAF ‘‘[t]ransactions in exchange listed 

options effected by a member when 

FINRA is not the designated options 

examining authority for that member.’’ 8

FINRA represented that the exemption 

was added to reflect the fact that 

FINRA’s regulatory responsibilities with 

respect to such activities were 

somewhat alleviated by its participation 

in a plan filed with the Commission 

under Rule 17d–2 of the Act 9 (‘‘17d–2 

Agreement’’) in which regulatory 

responsibilities for certain FINRA 

members that conducted a public 

options business were assumed by other 

self regulatory organizations (‘‘SROs’’) 

that would act as the members’ DOEA.10

In view of the fact that another SRO 

performed certain regulatory 

responsibilities with respect to the 

options activities of some of its 

members, FINRA decided to exempt 

transactions in exchange listed options 

by such members from the TAF.11 The 

exemption was also based on the fact 

that certain other SROs were assessing 

or preparing to assess specific regulatory 

fees for acting as DOEA,12 which FINRA 

believed made its TAF on options 

transactions appear redundant. 

However, subsequent amendments to 

the 17d–2 Agreement have consolidated 

within FINRA sole regulatory 

responsibility for the public options 

activities of all of its members 13 and 

FINRA assumed all regulatory 

responsibility for FINRA members 

under the 17d–2 Agreement.14 As a 

result of this increase in regulatory 

responsibility, FINRA filed the instant 

proposed rule change to delete the 

exemption from the TAF.15

FINRA represented that deleting this 

exemption would also remove any 

ambiguities over whether FINRA should 

collect the TAF from sole-FINRA 

members or from FINRA members that 

conduct only a proprietary options 

business. FINRA stated its belief that the 

existing language exempting a member’s 

transactions in exchange listed options 

from the TAF when FINRA is not the 

DOEA for the member does not properly 

align with those situations where 

FINRA has regulatory responsibility 

over the member firm. First, the DOEA 

designation is established only under 

the 17d–2 Agreement, which by its own 

terms applies only with respect to firms 

that are members of more than one SRO. 

Thus, according to FINRA, while it has 

regulatory responsibilities for the 


hsrobinson on DSK69SOYB1PROD with NOTICES