Document ID: SEC-2010-0354-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange
Posted Date: 2010-03-09T05:00Z

[Federal Register: March 9, 2010 (Volume 75, Number 45)]
[Notices]               
[Page 10853-10855]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09mr10-102]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61628; File No. SR-CBOE-2010-019]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Related to Multi-Class Broad Based Index Option Spread 
Orders

March 2, 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 February 18, 2010, the Chicago Board Options Exchange, Incorporated 
(``Exchange'' or ``CBOE'') 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. 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\ which renders the proposal 
effective upon filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend its rule related to multi-class 
broad-based index option spreads to include options on index-linked 
securities (also known as exchange-traded notes (``ETNs'')) within the 
definition of an eligible ``broad-based index option.'' The text of the 
proposed rule change 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.

[[Page 10854]]

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 Commission has approved CBOE's and other option exchanges' 
proposals to enable the listing and trading of options on ETNs.\5\ 
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.\6\
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    \5\ 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).
    \6\ 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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    Prior to the commencement of trading options on ETNs, the Exchange 
is proposing to amend CBOE Rule 24.19, Multi-Class Broad-Based Index 
Option Spread Orders, to include options on ETNs within the definition 
of an eligible ``broad-based index option'' that may be subject to the 
multi-class spread trading procedures outlined in Rule 24.19.\7\ 
Specifically, the definition of an eligible broad-based index option 
for purposes of Rule 24.19 will be amended to include an option on an 
ETN derived from a broad-based index that is determined by the Exchange 
to create an appropriate hedge with any other broad-based index option 
under Rule 24.19. This change to include ETNs is the same as an 
existing provision in the rule that provides that options on Units 
(also known as exchange-traded funds (``ETFs'')) that are derived from 
broad-based indices that are determined by the Exchange to create an 
appropriate hedge with any other broad-based index option may be 
subject to the multi-class spread trading procedures.\8\
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    \7\ Rule 24.19 sets for a procedure for trading multi-class 
spread orders for eligible broad-based index option classes. For 
purposes of Rule 24.19 only, the term ``broad-based index option'' 
means ``(i) options on the Mini-NDX Index (MNX), Nasdaq-100 Index 
(NDX), S&P 100 Index (OEX and XEO), iShares S&P 100 Index Fund 
(OEF), Nasdaq-100 Tracking Stock (QQQ), and S&P 500 Index (SPX); and 
(ii) any other broad-based index option or option on exchange-traded 
fund shares derived from a broad-based index that is determined by 
the Exchange to create an appropriate hedge with any other Broad-
Based Index Option under this Rule 24.19.'' See Rule 24.19(a)(1).
    \8\ The Exchange is also proposing a non-substantive change to 
the text of Rule 24.19(a)(1) to include a cross-reference to Units 
(another term for ETFs), which is defined under Interpretation and 
Policy .06 to CBOE Rule 5.3.
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    Without discounting the differences between ETFs and ETNs, the 
Exchange seeks to extend the trading conventions applicable to options 
on ETFs to options on ETNs. CBOE contends that the inclusion of options 
on ETNs within the broad-based index option definition for purposes of 
the multi-class broad-based index option spread trading procedures is 
consistent with what is currently permitted for options on ETFs.\9\
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    \9\ Id.
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2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5)\10\ that an exchange have rules that 
are designed to promote just and equitable principles of trade, and to 
remove impediments to and 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 proposed rule 
change seeks to extend the application of the multi-class broad-based 
index option spread trading procedures under CBOE Rule 24.19 to ETNs in 
a manner that is consistent with what is currently permitted for ETFs.
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    \10\ 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

    The Exchange neither solicited nor received comments on the 
proposal.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing 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 \11\ and Rule 19b-4(f)(6) 
thereunder.\12\ 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.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
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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 rule-comments@sec.gov. Please include 
File Number SR-CBOE-2010-019 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-2010-019. 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/

[[Page 10855]]

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 
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-2010-019 and should be submitted on or before March 30, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Florence E. Harmon,
Deputy Secretary.
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    \13\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2010-4910 Filed 3-8-10; 8:45 am]
BILLING CODE 8011-01-P