Document ID: SEC-2008-1546-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2008-11-18T05:00Z

[Federal Register: November 18, 2008 (Volume 73, Number 223)]
[Notices]               
[Page 68464-68465]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18no08-123]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58924; File No. SR-CBOE-2008-96]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Granting Approval of Proposed Rule Change To Permit 
$1 Strikes for MNX Options

November 10, 2008.

I. Introduction

    On September 16, 2008, the Chicago Board Options Exchange, 
Incorporated (``CBOE'' or ``Exchange'') filed with the Securities and 
Exchange Commission

[[Page 68465]]

(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'')\1\ and Rule 19b-4 thereunder,\2\ this 
proposed rule change. The proposed rule change was published for 
comment in the Federal Register on October 8, 2008.\3\ The Commission 
received no comments on the proposal. This order approves the proposed 
rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 58659 (September 26, 
2008), 73 FR 58998 (``Notice'').
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II. Description of the Proposal

    The proposed rule change amends Rule 24.9, Terms of Index Option 
Contracts, by adding a new interpretation that will allow the Exchange 
to list options on the Mini-Nasdaq-100 Index (``MNX'' or ``Mini-NDX''), 
which is based on \1/10\th the value of the Nasdaq-100 Index, at $1 or 
greater strike price intervals.\4\ For initial series, the Exchange 
will be able to list at least two strike prices above and two strike 
prices below the current value of the MNX at or about the time a series 
is opened for trading on the Exchange. As part of this initial listing, 
the Exchange will be able to list strike prices that are within five 
points from the closing value of the MNX on the preceding day.
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    \4\ Currently, under Interpretation and Policy .01(a)(xxv) to 
Rule 24.9, the Exchange has authority to list Mini-NDX options at 
$2.50 strike price intervals. The Commission notes that the Exchange 
rules currently allow the Exchange to list series at $1 or greater 
strike price intervals in similar options products. For example, 
Rule 24.9.01(b) allows the Exchange to list series on options based 
on one-one hundredth (1/100th) of the value of the Dow Jones 
Industrial Average Index at no less than $0.50 intervals. Similarly, 
Rule 24.9.01(f) allows the Exchange to list strike price intervals 
at no less than $1 for options on the CBOE S&P 500 BuyWrite Index 
(1/10th value). In addition, Rule 24.9.11 allows the Exchange to 
list strike price intervals at no less than $1 for the reduced-value 
version of the Standard & Poor's S&P 500 Stock Index option (``Mini-
SPX option''), which is based on 1/10th the value of the S&P 500 
Index. See Securities Exchange Act Release Nos. 39011 (September 3, 
1997), 62 FR 47840 (September 11, 1997); 58207 (July 29, 2008), 73 
FR 43963 (July 22, 2008); 52625 (October 18, 2005), 70 FR 61479 
(October 24, 2005); and 57049 (December 27, 2007), 73 FR 528 
(January 3, 2008).
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    The Exchange will be permitted to list additional series when the 
Exchange deems it necessary to maintain an orderly market, to meet 
customer demand, or when the underlying MNX moves substantially from 
the initial exercise price or prices. To the extent that any additional 
strike prices are listed by the Exchange, such additional strike prices 
shall be within thirty percent (30%) above or below the closing value 
of the MNX. The Exchange also will be permitted to open additional 
strike prices that are more than 30% above or below the current MNX 
value provided that demonstrated customer interest exists for such 
series, as expressed by institutional, corporate or individual 
customers or their brokers. Market-Makers trading for their own account 
will not be considered when determining customer interest. In addition 
to the initial listed series, the Exchange may list up to sixty (60) 
additional series per expiration month for each series in Mini-NDX 
options. The Exchange proposes that it shall not list LEAPS on Mini-NDX 
options at intervals less than $5.
    The Exchange also is proposing to set forth a delisting policy with 
respect to Mini-NDX options. The Exchange will, on a monthly basis, 
review series that are outside a range of five (5) strikes above and 
five (5) strikes below the current value of the MNX and delist series 
with no open interest in both the put and the call series having a: (i) 
Strike higher than the highest strike price with open interest in the 
put and/or call series for a given expiration month; and (ii) strike 
lower than the lowest strike price with open interest in the put and/or 
call series for a given expiration month. Notwithstanding the proposed 
delisting policy, customer requests to add strikes and/or maintain 
strikes in Mini-NDX options in series eligible for delisting shall be 
granted.

III. Commission's Findings and Order Granting Approval of the Proposed 
Rule Change

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\5\ 
In particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act \6\ in that it is 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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    \5\ In approving this proposed rule change, 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).
    \6\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Commission believes that the proposal to permit 
listing of $1 strike prices for Mini-NDX options will provide investors 
with added flexibility in the trading of Mini-NDX options and further 
the public interest by allowing investors to establish positions that 
are better tailored to meet their investment objectives. The Commission 
also believes that the proposal strikes a reasonable balance between 
the Exchange's desire to accommodate market participants by offering a 
wider array of investment opportunities and the need to avoid 
unnecessary proliferation of options series and the corresponding 
increase in quotes. The Commission notes that the existing restrictions 
on listing $1 strike price intervals will continue to apply, e.g., no 
$1 strike price may be listed (a) that is greater than $5 from MNX's 
closing price on the preceding day, or (b) that would result in strike 
prices being $0.50 apart.
    In approving the proposed rule change, the Commission has relied on 
the Exchange's representation that it has the necessary systems 
capacity to support the new options series that will be listed under 
this proposal. The Commission expects the Exchange to continue to 
monitor for options with little or no open interest and trading 
activity and to act promptly to delist such options. In addition, the 
Commission expects that CBOE will continue to monitor the trading 
volume associated with the additional options series listed as a result 
of this proposal and the effect of these additional series on market 
fragmentation and on the capacity of the Exchange's, OPRA's, and 
vendors' automated systems.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (SR-CBOE-2008-96) be, and it 
hereby is, approved.
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    \7\ 15 U.S.C. 78s(b)(2).
    \8\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-27280 Filed 11-17-08; 8:45 am]

BILLING CODE 8011-01-P