Document ID: SEC-2015-0200-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2015-02-02T05:00Z

[Federal Register Volume 80, Number 21 (Monday, February 2, 2015)]
[Notices]
[Pages 5602-5604]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-01862]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74144; File No. SR-CBOE-2015-009]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Regarding the Short Term Option Series Program

January 27, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that, on January 21, 2015, Chicago Board Options Exchange, Incorporated 
(the ``Exchange'' or ``CBOE'') 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.
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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

    CBOE proposes to amend Rule 5.5(d) (Short Term Option Series 
Program) to extend current $0.50 strike price intervals in non-index 
options to short term options with strike prices less than $100.
    The text of the proposed rule change is available on the Exchange's 
Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 
at the Exchange's Office of the Secretary, 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 Exchange 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 these 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 aspects 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 governing the Short Term 
Option Series Program to introduce finer strike price intervals for 
certain short term options. In particular, the Exchange proposes to 
amend Rule 5.5(d) to extend $0.50 strike price intervals in non-index 
options to short term options with strike prices less than $100 instead 
of the current $75. This proposed change is intended to eliminate 
gapped strikes between $75 and $100 that result from conflicting strike 
price parameters under the Short Term Option Series and $2.50 Strike 
Price Programs as described in more detail below. This is a competitive 
filing that is based on a recently approved filing by the International 
Securities Exchange, LLC (``ISE'').\5\
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    \5\ See Securities Exchange Act Release No. 73999 (January 6, 
2015), 80 FR 1559 (January 12, 2015) (Order Granting Approval of 
Proposed Rule Change Regarding the Short Term Option Series Program) 
(SR-ISE-2014-52).
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    Under CBOE's rules, the Exchange may list short term options in up 
to fifty option classes in addition to option classes that are selected 
by other securities exchanges that employ a similar program under their 
respective rules.\6\ On any Thursday or Friday that is a business day, 
the Exchange may list short term option series in designated option 
classes that expire at the close of business on each of the next five 
Fridays that are business days and are not Fridays in which monthly or 
quarterly options expire.\7\ These short term option series trade in 
$0.50, $1, or $2.50 strike price intervals depending on the strike 
price and whether the option trades in dollar increments in the related 
monthly

[[Page 5603]]

expiration.\8\ Specifically, short term options in non-index option 
classes admitted to the Short Term Options Series Program currently 
trade in: (1) $0.50 or greater strike price intervals where the strike 
price is less than $75, and $1 or greater where the strike price is 
between $75 and $150 for all classes that participate in the Short Term 
Option Series Program; (ii) $0.50 strike price intervals for classes 
that trade in one dollar increments in non-Short Term Options and that 
participate in the Short Term Option Series Program; or (iii) $2.50 or 
higher strike price intervals where the strike price is above $150.
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    \6\ See Rule 5.5(d)(1).
    \7\ See Rule 5.5(d).
    \8\ See Rule 5.5(d)(5).
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    The Exchange also operates a $2.50 Strike Price Program that 
permits the Exchange to select up to sixty options classes on 
individual stocks to trade in $2.50 strike price intervals, in addition 
to option classes selected by other securities exchanges that employ a 
similar program under their respective rules.\9\ Monthly expiration 
options in classes admitted to the $2.50 Strike Price Program trade in 
$2.50 intervals where the strike price is (1) greater than $25 but less 
than $50; or (2) between $50 and $100 if the strikes are no more than 
$10 from the closing price of the underlying stock in its primary 
market on the preceding day.\10\ These strike price parameters conflict 
with strike prices allowed for short term options as dollar strikes 
between $75 and $100 otherwise allowed under the Short Term Option 
Series Program may be within $0.50 of strikes listed pursuant to the 
$2.50 Strike Price Program. In order to remedy this conflict, the 
Exchange proposes to extend the $0.50 strike price intervals currently 
allowed for short term options with strike prices less than $75 to 
short term options with strike prices less than $100. With this 
proposed change, short term options in non-index option classes will 
trade in: (1) $0.50 or greater strike price intervals where the strike 
price is less than $100, and $1 or greater where the strike price is 
between $100 and $150 for all classes that participate in the Short 
Term Option Series Program; (ii) $0.50 strike price intervals for 
classes that trade in one dollar increments in non-Short Term Options 
and that participate in the Short Term Option Series Program; or (iii) 
$2.50 or higher strike price intervals where the strike price is above 
$150.
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    \9\ See Rule 5.5.05(a) ($2.50 Strike Price Program).
    \10\ See Rule 5.5.05(b).
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 2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\11\ In particular, the proposal is consistent with Section 6(b)(5) 
of the Act,\12\ because it is designed to promote just and equitable 
principles of trade, remove impediments to and perfect the mechanisms 
of a free and open market and a national market system and, in general, 
to protect investors and the public interest.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    During the month prior to expiration, the Exchange is permitted to 
list related monthly option contracts in the narrower strike price 
intervals available for short term option series.\13\ After 
transitioning to short term strike price intervals, however, monthly 
options that trade in $2.50 intervals between $50 and $100 under the 
$2.50 Strike Price Program, trade with dollar strikes between $75 and 
$150. Due to the overlap of $1 and $2.50 intervals, the Exchange cannot 
list certain dollar strikes between $75 and $100 that conflict with the 
prior $2.50 strikes.
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    \13\ See Rule 5.5(d)(6).
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    For example, if the Exchange initially listed monthly options on 
ABC with $75, $77.50, and $80 strikes, the Exchange could list the $76 
and $79 strikes when these transition to short term intervals. The 
Exchange would not be permitted to list the $77 and $78 strikes, 
however, as these are $0.50 away from the $77.50 strike already listed 
on the Exchange. This creates gapped strikes between $75 and $100, 
where investors are not able to trade otherwise allowable dollar 
strikes on the Exchange. Similarly, these conflicting strike price 
parameters create issues for investors who want to roll their positions 
from monthly to weekly expirations.
    In the example above, for instance, an investor that purchased a 
monthly ABC option with a $77.50 strike price would not be able to roll 
that position into a later short term expiration with the same strike 
price as that strike is unavailable under current Short Term Option 
Series Program rules. Permitting $0.50 intervals for short term options 
up to $100 would remedy both of these issues as strikes allowed under 
the $2.50 Strike Price Program would not conflict with the finer $0.50 
strike price interval.
    The Short Term Option Series Program has been well-received by 
market participants and the Exchange believes that introducing finer 
strike price intervals for short term options with strike prices 
between $75 and $100, and thereby eliminating the gapped strikes 
described above, will benefit these market participants by giving them 
more flexibility to closely tailor their investment and hedging 
decisions.
    With regard to the impact of this proposal on system capacity, the 
Exchange has analyzed its capacity and represents that it and the 
Options Price Reporting Authority (``OPRA'') have the necessary systems 
capacity to handle any potential additional traffic associated with 
this proposed rule change. The Exchange believes that its members will 
not have a capacity issue as a result of this proposal. The Exchange 
also represents that it does not believe this expansion will cause 
fragmentation of liquidity.

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 that is not necessary or appropriate in 
furtherance of the purposes of the Act. As described above, the current 
rule change is being proposed as a competitive response to a recently 
approved ISE filing. Also, the Exchange believes that the proposed rule 
change will result in additional investment options and opportunities 
to achieve the investment objectives of market participants seeking 
efficient trading and hedging vehicles, to the benefit of investors, 
market participants, and the marketplace in general. Finally, the 
Exchange believes that the proposed rule change is necessary to permit 
fair competition among the options exchanges with respect to the Short 
Term Option Series Program.

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 written comments on the 
proposed rule change.

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

    Because the proposed rule change 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, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A)

[[Page 5604]]

of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Exchange stated that waiver of this requirement will allow 
the Exchange to compete with other exchanges with similar provisions 
without putting the Exchange at a competitive disadvantage. For this 
reason, the Commission believes that the proposed rule change allowing 
the Exchange to open additional series of individual stock and ETF 
options in $.50 strike price intervals up to $100 in the same manner as 
other exchanges presents no novel issues and that waiver of the 30-day 
operative delay is consistent with the protection of investors and the 
public interest; and will allow the Exchange to remain competitive with 
other exchanges. Therefore, the Commission designates the proposed rule 
change to be operative upon filing.\16\
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    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

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 email to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2015-009 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2015-009. This file 
number should be included on the subject line if email 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 
10:00 a.m. and 3:00 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-2015-009 and should be 
submitted on or before February 23, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-01862 Filed 1-30-15; 8:45 am]
BILLING CODE 8011-01-P