Document ID: SEC-2011-0527-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2011-04-13T04:00Z

[Federal Register Volume 76, Number 71 (Wednesday, April 13, 2011)]
[Notices]
[Pages 20771-20773]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-8804]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64243; File No. SR-CBOE-2011-038]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Regarding Close of Trading Hours for Expiring End of Week 
and End of Month Expirations

April 7, 2011.
    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 April 6, 2011, 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 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 the 
Substance of the Proposed Rule Change

    CBOE proposes to amend Rule 24.9 to change the close of trading 
hours from 3:15 p.m. (Chicago time) to 3 p.m. (Chicago time) on the 
last day of trading in expiring End-of-Week and End-of Month 
Expirations. The text of the rule proposal 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's Public Reference Room.

[[Page 20772]]

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 Rule 24.9 to change the close of 
trading hours from 3:15 p.m. (Chicago time) to 3 p.m. (Chicago time) on 
the last day of trading in expiring End-of-Week Expirations and End-of-
Month Expirations. On September 14, 2010, the Securities and Exchange 
Commission (``Commission'') approved the implementation of a pilot 
program that permits P.M.-settled options on broad-based indexes to 
expire on (a) any Friday of the month, other than the third Friday-of-
the-month (``End-of-Week Expirations'' or ``EOWs'') and (b) the last 
trading day of the month (``End-of-Month Expirations'' or ``EOMs'').\5\
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    \5\ See Securities Exchange Act Release No. 34-62911 (September 
14, 2010), 75 FR 57539 (September 21, 2010) (SR-CBOE-2009-075).
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    EOWs and EOMs are treated the same as traditional options on the 
same underlying index that expire on the Saturday following the third 
Friday of the month; provided, however, that EOWs and EOMs are P.M.-
settled.\6\ EOWs and EOMs are subject to the same rules that currently 
govern the trading of traditional index options, including sales 
practice rules, margin requirements, and floor trading procedures. 
Contract terms for EOWs and EOMs are similar to regular index options, 
with one general exception: The exercise settlement value is based on 
the index value derived from the closing prices of component stocks.\7\
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    \6\ See CBOE Rule 24.9(e).
    \7\ See supra note 5.
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    Generally, EOWs and EOMs are priced in the market based on 
corresponding futures values. On the last day of trading, the closing 
prices of the component stocks (which are used to derive the exercise 
settlement value) are known at 3 p.m. (Chicago time) (or soon after) 
when the equity markets close. Despite the fact that the exercise 
settlement value is fixed at or soon after 3 p.m. (Chicago time), 
trading in expiring EOWs and EOMs continues, however, for an additional 
fifteen minutes until 3:15 p.m. (Chicago time) and are not priced on 
corresponding futures values, but rather the known cash value. At the 
same time, the prices of non-expiring EOW and EOM series continue to 
move and be priced in response to changes in corresponding futures 
prices.
    Because of the potential pricing divergence that could occur 
between 3:00 and 3:15 pm on the final trading day in expiring EOWs and 
EOMs (e.g., switch from pricing off of futures to cash), the Exchange 
believes that, in order to mitigate potential investor confusion, it is 
appropriate to cease trading in expiring EOWs and EOMs at 3 p.m. on the 
last day of trading. The proposed change to the close of trading hours 
will apply to all outstanding expiring EOW and EOM Expirations listed 
on or before the effective date of this proposal and to all EOWs and 
EOMs listed thereafter under the EOW/EOM Pilot Program.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act \8\ and the rules and regulations thereunder and, in 
particular, the requirements of Section 6(b) of the Act.\9\ 
Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \10\ 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. Preventing continued trading on a product after 
the exercise settlement value has been fixed eliminates potential 
confusion and thereby protects investors and the public interest.
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    \8\ 15 U.S.C. 78s(b)(1).
    \9\ 15 U.S.C. 78f(b).
    \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

    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 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,\11\ the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \11\ The Exchange has satisfied this requirement.
    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of such 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 rule-comments@sec.gov. Please include 
File No. SR-CBOE-2011-038 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

[[Page 20773]]

20549-1090. All submissions should refer to File No. SR-CBOE-2011-038. 
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 No. SR-CBOE-
2011-038 and should be submitted on or before May 4, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8804 Filed 4-12-11; 8:45 am]
BILLING CODE 8011-01-P