Document ID: SEC-2010-0241-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2010-02-10T05:00Z

[Federal Register: February 10, 2010 (Volume 75, Number 27)]
[Notices]               
[Page 6762-6764]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10fe10-142]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61478; File No. SR-CBOE-2010-009]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to the Penny Pilot Program

February 3, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on January 29, 2010, the Chicago Board Options Exchange, 
Incorporated (``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 [sic] its rules relating to the Penny Pilot 
Program. 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, at the Commission's Public Reference Room and on the 
Commission's Web site http://www.sec.gov.

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 these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    CBOE proposes to amend its rules in connection with the expansion 
of the Penny Pilot on February 1, 2010. Specifically, CBOE proposes to 
amend Rule 6.42 to provide that the minimum increment for all option 
series in the IWM and SPY option classes will be $0.01 effective 
February 1, 2010. Currently, the minimum increments in these two 
classes are $0.01 for all option series quoted below $3 (including 
LEAPS), and $0.05 for all option series $3 and above (including LEAPS). 
CBOE notes that the SEC recently approved an NYSEArca rule filing which 
provides that the minimum increment for all option series in the IWM 
and SPY option classes will be $0.01 effective February 1, 2010.\5\
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    \5\ See Securities Exchange Act Release No. 61061 (November 24, 
2009), granting partial approval of SR-NYSEArca-2009-44, as modified 
by Amendment No. 4 thereto.
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    CBOE also proposes to identify the 75 option classes that will be 
added to the Penny Pilot Program beginning on February 1, 2010. CBOE 
recently extended and expanded the Penny Pilot Program through December 
31, 2010.\6\ As described in its filing, the Pilot

[[Page 6763]]

Program will be expanded by adding 300 option classes, in groups of 75 
classes each quarter on the following dates: November 2, 2009, February 
1, 2010, May 3, 2010, and August 2, 2010.\7\ The option classes will be 
identified based on national average daily volume in the six calendar 
months preceding their addition to the Pilot Program using data 
compiled by The Options Clearing Corporation, except that the month 
immediately preceding their addition to the Pilot Program will not be 
utilized for purposes of the six-month analysis.
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    \6\ See Securities Exchange Act Release No. 60864 (October 22, 
2009), granting immediate effectiveness to SR-CBOE-2009-76.
    \7\ The classes to be added are among the most actively-traded, 
multiply-listed option classes that are not currently in the Pilot 
Program, excluding option classes with high premiums. An option 
class would be designated as ``high premium'' if, at the time of 
selection, the underlying security was priced at $200 per share or 
above, or the underlying index level was at 200 or above.
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    The following 75 option classes will be added to the Pilot Program 
beginning on February 1, 2010:

----------------------------------------------------------------------------------------------------------------
       Symbol                    Company name                   Symbol                    Company name
----------------------------------------------------------------------------------------------------------------
ABT.................  Abbott Laboratories.               LEAP................  Leap Wireless International Inc.
AEM.................  Agnico-Eagle Mines Ltd.            LLY.................  Eli Lilly & Co.
AET.................  Aetna Inc.                         LO..................  Lorillard Inc.
AFL.................  Aflac Inc.                         LOW.................  Lowe's Cos Inc.
AKAM................  Akamai Technologies Inc.           M...................  Macy's Inc
AMAT................  Applied Materials Inc.             MCO.................  Moody's Corp.
AMR.................  AMR Corp.                          MET.................  MetLife Inc.
ANF.................  Abercrombie & Fitch Co.            MMM.................  3M Co.
APC.................  Anadarko Petroleum Corp.           MU..................  Micron Technology Inc.
ATVI................  Activision Blizzard Inc.           NUE.................  Nucor Corp.
BBD.................  Banco Bradesco SA.                 OXY.................  Occidental Petroleum Corp.
BCRX................  BioCryst Pharmaceuticals Inc.      PARD................  Poniard Pharmaceuticals Inc.
BK..................  Bank of New York Mellon Corp/The.  PEP.................  PepsiCo Inc/NC.
BRCM................  Broadcom Corp.                     PM..................  Philip Morris International Inc.
BTU.................  Peabody Energy Corp.               PNC.................  PNC Financial Services Group Inc.
BX..................  Blackstone Group LP.               QID.................  ProShares UltraShort QQQ.
CAL.................  Continental Airlines Inc.          SHLD................  Sears Holdings Corp.
CF..................  CF Industries Holdings Inc.        SLM.................  SLM Corp.
CMCSA...............  Comcast Corp.                      SLW.................  Silver Wheaton Corp.
CSX.................  CSX Corp.                          SQNM................  Sequenom Inc.
CVS.................  CVS Caremark Corp.                 STEC................  STEC Inc.
CX..................  Cemex SAB de CV.                   STX.................  Seagate Technology.
DD..................  EI du Pont de Nemours & Co.        SU..................  Suncor Energy Inc.
ERTS................  Electronic Arts Inc.               TCK.................  Teck Resources Ltd.
EWJ.................  iShares MSCI Japan Index Fund.     TEVA................  Teva Pharmaceutical Industries
                                                                                Ltd.
FDX.................  FedEx Corp.                        TLT.................  iShares Barclays 20+ Year
                                                                                Treasury Bond Fund.
FNM.................  Federal National Mortgage          TZA.................  Direxion Daily Small Cap Bear 3X
                       Association.                                             Shares.
FRE.................  Federal Home Loan Mortgage Corp.   UAUA................  UAL Corp.
GILD................  Gilead Sciences Inc.               URE.................  ProShares Ultra Real Estate.
GLW.................  Corning Inc.                       UTX.................  United Technologies Corp.
HBC.................  HSBC Holdings PLC.                 WFR.................  MEMC Electronic Materials Inc.
HES.................  Hess Corp.                         WFT.................  Weatherford International Ltd.
HL..................  Hecla Mining Co.                   WLP.................  WellPoint Inc.
HOG.................  Harley-Davidson Inc.               XLB.................  Materials Select Sector SPDR
                                                                                Fund.
HON.................  Honeywell International Inc.       XRX.................  Xerox Corp.
JOYG................  Joy Global Inc.                    XTO.................  XTO Energy Inc.
JWN.................  Nordstrom Inc.                     YRCW................  YRC Worldwide Inc.
KFT.................  Kraft Foods Inc.
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2. Statutory Basis
    The Exchange believes the rule proposal is consistent with the 
Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations under the Act applicable to a national securities exchange 
and, in particular, the requirements of Section 6(b) of the Act.\8\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with the Section 6(b)(5) Act \9\ requirements that the rules 
of an exchange be 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. In particular, the proposed 
rule change allows for an expansion of the Penny Pilot Program for the 
benefit of market participants and identifies the option classes to be 
added to the Pilot Program in a manner consistent with CBOE's rule 
filing SR-CBOE-2009-76 to extend and expand the Pilot Program. The 
proposed rule change also allows for reductions in the minimum 
increments in IWM and SPY, which has been shown to reduce spreads.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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 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 prior to 30 days from the date on which it was filed, 
or such shorter

[[Page 6764]]

time as the Commission may designate if consistent with the protection 
of investors and the public interest, the proposed rule change has 
become effective pursuant to Section 19(b)(3)(A) of the Act \10\ and 
Rule 19b-4(f)(6)(iii) thereunder.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing.\11\ However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange requested that the Commission waive 
the 30-day operative delay, as specified in Rule 19b-4(f)(6)(iii),\12\ 
which would make the rule change effective and operative upon filing.
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    \11\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the self-regulatory organization to give the 
Commission notice of its 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. CBOE has satisfied this requirement.
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because the proposal is based on a recent Commission-approved proposal 
submitted by another options exchange \13\ and therefore does not raise 
any novel regulatory issues. Further, waiving the operative delay will 
allow the Exchange to commence quoting all series of IWM and SPY in 
increments of $0.01 effective February 1, 2010, contemporaneously with 
other options exchanges. Accordingly, the Commission designates the 
proposed rule change as operative upon filing with the Commission.\14\
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    \13\ See supra note 5.
    \14\ For purposes only of waiving the operative delay for this 
proposal, the Commission has 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 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.

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-2010-009 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-2010-009. 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 the filing also will be available for 
inspection and copying at the principal office of the self-regulatory 
organization. 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-2010-009 and should be submitted on or before March 3, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-2865 Filed 2-9-10; 8:45 am]
BILLING CODE 8011-01-P