Document ID: SEC-2016-1128-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2016-07-01T04:00Z

[Federal Register Volume 81, Number 127 (Friday, July 1, 2016)]
[Notices]
[Pages 43308-43315]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15716]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78177; File No. SR-CBOE-2016-049]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of a Proposed Rule Change To List 
Options That Overlie the FTSE Developed Europe Index and the FTSE 
Emerging Index, To Raise the Comprehensive Surveillance Agreement 
Percentage Applicable to Certain Index Options, and To Amend the 
Maintenance Listing Criteria Applicable to Certain Index Options

June 28, 2016.
    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 June 15, 2016, 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 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchanges seeks to list and trade options that overlie the FTSE 
Developed Europe Index and the FTSE Emerging Index (``FTSE Developed 
options'' and ``FTSE Emerging options''), raise the comprehensive 
surveillance agreement percentage applicable to options that overlie 
the MSCI EAFE Index and the MSCI Emerging Markets Index (``EAFE 
options'' and ``EM options''), and amend the maintenance listing 
criteria applicable to EAFE options, EM options, FTSE 100 Index options 
(``FTSE 100 options''), and FTSE China 50 Index options (``FTSE China 
50 options''). The text of the proposed rule change is provided in 
Exhibit 5.
    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 purpose of this proposed rule change is to permit the Exchange 
to list and trade FTSE Developed options and FTSE Emerging options, 
amend Rule 24.2.01(a)(7) to raise the comprehensive surveillance 
agreement (``CSA'') percentage applicable to EAFE options and EM 
options,\3\ and amend Rules 24.2.01(b)(1), 24.2.02(b)(1), and 
24.2.03(b)(1) to modify the maintenance listing criteria applicable to 
EAFE options, EM options, FTSE 100 options,\4\ and FTSE China 50 
options.\5\ FTSE Developed and FTSE Emerging options would be P.M., 
cash-settled contracts with European-style exercise.
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    \3\ The Securities and Exchange Commission (the ``Commission) 
approved CBOE's proposal to list and trade EAFE and EM options on 
April 8, 2015. See Securities Exchange Act Release No. 74681 (April 
8, 2015), 80 FR 20032 (April 14, 2015) (approving SR-CBOE-2015-023).
    \4\ The Securities and Exchange Commission (the ``Commission) 
approved CBOE's proposal to list and trade FTSE 100 options on 
December 11, 2015. See Securities Exchange Act Release No. 76626 
(December 11, 2015), 80 FR 78794 (December 17, 2015) (approving SR-
CBOE-2015-100).
    \5\ The Securities and Exchange Commission (the ``Commission) 
approved CBOE's proposal to list and trade FTSE China 50 options on 
December 17, 2015. See Securities Exchange Act Release No. 76676 
(December 17, 2015), 80 FR 79963 (December 23, 2015) (approving SR-
CBOE-2015-099).
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FTSE Developed Europe Index Design, Methodology and Dissemination
    The FTSE Developed Europe Index is a weighted index representing 
the performance of large- and mid-cap companies in Developed European 
markets. The index is comprised of over 500 securities from the 
following 15 countries: Austria, Belgium & Luxembourg, Denmark, 
Finland, France, Germany, Ireland, Italy, Netherlands,

[[Page 43309]]

Norway, Portugal, Spain, Sweden, Switzerland, and the United 
Kingdom.\6\
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    \6\ See FTSE Developed Europe Index fact sheet (dated May 31, 
2016) located at: http://www.ftse.com/Analytics/FactSheets/Home/DownloadSingleIssue?issueName=AWDEURS. Belgium and Luxembourg are 
listed as one country in the ``Country Breakdown.''
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    The FTSE Developed Europe Index was launched on May 31, 2000 and is 
calculated by FTSE International Limited (``FTSE''), which is a 
provider of investment support tools. The FTSE Developed Europe Index 
is calculated and published on a real-time basis in British pounds and 
U.S dollars during U.K. and U.S. trading hours: From 2:00 a.m.-10:30 
a.m. (Chicago time) the real-time index is calculated using real time 
prices of the securities. At 10:30 a.m. (Chicago time) the real-time 
index closes using the closing prices from the London Stock Exchange. 
Thus, between 10:30 a.m. and 3:15 p.m. (Chicago time) the FTSE 
Developed Europe Index level is a static value that market participants 
can access via data vendors.
    The methodology used to calculate the FTSE Developed Europe Index 
is similar to the methodology used to calculate the value of other 
benchmark market-capitalization weighted indexes. Specifically, the 
FTSE Developed Europe Index is governed by the Ground Rules for the 
FTSE Global Equity Index Series.\7\ The level of the FTSE Developed 
Europe Index reflects the free float-adjusted market value of the 
component stocks relative to a particular base date and is computed by 
dividing the total market value of the companies in the FTSE Developed 
Europe Index by the index divisor.
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    \7\ Summary and comprehensive information about the FTSE 
Developed Europe Index methodology may be reviewed at: http://www.ftse.com/products/downloads/FTSE_Global_Equity_Index_Series.pdf?840.
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    The FTSE Developed Europe Index is monitored and maintained by 
FTSE. Adjustments to the FTSE Developed Europe Index could be made on a 
daily basis with respect to corporate events and dividends. FTSE 
reviews the FTSE Developed Europe Index semi-annually (March and 
September).\8\
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    \8\ See id.
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    Real-time data is distributed at least every 15 seconds while the 
index is being calculated using FTSE's real-time calculation engine to 
Bloomberg L.P. (``Bloomberg''), Thomson Reuters (``Reuters'') and other 
major vendors. End-of-day data is distributed daily to clients through 
FTSE as well as through major quotation vendors, including Bloomberg 
and Reuters.
    The Exchange notes that FTSE Developed Europe Index futures 
contracts are listed for trading on the Chicago Mercantile Exchange 
(``CME'').\9\
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    \9\ See E-mini FTSE Developed Europe Index Futures contract 
specifications located at: http://www.cmegroup.com/trading/equity-index/international-index/e-mini-ftse-developed-europe-index_contract_specifications.html.
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FTSE Emerging Index Design, Methodology and Dissemination
    The FTSE Emerging Index is a weighted index representing the 
performance of large- and mid-cap companies in advanced and secondary 
emerging markets. The index is comprised of approximately 950 
securities from the following 22 countries: Brazil, Chile, China, 
Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, 
Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Russia, South 
Africa, Taiwan, Thailand, Turkey, and United Arab Emirates.\10\
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    \10\ See FTSE Emerging Index fact sheet (dated May 31, 2016) 
located at: http://www.ftse.com/Analytics/FactSheets/Home/DownloadSingleIssue?issueName=AWALLE.
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    The FTSE Emerging Index was launched on June 30, 2000 and is also 
calculated by FTSE.
    The FTSE Emerging Index is calculated and published on a real-time 
basis in U.S. dollars during U.K. and U.S. trading hours: From 6:30 
p.m. (Chicago time) (prior day) to 3:10 p.m. (Chicago time) (next day). 
At 3:10 p.m. (Chicago time) the real-time index closes using the 
closing prices from Brazil, Chile, Peru and Mexico. Thus, between 3:10 
p.m. and 3:15 p.m. (Chicago time) the FTSE Emerging Index level is a 
static value that market participants can access via data vendors.
    The methodology used to calculate the FTSE Emerging Index is 
similar to the methodology used to calculate the value of other 
benchmark market-capitalization weighted indexes. Specifically, the 
FTSE Emerging Index is also governed by the Ground Rules for the FTSE 
Global Equity Index Series.\11\ The level of the FTSE Emerging Index 
reflects the free float-adjusted market value of the component stocks 
relative to a particular base date and is computed by dividing the 
total market value of the companies in the FTSE Emerging Index by the 
index divisor.
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    \11\ Summary and comprehensive information about the FTSE 
Emerging Index methodology may be reviewed at: http://www.ftse.com/products/downloads/FTSE_Global_Equity_Index_Series.pdf?840.
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    The FTSE Emerging Index is monitored and maintained by FTSE. 
Adjustments to the FTSE Emerging Index could be made on a daily basis 
with respect to corporate events and dividends. FTSE reviews the FTSE 
Emerging Index semi-annually (March and September).\12\
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    \12\ See id.
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    Real-time data is distributed at least every 15 seconds while the 
index is being calculated using FTSE's real-time calculation engine to 
Bloomberg, Reuters and other major vendors. End-of-day data is 
distributed daily to clients through FTSE as well as through major 
quotation vendors, including Bloomberg and Reuters.
    The Exchange notes that FTSE Emerging Index futures contracts are 
listed for trading on CME.\13\
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    \13\ See E-mini FTSE Emerging Index Futures contract 
specifications located at: http://www.cmegroup.com/trading/equity-index/international-index/e-mini-ftse-emerging-index_contract_specifications.html.
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Initial and Maintenance Listing Criteria
    The FTSE Developed Europe Index and the FTSE Emerging Index each 
meet the definition of a broad-based index as set forth in Rule 
24.1(i)(1).\14\ In addition, the Exchange proposes to apply the initial 
and maintenance listing criteria currently only applicable to EAFE and 
EM options to FTSE Developed and FTSE Emerging options. Specifically, 
the Exchange proposes to amend Interpretation and Policy .01(a) to Rule 
24.2, Designation of the Index, to provide that the Exchange may trade 
FTSE Developed and FTSE Emerging options if each of the following 
conditions is satisfied: (1) The index is broad-based, as defined in 
Rule 24.1(i)(1); (2) Options on the index are designated as P.M.-
settled index options; (3) The index is capitalization-weighted, price-
weighted, modified capitalization-weighted or equal dollar-weighted; 
(4) The index consists of 500 or more component securities; (5) All of 
the component securities of the index will have a market capitalization 
of greater than $100 million; (6) No single component security accounts 
for more than fifteen percent (15%) of the weight of the index, and the 
five highest weighted component securities in the index do not, in the 
aggregate, account for more than fifty percent (50%) of the weight of 
the index; (7) Non-U.S. component securities (stocks or American 
Depositary Receipts (``ADRs'')) that are not subject to CSAs do not, in 
the aggregate, represent more than fifty percent (50%) of the weight of 
the FTSE Developed Europe Index or the FTSE Emerging Index;\15\ (8) 
During

[[Page 43310]]

the time options on the index are traded on the Exchange, the current 
index value is widely disseminated at least once every fifteen (15) 
seconds by one or more major market data vendors. However, the Exchange 
may continue to trade FTSE Developed and FTSE Emerging options after 
trading in all component securities has closed for the day and the 
index level is no longer widely disseminated at least once every 
fifteen (15) seconds by one or more major market data vendors, provided 
that FTSE Developed Europe Index futures or FTSE Emerging Index futures 
contracts are trading and prices for those contracts may be used as a 
proxy for the current index value; (9) The Exchange reasonably believes 
it has adequate system capacity to support the trading of options on 
the index, based on a calculation of the Exchange's current Independent 
System Capacity Advisor (ISCA) allocation and the number of new 
messages per second expected to be generated by options on such index; 
and (10) The Exchange has written surveillance procedures in place with 
respect to surveillance of trading of options on the index.
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    \14\ Rule 24.1(i)(1) defines a broad-based index to mean an 
index designed to be representative of a stock market as a whole or 
of a range of companies in unrelated industries.
    \15\ Other than proposed listing criteria 7 of Rule 24.2.01(a) 
and maintenance listing criteria 1 of Rule 24.2.01(b), the Exchange 
is proposing to adopt the same listing criteria for FTSE Developed 
and FTSE Emerging options that are currently applicable to EAFE and 
EM options. See infra text on ``MSCI EAFE and EM Indexes'' for the 
discussion on raising the CSA percentage for EAFE and EM options and 
text on ``Maintenance Listing Criteria'' amending maintenance 
listing criteria for EAFE, EM, FTSE 100 and FTSE China 50 options.
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    Additionally, pursuant to Interpretation and Policy .01(b) to Rule 
24.2, the Exchange is proposing the following maintenance listing 
standards for FTSE Developed and FTSE Emerging options: (1) The 
conditions set forth in subparagraphs .01(a) (1), (2), (3), (4), (8), 
(9) and (10) must continue to be satisfied. The conditions set forth in 
subparagraphs .01(a)(5), (6), and (7) must be satisfied only as of the 
first day of January and July in each year; and (2) The total number of 
component securities in the index may not increase or decrease by more 
than thirty-five percent (35%) from the number of component securities 
in the index at the time of its initial listing. In the event a class 
of index options listed on the Exchange fails to satisfy the 
maintenance listing standards set forth herein, the Exchange shall not 
open for trading any additional series of options of that class unless 
the continued listing of that class of index options has been approved 
by the Commission under Section 19(b)(2) of the Securities Exchange Act 
of 1934 (the ``Act'').
    The Exchange believes that P.M. settlement is appropriate for FTSE 
Developed and FTSE Emerging options due to the nature of these indexes 
that encompass multiple markets around the world. As to the FTSE 
Developed Europe Index, the components open with the start of trading 
in certain parts of Europe at approximately 2:00 a.m. (Chicago time) 
and close with the end of trading in Europe at approximately 10:30 a.m. 
(Chicago time) as closing prices from Ireland are accounted for in the 
closing calculation. The closing FTSE Developed Europe Index is 
distributed by FTSE between approximately 10:30 a.m. and 1:00 p.m. 
(Chicago time) each trading day.
    As a result, there will not be a current FTSE Developed Europe 
Index level calculated and disseminated during a portion of the time 
during which FTSE Developed options would be traded (from approximately 
10:30 a.m. (Chicago time) to 3:15 p.m. (Chicago time)). However, the 
FTSE Developed Europe Index futures contract trades on CME during this 
time period.\16\ The Exchange believes that the FTSE Developed Europe 
Index futures prices may be a proxy for the current FTSE Developed 
Europe Index level. Therefore, the Exchange believes that FTSE 
Developed options should be permitted to trade after trading in all 
component securities has closed for the day and the index level is no 
longer widely disseminated at least once every fifteen (15) seconds by 
one or more major market data vendors, provided that FTSE Developed 
Europe Index futures contracts are trading and prices for those 
contracts may be used as a proxy for the current index value.
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    \16\ The trading hours for E-mini FTSE Developed Europe Index 
futures are from 5:00 p.m. (Chicago time) (prior day) to 4:00 p.m. 
(Chicago time) (next day), Sunday through Friday. See E-mini FTSE 
Developed Europe Index Futures contract specifications located at: 
http://www.cmegroup.com/trading/equity-index/international-index/e-mini-ftse-developed-europe-index_contract_specifications.html.
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    As to the FTSE Emerging Index, the components open with the start 
of trading in certain parts of Asia at approximately 6:30 p.m. (Chicago 
time) (prior day) and close with the end of trading in Mexico and Peru 
at approximately 3:10 p.m. (Chicago time) (next day) as closing prices 
from Brazil, Chile, Peru and Mexico, including late prices, are 
accounted for in the closing calculation. The closing FTSE Emerging 
Index level is distributed at approximately 3:10 p.m. (Chicago time) 
each trading day.
    As a result, there will not be a current FTSE Emerging Index level 
calculated and disseminated during a portion of the time during which 
FTSE Emerging options would be traded (from approximately 3:10 p.m. 
(Chicago time) to 3:15 p.m. (Chicago time)). However, the FTSE Emerging 
Index futures contract trades on CME during this time period.\17\ The 
Exchange believes that the FTSE Emerging Index futures prices may be a 
proxy for the current FTSE Emerging Index level. Therefore, the 
Exchange believes that FTSE Emerging options should be permitted to 
trade after trading in all component securities has closed for the day 
and the index level is no longer widely disseminated at least once 
every fifteen (15) seconds by one or more major market data vendors, 
provided that FTSE Emerging Index futures contracts are trading and 
prices for those contracts may be used as a proxy for the current index 
value.
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    \17\ The trading hours for E-mini FTSE Emerging Index futures 
are from 5:00 p.m. (Chicago time) (prior day) to 4:00 p.m. (Chicago 
time) (next day), Sunday through Friday. See E-mini FTSE Emerging 
Index Futures contract specifications located at: http://www.cmegroup.com/trading/equity-index/international-index/e-mini-ftse-emerging-index_contract_specifications.html.
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    Because the FTSE Developed Europe Index and FTSE Emerging Index 
each has a large number of component securities and is representative 
of many countries, similar to other broad-based indexes, the Exchange 
believes that the initial listing requirements are appropriate to trade 
options on this index. In addition, similar to other broad-based 
indexes, the Exchange proposes various maintenance requirements, which 
require continual and periodic compliance.
Options Trading
    Generally, the proposed trading rules for FTSE Developed and FTSE 
Emerging options would be the same except for their respective trading 
hours, which the Exchange will describe separately below. Exhibit 3 
presents contract specifications for FTSE Developed and FTSE Emerging 
options.
    The contract multiplier for FTSE Developed and FTSE Emerging 
options would be $100. FTSE Developed and FTSE Emerging options would 
be quoted in index points, and one point would equal $100. The minimum 
tick size for series trading below $3 would be 0.05 ($5.00) and at or 
above $3 will be 0.10 ($10.00).
    Initially, the Exchange would list in-, at- and out-of-the-money 
strike prices. Additional series may be opened for trading as the 
underlying index level moves up or down.\18\ The minimum

[[Page 43311]]

strike price interval for FTSE Developed and FTSE Emerging options 
series would be 2.5 points if the strike price is less than 200. When 
the strike price is 200 or above, strike price intervals would be no 
less than 5 points.\19\ New series would be permitted to be added up to 
the fifth business day prior to expiration.\20\
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    \18\ See Rules 24.9(a), 24.9.01 and 24.9.04. These rules set 
forth the criteria for listing additional series of the same class 
as the current value of the underlying index moves. Generally, 
additional series must be ``reasonably related'' to the current 
index value, which means that strike prices must be within 30% of 
the current index value. Series exceeding the 30% range may be 
listed based on demonstrated customer interest.
    \19\ See proposed amendments to Rule 24.9.01(a) adding FTSE 
Developed and FTSE Emerging options as classes eligible for 2.5 
point minimum strikes if the strike price is below 200.
    \20\ See Rule 24.9.01(c).
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    The Exchange would be permitted to list up to twelve near-term 
expiration months.\21\ The Exchange would also be permitted to list up 
to ten expirations in Long-Term Index Option Series (``LEAPS'') \22\ on 
the FTSE Developed Europe Index and the FTSE Emerging Index and those 
indexes would be eligible for all other expirations permitted for other 
broad-based indexes, e.g., End of Week/End of Month/Wednesday 
Expirations, Short Term Option Series and Quarterly Option Series.\23\
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    \21\ See proposed amendments to Rule 24.9(a)(2). The Exchange is 
proposing to allow the listing of up to twelve expiration months at 
any one time for FTSE Developed and FTSE Emerging options.
    \22\ See, e.g., Rule 24.9(b) (LEAPS). The Exchange may list 
LEAPS that expire from 12 to 180 months from the date of issuance; 
however, as noted in Exhibit 3, the Exchange is limiting FTSE 
Developed and FTSE Emerging LEAPS to expirations between 12 and 60 
months. The Exchange may determine to list LEAPS that expire between 
60 and 180 months at a later date without a rule filing.
    \23\ See, e.g., Rules 24.9(e) (End of Week/End of Month/
Wednesday Expirations), 24.9(a)(2)(A) (Short Term Option Series) and 
24.9(a)(2)(B) (Quarterly Option Series).
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    The trading hours for FTSE Developed options would be from 8:30 
a.m. (Chicago time) to 3:15 p.m. (Chicago time), except that trading in 
expiring FTSE Developed options would end upon the close of the London 
Stock Exchange (usually 10:30 a.m. Chicago time) \24\ on their 
expiration date (usually a Friday). The Exchange is proposing that FTSE 
Developed options trade only during a portion of the day on their 
expiration date to align the trading hours of expiring FTSE Developed 
options with expiring FTSE Developed Europe Index futures. FTSE 
Developed Europe Index futures trade on CME and stop trading at 10:30 
a.m. (Chicago time) on the third Friday of the futures contract 
month.\25\
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    \24\ For example, Daylight Saving Time began in Chicago on March 
13, 2016, and in London on March 27, 2016. If an expiration were to 
occur after Daylight Savings was observed in Chicago but prior to 
observance in London, trading in expiring FTSE Developed options 
would end at 11:30 a.m. (Chicago time). FTSE Emerging options are 
not affected by Daylight Savings as trading in expiring FTSE 
Emerging options ends at 3:15 p.m. (Chicago Time).
    \25\ See CME Rule 39002.G, available at: http://www.cmegroup.com/rulebook/CME/IV/350/390.pdf.
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    The trading hours for FTSE Emerging options would be from 8:30 a.m. 
to 3:15 p.m. (Chicago time). The trading in expiring FTSE Emerging 
options would also end at 3:15 p.m. (Chicago time) on their expiration 
date (usually a Friday).
Exercise and Settlement
    The proposed FTSE Developed and FTSE Emerging options would expire 
on the third Friday of the expiring month. Trading in expiring FTSE 
Developed options would cease upon the close of the London Stock 
Exchange (usually 10:30 a.m. Chicago time) on their expiration date 
(usually a Friday) and trading in expiring FTSE Emerging options would 
cease at 3:15 p.m. (Chicago time) on their expiration date (usually a 
Friday). When the last trading day/expiration date is moved because of 
an Exchange holiday or closure, the last trading day/expiration date 
for expiring options would be the immediately preceding business day.
    Exercise would result in delivery of cash on the business day 
following expiration. FTSE Developed and FTSE Emerging options would be 
P.M.-settled. The exercise settlement value would be the official 
closing values of the FTSE Developed Europe Index and the FTSE Emerging 
Index as reported by FTSE on the last trading day of the expiring 
contract.\26\
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    \26\ See proposed amendment to Rule 24.1.01 to identify FTSE 
International Limited as the Reporting Authority for the FTSE 
Developed Europe Index and the FTSE Emerging Index. As the 
designated Reporting Authority for each of these indexes, the 
disclaimers set forth in Rule 24.14 (Disclaimers) would apply to 
FTSE International Limited.
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    The exercise settlement amount would be equal to the difference 
between the exercise-settlement value and the exercise price of the 
option, multiplied by the contract multiplier ($100).
    If the exercise settlement value is not available or the normal 
settlement procedure cannot be utilized due to a trading disruption or 
other unusual circumstance, the settlement value would be determined in 
accordance with the rules and bylaws of The Options Clearing 
Corporation (``OCC'').\27\
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    \27\ See Rule 24.7.
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Position and Exercise Limits
    The Exchange proposes to apply the default position limits for 
broad-based index options to FTSE Developed and FTSE Emerging options. 
Specifically, the chart set forth in Rule 24.4(a), Position Limits for 
Broad-Based Index Options, provides that the positions limits 
applicable to ``other broad-based indexes'' is 25,000 contracts 
(standard limit/on the same side of the market) and 15,000 contracts 
(near-term limit). Pursuant to Rule 24.5, Exercise Limits, the exercise 
limits for FTSE Developed and FTSE Emerging options would be equivalent 
to the near-term position limits for FTSE Developed and FTSE Emerging 
options. These same position and exercise limits would apply to FLEX 
trading. All position limit hedge exemptions would apply.
Margin
    The Exchange proposes that FTSE Developed and FTSE Emerging options 
be margined as ``broad-based index'' options, and under CBOE rules, 
especially Rule 12.3(c)(5)(A), the margin requirement for a short put 
or call shall be 100% of the current market value of the contract plus 
15% of the product of the current index group value and the applicable 
index multiplier, reduced by any out-of-the-money amount. There would 
be a minimum margin requirement of 100% of the current market value of 
the contract plus: 10% of the aggregate put exercise price amount in 
the case of puts, and 10% of the product of the current index group 
value and the applicable index multiplier in the case of calls. 
Additional margin may be required pursuant to Rules 12.3(h) and 12.10 
(Margin Required is Minimum).
    The Exchange believes that FTSE Developed and FTSE Emerging options 
are eligible products for portfolio margining under CBOE Rule 12.4. 
Accordingly, the Exchange proposes that FTSE Developed and FTSE 
Emerging options be allowed in portfolio margin accounts. CBOE proposes 
that the FTSE Developed Europe Index be treated as a high-
capitalization, broad-based index to be housed in the European Market 
Product Group. The market moves utilized for the European Markets 
Product Group is -8%/+6%, with a 100% offset of gains and losses 
between products in the same Class Group and an 85% offset with the 
other classes contained in the Product Group.\28\
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    \28\ A table detailing the currently existing portfolio 
margining Product Groups and their component class groups can be 
found at http://www.optionsclearing.com/components/docs/risk-management/cpm/cpm_parameters.pdf.
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    CBOE proposes that the FTSE Emerging Index be treated as a non-
high-capitalization, broad-based index to be housed in the Emerging 
Markets Indexes Product Group. The market

[[Page 43312]]

moves utilized for the Emerging Markets Indexes Product Groups are +/-
10%, with a 100% offset of gains and losses between products in the 
same Class Group and an 85% offset with the other classes contained in 
the Product Group.
Exchange Rules Applicable
    Except as modified herein, the rules in Chapters I through XIX, 
XXIV, XXIVA, and XXIVB would equally apply to FTSE Developed and FTSE 
Emerging options. FTSE Developed and FTSE Emerging options would be 
subject to the same rules that currently govern other CBOE index 
options, including sales practice rules,\29\ margin requirements \30\ 
and trading rules.\31\
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    \29\ See Chapter IX (Doing Business with the Public).
    \30\ See Chapter XII (Margins).
    \31\ See, e.g., Chapters IV (Business Conduct), VI (Doing 
Business on the Trading Floor), VIII (Market-Makers, Trading Crowds 
and Modified Trading Systems) and XXIV (Index Options).
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    The Exchange hereby designates FTSE Developed and FTSE Emerging 
options as eligible for trading as Flexible Exchange Options as 
provided for in Chapters XXIVA (Flexible Exchange Options) and XXIVB 
(FLEX Hybrid Trading System).\32\
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    \32\ See proposed amendments to Rules 24A.7, Position Limits and 
Reporting Requirements, and 24B.7, Position Limits and Reporting 
Requirements, providing that the position limits for FLEX Index 
options on the FTSE Developed Europe Index and on the FTSE Emerging 
Index would be equal to the position limits for Non-FLEX options on 
those indexes. Per existing Rules 24A.8, Exercise Limits, and 24B.8, 
Exercise Limits, the exercise limits for FLEX FTSE Developed and 
FTSE Emerging option would be equivalent to the position limits for 
FLEX FTSE Developed and FTSE Emerging options.
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Surveillance and Capacity
    The Exchange represents that it has an adequate surveillance 
program in place for FTSE Developed and FTSE Emerging options and 
intends to use the same surveillance procedures currently utilized for 
each of the Exchange's other index options to monitor trading in FTSE 
Developed and FTSE Emerging options.
    The Exchange is a member of the Intermarket Surveillance Group 
(``ISG''), which ``covers major self-regulatory bodies across the 
world.'' ``The purpose of the ISG is to provide a framework for the 
sharing of information and the coordination of regulatory efforts among 
exchanges trading securities and related products to address potential 
intermarket manipulations and trading abuses. The ISG plays a crucial 
role in information sharing among markets that trade securities, 
options on securities, security futures products, and futures and 
options on broad-based security indexes.'' A list identifying the 
current ISG members is available at: https://www.isgportal.org/home.html.
    The Exchange is also an affiliate member of the International 
Organization of Securities Commissions (``IOSCO''), which has members 
from over 100 different countries.\33\ A list identifying the current 
ordinary IOSCO members is available at: http://www.iosco.org/about/?subsection=membership&memid=1. Finally, the Exchange has entered into 
CSAs with various stock exchanges.\34\
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    \33\ There are three categories of IOSCO members: Ordinary, 
associate and affiliate. In general, the ordinary members (125) are 
the national securities commissions in their respective 
jurisdictions. Associate members (18) are usually agencies or 
branches of government, other than the principal national securities 
regulator in their respective jurisdictions that have some 
regulatory competence over securities markets, or intergovernmental 
international organizations and other international standard-setting 
bodies, such as the IMF and the World Bank, with a mission related 
to either the development or the regulation of securities markets. 
Affiliate members (64) are self-regulatory organizations, stock 
exchanges, financial market infrastructures, investor protection 
funds and compensation funds, and other bodies with an appropriate 
interest in securities regulation. See IOSCO Fact Sheet located at: 
http://www.iosco.org/about/pdf/IOSCO-Fact-Sheet.pdf.
    \34\ CSAs can be in the form of Memoranda of Understanding 
(``MOUs'') or information sharing agreements.
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    The FTSE Developed Europe Index is a broad-based index of which the 
component securities have a market capitalization of 7,073,781 (EUR 
Millions) and an average market capitalization per constituent of 
13,397 (EUR Millions). Additionally, the component stocks have an 
average daily volume of over 2.8 billion with an average daily volume 
per constituent of over 5 million. Also, the largest constituent in the 
FTSE Developed Europe Index currently only accounts for 2.89% of the 
weight of the FTSE Developed Europe Index.
    The FTSE Emerging Index is also a broad-based index of which the 
component securities have a market capitalization of 3,033,757 (USD 
Millions) and an average market capitalization per constituent of 3,118 
(USD Millions). Additionally, the component stocks have an average 
daily volume of over 25 billion with an average daily volume per 
constituent of over 29 million. Also, the largest constituent in the 
FTSE Emerging Index currently only accounts for 3.93% of the weight of 
the FTSE Emerging Index.
    Given the capitalization of the FTSE Developed Europe and FTSE 
Emerging Indexes and the deep and liquid markets for the securities 
underlying these Indexes, the concerns for market manipulation and/or 
disruption in the underlying markets are greatly reduced.
    CBOE has analyzed its capacity and represents that it believes the 
Exchange and the Options Price Reporting Authority (``OPRA'') have the 
necessary systems capacity to handle the additional traffic associated 
with the listing of new series that would result from the introduction 
of FTSE Developed and FTSE Emerging options. Because the proposal is 
limited to two new classes, the Exchange believes that the additional 
traffic that would be generated from the introduction of FTSE Developed 
and FTSE Emerging options would be manageable.
MSCI EAFE and EM Indexes
    On April 8, 2015, the Commission approved CBOE's proposal to list 
and trade options on the MSCI EAFE Index (``EAFE Index'') and the MSCI 
Emerging Markets Index (``EM Index'').\35\ On March 8, 2016, the 
Commission approved CBOE's proposal to amend Rule 24.2.01(a)(7) to 
raise the CSA percentage for the EAFE and EM Indexes by five percent 
(5%).\36\ Pursuant to SR-CBOE-2016-016, Rule 24.2.01(a)(7) currently 
states that Non-U.S. component securities (stocks or ADRs) that are not 
subject to CSAs do not, in the aggregate, represent more than: (i) 
Twenty-five percent (25%) of the weight of the EAFE Index, and (ii) 
twenty-seven and a half percent (27.5%) of the weight of the EM Index. 
Because both the EAFE and EM Indexes are broad-based indexes, the 
component securities of the indexes have high market capitalizations, 
the indexes are comprised of over 500 constituents, and no single 
component comprises more than 5% of the weight of either index, all of 
which makes the indexes not easily subject to market manipulation, the 
Exchange proposes to amend Rule 24.2.01(a)(7) to raise the CSA 
percentage for the EAFE and EM Indexes to fifty percent (50%).\37\
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    \35\ See Securities Exchange Act Release No. 74681 (April 8, 
2015), 80 FR 20032 (April 14, 2015) (approving SR-CBOE-2015-023).
    \36\ See Securities Exchange Act Release No. 77319 (March 8, 
2016), 81 FR 13429 (March 14, 2016) (approving SR-CBOE-2016-016).
    \37\ The Exchange is proposing to make this CSA percentage 
applicable to FTSE Developed and FTSE Emerging options because both 
the FTSE Developed Europe and FTSE Emerging Indexes are broad-based 
indexes, the component securities of the indexes have high market 
capitalizations, the indexes are comprised of over 500 constituents, 
and no single component comprises more than 5% of the weight of 
either index, which makes the indexes not easily susceptible to 
manipulation.
---------------------------------------------------------------------------

    The EAFE Index consists of the following 21 developed market 
countries: Australia, Austria, Belgium, Denmark, Finland, France, 
Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New 
Zealand, Norway,

[[Page 43313]]

Portugal, Singapore, Spain, Sweden, Switzerland, and the United 
Kingdom. The EAFE Index consists of large- and mid-cap components, has 
925 constituents and ``covers approximately 85% of the free float-
adjusted market capitalization in each country.'' \38\ Furthermore, the 
EAFE Index is a broad-based index of which the component securities 
have a market capitalization of 12,021,032.52 (USD Millions) and an 
average market capitalization per constituent of 12,995.71 (USD 
Millions). Additionally, the component stocks have an average daily 
volume of over 5 billion with an average daily volume per constituent 
of over 5 million. Also, the largest constituent in the EAFE Index 
currently accounts for less than 2% of the weight of the EAFE Index.
---------------------------------------------------------------------------

    \38\ See EAFE Index fact sheet (dated May 31, 2016) located at: 
http://www.msci.com/resources/factsheets/index_fact_sheet/msci-eafe-index-usd-price.pdf.
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    The EM Index consists of the following 23 emerging market country 
indexes [sic]: Brazil, Chile, China, Colombia, Czech Republic, Egypt, 
Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, 
Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, 
Turkey and United Arab Emirates. The EM Index consists of large- and 
mid-cap components, has 837 constituents and ``covers approximately 85% 
of the free float-adjusted market capitalization in each country.'' 
\39\ Furthermore, the EM Index is a broad-based index of which the 
component securities have a market capitalization of 3,506,908.00 (USD 
Millions) and an average market capitalization per constituent of 
4,189.85 (USD Millions). Additionally, the component stocks have an 
average daily volume of over 25 billion with an average daily volume 
per constituent of over 30 million. Also, the largest constituent in 
the EM Index currently accounts for less than 3.5% of the weight of the 
EM Index.
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    \39\ See EM Index fact sheet (dated May 31, 2016) located at: 
http://www.msci.com/resources/factsheets/index_fact_sheet/msci-emerging-markets-index-usd-price.pdf.
---------------------------------------------------------------------------

    Given the high number of constituents and capitalization of the 
EAFE and EM Indexes and the deep and liquid markets for the securities 
underlying these indexes, the concerns for market manipulation and/or 
disruption in the underlying markets are greatly reduced. Additionally, 
the Exchange represents that raising the CSA percentage will not have 
an adverse impact on the Exchange's surveillance program. The Exchange 
represents that it will still have an adequate surveillance program in 
place for EAFE and EM options and will continue to use the same 
surveillance procedures currently utilized for each of the Exchange's 
other index options to monitor trading in EAFE and EM options.
    The Exchange notes that equity exchanges are not required to have 
any CSAs in place to list ETFs that seek to track the EAFE, EM, FTSE 
Developed, and FTSE Emerging Indexes.\40\ Additionally, CBOE is not 
required to have any CSAs in place to list and trade options on an ETF 
that seeks to track these indexes as long as the ETF is listed in 
accordance with an equity exchange's generic listing criteria under 
which CSAs are not required.\41\ Finally, futures exchanges are 
similarly not required to have any CSAs in place to list futures on the 
EAFE, EM, FTSE Developed and FTSE Emerging Indexes.\42\
---------------------------------------------------------------------------

    \40\ See e.g., NYSE MKT Rule 1000 Commentary .03(a)(B); NYSE 
Arca Equities Rule 5.2(j)(3) Commentary .01(a)(B); NASDAQ Rule 
5705(a)(3)(A)(ii); and BATS Rule 14.11(b)(3)(A)(ii).
    \41\ See Rule 5.3.06(C)(i).
    \42\ See, e.g., CME Rulebook Chapters 390--E-mini FTSE Developed 
Europe Index Futures and 391--E-mini FTSE Emerging Index Futures; 
and ICE Futures Chapters 40--MSCI EAFE Mini Index Futures and 41--
MSCI Emerging Markets Mini Index Futures.
---------------------------------------------------------------------------

Maintenance Listing Criteria
    The Exchange is seeking to amend Rules 24.2.01(b)(1), 
24.2.02(b)(1), and 24.2.03(b)(1) to modify the maintenance listing 
criteria applicable to EAFE options, EM options, FTSE 100 options, and 
FTSE China 50 options. Currently, Rules 24.2.01(b)(1), 24.2.02(b)(1), 
and 24.2.03(b)(1) state, as applicable, that the listing criteria set 
forth in subparagraphs .01(a)(5) and (6), .02(a)(5) and (6), and 
.03(a)(5) and (6) to Rule 24.2 (``listing criteria 5 and 6'') \43\ need 
only be met as of the first day of January and July in each year. The 
Exchange is seeking to amend Rules 24.2.01(b)(1), 24.2.02(b)(1), and 
24.2.03(b)(1) \44\ to specify that listing criteria set forth in 
subparagraphs .01(a)(7), .02(a)(7), and .03(a)(7) to Rule 24.2 
(``listing criteria 7'') \45\ need also only be met as of the first of 
January and July in each year. The Exchange is not seeking to amend the 
frequency with which listing criteria 5 and 6 are reviewed; rather, the 
Exchange is seeking to specify the frequency with which the listing 
criteria 7 is reviewed. The substantive analysis involved in reviewing 
listing criteria 5, 6, and 7 is similar. Each review involves an 
analysis of the market capitalization of individual components and 
resulting changes to the weights those individual components contribute 
to indexes; thus, it's appropriate to review those criteria at the same 
time.
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    \43\ Listing criteria 5 provides that all of the component 
securities of the index will have a market capitalization of greater 
than $100 million. Listing criteria 6 provides that no single 
component security accounts for more than fifteen percent (15%) of 
the weight of the index, and the five highest weighted component 
securities in the index do not, in the aggregate, account for more 
than fifty percent (50%) of the weight of the index.
    \44\ Current Rule 24.2.03(b) and (b)(1) mistakenly references 
paragraph .02(a), instead of .03(a); thus, the Exchange is also 
amending Rule 24.2.03(b) to correct the technical error.
    \45\ Listing criteria 7 generally provides that non-U.S. 
component securities (stocks or American Depositary Receipts 
(``ADRs'')) that are not subject to CSAs do not, in the aggregate, 
represent more than a certain percent of the weight of the 
applicable index. As previously noted, this proposal seeks to amend 
the listing criteria 7 applicable to EAFE and EM options and apply 
that same percentage to FTSE Developed and FTSE Emerging options. 
This proposal does not seek to amend the listing criteria 7 
applicable to FTSE 100 and FTSE China 50 options; however, as noted 
above, this proposal does seek to amend the maintenance listing 
criteria for EAFE, EM, FTSE 100, and FTSE China 50 options.
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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.\46\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \47\ 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.
---------------------------------------------------------------------------

    \46\ 15 U.S.C. 78f(b).
    \47\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change will further 
the Exchange's goal of introducing new and innovative products to the 
marketplace. Currently, the Exchange believes that there is unmet 
market demand for exchange-listed security options listed on these two 
popular cash indexes. FTSE Developed Europe and FTSE Emerging Index 
futures are listed for trading on CME. As a result, CBOE believes that 
FTSE Developed and FTSE Emerging options are designed to provide 
different and additional opportunities for investors to hedge or 
speculate on the market risk associated with the FTSE Developed and 
FTSE Emerging Indexes by listing an option directly on these indexes.
    The Exchange believes that both the FTSE Developed Europe Index and 
FTSE Emerging Index are not easily susceptible to manipulation. Both 
indexes are broad-based indexes and

[[Page 43314]]

have high market capitalizations. The FTSE Developed Europe Index is 
comprised of 528 component stocks, the component stocks have a market 
capitalization 7,073,781 (EUR Millions) and average daily volume of 
over 2.8 billion, and no single component comprises more than 5% of the 
index, making it not easily subject to market manipulation. Similarly, 
the FTSE Emerging Index is comprised of 973 components stocks, the 
component stocks have a market capitalization of 3,033,757 (USD 
Millions) and average daily volume of over 25 billion, and no single 
component comprises more than 5% of the index, making it not easily 
subject to market manipulation. Due to both indexes having a large 
number of component securities, high market capitalization, and being 
representative of many countries, similar to other broad-based indexes, 
the Exchange believes that the initial listing requirements are 
appropriate to trade options on these indexes. In addition, similar to 
other broad-based indexes, the Exchange proposes to adopt various 
maintenance criteria, which would require continual compliance and 
periodic compliance.
    With regards to the CSA percentage applicable to FTSE Developed and 
FTSE Emerging options in particular, the purpose of a CSA is to allow 
the Exchange to investigate manipulation if it were to occur on an 
exchange at which one of the component securities trades. However, as 
described above, the FTSE Developed Europe and FTSE Emerging Indexes 
are unlikely to be susceptible to manipulation; thus, requiring fifty 
(50%) of the component securities to be subject to CSAs for the FTSE 
Developed Europe and the FTSE Emerging Indexes is unlikely to affect 
the Exchange's ability to investigate manipulation. Additionally, the 
Commission is in the best position to investigate potential 
manipulation occurring on foreign exchanges because the Commission has 
bilateral and multilateral information sharing agreements with foreign 
regulators in countries all over the world; \48\ thus, whether the 
Exchange receives information pursuant to a CSA or not, the Exchange 
can refer potential manipulation cases to the Commission. The Exchange 
notes that it is the practice today to refer cases to the Commission 
when the Exchange does not have jurisdiction over the potentially 
offending market participants, and the Exchange is unlikely to have 
jurisdiction over a market participant potentially manipulating markets 
on a foreign exchange. In addition, it is more than likely that market 
participants trading on foreign exchanges are subject to anti-
manipulation laws in those jurisdictions,\49\ which further limits the 
likelihood that these indexes will be manipulated.
---------------------------------------------------------------------------

    \48\ For example, the Commission's own Web site specifically 
identifies the multilateral memorandum of understanding created by 
the International organization of Securities Commissions, whereby 
the signatories, including the Commission, agreed: To provide 
certain critical information, to permit use of that information in 
civil or administrative proceedings, to onward share information 
with self-regulatory organizations and criminal authorities, and to 
keep such information confidential. In particular, the MMOU provides 
for the following: Sharing information and documents held in the 
regulators' files; obtaining information and documents regarding 
transactions in bank and brokerage accounts, and the beneficial 
owners of such accounts; and taking or compelling a person's 
statement or, where permissible, a person's testimony. The MMOU has 
significantly enhanced the SEC's enforcement program by increasing 
and expediting the SEC's ability to obtain information from a 
growing number of jurisdictions worldwide. See SEC's Cooperative 
Arrangements with Foreign Regulators Factsheet, available at: 
https://www.sec.gov/about/offices/oia/oia_coopfactsheet.htm. A list 
of the current signatories to the IOSCO multilateral memorandum of 
understanding is available at: https://www. iosco.org/about/?subSection=mmou&subSection 1=signatories. A list of the 
Commission's Cooperative Arrangements with Foreign Regulators is 
available at: https://www.sec.gov/about/offices/oia/oia_cooparrangements.shtml.
    \49\ See, e.g., Article 5 of European Union Directive 2003/6/EC 
(stating that member states shall prohibit any person from engaging 
in market manipulation), available at: http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A32003L0006; Article 15 of European 
Union Regulation 596/2014, which replaces Directive 2003/6/EC 
(stating that a person shall not engage in or attempt to engage in 
market manipulation); available at: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32014R0596; Article 16 of European Union 
Regulation 596/2014 (stating that market operators and investment 
firms that operate a trading venue shall establish and maintain 
effective arrangements, systems and procedures aimed at preventing 
and detecting insider dealing, market manipulation and attempted 
insider dealing and market manipulation); Rule 545 of the Stock 
Exchange of Hong Kong, available at: https://www.hkex.com.hk/eng/rulesreg/traderules/sehk/Documents/chap-5_eng.pdf; Rule 8.10 of the 
Johannesburg Stock Exchange, available at: https://www.jse.co.za/content/JSERulesPoliciesand RegulationItems/
JSE%20Equities%20Rules.pdf.
---------------------------------------------------------------------------

    FTSE Developed and FTSE Emerging options would be subject to the 
same rules that currently govern other CBOE index options, including 
sales practice rules,\50\ margin requirements \51\ and trading 
rules.\52\ The Exchange would apply the same default position limits 
for broad-based index options to FTSE Developed and FTSE Emerging 
options. Specifically, the applicable position limits would be 25,000 
contracts (standard limit/on the same side of the market) and 15,000 
contracts (near-term limit). The exercise limits for FTSE Developed and 
FTSE Emerging options would be equivalent to the position limits for 
EAFE and EM options. These same position and exercise limits would 
apply to FLEX trading. All position limit hedge exemptions would apply. 
The Exchange would apply existing index option margin requirements to 
the purchase and sale of FTSE Developed and FTSE Emerging options.
---------------------------------------------------------------------------

    \50\ See Chapter IX (Doing Business with the Public).
    \51\ See Chapter XII (Margins).
    \52\ See, e.g., Chapters IV (Business Conduct), VI (Doing 
Business on the Trading Floor), VIII (Market-Makers, Trading Crowds 
and Modified Trading Systems) and XXIV (Index Options).
---------------------------------------------------------------------------

    The Exchange represents that is has an adequate surveillance 
program in place for FTSE Developed and FTSE Emerging options. The 
Exchange also represents that it has the necessary systems capacity to 
support the new option series.
    With regards to the CSA percentage applicable to EAFE and EM 
options, both the MSCI EAFE and MSCI EM Indexes are not easily 
susceptible to manipulation. Both indexes are broad-based indexes and 
have high market capitalizations. The EAFE Index is comprised of 925 
component stocks, the component stocks have a market capitalization of 
12,021,032.52 (USD Millions) and average daily volume of over 5 
billion, and no single component comprises more than 5% of the index, 
making it not easily subject to market manipulation. Similarly, the EM 
Index is comprised of 837 components stocks, the component stocks have 
a market capitalization of 3,506,908.00 (USD Millions) and average 
daily volume of over 25 billion, and no single component comprises more 
than 5% of the index, making it not easily subject to market 
manipulation. As previously noted, the purpose of a CSA is to allow the 
Exchange to investigate manipulation if it were to occur on an exchange 
at which one of the component securities trades. However, as described 
above, the EAFE and EM Indexes are unlikely to be susceptible to 
manipulation; thus, raising the CSA percentage for the EAFE and EM 
Indexes to fifty (50%) is unlikely to affect the Exchange's ability to 
investigate manipulation. Additionally, as noted above, the Commission 
is in a prime position to investigate potential manipulation occurring 
on foreign exchanges, and the Exchange can always refer investigations 
to the Commission. Also, as previously noted, equity exchanges are not 
required to have any CSAs in place to list ETFs that seek to track the 
EAFE, EM, FTSE Developed, and FTSE Emerging Indexes, and CBOE is not 
required to have any CSAs in place to list and trade options on an ETF 
that seeks to track these

[[Page 43315]]

indexes as long as the ETF is listed in accordance with an equity 
exchange's generic listing criteria under which CSAs are not required. 
Thus, the proposed CSA percentage promotes just and equitable 
principles of trade and a free and open market by more equally applying 
CSA percentages to similar products.
    Finally, with regards to amending the maintenance listing criteria 
applicable to EAFE, EM, FTSE 100, and FTSE China 50 options, the 
substantive analysis of reviewing the listing criteria set forth in 
subparagraphs .01(a)(5) and (6), .02(a)(5) and (6), and .03(a)(5) and 
(6) to Rule 24.2 is similar to the analysis involved in reviewing the 
listing criteria set forth in subparagraphs .01(a)(7), .02(a)(7), and 
.03(a)(7) to Rule 24.2. Thus, it's appropriate, and generally 
supportive of the protection of investors and the public interest, to 
review those criteria at the same time as it strikes the appropriate 
balance between ensuring the Exchange has the ability to access 
information to conduct investigative activities with the Exchange 
efficiently and effectively deploying Exchange resources.

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. Specifically, CBOE believes that the 
introduction of new cash index options will enhance competition among 
market participants and will provide a new type of options to compete 
with domestic products such as FTSE Developed Europe and FTSE Emerging 
Index futures and European-traded derivatives on the FTSE Developed 
Europe and FTSE Emerging Indexes to the benefit of investors and the 
marketplace. With regards to the CSA percentage applicable to EAFE, EM, 
FTSE Developed, and FTSE Emerging options, the Exchange considers this 
a competitive filing. As noted above, equity exchanges are not required 
to have any CSAs in place to list ETFs that seek to track the EAFE, EM, 
FTSE Developed, and FTSE Emerging Indexes.\53\ Additionally, CBOE is 
not required to have any CSAs in place to list and trade options on an 
ETF that seeks to track these indexes as long as the ETF is listed in 
accordance with an equity exchange's generic listing criteria under 
which CSAs are not required.\54\ Futures exchanges are similarly not 
required to have any CSAs in place to list futures on the EAFE, EM, 
FTSE Developed and FTSE Emerging Indexes.\55\ Finally, modifying the 
maintenance listing criteria applicable to EAFE, EM, FTSE 100, and FTSE 
China 50 options as proposed will not impose any burden on 
competition--intermarket or otherwise--because maintenance listing 
criteria are applicable to products, not market participants, and, 
thus, are unrelated to competition among market participants.
---------------------------------------------------------------------------

    \53\ See, e.g., NYSE MKT Rule 1000 Commentary .03(a)(B); NYSE 
Arca Equities Rule 5.2(j)(3) Commentary .01(a)(B); NASDAQ Rule 
5705(a)(3)(A)(ii); and BATS Rule 14.11(b)(3)(A)(ii).
    \54\ See Rule 5.3.06(C)(i).
    \55\ See, e.g., CME Rulebook Chapters 390--E-mini FTSE Developed 
Europe Index Futures and 391--E-mini FTSE Emerging Index Futures; 
and ICE Futures Chapters 40--MSCI EAFE Mini Index Futures and 41--
MSCI Emerging Markets Mini Index Futures.
---------------------------------------------------------------------------

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    A. By order approve or disapprove such proposed rule change, or
    B. institute proceedings to determine whether the proposed rule 
change should be 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-2016-049 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-2016-049.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-2016-049 and should be 
submitted on or before July 22, 2016.
---------------------------------------------------------------------------

    \56\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\56\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-15716 Filed 6-30-16; 8:45 am]
 BILLING CODE 8011-01-P