Document ID: SEC-2011-1799-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2011-11-23T05:00Z

[Federal Register Volume 76, Number 226 (Wednesday, November 23, 2011)]
[Notices]
[Pages 72482-72483]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30196]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65772; File No. SR-CBOE-2011-086]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Granting Approval of Proposed Rule To Increase the 
Number of Series Permitted Per Class in the Short Term Option Series 
Program

November 17, 2011.

I. Introduction

    On September 19, 2011, the Chicago Board Options Exchange, 
Incorporated (``CBOE'' or ``Exchange'') filed with the Securities and 
Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to increase the number of series 
permitted per class in the Short Term Options Series Program. The 
proposed rule change was published for comment in the Federal Register 
on October 6, 2011.\3\ The Commission received no comment letters on 
the proposal. This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 65445 (September 30, 
2011), 76 FR 62102 (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposal

    The proposed rule change seeks to amend CBOE Rules 5.5 and 24.9 to 
increase the number of Short Term Options Series (``Weekly options'') 
that may be opened for each option class that participates in the 
Exchange's Short Term Option Series Program (``Weeklys Program'').\4\ 
Currently, Exchange rules

[[Page 72483]]

allow a total of 20 series to be opened for trading in each class that 
participates in the Weeklys Program. The proposed rule would increase 
this to a total of 30 series per class that may be opened for 
trading.\5\
---------------------------------------------------------------------------

    \4\ In 2005, the Commission approved the Weeklys Program on a 
pilot basis. See Securities Exchange Act Release No. 52011 (July 12, 
2005), 70 FR 41451 (July 19, 2005) (SR-CBOE-2004-63). In 2009, the 
Commission approved the Weeklys Program on a permanent basis. See 
Securities Exchange Act Release No. 59824 (April 27, 2009), 74 FR 
20518 (May 4, 2009) (SR-CBOE-2009-018).
    \5\ The Exchange previously increased the total number of series 
per Weeklys option class from seven to 20 series. See Securities 
Exchange Act Release No. 58870 (October 28, 2008), 73 FR 65430 
(November 3, 2008) (SR-CBOE-2008-110). The existing rules provide 
that series must be added pursuant to CBOE Rules 5.5 and 24.9. 
Initial series shall be within 30% above or below the closing price 
of the underlying security on the preceding day. Any additional 
strikes listed by the Exchange shall be within 30% above or below 
the current price of the underlying security. The existing rules 
also provide that the Exchange may open additional strikes of Short 
Term Options Series that are more than 30% above or below the 
current price of the underlying security if demonstrated customer 
interest exists for such series, as expressed by institutional, 
corporate, or individual customers or their brokers. Market-Makers 
trading for their own account are not considered when determining 
customer interest.
---------------------------------------------------------------------------

    In the Notice, the Exchange stated that the principal reason for 
the proposed expansion is market demand for additional series in Weekly 
option classes in which the maximum number of series (20) has already 
been reached. Specifically, CBOE cited an increased demand for more 
series when market-moving events, such as corporate events and large 
price swings, have occurred during the life span of an affected Weekly 
option class. Currently, if the maximum number of series has been 
reached, the Exchange must delete or delist certain series in order to 
make room for more in-demand series. The Exchange deletes series with 
no open interest and delists series with open interest if those series 
are open for trading on another exchange.

III. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\6\ 
Specifically, the Commission finds that the proposal is consistent with 
Section 6(b)(5) of the Act,\7\ which requires, among other things, that 
the rules of a national securities exchange be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest. The Commission believes that the 
proposal strikes a reasonable balance between the Exchange's desire to 
offer a wider array of products and the need to avoid unnecessary 
proliferation of options series.
---------------------------------------------------------------------------

    \6\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In approving this proposal, the Commission notes that the Exchange 
has analyzed its capacity and represents that it and the Options Price 
Reporting Authority (``OPRA'') have the necessary systems capacity to 
handle the potential additional traffic associated with trading of an 
expanded number of series for classes that participate in the Weeklys 
Program. The Commission expects the Exchange to monitor the trading 
volume associated with the additional options series listed as a result 
of this proposal and the effect of these additional series on market 
fragmentation and on the capacity of the Exchange's, OPRA's, and 
vendors' automated systems.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-CBOE-2011-086) be, and it 
hereby is, approved.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-30196 Filed 11-22-11; 8:45 am]
BILLING CODE 8011-01-P