Document ID: SEC-2007-0975-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2007-07-18T04:00Z

[Federal Register: July 18, 2007 (Volume 72, Number 137)]
[Notices]               
[Page 39472-39474]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18jy07-121]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56050; File No. SR-CBOE-2007-76]

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

July 11, 2007.
    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 July 2, 2007, 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 substantially prepared by 
the Exchange. The Exchange has designated this proposal as non-
controversial under Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 
19b-4(f)(6) thereunder,\4\ which renders the proposed rule change 
effective upon filing with the Commission. 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

    The Exchange proposes to extend the period for its Short Term 
Options Series pilot program (``Pilot Program'') through July 12, 2008, 
and to amend the Pilot Program related to a restriction on overlapping 
expirations of Short Term Option Series with Quarterly Options Series 
and Quarterly Index Options (``QIX''). The text of the proposed rule 
change is available on the Exchange's Web site (http://www.cboe.org/Legal
), at the Exchange's principal office, and at

[[Page 39473]]

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
    On July 12, 2005, the Commission approved the Pilot Program.\5\ The 
Pilot Program has since been extended and is currently scheduled to 
expire on July 12, 2007.\6\
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    \5\ See Securities Exchange Act Release No. 52011 (July 12, 
2005), 70 FR 41451 (July 19, 2005) (File No. SR-CBOE-2004-63) 
(``Pilot Program Approval Order'').
    \6\ See Securities Exchange Act Release No. 53984 (June 14, 
2006), 71 FR 35718 (June 21, 2006) (File No. SR-CBOE-2006-48); see 
also Securities Exchange Act Release No. 54338 (August 21, 2006), 71 
FR 50952 (August 28, 2006) (File No. SR-CBOE-2006-49) (order 
approving a modification to the Pilot Program that increased the 
number of series that may be listed for each class selected to 
participate in the Pilot Program from five series to seven series).
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    The Exchange has selected the following four options classes to 
participant in the Pilot Program: S&P 500 Index options (SPX); S&P 100 
Index American-style options (OEX); Mini-S&P 500 Index options (XSP); 
and S&P 100 Index European-style options (XEO). CBOE believes the Pilot 
Program has been successful and well received by its members and the 
investing public. Thus, CBOE proposes to extend the Pilot Program 
through July 12, 2008.
    In support of the proposed rule change, and as required by the 
Pilot Program Approval Order, the Exchange is submitting to the 
Commission a Pilot Program report (the ``Report'') detailing the 
Exchange's experience with the Pilot Program. Specifically, the Report 
contains data and written analysis regarding the four options classes 
included in the Pilot Program. The Report is being submitted under 
separate cover and seeks confidential treatment under the Freedom of 
Information Act.
    The Exchange believes there is sufficient investor interest and 
demand to extend the Pilot Program another year. The Exchange believes 
that the Pilot Program has provided investors with additional means of 
managing their risk exposures and carrying out their investment 
objectives. Furthermore, the Exchange has not experienced any capacity-
related problems with respect to Short Term Option Series. The Exchange 
also represents that is has the necessary system capacity to support 
the option series listed under the Pilot Program.
    Finally, the Exchange is proposing to amend the Pilot Program to 
provide that no Short Term Option Series may have an expiration that 
coincides with an expiration of Quarterly Options Series on the same 
class. Currently, the Exchange's rules do not have such a restriction. 
The Exchange is also proposing to amend the Pilot Program as it 
pertains to index options to provide that no Short Term Option Series 
may have an expiration that coincides with an expiration of QIX option 
series on the same class. Currently, the Exchange's rules provide that 
no Short Term Option Series may expire in the same week during which 
the QIXs expire. The Exchange believes these changes should provide 
consistency in the Exchange's rules with those of other exchanges 
sponsoring similar pilot programs.\7\
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    \7\ See, e.g., American Stock Exchange Rule 903, Commentary 
.09(b); International Securities Exchange Rule 504, Supplementary 
Material .03(b); and NYSE Arca Rule 5.19(a)(3).
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act.\8\ Specifically, the Exchange believes the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\9\ 
which requires 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. The Exchange 
believes that extension of the Pilot Program will result in a 
continuing benefit to investors by allowing them additional means to 
manage their risk exposures and carry out their investment objectives, 
and will allow the Exchange to further study investor interest in Short 
Term Option Series.
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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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange neither solicited nor received comments on the 
proposal.

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

    The Exchange has designated the proposed rule change as one that: 
(1) Does not significantly affect the protection of investors or the 
public interest; (2) does not impose any significant burden on 
competition; and (3) does not become operative for 30 days from the 
date of filing, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest. 
Therefore, the foregoing rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \10\ and subparagraph (f)(6) of Rule 
19b-4 thereunder.\11\ The Exchange has asked the Commission to waive 
the operative delay to permit the Pilot Program extension to become 
operative prior to the 30th day after filing.\12\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ As required under Rule 19b-4(f)(6)(iii), the Exchange 
provided the Commission with written notice of its intent to file 
the proposed rule change at least five business before doing so.
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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 it will allow the benefits of the Pilot Program to continue 
without interruption.\13\ Therefore, the Commission designates the 
proposal operative upon filing.\14\
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    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \14\ As set forth in the Commission's original release providing 
notice filing of CBOE's proposal to adopt the Pilot Program, if the 
Exchange were to propose an extension, an expansion, or permanent 
approval of the Pilot Program, the Exchange would submit, along with 
any filing proposing such amendments to the program, a report that 
would provide an analysis of the Pilot Program covering the entire 
period during which the Pilot Program was in effect. The report 
would include, at a minimum: (1) Data and written analysis on the 
open interest and trading volume in the classes for which Short Term 
Option Series were opened; (2) an assessment of the appropriateness 
of the option classes selected for the Pilot Program; (3) an 
assessment of the impact of the Pilot Program on the capacity of the 
Exchange, OPRA, and market data vendors (to the extent data from 
market data vendors is available); (4) any capacity problems or 
other problems that arose during the operation of the Pilot Program 
and how the Exchange addressed such problems; (5) any complaints 
that the Exchange received during the operation of the Pilot Program 
and how the Exchange addressed them; and (6) any additional 
information that would assist in assessing the operation of the 
Pilot Program. The report must be submitted to the Commission at 
least sixty (60) days prior to the expiration date of the Pilot 
Program. See Securities Exchange Act Release No. 51172 (February 9, 
2005), 70 FR 7979 (February 16, 2005) (File No. SR-CBOE-2004-63).

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[[Page 39474]]

    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate the 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 other CBOE 
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-2007-76 on the subject line.

Paper Comments:

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

All submissions should refer to File Number SR-CBOE-2007-76. 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 Commissions 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 inspection and copying 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 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-2007-76 and should be submitted on 
or before August 8, 2007.\15\
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
J. Lynn Taylor,
Assistant Secretary. 7
 [FR Doc. E7-13874 Filed 7-17-07; 8:45 am]

BILLING CODE 8010-01-P