Document ID: SEC-2013-2104-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2013-12-11T05:00Z

[Federal Register Volume 78, Number 238 (Wednesday, December 11, 2013)]
[Notices]
[Pages 75395-75396]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-29551]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71005; File No. SR-CBOE-2013-096]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Granting Approval of Proposed Rule Change, as 
Modified by Amendment No. 1, Relating to the Short Term Option Series 
Program

December 6, 2013.

I. Introduction

    On October 2, 2013, 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 amend Exchange Rules 5.5(d) 
and 24.9(a)(2)(A) to make certain modifications to the Exchange's Short 
Term Option Series Program (``Weeklys Program''). The proposed rule 
change was published for comment in the Federal Register on October 22, 
2013.\3\ The Commission received no comment letters on the proposal. 
This order approves the proposed rule change, as modified by Amendment 
No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 70685 (October 15, 
2013), 78 FR 62858 (``Notice''). The Commission notes that on 
October 15, 2013, the Exchange submitted Amendment No. 1 to the 
proposed rule change to make certain amendments that removed the 
phrase ``for each series'' from the proposed rule language relating 
to Short Term Option Expiration Dates.
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II. Description of the Proposal

    The Exchange proposed to amend Exchange Rules 5.5(d) and 
24.9(a)(2)(A) to: (i) Allow for the Exchange to list options in the 
Weeklys Progam (``Weekly options'') on each of the next five Fridays 
that are business days and are not Fridays in which monthly options 
series or quarterly options series expire (``Short Term Option 
Expiration Dates'') at one time; and (ii) state that additional series 
of Weekly options may be listed up to, and including on, the day of 
expiration.
    The proposed rule change would give the Exchange the ability to 
list a total of five Weekly options expirations at one time, not 
including monthly or quarterly option expirations. Currently, the 
Exchange's rules provide that the Exchange may open for trading on any 
Thursday or Friday that is a business day (``Short Term Option Opening 
Date'') options expiring ``on each of the next five consecutive Fridays 
that are business days.'' \4\ Because a Friday expiration may coincide 
with an existing expiration of a monthly or quarterly series of an 
option in the same class as the Weekly options series, the current 
requirement that the Fridays be consecutive may mean that the Exchange 
cannot open five Short Term Option Expiration Dates because of existing 
monthly or quarterly expirations. The proposed rule change would allow 
the Exchange to open the five Weekly options expirations closest to the 
Short Term Option Opening Date, not including monthly or quarterly 
option expirations.
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    \4\ See Exchange Rules 5.5(d) and 24.9(a)(2)(A).
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    The proposed rule change also adds language to Rules 5.5(d) and 
24.9(a)(2)(A) to state that additional series of Weekly options may be 
added up to, and including on, the expiration date of the series.\5\ 
Currently, Exchange rules state that the Exchange ``may open up to 20 
initial series for each option class that participates in the Short 
Term Option Series Program'' and ``up to 10 additional series for each 
option class that participates in the Short Term Option Series 
Program.'' \6\ However, the Exchange's rules are silent on when series 
may be added. Therefore, the Exchange is proposing to add language 
stating that additional Weekly options series may be added up to and on 
the day of expiration.
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    \5\ The Exchange also proposed to add language stating that the 
proposed provisions in Rules 5.5(d)(4) and 24.9(a)(2)(A)(iv) will 
not contradict current provisions in CBOE Rules. More specifically, 
the proposed provisions would not contradict 5.5.04 and 24.9.01(c) 
respectively. The Exchange stated that it believes this addition 
will eliminate any confusion about when additional series may be 
added in the Weeklys Program in comparison to other Exchange listing 
programs.
    \6\ See Exchange Rules 5.5(d)(3), 5.5.(d)(4), 
24.9(a)(2)(A)(iii), and 24.9(a)(2)(A)(iv).
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    The Exchange asserts that the proposed revisions to the Weeklys 
Program will permit the Exchange to meet increased customer demand and 
provide market participants with the ability to hedge in a greater 
number of option classes and series.\7\ In addition, the Exchange 
stated that it believes that, given the short lifespan of Weekly 
options, the ability to list new series of options intraday is 
appropriate.\8\
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    \7\ See Notice, supra note 3 at 62859.
    \8\ See id.
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III. Discussion and Commission Findings

    After careful review of the proposed rule change, 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

[[Page 75396]]

exchange.\9\ Specifically, the Commission finds that the proposal is 
consistent with Section 6(b)(5) of the Act,\10\ which requires, among 
other things, that the rules of a national securities exchange be 
designed to promote just and equitable principles of trade, to prevent 
fraudulent and manipulative acts, 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 proposed change may provide the investing 
public and other market participants with greater flexibility to 
closely tailor their investment and hedging decisions in a greater 
number of option series, thus allowing investors to better manage their 
risk exposure.
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    \9\ In approving this proposed rule change, the Commission 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(5).
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    In approving this proposal, the Commission notes that the Exchange 
has represented that it and the Options Price Reporting Authority 
(``OPRA'') have the necessary systems capacity to handle the potential 
additional traffic associated with the Exchange's proposed amendments 
to the Weeklys Program.\11\ That Commission also notes that the 
Exchange represented that the Options Clearing Corporation (``OCC'') 
has the ability to accommodate series in the Weeklys Program added 
intraday.\12\ The Commission expects the Exchange to monitor the 
frequency of additional series listed as a result of this proposal and 
record the reasons therefor, and 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, OCC's, and vendors' 
automated systems.
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    \11\ See Notice, supra note 3 at 62860.
    \12\ See id. at 62859, n. 10.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\13\ that the proposed rule change, as modified by Amendment No. 1 
(SR-CBOE-2013-096), be, and it hereby is, approved.
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    \13\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29551 Filed 12-10-13; 8:45 am]
BILLING CODE 8011-01-P