Document ID: SEC-2009-0609-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Approving Proposed Rule Change To Permanently Establish the Short Term Option Series Pilot Program
Posted Date: 2009-05-04T04:00Z

[Federal Register Volume 74, Number 84 (Monday, May 4, 2009)]
[Notices]
[Pages 20518-20519]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-10120]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59824; File No. SR-CBOE-2009-018]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Approving Proposed Rule Change To Permanently 
Establish the Short Term Option Series Pilot Program

April 27, 2009.
    On March 13, 2009, the Chicago Board Options Exchange, Incorporated 
(``Exchange'' or ``CBOE'') 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 permanently establish its 
Short Term Option Series pilot program (the ``Weeklys Program''). The 
proposed rule change was published for comment in the Federal Register 
on March 26, 2009.\3\ The Commission received no comment letters on the 
proposed rule change. This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 59601 (March 19, 
2009), 74 FR 13281.
---------------------------------------------------------------------------

    The Commission approved the Weeklys Program on a pilot basis on 
July 12, 2005.\4\ The proposed rule change permanently establishes the 
Weeklys Program. The proposal also consolidates the subsections of 
Rules 5.5 and 24.9 and make conforming, non-

[[Page 20519]]

substantive changes to the rule text related to the Exchange's 
Quarterly Option Series Pilot Program.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 52011 (July 12, 
2005), 70 FR 41451 (July 19, 2005) (SR-CBOE-2004-63) (``Weeklys 
Pilot Program Approval Order''). The Weeklys Program has since been 
extended and is currently scheduled to expire on July 12, 2009. See 
Securities Exchange Act Release Nos. 53984 (June 14, 2006), 71 FR 
35718 (June 21, 2006) (SR-CBOE-2006-48), 56050 (July 11, 2007), 72 
FR 39472 (July 18, 2007) (SR-CBOE-2007-76); and 58094 (July 3, 
2008), 73 FR 40000 (July 11, 2008) (SR-CBOE-2008-70). See also 
Securities Exchange Act Release Nos. 54338 (August 21, 2006), 71 FR 
50952 (August 28, 2006) (SR-CBOE-2006-49) (order approving an 
increase in the number of series that may be listed for a class 
selected to participate in the Weeklys Program from five to seven) 
and 58870 (October 28, 2008), 73 FR 65430 (November 3, 2008) (SR-
CBOE-2008-110) (immediately effective rule change increasing the 
number of series that may be listed for a classes selected to 
participate in the Weeklys Program from seven series to 20 series).
---------------------------------------------------------------------------

    The Weeklys Program allows CBOE to list and trade Short Term Option 
Series, which expire one week after the date on which a series is 
opened. Under the Weeklys Program, CBOE may select up to five approved 
option classes on which Short Term Option Series could be opened. For 
each class selected for the Weeklys Program, the Exchange may open up 
to 20 Short Term Option Series for each expiration date in that class, 
with approximately the same number of strike prices above and below the 
value of the underlying security or calculated index value at about the 
time that the Short Term Option Series is opened. If the Exchange opens 
less than 20 Short Term Option Series for a given expiration date, 
additional series may be opened for trading on the Exchange when the 
Exchange deems it necessary to maintain an orderly market, to meet 
customer demand, or when the current value of the underlying security 
or index moves substantially from the previously listed exercise 
prices. In any event, the total number of series for a given expiration 
date will not exceed 20 series.
    The Exchange has selected the following four options classes to 
participate in the Weeklys 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).
    In support of its proposal seeking permanent approval of the 
Weeklys Program, and as required by the Weeklys Pilot Program Approval 
Order, the Exchange submitted to the Commission a report on the Weeklys 
Program (the ``Report'') detailing the Exchange's experience with the 
Weeklys Program. In addition to the Report, the Exchange represented 
that it has not experienced any capacity-related problems with respect 
to Short Term Option Series, and also that it has the necessary system 
capacity to continue to support the option series listed under the 
Weeklys Program.
    After careful review, the Commission finds that the proposal is 
consistent with the Act and the rules and regulations thereunder 
applicable to a national securities exchange,\5\ and, in particular, 
the requirements of Section 6(b)(5) of the Act,\6\ which requires, 
among other things, that the rules of a national securities exchange be 
designed 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.
---------------------------------------------------------------------------

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

    The Commission finds that the Weeklys Program, as evidenced by the 
Report, has furthered the public interest by offering investors an 
alternative means of managing their risk exposures and carrying out 
their investment objectives. The Commission notes CBOE's representation 
that there is sufficient investor interest and demand in the Weeklys 
Program to warrant its permanent approval. The Commission further notes 
CBOE's representations that it has not experienced any capacity-related 
problems with respect to Short Term Option Series, and that the 
Exchange has the necessary system capacity to continue to support the 
option series listed under the Weeklys Program. Accordingly, the 
Commission finds that the proposed Weeklys Program strikes a reasonable 
balance between the Exchange's desire to offer a wider array of 
investment opportunities and the need to avoid the unnecessary 
proliferation of option series that could compromise systems capacity. 
The Commission expects CBOE to continue to monitor the trading and 
quotation volume associated with the Weeklys Program, and the effect 
the Weeklys Program has on the capacity of the Exchange's, OPRA's, and 
vendors' systems.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (SR-CBOE-2009-018) be, and it hereby is, 
approved.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
---------------------------------------------------------------------------

    \7\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-10120 Filed 5-1-09; 8:45 am]
BILLING CODE 8010-01-P