Document ID: SEC-2010-0088-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Permit Concurrent Listing of $3.50 and $4 Strikes for Classes in the $0.50 Strike and $1 Strike Programs
Posted Date: 2010-01-19T05:00Z

[Federal Register Volume 75, Number 11 (Tuesday, January 19, 2010)]
[Notices]
[Pages 2911-2912]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-820]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61331; File No. SR-CBOE-2010-002]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Permit Concurrent Listing of $3.50 and $4 Strikes for 
Classes in the $0.50 Strike and $1 Strike Programs

January 12, 2010.
    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 January 7, 2010, the Chicago Board Options Exchange, 
Incorporated (``Exchange'' or ``CBOE'') filed with the Securities and 
Exchange Commission (the ``Commission'') the proposed rule change as 
described in Items I, II and III below, which Items have been prepared 
by the Exchange. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ 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

    CBOE proposes to amend Interpretation and Policy .01 to Rule 5.5, 
Series of Options Open for Trading, to permit the concurrent listing of 
$3.50 and $4 strikes for classes that participate in both the $0.50 
Strike and $1 Strike Programs. The text of the rule proposal is 
available on the Exchange's Web site (http://www.cboe.org/legal), at 
the Exchange's Office of the Secretary and at the Commission.

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 self-regulatory organization 
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 those 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 parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange recently implemented a rule change that permits strike 
price intervals of $0.50 for options on stocks trading at or below 
$3.00 (``$0.50 Strike Program'').\5\ As part of the filing to establish 
the $0.50 Strike Program, the Exchange contemplated that a class may be 
selected to participate in both the $0.50 Strike Program and the $1 
Strike Program. Under the $1 Strike Program, new series with $1 
intervals are not permitted to be listed within $0.50 of an existing 
$2.50 strike price in the same series, except that strike prices of $2 
and $3 are permitted to be listed within $0.50 of a $2.50 strike price 
for classes also selected to participate in the $0.50 Strike 
Program.\6\ Under CBOE's existing rule, for classes selected to 
participate in both the $0.50 Strike Program and the $1 Strike Program, 
the Exchange may either: (a) List a $3.50 strike but not list

[[Page 2912]]

a $4 strike; or (b) list a $4 strike but not list a $3.50 strike. For 
example, under the Exchange's current rules, if a $3.50 strike for an 
option class in both the $0.50 and $1 Strike Programs was listed, the 
next highest permissible strike price would be $5.00. Alternatively, if 
a $4 strike was listed, the next lowest permissible strike price would 
be $3.00. The intent of the $.50 Strike Program was to expand the 
ability of investors to hedge risks associated with stocks trading at 
or under $3 and to provide finer intervals of $0.50, beginning at $1 up 
to $3.50. As a result, the Exchange believes that the current filing is 
consistent with the purpose of the $0.50 Strike Program and will permit 
the Exchange to fill in any existing gaps resulting from having to 
choose whether to list a $3.50 or $4 strike for options classes in both 
the $0.50 and $1 Strike Programs.
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    \5\ See Exchange Act Release No. 60695 (September 18, 2009), 74 
FR 49055 (September 24, 2009) (SR-CBOE-2009-069). See also 
Interpretation and Policy .01(b) to Rule 5.5.
    \6\ See Interpretation and Policy .01(a)(2) to Rule 5.5.
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    Therefore, the Exchange is submitting the current filing to permit 
the listing of concurrent $3.50 and $4 strikes for classes that are 
selected to participate in both the $0.50 Strike Program and the $1 
Strike Program. To effect this change, the Exchange is proposing to 
amend Interpretation and Policy .01(a)(2) to Rule 5.5 by adding $4 to 
the strike prices of $2 and $3 currently permitted if a class 
participates in both the $0.50 Strike Program and the $1 Strike 
Program.
    The Exchange is also proposing to amend the current rule text to 
delete references to ``$2.50 strike prices'' (and the example utilizing 
$2.50 strike prices) and to replace those references with broader 
language, e.g., ``existing strike prices.''
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act \7\ and the rules and regulations thereunder and, in 
particular, the requirements of Section 6(b) of the Act.\8\ 
Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \9\ 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 by permitting the Exchange to list more granular 
strikes on options overlying lower priced securities, which the 
Exchange believes will provide investors with greater flexibility by 
allowing them to establish positions that are better tailored to meet 
their investment objectives.
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    \7\ 15 U.S.C. 78s(b)(1).
    \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

    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.

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

    Because the foregoing proposed rule does not (i) significantly 
affect the protection of investors or the public interest; (ii) impose 
any significant burden on competition; and (iii) become operative for 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate if consistent with the protection of 
investors and the public interest, provided that the self-regulatory 
organization has given the Commission written notice of its intent to 
file the proposed rule change at least five business days prior to the 
date of filing of the proposed rule change or such shorter time as 
designated by the Commission, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such 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 otherwise 
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 Number SR-CBOE-2010-002 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2010-002. 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 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 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 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-2010-002 and should be 
submitted on or before February 9, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-820 Filed 1-15-10; 8:45 am]
BILLING CODE 8011-01-P