Document ID: SEC-2009-1227-0001
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 Clarify the Definition of "Narrow-Based Index"
Posted Date: 2009-08-27T04:00Z

[Federal Register: August 27, 2009 (Volume 74, Number 165)]
[Notices]               
[Page 43739-43741]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27au09-106]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60556; File No. SR-CBOE-2009-061]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Clarify the Definition of ``Narrow-Based Index''

August 21, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the

[[Page 43740]]

``Act'') \1\ and Rule 19b-4 \2\ thereunder, notice is hereby given that 
on August 18, 2009, 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 and II 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 Rule 24.1(i)(2) by clarifying the definition 
of ``industry index'' and ``narrow-based-index'' to include indices 
having component securities that are all headquartered within a single 
country. 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
    This proposed rule change is based on a filing previously submitted 
by NASDAQ OMX PHLX, Inc (``PHLX'') that was effective on filing.\5\
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    \5\ See Exchange Act Release No. 60150 (June 19, 2009), 74 FR 
30658 (June 26, 2009) (SR-Phlx-2009-35).
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    CBOE proposes to amend Rule 24.1(i)(2), which defines the terms 
``industry index'' and ``narrow-based index'' to mean ``an index 
designed to be representative of a particular industry or a group of 
related industries,'' to also accommodate an index having component 
securities that are all headquartered within a single country to be 
listed as a narrow-based index pursuant to Exchange rules. This would 
enable options based on an index, including companies all headquartered 
within a single country, to be rightfully considered as a generic 
narrow-based index for purposes of listing on the Exchange and trading.
    The listing and trading of index options on the Exchange is 
generally conditioned on the ability to meet the rule requirements for 
narrow-based, micro-narrow based and broad based indices.\6\ More 
particularly regarding narrow-based indices, Rule 24.2(b) states that 
the Exchange may trade options on an underlying index pursuant to Rule 
19b-4(e) of the Act \7\ where all of the conditions noted are 
satisfied.\8\ Indeed, the Exchange has, and continues to, list and 
trade options on narrow-based indices based on industries or a group of 
related industries that are located within various countries. These 
options are traded pursuant to the Exchange's index option trading 
rules.\9\
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    \6\ Broad-based (or market) and micro narrow-based indices, 
which are not at issue in this filing, are defined in Rule 
24.1(i)(1) and 24.1(i)(3).
    \7\ The International Securities Exchange and PHLX have the same 
ability pursuant to their own rules.
    \8\ These include the index is capitalization-weighted, price-
weighted, modified capitalization-weighted or equal dollar-weighted, 
and consists of ten or more component securities; each component 
security has a market capitalization of at least $75 million, except 
that for each of the lowest weighted component securities in the 
index that in the aggregate account for no more than 10% of the 
weight of the index; the market capitalization is at least $50 
million; and trading volume of each component security has been at 
least one million shares for each of the last six months, except 
that for each of the lowest weighted component securities in the 
index that in the aggregate account for no more than 10% of the 
weight of the index, trading volume has been at least 500,000 shares 
for each of the last six months. See Rule 24.2(b)(1)-(12) or all of 
the conditions [sic].
    \9\ See Chapter XXIV (index options trading rules). See also 
Chapters I through XIX (general options trading rules).
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    With the Exchange's interpretation of Rule 24.1(i)(2) as discussed 
herein, the Exchange proposes to list and trade options, pursuant to 
Rule 24.2(b), on an index(es) that has component securities, which are 
all headquartered within a single country. The Exchange represents 
that, in all other material aspects, the underlying narrow-based index 
would be required to satisfy all other requirements for generic listing 
and trading pursuant to Rule 24.2(b) and options on such indices would 
be traded pursuant to the Exchange's trading rules.\10\ The proposed 
rule change simply seeks to clarify that the generic listing and 
trading standards would cover an index that otherwise qualifies as a 
``narrow-based index,'' with the exception that the component 
securities of the index are all headquartered within a single country.
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    \10\ See id. The trading rules include, among other things, 
position limits, exercise limits and terms of options contracts 
(Rules 24.4A, 24.5 and 24.9). See also Securities Exchange Act 
Release No. 4052 (July 18, 2000), 65 FR 45805 (July 25, 2000) (SR-
CBOE-00-16) (order approving narrow-based index options position 
limit increase to 18,000, 24,000 and 31,500 contracts).
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    The Exchange represents that its existing surveillance procedures 
applicable to trading in options will be adequate to properly monitor 
the trading in options on these narrow-based indices.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act \11\ and the rules and regulations thereunder and, in 
particular, the requirements of Section 6(b) of the Act.\12\ 
Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \13\ 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 clarifying the term ``narrow-based index'' also 
accommodates an index having component securities that are all 
headquartered within a single country.
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    \11\ 15 U.S.C. 78f(b)(1). [sic]
    \12\ 15 U.S.C. 78f(b).
    \13\ 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.

[[Page 43741]]

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 \14\ and Rule 19b-
4(f)(6) thereunder.\15\ At any time within 60 days of the filing of 
such 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.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). CBOE has satisfied the five 
business-day prefiling requirement.
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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-2009-061 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-2009-061. 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 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 publicly available. All 
submissions should refer to File Number SR-CBOE-2009-061 and should be 
submitted on or before September 17, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-20656 Filed 8-26-09; 8:45 am]

BILLING CODE 8010-01-P