Document ID: SEC-2011-1692-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2011-11-03T04:00Z

[Federal Register Volume 76, Number 213 (Thursday, November 3, 2011)]
[Notices]
[Pages 68239-68240]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-28513]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65659; File No. SR-CBOE-2011-098]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Related to FLEX Options

October 31, 2011.
    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 October 17, 2011, 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, II, and III below, which Items have been prepared 
by the Exchange. The Exchange has designated the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 19(b)(3)(A) 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend certain rules pertaining to 
Flexible Exchange Options (``FLEX Options''). The text of the proposed 
rule change 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 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 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
    FLEX Options provide investors with the ability to customize basic 
option features including size, expiration date, exercise style, and 
certain exercise prices (referred to as ``variable terms'').\5\ For 
example, FLEX Options can have an expiration date that is any business 
day (specified as to day, month and year) with a maximum term of 
fifteen years.\6\ The rules governing the trading of FLEX Options on 
the FLEX Request for Quote (``RFQ'') System platform are generally 
contained in Chapter XXIVA. The rules governing the trading of FLEX 
Options on the FLEX Hybrid Trading System platform are generally 
contained in Chapter XXIVB. Within each Chapter, the provisions 
pertaining to the variable terms of FLEX Options are generally 
contained in Rules 24A.4 and 24B.4.
---------------------------------------------------------------------------

    \5\ FLEX Options can be FLEX Index Options or FLEX Equity 
Options. In addition, other products are permitted to be traded 
pursuant to the FLEX trading procedures. For example, credit options 
are eligible for trading as FLEX Options pursuant to the FLEX rules 
in Chapters XXIVA and XXIVB. See CBOE Rules 24A.1(e) and (f), 
24A.4(b)(1) and (c)(1), 24B.1(f) and (g), 24B.4(b)(1) and (c)(1), 
and 28.17.
    \6\ See Rule 24A.4(a)(2)(iv) and (a)(4)(i), and Rule 
24B.4(a)(2)(iv) and (a)(5)(i).
---------------------------------------------------------------------------

    The purpose of this proposed rule change is to reorganize and amend 
certain Exchange Rules pertaining to FLEX Options to provide within 
Chapters XXIVA and XXIVB that a new series of FLEX Options may be 
established on any business day prior to the expiration date. The 
adding of new FLEX Equity Options series on any business day prior to 
the expiration date is already addressed in Rule 5.5 of Chapter V of 
the Exchange Rules.\7\ In an effort to make reading and understanding 
the FLEX Option provisions easier, the Exchange is proposing to move 
this new series add provision from Rule 5.5 of Chapter V to Rules 24A.4 
and 24B.4 of Chapters XXIVA and XXIVB, respectively. In addition, the 
Exchange is proposing to apply the provision to all FLEX Options (not 
just FLEX Equity Options).\8\ Previously the rules did not clearly 
address the applicability of any such provision to other FLEX Options. 
However, it has been the Exchange's practice to permit other FLEX 
Options to be listed any business day prior to the expiration date.
---------------------------------------------------------------------------

    \7\ Rule 5.5 generally sets forth provisions pertaining to 
series of options that may be open for trading on the Exchange and 
generally pertains to option contracts that are not FLEX Options. 
However, Rule 5.5.04 currently provides as follows: ``New series of 
options on an individual stock may be added until the beginning of 
the month in which the option contract will expire. Due to unusual 
market conditions, the Exchange, in its discretion, may add new 
series of options on an individual stock until five business days 
prior to expiration. Notwithstanding the foregoing, a new series of 
FLEX Equity Options, as defined in and subject to the provisions of 
Chapter XXIVA or XXIVB of the Rules, may be added on any business 
day prior to the expiration date.''
    \8\ Specifically, the Exchange is proposing to delete the 
following sentence from Rule 5.5.04: ``Notwithstanding the 
foregoing, a new series of FLEX Equity Options, as defined in and 
subject to the provisions of Chapter XXIVA or XXIVB of the Rules, 
may be added on any business day prior to the expiration date.'' 
And, the Exchange is proposing to add the following sentence to both 
Rule 24A.4(a)(1) and 24B.4(a)(1): ``A new series of FLEX Options may 
be established on any business day prior to the expiration date as 
provided for in this Rule [24A.4 or 24B.4, as applicable].''
---------------------------------------------------------------------------

    The Exchange believes that reorganizing and amending the rules in 
the manner proposed should make it easier to read and understand the 
FLEX Options provisions. The Exchange also believes that it should 
provide additional clarity and avoid any confusion on the applicability 
of the new series add provision to any and all FLEX Options in a manner 
that is consistent with the existing provision for FLEX Equity Options.

[[Page 68240]]

2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the Act 
\9\ in general and furthers the objectives of Section 6(b)(5) of the 
Act \10\ in particular in that it should promote just and equitable 
principles of trade, serve to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and 
protect investors and the public interest. In particular, the Exchange 
believes that reorganizing and amending the rules in the manner 
proposed should make it easier to read and understand the FLEX Options 
provisions. The Exchange also believes that it should provide 
additional clarity and avoid any confusion on the applicability of the 
new series add provision to any and all FLEX Options in a manner that 
is consistent with the existing provision for FLEX Equity Options.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 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

    Because the foregoing 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 \11\ and Rule 19b-4(f)(6) 
thereunder.\12\ At any time within 60 days of the filing of such 
proposed rule change, the Commission summarily may temporarily suspend 
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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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 email to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2011-098 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-2011-098. This file 
number should be included on the subject line if email 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 Web site viewing and 
printing 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-2011-098 and should be 
submitted on or before November 25, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-28513 Filed 11-2-11; 8:45 am]
BILLING CODE 8011-01-P