Document ID: SEC-2010-0785-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2010-05-27T04:00Z

[Federal Register: May 27, 2010 (Volume 75, Number 102)]
[Notices]               
[Page 29787]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27my10-94]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62141; File No. SR-CBOE-2010-036]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Granting Accelerated Approval of Proposed Rule 
Change To Permit $1 Strikes for Options on Trust Issued Receipts

May 20, 2010.

I. Introduction

    On April 13, 2010, the 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 permit $1 strikes for options 
on Trust Issued Receipts. The proposed rule change was published for 
comment in the Federal Register on April 23, 2010.\3\ The Commission 
received no comment letters on the proposal. This order approves the 
proposed rule change on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 61935 (April 16, 2010), 
75 FR 21373 (``Notice'').
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II. Description of the Proposal

    CBOE has proposed to amend Rule 5.5, Series of Option Contracts 
Open for Trading, by adding new Interpretation and Policy .17 that 
would allow the Exchange to list options on the Trust Issued Receipts 
(``TIRs''), including HOLding Company Depository ReceiptS (``HOLDRS''), 
as defined under Interpretation and Policy .07 to Rule 5.3, in $1 or 
greater strike price intervals, where the strike price is $200 or less 
and $5 or greater where the strike price is greater than $200 (TIRs and 
HOLDRS are hereafter collectively referred to as TIRs).\4\ The proposed 
strike price intervals for options on TIRs are consistent with the 
strike price intervals currently permitted for options on exchange-
traded funds (``ETFs'').\5\
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    \4\ As more fully explained in the Notice, HOLDRS are a type of 
TIR. Currently, the strike price intervals for options on TIRs are 
as follows: (1) $2.50 or greater where the strike price is $25.00 or 
less; (2) $5.00 or greater where the strike price is greater than 
$25.00; and (3) $10.00 or greater where the strike price is greater 
than $200. See CBOE Rule 5.5.01(c)-(e).
    \5\ See Interpretation and Policy .08 to Rule 5.5. See also 
Securities Exchange Act Release No. 46507 (September 17, 2002), 67 
FR 60266 (September 25, 2002) (permitting list of options on ETFs at 
$1 strike price intervals) (SR-CBOE-2002-54).
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    In support of its proposal, CBOE stated that it believes the 
marketplace and investors will be expecting options on TIRs to trade in 
a similar manner to options on ETFs because TIRs have characteristics 
similar to ETFs.\6\ Accordingly, the Exchange asserts that the 
rationale for permitting $1 strikes for ETF options equally applies to 
permitting $1 strikes for options on TIRs and that investors will be 
better served if $1 strike price intervals are available for options on 
TIRs (where the strike price is less than $200).
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    \6\ See Notice, supra note 3, for CBOE's explanation of how TIRS 
are similar to ETFs.
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    CBOE further stated that it has analyzed its capacity and 
represents that it believes the Exchange and the Options Price 
Reporting Authority have the necessary systems capacity to handle the 
additional traffic associated with the listing and trading of $1 
strikes (where the strike price is less than $200) for options on TIRs.

III. Discussion

    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 exchange.\7\ 
Specifically, the Commission finds that the proposal is consistent with 
Section 6(b)(5) of the Act,\8\ which requires, among other things, that 
the rules of a national securities exchange be designed to promote just 
and equitable principles of trade, 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.
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    \7\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Commission notes that the proposed strike price intervals for 
options on TIRS are consistent with the strike price intervals 
currently permitted for options on ETFs.\9\ Accordingly, the proposal 
should provide consistency and predictability for investors who may 
view these products as serving similar investment functions in the 
marketplace to ETFs and may provide investors with greater flexibility 
in achieving their investment objectives.
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    \9\ See supra note 5.
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    In addition, the Commission notes that CBOE has represented that it 
believes the Exchange and the Options Price Reporting Authority CBOE 
and the Options Price Reporting Authority have the necessary systems 
capacity to handle the additional traffic associated with the listing 
and trading of $1 strikes for options on TIRS.
    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\10\ for approving the proposal prior to the thirtieth day 
after the date of publication of the Notice in the Federal Register. 
The Commission notes that it recently approved similar changes to 
strike price intervals for options on Index-Linked Securities for the 
Exchange.\11\ The Commission also notes that it has not received any 
comments regarding this proposal. The Commission believes that the 
proposed changes to strike price intervals for options on TIRs do not 
raise any novel regulatory issues and accelerating approval of this 
proposal should benefit investors by creating consistency and 
predictability for investors who may view these products as serving 
similar investment functions in the marketplace to ETFs and greater 
flexibility in achieving their investment objectives.
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    \10\ 15 U.S.C. 78s(b)(2).
    \11\ See Securities Exchange Act Release No. 61696 (March 12, 
2010), 75 FR 13174 (March 18, 2010) (SR-CBOE-2010-005).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-CBOE-2010-036) be, and 
hereby is, approved on an accelerated basis.
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    \12\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-12693 Filed 5-26-10; 8:45 am]
BILLING CODE 8010-01-P