Document ID: SEC-2013-1806-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2013-10-22T04:00Z

[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62858-62860]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24676]

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

SECURITIES AND EXCHANGE COMMISSION

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of a Proposed Rule Change and Amendment 
No. 1 Thereto Relating to the Short Term Option Series Program

[Release No. 34-70685; File No. SR-CBOE-2013-096]

October 15, 2013. Pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4

[[Page 62859]]

thereunder,\2\ notice is hereby given that on October 2, 2013, Chicago 
Board Options Exchange, Incorporated (``CBOE'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I and II, below, which 
Items have been prepared by the Exchange. On October 15, 2013, the 
Exchange filed Amendment No. 1 to the proposal.\3\ The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as modified by Amendment No. 1 thereto, from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange proposed to delete the 
phrase ``for each series'' in the proposed rule text for Rule 5.5(d) 
located on page three of the 19b-4 and page 19 of the Exhibit 5 of 
the original filing and in the proposed rule text for Rule 
24.9(a)(2)(A) located on page four of the 19b-4 and page 20 of the 
Exhibit 5 of the original filing.
---------------------------------------------------------------------------

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

    The Exchange is proposing to amend Exchange Rules 5.5(d) and 
24.9(a)(2)(A) to allow the Exchange to list five Short Term Option 
Series at one time and to specify that new series of Short Term Option 
Series may be listed up to, and including on, the expiration date. The 
text of the proposed rule change is available on the Exchange's Web 
site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at 
the Exchange's Office of the Secretary, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and the 
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 these 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 aspects of such 
statements.

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

1. Purpose
    The Exchange is proposing to amend Exchange Rules 5.5(d) and 
24.9(a)(2)(A). Currently the Exchange's Rules allow for the Exchange to 
list options in the Short Term Option Series Program (``Weeklys 
Program'' or ``Weekly option'') ``on each of the next five consecutive 
Fridays that are business days.'' \4\ The filing which gave the 
Exchange authority to list five Weekly option expirations specifically 
states that ``the total number of consecutive expirations will be five 
(5), including any existing monthly or quarterly expirations'' for the 
Weeklys Program.\5\ The Exchange is now proposing to make explicit that 
the next five Weekly options may listed at one time, not including the 
monthly or quarterly options. The Exchange is also proposing to codify 
an existing practice by adding language stating that strikes may be 
listed up until and on the day of expiration.
---------------------------------------------------------------------------

    \4\ See Exchange Rules 5.5(d) and 24.9(a)(2)(A).
    \5\ See Securities Exchange Act Release No. 68242 (November 15, 
2012), 77 FR 69908 (November 21, 2012) (notice of SR-CBOE-2012-110 
which was a rule filing based on based on an approved filings 
submitted by NYSE Arca, Inc. (``NYSE Arca'') and NYSE MKT, LLC 
(``NYSE MKT'')).
---------------------------------------------------------------------------

    As proposed, the Exchange will have the ability to list a total of 
five Weeklys and that count of five would not include monthly or 
quarterly option expirations. The Exchange notes that this proposal 
would restrict the five listed Weeklys to those closest to the Short 
Term Option Opening Date. For example, if a class of options has five 
Weeklys listed with expiration dates in July, the other two listed 
expiration dates may not be in December. The Exchange believes that 
allowing otherwise would undermine the purpose of the Short Term Option 
Program.
    As examples of how this would work in practice, consider a 
situation in which a quarterly option expires week 1 and a monthly 
option expire week 3 from now, the proposal would allow the following 
expirations: week 1 quarterly option, week 2 Weekly option, week 3 
monthly option, week 4 Weekly option, week 5 Weekly option, week 6 
Weekly option, and week 7 Weekly option.\6\ As another example, if a 
quarterly option expires week 3 and a monthly option expires week 5, 
the following expirations would be allowed: week 1 Weekly option, week 
2 Weekly option, week 3 quarterly option, week 4 Weekly option, week 5 
monthly option, week 6 Weekly option, week 7 Weekly option.\7\
---------------------------------------------------------------------------

    \6\ The proposal would not allow, for example, for nothing to be 
listed week 7 but week 8 a Weekly option.
    \7\ Id.
---------------------------------------------------------------------------

    Next, the Exchange is proposing to add language to Rules 5.5(d) and 
24.9(a)(2)(A) to state that additional series of Weekly options may be 
added up to, and including on, the expiration date of the series.\8\ 
Currently, Exchange rules state that the Exchange ``may open up to 20 
initial series for each option class that participates in the Short 
Term Option Series Program'' and ``up to 10 additional series for each 
option class that participates in the Short Term Option Series 
Program'' however the Exchange's rules are silent on when series may be 
added.\9\ In practice, however, the Exchange, along with the other 
exchanges, list additional series until the expiration day.\10\ The 
Exchange believes that codifying this provision will clearly state 
authority which is not currently explicitly stated to add series up 
until the day of expiration which is in the current rules. In addition, 
given the short lifespan of Weeklys, the Exchange believes that the 
ability to list new series of options intraday is appropriate.
---------------------------------------------------------------------------

    \8\ The Exchange is also proposing to add language stating that 
the proposed provisions in Rules 5.5(d)(4) and 24.9(a)(2)(A)(iv) 
will not contradict current provisions in CBOE Rules. More 
specifically, the proposed provisions would not contradict 5.5.04 
and 24.9.01(c) respectively. The Exchange believes this addition 
will eliminate any confusion about when additional series may be 
added in the Weeklys Program in comparison to other Exchange listing 
programs.
    \9\ See Exchange Rules 5.5(d)(3), 5.5.(d)(4), 
24.9(a)(2)(A)(iii), and 24.9(a)(2)(A)(iv).
    \10\ The Exchange notes that the Options Clearing Corporation 
(``OCC'') has the ability to accommodate series in the Weeklys 
Program added intraday.
---------------------------------------------------------------------------

    The Exchange notes that the Weeklys Program has been very well-
received by market participants, in particular by retail investors. The 
Exchange believes that the current proposed revision to the Weeklys 
Program will permit the Exchange to meet increased customer demand and 
provide market participants with the ability to hedge in a greater 
number of option classes and series. In addition, the proposed changes 
will codify an existing practice in the Exchange's rules.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\11\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \12\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling,

[[Page 62860]]

processing information with respect to, and facilitating transactions 
in securities, 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. Additionally, the Exchange 
believes the proposed rule change is consistent with the Section 
6(b)(5) \13\ requirement that the rules of an exchange not be designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ Id.
---------------------------------------------------------------------------

    In particular, the Exchange believes that expanding the Weeklys 
Program will result in a continuing benefit to investors by giving them 
more flexibility to closely tailor their investment decisions and 
hedging decisions in a greater number of securities. The Exchange also 
believes that expanding the Weeklys Program will provide the investing 
public and other market participants with additional opportunities to 
hedge their investment thus allowing these investors to better manage 
their risk exposure.
    With regard to the impact of this proposal on system capacity, the 
Exchange has analyzed its capacity and represents that it and the 
Options Price Reporting Authority (``OPRA'') have the necessary systems 
capacity to handle any potential additional traffic associated with 
this current amendment to the Weeklys Program. The Exchange believes 
that its TPHs will not have a capacity issue as a result of this 
proposal. The Exchange also represents that it does not believe this 
expansion will cause fragmentation to liquidity.

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. The Exchange believes this 
proposed rule change will benefit investors by providing additional 
methods to trade options on the liquid securities, and providing 
greater ability to mitigate risk in managing large portfolios. 
Specifically, the Exchange believes that investors would benefit from 
the introduction and availability of additional series by more series 
available as an investing tool. The Exchange also believes the proposed 
changes will provide investors with an additional tool for hedging risk 
in highly liquid securities. For all the reasons stated, the Exchange 
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, and believes the proposed change will enhance 
competition.

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 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission shall: (a) By order approve 
or disapprove such proposed rule change, or (b) institute proceedings 
to determine whether the proposed rule change should be disapproved.

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-2013-096 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-2013-096. 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 on 
official business days between the hours of 10:00 a.m. and 3:00 p.m. 
Copies of such filing also will be available for inspection and copying 
at the principal offices 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-2013-096, and should be submitted 
on or before November 12, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24676 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P