Document ID: SEC-2008-1518-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2008-11-06T05:00Z

[Federal Register: November 6, 2008 (Volume 73, Number 216)]
[Notices]               
[Page 66083-66085]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06no08-80]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58887; File No. SR-CBOE-2008-111]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Temporarily Increase the Number of Additional 
Quarterly Option Series in Exchange-Traded Fund Options That May Be 
Listed

October 30, 2008.
    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 October 29, 2008, 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

    The Exchange proposes to amend Rule 5.5(e), Quarterly Option Series 
Pilot Program, to temporarily increase the number of additional 
Quarterly Option Series (``QOS'') in exchange-traded fund (``ETF'') 
options from sixty (60) to one hundred (100) that may be added by the 
Exchange. 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
    The purpose of this proposed rule change is to temporarily increase 
the number of additional QOS in ETF options from sixty (60) to one 
hundred (100) that may be added by the Exchange. To effect this change, 
the Exchange is proposing to add new subparagraph (7) to Rule 5.5(e).
    Because of the current, unprecedented market conditions, the 
Exchange has received requests from market participants to add lower 
priced strikes for QOS in the Energy Select Sector SPDR (``XLE''), the 
DIAMONDS Trust, Series 1 (``DIA'') and the Standard and Poor's 
Depositary Receipts/SPDRs (``SPY''). For example, for December 2008 
expiration, there is demand for strikes (a) ranging from $20 up through 
and including $40 for XLE, (b) ranging from $60 up through and 
including $75 for DIA, and (c) ranging from $74 up through and 
including $85 for SPY. These strikes are much lower than those 
currently listed for which there is open interest.
    However, under current Rule 5.5(e)(4), the Exchange cannot honor 
these requests because the maximum number of additional series, sixty 
(60), has already been listed. The Exchange is therefore seeking to 
temporarily increase the number of additional QOS that may be added to 
one hundred (100). The increase of additional series would be permitted 
immediately for expiration months currently listed and for expiration 
months added throughout the last quarter of 2008, including the new 
expiration month added after December 2008 expiration. The Exchange 
believes that this proposal is reasonable and will allow for more 
efficient risk management. The Exchange believes this proposal will 
facilitate the functioning of the Exchange's market and will not harm 
investors or the public interest.
    The Exchange believes that user demand and the recent downward 
price movements in the underlying ETFs warrants a temporary increase in 
the number of strikes for all QOS in ETF options. Currently, the 
Exchange list QOS in five ETF options: (1) Nasdaq-100 Index Tracking 
Stock (``QQQQ''); (2) iShares Russell 2000 Index Fund (``IWM''); (3) 
DIA; (4) SPY; and (5) XLE. The below chart provides the historical 
closing prices of these ETFs over the past couple of months:

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                 ETF                    10/27/08   10/13/08   10/6/08    9/30/08    8/29/08    7/31/08
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QQQQ.................................      28.69      35.13      34.86      38.91      46.12      45.46
IWM..................................      44.86      56.98      59.72      68.00      73.87      71.32
DIA..................................      80.26      95.03      99.90     108.36     115.45     113.70
SPY..................................      83.95     101.35     104.72     115.99     128.79     126.83

[[Page 66084]]

XLE..................................      40.86      50.55      54.89      63.30      74.65      74.40
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    The additional series will enable the Exchange to list in-demand, 
lower priced strikes.
    It is expected that other options exchanges that have adopted the 
QOS Pilot Program will submit similar proposals.
    The Exchange represents that it has the necessary systems capacity 
to support the new options series that will result from this proposal. 
Further, as proposed, the Exchange notes that these series would 
temporarily become part of the pilot program and will be considered by 
the Commission when the Exchange seeks to renew or make permanent the 
pilot program in the future. In addition, the Exchange states that in 
the event that current market volatility continues, it may seek to 
continue (through a rule filing) the time period during which the 
additional series proposed by this filing may be added.
2. Statutory Basis
    Because the current rule proposal is responsive to the current, 
unprecedented market conditions, is limited in scope as to QOS in ETF 
options and as to time, and because the additional new series can be 
added without presenting capacity problems, the Exchange believes the 
rule proposal is consistent with the Act and the rules and regulations 
under the Act applicable to a national securities exchange and, in 
particular, the requirements of Section 6(b) of the Act.\5\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with the Section 6(b)(5) Act \6\ requirements that the rules 
of an exchange be designed to promote just and equitable principles of 
trade, to prevent fraudulent and manipulative acts and, in general, to 
protect investors and the public interest.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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

    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; or (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, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \7\ and Rule 19b-4(f)(6) 
thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide the Commission 
with written notice of its intent to file the proposed rule change, 
along with a brief description and text of 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 Commission deems this requirement to be met.
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    The Exchange has asked the Commission to waive the operative delay 
to permit the proposed rule change to become operative prior to the 
30th day after filing. The Commission has determined that waiving the 
30-day operative delay of the Exchange's proposal is consistent with 
the protection of investors and the public interest because such waiver 
will enable CBOE to better meet customer demand in light of recent 
increased volatility in the marketplace.\9\ Therefore, the Commission 
designates the proposal operative upon filing.
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    \9\ For purposes only of waiving the 30-day operative delay, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
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    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.

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 No. SR-CBOE-2008-111 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2008-111. 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 available publicly. All 
submissions should refer to File No. SR-CBOE-2008-111 and should be 
submitted on or before November 28, 2008.

[[Page 66085]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-26443 Filed 11-5-08; 8:45 am]

BILLING CODE 8011-01-P