Document ID: SEC-2015-1539-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2015-09-18T04:00Z

[Federal Register Volume 80, Number 181 (Friday, September 18, 2015)]
[Notices]
[Pages 56522-56525]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-23395]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75914; File No. SR-CBOE-2015-079]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To List Two Additional Products During Extended 
Trading Hours

September 14, 2015.
    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 September 10, 2015, Chicago Board Options Exchange, 
Incorporated (the ``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 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.
---------------------------------------------------------------------------

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

    The Exchange proposes to list two additional products during 
extended trading hours (``ETH''). The text of the proposed rule change 
is provided below.

(additions are italicized; deletions are [bracketed])
* * * * *

Chicago Board Options Exchange, Incorporated

Rules

* * * * *

Rule 6.1A. Extended Trading Hours

    (a)-(b) No change.
    (c) Eligibility. The Exchange may designate as eligible for 
trading during Extended Trading Hours any exclusively listed index 
option designated for trading under Rules 24.2 and 24.9. The 
following options are approved for trading on the Exchange during 
Extended Trading Hours:
    (i) Standard & Poor's 500 Stock Index (SPX)
    (ii) CBOE Volatility Index[supreg] (VIX[supreg])
    (iii) Standard & Poor's 500 Stock Index (P.M.-Settled) (SPXPM)
    (iv) Mini-SPX Index (XSP)
    Any series in these classes that are expected to be open for 
trading during Regular Trading Hours will be open for trading during 
Extended Trading Hours on that same trading day (subject to Rules 
6.2B and 24.13, Interpretation and Policy .03). FLEX options 
(pursuant to Chapters XXIVA and XXIVB) will not be eligible for 
trading during Extended Trading Hours.
    (d) No change.
    (e) Market-Makers.
    (i) Appointments. A Market-Maker's appointment to a class during 
Regular Trading Hours does not apply during Extended Trading Hours. 
Market-Makers may request appointments for Extended Trading Hours in 
accordance with Rule 8.3 and this subparagraph (i). Notwithstanding 
Rule 8.3(c), a Market-Maker can create a Virtual Trading Crowd 
(``VTC'') appointment, which confers the right to quote 
electronically during Extended Trading Hours in the appropriate 
number of classes selected from the Extended Trading Hours tier and 
related appointment costs as follows:

------------------------------------------------------------------------
                                                             Appointment
               Tier                         Classes              cost
------------------------------------------------------------------------
Extended Trading Hours...........   Options on the        [.5].4
                                    CBOE Volatility Index
                                    (VIX).
                                    Options on the        [.5].4
                                    Standard & Poor's 500
                                    (SPX).
                                    Options on the            .1
                                    Standard & Poor's 500
                                    Stock Index (P.M.-
                                    Settled) (SPXPM).
                                    Options on the            .1
                                    Mini-SPX Index (XSP).
------------------------------------------------------------------------

[[Page 56523]]

    Each Extended Trading Hours Trading Permit held by a Market-
Maker has an appointment credit of 1.0. A Market-Maker may select 
for each Extended Trading Hours Trading Permit the Market-Maker 
holds any combination of Extended Trading Hours classes, whose 
aggregate appointment cost does not exceed 1.0.
    (ii)-(iv) No change.
    (f)-(k) No change.
* * * * *

    The text of the proposed rule change is also 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 
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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    In March 2015, the Exchange launched Extended Trading Hours 
(``ETH'') for options on the S&P 500 Index (``SPX'') and CBOE 
Volatility Index[supreg] (``VIX''), two of the Exchange's exclusively 
listed options,\3\ as alternatives for hedging and other investment 
purposes, particularly as a complementary investment tool to VIX 
futures.\4\ Rule 6.1A(c) provides that the Exchange may designate as 
eligible for trading during ETH any exclusively listed index option 
designated for trading under Rules 24.2 and 24.9. In response to 
customer demand for additional options to trade during ETH for similar 
purposes, the Exchange has designated Mini-SPX Index Options (``XSP'') 
and p.m.-settled options on the Standard & Poor's 500 Stock Index 
(``SPXpm'') to be eligible for trading during ETH. The proposed rule 
change amends Rule 6.1A(c) to add these two products to the list of 
products the Exchange has approved for trading on the Exchange during 
ETH. CBOE currently lists XSP and SPXpm options during Regular Trading 
Hours (``RTH''); the proposed rule change merely extends the hours 
during which these options will trade on the Exchange. The Exchange 
notes that the S&P 500 Stock Index underlies both of these options, as 
it does for SPX options, which currently trade during ETH. During ETH, 
XSP and SPXpm options would trade in accordance with Rule 6.1A as VIX 
and SPX options currently do.\5\ The proposed rule change makes no 
changes to the trading rules applicable to ETH.
---------------------------------------------------------------------------

    \3\ An ``exclusively listed option'' is an option that trades 
exclusively on an exchange because the exchange has an exclusive 
license to list and trade the option or has the proprietary rights 
in the interest underlying the option. An exclusively listed option 
is different than a ``singly listed option,'' which is an option 
that is not an ``exclusively listed option'' but that is listed by 
one exchange and not by any other national securities exchange.
    \4\ See Securities Exchange Act Release No. 34-73704 (November 
28, 2014), 79 FR 72044 (December 4, 2014) (SR-CBOE-2014-062) (order 
granting accelerated approval of proposed rule change to adopt 
Extended Trading Hours for SPX and VIX).
    \5\ Rule 6.1A(a) states that all CBOE Rules apply to trading 
during ETH except as set forth in Rule 6.1A and for Rules that by 
their terms are inapplicable during ETH or where the context 
otherwise requires.
---------------------------------------------------------------------------

    The Exchange lists SPXpm options and p.m.-settled XSP options 
pursuant to a pilot program.\6\ Pursuant to the pilot program, CBOE 
submits annual reports to the Commission that contain analyses of 
volume, open interest and trading patterns, as well as interim reports 
that contain some of the information that is included in the annual 
reports. The Exchange will include in those annual and interim reports 
the applicable information regarding SPXpm and p.m.-settled XSP options 
that trade during ETH.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 34-73338 (October 
10, 2014), 79 FR 62502 (October 17, 2014) (SR-CBOE-2014-076) (notice 
of filing and immediate effectiveness of extension of pilot program 
to May 3, 2016).
---------------------------------------------------------------------------

    The Exchange also proposes to amend Rule 6.1A(e)(i) to change the 
current appointment cost for each of SPX and VIX from .5 to .4 and add 
an appointment cost of .1 for each of XSP and SPXpm. The Exchange 
believes these appointment costs are consistent with an analysis of 
various factors based on which the Exchange determines appointment 
costs, including competitive forces and trading volume. Because each 
ETH Trading Permit has an appointment credit of 1.0, a Market-Maker 
will continue to need to hold only one ETH Trading Permit if it wants 
to quote in all four products approved for trading during ETH.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\7\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \8\ 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, 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) \9\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ Id.
---------------------------------------------------------------------------

    In particular, the Exchange believes the proposed rule change will 
further improve the Exchange's marketplace for the benefit of 
investors. The listing of two additional products for trading during 
ETH will provide more hedging and other investment opportunities within 
the options trading industry that is consistent with the continued 
globalization of the securities markets. The proposed rule change also 
allows the Exchange to more effectively compete with exchanges located 
outside of the United States. The Exchange proposes to make two more 
products available during ETH in response to demand by investors to 
have access to these products outside of RTH. During ETH, XSP and SPXpm 
options would trade in accordance with Rule 6.1A as VIX and SPX options 
currently do. The proposed rule change makes no changes to the trading 
rules applicable to ETH; it merely approves for trading during ETH two 
products that already trade on the Exchange during RTH. Additionally, 
the S&P 500 index underlies both of these options, as it does for SPX 
options, which are currently approved for trading during ETH.
    The Exchange believes the appointment costs for the four classes 
approved for trading during ETH are appropriate given various factors 
considered by the Exchange, including competitive forces and trading 
volume.

[[Page 56524]]

The Exchange believes that allowing ETH Market-Makers to trade all four 
available products during ETH while holding only one ETH Trading Permit 
may encourage Trading Permit Holders to become ETH Market-Makers, as 
they can quote in more classes for the same cost. Additionally, current 
ETH Market-Makers can obtain appointments in these two additional 
classes without having to obtain an additional ETH Trading Permit. This 
may increase liquidity and result in more competitive pricing in these 
products during ETH, which will promote just and equitable principles 
of trade and ultimately benefit investors. The proposed rule change 
does not result in unfair discrimination, as the appointment costs for 
these products during ETH will apply to all ETH Market-Makers.

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. If CBOE lists XSP and SPXpm 
options for trading during ETH, all ETH Trading Permit Holders may 
trade these options during ETH. Additionally, non-ETH Trading Permit 
Holders may trade these options during ETH through a broker that is an 
ETH Trading Permit Holder. The proposed rule change is merely extending 
the trading hours of two products that currently trade on CBOE. The 
appointment costs for the four products approved for trading during ETH 
will apply to all ETH Market-Makers. Additionally, ETH Market-Makers 
will not need to obtain additional ETH Trading Permits to have 
appointments in the two additional products.
    CBOE does not believe the proposed rule change will detriment 
market participants on other exchanges, as it relates to options listed 
solely on CBOE and to trading hours during which no other U.S. options 
exchange is currently open for trading. Market participants on other 
exchanges are welcome to become ETH Trading Permit Holders, or engage a 
broker that is an ETH Trading Permit Holder, and trade at CBOE if they 
determine that this proposed rule change has made CBOE more attractive 
or favorable.
    CBOE believes that the proposed rule change will relieve any burden 
on, or otherwise promote, competition. As discussed above, listing two 
additional products for trading during ETH will provide more hedging 
and other investment opportunities within the options trading industry. 
The Exchange also believes the proposed rule change could increase its 
competitive position outside of the United States by providing 
investors with an additional investment vehicles with respect to their 
global trading strategies during times that correspond with RTH outside 
of the United States. The Exchange proposes to make two more products 
available during ETH in response to demand by investors to have access 
to these products outside of RTH. Additionally, the Exchange believes 
the appointment costs for the four products available for trading 
during ETH, which allow ETH Market-Makers to have appointments in all 
four products with only one ETH Trading Permit, may increase liquidity 
and enhance competition in those products during those hours.

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

    Because the foregoing proposed rule change 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, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\10\ and Rule 19b-4(f)(6) thereunder.\11\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give 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 Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange requests that the Commission waive 
the 30-day operative delay to allow the proposed rule change to become 
effective immediately. In its proposal, the Exchange stated that its 
proposal does not raise any new or unique issues, and only makes 
available for trading during ETH two additional exclusively-listed 
products that the Exchange currently lists and trades during RTH. In 
addition, the Exchange stated that the proposed changes to the 
appointment costs for these products is intended to allow Market-Makers 
to have appointments in all four ETH products without having to obtain 
an additional ETH Trading Permit. The Commission believes that waiving 
the 30-day operative delay is consistent with the protection of 
investors and the public interest.\12\ Among other things, the proposed 
rule change makes no changes to the trading rules applicable to ETH, 
and the Exchange states that XSP and SPXpm will trade during ETH in the 
same manner as VIX and SPX currently do during ETH. The Commission 
notes that the Exchange will include in its annual and interim reports 
to the Commission the applicable information regarding SPXpm and p.m.-
settled XSP options that trade during ETH. Because the proposed rule 
change involves two exclusively-listed products that already trade 
during RTH, does not alter the trading rules applicable to ETH, and 
does not raise any novel or unique regulatory issues, the Commission 
designates the proposed rule change as operative upon filing.
---------------------------------------------------------------------------

    \12\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the 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.

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-2015-079 on the subject line.

[[Page 56525]]

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-2015-079. 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 
10:00 a.m. and 3:00 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-2015-079 and should be 
submitted on or before October 9, 2015.

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

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

Brent J. Fields,
Secretary.
[FR Doc. 2015-23395 Filed 9-17-15; 8:45 am]
BILLING CODE 8011-01-P