Document ID: SEC-2009-0172-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2009-02-06T05:00Z

[Federal Register: February 6, 2009 (Volume 74, Number 24)]
[Notices]               
[Page 6332-6333]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06fe09-90]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59336; File No. SR-CBOE-2008-127]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Approving Proposal To Eliminate the $3 Underlying 
Price Requirement for Continued Listing and Listing of Additional 
Series

February 2, 2009.
    On December 18, 2008, the Chicago Board Options Exchange, 
Incorporated (``Exchange'' or ``CBOE'') 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 eliminate the $3 underlying 
price requirement for continued listing and for the listing of 
additional series. The proposed rule change was published for comment 
in the Federal Register on January 2, 2009.\3\ The Commission received 
one comment letter on the proposed rule change.\4\ This order approves 
the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(l).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 59152 (December 23, 
2008), 74 FR 149 (January 2, 2009) (``Notice'').
    \4\ See letter to Florence E. Harmon, Acting Secretary, 
Commission, from Janet M. Kissane, Senior Vice President--Legal and 
Corporate Secretary, Office of the General Counsel, NYSE Euronext 
dated January 9, 2009 (``NYSE Euronext Letter'').
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    The proposed rule change amends CBOE Rule 5.4.01 to eliminate the 
$3 market price per share requirement from the Exchange's requirements 
for continued approval for an underlying security and amends CBOE Rule 
5.4.02 to eliminate the prohibition against listing additional series 
of options on an underlying security at any time when the price per 
share of such underlying security is less than $3.
    The Exchange believes that the $3 market price per share 
requirement is no longer necessary or appropriate, and states that only 
those underlying securities meeting the remaining maintenance listing 
criteria set forth in Rule 5.4.01 will be eligible for

[[Page 6333]]

continued listing and the listing of additional option series. The 
Exchange believes that the current $3 market price per share 
requirement could have a negative effect on investors. For example, in 
the current volatile market environment, the Exchange is currently 
unable to list new series on underlying securities trading below $3. If 
there is market demand for series below $3, the Exchange would be 
unable to accommodate such requests and investors would be unable to 
hedge their positions with options series with strikes below $3.
    After carefully reviewing the proposed rule change, the Commission 
finds that the proposal is consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to a national 
securities exchange.\5\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\6\ 
which, among other things, requires that the rules of a national 
securities exchange be designed to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating 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.
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    \5\ 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).
    \6\ 15 U.S.C. 78f(b)(5).
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    CBOE's rules provide that a security underlying an option will not 
be deemed to meet the requirements for continued approval if the 
underlying security ceases to be an NMS stock.\7\ CBOE's rules also 
include other minimum standards for continued approval, including 
requirements related to the minimum number of outstanding shares, 
number of holders, and trading volume of the underlying security.\8\ 
The Commission believes that securities underlying options traded on 
CBOE will remain subject to adequate minimum standards for continued 
approval, which should help to ensure that only options on liquid 
underlying securities are permitted to trade on CBOE. The Commission 
also notes that the NYSE Euronext letter generally supports the 
proposal.\9\ Accordingly, the Commission believes that CBOE's proposed 
rule change is consistent with the Act.
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    \7\ See CBOE Rule 5.4.01(f). Rule 600 of Regulation NMS defines 
an NMS security as ``any security or class of securities for which 
transaction reports are collected, processed, and made available 
pursuant to an effective transaction reporting plan, or an effective 
national market system plan for reporting transactions in listed 
options,'' and an NMS stock as ``any NMS security other than an 
option.''
    \8\ See CBOE Rule 5.4.01(a)-(c).
    \9\ See NYSE Euronext Letter, supra note 4.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-CBOE-2008-127), be, and 
hereby is, approved.
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    \10\ 15 U.S.C. 78s(b)(2).
    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-2481 Filed 2-5-09; 8:45 am]

BILLING CODE 8011-01-P