Document ID: SEC-2009-1630-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposal To Permit $1 Strikes for RMN Options
Posted Date: 2009-11-18T05:00Z

[Federal Register: November 18, 2009 (Volume 74, Number 221)]
[Notices]               
[Page 59592-59594]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18no09-101]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60977; File No. SR-CBOE-2009-086]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposal 
To Permit $1 Strikes for RMN Options

November 10, 2009.
    Pursuant to Section 19(b)(1)\1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on November 6, 2009, the Chicago Board Options Exchange, 
Incorporated (``Exchange'' or ``CBOE'') 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. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \4\ and Rule 19b-4(f)(6) thereunder.\5\ 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \5\ 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

    CBOE proposes to amend certain of its rules to allow the Exchange 
to list options on the Mini-Russell 2000 Index (``RMN'' or ``Mini-
RUT''), which is based on 1/10th the value of the Russell 2000 Index, 
at $1 strike intervals. The text of the rule proposal 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 self-regulatory organization 
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
    This proposed rule change is based on a filing previously submitted 
by NASDAQ OMX PHLX, Inc. (``Phlx'') that was recently approved by the 
Commission.\6\
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    \6\ See Exchange Act Release No. 60840 (October 20, 2009), 74 FR 
55593 (October 28, 2009) (SR-Phlx-2009-77) (order approving proposal 
to permit the listing of certain option series at $1 and $2.50 
strike price intervals for strike prices below $200). CBOE's current 
filing is solely concerned with $1 strike intervals for Mini-RUT 
options, which was the only multiply-listed option class addressed 
in SR-Phlx-2009-77.
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    The purpose of the proposed rule change is to amend Rule 24.9, 
Terms of Index Option Contracts, by adding a new interpretation that 
would allow the Exchange to list options on the RMN, which is based on 
1/10th the value of the Russell 2000 Index, at $1 or greater strike 
price intervals, if the strike price is less than $200.\7\
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    \7\ Currently, under Interpretation and Policy .01(a)(xlix) to 
Rule 24.9, the Exchange has authority to list Mini-RUT options at 
$2.50 strike price intervals, if the strike price is less than $200.
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    Strike price intervals for index options are set forth in Rules 5.5 
and 24.9 at three levels: (1) Not less than $5.00 generally, (2) not 
less than $2.50 for index classes specifically listed in Rule 
24.9.01(a), and (3) not less than $1 for certain other index classes 
set forth in Rule 24.9.01 (e.g., 24.9.01(b) provides for $0.50 strike 
price intervals for options based on one-one hundredth the value of the 
DJIA, 24.9.01(h) provides for $1 strike price intervals for Mini-Nasdaq 
100 Index (``MNX'' or ``Mini-NDX'') options).
    The Exchange now proposes that the minimum strike price interval 
for RMN options will be $1 or greater, if the strike price is less than 
$200. The Exchange believes that $1 strike price intervals in this 
option series will provide investors with greater flexibility by 
allowing them to establish positions that are better tailored to meet 
their investment objectives.
    For initial series, the Exchange would list at least two strike 
prices above and two strike prices below the current value of the RMN 
at or about the time a series is opened for trading on the Exchange. As 
part of this initial listing, the Exchange would list strike prices 
that are within 5 points from the closing value of the RMN on the 
preceding day.
    As for additional series, the Exchange would be permitted to add 
additional series when the Exchange deems it necessary to maintain an 
orderly market, to meet customer demand or when the underlying RMN 
moves substantially from the initial exercise price or prices. To the 
extent that any additional strike prices are listed by the Exchange, 
such additional strike prices shall be within thirty percent (30%) 
above or below the closing value of the RMN. The Exchange would also be 
permitted to open additional strike prices that are more than 30% above 
or below the current RMN value provided that demonstrated customer 
interest exists for such series, as expressed by institutional, 
corporate or individual customers or their brokers. Market-Makers 
trading for their own account would not be considered when determining 
customer interest. In addition to the initial listed series, the 
Exchange may list up to sixty (60) additional series per expiration 
month for each series in Mini-RUT options. However, $1 strike price 
intervals may be listed on Mini-RUT options only where the strike price 
is below $200. In addition, the Exchange proposes that it shall not 
list LEAPS on Mini-RUT options at intervals less than $2.50.
    The Exchange is also proposing to set forth a delisting policy with 
respect to Mini-RUT options. Specifically, the Exchange would, on a 
monthly basis, review series that are outside a range of five (5) 
strikes above and five (5) strikes

[[Page 59593]]

below the current value of the RMN and delist series with no open 
interest in both the put and the call series having a: (i) Strike 
higher than the highest strike price with open interest in the put and/
or call series for a given expiration month; and (ii) strike lower than 
the lowest strike price with open interest in the put and/or call 
series for a given expiration month.
    Notwithstanding the proposed delisting policy, customer requests to 
add strikes and/or maintain strikes in Mini-RUT options in series 
eligible for delisting shall be granted.
    Further, in connection with the proposed delisting policy, if the 
Exchange identifies series for delisting, the Exchange shall notify 
other options exchanges with similar delisting policies regarding 
eligible series for listing, and shall work with such other exchanges 
to develop a uniform list of series to be delisted, so as to ensure 
uniform series delisting of multiply listed Mini-RUT options.
    It is expected that the proposed delisting policy for Mini-RUT 
options will be adopted by other options exchanges that list and trade 
Mini-RUT options.
    The Exchange also proposes to add new Interpretation and Policy .16 
to Rule 5.5, Series of Option Contracts Open for Trading, which would 
be an internal cross reference stating that the intervals between 
strike prices for Mini-RUT option series would be determined in 
accordance with proposed new Interpretation and Policy .01(k) to Rule 
24.9.
Technical Changes
    The Exchange is proposing to make some lettering and numbering 
changes to the Interpretations and Policies to Rules 5.5 and 24.9, 
which are being amended substantively by this filing. Specifically, the 
Exchange is proposing to re-number existing Interpretation and Policy 
.13 to Rule 5.5 as new Interpretation and Policy .15. The Exchange is 
proposing to make this change because the Exchange has two pending 
filings that have been formally submitted which overlap with the 
existing and proposed numbering to Rule 5.5.\8\ Similarly, the Exchange 
is proposing to re-letter existing Interpretation and Policy .01(h) to 
Rule 24.9 as new Interpretations and Policy .01(j). The Exchange is 
proposing to make this change because the previously referenced pending 
filings also overlap with the existing and proposed lettering to Rule 
24.9.01.
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    \8\ See SR-CBOE-2009-022 (proposal to list and trade S&P 500 
Dividend Index options and proposing to add new paragraph .13 to 
Rule 5.5 and new paragraph (h) to Rule 24.9.01 for S&P 500 Dividend 
Index options), and SR-CBOE-2009-080 (proposal to list and trade 
options on Equity-Based Volatility Index options and proposing to 
add new paragraph .14 to Rule 5.5 and new paragraph (i) to Rule 
24.9.01 for Equity-Based Volatility Index options).
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    Finally, the Exchange is proposing to reduce the minimum strike 
price intervals for LEAPS on Mini-NDX options from $5 to $2.50 in order 
to conform CBOE's listing ability with Phlx's.\9\
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    \9\ See Commentary .02(c) to Phlx Rule 1101A, Terms of Option 
Contracts, providing that LEAPS on Mini-NDX options shall be listed 
at intervals not less then $2.50.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'')\10\ and the rules and 
regulations thereunder 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 promote just and equitable 
principles of trade, to prevent fraudulent and manipulative acts, to 
remove impediments to and to perfect the mechanism for a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest by allowing the Exchange to list 
Mini-RUT options at $1 strike price intervals.
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    \10\ 15 U.S.C. 78s(b)(1).
    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    Because the foregoing proposed rule change: (i) Does not 
significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) by its terms, does not 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, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the self-regulatory organization to submit to the 
Commission 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 Exchange has satisfied this requirement.
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    The Exchange has requested that the Commission waive the 30-day 
operative delay and designate the proposed rule change immediately 
operative, so that the Exchange may, for competitive reasons, list 
Mini-RUT options at the same $1 strike price intervals currently listed 
by Phlx. The Commission believes such waiver is consistent with the 
protection of investors and the public interest.\15\ Accordingly, the 
Commission designates the proposed rule change operative upon filing 
with the Commission.
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    \15\ For purposes only of waiving the 30-day operative delay of 
this proposal, 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 the 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 Number SR-CBOE-2009-086 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-2009-086. This file

[[Page 59594]]

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 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 Number SR-
CBOE-2009-086 and should be submitted on or before December 9, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-27606 Filed 11-17-09; 8:45 am]

BILLING CODE 8011-01-P