Document ID: SEC-2011-1985-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2011-12-21T05:00Z

[Federal Register Volume 76, Number 245 (Wednesday, December 21, 2011)]
[Notices]
[Pages 79250-79252]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-32604]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65972; File No. SR-CBOE-2011-125]

 Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Expand the Weeklys Program

December 15, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'')\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that, 
on December 13, 2011, the Chicago Board Options Exchange, Incorporated 
(``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (``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

    CBOE proposes to amend Rules 5.5 and 24.9 to increase the number of 
option classes on which Short Term Options Series (``Weekly options'') 
may be opened in the Exchange's Short Term Option Series Program 
(``Weeklys Program'') from 25 to 30 classes. 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 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
    The purpose of this proposed rule change is to amend Rules 5.5 and 
24.9 by increasing the number of option classes on which Weekly options 
may be opened in the Exchange's Weeklys Program.\5\ Currently, the 
Exchange may select up to 25 currently listed option classes on which 
Weekly options may be opened in the Weeklys Program. The Exchange is 
proposing to increase this to a total of 30 classes on which Weekly 
options may be opened for trading. This is a competitive filing and is 
based on recently approved filings submitted by The NASDAQ Stock Market 
LLC for the NASDAQ Options Market (``NOM'') and NASDAQ OMX PHLX, Inc. 
(``PHLX'').\6\
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    \5\ On July 12, 2005, the Commission approved the Weeklys 
Program on a pilot basis. See Securities Exchange Act Release No. 
52011 (July 12, 2005), 70 FR 41451 (July 19, 2005) (SR-CBOE-2004-
63). The Weeklys Program was made permanent on April 27, 2009. See 
Securities Exchange Act Release No. 59824 (April 27, 2009), 74 FR 
20518 (May 4, 2009) (SR-CBOE-2009-018).
    \6\ See Securities Exchange Act Release Nos. 65775 (November 17, 
2011), 76 FR 72476 (November 23, 2011) (SR-NASDAQ-2011-138) and 
65776 (November 17, 2011), 76 FR 72482 (November 23, 2011) (SR-PHLX-
2011-131).
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    On November 17, 2011, CBOE amended its Weeklys Program by 
increasing the number of strikes that may be listed per class (from 20 
to 30) that participates in the Weeklys Program,\7\ and by increasing 
the number of classes (from 15 to 25) that are eligible to participate 
in CBOE's Weeklys Program.\8\ On that same day, NOM and PHLX each 
increased the number of classes that are eligible to participate in 
their Weeklys Programs from 15 classes to 30 classes. As a result, CBOE 
is competitively disadvantaged since it operates a substantially 
similar Weeklys Program as NOM and PHLX but is limited to selecting 
only 25 classes that may participate in CBOE Weeklys Program (whereas 
PHLX and NOM may each select 30 classes).\9\
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    \7\ See Securities Exchange Act Release No. 65772 (November 17, 
2011), 76 FR 72484 (November 23, 2011) (SR-CBOE-2011-086).
    \8\ See Securities Exchange Act Release No. 65774 (November 17, 
2011), 76 FR 72488 (November 23, 2011) (SR-CBOE-2011-108).
    \9\ CBOE is permitted to list Weekly options ``on any option 
classes that are selected by other securities exchanges that employ 
a similar program under their respective rules.'' See CBOE Rule 
5.5(d)(1) and 24.9(a)(2)(A)(i).
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    The Exchange is not proposing any changes to these additional 
Weeklys

[[Page 79251]]

Program limitations other than to increase from 25 to 30 the number of 
option classes that may participate in the Weeklys Program.
    The Exchange notes that the Weeklys Program has been well-received 
by market participants, in particular by retail investors. The Exchange 
believes a modest increase to the number of classes that may 
participate in the Weeklys Program, such as the one proposed in this 
rule filing, 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.
    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 the potential additional traffic associated with 
trading of an expanded number of classes that participate in the 
Weeklys Program.
    The proposed increase to the number of classes eligible to 
participate in the Weeklys Program is required for competitive purposes 
as well as to ensure consistency and uniformity among the competing 
options exchanges that have adopted similar Weeklys Programs.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) \10\ of the Act and the rules and regulations under 
the Act, in general, and furthers the objectives of Section 
6(b)(5),\11\ in particular, in that it is 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 facilitating transactions in securities, and to 
remove impediments to and perfect the mechanisms of a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest. 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. While the expansion of the 
Weeklys Program will generate additional quote traffic, the Exchange 
does not believe that this increased traffic will become unmanageable 
since the proposal remains limited to a fixed number of classes. 
Further, the Exchange does not believe that the proposal will result in 
a material proliferation of additional series because the number of 
series per class also remains limited, and the Exchange does not 
believe that the additional price points will result in fractured 
liquidity.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 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. In this regard and as indicated above, the 
Exchange notes that the rule change is being proposed as a competitive 
response to existing NOM and PHLX rules. CBOE believes this proposed 
rule change is necessary to permit fair competition among the options 
exchanges with respect to their short term options programs.

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 does not significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, 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, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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 has waived the five-day prefiling requirement in this 
case.
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    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission believes that waiver of the operative 
delay is consistent with the protection of investors and the public 
interest because the proposal is substantially similar to that of 
another exchange that has been approved by the Commission.\14\ 
Therefore, the Commission designates the proposal operative upon 
filing.\15\
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    \14\ See supra note 6.
    \15\ 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 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-2011-125 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-2011-125. 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

[[Page 79252]]

printing 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 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-2011-125 and should be 
submitted on or before January 11, 2012.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-32604 Filed 12-20-11; 8:45 am]
BILLING CODE 8011-01-P