Document ID: SEC-2010-0685-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2010-05-10T04:00Z

[Federal Register: May 10, 2010 (Volume 75, Number 89)]
[Notices]               
[Page 25899-25901]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10my10-96]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62023; File No. SR-CBOE-2010-039]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Trade Options on S&P 500 Annual Dividend Index With an 
Applied Scaling Factor of 1

May 3, 2010.
    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 April 28, 2010, the Chicago Board Options Exchange, Incorporated 
(``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described

[[Page 25900]]

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 the 
Substance of the Proposed Rule Change

    CBOE proposes to trade options on the S&P 500 Annual Dividend Index 
with an applied scaling factor of 1. The Exchange is not proposing any 
rule text changes. 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'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
    The Securities and Exchange Commission previously approved CBOE's 
proposed rule change, as modified Amendment No. 1, to list and trade 
cash-settled options that overlie the S&P 500 Dividend Index.\5\ In the 
filing, the Exchange stated that the S&P 500 Dividend Index is reported 
in absolute numbers (e.g., 3, 5, 7) and that the Exchange would apply a 
scaling factor of 10 to the underlying index. The Exchange proposed the 
use of the scaling factor in the original filing because it was 
premised on the S&P 500 Dividend Index representing the accumulated ex-
dividend amounts of all S&P 500 Index components over a specified 
quarterly accrual period. The use of a scaling factor was intended to 
increase the size of the underlying index value because it was expected 
to be a relatively low value.
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    \5\ See Securities Exchange Act Release No. 61136 (December 10, 
2009), 74 FR 66711 (December 16, 2009) (SR-CBOE-2009-022). The S&P 
500 Dividend Index represents the accumulated ex-dividend amounts of 
all S&P 500 Index component securities over a specified accrual 
period. Each day Standard & Poor's calculates the aggregate daily 
dividend totals for the S&P 500 Index component securities, which 
are summed over any given calendar quarter and are the basis of the 
S&P 500 Dividend index. On any given day, the index dividend is 
calculated as the total dividend value for all constituents of the 
S&P 500 Index divided by the S&P 500 Index divisor. The total 
dividend value is calculated as the sum of dividends per share 
multiplied by the shares outstanding for all constituents of the S&P 
500 Index that are trading ``ex-dividend'' on that day.
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    In Amendment No. 1, the Exchange proposed to permit varying terms 
for the accrual period (e.g., quarterly, semi-annually, annually). To 
date, the Exchange has only designated a quarterly accrual period for 
S&P 500 Dividend Index options. Beginning May 25, 2010, the Exchange 
plans to list options on the S&P 500 Annual Dividend Index, an index 
with a designated annual accrual period.\6\ The Exchange plans to list 
options with a single expiration for each year (e.g., Dec. 2010, Dec. 
2011).\7\ In the recent past, the final index value (at expiration) has 
ranged from the low 20s up to the upper 20s. The final value on 
December 18, 2009 was 22.81. Because the duration of an annual accrual 
period results in the underlying index value being higher than for 
lesser duration accrual periods, the Exchange proposes to apply a 
scaling factor of 1 to the underlying annual index. During each 
business day, CBOE will disseminate the underlying S&P 500 Annual 
Dividend Index value with the applied scaling factor of 1 through the 
Options Price Reporting Authority (``OPRA'') and/or one or more major 
market data vendors.
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    \6\ The Exchange will assign separate trading symbols to options 
overlying an index with a designated annual accrual period to 
distinguish them from options overlying an index with a designated 
quarterly accrual period.
    \7\ Standard & Poor's has created and now calculates the S&P 500 
Annual Dividend Index.
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    The use of a scaling factor of 10 was described in the purpose 
section of the filing and in the contract specifications that were 
submitted as Exhibit 3; therefore, the Exchange is not proposing any 
new or revised rule text to affect this change. Exhibit 3 presents 
revised contract specifications for S&P 500 Annual Dividend Index 
options.
2. Statutory Basis
    The Exchange believes this 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.\8\ Specifically, the Exchange believes that the 
proposed rule change is consistent with the Section 6(b)(5) Act \9\ 
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. In particular, the proposed rule change seeks to permit the 
Exchange to apply a scaling factor of 1 to options on the S&P 500 
Annual Dividend Index, an index with a designated annual accrual 
period, since the duration of an annual accrual period results in the 
underlying index value being higher than for lesser duration accrual 
periods.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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

    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 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) does not become 
operative for 30 days after the date of the filing, 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\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii) 
under the Act, the Exchange is required to give 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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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the

[[Page 25901]]

Act \12\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \13\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive the 30-day operative delay to 
allow the Exchange to begin listing options overlying the S&P 500 
Annual Dividend Index beginning on Tuesday, May 25, 2010.
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    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that acceleration of the operative date is 
consistent with the protection of investors and the public interest 
because the Commission has previously considered and approved the 
listing of options on the S&P 500 Annual Dividend Index and the current 
proposal raises no new regulatory issues. Acceleration of the operative 
date will allow the Exchange to list options on the S&P 500 Annual 
Dividend Index on May 25, 2010, thereby providing investors with an 
additional investment tool and greater flexibility in meeting their 
investment objectives without delay. For these reasons, the Commission 
designates that the proposed rule change become operative on May 25, 
2010.\14\
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    \14\ 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. 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 the 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-2010-039 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 No. SR-CBOE-2010-039. 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 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 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of the CBOE. 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-2010-039 and should be 
submitted on or before June 1, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-10956 Filed 5-7-10; 8:45 am]
BILLING CODE 8010-01-P