Document ID: SEC-2008-1474-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2008-10-27T04:00Z

[Federal Register: October 27, 2008 (Volume 73, Number 208)]
[Notices]               
[Page 63750-63752]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27oc08-102]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58829; File No. SR-CBOE-2008-108]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Immediately Add Two New VIX Option Series Within Five 
Days of Expiration

October 21, 2008.
    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 October 16, 2008, the Chicago Board Options

[[Page 63751]]

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 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 is seeking to immediately list two new series of CBOE 
Volatility Index (``VIX'') options prior to expiration next Wednesday, 
October 22, 2008, notwithstanding Interpretation and Policy .01(c) to 
Rule 24.9, Terms of Index Option Contracts. The Exchange is not 
proposing any rule text changes. Although the proposed rule change 
would not amend the text of Rule 24.9.01(c), the proposed change would 
have the effect of permitting the Exchange to immediately add two new 
series of VIX options within five business days prior to VIX expiration 
on Wednesday, October 22, 2008.

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 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 allow the Exchange 
to immediately list two new series of VIX options prior to expiration 
next Wednesday, October 22, 2008.
    The Exchange notes the exceptional market circumstances giving rise 
to this limited request relate only to VIX options. The Exchange states 
that this request will facilitate the functioning of the Exchange's 
market and will not harm investors or the public interest. VIX options 
are a unique product traded only at CBOE and unprecedented market 
volatility has caused the Exchange to respond to requests from market 
participants to offer the limited request sought by this proposal.
    Interpretation and Policy .01(c) to Rule 24.9 provides, ``[n]ew 
series of index option contracts may be added up to the fifth business 
day prior to expiration.'' Under this Rule 24.9.01(c), the last day for 
the Exchange to add new series of expiring October VIX option was 
Wednesday, October 15, 2008.
    However, given the current extraordinary market conditions and 
considerable market volatility, the Exchange has received user requests 
to add two new additional VIX option series--110 and 120 strikes 
expiring next Wednesday, October 22, 2008. The Exchange believes that 
these requests are reasonable and will allow for more efficient risk 
management. Specifically, liquidity providers are selling the 100 
October 2008 VIX option contracts without the ability to hedge those 
positions with an option having a higher strike. Currently, the highest 
strike listed for expiring October 2008 VIX options is 100. In 
addition, the Exchange believes that because of the recent volatility 
in the market, the addition of the two VIX option series will help 
prepare the market in the event there are large shifts in the time 
remaining until expiration. On the day of this filing, the VIX level 
reached 81.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirements provided under Section 6(b)(5) \5\ of the Act, 
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. The addition 
of the two requested VIX option series will facilitate the functioning 
of the Exchange's market by allowing for more efficient risk management 
and will not harm investors or the public interest.
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    \5\ 15 U.S.C. 78(f)(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 foregoing rule does not: (1) Significantly affect the 
protection of investors or the public interest; (2) impose any 
significant burden on competition; and (3) become operative for 30 days 
after the date of this filing, or such shorter time as the Commission 
may designate, it has become effective pursuant to Section 19(b)(3)(A) 
of the Act \6\ and Rule 19b-4(f)(6) thereunder.\7\
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide the Commission 
with 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 fulfilled this requirement.
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date of filing.\8\ However, 
Rule 19b-4(f)(6)(iii) \9\ 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. The Commission believes that waiving 
the 30-day operative delay is consistent with the protection of 
investors and the public interest because such waiver will allow the 
Exchange to immediately list the two new VIX option series prior to 
expiration on Wednesday, October 22, 2008.\10\ In particular, the 
addition by the Exchange of these two VIX option series has been 
necessitated, in the opinion of CBOE, by the current extraordinary 
market conditions and unusual levels of volatility. Allowing CBOE to 
immediately offer these new series will allow market participants to 
efficiently manage their volatility risk in current market conditions 
and will help market participants prepare for any potential significant 
movements in the VIX that may occur prior to expiration.
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    \8\ 17 CFR 240.19b-4(f)(6)(iii).
    \9\ Id.
    \10\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's effect on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).

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[[Page 63752]]

    At any time within 60 days of the filing of such 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-2008-108 on the subject line.

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-2008-108. 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 inspection and 
copying 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-2008-108 and should be 
submitted on or before November 17, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-25538 Filed 10-24-08; 8:45 am]

BILLING CODE 8011-01-P