Document ID: SEC-2009-0492-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Change the Close of Trading Hours on the Last Day of Trading in Expiring Quarterly Index Expirations
Posted Date: 2009-04-08T04:00Z

[Federal Register: April 8, 2009 (Volume 74, Number 66)]
[Notices]               
[Page 16018-16020]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08ap09-112]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59676; File No. SR-CBOE-2009-020]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Change the Close of Trading Hours on the Last Day of 
Trading in Expiring Quarterly Index Expirations

April 1, 2009.
    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 March 18, 2009, the Chicago Board Options Exchange, 
Incorporated (``Exchange'' or ``CBOE'') filed with the Securities and 
Exchange Commission (the ``Commission'') the proposed rule change as 
described in Items I, II, and III 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 Rule 24.6 to change the close of trading 
hours from 3:15 p.m. (Chicago time) to 3 p.m. (Chicago time) on the 
last day of trading in expiring Quarterly Index Expirations (``QIXs''). 
The filing also proposes to amend Rule 24.9(c) by adding the Mini-SPX 
Index to the list of broad-based indices on which the Exchange may list 
QIXs. In addition, the filing proposes to amend Rule 24.9 by making 
technical

[[Page 16019]]

changes that add the Mini-SPX Index to the lists of European-style 
exercise and A.M. settled options approved for trading on the Exchange. 
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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this proposed rule change is to amend Rule 24.6 to 
change the close of trading hours from 3:15 p.m. (Chicago time) to 3 
p.m. (Chicago time) on the last day of trading in expiring Quarterly 
Index Expirations (``QIXs''). The Exchange proposes that the change to 
the close of trading hours on the last trading day applies to all 
outstanding expiring QIXs that expire at the end of the second calendar 
quarter in 2009 and thereafter.
    QIXs were introduced in 1993 and are separate from the Quarterly 
Option Series Pilot Program provided for in Rule 5.5 and 24.9.\5\ QIXs 
are cash-settled options on certain specified broad-based indices that 
expire on the first business day of the month following the end of a 
calendar quarter.\6\ QIXs trade simultaneously with, not independent 
of, traditional options on the same underlying index. QIXs are subject 
to the same rules that currently govern the trading of traditional 
index options, including sales practice rules, margin requirements, and 
floor trading proceedings. Contract terms for QIXs are similar to 
traditional index options, with one general exception: the exercise 
settlement value is based on the index value derived from the closing 
prices of component stocks. In addition, the contract multiplier for 
QIXs may be set at 500 rather than the customary 100. Positions in QIXs 
are aggregated with option contracts on the same broad-based index and 
are subject to the applicable overall position limit.\7\
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    \5\ See Securities and Exchange Act Release No. 31800 (February 
1, 1993), 58 FR 7274 (February 5, 1993) (SR-CBOE-92-13) (QIX 
approval order).
    \6\ See id. and Rule 24.9(c).
    \7\ See Rule 24.4(b).
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    Generally, QIXs are priced in the market based on corresponding 
futures values. On the last day of trading, the closing prices of the 
component stocks (which are used to derive the exercise settlement 
value) are known at 3 p.m. (Chicago time) (or soon after) when the 
equity markets close. Despite the fact that the exercise settlement 
value is fixed after 3 p.m. (Chicago time), trading in expiring QIXs 
continues, however, for an additional fifteen minutes until 3:15 p.m. 
(Chicago time) and are not priced on corresponding futures values, but 
rather the known cash value. At the same time, the prices of non-
expiring QIX series continue to move and be priced in response to 
changes in corresponding futures prices.
    Because of the pricing divergence that occurs between 3 and 3:15 
p.m. on the final trading day in expiring QIXs (e.g., switch from 
pricing off of futures to cash), the Exchange believes that there is a 
risk to allow investors to continue trading expiring QIX contracts 
after 3 p.m. (Chicago time) on the last day of trading. As a result, 
the Exchange seeks to remedy any confusion by changing the close of 
trading hours from 3:15 p.m. (Chicago time) to 3 p.m. (Chicago time) 
for expiring QIXs on the last day of trading.
    It is expected that other options exchanges that have adopted QIX 
rules will submit similar proposals.
    The Exchange is also proposing to amend Rule 24.9(c) by adding the 
Mini-SPX Index to the list of broad-based indices on which the Exchange 
may list QIXs, which offers an additional method of tailoring portfolio 
hedges that expires on the last day of the calendar quarter. Finally, 
the Exchange is proposing to amend Rule 24.9 by making technical 
changes that add the Mini-SPX Index to the lists of European-style 
exercise and A.M. settled options approved for trading on the 
Exchange.\8\
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    \8\ In the original filing to list and trade Mini-SPX Index 
options, the Exchange inadvertently omitted to add the Mini SPX-
Index to the lists of European-style exercise and A.M settled 
options approved for trading on the Exchange. See Securities 
Exchange Act Release No. 32893 (September 14, 1993) 58 FR 49070 
(September 21, 1993) (SR-CBOE-93-12) (Mini-SPX Index option approval 
order). Options on the reduced-value version of the Standard & 
Poor's S&P 500 Stock Index are known as ``Mini-SPX Index options.''
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2. Statutory Basis
    Because the Exchange believes that the current rule proposal will 
lessen investor confusion, the Exchange believes the 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.\9\ Specifically, the Exchange 
believes that the proposed rule change is consistent with the Section 
6(b)(5) Act \10\ 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.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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 foregoing proposed rule does not (i) significantly 
affect the protection of investors or the public interest; (ii) impose 
any significant burden on competition; and (iii) 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, provided that the self-regulatory 
organization has given the Commission written notice of its intent to 
file 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,\11\ the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\ 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

[[Page 16020]]

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.
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    \11\ The Exchange has fulfilled this requirement.
    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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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-2009-020 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-2009-020. 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 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 Number SR-CBOE-2009-020 and should be 
submitted on or before April 29, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-7974 Filed 4-7-09; 8:45 am]

BILLING CODE 8010-01-P