[Federal Register Volume 69, Number 145 (Thursday, July 29, 2004)]
[Notices]
[Pages 45357-45358]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-17232]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50063; File No. SR-CBOE-2004-49]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Board Options 
Exchange, Incorporated To Allow the Exchange To List Up To Seven 
Expiration Months for Certain Index Options up Until the Expiration of 
Those Options in November 2004

July 22, 2004.
    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 July 22, 2004, the Chicago Board Options Exchange, Incorporated 
(``CBOE'' or ``Exchange'') 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 CBOE submitted the proposed rule change under section 19(b)(3)(A) 
of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the 
proposal effective upon filing with the Commission. 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).
    \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

    The CBOE proposes to list up to seven expiration months, instead of 
the currently permitted six, for certain index options up until the 
expiration of those options in November 2004. The text of the proposed 
rule change is below. Proposed new language is italicized; proposed 
deletions are in brackets.
* * * * *

CHAPTER XXIV

Index Options

* * * * *
Terms of Index Options
    Rule 24.9 (a) General.
    (1) No change.
    (2) Expiration Months. Index option contracts may expire at three-
month intervals or in consecutive months. The Exchange may list up to 
six expiration months at any one time, but will not list index options 
that expire more than twelve months out. Notwithstanding the preceding 
restriction, until the expiration in November 2004[January 2000], the 
Exchange may list up to seven expiration months at any one time for the 
SPX, MNX and DJX index option contracts, provided one of those 
expiration months is November 2004[January 2000].
    (3)-(5) No change.
    (b)-(c) No change.
    * * *Interpretations and Policies:
    .01-.11 No change.
* * * * *

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 CBOE 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 Exchange is proposing to amend paragraph (a)(2) of Rule 24.9 to 
allow, for a limited time, the Exchange to list up to seven expiration 
months in certain index options. Currently, Rule 24.9(a)(2) permits the 
Exchange to list only six expiration months in any index options at any 
one time.
    Under the current application of the Rule, the Exchange generally 
will list three consecutive near term months and three months on a 
quarterly expiration cycle. The Exchange has been approached by a 
number of institutional customers who are interested in trading the 
Standard & Poor's 500 (SPX), CBOE Mini-NDX (MNX) and the Dow Jones 
Industrial Average (DJX) index options with an expiration of November 
2004. These customers have explained to the Exchange that they believe 
that index options expiring at that time will provide a useful tool to 
hedge positions in stocks overlying particular index options or to 
hedge market exposure to the equity markets generally against the 
uncertainty presented by the elections. By listing index options with a 
November 2004 expiration at this point, the Exchange will provide these 
customers with the opportunity to hedge their positions in an orderly 
fashion well in advance of the elections. The Exchange notes that the 
Chicago Mercantile Exchange has announced that it will add November 
2004 expirations for certain index futures products that are generally 
considered financial instruments with which CBOE index options compete 
for customer interest.
    The Exchange recognizes that this request to expand the allowable 
expiration months for index options is a unique situation, and so the 
Exchange only intends to seek the ability to list seven expiration 
months until the November 2004 options expire. The Exchange notes that 
a seventh expiration month was permitted for index options for January 
2000 in connection with Y2K.\5\
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    \5\ See Securities Exchange Act Release No. 41252 (April 5, 
1999), 64 FR 17702 (April 12, 1999) (order approving File No. SR-
CBOE-99-09) (allowed the Exchange to list up to seven expiration 
months for certain index options up until the expiration of those 
options in January 2000, to provide customers with a useful tool to 
hedge positions in stocks overlying particular index options or to 
hedge market exposure to the equity markets generally against the 
uncertainty presented by potential Year 2000 computer problems).
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    The Exchange represents that it has the system capacity to 
adequately handle the series that would be permitted to be added by 
this proposal. The Exchange provided to the Commission information in a 
confidential submission that supports its system capacity 
representations.
2. Statutory Basis
    Because the temporary increase in the number of expiration months 
for index options would satisfy significant customer demand to address 
a unique hedging need, and because the series could be added without 
presenting capacity problems, the Exchange believes this rule change is 
consistent with and furthers the objectives of section 6(b)(5) of the 
Act in that it would remove impediments to and perfect the mechanism of 
a free and open market in a manner consistent with the protection of 
investors and the public interest.

[[Page 45358]]

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

    The CBOE has filed the proposed rule change pursuant to section 
19(b)(3)(A) of the Act \6\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\7\ Because the foregoing rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) 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, 
the proposed rule change has become effective pursuant to section 
19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder. 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.
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6).
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    Pursuant to Rule 19b-4(f)(6)(iii) under the Act,\8\ the proposal 
may not become operative for 30 days after the date of its filing, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest, and the self-
regulatory organization must file notice of its intent to file the 
proposed rule change at least five business days beforehand. The 
Exchange has requested that the Commission waive the five-day pre-
filing requirement and the 30-day operative delay so that the proposed 
rule change will become immediately effective upon filing.
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    \8\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the five-day pre-filing 
provision and the 30-day operative delay is consistent with the 
protection of investors and the public interest.\9\ The Commission 
believes that waiving the pre-filing requirement and accelerating the 
operative date does not raise any new regulatory issues, significantly 
affect the protection of investors or the public interest, or impose 
any significant burden on competition and, therefore, designates the 
proposed rule change as effective and operative immediately.
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    \9\ For purposes only of waiving the operative date of this 
proposal, 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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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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 [email protected]. Please include 
File Number SR-CBOE-2004-49 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-CBOE-2004-49. 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. Copies of the 
filing also will be available for inspection and copying at the 
principal offices 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-2004-49 and should be submitted on or before August 
19, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-17232 Filed 7-28-04; 8:45 am]
BILLING CODE 8010-01-P