[Federal Register Volume 76, Number 226 (Wednesday, November 23, 2011)]
[Notices]
[Pages 72482-72483]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-30196]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65772; File No. SR-CBOE-2011-086]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Granting Approval of Proposed Rule To Increase the
Number of Series Permitted Per Class in the Short Term Option Series
Program
November 17, 2011.
I. Introduction
On September 19, 2011, the Chicago Board Options Exchange,
Incorporated (``CBOE'' or ``Exchange'') filed with the Securities and
Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to increase the number of series
permitted per class in the Short Term Options Series Program. The
proposed rule change was published for comment in the Federal Register
on October 6, 2011.\3\ The Commission received no comment letters on
the proposal. This order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 65445 (September 30,
2011), 76 FR 62102 (``Notice'').
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II. Description of the Proposal
The proposed rule change seeks to amend CBOE Rules 5.5 and 24.9 to
increase the number of Short Term Options Series (``Weekly options'')
that may be opened for each option class that participates in the
Exchange's Short Term Option Series Program (``Weeklys Program'').\4\
Currently, Exchange rules
[[Page 72483]]
allow a total of 20 series to be opened for trading in each class that
participates in the Weeklys Program. The proposed rule would increase
this to a total of 30 series per class that may be opened for
trading.\5\
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\4\ In 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). In 2009, the
Commission approved the Weeklys Program on a permanent basis. See
Securities Exchange Act Release No. 59824 (April 27, 2009), 74 FR
20518 (May 4, 2009) (SR-CBOE-2009-018).
\5\ The Exchange previously increased the total number of series
per Weeklys option class from seven to 20 series. See Securities
Exchange Act Release No. 58870 (October 28, 2008), 73 FR 65430
(November 3, 2008) (SR-CBOE-2008-110). The existing rules provide
that series must be added pursuant to CBOE Rules 5.5 and 24.9.
Initial series shall be within 30% above or below the closing price
of the underlying security on the preceding day. Any additional
strikes listed by the Exchange shall be within 30% above or below
the current price of the underlying security. The existing rules
also provide that the Exchange may open additional strikes of Short
Term Options Series that are more than 30% above or below the
current price of the underlying security if demonstrated customer
interest exists for such series, as expressed by institutional,
corporate, or individual customers or their brokers. Market-Makers
trading for their own account are not considered when determining
customer interest.
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In the Notice, the Exchange stated that the principal reason for
the proposed expansion is market demand for additional series in Weekly
option classes in which the maximum number of series (20) has already
been reached. Specifically, CBOE cited an increased demand for more
series when market-moving events, such as corporate events and large
price swings, have occurred during the life span of an affected Weekly
option class. Currently, if the maximum number of series has been
reached, the Exchange must delete or delist certain series in order to
make room for more in-demand series. The Exchange deletes series with
no open interest and delists series with open interest if those series
are open for trading on another exchange.
III. Discussion
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange.\6\
Specifically, the Commission finds that the proposal is consistent with
Section 6(b)(5) of the Act,\7\ which requires, among other things, that
the rules of a national securities exchange be 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, to
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, to protect
investors and the public interest. The Commission believes that the
proposal strikes a reasonable balance between the Exchange's desire to
offer a wider array of products and the need to avoid unnecessary
proliferation of options series.
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\6\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\7\ 15 U.S.C. 78f(b)(5).
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In approving this proposal, the Commission notes that 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 series for classes that participate in the Weeklys
Program. The Commission expects the Exchange to monitor the trading
volume associated with the additional options series listed as a result
of this proposal and the effect of these additional series on market
fragmentation and on the capacity of the Exchange's, OPRA's, and
vendors' automated systems.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (SR-CBOE-2011-086) be, and it
hereby is, approved.
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\8\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-30196 Filed 11-22-11; 8:45 am]
BILLING CODE 8011-01-P