[Federal Register Volume 76, Number 226 (Wednesday, November 23, 2011)]
[Notices]
[Pages 72488-72490]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-30198]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65774; File No. SR-CBOE-2011-108]


 Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Expand the Weeklys Program

November 17, 2011.
    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 November 14, 2011, the Chicago Board Options Exchange, 
Incorporated (the ``Exchange'' or ``CBOE'') 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 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

    The Exchange proposes to amend Rules 5.5 and 24.9 to increase the 
number of option classes on which Short Term Options Series (``Weekly 
options'') may be opened in the Exchange's Short Term Option Series 
Program (``Weeklys Program'') from 15 to 25 classes.\5\ The text of the 
proposed rule change 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.
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    \5\ This rule filing assumes that proposed changes to Rules 
5.5(d)(1) and 24.9(A)(i) contained in a separate rule filing are 
effective. See Securities Exchange Act Release No. 65445 (September 
30, 2011), 75 FR 62102 (October 6, 2011) (noticing SR-CBOE-2011-086, 
which proposes to increase the number of series permitted per class 
in the Weeklys Program from 20 series to 30 series).
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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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this proposed rule change is to amend Rules 5.5 and 
24.9 by increasing the number of option classes on which Weekly options 
may be opened in the Exchange's Weeklys Program.\6\ Currently, the 
Exchange may select up to 15 currently listed option classes on which 
Weekly options may be opened in the Weeklys Program.\7\ The Exchange is 
proposing to increase this to a total of 25 classes on which Weekly 
options may be opened for trading. This is a competitive filing and is 
based on certain aspects of filings previously submitted by 
International Securities Exchange, LLC (``ISE''), The NASDAQ Stock 
Market LLC for the NASDAQ Options Market (``NOM''), and NASDAQ OMX 
PHLX, Inc. (``PHLX'').\8\
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    \6\ On July 12, 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). The Weeklys Program was made permanent on April 27, 2009. See 
Securities Exchange Act Release No. 59824 (April 27, 2009), 74 FR 
20518 (May 4, 2009) (SR-CBOE-2009-018).
    \7\ The Exchange previously increased the total number of 
classes on which Weekly options may be opened from 5 to 15 classes. 
See Securities Exchange Act Release No. 63877 (February 9, 2011), 76 
FR 8794 (February 15, 2011) (SR-CBOE-2011-012) (Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change to Expand the Short 
Term Option Series Program).
    \8\ See Securities Exchange Act Release Nos. 65503 (October 6, 
2011), 76 FR 63691 (October 13, 2011) (SR-ISE-2011-60); 65528 
(October 11, 2011), 76 FR 64142 (October 17, 2011) (SR-NASDAQ-2011-
138) and 65529 (October 11, 2011), 76 FR 64144 (October 17, 2011) 
(SR-PHLX-2011-131).
     CBOE notes that on September 19, 2011, it formally submitted a 
filing to the Commission to increase the number of strikes that may 
be listed per class that participates in the Weeklys Program. That 
filing was noticed by the Commission on September 30, 2011. See 
Securities Exchange Act Release No. 65445 (September 30, 2011), 75 
FR 62102 (October 6, 2011) (noticing SR-CBOE-2011-086). On September 
23, 2011, ISE formally submitted a filing to the Commission 
similarly proposing to increase the number of strikes per class that 
participates in ISE's Weeklys Program. However, in that filing ISE 
also requested to increase the number of classes (from 15 to 25) 
that are eligible to participate in ISE's Weekly Program. CBOE's 
current filing is competitive in that it seeks to permit CBOE to 
increase the number of classes that may participate in its Weeklys 
Program at the same time similar changes become operative at other 
exchanges.

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[[Page 72489]]

    CBOE's Weeklys Program is codified in Rules 5.5 and 24.9. These 
rules provide that after an option class has been approved for listing 
and trading on the Exchange, the Exchange may open for trading on any 
Thursday or Friday that is a business day series of options on no more 
than fifteen option classes that expire on the Friday of the following 
business week that is a business day. In addition to the 15-option 
class limitation, there is a limitation on the number of series that 
may be opened per class.\9\ The strike price of each Weekly option has 
to be fixed with approximately the same number of strike prices being 
opened above and below the value of the underlying security at about 
the time that the Weekly options are initially opened for trading on 
the Exchange, and with strike prices being within 30% above or below 
the closing price of the underlying security from the preceding day. 
The Exchange is not proposing any changes to these additional Weeklys 
Program limitations other than to increase from 15 to 25 the number of 
option classes that may participate in the Weeklys Program.
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    \9\ See Rules 5.5 and 24.9.
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    The principal reason for the proposed expansion is market demand 
for adding, and not removing, Weekly option classes from the Weeklys 
Program. In order for the Exchange not to exceed the current 15-option 
class restriction, from time to time the Exchange has had to 
discontinue trading one short term option class before it could begin 
trading other option classes within the Weeklys Program. This has 
negatively impacted investors and traders, particularly retail public 
customers. These same market participants also repeatedly request that 
the Exchange add classes to the Weeklys Program, which the Exchange is 
unable to do as it has already reached its maximum allotment of 15 
classes. The Exchange has also observed increased demand for more 
classes when market moving events, such as significant market 
volatility, corporate events, or large market, sector or individual 
issue price swings have occurred.
    The Exchange notes that the Weeklys Program has been well-received 
by market participants, in particular by retail investors. The Exchange 
believes a modest increase to the number of classes that may 
participate in the Weeklys Program, such as the one proposed in this 
rule filing, will permit the Exchange to meet increased customer demand 
and provide market participants with the ability to hedge in a greater 
number of option classes.
    With regard to the impact of this proposal on system capacity, 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 classes that participate in the 
Weeklys Program.
    The Exchange believes that the Weeklys Program has provided 
investors with greater trading opportunities and flexibility and the 
ability to more closely tailor their investment and risk management 
strategies and decisions. The Exchange further believes this proposed 
rule change will provide investors with additional Weekly option 
classes for investment, trading and risk management purposes. 
Therefore, the Exchange requests a modest expansion of the current 
Weeklys Program.
    The proposed increase to the number of classes eligible to 
participate in the Weeklys Program is required for competitive purposes 
as well as to ensure consistency and uniformity among the competing 
options exchanges that have adopted similar Weeklys Programs.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) \10\ of the Act and the rules and regulations under 
the Act, in general, and furthers the objectives of Section 
6(b)(5),\11\ in particular, in that it is 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, and to 
remove impediments to and perfect the mechanisms of a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest. The Exchange believes that expanding 
the Weeklys Program will result in a continuing benefit to investors by 
giving them more flexibility to closely tailor their investment 
decisions and hedging decisions in a greater number of securities. The 
Exchange also believes that expanding the Weeklys Program will provide 
the investing public and other market participants with additional 
opportunities to hedge their investment thus allowing these investors 
to better manage their risk exposure. While the expansion of the 
Weeklys Program will generate additional quote traffic, the Exchange 
does not believe that this increased traffic will become unmanageable 
since the proposal remains limited to a fixed number of classes. 
Further, the Exchange does not believe that the proposal will result in 
a material proliferation of additional series because the number of 
series per class also remains limited, and the Exchange does not 
believe that the additional price points will result in fractured 
liquidity.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 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. In this regard and as indicated above, the 
Exchange notes that the rule change is being proposed as a competitive 
response to proposed rule changes of ISE, NOM and PHLX. CBOE believes 
this proposed rule change is necessary to permit fair competition among 
the options exchanges with respect to their short term options 
programs.

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 change does not significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not become operative for 30 days from the date on which it was filed, 
or such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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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    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission believes that waiver of the operative 
delay is consistent with the protection of investors and the public 
interest

[[Page 72490]]

because the proposal is substantially similar to that of another 
exchange that has been approved by the Commission.\14\ Therefore, the 
Commission designates the proposal operative upon filing.\15\
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    \14\ See Securities Exchange Act Release No. 65771 (November 17, 
2011) (SR-ISE-2011-60) (order approving expansion of Short Term 
Option Program).
    \15\ 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. See 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 summarily may temporarily suspend 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 email to [email protected]. Please include 
File Number SR-CBOE-2011-108 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-2011-108. This file 
number should be included on the subject line if email 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 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-2011-108 and should be 
submitted on or before December 14, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-30198 Filed 11-22-11; 8:45 am]
BILLING CODE 8011-01-P