[Federal Register Volume 77, Number 14 (Monday, January 23, 2012)]
[Notices]
[Pages 3318-3319]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-1174]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66163; File No. SR-CBOE-2012-007]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Order Granting Accelerated Approval 
of Proposed Rule Change To Decouple and Extend CBOE's Credit Option 
Margin Pilot Program to January 17, 2013

January 17, 2012.
    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 January 13, 2012, 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 Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons and is approving the 
proposed rule change on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CBOE is proposing to decouple and extend the duration of its Credit 
Option Margin Pilot Program through January 17, 2013. 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's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, CBOE 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 III 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
    On February 2, 2011, the Commission approved the Exchange's 
proposal to establish a Credit Option Margin Pilot Program 
(``Program'').\3\ The Program became effective on a pilot basis and has 
run on a parallel track with FINRA Rule 4240, which is similarly 
operated on a pilot basis.\4\ CBOE's Program is currently scheduled to 
expire on January 17, 2012.
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    \3\ See Securities Exchange Act Release No. 63819 (February 2, 
2011), 76 FR 6838 (February 8, 2011) (order approving [SR-CBOE-2010-
106]). To implement the Program, the Exchange amended Rule 12.3(l), 
Margin Requirements, to make CBOE's margin requirements for Credit 
Options consistent with FINRA Rule 4240, Margin Requirements for 
Credit Default Swaps. CBOE's Credit Options (i.e., Credit Default 
Options and Credit Default Basket Options) are analogous to credit 
default swaps.
    \4\ See Securities Exchange Act Release No. 63819 (February 2, 
2011), 76 FR 6838 (February 8, 2011) (order approving [SR-CBOE-2010-
106]).
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    In this current proposal, CBOE proposes to decouple its Program 
from the FINRA Rule 4240 margin pilot program. CBOE's decoupled Program 
will be substantially similar to the provisions of the FINRA Rule 4240 
margin pilot program operated by FINRA.
    CBOE understands that in connection with renewing its Rule 4240 
margin pilot, FINRA will be revising its Rule 4240 by adding new 
Supplementary Material .02, which sets forth alternative tables to the 
existing tables that may be used by market participants to compute the 
required margin. CBOE similarly proposes to adopt alternative tables to 
the existing tables in its rules that may be used by Trading Permit 
Holders to compute the required margins. These new alternative tables 
are set forth in Rules 12.3(l)(3)(ii), 12.3(l)(3)(iv) and 
12.4(l)(4)(ii). Also, a few minor changes are being made to Rule 
12.3(l) to renumber paragraphs and to make other non-substantive 
changes.
    Finally, CBOE proposes to extend its decoupled Program for an 
additional year to January 17, 2013.
    CBOE notes for the Commission that there are currently Credit 
Options listed for trading on the Exchange that have open interest. As 
a result, CBOE believes that is in the public interest for the Program 
to continue uninterrupted.
    In the future, if the Exchange proposes an additional extension of 
the Credit Option Margin Pilot Program or proposes to make the Program 
permanent, then the Exchange will submit a filing proposing such 
amendments to the Program.
2. Statutory Basis
    The Exchange believes this 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.\5\ Specifically, the Exchange believes that the 
proposed rule change is consistent with the Section 6(b)(5) Act \6\ 
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, and because it

[[Page 3319]]

enhances fair competition among exchange markets.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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. 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-2012-007 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-2012-007. 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 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-2012-007 and should be 
submitted on or before February 13, 2012.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    In its filing, CBOE requested that the Commission approve the 
proposed rule change on an accelerated basis so that the Program will 
continue uninterrupted. After careful consideration, the Commission 
finds the proposed rule change is consistent with the requirements of 
the Act and the rules and regulations thereunder applicable to a 
national securities exchange.\7\ In particular, the Commission finds 
that the proposed rule change is consistent with Section 6(b)(5) of the 
Act \8\ because the proposed rule change will further investor 
protection and the public interest by permitting the Program to 
continue uninterrupted since there are currently Credit Options listed 
for trading on the Exchange that have open interest. In addition, the 
Commission believes that the proposed alternative tables that may be 
used by market participants to compute the required margin will provide 
market participants with some flexibility in computing margin, while 
still permitting the continued use of the existing margin tables. 
Finally, the Commission notes that the proposed rule change is 
substantively similar in all material respects to the margin pilot 
program administered by FINRA under FINRA Rule 4240.
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    \7\ In approving the proposed rule change, the Commission has 
considered its impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Commission also finds good cause, pursuant to Section 19(b)(2) 
of the Act,\9\ for approving the proposed rule change prior to the 30th 
day after the date of publication of notice in the Federal Register. 
This accelerated approval will allow the existing decoupled Program to 
continue without interruption and extend the benefits of a pilot 
program that the Commission has previously approved and extended. 
Moreover, the Commission notes that the proposed rule change is 
substantively similar in all material respects to the margin pilot 
program administered by FINRA under FINRA Rule 4240.
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    \9\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-CBOE-2012-007), be, and it 
hereby is, approved on an accelerated basis to January 17, 2013.
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    \10\ 15 U.S.C. 78s(b)(2).

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-1174 Filed 1-20-12; 8:45 am]
BILLING CODE 8011-01-P