[Federal Register Volume 77, Number 108 (Tuesday, June 5, 2012)]
[Notices]
[Pages 33259-33261]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-13532]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67078; File No. SR-CBOE-2012-051]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Related to FLEX Options

May 30, 2012.
    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 May 23, 2012, Chicago Board Options Exchange, Incorporated 
(``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 has designated the proposal as a ``non-controversial'' 
proposed rule change pursuant to Section 19(b)(3)(A) 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).
    \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 is proposing to provide for additional time to 
implement new system enhancements for trading Flexible Exchange Options 
(``FLEX Options'') \5\ that were the subject of another rule change 
filing that was recently approved. 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's Public 
Reference Room.
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    \5\ FLEX Options provide investors with the ability to customize 
basic option features including size, expiration date, exercise 
style, and certain exercise prices. FLEX Options can be FLEX Index 
Options or FLEX Equity Options. In addition, other products are 
permitted to be traded pursuant to the FLEX trading procedures. For 
example, credit options are eligible for trading as FLEX Options 
pursuant to the FLEX rules in Chapters XXIVA and XXIVB. See CBOE 
Rules 24A.1(e) and (f), 24A.4(b)(1) and (c)(1), 24B.1(f) and (g), 
24B.4(b)(1) and (c)(1), and 28.17. The rules governing the trading 
of FLEX Options on the FLEX Request for Quote (``RFQ'') System 
platform (which is limited to open outcry trading only) are 
contained in Chapter XXIVA. The rules governing the trading of FLEX 
Options on the FLEX Hybrid Trading System platform (which combines 
both open outcry and electronic trading) are contained in Chapter 
XXIVB. The Exchange notes that, currently, all FLEX Options are 
traded on the FLEX Hybrid Trading System platform.
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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 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 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
    On February 7, 2012, the Exchange received approval of a rule 
change filing, SR-CBOE-2011-122, which amended certain rules pertaining 
to the electronic trading of FLEX Options on the Exchange's FLEX Hybrid 
Trading System platform (the ``FLEX System'' or ``System'').\6\ In that 
filing, the Exchange indicated that it is in the process of enhancing 
the FLEX System in order to further integrate it with the Exchange's 
existing technology platform utilized for Non-FLEX trading. In 
conjunction with the enhancement, the filing made some modifications to 
the existing electronic trading processes utilized on the FLEX System 
platform. The filing made other amendments to eliminate certain 
European-Capped style settlement and currency provisions with the FLEX 
rules that pertain to both electronic and open outcry trading. The 
filing also indicated that the Exchange planned to announce to its 
Trading Permit Holders (``TPHs'') via Regulatory Circular an 
implementation schedule for transitioning from the existing technology 
platform to the new technology platform once the rollout schedule is 
finalized. The filing indicated that the Exchange intended to begin 
implementation by no later than March 30, 2012, with the specific 
implementation schedule to be announced via Regulatory Circular, as 
stated above. The Exchange intended to transition a few classes at a 
time and anticipated full implementation within approximately one to 
three weeks of the initial transition. Finally, in the event

[[Page 33260]]

that implementation did not begin by March 30, 2012, the Exchange 
represented that it would file a proposed rule change to establish the 
revised time period.
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    \6\ Securities Exchange Act No. 66348 (February 7, 2012), 77 FR 
8304 (February 14, 2012) (SR-CBOE-2011-122 Approval Order).
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    The Exchange thereafter submitted another rule change filing, SR-
CBOE-2012-033, which provided in relevant part for additional time to 
implement the new system enhancements for trading FLEX Options.\7\ In 
particular, rather than March 30, 2012, that rule change filing revised 
the implementation schedule such that the Exchange would begin 
implementation by no later than April 30, 2012, with the specific 
implementation schedule to be announced via Regulatory Circular. The 
Exchange still intended to transition a few classes at a time and 
anticipated full implementation within approximately one to three weeks 
of the initial transition.
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    \7\ Securities Exchange Act Release No. 66769 (April 6, 2012), 
77 FR 22012 (April 12, 2012) (SR-CBOE-2012-033 Notice of Filing and 
Immediate Effectiveness). Besides extending the implementation 
schedule, the rule change filing also contained certain amendments 
to the rules for trading FLEX Options.
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    The purpose of this instant rule change filing is to again provide 
for additional time to implement the new system enhancements for 
trading FLEX Options. While the Exchange did begin the initial rollout 
of the enhancements on April 24, 2012, the Exchange will not have the 
full implementation completed within the approximated three week 
transaction period. However, the Exchange believes that full 
implementation will be completed within the next several weeks. 
Therefore, the Exchange is submitting this rule change filing to advise 
that it anticipates the rollout of the new system enhancements will be 
fully implemented by June 29, 2012. Consistent with the prior rule 
change filings, the Exchange will announce the specific implementation 
schedule via Regulatory Circular and, in the event the implementation 
is not completed by June 29, 2012, the Exchange represents that it will 
file another proposed rule change to establish the revised time period.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act \8\ in general and furthers the objectives of 
Section 6(b)(5) of the Act \9\ in particular in that it should promote 
just and equitable principles of trade, serve to remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and protect investors and the public interest. In 
particular, the Exchange believes that the use of FLEX Options provides 
CBOE TPHs and investors with additional tools to trade customized 
options in an exchange environment \10\ and greater opportunities to 
manage risk. The Exchange believes that the enhancements to the FLEX 
System adopted under rule change filing SR-CBOE-2011-122 should serve 
to further those objectives and encourage use of FLEX Options by 
enhancing and simplifying the existing processes and integrating the 
FLEX System with the Exchange's existing technology platform for Non-
FLEX trading, which should make the FLEX System more efficient and 
effective and easier for users to understand. The Exchange believes 
that the provision for additional time to rollout the system 
enhancements will allow the Exchange to implement the enhancements in a 
fair and orderly manner.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ FLEX Options provide TPHs and investors with an improved 
but comparable alternative to the over-the-counter (``OTC'') market 
in customized options, which can take on contract characteristics 
similar to FLEX Options but are not subject to the same 
restrictions. The Exchange believes that making these changes will 
make the FLEX Hybrid Trading System an even more attractive 
alternative when market participants consider whether to execute 
their customized options in an exchange environment or in the OTC 
market. CBOE believes market participants benefit from being able to 
trade customized options in an exchange environment in several ways, 
including, but not limited to the following: (1) Enhanced efficiency 
in initiating and closing out positions; (2) increased market 
transparency; and (3) heightened contra-party creditworthiness due 
to the role of The Options Clearing Corporation as issuer and 
guarantor of FLEX Options.
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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 that is 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

    The Exchange neither solicited nor received comments on the 
proposal.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
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)(iii) thereunder.\13\
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    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
    \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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    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\15\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
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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 because such waiver will allow CBOE to revise its 
implementation schedule for the new system enhancements. The new 
schedule will provide adequate time for a fair and orderly 
implementation of the enhancements. Therefore, the Commission 
designates the proposal operative upon filing.\16\
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    \16\ 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 such 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:

[[Page 33261]]

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-2012-051 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-2012-051. 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 
10:00 a.m. and 3:00 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-2012-051 and should be 
submitted on or before June 26, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-13532 Filed 6-4-12; 8:45 am]
BILLING CODE 8011-01-P