[Federal Register Volume 78, Number 184 (Monday, September 23, 2013)]
[Notices]
[Pages 58354-58356]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-23005]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70424; File No. SR-CBOE-2013-088]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to the Appointment Cost of IWM Options

September 17, 2013.
    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 September 13, 2013, Chicago Board Options Exchange, 
Incorporated (the ``Exchange'' or ``CBOE'') filed with the Securities 
and Exchange Commission (the ``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.
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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

    The Exchange proposes to amend the appointment cost for options on 
the iShares Russell 2000 Index Fund (IWM). The text of the proposed 
rule change is provided below. (Additions are italicized; deletions are 
[bracketed].)
* * * * *

Chicago Board Options Exchange, Incorporated Rules

* * * * *

Rule 8.3. Appointment of Market-Makers

    (a)-(b) No change.
    (c) Market-Maker Appointments. Absent an exemption by the Exchange, 
an appointment of a Market-Maker confers the right to quote 
electronically and in open outcry in the Market-Maker's appointed 
classes as described below. Subject to paragraph (e) below, a Market-
Maker may change its appointed classes upon advance notification to the 
Exchange in a form and manner prescribed by the Exchange.
    (i) Hybrid Classes. Subject to paragraphs (c)(iv) and (e) below, a 
Market-Maker can create a Virtual Trading Crowd (``VTC'') appointment, 
which confers the right to quote electronically in an appropriate 
number of Hybrid classes (as defined in Rule 1.1(aaa)) selected from 
``tiers'' that have been structured according to trading volume 
statistics, except for the AA tier. All classes within a specific tier 
will be assigned an ``appointment cost'' depending upon its tier 
location. The following table sets forth the tiers and related 
appointment costs.

------------------------------------------------------------------------
    Tier             Hybrid options classes           Appointment cost
------------------------------------------------------------------------
AA..........   Options on the CBOE         .50
               Volatility Index (VIX).
               Options on the iShares      [.50].25
               Russell 2000 Index Fund (IWM).
               Options on the NASDAQ 100   .50
               Index (NDX).
               Options on the S&P 100      .40
               (OEX).
               Options on Standard &       .25
               Poor's Depositary Receipts (SPY).
               Options on the Russell      .25
               2000 Index (RUT).
               Options on the S&P 100      .10
               (XEO).
               Morgan Stanley Retail       .25
               Index Options (MVR).
               Options on the iPath S&P    .10
               500 VIX Short-Term Futures Index
               ETN (VXX).
               P.M.--Settled options on    1.0
               the Standard & Poor's 500 (SPXPM).
A *.........  Hybrid Classes 1-60................  .10
B *.........  Hybrid Classes 61-120..............  .05
C *.........  Hybrid Classes 121-345.............  .04
D *.........  Hybrid Classes 346-570.............  .02
E *.........  Hybrid Classes 571-999.............  .01
F *.........  All Remaining Hybrid Classes.......  .001
------------------------------------------------------------------------
* Excludes Tier AA.


[[Page 58355]]

    (ii)-(vi) No change.
    (d)-(e) No change.
* * * * *
    The text of the proposed rule change is also available on the 
Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 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, 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 Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The Exchange proposes to amend the appointment cost for options on 
the iShares Russell 2000 Index Fund (IWM). IWM options are part of Tier 
AA and have a fixed appointment cost of .50. The Exchange proposes to 
lower the appointment cost of IWM options to .25. While the appointment 
costs of Tier AA classes are not subject to quarterly rebalancing under 
Rule 8.3(c)(iv), the Exchange regularly reviews the appointment costs 
of Tier AA classes to ensure that they continue to be appropriate. The 
Exchange determines appointment costs of Tier AA classes based on 
several factors, including competitive forces and trading volume.\3\ 
The Exchange believes that the reduced appointment cost of IWM options 
is consistent with its most recent analysis of these factors. The 
Exchange believes that lowering the appointment cost of IWM options 
will encourage Market-Makers to select appointments in that class, and 
thus enhance competition in that class. Additionally, the Exchange 
believes the lower appointment cost will similarly promote competition 
in other classes, as Market-Makers can utilize the excess appointment 
credit of .25 to select an appointment and quote electronically in 
additional Hybrid option classes. The proposed rule change will become 
effective on September 17, 2013.
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    \3\ Similarly, the appointment costs of classes in all tiers 
other than Tier AA are based on trading volume statistics. See Rule 
8.3(c)(i).
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\4\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \5\ requirements that the rules of 
an 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 regulating, 
clearing, settling, processing information with respect to, and 
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. 
Additionally, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \6\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ Id.
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    In particular, the Exchange believes that lowering the appointment 
cost of IWM options will encourage Market-Makers to select appointments 
in that class, which may increase liquidity and enhance competition in 
that class. Additionally, the Exchange believes the lower appointment 
cost will similarly promote competition in other classes, as Market-
Makers can utilize the excess appointment credit of .25 to select an 
appointment and quote electronically in additional Hybrid option 
classes. The Exchange believes this may result in more competitive 
pricing in IWM and other Hybrid option classes, which will promote just 
and equitable principles of trade and ultimately benefit investors. The 
proposed rule change does not result in unfair discrimination, as the 
lower appointment cost for IWM options will apply to all Market-Makers.

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. The lower appointment cost for 
IWM options will apply to all Market-Makers. Any Market-Maker may 
select an appointment in IWM options at the lower appointment cost as 
long as it has sufficient appointment credits to cover the cost. CBOE 
does not believe the proposed rule change will detriment market 
participants on other exchanges, as it relates solely to Market-Maker 
appointment costs of options classes listed on CBOE. Market 
participants on other exchanges are welcome to become CBOE Trading 
Permit Holders as Market-Makers and trade at CBOE if they determine 
that this proposed rule change has made CBOE more attractive or 
favorable.
    CBOE believes that the proposed rule change will relieve any burden 
on, or otherwise promote, competition. As discussed above, the Exchange 
believes the lower appointment cost for IWM options will promote 
competition in IWM options and other option classes.

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 
proposed rule change.

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 \7\ and Rule 19b-4(f)(6) thereunder.\8\ 
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.
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    \7\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \8\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \9\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\10\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may

[[Page 58356]]

become operative immediately upon filing. According to the Exchange, 
the proposed rule change lowers an appointment cost, so it will not 
cause any Market-Maker to be out of compliance with the rules. The 
Exchange stated that waiving the 30-day operative delay period will 
allow Market-Makers with an appointment in IWM to obtain appointments 
in additional options classes in which they want to make markets as 
soon as possible and thus promote competition in those classes without 
undue delay. Based on the Exchange's statements, the Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest. Accordingly, the 
Commission hereby grants the Exchange's request and designates the 
proposal operative upon filing.\11\
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    \9\ Id.
    \10\ 17 CFR 240.19b-4(f)(6)(iii).
    \11\ 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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \12\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \12\ 15 U.S.C. 78s(b)(2)(B).
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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 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-2013-088 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-2013-088. 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 Section, 100 F Street 
NE., Washington, DC 20549-1090 on official business days between the 
hours of 10:00 a.m. and 3:00 p.m. Copies of the filing will also 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-2013-088 and should be submitted on or before October 15, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-23005 Filed 9-20-13; 8:45 am]
BILLING CODE 8011-01-P