[Federal Register Volume 79, Number 201 (Friday, October 17, 2014)]
[Notices]
[Pages 62502-62504]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-24680]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73338; File No. SR-CBOE-2014-076]


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

October 10, 2014.
    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 October 3, 2014, 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 extend a pilot program. The text of the 
proposed rule change is 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On February 8, 2013, the Exchange received approval of a rule 
change that established a Pilot Program that allows the Exchange to 
list options on the S&P 500 Index whose exercise settlement value is 
derived from closing prices on the last trading day prior to expiration 
(``SPXPM'').\3\ On July 31, 2013, the Exchange received approval of a 
rule change that amended the Pilot Program to allow the Exchange to 
list options on the Mini-SPX Index (``XSP'') whose exercise settlement 
value is derived from closing prices on the last trading day prior to 
expiration (``P.M.-settled'') \4\ (together, SPXPM and P.M.-settled XSP 
to be referred to herein as the ``Pilot Products'').\5\ In January 
2014, the Exchange filed a proposed rule change that extended the pilot 
period from February 8, 2014 to November 3, 2014.\6\ The Exchange 
hereby proposes to extend the duration of this pilot period to end on 
May 3, 2016.
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    \3\ See Securities Exchange Act Release No. 68888 (February 8, 
2013), 78 FR 10668 (February 14, 2013) (SR-CBOE-2012-120) (the 
``SPXPM Pilot Program Approval Order'').
    \4\ See Securities Exchange Act Release No. 70087 (July 31, 
2013), 78 FR 47809 (August 6, 2013) (SR-CBOE-2013-055) (the ``P.M.-
settled XSP Approval Order'').
    \5\ For more information on SPXPM, P.M.-settled XSP or the Pilot 
Program, see the SPXPM Approval Order and the P.M.-settled XSP 
Approval Order.
    \6\ See Securities Exchange Act Release No. 71424 (January 28, 
2014), 79 FR 6249 (February 3, 2014) (SR-CBOE-2014-004).
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    During the course of the Pilot Program and in support of the 
extension of the Pilot Program, the Exchange has submitted to the 
Commission reports regarding the Pilot Program which detail the 
Exchange's experience with the Pilot Program, pursuant to the SPXPM 
Approval Order and the P.M.-settled XSP Approval Order. Specifically, 
the Exchange has submitted a Pilot Program report to the Commission 
(the ``annual report''). The annual report has contained an analysis of 
volume, open interest, and trading patterns. The analysis examines 
trading in Pilot Products as well as trading in the securities that 
comprise the underlying index. In addition, for series that exceed 
certain minimum open interest parameters, the annual report provides 
analysis of index price volatility and share trading activity. In 
addition to the annual report, the Exchange provides the Commission 
with periodic interim

[[Page 62503]]

reports while the Pilot Program is in effect that contains some, but 
not all, of the information contained in the annual report. The annual 
report is provided to the Commission on a confidential basis.
    The annual report contains the following volume and open interest 
data:
    (1) Monthly volume aggregated for all trades;
    (2) monthly volume aggregated by expiration date;
    (3) monthly volume for each individual series;
    (4) month-end open interest aggregated for all series;
    (5) month-end open interest for all series aggregated by expiration 
date; and
    (6) month-end open interest for each individual series.

In addition to the annual report, the Exchange provides the Commission 
with interim reports of the information listed in Items (1) through (6) 
above periodically as required by the Commission while the Pilot 
Program is in effect. These interim reports are also provided on a 
confidential basis. The annual report also contains the information 
noted in Items (1) through (6) above for Expiration Friday, A.M.-
settled S&P 500 index options traded on CBOE.
    In addition, the annual report contains the following analysis of 
trading patterns in the Pilot Products options series in the Pilot 
Program:
    (1) A time series analysis of open interest; and
    (2) an analysis of the distribution of trade sizes.
    Also, for series that exceed certain minimum parameters, the annual 
report contains the following analysis related to index price changes 
and underlying share trading volume at the close on Expiration Fridays:
    (1) A comparison of index price changes at the close of trading on 
a given Expiration Friday with comparable price changes from a control 
sample. The data includes a calculation of percentage price changes for 
various time intervals and compare that information to the respective 
control sample. Raw percentage price change data as well as percentage 
price change data normalized for prevailing market volatility, as 
measured by the CBOE Volatility Index (VIX), is provided; and
    (2) a calculation of share volume for a sample set of the component 
securities representing an upper limit on share trading that could be 
attributable to expiring in-the-money series. The data includes a 
comparison of the calculated share volume for securities in the sample 
set to the average daily trading volumes of those securities over a 
sample period.
    The minimum open interest parameters, control sample, time 
intervals, method for randomly selecting the component securities, and 
sample periods are determined by the Exchange and the Commission. In 
proposing to extend the Pilot Program, the Exchange will continue to 
abide by the reporting requirements described herein, as well as in the 
SPXPM Approval Order and the P.M.-settled XSP Approval Order.
    The Exchange proposes the extension of the Pilot Program in order 
to continue to give the Securities and Exchange Commission (the 
``Commission'') more time to consider the impact of the Pilot Program. 
To this point, CBOE believes that the Pilot Program has been well-
received by its Trading Permit Holders (``TPHs'') and the investing 
public and the Exchange would like to continue to provide investors 
with the ability to trade SPXPM and P.M.-settled XSP. All terms 
regarding the trading of the Pilot Products shall continue to operate 
as described in the SPXPM Approval Order and the P.M.-settled XSP 
Approval Order. The Exchange merely proposes herein to extend the term 
of the Pilot Program to May 3, 2016.
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.\7\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \8\ 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) \9\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ Id.
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    In particular, the Exchange believes that the proposed extension of 
the Pilot Program will continue to provide greater opportunities for 
investors. Further, the Exchange believes that it has not experienced 
any adverse effects or meaningful regulatory concerns from the 
operation of the Pilot Program. As such, the Exchange believes that the 
extension of the Pilot Program does not raise any unique or prohibitive 
regulatory concerns. Also, the Exchange believes that such trading has 
not, and will not, adversely impact fair and orderly markets on 
Expiration Fridays for the underlying stocks comprising the S&P 500 
index. The extension of the Pilot Program will continue to provide 
investors with the opportunity to trade the desirable products of SPXPM 
and P.M.-settled XSP, while also providing the Commission further 
opportunity to observe such trading of the Pilot Products.

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 Exchange does not believe 
the continuation of the Pilot Program will impose any unnecessary or 
inappropriate burden on intramarket competition because it will 
continue apply equally to all CBOE market participants and the Pilot 
Products will be available to all CBOE market participants. The 
Exchange believes there is sufficient investor interest and demand in 
the Pilot Program to warrant its extension. The Exchange believes that, 
for the period that the Pilot Program has been in operation, it has 
provided investors with desirable products with which to trade. 
Furthermore, the Exchange believes that it has not experienced any 
adverse market effects or regulatory concerns with respect to the Pilot 
Program. The Exchange further does not believe that the proposed 
extension of the Pilot Program will impose any burden on intermarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act because it only applies to trading on CBOE. To the 
extent that the continued trading of the Pilot Products may make CBOE a 
more attractive marketplace to market participants at other exchanges, 
such market participants may elect to become CBOE market participants.

[[Page 62504]]

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

    Because the foregoing 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 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 \10\ and Rule 19b-
4(f)(6) \11\ thereunder. 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. If the Commission takes such action, the Commission will 
institute proceedings to determine whether the proposed rule change 
should be approved or disapproved.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6)(iii). Rule 19b-4(f)(6)(iii) states 
the Exchange must provide the Commission with written notice of its 
intent to file the proposed rule change, along with a brief 
description and the text of the proposed rule change at least five 
days 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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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-2014-076 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2014-076. 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-2014-076 and should be 
submitted on or before November 7, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-24680 Filed 10-16-14; 8:45 am]
BILLING CODE 8011-01-P