[Federal Register Volume 82, Number 36 (Friday, February 24, 2017)]
[Notices]
[Pages 11673-11674]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-03573]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-80060; File No. SR-CBOE-2016-091]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Approving a Proposed Rule Change Related to a
Change to the Trading Symbol for P.M.-Settled Options on the Standard &
Poor's 500 Index
February 17, 2017.
I. Introduction
On December 16, 2016, Chicago Board Options Exchange, Incorporated
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange
Commission (``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change amending CBOE's rules related to
P.M.-settled options on the Standard & Poor's 500 Index (``S&P 500
Index''). The proposed rule change was published for comment in the
Federal Register on January 5, 2017.\3\ The Commission received no
comment letters on the proposed rule change. This order approves the
proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 79712 (December 29,
2016), 82 FR 1383 (January 5, 2017) (``Notice'').
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II. Description of the Proposed Rule Change
CBOE proposes to move P.M.-settled S&P 500 Index options expiring
on the third-Friday of the month (``third-Friday''), currently listed
in a separate class and trading under the symbol ``SPXPM'', to the
Hybrid 3.0 S&P 500 Index options class. In connection with the move,
the Exchange proposes changing the trading symbol for these options
from ``SPXPM'' to ``SPXW.''
The Exchange currently lists A.M.-settled \4\ and P.M.-settled \5\
S&P 500 Index options that have standard third-Friday expirations.
Third-Friday A.M.-settled S&P 500 Index options trade under the symbol
``SPX'' on the Exchange's Hybrid 3.0 platform.\6\ Third-Friday P.M.-
settled S&P 500 Index options trade on the Hybrid Trading System in a
separate options class under the symbol ``SPXPM''.\7\
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\4\ See Rule 24.9(a)(4)(i) (A.M.-settled index options).
\5\ See Rule 24.9.14 (authorizing the Exchange to list P.M.-
settled S&P 500 options for a specified pilot period).
\6\ See Rule 8.3(c)(iii).
\7\ See Rule 8.3(c)(i) (identifying P.M.-settled third-Friday
S&P 500 options as a Tier AA Hybrid Options Class).
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In addition, the Hybrid 3.0 options class also includes nonstandard
P.M.-settled S&P 500 Index options trading under the symbol ``SPXW,''
which may expire on Mondays, Wednesdays, Fridays (other than the third-
Friday-of-the-month) (i.e., nonstandard weekly expirations pursuant to
Rule 24.9(e)), and the last trading day of the month.\8\ Although SPXW
options are included in the Hybrid 3.0 class, they trade on the Hybrid
Trading System.\9\
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\8\ See Rule 24.9(e).
\9\ See Rule 8.14.01.
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In its filing, the Exchange noted that a gap exists currently in
Friday expirations for SPXW as a user of SPXW options cannot roll an
existing SPXW position that expires on a first or second Friday of a
month into a SPXW position that expires on a third-Friday, because the
latter is part of the separate SPXPM class.\10\ Moving SPXPM into the
SPX class under symbol SPXW will remove this gap and allow market
participants to maintain exposure to SPXW Friday expirations throughout
the month if they so choose. The Exchange also noted that offering
access to all P.M.-settled S&P 500 Index options in a single class with
expirations every Friday of the month will provide market participants
with greater flexibility in submitting complex orders using S&P 500
index options.\11\
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\10\ See Notice, supra note 3, at 1384.
\11\ See id.
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In its filing, the Exchange noted its belief that moving SPXPM into
the SPX options class under the symbol SPXW should not adversely impact
market participants.\12\ Specifically, the Exchange noted that it
expects a smooth transition of the SPXPM series to the SPXW symbol
because SPXPM and SPXW options both trade on the Hybrid Trading System
\13\ and the Exchange's rules and systems treat SPXPM and SPXW the same
in many respects.\14\
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\12\ See id.
\13\ See Rules 8.3(c)(i) (identifying P.M.-settled third-Friday
S&P Index options as a Tier AA Hybrid Options Class) and 8.14.01
(allowing the Exchange to authorize a group of series of a class for
trading on the Hybrid Trading System).
\14\ See Notice, supra note 3, at 1384-85 (discussing areas
where trading parameters for SPXPM and SPXW are the same, such as
the minimum increment for bids and offers, and where they differ,
such as the appointment costs).
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Pilot Reports
SPXPM options currently are approved for listing and trading on a
pilot basis.\15\ The Exchange represents that the pilot will continue
under the same terms that established the pilot.\16\
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\15\ See Rule 24.9.14 and Securities Exchange Act Release No.
68457 (December 18, 2012), 77 FR 76135 (December 26, 2012) (SR-CBOE-
2012-120).
\16\ See Notice, supra note 3, at 1385. As part of the pilot,
the Exchange submits quarterly reports and annual reports that
analyze the market impact and trading patterns of third-Friday P.M.-
settled S&P 500 options. The Exchange will modify the reports to
provide the same data and analysis for third-Friday P.M.-settled S&P
500 Index options trading under symbol SPXW that it currently
submits for third-Friday P.M.-settled S&P 500 Index options trading
under symbol SPXPM. See id.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act \17\ and the
rules and regulations thereunder applicable to a national securities
exchange.\18\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act, \19\ which
requires, among other things, that the rules of a national securities
exchange be designed 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.
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\17\ 15 U.S.C. 78f.
\18\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\19\ 15 U.S.C. 78f(b)(5).
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The Exchange represents that trading P.M.-settled third-Friday
expirations as part of the S&P 500 Index options class under the SPXW
symbol, rather than as a separate class under the SPXPM symbol, will
help remove impediments to and perfect the mechanism of a free and open
market by providing market participants with access to a single class
[[Page 11674]]
of P.M.-settled S&P 500 Index options with expirations every Friday of
the month.\20\ The Commission believes that the proposal can thus
benefit investors by providing them with additional trading flexibility
for both simple and complex orders.
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\20\ See Notice, supra note 3, at 1386.
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Further, the Exchange represents that there are minimal differences
in the trading parameters of the two options classes.\21\ Although the
appointment costs for SPXPM and SPX are different, the Exchange
represents that market makers should not be adversely impacted by this
proposal because all market-makers currently appointed in SPXPM also
are appointed in SPX, which confers the right to trade SPXW
options.\22\ The Commission believes that, to the extent the trading
parameters of the two classes are substantively similar, the Exchange's
proposal to move SPXPM options into the SPX options class does not
raise novel issues.
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\21\ See id. at 1384-85.
\22\ See id. at 1385.
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Finally, SPXPM options currently are listed on a pilot basis. As
part of the pilot, the Exchange has been required to submit to the
Commission quarterly reports and annual reports that analyze the market
impact and trading patterns of third-Friday P.M.-settled S&P 500
options. The Exchange represents that it will continue to provide this
data in exactly the same scope and format.\23\ The Commission believes
that the continued pilot and reports will allow the Exchange and the
Commission to monitor for and assess any potential adverse market
impact caused by these P.M.-settled options.
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\23\ See id.
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Based on the Exchange's representations discussed above, and for
the reasons noted above, the Commission believes that the proposal to
move SPXPM options into the SPX options class is consistent with the
Act.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\24\, that the proposed rule change (SR-CBOE-2016-091) be, and hereby
is, approved.
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\24\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-03573 Filed 2-23-17; 8:45 am]
BILLING CODE 8011-01-P