[Federal Register Volume 82, Number 69 (Wednesday, April 12, 2017)]
[Notices]
[Pages 17704-17706]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-07306]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80386; File No. SR-CBOE-2017-025]


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

April 6, 2017.
    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 March 28, 2017, 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 Exchange filed the proposal as a ``non-controversial'' 
proposed rule change pursuant to Section 19(b)(3)(A)(iii) 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)(iii).
    \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 proposes to extend the operation of its SPXPM pilot 
program through May 3, 2018. The text of the proposed rule change is 
provided below.

(additions are italicized; deletions are [bracketed])
* * * * *
Chicago Board Options Exchange, Incorporated
Rules
* * * * *
Rule 24.9. Terms of Index Option Contracts
    No change.
    . . . Interpretations and Policies:
    .01-.13 No change.
    .14 The below provisions will remain in effect until a date 
specified by the Exchange in a Regulatory Circular, which date shall be 
no later than July 31, 2017:
    In addition to A.M.-settled Standard & Poor's 500 Stock Index 
options approved for trading on the Exchange pursuant to Rule 24.9, the 
Exchange may also 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''). The Exchange may also 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''). SPXPM options and P.M.-settled XSP options will be 
listed for trading for a pilot period ending May 3, 201[7]8.
    On the date specified by the Exchange in a Regulatory Circular, 
which date shall be no later than July 31, 2017, the following 
provisions shall be in effect:
    In addition to A.M.-settled Standard & Poor's 500 Stock Index 
options approved for trading on the Exchange pursuant to Rule 24.9, the 
Exchange may also 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 (P.M.-settled third Friday-of-the-month SPX options 
series). The Exchange may also 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''). 
P.M.-settled third Friday-of-the-month SPX options series and P.M.-
settled XSP options will be listed for trading for a pilot period 
ending May 3, 201[7]8.
* * * * *
    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 
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'').\5\ 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

[[Page 17705]]

from closing prices on the last trading day prior to expiration 
(``P.M.-settled'') \6\ (together, SPXPM and P.M.-settled XSP to be 
referred to herein as the ``Pilot Products'').\7\ In January 2014, the 
Exchange filed a proposed rule change that extended the end date of the 
pilot period from February 8, 2014 to November 3, 2014.\8\ 
Additionally, in October 2014, the Exchange filed a proposed rule 
change that extended the end date of the pilot period from November 3, 
2014 to May 3, 2016.\9\ The Exchange then filed a proposed rule change 
that extended the end date of the pilot period from May 3, 2016 to May 
3, 2017.\10\ The Exchange hereby proposes to further extend the end 
date of the pilot period to May 3, 2018.
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    \5\ See Securities Exchange Act Release No. 68888 (February 8, 
2013), 78 FR 10668 (February 14, 2013) (SR-CBOE-2012-120) (the 
``SPXPM Approval Order''). Pursuant to Securities Exchange Act 
Release No. 80060 (February 17, 2017), 82 FR 11673 (February 24, 
2017) (SR-CBOE-2016-091), the Exchange will move third-Friday P.M.-
settled options into the Hybrid 3.0 S&P 500 Index options class and 
as a result, the trading symbol for P.M.-settled S&P 500 Index 
options that have standard third Friday-of-the-month expirations 
will change from ``SPXPM'' to ``SPXW.'' This change will go into 
effect on a date no later than July 31, 2017 and will be announced 
in a Regulatory Circular by the Exchange.
    \6\ 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'').
    \7\ For more information on the Pilot Products or the Pilot 
Program, see the SPXPM Approval Order and the P.M.-settled XSP 
Approval Order.
    \8\ See Securities Exchange Act Release No. 71424 (January 28, 
2014), 79 FR 6249 (February 3, 2014) (SR-CBOE-2014-004).
    \9\ See Securities Exchange Act Release No. 73338 (October 10, 
2014), 79 FR 62502 (October 17, 2014) (SR-CBOE-2014-076).
    \10\ See Securities Exchange Act Release No. 77573 (April 8, 
2016), 81 FR 22148 (April 14, 2016) (SR-CBOE-2016-036).
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    During the course of the Pilot Program and in support of the 
extensions of the Pilot Program, the Exchange submits to the Securities 
and Exchange Commission (the ``Commission'') reports regarding the 
Pilot Program that detail the Exchange's experience with the Pilot 
Program, pursuant to the SPXPM Approval Order and the P.M.-settled XSP 
Approval Order. To date, the Exchange has submitted three annual Pilot 
Program reports to the Commission, as well as various periodic interim 
reports, as required by the Commission while the Pilot Program is in 
effect. The annual reports contain 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. Additionally, for series that exceed certain minimum 
open interest parameters, the annual reports provide analysis of index 
price volatility and share trading activity. The periodic interim 
reports contain some, but not all, of the information contained in the 
annual reports. In providing the annual and periodic interim reports 
(the ``pilot reports'') to the Commission, the Exchange has requested 
confidential treatment of the pilot reports under the Freedom of 
Information Act (``FOIA'').\11\ The confidentiality of the pilot 
reports is subject to the provisions of FOIA.
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    \11\ 5 U.S.C. 552.
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    The pilot reports both contain 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.
    The annual reports also contain the information noted in Items (1) 
through (6) above for Expiration Friday, A.M.-settled, S&P 500 index 
options traded on CBOE, as well as 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.
    Finally, for series that exceed certain minimum parameters, the 
annual reports contain 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.\12\ 
Additionally, all such pilot reports provided by the Exchange will 
continue to include a request for confidential treatment under 
FOIA.\13\
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    \12\ Pursuant to Securities Exchange Act Release No. 75914 
(September 14, 2015), 80 FR 56522 (September 18, 2015) (SR-CBOE-
2015-079), the Exchange added SPXPM and P.M.-settled XSP options to 
the list of products approved for trading during Extended Trading 
Hours (``ETH''). The Exchange will also include the applicable 
information regarding SPXPM and P.M.-settled XSP options that trade 
during ETH in its annual and interim reports.
    \13\ See supra note 6 [sic] and surrounding discussion. If the 
Exchange seeks permanent approval of the pilot program, the Exchange 
recognizes that certain information in the pilot reports may need to 
be made available on a public basis.
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    The Exchange proposes the extension of the Pilot Program in order 
to continue to give 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 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 options. 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, 2018.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') [sic] and the rules 
and regulations thereunder applicable to the Exchange and, in 
particular, the requirements of Section 6(b) of the Act.\14\ 
Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \15\ 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

[[Page 17706]]

the Section 6(b)(5)\16\ requirement that the rules of an exchange not 
be designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ 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 to 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.

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 \17\ and Rule 19b-
4(f)(6) \18\ thereunder.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided 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 business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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    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.
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-2017-025 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-2017-025.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-2017-025 and should be 
submitted on or before May 3, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-07306 Filed 4-11-17; 8:45 am]
 BILLING CODE 8011-01-P