80 FR 12675 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of Proposed Rule Change To List and Trade Options on the MSCI EAFE Index and on the MSCI Emerging Markets Index
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 46 (March 10, 2015)
Federal Register Volume 80, Issue 46 (March 10, 2015)
| Page Range | 12675-12680 | |
| FR Document | 2015-05477 |
[Federal Register Volume 80, Number 46 (Tuesday, March 10, 2015)] [Notices] [Pages 12675-12680] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-05477] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-74430; File No. SR-CBOE-2015-023] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of Proposed Rule Change To List and Trade Options on the MSCI EAFE Index and on the MSCI Emerging Markets Index March 4, 2015. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on February 26, 2015, the 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, II, and III 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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change CBOE proposes to list and trade options that overlie the MSCI EAFE Index and the MSCI Emerging Markets Index (``EAFE options'' and ``EM options''). EAFE and EM options would be P.M., cash-settled contracts with European-style exercise. 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. 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 self-regulatory organization 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. [[Page 12676]] A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this proposed rule change is to permit the Exchange to list and trade options that overlie the MSCI EAFE Index and the MSCI Emerging Markets Index (``EAFE options'' and ``EM options''). EAFE and EM options would be P.M., cash-settled contracts with European-style exercise.\3\ --------------------------------------------------------------------------- \3\ CBOE's proposed rule change is substantially similar to approved filings made by NASDAQ OMX Phlx (``Phlx'') in 2011 and 2012 to list and trade EM and EAFE options, respectively. See Securities Exchange Act Release Nos. 66420 (February 17, 2012), 77 FR 11177 (February 24, 2012) (approving SR-Phlx-2011-179 to list EM options) and 66861 (April 26, 2012), 77 FR 26056 (May 2, 2012) (approving SR- Phlx-2012-28 to list EAFE options). --------------------------------------------------------------------------- MSCI EAFE Index Design, Methodology and Dissemination The MSCI EAFE Index (Europe, Australasia, Far East) is a free, [sic] float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada. The MSCI EAFE Index consists of the following 21 developed market country indexes: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. The MSCI EAFE Index consists of large and midcap components, has 910 constituents and ``covers approximately 85% of the free float-adjusted market capitalization in each country.'' \4\ --------------------------------------------------------------------------- \4\ See MSCI EAFE Index fact sheet (dated December 31, 2014) located at: http://www.msci.com/resources/factsheets/index_fact_sheet/msci-eafe-index-usd-price.pdf. --------------------------------------------------------------------------- The MSCI EAFE Index was launched on December 31, 1969 and is calculated by MSCI Inc. (``MSCI''), which is a provider of investment support tools. The MSCI EAFE Index is calculated in U.S. dollars on a real-time basis from the open of the first market on which the components are traded to the closing of the last marked [sic] on which the components are traded. The methodology used to calculate the MSCI EAFE Index is similar to the methodology used to calculate the value of other benchmark market-capitalization weighted indexes. Specifically, the MSCI EAFE Index is based on the MSCI Global Investable Market Indexes (``GIMI'') Methodology.\5\ The level of the MSCI EAFE Index reflects the free float-adjusted market value of the component stocks relative to a particular base date and is computed by dividing the total market value of the companies in the MSCI EAFE Index by the index divisor. --------------------------------------------------------------------------- \5\ Summary and comprehensive information about the GIMI methodology may be reviewed at: http://www.msci.com/products/indexes/size/all_cap/methodology.html. --------------------------------------------------------------------------- The MSCI EAFE Index is monitored and maintained by MSCI. Adjustments to the MSCI EAFE Index are made on a daily basis with respect to corporate events and dividends. MSCI reviews the MSCI EAFE Index quarterly (February, May, August and November) ``with the objective of reflecting change in the underlying equity markets in a timely manner, while limiting undue index turnover. During the May and November reviews, the [MSCI EAFE Index] is rebalanced and the large and mid capitalization cutoff points are recalculated.'' \6\ --------------------------------------------------------------------------- \6\ See MSCI EAFE Index fact sheet (dated December 31, 2014) located at: http://www.msci.com/resources/factsheets/index_fact_sheet/msci-eafe-index-usd-price.pdf. --------------------------------------------------------------------------- Real-time data is distributed approximately every 15 seconds while the index is being calculated using MSCI's real-time calculation engine to Bloomberg L.P. (``Bloomberg''), FactSet Research Systems, Inc. (``FactSet'') and Thomson Reuters (``Reuters''). End of day data is distributed daily to clients through MSCI as well as through major quotation vendors, including Bloomberg, FactSet, and Reuters. The Exchange notes that the iShares MSCI EAFE exchange traded fund (``ETF'') is an actively traded product. CBOE also lists options overlying that ETF (``EFA options'') and those options are actively traded as well. MSCI EAFE Mini Index (``EAFE'') futures contracts are listed for trading on the Intercontinental Exchange, Inc. (``ICE'') \7\ and other derivatives contracts on the MSCI EAFE Index are listed for trading in Europe. --------------------------------------------------------------------------- \7\ See EAFE futures contract specifications located at: https://globalderivatives.nyx.com/node/10864. --------------------------------------------------------------------------- EM Index Design and Calculation The MSCI EM Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The MSCI EM Index consists of the following 23 emerging market country indexes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. The MSCI EM Index consists of large and midcap components, has 834 constituents and ``covers approximately 85% of the free float-adjusted market capitalization in each country.'' \8\ --------------------------------------------------------------------------- \8\ See MSCI EM Index fact sheet (dated December 31, 2014) located at: http://www.msci.com/resources/factsheets/index_fact_sheet/msci-emerging-markets-index-usd-price.pdf. --------------------------------------------------------------------------- The MSCI EM Index was launched on June 30, 1988 and is calculated by MSCI. The MSCI EM Index is calculated in U.S. dollars on a real-time basis from the open of the first market on which the components are traded to the closing of the last marked [sic] on which the components are traded. The methodology used to calculate the MSCI EM Index is similar to the methodology used to calculate the value of other benchmark market-capitalization weighted indexes. Specifically, the MSCI EM Index is based on the MSCI GIMI Methodology.\9\ The level of the MSCI EM Index reflects the free float-adjusted market value of the component stocks relative to a particular base date and is computed by dividing the total market value of the companies in the MSCI EM Index by the index divisor. --------------------------------------------------------------------------- \9\ Summary and comprehensive information about the GIMI methodology may be reviewed at: http://www.msci.com/products/indexes/size/all_cap/methodology.html. --------------------------------------------------------------------------- The MSCI EM Index is monitored and maintained by MSCI. Adjustments to the MSCI EM Index are made on a daily basis with respect to corporate events and dividends. MSCI reviews the MSCI EM Index quarterly (February, May, August and November) ``with the objective of reflecting change in the underlying equity markets in a timely manner, while limiting undue index turnover. During the May and November reviews, the [MSCI EM Index] is rebalanced and the large and mid capitalization cutoff points are recalculated.'' \10\ --------------------------------------------------------------------------- \10\ See MSCI EM Index fact sheet (dated December 31, 2014) located at: http://www.msci.com/resources/factsheets/index_fact_sheet/msci-emerging-markets-index-usd-price.pdf. --------------------------------------------------------------------------- Real-time data is distributed approximately every 15 seconds using MSCI's real-time calculation engine to Bloomberg, FactSet and Reuters. End of day data is distributed daily to clients through MSCI as well as through major quotation vendors, including Bloomberg, FactSet, and Reuters. The Exchange notes that the iShares MSCI Emerging Markets ETF is an actively traded product. CBOE also lists options overlying that ETF (``EEM options'') and those options are actively traded as well. MSCI Emerging Markets Mini Index (``EM'') futures contracts are listed for trading on ICE \11\ and other [[Page 12677]] derivatives contracts on the MSCI EM Index are listed for trading in Europe. --------------------------------------------------------------------------- \11\ See EM futures contract specifications located at: https://globalderivatives.nyx.com/node/10846. --------------------------------------------------------------------------- Initial and Maintenance Listing Criteria The MSCI EAFE Index and MSCI EM Index each meet the definition of a broad-based index as set forth in Rule 24.1(i)(1).\12\ In addition, the Exchange proposes to create specific initial and maintenance listing criteria for options on the MSCI EAFE Index and on the MSCI EM Index. Specifically, the Exchange proposes to add new Interpretation and Policy .01(a) to Rule 24.2, Designation of the Index, to provide that he [sic] Exchange may trade EAFE and EM options if each of the following conditions is satisfied: (1) The index is broad-based, as defined in Rule 24.1(i)(1); (2) Options on the index are designated as P.M.-settled index options; (3) The index is capitalization-weighted, price-weighted, modified capitalization-weighted or equal dollar- weighted; (4) The index consists of 500 or more component securities; (5) All of the component securities of the index will have a market capitalization of greater than $100 million; (6) No single component security accounts for more than fifteen percent (15%) of the weight of the index, and the five highest weighted component securities in the index do not, in the aggregate, account for more than fifty percent (50%) of the weight of the index; (7) Non-U.S. component securities (stocks or ADRs) that are not subject to comprehensive surveillance agreements do not, in the aggregate, represent more than: (i) Twenty percent (20%) of the weight of the EAFE Index, and (ii) twenty-two and a half percent (22.5%) of the weight of the EM Index; (8) During the time options on the index are traded on the Exchange, the current index value is widely disseminated at least once every fifteen (15) seconds by one or more major market data vendors. However, the Exchange may continue to trade EAFE options after trading in all component securities has closed for the day and the index level is no longer widely disseminated at least once every fifteen (15) seconds by one or more major market data vendors, provided that EAFE futures contracts are trading and prices for those contracts may be used as a proxy for the current index value; (9) The Exchange reasonably believes it has adequate system capacity to support the trading of options on the index, based on a calculation of the Exchange's current Independent System Capacity Advisor (ISCA) allocation and the number of new messages per second expected to be generated by options on such index; and (10) The Exchange has written surveillance procedures in place with respect to surveillance of trading of options on the index. --------------------------------------------------------------------------- \12\ Rule 24.2(i)(1) [sic] defines a broad-based index to mean an index designed to representative [sic] of a stock market as a whole or of a range of companies in unrelated industries. --------------------------------------------------------------------------- Additionally, the Exchange proposes to add new Interpretation and Policy .01(b) to Rule 24.2, Designation of the Index, to set forth the following maintenance listing standards for options on the MSCI EAFE Index and on the MSCI EM Index: (1) The conditions set forth in subparagraphs .01(a)(1), (2), (3), (4), (7), (8), (9) and (10) must continue to be satisfied. The conditions set forth in subparagraphs .01(a)(5) and (6) must be satisfied only as of the first day of January and July in each year; and (2) the total number of component securities in the index may not increase or decrease by more than thirty-five percent (35%) from the number of component securities in the index at the time of its initial listing. In the event a class of index options listed on the Exchange fails to satisfy the maintenance listing standards set forth herein, the Exchange shall not open for trading any additional series of options of that class unless the continued listing of that class of index options has been approved by the Commission under Section 19(b)(2) of the Exchange Act. The Exchange believes that P.M. settlement is appropriate for EAFE and EM options due to the natures of these indexes that encompass multiple markets around the world. As to the MSCI EAFE Index, the components open with the start of trading in certain parts of Asia at approximately 5:00 p.m. (Chicago time) (prior day) and close with the end of trading in Europe at approximately 11:30 a.m. (Chicago time) (next day) as closing prices from Ireland are accounting [sic] for in the closing calculation. The closing MSCI EAFE Index level is distributed by MSCI between approximately 1:00 p.m. and 2:00 p.m. (Chicago time) each trading day. As a result, there will not be a current MSCI EAFE Index level calculated and disseminated during a portion of the time during which EAFE options would be traded (from approximately 11:30 a.m. (Chicago time) to 3:15 p.m. (Chicago time)).\13\ However, the EAFE futures contract that trades on ICE will be trading during this time period.\14\ The Exchange believes that the EAFE futures prices would be a proxy for the current MSCI EAFE Index level. Therefore, the Exchange believes that EAFE options should be permitted to trade after trading in all component securities has closed for the day and the index level is no longer widely disseminated at least once every fifteen (15) seconds by one or more major market data vendors, provided that EAFE futures contracts are trading and prices for those contracts may be used as a proxy for the current index value. --------------------------------------------------------------------------- \13\ The trading hours for multiply listed EFA options are from 8:30 a.m. (Chicago time) to 3:15 p.m. (Chicago time). See EFA Options Product Specifications located at: http://www.cboe.com/micro/efa/specifications.aspx. \14\ The trading hours for EAFE futures are from 6:16 p.m. (Chicago time) to 4:00 p.m. (Chicago time) the following day, Sunday through Friday. See MSCI EAFE Mini Index Future Contract specifications located at: https://globalderivatives.nyx.com/node/10864. --------------------------------------------------------------------------- As to the MSCI EM index, the components open with the start of trading in certain parts of Asia at approximately 6:00 p.m. (Chicago time) (prior day) and close with the end of trading in Mexico and Peru at approximately 3:30 p.m. (Chicago time) (next day) as closing prices from Brazil, Chile, Peru and Mexico, including late prices, are accounted for in the closing calculation. The closing MSCI EM Index level is distributed at approximately 5:00 p.m. (Chicago time) each trading day.\15\ --------------------------------------------------------------------------- \15\ Late prices indicate that while the last real-time stock tick come [sic] in at approximately 3:00 p.m. (Chicago time), the MSCI EM Index will stay open for a few minutes longer to allow any late price information to be obtained. At approximately 3:30 p.m. (Chicago time), the final foreign currency rates are applied and the last real-time MSCI EM Index value is disseminated. --------------------------------------------------------------------------- Because the MSCI EAFE Index and on [sic] the MSCI EM Index each has a large number of component securities, representative of many countries, the Exchange believes that the initial listing requirements are appropriate to trade options on this index [sic]. In addition, similar to other broad based indexes, the Exchange proposes various maintenance requirements, which require continual compliance and periodic compliance. Options Trading Generally, the proposed trading rules for EAFE and EM options would be the same except for their respective trading hours, which the Exchange will describe separately below. Exhibit 3 presents contract specifications for EAFE and EM options. The contract multiplier for EAFE and EM options would be $100. EAFE and EM options would be quoted in index points and one point would equal $100. The minimum tick size for series trading below $3 would be 0.05 ($5.00) and above $3 will be 0.10 ($10.00). Initially, the Exchange would initially list in-, at- and out-of- the-money strike prices. Additional series may be opened [[Page 12678]] for trading as the underlying index level moves up or down.\16\ The minimum strike price interval for EAFE and EM series would be 2.5 points if the strike price is less than 200. When the strike price is 200 or above, strike price intervals would be no less than 5 points.\17\ New series would be permitted to be added up to the fifth business day prior to expiration.\18\ --------------------------------------------------------------------------- \16\ See Rules 24.9(c) [sic] and 24.9.04. These rules set forth the criteria for listing additional series of the same class as the current value of the underlying index moves. Generally, additional series must be ``reasonably related'' to the current index value, which means that strike prices must be within 30% of the current index value. Series exceeding the 30% range may be listed based on demonstrated customer interest. \17\ See proposed amendments to Rule 24.9.01(a) adding EAFE and EM as classes eligible for 2.5 point minimum strikes if the strike price is below 200. \18\ See Rule 24.9.01(c). --------------------------------------------------------------------------- The Exchange would be permitted to list up to twelve near-term expiration months.\19\ The Exchange would also be permitted to list up to ten expirations in Long-Term Index Option Series (``LEAPS'') on the EAFE and EM indexes and those indexes would be eligible for all other expirations permitted for other broad-based indexes, e.g., End of Week/ End of Month Expirations, Short Term Option Series and Quarterly Option Series.\20\ --------------------------------------------------------------------------- \19\ See proposed amendments to Rule 24.9(a)(2). The Exchange is proposing to allow the listing of up to twelve expiration months at any one time for EAFE and EM options. \20\ See, e.g., Rules 24.9(b) (LEAPS), 24.9(e) (End of Week/End of Month Expirations), 24.9(a)(2)(A) (Short Term Option Series) and 24.9(a)(2)(B) (Quarterly Option Series). --------------------------------------------------------------------------- The trading hours for EAFE options would be from 8:30 a.m. (Chicago time) to 3:15 p.m. (Chicago time), except that trading in expiring EAFE options would end at 10:00 a.m. (Chicago time) on their expiration date. The Exchange is proposing that EAFE options trade only during a portion of the day on their expiration date to align the trading hours of expiring EAFE options with expiring EAFE futures. EAFE futures trade on ICE and stop trading at 10:00 a.m. (Chicago time) on the third Friday of the futures contract month.\21\ --------------------------------------------------------------------------- \21\ See EAFE futures contract specifications located at: https://globalderivatives.nyx.com/node/10864. See also Securities Exchange Act Release No. 67070 [sic] (May 29, 2012), 77 FR 33013 (June 4, 2012) (Notice of SR-Phlx-2012-67 to close the trading of expiring EAFE options at 10:00 a.m. (Chicago time) on their expiration date). --------------------------------------------------------------------------- The trading hours for EM options would be from 8:30 a.m. to 3:15 p.m. (Chicago time). Exercise and Settlement The proposed EAFE and EM options would expire on the third Friday of the expiring month. Trading in expiring EAFE options would cease at 10:00 a.m. (Chicago time) on their expiration date and trading in expiring EM options would cease at 3:15 p.m. (Chicago time) on their expiration date. When the last trading day/expiration date is moved because of an Exchange holiday or closure, the last trading day/ expiration date for expiring options would be the immediately preceding business day. Exercise would result in delivery of cash on the business day following expiration. EAFE and EM options would be P.M.-settled. The exercise settlement value would be the official closing values of the MSCI EAFE Index and the MSCI EM Index as reported by MSCI on the last trading day of the expiring contract.\22\ --------------------------------------------------------------------------- \22\ See proposed amendment to Rule 24.1.01(a) [sic] to identify MSCI Inc. as the Reporting Authority for the MSCI EAFE Index (EAFE) and the MSCI Emerging Markets Index (EM). As the designated Reporting Authority for each of these indexes, the disclaimers set forth in Rule 24.14 (Disclaimers) would apply to MSCI Inc. --------------------------------------------------------------------------- The exercise settlement amount would be equal to the difference between the exercise-settlement value and the exercise price of the option, multiplied by the contract multiplier ($100). If the exercise settlement value is not available or the normal settlement procedure cannot be utilized due to a trading disruption or other unusual circumstance, the settlement value would be determined in accordance with the rules and bylaws of The Options Clearing Corporation (``OCC'').\23\ --------------------------------------------------------------------------- \23\ See Rule 24.7. --------------------------------------------------------------------------- Position and Exercise Limits The Exchange proposes to apply the default position limits for broad-based index options to EAFE and EM options. Specifically, the chart set forth in Rule 24.4(a), Position Limits for Broad-Based Index Options, provides that the positions limits applicable to ``other broad-based indexes'' is 25,000 contracts (standard limit/on the same side of the market) and 15,000 contracts (near-term limit). Pursuant to Rule 24.5, Exercise Limits, the exercise limits for EAFE and EM options would be equivalent to the position limits for EAFE and EM options. All position limit hedge exemptions would apply. Margin The Exchange proposes that EAFE and EM options be margined as ``broad-based index'' options, and under CBOE rules, especially, Rule 12.3(c)(5)(A), the margin requirement for a short put or call shall be 100% of the current market value of the contract plus 15% of the ``product of the current index group value and the applicable index multiplier,'' reduced by any out-of-the-money amount. There would be a minimum margin requirement of 100% of the current market value of the contract plus: 10% of the aggregate put exercise price amount in the case of puts, and 10% of the product of the current index group value and the applicable index multiplier in the case of calls. Additional margin may be required pursuant to Rules 12.3(h) and 12.10 (Margin Required is Minimum). Exchange Rules Applicable Except as modified herein, the rules in Chapters I through XIX, XXIV, XXIVA, and XXIVB would equally apply to EAFE and EM options. EAFE and EM options would be subject to the same rules that currently govern other CBOE index options, including sales practice rules,\24\ margin requirements \25\ and trading rules.\26\ --------------------------------------------------------------------------- \24\ See Chapter IX (Doing Business with the Public). \25\ See Chapter XII (Margins). \26\ See, e.g., Chapters IV (Business Conduct), VI (Doing Business on the Trading Floor), Chapter VIII (Market-Makers, Trading Crowds and Modified Trading Systems) and Chapter XXIV (Index Options). --------------------------------------------------------------------------- The Exchange hereby designates EAFE and EM options as eligible for trading as Flexible Exchange Options as provided for in Chapters XXIVA (Flexible Exchange Options) and XXIVB (FLEX Hybrid Trading System).\27\ --------------------------------------------------------------------------- \27\ See proposed amendments to Rules 24A.7, Position Limits and Reporting Requirements, and 24B.7, Position Limits and Reporting Requirements, providing that the position limits for FLEX Index options on the MSCI EAFE Index and on the MSCI Emerging Market [sic] Index would be equal to the position limits for Non-FLEX options on those indexes. Per existing Rules 24A.8, Exercise Limits, and 24B.8, Exercise Limits, the exercise limits for FLEX EAFE and EM option would be equivalent to the position limits for FLEX EAFE and EM options. --------------------------------------------------------------------------- Surveillance and Capacity The Exchange represents that is [sic] has an adequate surveillance program in place for EAFE and EM options and intends to use the same surveillance procedures currently utilized for each of the Exchange's other index options to monitor trading in EAFE and EM options. The Exchange is a member of the Intermarket Surveillance Group (``ISG''), which ``covers major self-regulatory bodies across the world.'' ``The purpose of the ISG is to provide a framework for the sharing of information and the coordination of regulatory efforts among exchanges trading securities and related products to address potential intermarket manipulations and trading abuses. The ISG plays a crucial role in [[Page 12679]] information sharing among markets that trade securities, options on securities, security futures products, and futures and options on broad-based security indexes.'' A list identifying the current ISG members is available at: https://www.isgportal.org/home.html. The Exchange is also an affiliate member of the International Organization of Securities Commissions (``IOSCO''), which has members from over 100 different countries. Each of the countries from which there is a component security in the [sic] both the MSCI EAFE and MSCI EM Indexes is a member of IOSCO.\28\ A list identifying the current ordinary IOSCO members is available at: http://www.iosco.org/about/?subsection=membership&memid=1. Finally, the Exchange has entered into various comprehensive surveillance agreements (``CSAs'') and/or Memoranda of Understanding with various stock exchanges. Given the capitalization of the EAFE and EM Indexes and the deep and liquid markets for the securities underlying these Indexes, the concerns for market manipulation and/or disruption in the underlying markets are greatly reduced. --------------------------------------------------------------------------- \28\ There are three categories of IOSCO members: ordinary, associate and affiliate. In general, the ordinary members (124) are the national securities commissions in their respective jurisdictions. Associate members (12) are usually agencies or branches of government, other than the principal national securities regulator in their respective jurisdictions that have some regulatory competence over securities markets, or intergovernmental international organizations and other international standard-setting bodies, such as the IMF and the World Bank, with a mission related to either the development or the regulation of securities markets. Affiliate members (62) are self-regulatory organizations, stock exchanges, financial market infrastructures, investor protection funds and compensation funds, and other bodies with an appropriate interest in securities regulation. See IOSCO Fact Sheet located at: http://www.iosco.org/about/pdf/IOSCO-Fact-Sheet.pdf. --------------------------------------------------------------------------- The Exchange notes that the EFA and EM ETFs are actively traded products. CBOE also lists options overlying those ETFS (EFA and EEM options) and those options are actively traded as well. CBOE has analyzed its capacity and represents that it believes the Exchange and the Options Price Reporting Authority (``OPRA'') have the necessary systems capacity to handle the additional traffic associated with the listing of new series that would result from the introduction of EAFE and EM options. Because the proposal is limited to two new classes, the Exchange believes that the additional traffic that would be generated from the introduction of EAFE and EM options would be manageable. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the ``Act'') and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.\29\ Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) \30\ requirements that the rules of an exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts, to remove impediments to and to perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. --------------------------------------------------------------------------- \29\ 15 U.S.C. 78f(b). \30\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that the proposed rule change will further the Exchange's goal of introducing new and innovative products to the marketplace. Currently, the Exchange believes that there is unmet market demand for exchange-listed security options listed on these two popular cash indexes. (CBOE understands that Phlx no longer lists EAFE and EM options). As described above, the iShares MSCI EAFE ETF and iShares MSCI Emerging Markets ETF are actively traded products, as are the options on those ETFs. EAFE and EM futures are listed for trading on ICE. In addition, other derivatives contracts on the MSCI EAFE Index and the MSCI EM Index are listed for trading in Europe. As a result, CBOE believes that EAFE and EM options are designed to provide different and additional opportunities for investors to hedge or speculate on the market risk on the MSCI EAFE Index and the MSCI EM Index by listing an option directly on these indexes. The Exchanges believes that both the MSCI EAFE Index and the MSCI EM Index are not easily susceptible to manipulation. Both indexes are broad-based indexes and have high market capitalizations. The MSCI EAFE Index is comprised of 910 component stocks and no single component comprises more than 5% of the index, making it not easily subject to market manipulation. Similarly, the MSCI EM Index is comprised of 834 components stocks and no single component comprises more than 3% to 5% of the index, making it not easily subject to market manipulation. Additionally, the iShares MSCI EAFE and iShares MSCI Emerging Markets ETFs are actively traded products, as are options on those ETFs. Because both indexes have large numbers of component securities, are representative of many countries and trade a large volume with respect to ETFs and options on those ETFs, the Exchange believes that the initial listing requirements are appropriate to trade options on these indexes. In addition, similar to other broad-based indexes, the Exchange proposes to adopt various maintenance criteria, which would require continual compliance and periodic compliance. EAFE and EM options would be subject to the same rules that currently govern other CBOE index options, including sales practice rules,\31\ margin requirements \32\ and trading rules.\33\ The Exchange would apply the same default position limits for broad-based index options to EAFE and EM options. Specifically, the applicable position limits would be 25,000 contracts (standard limit/on the same side of the market) and 15,000 contracts (near-term limit). The exercise limits for EAFE and EM options would be equivalent to the position limits for EAFE and EM options. These same position and exercise limits would apply to FLEX trading. All position limit hedge exemptions would apply. The Exchange would apply existing index option margin requirements for the purchase and sale of EAFE and EM options. --------------------------------------------------------------------------- \31\ See Chapter IX (Doing Business with the Public). \32\ See Chapter XII (Margins). \33\ See, e.g., Chapters IV (Business Conduct), VI (Doing Business on the Trading Floor), Chapter VIII (Market-Makers, Trading Crowds and Modified Trading Systems) and Chapter XXIV (Index Options). --------------------------------------------------------------------------- The Exchange represents that is [sic] has an adequate surveillance program in place for EAFE and EM options. The Exchange also represents that it has the necessary systems capacity to support the new option series. 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 not necessary or appropriate in furtherance of the purposes of the Act. Specifically, CBOE believes that the introduction of new cash index options will enhance competition among market participants and will provide a new type of options to compete with domestic products such as EFA and EEM options, EAFE and EM futures and European-traded derivatives on the MSCI EAFE Index and the MSCI EM Index to the benefit of investors and the marketplace. [[Page 12680]] C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will: A. by order approve or disapprove such proposed rule change, or B. institute proceedings to determine whether the proposed rule change should be disapproved. 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 CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to rule-comments@sec.gov. Please include File Number SR-CBOE-2015-023 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-2015-023. 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 such filing also will be available for inspection and copying at the principal office of the CBOE. 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-2015-023 and should be submitted on or before March 31, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\34\ --------------------------------------------------------------------------- \34\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2015-05477 Filed 3-9-15; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 80, No. 46 / Tuesday, March 10, 2015 / Notices 12675
specifically, the Exchange does not • Send an email to rule-comments@ SECURITIES AND EXCHANGE
believe that the proposed rule changes sec.gov. Please include File Number SR– COMMISSION
will impose any [sic] intramarket CBOE–2015–022 on the subject line.
competition because it [sic] will be [Release No. 34–74430; File No. SR–CBOE–
applicable to all TPHs trading on the Paper Comments
2015–023]
Exchange trading floor. In addition, the • Send paper comments in triplicate
Exchange does not believe the proposed to Brent J. Fields, Secretary, Securities Self-Regulatory Organizations;
changes will impose any intermarket Chicago Board Options Exchange,
and Exchange Commission, 100 F Street
burden because the Exchange trading Incorporated; Notice of Filing of
NE., Washington, DC 20549–1090.
floor will operate in a similar manner Proposed Rule Change To List and
only with more relevant equipment and All submissions should refer to File Trade Options on the MSCI EAFE Index
communication requirements. Number SR–CBOE–2015–022. This file and on the MSCI Emerging Markets
number should be included on the Index
C. Self-Regulatory Organization’s subject line if email is used. To help the
Statement on Comments on the March 4, 2015.
Commission process and review your
Proposed Rule Change Received From
comments more efficiently, please use Pursuant to Section 19(b)(1) of the
Members, Participants, or Others
only one method. The Commission will Securities Exchange Act of 1934 (the
The Exchange neither solicited nor post all comments on the Commission’s ‘‘Act’’ or ‘‘Exchange Act’’),1 and Rule
received comments on the proposed Internet Web site (http://www.sec.gov/ 19b–4 thereunder,2 notice is hereby
rule change. rules/sro.shtml). Copies of the given that on February 26, 2015, the
submission, all subsequent Chicago Board Options Exchange,
III. Date of Effectiveness of the Incorporated (the ‘‘Exchange’’ or
Proposed Rule Change and Timing for amendments, all written statements
with respect to the proposed rule ‘‘CBOE’’) filed with the Securities and
Commission Action Exchange Commission (the
change that are filed with the
Within 45 days of the date of Commission, and all written ‘‘Commission’’) the proposed rule
publication of this notice in the Federal change as described in Items I, II, and
communications relating to the
Register or within such longer period III below, which Items have been
proposed rule change between the
up to 90 days (i) as the Commission may prepared by the Exchange. The
Commission and any person, other than
designate if it finds such longer period Commission is publishing this notice to
those that may be withheld from the solicit comments on the proposed rule
to be appropriate and publishes its public in accordance with the
reasons for so finding or (ii) as to which change from interested persons.
provisions of 5 U.S.C. 552, will be
the Exchange consents, the Commission available for Web site viewing and I. Self-Regulatory Organization’s
will: printing in the Commission’s Public Statement of the Terms of Substance of
A. By order approve or disapprove Reference Room, 100 F Street NE., the Proposed Rule Change
such proposed rule change, or Washington, DC 20549 on official CBOE proposes to list and trade
B. institute proceedings to determine business days between the hours of options that overlie the MSCI EAFE
whether the proposed rule change 10:00 a.m. and 3:00 p.m. Copies of such Index and the MSCI Emerging Markets
should be disapproved. filing also will be available for Index (‘‘EAFE options’’ and ‘‘EM
IV. Solicitation of Comments inspection and copying at the principal options’’). EAFE and EM options would
office of the Exchange. All comments be P.M., cash-settled contracts with
Interested persons are invited to received will be posted without change; European-style exercise. The text of the
submit written data, views, and the Commission does not edit personal proposed rule change is available on the
arguments concerning the foregoing, identifying information from Exchange’s Web site (http://
including whether the proposed rule submissions. You should submit only www.cboe.com/AboutCBOE/
change is consistent with the Act. In information that you wish to make CBOELegalRegulatoryHome.aspx), at
particular, the Commission invites available publicly. All submissions the Exchange’s Office of the Secretary,
comment on CBOE’s proposal to no should refer to File Number SR–CBOE– and at the Commission.
longer require a member to obtain prior 2015–022, and should be submitted on II. Self-Regulatory Organization’s
approval from CBOE before using a new or before March 31, 2015. Statement of the Purpose of, and
communication device on the CBOE
For the Commission, by the Division of Statutory Basis for, the Proposed Rule
floor and instead adopt the open-ended
Trading and Markets, pursuant to delegated Change
approach in proposed paragraph (c) of
Rule 6.23 under which a member would authority.25
In its filing with the Commission, the
be permitted to use any communication Brent J. Fields, self-regulatory organization included
device unless specifically otherwise Secretary. statements concerning the purpose of
prohibited and would not be required to [FR Doc. 2015–05484 Filed 3–9–15; 8:45 am] and basis for the proposed rule change
seek Exchange approval or otherwise BILLING CODE 8011–01–P and discussed any comments it received
register the communication devices on the proposed rule change. The text
with the Exchange in advance of using of those statements may be examined at
them on the CBOE floor. Comments may
mstockstill on DSK4VPTVN1PROD with NOTICES
the places specified in Item IV below.
be submitted by any of the following The Exchange has prepared summaries,
methods: set forth in sections A, B, and C below,
Electronic Comments of the most significant parts of such
statements.
• Use the Commission’s Internet
comment form (http://www.sec.gov/ 1 15 U.S.C. 78s(b)(1).
rules/sro.shtml); or 25 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4.
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A. Self-Regulatory Organization’s The level of the MSCI EAFE Index float-adjusted market capitalization in
Statement of the Purpose of, and the reflects the free float-adjusted market each country.’’ 8
Statutory Basis for, the Proposed Rule value of the component stocks relative The MSCI EM Index was launched on
Change to a particular base date and is June 30, 1988 and is calculated by
computed by dividing the total market MSCI. The MSCI EM Index is calculated
1. Purpose
value of the companies in the MSCI in U.S. dollars on a real-time basis from
The purpose of this proposed rule EAFE Index by the index divisor.
change is to permit the Exchange to list the open of the first market on which
The MSCI EAFE Index is monitored
and trade options that overlie the MSCI the components are traded to the closing
and maintained by MSCI. Adjustments
EAFE Index and the MSCI Emerging of the last marked [sic] on which the
to the MSCI EAFE Index are made on a
Markets Index (‘‘EAFE options’’ and daily basis with respect to corporate components are traded. The
‘‘EM options’’). EAFE and EM options events and dividends. MSCI reviews the methodology used to calculate the MSCI
would be P.M., cash-settled contracts MSCI EAFE Index quarterly (February, EM Index is similar to the methodology
with European-style exercise.3 May, August and November) ‘‘with the used to calculate the value of other
objective of reflecting change in the benchmark market-capitalization
MSCI EAFE Index Design, Methodology weighted indexes. Specifically, the
and Dissemination underlying equity markets in a timely
manner, while limiting undue index MSCI EM Index is based on the MSCI
The MSCI EAFE Index (Europe, turnover. During the May and November GIMI Methodology.9 The level of the
Australasia, Far East) is a free, [sic] reviews, the [MSCI EAFE Index] is MSCI EM Index reflects the free float-
float-adjusted market capitalization rebalanced and the large and mid adjusted market value of the component
index that is designed to measure the capitalization cutoff points are stocks relative to a particular base date
equity market performance of developed recalculated.’’ 6 and is computed by dividing the total
markets, excluding the U.S. & Canada. Real-time data is distributed market value of the companies in the
The MSCI EAFE Index consists of the approximately every 15 seconds while MSCI EM Index by the index divisor.
following 21 developed market country the index is being calculated using The MSCI EM Index is monitored and
indexes: Australia, Austria, Belgium, MSCI’s real-time calculation engine to maintained by MSCI. Adjustments to
Denmark, Finland, France, Germany, Bloomberg L.P. (‘‘Bloomberg’’), FactSet the MSCI EM Index are made on a daily
Hong Kong, Ireland, Israel, Italy, Japan, Research Systems, Inc. (‘‘FactSet’’) and basis with respect to corporate events
the Netherlands, New Zealand, Norway, Thomson Reuters (‘‘Reuters’’). End of and dividends. MSCI reviews the MSCI
Portugal, Singapore, Spain, Sweden, day data is distributed daily to clients EM Index quarterly (February, May,
Switzerland, and the United Kingdom. through MSCI as well as through major August and November) ‘‘with the
The MSCI EAFE Index consists of large quotation vendors, including objective of reflecting change in the
and midcap components, has 910 Bloomberg, FactSet, and Reuters. underlying equity markets in a timely
constituents and ‘‘covers approximately The Exchange notes that the iShares manner, while limiting undue index
85% of the free float-adjusted market MSCI EAFE exchange traded fund turnover. During the May and November
capitalization in each country.’’ 4 (‘‘ETF’’) is an actively traded product. reviews, the [MSCI EM Index] is
The MSCI EAFE Index was launched CBOE also lists options overlying that rebalanced and the large and mid
on December 31, 1969 and is calculated ETF (‘‘EFA options’’) and those options capitalization cutoff points are
by MSCI Inc. (‘‘MSCI’’), which is a are actively traded as well. MSCI EAFE recalculated.’’ 10
provider of investment support tools. Mini Index (‘‘EAFE’’) futures contracts
The MSCI EAFE Index is calculated in are listed for trading on the Real-time data is distributed
U.S. dollars on a real-time basis from Intercontinental Exchange, Inc. (‘‘ICE’’) 7 approximately every 15 seconds using
the open of the first market on which and other derivatives contracts on the MSCI’s real-time calculation engine to
the components are traded to the closing MSCI EAFE Index are listed for trading Bloomberg, FactSet and Reuters. End of
of the last marked [sic] on which the in Europe. day data is distributed daily to clients
components are traded. The through MSCI as well as through major
methodology used to calculate the MSCI EM Index Design and Calculation quotation vendors, including
EAFE Index is similar to the The MSCI EM Index is a free float- Bloomberg, FactSet, and Reuters.
methodology used to calculate the value adjusted market capitalization index The Exchange notes that the iShares
of other benchmark market- that is designed to measure equity MSCI Emerging Markets ETF is an
capitalization weighted indexes. market performance of emerging actively traded product. CBOE also lists
Specifically, the MSCI EAFE Index is markets. The MSCI EM Index consists of options overlying that ETF (‘‘EEM
based on the MSCI Global Investable the following 23 emerging market options’’) and those options are actively
Market Indexes (‘‘GIMI’’) Methodology.5 country indexes: Brazil, Chile, China, traded as well. MSCI Emerging Markets
Colombia, Czech Republic, Egypt, Mini Index (‘‘EM’’) futures contracts are
3 CBOE’s proposed rule change is substantially Greece, Hungary, India, Indonesia, listed for trading on ICE 11 and other
similar to approved filings made by NASDAQ OMX Korea, Malaysia, Mexico, Peru,
Phlx (‘‘Phlx’’) in 2011 and 2012 to list and trade EM
and EAFE options, respectively. See Securities
Philippines, Poland, Qatar, Russia, 8 See MSCI EM Index fact sheet (dated December
Exchange Act Release Nos. 66420 (February 17, South Africa, Taiwan, Thailand, Turkey 31, 2014) located at: http://www.msci.com/
2012), 77 FR 11177 (February 24, 2012) (approving and United Arab Emirates. The MSCI resources/factsheets/index_fact_sheet/msci-
SR–Phlx–2011–179 to list EM options) and 66861 EM Index consists of large and midcap emerging-markets-index-usd-price.pdf.
(April 26, 2012), 77 FR 26056 (May 2, 2012) 9 Summary and comprehensive information about
mstockstill on DSK4VPTVN1PROD with NOTICES
(approving SR–Phlx–2012–28 to list EAFE options).
components, has 834 constituents and the GIMI methodology may be reviewed at:
4 See MSCI EAFE Index fact sheet (dated ‘‘covers approximately 85% of the free http://www.msci.com/products/indexes/size/all_
December 31, 2014) located at: http:// cap/methodology.html.
www.msci.com/resources/factsheets/index_fact_ 6 See MSCI EAFE Index fact sheet (dated 10 See MSCI EM Index fact sheet (dated December
sheet/msci-eafe-index-usd-price.pdf. December 31, 2014) located at: http:// 31, 2014) located at: http://www.msci.com/
5 Summary and comprehensive information about www.msci.com/resources/factsheets/index_fact_ resources/factsheets/index_fact_sheet/msci-
the GIMI methodology may be reviewed at: sheet/msci-eafe-index-usd-price.pdf. emerging-markets-index-usd-price.pdf.
http://www.msci.com/products/indexes/size/all_ 7 See EAFE futures contract specifications located 11 See EM futures contract specifications located
cap/methodology.html. at: https://globalderivatives.nyx.com/node/10864. at: https://globalderivatives.nyx.com/node/10846.
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![Federal Register / Vol. 80, No. 46 / Tuesday, March 10, 2015 / Notices 12677
derivatives contracts on the MSCI EM Capacity Advisor (ISCA) allocation and The Exchange believes that the EAFE
Index are listed for trading in Europe. the number of new messages per second futures prices would be a proxy for the
expected to be generated by options on current MSCI EAFE Index level.
Initial and Maintenance Listing Criteria
such index; and (10) The Exchange has Therefore, the Exchange believes that
The MSCI EAFE Index and MSCI EM written surveillance procedures in place EAFE options should be permitted to
Index each meet the definition of a with respect to surveillance of trading of trade after trading in all component
broad-based index as set forth in Rule options on the index. securities has closed for the day and the
24.1(i)(1).12 In addition, the Exchange Additionally, the Exchange proposes index level is no longer widely
proposes to create specific initial and to add new Interpretation and Policy disseminated at least once every fifteen
maintenance listing criteria for options .01(b) to Rule 24.2, Designation of the (15) seconds by one or more major
on the MSCI EAFE Index and on the Index, to set forth the following market data vendors, provided that
MSCI EM Index. Specifically, the maintenance listing standards for EAFE futures contracts are trading and
Exchange proposes to add new options on the MSCI EAFE Index and on prices for those contracts may be used
Interpretation and Policy .01(a) to Rule the MSCI EM Index: (1) The conditions as a proxy for the current index value.
24.2, Designation of the Index, to set forth in subparagraphs .01(a)(1), (2), As to the MSCI EM index, the
provide that he [sic] Exchange may (3), (4), (7), (8), (9) and (10) must components open with the start of
trade EAFE and EM options if each of continue to be satisfied. The conditions trading in certain parts of Asia at
the following conditions is satisfied: (1) set forth in subparagraphs .01(a)(5) and approximately 6:00 p.m. (Chicago time)
The index is broad-based, as defined in (6) must be satisfied only as of the first (prior day) and close with the end of
Rule 24.1(i)(1); (2) Options on the index day of January and July in each year; trading in Mexico and Peru at
are designated as P.M.-settled index and (2) the total number of component approximately 3:30 p.m. (Chicago time)
options; (3) The index is capitalization- securities in the index may not increase (next day) as closing prices from Brazil,
weighted, price-weighted, modified or decrease by more than thirty-five Chile, Peru and Mexico, including late
capitalization-weighted or equal dollar- percent (35%) from the number of prices, are accounted for in the closing
weighted; (4) The index consists of 500 component securities in the index at the calculation. The closing MSCI EM Index
or more component securities; (5) All of time of its initial listing. In the event a level is distributed at approximately
the component securities of the index class of index options listed on the 5:00 p.m. (Chicago time) each trading
will have a market capitalization of Exchange fails to satisfy the day.15
greater than $100 million; (6) No single maintenance listing standards set forth Because the MSCI EAFE Index and on
component security accounts for more herein, the Exchange shall not open for [sic] the MSCI EM Index each has a
than fifteen percent (15%) of the weight trading any additional series of options large number of component securities,
of the index, and the five highest of that class unless the continued listing representative of many countries, the
weighted component securities in the of that class of index options has been Exchange believes that the initial listing
index do not, in the aggregate, account approved by the Commission under requirements are appropriate to trade
for more than fifty percent (50%) of the Section 19(b)(2) of the Exchange Act. options on this index [sic]. In addition,
weight of the index; (7) Non-U.S. The Exchange believes that P.M. similar to other broad based indexes, the
component securities (stocks or ADRs) settlement is appropriate for EAFE and Exchange proposes various maintenance
that are not subject to comprehensive EM options due to the natures of these requirements, which require continual
surveillance agreements do not, in the indexes that encompass multiple compliance and periodic compliance.
aggregate, represent more than: (i) markets around the world. As to the
MSCI EAFE Index, the components Options Trading
Twenty percent (20%) of the weight of
the EAFE Index, and (ii) twenty-two and open with the start of trading in certain Generally, the proposed trading rules
a half percent (22.5%) of the weight of parts of Asia at approximately 5:00 p.m. for EAFE and EM options would be the
the EM Index; (8) During the time (Chicago time) (prior day) and close same except for their respective trading
options on the index are traded on the with the end of trading in Europe at hours, which the Exchange will describe
Exchange, the current index value is approximately 11:30 a.m. (Chicago time) separately below. Exhibit 3 presents
widely disseminated at least once every (next day) as closing prices from Ireland contract specifications for EAFE and EM
fifteen (15) seconds by one or more are accounting [sic] for in the closing options.
calculation. The closing MSCI EAFE The contract multiplier for EAFE and
major market data vendors. However,
Index level is distributed by MSCI EM options would be $100. EAFE and
the Exchange may continue to trade
between approximately 1:00 p.m. and EM options would be quoted in index
EAFE options after trading in all
2:00 p.m. (Chicago time) each trading points and one point would equal $100.
component securities has closed for the
day. The minimum tick size for series trading
day and the index level is no longer
As a result, there will not be a current below $3 would be 0.05 ($5.00) and
widely disseminated at least once every
MSCI EAFE Index level calculated and above $3 will be 0.10 ($10.00).
fifteen (15) seconds by one or more
disseminated during a portion of the Initially, the Exchange would initially
major market data vendors, provided
time during which EAFE options would list in-, at- and out-of-the-money strike
that EAFE futures contracts are trading
be traded (from approximately 11:30 prices. Additional series may be opened
and prices for those contracts may be
a.m. (Chicago time) to 3:15 p.m.
used as a proxy for the current index
(Chicago time)).13 However, the EAFE the following day, Sunday through Friday. See
value; (9) The Exchange reasonably MSCI EAFE Mini Index Future Contract
futures contract that trades on ICE will
believes it has adequate system capacity specifications located at: https://
mstockstill on DSK4VPTVN1PROD with NOTICES
be trading during this time period.14 globalderivatives.nyx.com/node/10864.
to support the trading of options on the
15 Late prices indicate that while the last real-time
index, based on a calculation of the 13 The trading hours for multiply listed EFA
stock tick come [sic] in at approximately 3:00 p.m.
Exchange’s current Independent System options are from 8:30 a.m. (Chicago time) to 3:15 (Chicago time), the MSCI EM Index will stay open
p.m. (Chicago time). See EFA Options Product for a few minutes longer to allow any late price
12 Rule 24.2(i)(1) [sic] defines a broad-based index Specifications located at: http://www.cboe.com/ information to be obtained. At approximately 3:30
to mean an index designed to representative [sic] micro/efa/specifications.aspx. p.m. (Chicago time), the final foreign currency rates
of a stock market as a whole or of a range of 14 The trading hours for EAFE futures are from are applied and the last real-time MSCI EM Index
companies in unrelated industries. 6:16 p.m. (Chicago time) to 4:00 p.m. (Chicago time) value is disseminated.
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![12678 Federal Register / Vol. 80, No. 46 / Tuesday, March 10, 2015 / Notices
for trading as the underlying index level EAFE options would cease at 10:00 a.m. ‘‘product of the current index group
moves up or down.16 The minimum (Chicago time) on their expiration date value and the applicable index
strike price interval for EAFE and EM and trading in expiring EM options multiplier,’’ reduced by any out-of-the-
series would be 2.5 points if the strike would cease at 3:15 p.m. (Chicago time) money amount. There would be a
price is less than 200. When the strike on their expiration date. When the last minimum margin requirement of 100%
price is 200 or above, strike price trading day/expiration date is moved of the current market value of the
intervals would be no less than 5 because of an Exchange holiday or contract plus: 10% of the aggregate put
points.17 New series would be permitted closure, the last trading day/expiration exercise price amount in the case of
to be added up to the fifth business day date for expiring options would be the puts, and 10% of the product of the
prior to expiration.18 immediately preceding business day. current index group value and the
The Exchange would be permitted to Exercise would result in delivery of applicable index multiplier in the case
list up to twelve near-term expiration cash on the business day following of calls. Additional margin may be
months.19 The Exchange would also be expiration. EAFE and EM options would required pursuant to Rules 12.3(h) and
permitted to list up to ten expirations in be P.M.-settled. The exercise settlement 12.10 (Margin Required is Minimum).
Long-Term Index Option Series value would be the official closing
(‘‘LEAPS’’) on the EAFE and EM Exchange Rules Applicable
values of the MSCI EAFE Index and the
indexes and those indexes would be MSCI EM Index as reported by MSCI on Except as modified herein, the rules
eligible for all other expirations the last trading day of the expiring in Chapters I through XIX, XXIV,
permitted for other broad-based indexes, contract.22 XXIVA, and XXIVB would equally
e.g., End of Week/End of Month The exercise settlement amount apply to EAFE and EM options. EAFE
Expirations, Short Term Option Series would be equal to the difference and EM options would be subject to the
and Quarterly Option Series.20 between the exercise-settlement value same rules that currently govern other
The trading hours for EAFE options and the exercise price of the option, CBOE index options, including sales
would be from 8:30 a.m. (Chicago time) multiplied by the contract multiplier practice rules,24 margin requirements 25
to 3:15 p.m. (Chicago time), except that ($100). and trading rules.26
trading in expiring EAFE options would If the exercise settlement value is not The Exchange hereby designates
end at 10:00 a.m. (Chicago time) on their available or the normal settlement EAFE and EM options as eligible for
expiration date. The Exchange is procedure cannot be utilized due to a trading as Flexible Exchange Options as
proposing that EAFE options trade only trading disruption or other unusual provided for in Chapters XXIVA
during a portion of the day on their circumstance, the settlement value (Flexible Exchange Options) and XXIVB
expiration date to align the trading would be determined in accordance (FLEX Hybrid Trading System).27
hours of expiring EAFE options with with the rules and bylaws of The
expiring EAFE futures. EAFE futures Surveillance and Capacity
Options Clearing Corporation
trade on ICE and stop trading at 10:00 (‘‘OCC’’).23 The Exchange represents that is [sic]
a.m. (Chicago time) on the third Friday has an adequate surveillance program in
of the futures contract month.21 Position and Exercise Limits place for EAFE and EM options and
The trading hours for EM options The Exchange proposes to apply the intends to use the same surveillance
would be from 8:30 a.m. to 3:15 p.m. default position limits for broad-based procedures currently utilized for each of
(Chicago time). index options to EAFE and EM options. the Exchange’s other index options to
Exercise and Settlement Specifically, the chart set forth in Rule monitor trading in EAFE and EM
24.4(a), Position Limits for Broad-Based options.
The proposed EAFE and EM options Index Options, provides that the The Exchange is a member of the
would expire on the third Friday of the positions limits applicable to ‘‘other Intermarket Surveillance Group (‘‘ISG’’),
expiring month. Trading in expiring broad-based indexes’’ is 25,000 which ‘‘covers major self-regulatory
contracts (standard limit/on the same bodies across the world.’’ ‘‘The purpose
16 See Rules 24.9(c) [sic] and 24.9.04. These rules
side of the market) and 15,000 contracts of the ISG is to provide a framework for
set forth the criteria for listing additional series of
the same class as the current value of the (near-term limit). Pursuant to Rule 24.5, the sharing of information and the
underlying index moves. Generally, additional Exercise Limits, the exercise limits for coordination of regulatory efforts among
series must be ‘‘reasonably related’’ to the current EAFE and EM options would be exchanges trading securities and related
index value, which means that strike prices must products to address potential
be within 30% of the current index value. Series
equivalent to the position limits for
exceeding the 30% range may be listed based on EAFE and EM options. All position intermarket manipulations and trading
demonstrated customer interest. limit hedge exemptions would apply. abuses. The ISG plays a crucial role in
17 See proposed amendments to Rule 24.9.01(a)
adding EAFE and EM as classes eligible for 2.5 Margin 24 See Chapter IX (Doing Business with the
point minimum strikes if the strike price is below Public).
200.
The Exchange proposes that EAFE
25 See Chapter XII (Margins).
18 See Rule 24.9.01(c). and EM options be margined as ‘‘broad- 26 See, e.g., Chapters IV (Business Conduct), VI
19 See proposed amendments to Rule 24.9(a)(2). based index’’ options, and under CBOE (Doing Business on the Trading Floor), Chapter VIII
The Exchange is proposing to allow the listing of rules, especially, Rule 12.3(c)(5)(A), the (Market-Makers, Trading Crowds and Modified
up to twelve expiration months at any one time for margin requirement for a short put or Trading Systems) and Chapter XXIV (Index
EAFE and EM options. Options).
20 See, e.g., Rules 24.9(b) (LEAPS), 24.9(e) (End of
call shall be 100% of the current market
27 See proposed amendments to Rules 24A.7,
Week/End of Month Expirations), 24.9(a)(2)(A) value of the contract plus 15% of the Position Limits and Reporting Requirements, and
mstockstill on DSK4VPTVN1PROD with NOTICES
(Short Term Option Series) and 24.9(a)(2)(B) 24B.7, Position Limits and Reporting Requirements,
(Quarterly Option Series). 22 See proposed amendment to Rule 24.1.01(a)
providing that the position limits for FLEX Index
21 See EAFE futures contract specifications [sic] to identify MSCI Inc. as the Reporting options on the MSCI EAFE Index and on the MSCI
located at: https://globalderivatives.nyx.com/node/ Authority for the MSCI EAFE Index (EAFE) and the Emerging Market [sic] Index would be equal to the
10864. See also Securities Exchange Act Release MSCI Emerging Markets Index (EM). As the position limits for Non-FLEX options on those
No. 67070 [sic] (May 29, 2012), 77 FR 33013 (June designated Reporting Authority for each of these indexes. Per existing Rules 24A.8, Exercise Limits,
4, 2012) (Notice of SR-Phlx-2012–67 to close the indexes, the disclaimers set forth in Rule 24.14 and 24B.8, Exercise Limits, the exercise limits for
trading of expiring EAFE options at 10:00 a.m. (Disclaimers) would apply to MSCI Inc. FLEX EAFE and EM option would be equivalent to
(Chicago time) on their expiration date). 23 See Rule 24.7. the position limits for FLEX EAFE and EM options.
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![Federal Register / Vol. 80, No. 46 / Tuesday, March 10, 2015 / Notices 12679
information sharing among markets that 2. Statutory Basis indexes have large numbers of
trade securities, options on securities, The Exchange believes the proposed component securities, are representative
security futures products, and futures rule change is consistent with the of many countries and trade a large
and options on broad-based security Securities Exchange Act of 1934 (the volume with respect to ETFs and
indexes.’’ A list identifying the current ‘‘Act’’) and the rules and regulations options on those ETFs, the Exchange
ISG members is available at: https:// thereunder applicable to the Exchange believes that the initial listing
www.isgportal.org/home.html. and, in particular, the requirements of requirements are appropriate to trade
The Exchange is also an affiliate Section 6(b) of the Act.29 Specifically, options on these indexes. In addition,
member of the International the Exchange believes the proposed rule similar to other broad-based indexes,
Organization of Securities Commissions change is consistent with the Section the Exchange proposes to adopt various
(‘‘IOSCO’’), which has members from 6(b)(5) 30 requirements that the rules of maintenance criteria, which would
over 100 different countries. Each of the an exchange be designed to promote just require continual compliance and
countries from which there is a and equitable principles of trade, to periodic compliance.
component security in the [sic] both the prevent fraudulent and manipulative EAFE and EM options would be
MSCI EAFE and MSCI EM Indexes is a acts, to remove impediments to and to subject to the same rules that currently
member of IOSCO.28 A list identifying perfect the mechanism for a free and govern other CBOE index options,
the current ordinary IOSCO members is open market and a national market including sales practice rules,31 margin
available at: http://www.iosco.org/ system, and, in general, to protect requirements 32 and trading rules.33 The
about/ investors and the public interest. Exchange would apply the same default
?subsection=membership&memid=1. The Exchange believes that the position limits for broad-based index
Finally, the Exchange has entered into proposed rule change will further the options to EAFE and EM options.
various comprehensive surveillance Exchange’s goal of introducing new and Specifically, the applicable position
agreements (‘‘CSAs’’) and/or innovative products to the marketplace. limits would be 25,000 contracts
Memoranda of Understanding with Currently, the Exchange believes that (standard limit/on the same side of the
various stock exchanges. Given the there is unmet market demand for market) and 15,000 contracts (near-term
capitalization of the EAFE and EM exchange-listed security options listed limit). The exercise limits for EAFE and
Indexes and the deep and liquid on these two popular cash indexes. EM options would be equivalent to the
markets for the securities underlying (CBOE understands that Phlx no longer position limits for EAFE and EM
these Indexes, the concerns for market lists EAFE and EM options). As options. These same position and
manipulation and/or disruption in the described above, the iShares MSCI exercise limits would apply to FLEX
underlying markets are greatly reduced. EAFE ETF and iShares MSCI Emerging trading. All position limit hedge
The Exchange notes that the EFA and Markets ETF are actively traded exemptions would apply. The Exchange
EM ETFs are actively traded products. products, as are the options on those would apply existing index option
CBOE also lists options overlying those ETFs. EAFE and EM futures are listed margin requirements for the purchase
ETFS (EFA and EEM options) and those for trading on ICE. In addition, other and sale of EAFE and EM options.
options are actively traded as well. derivatives contracts on the MSCI EAFE
Index and the MSCI EM Index are listed The Exchange represents that is [sic]
CBOE has analyzed its capacity and has an adequate surveillance program in
for trading in Europe. As a result, CBOE
represents that it believes the Exchange place for EAFE and EM options. The
believes that EAFE and EM options are
and the Options Price Reporting Exchange also represents that it has the
designed to provide different and
Authority (‘‘OPRA’’) have the necessary necessary systems capacity to support
additional opportunities for investors to
systems capacity to handle the the new option series.
hedge or speculate on the market risk on
additional traffic associated with the
the MSCI EAFE Index and the MSCI EM B. Self-Regulatory Organization’s
listing of new series that would result
Index by listing an option directly on Statement on Burden on Competition
from the introduction of EAFE and EM
these indexes.
options. Because the proposal is limited CBOE does not believe that the
The Exchanges believes that both the
to two new classes, the Exchange proposed rule change will impose any
MSCI EAFE Index and the MSCI EM
believes that the additional traffic that burden on competition not necessary or
Index are not easily susceptible to
would be generated from the appropriate in furtherance of the
manipulation. Both indexes are broad-
introduction of EAFE and EM options purposes of the Act. Specifically, CBOE
based indexes and have high market
would be manageable. believes that the introduction of new
capitalizations. The MSCI EAFE Index
is comprised of 910 component stocks cash index options will enhance
28 There are three categories of IOSCO members:
and no single component comprises competition among market participants
ordinary, associate and affiliate. In general, the
ordinary members (124) are the national securities more than 5% of the index, making it and will provide a new type of options
commissions in their respective jurisdictions. not easily subject to market to compete with domestic products such
Associate members (12) are usually agencies or manipulation. Similarly, the MSCI EM as EFA and EEM options, EAFE and EM
branches of government, other than the principal futures and European-traded derivatives
national securities regulator in their respective
Index is comprised of 834 components
jurisdictions that have some regulatory competence stocks and no single component on the MSCI EAFE Index and the MSCI
over securities markets, or intergovernmental comprises more than 3% to 5% of the EM Index to the benefit of investors and
international organizations and other international index, making it not easily subject to the marketplace.
standard-setting bodies, such as the IMF and the
mstockstill on DSK4VPTVN1PROD with NOTICES
World Bank, with a mission related to either the
market manipulation.
development or the regulation of securities markets. Additionally, the iShares MSCI EAFE 31 See Chapter IX (Doing Business with the
Affiliate members (62) are self-regulatory and iShares MSCI Emerging Markets Public).
32 See Chapter XII (Margins).
organizations, stock exchanges, financial market ETFs are actively traded products, as are
infrastructures, investor protection funds and 33 See, e.g., Chapters IV (Business Conduct), VI
compensation funds, and other bodies with an
options on those ETFs. Because both (Doing Business on the Trading Floor), Chapter VIII
appropriate interest in securities regulation. See (Market-Makers, Trading Crowds and Modified
29 15 U.S.C. 78f(b).
IOSCO Fact Sheet located at: http://www.iosco.org/ Trading Systems) and Chapter XXIV (Index
about/pdf/IOSCO-Fact-Sheet.pdf. 30 15 U.S.C. 78f(b)(5). Options).
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![12680 Federal Register / Vol. 80, No. 46 / Tuesday, March 10, 2015 / Notices
C. Self-Regulatory Organization’s provisions of 5 U.S.C. 552, will be Act of 1934, that trading in the
Statement on Comments on the available for Web site viewing and securities of the above-listed companies
Proposed Rule Change Received From printing in the Commission’s Public is suspended for the period from 9:30
Members, Participants, or Others Reference Room, 100 F Street NE., a.m. EST on March 5, 2015, through
No written comments were solicited Washington, DC 20549, on official 11:59 p.m. EDT on March 18, 2015.
or received with respect to the proposed business days between the hours of By the Commission.
rule change. 10:00 a.m. and 3:00 p.m. Copies of such Jill M. Peterson,
filing also will be available for Assistant Secretary.
III. Date of Effectiveness of the inspection and copying at the principal
[FR Doc. 2015–05516 Filed 3–6–15; 11:15 am]
Proposed Rule Change and Timing for office of the CBOE. All comments
BILLING CODE 8011–01–P
Commission Action received will be posted without change;
Within 45 days of the date of the Commission does not edit personal
publication of this notice in the Federal identifying information from SECURITIES AND EXCHANGE
Register or within such longer period submissions. You should submit only COMMISSION
up to 90 days (i) as the Commission may information that you wish to make
available publicly. All submissions [Release No. 34–74422; File No SR–CBOE–
designate if it finds such longer period 2015–020]
to be appropriate and publishes its should refer to File Number SR–CBOE–
reasons for so finding or (ii) as to which 2015–023 and should be submitted on
Self-Regulatory Organizations;
the Exchange consents, the Commission or before March 31, 2015.
Chicago Board Options Exchange,
will: For the Commission, by the Division of Incorporated; Notice of Filing and
A. by order approve or disapprove Trading and Markets, pursuant to delegated Immediate Effectiveness of a Proposed
such proposed rule change, or authority.34 Rule Change To Amend Its Fees
B. institute proceedings to determine Brent J. Fields, Schedule To Adopt Fees for Extended
whether the proposed rule change Secretary. Trading Hours
should be disapproved. [FR Doc. 2015–05477 Filed 3–9–15; 8:45 am]
March 4, 2015.
IV. Solicitation of Comments BILLING CODE 8011–01–P
Pursuant to Section 19(b)(1) of the
Interested persons are invited to Securities Exchange Act of 1934 (the
submit written data, views, and SECURITIES AND EXCHANGE ‘‘Act’’),1 and Rule 19b–4 thereunder,2
arguments concerning the foregoing, COMMISSION notice is hereby given that on February
including whether the proposed rule 18, 2015, Chicago Board Options
[File No. 500–1] Exchange, Incorporated (the ‘‘Exchange’’
change is consistent with the Act.
Comments may be submitted by any of or ‘‘CBOE’’) filed with the Securities
Order of Suspension of Trading; In the and Exchange Commission (the
the following methods: Matter of Aspire International, Inc., ‘‘Commission’’) the proposed rule
Electronic Comments Border Management, Inc., and change as described in Items I, II, and
Landmark Energy Enterprises, Inc.
• Use the Commission’s Internet III below, which Items have been
comment form (http://www.sec.gov/ March 5, 2015. prepared by the Exchange. The
rules/sro.shtml); or It appears to the Securities and Commission is publishing this notice to
• Send an email to rule-comments@ Exchange Commission that there is a solicit comments on the proposed rule
sec.gov. Please include File Number SR– lack of current and accurate information change from interested persons.
CBOE–2015–023 on the subject line. concerning the securities of Aspire I. Self-Regulatory Organization’s
Paper Comments International, Inc. because it has not Statement of the Terms of Substance of
filed any periodic reports since the the Proposed Rule Change
• Send paper comments in triplicate period ended December 31, 2010.
to Secretary, Securities and Exchange The Exchange proposes to adopt fees
It appears to the Securities and for its Extended Trading Hours session.
Commission, 100 F Street NE., Exchange Commission that there is a
Washington, DC 20549–1090. The text of the proposed rule change is
lack of current and accurate information available on the Exchange’s Web site
All submissions should refer to File concerning the securities of Border (http://www.cboe.com/AboutCBOE/
Number SR–CBOE–2015–023. This file Management, Inc. because it has not CBOELegalRegulatoryHome.aspx), at
number should be included on the filed any periodic reports since the the Exchange’s Office of the Secretary,
subject line if email is used. To help the period ended September 30, 2011. and at the Commission’s Public
Commission process and review your It appears to the Securities and Reference Room.
comments more efficiently, please use Exchange Commission that there is a
only one method. The Commission will lack of current and accurate information II. Self-Regulatory Organization’s
post all comments on the Commission’s concerning the securities of Landmark Statement of the Purpose of, and
Internet Web site (http://www.sec.gov/ Energy Enterprises, Inc. because it has Statutory Basis for, the Proposed Rule
rules/sro.shtml). Copies of the not filed any periodic reports since the Change
submission, all subsequent period ended July 31, 2012. In its filing with the Commission, the
amendments, all written statements The Commission is of the opinion that Exchange included statements
mstockstill on DSK4VPTVN1PROD with NOTICES
with respect to the proposed rule the public interest and the protection of concerning the purpose of and basis for
change that are filed with the investors require a suspension of trading the proposed rule change and discussed
Commission, and all written in the securities of the above-listed any comments it received on the
communications relating to the companies. proposed rule change. The text of these
proposed rule change between the Therefore, it is ordered, pursuant to statements may be examined at the
Commission and any person, other than Section 12(k) of the Securities Exchange
those that may be withheld from the 1 15 U.S.C. 78s(b)(1).
public in accordance with the 34 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4.
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Document Created: 2018-02-21 09:34:47
Document Modified: 2018-02-21 09:34:47
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 80 FR 12675 |
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