80 FR 60941 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change Relating To Margin Requirements
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 195 (October 8, 2015)
Federal Register Volume 80, Issue 195 (October 8, 2015)
| Page Range | 60941-60944 | |
| FR Document | 2015-25598 |
[Federal Register Volume 80, Number 195 (Thursday, October 8, 2015)] [Notices] [Pages 60941-60944] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-25598] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-76068; File No. SR-CBOE-2015-077] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change Relating To Margin Requirements October 2, 2015. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on September 22, 2015, 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 The Exchange proposes to amend its rules related to margin requirements. The text of the proposed rule change is provided below. (additions are italicized; deletions are [bracketed]) * * * * * Chicago Board Options Exchange, Incorporated Rules * * * * * Rule 12.3. Margin Requirements (a)-(b) No change. (c) Customer Margin Account--Exception. The foregoing requirements are subject to the following exceptions. Nothing in this paragraph (c) shall prevent a broker-dealer from requiring margin from any account in excess of the amounts specified in these provisions. (1)-(4) No change. (5) Initial and Maintenance Margin Requirements on Short Options, Stock Index Warrants, Currency Index Warrants and Currency Warrants. (A)-(B) No change. (C) Related Securities Positions--Listed or OTC Options. Unless otherwise specified, margin must be deposited and maintained in the following amounts for each of the following types of positions. (1) No change. (2) Covered Calls/Covered Puts. (a) No margin [need be]is required [in respect of]for a[n] call (put) option contract[, stock index warrant, currency index warrant] or [currency ]warrant carried in a short position [which is covered by] where there is carried in the same account a long (short) position in equivalent units of the underlying security[ in the case of a call, or a short position in equivalent units of the underlying security in the case of a put, provided, however, in computing margin on such position in the underlying security, the current market value to be used shall not be greater than the exercise price in the case of a call. In the case of a put, in computing margin on the underlying position, margin shall be the amount required by subparagraph (b)(2) of this Rule, plus the amount, if any, by which the exercise price of the put exceeds the current market value of the underlying]. (b) No margin is required for[In respect of an] a call (put) index option contract or warrant [on a market index ]carried in a short position[,] where there is carried in the same account a long (short) position in an (i) underlying stock basket, (ii) index mutual fund, (iii) IPR (as defined in Rule 1.1, Interpretation and Policy .02), or (iv) IPS (as defined in Rule 1.1, Interpretation and Policy .03), that is based on the same index underlying the index option or warrant and having a market value at least equal to the aggregate current index value [subject to the [[Page 60942]] same requirements for computing margin, may serve as cover]. [No margin is required in respect of a call option contract on a Standard and Poor's 500 (S&P 500) market index carried in a short position where there is carried for the same account a long position in the underlying open-end index mutual fund (which shall be specifically designated by the Exchange) having an aggregate market value at least equal to the underlying value of the S&P 500 contracts to be covered.] (c) In order for the exceptions in subparagraphs (a) and (b) above to apply, in computing margin on positions in the underlying security, underlying stock basket, index mutual fund, IPR or IPS, as applicable, (i) in the case of a call, the current market value to be used shall not be greater than the exercise price, and (ii) in the case of a put, margin shall be the amount required by subparagraph (b)(2) of this Rule, plus the amount, if any, by which the exercise price exceeds the current market value. (3)-(4) No change. (d)-(n) No change. . . . Interpretations and Policies: .01-.19 No change. * * * * * The text of the proposed rule change is also available on the Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the Secretary, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Rule 12.3 sets forth margin requirements, and certain exceptions to those requirements, applicable to security positions of Trading Permit Holders' customers. Rule 12.3(c)(5)(C)(2) currently requires no margin for covered calls and puts. Specifically, that rule provides the following:No margin need be required in respect of an option contract, stock index warrant, currency index warrant or currency warrant carried in a short position which is covered by a long position in equivalent units of the underlying security in the case of a call (covered call), or a short position in equivalent units of the underlying security in the case of a put (covered put).\3\ --------------------------------------------------------------------------- \3\ In computing margin on such a position in the underlying security, (a) in the case of a call, the current market value to be used shall not be greater than the exercise price and (b) in the case of a put, margin will be the amount required by Rule 12.3(b)(2), plus the amount, if any, by which the exercise price of the put exceeds the current market value of the underlying. --------------------------------------------------------------------------- An underlying stock basket \4\ may serve as cover for an option contract or warrant on a market index carried short (subject to the same requirements for computing margin). --------------------------------------------------------------------------- \4\ An ``underlying stock basket'' means a group of securities that includes each of the component securities of the applicable index and which meets the following conditions: (a) The quantity of each stock in the basket is proportional to its representation in the index, (b) the total market value of the basket is equal to the underlying index value of the index options or warrants to be covered, (c) the securities in the basket cannot be used to cover more than the number of index options or warrants represented by that value and (d) the securities in the basket shall be unavailable to support any other option or warrant transaction in the account. See Rule 12.3(a)(7). --------------------------------------------------------------------------- No margin is required in respect of a call option on a Standard and Poor's 500 (S&P 500) market index carried in a short position where there is carried for the same account a long position in an underlying open-end index mutual fund (which will be specifically designated by the Exchange) having an aggregate market value at least equal to the underlying value of the S&P 500 contracts to be covered. First, the proposed rule change makes some nonsubstantive changes to Rule 12.3(c)(5)(C)(2). The proposed rule change letters the provisions listed in the first two bulleted paragraphs above to become subparagraphs (2)(a) and (b) and moves part of the provision in the first bulleted paragraph to proposed subparagraph (2)(c) (as discussed below, the proposed rule change deletes the third bulleted paragraph above). Additionally, the proposed rule change revises the language to be consistent throughout these provisions, including clarifying that the underlying security or one of the other permissible offsets must be carried in the same account as the option position. The proposed rule change also makes the language more plain English, eliminates repetitive language, and inserts a missing space in proposed subparagraph (b). Second, the proposed rule change adds circumstances in which covered calls and puts require no margin. The proposed rule change applies the provision in proposed subparagraph (b) to index mutual funds, index portfolio receipts (``IPRs''),\5\ and index portfolio shares (``IPSs''),\6\ in addition to underlying stock baskets, based on the same index underlying the index option and having a market value at least equal to the aggregate current index value.\7\ IPRs and IPSs are commonly referred to as exchange-traded funds (``ETFs''). The proposed rule change also deletes the provision that provides no margin is required in respect of options on a Standard and Poor's 500 (S&P 500) market index carried in a short position where there is carried for the same account a long position in the underlying open-end index mutual fund having an aggregate market value at least equal to the underlying value of the S&P 500 contracts to be covered.\8\ Proposed subparagraph (b) extends the same margin exception to any index option offset by a position in a mutual fund based on the same underlying index, making this current provision duplicative. --------------------------------------------------------------------------- \5\ The term ``index portfolio receipts'' or ``IPRs'' means securities that (a) represent an interest in a unit investment trust (``UIT'') which holds the securities that comprise an index on which a series of IPRs is based; (b) are issued by the UIT in a specified aggregate minimum number in return for a ``Portfolio Deposit'' consisting of specified numbers of shares of stock plus a cash amount; (c) when aggregated in the same specified minimum number, may be redeemed from the UIT which will pay to the redeeming holder the stock and cash then comprising the Portfolio Deposit; and (d) pay holders a periodic cash payment corresponding to the regular cash dividends or distributions declared and paid with respect to the component securities of the stock index on which the IPRs are based, less certain expenses and other charges as set forth in the UIT prospectus. IPRs are ``UIT interests'' within the meaning of the CBOE Rules. See CBOE Rule 1.1, Interpretation and Policy .02. \6\ The term ``index portfolio shares'' or ``IPSs'' means securities that (a) are issued by an open-end management investment company based on a portfolio of stocks or fixed income securities designed to provide investment results that correspond generally to the price and yield performance of a specified foreign or domestic stock index or fixed income securities index; (b) are issued by such an open-end management investment company in a specified aggregate minimum number in return for a deposit of specified number of shares of stock and/or a cash amount, or a specified portfolio of fixed income securities and/or a cash amount, with a value equal to the next determined net asset value; and (c) when aggregated in the same specified minimum number, may be redeemed at a holder's request by such open-end management investment company which will pay to the redeeming holder stock and/or cash, or a specified portfolio of fixed income securities and/or cash with a value equal to the next determined net asset value. See CBOE Rule 1.1, Interpretation and Policy .03. \7\ The term ``aggregate current index value'' means the current index value times the index multiplier. See CBOE Rule 12.3, Interpretation and Policy .07. \8\ The proposed rule change also deletes the requirement for CBOE to specifically designate funds, as it thinks this is no longer necessary due to the continued increase in availability of these types of products, as discussed below. --------------------------------------------------------------------------- [[Page 60943]] Index ETFs and mutual funds function in a similar manner to underlying stock baskets, as they are intended to replicate the performance of their underlying market indexes. The types and diversity of products available on the market that track indexes continues to increase and provide additional investment and hedging opportunities. While an ETF or mutual fund may not meet the definition of an underlying stock basket (for example, some ETFs have a sampling of the securities that comprise the underlying index), it essentially has the same purpose as an underlying stock basket for investors. It closely tracks an underlying index, and thus can function as an offsetting position to an index option overlying the same index in the same way as an underlying stock basket.\9\ --------------------------------------------------------------------------- \9\ The Exchange notes that current federal net capital rules that apply to options define a qualified stock basket to mean a set or basket of stock positions which represents no less than 50% of the capitalization for a high-capitalization or non-high- capitalization diversified market index or no less than 95% of the capitalization of a narrow-based index. Those rules require positions in index options be grouped with related instruments within the option's class and qualified stock baskets in the same index. See 17 CFR 240.15c3-1a(b)(1)(i)(D) and (ii). Similar to a qualified stock basket, while an ETF or mutual fund may not hold every stock included in the underlying market index, its holdings are intended to track the index. --------------------------------------------------------------------------- The Board of Governors of the Federal Reserve System (``FRB'') previously indicated that no margin would be required if an index option (on a broad-based stock index with at least a 99% correlation with the S&P 500 index) is covered by an offsetting position in S&P Index Depositary Receipts (SPDRS), but rather such SPDR positions would be treated as cover in accordance with Section 220.5(c)(3) of Regulation T.\10\ CBOE and another exchange later afforded the same margin treatment to options on the Dow Jones Industrial Average (DJIA) covered by units of the DIAMONDS Trust held in the same account.\11\ Based on this previous guidance from the FRB and the Commission, and in conjunction with the Exchange's current rules, CBOE has applied this margin treatment to short index option positions where there are offsetting positions in an ETF that tracks the same underlying index held in the same margin account (which treatment the Exchange has announced in Regulatory Circulars).\12\ The proposed rule change is consistent with these previous findings and applies this margin treatment generally to all ETFs and mutual funds that overly market indexes, in the same manner that the rules currently apply to underlying stock baskets. Given that the Exchange regularly lists new products, including index options, the Exchange believes it is appropriate to have a more general rule related to margin on these index option products that applies in the same manner rather than identifying this margin treatment in Regulatory Circulars. --------------------------------------------------------------------------- \10\ See Letter dated February 1, 1993 from Michael J. Schoenfeld, FRB, to James McNeil, American Stock Exchange (``Amex''); see also Letter dated August 19, 1992 from James M. McNeil, Amex, to Sharon Lawson, Commission, and Letter dated January 14, 1993 from James M. McNeil, Amex, to Laura M. Homer, FRB. The section of Regulation T referenced in these letters currently corresponds to Section 220.4(b)(4), which provides margin requirements when stock is used as cover for short option positions. \11\ See Letter dated December 3, 1997 from James M. McNeil, Amex, to Scott Holz, FRB, and Letter dated January 8, 1998 from Scott Holz, FRB to James M. McNeil, Amex; see also Letter dated December 16, 1997 from Richard Lewandowski, CBOE, to Mr. Michael Walinskas, Commission. There was no objection from the FRB or the Commission to Amex's or CBOE's extension of the margin treatment previously provided to SPDRS to DIAMONDS. \12\ See Regulatory Circulars RG99-09 (permitting SPDRS and DIAMONDS to cover short positions of options on the S&P 500 (``SPX options'') and on the DJIA (DJX), respectively); RG00-171 (permitting units of iShares S&P 100 Index Fund to cover short positions of options on the S&P 100 Index (OEX)); RG01-119 (permitting Nasdaq-100 Index Tracking Shares to cover short positions of options on the Nasdaq-100 Shares (QQQ), the Nasdaq 100 Index (NDX) or the Mini-Nasdaq 100 Index (MNX); RG02-110 (permitting units of the iShares S&P 500 Fund (IVV) to cover short SPX option positions); and RG07-126 (permitting units of the iShares Russell 200 Index Fund (IWM) to cover short positions of options on the Russell 2000 index (RUT)). --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of section 6(b) of the Act.\13\ Specifically, the Exchange believes the proposed rule change is consistent with the section 6(b)(5) \14\ requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. Additionally, the Exchange believes the proposed rule change is consistent with the section 6(b)(5) \15\ requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \13\ 15 U.S.C. 78f(b). \14\ 15 U.S.C. 78f(b)(5). \15\ Id. --------------------------------------------------------------------------- In particular, the proposed rule change provides for a specific margin treatment related to covered puts and calls to apply to all index options in the same manner. The current rules, together with a no-action letter from the FRB and Regulatory Circulars, provide that no margin is required for a short position in certain specified index options if a long position in an underlying stock basket that meets a specific definition or certain specified ETFs that relate to the index are also held in the same account. The proposed rule change merely expands the availability of this margin treatment to all index options to the extent covered by any ETF based on the same index underlying the index option. Similarly, current rules provide for this margin treatment to apply to SPX options if covered by an approved mutual fund, and the proposed rule change merely expands the availability of this margin treatment to any mutual fund based on the same index underlying the index option. Stock baskets, ETFs and mutual funds that track a reference index can generally provide the same economic function as a security underlying an option. Therefore, the Exchange believes it is appropriate to extend the same ability to secure short index option positions to ETFs and mutual funds that is currently available to underlying stock baskets. Allowing this singular margin treatment to securities providing a similar economic function promotes just and equitable principles of trade. The Exchange believes including this in its rules, rather than specifying single indexes covered by this rule in Regulatory Circulars, and creating this clarity and consistency in margin requirements will remove impediments to and perfect the mechanisms of a free and open market and a national market system. Additionally, proposed subparagraph (b) is substantially similar to the rules of another options exchange.\16\ --------------------------------------------------------------------------- \16\ See NYSE MKT LLC (``NYSE MKT'') Section 7, Rule 462(d)(12)(B)(ii)(C) and Interpretation and Policy .06. --------------------------------------------------------------------------- The Exchange also believes the proposed rule change furthers the objectives of section 6(c)(3) of the Act,\17\ which authorizes the Exchange to, among other things, prescribe standards of financial responsibility or operational capability and standards of training, experience and competence for its Trading Permit Holders and person associated with Trading Permit Holders, as well as Regulation T issued by the [[Page 60944]] FRB. As discussed above, the proposed rule change is merely an extension of current margin standards and is consistent with an FRB no- action letter that permitted the applicable margin treatment for a specific index option and related ETF. --------------------------------------------------------------------------- \17\ 15 U.S.C. 78f(c)(3). --------------------------------------------------------------------------- The proposed nonsubstantive, technical changes provide for more consistent and plain English language in similar rule provisions, which will ultimately benefit investors. 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 proposed rule change applies to all Trading Permit Holders in the same manner and makes the same margin treatment available to all Trading Permit Holders. The proposed rule change is unrelated to competition and instead is intended to bring uniformity to CBOE's margin rules. It is consistent with current rules and interpretations set forth in Regulatory Circulars, as well as regulatory guidance, and is not intended to impact trading on the Exchange. As discussed above, proposed subparagraph (b) is also substantially similar to the rule of another options exchange.\18\ --------------------------------------------------------------------------- \18\ See supra note 16. --------------------------------------------------------------------------- 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 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 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-2015-077 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-2015-077. 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-2015-077 and should be submitted on or before October 29, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\19\ --------------------------------------------------------------------------- \19\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2015-25598 Filed 10-7-15; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 80, No. 195 / Thursday, October 8, 2015 / Notices 60941
Securities and Exchange Commission Written comments are invited on: (a) solicit comments on the proposed rule
(‘‘Commission’’) is soliciting comments Whether the proposed collection of change from interested persons.
on the existing collection of information information is necessary for the proper
I. Self-Regulatory Organization’s
provided for in Rule 17Ad–11 (17 CFR performance of the functions of the
Statement of the Terms of Substance of
240.17Ad–11) under the Securities Commission, including whether the
the Proposed Rule Change
Exchange Act of 1934 (15 U.S.C. 78a et information shall have practical utility;
seq.). The Commission plans to submit (b) the accuracy of the Commission’s The Exchange proposes to amend its
this existing collection of information to estimates of the burden of the proposed rules related to margin requirements.
the Office of Management and Budget collection of information; (c) ways to The text of the proposed rule change is
(‘‘OMB’’) for extension and approval. enhance the quality, utility, and clarity provided below.
Rule 17Ad–11 requires every of the information to be collected; and (additions are italicized; deletions are
registered recordkeeping transfer agent (d) ways to minimize the burden of the [bracketed])
to report to issuers and its appropriate collection of information on
regulatory agency in the event that the * * * * *
respondents, including through the use
aggregate market value of an aged record of automated collection techniques or Chicago Board Options Exchange,
difference exceeds certain thresholds. A other forms of information technology. Incorporated Rules
record difference occurs when an Consideration will be given to * * * * *
issuer’s records do not agree with those comments and suggestions submitted in
of securityholders as indicated, for Rule 12.3. Margin Requirements
writing within 60 days of this
instance, on certificates presented to the publication. (a)–(b) No change.
transfer agent for purchase, redemption (c) Customer Margin Account—Exception.
An agency may not conduct or The foregoing requirements are subject to the
or transfer. An aged record difference is sponsor, and a person is not required to following exceptions. Nothing in this
a record difference that has existed for respond to, a collection of information paragraph (c) shall prevent a broker-dealer
more than 30 calendar days. In addition, under the PRA unless it displays a from requiring margin from any account in
the rule requires every recordkeeping currently valid OMB number. excess of the amounts specified in these
transfer agent to report to its appropriate Please direct your written comments provisions.
regulatory agency in the event of a to: Pamela Dyson, Director/Chief (1)–(4) No change.
failure to post certificate detail to the Information Officer, Securities and (5) Initial and Maintenance Margin
master securityholder file within five Exchange Commission, c/o Remi Pavlik- Requirements on Short Options, Stock Index
business days of the time required by Warrants, Currency Index Warrants and
Simon, 100 F Street NE., Washington, Currency Warrants.
Rule 17Ad–10 (17 CFR 240.10). Also, a DC 20549, or send an email to: PRA_
transfer agent must maintain a copy of (A)–(B) No change.
Mailbox@sec.gov. (C) Related Securities Positions—Listed or
any report required under Rule 17Ad–
Dated: October 2, 2015. OTC Options. Unless otherwise specified,
11 for a period of not less than three margin must be deposited and maintained in
years following the date of the report, Brent J. Fields,
the following amounts for each of the
the first year in an easily accessible Secretary. following types of positions.
place. These recordkeeping [FR Doc. 2015–25600 Filed 10–7–15; 8:45 am] (1) No change.
requirements assist the Commission and BILLING CODE 8011–01–P (2) Covered Calls/Covered Puts.
other regulatory agencies with (a) No margin [need be]is required [in
monitoring transfer agents and ensuring respect of]for a[n] call (put) option contract[,
compliance with the rule. SECURITIES AND EXCHANGE stock index warrant, currency index warrant]
Because the information required by COMMISSION or [currency ]warrant carried in a short
Rule 17Ad–11 is already available to position [which is covered by] where there is
carried in the same account a long (short)
transfer agents, any collection burden [Release No. 34–76068; File No. SR–CBOE– position in equivalent units of the underlying
for small transfer agents is minimal. 2015–077] security[ in the case of a call, or a short
Based on a review of the number of Rule position in equivalent units of the underlying
17Ad–11 reports the Commission, the Self-Regulatory Organizations; security in the case of a put, provided,
Comptroller of the Currency, the Board Chicago Board Options Exchange, however, in computing margin on such
of Governors of the Federal Reserve Incorporated; Notice of Filing of a position in the underlying security, the
System, and the Federal Deposit Proposed Rule Change Relating To current market value to be used shall not be
Insurance Corporation received since Margin Requirements greater than the exercise price in the case of
2012, the Commission estimates that 10 a call. In the case of a put, in computing
respondents will file a total of October 2, 2015. margin on the underlying position, margin
Pursuant to section 19(b)(1) of the shall be the amount required by
approximately 12 reports annually. The
Securities Exchange Act of 1934 (the subparagraph (b)(2) of this Rule, plus the
Commission staff estimates that, on amount, if any, by which the exercise price
average, each report requires ‘‘Act’’),1 and Rule 19b–4 thereunder,2 of the put exceeds the current market value
approximately 30 minutes to prepare. notice is hereby given that on of the underlying].
Therefore, the Commission staff September 22, 2015, Chicago Board (b) No margin is required for[In respect of
estimates that the total annual hourly Options Exchange, Incorporated (the an] a call (put) index option contract or
burden to the entire transfer agent ‘‘Exchange’’ or ‘‘CBOE’’) filed with the warrant [on a market index ]carried in a short
industry is approximately six hours (30 Securities and Exchange Commission position[,] where there is carried in the same
account a long (short) position in an (i)
mstockstill on DSK4VPTVN1PROD with NOTICES
minutes x 12 reports). Assuming an (the ‘‘Commission’’) the proposed rule
average hourly rate of $25 for a transfer change as described in Items I, II, and underlying stock basket, (ii) index mutual
III below, which Items have been fund, (iii) IPR (as defined in Rule 1.1,
agent staff employee, the average total
Interpretation and Policy .02), or (iv) IPS (as
internal cost of the report is $12.50. The prepared by the Exchange. The defined in Rule 1.1, Interpretation and Policy
total annual internal cost of compliance Commission is publishing this notice to .03), that is based on the same index
for the approximated 10 respondents is underlying the index option or warrant and
approximately $150.00 (12 reports x 1 15 U.S.C. 78s(b)(1). having a market value at least equal to the
$12.50). 2 17 CFR 240.19b–4. aggregate current index value [subject to the
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![60942 Federal Register / Vol. 80, No. 195 / Thursday, October 8, 2015 / Notices
same requirements for computing margin, position which is covered by a long to index mutual funds, index portfolio
may serve as cover]. position in equivalent units of the receipts (‘‘IPRs’’),5 and index portfolio
[No margin is required in respect of a call underlying security in the case of a call shares (‘‘IPSs’’),6 in addition to
option contract on a Standard and Poor’s 500 (covered call), or a short position in underlying stock baskets, based on the
(S&P 500) market index carried in a short
position where there is carried for the same equivalent units of the underlying same index underlying the index option
account a long position in the underlying security in the case of a put (covered and having a market value at least equal
open-end index mutual fund (which shall be put).3 to the aggregate current index value.7
specifically designated by the Exchange) • An underlying stock basket 4 may IPRs and IPSs are commonly referred to
having an aggregate market value at least serve as cover for an option contract or as exchange-traded funds (‘‘ETFs’’). The
equal to the underlying value of the S&P 500 warrant on a market index carried short proposed rule change also deletes the
contracts to be covered.] (subject to the same requirements for provision that provides no margin is
(c) In order for the exceptions in computing margin). required in respect of options on a
subparagraphs (a) and (b) above to apply, in • No margin is required in respect of Standard and Poor’s 500 (S&P 500)
computing margin on positions in the a call option on a Standard and Poor’s
underlying security, underlying stock basket, market index carried in a short position
index mutual fund, IPR or IPS, as applicable,
500 (S&P 500) market index carried in where there is carried for the same
(i) in the case of a call, the current market a short position where there is carried account a long position in the
value to be used shall not be greater than the for the same account a long position in underlying open-end index mutual fund
exercise price, and (ii) in the case of a put, an underlying open-end index mutual having an aggregate market value at
margin shall be the amount required by fund (which will be specifically least equal to the underlying value of
subparagraph (b)(2) of this Rule, plus the designated by the Exchange) having an the S&P 500 contracts to be covered.8
amount, if any, by which the exercise price aggregate market value at least equal to
exceeds the current market value.
Proposed subparagraph (b) extends the
the underlying value of the S&P 500 same margin exception to any index
(3)–(4) No change. contracts to be covered.
(d)–(n) No change. option offset by a position in a mutual
First, the proposed rule change makes fund based on the same underlying
. . . Interpretations and Policies:
some nonsubstantive changes to Rule index, making this current provision
.01–.19 No change.
12.3(c)(5)(C)(2). The proposed rule
* * * * * duplicative.
change letters the provisions listed in
The text of the proposed rule change the first two bulleted paragraphs above 5 The term ‘‘index portfolio receipts’’ or ‘‘IPRs’’
is also available on the Exchange’s Web to become subparagraphs (2)(a) and (b) means securities that (a) represent an interest in a
site (http://www.cboe.com/AboutCBOE/ and moves part of the provision in the unit investment trust (‘‘UIT’’) which holds the
CBOELegalRegulatoryHome.aspx), at first bulleted paragraph to proposed securities that comprise an index on which a series
the Exchange’s Office of the Secretary, subparagraph (2)(c) (as discussed below, of IPRs is based; (b) are issued by the UIT in a
and at the Commission’s Public specified aggregate minimum number in return for
the proposed rule change deletes the a ‘‘Portfolio Deposit’’ consisting of specified
Reference Room. third bulleted paragraph above). numbers of shares of stock plus a cash amount; (c)
II. Self-Regulatory Organization’s Additionally, the proposed rule change when aggregated in the same specified minimum
revises the language to be consistent number, may be redeemed from the UIT which will
Statement of the Purpose of, and pay to the redeeming holder the stock and cash then
Statutory Basis for, the Proposed Rule throughout these provisions, including comprising the Portfolio Deposit; and (d) pay
Change clarifying that the underlying security or holders a periodic cash payment corresponding to
one of the other permissible offsets must the regular cash dividends or distributions declared
In its filing with the Commission, the and paid with respect to the component securities
be carried in the same account as the
Exchange included statements of the stock index on which the IPRs are based, less
option position. The proposed rule certain expenses and other charges as set forth in
concerning the purpose of and basis for
change also makes the language more the UIT prospectus. IPRs are ‘‘UIT interests’’ within
the proposed rule change and discussed
plain English, eliminates repetitive the meaning of the CBOE Rules. See CBOE Rule 1.1,
any comments it received on the Interpretation and Policy .02.
language, and inserts a missing space in
proposed rule change. The text of these 6 The term ‘‘index portfolio shares’’ or ‘‘IPSs’’
proposed subparagraph (b). means securities that (a) are issued by an open-end
statements may be examined at the Second, the proposed rule change management investment company based on a
places specified in Item IV below. The adds circumstances in which covered portfolio of stocks or fixed income securities
Exchange has prepared summaries, set calls and puts require no margin. The designed to provide investment results that
forth in sections A, B, and C below, of proposed rule change applies the correspond generally to the price and yield
the most significant aspects of such performance of a specified foreign or domestic stock
provision in proposed subparagraph (b) index or fixed income securities index; (b) are
statements. issued by such an open-end management
A. Self-Regulatory Organization’s 3 In computing margin on such a position in the investment company in a specified aggregate
underlying security, (a) in the case of a call, the minimum number in return for a deposit of
Statement of the Purpose of, and current market value to be used shall not be greater specified number of shares of stock and/or a cash
Statutory Basis for, the Proposed Rule than the exercise price and (b) in the case of a put, amount, or a specified portfolio of fixed income
Change margin will be the amount required by Rule securities and/or a cash amount, with a value equal
12.3(b)(2), plus the amount, if any, by which the to the next determined net asset value; and (c) when
1. Purpose exercise price of the put exceeds the current market aggregated in the same specified minimum number,
value of the underlying. may be redeemed at a holder’s request by such
Rule 12.3 sets forth margin 4 An ‘‘underlying stock basket’’ means a group of open-end management investment company which
requirements, and certain exceptions to securities that includes each of the component will pay to the redeeming holder stock and/or cash,
those requirements, applicable to securities of the applicable index and which meets or a specified portfolio of fixed income securities
security positions of Trading Permit the following conditions: (a) The quantity of each and/or cash with a value equal to the next
stock in the basket is proportional to its determined net asset value. See CBOE Rule 1.1,
mstockstill on DSK4VPTVN1PROD with NOTICES
Holders’ customers. Rule 12.3(c)(5)(C)(2) Interpretation and Policy .03.
representation in the index, (b) the total market
currently requires no margin for covered value of the basket is equal to the underlying index 7 The term ‘‘aggregate current index value’’ means
calls and puts. Specifically, that rule value of the index options or warrants to be the current index value times the index multiplier.
provides the following: covered, (c) the securities in the basket cannot be See CBOE Rule 12.3, Interpretation and Policy .07.
• No margin need be required in used to cover more than the number of index 8 The proposed rule change also deletes the
options or warrants represented by that value and requirement for CBOE to specifically designate
respect of an option contract, stock (d) the securities in the basket shall be unavailable funds, as it thinks this is no longer necessary due
index warrant, currency index warrant to support any other option or warrant transaction to the continued increase in availability of these
or currency warrant carried in a short in the account. See Rule 12.3(a)(7). types of products, as discussed below.
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![60944 Federal Register / Vol. 80, No. 195 / Thursday, October 8, 2015 / Notices
FRB. As discussed above, the proposed including whether the proposed rule SECURITIES AND EXCHANGE
rule change is merely an extension of change is consistent with the Act. COMMISSION
current margin standards and is Comments may be submitted by any of
consistent with an FRB no-action letter the following methods: [Release No. 34–76069; File No. SR–ICEEU–
that permitted the applicable margin 2015–016]
Electronic Comments
treatment for a specific index option
and related ETF. • Use the Commission’s Internet Self-Regulatory Organizations; ICE
The proposed nonsubstantive, comment form (http://www.sec.gov/ Clear Europe Limited; Notice of Filing
technical changes provide for more rules/sro.shtml); or and Immediate Effectiveness of a
consistent and plain English language in
similar rule provisions, which will • Send an email to rule-comments@ Proposed Rule Change Relating to
sec.gov. Please include File Number SR– Clearance of New Natural Gas Futures
ultimately benefit investors.
CBOE–2015–077 on the subject line. Contracts
B. Self-Regulatory Organization’s
Statement on Burden on Competition Paper Comments October 2, 2015.
CBOE does not believe that the • Send paper comments in triplicate Pursuant to section 19(b)(1) of the
proposed rule change will impose any to Secretary, Securities and Exchange Securities Exchange Act of 1934
burden on competition that is not Commission, 100 F Street NE., (‘‘Act’’),1 and Rule 19b–4 thereunder,2
necessary or appropriate in furtherance Washington, DC 20549–1090. notice is hereby given that on
of the purposes of the Act. The September 18, 2015, ICE Clear Europe
proposed rule change applies to all All submissions should refer to File Limited (‘‘ICE Clear Europe’’) filed with
Trading Permit Holders in the same Number SR–CBOE–2015–077. This file the Securities and Exchange
manner and makes the same margin number should be included on the
Commission (‘‘Commission’’) the
treatment available to all Trading Permit subject line if email is used. To help the
proposed rule change as described in
Holders. The proposed rule change is Commission process and review your
Items I, II and III below, which Items
unrelated to competition and instead is comments more efficiently, please use
only one method. The Commission will have been primarily prepared by ICE
intended to bring uniformity to CBOE’s Clear Europe. ICE Clear Europe filed the
margin rules. It is consistent with post all comments on the Commission’s
Internet Web site (http://www.sec.gov/ proposal pursuant to section 19(b)(3)(A)
current rules and interpretations set of the Act,3 and Rules 19b–4(f)(4)(ii) 4
forth in Regulatory Circulars, as well as rules/sro.shtml). Copies of the
submission, all subsequent thereunder, so that the proposal was
regulatory guidance, and is not intended effective upon filing with the
to impact trading on the Exchange. As amendments, all written statements
with respect to the proposed rule Commission. The Commission is
discussed above, proposed publishing this notice to solicit
subparagraph (b) is also substantially change that are filed with the
Commission, and all written comments on the proposed rule change
similar to the rule of another options
communications relating to the from interested persons.
exchange.18
proposed rule change between the
C. Self-Regulatory Organization’s I. Self-Regulatory Organization’s
Commission and any person, other than
Statement on Comments on the those that may be withheld from the Statement of the Terms of Substance of
Proposed Rule Change Received From public in accordance with the the Proposed Rule Change
Members, Participants, or Others provisions of 5 U.S.C. 552, will be The principal purpose of the
The Exchange neither solicited nor available for Web site viewing and proposed rule change is to modify the
received comments on the proposed printing in the Commission’s Public ICE Clear Europe Delivery Procedures
rule change. Reference Room, 100 F Street NE., with respect to the settlement of certain
Washington, DC 20549 on official
III. Date of Effectiveness of the European natural gas futures contracts
business days between the hours of
Proposed Rule Change and Timing for that will be traded on the ICE Endex
10:00 a.m. and 3:00 p.m. Copies of the
Commission Action filing also will be available for market and cleared by ICE Clear Europe.
Within 45 days of the date of inspection and copying at the principal II. Self-Regulatory Organization’s
publication of this notice in the Federal office of the Exchange. All comments Statement of the Purpose of, and
Register or within such longer period received will be posted without change; Statutory Basis for, the Proposed Rule
up to 90 days (i) as the Commission may the Commission does not edit personal Change
designate if it finds such longer period identifying information from
to be appropriate and publishes its submissions. You should submit only In its filing with the Commission, ICE
reasons for so finding or (ii) as to which information that you wish to make Clear Europe included statements
the Exchange consents, the Commission available publicly. All submissions concerning the purpose of and basis for
will: should refer to File Number SR–CBOE– the proposed rule change. The text of
A. By order approve or disapprove 2015–077 and should be submitted on these statements may be examined at
such proposed rule change, or or before October 29, 2015. the places specified in Item IV below.
B. institute proceedings to determine For the Commission, by the Division of ICE Clear Europe has prepared
whether the proposed rule change Trading and Markets, pursuant to delegated summaries, set forth in sections A, B
mstockstill on DSK4VPTVN1PROD with NOTICES
should be disapproved. authority.19 and C below, of the most significant
IV. Solicitation of Comments Brent J. Fields, aspects of such statements.
Interested persons are invited to Secretary.
submit written data, views, and [FR Doc. 2015–25598 Filed 10–7–15; 8:45 am] 1 15 U.S.C. 78s(b)(1).
arguments concerning the foregoing, BILLING CODE 8011–01–P 2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
18 See supra note 16. 19 17 CFR 200.30–3(a)(12). 4 17 CFR 240.19b–4(f)(4)(ii).
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Document Created: 2015-12-15 08:42:22
Document Modified: 2015-12-15 08:42:22
| 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 60941 |
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