80 FR 63598 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to End of Week/End of Month Expirations Pilot Program

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 202 (October 20, 2015)

[Federal Register Volume 80, Number 202 (Tuesday, October 20, 2015)]
[Notices]
[Pages 63598-63600]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-26520]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76149; File No. SR-CBOE-2015-085]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change to End of Week/End of Month Expirations Pilot Program

October 14, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on October 1, 2015, Chicago Board Options Exchange, Incorporated 
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Exchange filed the proposal as a ``non-controversial'' 
proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 
\3\ and Rule 19b-4(f)(6) thereunder.\4\ The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CBOE proposes to amend Rule 24.9(e) (End of Week/End of Month 
Expirations Pilot Program (``Program'')) by clarifying the maximum 
numbers of expirations permitted to be listed under the Program and by 
deleting outdated text from Rule 24.9(e). The Exchange is not proposing 
to change the substantive content of Rule 24.9(e).
    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 Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On September 14, 2010, the Commission approved CBOE's proposal to 
establish a pilot program under which CBOE is permitted to list P.M.-
settled options on broad-based indexes to expire on (a) any Friday of 
the month, other than the third Friday-of-the-month, and (b) the last 
trading day of the month.\5\ The terms of the Program are set forth in 
Rule 24.9(e) and End of Week Expirations (``EOWs'') and End of Month 
Expirations (``EOMs'') are permitted on any broad-based index that is 
eligible for standard options trading. EOWs and EOMs are cash-settled 
expirations with European-style exercise, and are subject to the same 
rules that govern the trading of standard index options.
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    \5\ See Securities Exchange Act Release No. 62911 (September 14, 
2010), 75 FR 57539 (September 21, 2010) (order approving SR-CBOE-
2009-075).
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Maximum Numbers of Expirations Permitted Under Program
    This current filing proposes to amend Rule 24.9(e) by clarifying 
the maximum numbers of expirations permitted to be listed under the 
Program. In support of this change, CBOE states that EOWs and EOMs are 
subject to the same rules governing standard options on the same broad-
based index class. In the filing to establish the Program, CBOE 
provided example expirations for EOWs and EOMs and cited to Rule 
24.9(a)(2) as the specific rule governing the expiration months that 
may be listed for index options.\6\ Because Rule 24.9(a)(2) is phrased 
in terms of ``standard monthly expirations'' (vs. the more general term 
``expirations''), CBOE believes that some ambiguity may exist as to the 
maximum numbers of EOWs and EOMs that may be listed under the Program. 
In addition, CBOE believes that providing for the maximum numbers of 
expirations permitted under the Program within Rule 24.9(e) would make 
that Program clearer on its face by eliminating any potential ambiguity 
about the maximum numbers of expirations permitted under the Program. 
As a result, CBOE proposes to amend the Program as follows.
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    \6\ Id., at note 5.
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    Respecting EOWs, CBOE proposes to amend Rule 24.9(e)(1) by adding 
the following rule text:

    The maximum numbers of expirations that may be listed for EOWs 
is the same as the maximum numbers of expirations permitted in Rule 
24.9(a)(2) for standard options on the same broad-based index. EOW 
expirations shall be for the nearest Friday expirations from the 
actual listing date, other than the third Friday-of-the-month or 
that coincide with an EOM expiration. If the last trading day of a 
month is a Friday, the Exchange will list an EOM and not an EOW. 
Other expirations in the same class are not counted as part of the 
maximum numbers of EOW expirations for a broad-based index class.

    In support of this change, CBOE states that under Rule 24.9(a)(2), 
the maximum numbers of expirations varies depending on the type of 
class or by specific class. Therefore, the maximum number of 
expirations permitted for EOWs on a given class would be determined 
based on the specific broad-based index option class. For example, if 
the broad-based index option class is used to calculate a volatility 
index, the maximum number of EOWs permitted in that class would be 12 
expirations (as is permitted in Rule 24.9(a)(2)). For EOWs, CBOE 
proposes to require that the expirations be for weeks that are in the 
nearest Friday from the actual listing date, other than the third 
Friday-of-the-month or that coincide with an EOM expiration. CBOE 
proposes to set forth the listing hierarchy described in the original 
Program filing, which provides that if the last trading day of a month

[[Page 63599]]

is a Friday, the Exchange would list an EOM and not an EOW.\7\ Finally, 
CBOE proposes to clarify that other expirations in the same class would 
not be counted as part of the maximum numbers of EOW expirations for a 
broad-based index class. CBOE states that this provision is similar to 
one recently adopted in connection with weekly CBOE Volatility Index 
(``VIX'') expirations, in that standard VIX expirations are not counted 
toward the maximum number of expirations permitted for weekly 
expiration in VIX options.\8\
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    \7\ Id., at note 5.
    \8\ See fourth bullet under Rule 24.9(a)(2).
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    Respecting EOMs, CBOE proposes to amend Rule 24.9(e)(2) by adding 
the following rule text:

    The maximum numbers of expirations that may be listed for EOMs 
is the same as the maximum numbers of expirations permitted in Rule 
24.9(a)(2) for standard options on the same broad-based index. EOM 
expirations shall be for the nearest end of month expirations from 
the actual listing date. Other expirations in the same class are not 
counted as part of the maximum numbers of EOM expirations for a 
broad-based index class.

    In support of this change, CBOE states that under Rule 24.9(a)(2), 
the maximum numbers of expirations varies depending on the type of 
class or by specific class. Therefore, the maximum number of 
expirations permitted for EOMs on a given class would be determined 
based on the specific broad-based index option class. For example, if 
the broad-based index option class is used to calculate a volatility 
index, the maximum number of EOMs permitted in that class would be 12 
expirations (as is permitted in Rule 24.9(a)(2)). For EOMs, CBOE 
proposes to require that the expirations be for the nearest end of 
month expirations from the actual listing date. Finally, CBOE proposes 
to clarify that other expirations in the same class would not be 
counted as part of the maximum numbers of EOM expirations for a broad-
based index class. CBOE states that this provision is similar to one 
recently adopted in connection with weekly VIX expirations, in that 
standard VIX expirations are not counted toward the maximum number of 
expirations permitted for weekly expiration in VIX options.\9\
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    \9\ See fourth bullet under Rule 24.9(a)(2).
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    The above described changes hard code into CBOE's rule its existing 
listing practice as to the maximum numbers of expirations permitted 
under the Program. Currently, the maximum numbers of expirations are 
not populated for EOWs and EOMs; however, the same is true for standard 
expirations in certain broad-based index option classes. As a result, 
CBOE believes that setting forth the maximum potential of a rule is 
non-controversial and is consistent with how CBOE has treated EOWs and 
EOMs under the Program since its adoption in 2010. In any event, 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 any additional traffic associated with the 
listing the maximum numbers of expirations permitted under the Program.
Remove Outdate [sic] Rule Text
    The Exchange proposes to make non-substantive changes to Rule 
24.9(e) by deleting rule text that references items with dates in 2011 
and 2015 that have passed. The Exchange represents that this rule text 
language is obsolete. Also, the Exchange is proposing to replace 
references to ``regular options'' with ``standard options'' to conform 
references to third-Friday expiring options (standard) between Rule 
24.9(a) (which uses ``standard'' when referring to third-Friday 
expiring options) and Rule 24.9(e).
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder, including the 
requirements of Section 6(b) of the Act.\10\ In particular, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \11\ requirements that the rules of an exchange be 
designed to promote just and equitable principles of trade, to prevent 
fraudulent and manipulative acts, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, 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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Exchange believes that some ambiguity may exist 
as to the maximum numbers of EOWs and EOMs that may be listed under the 
Program. Setting forth the numbers of expirations permitted under the 
Program would benefit market participants by making that Program 
clearer on its face by eliminating any potential ambiguity about the 
maximum numbers of expirations permitted under the Program. The 
Exchange also believes that the current proposal is designed to promote 
just and equitable principles of trade because it would hard code into 
CBOE's rule its existing listing practice as to the maximum numbers of 
expirations permitted under the Program.

B. Self-Regulatory Organization's Statement on Burden on Competition

    This proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. Specifically, CBOE believes that providing clarification about 
the numbers of expirations permitted under the Program would benefit 
all market participants who trade expirations listed under the Program 
and does not impose any burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not:
    A. Significantly affect the protection of investors or the public 
interest;
    B. impose any significant burden on competition; and
    C. become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \12\ and 
Rule 19b-4(f)(6) \13\ thereunder. At any time within 60 days of the 
filing of the proposed rule change, the Commission summarily may 
temporarily suspend such rule change if it appears to the Commission 
that such action is necessary or appropriate in the public interest, 
for the protection of investors, or otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission will institute proceedings to determine whether the proposed 
rule change should be approved or disapproved.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act.

[[Page 63600]]

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-2015-085 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-2015-085. 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-2015-085 and should be 
submitted on or before November 10, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-26520 Filed 10-19-15; 8:45 am]
BILLING CODE 8011-01-P