81 FR 1255 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Credit Option Margin Pilot Program Through January 17, 2017

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 6 (January 11, 2016)

[Federal Register Volume 81, Number 6 (Monday, January 11, 2016)]
[Notices]
[Pages 1255-1257]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-00259]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76824; File No. SR-CBOE-2015-118]


 Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Extend the Credit Option Margin Pilot Program 
Through January 17, 2017

January 5, 2016.
    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 December 23, 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 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 12.3 by extending the Credit Option 
Margin Pilot Program through January 17, 2017.
    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's 
Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    On February 2, 2011, the Commission approved the Exchange's 
proposal to establish a Credit Option Margin Pilot Program 
(``Program'').\5\ The proposal became effective on a pilot basis to run 
on a parallel track with Financial Industry Regulatory Authority

[[Page 1256]]

(``FINRA'') Rule 4240 that similarly operates on an interim pilot 
basis.\6\
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    \5\ See Securities Exchange Act Release No. 63819 (February 2, 
2011), 76 FR 6838 (February 8, 2011) order approving (SR-CBOE-2010-
106). To implement the Program, the Exchange amended Rule 12.3(l), 
Margin Requirements, to make CBOE's margin requirements for Credit 
Options consistent with Financial Industry Regulatory Authority 
(``FINRA'') Rule 4240, Margin Requirements for Credit Default Swaps. 
CBOE's Credit Options (i.e., Credit Default Options and Credit 
Default Basket Options) are analogous to credit default swaps.
    \6\ See Securities Exchange Act Release No. 59955 (May 22, 
2009), 74 FR 25586 (May 28, 2009) (Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change; SR-FINRA-
2009-012).
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    On January 17, 2012, the Exchange filed a rule change to, among 
other things, decouple the Program with the FINRA program and to extend 
the expiration date of the Program to January 17, 2013.\7\ The Program, 
however, continues to be substantially similar to the provisions of the 
FINRA program. Subsequently, the Exchange filed rule changes to extend 
the program until January 17, 2014, January 16, 2015, and January 15, 
2016, respectively.\8\ The Exchange believes that extending the 
expiration date of the Program further will allow for further analysis 
of the Program and a determination of how the Program should be 
structured in the future. Thus, the Exchange is now currently proposing 
to extend the duration of the Program for an additional year until 
January 17, 2017. Additionally, the Exchange believes that it is in the 
public interest to extend the expiration date of the Program because it 
will continue to allow the Exchange to list Credit Options for trading. 
As a result, the Exchange will remain competitive with the Over-the-
Counter market with respect to swaps and security-based swaps. In the 
future, if the Exchange proposes an additional extension of the Credit 
Option Margin Pilot Program or proposes to make the Program permanent, 
then the Exchange will submit a filing proposing such amendments to the 
Program.
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    \7\ See Securities Exchange Act Release No. 66163 (January 17, 
2012), 77 FR 3318 (January 23, 2012) (SR-CBOE-2012-007).
    \8\ See Securities Exchange Act Release Nos. 68539 (December 27, 
2012), 78 FR 138 (January 2, 2013) (SR-CBOE-2012-125), 71124 
(December 18, 2013), 78 FR 77754 (December 24, 2013) (SR-CBOE-2013-
123), and 73837 (December 15, 2014), 79 FR 75850 (December 19, 2014) 
(SR-CBOE-2014-091).
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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.\9\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \10\ 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 
facilitation 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) \11\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ Id.
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    In particular, the Exchange believes that the proposed rule change 
will further the purposes of the Act because, consistent with the goals 
of the Commission at the initial adoption of the program, the margin 
requirements set forth by the proposed rule change will help to 
stabilize the financial markets. In addition, the proposed rule change 
is substantially similar to existing FINRA Rule 4240.

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. Specifically, the Exchange 
believes that, by extending the expiration of the Program, the proposed 
rule change will allow for further analysis of the Program and a 
determination of how the Program shall be structured in the future. In 
doing so, the proposed rule change will also serve to promote 
regulatory clarity and consistency, thereby reducing burdens on the 
marketplace and facilitating investor protection.

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.
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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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    In its filing the Exchange requested that the Commission waive the 
30-day operative delay period after which a proposed rule change under 
Rule 19b-4(f)(6) becomes effective. Waiver of the 30-day operative 
delay would allow the Exchange to extend the pilot program prior to its 
expiration on January 15, 2016.
    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and public interest, as it 
will allow for the least amount of market disruption as the pilot will 
continue without interruption. For this reason, the Commission 
designates the proposed rule change to be operative upon filing.\14\
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    \14\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
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-2015-118 on the subject line.

Paper Comments

     Send paper comments in triplicate to Robert W. Errett, 
Deputy Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549.

All submissions should refer to File Number SR-CBOE-2015-118. This file

[[Page 1257]]

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-2015-118 and should be 
submitted on or before February 1, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12) and (59).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-00259 Filed 1-8-16; 8:45 am]
 BILLING CODE 8011-01-P