81 FR 54137 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Rule 24.6

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 157 (August 15, 2016)

[Federal Register Volume 81, Number 157 (Monday, August 15, 2016)]
[Notices]
[Pages 54137-54139]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-19318]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78513; File No. SR-CBOE-2016-058]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to Rule 24.6

August 9, 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 August 8, 2016, Chicago Board Options Exchange, Incorporated 
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I and II below, which Items have been prepared by the 
Exchange. The 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange seeks to amend Rule 24.6. The text of the proposed 
rule change is provided below.

(additions are underlined; deletions are [bracketed])
* * * * *
Chicago Board Options Exchange, Incorporated Rules
* * * * *
Rule 24.6. Days and Hours of Business

    (a)-(b) No change
    . . . Interpretations and Policies:
    .01-.05 No change.
    .06 With respect to options on a foreign index that is comprised of 
component securities trading in a single country, the Exchange may 
determine

[[Page 54138]]

not to open the options for trading when the component securities of 
the foreign index are not trading due to a holiday on the foreign 
exchange(s) at which the component securities trade. At least once a 
year in January, the Exchange will announce via Regulatory Circular the 
days on which options on a particular foreign index will be closed 
pursuant to this interpretation.
* * * * *
    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
    The Exchange seeks to add Interpretation and Policy .06 to Rule 
24.6 in order to specify that the Exchange may determine not to open 
for trading options on a foreign index that is comprised of component 
securities trading in a single country when the component securities of 
the foreign index are not open for trading due to a holiday on the 
foreign exchange or exchanges on which the component securities trade.
    Rule 6.1.04 identifies the days on which the Exchange is not open 
due to a holiday.\3\ Exchanges in foreign countries also have their own 
holiday schedules.\4\ As CBOE lists and trades options that overlie 
various foreign indexes,\5\ the components of which trade on foreign 
exchanges, CBOE proposes to specify in its Rules that the Exchange may 
determine to not open options on foreign indexes when the component 
securities of the foreign index are not open for trading due to a 
holiday on the foreign exchange; however, the Exchange proposes to 
limit the application of this proposal to options on foreign indexes 
that are comprised of component securities trading in a single 
country.\6\
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    \3\ Rule 6.1.04 provides that ``[t]he Board of Directors has 
determined that the Exchange will not be open for business on New 
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good 
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day 
or Christmas Day. The Board has also determined that, when any 
holiday observed by the Exchange falls on a Saturday, the Exchange 
will not be open for business on the preceding Friday, and that when 
any holiday observed by the Exchange falls on a Sunday, the Exchange 
will not be open for business on the following Monday, unless 
unusual business conditions exist at the time.''
    \4\ See e.g., Stock Exchange of Hong Kong Holiday Schedule, 
available at: https://www.hkex.com.hk/eng/market/sec_tradinfo/tradcal/nont10.htm and London Stock Exchange Holiday Schedule, 
available at: http://www.lseg.com/areas-expertise/our-markets/london-stock-exchange/equities-markets/trading-services/business-days.
    \5\ See e.g., Rules 24.2.01, 24.2.02, and 24.2.03.
    \6\ The Exchange notes that when there are multiple exchanges in 
a single country trading the component securities of a foreign index 
the holiday schedule for exchanges within that country are likely to 
be the same or similar.
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    The Exchange may trade options on various foreign indexes 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 seconds, provided that futures on the applicable indexes are 
trading and prices for those contracts may be used as a proxy for the 
current index value.\7\ For example, the component securities of the 
FTSE China 50 Index open with the start of trading on the Stock 
Exchange of Hong Kong (``SEHK'') at approximately 8:30 p.m. (Chicago 
time) (prior day) and close with the end of trading on the SEHK at 
approximately 3:00 a.m. (Chicago time) (next day). Thus, between 8:30 
a.m. and 3:15 p.m. (Chicago time) the FTSE China 50 Index level is a 
static value that market participants can access via data vendors. 
However, the Exchange continues to trade options on the FTSE China 50 
Index (``China 50 options'') from 8:30 a.m. Chicago time to 3:15 a.m. 
Chicago time because prices of the E-Mini FTSE China 50 Index futures 
trading at the CME may be used as a proxy for the current index 
value.\8\ When SEHK is closed because of a holiday, E-Mini FTSE China 
50 Index futures remain open and may still be used as a proxy for the 
current index value. However, the Exchange may determine to keep China 
50 Options (as well as other options on other foreign indexes) closed 
because of a holiday on SEHK (or the applicable foreign exchange on 
which the index constituents trade).
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    \7\ See Rules 24.2.01(a)(8), 24.2.02(a)(8), and 24.2.03(a)(8).
    \8\ The trading hours for E-Mini FTSE China 50 Index Futures are 
from 5:00 p.m. (Chicago time) to 4:00 p.m. (Chicago time) the 
following day, Sunday through Friday. See E-Mini FTSE China 50 Index 
Future Contract specifications located at: http://www.cmegroup.com/education/files/e-mini-ftse-china-50-index-futures.pdf. The Exchange 
believes E-Mini FTSE China 50 Index Futures are an appropriate proxy 
for China 50 options.
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    For example, prior to the launch of China 50 options, SEHK was 
closed from the weekend of February 7-8 through the 2016 Lunar New Year 
from February 8-10. Although E-Mini FTSE China 50 Index futures can be 
used as a proxy, the Exchange may have determined that options 
participants would be better served by keeping China 50 options closed 
because the holiday caused the underlying index value to be unavailable 
for an extended period of time.
    With respect to options on foreign indexes specifically, the 
Exchange has the authority to set the days and hours of business.\9\ 
This proposal simply seeks to add Interpretation and Policy .06 to 
notify market participants that the Exchange may determine not to open 
options on foreign indexes because of a holiday on a foreign exchange. 
Furthermore, as proposed, Interpretation and Policy .06 will also 
require the Exchange to announce via Regulatory Circular in January of 
every year the particular days on which options on particular foreign 
indexes will not be open due to a holiday on a foreign exchange or 
exchanges. However, there may be holidays between the date this 
proposal becomes effective and the following January; thus, the first 
announcement will be made via Regulatory Circular within 30 days of 
this proposal becoming effective.
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    \9\ See Rule 24.6(a) (providing that with respect to options on 
foreign indexes, the Board's designee shall determine the days and 
hours of business.).
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    Although keeping options closed because of a foreign exchange's 
holidays will cause users of these particular options to not be able to 
trade when the U.S. market is otherwise open, the closures will only 
occur a few times a year. Furthermore, users will have sufficient 
notice of such closures via the Regulatory Circular that will be 
published every January. Finally, this proposal may potentially allow 
users to receive better executions because for certain holidays, such 
as during the Lunar New Year described above, the closing of the 
component securities may not allow Market-Makers to quote as tightly 
and aggressively as they would otherwise. In effect, limiting users' 
ability to trade particular index options to days on which there is not 
a holiday on a foreign exchange may better serve

[[Page 54139]]

users because they will be trading on days in which Market-Makers may 
potentially provide tighter markets.
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.\10\ Specifically, 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 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) \12\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ Id.
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    In particular, the proposal helps 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 
by: (1) Limiting users' ability to trade particular index options to 
days on which there is not a holiday on a foreign exchange because 
doing so allows users of these index options to trade on days in which 
Market-Makers may potentially provide tighter markets and (2) providing 
a mechanism for notifying market participants of the days on which 
options on a particular foreign index will not be open due to a holiday 
on the foreign exchange(s) on which the index constituents trade.

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 proposal will not impose a 
burden on intramarket competition because all participants will be 
subject to the same holiday schedule as set forth by the Exchange. 
Furthermore, all participants will have adequate notice of the holiday 
schedule by virtue of the Exchange publishing a Regulatory Circular in 
January of every year that announces such holidays. The proposal will 
not impose a burden on intermarket competition because the options 
effected by this proposal are options on foreign indexes that are 
exclusive to CBOE. Any perceived burden on users of these options is 
outweighed by the fact that users may potentially receive better 
executions by trading on days on which Market-Makers may potentially be 
able to provide tighter markets.

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

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

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CBOE-2016-058 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-2016-058. 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-2016-058 and should be 
submitted on or before September 6, 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).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-19318 Filed 8-12-16; 8:45 am]
 BILLING CODE 8011-01-P