82 FR 27907 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Rule 5.5

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 116 (June 19, 2017)

Page Range		27907-27910
FR Document		2017-12585
Federal Register, Volume 82 Issue 116 (Monday, June 19, 2017)
[Federal Register Volume 82, Number 116 (Monday, June 19, 2017)]
[Notices]
[Pages 27907-27910]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-12585]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80913; File No SR-CBOE-2017-048]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Related to Rule 5.5

June 13, 2017.
    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 June 9, 2017, 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

    The Exchange proposes to amend Rule 5.5. The text of the proposed 
rule change is provided below.
    (additions are italicized; deletions are [bracketed])
* * * * *

Chicago Board Options Exchange, Incorporated Rules

* * * * *

Rule 5.5. Series of Option Contracts Open for Trading

    (a)-(e) No change.

. . . Interpretations and Policies:

    .01-.07 No change.
    .08
    (a) No change.
    (b) Notwithstanding Interpretation and Policy .01 and 
Interpretation and Policy .08(a) above, the interval between strike 
prices of series of options on Units of the Standard & Poor's 
Depository Receipts Trust (``SPY''), iShares S&P 500 Index ETF 
(``IVV''), and The DIAMONDS Trust (``DIA'') will be $1 or greater.
    .09-.23 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
    The Exchange proposes to amend Rule 5.5 (Series of Option Contracts 
Open for Trading) by modifying the strike setting regime for IVV 
options. Specifically, the Exchange proposes to modify the interval 
setting regime for IVV options to allow $1 strike price intervals above 
$200. The Exchange believes that the proposed rule change would make 
IVV options easier for investors and traders to use and more tailored 
to their investment needs. Additionally, the interval setting regime 
the Exchange proposes to apply to IVV options is currently applied to 
options on units of the Standard & Poor's Depository Receipts Trust 
(``SPY''),\5\ which is an exchange-traded fund (``ETF'') that is 
identical in all material respects to the IVV ETF.
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    \5\ See Current Rule 5.5.08.
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    The SPY and IVV ETFs are identical in all material respects. The 
SPY and IVV ETFs are designed to roughly track the performance of the 
S&P 500 Index

[[Page 27908]]

with the price of SPY and IVV designed to roughly approximate 1/10th of 
the price of the S&P 500 Index. Accordingly, SPY and IVV strike 
prices--having a multiplier of $100--reflect a value roughly equal to 
1/10th of the value of the S&P 500 Index. For example, if the S&P 500 
Index is at 1972.56, SPY and IVV options might have a value of 
approximately 197.26 with a notional value of $19,726. In general, SPY 
and IVV options provide retail investors and traders with the benefit 
of trading the broad market in a manageably sized contract. As options 
with an ETP underlying, SPY and IVV options are listed in the same 
manner as equity options under the Rules.
    However, under current Interpretation and Policy .08(a) to Rule 
5.5, the interval between strike prices in series of options on ETPs, 
including IVV options will be $1 or greater where the strike price is 
$200 or less and $5.00 or greater where the strike price is greater 
than $200.'' In addition, under Rule 5.5(d)(5),

    Strike Interval. The interval between strike prices on Short 
Term Option Series may be: (i) $0.50 or greater where the strike 
price is less than $100, and $1 or greater where the strike price is 
between $100 and $150 for all classes that participate in the Short 
Term Option Series Program; (ii) $0.50 or greater for classes that 
trade in one dollar increments in non-Short Term Options and that 
participate in the Short Term Option Series Program; or (iii) $2.50 
or greater where the strike price is above $150. A non-Short Term 
Option that is on a class that has been selected to participate in 
the Short Term Option Series Program is referred to as a ``Related 
non-Short Term Option.''

The Exchange's proposal seeks to narrow the strike price intervals to 
$1 for IVV options above $200, in effect matching the strike setting 
regime for strike intervals in IVV options below $200 and matching the 
strike setting regime applied to SPY options.
    Currently, the S&P 500 Index is above 2000. The S&P 500 Index is 
widely regarded as the best single gauge of large cap U.S. equities and 
is widely quoted as an indicator of stock prices and investor 
confidence in the securities market. As a result, individual investors 
often use S&P 500 Index-related products to diversify their portfolios 
and benefit from market trends. Accordingly, the Exchange believes that 
offering a wide range of S&P 500 Index-based options affords traders 
and investors important hedging and trading opportunities. The Exchange 
believes that not having the proposed $1 strike price intervals above 
$200 in IVV significantly constricts investors' hedging and trading 
possibilities.
    The Exchange proposes to amend Interpretation and Policy .08(b) to 
Rule 5.5 to allow IVV options to trade in $1 increments above a strike 
price of $200. Specifically, the Exchange proposes to amend 
Interpretation and Policy .08(b) to Rule 5.5 to state that 
notwithstanding other provisions limiting the ability of the Exchange 
to list $1 increment strike prices on equity and ETF options above 
$200, the interval between strike prices of series of options on Units 
of IVV will be $1 or greater. The Exchange believes that by having 
smaller strike intervals in IVV, investors would have more efficient 
hedging and trading opportunities due to the lower $1 interval 
ascension. The proposed $1 intervals, particularly above the $200 
strike price, will result in having at-the-money series based upon the 
underlying IVV moving less than 1%. The Exchange believes that the 
proposed strike setting regime is in line with the slower movements of 
broad-based indices. Furthermore, the proposed $1 intervals would allow 
option trading strategies (such as, for example, risk reduction/hedging 
strategies using IVV weekly options), to remain viable. Considering the 
fact that $1 intervals already exist below the $200 price point and 
that IVV is above the $200 level, the Exchange believes that continuing 
to maintain the artificial $200 level (above which intervals increase 
500% to $5), would have a negative effect on investing, trading and 
hedging opportunities, and volume. The Exchange believes that the 
investing, trading, and hedging opportunities available with IVV 
options far outweighs any potential negative impact of allowing IVV 
options to trade in more finely tailored intervals above the $200 price 
point.
    The proposed strike setting regime would permit strikes to be set 
to more closely reflect values in the underlying S&P 500 Index and 
allow investors and traders to roll open positions from a lower strike 
to a higher strike in conjunction with the price movement of the 
underlying. Under the current rule, where the next higher available 
series would be $5 away above a $200 strike price, the ability to roll 
such positions is effectively negated. Accordingly, to move a position 
from a $200 strike to a $205 strike under the current rule, an investor 
would need for the underlying product to move 2.5%, and would not be 
able to execute a roll up until such a large movement occurred. With 
the proposed rule change, however, the investor would be in a 
significantly safer position of being able to roll his open options 
position from a $200 to a $201 strike price, which is only a 0.5% move 
for the underlying. The proposed rule change will allow the Exchange to 
better respond to customer demand for IVV strike prices more precisely 
aligned with current S&P 500 Index values. The Exchange believes that 
the proposed rule change, like the other strike price programs 
currently offered by the Exchange, will benefit investors by providing 
investors the flexibility to more closely tailor their investment and 
hedging decisions using IVV options.
    By allowing series of IVV options to be listed in $1 intervals 
between strike prices over $200, the proposal will moderately augment 
the potential total number of options series available on the Exchange. 
However, the Exchange believes it and the Options Price Reporting 
Authority (``OPRA'') have the necessary systems capacity to handle any 
potential additional traffic associated with this proposed rule change. 
The Exchange also believes that Trading Permit Holders will not have a 
capacity issue due to the proposed rule change. In addition, the 
Exchange represents that it does not believe that this expansion will 
cause fragmentation of liquidity.
    In addition, the interval setting regime the Exchange proposes to 
apply to IVV options is currently applied to options on SPY,\6\ which 
is an ETF that is identical in all material respects to the IVV ETF.
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    \6\ See Current Rule 5.5.08.
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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.\7\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \8\ 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) \9\ requirement that

[[Page 27909]]

the rules of an exchange not be designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ Id.
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    In particular, the proposed rule change will allow investors to 
more easily use IVV options. Moreover, the proposed rule change would 
allow investors to better trade and hedge positions in IVV options 
where the strike price is greater than $200, and ensure that IVV 
options investors are not at a disadvantage simply because of the 
strike price.
    The Exchange also believes the proposed rule change is consistent 
with Section 6(b)(1) of the Act, which provides that the Exchange be 
organized and have the capacity to be able to carry out the purposes of 
the Act and the rules and regulations thereunder, and the rules of the 
Exchange. The rule change proposal allows the Exchange to respond to 
customer demand to allow IVV options to trade in $1 intervals above a 
$200 strike price. The Exchange does not believe that the proposed rule 
would create additional capacity issues or affect market functionality.
    As noted above, ETF options trade in wider $5 intervals above a 
$200 strike price, whereby options at or below a $200 strike price 
trade in $1 intervals. This creates a situation where contracts on the 
same option class effectively may not be able to execute certain 
strategies such as, for example, rolling to a higher strike price, 
simply because of the arbitrary $200 strike price above which options 
intervals increase by 500%. This proposal remedies the situation by 
establishing an exception to the current ETF interval regime for IVV 
options to allow such options to trade in $1 or greater intervals at 
all strike prices.
    The Exchange believes that the proposed rule change, like other 
strike price programs currently offered by the Exchange, will benefit 
investors by giving them increased flexibility to more closely tailor 
their investment and hedging decisions. Moreover, the proposed rule 
change is consistent with changes proposed by other exchanges.\10\
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    \10\ See Securities and Exchange Act Release 34-72664 (July 24, 
2014), 79 FR 44231 (July 30, 2014) (Notice of Filing of Proposed 
Rule Change, as Modified by Amendment No. 1, Relating to SPY and DIA 
Options) (SR-Phlx-2014-046).
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    With regard to the impact of this proposal on system capacity, the 
Exchange believes it and OPRA have the necessary systems capacity to 
handle any potential additional traffic associated with this proposed 
rule change. The Exchange believes that its members will not have a 
capacity issue as a result of this proposal.
    In addition, the interval setting regime the Exchange proposes to 
apply to IVV options is currently applied to options on SPY,\11\ which 
is an ETF that is identical in all material respects to the IVV ETF.
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    \11\ See Current Rule 5.5.08.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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. Rather, the Exchange 
believes that the proposed rule change will result in additional 
investment options and opportunities to achieve the investment and 
trading objectives of market participants seeking efficient trading and 
hedging vehicles, to the benefit of investors, market participants, and 
the marketplace in general. Specifically, the Exchange believes that 
IVV options investors and traders will significantly benefit from the 
availability of finer strike price intervals above a $200 price point. 
In addition, the interval setting regime the Exchange proposes to apply 
to IVV options is currently applied to options on SPY,\12\ which is an 
ETF that is identical in all material respects to the IVV ETF. Thus, 
applying the same strike setting regime to SPY and IVV options will 
help level the playing field for options on similar, competing ETFs.
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    \12\ See Current Rule 5.5.08.
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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 \13\ and 
Rule 19b-4(f)(6) \14\ thereunder.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6).
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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.
    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-2017-048 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-2017-048. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the 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-2017-048 and should be 
submitted on or before July 10, 2017.


[[Page 27910]]


    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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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-12585 Filed 6-16-17; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 82, No. 116 / Monday, June 19, 2017 / Notices 27907

IV. Solicitation of Comments For the Commission, by the Division of (a) No change.
Trading and Markets, pursuant to delegated (b) Notwithstanding Interpretation
Interested persons are invited to authority.21 and Policy .01 and Interpretation and
submit written data, views, and Eduardo A. Aleman, Policy .08(a) above, the interval between
arguments concerning the foregoing, Assistant Secretary. strike prices of series of options on
including whether the proposed rule [FR Doc. 2017–12588 Filed 6–16–17; 8:45 am] Units of the Standard & Poor’s
change is consistent with the Act. BILLING CODE 8011–01–P Depository Receipts Trust (‘‘SPY’’),
Comments may be submitted by any of iShares S&P 500 Index ETF (‘‘IVV’’),
the following methods: and The DIAMONDS Trust (‘‘DIA’’) will
SECURITIES AND EXCHANGE be $1 or greater.
Electronic Comments COMMISSION .09–.23 No change.
• Use the Commission’s Internet [Release No. 34–80913; File No SR–CBOE– * * * * *
comment form (http://www.sec.gov/ 2017–048] The text of the proposed rule change
rules/sro.shtml); or is also available on the Exchange’s Web
Self-Regulatory Organizations; site (http://www.cboe.com/AboutCBOE/
• Send an email to rule-comments@ CBOELegalRegulatoryHome.aspx), at
Chicago Board Options Exchange,
sec.gov. Please include File Number SR– Incorporated; Notice of Filing and the Exchange’s Office of the Secretary,
CHX–2017–11 on the subject line. Immediate Effectiveness of a Proposed and at the Commission’s Public
Paper Comments Rule Change Related to Rule 5.5 Reference Room.
II. Self-Regulatory Organization’s
• Send paper comments in triplicate June 13, 2017.
Pursuant to Section 19(b)(1) of the Statement of the Purpose of, and
to Secretary, Securities and Exchange
Securities Exchange Act of 1934 (the Statutory Basis for, the Proposed Rule
Commission, 100 F Street NE., Change
Washington, DC 20549–1090. ‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 9, In its filing with the Commission, the
All submissions should refer to File 2017, Chicago Board Options Exchange, Exchange included statements
Number SR–CHX–2017–11. This file Incorporated (the ‘‘Exchange’’ or concerning the purpose of and basis for
number should be included on the ‘‘CBOE’’) filed with the Securities and the proposed rule change and discussed
subject line if email is used. To help the Exchange Commission (the any comments it received on the
Commission process and review your ‘‘Commission’’) the proposed rule proposed rule change. The text of these
comments more efficiently, please use change as described in Items I, II, and statements may be examined at the
only one method. The Commission will III below, which Items have been places specified in Item IV below. The
post all comments on the Commission’s prepared by the Exchange. The Exchange has prepared summaries, set
Internet Web site (http://www.sec.gov/ Exchange filed the proposal as a ‘‘non- forth in sections A, B, and C below, of
rules/sro.shtml). Copies of the controversial’’ proposed rule change the most significant aspects of such
submission, all subsequent pursuant to Section 19(b)(3)(A)(iii) of statements.
amendments, all written statements the Act 3 and Rule 19b–4(f)(6)
thereunder.4 The Commission is A. Self-Regulatory Organization’s
with respect to the proposed rule Statement of the Purpose of, and
change that are filed with the publishing this notice to solicit
comments on the proposed rule change Statutory Basis for, the Proposed Rule
Commission, and all written Change
communications relating to the from interested persons.
proposed rule change between the I. Self-Regulatory Organization’s 1. Purpose
Commission and any person, other than Statement of the Terms of Substance of The Exchange proposes to amend
those that may be withheld from the the Proposed Rule Change Rule 5.5 (Series of Option Contracts
public in accordance with the Open for Trading) by modifying the
The Exchange proposes to amend
provisions of 5 U.S.C. 552, will be strike setting regime for IVV options.
Rule 5.5. The text of the proposed rule
available for Web site viewing and Specifically, the Exchange proposes to
change is provided below.
printing in the Commission’s Public modify the interval setting regime for
(additions are italicized; deletions are
Reference Room, 100 F Street NE., IVV options to allow $1 strike price
[bracketed])
Washington, DC 20549, on official intervals above $200. The Exchange
* * * * * believes that the proposed rule change
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the Chicago Board Options Exchange, would make IVV options easier for
Incorporated Rules investors and traders to use and more
filing also will be available for
tailored to their investment needs.
inspection and copying at the principal * * * * * Additionally, the interval setting regime
office of the Exchange. All comments the Exchange proposes to apply to IVV
Rule 5.5. Series of Option Contracts
received will be posted without change; options is currently applied to options
Open for Trading
the Commission does not edit personal on units of the Standard & Poor’s
identifying information from (a)–(e) No change.
Depository Receipts Trust (‘‘SPY’’),5
submissions. You should submit only
asabaliauskas on DSKBBXCHB2PROD with NOTICES

. . . Interpretations and Policies: which is an exchange-traded fund
information that you wish to make (‘‘ETF’’) that is identical in all material
available publicly. All submissions .01–.07 No change.
.08 respects to the IVV ETF.
should refer to File Number SR–CHX– The SPY and IVV ETFs are identical
2017–11, and should be submitted on or 21 17 CFR 200.30–3(a)(12). in all material respects. The SPY and
before July 10, 2017. 1 15 U.S.C. 78s(b)(1). IVV ETFs are designed to roughly track
2 17 CFR 240.19b–4. the performance of the S&P 500 Index
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6). 5 See Current Rule 5.5.08.

VerDate Sep<11>2014 17:09 Jun 16, 2017 Jkt 241001 PO 00000 Frm 00126 Fmt 4703 Sfmt 4703 E:\FR\FM\19JNN1.SGM 19JNN1
27908 Federal Register / Vol. 82, No. 116 / Monday, June 19, 2017 / Notices

with the price of SPY and IVV designed The Exchange proposes to amend move for the underlying. The proposed
to roughly approximate 1/10th of the Interpretation and Policy .08(b) to Rule rule change will allow the Exchange to
price of the S&P 500 Index. 5.5 to allow IVV options to trade in $1 better respond to customer demand for
Accordingly, SPY and IVV strike increments above a strike price of $200. IVV strike prices more precisely aligned
prices—having a multiplier of $100— Specifically, the Exchange proposes to with current S&P 500 Index values. The
reflect a value roughly equal to 1/10th amend Interpretation and Policy .08(b) Exchange believes that the proposed
of the value of the S&P 500 Index. For to Rule 5.5 to state that notwithstanding rule change, like the other strike price
example, if the S&P 500 Index is at other provisions limiting the ability of programs currently offered by the
1972.56, SPY and IVV options might the Exchange to list $1 increment strike Exchange, will benefit investors by
have a value of approximately 197.26 prices on equity and ETF options above providing investors the flexibility to
with a notional value of $19,726. In $200, the interval between strike prices more closely tailor their investment and
general, SPY and IVV options provide of series of options on Units of IVV will hedging decisions using IVV options.
retail investors and traders with the be $1 or greater. The Exchange believes By allowing series of IVV options to
benefit of trading the broad market in a that by having smaller strike intervals in be listed in $1 intervals between strike
manageably sized contract. As options IVV, investors would have more prices over $200, the proposal will
with an ETP underlying, SPY and IVV efficient hedging and trading moderately augment the potential total
options are listed in the same manner as opportunities due to the lower $1 number of options series available on
equity options under the Rules. interval ascension. The proposed $1 the Exchange. However, the Exchange
However, under current Interpretation intervals, particularly above the $200 believes it and the Options Price
and Policy .08(a) to Rule 5.5, the strike price, will result in having at-the- Reporting Authority (‘‘OPRA’’) have the
interval between strike prices in series money series based upon the underlying necessary systems capacity to handle
of options on ETPs, including IVV IVV moving less than 1%. The Exchange any potential additional traffic
options will be $1 or greater where the believes that the proposed strike setting associated with this proposed rule
strike price is $200 or less and $5.00 or regime is in line with the slower change. The Exchange also believes that
greater where the strike price is greater movements of broad-based indices. Trading Permit Holders will not have a
than $200.’’ In addition, under Rule Furthermore, the proposed $1 intervals capacity issue due to the proposed rule
5.5(d)(5), would allow option trading strategies change. In addition, the Exchange
(such as, for example, risk reduction/ represents that it does not believe that
Strike Interval. The interval between strike
prices on Short Term Option Series may be: hedging strategies using IVV weekly this expansion will cause fragmentation
(i) $0.50 or greater where the strike price is options), to remain viable. Considering of liquidity.
less than $100, and $1 or greater where the the fact that $1 intervals already exist In addition, the interval setting regime
strike price is between $100 and $150 for all below the $200 price point and that IVV the Exchange proposes to apply to IVV
classes that participate in the Short Term is above the $200 level, the Exchange options is currently applied to options
Option Series Program; (ii) $0.50 or greater believes that continuing to maintain the on SPY,6 which is an ETF that is
for classes that trade in one dollar increments artificial $200 level (above which identical in all material respects to the
in non-Short Term Options and that IVV ETF.
participate in the Short Term Option Series
intervals increase 500% to $5), would
Program; or (iii) $2.50 or greater where the have a negative effect on investing, 2. Statutory Basis
strike price is above $150. A non-Short Term trading and hedging opportunities, and
volume. The Exchange believes that the The Exchange believes the proposed
Option that is on a class that has been
investing, trading, and hedging rule change is consistent with the
selected to participate in the Short Term
Option Series Program is referred to as a opportunities available with IVV Securities Exchange Act of 1934 (the
‘‘Related non-Short Term Option.’’ options far outweighs any potential ‘‘Act’’) and the rules and regulations
negative impact of allowing IVV options thereunder applicable to the Exchange
The Exchange’s proposal seeks to and, in particular, the requirements of
narrow the strike price intervals to $1 to trade in more finely tailored intervals
above the $200 price point. Section 6(b) of the Act.7 Specifically,
for IVV options above $200, in effect the Exchange believes the proposed rule
matching the strike setting regime for The proposed strike setting regime change is consistent with the Section
strike intervals in IVV options below would permit strikes to be set to more 6(b)(5) 8 requirements that the rules of
$200 and matching the strike setting closely reflect values in the underlying an exchange be designed to prevent
regime applied to SPY options. S&P 500 Index and allow investors and fraudulent and manipulative acts and
Currently, the S&P 500 Index is above traders to roll open positions from a practices, to promote just and equitable
2000. The S&P 500 Index is widely lower strike to a higher strike in principles of trade, to foster cooperation
regarded as the best single gauge of large conjunction with the price movement of and coordination with persons engaged
cap U.S. equities and is widely quoted the underlying. Under the current rule, in regulating, clearing, settling,
as an indicator of stock prices and where the next higher available series processing information with respect to,
investor confidence in the securities would be $5 away above a $200 strike and facilitating transactions in
market. As a result, individual investors price, the ability to roll such positions securities, to remove impediments to
often use S&P 500 Index-related is effectively negated. Accordingly, to and perfect the mechanism of a free and
products to diversify their portfolios move a position from a $200 strike to a open market and a national market
and benefit from market trends. $205 strike under the current rule, an system, and, in general, to protect
asabaliauskas on DSKBBXCHB2PROD with NOTICES

Accordingly, the Exchange believes that investor would need for the underlying investors and the public interest.
offering a wide range of S&P 500 Index- product to move 2.5%, and would not Additionally, the Exchange believes the
based options affords traders and be able to execute a roll up until such proposed rule change is consistent with
investors important hedging and trading a large movement occurred. With the the Section 6(b)(5) 9 requirement that
opportunities. The Exchange believes proposed rule change, however, the
that not having the proposed $1 strike investor would be in a significantly 6 See Current Rule 5.5.08.
price intervals above $200 in IVV safer position of being able to roll his 7 15 U.S.C. 78f(b).
significantly constricts investors’ open options position from a $200 to a 8 15 U.S.C. 78f(b)(5).

hedging and trading possibilities. $201 strike price, which is only a 0.5% 9 Id.

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Federal Register / Vol. 82, No. 116 / Monday, June 19, 2017 / Notices 27909

the rules of an exchange not be designed options is currently applied to options action is necessary or appropriate in the
to permit unfair discrimination between on SPY,11 which is an ETF that is public interest, for the protection of
customers, issuers, brokers, or dealers. identical in all material respects to the investors, or otherwise in furtherance of
In particular, the proposed rule IVV ETF. the purposes of the Act. If the
change will allow investors to more Commission takes such action, the
easily use IVV options. Moreover, the B. Self-Regulatory Organization’s Commission will institute proceedings
proposed rule change would allow Statement on Burden on Competition to determine whether the proposed rule
investors to better trade and hedge The Exchange does not believe that change should be approved or
positions in IVV options where the the proposed rule change will impose disapproved.
strike price is greater than $200, and any burden on competition that is not Interested persons are invited to
ensure that IVV options investors are necessary or appropriate in furtherance submit written data, views, and
not at a disadvantage simply because of of the purposes of the Act. Rather, the arguments concerning the foregoing,
the strike price. Exchange believes that the proposed including whether the proposed rule
The Exchange also believes the rule change will result in additional change is consistent with the Act.
proposed rule change is consistent with investment options and opportunities to Comments may be submitted by any of
Section 6(b)(1) of the Act, which achieve the investment and trading the following methods:
provides that the Exchange be organized objectives of market participants seeking
and have the capacity to be able to carry Electronic Comments
efficient trading and hedging vehicles,
out the purposes of the Act and the to the benefit of investors, market • Use the Commission’s Internet
rules and regulations thereunder, and participants, and the marketplace in comment form (http://www.sec.gov/
the rules of the Exchange. The rule general. Specifically, the Exchange rules/sro.shtml); or
change proposal allows the Exchange to believes that IVV options investors and • Send an email to rule-comments@
respond to customer demand to allow traders will significantly benefit from sec.gov. Please include File Number SR–
IVV options to trade in $1 intervals the availability of finer strike price CBOE–2017–048 on the subject line.
above a $200 strike price. The Exchange intervals above a $200 price point. In Paper Comments
does not believe that the proposed rule addition, the interval setting regime the
would create additional capacity issues • Send paper comments in triplicate
Exchange proposes to apply to IVV to Secretary, Securities and Exchange
or affect market functionality. options is currently applied to options
As noted above, ETF options trade in Commission, 100 F Street NE.,
on SPY,12 which is an ETF that is Washington, DC 20549–1090.
wider $5 intervals above a $200 strike identical in all material respects to the
price, whereby options at or below a All submissions should refer to File
IVV ETF. Thus, applying the same strike
$200 strike price trade in $1 intervals. Number SR–CBOE–2017–048. This file
setting regime to SPY and IVV options
This creates a situation where contracts number should be included on the
will help level the playing field for subject line if email is used. To help the
on the same option class effectively may options on similar, competing ETFs.
not be able to execute certain strategies Commission process and review your
such as, for example, rolling to a higher C. Self-Regulatory Organization’s comments more efficiently, please use
strike price, simply because of the Statement on Comments on the only one method. The Commission will
arbitrary $200 strike price above which Proposed Rule Change Received From post all comments on the Commission’s
options intervals increase by 500%. Members, Participants, or Others Internet Web site (http://www.sec.gov/
This proposal remedies the situation by rules/sro.shtml). Copies of the
The Exchange neither solicited nor
establishing an exception to the current submission, all subsequent
received comments on the proposed
ETF interval regime for IVV options to amendments, all written statements
rule change.
allow such options to trade in $1 or with respect to the proposed rule
greater intervals at all strike prices. III. Date of Effectiveness of the change that are filed with the
The Exchange believes that the Proposed Rule Change and Timing for Commission, and all written
proposed rule change, like other strike Commission Action communications relating to the
price programs currently offered by the Because the foregoing proposed rule proposed rule change between the
Exchange, will benefit investors by change does not: Commission and any person, other than
giving them increased flexibility to more A. significantly affect the protection those that may be withheld from the
closely tailor their investment and of investors or the public interest; public in accordance with the
hedging decisions. Moreover, the B. impose any significant burden on provisions of 5 U.S.C. 552, will be
proposed rule change is consistent with competition; and available for Web site viewing and
changes proposed by other exchanges.10 C. become operative for 30 days from printing in the Commission’s Public
With regard to the impact of this the date on which it was filed, or such Reference Room, 100 F Street NE.,
proposal on system capacity, the shorter time as the Commission may Washington, DC 20549, on official
Exchange believes it and OPRA have the designate, it has become effective business days between the hours of
necessary systems capacity to handle pursuant to Section 19(b)(3)(A) of the 10:00 a.m. and 3:00 p.m. Copies of such
any potential additional traffic Act 13 and Rule 19b–4(f)(6) 14 filing also will be available for
associated with this proposed rule thereunder. inspection and copying at the principal
change. The Exchange believes that its At any time within 60 days of the office of the Exchange. All comments
members will not have a capacity issue
asabaliauskas on DSKBBXCHB2PROD with NOTICES

filing of the proposed rule change, the received will be posted without change;
as a result of this proposal. Commission summarily may the Commission does not edit personal
In addition, the interval setting regime identifying information from
temporarily suspend such rule change if
the Exchange proposes to apply to IVV submissions. You should submit only
it appears to the Commission that such
information that you wish to make
10 See Securities and Exchange Act Release 34–
11 See Current Rule 5.5.08. available publicly. All submissions
72664 (July 24, 2014), 79 FR 44231 (July 30, 2014)
(Notice of Filing of Proposed Rule Change, as
12 See Current Rule 5.5.08. should refer to File Number SR–CBOE–
Modified by Amendment No. 1, Relating to SPY 13 15 U.S.C. 78s(b)(3)(A). 2017–048 and should be submitted on
and DIA Options) (SR–Phlx–2014–046). 14 17 CFR 240.19b–4(f)(6). or before July 10, 2017.

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Document Created: 2017-06-17 01:48:04
Document Modified: 2017-06-17 01:48:04
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		82 FR 27907