
[Federal Register Volume 78, Number 224 (Wednesday, November 20, 2013)]
[Notices]
[Pages 69737-69739]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-27758]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70878; File No. SR-CBOE-2013-106]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Fourteen Month Extension of Pilot Program That 
Eliminates Position and Exercise Limits for Physically-Settled SPDR S&P 
500 ETF Trust (``SPY'') Options

November 14, 2013.
    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 November 5, 2013, the Chicago Board Options Exchange, 
Incorporated (the ``Exchange'' or ``CBOE'') filed with the Securities 
and Exchange Commission (the ``Commission'') the proposed rule

[[Page 69738]]

change as described in Items I and II 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 Interpretation and Policy .07 to Rule 4.11 
(Position Limits) by extending a pilot program that eliminates the 
position and exercise limits for physically-settled options on the SPDR 
S&P 500 ETF Trust (``SPY Pilot Program''), which is currently set to 
expire on November 27, 2013.
    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
    The Exchange proposes to amend Interpretation and Policy .07 to 
Rule 4.11 (Position Limits) to extend the duration of the SPY Pilot 
Program for an additional fourteen months.\5\ The SPY Pilot Program is 
currently scheduled to expire on November 27, 2013 and this proposal 
would extend the SPY Pilot Program through January 27, 2015. There are 
no substantive changes being proposed to the SPY Pilot Program.
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    \5\ See Securities Exchange Act Release No. 67937 (September 27, 
2012) 77 FR 60489 (October 3, 2012) (SR-CBOE-2012-091).
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    In proposing to extend the SPY Pilot Program, the Exchange 
reaffirms its consideration of several factors that supported its 
original proposal to establish the SPY Pilot Program, which include: 
(1) The liquidity of the option and the underlying security; (2) the 
market capitalization of the underlying security and the securities 
that make up the S&P 500 Index; (3) options reporting requirements; and 
(4) financial requirements imposed by CBOE and the Commission.
    In the original proposal to establish the SPY Pilot Program, CBOE 
stated that if CBOE were to submit a proposal to either extend the SPY 
Pilot Program, adopt the SPY Pilot Program on a permanent basis, or 
terminate the SPY Pilot Program, CBOE would submit, along with any 
proposal, a report providing any analysis of the SPY Pilot Program 
covering the first twelve months during which the SPY Pilot Program was 
in effect (the ``Pilot Report'').\6\ However, because not all self-
regulatory organizations (``SROs'') have adopted similar rules 
eliminating position and exercise limits for SPY options and because 
market participants that are members of such SROs are required to 
comply with the more restrictive SPY option position and exercise 
limits, no market participants have availed themselves of the SPY Pilot 
Program. As a result, there is not sufficient data to compile a 
meaningful Pilot Report at this time to file with this current 
extension request.
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    \6\ See 77 FR at 60490.
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    The Exchange believes that it is appropriate to extend the SPY 
Pilot Program for an additional fourteen months to provide time for 
other SROs to adopt similar pilot programs that eliminate positions and 
exercise limits for SPY options. In that event (and in a year's time), 
the Exchange will be able to prepare a meaningful Pilot Report in 
support of a proposal to either extend the SPY Pilot Program, adopt the 
SPY Pilot Program on a permanent basis, or terminate the SPY Pilot 
Program.
    As with the original proposal to establish the SPY Pilot Program, 
the Exchange represents that the Pilot Report would be submitted within 
thirty (30) days of the end of the first twelve months of the extended 
SPY Pilot Program time period and would cover the twelve months that 
just ended. The Pilot Report would detail the size and different types 
of strategies employed with respect to positions established as a 
result of the elimination of position limits in SPY options. In 
addition, the Pilot Report would note whether any problems resulted due 
to the no limit approach and any other information that may be useful 
in evaluating the effectiveness of the SPY Pilot Program. The Pilot 
Report would compare the impact of the SPY Pilot Program, if any, on 
the volumes of SPY options and the volatility in the price of the 
underlying SPY shares, particularly at expiration. In preparing the 
report the Exchange would utilize various data elements such as volume 
and open interest. In addition the Exchange would make available to 
Commission staff data elements relating to the effectiveness of the SPY 
Pilot Program.
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.\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 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.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Exchange believes that extending the SPY Pilot 
Program promotes just and equitable principles of trade by permitting 
market participants, including market makers, institutional investors 
and retail investors, to establish greater positions when pursuing 
their investment goals and needs.

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. The proposed rule change is 
not designed to address any aspect of competition, whether between the 
Exchange and its competitors, or among market participants. Instead, 
the proposed rule change is designed to allow the SPY Pilot Program to 
continue while other SROs adopt similar provisions and meaningful data 
can be compiled into a Pilot Report.

[[Page 69739]]

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 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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, along 
with a brief description and text of 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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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \11\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \12\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay. The 
Exchange believes that waiver of the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because it will benefit market participants since immediate operability 
will allow the SPY Pilot Program to continue without interruption. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Therefore, the Commission hereby waives the 30-day operative delay and 
designates the proposal operative upon filing.\13\
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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has 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 rule-comments@sec.gov. Please include 
File Number SR-CBOE-2013-106 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2013-106. 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-2013-106 and should be 
submitted on or before December 11, 2013.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-27758 Filed 11-19-13; 8:45 am]
BILLING CODE 8011-01-P


