
[Federal Register Volume 81, Number 124 (Tuesday, June 28, 2016)]
[Notices]
[Pages 42011-42013]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15179]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78131; File No. SR-CBOE-2016-052]


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

June 22, 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 June 20, 2016, 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 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to extend the operation of a pilot program 
that eliminates position and exercise limits for physically-settled SPY 
options (``SPY Pilot Program''). The text of the proposed rule change 
is provided below.

(additions are italicized; deletions are [bracketed])
* * * * *
Chicago Board Options Exchange, Incorporated Rules
* * * * *
Rule 4.11. Position Limits
No changes.
. . . Interpretations and Policies:
.01-.06 No change.
    .07 The position limits under Rule 4.11 applicable to options on 
shares or other securities that represent interests in registered 
investment companies (or series thereof) organized as open-end 
management investment companies, unit investment trusts or similar 
entities that satisfy the criteria set forth in Interpretation and 
Policy .06 under Rule 5.3 shall be the same as the position limits 
applicable to equity options under Rule 4.11 and Interpretations and 
Policies thereunder; except that the position limits under Rule 4.11 
applicable to option contracts on the securities listed in the below 
chart are as follows:

------------------------------------------------------------------------
           Security underlying option                 Position limit
------------------------------------------------------------------------
The DIAMONDS Trust (DIA)........................  300,000 contracts.
The Standard and Poor's Depositary Receipt Trust  None.
 (SPY).
The iShares Russell 2000 Index Fund (IWM).......  500,000 contracts.
The PowerShares QQQ Trust (QQQ).................  900,000 contracts.
The iShares MSCI Emerging Markets Index Fund      500,000 contracts.
 (EEM).
------------------------------------------------------------------------

    Position limits for SPY options are subject to a pilot program 
through [July 12, 2016] July 12, 2017.
.08 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

[[Page 42012]]

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.\5\ The SPY Pilot Program is currently scheduled to expire on 
July 12, 2016 and this proposal would extend the SPY Pilot Program 
through July 12, 2017. There are no substantive changes being proposed 
to the SPY Pilot Program.
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    \5\ See Securities Exchange Act Release Nos. 67937 (September 
27, 2012), 77 FR 60489 (October 3, 2012) (SR-CBOE-2012-091); 70878 
(November 14, 2013), 78 FR 69737 (November 20, 2013) (SR-CBOE-2013-
106); 74149 (January 27, 2015) 80 FR 5606 (February 2, 2015) (SR-
CBOE-2015-008); and 75381 (July 7, 2015) 80 FR 40111 (July 13, 2015) 
(SR-CBOE-2015-065).
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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. When the 
SPY Pilot Program was most recently renewed in July 2015, CBOE 
submitted a report providing an analysis of the SPY Pilot Program 
during the period January 2014 through May 2015 (the ``Pilot Report''). 
In the July 2015 extension, the Exchange stated that if it 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, 
it would submit another Pilot Report covering the period since the 
previous extension.\6\ Accordingly, the Exchange is submitting another 
Pilot Report that details CBOE's experience with the SPY Pilot Program. 
The Pilot Report now includes the period of June 2015 through April 
2016. The Pilot Report is attached as Exhibit 3. CBOE notes that it is 
unaware of any problems created by the SPY Pilot Program and does not 
foresee any as a result of the proposed extension. In extending the SPY 
Pilot Program, the Exchange states that if CBOE were to propose another 
extension, permanent approval or termination of the SPY Pilot Program, 
the Exchange will submit another Pilot Report covering the period since 
the previous extension, which will be submitted at least 30 days before 
the end of the proposed extension. If the SPY Pilot Program is not 
extended or adopted on a permanent basis by July 12, 2017, position 
limits in SPY will revert to their Pre-Pilot levels.
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    \6\ See 80 FR at 40112.
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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.\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. 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. Extending the SPY Pilot 
Program will give the Exchange and the Commission additional time to 
evaluate the pilot and its effect on the market.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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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. 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 as the Exchange expects other SROs will propose similar 
extensions.

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 and Rule 19b-
4(f)(6) thereunder.\9\
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    \9\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \10\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \11\ 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, noting 
that such waiver will allow the Exchange to extend the pilot program 
prior to its expiration on July 12, 2016. In addition, the Exchange 
believes that waiver of the operative delay is consistent with the 
protection of investors and the public interest because it will allow 
for the least amount of market disruption as the pilot will continue as 
it currently does maintaining the status quo. 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 operative delay and designates the 
proposed rule change operative upon filing.\12\
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    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ 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

[[Page 42013]]

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 shall 
institute proceedings to determine whether the proposed rule 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-2016-052 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2016-052. 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-2016-052, and should be 
submitted on or before July 19, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-15179 Filed 6-27-16; 8:45 am]
 BILLING CODE 8011-01-P


