Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt Two-Day Settlement on CBOE Stock Exchange

Table of Contents

September 28, 2011.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) [1] and Rule 19b-4 thereunder, [2] notice is hereby given that on September 28, 2011, the Chicago Board Options Exchange, Incorporated (“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.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange proposes to amend the rules of the CBOE Stock Exchange (“CBSX”) to permit the specification of bids and offers for delivery on the second business day following the day of the contract. The text of the proposed rule change is available on the Exchange's Web site (http://www.cboe.org/legal), at the Exchange's Office of the Secretary, and at the Commission.

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 self-regulatory organization 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 those 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 parts of such statements.

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

1. Purpose

According to CBOE Rule 51.7, bids and offers on CBSX may specify delivery on the day of a contract, on the business day following the day of the contract, and on the third business day following the day of the contract. [5] This rule does not permit delivery on the second business day following the day of the contract. Broker-dealers who execute a “cross”, resulting from the stock component of EFP (effective-for-physical) futures transactions, have requested that CBSX support a two-day settlement period in a similar manner as competing stock exchanges.

Therefore, the Exchange wishes to amend Rule 51.7 to permit delivery on the second business day following the day of the contract in order to provide CBSX Traders with the ability to agree upon delivery on any day from the day of the contract to the third business day following the day of the contract. This additional option provides further flexibility for investors regarding delivery of contracts. Moreover, the addition of two-day settlement puts the Exchange on a more even footing with other exchanges that permit delivery of a contract on second business day following the day of the contract. [6]

2. Statutory Basis

The Exchange believes the proposed rule change is consistent with the Act [7] and the rules and regulations thereunder and, in particular, the requirements of Section 6(b) of the Act. [8] Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) [9] requirements that the rules of an exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts, to remove impediments to and to perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. The proposed rule change perfects the mechanism for a free and open market by providing another option for the delivery of contracts and permitting CBSX Traders to agree upon delivery on any day from the day of the contract to the third business day following the day of the contract. Other exchanges already provide this option. [10]

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 not necessary or appropriate in furtherance of the purposes of the Act.

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

No written comments were solicited or received with respect to the proposed rule change.

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

The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act [11] and Rule 19b-4(f)(6) thereunder [12] because the proposal does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) by its terms, become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. [13]

The Exchange has requested that the Commission waive the 30-day operative delay period. The Exchange proposes to add an additional option for settlement delivery consistent with the practices of other exchanges. Therefore, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest, and designates the proposed rule change to be operative upon filing with the Commission. [14]

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 e-mail to rule-comments@sec.gov. Please include File Number SR-CBOE-2011-089 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-2011-089. This file number should be included on the subject line if e-mail 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 website 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 a.m. and 3 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-2011-089 and should be submitted on or before October 26, 2011.

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. [15]

Elizabeth M. Murphy,

Secretary.

Footnotes

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).

5. See CBOE Rule 51.7.

6. See New York Stock Exchange LLC (“NYSE”) chart titled “Delivery Dates on Exchange Contracts” at the beginning of the Section titled “Dealings and Settlements (Rules 45-299C) (the “NYSE Chart”)and NYSE Amex LLC (“Amex”) Equities Rule 14. The “Seller's Option” form of delivery described on the NYSE chart stipulates that delivery may occur “not less than two business days nor more than 180 days” following the day of the contract. Amex Equities Rule 14 stipulates that delivery may occur “not less than two business days after trade date and not more than 60 days after trade date.” While these rules differ from the proposed rule change in that they permit settlement at a later date than the proposed rule, they also permit settlement on the second business day following the trade date (like the proposed rule change).

7. 15 U.S.C. 78s(b)(1).

8. 15 U.S.C. 78f(b).

9. 15 U.S.C. 78f(b)(5).

10. See Note 6.

11. 15 U.S.C. 78s(b)(3)(A).

12. 17 CFR 240.19b-4(f)(6).

13. In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to give the Commission written notice of the Exchange's 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.

14. For purposes only of waiving the operative delay for this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See15 U.S.C. 78c(f).

15. 17 CFR 200.30-3(a)(12).

References

Loading most recent entriesloading

Feedback