Daily Rules, Proposed Rules, and Notices of the Federal Government
CBOE proposes to amend certain of its rules to allow the Exchange to list options on the Mini-Russell 2000 Index ("RMN" or "Mini-RUT"), which is based on 1/10th the value of the Russell 2000 Index, at $1 strike intervals. The text of the rule proposal is available on the Exchange's Web site (
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.
This proposed rule change is based on a filing previously submitted by NASDAQ OMX PHLX, Inc. ("Phlx") that was recently approved by the Commission.
The purpose of the proposed rule change is to amend Rule 24.9,
Strike price intervals for index options are set forth in Rules 5.5 and 24.9 at three levels: (1) Not less than $5.00 generally, (2) not less than $2.50 for index classes specifically listed in Rule 24.9.01(a), and (3) not less than $1 for certain other index classes set forth in Rule 24.9.01 (
The Exchange now proposes that the minimum strike price interval for RMN options will be $1 or greater, if the strike price is less than $200. The Exchange believes that $1 strike price intervals in this option series will provide investors with greater flexibility by allowing them to establish positions that are better tailored to meet their investment objectives.
For initial series, the Exchange would list at least two strike prices above and two strike prices below the current value of the RMN at or about the time a series is opened for trading on the Exchange. As part of this initial listing, the Exchange would list strike prices that are within 5 points from the closing value of the RMN on the preceding day.
As for additional series, the Exchange would be permitted to add additional series when the Exchange deems it necessary to maintain an orderly market, to meet customer demand or when the underlying RMN moves substantially from the initial exercise price or prices. To the extent that any additional strike prices are listed by the Exchange, such additional strike prices shall be within thirty percent (30%) above or below the closing value of the RMN. The Exchange would also be permitted to open additional strike prices that are more than 30% above or below the current RMN value provided that demonstrated customer interest exists for such series, as expressed by institutional, corporate or individual customers or their brokers. Market-Makers trading for their own account would not be considered when determining customer interest. In addition to the initial listed series, the Exchange may list up to sixty (60) additional series per expiration month for each series in Mini-RUT options. However, $1 strike price intervals may be listed on Mini-RUT options only where the strike price is below $200. In addition, the Exchange proposes that it shall not list LEAPS on Mini-RUT options at intervals less than $2.50.
The Exchange is also proposing to set forth a delisting policy with respect to Mini-RUT options. Specifically, the Exchange would, on a monthly basis, review series that are outside a range of five (5) strikes above and five (5) strikes
Notwithstanding the proposed delisting policy, customer requests to add strikes and/or maintain strikes in Mini-RUT options in series eligible for delisting shall be granted.
Further, in connection with the proposed delisting policy, if the Exchange identifies series for delisting, the Exchange shall notify other options exchanges with similar delisting policies regarding eligible series for listing, and shall work with such other exchanges to develop a uniform list of series to be delisted, so as to ensure uniform series delisting of multiply listed Mini-RUT options.
It is expected that the proposed delisting policy for Mini-RUT options will be adopted by other options exchanges that list and trade Mini-RUT options.
The Exchange also proposes to add new Interpretation and Policy .16 to Rule 5.5,
The Exchange is proposing to make some lettering and numbering changes to the Interpretations and Policies to Rules 5.5 and 24.9, which are being amended substantively by this filing. Specifically, the Exchange is proposing to re-number existing Interpretation and Policy .13 to Rule 5.5 as new Interpretation and Policy .15. The Exchange is proposing to make this change because the Exchange has two pending filings that have been formally submitted which overlap with the existing and proposed numbering to Rule 5.5.
Finally, the Exchange is proposing to reduce the minimum strike price intervals for LEAPS on Mini-NDX options from $5 to $2.50 in order to conform CBOE's listing ability with Phlx's.
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the "Act")
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.
No written comments were solicited or received with respect to the proposed rule change.
Because the foregoing proposed rule change: (i) Does not significantly affect the protection of investors or the public interest; (ii) does not impose any significant burden on competition; and (iii) by its terms, does not 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, it has become effective pursuant to Section 19(b)(3)(A) of the Act
The Exchange has requested that the Commission waive the 30-day operative delay and designate the proposed rule change immediately operative, so that the Exchange may, for competitive reasons, list Mini-RUT options at the same $1 strike price intervals currently listed by Phlx. The Commission believes such waiver is consistent with the protection of investors and the public interest.
At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate 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.
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:
* Use the Commission's Internet comment form
* Send an e-mail to
* Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.