Exchange Bulletin. July 27, 2012 Volume 40, Number 30 TRADING PERMIT INFORMATION FOR 07/19/2012 THROUGH 07/25/2012

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1 Exchange Bulletin July 27, 2012 Volume 40, Number 30 The Bylaws and Rules of Chicago Board Options Exchange, Incorporated ( Exchange ), in certain specific instances, require the Exchange to provide notice to Exchange Trading Permit Holders. To satisfy this requirement, a copy of the Exchange Bulletin, including the Regulatory Bulletin, is delivered by or by hard copy free of charge to all effective Trading Permit Holders on a weekly basis. Trading Permit Holders are encouraged to receive the Exchange and Regulatory Bulletin and Information Circulars via e- mail. subscriptions may be obtained by Trading Permit Holders by submitting your name, firm if applicable, address, and phone number, to registration@cboe.com. If you do sign up for delivery, please remember to inform the Registration Services Department of address changes. Subscriptions by Trading Permit Holders for hard copy delivery may be obtained by submitting your name, firm if any, mailing address and telephone number to: Chicago Board Options Exchange, Registration Services Department, 400 South LaSalle, Chicago, Illinois 60605, Attention: Bulletin Subscriptions. Copyright 2012 Chicago Board Options Exchange, Incorporated TRADING PERMIT INFORMATION FOR 07/19/2012 THROUGH 07/25/2012 TRADING PERMIT APPLICATIONS RECEIVED FOR WHICH BULLETIN PUBLICATION IS REQUIRED Individual Applicants Daniel T. Rudrud JP Morgan Securities LLC 1620 Washington Ave. Wilmette, IL EFFECTIVE TRADING PERMIT HOLDERS Individuals Nominee: Effective Date Eli Adler (ELI) 7/25/12 Bluefin Trading LLC Type of Business to be Conducted: Market Maker TERMINATIONS Individuals Nominee: Termination Date Stefan P. Weisse (SPW) 7/19/12 Byrd Trading LLC Aurelio Picciuca (PIC) 7/19/12 CMCJL, LLC John F Allen (ALN) 7/19/12 SunGard Brokerage & Securities Services LLC Andrius V. Paulius (AVP) 7/20/12 Sun Trading LLC TPH Organizations Byrd Trading LLC 7/19/12 CMCJL, LLC 7/19/12 SunGard Brokerage & 7/19/12 Securities Services LLC Sun Trading LLC 7/20/12

2 Page 2 July 27, 2012 Volume 40, Number 30 Chicago Board Options Exchange RESEARCH CIRCULARS The following Research Circulars were distributed between July 20 and July 26, If you wish to read the entire document, please refer to the CBOE website at and click on the Trading Tools Tab. New listings and series information is also available in the Trading Tools section of the website. For questions regarding information discussed in a Research Circular, please call The Options Clearing Corporation at OPTIONS. Research Circular #RS July 20, 2012 Ivanhoe Mines Ltd. ("IVN/IVN1") Rights Expiration and Position Consolidation Research Circular #RS July 23, 2012 Chesapeake Midstream Partners, L.P. ("CHKM") Name, Stock and Option Symbol Change to Access Midstream Partners, L.P. Research Circular #RS July 24, 2012 Opnext, Inc. ("OPXT") Merger COMPLETED with Oclaro, Inc. ("OCLR") Research Circular #RS July 25, 2012 Raven Industries, Inc. ("RAVN") 2-for-1 Stock Split Ex- Distribution Date: July 26, 2012 Research Circular #RS July 25, 2012 Motricity, Inc. ("MOTR") Rights Distribution Effective Date: July 26, 2012 Research Circular #RS July 25, 2012 Pioneer Drilling Company ("PDC") Name, Stock and Option Symbol Change to Pioneer Energy Services Corp. ("PES") Effective Date: July 30, 2012

3 July 27, 2012 Volume RB23, Number 30 The Bylaws and Rules of Chicago Board Options Exchange, Incorporated ( Exchange ), in certain specific instances, require the Exchange to provide notice to Trading Permit Holders. The weekly Regulatory Bulletin is delivered to all effective Trading Permit Holders to satisfy this requirement. Copyright 2012 Chicago Board Options Exchange, Incorporated. REGULATORY CIRCULARS Regulatory Circular RG To: CBOE Trading Permit Holders From: DPM and Market Maker Administration Date: July 23, 2012 Re: Relocation of Option Classes on CBOE The Chicago Board Options Exchange ( CBOE or Exchange ) is considering relocating the SPDR Gold Shares (GLD) and the ishares Silver Trust (SLV) from Post 4, Station 9 to Post 4, Station 5. Prior to making a final decision with respect to the relocation of GLD and SLV, trading permit holders affected by any proposed relocation may request to appear before the Exchange to discuss the relocation, or submit a written statement to the Exchange expressing their views. If you would like to appear before the Exchange to discuss the relocation, please contact Allison Kile at (312) on or before 12:00 p.m. on Friday, July 27, Alternatively, you may provide the Exchange with a written statement expressing your views on or before 12:00 p.m. on Friday, July 27, Regulatory Circular RG To: Trading Permit Holders From: Business Development Division Date: July 24, 2012 Re: Variance Strip Options - Systems Settings On July 27, 2012, CBOE plans to begin trading S&P 500 Variance Trades (also known as Variance Strip options), symbol VSTRP. System settings and other details for VSTRP are as follows: - Trading will be fully automated with no open outcry. - Trades executed electronically will be allocated using Price-Time priority consistent with Rule 6.45A(a)(ii). Public Customer priority and the Participation Entitlements shall not apply. - The minimum price increment will be.05 at all price levels. - The Hybrid Opening System (HOSS) will be used, (i.e., the HAL Opening Procedure (HALO) in Rule 6.2B.03 will not be active). July 27, 2012 Volume RB23, Number 30 1

4 - VSTRP will open systematically at 8:30AM and will close at 3:00PM. - Exchange Prescribed Widths (EPWs) and Opening Exchange Prescribed Widths (OEPWs) will follow standard settings, as described in Regulatory Circular RG All Order origins will be eligible for auto-ex. - All Order origins will be eligible for booking. - COB and COA will not be available. - AIM will not be available. - Preferred Market Maker trade allocation will not be available. - A daily SPX Variance Strip series listing and related information may be found at - CBOE requires permit holders to complete a TPH Routing Authorization form with a list of acronyms that may be enabled for routing VSTRP orders. Please note that the system will reject VSTRP orders from trading permit holders whose acronyms have not been enabled. Please contact Greg Burkhardt at , Bill Speth at , Charlie Hullihan at or the Help Desk at with any questions regarding this matter. Regulatory Circular RG DATE: July 24, 2012 TO: Trading Permit Holders FROM: Business Development Division RE: Reactivation of Automation of Stock-Option Strategy Orders This circular updates Regulatory Circular RG Effective July 25, 2012, CBOE will re-activate functionality to automate the handling of complex orders containing a stock leg through the use of the Complex Order Auction (COA), the Complex Order Book (COB), the Automated Improvement Mechanism (AIM), and the AIM AON Solicitation Auction Mechanism (SAM). The initial rollout schedule is provided below. Floor-wide activation in all equity option classes, including options classes on exchange-traded products (e.g., options on ETFs and ETNs), is expected as soon as possible thereafter and will be announced via subsequent circular(s). Product Activation Date T (AT&T Inc.) July 25, 2012 F (Ford Motor Company) July 25, 2012 HLF (Herbalife LTD) July 27, 2012 BAC (Bank of America Corp) July 27, 2012 Functionality details are available in Regulatory Circular RG Questions regarding this circular may be directed to: CBOE Help Desk at (866) or helpdesk@cboe.com Anthony Montesano at (312) or montesan@cboe.com July 27, 2012 Volume RB23, Number 30 2

5 Regulatory Circular RG TO: Trading Permit Holders FROM: CBOE Help Desk DATE: July 24, 2012 RE: Bid-Ask Differentials This Regulatory Circular updates and replaces RG CBOE s rules allow it to set the bid-ask differential requirements on a class by class basis. CBOE will announce the bid-ask differentials via Regulatory Circular. Except as provided below, the current differentials for all option classes are set forth on page 2 of this Regulatory Circular. Effective Monday, July 23, 2012, requests for bid-ask relief on a class by class basis should be directed to the CBOE Help Desk. Requests must include an explanation as to why bid-ask relief is needed. Please note that if a particular option class was granted bid-ask relief through an expiration period and the relief is greater than the below bid-ask differentials, the relief granted will continue through the expiration period. Additionally, due to the volatility in the underlying stocks and other factors affecting both the options and the underlying, CBOE by its authority under the provisions of Exchange Rule 8.7(b)(iv), has temporarily established modified bid/ask differentials in the option series of the following option class(es).* This relief is granted from the opening of business on July 23rd through the August 2012 Expiration Cycle unless withdrawn by the CBOE prior to that time. Class Relief For Near Term Options Relief for Leap Options Name DPM 1 UVXY ProShares Ultra Vix Short Term Fund Group One 2 SVXY ProShares Trust II Group One *Relief granted for the open only for both open outcry and electronic quotations CBOE granted this relief with the contingency that the disseminated markets in these classes will be competitive and in many instances will be narrower than the relief granted below. CBOE will continue to monitor the activity in the underlying securities of these options, and will modify the bid/ask differentials in the respective options accordingly. Questions regarding bid-ask relief should be directed to John Haffner (Haffner@cboe.com) or Jim Corsey (corseyj@cboe.com) or call (800) July 27, 2012 Volume RB23, Number 30 3

6 All classes excluding LEAPS, NDX, RUT, SPX, SPL, UltraShorts & UltraLongs LEAPS, NDX, RUT, SPX and SPL UltraShorts and UltraLongs Short Sale Circuit Breaker in Effect 1 A B Opening Rotation & Open Outcry Quote Widths Intraday Electronic Quoting Widths $0.50 if the bid is less than $2, 2x $0.80 where the bid is at least $2 but does not exceed $5, Row A Column 1 $1.00 where the bid is more than $5 but does not exceed $10, $2.00 where the bid is more than $10 but does not exceed $20 $3.00 where the bid is more than $20 but does not exceed $50, $5.00 where the bid is more than $50 but does not exceed $100, $8.00 where the bid is more than $100 but does not exceed $200, and $12.00 where the bid is more than $200 $5 where the bid does not exceed $100, 2x $8.00 where the bid is more than $100 but does not exceed $200, and Row B Column 1 $12.00 where the bid is more than $200 $10 wide, unless the bid is more than $200, in which case the bidask differential is $12 wide. $10 wide, unless the bid is more than $200, in which case the bidask differential is $12 wide 3x Row A Column 1, 2 or 3, as applicable 3x Row B Column 1, 2 or 3, as applicable The bid-ask differentials do not apply to at-the-money or in-the-money series where the quote width on the primary market of the underlying security, or the quote width calculated by the Exchange or its agent for various indices, is wider than the differentials set forth above. For these series, the bid-ask differential may be as wide as the quote width on the primary market of the underlying security or calculated by the Exchange or its agent, as applicable. "In-the-money series" are defined as follows: for call options, all strike prices below the offer or last sale in the underlying security (whichever is higher); and for put options, all strike prices above the bid or last sale in the underlying security (whichever is lower). 1 The bid-ask differentials may be 3x wider for the option class overlying an NMS stock while the underlying stock is subject to a short sale circuit breaker under Rule 201 of Regulation SHO under the Exchange Act. The bid-ask differentials shall set forth in Column 1, 2 or 3 above, as applicable, shall recommence once the short sale circuit breaker is no longer in effect for the underlying NMS stock. For example, when a circuit breaker is triggered in the underlying stock XYZ, the $0.50 opening rotation and open outcry quoting width requirement if the bid in an XYZ option series is less than $2 will change to $1.50, then revert back to $0.50 once the circuit breaker is no longer in effect. July 27, 2012 Volume RB23, Number 30 4

7 Regulatory Circular RG To: Trading Permit Holders From: DPM and Market Maker Administration Date: July 25, 2012 Re: Relocation of Option Classes on CBOE This Regulatory Circular updates RG With respect to the proposed relocation of the SPDR Gold Shares (GLD) and the ishares Silver Trust (SLV) option classes from Post 4, Station 9 to Post 4, Station 5 discussed in Regulatory Circular RG12-099, CBOE has determined to not take any action at this time. Therefore, the GLD and SLV option classes will continue to be located at Post 4, Station 9. Please contact Allison Kile at (312) or kilea@cboe.com if there are any questions. Regulatory Circular RG To: Trading Permit Holders From: Business Development Division Date: July 26, 2012 Re: Variance Strip Options - Systems Settings This circular updates RG On July 27, 2012, CBOE plans to begin trading S&P 500 Variance Trades (also known as Variance Strip options), symbol VSTRP. System settings and other details for VSTRP are as follows: - Trading will be fully automated with no open outcry. - Trades executed electronically will be allocated using Price-Time priority consistent with Rule 6.45A(a)(ii). Public Customer priority and the Participation Entitlements shall not apply. - The minimum price increment will be.05 at all price levels. - Orders priced at the Market (MKT) are not eligible and will be rejected. - The Hybrid Opening System (HOSS) will be used, (the HAL Opening Procedure (HALO) in Rule 6.2B.03 will not be active). - VSTRP will open systematically at 8:30AM and will close at 3:15PM. - Exchange Prescribed Widths (EPWs) and Opening Exchange Prescribed Widths (OEPWs) will follow standard settings, as described in Regulatory Circular RG All Order origins will be eligible for auto-ex. - All Order origins will be eligible for booking. - COB and COA will not be available. - AIM will not be available. - Preferred Market Maker trade allocation will not be available. - SPX option trades resulting from SPX Variance Strip executions will be reported with a BNMT (benchmark trade) suffix. - A daily SPX Variance Strip series listing and related information may be found at July 27, 2012 Volume RB23, Number 30 5

8 - CBOE requires permit holders to complete a TPH Routing Authorization for SPX Variance Strips form with a list of acronyms that may be enabled for routing VSTRP orders. The completed form should be sent to the Registration Services Department at registration@cboe.com or faxed to Please note that the system will reject VSTRP orders from trading permit holders whose acronyms have not been enabled. Please contact Greg Burkhardt at , Bill Speth at , Charlie Hullihan at or the Help Desk at with any questions regarding this matter. July 27, 2012 Volume RB23, Number 30 6

9 R U L E C H A N G E S APPROVED RULE CHANGE(S) The Securities and Exchange Commission ( SEC ) has approved the following change(s) to Exchange rules pursuant to Section 19(b) of the Securities Exchange Act of 1934 (the Act ). Below, any additions to rule text are underlined and any deletions are [bracketed]. Copies are available on the CBOE public website at The effective date of the rule change is the date of approval unless otherwise noted. SR-CBOE CBOE S&P 500 AM/PM Basis Options On July 20, 2012, the SEC approved Rule Change File No. SR-CBOE , which filing pertains to the listing and trading of CBOE S&P 500 AM/PM Basis (SPBAS) options. SPBAS options reflect the difference between the Special Opening Quotation (SOQ) of the S&P 500 Index and the closing level of the S&P 500 Index on the third Friday of each month. Any questions regarding the rule change may be directed to Jenny Klebes Golding, Legal Division, at The rule text is shown below and the rule filing is available at Rule 5.5 Series of Option Contracts Open for Trading RULE 5.5 (a) (e) No change. Interpretations and Policies No change..21 Notwithstanding Interpretation and Policy.01 above, the intervals between strike prices for CBOE S&P 500 AM/PM Basis option series shall be determined in accordance with Interpretation and Policy.01(e) to Rule CHAPTER XXIV Index Options Rule 24.1 Definitions RULE No change. Interpretations and Policies:.01 The reporting authorities designated by the Exchange in respect of each index underlying an index option contract traded on the Exchange are as follows: Index Reporting Authority (Add the following to the current list:) CBOE S&P 500 AM/PM Basis.... CBOE Rule 24.4 Position Limits for Broad-Based Index Options RULE (a) In determining compliance with Rule 4.11, there shall be no position limits for broad-based index option contracts (including reduced-value option contracts) on CBOE S&P 500 AM/PM Basis, CBOE S&P 500 Three-Month Realized Variance, CBOE S&P 500 Three-Month Realized Volatility and on the BXM (1/10th value), DJX, OEX, XEO, NDX, RUT, VIX, VXN, VXD, S&P 500 Dividend Index and SPX classes. All other broad-based index option contracts shall be subject to a contract limitation fixed by the Exchange, which shall not be larger than the limits provided in the chart below. (b) (e) No change. Interpretations and Policies: No change. July 27, 2012 Volume RB23, Number 30 7

10 .03 Reporting Requirement Each Trading Permit Holder (other than CBOE Market-Makers) or TPH organization that maintains a broad-based index option position on the same side of the market in excess of 100,000 contracts for OEX, XEO, NDX, RUT, VIX, VXN, VXD, S&P 500 Dividend Index, SPX, CBOE S&P 500 AM/PM Basis, CBOE S&P 500 Three-Month Realized Variance or CBOE S&P 500 Three-Month Realized Volatility and 1 million contracts for BXM (1/10th value) and DJX, for its own account or for the account of a customer, shall report information as to whether the positions are hedged and provide documentation as to how such contracts are hedged, in the manner and form required by the Department of Market Regulation. In calculating the applicable contract-reporting amount, reduced-value contracts will be aggregated with fullvalue contracts and counted by the amount by which they equal a full-value contract (e.g., 10 XSP options equal 1 SPX full-value contract). The Exchange may specify other reporting requirements of this interpretation as well as the limit at which the reporting requirement may be triggered.. 04 Margin and Clearing Firm Requirements Whenever the Exchange determines, based on a report by the Department of Market Regulation or otherwise, that additional margin is warranted in light of the risks associated with an under-hedged BXM (1/10th value), SPX, OEX, XEO, NDX, RUT, DJX, VIX, VXN, VXD, S&P 500 Dividend Index, CBOE S&P 500 AM/PM Basis, CBOE S&P 500 Three-Month Realized Variance or CBOE S&P 500 Three- Month Realized Volatility option position, the Exchange may consider imposing additional margin upon the account maintaining such under-hedged position pursuant to its authority under Exchange Rule Additionally, it should be noted that the clearing firm carrying the account will be subject to capital charges under SEC Rule 15c3-1 to the extent of any margin deficiency resulting from the higher margin requirements. Rule 24.5 Exercise Limits RULE In determining compliance with Rule 4.12, exercise limits for index option contracts shall be equivalent to the position limits prescribed for option contracts with the nearest expiration date in Rule 24.4, 24.4A, or 24.4C. There shall be no exercise limits for broad-based index options (including reducedvalue option contracts) on CBOE S&P 500 AM/PM Basis,CBOE S&P 500 Three-Month Realized Variance, CBOE S&P 500 Three-Month Realized Volatility and on the BXM (1/10th value), DJX, OEX, XEO, NDX, RUT, VIX, VXN, VXD, S&P 500 Dividend Index, or SPX. Interpretations and Policies: No change. Rule 24.6 Days and Hours of Business RULE No change. Interpretations and Policies: No change..03 On their last trading day, transactions in expiring CBOE S&P 500 AM/PM Basis options may be effected on the Exchange between the hours of 8:30 a.m. (Chicago time) and 3:00 pm (Chicago time). Rule 24.9 Terms of Index Option Contracts RULE (a) General. (1) No change. (2) Expiration Months. Index option contracts may expire at three-month intervals or in consecutive months. The Exchange may list up to six expiration months at any one time, but will not list index options that expire more than twelve months out. Notwithstanding the preceding restriction, the Exchange may list up to twelve expiration months at any one time for any broad-based security index option contracts, including reduced-value and jumbo option contracts, (e.g., DJX, NDX, RUT and SPX) upon which the Exchange calculates a volatility index and for CBOE S&P 500 AM/PM Basis options. (A) (B) No change. (3) European-Style Exercise. The following European-style index options, some of which are A.M.-settled as provided in paragraph (a)(4), are approved for trading on the Exchange: July 27, 2012 Volume RB23, Number 30 8

11 (i)- (civ) No change. (cv) CBOE S&P 500 AM/PM Basis (P.M.-settled) (4) (5) No change. (b) (e) No change. Interpretations and Policies:.01 The procedures for adding and deleting strike prices for index options are provided in Rule 5.5 and Interpretations and Policies related thereto, as otherwise generally provided by Rule 24.9, and include the following: (a) - (c) No change. (d) When new series of index options with a new expiration date are opened for trading, or when additional series of index options in an existing expiration date are opened for trading as the current value of the underlying index to which such series relate moves substantially from the exercise prices of series already opened, the exercise prices of such new or additional series shall be reasonably related to the current value of the underlying index at the time such series are first opened for trading. In the case of all classes of index options, the term reasonably related to the current value of the underlying index shall have the meaning set forth in Interpretation and Policy [.05].04 under Rule (e) [Reserved.] The interval between strike prices for CBOE S&P 500 AM/PM Basis options will be $1 or greater where the strike price is $200 or less and $5 or greater where the strike price is greater than $200. (f) (l) No change No change. Rule 24A.7 Position Limits and Reporting Requirements RULE 24A.7. (a) No change. (b) Certain Broad-Based FLEX Index Options. There shall be no position limits for FLEX BXM (1/10th value), DJX, OEX, XEO, NDX, RUT, VIX, VXN, VXD, CBOE S&P 500 AM/PM Basis, CBOE S&P 500 Three-Month Realized Variance, CBOE S&P 500 Three-Month Realized Volatility, S&P 500 Dividend Index or SPX option contracts (including reduced-value option contracts). However, each Trading Permit Holder or TPH organization (other than CBOE Market-Makers) that maintains a FLEX broad-based index option position on the same side of the market in excess of 100,000 contracts for OEX, XEO, NDX, RUT, S&P 500 Dividend Index, CBOE S&P 500 AM/PM Basis or SPX and 1 million contracts for BXM (1/10th value) and DJX, for its own account or for the account of a customer, shall report information as to whether the positions are hedged and provide documentation as to how such contracts are hedged, in the manner and form prescribed by the Exchange. In calculating the applicable contract-reporting amount, reducedvalue contracts will be aggregated with full-value contracts and counted by the amount by which they equal a full- value contract (e.g., 10 XSP options equal 1 SPX full-value contract). The Exchange may specify other reporting requirements of this interpretation as well as the limit at which the reporting requirement may be triggered. In addition, whenever the Exchange determines that a higher margin is warranted in light of the risks associated with an under-hedged FLEX BXM (1/10th value), DJX, OEX, XEO, NDX, RUT, VIX, VXN, VXD, CBOE S&P 500 AM/PM Basis, CBOE S&P 500 Three-Month Realized Variance, CBOE S&P 500 Three-Month Realized Volatility, S&P 500 Dividend Index or SPX option position, the Exchange may consider imposing additional margin upon the account maintaining such under-hedged position, pursuant to its authority under Exchange Rule Additionally, it should be noted that the clearing firm carrying the account will be subject to capital charges under 15c3-1 under the Exchange Act to the extent of any margin deficiency resulting from the higher margin requirements. (c) (d) No change. Rule 24A.8 Exercise Limits RULE 24A.8. (a) In determining compliance with Rules 4.12 and 24.5, exercise limits for FLEX Index and FLEX Individual Stock or ETF Based Volatility Index Options shall be equivalent to the FLEX position limits prescribed in Rule 24A.7. There shall be no exercise limits for broad-based FLEX Index Options (including reduced-value option contracts) on BXM (1/10th value), DJX, NDX, OEX, RUT, S&P 500 Dividend July 27, 2012 Volume RB23, Number 30 9

12 Index, SPX, VIX, VXN, VXD, CBOE S&P 500 AM/PM Basis, CBOE S&P 500 Three-Month Realized Variance, CBOE S&P 500 Three-Month Realized Volatility and XEO. (b) (d) No change. Rule 24B.7 Position Limits and Reporting Requirements RULE 24B.7. (a) No change. (b) Certain Broad-Based FLEX Index Options. There shall be no position limits for FLEX BXM (1/10th value), DJX, NDX, OEX, RUT, S&P 500 Dividend Index, SPX, VIX, VXN, VXD, CBOE S&P 500 AM/PM Basis, CBOE S&P 500 Three-Month Realized Variance, CBOE S&P 500 Three-Month Realized Volatility or XEO option contracts (including reduced-value option contracts). However, each Trading Permit Holder or TPH organization (other than a FLEX Market-Maker) that maintains a FLEX broad-based index option position on the same side of the market in excess of 100,000 contracts for NDX, OEX, RUT, S&P 500 Dividend Index, SPX, VIX, VXN, VXD, CBOE S&P 500 AM/PM Basis,CBOE S&P 500 Three- Month Realized Variance, CBOE S&P 500 Three-Month Realized Volatility or XEO and 1 million contracts for BXM (1/10th value) and DJX, for its own account or for the account of a customer, shall report information as to whether the positions are hedged and provide documentation as to how such contracts are hedged, in the manner and form prescribed by the Exchange. In calculating the applicable contract-reporting amount, reduced-value contracts will be aggregated with full-value contracts and counted by the amount by which they equal a full-value contract (e.g., 10 XSP options equal 1 SPX fullvalue contract). The Exchange may specify other reporting requirements of this interpretation as well as the limit at which the reporting requirement may be triggered. In addition, whenever the Exchange determines that a higher margin is warranted in light of the risks associated with an under-hedged FLEX BXM (1/10th value), DJX, NDX, OEX, RUT, S&P 500 Dividend Index, SPX, VIX, VXN, VXD, CBOE S&P 500 AM/PM Basis, CBOE S&P 500 Three-Month Realized Variance, CBOE S&P 500 Three-Month Realized Volatility or XEO option position, the Exchange may consider imposing additional margin upon the account maintaining such under-hedged position, pursuant to its authority under Exchange Rule Additionally, it should be noted that the clearing firm carrying the account will be subject to capital charges under Rule 15c3-1 under the Exchange Act to the extent of any margin deficiency resulting from the higher margin requirements. (c) (d) No change. Rule 24B.8. Exercise Limits RULE 24B.8. (a) In determining compliance with Rules 4.12 and 24.5, exercise limits for FLEX Index and FLEX Individual Stock or ETF Based Volatility Index Options shall be equivalent to the FLEX position limits prescribed in Rule 24B.7. There shall be no exercise limits for broad-based FLEX Index Options (including reduced-value option contracts) on BXM (1/10th value), DJX, NDX, OEX, RUT, S&P 500 Dividend Index, SPX, VIX, VXN, VXD, CBOE S&P 500 AM/PM Basis, CBOE S&P 500 Three-Month Realized Variance, CBOE S&P 500 Three-Month Realized Volatility and XEO. (b) (d) No change. EFFECTIVE-ON-FILING RULE CHANGE(S) The following rule filing(s) was submitted to the SEC effective on filing, and may have taken effect pursuant to Section 19(b)(3) of the Act. The rule filing(s) will remain in effect barring further action by the SEC within 60 days after publication in the Federal Register. Below, any additions to rule text are underlined and any deletions are [bracketed]. Copies are available on the CBOE public website at July 27, 2012 Volume RB23, Number 30 10

13 SR-CBOE CBSX Individual Stock Trading Pause Pilot On July 20, 2012, the Exchange filed Rule Change File No. SR-CBOE , which filing proposes to extend the CBSX individual stock trading pause pilot through February 4, Any questions regarding the rule change may be directed to Jennifer Lamie, Legal Division, at The rule text is shown below and the rule filing is available at Rule 6.3C - Individual Stock Trading Pause Due to Extraordinary Market Volatility... Interpretations and Policies:.03 The provisions of this Rule shall be in effect for eligible NMS stocks during a pilot period ending [July 31, 2012] February 4, The term eligible NMS stocks shall mean NMS stocks, other than rights and warrants. Trading in an eligible NMS stock will pause between the hours of 8:45 a.m. and 2:35 p.m. (all times are CT), or in the case of an early scheduled close, 25 minutes before the close of trading, if the price of the stock moved by a percentage specified below within a five-minute period ( Threshold Move ), as calculated by the primary listing market as follows: SR-CBOE CBSX Clearly Erroneous Policy Pilot On July 20, 2012, the Exchange filed Rule Change File No. SR-CBOE , which filing proposes to extend a CBSX clearly erroneous policy pilot (which is related to the CBSX individual stock trading pause pilot) through February 4, Any questions regarding the rule change may be directed to Jennifer Lamie, Legal Division, at The rule text is shown below and the rule filing is available at Rule 52.4 Clearly Erroneous Policy The provisions of paragraphs (c), (e)(2), (f), and (g) of this Rule, as amended on September 10, 2010, shall be in effect during a pilot period set to end on [July 31, 2012] February 4, If the pilot is not either extended or approved permanent, the prior versions of paragraphs (c), (e)(2), (f), and (g) shall be in effect. SR-CBOE Reference Updates On July 26, 2012, the Exchange filed Rule Change File No. SR-CBOE , which filing proposes to update references in CBOE Rules. Previous references to Rule 11Ac1-1 under the Act have been replaced with references to Regulation NMS. Any questions regarding the rule change may be directed to Jeff Dritz, Legal Division, at The rule text is shown below and the rule filing is available at Rule 8.7. Obligations of Market-Makers (a) No Change (b) Appointment. With respect to each class of option contracts for which a Market-Maker holds an Appointment under Rule 8.3, a Market-Maker has a continuous obligation to engage, to a reasonable degree under the existing circumstances, in dealings for the Market-Maker s own account when there exists, or it is reasonably anticipated that there will exist, a lack of price continuity, a temporary disparity between the supply of and demand for a particular option contract, or a temporary distortion of the price relationships between option contracts of the same class. Without limiting the foregoing, a Market-Maker is expected to perform the following activities in the course of maintaining a fair and orderly market: (i) No Change July 27, 2012 Volume RB23, Number 30 11

14 (ii) To make markets which, absent changed market conditions, will be honored in accordance with Rule 8.51, in all series of options classes in which the Market-Maker quotes. Each Market-Maker will communicate to the Exchange its bid and offers in accordance with the requirements of Rule [11Ac1-1] 602 of Regulation NMS under the Exchange Act and the rules of the Exchange. (iii)-(iv) No Change (c)-(d) No Change Rule Firm Disseminated Market Quotes (a) Definitions. (1) For the purposes of this rule, and [SEC] Rule [11Ac1-1] 602 of Regulation NMS as applied to the Exchange and Trading Permit Holders on the floor, the term responsible broker or dealer shall mean, with respect to any bid or offer for any reported security made available by the Exchange to quotation vendors, the trading crowd in a series or class of option, which shall be the responsible broker or dealer to the extent of the quotation size specified in (c) of this rule. Provided, however, that in classes in which the CBOE Hybrid System is operational, the term Responsible Broker or Dealer shall have the meaning prescribed in Rule [11Ac1-1 (a)(21)] 600(b)(65) of Regulation NMS under the Exchange Act (which is reproduced in Interpretations and Policies.01): (2) No Change (b)-(d) No Change (e) Exemptions to Firm Quote Requirements. Non-Firm Mode. (1) The responsible broker or dealer shall be relieved of its obligations under this Rule 8.51 and with respect to paragraph [(b)(3)] (a)(3) of [SEC] Rule [11Ac1-1] 602 of Regulation NMS: (i)-(iii) No Change (2)-(6) No Change (f) No Change Rule Firm Quotations a) Firm Quotations. Each Responsible Broker or Dealer (as defined in Rule [11Ac1-1] 602 of Regulation NMS [under the Exchange Act]) shall communicate to the Exchange its bids and offers in accordance with the requirements of Rule [11Ac1-1] 602 of Regulation NMS [under the Exchange Act] ( Rule [11Ac1-1] 602 ) and such bids and offers must be firm pursuant to Rule [11Ac1-1] 602 for the number of contracts specified in such Responsible Broker or Dealer s bids and offers, subject to subparagraph (c)(1) below. (b) No Change (c) Responsible Broker or Dealer Obligations. (1) Responsible Brokers or Dealers shall be relieved of their firm quote obligations under paragraph [(b)(3)] (a)(3) of [SEC] Rule [11Ac1-1] 602 and this Rule if: (i)-(iii) No Change (iv) any of the circumstances provided in paragraph [(c)(3)] (b)(3) of Rule [11Ac1-1] 602 exist. (2) No Change PROPOSED RULE CHANGE(S) Pursuant to Section 19(b)(1) of the Act, and Rule 19b-4 thereunder, the Exchange has filed the following proposed rule change(s) with the SEC. Below, any additions to rule text are underlined and any deletions are [bracketed]. Copies of the rule change filing are available at Trading Permit Holders may submit written comments to the Legal Division. The effective date of a proposed rule change will be the date of approval by the SEC, unless otherwise noted. July 27, 2012 Volume RB23, Number 30 12

15 SR-CBOE CBSX Silent Orders On July 23, 2012, the Exchange filed Rule Change File No. SR-CBOE , which filing proposes to adopt four different types of silent (dark) orders on CBSX. 1 Any questions regarding the rule change may be directed to Jeff Dritz, Legal Division, at The rule text is shown below and the rule filing is available at Rule 51.8 Types of Orders Handled At the discretion of CBSX, and once the CBSX System is so enabled, any of the following types of orders may be accommodated on the CBSX System: (g) Contingency Order. A contingency order is a limit or market order to buy or sell that is contingent upon a condition being satisfied while the order is held in the CBSX Book for execution. (10) [Reserved.]Silent Order. A silent order is an order that is not displayed publicly on the CBSX Book but is to be executed at the National Best Bid ( NBB ) (for a buy order) or National Best Offer ( NBO ) (for a sell order). A silent order is an order with an optional contingency price which will indicate the highest price that a buyer is willing to pay or the lowest price at which a seller is willing to accept (such contingency price to be in $0.01 (full penny) increments only). If the NBB is higher than this contingency price for a Buy order, or the NBO is lower than this contingency price for a Sell, Sell Short, or Sell Short Exempt order, the order, or remainder of the order, will be canceled prior to trading. A silent order may trade with any other type of order and is to execute following the execution of any displayed orders at the National Best Bid and Offer ( NBBO ) (if there are any displayed orders at the NBBO) and has a higher trading priority than All or None orders. A silent order will never be routed to an away market. When the NBBO is locked or crossed, a silent order will never trade, but instead rest on the CBSX Book and remain eligible to trade once the NBBO is no longer locked or crossed. (11) Silent-Mid Order. A silent-mid order is an order that is not displayed publicly on the CBSX Book but is to be executed at the mid-point between the NBBO. A silent-mid order is an order with an optional contingency price which will indicate the highest price that a buyer is willing to pay or the lowest price at which a seller is willing to accept. A silent-mid order may trade in $0.005 increments if priced at or above $1 and $ increments if priced below $1. If the mid-point between the NBBO is not at a tradable increment, CBSX will round down to the nearest tradable increment. If the mid-point of the NBBO is higher than this contingency price for a Buy order or is lower than this contingency price for a Sell, Sell Short, or Sell Short Exempt order, the order, or remainder of the order, will be canceled prior to trading. A silent-mid order may trade with any other type of order and is to execute following the execution of any displayed orders at the NBBO (if there are any displayed orders at the NBBO) and has a higher trading priority than All or None orders and Silent-Post-Mid orders. A silent-mid order will never be routed to an away market. When the NBBO is locked or crossed, a silent-mid order will never trade, but instead rest on the CBSX Book and remain eligible to trade once the NBBO is no longer locked or crossed. (12) Silent-Post-Mid Order. A silent-post-mid order is an order that is not displayed publicly on the CBSX Book but is to be executed at the mid-point between the NBBO. A silent-post-mid order is an order with an optional contingency price which will indicate the highest price that a buyer is willing to pay or the lowest price at which a seller is willing to accept. A silent-post-mid order may trade in $0.005 increments if priced at or above $1 and $ increments if priced below $1. If the mid-point between the NBBO is not at a tradable increment, CBSX will round down to the nearest tradable increment. If a silent-post-mid order is to trade upon its arrival into the system (thereby removing liquidity), it will not trade, but instead rest until another order comes in for it to trade against. If the NBBO mid-point is higher than this contingency price for a Buy order or is lower than this contingency price for a Sell, Sell Short, or Sell Short Exempt order, the order, or remainder of the order, will be canceled prior to trading. A silent-post-mid order may trade with any other type of order and is to execute following the execution of any displayed orders at the NBBO (if there are any displayed orders at the NBBO) and has a higher trading priority than All or None orders but a lower priority than Silent-Mid 1 Rule Change File No. SR-CBOE , which was included in the May 25, 2012 Bulletin, was modified and re-filed by the Exchange on July 23, July 27, 2012 Volume RB23, Number 30 13

16 orders. A silent-post-mid order will never be routed to an away market. When the NBBO is locked or crossed, a silent-post-mid order will never trade, but instead rest on the CBSX Book and remain eligible to trade once the NBBO is no longer locked or crossed. (13) Silent-Mid-Seeker Order. A silent-mid-seeker order is a take-only order that will never rest in the CBSX Book and is to be executed only at the mid-point between the NBBO. A silent-mid-seeker order may trade in $0.005 increments if priced at or above $1 and $ increments if priced below $1. If the mid-point between the NBBO is not at a tradable increment, CBSX will round down to the nearest tradable increment. If, upon the entry of a silent-mid-seeker order, there is undisplayed interest resting on the CBSX Book at the midpoint between the NBBO, the silent-mid-seeker order will interact with this interest. If the undisplayed resting interest is for a greater quantity than the silent-mid-seeker order, the silent-mid-seeker order will trade with the undisplayed resting interest up to the quantity of the silent-mid-seeker order, and the remainder of the undisplayed interest will remain resting on the CBSX Book. If the undisplayed resting interest is for a smaller quantity than the silent-mid-seeker order, the silent-mid-seeker order will trade with the undisplayed resting interest up to the quantity of the undisplayed resting interest, and the remainder of the silent-mid-seeker order will be canceled. If there is no undisplayed resting interest at the midpoint of the NBBO, the silent-mid-seeker order will be canceled. A silent-mid-seeker order will never be routed to an away market. When the NBBO is locked or crossed, a silent-mid-seeker order will be canceled. SR-CBOE LEAPS On July 24, 2012, the Exchange filed Rule Change File No. SR-CBOE , which filing proposes to increase the maximum term for LEAPS to 15 years. Any questions regarding the rule change may be directed to Jenny Klebes Golding, Legal Division, at The rule text is shown below and the rule filing is available at Rule 5.8. Long-Term Equity Options Series (LEAPS[ ]) (a) Notwithstanding conflicting language in Exchange Rule 5.6, the Exchange may list long-term equity options series (LEAPS[ ]) that expire 12 to [39] 180 months from the time they are listed. There may be up to six additional expiration months. Strike price interval, bid/ask differential and continuity rules shall not apply to such option series until the time to expiration is less than nine months. (b) (d) No change. Rule Terms of Interest Rate Option Contracts (a) No change. (b) Expiration Months. (1) Short-Term Options. Interest rate option contracts may expire at three-month intervals or in consecutive months. The Exchange may list up to six expiration months per short-term option at any one time, but may not list short-term options that expire more than twelve months out. (2) Long-Term Options ( LEAPS ) (A) The Exchange may list long-term interest rate options (LEAPS) in series that expire 12 to [36] 180 months from the date of listing. The Exchange may list up to six expiration months for each LEAPS option, with no more than a six month interval between each expiration month. Whenever a new expiration month is listed, series may be established near or bracketing the current interest rate measure. Additional series may thereafter be added when the value of the interest rate measure increases or decreases by at least ten percent (10%). (B) No change. (c) (e) No change. Interpretations and Policies: No change. Rule Terms of Index Option Contracts (a) No change. July 27, 2012 Volume RB23, Number 30 14

17 (b) Long-Term Index Option Series (LEAPS[ ]). (1) Notwithstanding the provision of Paragraph (a)(2) above, the Exchange may list long-term index options series that expire from 12 to [60] 180 months from the date of issuance. (A) Index LEAPS may be based on either the full or reduced value of the underlying index. There may be up to ten expiration months, none further out than [sixty (60)] one-hundred eighty (180) months. Strike price interval, bid/ask differential and continuity rules shall not apply to such option series until the time to expiration is less than twelve (12) months. (B) No change. (2) (A) (B) No change. (c) (e) No change. Interpretations and Policies: No change. July 27, 2012 Volume RB23, Number 30 15

18 BUSINESS CONDUCT COMMITTEE DECISIONS At its meeting on June 27, 2012, the Business Conduct Committee ( BCC ) resolved the following disciplinary matters by accepting one Offer of Settlement, and ten Letters of Consent, in which the Respondent and Subjects, respectively, consented to stipulations of facts and findings as detailed below without admitting or denying that Exchange Rules had been violated. In addition, at that meeting, the BCC instituted Summary Proceedings, due to the Respondent s failure to answer or deny the allegations set forth in the Statement of Charges. In the Matter of Aspen Trading, L.L.C.; File No (Offer of Settlement, Decision issued June 28, 2012). Aspen Trading, L.L.C., a CBOE Trading Permit Holder, was censured and fined $20,000 for the following conduct: (i) Aspen failed to register 2 of 3 associated persons by January 11, 2011; (ii) Aspen failed to review 12 of 12 personal brokerage account statements; and (iii) Aspen failed to retain its s in a WORM format. (CBOE Rules 3.6A, 4.2, 4.18 and 15.1; Section 15(f) of the Act; Section 17(a) of the Act and Rules 17a-3 and 17a-4 thereunder) In the Matter of Andrie Trading, L.L.C.; File No (Letter of Consent, Decision issued June 28, 2012). Andrie Trading, L.L.C., a CBOE Trading Permit Holder, was censured and fined $12,500 for the following conduct. Andrie failed to register 9 of 9 associated persons in WebCRD by January 11, 2011 and failed to designate a Chief Compliance Officer on Schedule A of Form BD in a timely manner. (CBOE Rules 3.6A and 15.1) In the Matter of MOG Capital, L.L.C.; File No (Letter of Consent, Decision issued June 28, 2012). MOG Capital, L.L.C., a CBOE Trading Permit Holder, was censured and fined $10,000 for the following conduct. MOG failed to register 9 of 14 associated persons by January 11, (CBOE Rule 3.6A) In the Matter of Everest Trading, L.L.C.; File No (Letter of Consent, Decision issued June 28, 2012). Everest Trading, L.L.C., a CBOE Trading Permit Holder, was censured and fined $7,500 for the following conduct. Everest failed to register 3 of 3 associated persons in WebCRD by January 11, 2011 and failed to designate a Chief Compliance Officer on Schedule A of Form BD in a timely manner. (CBOE Rules 3.6A and 15.1) In the Matter of Canal Street Trading, L.L.C.; File No (Letter of Consent, Decision issued June 28, 2012). Canal Street Trading, L.L.C., a CBOE Trading Permit Holder, was censured and fined $7,500 for the following conduct. Canal Street failed to register 3 of 3 associated persons in WebCRD by January 11, 2011 and failed to designate a Chief Compliance Officer on Schedule A of Form BD in a timely manner. (CBOE Rules 3.6A and 15.1) In the Matter of Timber Hill, LLC; File No (Letter of Consent, Decision issued June 28, 2012). Timber Hill, LLC a CBOE Stock Exchange Permit Holder was censured and fined $20,000 for the following conduct. Timber Hill during the third quarter of 2011, failed to meet the required 75% threshold in its assigned securities. (CBOE Exchange Rule 53.23(a)(2)(A)) In the Matter of OX Trading, LLC; File No (Letter of Consent, Decision issued June 28, 2012). OX Trading, LLC a TPH organization registered to transact business on CBOE in accordance with Exchange Rules as a Market-Maker organization, 1 was censured and fined $750,000 of which $250,000 shall represent fees reimbursed to the Exchange for the conduct below. In determining the level of sanction, the Committee considered the length of time concerning the misconduct at issue and the firm s lack of a culture of compliance. OX Trading: (i) entered numerous options orders with improper origin codes resulting in the execution of numerous options contracts; (ii) failed to register 3 of 4 associated persons by January 11, 2011; and (iii) failed to adequately to supervise by failing to prevent the conduct described in (i). (CBOE Rules 3.6A, 4.1, 4.2, 4.22, 6.51 and 15.1; and Section 17(a) of the Act and Rule 17a-3 thereunder) 1 Prior to February 1, 2008, OX was an Associated Person of optionsxpress, Inc., a CBOE TPH organization. July 27, 2012 Volume RB23, Number 30 16

19 In the Matter of optionsxpress, Inc.; File No (Letter of Consent, Decision issued June 28, 2012). optionsxpress, Inc. a TPH organization registered to transact business on CBOE in accordance with Exchange Rules and approved to conduct a non-member customer business, was censured and fined $500,000 for the conduct described below. In determining the level of sanction, the Committee considered the Subject s prior disciplinary history, the length of time concerning the misconduct at issue, the recidivist activity that concerns the Subject of this matter and the firm s lack of a culture of compliance. optionsxpress: (i) failed to create and maintain a daily record evidencing the calculation performed to deduct aggregate outstanding portfolio margin calls aged T+1 or more from net capital; (ii) failed to have a regular review and testing of its portfolio margin written risk analysis procedures by an independent internal or external audit unit; (iii) under-reserved its Customer Reserve Bank Account for 13 of 14 month-end computations sampled; (iv) entered approximately 1,013 AIM auction orders representing approximately 14,723 option contracts, and caused an early termination of the Auction by sending a remainder order to the Exchange immediately after routing the same customer s order to AIM; and (v) failed to adequately to supervise by failing to prevent the conduct. (CBOE Exchange Rules 4.1, 4.2, 6.74A.02, 13.5(c), 15.1 and 15.8A; Section 15(c) of the Act and Rule 15c3-1 and 15c3-3 thereunder and Section 17(a) of the Act and Rules 17a-3, 17a-4 and 17a-5 thereunder) In the Matter of Macatawa Trading, LLC; File No (Letter of Consent, Decision issued June 28, 2012). Macatawa Trading, LLC a CBOE Trading Permit Holder, was censured and fined $2,500 for the following conduct. Macatawa failed to designate a Chief Compliance Officer on Schedule A of Form BD in a timely manner. (CBOE Rules 3.6A and 15.1) In the Matter of Greycliff, LLC.; File No (Letter of Consent, Decision issued June 28, 2012). Greycliff, LLC an Exchange Trading Permit Holder, was censured and fined $2,500 for the following conduct. Greycliff failed to designate a Chief Compliance Officer on Schedule A of Form BD in a timely manner. (CBOE Rules 3.6A and 15.1) In the Matter of Green Coat Capital Trading, LLC; File No (Letter of Consent, Decision issued June 28, 2012). Green Coat Capital Trading, LLC an Exchange Trading Permit Holder was censured and fined $2,500 for the following conduct. Green Coat failed to designate a Chief Compliance Officer on Schedule A of Form BD in a timely manner. (CBOE Rules 3.6A and 15.1) The BCC resolved the following disciplinary matter by instituting Summary Proceedings, due to the Respondent s failure to answer or deny the allegations set forth in the Statement of Charges, wherein the charges were deemed admitted by the respondent and disciplinary sanctions were accordingly imposed. (CBOE Rule 17.7) In the Matter of Okoboji Options, L.L.C.; File No (Summary Proceedings, Decision issued June 28, 2012). Okoboji Options, L.L.C., a former Exchange Trading Permit Holder was censured and fined $20,000 for the following conduct. Okoboji failed to register 6 of its associated persons by January 11, 2011 and failed to retain attachments to its communications in a WORM format. (CBOE Rules 3.6A, 4.2 and 15.1; Section 17(a) of the Act and Rule 17a-4 thereunder) July 27, 2012 Volume RB23, Number 30 17