[Federal Register: September 29, 2005 (Volume 70, Number 188)]
[Notices]
[Page 56943-56944]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29se05-78]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-52494; File No. SR-CBOE-2005-70]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change to Extend a Pilot Program Relating to Market-Maker Access
to the Hybrid Automatic Execution System
September 22, 2005.
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 12, 2005, the Chicago Board Options Exchange, Incorporated
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Exchange has designated this proposal as ``non-
controversial'' pursuant to Section 19(b)(3)(A) of the Act,\3\ and Rule
19b-4(f)(6) thereunder,\4\ which renders the proposed rule change
effective upon filing with the Commission.\5\ The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
\5\ The Exchange asked the Commission to waive the five business
day pre-filing notice requirement. See Rule 19b-4(f)(6)(iii), 17 CFR
240.19b-4(f)(6)(iii). The Commission is exercising its authority to
waive the five business day pre-filing notice requirement and notes
that the Exchange provided the Commission with four business days'
notice.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to extend the pilot program in CBOE Rule 6.13
relating to market-maker access to the Exchange's automatic execution
system until October 12, 2006. No other changes are being made to the
pilot program. The text of the proposed rule change is available on the
Exchange's Web site (http://www.cboe.com), 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
In 2004, the Commission approved on a pilot basis, CBOE Rule
6.13(b)(i)(C)(iii) (``Rule'') relating to the frequency with which
certain market participants could submit orders for execution through
the Exchange's Hybrid Trading System (``Hybrid'').\6\ CBOE Rule
6.13(b)(i)(C)(iii) currently provides in relevant part:
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 50005 (July 12,
2004), 69 FR 43032 (July 19, 2004) (SR-CBOE-2004-33). The pilot
program has been extended once. See Securities Exchange Act Release
No. 51030 (January 12, 2005), 70 FR 3404 (January 24, 2005) (SR-
CBOE-2004-91) (extension of the pilot program until October 12,
2005).
---------------------------------------------------------------------------
(iii) 15-Second Limitation: With respect to orders eligible for
submission pursuant to paragraph (b)(i)(C)(ii), members shall neither
enter nor permit the entry of multiple orders on the same side of the
market in an option class within any 15-second period for an account or
accounts of the same beneficial owner. The appropriate FPC may shorten
the duration of this 15-second period by providing notice to the
membership via a Regulatory Circular that is issued at least one day
prior to implementation. The effectiveness of this rule shall terminate
on October 12, 2005.
Upon approval of the Rule, the Exchange began allowing orders from
options exchange market-makers to be eligible for automatic execution
subject to the 15-second limitation described above.\7\ As the pilot
period expires on
[[Page 56944]]
October 12, 2005, the Exchange proposes to extend the pilot program.
Given the success of the pilot program in attracting market-maker
volume to the Exchange, the Exchange proposes to extend the pilot
program's duration an additional year, until October 12, 2006.
---------------------------------------------------------------------------
\7\ CBOE Rule 6.13(b)(i)(C)(ii) governs the submission of orders
from market-makers (paragraph (C)(ii)(A)) and stock exchange
specialists (paragraph (C)(ii)(B)). It should be noted that,
pursuant CBOE Rule 6.13(b)(i)(C)(iii), the floor procedures
committees (FPCs) determined to shorten to 5 seconds (from 15
seconds) the period required between entry of multiple market-maker
orders (including non-CBOE market-maker orders) on the same side of
the market in an option class for an account or accounts of the same
beneficial owner using Hybrid. This change went into effect on July
18, 2005 and was announced to the membership via Regulatory Circular
RG05-61.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the extension of the pilot program will
allow the Exchange to continue to provide auto-ex access to all market-
makers. Accordingly, the Exchange believes the proposed rule change is
consistent with the Act \8\ and the rules and regulations under the Act
applicable to a national securities exchange and, in particular, the
requirements of Section 6(b) of the Act.\9\ Specifically, the Exchange
believes the proposed rule change is consistent with the Section
6(b)(5)\10\ requirements that the rules of an exchange be designed to
promote just and equitable principles of trade, to prevent fraudulent
and manipulative acts and, in general, to protect investors and the
public interest.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78a et seq.
\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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 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
The Exchange neither solicited nor received comments on the
proposal.
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 if consistent with
the protection of investors and the public interest, the proposed rule
change has become effective pursuant to Section 19(b)(3)(A) of the Act
\11\ and Rule 19b-4(f)(6) thereunder.\12\
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate the 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-2005-70 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-9303.
All submissions should refer to File Number SR-CBOE-2005-70. 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 inspection
and copying in the Commission's Public Reference Room. 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-2005-70 and should be submitted on or before
October 20, 2005.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
---------------------------------------------------------------------------
\13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jonathan G. Katz,
Secretary.
[FR Doc. 05-19498 Filed 9-28-05; 8:45 am]
BILLING CODE 8010-01-P