[Federal Register: March 13, 2006 (Volume 71, Number 48)]
[Notices]
[Page 12747-12749]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13mr06-88]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53410; File No. SR-CBOE-2006-24]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Amending Its Rule 8.3 To Extend for an Additional Year a
Pilot Program Relating to Market-Makers Quoting Outside Their Appointed
Trading Station
March 3, 2006.
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 March 2, 2006, 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 and II below, which Items have been prepared by the CBOE. The
Exchange filed the proposal as a ``non-controversial'' proposed rule
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6) thereunder,\4\ which renders the proposal 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\ As required by Rule 19b-4(f)(6)(iii), 17 CFR 240.19b-
4(f)(6)(iii), the CBOE submitted written notice of its 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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The CBOE proposes to amend CBOE Rule 8.3 to extend for an
additional year a pilot program relating to Market-Makers quoting
outside their appointed trading station. The text of the proposed rule
change is below. Proposed additions are in italics and proposed
deletions are in brackets:
Rule 8.3--Appointment of Market-Makers
Rule 8.3. This Rule governs the appointment of Market-Makers other
than Remote Market-Makers. Rule 8.4 governs the appointment of Remote
Market-Makers.
(a) No change.
(b) No change.
(c) Absent an exemption by the appropriate Market Performance
Committee, an appointment of a Market-Maker confers the right to quote
as described below:
(i) No change.
(ii) No change.
(iii) No change.
With respect to classes located at his/her appointed trading
station, a Market-Maker may submit, [for a one-year] as part of a pilot
program [period] ending March 24, 2007 [2006], electronic quotations
from a location outside of the appointed trading station in his/her
appointed Hybrid classes and his/her appointed Hybrid 2.0 Classes. Any
Market-Maker affiliated with an e-DPM or RMM shall be ineligible to
submit electronic quotations from outside of its appointed trading
station pursuant to this rule in any class in which the affiliated e-
DPM or RMM has an appointment.
* * * * *
(d) No Change.
* * * * *
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 CBOE included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any
[[Page 12748]]
comments it received on the proposal. The text of these statements may
be examined at the places specified in Item IV below. The CBOE 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 purpose of this rule change is to extend for an additional
year, until March 24, 2007, an existing Pilot Program that allows a
CBOE Market-Maker to submit electronic quotations in his/her Hybrid and
Hybrid 2.0 classes from a location outside of his/her appointed trading
station.
In March 2005, the CBOE amended its rules relating to Market-Maker
appointments and quoting obligations.\6\ The Exchange amended, among
other things, Rule 8.3 to provide that a Market-Maker may submit
electronic quotations from a location outside of his/her appointed
trading station. Previously, Market-Makers were only permitted to
stream electronic quotations in their appointed Hybrid and Hybrid 2.0
classes when they were physically present in the trading crowd. In
making this change, the CBOE determined to request that it only be
approved on a pilot basis so as to give the Exchange the ability to
evaluate the effectiveness of allowing Market-Makers to quote remotely.
The current Pilot program is scheduled to expire on March 24, 2006.
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 51429 (March 24,
2005), 70 FR 16536 (March 31, 2005) (approving SR-CBOE-2004-58).
---------------------------------------------------------------------------
The Exchange believes that the Pilot Program has been successful,
in that it allows Market-Makers to choose how they would like to
participate in CBOE's Hybrid Trading System, i.e., electronically, in
open outcry, or both. The CBOE states that, although not all Market-
Makers have chosen to quote electronically from outside their trading
station, those Market-Makers that have availed themselves of this Pilot
Program continued to provide liquidity and increased competition in
their appointed option classes when they quoted remotely. The Exchange
states that it has not experienced any negative effects from allowing
Market-Makers to quote from a location outside of their appointed
trading station. Thus, the CBOE believes it would be appropriate and
beneficial to extend the Pilot Program for an additional year until
March 24, 2007, and permit Market-Makers to continue to have the option
to quote electronically from a location outside their appointed trading
station.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act 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.\7\ Specifically, the Exchange believes the
proposed rule change is consistent with the requirement of Section
6(b)(5) Act \8\ 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.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The CBOE believes that the proposed rule change will not impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The CBOE has 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: (1) Does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
and (3) by its terms does not become operative for 30 days after the
date of this filing, 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 and Rule 19b-4(f)(6) thereunder.
Normally, a proposed rule change filed under Rule 19b-4(f)(6) does
not become operative for 30 days after the date of filing. However,
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter
time if such action is consistent with the protection of investors and
the public interest.
The CBOE has asked the Commission to waive the 30-day operative
delay. Allowing Market-Makers to quote electronically into their
appointed Hybrid and Hybrid 2.0 option classes from a location outside
their appointed trading station does not raise any new or unique
issues.\9\ The Commission believes that waiving the 30-day operative
delay is consistent with the protection of investors and the public
interest because the continuation of this program may enhance
competition and liquidity and provide Market-Makers with additional
trading opportunities.\10\ For this reason, the Commission designates
that the proposal has become effective and operative immediately upon
filing with the Commission. 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.\11\
---------------------------------------------------------------------------
\9\ See supra, at n.6.
\10\ 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. 15 U.S.C. 78c(f).
\11\ See Rule 19b-4(f)(6)(iii), 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
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-2006-24 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2006-24. 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
[[Page 12749]]
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 such filing also will be available for
inspection and copying at the principal office of the CBOE.
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-2006-24
and should be submitted on or before April 3, 2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
---------------------------------------------------------------------------
\12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Nancy M. Morris,
Secretary.
[FR Doc. E6-3481 Filed 3-10-06; 8:45 am]
BILLING CODE 8010-01-P