[Federal Register: March 13, 2006 (Volume 71, Number 48)]
[Notices]
[Page 12753-12755]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13mr06-91]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53414; File No. SR-CBOE-2006-25]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Amending Its Rule 8.4 To Extend for an Additional Year a
Pilot Program Relating to RMM Multiple Aggregation Units
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.
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\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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The CBOE proposes to amend CBOE Rule 8.4 to extend for an
additional year a pilot program relating to Remote Market Makers
(``RMMs'') multiple aggregation units.\6\ The text of the proposed rule
change is below. Proposed additions are in italics and proposed
deletions are in [brackets]:
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\6\ The Commission notes that the Exchange is also amending a
cross-reference to this program contained in CBOE Rule 8.3.
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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) Additionally, a Market-Maker that is submitting electronic
quotations in his/her appointed Hybrid and Hybrid 2.0 Classes can
submit electronic quotations in either two (2) additional Hybrid 2.0
Classes in Tier A or Tier B that are not located in the Market-Maker's
appointed trading station, or five (5) additional Hybrid 2.0 Classes in
Tiers C, D, or E that are not located in the Market-Maker's appointed
trading station. (For purposes of this paragraph,
[[Page 12754]]
the Exchange is using the Tiers set forth in Rule 8.4 that have been
structured for purposes of RMM appointments.) A Market-Maker cannot be
affiliated with an e-DPM or RMM that holds an appointment in any of
these additional Hybrid 2.0 Classes. Pursuant to a Pilot Program that
expires on September 14, 2006, a Market-Maker can be affiliated with
another Market-Maker (``Affiliated Market-Maker'') who holds an
appointment in one of these additional Hybrid 2.0 Classes, provided the
Market-Maker cannot submit electronic quotations in these additional
Hybrid 2.0 Classes if the Affiliated Market-Maker is submitting
electronic quotations from outside its appointed trading station.
Pursuant to a Pilot Program that expires on March 14, 2007 [2006], if
both Market-Makers operate as multiple aggregation units under the
criteria set forth in Rule 8.4(c)(ii), the preceding restriction does
not apply.
(d) No Change.
* * * * *
Rule 8.4--Remote Market-Makers
Rule 8.4. (a) No Change.
(b) No change.
(c) Affiliation Limitations: Except as provided in subparagraphs
(i) or (ii), an RMM may not have an appointment as an RMM in any class
in which it or its member organization serves as DPM, e-DPM, RMM, or
Market-Maker on CBOE.
(i) No change.
(ii) A CBOE Member or Member Firm may have, as part of a pilot
program until March 14, 2007 [2006], multiple aggregation units
operating as separate RMMs within the same class provided:
(A) No change.
(B) No change.
(C) No change.
(d) No change.
(e) No change.
(f) 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 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 14, 2007, an existing Pilot Program which allows a
CBOE member or member firm to have multiple aggregation units operating
as separate RMMs within the same class, provided they satisfy certain
criteria set forth in CBOE Rule 8.4(c)(ii)(A)-(C).
In March 2005, CBOE amended its rules to establish a new membership
status called RMM, who have the ability to submit quotes to the CBOE
from a location outside of the physical trading station of the RMM's
appointed class.\7\ In connection with the adoption of these rules,
CBOE also adopted provisions in its rules relating to RMM affiliation
limitations. Specifically, CBOE Rule 8.4(c) provides that except as
otherwise provided, an RMM may not have an appointment as an RMM in any
class in which it or its member organization serves as DPM, e-DPM, RMM,
or Market-Maker on CBOE. One exception that was approved on a pilot
basis was the ability of a CBOE member or member firm to have multiple
aggregation units operating as separate RMMs within the same class,
provided certain specific criteria were complied with.\8\ These
criteria were set forth in subparagraphs (A) though (C) of CBOE Rule
8.4(c)(ii), and were based on the criteria contained in Regulation SHO
which was approved by the Commission in July 2004.
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\7\ See Securities Exchange Act Release No. 51366 (March 14,
2005), 70 FR 13217 (March 18, 2005) (approving SR-CBOE-2004-75).
\8\ A second exception, also adopted on a pilot basis for a
period ending September 14, 2006 and contained in CBOE Rule
8.4(c)(i), permits a member or member firm operating as an RMM in a
class to have one Market-Maker affiliated with the RMM organization
trading in open outcry in any specific class allocated to the RMM,
provided such Market-Maker trades on a separate membership.
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CBOE's believes that the Pilot Program has been successful, in that
it allows a CBOE member or member firm to have multiple aggregation
units operating as separate RMMs within the same class, provided they
comply with certain specific criteria. CBOE has not experienced any
negative effects with respect to the Pilot Program. Thus, CBOE believes
it would be appropriate and beneficial to extend this Pilot Program for
an additional year, until March 14, 2007.
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.\9\ Specifically, the Exchange believes the
proposed rule change is consistent with the requirements of Section
6(b)(5) of the Act,\10\ which requires 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.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
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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 a CBOE member or member firm to have multiple
aggregation units operating as separate RMMs within the same class,
subject certain specific requirements, does not raise any new or
[[Page 12755]]
unique issues.\11\ 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 practice may enhance
competition and liquidity.\12\ 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.\13\
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\11\ See supra, at n.7.
\12\ 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).
\13\ See Rule 19b-4(f)(6)(iii), 17 CFR 240.19b-4(f)(6)(iii).
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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-2006-25 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-2006-25. 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 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-2006-25
and should be submitted on or before April 3, 2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\14\
Nancy M. Morris,
Secretary.
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\14\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E6-3496 Filed 3-10-06; 8:45 am]
BILLING CODE 8010-01-P