[Federal Register: March 25, 2008 (Volume 73, Number 58)]
[Notices]
[Page 15805-15807]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25mr08-103]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57519; File No. SR-CBOE-2008-29]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Extend Two Pilot Programs
March 18, 2008.
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 13, 2008, 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 substantially prepared by
the Exchange. The Exchange filed the proposed rule change pursuant to
Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder,
which renders it effective upon filing with the Commission.\4\ The
[[Page 15806]]
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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
CBOE proposes to amend its rules to extend for an additional year,
until March 14, 2009, two existing pilot programs.
The text of the proposed rule change is available on the CBOE's Web
site (http://www.cboe.org/Legal), at the Exchange's Office of
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, CBOE 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
The purpose of this rule change is to extend for an additional
year, until March 14, 2009, two existing pilot programs.
First, CBOE proposes to amend CBOE Rules 8.4(c)(i), 8.85, 8.91 and
8.93(vii) to extend, until March 14, 2009, the pilot programs that
allow a Remote Market Maker (``RMM''), an Off-Floor DPM, and an e-DPM
to have up to one separate affiliated Market-Maker physically present
in the trading crowds where it operates as an RMM, Off-Floor DPM, or e-
DPM, respectively. (Such Market-Makers would be required to trade on a
separate membership.) \5\
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\5\ These pilot programs previously were extended for one year
until March 14, 2008. See Securities Exchange Act Release No. 55438
(March 9, 2007), 72 FR 12642 (March 16, 2007) (SR-CBOE-2007-19)
(granting immediate effectiveness to SR-CBOE-2007-19). See also
Securities Exchange Act Release No. 55531 (March 26, 2007), 72 FR
15736 (April 2, 2007) (SR-CBOE-2006-94) (order allowing DPM's to
operate away from CBOE's trading floor).
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Second, CBOE proposes to amend Rules 8.3(c)(viii) and 8.4(c)(ii) to
extend, until March 14, 2009, the pilot program which allows a CBOE
member or member firm to have multiple aggregation units operating as
separate Market-Makers or RMMs within the same class, provided they
satisfy certain criteria set forth in CBOE Rule 8.4(c)(ii)(A)-(C).\6\
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\6\ This pilot program previously was extended for one year
until March 14, 2008. See Securities Exchange Act Release No. 55474
(March 15, 2007), 72 FR 13324 (March 21, 2007) (SR-CBOE-2007-20)
(granting immediate effectiveness to SR-CBOE-2007-20).
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CBOE initially proposed to extend these two pilot programs in its
pending rule filing, SR-CBOE-2007-120, which filing proposes to amend
CBOE rules relating Market-Makers and RMMs in various respects.\7\ SR-
CBOE-2007-120 has been published for comment in the Federal Register,
and the comment period expires on March 21, 2008.\8\ Because these
pilot programs are scheduled to expire prior to when the comment period
expires on SR-CBOE-2007-120 and the time by when the SEC may approve
SR-CBOE-2007-120, CBOE determined to seek a one-year extension of the
two pilot programs in this rule filing.
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\7\ Among other changes, SR-CBOE-2007-120 proposes to delete
reference to RMMs in CBOE's rules, amend CBOE Rules 8.3 and 8.7
relating to the appointment of Market-Makers and Market-Maker
obligations, respectively, and update or delete outdated provisions
in other rules, including CBOE Rule 8.3A relating to Class Quoting
Limits.
\8\ See Securities Exchange Act Release No. 57367 (February 21,
2008), 73 FR 11168 (February 29, 2008) (SR-CBOE-2007-120).
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As noted in SR-CBOE-2007-120, CBOE believes that both of these two
pilot programs have been successful, and CBOE has not experienced any
negative effects with respect to the pilot programs. Accordingly, CBOE
believes that the proposed rule change is designed to promote just and
equitable principles of trade, and will enhance competition and
liquidity in the option classes in which the market participants who
participate in the pilot programs trade.
Finally, CBOE notes that these pilot programs were initially
adopted, in part, due to CBOE's usage of an algorithm that allocates
electronic trades, in whole or in part, in an equal percentage based on
the number of market participants quoting at the best bid or offer--
specifically CBOE's ultimate matching algorithm, ``UMA.'' In January
2008, CBOE determined to utilize a pro-rata algorithm, instead of UMA,
as the applicable matching algorithm in all Hybrid classes. In the
event CBOE determines to utilize the UMA algorithm in the future in a
Hybrid option class, CBOE commits to providing data to the Commission
relating to the pilot programs which allow an RMM, an Off-Floor DPM,
and an e-DPM to have up to one separate affiliated Market-Maker
physically present in the trading crowds where it operates as an RMM,
Off-Floor DPM, or e-DPM, respectively.
2. Statutory Basis
CBOE believes that the proposed rule change is consistent with
Section 6(b) of the Act,\9\ in general, and furthers the objectives of
Section 6(b)(5) of the Act,\10\ in particular, in that it is designed
to prevent fraudulent and manipulative acts and practices, promote just
and equitable principles of trade, remove impediments to and perfect
the mechanisms of a free and open market and a national market system,
and, in general, 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 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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\
Because the 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 prior to
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 and Rule 19b-
4(f)(6)(iii) thereunder.\13\
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\11\ 15 U.S.C. 78s(b)(3)(A)(iii).
\12\ 17 CFR 240.19b-4(f)(6).
\13\ Rule 19b-4(f)(6) also requires the Exchange to give the
Commission 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 of
the proposed rule change, or such shorter time as designated by the
Commission. The Exchange has satisfied the pre-filing requirement.
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[[Page 15807]]
A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative prior to 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\14\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. CBOE has asked the
Commission to waive the 30-day operative delay so that the proposal may
become operative immediately upon filing. The Exchange believes the
waiver of this period will allow it to continue the pilot programs
without undue delay, which it believes is in the public interest as it
will avoid inconvenience and interruption to the public. The Commission
believes such waiver is consistent with the protection of investors and
the public interest because it presents no new issues and will allow
the pilot programs to operate without interruption. For this reason,
the Commission designates the proposal to be operative upon filing with
the Commission.\15\
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\14\ 17 CFR 240.19b-4(f)(6)(iii).
\15\ For purposes only of waiving the 30-day pre-operative
period, the Commission has considered the proposed rule's impact on
efficiency, competition and capital formation. 15 U.S.C. 78c(f).
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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.
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-2008-29 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-2008-29. 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, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing will also be available for
inspection and copying at the principal office of 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-2008-29 and should be
submitted on or before April 15, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-5921 Filed 3-24-08; 8:45 am]
BILLING CODE 8011-01-P