[Federal Register Volume 69, Number 244 (Tuesday, December 21, 2004)]
[Notices]
[Page 76510]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-27863]



[[Page 76510]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50853; File No. SR-CBOE-2004-50]


Self-Regulatory Organizations; Order Granting Approval to a 
Proposed Rule Change and Amendment No. 1 Thereto by the Chicago Board 
Options Exchange, Inc. To Amend Its Rules Regarding Limitations on 
Designated Primary Market-Makers Putting Into Effect Stop and Stop-
Limit Orders

December 14, 2004.
    On July 29, 2004, the Chicago Board Options Exchange, Inc 
(``CBOE'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend its rules regarding limitations on 
Designated Primary Market-Makers (``DPMs'') putting into effect stop 
and stop-limit orders. On October 8, 2004, the Exchange filed amendment 
No. 1 to the proposed rule change.\3\ The proposed rule change and 
Amendment No. 1 were published for comment in the Federal Register on 
October 21, 2004.\4\ The Commission received no comments on the 
proposal. This order approves the proposed rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Angelo Evangelou, Managing Senior Attorney, 
Legal Division. CBOE, to John Roeser, Senior Special Counsel, 
Division of Market Regulation, Commission, dated October 6, 2004 
(``Amendment No. 1'').
    \4\ See Securities Exchange Act Release No. 50542 (October 14, 
2004), 69 FR 61879.
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    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities association.\5\ In 
particular, the Commission believes that the proposal is consistent 
with section 6(b)(5) of the Act,\6\ which requires that the Exchange's 
rules promote just and equitable principles of trade, serve to remove 
impediments to and perfect the mechanisms of a free and open market and 
a national market system, and to protect investors and the public 
interest.
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    \5\ In approving this proposed rule change, the Commission has 
considered its impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Exchange proposes to automate the handling of stop and stop-
limit orders on CBOE's Hybrid trading system such that stop and stop 
limit orders would be handled automatically by the Hybrid system rather 
than by the DPM. In addition, the Exchange proposes to eliminate the 
restrictions which generally prohibit a DPM from initiating a 
transaction for its own account that would put into effect any stop or 
stop-limit orders which may be in the book or which the DPM represents 
as an agent. Under the proposal, stop and stop-limit orders would 
reside on the Hybrid system invisibly so that the DPM would not know 
whether a transaction would trigger a stop or stop-limit order. 
Further, the DPM would no longer handle the stop order at any point or 
have any influence to purposefully affect triggering the stop or the 
ultimate execution price of the order. The Commission believes that the 
restrictions on DPM transactions for stop and stop-limit orders are no 
longer necessary for orders that are handled by the Hybrid system 
because such orders are not visible to or handled by the DPM. 
Accordingly, the Commission finds that the proposal is consistent with 
the Act.
    It is therefore ordered, pursuant to section 19(b)(2) of the Act 
\7\ the proposed rule change (SR-CBOE-2004-50), as amended, is 
approved.
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    \7\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-27863 Filed 12-20-04; 8:45 am]
BILLING CODE 8010-01-M