80870 Federal Register / Vol. 75, No. 246 / Thursday, December 23, 2010 / Notices 

11 17 CFR 240.19b–4(f)(2). 

12 17 CFR 200.30–3(a)(12). 

1 15 U.S.C.78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4See, Article 20 for rules relating to the operation 

of the CHX Matching System. 

5See, Securities Exchange Act Rel. No. 54550 

(Sept. 29, 2006), 71 FR 59563 (October 10, 2006) 

(SR–CHX–2006–05) at Section II.C. (Institutional 

Broker), note 65 and accompanying text. 

6For example, an Institutional Broker 

Representative (‘‘IBR’’) may receive an order 

instruction from a customer over the telephone or 

some electronic means of communication (e.g., 

e-mail or instant message). The IBR is then 

responsible for entering the terms of the order into 

an electronic database (for the purpose of 

facilitating automated surveillance of such activity. 

See, Article 11, Rule 3) and seeking execution 

thereof. 

7See, Securities Exchange Act Rel. No. 54550 

(Sept. 29, 2006), 71 FR 59563 (October 10, 2006) 

(SR–CHX–2006–05). 

paragraph (f)(2) of Rule 19b–4 11

thereunder. At any time within 60 days 

of the filing of the proposed rule change, 

the Commission summarily may 

temporarily suspend 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 rulecomments@sec.gov. Please include File 

Number SR–Phlx–2010–177 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–Phlx–2010–177. 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 Web site viewing and 

printing 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–Phlx– 

2010–177 and should be submitted on 

or before January 13, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–32222 Filed 12–22–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63564; File No. SR–CHX– 

2010–25] 

Self-Regulatory Organizations; 

Chicago Stock Exchange, Inc.; Notice 

of Filing and Order Granting 

Accelerated Approval of a Proposed 

Rule Change To Eliminate the 

Validated Cross Trade Entry 

Functionality 

December 16, 2010. 

Pursuant to Section 19(b)(1) 1 of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on December 

10, 2010, the Chicago Stock Exchange, 

Inc. (the ‘‘Exchange’’ or ‘‘CHX’’) filed 

with the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons and is 

approving the proposed rule change on 

an accelerated basis. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The CHX proposes to amend its rules 

to eliminate the Validated Cross Trade 

Entry Functionality for Exchangeregistered Institutional Brokers. The text 

of this proposed rule change is available 

on the Exchange’s Web site at (http:// 

www.chx.com) and in 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 

CHX included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received regarding the 

proposal. The text of these statements 

may be examined at the places specified 

in Item IV below. The CHX 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 Exchange proposes to amend its 

rules relating to the submission and 

execution of certain cross orders by 

CHX-registered Institutional Brokers 

(‘‘Institutional Brokers’’) by eliminating 

the ability of an Institutional Broker to 

execute trades on the Exchange’s trading 

facilities outside of the Exchange’s 

Matching System.4 Institutional Brokers 

represent a voluntary registration 

category of Exchange Participants and 

the provisions of Article 17 of the 

Exchange’s Rules apply specifically to 

them. Institutional Brokers are deemed 

to be trading on the facilities of the 

Exchange.5 Institutional Brokers are the 

successors to the previous Floor Broker 

category and they largely handle orders 

from their customers on a manual 

basis.6

With the adoption and 

implementation of Regulation NMS 

(‘‘Reg NMS’’), the Exchange transitioned 

from its traditional floor-based, auction 

trading archetype to its current 

electronic trading model.7 In order to 

facilitate the handling and execution of 

orders by Institutional Brokers, Article 

17 has provided a means by which 

Institutional Brokers could attempt to 

manually execute and report 

transactions outside the CHX Matching 

System while complying with the tradethrough prohibitions of Reg NMS and 

the order priority rules of the 

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Federal Register / Vol. 75, No. 246 / Thursday, December 23, 2010 / Notices 80871 

8See, Reg NMS Rule 611 (Order Protection Rule); 

Article 20, Rule 8 (Operation of the Matching 

System). 

9 15 U.S.C. 78f(b). 

10 15 U.S.C. 78f(b)(5). 

11 In approving the proposed rule change, the 

Commission notes that it has considered the 

Continued 

Exchange.8 The Exchange’s Brokerplex 

order entry system, which is available 

for use by all Institutional Brokers, 

includes a functionality known as 

‘‘Validated Cross.’’ The Validated Cross 

functionality allows an Institutional 

Broker to electronically validate 

whether a proposed cross transaction 

would constitute an improper tradethrough under Reg NMS and/or violate 

the Exchange’s priority rules before the 

trade can be consummated and 

reported. The purpose of the Validated 

Cross functionality has been to permit 

an Institutional Broker to receive an 

execution instruction from a customer, 

to immediately validate it within 

Brokerplex for compliance with 

applicable regulations and complete the 

full transaction reporting within a 

timeframe which is consistent with 

industry standards. By using this 

functionality, the broker and its 

customers could avoid being 

disadvantaged simply because the IBR 

was not able to type the trade data into 

the system before the National Best Bid 

or Offer (‘‘NBBO’’) and/or CHX order 

book changed. 

Despite these apparent advantages, 

reliance on and usage of the Validated 

Cross functionality by Institutional 

Brokers has declined over time. 

Additionally, the Exchange has 

conducted an analysis of whether the 

Validated Cross allows Institutional 

Broker to submit trades which would be 

blocked if submitted as a regular cross 

order and has concluded that the 

Validated Cross is effective for that 

purpose only in a very small percentage 

of instances. Even though we are 

proposing to get rid of the Validated 

Cross functionality, Institutional 

Brokers will continue to have the ability 

to submit other cross orders to the CHX 

Matching System for execution. Given 

the additional systems and regulatory 

costs to maintaining the Validated Cross 

functionality, the Exchange is proposing 

to eliminate it within the Brokerplex 

trading application and delete the 

associated rule text. Since the Validated 

Cross was the only means by which an 

Institutional Broker could execute and 

report a trade on our facilities outside of 

the Matching System, the Exchange is 

also proposing to eliminate the clause in 

section (a) of Article 9, Rule 13 which 

referred to trades executed outside the 

Matching System by an Institutional 

Broker. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) of the Act in general,9 and 

furthers the objectives of Section 6(b)(5) 

in particular,10 in that it is designed to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

facilitating transaction in securities, to 

remove impediments and perfect the 

mechanisms of a free and open market, 

and, in general, to protect investors and 

the public interest. The elimination of 

the Validated Cross functionality 

available to Institutional Brokers will 

simplify the order entry process, 

eliminate certain regulatory concerns 

presented by the Validated Cross and 

reduce the burden on the Exchange to 

maintain overlapping order entry 

functionality. 

B. Self-Regulatory Organization’s 

Statement of 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 Regarding the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were solicited 

or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

(i) as the Commission may designate up 

to 90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve or disapprove 

the proposed rule change, or 

(B) Institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

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 rulecomments@sec.gov. Please include File 

Number SR–CHX–2010–25 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–CHX–2010–25. 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 Web site viewing and 

printing 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 

also will be available for inspection and 

copying at the principal office of the 

CHX. 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 publicly available. All 

submissions should refer to File 

Number SR–CHX–2010–25 and should 

be submitted on or before January 13, 

2011. 

V. Commission’s Findings and Order 

Granting Accelerated Approval of the 

Proposed Rule Change 

After careful consideration, 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 exchange.11 In 

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80872 Federal Register / Vol. 75, No. 246 / Thursday, December 23, 2010 / Notices 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

12 15 U.S.C. 78f(b)(5). 

13See supra Section II.A.2. 

14 15 U.S.C. 78s(b)(2). 

15 15 U.S.C.78s(b)(2). 

16 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3A ‘‘round lot’’ order is an order for a quantity 

that is a multiple of 100 (100, 200, 300, etc.). An 

‘‘odd lot’’ order is an order for a quantity that is less 

than 100. A ‘‘mixed lot’’ order is an order for a 

quantity that is greater than 100 but not a multiple 

of 100 (135, 372, 1126, etc.). 

4 15 U.S.C. 78s(b)(1). 

5 15 U.S.C. 78f(b). 

particular, the Commission finds that 

the proposed rule change is consistent 

with the requirements of Section 6(b)(5) 

of the Act,12 which requires, among 

other things, that the Exchange’s rules 

be designed to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in regulating, clearing, 

settling, processing information with 

respect to, and facilitating transactions 

in securities, to remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system, and in general, to protect 

investors and the public interest. The 

Commission agrees with the Exchange 

that the elimination of the Validated 

Cross functionality will simplify CHX’s 

order entry process, eliminate certain 

regulatory concerns presented by the 

Validated Cross functionality, and 

reduce the burden on the Exchange to 

maintain overlapping order entry 

functionality.13

The Commission finds good cause, 

pursuant to Section 19(b)(2) of the 

Act,14 for approving the proposed rule 

change prior to the 30th day after 

publication of notice in the Federal 

Register. The Exchange represents that 

accelerated approval will allow the 

Exchange to implement these changes 

prior to the application of its customary 

end-of-the-year software change freeze, 

and thereby minimize the systems and 

operational risks it says are inherent to 

coding changes made late in the year. 

Further, accelerated approval of the 

proposed rule change will allow the 

Exchange to more quickly address 

certain regulatory concerns associated 

with the Validated Cross functionality. 

VI. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,15 that the 

proposed rule change (SR–CHX–2010– 

25) be, and it hereby is, approved on an 

accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–32223 Filed 12–22–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63566; File No. SR–CBOE– 

2010–115] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Modify How Odd-Lots 

Are Handled on CBSX 

December 16, 2010. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on December 

14, 2010, the Chicago Board Options 

Exchange, Incorporated (‘‘Exchange’’ or 

‘‘CBOE’’) filed with the Securities and 

Exchange Commission (the 

‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to modify 

how odd-lot orders are handled on the 

CBOE Stock Exchange (‘‘CBSX’’). The 

text of the proposed rule change is 

available on the Exchange’s Web site 

(http://www.cboe.org/Legal), at the 

Exchange’s principal office, and on the 

Commission’s Web site at http:// 

www.sec.gov/rules/sro.shtml. 

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 

self-regulatory organization 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 parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Currently, CBSX handles and 

executes round lot orders differently 

from the manner in which it handles 

and executes odd lot and mixed lot 

orders.3 If CBSX is not displaying the 

NBBO and step-up is not achieved 

pursuant to the CBSX flash process in 

Rule 52.6, the round lot order is then 

routed to the exchange displaying the 

NBBO for execution. Odd lot orders, 

however, currently are not routed to the 

exchange displaying the NBBO for 

execution. The proposed change will 

ensure that odd and mixed lot orders 

will be handled and executed in a more 

consistent manner with round lot 

orders. 

Under the proposed rule change, OddLot orders will be matched by the CBSX 

System against interest at the best price 

in the CBSX Book. Odd-Lot orders (or 

the odd-lot portion of a mixed lot order) 

that are not marketable will be 

maintained in the System so that they 

may trade against later submitted orders 

(they will be traded using CBSX’s 

matching rules). Marketable Odd-lot 

orders will be handled similar to round 

lot orders. If fulfilling an Odd-Lot order 

would result in an impermissible tradethrough of another exchange, the order 

will be routed to other exchanges to be 

filled at prices better than the CBSX 

disseminated price. If an execution is 

not attained at the away exchange(s), the 

returned order is eligible for execution 

on CBSX. We note that the flash process 

utilized by CBSX prior to routing away 

orders will not be employed for Odd-lot 

orders. 

If an incoming Odd-lot order trades 

against a quote in the CBSX Book, the 

new quantity remaining in the quote 

will be rounded down to the nearest 

lower round-lot amount (zero or 

multiple of 100) for display purposes, 

with the remaining Odd-Lot amount 

being cancelled. If an incoming order 

trades against a limit order resting on 

the CBSX Book and an Odd-Lot amount 

remains from the limit order resting on 

the CBSX Book, that Odd-Lot amount 

will remain in the system eligible for 

execution but will not be displayed. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 4 and the rules and regulations 

thereunder and, in particular, the 

requirements of Section 6(b) of the Act.5

Specifically, the Exchange believes the 

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