[Federal Register Volume 74, Number 145 (Thursday, July 30, 2009)]
[Notices]
[Pages 38067-38068]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-18168]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60381; File No. SR-CBOE-2009-038]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Approving a Proposed Rule Change Relating to the 
Complex Order Book

July 24, 2009.

I. Introduction

    On June 16, 2009, the Chicago Board Options Exchange, Incorporated 
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (the ``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposal to amend CBOE Rule 6.53C(c) to modify the 
order and quote types that market participants may enter to trade 
against orders resting in the complex order book (``COB''). The 
proposed rule change was published for comment in the Federal Register 
on June 24, 2009.\3\ The Commission received no comments regarding the 
proposal. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 60130 (June 17, 
2009), 74 FR 30194.
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II. Description of the Proposal

    A market participant, as defined in CBOE Rule 6.45A or CBOE Rule 
6.45B, may submit orders or quotes to trade against orders in the 
COB.\4\ However, under CBOE Rule 6.53C(c)(i), the CBOE may determine 
the options classes and the complex order origin types (i.e., non-
broker-dealer public customer, broker-dealers that are not Market 
Makers or specialists on an options exchange, and/or Market Makers or 
specialists on an options exchange) that are eligible to be entered 
into (i.e., rest in) the COB, and whether such orders may route 
directly to the COB and/or from PAR to the COB.
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    \4\ See CBOE Rule 6.53C(c)(ii)(3).
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    Currently, a market participant whose quotes or orders are not 
eligible to rest in the COB, but that wishes to trade against orders 
resting in the COB, may enter limit orders using an immediate-or-cancel 
(``IOC'') contingency to avoid resting its orders in the COB. If such a 
market participant does not use an IOC contingency, it must cancel the 
unexecuted balance of its limit order or quote if the limit order or 
quote is partially filled by trading against an order resting in the 
COB.

[[Page 38068]]

    The CBOE proposes to amend CBOE Rule 6.53C(c)(ii)(3) to require 
market participants whose quotes or orders are not eligible to rest in 
the COB to enter only IOC orders and such other order or quote types as 
the CBOE may determine on a class-by-class basis. Quote types that are 
not eligible to rest in or trade against the COB will be cancelled 
automatically.\5\ According to the CBOE, Market Makers whose quotes are 
not eligible to rest in or trade against the COB would be able, at a 
minimum, to submit IOC orders to trade against the COB.\6\
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    \5\ See CBOE Rule 6.53C(c)(ii)(3).
    \6\ Only Market Makers may enter quotes.
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    Finally, the CBOE proposes to amend CBOE Rule 6.53C(c)(i) to 
clarify that an order entry firm whose complex orders are not eligible 
to route to the COB could route its orders to the firm's booth, as well 
as to PAR.

III. Discussion and Commission Findings

    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.\7\ In 
particular, the Commission finds that the proposal is consistent with 
Section 6(b)(5) of the Act,\8\ which requires, in part, that the rules 
of a national securities exchange be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, 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. CBOE Rule 
6.53C(c)(i) currently allows the Exchange to determine the class of 
entities that may enter orders to rest in the COB. By requiring market 
participants who are not eligible to rest orders or quotes in the COB 
to enter only IOC orders and such other order or quote types as the 
CBOE determines, and by providing for the automatic cancellation of 
quote types that are not eligible to rest in or trade against the COB, 
the proposal could help to prevent the entry of ineligible orders and 
quote types in the COB. The Commission notes that Market Makers that 
are not eligible to enter quotes to rest in or trade against the COB 
would be permitted, at a minimum, to enter IOC orders to trade against 
orders in the COB. Finally, the Commission believes that the amendment 
to CBOE Rule 6.53C(c)(i) to indicate that an order entry firm may route 
its orders to the firm's booth, as well as to PAR, should clarify the 
operation of CBOE Rule 6.53C.
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    \7\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (File No. SR-CBOE-2009-038) is 
approved.
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    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-18168 Filed 7-29-09; 8:45 am]
BILLING CODE 8010-01-P