48114 Federal Register / Vol. 74, No. 181 / Monday, September 21, 2009 / Notices 

13 17 CFR 240.19b–4(f)(6). 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 60420 

(August 3, 2009), 74 FR 39989. 

4Rules 6.45A and 6.45B also include the Ultimate 

Matching Algorithm (‘‘UMA’’). CBOE did not 

propose any changes to the UMA in this filing. 

5Under the existing participation entitlements, 

the Exchange may determine to grant marketmakers participation entitlements pursuant to the 

provisions of Rules 8.87, Participation Entitlement 

of DPMs and e-DPMs; 8.13, Preferred Market-Maker 

Program; or 8.15B, Participation Entitlement of 

LLMs. More than one such participation 

entitlement may be activated for an option class 

(including at different priority sequences), however 

in no case may more than one participation 

entitlement be applied on the same trade. In 

allocating the participation entitlement, all of the 

following apply: (i) To be entitled to its 

participation entitlement, the market-maker’s order 

and/or quote must be at the best price on the 

Exchange; (ii) the market-maker may not be 

allocated a total quantity greater than the quantity 

that it is quoting (including orders not part of 

quotes) at that price (if pro-rata priority is in effect, 

and the market-maker’s allocation of an order 

pursuant to its participation entitlement is greater 

than its percentage share of quotes/orders at the 

best price at the time that the participation 

entitlement is granted, the market-maker shall not 

receive any further allocation of that order); (iii) in 

establishing the counterparties to a particular trade, 

the participation entitlement must first be counted 

against that market-maker’s highest priority bids or 

offers; and (iv) the participation entitlement shall 

not be in effect unless the public customer priority 

is in effect in a priority sequence ahead of the 

participation entitlement and then the participation 

entitlement shall only apply to any remaining 

balance. See Rules 6.45A(a)(ii)(2) and 6.45B(a)(i)(2). 

immediately effective under Rule 19b– 

4(f)(6) 13 of the Act. 

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 rulecomments@sec.gov. Please include File 

Number SR–CBOE–2009–062 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–CBOE–2009–062. 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 also will 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–2009–062 and 

should be submitted on or before 

October 13, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–22684 Filed 9–18–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60665; File No. SR–CBOE– 

2009–052] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Order Approving a 

Proposed Rule Change Related to the 

Hybrid Matching Algorithms 

September 14, 2009. 

On July 17, 2009, the Chicago Board 

Options Exchange, Incorporated (the 

‘‘Exchange’’ or ‘‘CBOE’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’), pursuant to 

Section 19(b)(1) of the Securities 

Exchange Act of 1934 (the ‘‘Act’’),1 and 

Rule 19b–4 thereunder,2 a proposed rule 

change to amend CBOE Rules 6.45A and 

6.45B to adopt a modified participation 

entitlement overlay to orders executed 

electronically on the CBOE Hybrid 

System (‘‘Hybrid System’’). The 

proposed rule change was published for 

comment in the Federal Register on 

August 10, 2009.3 The Commission 

received no comments on the proposed 

rule change. This order approves the 

proposed rule change. 

CBOE Rules 6.45A and 6.45B set 

forth, among other things, the manner in 

which electronic Hybrid System trades 

in options are allocated. Paragraph (a) of 

each rule essentially governs how 

incoming orders received electronically 

by the Exchange are electronically 

executed against interest in the CBOE 

quote. Paragraph (a) of both rules 

currently provides for several different 

matching algorithms, including pricetime and pro-rata priority matching 

algorithms with additional priority 

overlays.4 The priority overlays 

currently include: public customer 

priority, market turner priority, and 

participation entitlements for certain 

qualifying market-makers.5 These 

overlays are optional. 

The purpose of the rule filing is to 

adopt the ‘‘modified participation 

entitlement,’’ an additional optional 

priority overlay for the price-time and 

pro-rata matching algorithms. The 

modified participation entitlement will 

operate in the same manner as the 

existing participation entitlement for 

certain qualifying market-makers; 

however, if at the time of execution 

there is one or more public customer 

orders resting at the execution price but 

none was entered first in time sequence, 

then the market-maker participation 

entitlement and public customer 

priority overlays would not be applied 

to the allocation—i.e. the allocation 

would revert back to the price-time or 

pro-rata methods. The participation 

entitlement for certain qualifying 

market-makers would therefore only be 

applied to the execution of an inbound 

order if there are no public customer 

orders resting on the Hybrid System at 

the best price or if a public customer 

was the first to rest interest at the best 

price, in which case the public customer 

order would have priority over the order 

of the market maker. This outcome is a 

mstockstill on DSKH9S0YB1PROD with NOTICES

Federal Register / Vol. 74, No. 181 / Monday, September 21, 2009 / Notices 48115 

6For example, assume the matching algorithm for 

an options class is established so that public 

customer orders have first priority, the modified 

participation entitlement has second priority, and 

any remaining balance is allocated using the prorata matching algorithm. If, at the time of execution, 

there is one or more public customer orders at the 

execution price but none is first in time sequence 

(for instance, because a market-maker quote was the 

first trading interest posted at the execution price), 

then the market-maker participation entitlement 

and public customer priority overlays would not be 

applied and the incoming order would be allocated 

solely on a pro-rata basis. 

7 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

8 15 U.S.C. 78f(b)(5). 

9See Securities Exchange Act Release No. 51822 

(June 10, 2005), 70 FR 35321 (June 17, 2005) 

(Adopting CBOE Rule 6.45B). 

10 15 U.S.C. 78s(b)(2). 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 60427 

(August 4, 2009), 74 FR 39986 (August 10, 2009) 

(‘‘Notice’’). 

4See Securities Exchange Act Release No. 58183 

(July 17, 2008), 73 FR 42850 (July 23, 

2008). 

5See Securities Exchange Act Release No. 57757 

(May 1, 2008), 73 FR 26159 (May 8, 

2008). 

6Rule 7003(b)(1). 

7Rule 7003(b)(2). 

8See Securities Exchange Act Release No. 59337 

(February 2, 2009), 74 FR 6441 

(February 9, 2009). 

9Rule 7003(b)(3) sets forth an annual fee of $50 

for each registered representative and principal for 

system processing. This annual fee was suspended 

on January 1, 2009 and will continue to be 

suspended until the Exchange submits a proposed 

rule change to reinstate it. See id. See also Notice. 

10 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

11 15 U.S.C. 78f(b)(4). 

change from how the existing 

participation entitlement works today.6

The Commission has carefully 

reviewed the proposed rule change and 

finds that it 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 proposed rule change is consistent 

with Section 6(b)(5) of the Act,8 which 

requires, among other things, that the 

rules of an exchange be designed to 

promote just and equitable principles of 

trade, 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; and 

are not designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. 

The new priority overlay is the same 

as the current market-maker 

participation entitlement overlay, 

except that the participation entitlement 

will only be applied if there are no 

public customer orders resting at the 

best price or if a public customer was 

the first to rest interest at the best price. 

Otherwise, neither the current public 

customer priority overlay nor the 

market-maker participation entitlement 

priority overlay will be in effect. Thus, 

public customer orders will have 

priority over the orders of other market 

participants if they are the first orders 

entered at the best price; if they are not 

the first orders at the best price, then the 

order will be allocated among market 

participants using the underlying 

matching algorithm—price-time or prorate—both of which the Commission 

already has found as consistent with the 

Act.9 The Commission therefore 

believes that the modified participation 

entitlement priority overlay is 

consistent with the Act. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,10 that the 

proposed rule change (SR–CBOE–2009– 

052), be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–22683 Filed 9–18–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60668; File No. SR–BX– 

2009–043] 

Self-Regulatory Organizations; 

NASDAQ OMX BX, Inc.; Order 

Approving Proposed Rule Change To 

Extend a Holiday for Certain 

Registration and Processing Fees for 

Associated Persons 

September 14, 2009. 

I. Introduction 

On July 23, 2009, NASDAQ OMX BX, 

Inc. (‘‘Exchange’’), 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 

extend a fee holiday for initial 

registration and processing and/or 

transfer and relicensing fees collected 

by the Exchange via Web CRD for the 

registration of associated persons of 

Exchange members. The proposed rule 

change was published for comment in 

the Federal Register on August 10, 

2009.3 The Commission received no 

comments on the proposal. This order 

approves the proposed rule change. 

II. Description of the Proposal 

The Exchange (as the Boston Stock 

Exchange), before its purchase by The 

NASDAQ OMX Group, Inc. in 2008,4

had ceased the trading of equity 

securities in 2007.5 In January 2009, 

when the Exchange’s market center was 

launched, the Exchange adopted a new 

set of Equity Rules, which include rules 

governing fees charged to members for 

registration of associated persons with 

the Exchange. Equity Rule 7003(b) sets 

forth the fees collected by the Exchange 

via the Web CRD system for initial 

registration and transfer or re-licensing: 

$60 for each initial Form U4 filed for the 

registration of a representative or 

principal,6 and $40 for each transfer or 

re-licensing of a representative or 

principal.7

The Exchange recognized that, in 

connection with the resumption of 

equities trading, additional firms might 

wish to become members of the 

Exchange, and if so, would need to 

register associated persons. Similarly, 

additional representatives or principals 

of pre-existing members might wish to 

trade equities on the Exchange and 

would thus need to register with the 

Exchange. Therefore, the Exchange 

waived these initial registration and 

transfer or re-licensing fees from January 

1, 2009 to July 1, 2009.8 The Exchange 

proposed to extend this fee waiver 

period to cover the period from July 1, 

2009 until October 1, 2009, to provide 

more time for associated persons that 

are new to equity trading through the 

Exchange to register, transfer, or relicense without incurring these costs. 

Registration events occurring after 

October 1, 2009 will be subject to the 

initial registration and/or transfer or relicensing fees.9

III. Discussion and Commission 

Findings 

The Commission has reviewed the 

proposed rule change and finds that it 

is consistent with the requirements of 

the Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.10 In particular, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(4) of the Act 11 in that it provides 

for an equitable allocation of reasonable 

dues, fees, and other charges among the 

Exchange’s members and other persons 

using its facilities. The fee waiver 

applies to initial registration, transfer, 

mstockstill on DSKH9S0YB1PROD with NOTICES