Federal Register / Vol. 74, No. 191 / Monday, October 5, 2009 / Notices 51205 

7 15 U.S.C. 78f(b). 

8 15 U.S.C. 78a, et seq. 

9 15 U.S.C. 78f(b)(1). 

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

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

Exchange or their facilities that would 

give NYFIX an unfair advantage over its 

competitors. 

(f) None of the Exchange, any facility 

of the Exchange, or any other affiliate of 

the Exchange or their facilities will 

disclose any system or design 

specifications, or any other information, 

to any employees of NYFIX or any 

affiliate of NYFIX that would give the 

Exchange, any other facility of the 

Exchange, any other affiliate of the 

Exchange, or NYFIX an unfair advantage 

over its competitors. 

The Exchange believes these measures 

effectively address the concerns noted 

above regarding the potential for 

conflicts of interest and informational 

advantages favoring NYFIX Millennium 

and NYFIX Securities vis-a`-vis other 

non-affiliated market participants. 

2. Statutory Basis 

The Exchange believes that this filing 

is consistent with Section 6(b) 7 of the 

Exchange Act,8 in general, and furthers 

the objectives of Section 6(b)(1),9 in 

particular, in that it enables the 

Exchange to be so organized as to have 

the capacity to be able to carry out the 

purposes of the Exchange Act and to 

comply, and to enforce compliance by 

its exchange members and persons 

associated with its exchange members, 

with the provisions of the Exchange Act, 

the rules and regulations thereunder, 

and the rules of the Exchange. The 

Exchange also believes that this filing 

furthers the objectives of Section 

6(b)(5) 10 of the Exchange Act because 

the rules summarized herein would 

create a governance and regulatory 

structure that is 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. In particular, the 

Proposed Rule Change sets forth certain 

conditions under which the Routing 

Services will be provided so as to assure 

that the potential for conflicts of 

interests and informational advantages 

are adequately addressed. The 

conditions under which the Exchange is 

permitted to be affiliated with the 

entities conducting the Routing Services 

will also be limited to no more than 6 

months. 

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 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 35 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 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 

No. SR–NYSEAMEX–2009–63 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 No. 

SR–NYSEAMEX–2009–63. 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 NYSE Amex. 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 No. 

SR–NYSEAMEX–2009–63 and should 

be submitted on or before October 26, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–23850 Filed 10–2–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60720; File No. SR– 

NYSEAmex–2009–64] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by NYSE 

Amex LLC Amending Commentary .06 

to Rule 903, Series of Options Open for 

Trading 

September 25, 2009. 

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 

September 23, 2009, NYSE Amex LLC 

(‘‘NYSE Amex’’ or the ‘‘Exchange’’) 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 


cprice-sewell on DSK2BSOYB1PROD with NOTICES
51206 Federal Register / Vol. 74, No. 191 / Monday, October 5, 2009 / Notices 

3See Exchange Act Release No. 60466 (August 10, 

2009), 74 FR 41475 (August 17, 2009) (SR–Phlx– 

2009–65). Approved in Exchange Act Release No. 

60694 (September 18, 2009). 

4The Exchange may not list long-term option 

series (‘‘LEAPS’’) at $1 strike price intervals for any 

class selected for the Program. 

5The Exchange recently amended NYSE Amex 

Rule 916, Withdrawal of Approval of Underlying 

Securities or Options, to eliminate the $3 market 

price per share requirement for continued approval 

for an underlying security. The amendment 

eliminated the prohibition against listing additional 

series or options on an underlying security at any 

time when the price per share of such underlying 

security is less than $3. The Exchange explained in 

that proposed rule change that the market price for 

a large number of securities has fallen below $3 in 

the current volatile market environment. See 

Securities Exchange Act Release No. 59348, SR– 

NYSEALTR–2009–08 (February 3, 2009), 74 FR 

6683 (February 10, 2009). 

6Additionally, market participants may be able to 

trade $2.50 strikes on the same option at another 

exchange, if that exchange has elected not to select 

the stock for participation in its own similar $1 

Strike Program. 

7Again, market participants may also be able to 

trade the option at $1 strike price intervals on other 

exchanges, if those exchanges have selected the 

stock for participation in their own similar $1 Strike 

Program. 

8The option on the qualifying stock could also 

have strike prices set at $5, $7.50 and so forth at 

$2.50 intervals (pursuant to Commentary .05 to 

Rule 903) or, if it has been selected for the $1 Strike 

Program, at $4, $5, $6, $7 and $8. 

9As of July 31, 2009, stocks trading at or below 

$3 include E*Trade Financial Corporation, Ambac 

Financial Group, Inc., Alcatel-Lucent, Federal 

Home Loan Mortgage Corporation (Freddie Mac) 

and Federal National Mortgage Association (Fannie 

Mae). A number of these stocks are widely held and 

actively traded equities, and the options overlying 

these stocks also trade actively on NYSE Amex. 

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 amend 

Commentary .06 to Rule 903, Series of 

Options Open for Trading in order to 

establish strike price intervals of $0.50, 

beginning at $1, for certain options 

classes whose underlying security 

closed at or below $3 in it s primary 

market on the previous trading day. The 

text of the proposed rule change is 

attached as Exhibit 5 to the 19b–4 form. 

A copy of this filing is available on the 

Exchange’s Web site at http:// 

www.nyse.com, at the Exchange’s 

principal office 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, 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 those 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 

The proposed rule change is based on 

a filing submitted by NASDAQ OMX 

PHLX Inc (‘‘Phlx’’) that was recently 

noticed for comment and approved by 

the Commission.3

The purpose of the proposed rule 

change is to expand the ability of 

investors to hedge risks associated with 

stocks trading at or under $3. Currently, 

Commentary .05 to NYSE Amex Rule 

903 provides that the interval of strike 

prices of series of options on individual 

stocks may be $2.50 or greater where the 

strike price is $25 or less. Additionally, 

Commentary .06 to Rule 903 allows the 

Exchange to establish $1 strike price 

intervals (the ‘‘$1 Strike Program’’) on 

options classes overlying no more than 

fifty-five individual stocks designated 

by the Exchange. In order to be eligible 

for selection into the $1 Strike Program, 

the underlying stock must close below 

$50 in its primary market on the 

previous trading day. If selected for the 

$1 Strike Program, the Exchange may 

list strike prices at $1 intervals from $1 

to $50, but no $1 strike price may be 

listed that is greater than $5 from the 

underlying stock’s closing price in its 

primary market on the previous day. 

The Exchange may also list $1 strikes on 

any other option class designated by 

another securities exchange that 

employs a similar $1 Strike Program its 

own rules.4 The Exchange is restricted 

from listing any series that would result 

in strike prices being within $0.50 of a 

strike price set pursuant to Rule 903 

Commentary .06(b). 

The Exchange is now proposing to 

establish strike prices of $1, $1.50, $ 2, 

$2.50, $3 and $3.50 for certain stocks 

that trade at or under $3.00.5 The listing 

of these strike prices will be limited to 

options classes whose underlying 

security closed at or below $3 in its 

primary market on the previous trading 

day, and which have national average 

daily volume that equals or exceeds 

1,000 contracts per day as determined 

by The Options Clearing Corporation 

during the preceding three calendar 

months. The listing of $0.50 strike 

prices would be limited to options 

classes overlying no more than 5 

individual stocks (the ‘‘$0.50 Strike 

Program’’) as specifically designated by 

the Exchange. The Exchange would also 

be able to list $0.50 strike prices on any 

other option classes if those classes 

were specifically designated by other 

securities exchanges that employed a 

similar $0.50 Strike Program under their 

respective rules. 

Currently, the Exchange may list 

options on stocks trading at $3 at strike 

prices of $1, $2, $3, $4, $5, $6, $7 and 

$8 if they are designated to participate 

in the $1 Strike Program.6 If these stocks 

have not been selected for the 

Exchange’s $1 Strike Program, the 

Exchange may list strike prices of $2.50, 

$5, $7.50 and so forth as provided in 

Commentary .05, but not strike prices of 

$1, $2, $3, $4, $6, $7 and $8.7 The 

Exchange is now proposing to amend 

Commentary .06 to Rule 903 by adding 

new sub-paragraph (d) to list strike 

prices on options on a number of 

qualifying stocks that trade at or under 

$3.00, not simply those stocks also 

participating in the $1 Strike Program, 

in finer intervals of $0.50, beginning at 

$1 up to $3.50. Thus, a qualifying stock 

trading at $3 would have option strike 

prices established not just at $2.50, 

$5.00, $7.50 and so forth (for stocks not 

in the Exchange’s $1 Strike Program) or 

just at $1, $2, $3, $4, $5, $6, $7 and $8 

(for stocks designated to participate in 

the $1 Strike Program), but rather at 

strike prices established at $1, $1.50, $2, 

$2.50 $3 and $3.50.8

The Exchange believes that current 

market conditions demonstrate the 

appropriateness of the new strike prices. 

Recently the number of securities 

trading below $3.00 has increased 

dramatically.9 Unless the underlying 

stock has been selected for the $1 Strike 

Program, there is only one possible inthe-money call (at $2.50) to be traded if 

an underlying stock trades at $3.00. 

Similarly, unless the underlying stock 

has been selected for the $1 Strike 

Program, only one out-of-the-money 

strike price choice within 100% of a 

stock price of $3 is available if an 

investor wants to purchase out-of-themoney calls. Stated otherwise, a 

purchaser would need over a 100% 

move in the underlying stock price in 

order to have a call option at any strike 

price other than the $5 strike price 

become in-the-money. If the stock is 

selected for the $1 Strike Program, the 

available strike price choices are 

somewhat broader, but are still greatly 

limited by the proximity of the $3 stock 

price to zero, and the very large percent 

gain or loss in the underlying stock 

price, relative to a higher priced stock, 


cprice-sewell on DSK2BSOYB1PROD with NOTICES
Federal Register / Vol. 74, No. 191 / Monday, October 5, 2009 / Notices 51207 

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

11 15 U.S.C. 78f(b)(5). 

12 15 U.S.C. 78s(b)(3)(A). 

13 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6) requires a self-regulatory organization to give 

the Commission written notice of its intent to file 

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 is deemed to have 

satisfied this requirement. 

14See Securities Exchange Act Release No. 60694 

(September 18, 2009) (SR–Phlx–2009–65) (order 

approving a $0.50 strike program substantially the 

same as the $0.50 Strike Program proposed by 

NYSE Amex). 

15For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

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

that would be required in order for 

strikes set at $1 or away from the stock 

price to become in-the-money and serve 

their intended hedging purpose. 

As a practical matter, a low-priced 

stock by its very nature requires narrow 

strike price intervals in order for 

investors to have any real ability to 

hedge the risks associated with such a 

security or execute other related options 

trading strategies. The current 

restriction on strike price intervals, 

which prohibits intervals of less than 

$2.50 (or $1 for stocks in the $1 Strike 

Program) for options on stocks trading at 

or below $3, could have a negative affect 

on investors. The Exchange believes that 

the proposed $0.50 strike price intervals 

would provide investors with greater 

flexibility in the trading of equity 

options that overlie lower priced stocks 

by allowing investors to establish equity 

option positions that are better tailored 

to meet their investment objectives. The 

proposed new strike prices would 

enable investors to more closely tailor 

their investment strategies and 

decisions to the movement of the 

underlying security. As the price of 

stocks decline below $3 or even $2, the 

availability of options with strike prices 

at intervals of $0.50 could provide 

investors with opportunities and 

strategies to minimize losses associated 

with owning a stock declining in price. 

With regard to the impact on system 

capacity, NYSE Amex has analyzed its 

capacity and represents that it and the 

Options Price Reporting Authority have 

the necessary systems capacity to 

handle the additional traffic associated 

with the listing and trading of an 

expanded number of series as proposed 

by this filing. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with Section 

6(b) 10 of the Securities Exchange Act of 

1934 (the ‘‘Act’’), in general, and 

furthers the objectives of Section 

6(b)(5) 11 in particular in that it is 

designed to promote just and equitable 

principles if trade, to prevent fraudulent 

and manipulative acts, to remove 

impediments to and to perfect the 

mechanism for a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest, by expanding the ability 

of investors to hedge risks associated 

with stocks trading at or below $3. The 

proposal should create greater trading 

and hedging opportunities and 

flexibility, and provide customers with 

the ability to more closely tailor 

investment strategies to the price 

movement of the underlying stocks, 

trading in many of which is highly 

liquid. 

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 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing 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 for 30 days after the date of 

the filing, or such shorter time as the 

Commission may designate, if 

consistent with the protection of 

investors and the public interest, it has 

become effective pursuant to 19(b)(3)(A) 

of the Act 12 and Rule 19b–4(f)(6) 

thereunder.13

The Exchange has requested that the 

Commission waive the 30-day operative 

delay to permit the Exchange to 

compete effectively with Phlx by being 

able to list the same strike prices as 

Phlx. The Commission recently 

approved SR–Phlx–2009–65,14 and 

therefore finds that waiver of the 

operative delay is consistent with the 

protection of investors and the public 

interest because such waiver will 

encourage fair competition among the 

exchanges. Therefore, the Commission 

designates the proposal operative upon 

filing.15

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–NYSEAmex–2009–64 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–NYSEAmex–2009–64. 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 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 


cprice-sewell on DSK2BSOYB1PROD with NOTICES
51208 Federal Register / Vol. 74, No. 191 / Monday, October 5, 2009 / Notices 

16 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A)(iii) 

4 17 CFR 240.19b–4(f)(6). 

5Pursuant to Rule 1.1(aaa), reference to Hybrid 

Trading System includes the Hybrid 3.0 Platform 

unless otherwise specified. 

6See Securities Exchange Act Release No. 58828 

(October 21, 2008), 73 FR 63749 (October 27, 2008), 

granting immediate effectiveness to SR–CBOE– 

2008–107. 

submissions should refer to File 

Number SR–NYSEAmex–2009–64 and 

should be submitted on or before 

October 26, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–23851 Filed 10–2–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60727; File No. SR–CBOE– 

2009–067] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to Bid/Ask 

Differentials 

September 28, 2009. 

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 

September 21, 2009, 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, II, and 

III below, which Items have been 

prepared by the Exchange. The 

Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change 

pursuant to Section 19(b)(3)(A)(iii) of 

the Act 3 and Rule 19b–4(f)(6) 

thereunder.4 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 amend its 

rules relating to bid/ask differentials. 

The text of the proposed rule change is 

available on the Exchange’s Web site 

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

Office of the Secretary, CBOE and at the 

Commission. 

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 those 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 

CBOE proposes to amend its rules 

pertaining to the bid/ask differential 

requirements. Currently, Rule 8.7(b)(iv) 

specifies the bid/ask differential 

requirements applicable to MarketMakers when bidding and offering in 

open outcry, during opening rotations 

and when quoting electronically on the 

Hybrid Trading System.5 With respect 

to bidding and offering in open outcry 

and during opening rotations, the 

requirements vary depending on the 

price of the bid. For example, Rule 

8.7(b)(iv)(A) states that the quote widths 

shall not be more than: $0.25 if the bid 

is less than $2; $0.40 where the bid is 

at least $2 but does not exceed $5; $0.50 

where the bid is more than $5 but does 

not exceed $10; $0.80 where the bid is 

more than $10 but does not exceed $20; 

and $1 where the bid is more than $20. 

With respect to electronic quoting on 

the Hybrid Trading System, the bid/ask 

differential requirement is $5. Rule 

8.7(b)(iv) also provides that CBOE may 

establish quote width differences other 

than those set forth above for one or 

more option series. Some or all of these 

quote width differentials are also 

applicable to LMMs in Hybrid 3.0 

classes (see Rule 8.15), LMMs in Hybrid 

classes (see Rule 8.15A), DPMs (see Rule 

8.85), and e-DPMs (see Rule 8.93), 

depending on the manner in which the 

market participant functions. 

CBOE proposes to amend its rules to 

allow the Exchange to set the bid/ask 

differential requirements on a class by 

class basis, and delete from its rules the 

specific differentials identified in Rule 

8.7(b)(iv). CBOE would announce the 

bid/ask differentials to its members via 

circular. Although CBOE at this time 

does not anticipate materially changing 

the bid/ask differentials from their 

current levels, it believes that this 

change provides it with additional 

flexibility to tailor the bid/ask 

differential requirements to particular 

option classes and to take into 

consideration the market conditions and 

the trading and liquidity in a particular 

option class and its underlying security 

when setting the bid/ask differentials. 

Under its existing rules, CBOE from 

time to time grants bid/ask relief in 

various option classes based on market 

conditions and it has not experienced 

any negative effects from such actions. 

CBOE believes that the proposed rule 

change will allow CBOE to continue to 

set the bid/ask differentials at an 

appropriate level which may be 

different than the existing bid/ask 

differentials, rather than waiting for 

market participants to request bid/ask 

relief as it traditionally has been done. 

CBOE notes that the rules of the Nasdaq 

Options Market do not contain any bid/ 

ask differential requirements, even 

though CBOE does not anticipate 

mimicking that market structure. 

Accordingly, CBOE believes that this 

proposed change is consistent with the 

Act. 

In connection with this proposal, 

CBOE proposes to make related changes 

to Rules 6.2B, 6.13, 6.25, 6.53C, 8.14, 

8.15, 8.15A, 8.85, and 8.93, which 

currently reference the bid/ask 

differentials in Rule 8.7(b)(iv). 

Finally, CBOE proposes to amend 

Rule 8.93(iv) to state that an e-DPM is 

obligated to assure that its market 

quotations comply with the minimum 

size requirements prescribed by CBOE, 

which minimum shall be at least one 

contract. Last year, CBOE amended its 

rules to allow the Exchange to set a 

minimum quotation size requirement 

for electronic and open outcry quotes on 

a class by class basis, provided the 

minimum set by the Exchange is at least 

one contract.6 In that filing, changes to 

Rule 8.93 were inadvertently omitted. 

2. Statutory Basis 

The proposed rule change would 

permit the Exchange to set the bid/ask 

differential requirements on a class by 

class basis. CBOE believes that this 

flexibility will enable the Exchange to 

tailor the bid/ask differential 

requirements to particular classes and to 

take into consideration the market 

conditions and the trading and liquidity 


cprice-sewell on DSK2BSOYB1PROD with NOTICES