Federal Register / Vol. 72, No. 85 / Thursday, May 3, 2007 / Notices 24639 

10 See supra note 5 and accompanying text. 

11 The Commission notes that minimum 

distribution requirements are extremely important 

to ensure, among other things, the liquidity of a 

security and an active public market. The changes 

being approved for meeting the distribution 

standards applicable to units and their components 

recognize the unique trading characteristics and 

challenges that can occur in meeting the minimum 

standards during the separation period of the units, 

while containing certain protections to ensure 

certain minimum standards will be met. 

12 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 Amendment No. 2 replaced and superseded 

Amendment No. 1 and the original filing in their 

entireties. 

Section 1009 of the Amex Company 

Guide. 

In addition, the proposal sets forth the 

application of continued listing 

standards to individual components 

comprising units once some, but not all, 

of the units have separated into their 

component parts, by specifying that the 

units that are intact and freely separable 

into their component parts will be 

counted toward the total distribution 

numbers 10 required for continued 

listing of the component. The rule 

change recognizes the practical situation 

that as investors decide whether to 

separate their unit, there may be a 

period of time at the outset of the 

separation period when there may be 

less components outstanding than 

necessary to meet the distribution 

requirements. However, to immediately 

delist these components during the 

separation period may be unfair to those 

investors who still have an opportunity 

to separate their components and want 

to trade them in a public market. The 

rule ensures that to be able to count the 

units for purposes of the distribution 

requirements for the component parts, 

the units must be freely separable into 

the components, so there is a reasonable 

basis for assuming that as more units are 

separated, which adds liquidity to the 

components, the distribution 

requirements for the components can, in 

fact, be separately met. 

Under the rule however, if it appears 

that not enough units will be separated 

to allow the components to meet the 

public distribution and aggregate market 

value requirements independently or 

there are other concerns, the rule makes 

clear that Amex should consider 

delisting the components or unit. This 

recognizes the fact that although the 

rule allows the aggregation of units and 

components for purposes of distribution 

standards, Amex will need to ensure 

that there is some minimal level of 

liquidity in each component and unit 

and should consider delisting if the 

public distribution or the aggregate 

market value of the components or unit 

has become so reduced as to make 

continued listing on the Exchange 

inadvisable. In this regard, the Exchange 

will take into account the individual 

distribution values and the trading 

characteristics of the component or unit 

and whether it would be in the public 

interest for continued trading of such 

component or unit.11

As Amex noted in its filing, the 

proposal should help to promote 

transparency of the Exchange rules 

relating to the continued listing of units 

and their components and provide 

clearer guidance for members and 

investors trading in such units and/or 

components. Finally, the technical 

changes to Section 1003 of the Company 

Guide ensure that the rule’s language 

will be consistent throughout. Based on 

the above, the Commission believes the 

proposal promotes just and equitable 

principles of trade in such securities 

and is designed to protect investors and 

the public interest, consistent with 

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

IV. Conclusion 

It is therefore ordered, pursuant to 

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

proposed rule change (SR–Amex–2006– 

114), as modified by Amendment No. 1, 

be, and it hereby is, approved. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.12

J. Lynn Taylor, 

Deputy Secretary. 

[FR Doc. E7–8397 Filed 5–2–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[(Release No. 34–55674; File No. SR–CBOE– 

2006–101] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing of 

Proposed Rule Change as Modified by 

Amendment Nos. 1 and 2 Thereto To 

Amend CBOE’s Rules To Reflect the 

Migration of Its TPF Technology 

Platform Over to the Existing 

CBOEdirect Technology Platform. 

April 26, 2007. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on November 

30, 2006, the Chicago Board Options 

Exchange, Incorporated (‘‘CBOE’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II and III 

below, which Items have been 

substantially prepared by the Exchange. 

The Exchange submitted Amendment 

No. 1 to the proposed rule change on 

February 15, 2007. The Exchange 

submitted Amendment No. 2 to the 

proposed rule change on April 13, 

2007.3 The Commission is publishing 

this notice and order to solicit 

comments on the proposal, as amended, 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

CBOE’s rules to reflect the migration of 

its TPF technology platform over to the 

existing CBOEdirect technology 

platform. The text of the proposed rule 

change, incorporating Amendment Nos. 

1 and 2, is set forth below. Proposed 

new language is in italics; proposed 

deletions are in brackets. 

Chicago Board Options Exchange, 

Incorporated 

Rules 

* * * * * 

CHAPTER I Definitions 

Rule 1.1. Definitions 

When used in these Rules, unless the 

context otherwise requires: 

(a) Any term defined in Article I of 

the Constitution and not otherwise 

defined in this Chapter shall have the 

meaning assigned to such term in such 

Article I. 

Hybrid Trading System 

(aaa) ‘‘Hybrid Trading System’’ refers 

to the Exchange’s trading platform that 

allows individual Market-Makers to 

submit electronic quotes in their 

appointed classes. ‘‘ Hybrid 2.0 

Platform’’ is an enhanced trading 

platform that allows remote quoting by 

authorized categories of members. 

‘‘Hybrid 3.0 Platform’’ is an electronic 

trading platform on the Hybrid Trading 

System that allows a single quoter to 

submit an electronic quote which 

represents the aggregate Market-Maker 

quoting interest in a series for the 

trading crowd. Classes authorized by the 

Exchange for trading on the Hybrid 

Trading System shall be referred to as 

Hybrid Classes. Classes authorized by 

the Exchange for trading on the Hybrid 

2.0 Platform shall be referred to as 

Hybrid 2.0 Classes. Classes authorized 

by the Exchange for trading on the 

Hybrid 3.0 Platform shall be referred to 

as Hybrid 3.0 Classes. References to 

‘‘Hybrid,’’ ‘‘Hybrid System,’’ or ‘‘Hybrid 

Trading System’’ in the Exchange’s 

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Rules shall include all platforms unless 

otherwise provided by rule. 

* * * * * 

Rule 6.2B. Hybrid Opening System 

(‘‘HOSS’’) 

(a) For a period of time before the 

opening of trading in the underlying 

security (or in the case of index options, 

prior to 8:30 a.m., CT), as determined by 

the appropriate Procedure Committee 

and announced to the membership via 

Regulatory Circular, the Hybrid System 

will accept orders and quotes. The 

Hybrid System will disseminate to 

market participants (as defined in Rule 

6.45A or 6.45B) information about 

resting orders in the Book that remain 

from the prior business day and any 

orders submitted before the opening. At 

a randomly selected time within a 

number of seconds after the primary 

market for the underlying security 

disseminates the opening trade or the 

opening quote (or after 8:30 a.m. for 

index options unless unusual 

circumstances exist), the System 

initiates the opening procedure and 

sends a notice (‘‘Opening Notice’’) to 

market participants who may then 

submit their opening quotes. The DPM 

or any appointed LMM and each e-DPM 

for the class must enter opening quotes. 

Spread orders and contingency orders 

do not participate in the opening trade 

or in the determination of the opening 

price. 

(b)–(h) No Change. 

* * * Interpretations and Policies 

.01 Not withstanding Paragraph (a), 

for purposes of Hybrid 3.0 Classes, the 

following shall apply: 

(a) Only the DPM or LMM will be 

required to enter opening quotes in 

opening rotations. Public customers, 

broker-dealers, Exchange MarketMakers, away Marker-Makers and 

Specialists will not be permitted to enter 

opening quotes but may enter opening 

orders in opening rotations. 

(b) The DPM or LMM must enter 

opening quotes that comply with the 

legal quote width requirements of Rule 

8.7(b)(iv). If there is not a quote present 

in a series that complies with the legal 

quote width requirements of Rule 

8.7(b)(iv), then that series will not open. 

(c) All provisions set forth in Rule 

6.2B shall remain in effect unless 

superseded or modified by this Rule 

6.2B.01. To facilitate the calculation of 

a settlement price for futures and 

options contracts on volatility indexes, 

the Exchange shall utilize a modified 

HOSS opening procedure for any index 

option series with respect to which a 

volatility index is calculated. This 

modified HOSS opening procedure will 

be utilized only on the final settlement 

date of the options and futures contracts 

on the applicable volatility index in 

each expiration month. 

On the final settlement day for 

options and futures on a volatility 

index, public customers, broker-dealers, 

Exchange Market-Makers, away MarkerMakers and Specialists may enter orders 

in any index options series used to 

calculate the final settlement price of 

that volatility index (‘‘modified HOSS 

opening procedures’’). The following 

provisions shall be applicable for an 

index option with respect to which a 

volatility index is calculated: 

(i) All orders (including public 

customer, broker-dealer, Exchange 

Market-Maker, away Market-Maker and 

Specialist orders), other than spread or 

contingency orders, will be eligible to be 

placed on the electronic book for those 

option contract months whose prices are 

used to derive the volatility indexes on 

which options and futures are traded, 

for the purpose of permitting those 

orders to participate in the opening 

price calculation for the applicable 

index option series. 

(ii) In addition to the LMM quoting 

requirement, all LMMs, if applicable, 

shall be required to enter opening orders 

during the modified HOSS opening 

procedures. 

(iii) All index option orders for 

participation in the modified HOSS 

opening procedure that are related to 

positions in, or a trading strategy 

involving, volatility index options or 

futures, and any change to or 

cancellation of any such order: 

(A) must be received prior to 8:00 a.m. 

(CT), and 

(B) may not be cancelled or changed 

after 8:00 a.m. (CT), unless the order is 

not executed in the modified HOSS 

opening procedure and the cancellation 

or change is submitted after the 

modified HOSS opening procedure is 

concluded (provided that any such 

order may be changed or cancelled after 

8:00 a.m. (CT) and prior to applicable 

cut-off time established in accordance 

with paragraph (iv) in order to correct 

a legitimate error, in which case the 

member submitting the change or 

cancellation shall prepare and maintain 

a memorandum setting forth the 

circumstances that resulted in the 

change or cancellation and shall file a 

copy of the memorandum with the 

Exchange no later than the next 

business day in a form and manner 

prescribed by the Exchange). 

In general, the Exchange shall 

consider index option orders to be 

related to positions in, or a trading 

strategy involving, volatility index 

options or futures for purposes of this 

Rule 6.2B.01(c) if the orders possess the 

following three characteristics: 

(1) The orders are for options series 

with the expiration month that will be 

used to calculate the settlement price of 

the applicable volatility index option or 

futures contract. 

(2) The orders are for options series 

spanning the full range of strike prices 

in the appropriate expiration month for 

options series that will be used to 

calculate the settlement price of the 

applicable volatility index option or 

futures contract, but not necessarily 

every available strike price. 

(3) The orders are for put options with 

strike prices less than the ‘‘at-themoney’’ strike price and for call options 

with strike prices greater than the ‘‘atthe-money’’ strike price. The orders may 

also be for put and call options with ‘‘atthe-money’’ strike prices. 

Whether index option orders are 

related to positions in, or a trading 

strategy involving, volatility index 

options or futures for purposes of this 

Rule 6.2B.01(c) depends upon specific 

facts and circumstances. Order types 

other than those provided above may 

also be deemed by the Exchange to fall 

within this category of orders if the 

Exchange determines that to be the case 

based upon the applicable facts and 

circumstances. 

The provisions of this Rule 6.2B.01(c) 

may be suspended by two Floor Officials 

in the event of unusual market 

conditions. 

(iv) All other index option orders for 

participation in the modified HOSS 

opening procedures, and any change to 

or cancellation of any such order, must 

be received prior to the applicable cutoff time in order to participate at the 

opening price for the applicable index 

option series. The applicable cut-off 

time for the affected index option series 

will be established by the appropriate 

Procedure Committee on a class-byclass basis, provided the cut-off time 

will be no earlier than 8:25 a.m. (CT) 

and no later than the opening of trading 

in the option series. All 

pronouncements regarding changes to 

the applicable cut-off time will be 

announced to the membership via 

Regulatory Circular that is issued at 

least one day prior to implementation. 

(v) The HOSS system shall 

automatically generate cancels 

immediately prior to the opening of the 

applicable index option series for 

broker-dealer, Exchange Market-Maker, 

away Market-Maker, and Specialist 

orders which remain on the electronic 

book following the modified HOSS 

opening procedures. 

(vi) Any imbalance of contracts to buy 

over contracts to sell in the applicable 

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index option series, or vice versa, as 

indicated on the electronic book, will be 

published as soon as practicable up 

through the opening bell on days that 

the modified HOSS opening procedures 

is utilized. 

* * * * * 

Rule 6.13. CBOE Hybrid System’s 

Automatic Execution Feature 

(a) No Change. 

(b) Automatic Execution 

(i) Eligibility: Eligibility: Orders 

eligible for automatic execution through 

the CBOE Hybrid System may be 

automatically executed in accordance 

with the provisions of this Rule or in 

accordance with Rule 6.13A for classes 

that have been designated for auction 

price improvement. This section 

governs automatic executions and splitprice automatic executions. The 

automatic execution and allocation of 

orders or quotes submitted by market 

participants also is governed by Rules 

6.45A (c) and (d) and Rules 6.45B (c) 

and (d). 

(A)(1) Eligible Order Size: The 

appropriate Procedure Committee shall 

establish on a class-by-class basis the 

maximum size of orders entitled to 

receive automatic execution through the 

CBOE Hybrid System. If the eligible 

order size exceeds the disseminated 

size, incoming eligible orders shall be 

entitled to receive an automatic 

execution up to the disseminated size. 

(A)(2) Hybrid 3.0 Eligibility and 

Process: For Hybrid 3.0 Classes, all 

eligible orders will receive automatic 

execution against public customer 

orders in the electronic book. Any 

remaining balance of the order may be 

represented in the electronic book 

provided such order is eligible for book 

entry pursuant to Rule 7.4. If the order 

is not eligible for book entry, or at the 

order entry firm’s discretion, the order 

will route to PAR, BART, or the order 

entry firm’s booth printer. 

(B) Orders Not Eligible for Automatic 

Execution: Orders not eligible for 

automatic execution will route on a 

class by class basis to PAR, BART, or at 

the order entry firm’s discretion to the 

order entry firm’s booth printer. 

(C) Access: 

(i) For Hybrid and Hybrid 2.0 classes, 

non-broker-dealer public customers and 

broker-dealers that are not MarketMakers or specialists on an exchange 

who are exempt from the provisions of 

Regulation T of the Federal Reserve 

Board pursuant to Section 7(c)(2) of the 

Securities Exchange Act of 1934 (‘‘nonMarket-Maker or non-Specialist brokerdealers’’) are eligible for automatic 

execution. The eligible order size for 

these classifications must be the same. 

For Hybrid 3.0 classes, non-brokerdealer public customer orders are 

eligible for automatic execution, and the 

appropriate Procedure Committee may 

determine, on a class by class basis, to 

allow non-Market-Maker or nonSpecialist broker-dealer orders to be 

eligible for automatic execution. The 

eligible order size for these 

classifications must be the same. 

(ii) No Change. 

(iii) No Change. 

(ii) Process: For Hybrid and Hybrid 

2.0 classes, [E]eligible orders of a size 

equal to or less than the size of the 

disseminated CBOE BBO shall be 

executed in the manner described in 

paragraph 6.13(b). Inbound eligible 

orders of a size greater than the 

disseminated size will automatically 

execute in part, as described below in 

paragraph 6.13(b)(iii) (Split Price 

Executions). Orders executed 

automatically shall be allocated to 

contra side trading interest pursuant to 

Rule 6.45A or 6.45B. 

(iii) Split Price Executions: For Hybrid 

and Hybrid 2.0 classes, [I]incoming 

eligible orders of a size greater than the 

disseminated size shall receive an 

automatic execution for a size up to the 

disseminated size. The balance of the 

order if marketable, will automatically 

execute at the revised disseminated 

price provided the revised disseminated 

price represents the NBBO (if the 

revised price is inferior to NBBO the 

balance of the order will route to PAR). 

If not marketable, the balance of the 

order will be automatically represented 

in the electronic book provided such 

order is eligible for book entry pursuant 

to Rule 7.4. If the order is not eligible 

for book entry, it will route to PAR, 

BART, or at the order entry firm’s 

discretion to the order entry firm’s 

booth printer. Pronouncements 

pursuant to this provision shall be made 

by the appropriate Procedure Committee 

and announced via Regulatory Circular. 

(iv) No Change. 

(c)–(e) No Change. 

* * * * * 

Rule 6.14. Hybrid Agency Liaison 

(HAL) 

This Rule governs the operation of the 

Hybrid Agency Liaison (‘‘HAL’’) system. 

HAL is a feature within the Hybrid 

System that provides automated order 

handling in designated classes trading 

on Hybrid [option classes] for qualifying 

electronic orders that are not 

automatically executed by the Hybrid 

System. 

(a)–(d) No Change. 

* * * Interpretations and Policies 

No Change. 

* * * * * 

Rule 6.43. Manner of Bidding and 

Offering 

(a) No Change. 

(b) Except for Hybrid and Hybrid 2.0 

classes designated for trading on the 

CBOE Hybrid System, members of the 

trading crowd may verbalize quotes 

(‘‘manual quotes’’) to be input into 

Exchange systems by quote reporters for 

dissemination to the Options Price 

Reporting Authority (‘‘OPRA’’). Manual 

quotes must be for a minimum size of 

five (5) contracts. A manual quote will 

remain as the Exchange’s disseminated 

quote until executions deplete the size, 

until the market maker or floor broker 

withdraws the quote, or until matched 

or improved by Autoquote or improved 

by an order in the electronic Book. 

(i) For Hybrid 3.0 classes, if market 

participants as defined in Rule 6.45B 

are eligible to submit orders for entry 

into the electronic book pursuant to 

Rule 7.4(a)(1)(i), then the appropriate 

Procedure Committee may determine to 

disable manual quotes. 

(ii) For Hybrid 3.0 classes, automatic 

execution against a manual quote will 

not be permissible. However, in 

accordance with Rule 6.13 automatic 

execution against public customer 

orders in the electronic book will be 

permissible when the electronic book 

matches a manual quote. 

* * * * * 

Rule 6.45B—Priority and Allocation of 

Trades in Index Options and Options 

on ETFs on the CBOE Hybrid System 

No Change. 

(a)–(c) No Change. 

(d) Quotes Interacting with Quotes. 

(i) In the event that a Market-Maker’s 

disseminated quotes interact with the 

disseminated quote(s) of other MarketMakers, resulting in the dissemination 

of a ‘‘locked’’ quote (e.g., $1.00 bid— 

1.00 offer), the following shall occur: 

(A) No Change. 

(B) No Change. 

(C) When the market locks, a 

‘‘counting period’’ will begin during 

which Market-Makers whose quotes are 

locked may eliminate the locked market. 

Provided, however, that in accordance 

with subparagraph (A) above a MarketMaker will be obligated to execute 

customer and broker-dealer orders 

eligible for automatic execution 

pursuant to Rule 6.13 at his 

disseminated quote in accordance with 

Rule 8.51. If at the end of the counting 

period the quotes remain locked, the 

locked quotes will automatically 

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execute against each other in 

accordance with the allocation 

algorithm described above in Rule 

6.45B(a). The length of the counting 

period will be established by the 

appropriate Procedure Committee, may 

vary by product, and will not exceed 

one second. For Hybrid 3.0 Classes, the 

length of the counting period will be 

established by the appropriate 

Procedure Committee, may vary by 

class, and shall not exceed ten seconds. 

(ii) No Change. 

* * * Interpretations and Policies 

.01 Principal Transactions: Order 

entry firms may not execute as principal 

against orders they represent as agent 

unless: (i) agency orders are first 

exposed on the Hybrid System for at 

least three (3) seconds, (ii) the order 

entry firm has been bidding or offering 

for at least three (3) seconds prior to 

receiving an agency order that is 

executable against such bid or offer, or 

(iii) the order entry firm proceeds in 

accordance with the crossing rules 

contained in Rule 6.74. 

.02 Solicitation Orders. Order entry 

firms must expose orders they represent 

as agent for at least three (3) seconds 

before such orders may be executed 

electronically via the electronic 

execution mechanism of the Hybrid 

System, in whole or in part, against 

orders solicited from members and nonmember broker-dealers to transact with 

such orders. 

.03 For purposes of Interpretations .01 

and .02, the minimum exposure time for 

Hybrid 3.0 Classes shall be determined 

by the appropriate Procedure 

Committee, on a class by class basis, 

provided the minimum exposure time 

must be at least 3 seconds but shall not 

exceed 30 seconds. 

* * * * * 

Rule 7.4. Obligations for Orders 

(a) Eligibility and Acceptance: 

(1) Eligibility: Public customer orders 

are eligible for entry into the electronic 

book. Market participants, as defined in 

Rule 6.45A or 6.45B in Hybrid and 

Hybrid 2.0 Classes shall be eligible to 

submit orders for entry into the book. 

The appropriate Procedure Committee 

may determine on an issue-by-issue 

basis that the following types of orders 

may also be eligible for entry into the 

electronic book: 

(i) Orders submitted by market 

participants, as defined in Rule 6.45B, 

in Hybrid 3.0 Classes; 

(ii) No Change. 

(iii) No Change. 

(2) No Change. 

(b)–(f) No Change. 

* * * Interpretations and Policies 

.01–.06 No Change. 

* * * * * 

Rule 8.3. Appointment of MarketMakers 

This Rule governs the appointment of 

Market-Makers other than Remote 

Market-Makers. Rule 8.4 governs the 

appointment of Remote Market-Makers. 

(a) No Change. 

(b) No Change. 

(c) Absent an exemption from the 

Exchange, an appointment of a MarketMaker confers the right to quote as 

below: 

(i)–(iii) No Change. 

(iv) Hybrid 3.0, Non-Hybrid and NonHybrid 2.0 Classes (for purposes of this 

rule, collectively ‘‘Non-Hybrid 

Classes’’). In addition to paragraphs (i) 

through (iii) above, and subject to 

paragraph (v) below, a Market-Maker 

can select as his appointment one or 

more Non-Hybrid Classes traded on the 

Exchange, which confers the right to 

trade in open outcry in an appropriate 

number of Non-Hybrid Classes as 

described below. Each Non-Hybrid 

Class will be assigned an ‘‘appointment 

cost’’, which are set forth below. 

(v)–(viii) No Change. 

* * * Interpretations and Policies 

.01 No Change. 

* * * * * 

Rule 8.7. Obligations of Market-Makers 

(a) No Change. 

(b) Appointment. With respect to each 

class of option contracts for which he 

holds an Appointment under Rule 8.3, 

a Market-Maker has a continuous 

obligation to engage, to a reasonable 

degree under the existing 

circumstances, in dealings for his own 

account when there exists, or it is 

reasonably anticipated that there will 

exist, a lack of price continuity, a 

temporary disparity between the supply 

of and demand for a particular option 

contract, or a temporary distortion of the 

price relationships between option 

contracts of the same class. Without 

limiting the foregoing, a Market-Maker 

is expected to perform the following 

activities in the course of maintaining a 

fair and orderly market: 

(i)–(iii) No Change. 

(iv) To price options contracts fairly 

by, among other things, bidding and/or 

offering in the following manner: 

(A) No Change. 

(B) Opening Rotations. The provisions 

of Rule 8.7(b)(iv)(A) shall apply during 

the applicable opening rotation 

employed in all classes.[Hybrid classes, 

Hybrid 2.0 classes, and Non-Hybrid and 

Non-Hybrid 2.0 classes.] 

(C) Option Classes Trading on the 

Hybrid Trading System. Except as 

provided in subparagraphs (i) and (ii) 

below, option classes trading on the 

Hybrid Trading System may be quoted 

electronically with a difference not to 

exceed $5 between the bid and offer 

regardless of the price of the bid. The 

provisions of Rule 8.7(b)(iv)(A) shall 

apply to any quotes given in open 

outcry in Hybrid classes. 

i.–ii. No Change. 

(c) No Change. 

(d) Market Making Obligations in 

Applicable Hybrid and Hybrid 2.0 

Classes 

The following obligations in this 

paragraph (d) are only applicable to 

Market-Makers trading classes on the 

CBOE Hybrid System and only in those 

Hybrid and Hybrid 2.0 classes. As such, 

this paragraph has no applicability to 

non-Hybrid classes. This paragraph is 

not applicable to Remote MarketMakers, who instead will be subject to 

the obligations imposed by Rule 8.7(e). 

Unless otherwise provided in this Rule, 

Market-Makers trading classes on the 

Hybrid System remain subject to all 

obligations imposed by CBOE Rule 8.7. 

To the extent another obligation 

contained elsewhere in Rule 8.7 is 

inconsistent with an obligation 

contained in paragraph (d) of Rule 8.7 

with respect to a class trading on 

Hybrid, this paragraph (d) shall govern 

trading in the Hybrid class. 

These requirements are applicable on 

a per class basis depending upon the 

percentage of volume a Market-Maker 

transacts electronically versus in open 

outcry. With respect to making this 

determination, the Exchange will 

monitor Market-Makers’ trading activity 

every calendar quarter to determine 

whether they exceed the thresholds 

established in paragraph (d)(i). If a 

Market-Maker exceeds the threshold 

established below, the obligations 

contained in (d)(ii) will be effective the 

next calendar quarter. 

For a period of ninety (90) days 

commencing immediately after a class 

begins trading on the Hybrid system, the 

provisions of paragraph (d)(i) shall 

govern trading in that class. 

(i) No Change. 

(ii) No Change. 

* * * Interpretations and Policies 

.01–.02 No Change. 

.03 For purposes of Rule 8.7, the 

following percentage requirements 

apply to Market-Maker trading activity 

for each quarter of a calendar year, 

except for unusual circumstances as 

determined by the appropriate Market 

Performance Committee. The 

appropriate Market Performance 

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Committee may assign a weighting 

factor based on volume to one or more 

classes or series of option contracts in 

connection with these requirements. 

A. No Change. 

B. In-Person Requirements for MarketMakers in non-Hybrid and Hybrid 3.0 

Classes: Respecting the manner in 

which Market-Maker transactions may 

be executed in non-Hybrid and Hybrid 

3.0 classes, a Market-Maker must 

execute in person, and not through the 

use of orders, at least 25 percent of his 

total transactions, provided, however, 

that for any calendar quarter in which 

a Market-Maker receives Market-Maker 

treatment for off-floor orders in 

accordance with Rule 8.1, in addition to 

satisfying the requirements of paragraph 

A of this Interpretation .03, the MarketMaker must execute in person, and not 

through the use of orders, at least 80 

percent of his total transactions. The offfloor orders for which a Market-Maker 

receives Market-Maker treatment shall 

be subject to the obligations of Rule 

8.7(a) and in general shall be effected for 

the purpose of hedging, reducing risk of, 

rebalancing or liquidating open 

positions of the Market-Maker. The 

appropriate Market Performance 

Committee may exempt one or more 

options classes from this calculation. 

.04–.13 No Change. 

* * * * * 

Rule 8.14. Index Hybrid Trading 

System Classes: Market-Maker 

Participants 

(a) Generally: The appropriate 

Exchange procedures committee (i) may 

authorize for trading on the CBOE 

Hybrid Trading System, [or] Hybrid 2.0 

Platform or Hybrid 3.0 Platform index 

options and options on ETFs trading on 

the Exchange prior to June 10, 2005 and 

(ii) if that authorization is granted, shall 

determine the eligible categories of 

Market-Maker participants for those 

options. For index options and options 

on ETFs trading for the first time on the 

Exchange on or subsequent to June 10, 

2005, the Exchange shall determine the 

appropriate trading platform ( e.g., 

CBOE Hybrid Trading System, Hybrid 

2.0 Platform, Hybrid 3.0 Platform) and 

the eligible categories of Market-Maker 

participants on that platform. The 

Exchange shall also have the authority 

to determine whether to change the 

trading platform on which those options 

trade and to change the eligible 

categories of Market-Maker participants 

for those options. The eligible categories 

of Market-Maker participants may 

include: 

Designated Primary Market-Makers 

(‘‘DPM’’): Market-Makers as defined in 

Rule 8.80 whose activities are governed 

by, among other rules, CBOE Rules 

8.80–8.91. 

Lead Market-Makers (‘‘LMM’’): 

Market-Makers as defined in Rule 8.15A 

whose activities are governed by, among 

other rules, CBOE Rule 8.15A. 

Electronic DPMs (‘‘e-DPM’’): MarketMakers as defined in Rule 8.92 whose 

activities are governed by, among other 

rules, CBOE Rules 8.92–8.94. 

Market-Makers (‘‘MM’’): MarketMakers as defined in Rule 8.1 whose 

activities are governed by, among other 

rules, CBOE Rules 8.1–8.11. 

(b) Each class designated for trading 

on Hybrid, [or] the Hybrid 2.0 Platform 

or the Hybrid 3.0 Platform shall have an 

assigned DPM or LMM. The Exchange 

or the appropriate Exchange committee, 

as applicable pursuant to the authority 

granted under CBOE Rule 8.14(a) to 

determine eligible categories of MarketMaker participants, may determine to 

designate classes for trading on Hybrid 

or the Hybrid 2.0 Platform without a 

DPM or LMM provided the following 

conditions are satisfied: 

1.–4. No Change. 

* * * * * 

Rule 8.15. Lead Market-Makers and 

Supplemental Market-Makers in NonHybrid and Hybrid 3.0 Classes 

No Change. 

* * * * * 

Rule 8.85. DPM Obligations 

(a) No Change. 

(b) No Change. 

(c) No Change. 

(d) No Change. 

(e) Requirement to Own Membership. 

Each DPM organization shall own one 

Exchange membership, and own or 

lease such additional Exchange 

memberships as may be necessary based 

on the aggregate ‘‘appointment cost’’ for 

the classes allocated to the DPM 

organization. Each membership owned 

or leased by the DPM organization has 

an appointment credit of 1.0. The 

appointment costs for the classes 

allocated to the DPM organization are: 

(i) No Change. 

(ii) No Change. 

(iii) For non-Hybrid Classes, the 

appointment costs as set forth and 

defined in paragraph (c)(iv) of Rule 8.3. 

For example, if the DPM organization 

has been allocated such number of 

option classes that its aggregate 

appointment cost is 1.6, the DPM 

organization would be required to own 

at least one Exchange membership, and 

own or lease one additional Exchange 

membership. The Exchange will 

rebalance the ‘‘tiers’’ set forth in Rule 

8.3(c)(i), excluding the ‘‘AA’’ and ‘‘A+’’ 

tiers, once each calendar quarter, which 

may result in additions or deletions to 

their composition. When a class changes 

‘‘tiers’’ it will be assigned the 

‘‘appointment cost’’ of that tier. Upon 

rebalancing, each DPM organization will 

be required to own or lease the 

appropriate number of Exchange 

memberships reflecting the revised 

‘‘appointment costs’’ of the classes that 

have been allocated to it. Additionally, 

a DPM organization is required to own 

or lease the appropriate number of 

Exchange memberships at the time a 

new option class allocated to it pursuant 

to Rule 8.95 begins trading. 

An Exchange membership shall 

include a transferable regular 

membership or a Chicago Board of 

Trade full membership that has 

effectively been exercised pursuant to 

Article Fifth(b) of the Certificate of 

Incorporation. The same Exchange 

membership(s) may not be used to 

satisfy this ownership requirement for 

different DPM organizations. In the 

event the member organization 

approved as the DPM organization is 

also approved to act as an RMM and/or 

e-DPM, and has excess membership 

capacity above the aggregate 

appointment cost for the classes 

allocated to it as the DPM, the member 

organization may utilize the excess 

membership capacity to quote 

electronically in an appropriate number 

of Hybrid 2.0 Classes in the capacity of 

a RMM and not trade in open outcry, or 

to quote electronically in the Hybrid 2.0 

Classes in which it is appointed an eDPM. For example, if the DPM 

organization has been allocated such 

number of option classes that its 

aggregate appointment cost is 1.6, the 

member organization could request an 

appointment as an RMM in any 

combination of Hybrid 2.0 Classes 

whose aggregate ‘‘appointment cost’’ 

does not exceed .40. The member 

organization will not function as a DPM 

in any of these additional classes. In the 

event the member organization utilizes 

any excess membership capacity to 

quote electronically in some additional 

Hybrid 2.0 Classes as an RMM or eDPM, it must comply with the 

provisions of Rules 8.4(c) and Rule 

8.93(vii), respectively. 

* * * Interpretations and Policies: 

No Change. 

* * * * * 

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 

Exchange included statements 

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4 See Securities Exchange Act Release No. 47959 

(May 30, 2003), 68 FR 34441 (June 9, 2003). 

5 Currently, the ‘‘non-Hybrid’’ classes consist of 

options on the S&P 100 Index (OEX), options on the 

S&P 500 (SPX), and options on the Morgan Stanley 

Retail Index (MVR). Telephone conference between 

Greg Hoogasian, Assistant Secretary, CBOE, and 

Geoffrey Pemble, Special Counsel, Division of 

Market Regulation, Commission, on April 23, 2007. 

6 By comparison, this is similar to CBOE’s 

existing non-Hybrid platform. 

7 See proposed changes to CBOE Rule 1.1(aaa). 

8 Currently, the non-Hybrid platform allows for 

the use of an Exchange-sponsored autoquote 

system. However, this functionality will not be 

available for Hybrid 3.0. 

9 Similar to the existing functionality for manual 

quotes in non-Hybrid classes, in Hybrid 3.0 the 

Exchange’s disseminated OPRA quote will not 

distinguish between electronic and manual quotes 

but members of the trading crowd will be able to 

distinguish between electronic and manual quotes. 

10 See proposed changes to CBOE Rule 6.43(b). 

11 See proposed changes to CBOE Rule 7.4. 12 See CBOE Rule 7.4(a)(1). 13 Id. 

14 Currently, for Hybrid and Hybrid 2.0 classes, 

CBOE Rule 7.4(a)(1) permits market participants as 

defined in Rule 6.45A or 6.45B to be eligible to 

submit orders for entry into the electronic book 

without the appropriate Procedure Committee’s 

approval. 

15 See CBOE Rule 6.8.01. 

16 See CBOE Rule 6.13. 

17 See proposed changes to CBOE Rule 6.43(b). 

18 By comparison, in CBOE’s non-Hybrid Classes, 

orders may be eligible for automatic execution on 

the Exchange’s Retail Automatic Execution System 

(‘‘RAES’’) (See CBOE Rules 6.8 and 24.17). 

However, the number of trades that occur on RAES 

is minimal (approximately 1⁄10th of 1% of all 

volume occurs on RAES). 

concerning the purpose of, and basis for, 

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 

I. Purpose 

In 2003, CBOE introduced the Hybrid 

Trading System (‘‘Hybrid’’ or ‘‘Hybrid 

System’’), an electronic trading platform 

integrated with CBOE’s floor-based 

open-outcry auction market.4 Under 

CBOE’s existing rules, the Hybrid 

System currently supports two trading 

platforms: (i) The original Hybrid 

Trading System, which is a trading 

platform that allows individual MarketMakers to submit electronic quotes in 

their appointed classes; and (ii) Hybrid 

2.0, which is an enhanced trading 

platform that allows remote quoting by 

authorized categories of Exchange 

members. These two platforms operate 

on a technology system that is referred 

to as the CBOEdirect trade engine. In 

addition to these two platforms, prior to 

2003 and through the present, CBOE has 

also utilized its TPF mainframe system 

to support trading in its ‘‘non-Hybrid’’ 

classes.5 Therefore, options classes 

currently may be authorized by the 

Exchange to trade on the non-Hybrid, 

the Hybrid Trading System or Hybrid 

2.0 platforms. 

CBOE has determined to migrate the 

trading programs operating on its TPF 

mainframe system over to the 

CBOEdirect trade engine. To 

accommodate this changeover, this 

filing proposes to amend CBOE’s Hybrid 

rules to introduce a third trading 

platform into its existing CBOEdirect 

system, called ‘‘Hybrid 3.0.’’ Hybrid 3.0 

will incorporate certain aspects of both 

the Hybrid Trading System and nonHybrid platforms. Current CBOE hybrid 

rules will apply to the proposed Hybrid 

3.0 except for a few distinctions noted 

below. This in turn will allow CBOE to 

provide a more streamlined, simplified 

and enhanced trading functionality for 

all options products trading on CBOE. 

Hybrid 3.0 will consist of a single set 

of automatically updated market 

quotations that represents the entire 

group of Market-Markers in the trading 

crowd that are assigned to an option 

class.6 Consistent with this philosophy, 

Hybrid 3.0 will allow a single electronic 

quote to be submitted in each option 

series (collectively ‘‘Hybrid 3.0 crowd 

quote’’).7 The single quote in each 

option series will be generated from 

either an appointed Designated Primary 

Market Maker (‘‘DPM’’) or Lead Market 

Maker (‘‘LMM’’). Thus, as with the 

existing non-Hybrid platform where 

there may be an appointed DPM or 

LMM that generates an automated quote 

for the trading crowd,8 in the proposed 

Hybrid 3.0 platform, the quote that the 

DPM or LMM electronically 

disseminates in each option series will 

be the quote that represents the trading 

crowd that is assigned to that option 

series’ class. 

In Hybrid 3.0, members of the trading 

crowd will be able to affect changes to 

the Hybrid 3.0 crowd quote through the 

submission of manual quotes. The 

manual quotes disseminated in Hybrid 

3.0 Classes will be separate and 

additional to the Hybrid 3.0 crowd 

quote. Similar to automatic quotes and 

manual quotes in existing CBOE nonHybrid classes, in Hybrid 3.0 Classes, 

members of the trading crowd may 

verbalize manual quotes to be input into 

Exchange systems by quote reporters for 

dissemination to the Options Price 

Reporting Authority (‘‘OPRA’’).9 In 

addition, this filing proposes that for 

Hybrid 3.0 classes, if market 

participants as defined in Rule 6.45B are 

eligible to submit orders for entry into 

the electronic book pursuant to 

proposed CBOE Rule 7.4(a)(1)(i), then 

the appropriate Procedure Committee 

may determine to disable manual 

quotes.10 Whether orders are entered 

into the electronic book or whether 

manual quoting is allowed, access to 

Hybrid 3.0 classes will be maintained at 

all times. 

CBOE Rule 7.4, which pertains to the 

obligations of orders, will be applied to 

Hybrid 3.0 similar to the way it applies 

to CBOE’s existing Hybrid Trading 

System, with one distinction as noted 

below.11 Consistent with current 

practices as applied to Hybrid, Hybrid 

3.0 will allow customer orders to rest in 

the electronic book.12 In addition, this 

filing proposes to permit Hybrid 3.0 to 

be configured to allow other origin order 

types into the electronic book with 

certain committee approval. 

Specifically, CBOE Rule 7.4 would 

allow the appropriate Procedure 

Committee to determine, on a class by 

class basis, to allow certain types of 

orders (other than customer orders) into 

the electronic book.13 This filing 

proposes to allow the appropriate 

Procedure Committee to make such a 

determination in Hybrid 3.0, with one 

distinction, in that the appropriate 

Procedure Committee, on a class by 

class basis, may allow market 

participants as defined in Rule 6.45B to 

be eligible to submit orders for entry 

into the electronic book.14 This is 

consistent with current practices in 

CBOE’s non-Hybrid Classes.15

On the proposed Hybrid 3.0 platform, 

automatic execution against quotes will 

not be allowed.16 However, if the 

electronic book price matches a manual 

quote, then automatic execution will be 

permissible against public customer 

orders in the electronic book (for 

example, if the electronic book is a 

$1.20 bid and the manual quote is at a 

$1.20 bid, then the system will allow for 

automatic execution against the $1.20 

electronic book bid but not the $1.20 

quote).17

For Hybrid 3.0 Classes, all eligible 

orders will receive automatic execution 

against public customer orders in the 

electronic book. The remaining balance 

of the eligible order, if any, may be (i) 

represented in the electronic book 

provided such order is eligible for book 

entry pursuant to Rule 7.4 or (ii) if the 

order is not eligible for book entry, it 

will route to PAR, BART, or to the order 

entry firm’s booth printer.18 Even if an 

order is eligible for book entry, the order 

entry firm would have the discretion to 

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Federal Register / Vol. 72, No. 85 / Thursday, May 3, 2007 / Notices 24645 

19 See proposed changes to CBOE Rule 

6.13(b)(i)(C)(i). By comparison, this is consistent 

with the appropriate Procedure Committee’s 

determination to permit broker-dealer orders to be 

automatically executed through RAES in CBOE’s 

non-Hybrid Classes (See CBOE Rule 6.8.01). 

20 See CBOE Rule 6.45B(a)(ii)(A)(1). 

21 See proposed changes to CBOE Rule 6.45B(d). 

22 By comparison, the current quote lock timer for 

Hybrid and Hybrid 2.0 classes may not exceed one 

second. (See CBOE Rule 6.45B(d)(i)(C)). 

23 See proposed changes to CBOE Rule 6.45B.01 

and 6.45B.02. 

24 By comparison, the current exposure period for 

Hybrid and Hybrid 2.0 classes is at least three 

seconds. (See CBOE Rule 6.45B.01 and 6.45B.02). 

25 Opening rotations include all openings and reopenings in Hybrid 3.0 option classes. 

26 By comparison, this is consistent with the 

opening quote requirements in CBOE’s existing 

Hybrid classes that utilize CBOE’s Hybrid Opening 

System (‘‘HOSS’’) (See CBOE Rule 6.2B). 

27 See proposed Interpretation .01 to CBOE Rule 

6.2B. By comparison, in non-Hybrid option classes 

(such as options on the S&P 500 (‘‘SPX’’) and 

options on the S&P 100 (‘‘OEX’’)), Market-Makers 

and broker-dealers are not able to directly 

participate in the opening series that utilize ROS. 

For example, Market-Makers who wish to 

participate on ROS in the opening series in nonHybrid option classes may submit orders through 

the LMM at least ten minutes prior to the opening 

of trading pursuant to CBOE Rules 6.2A and 24.13. 

28 See the ‘‘Modified HOSS Opening Procedures’’ 

in proposed Interpretation .01 to CBOE Rule 6.2B. 

By comparison, non-Hybrid option classes that 

utilize RAES and ROS have special procedures for 

purposes of settlement in the volatility indexes 

called ‘‘Modified ROS Opening Procedures’’ 

pursuant to Interpretation .03 to CBOE Rule 6.2A. 

29 See CBOE Rule 6.53C. 

have the remaining balance of the 

eligible order route to PAR, BART, or to 

the order entry firm’s booth printer. 

Consistent with existing practices in 

CBOE’s non-Hybrid Classes, CBOE will 

apply similar firm quote surveillance 

procedures in Hybrid 3.0. 

Hybrid 3.0 proposes to permit 

automatic execution by non-brokerdealer public customers, and, as 

determined by the appropriate 

Procedure Committee, on a class-byclass basis, broker-dealers that are not 

Market-Makers or Specialists on an 

exchange who are exempt from the 

provisions of Regulation T of the 

Federal Reserve Board pursuant to 

Section 7(c)(2) of the Act (‘‘non-MarketMaker or non-Specialists brokerdealers’’) may be eligible for automatic 

execution.19

CBOE Rule 6.45B, which relates to the 

priority and allocation of trades, will 

also be applied to Hybrid 3.0 similar to 

the way it is applied to CBOE’s existing 

Hybrid Trading System as described in 

various examples below. 

In Hybrid 3.0, eligible public 

customer orders in the electronic book 

may have priority to trade against 

marketable orders in Hybrid 3.0 classes 

and multiple customer orders in the 

electronic book at the same price will be 

ranked based on time priority pursuant 

to the priority methods set forth in Rule 

6.45B.20

Unlike CBOE’s non-Hybrid classes, 

Hybrid 3.0 proposes to allow the 

interaction of certain market 

participants’ quotes and orders with the 

electronic book. Specifically, Hybrid 3.0 

proposes to allow (i) Each Market-Maker 

in the trading crowd and (ii) all floor 

brokers in the trading crowd 

(collectively referred to as ‘‘in-crowd 

market participants’’ or ‘‘ICMPs’’) to 

trade against the electronic book 

pursuant to CBOE Rule 6.45B(c). As 

with CBOE’s existing Hybrid platforms 

and pursuant to CBOE Rule 6.45B(c), if 

only one ICMP submits an electronic 

order or quote to trade with an order in 

the electronic book on the proposed 

Hybrid 3.0, then that ICMP will 

automatically execute against the order 

in the electronic book and shall be 

entitled to receive an allocation of the 

order in the electronic book up to the 

size of the market participant’s order or 

quote. For instances when there is more 

than one ICMP, Hybrid 3.0 proposes to 

allow the use of a quote trigger (joining 

period) which may be set by the 

appropriate Procedure Committee, on a 

class by class basis, pursuant to CBOE 

Rule 6.45B(c). Under the quote trigger 

process, the first ICMP to interact with 

the electronic book order starts a 

counting period lasting N-seconds 

whereby each ICMP that submits an 

order within that ‘‘N-second period’’ 

becomes part of the ‘‘N-second group’’ 

and is entitled to share in the allocation 

of that order via the formula contained 

in CBOE Rule 6.45B(c). 

CBOE Rule 6.45B(d) currently governs 

the interaction of quotes when they are 

locked (e.g., $1.00 bid–1.00 offer). 

Specifically, CBOE Rule 6.45B(d) 

provides that when the quotes of two 

Market-Makers interact (i.e., ‘‘quote 

lock’’), either party has one second 

during which it may move its quote 

without obligation to trade with the 

other party. If, however, the quotes 

remain locked at the conclusion of onesecond, the quotes trade in full against 

each other. For quote locks in Hybrid 

3.0 classes, this filing proposes the 

length of the counting period to be set 

by the appropriate Procedure Committee 

pursuant to CBOE Rule 6.45B(d) 

provided that the period shall not 

exceed ten seconds.21 The proposed ten 

second threshold is intended to provide 

additional flexibility for Market-Makers 

to become acclimated with Hybrid 3.0.22

Regarding the time periods pertaining 

to order exposure in ‘‘Principal 

Transactions’’ in Interpretation .01 of 

Rule 6.45B and ‘‘Solicitation Orders’’ in 

Interpretation .02 of Rule 6.45B, this 

filing proposes a minimum exposure 

time for Hybrid 3.0 classes, on a classby-class basis, to be at least three 

seconds but shall not exceed thirty 

seconds.23 Again, this extended time 

frame for exposure will provide 

additional flexibility as ICMPs become 

more acclimated with Hybrid 3.0.24

Since Hybrid 3.0 proposes a single 

quoter environment, only the DPM or 

LMM responsible for generating the 

trading crowd’s quote will be required 

to enter quotes as part of the opening 

rotations 25 in Hybrid 3.0 option classes. 

The DPM or LMM must enter opening 

quotes in opening rotations that comply 

with the legal quote width requirements 

of Rule 8.7(b)(iv), and if there is not a 

quote present in a series that complies 

with the legal quote width requirements 

of Rule 8.7(b)(iv), then that series will 

not open.26 Additionally, Hybrid 3.0 

will allow public customer, brokerdealer, Exchange Market-Maker, away 

Marker-Maker and Specialist 

participation in the opening. Since 

Hybrid 3.0 is a single quoter 

environment, these participants will not 

be permitted to enter opening quotes in 

opening rotations but will be permitted 

to directly enter opening orders in 

opening rotations in Hybrid 3.0 

classes.27

Similar to CBOE’s non-Hybrid classes, 

Hybrid 3.0 also proposes to allow 

special ‘‘modified’’ opening procedures 

for settlement in options on the 

Volatility Indexes.28 Similar to what is 

utilized today in CBOE’s non-Hybrid 

classes, the proposed Modified HOSS 

Opening Procedures in Hybrid 3.0 will 

provide a more accurate determination 

of these settlement values and will 

assure that these values more closely 

converge with the prices of the index 

options from which they are derived 

just as they do for settlement in the 

Volatility Indexes. This in turn will 

continue to make it easier for all market 

participants to participate fully in the 

establishment of the settlement values 

of Volatility Indexes in an efficient and 

automated manner. 

Consistent with CBOE’s current 

Hybrid platforms, this filing also 

proposes to allow the appropriate 

Exchange committee to determine 

whether complex orders entered in 

Hybrid 3.0 option classes are eligible for 

entry into CBOE’s Complex Order 

Book.29

Overall, this filing proposes to 

incorporate Hybrid 3.0 into CBOE’s 

existing Hybrid rules, since Hybrid 3.0 

is being introduced as an additional 

platform to CBOE’s current Hybrid 

Trading System. By establishing Hybrid 

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30 15 U.S.C. 78f(b). 

31 15 U.S.C. 78f(b)(5). 32 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). 

4 17 CFR 240.19b–4(f)(6). 

3.0, CBOE will then be able to migrate 

all of its trading platforms to the more 

advanced CBOE direct technology 

platform. For these reasons, we are 

proposing to define all references to 

‘‘Hybrid,’’ ‘‘Hybrid System,’’ and 

‘‘Hybrid Trading System’’ in CBOE’s 

rules to mean all CBOE hybrid 

platforms, including Hybrid 3.0, unless 

otherwise provided by a specific CBOE 

rule. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with Section 

6(b) of the Securities Exchange Act of 

1934 (the ‘‘Act’’) 30 in general and 

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

of the Act 31 in particular in that it 

should promote just and equitable 

principles of trade, serve to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and 

protect investors and the public interest. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

This proposed rule change does not 

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, as amended, is consistent with 

the Act. Comments may be submitted by 

any of the following methods: 

Electronic Comments 

<bullet≤ Use the Commission’s 

Internet comment form (http:// 

www.sec.gov/rules/sro.shtml); or 

<bullet≤ Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–CBOE–2006–101 on the 

subject line. 

Paper Comments 

<bullet≤ Send paper comments in 

triplicate to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–CBOE–2006–101. 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. Copies of such filing also will be 

available for inspection and copying at 

the principal offices 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–CBOE–2006–101 and 

should be submitted on or before May 

24, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.32

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–8395 Filed 5–2–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55673; File No. SR–CBOE– 

2007–38] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to the Extension 

of a Pilot Program That Allows for the 

Listing of Option Series at $1 Strike 

Price Intervals 

April 26, 2007. 

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

Securities Exchange Act of 1934 (‘‘Act’’) 

1 and Rule 19b–4 thereunder,2 notice is 

hereby given that on April 24, 2007, the 

Chicago Board Options Exchange, 

Incorporated (‘‘CBOE’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been substantially prepared by 

CBOE. The Exchange has filed the 

proposal as a ‘‘non-controversial’’ rule 

change pursuant to Section 19(b)(3)(A) 

of the Act 3 and Rule 19b–4(f)(6) 

thereunder,4 which renders it effective 

upon filing with the Commission. 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 extend the 

pilot period for the $1 strike price pilot 

program (‘‘Pilot Program’’) for an 

additional year until June 5, 2008. The 

text of the proposed rule change is 

available at CBOE, the Commission’s 

Public Reference Room, and http:// 

www.cboe.org/legal. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

CBOE 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. CBOE has prepared 

summaries, set forth in Sections A, B, 

and C below, of the most significant 

aspects of such statements. 

mmaher on DSK3CLS3C1PROD with $$_JOB