63272 Federal Register / Vol. 65, No. 205 / Monday, October 23, 2000 / Notices

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

2 17 C.F.R. 240.19b–4.

3Securities Exchange Act Release No. 42168

(November 22, 1999), 64 FR 66952 (November 30,

1999) (notice of rule proposal filing and accelerated

approval of order establishing Pilot) (‘‘Original

Notice’’); Securities Exchange Act Release No.

42615 (April 3, 2000), 65 FR 19401 (April 11, 2000)

(notice of rule proposal filing and accelerated

approval of order granting extension of Pilot) (‘‘First

Extension Notice’’).

4The Pilot was due to expire on August 21, 2000.

5First Extension Notice at 65 FR 19403.

6 Id.

7See SR–CBOE–00–21. The proposed rule change

was published for public comment in Securities

Exchange Act Release No. 34–43430 (October 11,

2000).

8See SR–CBOE–00–22.

9 15 U.S.C. 78f(b)(5).

For the Commission, by the Division of

Investment Management, under delegated

authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 00–27132 Filed 10–20–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43448; File No. SR–CBOE–

00–35]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the Chicago Board

Options Exchange, Inc. Relating to

Manual Handling of RAES Orders in

Certain Limited Situations

October 17, 2000.

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 August 9,

2000, 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 prepared

by the Exchange. The Commission is

publishing this notice to solicit

comments on the proposed rule change

from interested persons and to approve

the extension of a pilot program through

February 21, 2001.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The CBOE proposes to amend

Exchange Rule 6.8(c) in order to extend,

for an additional six-month period, the

pilot program that currently provides for

certain orders to be rejected from RAES

for manual handling under certain

limited conditions (‘‘Pilot’’). The text of

the proposed rule change is available at

the CBOE and 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

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. The CBOE has

prepared summaries, set forth in

sections A, B, and C below of the most

significant aspects of such statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

The purpose of the proposed rule

change is to extend the Pilot for an

additional six-month period. The Pilot

provides that orders be rejected from

RAES in the limited situation when an

Autoquote-generated bid or offer for a

particular series of options has become

locked or crossed with the Exchange’s

best bid or offer as established by a

booked order.3 The Exchange is

requesting an extension of the Pilot 4 so

that RAES kick-out procedures may

continue in effect while the Commission

is considering the approval of two

proposed rule changes. The Exchange

represents that these proposed rule

changes, currently pending before the

Commission, were developed to obviate

the need for RAES kick-outs under the

circumstances covered by the Pilot.

In the first extension of the Pilot,5 the

CBOE stated that the Exchange would

continue to seek other alternatives to

having RAES orders rejected in the

limited situation where quotations

generated by the Autoquote system

become locked or crossed with a booked

order.6 During the 6-month period of the

first extension of the Pilot, CBOE

developed two systems changes which

the Exchange represents would, if

implemented, virtually eliminate RAES

kick-outs under the Pilot. The systems

changes are the subject of the two

proposed rule changes currently

pending at the Commission.

The first systems change is an

enhancement to the Automated Book

Priority System (‘‘ABP’’), called ABP

Split Price, that would allow incoming

RAES orders utilizing ABP to be

executed against the book price up to

the applicable book volume, or a larger

amount as predetermined by the

appropriate Floor Procedure Committee,

for the subject option class.7 The

balance of these orders would trade at

the next best available price, whether:

(1) Against another booked order; or (2)

against market-makers logged onto

RAES. If traded against market makers,

the balance of such orders would trade

at the best market-maker quote, whether

generated by Autoquote or verbalized by

a market maker.

The second systems change for which

the CBOE has sought approval is called

Autoquote Triggered EBook Execution

(‘‘Trigger’’).8 Trigger is an enhancement

to the electronic limit order book

(‘‘EBook’’) that would allow certain

booked orders to be automatically

executed up to the RAES contract limit

applicable to the particular series of

options. Trigger would become

operative in the limited situation where

the bid or offer generated by Autoquote

(or any Exchange-approved proprietary

quote generation system) for a particular

options series locks or crosses the

Exchange’s best bid or offer for that

series as established by a booked order.

By providing for automatic execution of

these booked orders, Trigger would

eliminate the vast majority of RAES

kick-outs which result when firms

seeking out pricing anomalies detect a

skewed quote and submit a RAES

eligible order or orders to trade at the

book price.

2. Statutory Basis

The proposed rule change is

consistent with and furthers the

objectives of Section 6(b)(5) of the Act 9

in that it is designed to remove

impediments to a free and open market

and to protect investors and the public

interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The CBOE does not believe that the

proposed rule change will impose a

burden on competition that is not

necessary or appropriate in furtherance

of 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. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposed rule

Federal Register / Vol. 65, No. 205 / Monday, October 23, 2000 / Notices 63273

10 15 U.S.C. 78f.

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

12Original Notice at 63 FR 66952.

13 15 U.S.C. 78s(b)(2).

14 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3 17 CFR 240.19b–4(f)(6).

4The Exchange has represented that the proposed

rule change: (i) Will not significantly affect the

protection of investors or the public interest; (ii)

will not impose any significant burden on

competition; and (iii) will not become operative for

30 days after the date of this filing, unless otherwise

accelerated by the Commission. The Exchange also

has provided at least five business days notice to

the Commission of its intent to file this proposed

rule change, as required by Rule 19b–4(f)(6) under

the Act. Id.

change is consistent with the Act.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 20549–0609. 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 will also be

available for inspection and copying at

the principal office of CBOE. All

submissions should refer to File No.

SR–CBOE–00–35 and should be

submitted by November 13, 2000.

IV. Commission’s Findings and Order

Granting Accelerated Approval of

Proposed Rule Change

After careful review, the Commission

finds that the proposal is consistent

with Section 6 of the Act.10 In

particular, the Commission finds the

proposal consistent with Section 6(b)(5)

of the Act,11 which requires, among

other things, that the rules of an

exchange be designed to promote just

and equitable principles of trade and to

protect investors and the public interest.

The Commission finds that it is in the

public interest to encourage the

Exchange to expand its implementation

of ABP. The broader the implementation

of ABP, the more likely customer limit

orders will, where appropriate, be given

priority over other interest on the

Exchange. On the other hand,

implementation of ABP may also expose

market makers to an unfair risk of

financial loss where the market in an

underlying stock moves significantly

and quickly in a direction that makes a

price established by a booked order

substantially better than the price

calculated by CBOE’s Autoquote

formula.12 The Commission approves

this extension of the Pilot in order to

permit the mitigation of these risks

while encouraging the Exchange to more

broadly implement ABP. At the same

time, this extension will provide the

Commission an opportunity to evaluate,

while the Pilot is still in effect, the

Trigger and ABP Split price proposals

designed to reduce the number of RAES

rejects pursuant to the Pilot.

Finally, the Commission plans to

evaluate the continued impact of the

Pilot on ABP executions, as well as the

impact of any related rule proposals

approved and implemented during the

Pilot, based on statistical data provided

by the Exchange. Accordingly, the

Commission finds good cause for

approving the proposed rule change

prior to the thirtieth day after the date

of publication of notice thereof in the

Federal Register.

It is therefore ordered, pursuant to

section 19(b)(2) of the Act,13 that the

proposed rule change (SR–CBOE–00–

35) is hereby approved through

February 21, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–27133 Filed 10–20–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43444; File No. SR–CHX–

00–32]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of a Proposed Rule Change by the

Chicago Stock Exchange, Incorporated

Relating to Partial Automatic

Execution of Orders for NASDAQ/NM

Issues

October 13, 2000.

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

Securities Exchange Act of 1934

(‘‘Act’’),1 and Rule 19b–4

thereunder,2 notice hereby is given

that on October 10, 2000, the Chicago

Stock Exchange, Incorporated (‘‘CHX’’

or ‘‘Exchange’’) filed with the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’) the proposed rule

change as described in Items I, II and III

below, which Items have been prepared

by the Exchange. The Exchange has

designated the proposed rule change as

constituting a ‘‘non-controversial’’ rule

change under paragraph (f)(6) of Rule

19b–4 under the Act,3 which renders

the proposal effective upon receipt of

this filing by the Commission.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 the

CHX rule governing automatic

execution of orders for NASDAQ/NM

issues. Specifically, the Exchange

proposes to amend CHX Article XX,

Rule 37(b)(7)(ii), to provide ordersending firms with the option to select

partial automatic execution of orders

that are larger than the specialist’s autoexecution threshold in instances where

a specialist’s quote is away from the

national best bid or offer (‘‘NBBO’’). The

text of the proposed rule change is

available at the Commission or the CHX.

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

concerning the purpose of and basis for

the proposed rule change and discussed

any comments it received regarding the

proposed rule change. The text of these

statements may be examined at the

places specified in Item IV below. The

Exchange prepared summaries, set forth

in Section A, B and C below, of the most

significant aspects of such statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

The Exchange proposes to amend the

CHX rules governing the execution of

NASDAQ/NM Securities. Specifically,

the Exchange proposes to amend CHX

Article XX, Rule 37(b)(7)(ii) to give

order-sending firms the option to

receive partial automatic executions if

their orders are larger than the

specialist’s auto-execution threshold

when the specialist’s quote is away from

the NBBO, or have these orders

manually executed in their entirety as

they are handled under the current rule.

The proposed amendments are intended

to bring the Exchange’s rules in line

with the practices that currently exist in

other markets with respect to the trading

of NASDAQ/NM Securities.