[Federal Register Volume 65, Number 238 (Monday, December 11, 2000)]
[Notices]
[Pages 77403-77404]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-31383]



[[Page 77403]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43646; File No. SR-CBOE-00-53]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by Chicago Board Options Exchange, Inc. Relating to Permanent 
Approval of Live Ammo to RAES

November 30, 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 November 8, 2000, the Chicago Board Options Exchange, Inc. (``CBOE'' 
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 CBOE. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to adopt on a permanent basis the system that 
allows an Order Book Official (``OBO'') or Designated Primary Market 
Maker (``DPM'') to designate certain booked orders to be electronically 
executed against market markers standing in the crowd. The text of the 
proposed rule change is available 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, 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
On February 2, 2000, the Commission approved, on a pilot basis, a 
systems change that allows an OBO or a DPM to reroute orders on the 
electronic book screen that displays market orders and limit orders 
that improve the market (``Live Ammo'') to the Retail Automatic 
Execution System (``RAES'').\3\ On October 31, 2000, the pilot was 
extended through December 15, 2000.\4\
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    \3\ Securities Exchange Act Release No. 42379, 65 FR 6665 
(February 10, 2000) (approving SR-CBOE-98-27 on a pilot basis until 
October 31, 2000) (``Pilot Order'').
    \4\ Securities Exchange Act Release No. 43499, 65 FR 67023 
(November 8, 2000).
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    The Exchange now proposes to make permanent the pilot program with 
respect to the processing of Live Ammo orders.\5\ The Commission 
recently approved a system enhancement to the Exchange's Order Routing 
System (``ORS''), which provided for the automatic rerouting of cancel/
replace orders.\6\ The Exchange believes that this systems change 
addresses the Commission's expectation that the Exchange develop a 
system enhancement to ensure that RAES-eligible orders will be routed 
directly to RAES without the interim step of first appearing on the 
Live Ammo screen.\7\ The Exchange expects that the enhancement to ORS 
will be implemented in December 2000.
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    \5\ The Exchange rule pertaining to the processing of Live Ammo 
orders is CBOE Rule 7.4(g).
    \6\ Securities Exchange Act Release No. 43185 (August 21, 2000), 
65 FR 51884 (August 25, 2000).
    \7\ See Pilot Order, note 3 supra.
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    Although the number of Live Ammo orders should be substantially 
reduced by the planned enhancement to ORS, there occasionally may still 
be circumstances when the OBO or DPM may have reason to reroute Live 
Ammo orders manually. For example, in the event that a Floor Broker 
becomes so busy during heavy trading conditions that he is unable to 
represent and execute orders in a timely manner, the Floor Broker can 
electronically book all non-market, non-contingency orders he holds by 
hitting the ``book all'' button on his PAR workstation. Those orders 
that are marketable will route to the Live Ammo screen while those that 
are not marketable will stay in the book. Those orders that route to 
the Live Ammo screen will still require an OBO or DPM to manually 
reroute the orders to RAES. Therefore, the Exchange proposes that the 
Live Ammo to RAES functionality be approved on a permanent basis to 
deal with such limited circumstances.
2. Basis
    The Exchange believes that because the Live Ammo to RAES processing 
system has provided for the more timely execution of marketable orders, 
the proposed rule change is consistent with Section 6(b) of the Act,\8\ 
in general, and furthers the objectives of Section 6(b)(5),\9\ in 
particular, because it is designed to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
and processing information with respect to, and facilitating 
transactions in securities, and 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.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE does not believe that the proposed rule change will impose any 
burden on competition 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. 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 reason for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (a) By order approve such proposed rule change, or
    (b) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested person are invited to submit written date, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions

[[Page 77404]]

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-00-53 and should be 
submitted by January 2, 2001.

    For the Commission, by the Division of Market Regulations, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-31383 Filed 12-8-00; 8:45 am]
BILLING CODE 8010-01-M