[Federal Register Volume 70, Number 181 (Tuesday, September 20, 2005)]
[Notices]
[Pages 55192-55193]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-18623]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52419; File No. SR-CBOE-2005-51]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Approving a Proposed Rule Change and Amendment No. 
1 Thereto To Amend the Exchange's Trade-Through and Locked Markets 
Rules

September 13, 2005.
    On June 30, 2005, the Chicago Board Options Exchange, Incorporated 
(``CBOE''), filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ to implement Amendment No. 15 to the Plan for the 
Purpose of Creating and Operating an Intermarket Option Linkage \3\ by

[[Page 55193]]

amending CBOE Rules 6.80 and 6.84 to add a ``trade and ship'' exception 
to the definition of ``Trade-Through'' and add a ``book and ship'' 
exception to the provision relating to locked markets, respectively. On 
July 26, 2005, the CBOE filed Amendment No. 1 to the proposed rule 
change.\4\ The proposed rule change, as amended, was published for 
comment in the Federal Register on August 5, 2005.\5\ The Commission 
received no comments on the proposal. This order approves the proposed 
rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On July 28, 2000, the Commission approved a national market 
system plan for the purpose of creating and operating an intermarket 
option linkage proposed by the American Stock Exchange LLC, the 
CBOE, and the International Securities Exchange, Inc. See Securities 
Exchange Act Release No. 43086 (July 28, 2000), 65 FR 48023 (August 
4, 2000) (``Linkage Plan''). Subsequently, upon separate requests by 
the Philadelphia Stock Exchange, Inc., the Pacific Exchange, Inc., 
and the Boston Stock Exchange, Inc., the Commission issued orders to 
permit these exchanges to participate in the Linkage Plan. See 
Securities Exchange Act Release Nos. 43573 (November 16, 2000), 65 
FR 70851 (November 28, 2000); 43574 (November 16, 2000), 65 FR 70850 
(November 28, 2000); and 49198 (February 5, 2004), 69 FR 7029 
(February 12, 2004).
    \4\ In Amendment No. 1, the CBOE revised the rule text to use 
terms consistent with CBOE's current rules and made certain 
clarifying changes to the purpose section.
    \5\ See Securities Exchange Act Release No. 52173 (July 29, 
2005), 70 FR 45452.
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    Under the proposed rule change, an order could be traded at a price 
that is one minimum quoting increment inferior to the national best bid 
or offer (``NBBO'') if a Linkage Order \6\ is sent contemporaneously to 
the market(s) disseminating the NBBO to satisfy all interest at the 
NBBO price. The proposed rule change also would provide that an order 
may be booked that would otherwise lock another market if a Linkage 
Order is sent contemporaneously to such other market to satisfy all 
interest at the lock price and only the remaining portion of the order 
is booked. The CBOE proposes that, under trade and ship, any execution 
received from the market disseminating the NBBO must (pursuant to 
agency obligations) be reassigned to the customer order that is 
underlying the Linkage Order that was sent to trade with the market 
disseminating the NBBO.
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    \6\ See CBOE Rule 6.80(12).
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    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of section 6 of the Act 
\7\ and the rules and regulations thereunder applicable to a national 
securities exchange.\8\ In particular, the Commission finds that the 
proposed rule change is consistent with section 6(b)(5) of the Act,\9\ 
which requires, among other things, that the rules of an exchange be 
designed 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. The Commission believes that the proposed rule change 
should help to implement the Linkage Plan by facilitating the ability 
of CBOE's members to execute their customer orders in a timely manner 
and potentially could decrease the incidence of Trade-Throughs and 
locked markets.
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    \7\ 15 U.S.C. 78f.
    \8\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(5).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-CBOE-2005-51) as amended, is 
approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 05-18623 Filed 9-19-05; 8:45 am]
BILLING CODE 8010-01-P