7336 Federal Register / Vol. 73, No. 26 / Thursday, February 7, 2008 / Notices 

10The language in Rule 110A–AEMI(c)(ii) crossreferencing Amex Rule 193 is substantively 

identical to language also contained in Amex Rules 

993–ANTE(d)(iii) (Supplemental Registered 

Options Traders) and 994–ANTE(d)(iii) (Remote 

Registered Options Traders), neither of which have 

been interpreted to expand the applicability of 

Amex Rule 193 beyond affiliates of specialists. 

11Rule 15c3–1 under the Act, 17 CFR 240.15c3–

1. 

12 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). 13 15 U.S.C. 78f(b)(5). 

14 15 U.S.C. 78s(b)(2). 

15 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

• Ability to transact in any ETF 

underlying markets. 

The regulatory requirements 

applicable to DARTs will be surveilled 

for by the FINRA Amex Regulation 

Division (‘‘FINRA Amex’’) consistent 

with current surveillance procedures for 

Registered Traders on the Exchange. 

FINRA Amex staff will work with Amex 

technical staff on planning the 

necessary changes to AEMI to capture 

required surveillance data and 

surveilling the increased number of 

market makers that the program is 

expected to attract. Adjustments to 

current technology and surveillance 

procedures will likely also be 

necessitated by the fact that DARTs will 

not be physically located on the floor of 

the Exchange. 

DARTs will interface with the Amex’s 

Floor Officials in the case of trade 

disputes substantially in accordance 

with existing procedures used for 

SROTs. Each DART accordingly will be 

required to designate persons on and/or 

off-floor to be in direct real-time contact 

with Floor Officials on such matters. 

Regulation M will apply to DARTs in 

the same way that it applies to other 

market participants, as will Amex Rule 

193 to the extent a DART is affiliated 

with a specialist member organization. 

However, no expansion of the 

application of Amex Rule 193 beyond 

current practice is intended.10

Finally, the Comment Letter had 

observed that a provision proposed in 

SR–Amex–2007–85 relating to 

minimum capital requirements for 

DARTs is unnecessary due to its current 

inapplicability to DARTs (who will be 

subject to the Commission’s net capital 

rule).11 The Exchange has eliminated 

that provision from the current 

proposed rule change. 

III. Discussion 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.12 In particular, the 

Commission finds that the proposal is 

consistent with section 6(b)(5) of the 

Act,13 which requires, among other 

things, that a national securities 

exchange’s rules be designed to promote 

just and equitable principles of trade, to 

remove impediments to and to perfect 

the mechanism of a free and open 

market and a national market system, 

and, in general, to protect investors and 

the public interest. 

Under the proposal, DARTs would be 

permitted to quote electronically in 

ETFs from off the Exchange’s physical 

trading floor. Amex’s rules already 

provide for one type of competing 

market maker in ETF securities—

Registered Traders. Like Registered 

Traders, DARTs will not be permitted to 

enter quotations in equity securities. In 

addition, similar rules would govern the 

allocations of DARTs and Registered 

Traders, except DARTs will not be 

permitted to participate in a post-trade 

allocation in connection with an auction 

trade. The Commission believes it is 

reasonable and consistent with the Act 

for Amex to establish DARTs as remote 

competitive market makers subject to 

the allocation rules described in the 

proposal. 

The Commission notes that DARTs 

will be required to meet certain 

eligibility requirements. The existence 

of order flow commitments between a 

DART applicant and order flow 

providers is one such factor. The 

Commission notes the Exchange’s 

representation that a future change to, or 

termination of, any such commitments 

would not be used by the Exchange at 

any point in the future to terminate or 

take remedial action against a DART, 

and that the Exchange would not take 

remedial action solely because orders 

subject to any such commitments were 

not subsequently routed to the 

Exchange. Similarly, the Exchange has 

included the ‘‘willingness to promote 

the Exchange’’ as a factor that the 

Committee may consider when making 

its application decisions. The 

Commission notes the Exchange’s 

representation that the Committee 

would not apply this factor to in any 

way restrict, either directly or 

indirectly, a DART’s activities as a 

market maker or specialist on other 

exchanges, or to restrict how a DART 

handles orders it holds in a fiduciary 

capacity to which it owes a duty of best 

execution. 

The Commission also notes that, 

should the Committee decide not to 

approve a DART applicant, or should a 

DART’s appointment be suspended or 

terminated in one or more classes, a 

DART applicant or DART, respectively, 

would be entitled to a hearing under 

Article IV, section 1(g) of the Amex 

Constitution and Amex Rule 40. 

Proposed Amex Rule 110A(b)–AEMI 

sets forth the obligations that a DART 

would be required to fulfill. 

Specifically, a DART would be required 

to generate continuous, two-sided 

quotations in all assigned ETF 

securities. A DART’s affirmative market 

making obligations appear to be 

sufficient to justify the benefits it would 

receive as a market maker. 

The proposal also appears reasonably 

designed to prevent the misuse of 

material, non-public information with 

any affiliates that may conduct a 

brokerage business in securities 

assigned to a DART, or that may act as 

a specialist or market maker in any 

security underlying a derivative security 

assigned to a DART. 

IV. Conclusion 

It is therefore ordered, pursuant to 

section 19(b)(2) of the Act,14 that the 

proposed rule change (SR–Amex–2007–

138) is approved. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.15

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E8–2123 Filed 2–6–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–57250; File No. SR–CBOE–

2008–11] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to CBOE’s 

Holdback Timer 

February 1, 2008. 

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 January 

29, 2008, 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 and II 

below, which Items have been 

substantially prepared by the CBOE. 

The Exchange filed the proposal as a 

‘‘non-controversial’’ proposed rule 

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


jlentini on PROD1PC65 with NOTICES
Federal Register / Vol. 73, No. 26 / Thursday, February 7, 2008 / Notices 7337 

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

4 17 CFR 240.19b–4(f)(6). 

5See Securities Exchange Act Release 55772 (May 

16, 2007), 72 FR 28732 (May 22, 2007) (SR–CBOE–

2007–45). 

6See CBOE Rule 1.1(aaa). 

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

8 15 U.S.C. 78f(b)(5). 

9 15 U.S.C. 78s(b)(3)(A). 

10 17 CFR 240.19b–4(f)(6). 

11 17 CFR 240.19b–4(f)(6)(iii). In addition, Rule 

19b–4(f)(6)(iii) requires the self-regulatory 

organization to give the Commission notice of its 

intent to file the proposed rule change, along with 

a brief description and text of 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. 

CBOE has satisfied the five-day pre-filing 

requirement. 

12 17 CFR 240.19b–4(f)(6)(iii). 

13For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

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

14See 15 U.S.C. 78s(b)(3)(C). 

of the Act 3 and Rule 19b–4(f)(6) 

thereunder,4 which rendered the 

proposal 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 

CBOE proposes to amend its rules 

relating to the usage of its holdback 

timer. 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 proposal. 

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. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

On May 16, 2007, the Commission 

approved CBOE’s proposed rule change, 

which implemented an additional quote 

mitigation strategy, namely, a holdback 

timer.5 In its filing, CBOE stated that it 

would utilize a holdback timer that 

delays quotation updates to OPRA for 

no longer than one (1) second, and that 

it would be used in option classes 

trading on the Hybrid Trading System 

and Hybrid 2.0 Platform. Subsequently, 

CBOE implemented a new trading 

platform, the Hybrid 3.0 Platform, 

which allows a single quoter to submit 

an electronic quote which represents the 

aggregate Market-Maker quoting interest 

in a series in the trading crowd.6

CBOE now proposes to clarify that it 

may utilize the holdback timer in any 

option classes traded on CBOE, 

including option classes traded on the 

Hybrid 3.0 Platform. CBOE believes that 

the holdback timer is an appropriate 

and useful tool in mitigating quotations, 

as it reduces the number of quotations 

that CBOE disseminates to OPRA, 

without negatively impacting 

transparency. CBOE also notes that the 

holdback timer has been endorsed by 

the Securities Information and Financial 

Markets Association. CBOE is not 

proposing to change the manner in 

which the holdback timer functions, as 

described in its original rule filing SR–

CBOE–2007–45. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 7 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 8

in particular, in that it is designed to 

prevent fraudulent and manipulative 

acts and practices, promote just and 

equitable principles of trade, 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. 

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 either 

solicited or received by the Exchange. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The proposed rule change has become 

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

of the Act 9 and Rule 19b–4(f)(6) 

thereunder,10 because the foregoing 

proposed rule 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 from 

the date on which it was filed, or such 

shorter time as the Commission may 

designate if consistent with the 

protection of investors and the public 

interest. 

A proposed rule change filed under 

Rule 19b–4(f)(6) normally may not 

become operative prior to 30-days after 

the date of filing.11 However, Rule 19b–

4(f)(6)(iii) permits the Commission to 

designate a shorter time if such action 

is consistent with the protection of 

investors and the public interest.12 The 

Exchange has requested that the 

Commission waive the 30-day operative 

delay. The Commission believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest 

because such waiver will allow CBOE to 

implement the holdback timer in Hybrid 

3.0 option classes immediately, and 

thus reduce the number of quotations it 

disseminates to OPRA. Furthermore, the 

proposed rule change does not present 

any novel regulatory issues as the 

holdback timer is already implemented 

with respect to options classes trading 

on the Hybrid Trading System and 

Hybrid 2.0 Platform. For these reasons, 

the Commission designates the proposal 

to be operative upon filing with the 

Commission.13

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.14

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–CBOE–2008–11 on the 

subject line. 


jlentini on PROD1PC65 with NOTICES
7338 Federal Register / Vol. 73, No. 26 / Thursday, February 7, 2008 / Notices 

15 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. 78f(b). 

4 15 U.S.C. 78f(b)(5). 

Paper Comments 

• 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–2008–11. 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 CBOE. 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–2008–11 and should 

be submitted on or before February 28, 

2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E8–2204 Filed 2–6–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–57256; File No. SR–CBOE–

2008–09] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing of 

Proposed Rule Change Establishing a 

Voluntary Professional Designation 

February 1, 2008. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on January 

18, 2008, the Chicago Board Options 

Exchange, Incorporated (the ‘‘Exchange’’

or ‘‘CBOE’’) 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 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 adopt a 

voluntary professional designation. 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. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

This filing proposes to allow nonbroker-dealer customers to voluntarily 

have their orders categorized as brokerdealer orders for order handling, order 

execution, and cancel fee calculation 

purposes (‘‘Voluntary Professional(s)’’). 

Specifically, these orders would be 

treated as broker-dealer orders for 

purposes of CBOE Rules 6.13 (CBOE 

Hybrid System’s Automatic Execution 

Feature), 6.45 (Priority of Bids and 

Offers—Allocation of Trades), 6.45A 

(Priority and Allocation of Equity 

Option Trades on the CBOE Hybrid 

System), 6.45B (Priority and Allocation 

of Trades in Index Options and Options 

on ETFs on the CBOE Hybrid System), 

and 6.53C (Complex Orders on the 

Hybrid System). 

Some Exchange users have requested 

this flexibility because it is more 

suitable to their trading strategies that 

involve high volume order submission 

and cancellation. These Voluntary 

Professionals would participate on 

trades on the same terms as brokerdealer orders for purposes of the rules 

set forth above. Orders from Voluntary 

Professionals would continue to be 

treated as public customer orders for 

purposes of the linkage-related rules. 

CBOE would provide the same awaymarket protection for orders from 

Voluntary Professionals as for orders 

from public customers. Additionally, 

orders from Voluntary Professionals that 

are cancelled would not be counted as 

public customer order cancellations in 

connection with the cancellation fee 

calculation applicable to clearing 

members. The Exchange intends to 

establish, via a separate rule filing under 

Section 19(b) of the Act, a transaction 

fee applicable to Voluntary 

Professionals and the Exchange would 

not commence the Voluntary 

Professional program until such fee was 

in place. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) of the Act,3 in general, and 

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

of the Act,4 in particular, in that it is 

designed to 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 

CBOE 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. 


jlentini on PROD1PC65 with NOTICES