10332 Federal Register / Vol. 66, No. 31 / Wednesday, February 14, 2001 / Notices

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

2 17 CFR 240.19b–4.

3 In Amendment No. 1, CBOE amended the text

of the proposed rule change and included a

discussion of the indicator to be used when a book

order is establishing CBOE’s best bid or offer. See

letter from Angelo Evangelou, Attorney, CBOE, to

Joseph Corcoran, Attorney, Division of Market

Regulation, Commission, dated June 20, 2000

(‘‘Amendment No. 1’’).

4Securities Exchange Act Release No. 43430

(October 11, 2000), 65 FR 62776 (October 19, 2000)

(‘‘Notice’’).

5 In Amendment No. 2, CBOE amended the text

of the proposed change to CBOE Rule 6.8,

Interpretation and Policy .04, to correspond with

the proposed changes to the remainder of the rule

by obligating the trading crowd to execute orders

rejected from RAES up to, and not in addition to,

the Book Price Commitment Quantity. See letter

from Angelo Evangelou, Attorney, CBOE, to

Andrew Shipe, Attorney, Division of Market

Regulation, Commission, dated November 29, 2000

(‘‘Amendment No. 2’’).

6The text of the proposed rule change was

previously published in the Notice. This

publication of rule text corrects technical errors in

the Notice relating to numbering, and reflects

certain unrelated changes made to the CBOE Rule

since the filing of the proposed rule change with the

Commission. In addition, rule text has been revised

to correct a typographical error in the original text.

See telephone conversation between Angelo

Evangelou, Attorney, CBOE, and Andrew Shipe,

Attorney, Division of Market Regulation,

Commission, January 8, 2001.

FOR FURTHER INFORMATION CONTACT:

OPIC Agency Submitting Officer: Carol

Brock, Records Manager, Overseas

Private Investment Corporation, 1100

New York Avenue, NW., Washington,

DC 20527; 202/336–8563.

SUMMARY OF FORM UNDER REVIEW:

Type of Request: Reinstatement, with

change, of a previously approved

collection for which approval is

expiring.

Title: Finance Application.

Form Number: OPIC–115.

Frequency of Use: Once per project.

Type of Respondents: Business or

other institutions, individuals.

Standard Industrial Classification

Codes: All.

Description of Affected Public: U.S.

companies or citizens investing

overseas.

Reporting Hours: 3 hours per project.

Number of Responses: 300 per year.

Federal Cost: $14,796 per year.

Authority for Information Collection:

Sections 231 and 234 (b) and (c) of the

Foreign Assistance Act of 1961, as

amended.

Abstract (Needs and Uses): The

application is the principal document

used by OPIC to determine the

investor’s and project’s eligibility, assess

the environmental impact and

developmental effects of the project,

measure the economic effects for the

United States and the host country

economy, and collection information for

underwriting analysis.

Dated: February 8, 2001.

Rumu Sarkar,

Assistant General Counsel, Administrative

Affairs, Department of Legal Affairs.

[FR Doc. 01–3703 Filed 2–13–01; 8:45 am]

BILLING CODE 3210–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43932; File No. SR–CBOE–

00–21]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change, and

Notice of Filing and Order Granting

Accelerated Approval to Amendment

No. 2 to Proposed Rule Change, by the

Chicago Board Options Exchange, Inc.

To Amend its Rule Governing the

Operation of Its Automatic Book

Priority System To Permit Split-Price

Executions

DATE: February 6, 2001.

I. Introduction

On May 24, 2000, the Chicago Board

Options Exchange, Inc. (‘‘CBOE’’ or

‘‘Exchange’’), filed with the Securities

and Exchange Commission

(‘‘Commission’’), pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’),1 and Rule 19b–4

thereunder,2 a proposed rule change to

amend its rules governing the operation

of its Retail Automatic Execution

System (‘‘RAES’’) to provide for splitprice executions under the Automatic

Book Priority (‘‘ABP’’) system. On June

22, 2000, CBOE filed Amendment No. 1

to the proposed rule change.3 The

proposed rule change was published in

the Federal Register on October 19,

2000.4 No comments were received on

the proposal. On November 30, 2000,

CBOE filed Amendment No. 2 to the

proposed rule change.5 This order

approves the proposed rule change, as

amended. In addition, the Commission

is publishing this notice to solicit

comments on Amendment No. 2 to the

proposed rule change, and is

simultaneously approving Amendment

No. 2 on an accelerated basis.

II. Description of the Proposed Rule

Change

A. Text of the Proposed Rule Change

The CBOE proposes to amend its rules

governing the operation of its Retail

Automatic Execution System (‘‘RAES’’)

to provide for split-price executions

under the ABP system. Below is the text

of the proposed rule change. Proposed

new language is italicized and proposed

deletions are in [brackets].6

* * * * *

Rule 6.8. RAES Operations

This Rule governs RAES operations in

all classes of options, except to the

extent otherwise expressly provided in

this or other Rules in respect of

specified classes of options.

(a)(i) Firms on the Exchange’s Order

Routing System (‘‘ORS’’) will

automatically be on the Exchange’s

Retail Automatic Execution System

(‘‘RAES’’) for purposes of routing small

public customer market or marketable

limit orders into the RAES system.

Those orders which are eligible for

routing to RAES may be subject to such

contingencies as the appropriate Floor

Procedure Committee (‘‘FPC’’) shall

approve. Public customer orders are

orders for accounts other than accounts

in which a member, non-member

participant in a joint-venture with a

member, or any non-member brokerdealer (including a foreign broker-dealer

as defined in Rule 1.1 (xx)) has an

interest. The appropriate Floor

Procedure Committee (‘‘FPC’’) shall

determine the size of orders eligible for

entry into RAES in accordance with

paragraph (e) of this Rule. For purposes

of determining what a small customer

order is, a customer’s order cannot be

split up such that its parts are eligible

for entry into RAES. Firms on ORS have

the ability to go on and off ORS at will.

Firms not on ORS that wish to

participate will be given access to RAES

from terminals at their booths on the

floor.

(ii) When RAES receives an order, the

system automatically will attach to the

order its execution price, determined by

the prevailing market quote at the time

of the order’s entry to the system, except

as otherwise provided in paragraph (b)

of this Rule in instances where the best

bid or offer on the Exchange’s book

constitutes the prevailing market best

bid or offer, and as otherwise provided

in Interpretation and Policy .02 under

this Rule 6.8 in respect of multiplytraded options. A buy order will pay the

offer, a sell order will sell at the bid. A

Market-Maker logged on to participate

in RAES (a ‘‘Participating Marketmaker’’) will be designated as contrabroker on the trade. A trade executed on

RAES at an erroneous quote should be

treated as a trade reported at an

erroneous price and adjusted to reflect

the accurate market after receiving a

Floor Official’s approval.

(b) When the best bid or offer on the

Exchange’s book constitutes the best bid

or offer on the Exchange and is for a

size less than the RAES order eligibility

size for that class, such fact shall be

Federal Register / Vol. 66, No. 31 / Wednesday, February 14, 2001 / Notices 10333

7See Amendment No. 1, supra.

8See Amendment No. 1, supra.

9The indicator would be a ‘‘B’’ if the bid on the

book is better than the trading crowd bid; ‘‘O’’ if

the book offer is better than the trading crowd offer;

and ‘‘C’’ if both were better than the trading crowd

bid and offer. This indicator would be disseminated

in the ‘‘Special Market Conditions’’ field that also

includes indicators for, among other things, fast

markets and trading halts. See Amendment No. 1,

Supra.

denoted in the Exchange’s disseminated

quote by a ‘‘Book Indicator’’. It is

possible that the best bid or offer on the

Exchange’s book constitutes the

prevailing market bid or offer [may be

equal to the best bid or offer on the

Exchange’s book]. In those instances, a

RAES order will be executed against the

order in the book. In the event the order

in the book is for a smaller number of

contracts than the RAES order, the

balance of the RAES order will be

assigned to participating market-makers

at the same price at which the initial

portion [rest] of the order was executed

up to an amount prescribed by the

appropriate Floor Procedure Committee

on a class-by-class basis (the ‘‘Book

Price Commitment Quantity’’). Any

remaining balance thereafter shall be (i)

routed to the crowd PAR terminal if

Autoquote is not in effect for that series;

(ii) assigned to participating marketmakers at the Autoquote price if

Autoquote constitutes the new

prevailing market bid or offer; or (iii)

executed against any order in the book

that constitutes the new prevailing

market bid or offer with the balance of

the RAES order being assigned to

participating market-makers at that

price up to the Book Price Commitment

Quantity. Any additional remaining

balance of a RAES order shall be

handled in accordance with (ii) or (iii)

of this paragraph.

(c)–(g) Unchanged.

* * * Interpretations and Policies:

.01–.03 Unchanged.

.04 In those option classes where the

Automated Book Priority (‘‘ABP’’)

system is not operational or has not yet

been implemented, if a RAES order

would be executed at the price of one

or more booked orders, the order will be

rerouted on ORS to either the DPM or

to another location pursuant to the

firm’s routing parameters. Under

ordinary circumstances, in those option

classes where the Automated Book

Priority system is not operational or has

not yet been implemented, when one or

more RAES eligible orders in a class of

options is re-routed on ORS as

described (but not in cases when the

orders are routed to the firm’s booth),

the crowd will be obligated to sell (buy)

the rerouted order (or the first order in

any group of rerouted orders at the same

price) up to the number of contracts

represented by the booked order(s) and,

in the event a balance remains on the

rerouted order (or the first order in any

group of rerouted orders at the same

price) up to the Book Price Commitment

Quantity (as defined in paragraph (b) of

this Rule) where applicable, [equal to

applicable maximum size of RAES

eligible orders for that class of options]

at the offer (bid) which existed at the

time of the order’s entry into the RAES

system. Because the first such rerouted

order will be entitled to a price that

existed when the order was initially

entered into the RAES system, it is

imperative that such an order be

represented by the floor brokers as

quickly as possible. Orders re-routed to

the firm’s booth and orders rerouted to

the trading station that are not entitled

to the above protection will be entitled

to be filled by the trading crowd at the

bid or offer existing when the Floor

Broker represents the order in open

outcry in the crowd, pursuant to Rule

8.51.

.05–.08 Unchanged.

* * * * *

B. Description of the Proposed Rule

Change

Under current CBOE Rule 6.8, the

ABP system allows an order entered

into RAES to trade directly with an

order on the Exchange’s customer limit

order book where the best bid or offer

on the Exchange’s book is equal to the

prevailing market bid or offer. If any

portion of the RAES order remains to be

filled thereafter, the entire balance of

the RAES order is assigned to

participating market-makers at the price

at which the initial portion of the order

was executed against the book,

regardless of the next prevailing best bid

or offer on the Exchange. According to

the Exchange, market-makers

participating on RAES may find

themselves holding positions at prices

substantially different from those they

quoted, and subject to unanticipated

market risk.

To address this situation, the

Exchange proposes to modify Rule 6.8

so that such RAES order balances would

be executed against participating

market-makers at the book price only up

to an amount pre-determined by the

appropriate Floor Procedure Committee

(‘‘FPC’’) for the subject option class. The

pre-determined amount, to be called the

‘‘Book Commitment Quantity,’’ would

be set by the FPC from zero contracts up

to the maximum RAES eligible order

size for that option class. The Exchange

anticipates that the FPC will mandate a

generally uniform Book Price

Commitment Quantity among option

classes, which would become widely

known to CBOE customers and other

market participants. The Exchange also

intends to issue a regulatory circular

regarding Book Price Commitment

Quantity parameters established by the

FPC. The FPC would have to conduct a

meeting to adjust the Book Price

Commitment Quantity.7

If, after execution up to the Book Price

Commitment Quantity, any portion of

the RAES order is still unexecuted, that

remaining balance would be: (i) Routed

to the Public Automated Routing

(‘‘PAR’’) system if Autoquote is not in

effect for that series; (ii) assigned to

participating market-makers at the

Autoquote price if Autoquote represents

the best bid or offer; or (iii) executed

against an order in the book if such

order equals or represents the best bid

or offer, with any further balance of the

RAES order again being assigned to

participating market-makers at the new

book price up to the Book Price

Commitment Quantity. As long as an

order in the book equals or represents

the next best bid or offer (and Autoquote

is in effect for the subject series), any

remaining balance of a RAES order

would be handled pursuant to (ii) or (iii)

above.8

CBOE further proposes to affix a

‘‘Book Indicator’’ to its disseminated

quotation when an order in the book

represents the best bid or offer on the

Exchange. This indicator will alert

brokers and the public that the bid,

offer, or both are being generated by

orders in the book, not by market maker

quotes,9 However, the indicator would

not be disseminated if the booked order

is for a size greater than the RAES order

eligibility size because a split-price

execution would not occur in such

instance.

Where ABP is not in place, CBOE

Rule 6.8, Interpretation and Policy .04

currently provides that the trading

crowd is obligated to execute the first

order rejected from RAES at the price of

the booked order that caused the

rejection, or ‘‘kickout’’. The Exchange

now proposes, in order to provide

consistency with the proposed ABP

rule, to amend Interpretation and Policy

.04 to provide that the first order

rejected from RAES (because of a

kickout based on a booked order) be

filled against the book, with any

remainder thereafter being executed by

the crowd at the book price up to the

Book Price Commitment Quantity.

Finally, CBOE proposes to amend

Interpretation and Policy .04 to apply in

10334 Federal Register / Vol. 66, No. 31 / Wednesday, February 14, 2001 / Notices

10 In approving this proposal, the Commission has

considered the proposed rule’s impact on

efficiently, competition, and capital formation. 15

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

12 15 U.S.C. 78s(b)(2).

13 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

all instances where ABP is not

operational.

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.10 In particular, the

Commission believes that the proposal

is 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, to remove

impediments to and perfect the

mechanism of a free and open market,

and to protect investors and the public

interest.

Under the proposal, in those options

classes where ABP is in place, if an

incoming RAES order is larger than the

booked order establishing the

Exchange’s best price, the RAES order

would be executed against the booked

order. The remainder of the RAES order

no longer would be executed in its

entirety at the book price against

market-makers participating on RAES.

Rather, only the amount of that order up

to the Book Price Commitment Quantity

would be executed in this manner.

Thereafter, if any portion of the RAES

order remains unfilled, the balance of

the order will be executed at the next

prevailing bid or offer, i.e., the book

price or the Autoquote price. If the

Autoquote system is not in effect, the

remainder of the RAES order would be

routed to the crowd PAR terminal for

execution, whether against the book or

competing members of the trading

crowd.

The Commission notes that the

proposed rule change would continue to

permit limit orders in the Exchange’s

book to trade against RAES orders.

RAES orders, on the other hand, would

be permitted to trade against orders in

the book up to the applicable book size,

and thereafter up to the new Book Price

Commitment Quantity at the book price,

with market-makers participating on

RAES taking the opposite side of such

transactions. Any portion of the RAES

order remaining thereafter would be

executed at the best price available,

whether from the book, Autoquote, or

the trading crowd. In addition, CBOE

will attach a ‘‘Book Indicator’’ to its

disseminated quote to indicate to

persons entering orders on RAES that

their orders may be subject to a splitprice execution. Therefore, firms

sending orders to RAES should have

notice that the displayed quote may not

be good for the full RAES-eligible size,

and instead would be executed at the

prevailing quote up to the Book Price

Commitment Quantity only. The

Commission finds that these procedures

are consistent with the Act.

The Commission further finds that the

proposed revisions to Interpretation .04

of Rule 6.8 are proper. These changes

are meant to parallel the abovedescribed modifications to the ABP

system in options classes where ABP

has not been implemented. The

Commission further believes that the

CBOE’s proposal to extend the

application of Interpretation and Policy

.04 to situations where ABP is not

operational, such as in the case of a fast

market or an operational failure, is also

proper. The procedures to be employed,

as outlined above, would thus be

applied to all classes of options,

whether ABP is in effect or not, thereby

promoting uniformity of execution

procedures in all classes of options.

Finally, the Commission finds good

cause for approving Amendment No. 2

prior to the thirtieth day after the date

of publication of notice thereof in the

Federal Register. In Amendment No. 2,

the CBOE merely clarified the text of the

proposed change to Interpretation and

Policy .04, to reflect that where ABP is

not in operation, the trading crowd is

required to execute re-routed orders at

the book price up to, and not in addition

to, the Book Price Commitment

Quantity. This confirms the

Interpretation to the revised rule text.

Therefore, the amendment did not

substantively alter the proposal.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning Amendment No.

2, including whether Amendment No. 2

is consistent with the Act. Persons

making written submissions should be

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 the CBOE. All

submissions should refer to File No.

SR–CBOE–00–21 and should be

submitted by March 7, 2001.

V. Conclusion

For the foregoing reasons, the

Commission finds that CBOE’s proposal

to amend its rules governing the

operation of its RAES system to provide

for split-price executions under the

Automatic Book Priority System, as

amended, is consistent with the

requirements of the Act and rules and

regulations thereunder.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,12 that the

proposed rule change (SR–CBOE–00–

21), as amended, is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.13

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–3683 Filed 2–13–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43931; File No. SR–Phlx–

00–109]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Philadelphia Stock Exchange, Inc.

Amending Eligibility to Impose Fees

for Computer Equipment Services,

Repairs or Replacements and

Relocation of Computer Equipment on

Foreign Currency Options Participants

on the Currency Options Trading

Floor, While Exempting Track Balls

from Fee Schedule Coverage

February 6, 2001.

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 2,

2001, the Philadelphia Stock Exchange,

Inc. (‘‘Phlx’’ 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