Document ID: SEC-2006-0414-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2006-03-29T05:00Z

[Federal Register: March 29, 2006 (Volume 71, Number 60)]
[Notices]               
[Page 15778-15780]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29mr06-140]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53537; File No. SR-CBOE-2006-15]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change and Amendment No. 1 Thereto To Reflect Committee Revisions

March 21, 2006.

    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 February 6, 2006, 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. On March 13, 2006, the CBOE filed Amendment No. 1 to the 
proposed rule change.\3\ The CBOE has designated the proposed rule 
change as concerned solely with the administration of the Exchange 
under Section 19(b)(3)(A)(iii) of the Act,\4\ and Rule 19b-4(f)(3) 
thereunder,\5\ which renders the proposal effective upon filing with 
the Commission.\6\ The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaces the original filing in its 
entirety. In Amendment No. 1, the Exchange: (i) revised the rule 
text to reflect revisions that had become effective through 
separate, unrelated rule change filings and to correct typographical 
errors; and (ii) made certain clarifications in the text of CBOE 
Rule 4.11, Interpretation and Policy .05(b) regarding the Exchange's 
procedures in the event that a Market-Maker's position limit 
exemption request is denied and in the event that the Exchange 
subsequently reviews a position limit exemption request that it had 
granted.
    \4\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \5\ 17 CFR 240.19b-4(f)(3).
    \6\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change, as 
amended, under Section 19(b)(3)(C) of the Act, the Commission 
considers the period to commence on March 13, 2006, the date on 
which the Exchange submitted Amendment No. 1. See 15 U.S.C. 
78s(b)(3)(C).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its rules to delete or modify 
specific references to certain committees that have been eliminated and 
to modify specific references to other committees whose titles or 
authorities have changed. All references that currently relate to 
committees that are being eliminated will be replaced with terms such 
as the ``appropriate Exchange committee'' or the ``Exchange.'' All 
references to committees that have changed titles or authorities will 
be amended accordingly. The text of the proposed rule change is 
available on the Exchange's Web site (http://www.cboe.com), at the 

Exchange's Office of the Secretary, and at the Commission's Public 
Reference Room.

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 on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange 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, as amended, is to delete 
from the CBOE Rules any specific references to the Clearing Procedures 
Committee, Exemption Committee, Modified Trading System Appointments 
(``MTS'') Committee, appropriate Screen-Based Trading (``SBT'') Trading 
Committee, appropriate SBT DPM Appointments Committee, and Special 
Product Assignment Committee. The Exchange is proposing to make these 
changes at this time because it recently determined to eliminate these 
committees and reassign their respective authorities to other 
committees and/or to Exchange staff.\7\ The Exchange is also deleting 
all references to the Allocation Committee in the CBOE Rules in order 
to simplify the rule text and avoid confusion over the division of 
authorities among that

[[Page 15779]]

committee and other appropriate Exchange committees that are assuming 
the authorities of the former Special Product Assignment Committee. In 
addition, a reference to the Securities Committee in CBOE Rule 6.41 is 
being deleted to avoid confusion, because this committee is a committee 
of the Options Clearing Corporation and not of the Exchange. References 
to the ``appropriate Floor Procedure Committee,'' the ``appropriate 
FPC'' and the like are also being amended to say the ``appropriate 
Procedure Committee'' to reflect a change in the names of those 
committees.\8\
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    \7\ For example, the authorities of the former MTS Committee 
have been reassigned to the Allocation Committee and the appropriate 
Market Performance Committees. There were also other committees that 
the Exchange eliminated for which there are no specific references 
in the CBOE rules that need to be updated. For example, the Market 
Fee Oversight Committee was eliminated and its specific authorities 
have been reassigned to the appropriate Market Performance 
Committees.
    \8\ Specifically, the Exchange has changed the titles of its 
Floor Procedure Committees to simply ``Procedure Committees'' (e.g., 
the Equity Floor Procedure Committee is now the Equity Option 
Procedure Committee and the Index Floor Procedure Committee is now 
the Index Option Procedure Committee).
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    The Exchange also proposes to make certain clarifications in the 
text of CBOE Rule 4.11, Interpretation and Policy .05(b) regarding the 
procedures following denial of a Market-Maker's position limit 
exemption request and subsequent Exchange review of a granted position 
limit exemption request.\9\
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    \9\ With respect to an initial request, ordinarily a first 
exemption request application will be considered without the 
presence of the Market-Maker. If a Market-Maker's first application 
request for an exemption is denied and he wishes to reapply, he may 
make a brief personal appearance before the Exchange. The proposed 
rule change deletes language that had limited a Market-Maker's 
appearance to presenting only those issues not previously considered 
as part of the first application. Under the proposed rule change, no 
such restriction will apply. With respect to review of a granted 
request, which may be revoked or modified by the Exchange, the 
proposed rule change clarifies that such reviews may be considered 
by the Exchange without the presence of the Market-Maker that 
originally received the exemption. The proposed rule change also 
clarifies that, if a granted exemption that is reviewed by the 
Exchange without the presence of a Market-Maker is revoked or 
modified and the Market-Maker wishes to reapply for the exemption or 
a modified exemption, the Market-Maker may make a brief scheduled 
personal appearance before the Exchange. The Exchange notes that 
CBOE Rule 4.11, Interpretation and Policy .05 applies only to 
Market-Makers seeking an exemption to the standard position limits 
in all options traded on the Exchange for the purpose of assuring 
that there is sufficient depth and liquidity in the marketplace, and 
not to confer a right upon the Market-Maker applying for an 
exemption. As such and in light of the procedural safeguards 
described herein, as well as other procedural safeguards set out in 
Rule 4.11, Interpretation and Policy .05, the purpose of the 
exemption process, and the prohibition against the granting of 
retroactive exemptions, decisions granting or denying exemptions are 
not subject to review under Chapter XIX of the Exchange Rules 
regarding Hearings and Review.
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    Finally, various miscellaneous changes to the rule text to 
accommodate the above-described changes are also being made.
    In trying to accommodate the reassignments, the Exchange believes a 
better approach than making a specific reference to a committee is to 
make reference to the ``appropriate Exchange committee'' in the 
instances where the reassignment is to another committee and to the 
``Exchange'' in instances where the reassignment is to Exchange staff 
and/or a committee. In this way, the Exchange will have the flexibility 
to delegate the authorities under the rules to the appropriate 
committee (or appropriate Exchange staff) and will not have to make a 
rule change merely, for instance, to accommodate a future change in the 
title of a committee or to accommodate the reassignment of an authority 
to another committee. As the authority exercised by committees (and by 
Exchange staff) is delegated pursuant to Exchange rules, the Exchange 
believes that the title of the committees exercising their authority 
should not be relevant.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the requirements of Section 6(b)(5) of the Act \10\ which requires, 
among other things, that the rules of the Exchange be designed to 
promote just and equitable principles of trade, foster cooperation 
among persons engaged in facilitating securities transactions, and 
protect investors and the public interest. The CBOE believes that this 
proposal complies with the Act because the CBOE is amending its rules 
to update and/or generalize certain committee references to facilitate 
compliance.
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    \10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The 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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposal.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has designated this proposal as concerned solely with 
the administration of the Exchange under Section 19(b)(3)(A)(iii) of 
the Act,\11\ and Rule 19b-4(f)(3) thereunder,\12\ which renders the 
proposal effective upon filing with the Commission.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(3).
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    At any time within 60 days of the filing of the proposed rule 
change, as amended, 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.\13\
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    \13\ See supra note 6.
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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 rule-comments@sec.gov. Please include 

File Number SR-CBOE-2006-15 on the subject line.

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 No. SR-CBOE-2006-15. 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. Copies of the filing 
also will be available for inspection and copying at the principal 
office of the Exchange. All comments received will be posted without 
change; the Commission does not edit personal identifying

[[Page 15780]]

information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File No. SR-CBOE-2006-15 and should be submitted on or before April 19, 
2006.
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    \14\ 17 CFR 200.30-3(a)(12).

For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\14\
Nancy M. Morris,
Secretary.
[FR Doc. E6-4517 Filed 3-28-06; 8:45 am]

BILLING CODE 8010-01-P