Document ID: SEC-2007-0237-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2007-02-15T05:00Z

[Federal Register: February 15, 2007 (Volume 72, Number 31)]
[Notices]               
[Page 7488-7489]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15fe07-118]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55263; File No. SR-CBOE-2005-111]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Approving Proposed Rule Change as Modified by 
Amendment No. 1 Thereto Relating to Multiple Representation Exception 
Procedures

February 9, 2007.
    On December 16, 2005, the Chicago Board Options Exchange, 
Incorporated (``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 adopt additional exceptions to 
the prohibition on multiple representation by Market Makers contained 
in CBOE Rule 6.55.\3\ On October 17, 2006, the Exchange filed Amendment 
No. 1 to the proposed rule change. The proposed rule change, as 
modified by Amendment No. 1, was published for comment in the Federal 
Register on December 6, 2006.\4\ The Commission received no comments 
regarding the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The proposed rule change would also make revisions to 
certain procedures in Rule 6.55 that have become outdated.
    \4\ See Securities Exchange Act Release No. 54823 (November 28, 
2006), 71 FR 70810.
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    Rule 6.55 is intended to ensure that Market Makers are not 
disproportionately represented in the trading crowd. The general 
prohibition of Rule 6.55 provides, in relevant part, that no Market-
Maker shall enter or be present in a trading crowd while a Floor Broker 
present in the trading crowd is holding an order on behalf of the 
Market Maker's individual account or an order initiated by the Market-
Maker for an account in which the Market-Maker has an interest.\5\
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    \5\ Rule 6.55 also provides that regulatory circulars concerning 
joint accounts should be consulted in connection with procedures 
governing the simultaneous presence in the trading crowd of 
participants in and orders for the same joint account. These 
circulars, among other things, extend the prohibition against 
multiple representation to cover joint account activity in certain 
circumstances.
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    The proposed rule change would add to the Rule's current exceptions 
by permitting a Market-Maker to enter or be present in a trading crowd 
in which a Floor Broker is present who holds either a solicited order 
on behalf of the Market Maker's individual or joint account or a 
solicited order initiated by the Market-Maker for an account in which 
the Market Maker has an interest--provided that the Market-Maker 
advises the Floor Broker of his or her intention to enter or be present 
in the trading crowd and also refrains from trading in-person on the 
same trade as the original order.\6\ The proposed rule change would 
further permit a Market-Maker to enter or be present in a trading crowd 
in which a Floor Broker is present who holds an order on behalf of the 
Market Maker's individual account or an order the Market Maker 
initiated for an account in which the Market Maker has an interest 
(i.e., even when that order is not a solicited order)--provided that 
the Market-Maker advises the Floor Broker of his or her intention to 
enter or be present in the trading crowd and also refrains from trading 
in-person on the same trade as the order being represented by the Floor 
Broker.
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    \6\ In the case of joint accounts, it would be the 
responsibility of the Market-Maker to ascertain whether solicited 
orders for his or her joint account had already been entered with a 
Floor Broker in a trading crowd prior to his or her trading for the 
joint account in-person.
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    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, and in 
particular, with Section 6(b)(5) of the Act,\7\ which requires, among 
other things, that the rules of a national securities 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.\8\
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    \7\ 15 U.S.C. 78f(b)(5).
    \8\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition and 
capital formation. See 15 U.S.C. 78c(f).

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[[Page 7489]]

    The Commission notes that, under each of the proposed new 
exceptions, the Market Maker would be required to make the Floor Broker 
aware of his or her intention to enter or be present in the trading 
crowd, and the Market Maker would also be required to refrain from 
trading in-person on the same trade as the relevant order being 
represented by the Floor Broker. The Commission believes that these 
provisions are appropriately designed to prevent a Market-Maker from 
being disproportionately represented in the trading crowd, consistent 
with the original purpose of the prohibition in CBOE Rule 6.55. The 
Commission, therefore, believes that the proposed rule change is 
consistent with the Act.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-CBOE-2005-111), as modified 
by Amendment No. 1, is approved.
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    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E7-2610 Filed 2-14-07; 8:45 am]

BILLING CODE 8010-01-P