Document ID: SEC-2009-0342-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2009-03-16T04:00Z

[Federal Register: March 16, 2009 (Volume 74, Number 49)]
[Notices]               
[Page 11144-11146]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16mr09-104]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59546; File No. SR-CBOE-2009-016]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Modify the Hybrid Rule Pertaining to Orders Represented 
in Open Outcry

March 10, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on March 6, 2009, the Chicago Board Options Exchange, Incorporated 
(``Exchange'' or ``CBOE'') filed with the Securities and

[[Page 11145]]

Exchange Commission (the ``Commission'') the proposed rule change as 
described in Items I and II below, which Items have been prepared by 
the Exchange. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to make permanent the pilot program in Rule 
6.45A(b) relating to the allocation of orders represented in open 
outcry in equity option classes designated by the Exchange to be traded 
on the CBOE Hybrid Trading System (``Hybrid''). The text of the 
proposed rule change is available on the Exchange's Web site (http://
www.cboe.org/Legal), at the Exchange's Office of the Secretary and at 
the Commission.

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 self-regulatory organization 
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 those 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 parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    In March 2005 the Commission approved revisions to CBOE Rule 6.45A 
related to the introduction of Remote Market-Makers.\5\ Among other 
things, Rule 6.45A(b), pertaining to the allocation of orders 
represented in open outcry in equity options classes traded on Hybrid, 
was amended to clarify that only in-crowd market participants would be 
eligible to participate in open outcry trade allocations. In addition, 
Rule 6.45A(b) was amended to limit the duration of paragraph (b) of 
Rule 6.45A until September 14, 2005 to allow for an analysis of the 
application of Section 11(a)(1) of the Securities Exchange Act of 1934 
to trading conducted pursuant to paragraph 6.45A(b). The duration of 
this paragraph was thereafter extended through March 31, 2009.\6\ The 
Exchange now proposes to make paragraph (b) of Rule 6.45A permanent.
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    \5\ See Securities Exchange Act Release No. 51366 (March 14, 
2005), 70 FR 13217 (March 18, 2005) (SR-CBOE-2004-75).
    \6\ See Securities Exchange Act Release Nos. 52423 (September 
14, 2005), 70 FR 55194 (September 20, 2005) (extension through 
December 14, 2005), 52957 (December 15, 2005), 70 FR 76085 (December 
22, 2005) (extension through March 14, 2006), 53524 (March 21, 
2006), 71 FR 15235 (March 27, 2006) (SR-CBOE-2006-22) (extension 
through July 14, 2006), 54164 (July 17, 2006), 71 FR 42143 (July 25, 
2006) (SR-CBOE-2006-60) (extension through October 31, 2006), 54680 
(November 1, 2006), 71 FR 65554 (November 8, 2006) (SR-CBOE-2006-86) 
(extension through January 31, 2007), 55219 (February 1, 2007), 72 
FR 6305 (February 9, 2007) (SR-CBOE-2007-10) (extension through 
April 30, 2007), 55676 (April 27, 2007), 72 FR 25348 (May 4, 2007) 
(SR-CBOE-2007-40) (extension through July 31, 2007), 56177 (August 
1, 2007), 72 FR 44194 (August 7, 2007) (SR-CBOE-2007-89) (extension 
through December 31, 2007), 57054 (December 27, 2007), 73 FR 899 
(January 4, 2008) (SR-CBOE-2007-149) (extension through June 30, 
2008) and 58048 (June 27, 2008) 73 FR 39355 (July 9, 2008) (SR-CBOE-
2008-65) (extension through December 31, 2008), 73 FR 79956 
(December 30, 2008) (SR-CBOE-2008-126) (extension through March 31, 
2009).
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    In connection with the elimination of subparagraph (iii) of Rule 
6.45A(b) (elimination of the language providing that the effectiveness 
of 6.45A(b) is temporary), the Exchange will issue a regulatory 
circular providing members guidance on the application of Section 
11(a)(1) to trading on the Hybrid System.\7\ The regulatory circular is 
attached as Exhibit 5 to the 19b-4 filing. The circular describes 
Section 11(a)(1) and certain of the exemptions to Section 11(a)(1) as 
well as the application of the ``(G) Order'' exemption and the ``Effect 
vs. Execute'' exemption (Rule 11a2-2(T)) to trading on the Hybrid 
System.
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    \7\ In order to effect proprietary transactions on the floor of 
the Exchange, in addition to complying with the requirements of CBOE 
Rule 6.45A(b), members are also required to comply with the 
requirements of Section 11(a)(1) of the Securities Exchange Act of 
1934 (the ``Act''), 15 U.S.C. 78k(a)(1), or qualify for an 
exemption. Section 11(a)(1) of the Act restricts any member of a 
national securities exchange from effecting any transaction on such 
exchange for (i) the member's own account, (ii) the account of a 
person associated with the member, or (iii) an account over which 
the member or a person associated with the member exercises 
discretion, unless a specific exemption is available. The Exchange 
has issued regulatory circulars to members informing them of the 
applicability of these Section 11(a)(1) requirements each time the 
duration of the Rule was extended. See CBOE Regulatory Circulars 
RG05-103 (November 2, 2005), RG06-001 (January 3, 2006), RG06-34 
(April 7, 2006), RG06-79 (July 31, 2006), RG06-115 (November 8, 
2006), RG07-21 (February 8, 2007), RG07-53 (May 17, 2007), RG07-88 
(August 15, 2007), RG08-08 (January 9, 2008) and RG08-83 (July 10, 
2008).
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2. Statutory Basis
    Making the rule permanent will allow the Exchange to operate under 
the existing allocation parameters for orders represented in open 
outcry in Hybrid on an uninterrupted basis. Accordingly, CBOE believes 
the proposed rule change is consistent with the Act \8\ and the rules 
and regulations under the Act applicable to a national securities 
exchange and, in particular, the requirements of Section 6(b) of the 
Act.\9\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \10\ requirements that the rules of 
an exchange be designed to promote just and equitable principles of 
trade, to prevent fraudulent and manipulative acts and, in general, to 
protect investors and the public interest.
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    \8\ 15 U.S.C. 78a et seq.
    \9\ 15 U.S.C. 78(f)(b).
    \10\ 15 U.S.C. 78(f)(b)(5).
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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 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

    Because the foregoing 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, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6) 
thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires that a self-regulatory organization submit to the 
Commission written 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. The Exchange has satisfied this requirement.
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    The Exchange has asked the Commission to waive the 30-day operative 
delay to the extent necessary. The Commission believes that waiver of

[[Page 11146]]

the operative delay is consistent with the protection of investors and 
the public interest because such waiver will enable CBOE Rule 6.45A(b) 
to continue without interruption. The Commission notes that the rule 
has been in effect on a pilot basis since March 14, 2005 \13\ and 
therefore does not raise any novel or significant regulatory issues. 
Therefore, the Commission designates the proposed rule change as 
operative upon filing.\14\
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    \13\ See infra notes 5 and 6.
    \14\ For purposes only of waiving the operative date of this 
proposal, the Commission has considered the rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of such 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.

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 rule-comments@sec.gov. Please include 
File Number SR-CBOE-2009-016 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2009-016. 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-2009-016 and should be 
submitted on or before April 6, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-5572 Filed 3-13-09; 8:45 am]

BILLING CODE 8011-01-P