Document ID: SEC-2009-0846-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2009-06-24T04:00Z

[Federal Register Volume 74, Number 120 (Wednesday, June 24, 2009)]
[Notices]
[Pages 30194-30196]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-14800]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60130; File No. SR-CBOE-2009-038]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of Proposed Rule Change Related to the 
Complex Order Book

June 17, 2009.
    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 June 16, 2009, 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 CBOE. 
The Commission is publishing this notice to solicit

[[Page 30195]]

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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The CBOE proposes to amend Rule 6.53C, ``Complex Orders on the 
Hybrid System,'' with respect to order and quote types that may be 
entered to trade against orders in the complex order book (``COB'') 
system. The text of the proposed rule change is available on the 
Exchange's Web site at (http://www.cboe.org/Legal), at the CBOE'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
    Under Rule 6.53C(c)(1), the Exchange determines which classes and 
which complex order origin types (i.e., non-broker-dealer public 
customer, broker-dealers that are not Market-Makers or specialists on 
an options exchange, and/or Market-Makers or specialists on an options 
exchange) are eligible for entry into the COB and whether such complex 
orders can route directly to the COB and/or from PAR to the COB. 
Complex orders not eligible to route to COB (either directly or from 
PAR to COB) route to PAR. In addition, Rule 6.53C(c)(ii)(3) provides in 
relevant part that market participants, as defined in Rule 6.45A or 
6.45B, may submit orders or quotes to trade against orders resting in 
the COB.
    Depending on the particular option class, orders and quotes 
submitted by market participants may or may not be eligible to rest in 
COB. For example, the Exchange may determine for a particular option 
class that only non-broker-dealer public customer and broker-dealers 
that are not Market-Makers or specialists on an options exchange are 
eligible to rest in COB. For that class, Market-Maker orders and quotes 
would not be eligible to rest in COB, but may be submitted to trade 
against orders resting in COB pursuant to subparagraph (c)(ii)(3).
    Currently, market participants whose orders and quotes are not 
eligible to rest in COB but who wish to trade against orders resting in 
the COB may enter limit orders using an immediate-or-cancel (``IOC'') 
contingency to avoid resting in COB. Alternatively, if an IOC 
contingency is not used, a market participant needs to cancel any 
remaining volume for a limit order or quote after the limit order or 
quote trades against an order resting in COB.
    The Exchange now proposes to amend Rule 6.53C(c)(ii)(3) to provide 
that market participants entering orders or quotes that are not 
eligible to rest in the COB may only enter IOC orders, and such other 
order or quote types as the Exchange may determine on a class-by-class 
basis, to trade against orders resting in the COB. For orders types 
that are not eligible to rest in or trade against the COB, the orders 
will be automatically routed to PAR or at the order entry firm's 
discretion to the order entry firm's booth. For quotes types that are 
not eligible to rest in or trade against the COB, the quotes will be 
automatically cancelled. In this regard, the Exchange notes that only 
Market-Makers may enter quotes. The Exchange also notes that, should 
the Exchange determine that Market-Maker quotes are not eligible to 
rest in or trade against the COB, Market-Makers would at a minimum be 
permitted to submit IOC orders to trade against the COB.
    Finally, the Exchange is also proposing changes to the text of Rule 
6.53C(c)(i) to clarify that complex orders not eligible to rest in or 
trade against the COB will route to PAR or at the order entry firm's 
discretion to the order entry firm's booth. Currently the rule text in 
this subparagraph only references that such orders will route to PAR.
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 foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, 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. In particular, the Exchange believes that the addition of the 
new functionality further automates the handling of complex orders and 
quotes in accordance with the requirements of Rule 6.53C.
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    \3\ 15 U.S.C. 78f(b).
    \4\ 15 U.S.C. 78f(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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-2009-038 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-2009-038. This file 
number should be included on the

[[Page 30196]]

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 such 
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-2009-038 and should be submitted on or before July 
15, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-14800 Filed 6-23-09; 8:45 am]
BILLING CODE 8010-01-P