Document ID: SEC-2010-1430-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2010-09-17T04:00Z

[Federal Register: September 17, 2010 (Volume 75, Number 180)]
[Notices]               
[Page 57100-57102]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17se10-146]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62897; File No. SR-CBOE-2010-083]

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

September 13, 2010.
    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 September 9, 2010, the Chicago Board Options Exchange, 
Incorporated (``Exchange'' or ``CBOE'') filed with the Securities and 
Exchange Commission (the ``Commission'') the proposed rule change as 
described in Items I and II

[[Page 57101]]

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 amend CBOE Rule 6.53C, Complex Orders on 
the Hybrid System, to incorporate a provision related to option classes 
in which the electronic complex order book (``COB'') is activated. 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
    CBOE Rule 6.53C governs the operation of the Exchange's electronic 
COB system. The purpose of this proposed rule change is to incorporate 
a provision to provide the Exchange with additional flexibility to 
determine the applicable matching algorithm \5\ for option classes in 
which COB is activated. Currently, Rule 6.53C(c)(ii)(2) specifies that 
the allocation of complex orders within COB shall be pursuant to the 
rules of trading priority otherwise applicable to incoming electronic 
orders in the individual component legs, and Rule 6.53C(iii)(3) 
specifies that the allocation of complex orders among market 
participants that submit orders or quotes to trade against the COB 
shall be pursuant to paragraph (c) of Rule 6.45A or Rule 6.45B, as 
applicable.
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    \5\ The matching algorithms include price-time, pro-rata, and 
the ultimate matching algorithm (``UMA'') base priorities and a 
combination of various optional priority overlays pertaining to 
public customer priority, Market-Maker participation entitlements, 
small order preference, and market turner. See Rules 6.45A, Priority 
and Allocation of Equity Option Trades on the CBOE Hybrid System, 
and 6.45B, Priority and Allocation of Trades in Index Options and 
Options on ETFs on the CBOE Hybrid System.
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    This filing proposes to provide the Exchange with additional 
flexibility regarding the allocation to permit the matching algorithm 
in effect for COB to be different from the matching algorithm in effect 
for the option class. Specifically, we are proposing that the Exchange 
may determine on a class-by-class basis which electronic matching 
algorithm shall apply to COB executions. Pursuant to Rule 6.53C.01, all 
pronouncements regarding COB matching algorithm determinations by the 
Exchange will be announced to CBOE Trading Permit Holders via 
Regulatory Circular.
    The matching algorithm applied to COB for each option class will 
continue to be pursuant to Rule 6.45A or 6.45B, as applicable. Thus, 
the Exchange is not creating any new algorithms for COB, but is 
amending Rule 6.53C to provide the flexibility to choose an algorithm 
from among the existing algorithms to be applied to COB rather than 
simply defaulting to the algorithm in effect for an option class. All 
other aspects of COB pursuant to Rule 6.53C shall apply unchanged.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \6\ that an exchange have rules that 
are designed to promote just and equitable principles of trade, and to 
remove impediments to and perfect the mechanism for 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 
the proposed change would provide more flexibility for the Exchange to 
designate the matching algorithm for COB in a manner that is consistent 
with existing CBOE rules.
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    \6\ 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

    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, provided that the self-regulatory organization 
has given the Commission written notice of its intent to file 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 proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \7\ and Rule 19b-4(f)(6) 
thereunder.\8\ At any time within 60 days of the filing of such 
proposed rule change, the Commission summarily may temporarily suspend 
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.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires 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 filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Commission notes that the Exchange has satisfied this requirement.
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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 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-2010-083 on the subject line.

[[Page 57102]]

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-2010-083. 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 website (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 website viewing and printing 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 Exchange. 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-2010-083 and should be submitted on 
or before October 8, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-23297 Filed 9-16-10; 8:45 am]
BILLING CODE 8010-01-P