Document ID: SEC-2008-1598-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2008-11-26T05:00Z

[Federal Register: November 26, 2008 (Volume 73, Number 229)]
[Notices]               
[Page 72091-72093]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26no08-111]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58980; File No. SR-CBOE-2008-61]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Clarify Exchange Rule 9.11 Relating to Confirmations to 
Customers

November 19, 2008.
    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 November 10, 2008, 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, II, and III below, which Items have been substantially 
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 Chicago Board Options Exchange, Incorporated (``CBOE'' or 
``Exchange''), proposes to amend CBOE Rule 9.11--Confirmation to 
Customers to clarify that written confirmations relating to options 
transactions do not need to specify the exchange or exchanges on which 
an option contract is executed. The text of the proposed rule change is 
available on the Exchange's Web site (http://www.cboe.com/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 and is set forth in sections (A), 
(B), and (C) below.

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

1. Purpose
    The proposed amendment to Exchange Rule 9.11 clarifies that a 
member organization is not required to disclose the market on which an 
options transaction is executed on a written confirmation furnished to 
a customer of a member organization. The member organization will 
continue to furnish a written confirmation that contains a description 
of each transaction in the option contracts, the underlying security 
type, option expiration month, exercise price, number of option

[[Page 72092]]

contracts, premium, commissions, date of transaction and settlement 
date, and shall indicate whether the transaction is a purchase or sale 
and whether a principal or agency transaction. The confirmation shall 
also by appropriate symbols distinguish between Exchange transactions 
and other transactions in options contracts.
    Prior to August 1999, an options class was typically listed on only 
one options exchange. In August 1999, the options exchanges began to 
multiply-list options classes that were previously listed on only one 
exchange. In October 1999, the Commission stated that it believed a 
linkage among options markets would benefit investors by increasing 
competition among markets (and market participants) to provide the best 
execution of customer orders.\5\ Subsequently, the Commission directed 
the options exchanges to act jointly in discussing, developing, and 
submitting for Commission approval an intermarket linkage plan for 
multiply-traded options. On July 28, 2000, the Commission approved the 
Plan for the Purpose of Creating and Operating an Intermarket Options 
Market Linkage (the ``Options Linkage Plan'' or ``Linkage Plan'') 
submitted by the CBOE, the American Stock Exchange LLC (``Amex'') and 
the International Securities Exchange, Inc.\6\ The Philadelphia Stock 
Exchange, Inc., and the Pacific Stock Exchange agreed to participate in 
the Options Linkage Plan in November 2000.\7\ As a result of the 
introduction of multiply listed options and the implementation of the 
Linkage Plan, the contracts in a customer options order could be 
executed on more than one options exchange and the significance of the 
options exchange or exchanges that execute a particular options 
transaction has diminished significantly.
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    \5\ See Exchange Act Release No. 42029 (Oct. 19, 1999), 64 FR 
57674 (Oct. 26, 1999).
    \6\ See Exchange Act Release No. 43086 (July 28, 2000), 65 FR 
48023 (Aug. 4, 2000).
    \7\ See Exchange Act Release Nos. 43573 (Nov. 16, 2000), 65 FR 
70850 (November 28, 2000) and 43574 (Nov. 16, 2000), 65 FR 70851 
(Nov. 28, 2000) (approval order).
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    Under the duty of best execution, CBOE members are required to 
exercise diligence to obtain the best price when routing customer 
options orders for execution. The Exchange, as well as the other 
members of the Options Self Regulatory Council (the ``OSRC''),\8\ 
believes that in light of the existing best execution and disclosure 
requirements, the usefulness of including on an options confirmation 
the name of the options exchange or exchanges on which an options 
transaction was effected does not outweigh the operational difficulties 
of capturing the information given the multiple trading of options and 
the application of the Options Linkage Plan industry-wide. 
Consequently, the proposal would amend Exchange Rule 9.11 to make clear 
that written confirmations relating to options transactions are not 
required to specify the options exchange or exchanges on which such 
options contracts were executed.
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    \8\ The ORSC consists of the options exchanges and the Financial 
Industry Regulatory Authority, Inc. (``FINRA'').
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    The Exchange has worked with the other members of the OSRC in 
developing these proposed rule changes. Also, the Commission has 
approved an Amex proposal to clarify that written confirmations 
relating to options transactions are not required to specify the 
options exchange or exchanges on which such options contracts are 
executed.\9\ Each additional member of the OSRC is expected to 
similarly file rule proposals to either delete the requirement that the 
written options confirmation disclose the name of the options exchange 
or exchanges on which the options transaction was executed, or clarify 
that no such requirement exists.
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    \9\ See Exchange Act Release No. 58814 (Oct. 20, 2008), 73 FR 
63527 (Oct. 24, 2008) (SR-Amex-2008-53).
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    The Exchange believes that with the expansion of multi-listing of 
options and the introduction of new options exchanges, it has become 
operationally inefficient to require the disclosure of the market 
center on which an order was executed on the confirmation. As an 
example, a customer may have a single option order containing numerous 
option contracts executed on multiple exchanges. Under these 
conditions, it would be inefficient for the member organization to be 
required to identify the exchange symbol for each contract executed on 
that customer's order.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Exchange Act \10\ in general, and furthers the 
objectives of Section 6(b)(5) \11\ of the Act in particular in that it 
is designed to promote just and equitable principles of trade, 
facilitate transactions in securities, remove impediments to and 
perfect the mechanisms of a free and open market and a national market 
system, and, in general, to protect investors and the public interest 
by clarifying the Exchange's options confirmation procedure rules to 
better reflect the realities of the modern options market.
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    \10\ 15 U.S.C. 78f.
    \11\ 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

    Because the forgoing rule change does not: (1) Significantly affect 
the protection of investors or the public interest; (2) impose any 
significant burden on competition; and (3) become operative for 30 days 
after the date of this filing, or such shorter time as the Commission 
may designate, it has become effective pursuant to Section 19(b)(3)(A) 
of the Act \12\ and Rule 19b-4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date of filing.\14\ 
However, Rule 19b-4(f)(6)(iii) \15\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay.
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    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ Id.
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    The proposed rule change is substantially similar to an Amex rule 
that provides that written confirmations relating to options 
transactions are not required to specify the options exchange or 
exchanges on which such options were executed.\16\ The Exchange 
believes that this proposed rule change does not raise any new, unique 
or substantive issues from those raised in the approved Amex filing. 
The Exchange also believes that acceleration of the operative date is 
consistent with the protection of investors and the public 
interest.\17\

[[Page 72093]]

Lastly, the Exchange provided the Commission with 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 days prior to the 
date of the filing of the proposed rule change as required by Rule 19b-
4(f)(6).
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    \16\ See supra note 9, and related text.
    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the impact of the proposed rule on 
efficiency, competition, and capital formation. 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-2008-61 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2008-61. 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 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-2008-61 and should be 
submitted on or before December 17, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Florence E. Harmon,
Acting Secretary.
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    \18\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E8-28140 Filed 11-25-08; 8:45 am]

BILLING CODE 8011-01-P