Document ID: SEC-2006-0672-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2006-05-24T04:00Z

[Federal Register: May 24, 2006 (Volume 71, Number 100)]
[Notices]               
[Page 30006-30007]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24my06-139]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53816; File No. SR-CBOE-2006-50

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Amend CBOE Rule 8.4 Relating to Remote Market-Maker 
Appointments

May 17, 2006.
    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 May 16, 2006, 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 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

    CBOE proposes to amend CBOE Rule 8.4 relating to Remote Market-
Maker appointments. The text of the proposed rule change is available 
on CBOE's Web site (http://www.cboe.com), 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
    The purpose of the proposed rule change is to amend CBOE Rule 8.4 
relating to Remote Market-Maker (``RMM'') appointments. CBOE Rule 8.4 
provides that RMMs will have a Virtual Trading Crowd (``VTC'') 
Appointment, which confers the right to quote electronically in a 
certain number of products selected from various Tiers. Currently, 
there are five Tiers (Tiers A, B, C, D, and E) that are structured 
according to trading volume statistics, and an ``A+'' Tier which 
consists of four option classes--options on Standard & Poor's 
Depositary Receipts (SPY), options on the Nasdaq-100 Index Tracking 
Stock (QQQQ), options on Diamonds (DIA), and options based on The Dow 
Jones Industrial Average (DJX). CBOE Rule 8.4(d) assigns appointment 
costs to Hybrid 2.0 Classes based on the Tier in which they are 
located, and an RMM may select for each Exchange membership it owns or 
leases any combination of products trading on the Hybrid 2.0 Platform 
\5\ whose aggregate appointment cost does not exceed 1.0.
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    \5\ CBOE Rule 1.1(aaa) defines Hybrid Trading System and Hybrid 
2.0 Platform.
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    CBOE proposes to make the following changes to the Tiers. First, 
CBOE proposes to remove from the A+ Tier DIA options and DJX options. 
Going forward, DIA options and DJX options would fall within one of the 
remaining Tiers A through E depending on their trading volume. As a 
result of this change, the appointment costs for DIA options and DJX 
options would be reduced from .25 to the appointment cost for whichever 
Tier (A through E) they are assigned. This change would lower an RMM's 
cost to receive an appointment in these two Hybrid 2.0 Classes. Second, 
CBOE proposes to create a new Tier--the ``AA'' Tier, and place within 
it options on the CBOE Volatility Index (VIX). CBOE proposes to assign 
an appointment cost of .50 to VIX options. Currently, VIX options are 
traded on the Hybrid Trading System, but not on the Hybrid 2.0 
Platform.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act 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.\6\ Specifically, the Exchange believes the 
proposed rule change is consistent with the Section 6(b)(5) of the 
Act,\7\ which requires 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 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 that is not necessary or appropriate in 
furtherance of the purposes of the Act.

[[Page 30007]]

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(iii) of the Act \8\ and subparagraph (f)(6) of Rule 19b-4 
\9\ thereunder because it does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; (iii) become operative for 30 days 
from the date on which it was filed, or such shorter time as the 
Commission may designate; and the Exchange has given the Commission 
written notice of its intention to file the proposed rule change at 
least five business days prior to filing. 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.
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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6).
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    Under Rule 19b-4(f)(6) of the Act,\10\ the proposal does not become 
operative for 30 days after the date of its filing, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interest. The Exchange has requested that 
the Commission waive the 30-day operative date, so that the proposal 
may take effect upon filing. The Exchange believes that the proposal to 
lower the appointment costs for the DIA and DJX option classes does not 
raise any new regulatory issues and promotes competition by reducing 
the access costs of trading in multiple options classes as an RMM. The 
Exchange believes that the proposal to add VIX options to a new AA Tier 
also does not raise any new, unique, or substantive issues from those 
raised in previous CBOE rule changes relating to these Tiers. The 
Commission agrees and, consistent with the protection of investors and 
the public interest, has determined to waive the 30-day operative date 
so that the proposal may take effect upon filing.\11\
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    \10\ Id.
    \11\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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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-2006-50 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2006-50. 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 Section, 100 F Street, NE., Washington, 
DC 20549. 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-2006-50 and 
should be submitted on or before June 14, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-7916 Filed 5-23-06; 8:45 am]

BILLING CODE 8010-01-P