Document ID: SEC-2007-0017-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2007-01-05T05:00Z

[Federal Register: January 5, 2007 (Volume 72, Number 3)]
[Notices]               
[Page 599-600]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05ja07-68]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55012; File No. SR-CBOE-2006-109]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of a Proposed Rule Change Regarding 
Complex Trades

December 27, 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 December 21, 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, II, and III below, which Items have been substantially 
prepared by the Exchange. 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.
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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 CBOE Rule 6.80 to revise the definition 
of ``Complex Trade,'' a term that applies to trades through the 
Intermarket Linkage (``Linkage''). The text of the proposed rule change 
appears below, with additions italicized and deletions in [brackets]: 
Rule 6.80. Definitions
    (1)-(3) No change.
    (4) ``Complex Trade'' means the execution of an order in an option 
series in conjunction with the execution of one or more related 
order(s) in different options series in the same underlying security 
occurring at or near the same time [for the equivalent number of 
contracts and for the purpose of executing a particular investment 
strategy] for the purpose of executing a particular investment strategy 
and for an equivalent number of contracts, provided that the number of 
contracts of the legs of a spread, straddle, or combination order may 
differ by a permissible ratio. The permissible ratio for this purpose 
is any ratio that is equal to or greater than one-to-three (.333) and 
less than or equal to three-to-one (3.00).
    (5)-(21) No change.
* * * * *

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 substantially 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 CBOE proposes to amend the definition of ``Complex Trade,'' 
which is a term that the CBOE uses for Linkage purposes. A Complex 
Trade is an execution of an order in an options series in conjunction 
with one or more

[[Page 600]]

other orders in different series with the same underlying security 
``for the equivalent number of contracts.'' \3\ A Complex Trade is 
exempt from the trade-through rule.\4\
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    \3\ See CBOE Rule 6.80(4).
    \4\ See CBOE Rule 6.83(b)(7).
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    In contrast to the Linkage term, Complex Trade, CBOE Rule 6.53C(a) 
defines the term ``Complex Order'' for purposes other than Linkage. 
According to that definition, one type of Complex Order is a ``Ratio 
Order,'' which need not have an equivalent number of contracts.\5\ 
Specifically, a Ratio Order may have a ratio ranging from one-to-three 
(.333) to three-to-one (3.00). The Exchange applies modified priority 
rules to Complex Orders.\6\
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    \5\ See CBOE Rule 6.53C(a)(5).
    \6\ See CBOE Rule 6.45.
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    This proposal will make the Linkage term, Complex Trade, consistent 
with the general term, Complex Order. According to the CBOE, the other 
five options exchanges are adopting a similar definition of Complex 
Trade, which will result in uniform application of the term across all 
options exchanges. The CBOE believes that such uniformity will 
facilitate the rapid execution of complex trades in all markets.
2. Statutory Basis
    The CBOE 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, with the requirements 
of Section 6(b) of the Act.\7\ Specifically, the Exchange believes the 
proposed rule change is consistent with the Section 6(b)(5) \8\ 
requirements that the rules of an exchange be designed to promote just 
and equitable principles of trade and to protect investors and the 
public interest.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The 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 CBOE neither solicited nor received comments on the proposal.

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 self-regulatory organization 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 No. SR-CBOE-2006-109 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-2006-109. 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 Commissions 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. 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-2006-109 and should be submitted on or before January 26, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
 [FR Doc. E6-22595 Filed 1-4-07; 8:45 am]

BILLING CODE 8011-01-P