Document ID: SEC-2007-0794-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2007-06-11T04:00Z

[Federal Register: June 11, 2007 (Volume 72, Number 111)]
[Notices]               
[Page 32151-32152]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11jn07-91]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55853; File No. SR-CBOE-2007-56]

 
 Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Market-Maker Obligations

June 4, 2007.
    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 30, 2007, the Chicago Board Options Exchange, Incorporated 
(``Exchange'' or ``CBOE'') 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 
substantially 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's rules relating to Market-
Maker obligations. The text of the proposed rule change is available on 
the Exchange's Web site (http://www.cboe.com), at the Exchange'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 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
    On January 23, 2007, the Commission approved CBOE's proposed rule 
change to permit thirteen option classes to trade in penny increments 
in connection with the Penny Pilot Program.\5\ In its proposed rule 
change, CBOE discussed the various quote mitigation strategies that it 
had already implemented and intended to implement. One of the quote 
mitigation strategies was to amend Rule 8.7 to modify the continuous 
electronic quoting obligation of Market-Makers and Remote Market-Makers 
(``RMMs''). Specifically, CBOE amended these obligations to provide 
that Market-Makers and RMMs shall provide continuous electronic quotes 
in 60% of the series of his/her appointed class that have a time to 
expiration of less than nine months. CBOE noted that this was 
consistent with its Rule 5.8.
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    \5\ See Securities Exchange Act Release No. 55154, 72 FR 4743 
(February 1, 2007).
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    Because CBOE's rule filing relating to the Penny Pilot Program was 
only approved on a six-month pilot basis (which is scheduled to expire 
on July 26, 2007), including apparently the proposed change to the 
continuous electronic quoting obligation of Market-Makers and RMMs, 
CBOE requests that the change to continuous electronic quoting 
obligations be approved on a permanent basis.\6\ CBOE notes that this 
quote mitigation strategy is similar to Phlx Rule 1014(b)(ii)(D)(4).\7\
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    \6\ It is unclear from the approval order whether the proposed 
change to the continuous electronic quoting obligation of Market-
Makers and RMMs was intended to be approved only on a six-month 
pilot basis, as opposed to the changes to the minimum increments for 
the thirteen option classes participating in the Penny Pilot 
Program.
    \7\ See Securities Exchange Act Release No. 55689 (May 1, 2007), 
72 FR 26192 (May 8, 2007) (granting immediate effectiveness to SR-
Phlx-2007-36).
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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.\8\ Specifically, the Exchange believes the 
proposed rule change is consistent with the Section 6(b)(5) Act \9\ 
requirements

[[Page 32152]]

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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    \8\ 15 U.S.C. 78f(b).
    \9\ 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.

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 \10\ and Rule 19b-4(f)(6) 
thereunder.\11\ 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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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). The Exchange provided the 
Commission with written notice of its intention to file the proposed 
rule change on May 16, 2007.
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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-2007-56 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-2007-56. 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. 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-2007-56 and should be submitted on or before July 
2, 2007.

    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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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-11158 Filed 6-8-07; 8:45 am]

BILLING CODE 8010-01-P