Document ID: SEC-2007-0998-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2007-07-25T04:00Z

[Federal Register: July 25, 2007 (Volume 72, Number 142)]
[Notices]               
[Page 40910-40911]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25jy07-102]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56094; File No. SR-CBOE-2007-80]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Extend Two Pilot Programs Related to the Exchange's 
Automated Improvement Mechanism Until July 18, 2008

July 18, 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 July 13, 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 and II below, which Items have been substantially prepared by 
the Exchange. The Exchange filed the proposed rule change pursuant to 
Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ 
which renders the proposed rule change effective upon filing with the 
Commission. 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).
    \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 extend two pilot programs related to the 
Exchange's Automated Improvement Mechanism (``AIM'') for one year, 
until July 18, 2008. 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
    In February 2006, CBOE obtained approval of a filing adopting the 
AIM auction process.\5\ AIM exposes certain orders electronically to an 
auction process to provide such orders with the opportunity to receive 
an execution at an improved price. The AIM auction is available only 
for orders that an Exchange member represents as agent and for which a 
second order of the same size as the ``Agency Order'' (and on the 
opposite side of the market) is also submitted (effectively stopping 
the Agency Order at a given price).
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    \5\ See Securities Exchange Act Release No. 53222 (February 3, 
2006), 71 FR7089 (February 10, 2006) (approving SR-CBOE-2005-60).
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    Two components of AIM were approved on a pilot basis: (1) That 
there is no minimum size requirement for orders to be eligible for the 
auction; and (2) that the auction will conclude prematurely anytime 
there is a quote lock on the Exchange pursuant to Exchange Rule 
6.45A(d).\6\ In connection with the pilot programs, the Exchange has 
submitted to the Commission reports providing detailed AIM auction and 
order execution data. In July 2006, the Exchange extended the pilot 
program until July 18, 2007.\7\ The proposed rule change merely extends 
the duration of the pilot programs until July 18, 2008. Extending the 
pilots for an additional year will allow the Commission more time to 
consider the impact of the pilot programs on AIM order executions.
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    \6\ That rule relates to situations where a Market-Maker's quote 
interacts with the quote of another CBOE Market-Maker (i.e. when 
internal quotes lock).
    \7\ See Securities Exchange Act Release No. 54147 (July 14, 
2006), 71 FR 41487 (July 21, 2006) (SR-CBOE-2006-64).
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act,\8\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act,\9\ in particular, in that by allowing the 
Commission additional time to evaluate the AIM pilot programs, it 
should serve to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and protect 
investors and the public interest.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78(f)(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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) \11\ thereunder 
because the proposal does not: (i) Significantly affect the protection 
of investors or the public interest; (ii) impose any significant burden 
on competition; and (iii) by its terms, 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.\12\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ Rule 19b-4(f)(6)(iii) under the Act requires the Exchange 
to provide the Commission notice of the Exchange's 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 
date of filing of the proposed rule change, or such shorter time as 
designated by the Commission. See 17 CFR 240.19b-4(f)(6)(iii). The 
Commission deems this requirement to have been satisfied by the 
notice of intent filed by the Exchange on July 10, 2007.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not

[[Page 40911]]

become operative prior to 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) \13\ 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 period. The Commission 
believes that waiver of the 30-day operative delay is consistent with 
the protection of investors and the public interest, because the 
proposal would allow the pilots to continue without interruption until 
July 18, 2008.\14\ For this reason, the Commission designates the 
proposal to be operative upon filing with the Commission.
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    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such proposed 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.\15\
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    \15\ 15 U.S.C. 78s(b)(3)(C).
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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-2007-80 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-2007-80. 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 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-2007-80 and should be 
submitted on or before August 15, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-14311 Filed 7-24-07; 8:45 am]

BILLING CODE 8010-01-P