Document ID: SEC-2008-0281-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2008-02-21T05:00Z

[Federal Register: February 21, 2008 (Volume 73, Number 35)]
[Notices]               
[Page 9609-9610]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21fe08-115]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57326; File No. SR-CBOE-2008-03]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of Proposed Rule Change Relating to 
Complex Orders

Feburary 13, 2008.
    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 January 14, 2008, the Chicago Board Options Exchange, Incorporated 
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') a proposed rule change as described in 
Items I, II, and III below, which Items have been prepared 
substantially by CBOE. 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 Exchange proposes to amend its rules regarding complex orders. 
The text of the proposed rule change is available at CBOE, the 
Commission's Public Reference Room, and http://www.cboe.com/legal.

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

    In its filing with the Commission, CBOE 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. CBOE 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 Exchange is proposing to amend its priority provisions 
contained in CBOE Rules 6.45, 6.45A and 6.45B to provide that a complex 
order may be executed at a net debit or credit price with another 
member without giving priority to equivalent bids (offers) in the 
individual series legs that are represented in the public customer 
limit order book, provided that one leg of the complex order betters 
the corresponding bid (offer) in the public customer limit order book 
by at least the amount determined by the Exchange on a class-by-class 
basis. The amount shall be either (i) one minimum trading increment 
(i.e., $0.10, $0.05 or $0.01, as applicable) or (ii) a $0.01 
increment.\3\
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    \3\ Additionally, the Exchange is proposing to make two non-
substantive changes to Rule 6.45B(b) in order to conform the text of 
that rule to Rule 6.45A(b). Specifically, the Exchange is replacing 
the phrase ``the trading crowd'' with the phrase ``open outcry'' in 
Rule 6.45B(b) and inserting the phrase ``at a net debit or credit 
price'' in Rule 6.45B(b)(ii).
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    Currently the rules provide that one leg of a complex order must 
better the corresponding bid (offer) in the public customer limit order 
book by at least one minimum trading increment.\4\ The Exchange 
believes that changing the rule to permit the minimum amount to be 
$0.01 would provide additional flexibility to better facilitate the 
orderly execution of complex orders, and would provide additional 
opportunities and incentives for members to provide price improvement 
to complex orders.\5\
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    \4\ The rules also provide that a complex order may be executed 
at the same derived net price as other individual series legs 
represented in the trading crowd, which for purposes of the complex 
order priority provision includes broker-dealer orders resting in 
the electronic book and electronic quotes of Market-Makers.
    \5\ Currently, for example, if a complex order spread market is 
quoted on a net debit/credit basis at $0.90 to $1.10 and there are 
orders represented in the public customer limit order book in the 
individual series at each of the respective prices, the complex 
order may only be executed with another member at a net price of 
$0.95 to $1.05. Under the proposed revisions, a complex order may be 
executed at a net price of $0.91 to $1.09, permitting price 
improvement at net prices ranging from $0.91-$0.94 and $1.06-$1.09.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
section 6(b) of the Act,\6\ in general, and furthers the objectives of 
section 6(b)(5) of the Act,\7\ in particular, in that it is designed to 
prevent fraudulent and manipulative acts and practices, promote just 
and equitable principles of trade, remove impediments to and perfect 
the mechanisms of a free and open market and a national market system, 
and, in general, 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 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 either solicited or received with respect 
to the proposed rule change.

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 CBOE 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 Number SR-CBOE-2008-03 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission,

[[Page 9610]]

100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2008-03. 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 the filing also will be available for 
inspection and copying at the principal office of 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-2008-03 and should be 
submitted on or before March 13, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
Florence E. Harmon,
Deputy Secretary.
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    \8\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E8-3197 Filed 2-20-08; 8:45 am]

BILLING CODE 8011-01-P