Document ID: SEC-2007-0395-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2007-03-16T04:00Z

[Federal Register: March 16, 2007 (Volume 72, Number 51)]
[Notices]               
[Page 12642-12643]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16mr07-106]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55438; File No. SR-CBOE-2007-19]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change to Extend Two Pilot Programs That Allow RMMs and e-DPMs to 
Have up to One Affiliated Market-Maker Physically Present in the 
Trading Crowd

March 9, 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 February 22, 2007, the Chicago Board Options Exchange, Incorporated 
(``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') 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\ 
which renders the proposal 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)(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 extend two pilot programs allowing Remote Market-
Makers (``RMMs'') and Electronic DPMs (``e-DPMs'') to have up to one 
separate affiliated Market-Maker physically present in the trading 
crowd. The CBOE proposes to extend the pilots until March 14, 2008. The 
text of the proposed rule change is available on CBOE's Web site 
(http://www.cboe.org/Legal), at the CBOE's Office of the Secretary, and 

at the Commission.

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 Exchange proposes to amend CBOE Rules 8.4(c)(i) and 8.93(vii) 
to extend the pilot programs allowing an RMM and e-DPM the option to 
have up to one separate affiliated Market-Maker physically present in 
the trading crowds where it operates as an RMM or e-DPM, respectively 
(such Market-Makers would be required to trade on a separate 
membership).\5\ The pilots would be extended from March 14, 2007 until 
March 14, 2008.
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    \5\ The SEC previously extended the pilot programs for 6 months, 
from September 14, 2006 until March 14, 2006. See Securities 
Exchange Act Release No. 54443 (September 14, 2006), 71 FR 55237 
(September 21, 2006) (granting immediate effectiveness to SR-CBOE-
2006-77).
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    In July of 2003, the SEC approved the e-DPM program, including the 
pilot program.\6\ The pilot allows e-DPM firms to maintain a physical 
presence in the trading crowd through an affiliated Market-Maker who 
would also be able to stream a quote. The pilot, however, limits the 
number of separate affiliates per trading crowd to one.
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    \6\ See Securities Exchange Act Release No. 50003 (July 12, 
2004), 69 FR 43028 (July 19, 2004) (approving SR-CBOE-2004-24).
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    In March of 2005, the SEC approved the RMM program, including the 
pilot program.\7\ The pilot allows RMM firms to maintain a physical 
presence in the trading crowd through an affiliated Market-Maker who 
would also be able to stream a quote. The pilot limits the number of 
separate affiliates per trading crowd to one.
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    \7\ See Securities Exchange Act Release No. 51366 (March 14, 
2005), 70 FR 13217 (March, 18, 2005) (approving SR-CBOE-2004-75).
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    CBOE has provided the Commission, under separate cover, data 
relating to these Pilot Programs, which the SEC staff is reviewing.\8\ 
The Exchange has committed to providing by September 14, 2007, data 
required by the Pilots.
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    \8\ The Exchange has committed to providing by September 14, 
2007, updated data required by the Pilots. Telephone conversation 
between Patrick Sexton, Associate General Counsel, CBOE and Sonia 
Trocchio, Special Counsel, Division of Market Regulation, Commission 
(March 7, 2007).
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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.\9\ Specifically, the Exchange believes the 
proposed rule change is consistent with the Section 6(b)(5) of the 
Act,\10\ 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 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

[[Page 12643]]

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

    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 \11\ and subparagraph (f)(6) of Rule 19b-4 
\12\ 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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    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
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    Under Rule 19b-4(f)(6) of the Act,\13\ 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 pilots may 
continue without interruption. The Commission believes that the 
proposed rule change does not raise any new regulatory issues and, 
consistent with the protection of investors and the public interest, 
has determined to waive the 30-day operative date.\14\
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    \13\ Id.
    \14\ For purposes only of waiving 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-2007-19 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-2007-19. 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. 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-2007-19 and should be 
submitted on or before April 6, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-4812 Filed 3-15-07; 8:45 am]

BILLING CODE 8010-01-P