Document ID: SEC-2006-1303-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2006-10-06T04:00Z

[Federal Register: October 6, 2006 (Volume 71, Number 194)]
[Notices]               
[Page 59169-59170]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06oc06-104]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54533; File No. SR-CBOE-2006-79]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change to Include DXL Options on the Hybrid 2.0 Platform

September 28, 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 September 22, 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 and II below, which Items have been prepared by the CBOE. 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 CBOE proposes to amend CBOE Rule 8.3 relating to Market-Maker 
appointments to include DXL options on the Hybrid 2.0 Platform. 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.

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 purpose of this rule change is to amend CBOE Rule 8.3 in 
connection with CBOE's determination to trade options based on \1/10\ 
the Value of The Dow Jones Industrial Average (DXL) on the Hybrid 2.0 
Platform.\5\ Specifically, CBOE proposes to amend Rule 8.3(c)(iv) to 
delete the reference to DXL options in the table listing the non-Hybrid 
option classes and their related appointment costs. As a Hybrid 2.0 
Class, DXL would fall within the appointment cost structure set forth 
in CBOE Rule 8.3(c)(i), and based on its trading volume, initially be 
included in Tier E with an appointment cost of .01.\6\ As a result, it 
would have an appointment cost that is identical to its current 
appointment cost.
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    \5\ CBOE Rule 1.1(aaa) defines Hybrid Trading System and Hybrid 
2.0 Platform.
    \6\ CBOE Rules 8.3 and 8.4 provide that Market-Makers and RMMs, 
respectively, can create a Virtual Trading Crowd (``VTC'') 
Appointment, which confers the right to quote electronically in a 
certain number of products selected from various ``Tiers.'' 
Currently, there are five Tiers (Tiers A, B, C, D, and E) that are 
structured according to trading volume statistics, an ``A++'' Tier 
which consists of options on the CBOE Volatility Index (VIX), and an 
``A+'' Tier which consists of two option classes--options on 
Standard & Poor's Depositary Receipts (SPY) and options on the 
Nasdaq-100 Index Tracking Stock (QQQQ). These Tiers are also 
utilized for purposes of determining DPM and e-DPM membership 
ownership requirements as provided in CBOE Rules 8.85 and 8.92, 
respectively.
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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.\7\ Specifically, the Exchange believes the 
proposed rule change is consistent with the requirements of section 
6(b)(5) \8\ 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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    \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

    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 received nor solicited written 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 Exchange has given the 
Commission written notice of its intent to file the proposed rule 
change prior to the date

[[Page 59170]]

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 \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    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.
    Under Rule 19b-4(f)(6)(iii) of the Act,\11\ 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 five-day pre-filing requirement 
and accelerate the 30-day operative date. The Commission, consistent 
with the protection of investors and the public interest, has 
determined to waive the five-day pre-filing requirement and to 
accelerate the 30-day operative date to allow DXL options to be traded 
on Hybrid 2.0 without delay.\12\
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    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ For purposes only of waiving the five-day pre-filing 
requirement and accelerating the 30-day operative period for 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-2006-79 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-2006-79. 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-2006-79 and should be submitted on or before 
October 27, 2006. 

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-16579 Filed 10-5-06; 8:45 am]

BILLING CODE 8011-01-P