Document ID: SEC-2006-1564-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2006-12-06T05:00Z

[Federal Register: December 6, 2006 (Volume 71, Number 234)]
[Notices]               
[Page 70814-70816]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06de06-110]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54831; File No. SR-CBOE-2006-100]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to the Appointment of CBSX DPMs

November 29, 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 November 27, 2006, 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 has designated this proposal as non-
controversial under Section 19(b)(3)(A)(iii) 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)(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 adopt rules to appoint CBOE Stock Exchange DPMs. 
The text of the proposed rule change is available on the Exchange's Web 
site (http://www.cboe.com), at the Exchange's principal office, 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 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
    In September 2006, the Commission approved Exchange Chapters 50-55 
governing the trading of non-option securities on the Exchange.\5\ The 
Exchange, via a separate rule filing, will be proposing to further 
modify Chapters 50-55 in connection with the establishment of the CBOE 
Stock Exchange (``CBSX''). CBSX will be a facility of the Exchange and 
will serve as the Exchange's vehicle for trading non-option securities. 
CBSX is a separate legal entity (a Delaware Limited Liability Company) 
that is owned by the Exchange and several strategic partners. The 
Exchange separately has submitted a rule filing governing the 
allocation of securities to CBSX DPMs,\6\ and will shortly submit a 
rule filing proposing to establish CBSX as a facility of the Exchange.
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    \5\ See Securities Exchange Act Release No. 54422 (September 11, 
2006), 71 FR 54537 (September 15, 2006) (``STOC Approval Order'') 
(approving SR-CBOE-2004-21).
    \6\ See Securities Exchange Act Release No. 54792 (November 20, 
2006), 71 FR 68659 (November 27, 2006) (notice of filing of SR-CBOE-
2006-96).
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    The purpose of this filing is to adopt rules that will allow for 
the appointment of CBSX DPMs. Any such appointments would be contingent 
on Commission approval of rules governing CBSX DPM trading procedures 
and obligations. The Exchange hopes to

[[Page 70815]]

launch CBSX on February 5, 2007. Establishing rules to allow for 
appointment of CBSX DPMs ahead of the anticipated launch of CBSX will 
allow the CBSX DPM firms to immediately market CBSX as a destination 
marketplace.
    The Exchange expects CBSX will appoint a limited number of CBSX 
DPMs. In accordance with the proposed revisions to Rule 53.53, CBSX 
will select the firms that would be designated as CBSX DPMs. Factors to 
be considered in making such a selection are essentially identical to 
the factors set forth in the current rule applicable to STOC DPMs. Such 
factors may include, but are not limited to, any one or more of the 
following: (1) Adequacy of capital; (2) operational capacity; (3) 
trading experience and observance of generally accepted standards of 
conduct by the applicant; (4) number and experience of support 
personnel of the applicant; (5) regulatory history of adherence to 
Exchange rules by the applicant; (6) willingness and ability of the 
applicant to promote CBSX as a marketplace; (7) performance evaluations 
conducted pursuant to Exchange/CBSX rules; and (8) in the event that 
one or more shareholders, directors, officers, partners, managers, 
members, or other principals of an applicant is or has previously been 
a shareholder, director, officer, partner, manager, member, or other 
principal in another CBSX DPM, adherence by such CBSX DPM to the 
requirements set forth in CBSX rules regarding CBSX DPM 
responsibilities and obligations during the time period in which such 
person(s) held such position(s) with the CBSX DPM.
2. Statutory Basis
    CBOE 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 Section 6(b)(5) \8\ requirements 
that the rules of an exchange be designed to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and 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 would 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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \9\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\10\ Because the foregoing proposed rule change (i) does not 
significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) does not 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, 
the proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act and Rule 19b-4(f)(6)(iii) thereunder.\11\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ Rule 19b-4(f)(6)(iii) also requires the Exchange to give 
written notice to the Commission of its intent to file the proposed 
rule change at least five business days prior to filing. The 
Exchange complied with this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to waive the operative 
delay if such action is consistent with the protection of investors and 
the public interest. The Exchange has asked the Commission to waive the 
operative delay to permit the proposed rule change to become effective 
prior to the 30th day after filing.
    The Commission has determined to waive the 30-day delay and allow 
the proposed rule change to become operative immediately.\12\ The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
The proposed rule is substantially similar to the previous version of 
the rule approved for the Exchange's STOC system.\13\
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    \12\ For purposes only of waiving the operative delay of this 
proposal, the Commission notes that it has considered the proposed 
rule's impact on efficiency, competition, and capital formation. See 
15 U.S.C. 78c(f).
    \13\ See STOC Approval Order, supra note 5.
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    At any time within 60 days of the filing of the 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.

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 No. SR-CBOE-2006-100 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-2006-100. 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 Commissions 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 Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying

[[Page 70816]]

information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-CBOE-2006-100 and should be submitted on or before 
December 27, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-20656 Filed 12-5-06; 8:45 am]

BILLING CODE 8011-01-P