Document ID: SEC-2012-0062-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2012-01-13T05:00Z

[Federal Register Volume 77, Number 9 (Friday, January 13, 2012)]
[Notices]
[Pages 2112-2114]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-527]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66119; File No. SR-CBOE-2011-126]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of a Proposed Rule Change Relating to 
the CBOE Stock Exchange Request for Quote Rules

January 9, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on December 27, 2011, the Chicago Board Options Exchange, 
Incorporated (the ``Exchange'' or ``CBOE'') filed with the Securities 
and Exchange Commission (the ``Commission'') the proposed rule change 
as described in Items I, II and III below, which Items have been 
prepared by the Exchange. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its rules relating to requests for 
quotes on the CBOE Stock Exchange (``CBSX''). The text of the proposed 
rule change is available on the Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 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 self-regulatory organization 
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 self-regulatory organization 
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
    CBSX is a stock-trading facility of CBOE. Prior to the 
establishment of CBSX, CBOE adopted trading rules in Chapters 50-54 for 
the purely electronic trading of non-option securities.\3\ Those rules, 
which were based, to an extent, on CBOE's screen-based trading rules in 
Chapters 40-46, contemplated the use of request-for-quote messages 
(RFQs). Chapters 50-54 were subsequently modified in connection with 
the introduction of CBSX.\4\ The provisions related to RFQs were not 
materially changed at that time. RFQ messages are generally intended to 
prompt market-makers in a given security to respond with a quote. RFQs 
are generally beneficial when seeking liquidity for a security in which 
a quote does not exist.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 54422 (September 11, 
2006), 71 FR 54537 (September 15, 2006) approving SR-CBOE-2004-21.
    \4\ See Securities Exchange Act Release No. 55392 (March 2, 
2007), 72 FR 10572 (March 8, 2007) approving SR-CBOE-2006-112.
---------------------------------------------------------------------------

    The purpose of this filing is to delete Rule 50.1 regarding the 
definition of RFQ, Rule 52.9 regarding RFQ processing, and references 
to RFQs in Rule 53.23 regarding CBSX Remote Market-Maker obligations. 
There are two reasons behind the Exchange's desire to eliminate RFQs on 
CBSX: (1) Because

[[Page 2113]]

CBSX Remote Market-Makers are required by rule to maintain two-sided 
quotations and because CBSX links orders to NBBO markets when CBSX is 
not quoting at the NBBO, CBSX participants have never inquired about 
utilizing RFQs; and (2) the functionality for users to transmit RFQs on 
CBSX is not fully supported by the system.
    As more fully set forth in CBSX Rule 53.23 Interpretation and 
Policy .01, CBSX Remote Market-Makers are required to maintain two-
sided quotations throughout the trading day using prices that are no 
further than a designated percentage from the national best bid and 
offer (``NBBO''). This requirement, the fact that the CBSX market is 
typically competitive in terms of displayed prices, and the fact that 
CBSX transmits orders to other market centers displaying the NBBO when 
CBSX is not posting the NBBO, obviates the need for an RFQ process.\5\
---------------------------------------------------------------------------

    \5\ The Exchange notes that it is working with SEC Staff on 
enhancements to the CBSX Market-Maker obligations and that those 
revisions do not contemplate the use of RFQs.
---------------------------------------------------------------------------

    The Exchange also has realized that the ability of a CBSX 
participant to submit an RFQ is not currently functional. Accordingly, 
the Exchange believes it is appropriate to delete RFQ processes from 
the CBSX trading rules. This will ensure that CBSX participants or 
other interested parties are not confused by these rules and do not 
expect to be able to submit RFQs on CBSX. The Exchange notes that it is 
not aware of any CBSX participants, or any other party, having 
expressed an interest in utilizing RFQs.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') \6\ and the rules and 
regulations thereunder 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 remove impediments to and 
to perfect the mechanism for a free and open market in that elimination 
of references to RFQs in the CBSX trading rules will remove any 
potential confusion caused by having rules that reference functionality 
that is not operational.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78s(b)(1)[sic].
    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 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 45 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 the self-regulatory organization consents, the Commission will: 
(A) by order approve or disapprove 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 email to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2011-126 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2011-126. This file 
number should be included on the subject line if email 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 Web site viewing and 
printing 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 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-2011-126 and should be 
submitted on or before February 3, 2012.
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12).

[[Page 2114]]

---------------------------------------------------------------------------

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-527 Filed 1-12-12; 8:45 am]
BILLING CODE 8011-01-P