Document ID: SEC-2009-0345-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2009-03-16T04:00Z

[Federal Register: March 16, 2009 (Volume 74, Number 49)]
[Notices]               
[Page 11143-11144]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16mr09-103]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59539; File No. SR-CBOE-2009-015]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Two Pilot Programs

March 9, 2009.
    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 February 27, 2009, 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 and II below, which Items have been prepared by 
the Exchange. The Exchange filed the proposed rule change pursuant to 
Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ 
which renders it 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).
    \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 Exchange proposes to amend CBOE rules relating to two pilot 
programs. The text of the proposed rule change is available on the 
Exchange's Web site (http://www.cboe.org/Legal), 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 those 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 parts 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 delete reference to two 
existing pilot programs in CBOE's rules that CBOE no longer utilizes 
and which are scheduled to expire on March 14, 2009.
    One pilot program allows a Market-Maker, Off-Floor DPM, Off-Floor 
LMM or an e-DPM to have an affiliated Market-Maker physically present 
in the trading crowds where it operates as a Market-Maker, Off-Floor 
DPM, Off-Floor LMM, or e-DPM, respectively. The second pilot program 
allows a CBOE member or member firm to have multiple aggregation units 
operating as separate Market-Makers within the same class, provided 
they satisfy certain criteria set forth in Rule 8.3(c)(vi).\5\
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    \5\ These pilot programs previously were extended for one year 
until March 14, 2009. See Rel. No. 57519 (March 18, 2008), 73 FR 
15805 (March 25, 2008) (immediate effectiveness of SR-CBOE-2008-29).
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    CBOE notes that these pilot programs were initially adopted, in 
part, due to CBOE's usage of an algorithm that allocates electronic 
trades, in whole or in part, in an equal percentage based on the number 
of market participants quoting at the best bid or offer--specifically 
CBOE's ultimate matching algorithm ``UMA.'' In January 2008,

[[Page 11144]]

CBOE determined to utilize a pro-rata algorithm, instead of UMA, as the 
applicable matching algorithm in all Hybrid classes. As a result, these 
pilot programs are no longer being utilized and CBOE proposes to delete 
reference to them in its rules in connection with their expiration on 
March 14, 2009.
    As amended, Rule 8.3(c)(vi) states that a Market-Maker may not hold 
an appointment and submit electronic quotations in any class in which 
an affiliated DPM, LMM or e-DPM is appointed, or in which an affiliated 
Market-Maker holds an appointment and submits electronic quotations, if 
CBOE uses in that class an allocation algorithm that allocates 
electronic trades, in whole or in part, in an equal percentage based on 
the number of market participants quoting at the best bid or offer. 
However, Rule 8.3(c)(vi) also notes that: (i) The foregoing restriction 
does not apply if CBOE uses in a particular options class an allocation 
algorithm that does not allocate electronic trades, in whole or in 
part, in an equal percentage based on the number of market participants 
quoting at the best bid or offer; and (ii) there is no restriction on 
affiliated Market-Makers holding an appointment in the same class for 
purposes of trading in open outcry. These exceptions are currently 
contained in Rule 8.3(c)(vi)(3).
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (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. 
Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) Act \6\ requirements 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, in that deleting reference 
to two existing pilot programs in CBOE's rules that CBOE no longer 
utilizes and which are scheduled to expire on March 14, 2009 clarifies 
the rules that members are obligated to comply with.
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    \6\ 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

    The Exchange neither solicited nor received comments on the 
proposal.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change 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, it 
has become effective pursuant to Section 19(b)(3)(A) of the Act \7\ and 
Rule 19b-4(f)(6) thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the self-regulatory organization to submit to the 
Commission written notice of its intent to file the proposed rule 
change, along with a brief description and text of the proposed rule 
change, at least five business days prior to the date of filing of 
the proposed rule change, or such shorter time as designated by the 
Commission. The Exchange has satisfied this requirement.
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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 Number SR-CBOE-2009-015 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-2009-015. 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 on official business 
days between the hours of 10 a.m. and 3 p.m. 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 information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
CBOE-2009-015 and should be submitted on or before April 6, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-5566 Filed 3-13-09; 8:45 am]

BILLING CODE 8011-01-P