Document ID: SEC-2011-0132-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2011-01-31T05:00Z

[Federal Register Volume 76, Number 20 (Monday, January 31, 2011)]
[Notices]
[Pages 5415-5417]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-1984]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63763; File No. SR-CBOE-2011-005]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Related to Short Sell Order Handling

January 25, 2011.
    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 January 14, 2011, the Chicago Board Options Exchange, 
Incorporated (``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 substantially 
prepared by the Exchange. The Exchange has designated 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

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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 Exchange is proposing to amend CBOE Stock Exchange, LLC's 
(``CBSX,'' the CBOE's stock trading facility) rules to describe the 
manner in which the CBSX System \5\ will handle short sell orders for 
openings and reopenings in relation to Rule 201 of Regulation SHO.\6\ 
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.
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    \5\ The ``CBSX System'' means the electronic system which 
performs the functions set out in the CBSX rules including 
controlling, monitoring, and recording trading by CBSX Traders 
through CBSX Workstations and trading between CBSX Traders. See Rule 
50.1(a). A ``CBSX Trader'' means an individual who or organization 
which has the right to trade on CBSX. See Rules 50.1(f) and 50.3. A 
``CBSX Workstation'' means a computer connected to CBSX for the 
purposes of trading pursuant to the CBSX rules. See Rule 50.1(d).
    \6\ 17 CFR 242.201. See Securities Exchange Act Release Nos. 
61595 (February 26, 2010), 75 FR 11232 (March 10, 2010) and 63247 
(November 4, 2010), 75 FR 68702 (November 9, 2010). In connection 
with the adoption of Rule 201, Rule 200(g) of Regulation SHO, 17 CFR 
242.200(g), was amended to include a ``short exempt'' marking 
requirement. The amendments to Rule 201 and Rule 200(g) have a 
compliance date of February 28, 2011.
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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 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Rule 201 of Regulation SHO under the Act \7\ sets forth a short 
sale-related circuit breaker that, if triggered, will impose a 
restriction on the prices at which NMS stocks \8\ may be sold short. In 
anticipation of the upcoming February 28, 2011 compliance date for Rule 
201,\9\ the Exchange is proposing to amend CBSX's rules to describe the 
manner in which the CBSX System will handle short sell orders during 
opening rotations when a circuit breaker is triggered under Rule 201 of 
Regulation SHO.\10\
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    \7\ Id.
    \8\ 17 CFR 242.201(a)(1).
    \9\ See Securities Exchange Act Release No. 63247, note 6, 
supra, which extended the compliance date for Rule 201, 17 CFR 
242.201 and Rule 200(g), 17 CFR 242.200(g), from November 10, 2010 
to February 28, 2011.
    \10\ Opening and reopening rotations are conducted pursuant to 
Rule 52.2, Opening Procedures. Rule 52.2 provides that the CBSX 
System shall automatically open each security at the price that 
provides the highest matched quantity of order volume. Subsequent to 
any such opening prints, or immediately if there are no pre-opening 
orders in a security, the CBSX System shall disseminate regular 
quotations.
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    In particular, the Exchange is proposing to amend Interpretation 
and Policy .02 to its Rule 51.8, Types of Orders Handled, to provide 
that, if a short sale-related circuit breaker is triggered under 
Regulation SHO, orders marked ``short'' that are received by the CBSX 
System after the time a circuit breaker is triggered but prior to the 
opening of trading or reopening of trading following a halt, suspension 
or pause in the NMS stock will be cancelled/rejected.\11\ Consistent 
with the existing text of the rule and a proposed clarifying amendment 
to that text, (1) short sell orders that are resting in the CBSX Book 
\12\ at the time a circuit breaker is triggered will be permitted to 
continue resting and/or execute,\13\ and (2) short sell orders that are 
received by the CBSX System after the time a circuit breaker is 
triggered and while the NMS stock is open for trading on CBSX that are 
(A) priced above the National Best Bid will be permitted to rest and/or 
execute or (B) priced at or below the National Best Bid will be 
rejected/cancelled.\14\
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    \11\ See proposed paragraph (a)(3) of Rule 51.8.02.
    \12\ The ``CBSX Book'' means all unexecuted orders currently 
held by the CBSX System. See Rule 50.1(c).
    \13\ Short sell orders that are resting in the CBSX Book at the 
time a circuit breaker is triggered by definition are priced above 
the National Best Bid at the time of initial display and therefore 
will be permitted to continue resting and/or execute intra-day and 
during any opening/reopening rotations that occur while a circuit 
breaker is in effect. 17 CFR 242.201(b)(1).
    \14\ See existing paragraphs (a)(1) through (2) of Rule 51.8.02 
and proposed changes to clarify that subparagraph (2) (which is also 
numbered as item (2) in the description above) applies to short sale 
orders received while the NMS stock is open for trading on CBSX.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act,\15\ in general, and, in particular, furthers 
the objectives of Section 6(b)(5) of the Act,\16\ which requires that 
an exchange have rules that are designed to promote just and equitable 
principles of trade and, in general, to protect investors and the 
public interest. In particular, the Exchange believes the proposed 
change will provide clarity on the short sell order handling procedures 
that the CBSX System will apply for openings and reopenings when a 
short sale-related circuit breaker is triggered under Rule 201 of 
Regulation SHO.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 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 solicited nor received 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 self-regulatory organization 
has given the Commission written notice of its intent to file 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 proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \17\ and Rule 19b-4(f)(6) 
thereunder.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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 summarily may temporarily suspend 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

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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-2011-005 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-2011-005. 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 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 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-2011-005 and should be 
submitted on or before February 22, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-1984 Filed 1-28-11; 8:45 am]
BILLING CODE 8011-01-P