Document ID: SEC-2006-1401-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2006-10-30T05:00Z

[Federal Register: October 30, 2006 (Volume 71, Number 209)]
[Notices]               
[Page 63370-63372]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30oc06-139]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54640; File No. SR-CBOE-2006-82]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to the Appointment Costs of Certain Hybrid 2.0 
Classes

 October 23, 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 October 12, 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 prepared by the Exchange. 
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 Rules relating to the ``appointment 
costs'' of certain Hybrid 2.0 Classes. The text of the proposed rule 
change is available on the Exchange's Web site (http://www.cboe.com), 

at the CBOE's Office of the Secretary, 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

[[Page 63371]]

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
    The purpose of this rule change is to amend CBOE Rules 8.3 and 8.4 
relating to the ``appointment costs'' of certain Hybrid 2.0 Classes. 
CBOE Rules 8.3 and 8.4 provide that Market-Makers and Remote Market-
Makers (``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 ``AA'' 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).
    CBOE Rules 8.3 and 8.4 assign ``appointment costs'' to Hybrid 2.0 
Classes based on the Tier in which they are located, and a Market-Maker 
and an RMM may select for each Exchange membership it owns or leases 
any combination of products trading on the Hybrid 2.0 Platform \5\ 
whose aggregate ``appointment cost'' does not exceed 1.0.\6\
    CBOE proposes to make the following changes to the Tiers. First, 
CBOE proposes to amend the composition of Tier E such that it includes 
Hybrid 2.0 Classes 571 to 999. Currently, Tier E is composed of all 
remaining Hybrid 2.0 Classes that are not ranked among the top 570 
Hybrid 2.0 Classes in terms of volume. CBOE intends to maintain the 
current appointment cost of .01 for Tier E classes. Second, CBOE 
proposes to create a new Tier F composed of all remaining Hybrid 2.0 
Classes with an appointment cost of .001.
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    \5\ CBOE Rule 1.1(aaa) defines Hybrid Trading System and Hybrid 
2.0 Platform.
    \6\ 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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    CBOE believes that amending the composition of Tier E and creating 
a new Tier F with an appointment cost of .001 will effectively lower a 
Market-Maker's and RMM's cost to access CBOE's marketplace and receive 
an appointment in multiple Hybrid 2.0 Classes. Moreover, these revised 
appointment costs are more competitive with the access costs at other 
options exchanges to hold an appointment as a market-maker in multiple 
option classes.
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 Section 6(b)(5) \8\ 
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.
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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 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 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 \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 accelerate the 30-day operative date. The 
Commission, consistent with the protection of investors and the public 
interest, has determined to accelerate the 30-day operative date to 
enable the Exchange to implement the changes to the Tiers in connection 
with its quarterly rebalancing of the Tiers.\12\
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    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ For purposes only of 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-2006-82 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-2006-82. 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

[[Page 63372]]

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-2006-82 and should be 
submitted on or before November 20, 2006.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
Nancy M. Morris,
Secretary.
[FR Doc. E6-18082 Filed 10-27-06; 8:45 am]

BILLING CODE 8011-01-P