Document ID: SEC-2007-0597-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2007-04-25T04:00Z

[Federal Register: April 25, 2007 (Volume 72, Number 79)]
[Notices]               
[Page 20570-20571]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25ap07-120]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55644; File No. SR-CBOE-2007-27]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of a Proposed Rule Change and Amendment 
No. 1 Thereto Relating to Class Quoting Limits

April 19, 2007.
    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 March 5, 2007, the Chicago Board Options Exchange, Incorporated 
(``CBOE'' or the ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been substantially 
prepared by the Exchange. The Exchange submitted Amendment No. 1 to the 
proposed rule change on April 18, 2007. The Commission is publishing 
this notice to solicit comments on the proposed rule change, as 
amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange submits this rule filing to amend CBOE Rule 8.3A 
pertaining to Class Quoting Limits. The proposed rule change is 
available on the Exchange's Web site (http://www.cboe.com), at the 

Office of the Secretary, CBOE, 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 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
    BOE Rule 8.3A establishes the upper limit, i.e., Class Quoting 
Limit (``CQL''), on the number of members that may quote electronically 
in a particular product traded on CBOE's Hybrid Trading System and 
Hybrid 2.0 Platform (collectively ``Hybrid'').\3\
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    \3\ See Securities Exchange Act Release No. 51429 (March 24, 
2005), 70 FR 16536 (March 31, 2005) (approving SR-CBOE-2005-58).
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    The purpose of this rule change is to amend CBOE Rule 8.3A to adopt 
an interpretation which is applicable only in those option classes 
traded on Hybrid in which the CQL for the option class is full and 
there is a waiting list of member(s) requesting the ability to quote 
electronically in the option class. Specifically, in the event a 
Market-Maker or Remote Market-Maker

[[Page 20571]]

(``RMM'') who holds an appointment in an option class traded on Hybrid 
has not submitted any electronic quotations in that option class during 
the preceding 30 days (calculated on a rolling basis), then the Market-
Maker or RMM's appointment in that option class will be terminated 
effective immediately. CBOE will notify the Market-Maker or RMM prior 
to terminating its appointment, and the rule provides that CBOE can 
make exceptions to this Interpretation and Policy in unusual 
circumstances.
    The Market-Maker or RMM can subsequently request an appointment in 
the option class. If there is a wait-list of members requesting the 
ability to quote electronically, then the Market-Maker or RMM will be 
placed on the wait-list for the option class.
    Although CBOE anticipates that this situation may arise in only a 
handful of option classes from time to time, absent this 
interpretation, the CQL in these option classes could be met even 
though some number of appointed Market-Makers or RMMs are not 
submitting electronic quotations. As a consequence, other members who 
might be willing to provide competitive quotations and liquidity in 
that option class would be prevented from doing so unless CBOE 
determined to increase the CQL under the provisions of Rule 8.3A.
    CBOE believes that this interpretation is consistent with the 
purpose of Rule 8.3A, which as noted above is to limit the number of 
members that are quoting electronically in a particular product to 
ensure that the Exchange has the ability to effectively handle all 
quotes generated by members. Although CBOE believes that it has the 
authority to terminate appointments of Market-Makers and RMMs under its 
existing Rule 8.3 and Rule 8.4,\4\ CBOE determined to adopt this 
interpretation to specifically address the situation in which the CQL 
for the option class is full and there is a waiting list of member(s) 
requesting the ability to quote electronically in the option class, and 
the Market-Makers or RMMs who hold an appointment in an option class 
have chosen not to submit any electronic quotations during the 
preceding 30 days. CBOE intends to implement the proposal upon approval 
by the Commission.
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    \4\ Rule 8.3(a) provides that ``[t]he Exchange may suspend or 
terminate any Appointment of a Market-Maker under this rule and may 
make additional appointments whenever, in the Exchange's judgment, 
the interests of a fair and orderly market are best served by such 
action.'' Rule 8.4(e) contains similar language.
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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.\5\ Specifically, the Exchange believes the proposed 
rule change is consistent with the Section 6(b)(5) \6\ requirements 
that the rules of an exchange be designed to remove impediments to and 
perfect the mechanism for a free and open market and a national market 
system, and, in general, to protect investors and the public interest.
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    \5\ 15 U.S.C. 78(f)(b).
    \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 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

    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 35 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 Exchange consents, the Commission will:
    (A) By order approve 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, as amended, 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-2007-27 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-2007-27. 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 Section, 100 F Street, 
NE., Washington, DC 20549. 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-2007-27 and should be 
submitted on or before May 16, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-7837 Filed 4-24-07; 8:45 am]

BILLING CODE 8010-01-P