Document ID: SEC-2008-1396-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2008-10-09T04:00Z

[Federal Register: October 9, 2008 (Volume 73, Number 197)]
[Notices]               
[Page 59692-59694]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09oc08-152]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58719; File No. SR-CBOE-2008-103]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Permit Electronic Indicative FLEX Quotes

October 2, 2008.
    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 September 30, 2008, 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, II, and III 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 Exchange proposes to amend its rules related to Flexible 
Exchange Options (``FLEX Options'') \5\ in order to adopt provisions 
codifying certain electronic Indicative FLEX Quote functionality. 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's Public Reference Room.
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    \5\ FLEX Options provide investors with the ability to customize 
basic option features including size, expiration date, exercise 
style, and certain exercise prices.
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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 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.

[[Page 59693]]

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 the proposed rule change is to modify Rule 24B.14, 
FLEX Official, and to include a new definition of the term ``Indicative 
FLEX Quote'' in Rule 24B.1, Definitions, in order to make clear that 
non-binding electronic indications of the market for particular series 
of FLEX Options may be periodically supplied by FLEX Traders \6\ and 
displayed on the FLEX Hybrid Trading System communications network, 
which is made available to all FLEX Traders that chose to receive the 
information. Under the proposed rule text, a FLEX Official \7\ may call 
for such Indicative FLEX quotes at any time during the course of 
trading and with respect to any series of FLEX Options that the FLEX 
Official deems appropriate. In addition, FLEX Traders may call for 
Indicative FLEX Quotes, updates thereto, or cancellations thereof.
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    \6\ The reference to ``FLEX Traders'' includes any Exchange 
members that have been approved by the Exchange to use the FLEX 
Hybrid Trading System and any non-member Sponsored Users that have 
been provided electronic access, through Sponsoring Members, to the 
FLEX Hybrid Trading System in accordance with Rule 6.20A, Sponsored 
Users.
    \7\ The Exchange may at any time designate an Exchange employee 
or independent contractor to act as a FLEX Official in one or more 
classes of FLEX Options. A FLEX Official performs the functions set 
out in Rule 24B.14.
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    This ability to call for and provide electronic Indicative FLEX 
Quotes is somewhat like the Indicative FLEX Quote functionality that 
CBOE previously utilized on its open outcry-based FLEX RFQ System (the 
``legacy FLEX system''),\8\ except that under the proposed FLEX Hybrid 
Trading System application: FLEX Officials and all FLEX Traders have 
the ability to electronically request an Indicative FLEX Quote 
(previously under the legacy FLEX system, only FLEX Officials had the 
ability to make a verbal request on their own motion or at the request 
of a Market-Maker); FLEX Traders can now electronically communicate 
their Indicative FLEX Quotes (previously such quotes were only 
verbalized by Market-Makers in open outcry); and the information is 
disseminated over the FLEX Hybrid Trading System communications network 
interface (previously the information was disseminated at the trading 
post and over a different communications network). We believe the 
ability to request and provide Indicative FLEX Quotes over the 
interface serves as a useful tool for FLEX Traders to obtain 
information about indicative FLEX markets, and the above-described 
distinctions represent an enhancement to the former process by 
providing a more efficient and effective means of communication.
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    \8\ See Securities Exchange Act Release Nos. 31920 (February 24, 
1993), 58 FR 12280 (March 3, 1993)(SR-CBOE-92-17)(approval of rule 
change that, among other things, established the legacy FLEX system 
rule provisions pertaining to Indicative FLEX Quotes) and 56792 
(November 15, 2007), 72 FR 65776 (November 23, 2007)(SR-CBOE-2006-
99)(approval of rule change that, among other things, deleted the 
legacy FLEX system rule provisions pertaining to Indicative FLEX 
Quotes because the then-existing functionality was no being longer 
utilized).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) of the Act \9\ and the rules and 
regulations thereunder, in general, and Section 6(b)(5),\10\ in 
particular, in that it is designed to promote just and equitable 
principles of trade, to prevent fraudulent and manipulative acts, to 
remove impediments to and to perfect the mechanism for a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest. The proposed rule change allows FLEX 
Traders to more efficiently and effectively communicate information 
about indicative prices to the benefit of customers.
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    \9\ 15 U.S.C. 78s(b)(1).
    \10\ 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 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 \11\ and Rule 19b-4(f)(6) 
thereunder.\12\ 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.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
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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-2008-103 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2008-103. 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

[[Page 59694]]

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, 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 will also be available for 
inspection and copying at the principal office of the self-regulatory 
organization. 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-2008-103 and should be submitted on or before October 30, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-23927 Filed 10-8-08; 8:45 am]

BILLING CODE 8011-01-P