Document ID: SEC-2006-1223-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2006-09-21T04:00Z

[Federal Register: September 21, 2006 (Volume 71, Number 183)]
[Notices]               
[Page 55237-55239]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21se06-86]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54443; File No. SR-CBOE-2006-77]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Extending Pilot Programs for Remote Market-Makers and e-
DPMs

September 14, 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 September 11, 2006, the Chicago Board Options Exchange, Incorporated 
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') the proposed rule change as 
described in Items I and II below, which Items have been prepared by 
the CBOE. 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

    CBOE proposes to extend the pilots allowing Remote Market-Makers 
(``RMMs'') and e-DPMs to have up to one affiliated Market-Maker trade 
in classes assigned to the RMM and e-DPM, respectively. The text of the 
proposed rule change is available on the Exchange's Web site (http://www.cboe.com
), at the Exchange'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 any comments it received on the proposed rule change. The 
text of these 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

[[Page 55238]]

the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend CBOE Rules 8.4(c)(i) and 8.93(vii) 
to extend the pilot programs allowing an RMM and e-DPM the option to 
have up to one separate affiliated Market-Maker physically present in 
the trading crowds where it operates as an RMM or e-DPM, respectively 
(such Market-Makers would be required to trade on a separate 
membership). The pilots would be extended from September 14, 2006 until 
March 14, 2007.
    In July of 2003, the SEC approved the e-DPM program, including the 
pilot program.\5\ The pilot allows e-DPM firms to maintain a physical 
presence in the trading crowd through an affiliated Market-Maker who 
would also be able to stream a quote. The pilot, however, limits the 
number of separate affiliates per trading crowd to one.
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    \5\ See Securities Exchange Act Release No. 50003 (July 12, 
2004), 69 FR 43028 (July 19, 2004) (SR-CBOE-2004-24).
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    In March of 2005, the SEC approved the RMM program, including the 
pilot program.\6\ The pilot allows RMM firms to maintain a physical 
presence in the trading crowd through an affiliated Market-Maker who 
would also be able to stream a quote. This pilot also limits the number 
of separate affiliates per trading crowd to one.
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    \6\ See Securities Exchange Act Release No. 51366 (March 14, 
2005), 70 FR 13217 (March, 18, 2005) (SR-CBOE-2004-75).
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    CBOE will be sending the Commission, under separate cover, data 
relating to: (1) The size of the orders that RMMs and affiliated 
Market-Makers both trade with remotely; (2) the price and size of the 
RMM's and the affiliated Market-Maker's respective quotes; (3) the 
price and size of quotes of other participants in the classes where an 
RMM and an affiliate are quoting; and (4) a breakdown of how orders are 
allocated to the RMM, the affiliated Market-Maker, and any other 
participants.
    In addition, CBOE will be sending the Commission, under separate 
cover, data relating to: (1) The size of the orders that e-DPMs and 
affiliated Market-Makers both trade with electronically; (2) the price 
and size of the e-DPM's and the affiliated Market-Maker's respective 
quotes; (3) the price and size of quotes of other participants in the 
classes where an e-DPM and an affiliate are quoting; and (4) a 
breakdown of how orders are allocated to the e-DPM, the affiliated 
Market-Maker, and any other participants.
    The date chosen to extend the pilot programs for RMMs and e-DPMs is 
the same, which will allow the Commission to evaluate both pilot 
programs simultaneously.
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 requirements of section 
6(b)(5) \8\ 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 received nor solicited written 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 Exchange 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 
allow the pilots to continue without interruption.\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-2006-77 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-2006-77. 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

[[Page 55239]]

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-2006-77 and should be submitted on or before October 12, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 06-7843 Filed 9-20-06; 8:45 am]

BILLING CODE 8010-01-P