Document ID: SEC-2006-0316-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2006-03-13T05:00Z

[Federal Register: March 13, 2006 (Volume 71, Number 48)]
[Notices]               
[Page 12747-12749]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13mr06-88]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53410; File No. SR-CBOE-2006-24]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Amending Its Rule 8.3 To Extend for an Additional Year a 
Pilot Program Relating to Market-Makers Quoting Outside Their Appointed 
Trading Station

March 3, 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 March 2, 2006, the Chicago Board Options Exchange, Incorporated 
(``CBOE'' or ``Exchange'') 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 CBOE. The 
Exchange filed the proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6) thereunder,\4\ which renders the proposal effective upon filing 
with the Commission.\5\ 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).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ As required by Rule 19b-4(f)(6)(iii), 17 CFR 240.19b-
4(f)(6)(iii), the CBOE submitted written notice of its intent to 
file the proposed rule change, along with a brief description and 
text of the proposed rule change, at least five business days prior 
to the date of filing.
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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 Rule 8.3 to extend for an 
additional year a pilot program relating to Market-Makers quoting 
outside their appointed trading station. The text of the proposed rule 
change is below. Proposed additions are in italics and proposed 
deletions are in brackets:
Rule 8.3--Appointment of Market-Makers
    Rule 8.3. This Rule governs the appointment of Market-Makers other 
than Remote Market-Makers. Rule 8.4 governs the appointment of Remote 
Market-Makers.
    (a) No change.
    (b) No change.
    (c) Absent an exemption by the appropriate Market Performance 
Committee, an appointment of a Market-Maker confers the right to quote 
as described below:
    (i) No change.
    (ii) No change.
    (iii) No change.
    With respect to classes located at his/her appointed trading 
station, a Market-Maker may submit, [for a one-year] as part of a pilot 
program [period] ending March 24, 2007 [2006], electronic quotations 
from a location outside of the appointed trading station in his/her 
appointed Hybrid classes and his/her appointed Hybrid 2.0 Classes. Any 
Market-Maker affiliated with an e-DPM or RMM shall be ineligible to 
submit electronic quotations from outside of its appointed trading 
station pursuant to this rule in any class in which the affiliated e-
DPM or RMM has an appointment.
* * * * *
    (d) No Change.
* * * * *

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 CBOE included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any

[[Page 12748]]

comments it received on the proposal. The text of these statements may 
be examined at the places specified in Item IV below. The CBOE has 
prepared summaries, set forth in Sections A, B, and C below, of 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 purpose of this rule change is to extend for an additional 
year, until March 24, 2007, an existing Pilot Program that allows a 
CBOE Market-Maker to submit electronic quotations in his/her Hybrid and 
Hybrid 2.0 classes from a location outside of his/her appointed trading 
station.
    In March 2005, the CBOE amended its rules relating to Market-Maker 
appointments and quoting obligations.\6\ The Exchange amended, among 
other things, Rule 8.3 to provide that a Market-Maker may submit 
electronic quotations from a location outside of his/her appointed 
trading station. Previously, Market-Makers were only permitted to 
stream electronic quotations in their appointed Hybrid and Hybrid 2.0 
classes when they were physically present in the trading crowd. In 
making this change, the CBOE determined to request that it only be 
approved on a pilot basis so as to give the Exchange the ability to 
evaluate the effectiveness of allowing Market-Makers to quote remotely. 
The current Pilot program is scheduled to expire on March 24, 2006.
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    \6\ See Securities Exchange Act Release No. 51429 (March 24, 
2005), 70 FR 16536 (March 31, 2005) (approving SR-CBOE-2004-58).
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    The Exchange believes that the Pilot Program has been successful, 
in that it allows Market-Makers to choose how they would like to 
participate in CBOE's Hybrid Trading System, i.e., electronically, in 
open outcry, or both. The CBOE states that, although not all Market-
Makers have chosen to quote electronically from outside their trading 
station, those Market-Makers that have availed themselves of this Pilot 
Program continued to provide liquidity and increased competition in 
their appointed option classes when they quoted remotely. The Exchange 
states that it has not experienced any negative effects from allowing 
Market-Makers to quote from a location outside of their appointed 
trading station. Thus, the CBOE believes it would be appropriate and 
beneficial to extend the Pilot Program for an additional year until 
March 24, 2007, and permit Market-Makers to continue to have the option 
to quote electronically from a location outside their appointed trading 
station.
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 requirement of Section 
6(b)(5) Act \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

    The CBOE believes that the proposed rule change will not impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The CBOE has neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest, the proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder.
    Normally, a proposed rule change filed under Rule 19b-4(f)(6) does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest.
    The CBOE has asked the Commission to waive the 30-day operative 
delay. Allowing Market-Makers to quote electronically into their 
appointed Hybrid and Hybrid 2.0 option classes from a location outside 
their appointed trading station does not raise any new or unique 
issues.\9\ The Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest because the continuation of this program may enhance 
competition and liquidity and provide Market-Makers with additional 
trading opportunities.\10\ For this reason, the Commission designates 
that the proposal has become effective and operative immediately upon 
filing with the Commission. At any time within 60 days of the filing of 
the 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.\11\
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    \9\ See supra, at n.6.
    \10\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
    \11\ See Rule 19b-4(f)(6)(iii), 17 CFR 240.19b-4(f)(6)(iii).
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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-2006-24 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-2006-24. 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 12749]]

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-2006-24 
and should be submitted on or before April 3, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-3481 Filed 3-10-06; 8:45 am]

BILLING CODE 8010-01-P