Document ID: SEC-2006-0949-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2006-07-26T04:00Z

[Federal Register: July 26, 2006 (Volume 71, Number 143)]
[Notices]               
[Page 42427-42428]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26jy06-121]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54171; File No. SR-CBOE-2006-01]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Approving Proposed Rule Change and Amendment No. 1 
Thereto Regarding a Disaster Recovery Facility

July 19, 2006.
    On January 3, 2006, the Chicago Board Options Exchange, 
Incorporated (``CBOE'' or ``Exchange'') filed with the Securities and 
Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change regarding the establishment of a 
disaster recovery facility (``DRF''). On June 2, 2006, the Exchange 
submitted Amendment No. 1 to the proposed rule change.\3\ The proposed 
rule change, as amended, was published for comment in the Federal 
Register on June 26, 2006.\4\ The Commission received no comments 
regarding the proposal. This order approves the proposed rule change, 
as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, CBOE made minor revisions to the 
proposed rule text and clarified certain details of its proposal.
    \4\ See Securities Exchange Act Release No. 54014 (June 19, 
2006), 71 FR 36367 (``Notice'').
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    The Exchange proposes to adopt new Exchange Rule 6.18, which 
contains the rules that would govern the operation of the DRF in the 
event of a disaster or other unusual circumstance that renders the 
Exchange's trading floor inoperable. As set forth in the Notice, the 
DRF would allow CBOE's members to operate remotely in a screen-based-
only environment until the Exchange's trading floor again became 
available. Prior to the commencement of trading on the DRF, the 
Exchange would announce all classes of securities that would be traded 
on the DRF with priority given to those classes exclusively listed on 
the Exchange. The Exchange represents that it is able to

[[Page 42428]]

conduct appropriate surveillance of trading activity on the DRF and has 
in place relevant surveillance procedures.\5\ All classes of securities 
traded on the DRF would be subject to the Exchange's Hybrid System 
rules relating to the electronic component of Hybrid trading and any 
applicable non-trading rules. To the extent system capacity limits the 
number of members that can quote on the DRF, proposed Exchange Rule 
6.18 provides a priority system to select member participants. 
Connectivity procedures are available to all CBOE members. The Exchange 
represents that there is already sufficient member connectivity to 
ensure that the DRF, if activated, could operate in a useful manner.\6\
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    \5\ See Notice at 3.
    \6\ Id.
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    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\7\ 
Specifically, the Commission finds that the proposal is consistent with 
Section 6(b)(1) of the Act,\8\ which requires that an exchange is 
organized and has the capacity to be able to carry out the purposes of 
the Act and to comply, and to enforce compliance by its members and 
persons associated with its members, with the provisions of the Act, 
the rules and regulations thereunder, and the rules of the exchange. 
Specifically, the Commission finds that proposed Exchange Rule 6.18 
provides a business continuity plan that is reasonably designed to 
allow the Exchange to continue its trading operations in the event a 
disaster or other unusual circumstance renders the CBOE trading floor 
inoperable. Furthermore, the Commission believes the proposed rule 
change is reasonably designed to enhance the resilience of the U.S. 
financial markets generally.
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    \7\ In approving this proposed rule change the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(1).
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    In addition, the Commission finds that the proposal is consistent 
with Section 6(b)(5) of the Act,\9\ which requires, among other things, 
that the rules of a national securities exchange be designed to promote 
just and equitable principles of trade, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system and, in general, to protect investors and the public interest. 
Specifically, the Commission finds the proposed rule change is 
reasonably designed to provide market participants with the necessary 
disclosure to understand the Exchange's operational capabilities and 
plans in the event of a disaster.
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    \9\ 15 U.S.C. 78f(b)(5).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-CBOE-2006-01), as amended, 
is approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
 [FR Doc. E6-11926 Filed 7-25-06; 8:45 am]

BILLING CODE 8010-01-P