Document ID: SEC-2010-1992-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2010-12-23T05:00Z

[Federal Register Volume 75, Number 246 (Thursday, December 23, 2010)]
[Notices]
[Pages 80872-80873]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-32224]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63566; File No. SR-CBOE-2010-115]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Modify How Odd-Lots Are Handled on CBSX

December 16, 2010.
    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 December 14, 2010, 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 and II below, which Items have been prepared by 
the Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to modify how odd-lot orders are handled on 
the CBOE Stock Exchange (``CBSX''). The text of the proposed rule 
change is available on the Exchange's Web site (http://www.cboe.org/Legal), at the Exchange's principal office, and on the Commission's Web 
site at http://www.sec.gov/rules/sro.shtml.

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 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 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
    Currently, CBSX handles and executes round lot orders differently 
from the manner in which it handles and executes odd lot and mixed lot 
orders.\3\ If CBSX is not displaying the NBBO and step-up is not 
achieved pursuant to the CBSX flash process in Rule 52.6, the round lot 
order is then routed to the exchange displaying the NBBO for execution. 
Odd lot orders, however, currently are not routed to the exchange 
displaying the NBBO for execution. The proposed change will ensure that 
odd and mixed lot orders will be handled and executed in a more 
consistent manner with round lot orders.
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    \3\ A ``round lot'' order is an order for a quantity that is a 
multiple of 100 (100, 200, 300, etc.). An ``odd lot'' order is an 
order for a quantity that is less than 100. A ``mixed lot'' order is 
an order for a quantity that is greater than 100 but not a multiple 
of 100 (135, 372, 1126, etc.).
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    Under the proposed rule change, Odd-Lot orders will be matched by 
the CBSX System against interest at the best price in the CBSX Book. 
Odd-Lot orders (or the odd-lot portion of a mixed lot order) that are 
not marketable will be maintained in the System so that they may trade 
against later submitted orders (they will be traded using CBSX's 
matching rules). Marketable Odd-lot orders will be handled similar to 
round lot orders. If fulfilling an Odd-Lot order would result in an 
impermissible trade-through of another exchange, the order will be 
routed to other exchanges to be filled at prices better than the CBSX 
disseminated price. If an execution is not attained at the away 
exchange(s), the returned order is eligible for execution on CBSX. We 
note that the flash process utilized by CBSX prior to routing away 
orders will not be employed for Odd-lot orders.
    If an incoming Odd-lot order trades against a quote in the CBSX 
Book, the new quantity remaining in the quote will be rounded down to 
the nearest lower round-lot amount (zero or multiple of 100) for 
display purposes, with the remaining Odd-Lot amount being cancelled. If 
an incoming order trades against a limit order resting on the CBSX Book 
and an Odd-Lot amount remains from the limit order resting on the CBSX 
Book, that Odd-Lot amount will remain in the system eligible for 
execution but will not be displayed.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') \4\ and the rules and 
regulations thereunder and, in particular, the requirements of Section 
6(b) of the Act.\5\ Specifically, the Exchange believes the

[[Page 80873]]

proposed rule change is consistent with the Section 6(b)(5) \6\ 
requirements that the rules of an exchange be 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. Handling odd 
and mixed lot orders in the same manner as round lot orders allows CBSX 
to simplify the handling of odd-lot orders to the benefit of investors.
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    \4\ 15 U.S.C. 78s(b)(1).
    \5\ 15 U.S.C. 78f(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 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 proposed rule change 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, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \7\ and Rule 19b-
4(f)(6) thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
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 of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    The Exchange has requested that the Commission waive the 30-day 
operative delay. Waiver of the 30-day operative delay would allow CBSX 
to immediately begin processing odd-lot orders and mixed-lot orders in 
a manner similar to its processing of round-lot orders. The Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest and designates the 
proposal operative upon filing.\9\
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    \9\ 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. See 15 U.S.C. 78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend 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.

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-2010-115 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2010-115. 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 Web site viewing and 
printing in the Commission's Public Reference Room, on official 
business days between the hours of 10 a.m. and 3 p.m. Copies of the 
filing also will be available for inspection and copying at the 
principal office of the Exchange. 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-2010-115 and should be submitted on or before 
January 13, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-32224 Filed 12-22-10; 8:45 am]
BILLING CODE 8011-01-P