Document ID: SEC-2008-1731-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2008-12-30T05:00Z

[Federal Register: December 30, 2008 (Volume 73, Number 250)]
[Notices]               
[Page 79946-79948]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30de08-143]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59121; File No. SR-CBOE-2008-126]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Extend the Duration of the Hybrid Rule Pertaining to 
Orders Represented in Open Outcry

December 19, 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 December 17, 2008, the Chicago Board Options Exchange, 
Incorporated (``CBOE'' or

[[Page 79947]]

``Exchange'') 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 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\ which renders it 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)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ The Exchange has requested that the Commission waive the 30-
day operative delay required by Rule 19b-4(f)(6)(iii), 17 CFR 
240.19b-4(f)(6)(iii). See discussion infra Section III.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend the duration of Rule 6.45A(b) 
relating to the allocation of orders represented in open outcry in 
equity option classes designated by the Exchange to be traded on the 
CBOE Hybrid Trading System (``Hybrid'') through March 31, 2009. No 
other changes are being made to the Rule. 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.

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 comments it received on the proposed rule change. The 
text of those 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
    In March 2005 the Commission approved revisions to CBOE Rule 6.45A 
related to the introduction of Remote Market-Makers.\6\ Among other 
things, Rule 6.45A(b), pertaining to the allocation of orders 
represented in open outcry in equity options classes traded on Hybrid, 
was amended to clarify that only in-crowd market participants would be 
eligible to participate in open outcry trade allocations. In addition, 
Rule 6.45A(b) was amended to limit the duration of paragraph (b) of 
Rule 6.45A until September 14, 2005. The duration of this paragraph was 
thereafter extended through December 31, 2008.\7\ As the duration 
period expires on December 31st, the Exchange proposes to extend the 
effectiveness of Rule 6.45A(b) through March 31, 2009.\8\
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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).
    \7\ See Securities Exchange Act Release Nos. 52423 (September 
14, 2005), 70 FR 55194 (September 20, 2005) (SR-CBOE-2005-76) 
(extension through December 14, 2005), 52957 (December 15, 2005), 70 
FR 76085 (December 22, 2005) (extension through March 14, 2006), 
53524 (March 21, 2006), 71 FR 15235 (March 27, 2006)(SR-CBOE-2006-
22)(extension through July 14, 2006), 54164 (July 17, 2006), 71 FR 
42143 (July 25, 2006)(SR-CBOE-2006-60)(extension through October 31, 
2006), 54680 (November 1, 2006), 71 FR 65554 (November 8, 2006) (SR-
CBOE-2006-86)(extension through January 31, 2007), 55219 (February 
1, 2007), 72 FR 6305 (February 9, 2007)(SR-CBOE-2007-10)(extension 
through April 30, 2007), 55676 (April 27, 2007), 72 FR 25348 (May 4, 
2007)(SR-CBOE-2007-40)(extension through July 31, 2007), 56177 
(August 1, 2007), 72 FR 44194 (August 7, 2007)(SR-CBOE-2007-
89)(extension through December 31, 2007), 57054 (December 27, 2007), 
73 FR 899 (January 4, 2008)(SR-CBOE-2007-149)(extension through June 
30, 2008) and 58048 (June 27, 2008) 73 FR 39355 (July 9, 2008)(SR-
CBOE-2008-65)(extension through December 31, 2008).
    \8\ In order to effect proprietary transactions on the floor of 
the Exchange, in addition to complying with the requirements of CBOE 
Rule 6.45A(b), members are also required to comply with the 
requirements of Section 11(a)(1) of the Act, 15 U.S.C. 78k(a)(1), or 
qualify for an exemption. Section 11(a)(1) of the Act restricts 
securities transactions of a member of any national securities 
exchange effected on that exchange for (i) The member's own account, 
(ii) the account of a person associated with the member, or (iii) an 
account over which the member or a person associated with the member 
exercises discretion, unless a specific exemption is available. The 
Exchange has issued regulatory circulars to members informing them 
of the applicability of these Section 11(a)(1) requirements each 
time the duration of the Rule was extended. See CBOE Regulatory 
Circulars RG05-103 (November 2, 2005), RG06-001 (January 3, 2006), 
RG06-34 (April 7, 2006), RG06-79 (July 31, 2006), RG06-115 (November 
8, 2006), RG07-21 (February 8, 2007), RG07-53 (May 17, 2007), RG07-
88 (August 15, 2007), RG08-08 (January 9, 2008) and RG08-83 (July 
10, 2008).
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2. Statutory Basis
    Extension of the duration of the Rule will allow the Exchange to 
continue to operate under the existing allocation parameters for orders 
represented in open outcry in Hybrid on an uninterrupted basis. 
Accordingly, CBOE believes the proposed rule change is consistent with 
the Act \9\ 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.\10\ Specifically, the Exchange believes the 
proposed rule change is consistent with the Section 6(b)(5)\11\ 
requirements 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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    \9\ 15 U.S.C. 78a et seq.
    \10\ 15 U.S.C. 78f(b).
    \11\ 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: (1) 
Significantly affect the protection of investors or the public 
interest; (2) impose any significant burden on competition; and (3) 
become operative for thirty 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, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6)\13\ thereunder.\14\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6). When filing a proposed rule change 
pursuant to Rule 19b-4(f)(6) under the Act, an Exchange is required 
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 provided notice to the 
Commission three business days prior to filing the proposed rule 
change, and the Commission has determined to waive the five business 
day requirement.
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    A proposed rule change filed under Commission Rule 19b-4(f)(6)\15\ 
normally does not become operative prior to thirty days after the date 
of filing. The CBOE requests that the Commission waive the 30-day 
operative delay, as specified in Rule 19b-4(f)(6)(iii), and designate 
the proposed rule change to become operative immediately to allow the 
Exchange to continue to operate under

[[Page 79948]]

the existing allocation parameters for orders represented in open 
outcry in Hybrid on an uninterrupted basis. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because such waiver 
will allow the CBOE to continue to operate under Rule 6.45A(b) without 
interruption. For this reason, the Commission designates the proposed 
rule change as operative upon filing.\16\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ For the purposes only of waiving the operative date of this 
proposal, 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 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 the 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-2008-126 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-2008-126. 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 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 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-2008-126 and should be 
submitted on or before January 20, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Florence E. Harmon,
Acting Secretary.
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    \17\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E8-30856 Filed 12-29-08; 8:45 am]

BILLING CODE 8011-01-P