Document ID: SEC-2007-1724-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2007-12-18T05:00Z

[Federal Register: December 18, 2007 (Volume 72, Number 242)]
[Notices]               
[Page 71726-71727]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18de07-81]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56943; File No. SR-CBOE-2007-133]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Class Quoting Limits

December 12, 2007.
    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 November 29, 2007, the Chicago Board Options Exchange, Incorporated 
(``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been substantially 
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\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The CBOE proposes to amend CBOE Rule 8.3A pertaining to Class 
Quoting Limits. 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 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 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
    CBOE Rule 8.3A, Interpretation and Policy .01, establishes the 
upper limit, i.e., Class Quoting Limit (``CQL''), on the number of 
members that may quote electronically in a particular product traded on 
CBOE's Hybrid Trading System or Hybrid 2.0 Platform. CBOE determined to 
establish the current CQLs in 2005 to ensure that it has the ability to 
effectively handle all quotes generated by its members, and because 
CBOE does not have systems bandwidth capacity to support an unlimited 
number of electronic quoters in every class.\5\ The CQLs that CBOE 
established varied from 25 to 40, with the CQL for all Hybrid Trading 
Classes being 25, and the CQLs for products trading on the Hybrid 2.0 
Platform ranging from 25 to 40 depending on the trading volume of the 
product in the preceding calendar quarter.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 51366 (March 14, 
2005), 70 FR 13217 (March 18, 2005) (approving SR-CBOE-2004-75).
---------------------------------------------------------------------------

    CBOE now proposes to amend Rule 8.3A, Interpretation and Policy 
.01, to increase to fifty the CQL for products trading on the Hybrid 
Trading System or Hybrid 2.0 Platform.\6\ CBOE does not believe 
maintaining the existing CQL levels is appropriate and necessary, and 
represents that it has the systems bandwidth capacity to support this 
increase in the CQLs. Additionally, CBOE believes that establishing a 
CQL level of 50 for products traded on CBOE's Hybrid Trading System or 
Hybrid 2.0 Platform will alleviate the operational burden of having to 
calculate and assign different CQLs each quarter for products traded on 
the Hybrid 2.0 Platform based on revised trading volume statistics, and 
maintaining lists of classes that have ``increased CQLs'' because the 
number of quoters in a product on the last trading day of the quarter 
exceeded the product's new CQL.
---------------------------------------------------------------------------

    \6\ Presently, all products traded on CBOE except three are 
traded on the Hybrid 2.0 Platform.
---------------------------------------------------------------------------

    If CBOE's President previously had determined to increase the CQL 
in a particular product due to exceptional circumstances in accordance 
with Interpretation and Policy .01(c) of Rule 8.3A, then the product 
will continue to maintain the increased CQL notwithstanding this rule 
change provided the increased CQL exceeded 50. If the increased CQL was 
less than 50, then pursuant to this rule change the product's CQL would 
now be set at 50.\7\
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 56772 (November 8, 
2007), 72 FR 64261 (November 15, 2007) (increasing the CQL in 
fourteen option classes due to exceptional circumstances). The CQL 
in Goldman Sachs Group will continue to be 60, whereas the CQL in 
the other option classes will now be set at 50 pursuant to this rule 
filing.
---------------------------------------------------------------------------

    Finally, because paragraph (a)(ii) of Interpretation .01 of Rule 
8.3A is proposed to be deleted in connection with this rule change, 
CBOE proposes to incorporate the language of paragraph (a)(ii) in new 
paragraph (b) of Interpretation .01 which pertains to the authority of 
the President to increase the CQL in a particular class due to 
exceptional circumstances. In that regard, if the President (or his 
designee) later determines to reduce the CQL upon cessation of the 
exceptional circumstances, any reduction must be undertaken in 
accordance with the following procedure. If a member changes his/her 
appointment and ceases quoting electronically in that class after the 
President (or his designee) has determined to decrease the CQL, the 
``increased'' CQL will decrease by one until such time that the number 
of remaining members quoting electronically in the product equals the 
``reduced CQL.'' From that point forward, the number of members quoting 
electronically in the product may not exceed the ``reduced CQL.''
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.\8\ Specifically, the Exchange believes the 
proposed rule change is consistent with the Section 6(b)(5) Act \9\ 
requirements

[[Page 71727]]

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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 solicited nor received 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 self-regulatory organization 
has given the Commission written notice of its intent to file 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,\10\ the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6) 
thereunder.\12\ 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.
---------------------------------------------------------------------------

    \10\ CBOE fulfilled this requirement.
    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    Under Rule 19b-4(f)(6) of the Act,\13\ 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 represents that 
there currently is a waitlist in some option classes traded on the 
Exchange and that the Exchange has not filed a proposed rule change to 
increase the CQL in these classes in light of the current filing.\14\ 
The Exchange has requested that the Commission waive the 30-day 
operative date, so that the proposal may become operative upon filing, 
enabling parties currently on the waitlist to begin quoting an option 
without delay. The Commission agrees and, consistent with the 
protection of investors and the public interest, has determined to 
waive the 30-day operative date so that the proposal may become 
operative upon filing.\15\
---------------------------------------------------------------------------

    \13\ Id.
    \14\ Telephone conversation between Patrick Sexton, Associate 
General Counsel, CBOE, and Sonia Trocchio, Special Counsel, Division 
of Trading and Markets, Commission (December 6, 2007).
    \15\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

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-2007-133 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-2007-133. 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-2007-133 and should be 
submitted on or before January 8, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-24468 Filed 12-17-07; 8:45 am]

BILLING CODE 8011-01-P