Document ID: SEC-2010-0696-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2010-05-11T04:00Z

[Federal Register: May 11, 2010 (Volume 75, Number 90)]
[Notices]               
[Page 26303-26304]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11my10-137]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62034; File No. SR-CBOE-2010-035]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Amending CBOE Rules 9.11, 9.18 and 9.21 To Correspond and 
Harmonize With Rules of the Financial Industry Regulatory Authority, 
Inc.

May 4, 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 the Chicago Board Options Exchange, Incorporated (``Exchange'' or 
``CBOE'') filed with the Securities and Exchange Commission (the 
``Commission'') on April 9, 2010, the proposed rule change as described 
in Items I, II, and III below, which Items have been substantially 
prepared by the Exchange. The Exchange has designated the proposed rule 
change as constituting a ``non-controversial'' rule change under 
paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which renders the 
proposal effective upon receipt of the filing by the Commission. 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\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its guarantees and profit sharing, 
confirmation to customers, and options communication rules to harmonize 
the Exchange's requirements with those of the Financial Industry 
Regulatory Authority (``FINRA''). The text of the proposed rule change 
is available on the Exchange's Web site at http://www.cboe.org/Legal, 
at the Exchange's Office of the Secretary, and at the Commission's 
Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, 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
    Pursuant to Rule 17d-2 under the Act,\4\ the BATS Exchange, Inc. 
(``BATS''), CBOE, C2 Options Exchange, Incorporated (``C2''), the 
International Securities Exchange, LLC (``ISE''), FINRA, the New York 
Stock Exchange LLC (``NYSE''), NYSE Amex LLC (``Amex''), NYSE Arca, 
Inc. (``Arca''), The NASDAQ Stock Market LLC (``NASDAQ''), NASDAQ OMX 
BX, Inc. (``BX''), and NASDAQ OMX PHLX, Inc. (``Phlx''), (collectively 
the ``Options Self Regulatory Council''), entered into an agreement 
dated February 9, 2010 (the ``17d-2 Agreement'') to allocate regulatory 
responsibility for common rules.
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    \4\ 17 CFR 240.17d-2.
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    First, by this proposal, the Exchange seeks to harmonize its 
``Sharing in Accounts'' rule with FINRA's rule pursuant to the terms of 
the 17d-2 Agreement. In order to maintain substantial similarity with 
FINRA rules, the Exchange proposes to amend CBOE Rule 9.18(a) to 
clarify that the prohibition against guarantees also applies to persons 
associated with a member and to delete the language of CBOE Rule 9.18 
related to profit sharing of a customer account, and replace it with 
the language of FINRA Rule 2150(c), Sharing in Accounts; Extent 
Permissible. FINRA Rule 2150(c) contains the same prohibition against 
sharing in accounts as CBOE Rule 9.18, but with additional limited 
exceptions. The general prohibition contained in CBOE Rule 9.18 against 
sharing in the profits or losses of a customer account is currently 
covered by the 17d-2 Agreement. However, the limited exceptions of 
FINRA Rule 2150(c) are not covered by the 17d-2 Agreement. The Exchange 
proposes to add those limited exceptions to CBOE Rule 9.18 to harmonize 
its rule with the FINRA rule and add those limited exceptions pursuant 
to the 17d-2 Agreement. The portion of the rule prohibiting the 
guarantee of a customer against loss will remain unchanged.
    Second, CBOE proposes to amend its confirmation rule, CBOE Rule 
9.11, to add a requirement that confirmations disclose whether the 
transaction was an opening or closing transaction to harmonize the rule 
with FINRA Rule 2360(b)(12).
    Third, CBOE proposes to amend its options communication rule, CBOE 
Rule 9.21, by deleting the term ``market letters'' in the definition of 
``sales literature'' and adding the term ``market letters'' to the 
definition of ``correspondence'' to harmonize the rule with FINRA Rule 
2220 and NASD Rule 2210(a)(2).
2. Statutory Basis
    CBOE believes that the proposed rule change is consistent with the 
provisions of, and furthers the objectives of, Section 6(b)(5) of the 
Act,\5\ which requires, among other things, that the Exchange's rules 
must be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanisms of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. Specifically, 
the proposed rule changes, by harmonizing CBOE rules with FINRA rules, 
would provide CBOE Members with a clearer regulatory scheme. The 
Exchange further notes that the proposed rule changes are neither novel 
nor controversial and are modeled on existing FINRA rules.
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    \5\ 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.

[[Page 26304]]

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 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, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \6\ and Rule 19b-4(f)(6) 
thereunder.\7\ A proposed rule change filed under Rule 19b-4(f)(6) \8\ 
normally does not become operative prior to 30 days after the date of 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\9\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. CBOE has asked the 
Commission to waive the 30-day operative delay so that the proposal may 
become operative immediately upon filing. Because the proposed rule 
change will harmonize the CBOE rules pertaining to guarantees and 
profit sharing, confirmations to customers, and options communications 
with the comparable FINRA rules pursuant to the 17d-2 Agreement, the 
Commission finds that it is consistent with the protection of investors 
and the public interest to waive the 30-day operative delay, and hereby 
grants such waiver.\10\
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6).
    \8\ Id.
    \9\ 17 CFR 240.19b-4(f)(6)(iii).
    \10\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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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-2010-035 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-2010-035. 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, 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 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-2010-035 and 
should be submitted on or before June 1, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-11096 Filed 5-10-10; 8:45 am]
BILLING CODE 8010-01-P