Document ID: SEC-2006-0813-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2006-06-26T04:00Z

[Federal Register: June 26, 2006 (Volume 71, Number 122)]
[Notices]               
[Page 36367-36368]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26jn06-83]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54014; File No. SR-CBOE-2006-01]

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

June 19, 2006.
    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 January 3, 2006, the Chicago Board Options Exchange, Incorporated 
(``CBOE'' or ``Exchange'') 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 prepared by the CBOE. 
On June 2, 2006, the Exchange submitted Amendment No. 1 to the proposed 
rule change.\3\ The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
persons.
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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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange submits this proposed rule change regarding the 
operation of a remote business facility in order to preserve the 
Exchange's ability to trade options in the event the Exchange's trading 
floor becomes inoperable or otherwise unavailable.
    The text of the proposed rule change is available on CBOE's Web 
site (http://www.cboe.com), at the CBOE'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, 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 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 aspects of such 
statements.

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

1. Purpose
    The Exchange proposes to adopt new Exchange Rule 6.18, which would 
allow for the operation of the DRF. The DRF would only be used in the 
event a disaster or other unusual circumstance renders the CBOE trading 
floor inoperable. The purpose of the DRF is to allow CBOE members to 
operate remotely in a screen-based only environment until the 
Exchange's trading floor is again available. There would be no open-
outcry trading at the DRF. CBOE's Hybrid trading platform would be used 
for trading through the DRF minus the open-outcry component of the 
Hybrid platform. Thus, electronic orders would continue to be received 
by the Exchange and processed and/or executed in the manner they would 
be handled by the Hybrid System today.

[[Page 36368]]

    CBOE would announce prior to the commencement of trading on the DRF 
all classes that would be traded on the DRF. Priority would be afforded 
to classes that are exclusively listed on CBOE. All classes traded via 
the DRF would be subject to all applicable Hybrid System rules relating 
to the electronic component of Hybrid trading and non-trading rules of 
the Exchange would continue to be applicable. The Exchange represents 
that those rules in their current form will enable the operation of the 
DRF. The Exchange also represents that it is able to conduct 
appropriate surveillance for trading activity on the DRF and that 
procedures are in place to conduct appropriate surveillance (a document 
detailing such procedures will be forwarded to the Commission for 
review under separate cover).
    As mentioned above, rules governing the general use of the DRF 
would be contained in proposed Exchange Rule 6.18. That rule provides, 
among other things, that members shall take such action as instructed 
by the Exchange to accommodate the Exchange's ability to trade options 
via the DRF. The Exchange is currently working with members to 
establish appropriate connectivity to the DRF. As part of this process, 
members electing to establish connectivity to the DRF must test with 
the Exchange to ensure the connection to the DRF is functional. 
Connectivity procedures are available to all interested members. The 
Exchange represents that there is already sufficient member 
connectivity to ensure that the DRF, if activated, could operate in a 
meaningful manner.
    Exchange Rule 6.18 also provides that, to the extent system 
capacity restricts the ability of all members from quoting on the DRF, 
the Exchange shall have authority to designate the members that will be 
allowed to submit quotations on the DRF (all members would still be 
able to send in orders to the DRF). In such cases, priority shall be 
afforded to members that made markets in the products trading on the 
DRF throughout the calendar quarter preceding the use of the DRF. 
Additional members and/or member organizations shall be allowed to make 
markets on the DRF based upon their total contract volume effected on 
the Exchange during the preceding calendar quarter. Unless otherwise 
authorized by the Exchange, there would be a one streaming quotation 
per product limit for each member organization quoting on the system 
and its associated persons.
    Lastly, this Exchange Rule 6.18 does not preclude the Exchange from 
trading options, in the event the trading floor is rendered inoperable, 
pursuant to Exchange Rule 6.16 (Back-up Trading Arrangements).
2. Statutory Basis
    The Exchange believes the proposed rule change, as amended, is 
consistent with the Securities Exchange Act of 1934 (the ``Act'') \4\ 
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.\5\ Specifically, the Exchange believes the proposed 
rule change, as amended, is consistent with section 6(b)(1) \6\ in that 
it will allow the Exchange the capacity to carry out the purposes of 
the Act (by allowing the Exchange to continue trading if the trading 
floor becomes inoperable). The proposed rule change, as amended, is 
also consistent with section 6(b)(5) \7\ requirements that the rules of 
an exchange be designed to promote just and equitable principles of 
trade, and to protect investors and the public interest.
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    \4\ 15 U.S.C. 78a et seq.
    \5\ 15 U.S.C. 78(f)(b).
    \6\ 15 U.S.C. 78(f)(b)(1).
    \7\ 15 U.S.C. 78(f)(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change, as 
amended, would 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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding, or (ii) as to 
which the CBOE consents, the Commission will:
    A. By order approve such proposed rule change; or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-2006-01 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2006-01. 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. Copies of such 
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 publicly available. All submissions should refer to 
File Number SR-CBOE-2006-01 and should be submitted on or before July 
17, 2006.
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    \8\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
Nancy M. Morris,
Secretary.
[FR Doc. E6-9982 Filed 6-23-06; 8:45 am]

BILLING CODE 8010-01-P