[Federal Register Volume 73, Number 236 (Monday, December 8, 2008)]
[Notices]
[Pages 74543-74544]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-28965]
[[Page 74543]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59038; File No. SR-CBOE-2008-118]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing of Proposed Rule Change Related to
Obvious Error Rules
December 2, 2008.
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 26, 2008, the Chicago Board Options Exchange, Incorporated
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange
Commission (the ``Commission'') the proposed rule change as described
in Items I, II, and III 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 6.25 and Rule 24.16 to adopt
procedures which would allow CBOE to review transactions on its own
motion. The text of the proposed rule change is available on the
Exchange's Web site (http://www.cboe.org/Legal ), at the Office of the
Secretary, CBOE 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 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 aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
CBOE proposes to amend Rule 6.25 and Rule 24.16 pertaining to the
nullification and adjustment of options transactions. Specifically,
CBOE proposes to adopt a new provision which provides that in the
interest of maintaining a fair and orderly market and for the
protection of investors, the President of CBOE or his/her designee
(collectively ``CBOE officer''), who shall be an officer of CBOE but
may not be a member, may, on his or her own motion or upon request,
determine to review any transaction occurring on CBOE that is believed
to be erroneous.\3\ A transaction reviewed pursuant to this new
paragraph (3) may be nullified or adjusted only if it is determined by
the CBOE officer that the transaction is erroneous as provided in Rule
6.25(a)(1)-(6) or Rule 24.16(a)(1)-(6). A transaction would be adjusted
or nullified in accordance with the provision under which it is deemed
an erroneous transaction.\4\ The CBOE officer may be assisted by
Trading Officials in reviewing a transaction (or the senior official in
the control room in the case of transactions being reviewed under
6.25(a)(6) or Rule 24.16(a)(6)).
---------------------------------------------------------------------------
\3\ In the event a party to a transaction requests that the
President or his/her designee review a transaction, the CBOE officer
nonetheless would need to determine, on his or her own motion,
whether to review the transaction.
\4\ With regard to Rule 24.16, paragraph (c) pertaining to
adjustments and nullifications would also be considered.
---------------------------------------------------------------------------
The CBOE officer shall act pursuant to this paragraph as soon as
possible after receiving notification of the transaction, and
ordinarily would be expected to act on the same day as the transaction
occurred. However, because a transaction under review may have occurred
near the close of trading or due to unusual circumstances, the rule
provides that the CBOE officer shall act no later than 8:30 a.m. (CT)
on the next trading day following the date of the transaction at issue.
A member affected by a determination to nullify or adjust a transaction
pursuant to this new paragraph (3) may appeal such determination in
accordance with Rule 6.25(d) or Rule 24.16(d); however, a determination
by a CBOE officer not to review a transaction, or a determination not
to nullify or adjust a transaction for which a review was requested or
conducted, is not appealable. CBOE believes it is appropriate to limit
review on appeal to only those situations in which a transaction is
actually nullified or adjusted. Additionally, transactions adjusted or
nullified pursuant to this new paragraph cannot be reviewed by an
Obvious Error Panel under paragraph (c) of Rule 6.25.
This new provision is not intended to replace a party's obligation
to request review, within the required time periods under Rule 6.25 and
Rule 24.16, of any transaction that it believes meets the criteria for
an obvious error. And, if a transaction is reviewed and a determination
is rendered pursuant to paragraphs (b)(1) and (b)(2), Rule 6.25 and
Rule 24.16, as amended, specifically state that relief shall not be
granted under this new paragraph (b)(3).
Moreover, CBOE does not anticipate exercising this new authority in
every situation in which a party fails to make a timely request for
review of a transaction under paragraph (b)(1) of Rule 6.25 and Rule
24.16. CBOE believes this provision will help to protect the integrity
of its marketplace by vesting a CBOE officer with the authority to
review a transaction that may be erroneous, in those situations where a
party failed to make a timely request for a review.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (``Act'') \5\ and the rules and
regulations thereunder and, in particular, the requirements of Section
6(b) of the Act.\6\ Specifically, the Exchange believes the proposed
rule change is consistent with the Section 6(b)(5) \7\ 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. CBOE notes that the CBOE officer can
adjust or nullify a transaction under the authority granted by this new
provision only if the transaction meets the objective criteria for an
obvious error under CBOE's rules.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78f(b)(1).
\6\ 15 U.S.C. 78f(b).
\7\ 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 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.
[[Page 74544]]
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 Exchange 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 [email protected]. Please include
File Number SR-CBOE-2008-118 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-2008-118. 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 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-2008-118 and should be submitted on
or before December 29, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
---------------------------------------------------------------------------
\8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-28965 Filed 12-5-08; 8:45 am]
BILLING CODE 8011-01-P