[Federal Register Volume 75, Number 80 (Tuesday, April 27, 2010)]
[Notices]
[Pages 22170-22171]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-9678]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61946; File No. SR-CBOE-2010-032]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Remove a Feature and Revise Outdated Text Regarding
Certain Execution Rules
April 20, 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, on April 5, 2010, Chicago Board Options Exchange, Incorporated
(``CBOE'' or the ``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 self-
regulatory organization. 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.
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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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposing to eliminate a feature and revise
outdated text regarding certain of its execution rules. The text of the
proposed rule change is available on CBOE's Web site at http://www.cboe.org, on the Commission's Web site at http://www.sec.gov, 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 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 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to eliminate a feature and revise
outdated text regarding certain of its execution rules.
In August 2008,\5\ the Exchange received Securities and Exchange
Commission (``Commission'') approval of a rule change to give certain
non-broker-dealer orders (identified as ``Voluntary Professional''
orders) the priority given broker-dealer orders rather than the
priority given to public customer orders. In December 2009,\6\ the
Exchange received Commission approval of a rule change to give certain
other non-broker-dealer orders (identified as ``Professional'' orders)
the priority given broker-dealer orders rather than the priority given
to public customer orders. The rules changed the execution priority in
various Exchange execution rules as they existed in August 2008 and
December 2009, respectively. After reviewing its execution rules, the
Exchange has determined to eliminate a feature within its execution
rules pertaining to customer-to-customer immediate cross orders related
to Voluntary Professionals and Professionals. Specifically, the
Exchange is proposing to amend the execution rules as follows:
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\5\ Securities Exchange Act Release No. 58327 (August 7, 2008),
73 FR 47988 (August 15, 2008) (SR-CBOE-2008-09).
\6\ Securities Exchange Act Release No. 61198 (December 17,
2009), 74 FR 68880 (December 29, 2009) (SR-CBOE-2009-078).
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Rule 6.74A.09 pertains to customer-to-customer immediate cross
orders. Under this provision, the Exchange may determine whether the
customer-to-customer immediate cross functionality will be available on
a class-by-class basis. If the functionality is available, an agency
order for the account of a non-broker-dealer customer may be paired
with a solicited order for the account of a non-broker-dealer customer
and such orders will be crossed without any auction exposure period,
provided certain conditions are met. For purposes of this provision,
the rule provides that Voluntary Professional and Professional orders
may be considered customer agency orders or solicited orders.\7\
However, the system does not currently recognize Voluntary Professional
and Professional orders as customer orders for purposes of the
customer-to-customer immediate cross. Thus, the proposed rule change
narrows the definition of customer-to-customer immediate cross orders
to only public customer orders that are not Voluntary Professionals or
Professionals, which is consistent with the current operation of the
system. The rule will continue to provide that customer-to-customer
immediate cross orders cannot be executed at the same price as any
resting customer orders (i.e., non-broker-dealer orders that are not
Voluntary Professional or Professional orders).\8\
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\7\ See cross reference to Rule 6.74A.09 in Rule 1.1(fff) and
(ggg).
\8\ Under CBOE Rules 6.45A.01 through .02 and 6.45B.01 through
.02, members are required to expose trading interest to the market
before executing agency orders as principal or before executing
agency orders against orders that were solicited from other broker-
dealers (i.e., proprietary and solicited crossing transactions).
However, the CBOE options rules do not contain any limitations or
exposure requirements regarding the execution of customer orders
against other customer orders. Customer-to-customer immediate cross
orders was [sic] adopted to provide a way to enter opposing customer
orders using a paired order type that protected customer orders on
the book. See Securities Exchange Act Release No. 57512 (March 17,
2008), 73 FR 15546 (March 24, 2008) (SR-CBOE-2008-19). While only a
public customer order that is not a Voluntary Professional or
Professional will be permitted to be executed using the customer-to-
customer immediate cross order mechanism under the proposed rule
change, Rules 6.45A.02 and 6.45B.02 continue to allow the execution
of all public customer orders (including Voluntary Professional and
Professional orders) without an exposure period. Members may
continue to enter two public customer orders (including Voluntary
Professional and Professional orders) on the Exchange with the
intent to cross them without the use of the customer-to-customer
immediate cross order type. See cross references to Rules 6.45A.02
and 6.45B.02 in Rule 1.1(fff) and (ggg).
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[[Page 22171]]
The Exchange also proposes to delete a provision from Rule 6.74A.09
(which is proposed to be re-numbered to Rule 6.74A.08) regarding
customer-to-customer immediate cross orders that was related to a block
exemption from the old linkage rules that does not now exist under the
distributive linkage plan.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \9\ that an exchange have rules that
are designed to promote just and equitable principles of trade, and to
remove impediments to and perfect the mechanism for a free and open
market and a national market system, and, in general, to protect
investors and the public interest. In particular, the proposed rule
change corrects an inconsistency by eliminating a feature and revises
outdated text regarding certain Exchange execution rules.
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\9\ 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: (i) Does not
significantly affect the protection of investors or the public
interest; (ii) does not impose any significant burden on competition;
and (iii) by its terms, does not 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, it has become effective pursuant to Section
19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the self-regulatory organization to submit to 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 has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \12\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\13\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing.
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\12\ 17 CFR 240.19b-4(f)(6).
\13\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
The Commission notes that the proposed rule change removes an
inconsistency in the Exchange rules, which may eliminate member
confusion and provide clarity on the meaning and applicability of the
affected rules. Therefore, the Commission designates the proposal
operative upon filing.\14\
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\14\ For purposes only of waiving the operative delay for 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 the 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.
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-2010-032 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-2010-032. 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 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-2010-032 and should be
submitted on or before May 18, 2010.
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\15\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-9678 Filed 4-26-10; 8:45 am]
BILLING CODE 8011-01-P