[Federal Register Volume 66, Number 46 (Thursday, March 8, 2001)]
[Notices]
[Pages 13985-13986]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-5691]



[[Page 13985]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44020; File No. SR-CBOE-01-07]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Board Options 
Exchange, Incorporated Extending for a Six-Month Period the Pilot 
Program for the Exchange's 100 Spoke RAES Wheel

February 28, 2001.
    Pursuant to section 19(b)(1) of the Securities Act of 1934 
(``Act'') \1\ and rule 19b-4 \2\ thereunder, notice is hereby given 
that on February 27, 2001, 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 Exchange. CBOE filed the proposal pursuant to section 
19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) \4\ thereunder, which 
renders the proposal effective upon filing with 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\ 15 U.S.C. 78s(b)(3)(A).
    \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

    CBOE hereby proposes to extend, for an additional six-month period, 
the pilot program that permits the appropriate Floor Procedure 
Committee (``FPC'') to allocate orders on the Exchange's Retail 
Automatic Execution System (``RAES'') under the allocation system known 
as the 100 Spoke RAES Wheel. CBOE has designated this proposal as non-
controversial and requests that the Commission waive both the five-day 
pre-filing notice and the 30-day pre-operative waiting period contained 
in Rule 19b-4(f)(6)(iii) under the Act,\5\ to allow the proposal to be 
both effective and operative immediately upon filing with the 
Commission.
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    \5\ 17 CFR 240.19b-4(f)(6)(iii).
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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 these statements may be examined at the places specified in 
Item IV below. CBOE 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
    On May 25, 2000, the Commission approved on a pilot basis the 
Exchange's proposal to amend CBOE Rule 6.8, which governs the operation 
of RAES,\6\ to provide the appropriate FPC with another choice for 
apportioning RAES trades among participating market makers, the 100 
Spoke RAES Wheel.\7\ In those classes where the 100 Spoke RAES Wheel is 
employed, the percentages of RAES contracts assigned to a participating 
market maker is essentially identical to the percentage of non-RAES in-
person agency contracts traded by that market maker in that class. The 
Exchange now proposes to extend the pilot program for an additional 
six-month period ending August 28, 2001.\8\ The pilot will continue to 
operate under its current terms and conditions.
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    \6\ RAES is the Exchange's automatic execution system for public 
customer market or marketable limit orders of less than a certain 
size.
    \7\ See Securities Exchange Act Release No. 42824 (May 25, 
2000), 65 FR 37442 (June 14, 2000).
    \8\ The Exchange intends to submit a rule change in the near 
future proposing permanent approval of the 100 Spoke RAES Wheel 
allocation system.
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    CBOE believes that the 100 Spoke RAES Wheel pilot program has been 
used as anticipated. Use of the 100 Spoke RAES Wheel has expanded since 
its implementation, and it is currently used in approximately two-
thirds to three-fourths of the equity options trading stations. CBOE 
believes that an extension of the pilot program will continue to 
provide the appropriate FPC with flexibility in determining the 
appropriate allocation system for a given class of options on RAES. In 
addition, CBOE believes that the continuation of the pilot program will 
continue to reward those market makers who are most active in providing 
liquidity to agency business in the assigned options class.
2. Statutory Basis
    CBOE believes that the proposed rule change will continue to be 
consistent with the requirements of section 6(b)(5) Act.\9\ Section 
6(b)(5) requires, among other things, that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices; to 
promote just and equitable principles of trade; to facilitate 
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.
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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 a 
burden on competition that is not necessary or appropriate in 
furtherance of 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

    CBOE has asserted that, because the foregoing 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) it has become 
effective pursuant to section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6) \11\ thereunder. 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 the furtherance of the purposes of the Act.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    CBOE has requested that the Commission waive the 30-day pre-
operative waiting period, which will allow the Exchange to continue the 
pilot program without interruption until the Commission determines 
whether to approve the pilot on a permanent basis. The Commission 
believes that, with the continuation of the pilot program, market 
makers will continue to have greater incentive to compete effectively 
for orders in the crowd, which benefits investors and promotes the 
public interest. In addition, given the widespread use of the 100 Spoke 
RAES

[[Page 13986]]

Wheel in equity options trading stations, requiring the Exchange to 
discontinue the use of the 100 Spoke RAES Wheel as of March 1, 2001, 
would cause disruption to those trading stations, and thus, be 
disruptive to investors and the public interest. Accordingly, the 
Commission finds good cause to waive the 30-day operative waiting 
period and to designate that the proposal become operative 
immediately.\12\
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    \12\ 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. See 15 
U.S.C. 78c(f).
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    The Commission has also waived the requirement that the Exchange 
provide written notice of its intent to file the proposed rule change 
at least five business days prior to the date of filing.\13\
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    \13\ See 17 CFR 240.19b-4(f)(6)(iii).
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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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
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 will also be 
available for inspection and copying at the principal office of the 
Exchange. All submissions should refer to File No. SR-CBOE-01-07 and 
should be submitted by March 29, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-5691 Filed 3-7-01; 8:45 am]
BILLING CODE 8010-01-M