[Federal Register Volume 66, Number 66 (Thursday, April 5, 2001)]
[Notices]
[Pages 18127-18131]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-8346]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44104; File No. SR-CBOE-00-47]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of a Proposed Rule Change and Amendments 
No. 1 and 2 Thereto by the Chicago Board Options Exchange, Inc. 
Relating to Changes to Its Rule Governing the Retail Automatic 
Execution System (``RAES'')

March 26, 2001.
    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 September 8, 2000, the Chicago Board Options Exchange, Inc. 
(``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 February 27, 2001, the CBOE filed Amendment No. 1 to the proposed 
rule change.\3\ On March 23, 2001, the CBOE filed Amendment No. 2 to 
the proposed rule change.\4\ The Commission is publishing this notice 
to solicit comments on the proposed rule change, as amended, from 
interested persons. For the reasons discussed below, the Commission is 
granting accelerated approval of the proposed rule change and 
Amendments No. 1 and 2.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Timothy Thompson, Assistant General Counsel, 
CBOE, to Nancy Sanow, Assistant Director, Division of Market 
Regulation (``Division''), Commission, dated February 23, 2001 
(``Amendment No. 1''). In Amendment No. 1, the CBOE amended its 
proposed rule language to eliminate: (1) The proposed requirement 
that Order Entry Firms execute an application and agreement with the 
Exchange; (2) the proposed language establishing a presumption that 
the Exchange's prohibition against unbundling would be violated when 
multiple orders were entered within a 15-second period; (3) the 
proposed prohibition against entering orders via RAES to perform a 
market-making function; and (4) the proposed prohibition against 
manipulation, which the CBOE indicated is covered by other 
applicable rules and regulations. Instead, the CBOE proposed to 
adopt a prohibition against the entry of multiple orders in a call 
class and/or put class for the same option issue within a 15-second 
period by an account or accounts for the same beneficial owner. The 
CBOE also made minor technical corrections to the proposed rule 
text. These provisions are discussed more fully in Sections II and 
IV below.
    \4\ See letter from Timothy Thompson, Assistant General Counsel, 
CBOE, to Nancy Sanow, Assistant Director, Division, Commission, 
dated March 22, 2001 (``Amendment No. 2''). In Amendment No. 2, the 
CBOE made minor technical changes to its proposed rule text. The 
CBOE also requested accelerated approval of the instant proposal and 
stated that the Commission has already approved similar proposals by 
other options exchanges.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The CBOE proposes to simplify Rule 6.8 (``Rule'' or ``RAES Rule'' 
by ordering the provisions of the RAES Rule in a more organized fashion 
and by adopting new rules and procedures to establish means of assuring 
better compliance with the RAES Rule.
    Below is the text of the proposed rule change. Proposed new 
language is italicized and proposed deletions are in brackets.
* * * * *

CHAPTER VI

Doing Business on the Exchange

Section A: General

* * * * *

RAES Operations

* * * * *

Rule 6.8.

    This Rule governs RAES operations in all classes of options, 
except to the extent otherwise expressly provided in this or other 
Rules in respect of specified classes of options. (a)[(i)] Firms on 
the Exchange's Order Routing System (``ORS'') will automatically be 
on the Exchange's Retail Automatic Execution System (``RAES'') for 
purposes of routing eligible orders [small public customer market or 
marketable limit orders] into the RAES system.
    (b) Definitions. For purposes of this Rule 6.8:
    (i) The term ``RAES'' means the automated execution system 
feature of ORS that is owned and operated by the Exchange and that 
provides automated order execution and reporting services for 
option.
    (ii) The term ``User'' means any person or firm that obtains 
access to RAES through an Order Entry Firm.
    (iii) The term ``Order Entry Firm'' means a member organization 
of the Exchange that is able to route orders to the Exchange's ORS.
    (c) Eligible Orders.
    An order must meet the following criteria to be eligible for 
RAES:
    (i) The order must be a market order or a marketable limit 
order. A marketable limit order is a limit order where the specified 
price at which to sell is below or at the

[[Page 18128]]

current bid, or if to buy is above or at the current offer.
    (ii) Orders are not eligible for execution on the RAES system if 
they are orders for accounts in which a member, non-member 
participant in a joint-venture with a member, or any non-member 
broker-dealer has an interest. 
    (iii) Those orders which are eligible for routing to RAES may be 
subject to such contingencies as the appropriate Floor Procedure 
Committee (``FPC'') shall approve.
    (iv) For purposes of this Rule, the term ``broker-dealer'' 
includes the term ``foreign broker-dealer'' as defined in Rule 
1.1(xx).
    [Public customer orders are orders for accounts other than 
accounts in which a member, non-member participant in a joint-
venture with a member, or any non-member broker-dealer (including a 
foreign-broker as defined in Rule 1.1 (xx)) has an interest.]
    (v) The appropriate [Floor Procedure Committee (``FPC'')] FPC 
shall determine the size of orders eligible for entry into RAES [in 
accordance with paragraph (e) of this Rule]. Eligible orders must be 
for one hundred [seventy-five] or fewer contracts on series placed 
on the system. The appropriate FPC, in its discretion, may determine 
to restrict the size and kind of eligible orders, including but not 
limited to, lowering contract limits on particular option issues. 
Announcements concerning the size and kind of eligible orders will 
be made promptly as these are adjusted. The appropriate FPC will 
have discretion to place on the system such series in classes of 
options subject to its jurisdiction as it determines is appropriate.
    (vi) Notwithstanding the provisions of sub-paragraph (c)(v) 
[paragraph (e) of this Rule], the appropriate FPC may increase the 
size or orders in one or more classes of multiply-traded options 
eligible for entry into RAES to the extent necessary to match the 
size of orders in options of the same class or classes eligible for 
entry into the automated execution system of any other options 
exchange, provided that the effectiveness of any such increase shall 
be conditioned upon its having been filed with the Securities and 
Exchange Commission pursuant to Section 19(b)(3)(A) of the 
Securities Exchange Act of 1934.
    (vii) For purposes of determining whether an order meets the 
maximum size requirement set forth in sub-paragraph (c)(v) [what a 
small customer order is], a customer's order cannot be split up such 
that its parts are eligible for entry into RAES. [Firms on ORS have 
the ability to go on and off ORS at will. Firms not on ORS that wish 
to participate will be given access to RAES from terminals at their 
booths on the floor.]
    (d) Execution on RAES.
    [(ii)] (i) When RAES receives an order, the system automatically 
will attach to the order its execution price, determined by the 
prevailing market quote at the time of the order's entry to the 
system, except as otherwise provided in [Interpretation and Policy 
.02 under] this Rule 6.8 and the Interpretations to this Rule [in 
respect of multiply-traded options]. A buy order will pay the offer, 
a sell order will sell at the bid. Marketable limit orders will not 
be executed to sell for less or buy for more than the specified 
price, but the order can be executed to sell for a higher price or 
buy for a lower price. However, if the order's limit price is under 
$3, RAES will execute the order only if the necessary bid or offer 
is \1/2\ point or less from the limit price. If the order's limit 
price is $3 or more, RAES will execute the order only if the 
necessary bid or offer is one dollar or less from the limit price.
    (ii) A Market-Maker logged on to participate in RAES (a 
``Participating Market-Maker'') will be designated as contra-broker 
on the trade.
    (iii) A trade executed on RAES at an erroneous quote should be 
treated as a trade reported at an erroneous price and adjusted to 
reflect the accurate market after receiving a Floor Official's 
approval.
    [(b)] (iv) [It is possible that the prevailing market bid or 
offer may be equal to the best bid or offer on the Exchange's book. 
In those instances, a RAES order will be executed against the order 
in the book. In the event, the order in the book is for a smaller 
number of contracts than the RAES order, the balance of the RAES 
order will be assigned to participating market-makers at the same 
price at which the rest of the order was executed.] When the best 
bid or offer on the Exchange's book constitutes the best bid or 
offer on the Exchange and is for a size less than the RAES order 
eligibility size for that class, such fact shall be denoted in the 
Exchange's disseminated quote by a ``Book Indicator''. It is 
possible that the best bid or offer on the Exchange's book 
constitutes the prevailing market bid or offer. In those instances, 
a RAES order will be executed against the order in the book. In the 
event, the order in the book is for a smaller number of contracts 
than the RAES order, the balance of the RAES order will be assigned 
to participating market-makers at the same price at which the 
initial portion of the order was executed up to an amount prescribed 
by the appropriate Floor Procedure Committee on a class-by-class 
basis (the ``Book Price Commitment Quantity''). Any remaining 
balance thereafter shall be [(i)] (A) routed to the crowd PAR 
terminal if Autoquote is not in effect for that series; [(ii)](B) 
assigned to participating market-makers at the Autoquote price if 
Autoquote constitutes the new prevailing market bid or offer; or 
[(iii)] (C) executed against any order in the book that constitutes 
the new prevailing market bid or offer with the balance of the RAES 
order being assigned to participating market-makers at that price up 
to the Book Price Commitment Quantity. Any additional remaining 
balance of a RAES order shall be handled in accordance with 
[(ii)](B) or [(iii)](C) of this paragraph.\5\
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    \5\ Telephone conversation between Timothy Thompson, Assistant 
General Counsel, CBOE, and Sapna C. Patel, Attorney, Division, 
Commission, on March 27, 2001. Minor technical changes were made to 
the numbering of the provisions of sub-paragraph (d)(iv).
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    [(c)] (v) Notwithstanding sub-paragraph (d)(iv) [(b)], for a six 
month pilot program ending August 21, 2001, for any series of 
options where the bid or offer generated by the Exchange's Autoquote 
system (or any Exchange approved proprietary quote generation system 
used in lieu of the Exchange's Autoquote system) crosses or locks 
the Exchange's best bid or offer as established by an order in the 
Exchange's customer limit order book, orders in RAES for options of 
that series will not be automatically executed but instead will be 
rerouted on ORS to the crowd PAR terminal or to another location in 
the event of system problems or contrary firm routing instructions.
    (e) Order Entry Firms. Order Entry Firms shall:
    (i) Comply with all applicable CBOE options trading rules and 
procedures;
    (ii) Provide written notice to all Users regarding the proper 
use of RAES;
    (iii) Neither enter nor permit the entry of multiple orders in a 
call class and/or put class 
    for the same option issue within any 15-second period for an 
account or accounts of the same beneficial owner.
    Violations of this rule may be referred to the Business Conduct 
Committee for appropriate disciplinary action.
    (f)[(d)] Participating Market-Makers.
    (i) Participating Market-Makers will be assigned trades by RAES 
[on a rotating basis, with the first Market-Maker selected at random 
from the list of Participating Market-Makers,] in accordance with 
procedures adopted by the appropriate FPC pursuant to Interpretation 
.06 of this Rule. [Participating Market-Makers are obligated to 
trade at the displayed market quote at the time an order enters the 
system.] Exchange rules shall not apply to the extent that they are 
inconsistent with these terms, including but not limited to Rule 
6.45 (Priority of Bids and Offers), Rule 6.43 (Manner of Bidding and 
Offering), and Rule 8.1 (Market-Maker Defined). Applicable position 
and exercise limits will remain in effect for RAES transactions. 
Transactions executed through RAES orders will count towards 
fulfillment of the in-person requirement of Rule 8.7.
    (ii) To the extent possible, a [A]ll participants will be 
informed of trades immediately upon execution. A fill report may be 
generated to the firm at the firm's point of entry into the system 
(i.e., either its branch office or floor booth), and a trade 
acknowledgement ticket (``TAT'') will be made available to 
Participating Market-Makers in a manner prescribed by the Exchange. 
[A log for all transactions will be available throughout the day for 
review by participants. Audit reports will be sent to the Exchange's 
Regulatory Services Division.]
    [(e) Eligible orders must be for fifty or fewer contracts on 
series placed on the system, except that eligible orders for 
interest rate options or for options on the S&P 500 Index, the 
Nasdaq 100 Index or the Dow Jones Industrial Average must be for one 
hundred or fewer contracts on series placed on the system. The 
appropriate FPC, in its discretion, may determine to restrict the 
size and kind of eligible orders, including but not limited to, 
lowering contract limits. Announcements concerning the size and kind 
of eligible orders will be made promptly as these are adjusted. The 
appropriate FPC will have discretion to place on the system such 
series in classes of options subject to its jurisdiction as it 
determines is appropriate.]
    [(f)] (g) Each day the system is available, a post director or 
his representative will start the system, after quotes in the 
eligible series have been updated following the opening of the 
option class [rotation]. If the system is or becomes unavailable, 
for any reason, eligible orders will be handled as they are handled 
currently in non-eligible option series.

[[Page 18129]]

    [(g) A marketable limit order is a limit order where the 
specified price at which to sell is below or at the current bid, or 
if to buy is above or at the current offer. Marketable limit orders 
will not be executed to sell for less or buy for more than the 
specified price, but the order can be executed to sell for a higher 
price or buy for a lower price. However, if the order's limit price 
is under $3, RAES will execute the order only if the necessary bid 
or offer is 1/2 point or less from the limit price. If the order's 
limit price is $3 or more, RAES will execute the order only if the 
necessary bid or offer is one dollar or less from the limit price.]

* * * Interpretations and Policies

    .01  [Reserved.] [Notwithstanding the provisions of paragraph 
(e) of this Rule, the appropriate FPC may increase the size or 
orders in one or more classes of multiply-traded options eligible 
for entry into RAES to the extent necessary to match the size of 
orders in options of the same class or classes eligible for entry 
into the automated execution system of any other options exchange, 
provided that the effectiveness of any such increase shall be 
conditioned upon its having been filed with the Securities and 
Exchange Commission pursuant to Section 19(b)(3)(A) of the 
Securities Exchange Act of 1934.]
    .02-.08 No change.
* * * * *

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 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
    a. Background. RAES has been in operation on the Exchange since the 
Commission approved it as a pilot program for Standard & Poor's 100 
Index Options (``OEX'') in 1984.\6\ Since its inception, RAES was 
designed to provide automatic execution of non-broker-dealer customer 
orders at the Exchange's displayed bid and ask prices \7\ for market or 
marketable limit orders of ten contracts or fewer. Recently, in 
response to requests of its customers and based upon the popularity of 
the RAES system with these customers, the Exchange amended its RAES 
Rule to allow for the appropriate Floor Procedure Committee to provide 
on an issue-by-issue basis for orders of up to one hundred contracts to 
be executed on RAES.\8\
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    \6\ See Securities Exchange Act Release No. 21549 (December 7, 
1984), 49 FR 49195 (December 18, 1984) (approving File No. SR-CBOE-
84-30).
    \7\ If the current best bid or offer, as such bids or offers are 
identified on RAES, is being quoted on another exchange for a 
particular series, RAES will either reject the order for manual 
handling or execute the order automatically at the current best bid 
or offer if the current best bid or offer is not more than a 
designated number of ticks better than the CBOE bid or offer. The 
appropriate Floor Procedure Committee of the Exchange determines the 
number of ticks better than CBOE best bid or offer at which the 
current best bid or offer may be in order for RAES order to be 
executed automatically at the current best bid or offer price.
    \8\ See Securities Exchange Act Release No. 44008 (February 27, 
2001), 66 FR 13599 (March 6, 2001) (approving File No. SR-CBOE-01-
03).
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    b. Definitions. The Exchange proposes to add a number of 
definitions in proposed paragraph (b) of the RAES Rule so that the 
meaning of each of these terms is clear to members and users of RAES. 
The term ``RAES'' is defined as the automated execution system feature 
of the Order Routing System (``ORS'') that is owned and operated by the 
Exchange and that provides automated execution and reporting services 
for options.
    The terms ``User'' means any person or firm that obtains access to 
RAES through an Order Entry Firm.
    The terms ``Order Entry Firm'' means a member organization of the 
Exchange that is able to route orders to the Exchange's ORS.
    c. Eligible Orders. Proposed paragraph (c) of the RAES Rule 
includes all of the provisions of current RAES Rule which concern the 
eligibility of orders to be executed on RAES. Many of these provisions 
are scattered throughout the current version of the Rule and are now 
proposed to be moved to paragraph (c).
    d. Execution on RAES. Proposed paragraph (d) of the RAES Rule 
includes all the provisions of the RAES Rule which concern the 
execution of RAES orders. The proposed changes merely consist of 
reorganizing and renumbering current provisions of the Rule.
    e. Order Entry Firms. The Exchange proposes to add new paragraph 
(e) to the RAES Rule which will provide that Order Entry Firms, as 
defined in paragraph (b), agree to: (1) Comply with all applicable CBOE 
options trading rules and procedures; (2) provide written notice to all 
Users regarding the proper use of RAES; and (3) neither enter nor 
permit the entry of multiple orders in a call class and/or put class 
for the same option issue within any 15-second period for an account or 
accounts of the same beneficial owner. The Exchange determined to make 
these changes to protect investors and other market participants from 
the potential negative consequences that might result from Order Entry 
Firms engaging in prohibited conduct. The Exchange further wanted to 
ensure that the member that provides access to RAES to its customers is 
ultimately responsible for the orders that are entered by its 
customers. The Exchange believes that these safeguards are more 
important than ever now that a growing number of members have direct 
access to the Exchange's ORS and to RAES.
    The Exchange has otherwise renumbered the remaining paragraphs of 
the Rule.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of section 6(b) \9\ of the Act in general, and 
furthers the objectives of section 6(b)(5) \10\ of the Act in 
particular, in that it will promote just and equitable principles of 
trade, remove impediments to and perfect the mechanisms of a free and 
open market, and protect investors and the public interest.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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.

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

    The CBOE requests that the proposed rule change and Amendments No. 
1 and 2 be given accelerated effectiveness pursuant to section 19(b)(2) 
\11\ of the Act. The Exchange believes that because the proposed rule 
change is essentially identical to rules of other options exchanges 
that the Commission has already noticed for public comment and recently 
approved,\12\ the proposed rule change raises no new issues. 
Furthermore, the CBOE believes that

[[Page 18130]]

accelerated approval of the proposed rule change filing will ensure 
that the Exchange's market makers are not placed at a competitive 
disadvantage to those market makers who are trading at an exchange that 
currently has a similar prohibition in place. The CBOE further believes 
that acceleration of the proposed rule change will ensure that the 
Exchange's public customers can enjoy the benefits that the Exchange 
expects to be derived from the proposed rule at the earliest possible 
time.
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    \11\ 15 U.S.C. 78(b)(2).
    \12\ See, e.g., Securities Exchange Act Release No. 43971 
(February 15, 2001), 66 FR 11344 (February 23, 2001) (order 
partially approving File No. SR-PCX-00-05).
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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, as amended, 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 CBOE. All submissions should refer to File No. 
SR-CBOE-00-47 and should be submitted by April 26, 2001.

V. Commission Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change and Amendments No. 1 and 2 Thereto

    After careful review, the Commission finds that the proposed rule 
change, as amended, is consistent with the Act and the rules and 
regulations promulgated thereunder applicable to a national securities 
exchange and, in particular, with the requirements of section 6(b).\13\ 
Specifically, the Commission finds that approval of the proposed rule 
change is consistent with section 6(b)(5) \14\ of the Act in that it is 
designed to promote just and equitable principles of trade, to remove 
impediments and to perfect the mechanism 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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    \13\ 15 U.S.C. 78f(b). In approving this proposal, the 
Commission has considered the proposed rule's impact on efficiency, 
competition and capital formation. 15 U.S.C. 78c(f).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Commission finds that the Exchange's proposed provisions under 
paragraph (b) of the RAES Rule, codifying and defining the terms 
``RAES,'' ``User,'' and ``Order Entry Firm,'' will help provide RAES 
participants with more clarity and guidance and a better understanding 
of the use of these terms as used in the CBOE's rules governing RAES.
    The Commission also finds that the Exchange's proposed paragraph 
(c) of the RAES Rule, entitled ``Eligible Orders,'' and proposed 
paragraph (d) of the RAES Rule, entitled ``Execution on RAES,'' will 
help organize various scattered provisions throughout the CBOE's RAES 
Rule regarding the eligibility of orders and the execution of these 
orders through RAES. The Commission believes that this reorganization 
will better clarify the RAES Rules of Order Entry Firms and Users of 
RAES.
    Furthermore, the CBOE proposes to add new paragraph (e) to the RAES 
Rule to specify that Order Entry Firms comply with certain 
requirements. First, Order Entry Firms must comply with all applicable 
CBOE options trading rules and procedures. Second, Order Entry Firms 
must provide written notice to all Users regarding the proper use of 
RAES. Finally, Order Entry Firms must neither enter nor permit the 
entry of multiple orders in a call class and/or put class for the same 
option issue within any 15-second period for an account or accounts of 
the same beneficial owner.
    The Commission finds that paragraph (e) makes explicit the 
responsibilities and requirements of Order Entry Firms. The Commission 
recognizes that the Exchange's proposal will place an explicit 
prohibition against Order Entry Firms entering or permitting the entry 
of multiple orders in a call class and/or put class for the same option 
issue within any 15-second period for an account or accounts of the 
same beneficial owner. The Commission finds that such prohibition is 
similar to, although not exactly identical to, provision that it has 
already approved for other options exchanges.\15\ The Commission 
therefore finds that this 15-second requirement as applicable to 
multiple orders from the same beneficial owner is consistent with the 
provisions of the Act and rules thereunder. Furthermore, the Commission 
believes that accelerated approval of the proposal is appropriate to 
ensure that the Exchange's market makers are not placed at a 
competitive disadvantage to those market makers who are trading at an 
exchange where a substantially similar requirement is currently in 
place. For these reason, the Commission finds good cause, consistent 
with section 19(b)(2) of the Act,\16\ to accelerate approval of this 
proposed rule change and Amendments No. 1 and 2.
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    \15\ See Securities Exchange Act Release Nos. 43971 (February 
15, 2001), 66 FR 11344 (February 23, 2001) (order partially 
approving File No. SR-PCX-00-05); and 44017 (February 28, 2001), 66 
FR 13820 (March 7, 2001) (ordering approving File No. SR-ISE-00-20). 
The Commission approved proposals by the International Stock 
Exchange LLC (``ISE'') and the Pacific Exchange, Inc. (``PCX'') that 
prohibit members from entering multiple orders for the same 
beneficial account within a 15-second period.
    \16\ 15 U.S.C. 78s(b)(2).
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    Furthermore, the Commission finds good cause for approving the 
proposed rule change and Amendments No. 1 and 2 prior to the thirtieth 
day after notice of the publication in the Federal Register. In 
addition to making minor technical changes to the proposed rule 
language, Amendment No. 1 proposes a prohibition against the entry of 
multiple order in a call class and/or put class for the same option 
issue within 15-second period by an account or accounts for the same 
beneficial owner. In addition, Amendment No. 1 amends the proposed rule 
language to eliminate: (1) The proposed requirement of Order Entry 
Firms to execute an application and agreement with the Exchange; (2) 
the proposed language establishing a presumption that the Exchange's 
prohibition against unbundling would be violated when multiple orders 
were entered within a 15-second period; (3) the proposed prohibition 
against entering orders via RAES to perform a market-making function; 
and (4) the proposed prohibition against manipulation, which the CBOE 
indicated is covered by other applicable rules and regulations. The 
CBOE further made minor technical corrections to the proposed rule 
text. In Amendment No. 2, the CBOE, in addition to making additional 
technical corrections to the proposed rule text, requested accelerated 
approval of the instant proposal and stated that the Commission has 
already approved similar proposals by other options exchanges. The 
Commission believes that it is not necessary to separately solicit 
comment on these amendments prior to approving this proposal because it 
finds that these changes to the proposed rule language are necessary to 
accomplish the intended goals of the Exchange's proposal. In 
particular, the Commission believes that the Exchange's establishment 
of a prohibition on members entering or

[[Page 18131]]

permitting the entry of multiple orders from the account or accounts of 
the same beneficial owner within a 15-second period, in lieu of a 
presumption regarding the unbundling of such orders, will add certainty 
and consistency to the enforcement of the Rule and provide Order Entry 
Firms with clarity as to what conduct violates the Rule. The Commission 
therefore finds that acceleration of Amendments No. 1 and 2 is 
appropriate.
    It Is Therefore Ordered, pursuant to section 19(b)(2) of the 
Act,\17\ that the proposed rule change (SR-CBOE-00-47), and Amendments 
No. 1 and 2 thereto, are hereby approved on an accelerated basis.
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    \17\ Id.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-8346 Filed 4-4-01; 8:45 am]
BILLING CODE 8010-01-M