[Federal Register Volume 66, Number 172 (Wednesday, September 5, 2001)]
[Notices]
[Pages 46487-46488]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-22239]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44749; File No. SR-CBOE-2001-47]


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

August 28, 2001.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on August 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 as a ``non-controversial'' 
rule change, pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 
19b-4(f)(6) \4\ thereunder. 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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Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CBOE hereby proposed to extend, for an additional four-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 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 nine-month 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 percentage of RAES contracts assigned to a 
participating market maker is essentially identical to the percent of 
non-RAES in-person agency contracts traded by that market maker in that 
class. At the conclusion of the pilot program on February 28, 2001, the 
program was extended for a six-month period that ends on August 28, 
2001.\8\ CBOE now proposes to extend the pilot program for an 
additional four-month period ending December 28, 2001.\9\ 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\ See Securities Exchange Act Release No. 44020 (February 28, 
2001), 66 FR 13985 (March 8, 2001).
    \9\ The Exchange represents that it 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 states that it believes that the 100 Spoke RAES Wheel pilot 
program is used as anticipated. CBOE represents that 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 further represents that it 
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 option class.
2. Statutory Basis
    CBOE believes that the proposed rule change will continue to be 
consistent with the requirements of Section 6(b)(5) of the Act.\10\ 
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 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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    \10\ 15 U.S.C. 78f(b)(5).

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[[Page 46488]]

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 \11\ and Rule 19b-
4(f)(6) \12\ 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 furtherance of the purposes of the Act.\13\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ See U.S.C. 78s(b)(3)(C).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of the filing. 
However, Rule 19b-4(f)(6) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. 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. CBOE contends 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, CBOE argues that, given the widespread use of the 100 Spoke 
RAES Wheel in equity options trading stations, requiring the Exchange 
to discontinue use of the 100 Spoke RAES Wheel as of August 29, 2001, 
would cause disruption to those trading stations and, thus, be 
disruptive to investors and the public interest. In light of these 
considerations, the Commission, consistent with the protection of 
investors and the public interest, has determined to designate the 
proposed rule change as operative immediately.\14\
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    \14\ 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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    In addition, Rule 19b-4(f)(6) requires the self-regulatory 
organization submitting the proposed rule change to give 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, or such shorter time as 
designated by the Commission. CBOE has requested that the Commission 
waive the five-day pre-filing requirement. Consistent with CBOE's 
request, the Commission has determined to waive the pre-filing 
requirement.

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-2001-47 and 
should be submitted by September 26, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
Jonathan G. Katz,
Secretary.
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    \15\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 01-22239 Filed 9-4-01; 8:45 am]
BILLING CODE 8010-01-M