[Federal Register Volume 67, Number 7 (Thursday, January 10, 2002)]
[Notices]
[Pages 1380-1382]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-596]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45230; File No. SR-CBOE-2001-68]


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

January 3, 2002.
    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 December 26, 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) thereunder,\4\ 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

I. Self Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    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 the 30-day pre-
operative waiting period set forth in Rule 19b-4(f)(6)(iii) under the

[[Page 1381]]

Act \5\ to allow the proposal to be effective and operative immediately 
upon filing with the Commission.
---------------------------------------------------------------------------

    \5\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

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\ The pilot program has been extended twice 
and will expire on December 28, 2001.\8\ CBOE now proposes to extend 
the pilot program for an additional six-month period ending June 28, 
2002.
---------------------------------------------------------------------------

    \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). 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 percentage of non-RAES in-person agency contracts traded by that 
market maker in that class.
    \8\ See Securities Exchange Act Release No. 44020 (February 28, 
2001), 66 FR 13985 (March 8, 2001) (six-month extension to August 
28, 2001; Securities Exchange Act Release No. 44749 (August 28, 
2001), 66 FR 46487 (September 5, 2001) (four-month extension to 
December 28, 2001).
---------------------------------------------------------------------------

    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; it is currently 
used in approximately three-fourths of the equity options trading 
stations. CBOE has represented that an extension of the pilot program 
is necessary to further study the pilot program. 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. CBOE also 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 is consistent with the 
requirements of section 6(b)(5) of the 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 mechanism of a 
free and open market and a national market system; and, in general, to 
protect investors and the public interest.
---------------------------------------------------------------------------

    \9\ 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 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) thereunder.\11\ 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.\12\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ See 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally would 
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 would 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 December 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.\13\
---------------------------------------------------------------------------

    \13\ 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).
---------------------------------------------------------------------------

    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

[[Page 1382]]

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-2001-68 and should be 
submitted by January 31, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-596 Filed 1-9-02; 8:45 am]
BILLING CODE 8010-01-M