[Federal Register Volume 67, Number 130 (Monday, July 8, 2002)]
[Notices]
[Pages 45161-45162]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-16983]



[[Page 45161]]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46149; File No. SR-CBOE-2002-34]


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

June 28, 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 June 12, 2002, 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 Exchange. The 
proposed rule change has been filed by CBOE as a ``non-controversial'' 
rule change under Rule 19b-4(f)(6) of the Act.\3\ 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\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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

    CBOE proposes to extend, for an additional three-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.
    The text of the proposed rule change is available at the Office of 
the Secretary, CBOE and at the Commission.

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 Rule 6.8, which governs the 
operation of RAES,\4\ to provide the appropriate FPC with a third 
choice for apportioning RAES trades among participating market makers, 
the 100 Spoke RAES Wheel.\5\ In those classes where the 100 Spoke RAES 
Wheel is employed, the distribution of RAES trades to participating 
market-makers is essentially identical to the distribution of in-person 
agency market-maker trades for non-RAES trades in that class. The 100 
Spoke RAES Wheel pilot program is used as anticipated.
---------------------------------------------------------------------------

    \4\ RAES is the Exchange's automatic execution system for public 
customer market or marketable limit orders of less than a certain 
size.
    \5\ Securities Exchange Act Release No. 42824 (May 25, 2000), 65 
FR 37442 (June 14, 2000) (SR-CBOE-99-40).
---------------------------------------------------------------------------

    The pilot program was extended three times and currently ends on 
June 28, 2002.\6\ The Exchange now proposes to extend the pilot program 
for an additional three-month period ending September 28, 2002 \7\ for 
additional study of the pilot program.
---------------------------------------------------------------------------

    \6\ Securities Exchange Act Release No. 44020 (February 28, 
2001), 66 FR 13985 (March 8, 2001) (six-month extension, SR-CBOE-
2001-07); Securities Exchange Act Release No. 44749 (August 28, 
2001), 66 FR 46487 (September 5, 2001) (four-month extension, SR-
CBOE-2001-47); and Securities Exchange Act Release No. 45230 
(January 3, 2002), 67 FR 1380 (January 10, 2002) (six-month 
extension, SR-CBOE-2001-68).
    \7\ In the narrative portion of the filing, CBOE inadvertently 
identified the expiration date of the three-month extension that is 
the subject of the filing as June 28, 2002. According to CBOE, the 
intended expiration date is September 28, 2002. Telephone 
conversation among Madge Hamilton, Legal Division, CBOE, Gordon 
Fuller, Counsel to the Assistant Director, and Geoffrey Pemble, 
Attorney, Division of Market Regulation, Commission.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\8\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\9\ in particular. Section 
6(b)(5) of the Act 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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \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 any 
burden on competition that is 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

    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 proposed rule change has been filed by the Exchange as a ``non-
controversial'' rule change pursuant to Section 19(b)(3)(A) of the Act 
\10\ and Rule 19b-4(f)(6) thereunder.\11\ Because the foregoing 
proposed rule change: (1) Does not significantly affect the protection 
of investors or the public interest, (2) Does not impose any 
significant burden on competition, and (3) by its terms does not become 
operative for 30 days after the date of this filing, or such shorter 
time as the Commission may designate, if consistent with the protection 
of investors and the public interest, provided that the self-regulatory 
organization has given 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, it has become effective pursuant to 
Section 19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6) \13\ 
thereunder.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    The Exchange has requested that the Commission waive the five-day 
pre-notice requirement and the 30-day operative delay, to permit the 
Exchange to implement the proposal immediately. Under Rule 19b-
4(f)(6)(iii), a proposed ``non-controversial'' rule change does not 
become operative for 30 days after the date of filing, unless the 
Commission designates a shorter time.
    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest

[[Page 45162]]

because it will allow for the continued operation of the pilot without 
interruption.\14\ According to CBOE, 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 maintains that 
given the widespread use of the 100 Spoke RAES Wheel in equity options 
trading stations, requiring the Exchange to discontinue the use of the 
100 Spoke RAES Wheel as of June 29, 2002 would cause disruption to 
those trading stations and thus, be disruptive to investors and the 
public interest. For these reasons, the Commission designates the 
proposed rule change to be effective and operative upon filing with the 
Commission. The Commission also waives the five-business-day pre-filing 
requirement. 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.
---------------------------------------------------------------------------

    \14\ For the purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rules 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

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 at 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 the File No. SR-CBOE-2002-34 
and should be submitted by July 29, 2002.


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 02-16983 Filed 7-5-02; 8:45 am]
BILLING CODE 8010-01-P