[Federal Register Volume 67, Number 168 (Thursday, August 29, 2002)]
[Notices]
[Pages 55443-55444]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-22098]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46397; File No. SR-CBOE-2002-44]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Board Options Exchange, Incorporated To Amend its 
Rules To Eliminate the ``Book Indicator''

August 21, 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 August 19, 2002, the Chicago Board Options Exchange, Incorporated 
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by the CBOE. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its rules to eliminate the ``Book 
Indicator.''

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. 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
    The Exchange is proposing to eliminate the ``Book Indicator.'' This 
indicator is affixed to the CBOE disseminated quotation when an order 
in the Exchange's book represents the best bid or offer on the 
Exchange. It alerts brokers and the public that the bid, offer or both 
are being generated by orders in the book, not by market-maker quotes. 
The Book Indicator was adopted as part of the Exchange's initiative to 
provide split-price Retail Automatic Execution System (``RAES'') 
executions for incoming customer orders when the prevailing best bid 
(offer) is generated by an existing customer order in the CBOE book.\3\ 
At the time split-price execution functionality was adopted, CBOE's 
disseminated quote did not display size. Thus, the Book Indicator 
served to alert customers that an RAES eligible order might not be 
executed in its entirety at CBOE's displayed price. For example, if the 
RAES limit was 50 contracts, and the best bid was a customer order in 
the book for 3 contracts, an incoming RAES order to sell 40 contracts 
would only be entitled to the book price for 3 contracts. However, 
because a customer would not know that the CBOE best bid was a booked 
order, the customer might expect his 40 contract order to execute in 
its entirety at the bid disseminated by CBOE. The Book Indicator 
alerted the customer that he might receive a split-price execution.
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    \3\ See Securities Exchange Act Release No. 43932 (February 6, 
2001), 66 FR 10332 (February 14, 2001).
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    Now that CBOE disseminates quotes with size, it no longer needs the 
Book Indicator. Today, in the above example, CBOE's disseminated bid 
would contain a size of 3 contracts. Thus, the customer would know that 
an RAES sell order would receive only 3 contracts at the disseminated 
bid price. This obviates the need for the Book Indicator; therefore 
CBOE proposes to eliminate it.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act \4\ in general and furthers the objectives of 
Section 6(b)(5) \5\ in particular in that it should promote just and 
equitable principles of trade, serve to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and protect investors and the public interest.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    This proposed rule change does not 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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 CBOE. 
All submissions should refer to the File No. SR-CBOE-2002-44 and should 
be submitted by September 19, 2002.


[[Page 55444]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-22098 Filed 8-28-02; 8:45 am]
BILLING CODE 8010-01-U