[Federal Register Volume 67, Number 219 (Wednesday, November 13, 2002)]
[Notices]
[Pages 68894-68895]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-28744]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46776; File No. SR-CBOE-2002-50]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by the Chicago Board Options 
Exchange, Incorporated Relating to the Retail Automatic Execution 
System Log-On Requirements for Market-Makers

November 6, 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 28, 2002, the Chicago Board Options Exchange (``CBOE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the CBOE. On October 25, 
2002, the Exchange filed Amendment No. 1 to the proposed rule 
change.\3\ The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons and to approve the 
proposal on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Exchange submitted a new Form 19b-4, which replaces and 
supersedes the original filing in its entirety.
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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 Exchange Rule 8.16 to eliminate the 
current Retail Automatic Execution System (``RAES'') log on 
requirements for market-makers. Below is the text of the proposed rule 
change. Proposed new text is italicized and proposed deleted text is 
[bracketed].
* * * * *

RAES Eligibility in Option Classes Other Than DJX, OEX and SPX

RULE 8.16 (a). No Change
    [(b) In option classes designated by the appropriate Market 
Performance Committee, any Market-Maker who has logged on RAES at any 
time during an expiration month must log on the RAES system in that 
option class whenever he is present in that trading crowd until the 
next expiration.]
    [(c)](b) Notwithstanding the limitations in Paragraphs (a)(iii) and 
(a)(iv) above, if there is inadequate RAES participation in a 
particular options class, Floor Officials of the appropriate Market 
Performance Committee may require Market-Makers who are members of the 
trading crowd, as defined in Rule 8.50 to log on RAES absent reasonable 
justification or excuse for non-participation or may allow Market-
Makers in other classes of options to log on RAES in such classes.
    [(d)] (c) Members who fail to abide by the foregoing requirements 
may be subject to disciplinary action under, among others, Rule 6.20 
and Chapter XVII of the Exchange Rules. Such failure may also be the 
subject of remedial action by the appropriate Market Performance 
Committee, including but not limited to suspending a member's 
eligibility for participation on RAES and such other remedies as may be 
appropriate and allowed under Chapter VIII of the Exchange Rules.
    * * * Interpretations and Policies:
    .01 No Change.
    .02 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.

[[Page 68895]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Current CBOE Rule 8.16 outlines the requirements with which a 
market-maker must comply in order to participate on RAES. Among the 
requirements, any market-maker who has logged on to RAES at any time 
during an expiration month must log on to the RAES system in that 
option class whenever he is present in that trading crowd until the 
next expiration. After assessing the impact of the RAES log on 
requirement, the Exchange believes that it no longer serves the purpose 
for which it was created, i.e., encouraging greater market-maker 
participation on RAES. Current CBOE Rule 8.16 limits participation in 
an all-or-none fashion. As a result, the Exchange seeks to remove the 
log on requirement in its entirety in order to encourage market-makers 
to log onto RAES to the extent that their business models permit. The 
Exchange believes this rule change is consistent with the recent 
changes to Rule 6.87 of the log on requirements of the Pacific 
Exchange, Inc.\4\
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    \4\ Securities Exchange Act Release No. 45894 (May 8, 2002), 67 
FR 34745 (May 15, 2002).
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations under the Act applicable to a 
national securities exchange and, in particular, the requirements of 
Section 6(b) of the Act.\5\ Specifically, the Exchange believes the 
proposed rule change is consistent with the Section 6(b)(5) \6\ 
requirements that the rules of an exchange be designed to promote just 
and equitable principles of trade, to prevent fraudulent and 
manipulative acts and, in general, to protect investors and the public 
interest.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The CBOE believes that the proposed rule change, as amended, 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

    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 \7\ and Rule 19b-
4(f)(6) thereunder.\8\ At any time within 60 days of the filing of such 
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 Exchange Act.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
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    The CBOE has requested that the Commission waive the 30-day 
operative delay.\9\ The Commission believes waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Waiver of the notice requirement and acceleration of 
the operative date will permit the CBOE to implement the proposed rule 
change without undue delay. For these reasons, the Commission 
designates the proposal to be effective and operative upon filing with 
the Commission.\10\
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    \9\ The CBOE did not specifically request the Commission to 
waive the 5-day pre-filing requirement. However, because the 
original filing was filed more than 5 days before Amendment No. 1, 
which converted the filing to a non-controversial filing pursuant to 
Section 19b(3)(A) of the Act and Rule 19b-4(f)(6) thereunder, the 
Commission finds that the 5-day pre-filing requirement has been 
satisfied.
    \10\ 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. 15 U.S.C. 
78c(f).
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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 also will be 
available for inspection and copying at the principal office of the 
CBOE. All submissions should refer to File No. SR-CBOE-2002-50 and 
should be submitted by December 4, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-28744 Filed 11-12-02; 8:45 am]
BILLING CODE 8010-01-P