[Federal Register Volume 69, Number 235 (Wednesday, December 8, 2004)]
[Notices]
[Pages 71087-71088]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-3534]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50779; File No. SR-CBOE-2004-78]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Board Options 
Exchange, Incorporated To Extend a Pilot Program Relating to the Retail 
Automatic Execution System

December 1, 2004.
    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 November 30, 2004 the Chicago Board Options Exchange, 
Incorporated (``CBOE'' or ``Exchange'') submitted to 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. 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 CBOE proposes to extend a pilot program relating to the 
operation of CBOE's Retail Automatic Execution System (``RAES'') until 
November 30, 2005 to allow broker-dealer orders that are eligible for 
execution on RAES pursuant to CBOE Rule 6.8, Interpretation and Policy 
.01 to automatically execute against customer limit orders on CBOE's 
book in classes designated by the appropriate Floor Procedure Committee 
(``Pilot''). The text of the proposed rule change is available at the 
Office of the Secretary, the Exchange, 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, the Exchange 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 Exchange 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 purpose of this filing is to extend the Pilot until November 
30, 2005 to allow broker-dealer orders that are eligible for execution 
on RAES pursuant to CBOE Rule 6.8, Interpretation and Policy .01 to 
automatically execute against customer limit orders on CBOE's book in 
classes designated by the appropriate Floor Procedure Committee. The 
pilot was originally approved on May 13, 2004.\3\
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    \3\ See Securities Exchange Act Release No. 49699 (May 13, 
2004), 69 FR 28958 (May 19, 2004) (SR-CBOE-2003-42).
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    The Exchange's RAES system was created to allow for the automatic 
execution of retail customer options orders against CBOE market makers 
at their disseminated prices. In 1999, the Exchange expanded the RAES 
system to allow incoming RAES orders to execute against customer limit 
orders on the CBOE book when such booked orders constitute CBOE's best 
bid/offer.\4\ Recently, the Exchange has allowed broker-dealer orders 
to be executed on RAES in classes/series designated by the appropriate 
Floor Procedure Committee.\5\ The Pilot would allow these broker-dealer 
orders to automatically execute against the book.
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    \4\ See Securities Exchange Act Release No. 41995 (October 8, 
1999), 64 FR 56547 (October 20, 1999) (SR-CBOE-99-29).
    \5\ See Securities Exchange Act Release Nos. 45967 (May 20, 
2002), 67 FR 37888 (May 30, 2002) (SR-CBOE-2002-22); 46113 (June 25, 
2002), 67 FR 44486 (July 2, 2002) (SR-CBOE-2002-35); and 46598 
(October 3, 2002), 67 FR 63478 (October 11, 2002) (SR-CBOE-2002-56).
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2. Statutory Basis
    Because the proposed rule change will expand the number of orders 
eligible to trade automatically with booked customer limit orders, the 
Exchange believes the proposed rule change is consistent with Section 
6(b) of the Act \6\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \7\ in particular, because it is designed to promote 
just and equitable principles of trade, 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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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change will 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 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 if consistent with the protection of

[[Page 71088]]

investors and the public interest, and because the Exchange provided 
the Commission with written notice of its intent to file the proposed 
rule change at least five days prior to the filing date, the proposed 
rule change has become effective pursuant to Section 19(b)(3)(A) of the 
Act \8\ and Rule 19b-4(f)(6) thereunder.\9\ 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.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
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    The Exchange requests that the Commission waive the 30-day delayed 
operative period under Rule 19b-4(f)(6)(iii).\10\ The Exchange believes 
that the waiver of this period is appropriate because the filing merely 
extends the Pilot that has been in effect since May 13, 2004 and 
because the Pilot affords automatic executions to a greater number of 
market participants.
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    \10\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that it is consistent with the protection 
of investors and the public interest to waive the 30-day operative 
delay and make this proposed rule change immediately effective.\11\ The 
Commission believes that the waiver of the 30-day operative delay will 
allow the Exchange to continue, without interruption, the existing 
operation of its Pilot for an additional year, expiring on November 30, 
2005.
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    \11\ For purposes only of waiving the 30-day operative delay 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 is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-CBOE-2004-78 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-CBOE-2004-78. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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, 450 Fifth 
Street, NW., Washington, DC 20549. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
CBOE. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
CBOE-2004-78 and should be submitted on or before December 29, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E4-3534 Filed 12-7-04; 8:45 am]
BILLING CODE 8010-01-P