[Federal Register Volume 70, Number 66 (Thursday, April 7, 2005)]
[Notices]
[Pages 17731-17732]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-1582]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51459; File No. SR-CBOE-2005-27]


Self-Regulatory Organizations; Notice of Filing of a Proposed 
Rule Change by the Chicago Board Options Exchange, Incorporated 
Relating to the Hybrid Opening System

March 31, 2005.
    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 March 24, 2005, 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 CBOE. 
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.
---------------------------------------------------------------------------

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

    The proposed rule change would amend the Hybrid Opening System 
(``HOSS'') procedures and the rule relating to the obligations of 
electronic designated primary market makers (``e-DPMs''). The text of 
the proposed rule change is available on the CBOE's Web site (http://www.cboe.com), at the CBOE's Office of the Secretary, and at the 
Commission's Public Reference Room.

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 amend its rules relating to HOSS 
procedures and the rules relating to e-DPMs to require all e-DPMs to 
submit opening quotes during the HOSS opening rotation for every series 
in each Hybrid class to which any e-DPM is allocated. Currently, CBOE 
rules only require DPMs to submit opening quotes in option classes 
listed and traded on the Exchange. The Exchange believes that requiring 
e-DPMs to submit opening quotes along with DPMs would enhance the 
opening process for Hybrid option classes by providing greater 
liquidity during opening rotations, which would in turn lessen the 
possibility that a Hybrid option class might be unable to open.
    To illustrate, under current CBOE rules, only a DPM is required to 
submit opening quotes in a series \3\ and, if the DPM's quoted size at 
the open is below the total size of the market orders on the other side 
of the market and no other quotes are on the open, there is a market 
order imbalance and, under CBOE rules, HOSS will not open that 
series.\4\ If all e-DPMs are now required to add size to the opening 
quote for each series in the option classes allocated to e-DPMs, the 
incidence of market order imbalances is likely to decrease.
---------------------------------------------------------------------------

    \3\ See Rule 6.2B(a).
    \4\ See Rule 6.2B(e)(iii).
---------------------------------------------------------------------------

    As such, HOSS rules \5\ and the rules relating to e-DPM and DPM 
obligations, respectively,\6\ will be amended to require both e-DPMs 
and DPMs to enter opening quotes in accordance with HOSS rules in 100% 
of the series of each class allocated to that DPM or e-DPM.\7\
---------------------------------------------------------------------------

    \5\ Rule 6.2B.
    \6\ DPM obligations are provided under Rule 8.85(a) and e-DPM 
obligations are provided under Rule 8.93.
    \7\ Under current CBOE rules, DPMs already are required to 
submit opening quotes in all of its allocated classes, but this rule 
filing proposes to adopt rule language that will apply uniformly to 
both DPMs and e-DPMs.
---------------------------------------------------------------------------

2. Statutory Basis
    By enhancing HOSS opening procedures and making an e-DPM's HOSS 
obligations consistent with those of a DPM's, the Exchange believes 
that this proposed rule change is consistent with Section 6(b) of the 
Act,\8\ in general, and further the objectives of Section 6(b)(5) \9\ 
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.
---------------------------------------------------------------------------

    \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

    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 CBOE 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. 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-2005-27 on the subject line.

[[Page 17732]]

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-2005-27. 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 Section, 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-2005-27 and should be submitted on or before April 28, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
---------------------------------------------------------------------------

    \6\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-1582 Filed 4-6-05; 8:45 am]
BILLING CODE 8010-01-P