[Federal Register Volume 70, Number 122 (Monday, June 27, 2005)]
[Notices]
[Pages 36977-36979]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3327]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51888; File No. SR-CBOE-2005-47]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to the Exchange's Hybrid Trading System 
and Hybrid 2.0 Platform

June 20, 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 June 14, 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 
Exchange. The Exchange has designated this proposal as one constituting 
a stated policy, practice, or interpretation with respect to the 
meaning, administration, or enforcement of an existing rule under 
Section 19(b)(3)(A)(i) of the Act,\3\ and Rule 19b-4(f)(1) 
thereunder,\4\ which renders the proposal effective upon filing with 
the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(i).
    \4\ 17 CFR 240.19b-4(f)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to clarify its rules that relate to the 
designation of index options and options on ETFs on CBOE's Hybrid 
Trading System and Hybrid 2.0 Platform. Below is the text of the 
proposed rule change. Proposed new language is italicized; proposed 
deletions are in [brackets].
Chicago Board Options Exchange, Incorporated
Rules
Rule 6.45B--Priority and Allocation of Trades in Index Options and 
Options on ETFs on the CBOE Hybrid System
    Generally: The rules of priority and order allocation procedures 
set forth in this rule shall apply only to index options and options on 
ETFs that have been designated [by the appropriate Exchange procedures 
committee] for trading on the CBOE Hybrid System. The term ``market 
participant'' as used throughout this rule refers to a Market-Maker, a 
Remote Market-Maker, an in-crowd DPM or LMM, an e-DPM with an 
appointment in the subject class, and a floor broker representing 
orders in the trading crowd. The term ``in-crowd market participant'' 
only includes an in-crowd Market-Maker, in-crowd DPM or LMM, and floor 
broker representing orders in the trading crowd.
    (a)--(d) No change.
    * * * Interpretations and Policies:
    No change.
Rule 8.14 Index Hybrid Trading System Classes: Market-Maker 
Participants
    (a) Generally: The appropriate Exchange procedures committee (i) 
may authorize for trading on the CBOE Hybrid Trading System or Hybrid 
2.0 [Program] Platform index options and options on ETFs [currently] 
trading on the Exchange prior to June 10, 2005 and (ii) [. The 
appropriate Exchange procedures committee] if that authorization is 
granted, shall determine the eligible categories of market maker 
participants for those options [classes currently trading on the 
Exchange]. For index options and options on ETFs trading for the first 
time on the Exchange on or subsequent to June 10, 2005, the Exchange 
shall determine the appropriate trading platform (e.g., CBOE Hybrid 
Trading System, Hybrid 2.0 Platform) and the eligible categories of 
market maker participants on that platform. The Exchange shall also 
have the authority to determine whether to change the trading platform 
on which those options trade and to change the eligible categories of 
market maker participants for those options. The eligible categories of 
market maker participants[, which] may include:
* * * * *
    (b) Each class designated [by the appropriate Exchange committee] 
for trading on Hybrid or the Hybrid 2.0 Platform shall have an assigned 
DPM or LMM. The Exchange or the appropriate Exchange committee, as 
applicable pursuant to the authority granted under CBOE Rule 8.14(a) to 
determine eligible categories of market maker participants, [The 
appropriate Exchange committee] may determine to designate classes for 
trading on Hybrid or the Hybrid 2.0 Platform without a DPM or LMM 
provided the following conditions are satisfied:
* * * * *

[[Page 36978]]

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 Exchange proposes to make a technical revision in CBOE Rule 
8.14(a) to change ``Hybrid 2.0 Program'' to ``Hybrid 2.0 Platform'' 
since this is a defined term under CBOE Rule 1.1. CBOE Rule 8.14(a) 
currently sets forth the general rules that determine which index 
options and options on ETFs the Exchange procedures committee may 
designate for trading on CBOE's Hybrid Trading System and Hybrid 2.0 
Program. CBOE Rule 8.14(a) currently provides that ``[t]he Exchange 
procedures committee may authorize for trading on the CBOE Hybrid 
Trading System or Hybrid 2.0 Program index options and options on ETFs 
currently trading on the Exchange. The appropriate Exchange procedures 
committee shall determine the eligible categories of market maker 
participants for option classes currently trading on the Exchange * * * 
.''
    The Exchange proposes to (i) establish the cut-off date that 
determines which index options and options on ETFs the appropriate 
Exchange procedures committee may authorize for trading on the Hybrid 
Trading System or the Hybrid 2.0 Platform; and (ii) set forth in CBOE 
Rule 8.14 that the Exchange shall determine the trading platform and 
eligible categories of market maker participants in classes trading for 
the first time on the Exchange after the cut-off date.
    Specifically, the Exchange proposes to delete the word 
``currently'' in CBOE Rule 8.14(a) and insert the specific date of June 
10, 2005 to clarify that the appropriate Exchange procedures committee 
may authorize for trading on the Hybrid Trading System or the Hybrid 
2.0 Platform those index options and options on ETFs that are trading 
on the Exchange prior to June 10, 2005. June 10, 2005, is the date of 
Commission approval of SR-CBOE-2004-87 \5\, which rule filing created 
rules, including CBOE Rule 8.14, that permit the trading of index 
options and options on ETFs on CBOE's Hybrid Trading System and Hybrid 
2.0 Platform either with a Designated Primary Market-Maker (``DPM''), a 
Lead Market-Maker (``LMM''), or without a DPM or LMM where a requisite 
number of assigned market-makers exist. Although the word ``currently'' 
was originally used to delineate the date of Commission approval of SR-
CBOE-2004-87, the Exchange believes the proposed language that sets 
forth the specific date of Commission approval is clearer in this 
regard.
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    \5\ See Securities Exchange Act Release No. 51822 (June 10, 
2005), 70 FR 35321 (June 17, 2005) (SR-CBOE-2004-87).
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    Second, the Exchange is proposing to add two sentences to CBOE Rule 
8.14(a) to clarify that for index options and options on ETFs that are 
trading for the first time on the Exchange on or subsequent to June 10, 
2005, the Exchange generally, as opposed to the appropriate Exchange 
procedures committee, would determine the appropriate platform on which 
such options would trade, and the Exchange would also determine the 
eligible categories of market maker participants trading on such 
platform. Although the Exchange believes that the current construction 
of CBOE Rule 8.14(a) fairly implies that the Exchange retains the 
authority to determine the trading platform and eligible categories of 
market maker participants over products not currently trading \6\ on 
the Exchange, the proposed rule change, as set forth in CBOE Rule 
8.14(a), would clarify the Exchange's authority in this regard.
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    \6\ As explained in the immediately preceding paragraph, the 
Exchange is deleting ``currently'' and inserting June 10, 2005 to 
provide an exact date of reference in Rule 8.14(a).
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    Third, corollary changes are being proposed in CBOE Rule 8.14(b) to 
further clarify that the authority retained by the Exchange under Rule 
8.14(a), with respect to determining eligible categories of market 
maker participants, would extend to determining whether to designate 
index options or options on ETFs for trading on the Hybrid Trading 
System or Hybrid 2.0 Platform without a DPM or LMM.
    Lastly, the Exchange proposes to remove language from the 
introduction section of CBOE Rule 6.45B to clarify that CBOE Rule 
8.14(a), and not CBOE Rule 6.45B, governs how index options and options 
on ETFs are to be authorized for trading on CBOE's Hybrid Trading 
System and Hybrid 2.0 Platform.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \7\ in general, and furthers the 
objectives of Section 6(b)(5) \8\ in particular, in that it should 
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 protect investors and the public interest. 
Specifically, the Exchange believes that the proposed rule change 
clarifies the meaning of current Exchange rules that are already fairly 
implied by the language therein.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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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 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

    The Exchange neither solicited nor received written comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing proposed rule change will take effect upon filing 
with the Commission pursuant to Section 19(b)(3)(A)(i) of the Act \9\ 
and Rule 19b-4(f)(1) thereunder,\10\ because it constitutes a stated 
policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(i).
    \10\ 17 CFR 240.19b-4(f)(1).
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    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.

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.

[[Page 36979]]

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-2005-47 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE, Washington, DC 20549-9303.
    All submissions should refer to File Number SR-CBOE-2005-47. 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. 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-2005-47 and should be submitted on or before July 
18, 2005.

    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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-3327 Filed 6-24-05; 8:45 am]
BILLING CODE 8010-01-P