[Federal Register Volume 70, Number 143 (Wednesday, July 27, 2005)]
[Notices]
[Pages 43473-43474]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3983]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52068; File No. SR-CBOE-2005-57]


Self-Regulatory Organizations; Notice of Filing of a Proposed 
Rule Change by the Chicago Board Options Exchange, Incorporated 
Relating to the 80/20 Test of the Plan for the Purpose of Creating and 
Operating an Intermarket Linkage

July 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 July 19, 2005, 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 governing the operation of 
the Intermarket Linkage (``Linkage''). The Exchange is proposing to 
modify the ``80/20 Test'' in determining limitations on Principal Order 
access. The text of the proposed rule change is available on 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 purpose of the filing is to modify the so-called ``80-20 Test'' 
(``Test'') in Exchange Rule 6.85. The Rule states that Market-Makers 
should send Principal Orders through the Linkage on a limited basis and 
not as a primary aspect of their business.\3\ The Test implements this 
general principle by prohibiting a Market-Maker from sending Principal 
Orders in an eligible option class if, in the last calendar quarter, 
the Market-Maker's Principal Order contract volume is disproportionate 
to the Market-Maker's contract volume executed against customer orders 
in its own market.
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    \3\ A Principal Order is an order for the account of an Eligible 
Market-Maker that does not relate to a customer order the Market-
Maker is holding. See Exchange Rule 6.80(12)(ii).
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    The Exchange believes that applying the Test has resulted in 
anomalies for Market-Makers with limited volume in an eligible option 
class. Specifically, if a Market-Maker has very little overall trading 
volume in an option, the execution of one or two Principal Orders 
during a calendar quarter could result in the Market-Maker failing to 
meet the Test. This would bar the Market-Maker from using the Linkage 
to send Principal Orders in that options class for the following 
calendar quarter. The Exchange believes that it was not the intent of 
the Participants to bar Market-Makers with limited volume from sending 
Principal Orders through the Linkage in these circumstances since such 
trading clearly was not ``a primary aspect of their business.'' Thus, 
the filing proposes to create a de minimis exemption from the Test for 
Market-Makers that have total contract volume of less than 1000 
contracts in an options class for a calendar quarter.
    This filing comports to Linkage Plan Joint Amendment No. 17, which 
is currently pending Commission approval.
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,

[[Page 43474]]

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

    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. 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-2005-57 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-CBOE-2005-57. 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, 100 F Street, 
NE., 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-2005-57 and should be 
submitted by August 17, 2005.

    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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Jonathan G. Katz,
Secretary.
[FR Doc. E5-3983 Filed 7-26-05; 8:45 am]
BILLING CODE 8010-01-P