[Federal Register Volume 70, Number 178 (Thursday, September 15, 2005)]
[Notices]
[Pages 54597-54598]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-5027]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52398; File No. SR-CBOE-2005-74]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Amend CBOE Rule 8.4 Relating to Remote Market-Maker 
Appointments

September 8, 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 September 2, 2005, the Chicago Board Options Exchange, Incorporated 
(``Exchange'' or ``CBOE'') 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 Exchange. 
The Exchange filed the proposal pursuant to Section 19(b)(3)(A) of the 
Act \3\ and Rule 19b-4(f)(6) 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).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CBOE proposes to amend CBOE Rule 8.4 relating to Remote Market-
Maker appointments. 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, 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 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this rule change is to amend CBOE Rule 8.4 relating 
to Remote Market-Maker (``RMM'') appointments. Rule 8.4 provides that 
RMMs will have a Virtual Trading Crowd (``VTC'') Appointment, which 
confers the right to quote electronically in a certain number of 
products selected from various ``tiers''. There are five tiers that are 
structured according to trading volume statistics and an ``A+'' Tier 
which consists of two option classes--options on Standard & Poor's 
Depositary Receipts and options on the Nasdaq-100 Index Tracking 
Stock.\5\ Rule 8.4(d) assigns ``appointment costs'' to products based 
on the tier in which they are located, and an RMM may select for each 
Exchange membership it owns or leases any combination of products 
trading on the Hybrid 2.0 Platform whose aggregate ``appointment cost'' 
does not exceed 1.0.
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    \5\ See Securities Exchange Act Release No. 51543 (April 14, 
2005), 70 FR 20952 (April 22, 2005), approving SR-CBOE-2005-23.
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    CBOE proposes to amend Rule 8.4(d) relating to the ``A+'' Tier in 
two respects. First, CBOE proposes to include an additional option 
class in the ``A+'' Tier, namely options on Diamonds (DIA). CBOE 
believes it is appropriate to include this option class in this tier 
based on its trading volume.\6\
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    \6\ Currently, DIA options are traded on CBOE's Hybrid Trading 
System, but not on the Hybrid 2.0 Platform. Thus, there are no RMMs 
currently appointed in the DIA option class.
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    Second, CBOE proposes to lower the ``appointment cost'' for the 
``A+'' Tier from .60 to .25 for each option class in this tier. CBOE 
believes that an ``appointment cost'' of .25, or one quarter of a CBOE 
membership, is a more appropriate ``appointment cost'' for each product 
in the ``A+'' Tier.
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 is designed to prevent 
fraudulent and manipulative acts and practices, 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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    \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

    The Exchange does not believe that the proposed rule change will 
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, if 
consistent with the protection of investors and the public interest, it 
has become effective pursuant to Section 19(b)(3)(A) of the Act \9\ and 
Rule 19b-4(f)(6) thereunder.\10\ As required under Rule 19b-
4(f)(6)(iii) under the Act,\11\ the Exchange provided the Commission 
with written notice of its intent to file the proposed rule change, 
along with a brief description and text of the proposed rule change, at 
least five business days prior to the date of the filing of the 
proposed rule change.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date of filing.\12\ 
However, Rule 19b-4(f)(6)(iii) \13\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. In addition, the Exchange has 
requested that the Commission waive the 30-day operative delay and 
render the proposed rule change to become operative immediately. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of

[[Page 54598]]

investors and the public interest. The two changes to the ``A+'' Tier 
that are described in this proposed rule change do not raise any new, 
unique, or substantive issues from those raised in the filing that 
initially established the ``A+'' Tier and the appointment cost for this 
tier.\14\ By lowering the ``appointment cost'' of the ``A+'' Tier, CBOE 
is reducing the cost to its members to trade in the products that are 
in this tier. For the reasons stated above, the Commission therefore 
designates the proposal to become operative immediately.\15\
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    \12\ Id.
    \13\ Id.
    \14\ See supra note 5.
    \15\ For purposes only of waiving the operative date of this 
proposal, the Commission has considered the impact of the proposed 
rule on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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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. 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-2005-74 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-2005-74. 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-2005-74 and should be submitted on or before 
October 6, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. E5-5027 Filed 9-14-05; 8:45 am]
BILLING CODE 8010-01-P