[Federal Register Volume 71, Number 40 (Wednesday, March 1, 2006)]
[Notices]
[Pages 10576-10577]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-2847]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53343; File No. SR-CBOE-2006-13]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change and Amendment No. 1 Thereto To Amend CBOE Rule 8.3 Relating 
to Market-Maker Appointments

February 22, 2006.
    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 February 2, 2006, 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 as a ``non-controversial'' proposed 
rule change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and 
Rule 19b-4(f)(6) thereunder.\4\ On February 17, 2006, the Exchange 
filed Amendment No. 1 to the proposed rule change.\5\ The Commission is 
publishing this notice, as amended, 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)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ Amendment No. 1 is incorporated in this notice. Amendment 
No. 1 clarifies that for purposes of the proposed amendment to CBOE 
Rule 8.3, the Exchange is using the specific Tiers set forth in CBOE 
Rule 8.4(d) that have been structured for purposes of Remote Market-
Maker appointments.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The CBOE proposes to amend CBOE Rule 8.3 relating to 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.

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 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 those 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 parts 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 8.3 relating 
to Market-Maker appointments, other than appointments for Remote 
Market-Makers. Currently, CBOE Rule 8.3(c) provides that a Market-Maker 
can quote (i) electronically in all classes traded on the Hybrid 
Trading System that are located in one designated trading station 
(``appointed trading station'') provided, however, that with respect to 
Hybrid 2.0 Classes, a Market-Maker may submit electronic quotations in 
up to 40 classes for each Exchange membership it owns or up to 30 
classes for each Exchange membership it leases; and (ii) in open outcry 
all classes traded on the Exchange.
    CBOE proposes to allow a Market-Maker that is submitting electronic 
quotations in his or her appointed Hybrid and Hybrid 2.0 Classes to 
quote electronically in either two additional Hybrid 2.0 Classes in 
Tier A or Tier B that are not located in the Market-Maker's appointed 
trading station, or five additional Hybrid 2.0 Classes in Tiers C, D, 
or E that are not located in the Market-Maker's appointed trading 
station.\6\
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    \6\ For purposes of Remote Market-Maker appointments, CBOE has 
assigned approximately 604 Hybrid 2.0 Classes to five separate tiers 
structured according to trading volume statistics and an ``A+'' Tier 
which consists of five option classes listed in CBOE Rule 8.4(d). 
Tiers A though E each consist of approximately 120 Hybrid 2.0 
Classes.
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    CBOE Rule 8.3 also would provide that the Market-Maker cannot be 
affiliated with an e-DPM or RMM that holds an appointment in one of 
these additional Hybrid 2.0 Classes, which is consistent with the 
current restriction in CBOE Rule 8.3 on Market-Makers streaming 
electronic quotations from outside of their appointed trading stations 
in classes in which an affiliated e-DPM or RMM submits electronic 
quotations.\7\ Moreover, pursuant to a Pilot Program that expires on 
September 14, 2006, a Market-Maker could be affiliated with another 
Market-Maker (``Affiliated Market-Maker'') who holds an appointment in 
one of these additional Hybrid 2.0 Classes, provided that the Market-
Maker could not submit electronic quotations in these additional Hybrid 
2.0 Classes if the Affiliated Market-Maker is submitting electronic 
quotations from outside its appointed trading station. Pursuant to a 
separate Pilot Program that expires on March 14, 2006 (see CBOE Rule 
8.4(c)(ii)), if both Market-Makers operate as multiple aggregation 
units under the criteria set forth in CBOE Rule 8.4(c)(ii), the 
preceding restriction would not apply.
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    \7\ CBOE Rule 8.3(c) states that: ``Any Market-Maker affiliated 
with an e-DPM or RMM shall be ineligible to submit electronic 
quotations from outside of its appointed trading station prusuant to 
this rule in any class in which the affiliated e-DPM or RMM has an 
appointment.''
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    With respect to the additional Hybrid 2.0 Classes, the provisions 
of CBOE Rule 8.3A would continue to apply, and a Market-Maker would be 
able to quote electronically in the options classes provided the Class 
Quoting Limit (``CQL'') for the option class has not been met (unless 
the CQL has been otherwise increased under the provisions of CBOE Rule 
8.3A).
    CBOE believes it would be appropriate and beneficial to permit 
Market-Makers to quote electronically in an additional number of Hybrid 
2.0 Classes which are not located in the Market-Maker's appointed 
trading station. The Exchange believes that allowing Market-Makers the 
opportunity to quote electronically in up to either two additional 
Hybrid 2.0 Classes in Tier A or Tier B that are not located in the 
Market-Maker's appointed trading station, or five additional Hybrid 2.0 
Classes in Tiers C, D, or E that are not located in the Market-Maker's 
appointed trading station would increase competition and liquidity in 
the classes, while providing Market-Makers with additional trading 
opportunities outside of their appointed trading stations.
    CBOE also proposes to eliminate the 40/30 restriction on quoting 
Hybrid 2.0 Classes electronically depending on whether the Market-Maker 
owns or leases a membership. Instead, the CBOE proposes to allow a 
Market-Maker to submit electronic quotations in all Hybrid and Hybrid 
2.0 Classes located in his/her appointed trading station. CBOE does not 
believe that the limitation on only quoting electronically

[[Page 10577]]

in either 40 Hybrid 2.0 Classes (if a market-Maker owns a membership) 
or 30 Hybrid 2.0 Classes (if the market-Maker leases a membership) is 
necessary since the average number of Hybrid 2.0 Classes in a trading 
crowd is 14.9, and the highest number of Hybrid 2.0 Classes in one 
trading crowd is 28.
2. Statutory Basis
    The Exchange believes the proposed rule change, as amended, is 
consistent with the Act and the rules and regulations under the Act 
applicable to a national securities exchange and, in particular, the 
requirements of Section 6(b) of the Act.\8\ Specifically, the Exchange 
believes the proposed rule change is consistent with the Section 
6(b)(5) Act \9\ requirements that the rules of an exchange be designed 
to promote just and equitable principles of trade, to prevent 
fraudulent and manipulative acts and, in general, to protect investors 
and the public interest.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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, as amended, 
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 comments on the 
proposal.

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

    Because the foregoing 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 investors 
and the public interest, provided that the Exchange has given the 
Commission written notice of its intent to file the proposed rule 
change prior to the date of filing of the proposed rule change or such 
shorter time as designated by the Commission, the proposed rule change 
has become effective pursuant to Section 19(b)(3)(A) of the Act \10\ 
and Rule 19b-4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of such 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.\12\
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    \12\ For purposes of calculating the 60-day abrogation date, the 
Commission considers the 60-day period to have commenced on February 
17, 2006, the date CBOE filed Amendment No. 1.
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    Under Rule 19b-4(f)(6)(iii) of the Act,\13\ the proposal does not 
become operative for 30 days after the date of its filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest. The Exchange has 
requested that the Commission accelerate the 30-day operative date. The 
Commission, consistent with the protection of investors and the public 
interest, has determined to accelerate the 30-day operative date 
because the proposal does not raise any unique regulatory issues.\14\
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    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ For purposes only of accelerating the 30-day operative 
period for 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, as amended, 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-2006-13 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

    All submissions should refer to File Number SR-CBOE-2006-13. 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. 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-2006-13 and should be submitted on or before March 
22, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-2847 Filed 2-28-06; 8:45 am]
BILLING CODE 8010-01-P