[Federal Register Volume 71, Number 109 (Wednesday, June 7, 2006)]
[Notices]
[Pages 33017-33019]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-8805]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53922; File No. SR-CBOE-2006-52]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Order Granting Accelerated Approval
of a Proposed Rule Change Extending the Exchange's Preferred Market-
Maker Pilot Program
June 1, 2006.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
[[Page 33018]]
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 22, 2006, 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 and II below, which Items have been prepared by the Exchange.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons and is approving the
proposal on an accelerated basis, for a pilot period through June 2,
2007.
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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 to extend the Preferred
Market-Maker Pilot Program for one year, until June 2, 2007. The text
of the proposed rule change is set forth below. Brackets indicate
deletions; italics indicates new text.
* * * * *
Chicago Board Options Exchange, Incorporated
Rules
* * * * *
Rule 8.13 Preferred Market-Maker Program
(a) Generally. The Exchange may allow, on a class-by-class basis,
for the receipt of marketable orders, through the Exchange's Order
Routing System when the Exchange's disseminated quote is the NBBO, that
carry a designation from the member transmitting the order that
specifies a Market-Maker in that class as the ``Preferred Market-
Maker'' for that order. A qualifying recipient of a Preferred Market-
Maker order shall be afforded a participation entitlement as set forth
in subparagraph (c) below. The Preferred Market-Maker Program shall be
in effect until June 2, 2007[6] on a pilot basis.
(b)-(c) No change.
* * * * *
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 III 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
In June 2005, CBOE obtained approval of a filing adopting a
Preferred DPM Program.\3\ This allowed order providers to send orders
to the Exchange designating a Preferred DPM from among the DPM complex.
If the Preferred DPM was quoting at the NBBO at the time the order was
received by CBOE, the Preferred DPM was entitled to the entire DPM
participation entitlement. The Exchange subsequently modified the
applicable participation entitlement percentages under the program \4\
and, then expanded the scope of the program to apply to qualifying
Market-Makers (as opposed to just DPMs).\5\ At that time, the program
was renamed the Preferred Market-Maker Program.
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\3\ See Securities Exchange Act Release No. 51779 (June 2,
2005), 70 FR 33564 (June 8, 2005) (approving SR-CBOE-2004-71).
\4\ See Securities Exchange Act Release Nos. 51824 (June 10,
2005), 70 FR 35476 (June 20, 2005) (approving SR-CBOE-2005-45); and
52021 (July 13, 2005), 70 FR 41462 (July 19, 2005) (approving SR-
CBOE-2005-50).
\5\ See Securities Exchange Act Release No. 52506 (September 23,
2005), 70 FR 57340 (September 30, 2005) (approving SR-CBOE-2005-58).
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CBOE Rule 8.13 establishes a Preferred Market-Maker Program on a
pilot basis. The pilot is due to expire on June 2, 2006. CBOE proposes
extending the pilot program an additional year, until June 2, 2007.
According to CBOE, since the pilot program was put into operation it
has been positively received by the options trading community. CBOE
believes that there has not been any adverse or unanticipated negative
impact on the market by the presence of the Preferred Market-Maker
Program. Further, CBOE believes that the pilot program helps generate
greater order flow for the Exchange.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act \6\ in general, and furthers the
objectives of section 6(b)(5) of the Act \7\ 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.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the 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
The Exchange has not solicited, and does not intend to solicit
comments on the proposed rule change.
III. 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 and whether the pilot time frame is
appropriate. 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-2006-52 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-2006-52. 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
[[Page 33019]]
the Commission's Public Reference Room. Copies of such filing also will
be available for inspection and copying at the principal office of the
Exchange. 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-2006-52 and should be submitted on or before June 28, 2006.
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
The Exchange has asked the Commission to approve the proposed rule
change on an accelerated basis for an additional year so that the pilot
program may continue uninterrupted. After careful consideration, the
Commission finds that the proposed rule change is consistent with the
requirements of section 6 of the Act \8\ and the rules and regulations
thereunder applicable to a national securities exchange,\9\ and, in
particular, the requirements of section 6(b)(5) of the Act.\10\ Section
6(b)(5) requires, among other things, that the rules of a national
securities exchange be 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. The Commission notes that the
current pilot was approved on a one-year basis to give the Commission
an opportunity to evaluate the impact of the pilot program on the
options markets to determine whether it would be beneficial to
customers and to the options markets as a whole before approving any
request for permanent approval of the pilot program. The Commission
believes that a one-year extension of the pilot period would provide
the Commission with additional time to continue evaluate the Exchange's
Preferred Market-Maker Program.
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\8\ 15 U.S.C. 78f.
\9\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
\10\ 15 U.S.C. 78f(b)(5).
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The Exchange has requested that the Commission find good cause for
approving the proposed rule change prior to the thirtieth day after
publication of notice thereof in the Federal Register. The Commission
believes that granting accelerated approval of the proposed rule change
would allow the pilot program to continue without disruption while the
Commission and the Exchange continue to review the pilot program's
impact on the options market. Accordingly, the Commission finds good
cause, consistent with section 19(b)(2) of the Act,\11\ for approving
the proposed rule change prior to the thirtieth day after publication
of notice thereof in the Federal Register.
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\11\ 15 U.S.C. 78s(b)(2).
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V. Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\12\ that the proposed rule change (SR-CBOE-2006-52), which
institutes the pilot program through June 2, 2007, is hereby approved
on an accelerated basis.
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\12\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E6-8805 Filed 6-6-06; 8:45 am]
BILLING CODE 8010-01-P