[Federal Register Volume 72, Number 2 (Thursday, January 4, 2007)]
[Notices]
[Pages 355-357]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-22544]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54990; File No. SR-CBOE-2006-108]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Amend CBOE Rules in Connection With CBOE's Determination 
To Trade Certain Option Classes on Hybrid

December 21, 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 December 15, 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\ The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CBOE proposes amend its rules relating to CBOE's determination to 
trade certain option classes on Hybrid. 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.

[[Page 356]]

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 purpose of this rule change is to amend CBOE Rules 8.3 and 8.4 
in connection with CBOE's determination to trade options on the Russell 
2000 Index (RUT) on the Hybrid 2.0 Platform. Additionally, CBOE 
proposes to amend Rule 8.3 in connection with CBOE's determination to 
trade options on the iShares Russell 2000 Index Fund (IWM) on the 
Hybrid Trading System, and options on the NASDAQ 100 Index (NDX) on the 
Hybrid Trading System.\5\
---------------------------------------------------------------------------

    \5\ CBOE Rule 1.1(aaa) defines Hybrid Trading System and Hybrid 
2.0 Platform.
---------------------------------------------------------------------------

    RUT options currently has an appointment cost of .25, and CBOE 
intends to maintain that appointment cost when RUT options trade on the 
Hybrid 2.0 Platform. As a result, RUT options would be classified as an 
A+ Tier option class. CBOE intends to trade RUT options on the Hybrid 
2.0 Platform beginning on December 19, 2006.
    CBOE proposes to amend Rule 8.3(c)(ii) to specifically reference 
IWM options and NDX options as option classes trading on the Hybrid 
Trading System. IWM options would have an appointment cost of .50, and 
NDX options would have an appointment cost of 1.0.\6\ CBOE proposes to 
amend CBOE Rule 8.3(c)(iv) to delete reference to IWM options and NDX 
options in the table listing the non-Hybrid option classes and their 
related appointment costs. CBOE notes that the new appointment cost for 
IWM is lower than its current non-Hybrid appointment cost of .85. CBOE 
intends to trade IWM options on the Hybrid Trading System beginning on 
December 19, 2006, and NDX options on the Hybrid Trading System 
beginning on January 9, 2007.
---------------------------------------------------------------------------

    \6\ Because not all option classes traded on the Hybrid Trading 
System have an appointment cost of .01, CBOE proposes to modify Rule 
8.85(e)(ii) to state that the appointment cost for option classes 
traded on the Hybrid Trading System is as set forth in Rule 
8.3(c)(ii). Currently, Rule 8.85(e)(ii) states that the appointment 
cost of Hybrid option classes is .01.
---------------------------------------------------------------------------

    Finally, CBOE proposes to amend Rule 8.3A to expressly include a 
reference to the ``AA'' tier in Interpretation and Policy .01. 
Currently, Interpretation .01 references the ``A+'' tier, but not the 
``AA'' tier. Products designated as ``A+'' tier products have a class 
quoting limit (``CQL'') of 40 as provided in Interpretation .01 of Rule 
8.3A. By including reference to the ``AA'' tier option in 
Interpretation.01, products designated as ``AA'' tier products 
(presently options on the CBOE Volatility Index (VIX)), would have a 
CQL of 40, which is consistent with the current CQL for VIX options.
2. Statutory Basis
    The Exchange believes the proposed rule change 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.\7\ Specifically, the Exchange believes the 
proposed rule change is consistent with the Section 6(b)(5) of the 
Act,\8\ which requires 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.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(iii) of the Act \9\ and subparagraph (f)(6) of Rule 19b-4 
\10\ thereunder because it does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; (iii) become operative for 30 days 
from the date on which it was filed, or such shorter time as the 
Commission may designate; and the Exchange has given the Commission 
written notice of its intention to file the proposed rule change at 
least five business days prior to filing. 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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    Under Rule 19b-4(f)(6) of the Act,\11\ 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 waive the 30-day operative date, so that the proposal 
may take effect on December 19, 2006 with respect to IWM options and 
RUT options, and January 9, 2007, with respect to NDX options. The 
Exchange believes that the proposed rule change does not raise any new 
regulatory issues. The Commission agrees and, consistent with the 
protection of investors and the public interest, has determined to 
waive the 30-day operative date, which renders the proposal effective 
on December 19, 2006 with respect to IWM options and RUT options, and 
January 9, 2007, with respect to NDX options.\12\
---------------------------------------------------------------------------

    \11\ Id.
    \12\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition and capital formation. 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

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-2006-108 on the subject line.

[[Page 357]]

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-2006-108. 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-2006-108 and should be 
submitted on or before January 25, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
 [FR Doc. E6-22544 Filed 1-3-07; 8:45 am]
BILLING CODE 8011-01-P