[Federal Register Volume 75, Number 6 (Monday, January 11, 2010)]
[Notices]
[Pages 1437-1438]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-190]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61274; File No. SR-CBOE-2009-089]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Approving a Proposed Rule Change Related to Stock-
Option Orders

January 4, 2010.

I. Introduction

    On November 18, 2009, the Chicago Board Options Exchange, 
Incorporated (``CBOE'' or the ``Exchange'') filed with the Securities 
and Exchange Commission (``Commission''), pursuant to Section 19(b)(1) 
of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend CBOE Rule 6.53C, 
Commentary .06(d) to modify the handling of market stock-option orders 
that cannot be filled in whole or in a permissible ratio at the 
conclusion of a complex order RFR auction (``COA''). The proposed rule 
change was published for comment in the Federal Register on December 4, 
2009.\3\ The Commission received no comments regarding the proposal. 
This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 61068 (November 27, 
2009), 74 FR 63807 (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposal

    Under the CBOE's rules, eligible complex orders, including stock-
option orders, may be subject to an automated COA process where the 
eligible order is exposed for possible price improvement.\4\ Currently, 
if a complex order cannot be filled in whole or in a permissible ratio 
at the conclusion of COA, the order, or any remaining balance, will 
route to the CBOE's Complex Order Book or to PAR for manual 
handling.\5\
---------------------------------------------------------------------------

    \4\ See CBOE Rule 6.53C(d).
    \5\ See CBOE Rule 6.53C(d)(vi).
---------------------------------------------------------------------------

    The Exchange proposes to revise CBOE Rule 6.53C, Interpretation and 
Policy .06(d), to modify the operation of the COA with respect to 
market stock-option orders, including market stock-option orders with 
more than one option leg, that cannot be executed in whole or in a 
permissible ratio at the conclusion of a COA. Specifically, the CBOE 
proposes to allow the Exchange to determine, on a class-by-class basis, 
to route the remaining balance of the option leg(s) of such an order to 
CBOE's Hybrid System for processing as a simple market order(s), 
consistent with CBOE's order execution rules, and to route the 
remaining balance of the stock leg of such an order to the CBOE Stock 
Exchange (``CBSX''), CBOE's stock facility, for processing as a market 
order, consistent with CBSX's order execution rules.\6\ The CBOE will 
announce to members via Regulatory Circular any determination regarding 
the routing of market stock-option orders pursuant to the rule.\7\
---------------------------------------------------------------------------

    \6\ See CBOE Rule 6.53C, Interpretation and Policy .06(d), and 
Notice, supra note 3.
    \7\ See Notice, supra note 3, at note 4.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\8\ In 
particular, the Commission finds that the proposal is consistent with 
Section 6(b)(5) of the Act,\9\ which requires, among other things, that 
the rules of a national securities exchange be designed 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 believes that the proposal could help facilitate the 
execution of market stock-option orders, including market stock-option 
orders with more than one option leg, that are not filled in whole or 
in a permissible ratio at the conclusion of a COA. The Commission notes 
that the proposed rule applies solely to market stock-option orders. 
The Commission notes, further, that if the remaining balance of the 
option leg(s) and the stock leg of the market stock-option order are 
routed to the CBOE's Hybrid system and to CBSX, respectively, as 
provided in the proposed rule, the execution of the option leg(s) of 
the order on the CBOE's Hybrid system and the execution of the stock 
leg of the order on CBSX will be consistent with the order execution 
rules of CBOE and CBSX, respectively.
---------------------------------------------------------------------------

    \8\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-CBOE-2009-089), be, and it 
hereby is, approved.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(2).
    \11\ 17 CFR 200.30-3(a)(12).


[[Page 1438]]


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

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-190 Filed 1-8-10; 8:45 am]
BILLING CODE 8011-01-P