Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Approving Proposed Rule Change and Amendment No. 1 Thereto Relating to Split Price Priority, 7783 [E5-600]

Download as PDF 7783 Federal Register / Vol. 70, No. 30 / Tuesday, February 15, 2005 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–51148; File No. SR–CBOE– 2004–67] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Approving Proposed Rule Change and Amendment No. 1 Thereto Relating to Split Price Priority February 8, 2005. On October 21, 2004, the Chicago Board Options Exchange, Incorporated (‘‘CBOE’’) 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 its split price priority rule. On December 17, 2004, the Exchange filed Amendment No. 1 to the proposed rule change. The proposed rule change, as amended, was published for notice and comment in the Federal Register on January 3, 2005.3 The Commission received no comment letters on the proposal. The proposed rule change would amend the Exchange’s rule regarding split price transactions in open outcry generally to permit a member with an order for at least 100 contracts who buys (sells) at least 50 contracts at a particular price to have priority over all others in purchasing (selling) up to an equivalent number of contracts of the same order at the next lower (higher) price without being required to yield to existing customer interest in the limit order book. The Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.4 In particular, the Commission believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,5 which requires, among other things, that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade and, in general, to protect investors and the public interest. The Commission believes that the proposed rule change should encourage more aggressive quoting by market 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 50924 (December 23, 2004), 70 FR 128. 4 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 5 15 U.S.C. 78f(b). 2 17 VerDate jul<14>2003 17:50 Feb 14, 2005 Jkt 205001 makers in competition for large-sized orders, and, in turn, lead to betterpriced executions. The Commission notes that the proposed rule change includes interpretive language that clarifies that floor brokers who avail themselves of the split priority rule are obligated to ensure compliance with Section 11(a) of the Act. It is therefore ordered, pursuant to Section 19(b)(2) of the Act,6 that the proposed rule change (SR–CBOE–2004– 67), as amended, be hereby approved. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.7 Margaret H. McFarland, Deputy Secretary. [FR Doc. E5–600 Filed 2–14–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–51147; File No. SR–CBOE– 2005–15] Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Chicago Board Options Exchange, Inc., To Permit a Decrease of the Designated Primary Market-Maker Participation Entitlement for Certain Option Classes February 7, 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 January 31, 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 Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 8.87 to permit the Exchange to decrease the Designated Primary Market-Maker (‘‘DPM’’) participation entitlement for certain option classes. The text of the proposed rule change follows. Additions are in italics. PO 00000 6 15 U.S.C. 78f(b)(5). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 7 17 Frm 00073 Fmt 4703 Sfmt 4703 Chicago Board Options Exchange, Incorporated Rules * * * * * Rule 8.87 Participation Entitlements of DPMs and e-DPMs (a) Subject to the review of the Board of Directors, the MTS Committee may establish from time to time a participation entitlement formula that is applicable to all DPMs. (b) The participation entitlement for DPMs and e-DPMs (as defined in Rule 8.92) shall operate as follows: (1) Generally. (i) To be entitled to a participation entitlement, the DPM/e-DPM must be quoting at the best bid/offer on the Exchange. (ii) A DPM/e-DPM may not be allocated a total quantity greater than the quantity that the DPM/e-DPM is quoting at the best bid/offer on the Exchange. (iii) The participation entitlement is based on the number of contracts remaining after all public customer orders in the book at the best bid/offer on the Exchange have been satisfied. (2) Participation Rates applicable to DPM Complex. The collective DPM/eDPM participation entitlement shall be: 50% when there is one Market-Maker also quoting at the best bid/offer on the Exchange; 40% when there are two Market-Makers also quoting at the best bid/offer on the Exchange; and, 30% when there are three or more MarketMakers also quoting at the best bid/offer on the Exchange. (3) Allocation of Participation Entitlement Between DPMs and eDPMs. The participation entitlement shall be as follows: If the DPM and one or more e-DPMs are quoting at the best bid/offer on the Exchange, the e-DPM participation entitlement shall be onehalf (50%) of the total DPM/e-DPM entitlement and shall be divided equally by the number of e-DPMs quoting at the best bid/offer on the Exchange. The remaining half shall be allocated to the DPM. If the DPM is not quoting at the best bid/offer on the Exchange and one or more e-DPMs are quoting at the best bid/offer on the Exchange, then the eDPMs shall be allocated the entire participation entitlement (divided equally between them). If no e-DPMs are quoting at the best bid/offer on the Exchange and the DPM is quoting at the best bid/offer on the Exchange, then the DPM shall be allocated the entire participation entitlement. If only the DPM and/or e-DPMs are quoting at the best bid/offer on the Exchange (with no Market-Makers at that price), the E:\FR\FM\15FEN1.SGM 15FEN1

Agencies

[Federal Register Volume 70, Number 30 (Tuesday, February 15, 2005)]
[Notices]
[Page 7783]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-600]



[[Page 7783]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51148; File No. SR-CBOE-2004-67]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Approving Proposed Rule Change and Amendment No. 1 
Thereto Relating to Split Price Priority

February 8, 2005.
    On October 21, 2004, the Chicago Board Options Exchange, 
Incorporated (``CBOE'') 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 its split price priority 
rule. On December 17, 2004, the Exchange filed Amendment No. 1 to the 
proposed rule change. The proposed rule change, as amended, was 
published for notice and comment in the Federal Register on January 3, 
2005.\3\ The Commission received no comment letters on the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 50924 (December 23, 
2004), 70 FR 128.
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    The proposed rule change would amend the Exchange's rule regarding 
split price transactions in open outcry generally to permit a member 
with an order for at least 100 contracts who buys (sells) at least 50 
contracts at a particular price to have priority over all others in 
purchasing (selling) up to an equivalent number of contracts of the 
same order at the next lower (higher) price without being required to 
yield to existing customer interest in the limit order book.
    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\4\ 
In particular, the Commission believes that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\5\ which requires, among 
other things, that the rules of an exchange be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade and, in general, to protect investors and 
the public interest. The Commission believes that the proposed rule 
change should encourage more aggressive quoting by market makers in 
competition for large-sized orders, and, in turn, lead to better-priced 
executions. The Commission notes that the proposed rule change includes 
interpretive language that clarifies that floor brokers who avail 
themselves of the split priority rule are obligated to ensure 
compliance with Section 11(a) of the Act.
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    \4\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \5\ 15 U.S.C. 78f(b).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\6\ that the proposed rule change (SR-CBOE-2004-67), as amended, be 
hereby approved.
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    \6\ 15 U.S.C. 78f(b)(5).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
 [FR Doc. E5-600 Filed 2-14-05; 8:45 am]
BILLING CODE 8010-01-P
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