Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Order Granting Accelerated Approval to a Proposed Rule Change and Amendment Nos. 1, 2, 3, and 4 Thereto Relating to Position Limits and Exercise Limits, 13558-13559 [E5-1210]

Download as PDF 13558 Federal Register / Vol. 70, No. 53 / Monday, March 21, 2005 / Notices appointment process assigns appointment costs to products based on their locations in tiers that have been established based on trading volume. Second, proposed CBOE Rule 8.3A assigns Class Quoting Limits (‘‘CQLs’’) based on a product’s trading volume.5 The Exchange proposes to create a new tier, the ‘‘A+’’ tier consisting of two products: options on Spiders and options on the Nasdaq-100 Index Tracking Stock. The ‘‘appointment cost’’ for each ‘‘A+’’ tier product would be .60 (6/10ths of a membership) and the CQL would be 40. The CBOE represents that there are two primary reasons supporting a higher appointment cost for ‘‘A+’’ tier products. First, these two products have trading volumes that substantially exceed the trading volumes of most other Hybrid or Hybrid 2.0 products. The whole ‘‘tiering’’ concept is premised on the fact that the more actively-traded products should cost more in terms of appointment costs. The addition of an ‘‘A+’’ tier is no different in that it operates on the same principle. Second, currently these products trade either by themselves or in a trading crowd with only one other product. In this regard, Spiders options are the only product traded in one trading station, which essentially creates an appointment cost of 1.0. Accordingly, the CBOE believes that assigning a higher appointment cost to these products is justified because they already have higher appointment costs than do other Hybrid 2.0 products. 2. Statutory Basis CBOE 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.6 Specifically, CBOE believes the proposed rule change is consistent with the section 6(b)(5) of the Act7 requirements that the rules of an exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative 5 For example, the 20% most actively-traded products have a CQL of 40 quoters. The tiers for CQLs correspond to the appointment cost tiers contained in CBOE Rule 8.4(d). Accordingly, the 20% most actively-traded products (i.e., the A tier products) would have a CQL of 40 quoters and an appointment cost of .10. Tier A+ products would be excluded when determining the 20% most actively-traded products for Tier A and for CQL purposes. See proposed changes to CBOE Rules 8.4(d) and 8.3A, Interpretation and Policy .01(a), respectively. 6 15 U.S.C. 78f(b). 7 15 U.S.C. 78f(b)(5). VerDate jul<14>2003 18:36 Mar 18, 2005 Jkt 205001 acts and, in general, to protect investors and the public interest. 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 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 comments. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will: (A) By order approve such proposed rule change; or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. 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 (https://www.sec.gov/ rules/sro.shtml; or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–CBOE–2005–23 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549–0609. All submissions should refer to File Number SR–CBOE–2005–23. 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 (https://www.sec.gov/ Frm 00116 Fmt 4703 Sfmt 4703 For the Commission, by the Division of Market Regulation, pursuant to delegated authority.8 Margaret H. McFarland, Deputy Secretary. [FR Doc. E5–1208 Filed 3–18–05; 8:45 am] BILLING CODE 8010–01–P IV. Solicitation of Comments PO 00000 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, 450 Fifth Street, NW., 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– 2005–23 and should be submitted on or before April 11, 2005. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–51244A; File No. SR– CBOE–2003–30] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Order Granting Accelerated Approval to a Proposed Rule Change and Amendment Nos. 1, 2, 3, and 4 Thereto Relating to Position Limits and Exercise Limits March 15, 2005. Correction In Part V of Release No. 34–51244, issued February 23, 2005,1 the Commission is replacing the following sentence: ‘‘It is therefore ordered, pursuant to section 19(b)(2) of the Act,2 that the proposed rule change (SR–CBOE–2003– 30), as amended, is hereby approved on 8 17 CFR 200.30–3(a)(12). Exchange Act Release No. 51244 (February 23, 2005), 70 FR 10010 (March 1, 2005). 2 15 U.S.C. 78s(b)(2). 1 SeeSecurities E:\FR\FM\21MRN1.SGM 21MRN1 Federal Register / Vol. 70, No. 53 / Monday, March 21, 2005 / Notices an accelerated basis for a pilot period to expire on August 23, 2005.’’ with: ‘‘It is therefore ordered, pursuant to section 19(b)(2) of the Act,3 that the proposed rule change (SR–CBOE–2003– 30), as amended, is hereby approved on an accelerated basis, with the portion of the proposed rule change that relates to increases in position and exercise limits approved for a pilot period to expire on August 23, 2005.’’ For the Commission, by the Division of Market Regulation, pursuant to delegated authority.4 Margaret H. McFarland, Deputy Secretary. [FR Doc. E5–1210 Filed 3–18–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–51370; File No. SR–CBOE– 2005–22] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Chicago Board Options Exchange, Incorporated To Adopt an Inactivity Fee To Be Charged Against Remote Market-Makers That Fail To Commence Quoting in Their Appointed Classes March 15, 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 March 15, 2005, 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, II, and III below, which items have been prepared by CBOE. 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 CBOE proposes to adopt an inactivity fee to be charged against Remote Market-Makers (‘‘RMMs’’) that fail to commence quoting in their appointed classes. The text of the proposed rule change is available on the CBOE’s Web site (https://www.cboe.com), at the CBOE’s Office of the Secretary, and at the Commission’s Public Reference Room. U.S.C. 78s(b)(2). CFR 200.30(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 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 Exchange received approval of its RMM Program on March 14, 2005.3 During the next several weeks, the Exchange will begin a solicitation process whereby members that are interested in becoming an RMM will submit to the Exchange their appointment requests.4 As the Exchange does not have unlimited systems bandwidth capacity to support an unlimited number of members quoting electronically in each product, it was necessary to develop procedures by which electronic quoting appointments would be allocated to members in the instance where demand (i.e., the number of members requesting an appointment) exceeds supply (i.e., the actual number of appointments). CBOE Rule 8.3A describes these procedures. In order to prevent a member that obtains an electronic appointment in a product from not initiating quoting in that product, the Exchange proposes to adopt an inactivity fee that would apply in two instances, as described below. Retaining Appointment Without Quoting This aspect of the proposed inactivity fee is structured to apply only in those rare instances when an RMM receives an appointment, retains its appointment, but does not submit quotes in that product during any portion of the rollout of the RMM Program. If an RMM receives an appointment and does not commence quoting in that appointed product within thirty days after the termination of the rollout of the RMM Program, the RMM would be assessed a $1,000 3 15 4 17 VerDate jul<14>2003 18:36 Mar 18, 2005 3 See Securities Exchange Act Release No. 51366. Rule 8.4(d) describes the appointment process for RMMs. 4 CBOE Jkt 205001 PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 13559 inactivity fee and the Exchange would reallocate the product to the next member on the waiting list (in accordance with proposed CBOE Rule 8.3A.) The Exchange represents that the RMM Program rollout would terminate no sooner than July 15, 2005. The inactivity fee (and subsequent reallocation) would occur on a per product basis. For example, if during the requisite measurement period an RMM does not submit quotes in five products in which it requested and received an allocation, it would be assessed a $5,000 fee and the five products would be reallocated. Relinquishing Appointment Without Quoting The second instance in which the inactivity fee would apply occurs when an RMM receives an appointment in a product and subsequently relinquishes its appointment in that product (prior to termination of the RMM Program rollout) without having submitted any quotes during the requisite period. Using the example above in which an RMM requested and received an appointment in five classes, a $1,000 inactivity fee would be assessed for each product in which the RMM terminates its appointment prior to the end of the rollout of the RMM Program provided the RMM has not submitted any quotes prior to its relinquishing the appointment. The CBOE believes that the imposition of an inactivity fee is necessary in order to prevent members from receiving appointments in products for which they have no ability to quote or no intention of quoting. Without the fee, members could obtain multiple appointments and choose not to quote. The CBOE believes that this would affect the overall viability of the RMM Program on two fronts. First, it would deprive the Exchange of transaction revenue and, second, it would prevent other members on the waiting list from quoting. The ability of one member to hoard appointments could severely affect the amount of liquidity offered by keeping other ready, willing, and able-to-quote members from quoting. In this regard, the CBOE believes that the $1,000 fee represents a conservative estimate of the amount of revenue the Exchange would lose when an RMM receives an appointment in a class but chooses not to submit quotes. An RMM very easily may avoid assessment of the fee simply by submitting quotes during any point of the rollout of the RMM Program. The CBOE represents that members would have ample time to have their systems fully operational prior to the E:\FR\FM\21MRN1.SGM 21MRN1

Agencies

[Federal Register Volume 70, Number 53 (Monday, March 21, 2005)]
[Notices]
[Pages 13558-13559]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-1210]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51244A; File No. SR-CBOE-2003-30]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Order Granting Accelerated Approval 
to a Proposed Rule Change and Amendment Nos. 1, 2, 3, and 4 Thereto 
Relating to Position Limits and Exercise Limits

March 15, 2005.

Correction

    In Part V of Release No. 34-51244, issued February 23, 2005,\1\ the 
Commission is replacing the following sentence:
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    \1\ SeeSecurities Exchange Act Release No. 51244 (February 23, 
2005), 70 FR 10010 (March 1, 2005).
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    ``It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\2\ that the proposed rule change (SR-CBOE-2003-30), as amended, is 
hereby approved on

[[Page 13559]]

an accelerated basis for a pilot period to expire on August 23, 2005.''
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    \2\ 15 U.S.C. 78s(b)(2).
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     with:
    ``It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\3\ that the proposed rule change (SR-CBOE-2003-30), as amended, is 
hereby approved on an accelerated basis, with the portion of the 
proposed rule change that relates to increases in position and exercise 
limits approved for a pilot period to expire on August 23, 2005.''
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    \3\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\ 17 CFR 200.30(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-1210 Filed 3-18-05; 8:45 am]
BILLING CODE 8010-01-P
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