Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend CBOE Rule 11.1 Relating to the Exercise of Option Contracts, 13641-13642 [E6-3787]
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Federal Register / Vol. 71, No. 51 / Thursday, March 16, 2006 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53438; File No. SR–CBOE–
2006–19]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend CBOE Rule
11.1 Relating to the Exercise of Option
Contracts
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 3,
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 CBOE filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
section 19(b)(3)(A) of the Act 3 and Rule
19b–4(f)(6) thereunder,4 which renders
it effective upon filing with the
Commission.5 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 CBOE, pursuant to section
19(b)(1) of the Act 6 and Rule 19b–4
thereunder,7 proposes to amend CBOE
Rule 11.1 relating to the exercise of
option contracts. 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.
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,
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6).
5 As required by Rule 19b–4(f)(6)(iii), 17 CFR
240.19b–4(f)(6)(iii), the CBOE submitted written
notice of its intent to file the proposed rule change,
along with a brief description and text of the
proposed rule change, at least five days prior to the
date of filing.
6 15 U.S.C. 78s(b)(1).
7 17 CFR 240.19b–4.
2 17
wwhite on PROD1PC61 with NOTICES
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
March 7, 2006.
VerDate Aug<31>2005
the proposed rule change and discussed
any comments it received on the
proposal. The text of these statements
may be examined at the places specified
in Item IV below. The CBOE has
prepared summaries, set forth in
sections A, B, and C below, of the most
significant aspects of such statements.
15:48 Mar 15, 2006
Jkt 208001
The purpose of the proposed rule
change is to amend CBOE Rule 11.1
relating to the exercise of option
contracts.
On February 13, 2006, CBOE changed
its closing time for trading in equity
options and options on narrow-based
indices from 3:02 p.m. to 3 p.m.
(Chicago time).8 However, at that time,
CBOE did not make a corresponding
change to CBOE Rule 11.1 as it relates
to situations where there is a modified
time for the close of trading in non cashsettled equity options on the last
business day before expiration will
occur.
CBOE believes that, consistent with
its decision to change the closing time
for equity options and options on
narrow-based indices to 3 p.m., the
references to 1 hour and 28 minutes and
2 hours and 28 minutes in CBOE Rule
11.1(c)(1) and (2) should be changed to
1 hour 30 minutes and 2 hours 30
minutes, respectively. CBOE believes
that this proposed rule change is
consistent with a Commission approved
amendment that the Pacific Exchange,
Inc. (‘‘PCX’’) recently made to PCX Rule
6.24(g).9 CBOE also notes that it believes
that the other option exchanges intend
to make similar changes as well.10
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
section 6(b) of the Act 11 in general, and
furthers the objectives of section 6(b)(5)
of the Act 12 in particular, because it is
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.
8 See Securities Exchange Act Release No. 53246
(February 7, 2006), 71 FR 8014 (February 15, 2006).
9 See Securities Exchange Act Release No. 53249
(February 7, 2006), 71 FR 8035 (February 15, 2006)
(order granting accelerated approval of SR–PCX–
2005–138).
10 See SR–ISE–2006–11 and SR–Phlx–2006–12.
11 15 U.S.C. 78f(b).
12 15 U.S.C. 78f(b)(5).
PO 00000
Frm 00076
Fmt 4703
Sfmt 4703
13641
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange 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
The CBOE has neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change: (1) Does not significantly affect
the protection of investors or the public
interest; (2) does not impose any
significant burden on competition; and
(3) by its terms does not become
operative for 30 days after the date on
which it was filed, or such shorter time
as the Commission may designate if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to section 19(b)(3)(A)
of the Act 13 and Rule 19b–4(f)(6)
thereunder.14
A proposed rule change filed under
Rule 19b–4(f)(6) 15 normally does not
become operative prior to 30 days after
the date of filing. However, Rule 19b–
4(f)(6)(iii) permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
CBOE has asked the Commission to
waive the 30-day operative delay. The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest because such waiver will
allow the CBOE to immediately clarify
its rule and conform it to the industrywide close of trading times now in
effect. Accelerating the operative date
will allow for a more efficient and
effective market operation by offering
clarity and internal consistency with
existing CBOE rules. For these reasons,
the Commission designates the
proposed rule change as effective and
operative immediately upon filing with
the Commission.16
13 15
14 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
15 Id.
16 For the purposes only of waiving the 30-day
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).
E:\FR\FM\16MRN1.SGM
16MRN1
13642
Federal Register / Vol. 71, No. 51 / Thursday, March 16, 2006 / Notices
At any time within 60 days after the
filing of the proposed rule change, the
Commission may summarily abrogate
the 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.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.17
Nancy M. Morris,
Secretary.
[FR Doc. E6–3787 Filed 3–15–06; 8:45 am]
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:
SECURITIES AND EXCHANGE
COMMISSION
wwhite on PROD1PC61 with NOTICES
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–2006–19 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–2006–19. 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/
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
Room. 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–2006–19 and should
be submitted on or before April 6, 2006.
VerDate Aug<31>2005
15:48 Mar 15, 2006
Jkt 208001
BILLING CODE 8010–01–P
[Release No. 34–53441; File No. SR–CHX–
2006–03]
Self-Regulatory Organizations; the
Chicago Stock Exchange, Inc.; Notice
of Filing of Proposed Rule Change
Relating to the Prohibition of Trade
Shredding
March 8, 2006.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934, as
amended, (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 notice is hereby given that
on January 24, 2006, the Chicago Stock
Exchange, Inc. (‘‘CHX’’ 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 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 its
rules to prohibit ‘‘trade shredding.’’ The
text of the proposed rule change appears
below. Additions are in italics.
ARTICLE IX
Trading Rules
* * *
Breaking Up Orders
RULE 18. No Participant shall break
customer orders into multiple smaller
orders for the primary purpose of
maximizing rebates or other payments
to the Participant without regard for the
customer’s interest.
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
CHX included statements concerning
the purpose of, and basis for, the
proposed rule change and discussed any
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00077
Fmt 4703
Sfmt 4703
comments it received regarding the
proposal. The text of these statements
may be examined at the places specified
in Item IV below. The CHX 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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Commission has expressed
concern that participants in the U.S.
securities markets may be engaging in
the practice of ‘‘trade shredding.’’
‘‘Trade shredding’’ is the practice of
unbundling customer orders for
securities into multiple smaller orders
for the primary purpose of maximizing
payments to the participant or
participant firm. The Commission has
noted that firms might engage in this
practice to maximize the market data
rebates available to them from selfregulatory organizations.3 Unbundling
customer orders also could have the
effect of causing customers to pay (and
participant firms to receive) excessive
fees or commissions or could result in
situations where customer orders are
not receiving best execution.
The Commission has requested that
self-regulatory organizations adopt rules
to prohibit the practice of trade
shredding.4 Although the Exchange
does not currently rebate market data
fees to its order-sending firms—and
therefore does not believe that its ordersending firms have an incentive to
engage in the practice of trade shredding
with respect to orders sent to the
Exchange—the Exchange believes that it
is appropriate to implement a rule that
would prohibit this type of
inappropriate practice. Specifically,
new Rule 18, in Article IX of the
Exchange’s Rules, would prohibit an
Exchange participant from breaking
customer orders into smaller multiple
orders for the primary purpose of
maximizing rebates or other payments
to the participant without regard for the
customer’s interest.
3 The Commission has noted that the changes to
the market data revenue formulas as a result of
Regulation NMS were developed, at least in part,
to respond to concerns relating to ‘‘trade
shredding.’’
4 Other self-regulatory organizations have
submitted these types of rules in response to the
Commission’s request. See e.g., NYSE Rule 123G
(approved by Securities Exchange Act Release No.
52683 (October 26, 2005), 70 FR 66480 (November
2, 2005)).
E:\FR\FM\16MRN1.SGM
16MRN1
]]>Agencies
[Federal Register Volume 71, Number 51 (Thursday, March 16, 2006)]
[Notices]
[Pages 13641-13642]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-3787]
[[Page 13641]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53438; File No. SR-CBOE-2006-19]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Amend CBOE Rule 11.1 Relating to the Exercise of Option
Contracts
March 7, 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 March 3, 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 CBOE filed the proposal as a ``non-controversial'' proposed rule
change pursuant to section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6) thereunder,\4\ which renders it effective upon filing with the
Commission.\5\ 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).
\4\ 17 CFR 240.19b-4(f)(6).
\5\ As required by Rule 19b-4(f)(6)(iii), 17 CFR 240.19b-
4(f)(6)(iii), the CBOE submitted written notice of its intent to
file the proposed rule change, along with a brief description and
text of the proposed rule change, at least five days prior to the
date of filing.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The CBOE, pursuant to section 19(b)(1) of the Act \6\ and Rule 19b-
4 thereunder,\7\ proposes to amend CBOE Rule 11.1 relating to the
exercise of option contracts. 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.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78s(b)(1).
\7\ 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 proposal. The text of these
statements may be examined at the places specified in Item IV below.
The CBOE 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 the proposed rule change is to amend CBOE Rule 11.1
relating to the exercise of option contracts.
On February 13, 2006, CBOE changed its closing time for trading in
equity options and options on narrow-based indices from 3:02 p.m. to 3
p.m. (Chicago time).\8\ However, at that time, CBOE did not make a
corresponding change to CBOE Rule 11.1 as it relates to situations
where there is a modified time for the close of trading in non cash-
settled equity options on the last business day before expiration will
occur.
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 53246 (February 7,
2006), 71 FR 8014 (February 15, 2006).
---------------------------------------------------------------------------
CBOE believes that, consistent with its decision to change the
closing time for equity options and options on narrow-based indices to
3 p.m., the references to 1 hour and 28 minutes and 2 hours and 28
minutes in CBOE Rule 11.1(c)(1) and (2) should be changed to 1 hour 30
minutes and 2 hours 30 minutes, respectively. CBOE believes that this
proposed rule change is consistent with a Commission approved amendment
that the Pacific Exchange, Inc. (``PCX'') recently made to PCX Rule
6.24(g).\9\ CBOE also notes that it believes that the other option
exchanges intend to make similar changes as well.\10\
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 53249 (February 7,
2006), 71 FR 8035 (February 15, 2006) (order granting accelerated
approval of SR-PCX-2005-138).
\10\ See SR-ISE-2006-11 and SR-Phlx-2006-12.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act \11\ in general, and furthers the
objectives of section 6(b)(5) of the Act \12\ in particular, because it
is 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.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange 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
The CBOE has neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change: (1) Does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
and (3) by its terms does not become operative for 30 days after the
date on which it was filed, or such shorter time as the Commission may
designate if consistent with the protection of investors and the public
interest, the proposed rule change has become effective pursuant to
section 19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6)
thereunder.\14\
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally
does not become operative prior to 30 days after the date of filing.
However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a
shorter time if such action is consistent with the protection of
investors and the public interest. The CBOE has asked the Commission to
waive the 30-day operative delay. The Commission believes that waiving
the 30-day operative delay is consistent with the protection of
investors and the public interest because such waiver will allow the
CBOE to immediately clarify its rule and conform it to the industry-
wide close of trading times now in effect. Accelerating the operative
date will allow for a more efficient and effective market operation by
offering clarity and internal consistency with existing CBOE rules. For
these reasons, the Commission designates the proposed rule change as
effective and operative immediately upon filing with the
Commission.\16\
---------------------------------------------------------------------------
\15\ Id.
\16\ For the purposes only of waiving the 30-day 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).
---------------------------------------------------------------------------
[[Page 13642]]
At any time within 60 days after the filing of the proposed rule
change, the Commission may summarily abrogate the 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.
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 (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-CBOE-2006-19 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-2006-19. 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/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 Room. 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-2006-19 and should be submitted on or before April
6, 2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\17\
---------------------------------------------------------------------------
\17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Nancy M. Morris,
Secretary.
[FR Doc. E6-3787 Filed 3-15-06; 8:45 am]
BILLING CODE 8010-01-P
