Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change and Amendment No. 1 Thereto To Clarify the Application of Certain Exchange Rules to the Trading of Options on Exchange-Traded Fund Shares, 16845-16847 [E6-4799]
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Federal Register / Vol. 71, No. 64 / Tuesday, April 4, 2006 / Notices
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 Exchange. 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–Amex–2005–103 and
should be submitted on or before April
25, 2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.10
Nancy M. Morris,
Secretary.
[FR Doc. E6–4829 Filed 4–3–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53558; File No. SR–CBOE–
2006–28]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change and Amendment No. 1
Thereto To Clarify the Application of
Certain Exchange Rules to the Trading
of Options on Exchange-Traded Fund
Shares
sroberts on PROD1PC70 with NOTICES
March 28, 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 16,
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, II, and III below, which Items
have been prepared by the Exchange.
On March 27, 2006, the Exchange filed
Amendment No. 1 to the proposed rule
10 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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18:55 Apr 03, 2006
Jkt 208001
change.3 The Exchange filed the
proposed rule change as a ‘‘noncontroversial’’ proposed rule change
pursuant to Section 19(b)(3)(A) of the
Act 4 and Rule 19b–4(f)(6) thereunder,5
which renders the proposal effective
upon filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change, as amended, from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to make
amendments to clarify the application of
certain Exchange rules to the trading of
options on exchange-traded fund
(‘‘ETF’’) shares.
The text of the proposed rule change,
as amended, is available on the
Exchange’s Web site (https://
www.cboe.com), at the Exchange’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
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of those
statements may be examined at the
places specified in Item IV below and is
set forth in Sections A, B, and C below.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange currently trades, among
other things, options on ETFs. In
conjunction with a recent review of
Exchange rules, this filing proposes to
make amendments to clarify the
application of certain Exchange rules to
the trading of ETF options.
First, this filing proposes to make
certain clarifying changes to CBOE Rule
6.3. CBOE Rule 6.3 pertains to trading
halts and provides generally that
Exchange Floor Officials may halt
trading in any security in the interests
of maintaining a fair and orderly market.
Though the rule has general
applicability to all securities traded on
the Exchange and authorizes trading
3 In Amendment No. 1, the Exchange made minor
clarifying and technical changes to the proposed
rule change.
4 15 U.S.C. 78s(b)(3)(A).
5 17 CFR 240.19b–4(f)(6).
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16845
halts in any such security, certain of the
factors identified in the rule that may be
considered in making a decision to halt
trading vary depending on the particular
type of Exchange traded security while
other factors apply generally to all
securities.
For example, the rule currently
references factors for considering halts
in the case of (i) a stock option, (ii) any
security other than an option, and (iii)
an index warrant or an index UIT
interest and also references general,
non-security type specific factors
pertaining to rotations and unusual
conditions or circumstances.6 The rule
is being amended to change the
references in the list of factors from
particular types of securities (such as
‘‘stock options’’) to more general
references (such as ‘‘an option on a
security’’).
Additionally, the Exchange is
proposing to add similar clarifying
language in Interpretation .04 of CBOE
Rule 6.3, which addresses trading halts
on the Exchange when a regulatory halt
in an underlying stock has been
declared in the primary market (a
‘‘regulatory halt’’). Since such regulatory
halts may be declared for securities
other than stock options, such as ETF
options, Interpretation .04 is being
amended to clarify that, in general, a
halt on the Exchange can be made when
there is a regulatory halt in the
underlying security. This revision
makes clear Interpretation .04’s
applicability to stock options, ETF
options, and any other such options for
which there is an underlying security.
Second, this filing proposes to amend
CBOE Rule 7.4, which rule pertains to
certain obligations of Order Book
Officials (‘‘OBOs’’). Specifically, CBOE
Rule 7.4(a)(2) describes what types of
orders shall ordinarily be accepted by
an OBO and certain OBO
responsibilities pertaining to the
processing of orders that are submitted
6 The existing rule text provides that ‘‘[a]mong the
factors that may be considered in making [a
determination to halt trading] are whether: (i) In the
case of a stock option, trading in the underlying
security has been halted or suspended in the
primary market, (ii) in the case of a stock option,
the opening of such underlying security has been
delayed because of unusual circumstances, (iii) in
the case of any security other than an option, (A)
the opening of such security has been delayed due
to order imbalances, (B) the Exchange has been
advised that the issuer of the security is about to
make an important announcement affecting such
issue, or (C) trading in such security has been
halted or suspended in the primary market for such
security. (iv) In the case of an index warrant or an
index UIT interest, trading in index options has
been halted pursuant to the provisions of Rule 24.7,
(v) the extent to which the rotation has been
completed or other factors regarding the status of
the rotation, or (vi) other unusual conditions or
circumstances are present.’’ CBOE Rule 6.3(a).
E:\FR\FM\04APN1.SGM
04APN1
sroberts on PROD1PC70 with NOTICES
16846
Federal Register / Vol. 71, No. 64 / Tuesday, April 4, 2006 / Notices
through the Intermarket Options
Linkage (‘‘Linkage Orders’’). This
current rule states that for those index
option classes on the Exchange’s Hybrid
Trading System (‘‘Hybrid’’) that are not
assigned a Designated Primary MarketMaker (‘‘DPM’’), the OBO shall be
responsible for (i) routing Principal
Acting as Agent (P/A) orders and
Satisfaction orders to other markets
based on prior written instructions that
must be provided by the Lead MarketMaker (‘‘LMM’’) to the OBO and (ii)
handling all Linkage Orders or portions
of Linkage Orders received by the
Exchange that are not automatically
executed.
The Exchange currently has some
options on ETFs that are not assigned to
a DPM and that trade on Hybrid. One
example is the DIAMOND (DIA)
options. The intent of CBOE Rule 7.4
has always been that the responsibilities
of the OBO is not only for index options
classes on Hybrid that are not assigned
a DPM but also for ETF options classes
on Hybrid that are not assigned a DPM.
However, the rule is currently unclear
in making this point. For this reason,
the Exchange is proposing that in CBOE
Rule 7.4(a)(2), ‘‘ETF options’’ be added
to the rule’s current language to clarify
that an OBO’s responsibilities
pertaining to the process of Linkage
Orders applies for both (i) index options
classes and (ii) ETF option classes, that
are on Hybrid and that are not assigned
a DPM.
Third, this filing proposes to amend
CBOE Rule 8.15, which governs the
LMM and Supplemental Market-Maker
(‘‘SMM’’) appointment process in nonHybrid classes, to make the list of
factors considered in selecting LMMs
and SMMs consistent with the language
in the Exchange rule governing LMM
appointments in Hybrid classes.
Specifically, the current factors in CBOE
Rule 8.15(a)(1) that are considered in
selecting LMMs and SMMs in nonHybrid classes include: Adequacy of
capital, experience in trading index
options, presence in the trading crowd,
adherence to Exchange rules and ability
to meet certain other obligations.
Similarly, current CBOE Rule 8.15A
governs the factors that are considered
in selecting LMMs in Hybrid classes.7
The current factors in CBOE Rule
8.15A(a)(1) include: Adequacy of
capital, experience in trading index
options or options on ETFs, presence in
the trading crowd, adherence to
Exchange rules and ability to meet
certain other obligations. The factors
used in selecting LMMs and SMMs for
both Hybrid and non-Hybrid classes are
the same except for the additional factor
of experience in trading options on
ETFs for Hybrid classes.
This filing proposes to amend CBOE
Rule 8.15 to add experience in trading
‘‘options on ETFs’’ as an additional
factor used in selecting LMMs and
SMMs in non-hybrid classes. Currently,
options on ETFs are traded on both
Hybrid and non-Hybrid classes. For this
reason, the Exchange is proposing to
make CBOE Rule 8.15 consistent with
the factors used in CBOE Rule 8.15A.
2. Statutory Basis
By proposing to make certain
amendments to clarify the application of
certain Exchange Rules as they pertain
to the trading of options on ETF shares,
the Exchange believes the proposed rule
change is consistent with Section 6(b) of
the Act 8 in general, and furthers the
objectives of Section 6(b)(5) of the Act 9
in particular, in that it should promote
just and equitable principles of trade,
serve 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.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
This proposed rule change does not
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
Because the foregoing proposed rule
change, as amended, does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
for 30 days from 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; provided that the
Exchange has given the Commission
written notice of its intent to file the
proposed rule change at least five
business days prior to the date of filing
of the proposed rule change or such
shorter time as designated by the
8 15
7 SMMs
do not exist in Hybrid.
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18:55 Apr 03, 2006
9 15
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PO 00000
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00091
Fmt 4703
Sfmt 4703
Commission, the proposed rule change,
as amended, has become effective
pursuant to Section 19(b)(3)(A) of the
Act 10 and Rule 19b–4(f)(6)
thereunder.11
At any time within 60 days of the
filing of the 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.12
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change, as amended, 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–2006–28 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–2006–28. 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
10 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). The Commission notes
that the Exchange satisfied the pre-filing five-day
notice requirement.
12 For purposes of calculating the 60-day period
within which the Commission may summarily
abrogate the proposed rule change, as amended,
under Section 19(b)(3)(C) of the Act, the
Commission considers the period to commence on
March 27, 2006, the date on which the Exchange
filed Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
11 17
E:\FR\FM\04APN1.SGM
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Federal Register / Vol. 71, No. 64 / Tuesday, April 4, 2006 / Notices
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 Exchange. 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–2006–28 and should
be submitted on or before April 25,
2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.13
Nancy M. Morris,
Secretary.
[FR Doc. E6–4799 Filed 4–3–06; 8:45 am]
(a) Filing of Application
(1)—No Change.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53564; File No. SR–NASD–
2006–038]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to Proposed
Amendments to NASD Rule 1013 To
Adopt a Standardized New Member
Application Form (Form NMA)
March 29, 2006.
sroberts on PROD1PC70 with NOTICES
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 National Association of
Securities Dealers, Inc. (‘‘NASD’’) 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 NASD. NASD
has designated the proposed rule change
as constituting a ‘‘non-controversial’’
rule change pursuant to Section
19(b)(3)(A) of the Act 3 and Rule 19b–
4(f)(6) thereunder,4 which renders the
proposal effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
CFR 200.30–3(a)(12).
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 240.19–b4(f)(6). NASD gave the
Commission written notice of its intent to file this
proposed rule change on February 8, 2006.
VerDate Aug<31>2005
18:55 Apr 03, 2006
Jkt 208001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASD is proposing to amend Rule
1013 (New Member Application and
Interview) to adopt a standardized new
member application form, Form NMA,
to be used by all new applicants
applying for membership to NASD. The
proposed rule change also makes several
technical changes to NASD Rules 1013
and 1014. The proposed new form is
available at NASD, the Commission, and
at https://www.nasd.com. Below is the
text of the proposed rule change.
Proposed new language is in italics;
proposed deletions are in [brackets].
*
*
*
*
*
1013. New Member Application and
Interview
BILLING CODE 8010–01–P
13 17
comments on the proposed rule change
from interested persons.
(2) Contents
An Applicant shall submit an
application using NASD Form NMA.
The application shall include:
(A) Through (Q) No Change.
(R) [a Web CRD entitlement request
form] an NASD Entitlement Program
Agreement and Terms of Use and an
NASD Member Firm Account
Administrator Entitlement Form [a
Member Contact Questionnaire user
access request form].
(3) Electronic Filings
Upon approval of the Applicant’s
[Web CRD entitlement request form]
NASD Member Firm Account
Administrator Entitlement Form, the
Applicant shall submit its Forms U4 for
each Associated Person who is required
to be registered under NASD Rules, any
amendments to its Forms BD or U4 and
any Form U5 electronically via Web
CRD. [Upon approval of the Applicant’s
membership, the Applicant shall submit
any amendments to its Member Contact
Questionnaire electronically.]
(4) through (5) No Change.
(b) Membership Interview
(1) through (7) No Change.
*
*
*
*
*
1014. Department Decision
(a). Standards for Admission
(1) through (5) No Change.
(6) The communications and
operational systems that the Applicant
intends to employ for the purpose of
conducting business with customers
and other members are adequate and
PO 00000
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16847
provide reasonably for business
continuity in each area set forth in Rule
1013(a)(2)([F]E)(xii);
(7) through (14) No change.
*
*
*
*
*
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
NASD 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. NASD 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
NASD staff has been working to make
its membership application process
more efficient and less burdensome for
both new applicants and the staff.
Applying for NASD membership is an
intensive process requiring considerable
attention to detail as well as a
substantial time commitment. NASD
Rule 1013 (New Member Application
and Interview) identifies the
requirements for submitting a new
member application for NASD
membership, including a listing of the
necessary documents and a requirement
that the applicant submit a
‘‘substantially complete’’ application.5
Pursuant to NASD Rule 1013(a)(4),
NASD can reject an application that is
not substantially complete.
Although NASD Rule 1013 contains a
listing of the requirements for a new
member application submission, NASD
continues to receive incomplete or
inadequate membership applications.
Such applications often require NASD
staff to serve requests for significant
additional information or
documentation to the applicant and
require a great deal of NASD staff time
and resources to process appropriately.
Applications initially submitted with
inadequate or incomplete information
result in increased processing times,
which can have the effect of
significantly delaying when an
applicant can begin conducting business
as a member of NASD.
To address these issues, NASD is
proposing to amend NASD Rule 1013 to
5 See
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NASD Rule 1013(a)(4).
04APN1
]]>Agencies
[Federal Register Volume 71, Number 64 (Tuesday, April 4, 2006)]
[Notices]
[Pages 16845-16847]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-4799]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53558; File No. SR-CBOE-2006-28]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change and Amendment No. 1 Thereto To Clarify the
Application of Certain Exchange Rules to the Trading of Options on
Exchange-Traded Fund Shares
March 28, 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 16, 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, II, and III below, which Items have been prepared by the
Exchange. On March 27, 2006, the Exchange filed Amendment No. 1 to the
proposed rule change.\3\ The Exchange filed the proposed rule change as
a ``non-controversial'' proposed rule change pursuant to Section
19(b)(3)(A) of the Act \4\ and Rule 19b-4(f)(6) thereunder,\5\ which
renders the proposal effective upon filing with the Commission. The
Commission is publishing this notice to solicit comments on the
proposed rule change, as amended, from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, the Exchange made minor clarifying and
technical changes to the proposed rule change.
\4\ 15 U.S.C. 78s(b)(3)(A).
\5\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to make amendments to clarify the application
of certain Exchange rules to the trading of options on exchange-traded
fund (``ETF'') shares.
The text of the proposed rule change, as amended, is available on
the Exchange's Web site (https://www.cboe.com), at the Exchange'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 the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of those statements may be examined at the places specified in
Item IV below and is set forth in Sections A, B, and C below.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange currently trades, among other things, options on ETFs.
In conjunction with a recent review of Exchange rules, this filing
proposes to make amendments to clarify the application of certain
Exchange rules to the trading of ETF options.
First, this filing proposes to make certain clarifying changes to
CBOE Rule 6.3. CBOE Rule 6.3 pertains to trading halts and provides
generally that Exchange Floor Officials may halt trading in any
security in the interests of maintaining a fair and orderly market.
Though the rule has general applicability to all securities traded on
the Exchange and authorizes trading halts in any such security, certain
of the factors identified in the rule that may be considered in making
a decision to halt trading vary depending on the particular type of
Exchange traded security while other factors apply generally to all
securities.
For example, the rule currently references factors for considering
halts in the case of (i) a stock option, (ii) any security other than
an option, and (iii) an index warrant or an index UIT interest and also
references general, non-security type specific factors pertaining to
rotations and unusual conditions or circumstances.\6\ The rule is being
amended to change the references in the list of factors from particular
types of securities (such as ``stock options'') to more general
references (such as ``an option on a security'').
---------------------------------------------------------------------------
\6\ The existing rule text provides that ``[a]mong the factors
that may be considered in making [a determination to halt trading]
are whether: (i) In the case of a stock option, trading in the
underlying security has been halted or suspended in the primary
market, (ii) in the case of a stock option, the opening of such
underlying security has been delayed because of unusual
circumstances, (iii) in the case of any security other than an
option, (A) the opening of such security has been delayed due to
order imbalances, (B) the Exchange has been advised that the issuer
of the security is about to make an important announcement affecting
such issue, or (C) trading in such security has been halted or
suspended in the primary market for such security. (iv) In the case
of an index warrant or an index UIT interest, trading in index
options has been halted pursuant to the provisions of Rule 24.7, (v)
the extent to which the rotation has been completed or other factors
regarding the status of the rotation, or (vi) other unusual
conditions or circumstances are present.'' CBOE Rule 6.3(a).
---------------------------------------------------------------------------
Additionally, the Exchange is proposing to add similar clarifying
language in Interpretation .04 of CBOE Rule 6.3, which addresses
trading halts on the Exchange when a regulatory halt in an underlying
stock has been declared in the primary market (a ``regulatory halt'').
Since such regulatory halts may be declared for securities other than
stock options, such as ETF options, Interpretation .04 is being amended
to clarify that, in general, a halt on the Exchange can be made when
there is a regulatory halt in the underlying security. This revision
makes clear Interpretation .04's applicability to stock options, ETF
options, and any other such options for which there is an underlying
security.
Second, this filing proposes to amend CBOE Rule 7.4, which rule
pertains to certain obligations of Order Book Officials (``OBOs'').
Specifically, CBOE Rule 7.4(a)(2) describes what types of orders shall
ordinarily be accepted by an OBO and certain OBO responsibilities
pertaining to the processing of orders that are submitted
[[Page 16846]]
through the Intermarket Options Linkage (``Linkage Orders''). This
current rule states that for those index option classes on the
Exchange's Hybrid Trading System (``Hybrid'') that are not assigned a
Designated Primary Market-Maker (``DPM''), the OBO shall be responsible
for (i) routing Principal Acting as Agent (P/A) orders and Satisfaction
orders to other markets based on prior written instructions that must
be provided by the Lead Market-Maker (``LMM'') to the OBO and (ii)
handling all Linkage Orders or portions of Linkage Orders received by
the Exchange that are not automatically executed.
The Exchange currently has some options on ETFs that are not
assigned to a DPM and that trade on Hybrid. One example is the DIAMOND
(DIA) options. The intent of CBOE Rule 7.4 has always been that the
responsibilities of the OBO is not only for index options classes on
Hybrid that are not assigned a DPM but also for ETF options classes on
Hybrid that are not assigned a DPM. However, the rule is currently
unclear in making this point. For this reason, the Exchange is
proposing that in CBOE Rule 7.4(a)(2), ``ETF options'' be added to the
rule's current language to clarify that an OBO's responsibilities
pertaining to the process of Linkage Orders applies for both (i) index
options classes and (ii) ETF option classes, that are on Hybrid and
that are not assigned a DPM.
Third, this filing proposes to amend CBOE Rule 8.15, which governs
the LMM and Supplemental Market-Maker (``SMM'') appointment process in
non-Hybrid classes, to make the list of factors considered in selecting
LMMs and SMMs consistent with the language in the Exchange rule
governing LMM appointments in Hybrid classes. Specifically, the current
factors in CBOE Rule 8.15(a)(1) that are considered in selecting LMMs
and SMMs in non-Hybrid classes include: Adequacy of capital, experience
in trading index options, presence in the trading crowd, adherence to
Exchange rules and ability to meet certain other obligations.
Similarly, current CBOE Rule 8.15A governs the factors that are
considered in selecting LMMs in Hybrid classes.\7\ The current factors
in CBOE Rule 8.15A(a)(1) include: Adequacy of capital, experience in
trading index options or options on ETFs, presence in the trading
crowd, adherence to Exchange rules and ability to meet certain other
obligations. The factors used in selecting LMMs and SMMs for both
Hybrid and non-Hybrid classes are the same except for the additional
factor of experience in trading options on ETFs for Hybrid classes.
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\7\ SMMs do not exist in Hybrid.
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This filing proposes to amend CBOE Rule 8.15 to add experience in
trading ``options on ETFs'' as an additional factor used in selecting
LMMs and SMMs in non-hybrid classes. Currently, options on ETFs are
traded on both Hybrid and non-Hybrid classes. For this reason, the
Exchange is proposing to make CBOE Rule 8.15 consistent with the
factors used in CBOE Rule 8.15A.
2. Statutory Basis
By proposing to make certain amendments to clarify the application
of certain Exchange Rules as they pertain to the trading of options on
ETF shares, the Exchange believes the proposed rule change is
consistent with Section 6(b) of the Act \8\ in general, and furthers
the objectives of Section 6(b)(5) of the Act \9\ in particular, in that
it should promote just and equitable principles of trade, serve 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.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
This proposed rule change does not 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
Because the foregoing proposed rule change, as amended, does not:
(i) Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from 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; provided that the
Exchange has given the Commission written notice of its intent to file
the proposed rule change at least five business days prior to the date
of filing of the proposed rule change or such shorter time as
designated by the Commission, the proposed rule change, as amended, has
become effective pursuant to Section 19(b)(3)(A) of the Act \10\ and
Rule 19b-4(f)(6) thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6). The Commission notes that the
Exchange satisfied the pre-filing five-day notice requirement.
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At any time within 60 days of the filing of the 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.\12\
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\12\ For purposes of calculating the 60-day period within which
the Commission may summarily abrogate the proposed rule change, as
amended, under Section 19(b)(3)(C) of the Act, the Commission
considers the period to commence on March 27, 2006, the date on
which the Exchange filed Amendment No. 1. See 15 U.S.C.
78s(b)(3)(C).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, 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-2006-28 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-2006-28. 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
[[Page 16847]]
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 Exchange. 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-2006-28 and should be submitted on or before April
25, 2006.
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\13\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
Nancy M. Morris,
Secretary.
[FR Doc. E6-4799 Filed 4-3-06; 8:45 am]
BILLING CODE 8010-01-P
