Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Accommodation Liquidations (Cabinet Trades), 29371-29373 [E6-7718]
Download as PDF
<![CDATA[
Federal Register / Vol. 71, No. 98 / Monday, May 22, 2006 / Notices
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 the 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–BSE–2006–13 and should
be submitted on or before June 12, 2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.9
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6–7719 Filed 5–19–06; 8:45 am]
*
*
*
*
Doing Business on the Exchange Floor
(Rules 6.1–6.85)
*
*
*
*
*
Section C: Trading Practices and
Procedures
[Release No. 34–53808; File No. SR–CBOE–
2006–33]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to
Accommodation Liquidations (Cabinet
Trades)
May 16, 2006.
cchase on PROD1PC60 with NOTICES
Chicago Board Options Exchange,
Incorporated Rules
Chapter VI
SECURITIES AND EXCHANGE
COMMISSION
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 May 4,
2006, the Chicago Board Options
Exchange, Incorporated (‘‘Exchange’’ or
‘‘CBOE’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
*
*
*
*
*
Rule 6.54. Accommodation Liquidations
(Cabinet Trades)
Cabinet t[T]rading under the
following terms and conditions shall be
available in each series of option
contracts open for trading on the
Exchange.
(a) For classes not trading on the
CBOE Hybrid System:
(i) Trading shall be conducted in
accordance with other CBOE Rules
except as otherwise provided herein.
(ii) Limit orders labeled at a price of
$1 per option contract must be placed
with the Order Book Official or with a
Floor Broker.
(iii) Orders may be placed for
customer, firm, and Market-Maker
3 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
5 Accommodation liquidations are transactions to
close out positions in worthless or nearly worthless
out-of-the-money option contracts.
4 17
9 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
20:16 May 19, 2006
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
provisions of CBOE Rule 6.54 that
pertain to accommodation liquidations
(also referred to as ‘‘cabinet trades’’) 5 to
authorize PAR Officials and Floor
Brokers to represent cabinet orders on
the Exchange. The Exchange is also
proposing various other non-substantive
changes to reorganize and update the
existing text in CBOE Rule 6.54 and to
update references in the heading of
Chapter VII of the CBOE rulebook and
CBOE Rule 7.4. The text of the proposed
rule change is set forth below. Additions
are in italics and deletions are in
[brackets].
*
*
*
*
*
*
BILLING CODE 8010–01–P
VerDate Aug<31>2005
in Items I and II below, which Items
have been prepared by the Exchange.
CBOE has designated this proposal as
non-controversial under section
19(b)(3)(A)(iii) of the Act 3 and Rule
19b–4(f)(6) thereunder,4 which renders
the proposed rule change effective upon
filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
Jkt 208001
PO 00000
Frm 00085
Fmt 4703
Sfmt 4703
29371
accounts and, to the extent such orders
are placed with the Order Book Official,
priority in the cabinet book will be
based upon the sequence in which such
orders are placed with the Order Book
Official.
[(iii)](iv) Bids or offers for opening
transactions at a price of $1 per option
contract may be placed with the Order
Book Official only to the extent that the
[public order book] cabinet book
contains unexecuted contra closing
orders with which the opening orders
immediately may be matched. Bids and
offers at a price of $1 per option
contract may also be provided in
response to a request for quote by an
Order Book Official or a Floor Broker,
but must yield priority to all orders in
the cabinet book.
[(iv) Orders may be placed for
customer, firm, and Market-Maker
accounts, with priority based upon the
sequence in which such orders are
placed with the Order Book Official.]
(v) Market-Makers shall not be subject
to the requirements of Rule 8.7 for
orders placed pursuant to this Rule.
(vi) The Order Book Official
appointed to each class of option
contracts shall be responsible for $1
orders that are placed with him for that
class. All bids and offers that are
submitted to the Order Book Official
must be submitted to the Order Book
Official in writing and displayed as
such in accordance with Rule 7.7, and
the Order Book Official shall effect [all
such] transactions during the day by
matching such orders placed with him
or by executing such orders placed with
him with a Floor Broker representing a
contra order.
(vii) All cabinet transactions at a price
of $1 per option contract shall be
reported to the Exchange following the
close of each business day.
(b) For classes trading on the CBOE
Hybrid System:
(i) Trading shall be conducted in
accordance with other CBOE Rules
except as otherwise provided herein.
(ii) Limit orders labeled at a price of
$1 per option contract must be traded
on the Exchange in a form and manner
prescribed by the Exchange. Currently,
accommodation liquidations are only
eligible for Exchange trading via open
outcry and hence are not eligible for
placement into the Electronic Book.
. . . Interpretations and Policies
.01 Order Book Official: An Order
Book Official who receives a closing buy
(sell) order for $1 per option contract
shall attempt to execute the order
against any $1 closing sell (buy) orders
in his possession. If any part of the buy
(sell) order cannot be immediately
E:\FR\FM\22MYN1.SGM
22MYN1
29372
Federal Register / Vol. 71, No. 98 / Monday, May 22, 2006 / Notices
executed, the Order Book Official shall
display the $1 bid (offer).
[Upon receiving a closing sell order
for $1 per option contract, the Order
Book Official shall attempt to execute
the order against any $1 closing buy
orders in his possession. If any part of
the sell order cannot be immediately
executed, the Order Book Official shall
display the $1 offer.] The Order Book
Official may accept bids or offers for
opening transactions at a price of $1 per
contract only to the extent that the
[public order book] cabinet book already
contains closing orders for the contra
side.
Upon execution of any $1 per contract
orders, the Order Book Official shall
promptly supply reports of the
transaction back to the member firms
involved. In accordance with (a)(vii)
above, he will not report the
transactions to the Exchange until after
the close of each business day.
.02 PAR Officials: For purposes of
this Rule, a PAR Official may also
perform the functions of an Order Book
Official.
*
*
*
*
*
Chapter VII
Order Book Officials [and Board
Brokers] (Rules 7.1—7.50)
*
*
*
*
*
Rule 7.4. Obligations for Orders
(a)–(c) No change.
(d)(1)–(2) No change.
(3) The provisions of paragraph (d) of
this Rule shall not apply to matching
[1¢] buy and sell orders under Rule
6.54.
(4) No change.
(e)–(f) No change.
. . . Interpretations and Policies
*
No change.
*
*
*
*
cchase on PROD1PC60 with NOTICES
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.
VerDate Aug<31>2005
20:16 May 19, 2006
Jkt 208001
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
An ‘‘accommodation’’ or ‘‘cabinet’’
trade refers to trades in listed options on
the Exchange that are worthless or not
actively traded. Cabinet trading is
generally conducted in accordance with
CBOE rules; CBOE Rule 6.54,
Accommodation Liquidations, sets forth
specific procedures for engaging in
cabinet trades. CBOE Rule 6.54
currently provides for cabinet trades to
occur via open outcry whether or not
the security class trades on the
Exchange’s Hybrid Trading System.
The purpose of the rule change is to
amend CBOE Rule 6.54 to clarify
through proposed Interpretation and
Policy .02 that PAR Officials 6 may
perform the functions that Order Book
Officials perform with respect to cabinet
trading. Clarifying that PAR Officials are
authorized to represent cabinet orders
and effect cabinet trades is consistent
with recent amendments to the CBOE
rules that established the PAR Official
position on the Exchange.7
The Exchange is also proposing to
amend CBOE Rule 6.54 to authorize
Floor Brokers to represent cabinet
orders and effect cabinet trades. As a
result, in addition to the existing
procedures which permit cabinet orders
to be placed with an Order Book Official
(which, as this rule change clarifies,
would include a PAR Official fulfilling
the duties of an Order Book Official) for
representation and execution, a Floor
Broker may now represent and execute
a cabinet order in the trading crowd,
thereby saving the additional time and
steps involved in first placing a cabinet
order with an Order Book Official who
would then in turn represent and
execute the order. Thus, permitting
Floor Brokers to handle cabinet orders
and trades in accordance with the
procedures described in Rule 6.54 will
provide members with additional
flexibility and assist in the fair, orderly
and efficient handling of cabinet
transactions on the Exchange.
6 A PAR Official is an Exchange employee or
independent contractor whom the Exchange may
designate as being responsible for (i) operating the
PAR workstation in a DPM trading crowd with
respect to the classes of options assigned to him/
her; (ii) when applicable, maintaining the book with
respect to the classes of options assigned to him/
her; and (iii) effecting proper executions of orders
placed with him/her. See CBOE Rule 7.12.
7 See Securities Exchange Act Release No. 52798
(November 18, 2005), 70 FR 71344 (November 28,
2005) (File No. SR–CBOE–2005–46) (order
approving amendments relating to the removal of
agency responsibilities from DPMs and establishing
Exchange PAR Officials).
PO 00000
Frm 00086
Fmt 4703
Sfmt 4703
The revised cabinet trading
procedures set forth in the proposed
rule change will be substantially similar
to the procedures that currently exist.
Under the revised procedures, limit
orders labeled at a price of $1 per option
contract may be still be placed with the
Order Book Official or, as this rule
change proposes, with a Floor Broker or
a PAR Official. As is the case under the
current procedures, cabinet orders may
be placed for the accounts of customers,
firms, and Market-Makers. To the extent
such orders are placed with an Order
Book Official, priority will continue to
be based on the sequence in which such
orders are placed with the Order Book
Official. Also as under the current
procedures, bids and offers for opening
transactions at a price of $1 per option
contract may be placed with the Order
Book Official only to the extent that the
cabinet contains unexecuted contra
closing orders with which those
opening orders immediately may be
matched. Under the proposed revisions,
bids and offers (whether opening or
closing a position) at a price of $1 per
option contract may also be provided in
response to a request for quotes by an
Order Book Official or a Floor Broker,
but must yield priority to all orders in
the Order Book Official’s cabinet book.
All cabinet transactions will continue to
be reported to the Exchange following
the close of each business day and the
procedures for maintaining quotation,
order and transaction information for
cabinet transactions will remain
unchanged.8
The responsibilities of the Order Book
Official under the revised cabinet
trading procedures will be substantially
similar to his current responsibilities.
The Order Book Official will continue to
be responsible for $1 orders that are
placed with him. Further, all bids and
offers that are submitted to the Order
Book Official must continue to be
submitted in writing and displayed as
such in accordance with CBOE Rule 7.7.
The Order Book Official will continue to
effect cabinet transactions during the
day by matching such orders placed
with him or, under the revised
procedures, by executing orders placed
with him with a Floor Broker
representing a contra order. The Order
Book Official will also continue to
8 Accommodation liquidations as described in
CBOE Rule 6.54 are exempt from the requirements
of CBOE Rule 6.24, Required Order Information,
pertaining to the Consolidated Options Audit Trail.
However, the Exchange maintains quotation, order
and transaction information for accommodation
liquidations in the same format as the COATS data
is maintained, and will make such information
available to the Commission upon request. See
Interpretation and Policy .04 to CBOE Rule 6.24.
E:\FR\FM\22MYN1.SGM
22MYN1
Federal Register / Vol. 71, No. 98 / Monday, May 22, 2006 / Notices
supply reports of cabinet transactions he
executes back to member firms. In
addition, the Order Book Official will
continue to report cabinet transactions
to the Exchange after the close of each
business day.
Finally, the rule change makes
various non-substantive changes to
reorganize and update the existing text
in CBOE Rule 6.54 and update
references in the heading of Chapter VII
of the CBOE rulebook and CBOE Rule
7.4.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
section 6(b) of the Act 9 in general and
furthers the objectives of section 6(b)(5)
of the Act 10 in particular in that it is
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.
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
No written comments were solicited
or received with respect to the proposed
rule change.
cchase on PROD1PC60 with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change
has become effective pursuant to section
19(b)(3)(A) of the Act 11 and Rule 19b–
4(f)(6) 12 thereunder because it (i) does
not significantly affect the protection of
investors or the public interest; (ii) does
not impose any significant burden on
competition; and (iii) does not become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate,
provided that the self-regulatory
organization has given the Commission
written notice of its intent to file the
proposed rule change at least five
9 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
11 15 U.S.C. 78s(b)(3)(A).
12 17 CFR 240.19b–4(f)(6).
10 15
VerDate Aug<31>2005
20:16 May 19, 2006
Jkt 208001
business days prior to the filing date of
the proposed rule change.13
The Exchange has requested that the
Commission waive the 30-day operative
delay of Rule 19b–4(f)(6)(iii) so that the
proposed rule change may become
effective immediately. The Commission
believes that waiving the pre-filing
requirement and the operative delay is
consistent with the protection of
investors and the public interest. The
Commission notes that the proposal
does not substantially change the
existing cabinet trading procedures, but
does provide market participants on the
Exchange with additional flexibility for
handling cabinet trades, which should
promote the fair, orderly and efficient
handling of these transactions.
Therefore, the Commission has
determined to waive the 30-day
operative delay and allow the proposed
rule change to become operative
immediately.14
At any time within 60 days of 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 rulecomments@sec.gov. Please include File
No. SR–CBOE–2006–33 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–2006–33. This file
number should be included on the
13 As required under Rule 19b–4(f)(6)(iii), the
Exchange provided the Commission with written
notice of its attempt to file the proposed rule change
at least five days prior to the filing date.
14 For purposes only of waiving the operative
delay of this proposal, the Commission notes that
it has considered the proposed rule’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
PO 00000
Frm 00087
Fmt 4703
Sfmt 4703
29373
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 Commissions
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 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–2006–33 and should
be submitted on or before June 12, 2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.15
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6–7718 Filed 5–19–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53807; File No. SR–
NYSEArca–2006–14]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Extend Until June 5,
2007, a Pilot Program for Listing
Options on Selected Stocks Trading
Below $20 at One-Point Intervals
May 15, 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 May 8,
2006, NYSE Arca, Inc. (‘‘NYSE Arca’’ 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
15 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\22MYN1.SGM
22MYN1
]]>Agencies
[Federal Register Volume 71, Number 98 (Monday, May 22, 2006)]
[Notices]
[Pages 29371-29373]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-7718]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53808; File No. SR-CBOE-2006-33]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Relating to Accommodation Liquidations (Cabinet Trades)
May 16, 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 May 4, 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 and II below, which Items have been prepared by the Exchange.
CBOE has designated this proposal as non-controversial under section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\
which renders the proposed rule change effective upon filing with the
Commission. 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)(iii).
\4\ 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 amend the provisions of CBOE Rule 6.54
that pertain to accommodation liquidations (also referred to as
``cabinet trades'') \5\ to authorize PAR Officials and Floor Brokers to
represent cabinet orders on the Exchange. The Exchange is also
proposing various other non-substantive changes to reorganize and
update the existing text in CBOE Rule 6.54 and to update references in
the heading of Chapter VII of the CBOE rulebook and CBOE Rule 7.4. The
text of the proposed rule change is set forth below. Additions are in
italics and deletions are in [brackets].
---------------------------------------------------------------------------
\5\ Accommodation liquidations are transactions to close out
positions in worthless or nearly worthless out-of-the-money option
contracts.
---------------------------------------------------------------------------
* * * * *
Chicago Board Options Exchange, Incorporated Rules
* * * * *
Chapter VI
Doing Business on the Exchange Floor (Rules 6.1-6.85)
* * * * *
Section C: Trading Practices and Procedures
* * * * *
Rule 6.54. Accommodation Liquidations (Cabinet Trades)
Cabinet t[T]rading under the following terms and conditions shall
be available in each series of option contracts open for trading on the
Exchange.
(a) For classes not trading on the CBOE Hybrid System:
(i) Trading shall be conducted in accordance with other CBOE Rules
except as otherwise provided herein.
(ii) Limit orders labeled at a price of $1 per option contract must
be placed with the Order Book Official or with a Floor Broker.
(iii) Orders may be placed for customer, firm, and Market-Maker
accounts and, to the extent such orders are placed with the Order Book
Official, priority in the cabinet book will be based upon the sequence
in which such orders are placed with the Order Book Official.
[(iii)](iv) Bids or offers for opening transactions at a price of
$1 per option contract may be placed with the Order Book Official only
to the extent that the [public order book] cabinet book contains
unexecuted contra closing orders with which the opening orders
immediately may be matched. Bids and offers at a price of $1 per option
contract may also be provided in response to a request for quote by an
Order Book Official or a Floor Broker, but must yield priority to all
orders in the cabinet book.
[(iv) Orders may be placed for customer, firm, and Market-Maker
accounts, with priority based upon the sequence in which such orders
are placed with the Order Book Official.]
(v) Market-Makers shall not be subject to the requirements of Rule
8.7 for orders placed pursuant to this Rule.
(vi) The Order Book Official appointed to each class of option
contracts shall be responsible for $1 orders that are placed with him
for that class. All bids and offers that are submitted to the Order
Book Official must be submitted to the Order Book Official in writing
and displayed as such in accordance with Rule 7.7, and the Order Book
Official shall effect [all such] transactions during the day by
matching such orders placed with him or by executing such orders placed
with him with a Floor Broker representing a contra order.
(vii) All cabinet transactions at a price of $1 per option contract
shall be reported to the Exchange following the close of each business
day.
(b) For classes trading on the CBOE Hybrid System:
(i) Trading shall be conducted in accordance with other CBOE Rules
except as otherwise provided herein.
(ii) Limit orders labeled at a price of $1 per option contract must
be traded on the Exchange in a form and manner prescribed by the
Exchange. Currently, accommodation liquidations are only eligible for
Exchange trading via open outcry and hence are not eligible for
placement into the Electronic Book.
. . . Interpretations and Policies
.01 Order Book Official: An Order Book Official who receives a
closing buy (sell) order for $1 per option contract shall attempt to
execute the order against any $1 closing sell (buy) orders in his
possession. If any part of the buy (sell) order cannot be immediately
[[Page 29372]]
executed, the Order Book Official shall display the $1 bid (offer).
[Upon receiving a closing sell order for $1 per option contract,
the Order Book Official shall attempt to execute the order against any
$1 closing buy orders in his possession. If any part of the sell order
cannot be immediately executed, the Order Book Official shall display
the $1 offer.] The Order Book Official may accept bids or offers for
opening transactions at a price of $1 per contract only to the extent
that the [public order book] cabinet book already contains closing
orders for the contra side.
Upon execution of any $1 per contract orders, the Order Book
Official shall promptly supply reports of the transaction back to the
member firms involved. In accordance with (a)(vii) above, he will not
report the transactions to the Exchange until after the close of each
business day.
.02 PAR Officials: For purposes of this Rule, a PAR Official may
also perform the functions of an Order Book Official.
* * * * *
Chapter VII
Order Book Officials [and Board Brokers] (Rules 7.1--7.50)
* * * * *
Rule 7.4. Obligations for Orders
(a)-(c) No change.
(d)(1)-(2) No change.
(3) The provisions of paragraph (d) of this Rule shall not apply to
matching [1[cent]] buy and sell orders under Rule 6.54.
(4) No change.
(e)-(f) No change.
. . . Interpretations and Policies
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, 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
An ``accommodation'' or ``cabinet'' trade refers to trades in
listed options on the Exchange that are worthless or not actively
traded. Cabinet trading is generally conducted in accordance with CBOE
rules; CBOE Rule 6.54, Accommodation Liquidations, sets forth specific
procedures for engaging in cabinet trades. CBOE Rule 6.54 currently
provides for cabinet trades to occur via open outcry whether or not the
security class trades on the Exchange's Hybrid Trading System.
The purpose of the rule change is to amend CBOE Rule 6.54 to
clarify through proposed Interpretation and Policy .02 that PAR
Officials \6\ may perform the functions that Order Book Officials
perform with respect to cabinet trading. Clarifying that PAR Officials
are authorized to represent cabinet orders and effect cabinet trades is
consistent with recent amendments to the CBOE rules that established
the PAR Official position on the Exchange.\7\
---------------------------------------------------------------------------
\6\ A PAR Official is an Exchange employee or independent
contractor whom the Exchange may designate as being responsible for
(i) operating the PAR workstation in a DPM trading crowd with
respect to the classes of options assigned to him/her; (ii) when
applicable, maintaining the book with respect to the classes of
options assigned to him/her; and (iii) effecting proper executions
of orders placed with him/her. See CBOE Rule 7.12.
\7\ See Securities Exchange Act Release No. 52798 (November 18,
2005), 70 FR 71344 (November 28, 2005) (File No. SR-CBOE-2005-46)
(order approving amendments relating to the removal of agency
responsibilities from DPMs and establishing Exchange PAR Officials).
---------------------------------------------------------------------------
The Exchange is also proposing to amend CBOE Rule 6.54 to authorize
Floor Brokers to represent cabinet orders and effect cabinet trades. As
a result, in addition to the existing procedures which permit cabinet
orders to be placed with an Order Book Official (which, as this rule
change clarifies, would include a PAR Official fulfilling the duties of
an Order Book Official) for representation and execution, a Floor
Broker may now represent and execute a cabinet order in the trading
crowd, thereby saving the additional time and steps involved in first
placing a cabinet order with an Order Book Official who would then in
turn represent and execute the order. Thus, permitting Floor Brokers to
handle cabinet orders and trades in accordance with the procedures
described in Rule 6.54 will provide members with additional flexibility
and assist in the fair, orderly and efficient handling of cabinet
transactions on the Exchange.
The revised cabinet trading procedures set forth in the proposed
rule change will be substantially similar to the procedures that
currently exist. Under the revised procedures, limit orders labeled at
a price of $1 per option contract may be still be placed with the Order
Book Official or, as this rule change proposes, with a Floor Broker or
a PAR Official. As is the case under the current procedures, cabinet
orders may be placed for the accounts of customers, firms, and Market-
Makers. To the extent such orders are placed with an Order Book
Official, priority will continue to be based on the sequence in which
such orders are placed with the Order Book Official. Also as under the
current procedures, bids and offers for opening transactions at a price
of $1 per option contract may be placed with the Order Book Official
only to the extent that the cabinet contains unexecuted contra closing
orders with which those opening orders immediately may be matched.
Under the proposed revisions, bids and offers (whether opening or
closing a position) at a price of $1 per option contract may also be
provided in response to a request for quotes by an Order Book Official
or a Floor Broker, but must yield priority to all orders in the Order
Book Official's cabinet book. All cabinet transactions will continue to
be reported to the Exchange following the close of each business day
and the procedures for maintaining quotation, order and transaction
information for cabinet transactions will remain unchanged.\8\
---------------------------------------------------------------------------
\8\ Accommodation liquidations as described in CBOE Rule 6.54
are exempt from the requirements of CBOE Rule 6.24, Required Order
Information, pertaining to the Consolidated Options Audit Trail.
However, the Exchange maintains quotation, order and transaction
information for accommodation liquidations in the same format as the
COATS data is maintained, and will make such information available
to the Commission upon request. See Interpretation and Policy .04 to
CBOE Rule 6.24.
---------------------------------------------------------------------------
The responsibilities of the Order Book Official under the revised
cabinet trading procedures will be substantially similar to his current
responsibilities. The Order Book Official will continue to be
responsible for $1 orders that are placed with him. Further, all bids
and offers that are submitted to the Order Book Official must continue
to be submitted in writing and displayed as such in accordance with
CBOE Rule 7.7. The Order Book Official will continue to effect cabinet
transactions during the day by matching such orders placed with him or,
under the revised procedures, by executing orders placed with him with
a Floor Broker representing a contra order. The Order Book Official
will also continue to
[[Page 29373]]
supply reports of cabinet transactions he executes back to member
firms. In addition, the Order Book Official will continue to report
cabinet transactions to the Exchange after the close of each business
day.
Finally, the rule change makes various non-substantive changes to
reorganize and update the existing text in CBOE Rule 6.54 and update
references in the heading of Chapter VII of the CBOE rulebook and CBOE
Rule 7.4.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act \9\ in general and furthers the objectives
of section 6(b)(5) of the Act \10\ in particular in that it is 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.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f(b).
\10\ 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
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
The foregoing proposed rule change has become effective pursuant to
section 19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6) \12\
thereunder because it (i) does not significantly affect the protection
of investors or the public interest; (ii) does not impose any
significant burden on competition; and (iii) does not become operative
for 30 days from the date on which it was filed, or such shorter time
as the Commission may designate, provided that the self-regulatory
organization has given the Commission written notice of its intent to
file the proposed rule change at least five business days prior to the
filing date of the proposed rule change.\13\
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6).
\13\ As required under Rule 19b-4(f)(6)(iii), the Exchange
provided the Commission with written notice of its attempt to file
the proposed rule change at least five days prior to the filing
date.
---------------------------------------------------------------------------
The Exchange has requested that the Commission waive the 30-day
operative delay of Rule 19b-4(f)(6)(iii) so that the proposed rule
change may become effective immediately. The Commission believes that
waiving the pre-filing requirement and the operative delay is
consistent with the protection of investors and the public interest.
The Commission notes that the proposal does not substantially change
the existing cabinet trading procedures, but does provide market
participants on the Exchange with additional flexibility for handling
cabinet trades, which should promote the fair, orderly and efficient
handling of these transactions. Therefore, the Commission has
determined to waive the 30-day operative delay and allow the proposed
rule change to become operative immediately.\14\
---------------------------------------------------------------------------
\14\ For purposes only of waiving the operative delay of this
proposal, the Commission notes that it has considered the proposed
rule's impact on efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
---------------------------------------------------------------------------
At any time within 60 days of 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 No. SR-CBOE-2006-33 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-2006-33. 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 Commissions 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 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-2006-33 and should be submitted on or before June
12, 2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\15\
---------------------------------------------------------------------------
\15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6-7718 Filed 5-19-06; 8:45 am]
BILLING CODE 8010-01-P
