Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Order Granting Accelerated Approval to a Proposed Rule Change and Amendment No. 1 Thereto To Establish a Quote Risk Monitor Mechanism and To Define Continuous Quoting, 44729-44734 [E6-12740]
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Federal Register / Vol. 71, No. 151 / Monday, August 7, 2006 / Notices
each reporting institution will submit
this report 50 times each year. The staff
estimates that the average amount of
time necessary to comply with Rule
17f–1(c) and Form X–17F–1A is five
minutes per submission. The total
burden is 108,333 hours annually for
the entire industry (26,000 times 50
times 5 divided by 60).
Rule 17f–1(c) is a reporting rule and
does not specify a retention period. The
rule requires an incident-based
reporting requirement by the reporting
institutions when securities certificates
are discovered to be missing, lost,
counterfeit, or stolen. Registering under
rule 17f–1(c) is mandatory to obtain the
benefit of a central database that stores
information about missing, lost,
counterfeit, or stolen securities for the
Lost and Stolen Securities Program.
Reporting institutions required to
register under Rule 17f–1(c) will not be
kept confidential; however, the Lost and
Stolen Securities Program database will
be kept confidential. Please note that an
agency may not conduct or sponsor, and
a person is not required to respond to,
a collection of information unless it
displays a currently valid control
number.
Comments should be directed to (i)
the Desk Officer for the Securities and
Exchange Commission, Office of
Information and Regulatory Affairs,
Office of Management and Budget,
Room 10102, New Executive Office
Building, Washington, DC 20503 or by
sending an e-mail to:
David_Rostker@omb.eop.gov; and (ii) R.
Corey Booth, Director/Chief Information
Officer, Securities and Exchange
Commission, c/o Shirley Martinson,
6432 General Green Way, Alexandria,
Virginia 22312 or send an e-mail to:
PRA_Mailbox@sec.gov. Comments must
be submitted to OMB within 30 days of
this notice.
Dated: July 31, 2006
Nancy M. Morris,
Secretary.
[FR Doc. E6–12700 Filed 8–4–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54250; File No. SR–CBOE–
2005–93]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Order Granting Accelerated Approval
to a Proposed Rule Change and
Amendment No. 1 Thereto To Establish
a Quote Risk Monitor Mechanism and
To Define Continuous Quoting
July 31, 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 November
3, 2005, the Chicago Board Options
Exchange, Incorporated (‘‘CBOE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. On May 16, 2006, the
Exchange filed Amendment No. 1 to the
proposed rule change.3 The Commission
is publishing this notice to solicit
comments on the proposed rule change,
as amended, from interested persons. In
addition, the Commission is granting
accelerated approval of the proposed
rule change, as amended.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
CBOE proposes to adopt CBOE Rule
1.1(ccc) to define the nature of CBOE
Market-Makers’ continuous electronic
quoting obligations under the Exchange
rules. CBOE also proposes to adopt
CBOE Rule 8.18 to codify a description
of the Quote Risk Monitor (‘‘QRM’’)
Mechanism, which is a certain
functionality the Exchange offers CBOE
Market-Makers who have continuous
electronic quoting obligations under
Exchange rules for the Hybrid Trading
System and Hybrid 2.0 Platform
(‘‘Hybrid’’) to help them manage their
quotations. The text of the proposed
rule change, as amended, is below.
Proposed new language is in italics;
proposed deletions are in [brackets].
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Amendment No. 1, which replaced and
superseded the original filing in its entirety,
modified the proposed rule change to: (1) clarify the
nature of a CBOE Market-Maker’s obligation to
quote ‘‘continuously’’ in order to incorporate a
‘‘99% standard’’ applicable to electronic quotes;
and (2) provide that Hybrid Market-Makers are not
required to use the QRM Mechanism.
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44729
Rule 1.1. Definitions
When used in these Rules, unless the
context otherwise requires: (a)-(bbb) No
change.
Continuous Electronic Quotes
(ccc) With respect to a Market-Maker
who is obligated to provide continuous
electronic quotes on the Hybrid Trading
System or Hybrid 2.0 Platform (‘‘Hybrid
Market Maker’’), the Hybrid MarketMaker shall be deemed to have provided
‘‘continuous electronic quotes’’ if the
Hybrid Market-Maker provides
electronic two-sided quotes for 99% of
the time that the Hybrid Market-Maker
is required to provide electronic quotes
in an appointed option class on a given
trading day. If a technical failure or
limitation of a system of the Exchange
prevents the Hybrid Market-Maker from
maintaining, or prevents the Hybrid
Market-Maker from communicating to
the Exchange, timely and accurate
electronic quotes in a class, the duration
of such failure shall not be considered
in determining whether the Hybrid
Market-Maker has satisfied the 99%
quoting standard with respect to that
option class. The Exchange may
consider other exceptions to this
continuous electronic quote obligation
based on demonstrated legal or
regulatory requirements or other
mitigating circumstances.
*
*
*
*
*
Rule 8.7—Obligations of Market-Makers
(a)–(c) No change.
(d) Market Making Obligations in
Applicable Hybrid Classes
The following obligations in this
paragraph (d) are only applicable to
Market-Makers trading classes on the
CBOE Hybrid System and only in those
Hybrid classes. As such, this paragraph
has no applicability to non-Hybrid
classes. This paragraph is not applicable
to Remote Market-Makers, who instead
will be subject to the obligations
imposed by Rule 8.7(e). Unless
otherwise provided in this Rule, MarketMakers trading classes on the Hybrid
System remain subject to all obligations
imposed by CBOE Rule 8.7. To the
extent another obligation contained
elsewhere in Rule 8.7 is inconsistent
with an obligation contained in
paragraph (d) of Rule 8.7 with respect to
a class trading on Hybrid, this paragraph
(d) shall govern trading in the Hybrid
class.
These requirements are applicable on
a per class basis depending upon the
percentage of volume a Market-Maker
transacts electronically versus in open
outcry. With respect to making this
determination, the Exchange will
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monitor Market-Makers’ trading activity
every calendar quarter to determine
whether they exceed the thresholds
established in [this] paragraph (d)(i). If
a Market-Maker exceeds the threshold
established below, the obligations
contained in (d)(ii) will be effective the
next calendar quarter.
For a period of ninety (90) days
commencing immediately after a class
begins trading on the Hybrid system, the
provisions of paragraph (d)(i) shall
govern trading in that class.
(i) Market-Maker Trades [Less Than]
20% or Less Contract Volume
Electronically:
If a Market-Maker on the CBOE
Hybrid System never transacts more
than 20% (i.e., he trades 20% or less) of
his contract volume electronically in an
appointed Hybrid class during any
calendar quarter, the following
provisions shall apply to that MarketMaker with respect to that class:
(A) Quote Widths: With respect to
electronic quoting, the Market-Maker
will not be required to comply with the
quote width requirements of CBOE Rule
8.7(b)(iv) in that class. The effectiveness
of this subparagraph (i)(A) shall be in
effect in each Hybrid for a period of one
year commencing with the date the class
begins trading on the Hybrid System.
(B) Continuous Electronic Quoting
Obligation: The Market-Maker will not
be obligated to quote electronically in
any designated percentage of series
within that class. If a Market-Maker
quotes electronically, its undecremented
quote must be for at least ten contracts
(‘‘10-up’’), unless the underlying
primary market disseminates a 100share quote, in which case the MarketMaker’s undecremented quote may be
for as low as 1-contract (‘‘1-up’’). The
ability to quote 1-up when the
underlying primary quotes 100 shares is
expressly conditioned on the process
being automated (i.e., a Market-Maker
may not manually adjust his quotes to
reflect 1-up sizes). Quotes must
automatically return to at least 10-up
when the underlying primary market no
longer disseminates a 100-share quote.
Market-Makers that have not automated
this process may not avail themselves of
the relief provided herein. The ability to
quote 1-up shall operate on a pilot basis
and shall terminate February 17, 2006.
(C) Continuous Open Outcry Quoting
Obligation: In response to any request
for quote by a [floor broker or DPM
representing an order as agent] member
or PAR Official, Market-Makers must
provide a two-sided market complying
with the quote width requirements
contained in Rule 8.7(b)(iv) for a
minimum of ten contracts for non-
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broker-dealer orders and one contract
for broker-dealer orders.
(D) In-Person Quoting Requirement:
Any volume transacted electronically
will not count towards the MarketMaker’s in-person requirement
contained in Rule 8.7.03(B).
(ii) Market-Maker Trades More Than
20% Contract Volume Electronically:
If a Market-Maker on the CBOE
Hybrid System transacts more than 20%
of his contract volume electronically in
an appointed Hybrid class during any
calendar quarter, commencing the next
calendar quarter he will be subject to
the following quoting obligations in that
class for as long as he remains in that
class:
(A) Quote Widths: The Market-Maker
must comply with the quote width
requirements contained in Rule
8.7(b)(iv).
(B) Continuous Electronic Quoting
Obligation: A Market-Maker will be
required to maintain continuous
electronic [two-sided] quotes (as
defined in Rule 1.1(ccc)) [for at least ten
contracts (undecremented size)] in 60%
of the series of his/her appointed
class[es]. The initial size of a MarketMaker’s quote must be for at least ten
contracts (undecremented size). If the
underlying primary market disseminates
a 100-share quote, a Market-Maker’s
undecremented quote may be for as low
as 1-contract (‘‘1-up’’), however, this
ability is expressly conditioned on the
process being automated (i.e., a MarketMaker may not manually adjust his
quotes to reflect 1-up sizes). Quotes
must automatically return to at least 10up when the underlying primary market
no longer disseminates a 100-share
quote. Market-Makers that have not
automated this process may not avail
themselves of the relief provided herein.
The ability to quote 1-up shall operate
on a pilot basis and shall terminate
February 17, 2006.
(C) Continuous Open Outcry Quoting
Obligation: In response to any request
for quote by a [floor broker or DPM
representing an order as agent] member
or PAR Official, in-crowd MarketMakers must provide a two-sided
market complying with the current
quote width requirements contained in
Rule 8.7(b)(iv) for a minimum of ten
contracts for non-broker-dealer orders
and one contract for broker-dealer
orders.
(iii) The obligations and duties of
Market-Makers set forth in paragraphs
(d)(i) and (d)(ii) apply to a MarketMaker on a per class basis and only
when the Market-Maker is quoting in a
particular class on a given trading day
(e.g., if on a given trading day a MarketMaker is quoting in 1 of his/her 10
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appointed classes, the Market-Maker
has quote width, continuous electronic
quoting and, to the extent the MarketMaker is present in the trading crowd,
continuous open outcry quoting
obligations in that class; the continuous
electronic quoting obligation in
subparagraph (d)(ii)(B) applies to 60%
of the series of that class while the
Market-Maker is quoting). The
obligations and duties are not
applicable to an appointed class if a
Market-Maker is not quoting in that
appointed class.
(iv) A Market-Maker that is in the
trading crowd but that is not quoting
electronically or in open outcry in an
appointed class must provide an open
outcry two-sided market complying with
the current quote width requirements
contained in Rule 8.7(b)(iv) for a
minimum of ten contracts for nonbroker-dealer orders and one contract
for broker-dealer orders in response to a
request for quote by a member or PAR
Official directed at that Market-Maker
or when, in response to a general
request for a quote by a member of PAR
Official, a market is not then being
vocalized by a reasonable number of
Market-Makers. A Market-Maker may
also be called upon by an Exchange
official designated by the Board of
Directors to submit a single quote or
maintain continuous quotes in one or
more series of a class to which the
Market-Maker is appointed whenever, in
the judgment of such official, it is
necessary to do so in the interest of
maintaining a fair and orderly market.
(e) Obligations of Remote MarketMakers (RMMs): The following
obligations apply only to RMMs:
(i) An RMM[s] must provide legalwidth, continuous [two-sided, legalwidth quotations] electronic quotes (as
defined in Rule 1.1(ccc)) in 60% of the
series of [their] its appointed class[es].
The initial size of an RMM’s quote must
be for at least ten contracts
(undecremented size). [The Exchange
may consider exceptions to this quoting
requirement based on demonstrated
legal or regulatory requirements or other
mitigating circumstances (e.g., excused
leaves of absence, personal emergencies,
or equipment problems).] If the
underlying primary market disseminates
a 100-share quote, an RMM’s
undecremented quote may be for as low
as 1-contract (‘‘1-up’’), however, this
ability is expressly conditioned on the
process being automated (i.e., an RMM
may not manually adjust its quotes to
reflect 1-up sizes). Quotes must
automatically return to at least 10-up
when the underlying primary market no
longer disseminates a 100-share quote.
RMMs that have not automated this
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process may not avail themselves of the
relief provided herein. The ability to
quote 1-up shall operate on a pilot basis
and shall terminate February 17, 2006.
The obligations and duties of an RMM
set forth in this paragraph (e)(i) apply to
an RMM on a per class basis and only
when the RMM is logged on to the CBOE
Hybrid system and quoting
electronically in a particular class on a
given trading day (e.g., if on a given
trading day an RMM is logged in and
quoting electronically in 1 of its 10
appointed classes, the RMM has quote
width and continuous electronic quoting
obligations in that class; the continuous
electronic quoting obligation applies to
60% of the series of that class while the
RMM is logged on to the CBOE Hybrid
system and quoting electronically in
that class). The obligations and duties
are not applicable to an appointed class
if an RMM is not logged in and quoting
electronically in that appointed class.
(ii) An RMM may be called upon by
an Exchange official designated by the
Board of Directors to submit a single
electronic quote or maintain continuous
electronic quotes in one or more series
of a class to which the RMM is
appointed whenever, in the judgment of
such official, it is necessary to do so in
the interest of maintaining a fair and
orderly market.
(iii)–(vi) No change.
* * * Interpretations and Policies:
.01–.13 No change.
*
*
*
*
*
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Rule 8.13. Preferred Market-Maker
Program
(a) No change.
(b) Eligibility. Any Exchange MarketMaker type (e.g. Remote Market-Maker,
Lead Market-Maker, and Designated
Primary Market-Maker) may be
designated as a Preferred Market-Maker,
however, a recipient of a Preferred
Market-Maker order will only receive a
participation entitlement for such order
if the following provisions are met:
(i)–(ii) No change.
(iii) The Preferred Market-Maker must
comply with the quoting obligations
applicable to its Market-Maker type
under Exchange rules and must provide
continuous [two-sided quotations]
electronic quotes (as defined in Rule
1.1(ccc)) in at least 90% of the series of
each class for which it receives
Preferred Market-Maker orders.
(c) No change.
*
*
*
*
*
Rule 8.15A. Lead Market-Makers in
Hybrid Classes
(a) No change.
(b) LMM Obligations: LMMs are
required to:
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(i) provide continuous [market
quotations] electronic quotes (as defined
in Rule 1.1(ccc)) that comply with the
bid/ask differentials permitted by Rule
8.7(b) in 90% of the option series within
their assigned classes;
(ii)–(vi) No change.
*
*
*
*
*
Rule 8.18. Quote Risk Monitor
Mechanism
Each Market-Maker who is obligated
to provide and maintain continuous
electronic quotes (as defined in Rule
1.1(ccc)) in an option class traded on
the Hybrid Trading System or the
Hybrid 2.0 Platform (‘‘Hybrid MarketMaker’’) may establish parameters by
which the Exchange will activate the
Quote Risk Monitor (‘‘QRM’’)
Mechanism. Hybrid Market-Makers that
use the QRM Mechanism shall specify,
for each such option class in which the
Hybrid Market-Maker is engaged in
trading, a maximum number of
contracts for such option class (the
‘‘Contract Limit’’) and a rolling time
period in seconds within which such
Contract Limit is to be measured (the
‘‘Measurement Interval’’). When the
Exchange determines that the Hybrid
Market-Maker has traded more than the
Contract Limit for such option class
during any rolling Measurement
Interval, the QRM Mechanism shall
cancel all electronic quotes that are
being disseminated with respect to that
Hybrid Market-Maker in that option
class until the Hybrid Market-Maker
refreshes those electronic quotes.
*
*
*
*
*
Rule 8.85. DPM Obligations
(a) Dealer Transactions. Each DPM
shall fulfill all of the obligations of a
Market-Maker under the Rules, and
shall satisfy each of the following
requirements in respect of each of the
securities allocated to the DPM. To the
extent that there is any inconsistency
between the specific obligations of a
DPM set forth in subparagraphs (a)(i)
through (a)(xi) of this Rule and the
general obligations of a Market-Maker
under the Rules, subparagraphs (a)(i)
through (a)(xi) of this Rule shall govern.
Each DPM shall:
(i) provide continuous [market
quotations] electronic quotes (as defined
in Rule 1.1(ccc)) for each class and
series allocated to it and assure that its
disseminated market quotations are
accurate;
(ii)–(xii) No change.
(b)–(e) No change.
* * * Interpretations and Policies:
.01–.03 No change.
*
*
*
*
*
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44731
Rule 8.93. e-DPM Obligations
Each e-DPM shall fulfill all of the
obligations of a Market-Maker and of a
DPM under the Rules (except those
contained in Rules 8.85(a)(i),(iv),(v) and
(vii)–(x), 8.85(b), 8.85(c)(i) and (v), and
8.85(e)), and shall satisfy each of the
following requirements:
(i) provide continuous [two-sided
quotations] electronic quotes (as defined
in Rule 1.1(ccc)) in at least 90% of the
series of each allocated class, or
alternatively, respond to 98% of
Requests for Quotes (RFQs) if RFQ
functionality is enabled as determined
by the Exchange;
(ii)–(xi) 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 had received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item III below. 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
Proposed CBOE Rule 1.1(ccc)
The purpose of the proposed change
to CBOE Rule 1.1 is to define the nature
of a CBOE Market-Maker’s obligation to
provide ‘‘continuous’’ electronic quotes
in an option class traded on Hybrid.
This continuous electronic quoting
obligation is contained in various CBOE
rules—including CBOE Rules
8.7(d)(ii)(B), 8.7(e), 8.13(b)(iii),
8.14(b)(2), 8.15A(b)(i), 8.85(a)(i), and
8.93(i)—and these rules in turn
prescribe the percentage of the series of
an option class with respect to which
specified types of Market-Makers
(‘‘Hybrid Market-Makers’’) have an
obligation to provide continuous
electronic quotes.
Proposed CBOE Rule 1.1(ccc) will
provide that a Hybrid Market-Maker
satisfies the continuous electronic
quoting obligation by providing
electronic quotes for 99% of the time
that the Hybrid Market-Maker is
obligated to provide electronic quotes in
an appointed option class on a given
trading day. Proposed CBOE Rule
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1.1(ccc) recognizes that there is always
an interval between successive
electronic quotes and that ‘‘continuous’’
electronic quoting cannot literally
preclude all gaps in electronic quoting.
In addition, gaps in electronic quoting
are expected in certain circumstances.
For instance, a Hybrid Market-Maker
requires time to repost electronic quotes
either after the quantity associated with
an electronic quote has been exhausted
by trades done at the quoted price or
after electronic quotes have been
canceled pursuant to the Quote Risk
Monitor covered by proposed CBOE
Rule 8.18.
In applying the proposed definition,
the Exchange notes that the duration of
a Hybrid Market-Maker’s continuous
electronic quoting obligation, and the
percentage of series to which that
obligation applies, varies depending on
the particular type of Market-Maker. For
instance, the Exchange rules impose a
continuous electronic quoting obligation
for the time the Exchange is open for
trading in 100% of the series in each of
a Designated Primary Market-Maker’s
(‘‘DPM’’) appointed classes, in 90% of
the series in each of an Electronic
DPM’s (‘‘e-DPM’’) appointed classes,
and in 90% of the series in each of a
Lead Market-Maker’s (‘‘LMM’’)
appointed classes. The Exchange thus
believes that these types of MarketMakers should be deemed to have
provided continuous electronic quotes
with respect to the applicable
percentage of series in an option class
if the respective DPM, e-DPM, or LMM
has provided electronic quotes for 99%
of the time that the Exchange is open for
trading in that option class on a given
trading day. The Exchange rules also
impose a continuous electronic quoting
obligation in 60% of the series in the
respective Market-Maker’s or Remote
Market-Maker’s (‘‘RMM’’) appointed
class which applies only during the
time the Market-Maker is quoting in the
class or the RMM is logged onto Hybrid
and quoting in that class. The Exchange
thus believes that these two types of
Market-Makers should be deemed to
have provided continuous electronic
quotes with respect to the applicable
percentage of series in an option class
if the respective Market-Maker or RMM
has provided electronic quotes for 99%
of the time that he is quoting in the class
(in the case of a Market-Maker) or
logged into Hybrid and quoting in that
option class (in the case of an RMM) on
a given trading day. Consequently, in
calculating compliance with CBOE Rule
1.1(ccc), any time interval during which
the Market-Maker or RMM has ceased
quoting in that option class (e.g., while
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taking breaks, during lunch or upon
ceasing trading for the day) would not
be considered.
The Exchange believes that the 99%
standard sets an appropriately high
threshold for continuous electronic
quoting, while also recognizing the
circumstances under which a Hybrid
Market-Maker may require a brief time
interval in order to post new electronic
quotes. This 99% standard is similar to
one contained in a rule submitted by the
Pacific Exchange, Inc. (‘‘PCX’’) and
approved by the Commission.4
The Exchange does not believe that a
Hybrid Market-Maker has failed to quote
continuously if Exchange technical
problems prevent electronic quotes from
being provided. Accordingly, if a
technical failure or limitation in an
Exchange system prevents a Hybrid
Market-Maker from maintaining, or
communicating to the Exchange, timely
and accurate electronic quotes,
proposed CBOE Rule 1.1(ccc) would
exclude the duration of that technical
failure or limitation in determining
whether the Hybrid Market-Maker has
satisfied the 99% continuous electronic
quote obligation with respect to that
option class.
Proposed CBOE Rule 1.1(ccc) will
also provide that the Exchange may
consider other exceptions to the
continuous electronic quote obligation
based on demonstrated legal or
regulatory requirements or other
mitigating circumstances.5 This
provision is the same as an existing
provision with respect to continuous
electronic quoting obligations of RMMs
contained in CBOE Rule 8.7(e). The
Exchange believes it is appropriate to
apply the same considerations to all
Hybrid Market-Makers with continuous
electronic quoting obligations and
including this provision within the text
of proposed CBOE Rule 1.1(ccc)
accordingly reflects that principle. The
Exchange is also proposing to amend
various rules to include cross-references
to the definition of ‘‘continuous
electronic quotes’’ contained in
proposed CBOE Rule 1.1(ccc). The
4 See Securities Exchange Act Release No. 51740
(May 25, 2005), 70 FR 32686 (June 3, 2005) (SR–
PCX–2005–64) (notice of filing and order granting
accelerated approval to SR–PCX–2005–64).
5 Mitigating circumstances that may be
considered by the Exchange may include, but is not
limited to, instances where a technical failure or
limitation in a Hybrid Market-Maker’s system
prevents the Hybrid Market-Maker from
maintaining, or communicating to the Exchange,
timely and accurate electronic quotes. However, a
pattern or practice of technical failures or
limitations, or the excessive frequency of technical
failures or limitations, may also be considered by
the Exchange in determining whether to except the
period of time from the continuous electronic
quoting requirements.
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Exchange will conduct regulatory
surveillance for compliance with the
99% continuous electronic quote
requirement set forth in CBOE Rule
1.1(ccc).
The Exchange is proposing various
clarifying changes to CBOE Rule 8.7
respecting Market-Maker and RMM
quoting obligations in order to clarify
the intent and application of the rule
that the continuous electronic quoting
obligations apply on a per class basis
and only during the time the respective
Market-Maker is quoting or respective
RMM is logged onto Hybrid and
quoting, and to clarify certain open
outcry quoting obligations. First, the
changes make clear that obligations and
duties of Market-Makers, as set forth in
paragraph (d) of CBOE Rule 8.7, apply
to a Market-Maker on a per class basis
and only when the Market-Maker is
quoting in a particular class on a given
trading day (e.g., if on a given trading
day a Market-Maker is quoting in 1 of
his 10 appointed classes, the MarketMaker has quote width, continuous
electronic quoting and, to the extent the
Market-Maker is present in the trading
crowd, continuous open outcry quoting
obligations in that 1 class; the
continuous electronic quoting obligation
applies in 60% of the series of that class
while the Market-Maker is quoting in
that class). The obligations and duties
are not applicable to an appointed class
if a Market-Maker is not quoting in an
appointed class. The clarifications also
make clear that, under certain
circumstances, a Market-Maker present
in the trading crowd may still be
obligated to provide a quote in an
appointed class that he is not currently
quoting in electronically or in open
outcry. Specifically, a Market-Maker in
the trading crowd must provide an open
outcry two-sided market complying
with the Exchange rules on quote width
and size in response to a request for
quote directed at that Market-Maker or
when, in response to a general request
for a quote, a market is not then being
vocalized in that series by a reasonable
number of Market-Makers. These
obligations are derived from CBOE Rule
8.7(b), which describes various
conditions that trigger a Market-Maker’s
duty to verbalize a market in a
particular option series. In addition, a
Market-Maker may also be called upon
by an Exchange official designated by
the Board of Directors to submit a single
quote or maintain continuous quotes in
one or more series of a class to which
the Market-Maker is appointed
whenever, in the judgment of such
official, it is necessary to do so in the
interest of maintaining a fair and orderly
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market. This Exchange official provision
is parallel to language that is already
provided in paragraph (e) for RMMs.
Second, the changes make clear the
obligations and duties of RMMs, as set
forth in paragraph (e) of CBOE Rule 8.7,
apply to an RMM on a per class basis
and only when the RMM is logged on
to the CBOE Hybrid system and quoting
in a particular class on a given trading
day (e.g., if on a given trading day an
RMM is logged in and quoting in 1 of
its 10 appointed classes, the RMM has
quote width and continuous electronic
quoting obligations in that 1 class; the
continuous electronic quoting obligation
applies in 60% of the series of that class
while the RMM is logged in and quoting
in that class). The obligations and duties
are not applicable to an appointed class
if an RMM is not logged in and quoting
in that appointed class. Clarifying
language proposed to be added to
paragraph (e) make clear these
obligations and duties of RMMs.
Finally, the Exchange is proposing to
amend the text in paragraphs (d)(i)(C)
and (d)(ii)(C) of CBOE Rule 8.7, which
pertains to the continuous open outcry
quoting obligation of Market-Makers.
The revised text will provide that the
open outcry quoting obligation is
triggered in response to a request for
quote by a member or Exchange PAR
Official. As currently written, the
obligation is only triggered in response
to a request for quote from a floor broker
or a DPM representing an order as agent,
the later of which is an outdated
reference because DPMs no longer
perform an agency function.6
Proposed CBOE Rule 8.18
Through this rule change, the
Exchange is also seeking to codify in its
rules a service CBOE offers Hybrid
Market-Makers to help them manage
their quotations. As discussed above,
CBOE Rules require Hybrid MarketMakers to maintain continuous
electronic quotes. To comply with this
requirement, each Hybrid Market-Maker
can employ its own proprietary
quotation and risk management systems
to determine the prices and sizes at
which it quotes. In addition, Hybrid also
has the QRM Mechanism, which is
designed to help Hybrid Market-Makers
manage their quotations in related
option series.
A Hybrid Market-Maker’s risk in an
options class is not limited to the risk
in a single series of that class. Rather, a
Hybrid Market-Maker typically is active
6 See Securities Exchange Act Release No. 52798
(November 18, 2005), 70 FR 71344 (November 28,
2005) (order approving amendments relating to the
removal of agency responsibilities from DPMs and
the establishment of PAR Officials).
VerDate Aug<31>2005
17:19 Aug 04, 2006
Jkt 208001
in quoting in multiple option classes,
and each such option class can
comprise dozens of individual option
series. Under the Hybrid systems, trades
are automatically effected against the
Hybrid Market-Maker’s then current
quote. As a result, a Hybrid MarketMaker faces exposure in all series of a
class, requiring that the Hybrid MarketMaker off-set or otherwise hedge its
overall position in a class. The QRM
functionality described in Proposed
CBOE Rule 8.18 helps Hybrid MarketMakers limit this overall exposure and
risk. Specifically, the functionality
permits a Hybrid Market-Maker to
establish parameters in the Hybrid to
cancel its electronic quotes in all series
of an option class until the Hybrid
Market-Maker refreshes those electronic
quotes.
Under proposed CBOE Rule 8.18,
each Hybrid Market-Maker that elect to
use the functionality would be required
to specify two parameters that the QRM
Mechanism would use to determine
when that Hybrid Market-Maker’s
quotes should be cancelled. In
particular, each Hybrid Market-Maker is
required to specify a maximum number
of contracts for each option class (the
‘‘Contract Limit’’) and a rolling time
period in seconds during which such
Contract Limit is to be measured (the
‘‘Measurement Interval’’).
When the QRM Mechanism
determines that the Hybrid MarketMaker has traded more than the
Contract Limit for any option class
during any rolling Measurement
Interval, the QRM Mechanism
automatically cancels all of the Hybrid
Market-Maker’s quotes in any series of
that option class. By limiting its
exposure across series, a Hybrid MarketMaker is better able to quote
aggressively in an option, knowing that
the QRM Mechanism will automatically
cancel all its quotations in a class when
its exposure limit it hit.
The Exchange notes that the proposed
rule would not relieve a Hybrid MarketMaker of its obligations to provide
continuous electronic quotes under the
Exchange rules nor to provide ‘‘firm’’
quotes pursuant to the requirements of
CBOE Rule 8.51.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with Section
6(b) of the Act,7 in general, and furthers
the objectives of Section 6(b)(5) of the
Act,8 in particular, in that it is designed
to promote just and equitable principles
of trade, to remove impediments to and
7 15
8 15
PO 00000
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00129
Fmt 4703
Sfmt 4703
44733
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 would 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 either
solicited or received with respect to the
proposed rule change.
III. 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–2005–93 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–2005–93. 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
E:\FR\FM\07AUN1.SGM
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available for inspection and copying at
the principal office of 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 publicly available. All
submissions should refer to File
Number SR–CBOE–2005–93 and should
be submitted on or before August 28,
2006.
sroberts on PROD1PC70 with NOTICES
IV. Commission’s Findings and Order
Granting Accelerated Approval of
Proposed Rule Change
After careful review, the Commission
finds that the proposed rule change, as
amended, is consistent with the
requirements of the Act and the rules
and regulations thereunder, applicable
to a national securities exchange.9 In
particular, the Commission believes that
the proposed rule change is consistent
with Section 6(b)(5) of the Act,10 which
requires among other things, that the
rules of the Exchange are 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.
The Commission believes that the
proposed QRM Mechanism should
provide Hybrid Market-Makers
assistance in effectively managing its
quotations. In conjunction with the
implementation of the QRM
Mechanism, CBOE proposes to define
the nature of Hybrid Market-Makers’
continuous electronic quoting
obligations under its rules. The
Commission believes that it is
consistent with the Act to allow CBOE
to define ‘‘continuous electronic
quotes’’ as providing electronic twosided quotes for 99% of the time that
the Hybrid Market-Maker is required to
provide electronic quotes in an
appointed option class on a given
trading day. The Commission notes that
when the QRM Mechanism is triggered
for an option class it will automatically
cancel all of the Hybrid Market-Maker’s
quotes in any series of that option class.
The Commission believes that the
proposed definition of ‘‘continuous
electronic quotes’’ should provide a
Hybrid Market-Maker a brief amount of
time to update its quotes after the QRM
Mechanism has canceled its quotes in
an option class.
9 In
approving this proposal, the Commission has
considered its impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
10 15 U.S.C. 78f(b)(5).
VerDate Aug<31>2005
17:19 Aug 04, 2006
Jkt 208001
In addition, CBOE proposes certain
clarifying changes to CBOE Rule 8.7
regarding Market-Maker and RMM
quoting obligations. Specifically, CBOE
proposes to clarify the intent and
application of the rule that the
continuous electronic quoting
obligations apply on a per class basis
and only during the time the respective
Market-Maker is quoting or respective
RMM is logged onto Hybrid and
quoting, and to clarify certain open
outcry quoting obligations. The
Commission believes that these
clarifying changes are appropriate and
consistent with the Act.
The Commission notes that the
proposal does not alter the obligations
of Hybrid Market-Makers, except for the
fact that it will specifically define what
it means to provide continuous
electronic quotes. The Commission also
notes that CBOE has represented that it
will conduct routine surveillance for
Hybrid Market-Maker compliance with
the 99% standard for continuous
electronic quotes set forth in CBOE Rule
1.1(ccc).
CBOE has requested that the
Commission find good cause for
approving the proposed rule change
prior to the thirtieth day after
publication of notice thereof in the
Federal Register. The Commission notes
that similar proposals to provide
protection from risk for market makers
have been approved for other options
exchanges.11 The Commission believes
that granting accelerated approval of the
proposal should allow Hybrid MarketMakers to have similar protections from
the risk associated with an excessive
number of near simultaneous executions
in a single options class. Accordingly,
the Commission finds good cause,
pursuant to Section 19(b)(2) of the
Act,12 for approving the proposed rule
change, as amended, prior to the
thirtieth day after the date of
publication of notice thereof in the
Federal Register.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,13 that the
proposed rule change (SR–CBOE–2005–
93) and Amendment No. 1 thereto be,
11 See Securities Exchange Act Release Nos.
51049 (January 18, 2005), 70 FR 3756 (January 26,
2005) (SR–BSE–2004–52); 51050 (January 18, 2005),
70 FR 3758 (January 26, 2005) (SR–ISE–2004–31);
51740 (May 25, 2005), 70 FR 32686 (June 3, 2005)
(SR–PCX–2005–64); 53148 (January 19, 2006), 71
FR 4386 (January 26, 2006) (SR–Amex–2005–131);
and 53166 (January 23, 2006), 71 FR 4625 (January
27, 2006) (SR–Phlx–2006–05).
12 15 U.S.C. 78s(b)(2).
13 15 U.S.C. 78s(b)(2).
PO 00000
Frm 00130
Fmt 4703
Sfmt 4703
and hereby are, approved on an
accelerated basis.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.14
Nancy M. Morris,
Secretary.
[FR Doc. E6–12740 Filed 8–4–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54253; File No. SR–
NASDAQ–2006–018]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change Regarding
Technical and Conforming Changes to
Nasdaq’s 2000 and 3000 Series Rules
July 31, 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 July 25,
2006, The NASDAQ Stock Market LLC
(‘‘Exchange’’ or ‘‘Nasdaq’’), 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 Nasdaq. Nasdaq has
filed this proposed rule change as a
‘‘non-controversial’’ rule change
pursuant to Section 19(b)(3)(A)(iii) 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
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
Nasdaq proposes to conform the Rule
2000 and 3000 Series of Nasdaq’s rules
to certain changes made to the Rule
2000 and 3000 Series of the rules of
National Association of Securities
Dealers, Inc. (‘‘NASD’’) since approval
of Nasdaq’s rules by the Commission in
January 2006, to make several minor
modifications, and to correct certain
typographical errors in the approved
rules. Nasdaq proposes to implement
the proposed rule change immediately.
The text of the proposed rule change
is included below. Proposed new
14 17
CFR 200.30–3(a)(12).
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).
1 15
E:\FR\FM\07AUN1.SGM
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]]>Agencies
[Federal Register Volume 71, Number 151 (Monday, August 7, 2006)]
[Notices]
[Pages 44729-44734]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-12740]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54250; File No. SR-CBOE-2005-93]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Order Granting Accelerated Approval
to a Proposed Rule Change and Amendment No. 1 Thereto To Establish a
Quote Risk Monitor Mechanism and To Define Continuous Quoting
July 31, 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 November 3, 2005, the Chicago Board Options Exchange, Incorporated
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
On May 16, 2006, the Exchange filed Amendment No. 1 to the proposed
rule change.\3\ The Commission is publishing this notice to solicit
comments on the proposed rule change, as amended, from interested
persons. In addition, the Commission is granting accelerated approval
of the proposed rule change, as amended.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1, which replaced and superseded the original
filing in its entirety, modified the proposed rule change to: (1)
clarify the nature of a CBOE Market-Maker's obligation to quote
``continuously'' in order to incorporate a ``99% standard''
applicable to electronic quotes; and (2) provide that Hybrid Market-
Makers are not required to use the QRM Mechanism.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
CBOE proposes to adopt CBOE Rule 1.1(ccc) to define the nature of
CBOE Market-Makers' continuous electronic quoting obligations under the
Exchange rules. CBOE also proposes to adopt CBOE Rule 8.18 to codify a
description of the Quote Risk Monitor (``QRM'') Mechanism, which is a
certain functionality the Exchange offers CBOE Market-Makers who have
continuous electronic quoting obligations under Exchange rules for the
Hybrid Trading System and Hybrid 2.0 Platform (``Hybrid'') to help them
manage their quotations. The text of the proposed rule change, as
amended, is below. Proposed new language is in italics; proposed
deletions are in [brackets].
Rule 1.1. Definitions
When used in these Rules, unless the context otherwise requires:
(a)-(bbb) No change.
Continuous Electronic Quotes
(ccc) With respect to a Market-Maker who is obligated to provide
continuous electronic quotes on the Hybrid Trading System or Hybrid 2.0
Platform (``Hybrid Market Maker''), the Hybrid Market-Maker shall be
deemed to have provided ``continuous electronic quotes'' if the Hybrid
Market-Maker provides electronic two-sided quotes for 99% of the time
that the Hybrid Market-Maker is required to provide electronic quotes
in an appointed option class on a given trading day. If a technical
failure or limitation of a system of the Exchange prevents the Hybrid
Market-Maker from maintaining, or prevents the Hybrid Market-Maker from
communicating to the Exchange, timely and accurate electronic quotes in
a class, the duration of such failure shall not be considered in
determining whether the Hybrid Market-Maker has satisfied the 99%
quoting standard with respect to that option class. The Exchange may
consider other exceptions to this continuous electronic quote
obligation based on demonstrated legal or regulatory requirements or
other mitigating circumstances.
* * * * *
Rule 8.7--Obligations of Market-Makers
(a)-(c) No change.
(d) Market Making Obligations in Applicable Hybrid Classes
The following obligations in this paragraph (d) are only applicable
to Market-Makers trading classes on the CBOE Hybrid System and only in
those Hybrid classes. As such, this paragraph has no applicability to
non-Hybrid classes. This paragraph is not applicable to Remote Market-
Makers, who instead will be subject to the obligations imposed by Rule
8.7(e). Unless otherwise provided in this Rule, Market-Makers trading
classes on the Hybrid System remain subject to all obligations imposed
by CBOE Rule 8.7. To the extent another obligation contained elsewhere
in Rule 8.7 is inconsistent with an obligation contained in paragraph
(d) of Rule 8.7 with respect to a class trading on Hybrid, this
paragraph (d) shall govern trading in the Hybrid class.
These requirements are applicable on a per class basis depending
upon the percentage of volume a Market-Maker transacts electronically
versus in open outcry. With respect to making this determination, the
Exchange will
[[Page 44730]]
monitor Market-Makers' trading activity every calendar quarter to
determine whether they exceed the thresholds established in [this]
paragraph (d)(i). If a Market-Maker exceeds the threshold established
below, the obligations contained in (d)(ii) will be effective the next
calendar quarter.
For a period of ninety (90) days commencing immediately after a
class begins trading on the Hybrid system, the provisions of paragraph
(d)(i) shall govern trading in that class.
(i) Market-Maker Trades [Less Than] 20% or Less Contract Volume
Electronically:
If a Market-Maker on the CBOE Hybrid System never transacts more
than 20% (i.e., he trades 20% or less) of his contract volume
electronically in an appointed Hybrid class during any calendar
quarter, the following provisions shall apply to that Market-Maker with
respect to that class:
(A) Quote Widths: With respect to electronic quoting, the Market-
Maker will not be required to comply with the quote width requirements
of CBOE Rule 8.7(b)(iv) in that class. The effectiveness of this
subparagraph (i)(A) shall be in effect in each Hybrid for a period of
one year commencing with the date the class begins trading on the
Hybrid System.
(B) Continuous Electronic Quoting Obligation: The Market-Maker will
not be obligated to quote electronically in any designated percentage
of series within that class. If a Market-Maker quotes electronically,
its undecremented quote must be for at least ten contracts (``10-up''),
unless the underlying primary market disseminates a 100-share quote, in
which case the Market-Maker's undecremented quote may be for as low as
1-contract (``1-up''). The ability to quote 1-up when the underlying
primary quotes 100 shares is expressly conditioned on the process being
automated (i.e., a Market-Maker may not manually adjust his quotes to
reflect 1-up sizes). Quotes must automatically return to at least 10-up
when the underlying primary market no longer disseminates a 100-share
quote. Market-Makers that have not automated this process may not avail
themselves of the relief provided herein. The ability to quote 1-up
shall operate on a pilot basis and shall terminate February 17, 2006.
(C) Continuous Open Outcry Quoting Obligation: In response to any
request for quote by a [floor broker or DPM representing an order as
agent] member or PAR Official, Market-Makers must provide a two-sided
market complying with the quote width requirements contained in Rule
8.7(b)(iv) for a minimum of ten contracts for non-broker-dealer orders
and one contract for broker-dealer orders.
(D) In-Person Quoting Requirement: Any volume transacted
electronically will not count towards the Market-Maker's in-person
requirement contained in Rule 8.7.03(B).
(ii) Market-Maker Trades More Than 20% Contract Volume
Electronically:
If a Market-Maker on the CBOE Hybrid System transacts more than 20%
of his contract volume electronically in an appointed Hybrid class
during any calendar quarter, commencing the next calendar quarter he
will be subject to the following quoting obligations in that class for
as long as he remains in that class:
(A) Quote Widths: The Market-Maker must comply with the quote width
requirements contained in Rule 8.7(b)(iv).
(B) Continuous Electronic Quoting Obligation: A Market-Maker will
be required to maintain continuous electronic [two-sided] quotes (as
defined in Rule 1.1(ccc)) [for at least ten contracts (undecremented
size)] in 60% of the series of his/her appointed class[es]. The initial
size of a Market-Maker's quote must be for at least ten contracts
(undecremented size). If the underlying primary market disseminates a
100-share quote, a Market-Maker's undecremented quote may be for as low
as 1-contract (``1-up''), however, this ability is expressly
conditioned on the process being automated (i.e., a Market-Maker may
not manually adjust his quotes to reflect 1-up sizes). Quotes must
automatically return to at least 10-up when the underlying primary
market no longer disseminates a 100-share quote. Market-Makers that
have not automated this process may not avail themselves of the relief
provided herein. The ability to quote 1-up shall operate on a pilot
basis and shall terminate February 17, 2006.
(C) Continuous Open Outcry Quoting Obligation: In response to any
request for quote by a [floor broker or DPM representing an order as
agent] member or PAR Official, in-crowd Market-Makers must provide a
two-sided market complying with the current quote width requirements
contained in Rule 8.7(b)(iv) for a minimum of ten contracts for non-
broker-dealer orders and one contract for broker-dealer orders.
(iii) The obligations and duties of Market-Makers set forth in
paragraphs (d)(i) and (d)(ii) apply to a Market-Maker on a per class
basis and only when the Market-Maker is quoting in a particular class
on a given trading day (e.g., if on a given trading day a Market-Maker
is quoting in 1 of his/her 10 appointed classes, the Market-Maker has
quote width, continuous electronic quoting and, to the extent the
Market-Maker is present in the trading crowd, continuous open outcry
quoting obligations in that class; the continuous electronic quoting
obligation in subparagraph (d)(ii)(B) applies to 60% of the series of
that class while the Market-Maker is quoting). The obligations and
duties are not applicable to an appointed class if a Market-Maker is
not quoting in that appointed class.
(iv) A Market-Maker that is in the trading crowd but that is not
quoting electronically or in open outcry in an appointed class must
provide an open outcry two-sided market complying with the current
quote width requirements contained in Rule 8.7(b)(iv) for a minimum of
ten contracts for non-broker-dealer orders and one contract for broker-
dealer orders in response to a request for quote by a member or PAR
Official directed at that Market-Maker or when, in response to a
general request for a quote by a member of PAR Official, a market is
not then being vocalized by a reasonable number of Market-Makers. A
Market-Maker may also be called upon by an Exchange official designated
by the Board of Directors to submit a single quote or maintain
continuous quotes in one or more series of a class to which the Market-
Maker is appointed whenever, in the judgment of such official, it is
necessary to do so in the interest of maintaining a fair and orderly
market.
(e) Obligations of Remote Market-Makers (RMMs): The following
obligations apply only to RMMs:
(i) An RMM[s] must provide legal-width, continuous [two-sided,
legal-width quotations] electronic quotes (as defined in Rule 1.1(ccc))
in 60% of the series of [their] its appointed class[es]. The initial
size of an RMM's quote must be for at least ten contracts
(undecremented size). [The Exchange may consider exceptions to this
quoting requirement based on demonstrated legal or regulatory
requirements or other mitigating circumstances (e.g., excused leaves of
absence, personal emergencies, or equipment problems).] If the
underlying primary market disseminates a 100-share quote, an RMM's
undecremented quote may be for as low as 1-contract (``1-up''),
however, this ability is expressly conditioned on the process being
automated (i.e., an RMM may not manually adjust its quotes to reflect
1-up sizes). Quotes must automatically return to at least 10-up when
the underlying primary market no longer disseminates a 100-share quote.
RMMs that have not automated this
[[Page 44731]]
process may not avail themselves of the relief provided herein. The
ability to quote 1-up shall operate on a pilot basis and shall
terminate February 17, 2006.
The obligations and duties of an RMM set forth in this paragraph
(e)(i) apply to an RMM on a per class basis and only when the RMM is
logged on to the CBOE Hybrid system and quoting electronically in a
particular class on a given trading day (e.g., if on a given trading
day an RMM is logged in and quoting electronically in 1 of its 10
appointed classes, the RMM has quote width and continuous electronic
quoting obligations in that class; the continuous electronic quoting
obligation applies to 60% of the series of that class while the RMM is
logged on to the CBOE Hybrid system and quoting electronically in that
class). The obligations and duties are not applicable to an appointed
class if an RMM is not logged in and quoting electronically in that
appointed class.
(ii) An RMM may be called upon by an Exchange official designated
by the Board of Directors to submit a single electronic quote or
maintain continuous electronic quotes in one or more series of a class
to which the RMM is appointed whenever, in the judgment of such
official, it is necessary to do so in the interest of maintaining a
fair and orderly market.
(iii)-(vi) No change.
* * * Interpretations and Policies:
.01-.13 No change.
* * * * *
Rule 8.13. Preferred Market-Maker Program
(a) No change.
(b) Eligibility. Any Exchange Market-Maker type (e.g. Remote
Market-Maker, Lead Market-Maker, and Designated Primary Market-Maker)
may be designated as a Preferred Market-Maker, however, a recipient of
a Preferred Market-Maker order will only receive a participation
entitlement for such order if the following provisions are met:
(i)-(ii) No change.
(iii) The Preferred Market-Maker must comply with the quoting
obligations applicable to its Market-Maker type under Exchange rules
and must provide continuous [two-sided quotations] electronic quotes
(as defined in Rule 1.1(ccc)) in at least 90% of the series of each
class for which it receives Preferred Market-Maker orders.
(c) No change.
* * * * *
Rule 8.15A. Lead Market-Makers in Hybrid Classes
(a) No change.
(b) LMM Obligations: LMMs are required to:
(i) provide continuous [market quotations] electronic quotes (as
defined in Rule 1.1(ccc)) that comply with the bid/ask differentials
permitted by Rule 8.7(b) in 90% of the option series within their
assigned classes;
(ii)-(vi) No change.
* * * * *
Rule 8.18. Quote Risk Monitor Mechanism
Each Market-Maker who is obligated to provide and maintain
continuous electronic quotes (as defined in Rule 1.1(ccc)) in an option
class traded on the Hybrid Trading System or the Hybrid 2.0 Platform
(``Hybrid Market-Maker'') may establish parameters by which the
Exchange will activate the Quote Risk Monitor (``QRM'') Mechanism.
Hybrid Market-Makers that use the QRM Mechanism shall specify, for each
such option class in which the Hybrid Market-Maker is engaged in
trading, a maximum number of contracts for such option class (the
``Contract Limit'') and a rolling time period in seconds within which
such Contract Limit is to be measured (the ``Measurement Interval'').
When the Exchange determines that the Hybrid Market-Maker has traded
more than the Contract Limit for such option class during any rolling
Measurement Interval, the QRM Mechanism shall cancel all electronic
quotes that are being disseminated with respect to that Hybrid Market-
Maker in that option class until the Hybrid Market-Maker refreshes
those electronic quotes.
* * * * *
Rule 8.85. DPM Obligations
(a) Dealer Transactions. Each DPM shall fulfill all of the
obligations of a Market-Maker under the Rules, and shall satisfy each
of the following requirements in respect of each of the securities
allocated to the DPM. To the extent that there is any inconsistency
between the specific obligations of a DPM set forth in subparagraphs
(a)(i) through (a)(xi) of this Rule and the general obligations of a
Market-Maker under the Rules, subparagraphs (a)(i) through (a)(xi) of
this Rule shall govern. Each DPM shall:
(i) provide continuous [market quotations] electronic quotes (as
defined in Rule 1.1(ccc)) for each class and series allocated to it and
assure that its disseminated market quotations are accurate;
(ii)-(xii) No change.
(b)-(e) No change.
* * * Interpretations and Policies:
.01-.03 No change.
* * * * *
Rule 8.93. e-DPM Obligations
Each e-DPM shall fulfill all of the obligations of a Market-Maker
and of a DPM under the Rules (except those contained in Rules
8.85(a)(i),(iv),(v) and (vii)-(x), 8.85(b), 8.85(c)(i) and (v), and
8.85(e)), and shall satisfy each of the following requirements:
(i) provide continuous [two-sided quotations] electronic quotes (as
defined in Rule 1.1(ccc)) in at least 90% of the series of each
allocated class, or alternatively, respond to 98% of Requests for
Quotes (RFQs) if RFQ functionality is enabled as determined by the
Exchange;
(ii)-(xi) 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 had received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item III below. 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
Proposed CBOE Rule 1.1(ccc)
The purpose of the proposed change to CBOE Rule 1.1 is to define
the nature of a CBOE Market-Maker's obligation to provide
``continuous'' electronic quotes in an option class traded on Hybrid.
This continuous electronic quoting obligation is contained in various
CBOE rules--including CBOE Rules 8.7(d)(ii)(B), 8.7(e), 8.13(b)(iii),
8.14(b)(2), 8.15A(b)(i), 8.85(a)(i), and 8.93(i)--and these rules in
turn prescribe the percentage of the series of an option class with
respect to which specified types of Market-Makers (``Hybrid Market-
Makers'') have an obligation to provide continuous electronic quotes.
Proposed CBOE Rule 1.1(ccc) will provide that a Hybrid Market-Maker
satisfies the continuous electronic quoting obligation by providing
electronic quotes for 99% of the time that the Hybrid Market-Maker is
obligated to provide electronic quotes in an appointed option class on
a given trading day. Proposed CBOE Rule
[[Page 44732]]
1.1(ccc) recognizes that there is always an interval between successive
electronic quotes and that ``continuous'' electronic quoting cannot
literally preclude all gaps in electronic quoting. In addition, gaps in
electronic quoting are expected in certain circumstances. For instance,
a Hybrid Market-Maker requires time to repost electronic quotes either
after the quantity associated with an electronic quote has been
exhausted by trades done at the quoted price or after electronic quotes
have been canceled pursuant to the Quote Risk Monitor covered by
proposed CBOE Rule 8.18.
In applying the proposed definition, the Exchange notes that the
duration of a Hybrid Market-Maker's continuous electronic quoting
obligation, and the percentage of series to which that obligation
applies, varies depending on the particular type of Market-Maker. For
instance, the Exchange rules impose a continuous electronic quoting
obligation for the time the Exchange is open for trading in 100% of the
series in each of a Designated Primary Market-Maker's (``DPM'')
appointed classes, in 90% of the series in each of an Electronic DPM's
(``e-DPM'') appointed classes, and in 90% of the series in each of a
Lead Market-Maker's (``LMM'') appointed classes. The Exchange thus
believes that these types of Market-Makers should be deemed to have
provided continuous electronic quotes with respect to the applicable
percentage of series in an option class if the respective DPM, e-DPM,
or LMM has provided electronic quotes for 99% of the time that the
Exchange is open for trading in that option class on a given trading
day. The Exchange rules also impose a continuous electronic quoting
obligation in 60% of the series in the respective Market-Maker's or
Remote Market-Maker's (``RMM'') appointed class which applies only
during the time the Market-Maker is quoting in the class or the RMM is
logged onto Hybrid and quoting in that class. The Exchange thus
believes that these two types of Market-Makers should be deemed to have
provided continuous electronic quotes with respect to the applicable
percentage of series in an option class if the respective Market-Maker
or RMM has provided electronic quotes for 99% of the time that he is
quoting in the class (in the case of a Market-Maker) or logged into
Hybrid and quoting in that option class (in the case of an RMM) on a
given trading day. Consequently, in calculating compliance with CBOE
Rule 1.1(ccc), any time interval during which the Market-Maker or RMM
has ceased quoting in that option class (e.g., while taking breaks,
during lunch or upon ceasing trading for the day) would not be
considered.
The Exchange believes that the 99% standard sets an appropriately
high threshold for continuous electronic quoting, while also
recognizing the circumstances under which a Hybrid Market-Maker may
require a brief time interval in order to post new electronic quotes.
This 99% standard is similar to one contained in a rule submitted by
the Pacific Exchange, Inc. (``PCX'') and approved by the Commission.\4\
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\4\ See Securities Exchange Act Release No. 51740 (May 25,
2005), 70 FR 32686 (June 3, 2005) (SR-PCX-2005-64) (notice of filing
and order granting accelerated approval to SR-PCX-2005-64).
---------------------------------------------------------------------------
The Exchange does not believe that a Hybrid Market-Maker has failed
to quote continuously if Exchange technical problems prevent electronic
quotes from being provided. Accordingly, if a technical failure or
limitation in an Exchange system prevents a Hybrid Market-Maker from
maintaining, or communicating to the Exchange, timely and accurate
electronic quotes, proposed CBOE Rule 1.1(ccc) would exclude the
duration of that technical failure or limitation in determining whether
the Hybrid Market-Maker has satisfied the 99% continuous electronic
quote obligation with respect to that option class.
Proposed CBOE Rule 1.1(ccc) will also provide that the Exchange may
consider other exceptions to the continuous electronic quote obligation
based on demonstrated legal or regulatory requirements or other
mitigating circumstances.\5\ This provision is the same as an existing
provision with respect to continuous electronic quoting obligations of
RMMs contained in CBOE Rule 8.7(e). The Exchange believes it is
appropriate to apply the same considerations to all Hybrid Market-
Makers with continuous electronic quoting obligations and including
this provision within the text of proposed CBOE Rule 1.1(ccc)
accordingly reflects that principle. The Exchange is also proposing to
amend various rules to include cross-references to the definition of
``continuous electronic quotes'' contained in proposed CBOE Rule
1.1(ccc). The Exchange will conduct regulatory surveillance for
compliance with the 99% continuous electronic quote requirement set
forth in CBOE Rule 1.1(ccc).
---------------------------------------------------------------------------
\5\ Mitigating circumstances that may be considered by the
Exchange may include, but is not limited to, instances where a
technical failure or limitation in a Hybrid Market-Maker's system
prevents the Hybrid Market-Maker from maintaining, or communicating
to the Exchange, timely and accurate electronic quotes. However, a
pattern or practice of technical failures or limitations, or the
excessive frequency of technical failures or limitations, may also
be considered by the Exchange in determining whether to except the
period of time from the continuous electronic quoting requirements.
---------------------------------------------------------------------------
The Exchange is proposing various clarifying changes to CBOE Rule
8.7 respecting Market-Maker and RMM quoting obligations in order to
clarify the intent and application of the rule that the continuous
electronic quoting obligations apply on a per class basis and only
during the time the respective Market-Maker is quoting or respective
RMM is logged onto Hybrid and quoting, and to clarify certain open
outcry quoting obligations. First, the changes make clear that
obligations and duties of Market-Makers, as set forth in paragraph (d)
of CBOE Rule 8.7, apply to a Market-Maker on a per class basis and only
when the Market-Maker is quoting in a particular class on a given
trading day (e.g., if on a given trading day a Market-Maker is quoting
in 1 of his 10 appointed classes, the Market-Maker has quote width,
continuous electronic quoting and, to the extent the Market-Maker is
present in the trading crowd, continuous open outcry quoting
obligations in that 1 class; the continuous electronic quoting
obligation applies in 60% of the series of that class while the Market-
Maker is quoting in that class). The obligations and duties are not
applicable to an appointed class if a Market-Maker is not quoting in an
appointed class. The clarifications also make clear that, under certain
circumstances, a Market-Maker present in the trading crowd may still be
obligated to provide a quote in an appointed class that he is not
currently quoting in electronically or in open outcry. Specifically, a
Market-Maker in the trading crowd must provide an open outcry two-sided
market complying with the Exchange rules on quote width and size in
response to a request for quote directed at that Market-Maker or when,
in response to a general request for a quote, a market is not then
being vocalized in that series by a reasonable number of Market-Makers.
These obligations are derived from CBOE Rule 8.7(b), which describes
various conditions that trigger a Market-Maker's duty to verbalize a
market in a particular option series. In addition, a Market-Maker may
also be called upon by an Exchange official designated by the Board of
Directors to submit a single quote or maintain continuous quotes in one
or more series of a class to which the Market-Maker is appointed
whenever, in the judgment of such official, it is necessary to do so in
the interest of maintaining a fair and orderly
[[Page 44733]]
market. This Exchange official provision is parallel to language that
is already provided in paragraph (e) for RMMs.
Second, the changes make clear the obligations and duties of RMMs,
as set forth in paragraph (e) of CBOE Rule 8.7, apply to an RMM on a
per class basis and only when the RMM is logged on to the CBOE Hybrid
system and quoting in a particular class on a given trading day (e.g.,
if on a given trading day an RMM is logged in and quoting in 1 of its
10 appointed classes, the RMM has quote width and continuous electronic
quoting obligations in that 1 class; the continuous electronic quoting
obligation applies in 60% of the series of that class while the RMM is
logged in and quoting in that class). The obligations and duties are
not applicable to an appointed class if an RMM is not logged in and
quoting in that appointed class. Clarifying language proposed to be
added to paragraph (e) make clear these obligations and duties of RMMs.
Finally, the Exchange is proposing to amend the text in paragraphs
(d)(i)(C) and (d)(ii)(C) of CBOE Rule 8.7, which pertains to the
continuous open outcry quoting obligation of Market-Makers. The revised
text will provide that the open outcry quoting obligation is triggered
in response to a request for quote by a member or Exchange PAR
Official. As currently written, the obligation is only triggered in
response to a request for quote from a floor broker or a DPM
representing an order as agent, the later of which is an outdated
reference because DPMs no longer perform an agency function.\6\
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 52798 (November 18,
2005), 70 FR 71344 (November 28, 2005) (order approving amendments
relating to the removal of agency responsibilities from DPMs and the
establishment of PAR Officials).
---------------------------------------------------------------------------
Proposed CBOE Rule 8.18
Through this rule change, the Exchange is also seeking to codify in
its rules a service CBOE offers Hybrid Market-Makers to help them
manage their quotations. As discussed above, CBOE Rules require Hybrid
Market-Makers to maintain continuous electronic quotes. To comply with
this requirement, each Hybrid Market-Maker can employ its own
proprietary quotation and risk management systems to determine the
prices and sizes at which it quotes. In addition, Hybrid also has the
QRM Mechanism, which is designed to help Hybrid Market-Makers manage
their quotations in related option series.
A Hybrid Market-Maker's risk in an options class is not limited to
the risk in a single series of that class. Rather, a Hybrid Market-
Maker typically is active in quoting in multiple option classes, and
each such option class can comprise dozens of individual option series.
Under the Hybrid systems, trades are automatically effected against the
Hybrid Market-Maker's then current quote. As a result, a Hybrid Market-
Maker faces exposure in all series of a class, requiring that the
Hybrid Market-Maker off-set or otherwise hedge its overall position in
a class. The QRM functionality described in Proposed CBOE Rule 8.18
helps Hybrid Market-Makers limit this overall exposure and risk.
Specifically, the functionality permits a Hybrid Market-Maker to
establish parameters in the Hybrid to cancel its electronic quotes in
all series of an option class until the Hybrid Market-Maker refreshes
those electronic quotes.
Under proposed CBOE Rule 8.18, each Hybrid Market-Maker that elect
to use the functionality would be required to specify two parameters
that the QRM Mechanism would use to determine when that Hybrid Market-
Maker's quotes should be cancelled. In particular, each Hybrid Market-
Maker is required to specify a maximum number of contracts for each
option class (the ``Contract Limit'') and a rolling time period in
seconds during which such Contract Limit is to be measured (the
``Measurement Interval'').
When the QRM Mechanism determines that the Hybrid Market-Maker has
traded more than the Contract Limit for any option class during any
rolling Measurement Interval, the QRM Mechanism automatically cancels
all of the Hybrid Market-Maker's quotes in any series of that option
class. By limiting its exposure across series, a Hybrid Market-Maker is
better able to quote aggressively in an option, knowing that the QRM
Mechanism will automatically cancel all its quotations in a class when
its exposure limit it hit.
The Exchange notes that the proposed rule would not relieve a
Hybrid Market-Maker of its obligations to provide continuous electronic
quotes under the Exchange rules nor to provide ``firm'' quotes pursuant
to the requirements of CBOE Rule 8.51.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) of the Act,\7\ in general, and furthers the objectives of
Section 6(b)(5) of the Act,\8\ 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.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f(b).
\8\ 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 would
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 either solicited or received with respect
to the proposed rule change.
III. 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-2005-93 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-2005-93. 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
[[Page 44734]]
available for inspection and copying at the principal office of 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 publicly
available. All submissions should refer to File Number SR-CBOE-2005-93
and should be submitted on or before August 28, 2006.
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
After careful review, the Commission finds that the proposed rule
change, as amended, is consistent with the requirements of the Act and
the rules and regulations thereunder, applicable to a national
securities exchange.\9\ In particular, the Commission believes that the
proposed rule change is consistent with Section 6(b)(5) of the Act,\10\
which requires among other things, that the rules of the Exchange are
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\ In approving this proposal, the Commission has considered
its impact on efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
\10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission believes that the proposed QRM Mechanism should
provide Hybrid Market-Makers assistance in effectively managing its
quotations. In conjunction with the implementation of the QRM
Mechanism, CBOE proposes to define the nature of Hybrid Market-Makers'
continuous electronic quoting obligations under its rules. The
Commission believes that it is consistent with the Act to allow CBOE to
define ``continuous electronic quotes'' as providing electronic two-
sided quotes for 99% of the time that the Hybrid Market-Maker is
required to provide electronic quotes in an appointed option class on a
given trading day. The Commission notes that when the QRM Mechanism is
triggered for an option class it will automatically cancel all of the
Hybrid Market-Maker's quotes in any series of that option class. The
Commission believes that the proposed definition of ``continuous
electronic quotes'' should provide a Hybrid Market-Maker a brief amount
of time to update its quotes after the QRM Mechanism has canceled its
quotes in an option class.
In addition, CBOE proposes certain clarifying changes to CBOE Rule
8.7 regarding Market-Maker and RMM quoting obligations. Specifically,
CBOE proposes to clarify the intent and application of the rule that
the continuous electronic quoting obligations apply on a per class
basis and only during the time the respective Market-Maker is quoting
or respective RMM is logged onto Hybrid and quoting, and to clarify
certain open outcry quoting obligations. The Commission believes that
these clarifying changes are appropriate and consistent with the Act.
The Commission notes that the proposal does not alter the
obligations of Hybrid Market-Makers, except for the fact that it will
specifically define what it means to provide continuous electronic
quotes. The Commission also notes that CBOE has represented that it
will conduct routine surveillance for Hybrid Market-Maker compliance
with the 99% standard for continuous electronic quotes set forth in
CBOE Rule 1.1(ccc).
CBOE has requested that the Commission find good cause for
approving the proposed rule change prior to the thirtieth day after
publication of notice thereof in the Federal Register. The Commission
notes that similar proposals to provide protection from risk for market
makers have been approved for other options exchanges.\11\ The
Commission believes that granting accelerated approval of the proposal
should allow Hybrid Market-Makers to have similar protections from the
risk associated with an excessive number of near simultaneous
executions in a single options class. Accordingly, the Commission finds
good cause, pursuant to Section 19(b)(2) of the Act,\12\ for approving
the proposed rule change, as amended, prior to the thirtieth day after
the date of publication of notice thereof in the Federal Register.
---------------------------------------------------------------------------
\11\ See Securities Exchange Act Release Nos. 51049 (January 18,
2005), 70 FR 3756 (January 26, 2005) (SR-BSE-2004-52); 51050
(January 18, 2005), 70 FR 3758 (January 26, 2005) (SR-ISE-2004-31);
51740 (May 25, 2005), 70 FR 32686 (June 3, 2005) (SR-PCX-2005-64);
53148 (January 19, 2006), 71 FR 4386 (January 26, 2006) (SR-Amex-
2005-131); and 53166 (January 23, 2006), 71 FR 4625 (January 27,
2006) (SR-Phlx-2006-05).
\12\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\13\ that the proposed rule change (SR-CBOE-2005-93) and Amendment
No. 1 thereto be, and hereby are, approved on an accelerated basis.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\14\
---------------------------------------------------------------------------
\14\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-12740 Filed 8-4-06; 8:45 am]
BILLING CODE 8010-01-P
