Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of Proposed Rule Change To Adopt Rules Relating to Regulation NMS, 50480-50482 [E6-14127]
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50480
Federal Register / Vol. 71, No. 165 / Friday, August 25, 2006 / Notices
Dated: August 15, 2006.
Nancy M. Morris,
Secretary.
[FR Doc. E6–14125 Filed 8–24–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
Proposed Collection; Comment
Request
Upon written request, copies available
from: Securities and Exchange
Commission, Office of Filings and
Information Services, Washington, DC
20549.
Extension:
Rule 17i–5, SEC File No. 270–531, OMB
Control No. 3235–0590.
cprice-sewell on PROD1PC66 with NOTICES
Notice is hereby given that pursuant
to the Paperwork Reduction Act of
19951 the Securities and Exchange
Commission (‘‘Commission’’) intends to
submit to the Office of Management and
Budget a request for extension of the
previously approved collection of
information discussed below. The Code
of Federal Regulation citation to this
collection of information is the
following rule: 17 CFR 240.17i–5.
Section 231 of the Gramm-LeachBliley Act of 1999 2 (the ‘‘GLBA’’)
amended Section 17 of the Securities
Exchange Act of 1934 to create a
regulatory framework under which a
holding company of a broker-dealer
(‘‘investment bank holding company’’ or
‘‘IBHC’’) may voluntarily be supervised
by the Commission as a supervised
investment bank holding company (or
‘‘SIBHC’’).3 In 2004, the Commission
promulgated rules, including Rule 17i–
5, to create a framework for the
Commission to supervise SIBHCs.4 This
framework includes qualification
criteria for SIBHCs, as well as
recordkeeping and reporting
requirements. Among other things, this
regulatory framework for SIBHCs is
intended to provide a basis for non-U.S.
financial regulators to treat the
Commission as the principal U.S.
consolidated, home-country supervisor
for SIBHCs and their affiliated brokerdealers.5
Pursuant to Section 17(i)(3)(A) of the
Exchange Act, an SIBHC would be
required to make and keep records,
furnish copies thereof, and make such
U.S.C. 3501 et seq.
L. No. 106–102, 113 Stat. 1338 (1999).
3 See 15 U.S.C. 78q(i).
4 See Exchange Act Release No. 49831 (Jun. 8,
2004), 69 FR 34472 (Jun. 21, 2004).
5 See H.R. Conf. Rep. No. 106–434, 165 (1999).
See also Exchange Act Release No. 49831, at 6 (Jun.
8, 2004), 69 FR 34472, at 34473 (Jun. 21, 2004).
reports as the Commission may require
by rule.6 Rule 17i–5 would require that
an SIBHC make and keep current certain
records relating to its business. In
addition, it would require that an SIBHC
preserve those and other records for
certain prescribed time periods.
The collections of information
required pursuant to Rule 17i-5 are
necessary so that the Commission can
adequately supervise the activities of
these SIBHCs. In addition, these
collections of information are needed to
allow the Commission to effectively
determine whether supervision of an
IBHC as an SIBHC is necessary or
appropriate in furtherance of the
purposes of section 17 of the Act. Rule
17i–5 also enhances the Commission’s
supervision of the SIBHCs’ subsidiary
broker-dealers through collection of
additional information and inspections
of affiliates of those broker-dealers.
Without this information and
documentation, the Commission would
be unable to adequately supervise an
SIBHC, nor would it be able to
determine whether continued
supervision of an IBHC as an SIBHC
were necessary and appropriate in
furtherance of the purposes of section
17 of the Act.
We estimate that three IBHCs will file
Notices of Intention with the
Commission to be supervised by the
Commission as SIBHCs. An SIBHC will
require, on average, approximately 64
hours each quarter to create a record
regarding stress tests, or approximately
256 hours each year. In addition, an
SIBHC will generally require about 40
hours to create and document a
contingency plan regarding funding and
liquidity of the affiliate group. Further,
an SIBHC will establish approximately
20 new counterparty arrangements each
year, and will take, on average, about 30
minutes to create a record regarding the
basis for credit risk weights for each
such counterparty.7 Finally, an SIBHC
will generally require about 24 hours
per year to maintain the specified
records.
We believe that an IBHC likely would
upgrade its information technology
(‘‘IT’’) systems in order to more
efficiently comply with certain of the
SIBHC framework rules (including
Rules 17i–4, 17i–5, 17i–6 and 17i–7),
and that this would be a one-time cost.
Depending on the state of development
of the IBHC’s IT systems, it would cost
1 44
2 Pub.
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14:57 Aug 24, 2006
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6 15
U.S.C. 78q(i)(3)(A).
average, each firm presently maintains
relationships with approximately 1,000
counterparties. Further, firms generally already
maintain documentation regarding their credit
decisions, including their determination of credit
risk weights, for those counterparties.
7 On
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an IBHC between $1 million and $10
million to upgrade its IT systems to
comply with the SIBHC framework of
rules. Thus, on average, it would cost
each of the three IBHCs about $5.5
million to upgrade their IT systems, or
approximately $16.5 million in total. It
is impossible to determine what
percentage of the IT systems costs
would be attributable to each Rule, so
we allocated the total estimated upgrade
costs equally (at 25% for each of the
above-mentioned Rules), with
$4,125,000 attributable to Rule 17i–5.
Written comments are invited on: (a)
Whether the collection of information is
necessary for the proper performance of
the functions of the agency, including
whether the information will have
practical utility; (b) the accuracy of the
agency’s estimate of the burden of the
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Comments should be directed to: 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 within 60 days of this
notice.
Dated: August 15, 2006.
Nancy M. Morris,
Secretary.
[FR Doc. E6–14126 Filed 8–24–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54332; File No. SR–CBOE–
2006–70]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing of
Proposed Rule Change To Adopt Rules
Relating to Regulation NMS
August 18, 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 August
18, 2006, the Chicago Board Options
Exchange, Incorporated (‘‘CBOE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
1 15
2 17
E:\FR\FM\25AUN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
25AUN1
Federal Register / Vol. 71, No. 165 / Friday, August 25, 2006 / Notices
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange submits this rule
change filing to modify its rules relating
to the trading of non-option securities to
conform with Regulation NMS. The text
of the proposed rule change is available
from the Exchange’s Web site (https://
www.cboe.com), the Exchange’s
principal office, the Commission’s Web
site (https://www.sec.gov), and the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of 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.
cprice-sewell on PROD1PC66 with NOTICES
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
CBOE anticipates migrating the
trading of non-option securities on
CBOE to CBOEdirect, the Exchange’s
screen-based trading platform. This
migration is proposed in SR–CBOE–
2004–21.3 Upon completion of the
proposed migration, CBOE’s platform
for non-option securities would offer
fully automated quotations that are
accessible via automatic execution
without regard to order size and that
will never be posted ‘‘manually.’’ Thus,
unless execution of an order would
cause an impermissible trade-through of
another trading center, all marketable
orders would automatically execute on
the system against the Exchange
quotation (which incorporates resting
limit orders and interest from CBOE
market-makers).
The purpose of this filing to amend
the rules proposed in SR–CBOE–2004–
3 See Securities Exchange Act Release No. 53112
(January 12, 2006), 71 FR 3579 (January 23, 2006).
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Jkt 208001
21 to conform to certain requirements of
Regulation NMS and to qualify as an
automated trading center with protected
quotations.4 In its release extending the
compliance dates for Rules 610 and 611
of Regulation NMS,5 the Commission
established a ‘‘Specifications Date’’ of
October 16, 2006, by which certain
milestones must be achieved by trading
centers to ensure that quotations may be
deemed protected from trade-throughs
by other trading centers. A major
component of the milestones relate to
adopting certain rules that are
consistent with Regulation NMS. More
specifically, trading centers are required
to: (1) Establish a framework for
identifying (marking) quotations as
automated or manual to meet the
requirements of Rule 600(b)(4); (2) adopt
an immediate-or-cancel order (‘‘IOC’’)
functionality that meets the
requirements of Rule 600(b)(3); and (3)
adopt an intermarket sweep order
(‘‘ISO’’) functionality that allows other
industry participants to meet the
requirements of Rule 600(b)(30). The
proposed rules would modify CBOE’s
screen-based rules to specifically
address these requirements as well as
other matters relating to Regulation
NMS.
As previously mentioned, all quotes
on the system would be firm and
available for immediate and automated
execution at all times unless the
execution would cause an
impermissible trade-through. There
would be no ‘‘manual’’ mode or quotes.
Accordingly, CBOE’s quotations would
always be ‘‘automated’’ for purposes of
Rule 600(b)(4). This is made clear in
proposed Rule 52.13(a). If CBOE were to
experience a technical failure, it would
cease disseminating quotations (as
opposed to disseminating ‘‘manual’’
quotations).
The Exchange also proposes to modify
the definition and handling of IOC
orders to make clear that IOC orders
routed to CBOE would either be
immediately executed (in part or in full)
or canceled. Such orders would not be
‘‘held up’’ for manual processing or for
potential price improvement above
CBOE’s disseminated quote. The revised
definition, which sets forth the manner
4 The Commission notes that, at the time of filing
of this proposal, it had taken no final action on SR–
CBOE–2004–21. Therefore, the rules proposed in
SR–CBOE–2004–21 have not yet been adopted by
the Exchange, and the entire STOC ruleset is
presented in Exhibit 5 to this filing as proposed rule
text. However, in Exhibit 3 to this filing, the
Exchange has provided a document that shows only
the differences between the STOC rules as
originally proposed in SR–CBOE–2004–21 and how
they would be revised by the instant proposal.
5 Securities Exchange Act Release No. 53829 (May
18, 2006), 71 FR 30038 (May 24, 2006).
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50481
in which these orders will be handled,
is contained in proposed Rule 51.8(g)(4).
To allow other industry participants to
comply with the requirements of Rule
600(b)(30) of Regulation NMS, which
explains the manner in which ISOs
must be routed, the Exchange is
proposing to adopt ISO functionality so
that ISO orders routed to CBOE would
be automatically executed without
regard for better prices displayed by
other trading centers. Proposed Rule
51.8(n) spells out the Exchange’s
definition of ISOs. The Exchange would
also provide technical specifications on
its Web site to allow other market
participants to access CBOE’s protected
quotations and to transmit ISOs to
CBOE. Thus, upon activation of the
system, CBOE would receive and
process IOC and ISO orders consistent
with Regulation NMS before the actual
applicable compliance dates are
reached.
The proposed rules also would
incorporate additional language relating
to Regulation NMS but that may not be
a necessary component of the
Specifications Date deadline. More
specifically, the Exchange is proposing
to add language providing that: (1)
Members should reasonably avoid
displaying quotations that lock or cross
protected quotations from other trading
centers; (2) the Exchange may avail
itself of the ‘‘self-help’’ exception
contained in Rule 611(b)(8) of
Regulation NMS; and (3) when
sufficient functionality is available on
CBOE, that the Exchange would route
orders to trading centers displaying
better-priced protected quotations on
behalf of orders routed to CBOE using
‘‘private front-door’’ connectivity as
opposed to via the ITS Plan or any
successor to the ITS Plan.6 This
‘‘Routing Service’’ would be provided
directly and automatically by CBOE
pursuant to several contractual
agreements referenced in proposed Rule
52.10.
The Exchange anticipates making
additional enhancements to its nonoption trading platform prior to the
6 Prior to that time, however, CBOE would access
better priced quotes through the ITS Plan (or its
successor). By way of example, if CBOE receives a
market order to sell 1000 shares while CBOE’s bid
is $50 for 500 shares and Exchange A’s bid is 50.02
for 200 shares and Exchange B’s bid is 50.01 for 400
shares, and assuming CBOE Market-Makers do not
match the 50.02 NBBO, then the order will route
to the DPM for handling. The DPM’s handling
options include the following: (i) route 1000 shares
to Exchange A; (ii) route 200 to Exchange A and 400
to Exchange B while concurrently executing 400 on
CBOE at 50; or (iii) route 200 to Exchange A and
price improve 800 on CBOE at 50.01. Note that, if
a better price becomes available prior to the DPM
routing away, such better price must be taken into
account by the DPM.
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50482
Federal Register / Vol. 71, No. 165 / Friday, August 25, 2006 / Notices
February 2007 compliance date for
Regulation NMS that are not related to
the requirements of the Specifications
Date.
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–CBOE–2006–70 on the
subject line.
2. Statutory Basis
CBOE believes the proposed rule
change is consistent with the Act and
the rules and regulations under the Act
applicable to a national securities
exchange and, in particular, the
requirements of Section 6(b) of the Act.7
Specifically, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 8 requirements that
the rules of an exchange be designed to
promote just and equitable principles of
trade and to protect investors and the
public interest.
Paper Comments
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange believes the proposed
rule change would impose no 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 by the Exchange on this
proposal.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding, or
(ii) as to which the Exchange consents,
the Commission will:
(A) By order approve the proposed
rule change or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
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IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
• 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–2006–70. 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 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–CBOE–2006–70 and should
be submitted on or before September 15,
2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.9
Nancy M. Morris,
Secretary.
[FR Doc. E6–14127 Filed 8–24–06; 8:45 am]
BILLING CODE 8010–01–P
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
7 15
8 15
U.S.C. 78(f)(b).
U.S.C. 78(f)(b)(5).
VerDate Aug<31>2005
14:57 Aug 24, 2006
[Release No. 34–54329; File No. SR–Phlx–
2006–43]
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Notice of Filing of Proposed Rule
Change and Amendment Nos. 1 and 2
Thereto Relating to the Exchange’s
New Equity Trading System, XLE
August 17, 2006.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1, and Rule 19b–4 2 thereunder,
notice is hereby given that on July 13,
2006, the Philadelphia Stock Exchange,
Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III, below, which Items
have been prepared by the Phlx. On
August 14, 2006, the Exchange filed
Amendment No. 1 to the proposed rule
change.3 On August 16, 2006, the
Exchange filed Amendment No. 2 to the
proposed rule change.4 The Commission
is publishing this notice to solicit
comments on the proposed rule change,
as amended, from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Phlx, pursuant to Section 19(b)(1)
of the Act 5 and Rule 19b–4 thereunder,6
proposes to amend its rules to
implement a new trading model for
equity securities that provides the
opportunity for entirely automated
executions to occur within a central
matching system accessible by Exchange
members and member organizations and
their Sponsored Participants, as defined
below. The rules proposed herein are
intended to comply with the
requirements of Regulation NMS.7 The
Exchange will no longer operate a
physical trading floor for equity
securities, nor the Philadelphia Stock
Exchange Automated Communication
and Execution (‘‘PACE’’) system. This
proposal does not affect the way options
trade on the Exchange, and the
Exchange will continue to have a
physical trading floor for options. The
text of this proposed rule change is
available on the Exchange’s Web site at
https://www.phlx.com, in the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Amendment No. 1 replaced and superseded the
original filing in its entirety.
4 See Partial Amendment No. 2.
5 15 U.S.C. 78s(b)(1).
6 17 CFR 240.19b–4.
7 17 CFR 242.600 et seq.
2 17
9 17
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]]>Agencies
[Federal Register Volume 71, Number 165 (Friday, August 25, 2006)]
[Notices]
[Pages 50480-50482]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-14127]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54332; File No. SR-CBOE-2006-70]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing of Proposed Rule Change To Adopt Rules
Relating to Regulation NMS
August 18, 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 August 18, 2006, the Chicago Board Options Exchange, Incorporated
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange
Commission
[[Page 50481]]
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange submits this rule change filing to modify its rules
relating to the trading of non-option securities to conform with
Regulation NMS. The text of the proposed rule change is available from
the Exchange's Web site (https://www.cboe.com), the Exchange's principal
office, the Commission's Web site (https://www.sec.gov), and the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of 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
CBOE anticipates migrating the trading of non-option securities on
CBOE to CBOEdirect, the Exchange's screen-based trading platform. This
migration is proposed in SR-CBOE-2004-21.\3\ Upon completion of the
proposed migration, CBOE's platform for non-option securities would
offer fully automated quotations that are accessible via automatic
execution without regard to order size and that will never be posted
``manually.'' Thus, unless execution of an order would cause an
impermissible trade-through of another trading center, all marketable
orders would automatically execute on the system against the Exchange
quotation (which incorporates resting limit orders and interest from
CBOE market-makers).
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 53112 (January 12,
2006), 71 FR 3579 (January 23, 2006).
---------------------------------------------------------------------------
The purpose of this filing to amend the rules proposed in SR-CBOE-
2004-21 to conform to certain requirements of Regulation NMS and to
qualify as an automated trading center with protected quotations.\4\ In
its release extending the compliance dates for Rules 610 and 611 of
Regulation NMS,\5\ the Commission established a ``Specifications Date''
of October 16, 2006, by which certain milestones must be achieved by
trading centers to ensure that quotations may be deemed protected from
trade-throughs by other trading centers. A major component of the
milestones relate to adopting certain rules that are consistent with
Regulation NMS. More specifically, trading centers are required to: (1)
Establish a framework for identifying (marking) quotations as automated
or manual to meet the requirements of Rule 600(b)(4); (2) adopt an
immediate-or-cancel order (``IOC'') functionality that meets the
requirements of Rule 600(b)(3); and (3) adopt an intermarket sweep
order (``ISO'') functionality that allows other industry participants
to meet the requirements of Rule 600(b)(30). The proposed rules would
modify CBOE's screen-based rules to specifically address these
requirements as well as other matters relating to Regulation NMS.
---------------------------------------------------------------------------
\4\ The Commission notes that, at the time of filing of this
proposal, it had taken no final action on SR-CBOE-2004-21.
Therefore, the rules proposed in SR-CBOE-2004-21 have not yet been
adopted by the Exchange, and the entire STOC ruleset is presented in
Exhibit 5 to this filing as proposed rule text. However, in Exhibit
3 to this filing, the Exchange has provided a document that shows
only the differences between the STOC rules as originally proposed
in SR-CBOE-2004-21 and how they would be revised by the instant
proposal.
\5\ Securities Exchange Act Release No. 53829 (May 18, 2006), 71
FR 30038 (May 24, 2006).
---------------------------------------------------------------------------
As previously mentioned, all quotes on the system would be firm and
available for immediate and automated execution at all times unless the
execution would cause an impermissible trade-through. There would be no
``manual'' mode or quotes. Accordingly, CBOE's quotations would always
be ``automated'' for purposes of Rule 600(b)(4). This is made clear in
proposed Rule 52.13(a). If CBOE were to experience a technical failure,
it would cease disseminating quotations (as opposed to disseminating
``manual'' quotations).
The Exchange also proposes to modify the definition and handling of
IOC orders to make clear that IOC orders routed to CBOE would either be
immediately executed (in part or in full) or canceled. Such orders
would not be ``held up'' for manual processing or for potential price
improvement above CBOE's disseminated quote. The revised definition,
which sets forth the manner in which these orders will be handled, is
contained in proposed Rule 51.8(g)(4). To allow other industry
participants to comply with the requirements of Rule 600(b)(30) of
Regulation NMS, which explains the manner in which ISOs must be routed,
the Exchange is proposing to adopt ISO functionality so that ISO orders
routed to CBOE would be automatically executed without regard for
better prices displayed by other trading centers. Proposed Rule 51.8(n)
spells out the Exchange's definition of ISOs. The Exchange would also
provide technical specifications on its Web site to allow other market
participants to access CBOE's protected quotations and to transmit ISOs
to CBOE. Thus, upon activation of the system, CBOE would receive and
process IOC and ISO orders consistent with Regulation NMS before the
actual applicable compliance dates are reached.
The proposed rules also would incorporate additional language
relating to Regulation NMS but that may not be a necessary component of
the Specifications Date deadline. More specifically, the Exchange is
proposing to add language providing that: (1) Members should reasonably
avoid displaying quotations that lock or cross protected quotations
from other trading centers; (2) the Exchange may avail itself of the
``self-help'' exception contained in Rule 611(b)(8) of Regulation NMS;
and (3) when sufficient functionality is available on CBOE, that the
Exchange would route orders to trading centers displaying better-priced
protected quotations on behalf of orders routed to CBOE using ``private
front-door'' connectivity as opposed to via the ITS Plan or any
successor to the ITS Plan.\6\ This ``Routing Service'' would be
provided directly and automatically by CBOE pursuant to several
contractual agreements referenced in proposed Rule 52.10.
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\6\ Prior to that time, however, CBOE would access better priced
quotes through the ITS Plan (or its successor). By way of example,
if CBOE receives a market order to sell 1000 shares while CBOE's bid
is $50 for 500 shares and Exchange A's bid is 50.02 for 200 shares
and Exchange B's bid is 50.01 for 400 shares, and assuming CBOE
Market-Makers do not match the 50.02 NBBO, then the order will route
to the DPM for handling. The DPM's handling options include the
following: (i) route 1000 shares to Exchange A; (ii) route 200 to
Exchange A and 400 to Exchange B while concurrently executing 400 on
CBOE at 50; or (iii) route 200 to Exchange A and price improve 800
on CBOE at 50.01. Note that, if a better price becomes available
prior to the DPM routing away, such better price must be taken into
account by the DPM.
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The Exchange anticipates making additional enhancements to its non-
option trading platform prior to the
[[Page 50482]]
February 2007 compliance date for Regulation NMS that are not related
to the requirements of the Specifications Date.
2. Statutory Basis
CBOE believes the proposed rule change is consistent with the Act
and the rules and regulations under the Act applicable to a national
securities exchange and, in particular, the requirements of Section
6(b) of the Act.\7\ Specifically, the Exchange believes the proposed
rule change is consistent with the Section 6(b)(5) \8\ requirements
that the rules of an exchange be designed to promote just and equitable
principles of trade and to protect investors and the public interest.
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\7\ 15 U.S.C. 78(f)(b).
\8\ 15 U.S.C. 78(f)(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes the proposed rule change would impose no
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 by the Exchange on
this proposal.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding, or (ii) as to
which the Exchange consents, the Commission will:
(A) By order approve the proposed rule change or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-CBOE-2006-70 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-2006-70. 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 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-CBOE-2006-70 and should be submitted on or before September 15,
2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-14127 Filed 8-24-06; 8:45 am]
BILLING CODE 8010-01-P
