Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding Its Open Outcry Allocation Rules, 36744-36746 [E7-12940]

Download as PDF 36744 Federal Register / Vol. 72, No. 128 / Thursday, July 5, 2007 / Notices sroberts on PROD1PC70 with NOTICES protection of investors or the public interest; (ii) impose any significant burden on competition; or (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate. The Exchange has provided the Commission written notice of its intention to file the proposed rule change at least five business days prior to filing. The Exchange requests that the Commission waive the 30-day operative delay specified in Rule 19b–4(f)(6)(iii) 10 with respect to the proposed rule change and that the proposed rule change be made operative on July 1, 2007, the same day the fee changes proposed in the Fee Filing take effect. The Exchange has represented that all the ETF specialist firms affected by the proposal have agreed to the elimination of commissions, contingent on the Exchange’s implementation of the proposed revenue sharing program included in the Fee Filing. The proposal herein, together with the revisions to the Exchange’s transaction charges and the revenue sharing program, is part of an integrated plan in which: (i) The revenues generated from the revised fees will partially offset the cost to the Exchange of the payments the Exchange will make to the specialists and registered traders under the revenue sharing program; and (ii) the cost to customers of the increased transaction charges will be offset partially by the elimination of commissions. Amex believes it is essential that the proposal in this filing become operative at the same time as the proposal set forth in the Fee Filing. The Commission has determined to waive the 30-day delay and allow the proposed rule change to become operative on July 1, 2007.11 The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because doing so will enable all aspects of Amex’s new fee structure to become operative as of the same date. The Commission has relied on Amex’s representation that all affected Amex specialists have agreed to the new fee structure. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, 10 17 CFR 240.19b–4(f)(6)(iii). purposes only of waiving the operative delay of this proposal, the Commission notes that it has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 11 For VerDate Aug<31>2005 18:43 Jul 03, 2007 Jkt 211001 or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: For the Commission, by the Division of Market Regulation, pursuant to delegated authority.12 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–13013 Filed 7–3–07; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION Electronic Comments [Release No. 34–55971; File No. SR–CBOE– 2007–66] • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File No. SR–Amex–2007–67 on the subject line. Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding Its Open Outcry Allocation Rules June 28, 2007. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (the • Send paper comments in triplicate ‘‘Act’’),1 and Rule 19b–4 thereunder,2 to Nancy M. Morris, Secretary, notice is hereby given that on June 18, Securities and Exchange Commission, 2007, the Chicago Board Options 100 F Street, NE., Washington, DC Exchange, Incorporated (‘‘CBOE’’ or 20549–1090. ‘‘Exchange’’) filed with the Securities and Exchange Commission (the All submissions should refer to File ‘‘Commission’’) the proposed rule Number SR–Amex–2007–67. This file change as described in Items I, II and III number should be included on the subject line if e-mail is used. To help the below, which Items have been substantially prepared by CBOE. The Commission process and review your Exchange filed the proposal as a ‘‘noncomments more efficiently, please use only one method. The Commission will controversial’’ proposed rule change pursuant to section 19(b)(3)(A)(iii) of the post all comments on the Commissions Act 3 and Rule 19b–4(f)(6) thereunder,4 Internet Web site (https://www.sec.gov/ which renders it effective upon filing rules/sro.shtml). Copies of the with the Commission. The Commission submission, all subsequent is publishing this notice to solicit amendments, all written statements comments on the proposed rule change with respect to the proposed rule from interested persons. change that are filed with the I. Self-Regulatory Organization’s Commission, and all written Statement of the Terms of Substance of communications relating to the the Proposed Rule Change proposed rule change between the Commission and any person, other than CBOE proposes to amend its open those that may be withheld from the outcry allocation rules for classes public in accordance with the trading on the Hybrid Trading System provisions of 5 U.S.C. 552, will be (‘‘Hybrid’’). The text of the proposed available for inspection and copying in rule change is available at CBOE, the the Commission’s Public Reference Commission’s Public Reference Room, Room, 100 F Street, NE., Washington, and (https://www.cboe.org/Legal). DC 20549, on official business days II. Self-Regulatory Organization’s between the hours of 10 a.m. and 3 p.m. Statement of the Purpose of, and Copies of such filing also will be Statutory Basis for, the Proposed Rule available for inspection and copying at Change the principal office of the Exchange. All In its filing with the Commission, the comments received will be posted CBOE included statements concerning without change; the Commission does the purpose of, and basis for, the not edit personal identifying proposed rule change and discussed any information from submissions. You should submit only information that 12 17 CFR 200.30–3(a)(12). you wish to make available publicly. All 1 15 U.S.C. 78s(b)(1). submissions should refer to File 2 17 CFR 240.19b–4. Number SR–Amex–2007–67 and should 3 15 U.S.C. 78s(b)(3)(A)(iii). be submitted on or before July 26, 2007. 4 17 CFR 240.19b–4(f)(6). Paper Comments PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 E:\FR\FM\05JYN1.SGM 05JYN1 Federal Register / Vol. 72, No. 128 / Thursday, July 5, 2007 / Notices comments it received on the proposed rule change. The text of those 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 parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change sroberts on PROD1PC70 with NOTICES 1. Purpose The Exchange is proposing to modify its open outcry allocation rules for Hybrid classes, which are contained in paragraph (b) of Rules 6.45A, Priority and Allocation of Equity Option Trades on the CBOE Hybrid System, and 6.45B, Priority and Allocation of Trades in Index Options and Options on ETFs on the CBOE Hybrid System, as applicable. Under the existing allocation rules, at the same execution price: (i) Public customer orders in the electronic book have first priority, with multiple public customer orders prioritized based on time priority; (ii) in-crowd market participants and broker-dealer orders resting in the electronic book collectively have second priority, with the broker-dealer orders getting a ‘‘book market participant’’ share;5 and (iii) electronic quotes of Market-Makers have third priority, with multiple bids or offers prioritized based on the electronic 5 Under the existing allocation rules, the cumulative number of broker-dealer orders in the electronic book at the best price are deemed to be one ‘‘book market participant’’ regardless of the number of broker-dealer orders in the book. Also under the existing rules, the allocation due the broker-dealer orders in the electronic book by virtue of their being deemed a ‘‘book market participant’’ is as follows: If two or more bids (offers) represent the best price, one of which represents a book market participant, priority is afforded to the incrowd market participants in the sequence in which their bids (offers) were made; provided, however, that (i) the first in-crowd market participant to respond is entitled to 70% of the order; (ii) the second in-crowd market participant to respond (if ascertainable) is entitled to 70% of the remainder of the order (i.e., 70% of 30%); and (iii) the balance of the order is apportioned equally among the remaining in-crowd market participants bidding (offering) at the same price and the book market participant share. If it is not possible to determine the order in which in-crowd market participants responded, the balance of the order shall be apportioned equally among the remaining market participants bidding (offering) at the same price and, if applicable, the book market participant. If two or more bids (offers) represent the best price, each of which is NOT a book market participant, priority is afforded to the in-crowd market participants in accordance with the allocation principles contained in CBOE Rule 6.45(a) or (b), which generally provide that priority is afforded to such bids (offers) in the sequence in which they are made or, if the bids were made at the same time or in the event the sequence cannot be reasonably determined, priority is apportioned equally. See existing CBOE Rules 6.45A(b) and 6.45B(b). VerDate Aug<31>2005 18:43 Jul 03, 2007 Jkt 211001 allocation algorithm in effect for the option class.6 The Exchange is proposing to revise the priority levels so that, at the same execution price: (i) Public customer orders in the electronic book would continue to have first priority, with multiple public customer orders prioritized based on time priority; (ii) in-crowd market participants would have second priority, with multiple bids or offers prioritized based on the allocation algorithm provided in Rule 6.45(A) or (B);7 and (iii) broker-dealer orders resting in the electronic book and electronic quotes of Market-Makers would collectively have third priority, with multiple bids or offers prioritized based on the electronic allocation algorithm in effect for the option class.8 In addition, in order to transact proprietary orders 9 on the floor of the Exchange pursuant to Rule 6.45A(b) or 6.45B(b), members must also ensure that they qualify for an exemption from section 11(a)(1) of the Act.10 Members relying on section 11(a)(1)(G) of the Act 11 and Rule 11a1–1(T) thereunder (commonly known as the ‘‘G exemption 6 The particular algorithm is determined on a class-by- class basis and can be based on either price-time priority, pro-rata priority or the Ultimate Match Algorithm (‘‘UMA’’). The UMA allocation formula has a component based on the number of market participants quoting at the best price (‘‘Component A’’) and a component based on the size of market participant quotes. Depending on the particular algorithm and class, additional priority overlays pertaining to public customer orders, Market-Maker participation entitlements and market turner may also apply. See CBOE Rule 6.45A(a) or 6.45B(a), as applicable. 7 Allocation among the in-crowd market participants in this manner is consistent with the existing CBOE Rule 6.45A(b) and 6.45B(b) allocation procedures that apply when there is NOT a book market participant. See note 5, supra. 8 If the UMA algorithm is in effect, the cumulative number of broker-dealer orders in the electronic book at the best price are deemed one ‘‘market participant’’ for purposes of calculating Component A. See note 6, supra. In revising the priority algorithm to provide that in-crowd market participants have priority over the trading interests of both broker-dealer orders resting in the electronic and electronic quotes of Market-Makers, the Exchange notes that at least one other options exchange already has in place rules that afford incrowd participants priority over electronic trading interests. See Rule 6.76(d) of NYSE Arca Inc. In addition, this change in the priority algorithm will make the open outcry priority rules for non-crossing transactions more consistent with the Exchange’s open outcry priority rules for crossing transactions, which currently provide for in-crowd market participants to have priority over the trading interests of both broker-dealer orders resting in the electronic book and electronic quotes of MarketMakers. See CBOE Rule 6.74, Crossing Orders. 9 For purposes of CBOE Rule 6.45A(b) or 6.45B(b), a ‘‘proprietary order’’ will mean an order for a member’s own account, the account of an associated person, or an account with respect to which it or an associated person thereof exercises investment discretion. 10 15 U.S.C. 78k(a)(1). 11 15 U.S.C. 78k(a)(1)(G). PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 36745 rule’’) 12 as an exemption must comply with the requirements of that exemption before executing a proprietary order, including the requirement to yield priority to any bid or offer at the same price for the account of a person who is not, or is not associated with, a member (a ‘‘non-member’’), irrespective of the size of any such bid or offer or the time when entered. Because CBOE’s electronic book does not distinguish between member and non-member broker-dealer orders, the revised priority provisions would further provide that members relying on the G exemption rule must yield priority to any bid (offer) at the same price of public customer orders and broker-dealer orders (whether non-member or member) resting in the electronic book, as well as any other bids and offers that would otherwise have priority over such broker-dealer orders under Rule 6.45A(b) or 6.45B(b).13 2. Statutory Basis The Exchange believes the proposed rule change is consistent with section 6(b) of the Act 14 in general and furthers the objectives of section 6(b)(5) of the Act 15 in particular in that it is designed to promote just and equitable principles of trade, serve to remove impediments to and perfect the mechanism of a free and open market and a national market system, and protect investors and the public interest. B. Self-Regulatory Organization’s Statement on Burden on Competition CBOE does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. 12 17 CFR 240.11a1–1(T). for example, a Floor Broker that is relying on the G exemption rule must first yield priority to any same priced public customer orders and broker-dealer orders resting in the electronic book, as well as any in-crowd market participants that would otherwise have priority over those broker-dealer orders, before executing a proprietary order. In such a scenario, the Rule 6.45A(b) or Rule 6.45B(b) priority sequence described above is modified so that, at the same price, public customer orders resting in the book would have first priority, then the in-crowd market participants (to the extent each such market participant also qualifies for an exemption from Section 11(a)(1) but is not relying on the G exemption rule), then broker-dealer orders resting in the book, then the Floor Broker’s proprietary order (along with any other in-crowd market participants also relying on the G exemption rule). To the extent there may be any further remaining balance, same priced electronic quotes of Market-Makers would have priority to trade next. 14 15 U.S.C. 78f(b). 15 15 U.S.C. 78f(b)(5). 13 Thus, E:\FR\FM\05JYN1.SGM 05JYN1 36746 Federal Register / Vol. 72, No. 128 / Thursday, July 5, 2007 / Notices C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposal. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (1) Significantly affect the protection of investors or the public interest; (2) impose any significant burden on competition; and (3) become operative for thirty days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, it has become effective pursuant to section 19(b)(3)(A) of the Act 16 and Rule 19b– 4(f)(6) 17 thereunder.18 At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in the furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments Paper Comments 16 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). 18 Pursuant to Rule 19b–4(f)(6)(iii), the Exchange has given the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date on which the Exchange filed the proposed rule change. See 17 CFR 240.19b–4(f)(6)(iii). 17 17 sroberts on PROD1PC70 with NOTICES DEPARTMENT OF TRANSPORTATION Federal Aviation Administration Agency Information Collection Activity Seeking OMB Approval Federal Aviation Administration (FAA), DOT. ACTION: Notice. AGENCY: • 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–2007–66. This file number should be included on the 18:43 Jul 03, 2007 For the Commission, by the Division of Market Regulation, pursuant to delegated authority.19 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–12940 Filed 7–3–07; 8:45 am] BILLING CODE 8010–01–P • 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–2007–66 on the subject line. VerDate Aug<31>2005 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, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be 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 available publicly. All submissions should refer to File Number SR–CBOE–2007–66 and should be submitted on or before July 26, 2007. Jkt 211001 SUMMARY: The FAA invites public comments about our intention to request the Office of Management and Budget’s (OMB) revision of a current information collection. The Federal Register Notice with a 60-day comment period soliciting comments on the following collection of information was published on March 26, 2007, vol. 72, no. 57, page 14162. This collection establishes requirements for the certification, operation, and maintenance of light-sport aircraft. PO 00000 19 17 CFR 200.30–3(a)(12). Frm 00100 Fmt 4703 Sfmt 4703 Please submit comments by August 6, 2007. FOR FURTHER INFORMATION CONTACT: Carla Mauney at Carla.Mauney@faa.gov. SUPPLEMENTARY INFORMATION: DATES: Federal Aviation Administration (FAA) Title: Certification of Airmen for the Operation of Light-Sport Aircraft. Type of Request: Extension of a currently approved collection. OMB Control Number: 2120–0690. Forms(s): 8130–6, 8130–7, 8130–15, 8710–11, 337, 8110–14, 8110–28, 8610– 2. Affected Public: An estimated 28,449 Respondents. Frequency: This information is collected on occasion. Estimated Average Burden Per Response: Approximately 1.27 hours per response. Estimated Annual Burden Hours: An estimated 72,582 hours annually. Abstract: For the operation of lightsport aircraft, the FAA has established a sport pilot certificate and a flight instructor certificate with a sport pilot rating, requirements for student pilots and private pilots to operate these aircraft and to revise the recreational pilot certificate to align it with privileges proposed for the new sport pilot certificate, and a new repairman certificate with ratings for individuals who would inspect and maintain lightsport aircraft. In addition, the FAA has established a new category of special airworthiness certificate for light-sport aircraft that meet a consensus standard. ADDRESSES: Interested persons are invited to submit written comments on the proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget. Comments should be addressed to Nathan Lesser, Desk Officer, Department of Transportation/FAA, and sent via electronic mail to oira_submission@omb.eop.gov or faxed to (202) 395–6974. Comments are invited on: Whether the proposed collection of information is necessary for the proper performance of the functions of the Department, including whether the information will have practical utility; the accuracy of the Department’s estimates of the burden of the proposed information collection; ways to enhance the quality, utility, and clarity of the information to be collected; and ways to minimize the burden of the collection of information on respondents, including the use of automated collection techniques or other forms of information technology. E:\FR\FM\05JYN1.SGM 05JYN1

Agencies

[Federal Register Volume 72, Number 128 (Thursday, July 5, 2007)]
[Notices]
[Pages 36744-36746]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-12940]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55971; File No. SR-CBOE-2007-66]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Regarding Its Open Outcry Allocation Rules

June 28, 2007.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on June 18, 2007, the Chicago Board Options Exchange, Incorporated 
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I, II and III below, which Items have been substantially 
prepared by CBOE. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ 
which renders it effective upon filing with the Commission. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CBOE proposes to amend its open outcry allocation rules for classes 
trading on the Hybrid Trading System (``Hybrid''). The text of the 
proposed rule change is available at CBOE, the Commission's Public 
Reference Room, and (https://www.cboe.org/Legal).

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 CBOE included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any

[[Page 36745]]

comments it received on the proposed rule change. The text of those 
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 parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to modify its open outcry allocation 
rules for Hybrid classes, which are contained in paragraph (b) of Rules 
6.45A, Priority and Allocation of Equity Option Trades on the CBOE 
Hybrid System, and 6.45B, Priority and Allocation of Trades in Index 
Options and Options on ETFs on the CBOE Hybrid System, as applicable. 
Under the existing allocation rules, at the same execution price: (i) 
Public customer orders in the electronic book have first priority, with 
multiple public customer orders prioritized based on time priority; 
(ii) in-crowd market participants and broker-dealer orders resting in 
the electronic book collectively have second priority, with the broker-
dealer orders getting a ``book market participant'' share;\5\ and (iii) 
electronic quotes of Market-Makers have third priority, with multiple 
bids or offers prioritized based on the electronic allocation algorithm 
in effect for the option class.\6\
---------------------------------------------------------------------------

    \5\ Under the existing allocation rules, the cumulative number 
of broker-dealer orders in the electronic book at the best price are 
deemed to be one ``book market participant'' regardless of the 
number of broker-dealer orders in the book. Also under the existing 
rules, the allocation due the broker-dealer orders in the electronic 
book by virtue of their being deemed a ``book market participant'' 
is as follows: If two or more bids (offers) represent the best 
price, one of which represents a book market participant, priority 
is afforded to the in-crowd market participants in the sequence in 
which their bids (offers) were made; provided, however, that (i) the 
first in-crowd market participant to respond is entitled to 70% of 
the order; (ii) the second in-crowd market participant to respond 
(if ascertainable) is entitled to 70% of the remainder of the order 
(i.e., 70% of 30%); and (iii) the balance of the order is 
apportioned equally among the remaining in-crowd market participants 
bidding (offering) at the same price and the book market participant 
share. If it is not possible to determine the order in which in-
crowd market participants responded, the balance of the order shall 
be apportioned equally among the remaining market participants 
bidding (offering) at the same price and, if applicable, the book 
market participant. If two or more bids (offers) represent the best 
price, each of which is NOT a book market participant, priority is 
afforded to the in-crowd market participants in accordance with the 
allocation principles contained in CBOE Rule 6.45(a) or (b), which 
generally provide that priority is afforded to such bids (offers) in 
the sequence in which they are made or, if the bids were made at the 
same time or in the event the sequence cannot be reasonably 
determined, priority is apportioned equally. See existing CBOE Rules 
6.45A(b) and 6.45B(b).
    \6\ The particular algorithm is determined on a class-by- class 
basis and can be based on either price-time priority, pro-rata 
priority or the Ultimate Match Algorithm (``UMA''). The UMA 
allocation formula has a component based on the number of market 
participants quoting at the best price (``Component A'') and a 
component based on the size of market participant quotes. Depending 
on the particular algorithm and class, additional priority overlays 
pertaining to public customer orders, Market-Maker participation 
entitlements and market turner may also apply. See CBOE Rule 
6.45A(a) or 6.45B(a), as applicable.
---------------------------------------------------------------------------

    The Exchange is proposing to revise the priority levels so that, at 
the same execution price: (i) Public customer orders in the electronic 
book would continue to have first priority, with multiple public 
customer orders prioritized based on time priority; (ii) in-crowd 
market participants would have second priority, with multiple bids or 
offers prioritized based on the allocation algorithm provided in Rule 
6.45(A) or (B);\7\ and (iii) broker-dealer orders resting in the 
electronic book and electronic quotes of Market-Makers would 
collectively have third priority, with multiple bids or offers 
prioritized based on the electronic allocation algorithm in effect for 
the option class.\8\
---------------------------------------------------------------------------

    \7\ Allocation among the in-crowd market participants in this 
manner is consistent with the existing CBOE Rule 6.45A(b) and 
6.45B(b) allocation procedures that apply when there is NOT a book 
market participant. See note 5, supra.
    \8\ If the UMA algorithm is in effect, the cumulative number of 
broker-dealer orders in the electronic book at the best price are 
deemed one ``market participant'' for purposes of calculating 
Component A. See note 6, supra. In revising the priority algorithm 
to provide that in-crowd market participants have priority over the 
trading interests of both broker-dealer orders resting in the 
electronic and electronic quotes of Market-Makers, the Exchange 
notes that at least one other options exchange already has in place 
rules that afford in-crowd participants priority over electronic 
trading interests. See Rule 6.76(d) of NYSE Arca Inc. In addition, 
this change in the priority algorithm will make the open outcry 
priority rules for non-crossing transactions more consistent with 
the Exchange's open outcry priority rules for crossing transactions, 
which currently provide for in-crowd market participants to have 
priority over the trading interests of both broker-dealer orders 
resting in the electronic book and electronic quotes of Market-
Makers. See CBOE Rule 6.74, Crossing Orders.
---------------------------------------------------------------------------

    In addition, in order to transact proprietary orders \9\ on the 
floor of the Exchange pursuant to Rule 6.45A(b) or 6.45B(b), members 
must also ensure that they qualify for an exemption from section 
11(a)(1) of the Act.\10\ Members relying on section 11(a)(1)(G) of the 
Act \11\ and Rule 11a1-1(T) thereunder (commonly known as the ``G 
exemption rule'') \12\ as an exemption must comply with the 
requirements of that exemption before executing a proprietary order, 
including the requirement to yield priority to any bid or offer at the 
same price for the account of a person who is not, or is not associated 
with, a member (a ``non-member''), irrespective of the size of any such 
bid or offer or the time when entered. Because CBOE's electronic book 
does not distinguish between member and non-member broker-dealer 
orders, the revised priority provisions would further provide that 
members relying on the G exemption rule must yield priority to any bid 
(offer) at the same price of public customer orders and broker-dealer 
orders (whether non-member or member) resting in the electronic book, 
as well as any other bids and offers that would otherwise have priority 
over such broker-dealer orders under Rule 6.45A(b) or 6.45B(b).\13\
---------------------------------------------------------------------------

    \9\ For purposes of CBOE Rule 6.45A(b) or 6.45B(b), a 
``proprietary order'' will mean an order for a member's own account, 
the account of an associated person, or an account with respect to 
which it or an associated person thereof exercises investment 
discretion.
    \10\ 15 U.S.C. 78k(a)(1).
    \11\ 15 U.S.C. 78k(a)(1)(G).
    \12\ 17 CFR 240.11a1-1(T).
    \13\ Thus, for example, a Floor Broker that is relying on the G 
exemption rule must first yield priority to any same priced public 
customer orders and broker-dealer orders resting in the electronic 
book, as well as any in-crowd market participants that would 
otherwise have priority over those broker-dealer orders, before 
executing a proprietary order. In such a scenario, the Rule 6.45A(b) 
or Rule 6.45B(b) priority sequence described above is modified so 
that, at the same price, public customer orders resting in the book 
would have first priority, then the in-crowd market participants (to 
the extent each such market participant also qualifies for an 
exemption from Section 11(a)(1) but is not relying on the G 
exemption rule), then broker-dealer orders resting in the book, then 
the Floor Broker's proprietary order (along with any other in-crowd 
market participants also relying on the G exemption rule). To the 
extent there may be any further remaining balance, same priced 
electronic quotes of Market-Makers would have priority to trade 
next.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
section 6(b) of the Act \14\ in general and furthers the objectives of 
section 6(b)(5) of the Act \15\ in particular in that it is designed to 
promote just and equitable principles of trade, serve to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and protect investors and the public 
interest.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

[[Page 36746]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposal.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (1) 
Significantly affect the protection of investors or the public 
interest; (2) impose any significant burden on competition; and (3) 
become operative for thirty days from the date on which it was filed, 
or such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest, it has become 
effective pursuant to section 19(b)(3)(A) of the Act \16\ and Rule 19b-
4(f)(6) \17\ thereunder.\18\
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ Pursuant to Rule 19b-4(f)(6)(iii), the Exchange has given 
the Commission written notice of its intent to file the proposed 
rule change, along with a brief description and text of the proposed 
rule change, at least five business days prior to the date on which 
the Exchange filed the proposed rule change. See 17 CFR 240.19b-
4(f)(6)(iii).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in the furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2007-66 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-2007-66. 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, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of such filing also will be 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 available publicly.
    All submissions should refer to File Number SR-CBOE-2007-66 and 
should be submitted on or before July 26, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-12940 Filed 7-3-07; 8:45 am]
BILLING CODE 8010-01-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.