Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change and Amendment No. 1 Thereto To Codify the Hybrid Price Check Parameter, 46525-46527 [E7-16331]
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Federal Register / Vol. 72, No. 160 / Monday, August 20, 2007 / Notices
The Commission believes that the
proposed position limits and margin
rules for FROs are reasonable and
consistent with the Act. The proposed
position limit of 25,000 contracts in any
FRO class appears to reasonably balance
the promotion of a free and open market
for these securities with minimization of
incentives for market manipulation. The
proposed margin rules appear
reasonably designed to deter a member
or its customer from assuming an
imprudent position in FROs.
In support of this proposal, Amex
made the following representations:
• Amex has in place an adequate
surveillance program to monitor trading
in FROs and intends to largely apply its
existing surveillance program for
options to the trading of FROs; and
• Amex has the necessary systems
capacity to support the new options
series that would result from the
introduction of FROs.
This approval order is based on
Amex’s representations.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning Amendment No.
4, including whether Amendment No. 4
is consistent with the Act. Comments
may be submitted by any of the
following methods:
pwalker on PROD1PC71 with NOTICES
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–Amex–2004–27 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–Amex–2004–27. 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
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16:53 Aug 17, 2007
Jkt 211001
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 Amex. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–Amex–2004–27 and should
be submitted on or before September 10,
2007.
V. Accelerated Approval
The Commission finds good cause for
approving the proposed rule change, as
amended, prior to the thirtieth day after
the date of publication of notice of filing
of Amendment No. 4 in the Federal
Register. In Amendment No. 4, Amex
provided representations regarding
surveillance and systems capacity and
corrected minor errors in the text of the
proposed rules. In addition,
Amendment No. 4 clarified the use of
composite prices in calculating the allday VWAP that will be used to establish
the settlement price for FROs, and
clarified that positions of 10,000
contracts, rather than 25,000 contracts,
will be subject to certain reporting
requirements. The Commission believes
that Amendment No. 4 clarifies and
strengthens the proposal and raises no
new regulatory issues. Accordingly, the
Commission finds good cause for
approving the proposal, as amended, on
an accelerated basis, pursuant to Section
19(b)(2) of the Act.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,31 that the
proposed rule change (SR–Amex–2004–
27), as amended, is approved, on an
accelerated basis.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.32
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–16330 Filed 8–17–07; 8:45 am]
BILLING CODE 8010–01–P
31 15
32 17
PO 00000
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
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46525
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56245; File No. SR–CBOE–
2006–104]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing of a
Proposed Rule Change and
Amendment No. 1 Thereto To Codify
the Hybrid Price Check Parameter
August 14, 2007.
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 December
7, 2006, 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, II, and
III below, which Items have been
substantially prepared by the Exchange.
On August 1, 2007, the Exchange filed
Amendment No. 1 to the proposed rule
change. The Commission is publishing
this notice to solicit comments on the
proposed rule change, as amended, from
interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 6.13, CBOE Hybrid System’s
Automatic Execution Feature, in order
to codify an automated system feature
that prevents executions at potentially
erroneous prices.
The text of the proposed rule change
is available on the Exchange’s Web site
(https://www.cboe.com), at the
Exchange’s principal office, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of, and basis for,
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of 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.
1 15
2 17
E:\FR\FM\20AUN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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46526
Federal Register / Vol. 72, No. 160 / Monday, August 20, 2007 / Notices
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
Orders that are eligible for automatic
execution through the CBOE Hybrid
Trading System (‘‘Hybrid’’) may be
automatically executed in accordance
with the provisions of CBOE Rule 6.13.
Orders that are not eligible for automatic
execution route on a class by class basis
to PAR (the public automated routing
system) or BART (the booth automated
routing terminal) or, at the order entry
firm’s discretion, to the order entry
firm’s booth printer.
The purpose of the proposed rule
change is to amend CBOE Rule 6.13 to
codify a description of the Exchange’s
price check parameter functionality,
which is a functionality that could be
activated in certain series of a given
options class that would prevent an
automatic execution of a market order
from occurring outside a prescribed
market width. The Exchange represents
that the price check parameter is
designed to help maintain a fair and
orderly market. Specifically, the
functionality would not automatically
execute eligible orders that are market
orders if the width between the
Exchange’s best bid and best offer is not
within an acceptable price range. The
applicable price ranges will be
determined by the appropriate Exchange
Procedure Committee on a series by
series basis and will be announced to
the membership via Regulatory Circular
generally at least one day in advance.
For purposes of this provision, an
‘‘acceptable price range’’ shall be no less
than 1.5 times the corresponding bid/
ask differentials in CBOE Rule
8.7(b)(iv)(A).3 In addition, the Exchange
is proposing that the senior official in
CBOE’s Control Room or two Floor
Officials may grant intra-day relief by
widening the acceptable price range for
one or more option series. If intra-day
relief is granted, it will be announced
via verbal message to the trading crowd,
printer message to member
organizations on the trading floor, and
electronic message to members that
request to receive such messages. The
granting of this intra-day relief will be
for no more than the duration of the
3 CBOE Rule 8.7(b)(iv)(A) sets forth the bid/ask
differentials for open outcry trading, which are as
follows: No more than $0.25 between the bid and
offer for each option contract for which the bid is
less than $2, no more than $0.40 where the bid is
at least $2 but does not exceed $5, no more than
$0.50 where the bid is more than $5 but does not
exceed $10, no more than $0.80 where the bid is
more than $10 but does not exceed $20, and no
more than $1.00 where the bid is more than $20.
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16:53 Aug 17, 2007
Jkt 211001
particular trading day. Any decision to
extend relief beyond an intra-day basis
would be announced to the membership
via Regulatory Circular. Market orders
that trigger the applicable price check
parameter and, thus, that are not eligible
for automatic execution, will be routed
on a class by class basis to PAR or BART
or, at the order entry firm’s discretion,
to the order entry firm’s booth printer.
For example, the Exchange may
determine to set a price check parameter
that provides that market orders would
not automatically execute if the width
between the Exchange’s best bid and
best offer is $0.40 or more in a series
where the bid is less than $2 ($0.40 is
more than 1.5 × the standard bid/ask
differential of $0.25). Assume that the
market in the series is $1.65¥$1.85; the
bid is for 10 contracts, the next best bid
is $1.50 for 10 contracts, and the next
best bid is $0.50 for 10 contracts. An
incoming sell order for 50 contracts
would trade against the $1.65 for 10
contracts and the $1.50 for 10
contracts.4 When the bid moves to
$0.50, the price check parameter would
be triggered because the width between
the best bid ($0.50) and best offer
($1.85) is wider than the acceptable
$0.40 price range. As a result, the
remaining 30 contracts would route to
PAR, BART, or the booth.5
The Exchange believes that the
proposed rule change is consistent with
the firm quote requirements of CBOE’s
Rule 8.51, Firm Disseminated Market
Quotes, and the Commission’s Rule 602
under Regulation NMS.6 In that regard,
the Exchange notes that the Quote Rule
does not require an automatic
execution.7 The Exchange also notes
that it would not be disengaging its
auto-ex system by this proposed rule
change, but merely amending the rule to
provide for certain circumstances in
4 This example assumes that CBOE is at the
national best bid or offer (‘‘NBBO’’) at each price
point. If CBOE is not at the NBBO, the order would
not be automatically executed at prices inferior to
the NBBO and instead would route to PAR, BART,
or the Hybrid Agency Liaison (‘‘HAL’’), which is a
feature within Hybrid that provides automated
handling in designated Hybrid option classes for
qualifying electronic orders that are not
automatically executed. See CBOE Rules 6.13(b)(iv)
and 6.14.
5 Following from the example above, on an intraday basis the senior official or two Floor Officials
may determine based on market conditions to grant
relief by widening the acceptable price range from
$0.40 (e.g., the range might be temporarily widened
so that automatic executions would not occur if the
width between the best bid and best offer is $0.80
or more).
6 17 CFR 242.602.
7 See Securities Exchange Act Release No. 47959
(May 30, 2003), 68 FR 34441 (June 9, 2003) (SR–
CBOE–2002–05) (order approving Hybrid, including
Hybrid’s automatic execution feature).
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which market orders may not receive an
automatic execution.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the Act 8
and the rules and regulations under the
Act applicable to national securities
exchanges and, in particular, the
requirements of section 6(b) of the Act.9
Specifically, the Exchange believes the
proposed rule change is consistent with
section 6(b)(5) of the Act,10 which
requires that the rules of an exchange be
designed to promote just and equitable
principles of trade, to prevent
fraudulent and manipulative acts, to
remove impediments to and to perfect
the mechanism for 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
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.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
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 self-regulatory
organization consents, the Commission
will:
(A) By order approve such 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:
8 15
U.S.C. 78s(b)(1).
U.S.C. 78f(b).
10 15 U.S.C. 78f(b)(5).
9 15
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Federal Register / Vol. 72, No. 160 / Monday, August 20, 2007 / Notices
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
No. SR–CBOE–2006–104 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street, NE.,
Washington, DC 20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56240; File No. SR–ISE–
2007–49]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Order Approving Proposed Rule
Change Relating to Fee Changes on a
Retroactive Basis
August 13, 2007.
I. Introduction
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On June 15, 2007, the International
Securities Exchange, LLC (‘‘ISE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
All submissions should refer to File
(‘‘Commission’’), pursuant to Section
Number SR–CBOE–2006–104. This file
19(b)(1) of the Securities Exchange Act
number should be included on the
of 1934 (the ‘‘Act’’),1 and Rule 19b–4
subject line if e-mail is used. To help the thereunder,2 a proposed rule change to
Commission process and review your
amend its Schedule of Fees on a
comments more efficiently, please use
retroactive basis. The proposed rule
only one method. The Commission will change was published for comment in
post all comments on the Commission’s the Federal Register on July 10, 2007.3
Internet Web site (https://www.sec.gov/
The Commission received no comments
rules/sro.shtml). Copies of the
regarding the proposal. This order
submission, all subsequent
approves the proposed rule change.
amendments, all written statements
II. Description of the Proposal
with respect to the proposed rule
ISE proposes to amend its Schedule of
change that are filed with the
Fees to: (1) Increase the per contract
Commission, and all written
surcharge from $0.10 per contract to
communications relating to the
$0.15 per contract for options on the
proposed rule change between the
Commission and any person, other than Russell 1000 Index (‘‘RUI’’), the
Russell 2000 Index (‘‘RUT’’), and the
those that may be withheld from the
Mini Russell 2000 Index (‘‘RMN’’);
public in accordance with the
and (2) refund surcharge fees collected
provisions of 5 U.S.C. 552, will be
for transactions in options on the
available for inspection and copying in
iShares Russell 2000 Index Fund
the Commission’s Public Reference
(‘‘IWM’’), the iShares Russell 2000
Room, 100 F Street, NE., Washington,
Value Index Fund (‘‘IWN’’), the iShares
DC 20549, on official business days
Russell 2000 Growth Index Fund
between the hours of 10 a.m. and 3 p.m. (‘‘IWO’’), the iShares Russell 1000
Copies of such filing also will be
Value Index Fund (‘‘IWD’’) and the
available for inspection and copying at
iShares Russell 1000 Index Fund
the principal office of CBOE. All
(‘‘IWB’’), in both cases for the period
comments received will be posted
commencing January 1, 2007 and
without change; the Commission does
ending June 15, 2007 (the ‘‘Retroactive
not edit personal identifying
Period’’). The Exchange proposes the
information from submissions. You
surcharge increase to become effective
should submit only information that
retroactively, as of January 1, 2007.4
The Exchange revised its license
you wish to make available publicly. All
agreement with the Frank Russell
submissions should refer to File
Company (‘‘Russell’’), effective January
Number SR–CBOE–2006–104 and
should be submitted on or before
1 15 U.S.C. 78s(b)(1).
September 10, 2007.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.11
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–16331 Filed 8–17–07; 8:45 am]
BILLING CODE 8010–01–P
11 17
CFR 200.30–3(a)(12).
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16:53 Aug 17, 2007
Jkt 211001
2 17
CFR 240.19b–4.
Securities Exchange Act Release No. 56005
(July 3, 2007), 72 FR 37555.
4 On June 15, 2007, the Exchange filed a proposed
rule change as immediately effective under Section
19(b)(3)(A) of the Exchange Act that: (1) Removes
the surcharge fee for IWM, IWN, IWO, IWD and
IWB from its Schedule of Fees and (2) raises the
surcharge fee from $.10 per contract to $.15 per
contract for options on RUI, RUT and RMN. See
Securities Exchange Act Release No. 55975 (June
28, 2007), 72 FR 37064 (July 6, 2007) (SR–ISE–
2007–48).
3 See
PO 00000
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46527
1, 2007. Pursuant to the revised
agreement, the Exchange pays Russell
$0.15 per contract to trade options on
RUI, RUT and RMN. The Exchange thus
proposes to increase the surcharge fee
for options on RUI, RUT and RMN from
$0.10 per contract to $0.15 per contract
retroactive to January 1, 2007 and
collect from members the applicable
fees due to the Exchange for the
Retroactive Period. This surcharge fee
will only be charged to Exchange
members with respect to non-Public
Customer Orders (e.g., ISE Market
Maker, non-ISE Market Maker, and Firm
Proprietary orders) and shall apply to
certain Linkage Orders under a pilot
program that is set to expire on July 31,
2008.5
Additionally, the Exchange had
previously adopted a $0.10 per contract
surcharge in connection with the listing
and trading of options on IWM, IWN,
IWO, IWD,6 and IWB.7 However,
pursuant to the revised license
agreement with Russell, the Exchange,
as of January 1, 2007, no longer pays a
license fee to Russell in connection with
the listing and trading of options on
IWM, IWN, IWO, IWD and IWB. As a
result, the Exchange proposes to refund
to members the surcharge fee it has
collected during the Retroactive Period.
III. Discussion
The Commission finds that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to a national securities
exchange.8 Specifically, the
Commission finds that the proposal is
consistent with section 6(b)(4) of the
Act,9 which requires that the rules of a
national securities exchange provide for
the equitable allocation of reasonable
dues, fees, and other charges among its
members and issuers and other persons
using its facilities. Specifically, the
Commission believes that application of
the amendments to ISE’s Schedule of
Fees on a retroactive basis is appropriate
5 Linkage Orders are defined in ISE Rule
1900(10). Under a pilot program that was recently
extended and is now set to expire on July 31, 2008,
these fees will also be charged to Principal Acting
as Agent Orders and Principal Orders (as defined
in ISE Rule 1900(10)(i)–(ii)). See Securities
Exchange Act Release No. 56128 (July 24, 2007), 72
FR 42161 (August 1, 2007).
6 See Securities Exchange Act Release No. 47075
(December 20, 2002), 67 FR 79673 (December 30,
2002) (SR–ISE–2002–29).
7 See Securities Exchange Act Release No. 47564
(March 24, 2003), 68 FR 15256 (March 28, 2003)
(SR–ISE–2003–13).
8 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
9 15 U.S.C. 78f(b)(4).
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]]>Agencies
[Federal Register Volume 72, Number 160 (Monday, August 20, 2007)]
[Notices]
[Pages 46525-46527]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-16331]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56245; File No. SR-CBOE-2006-104]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing of a Proposed Rule Change and Amendment
No. 1 Thereto To Codify the Hybrid Price Check Parameter
August 14, 2007.
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 December 7, 2006, 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, II, and III below, which Items have been substantially
prepared by the Exchange. On August 1, 2007, the Exchange filed
Amendment No. 1 to the proposed rule change. The Commission is
publishing this notice to solicit comments on the proposed rule change,
as amended, from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 6.13, CBOE Hybrid System's
Automatic Execution Feature, in order to codify an automated system
feature that prevents executions at potentially erroneous prices.
The text of the proposed rule change is available on the Exchange's
Web site (https://www.cboe.com), at the Exchange's principal office, and
at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of 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.
[[Page 46526]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Orders that are eligible for automatic execution through the CBOE
Hybrid Trading System (``Hybrid'') may be automatically executed in
accordance with the provisions of CBOE Rule 6.13. Orders that are not
eligible for automatic execution route on a class by class basis to PAR
(the public automated routing system) or BART (the booth automated
routing terminal) or, at the order entry firm's discretion, to the
order entry firm's booth printer.
The purpose of the proposed rule change is to amend CBOE Rule 6.13
to codify a description of the Exchange's price check parameter
functionality, which is a functionality that could be activated in
certain series of a given options class that would prevent an automatic
execution of a market order from occurring outside a prescribed market
width. The Exchange represents that the price check parameter is
designed to help maintain a fair and orderly market. Specifically, the
functionality would not automatically execute eligible orders that are
market orders if the width between the Exchange's best bid and best
offer is not within an acceptable price range. The applicable price
ranges will be determined by the appropriate Exchange Procedure
Committee on a series by series basis and will be announced to the
membership via Regulatory Circular generally at least one day in
advance.
For purposes of this provision, an ``acceptable price range'' shall
be no less than 1.5 times the corresponding bid/ask differentials in
CBOE Rule 8.7(b)(iv)(A).\3\ In addition, the Exchange is proposing that
the senior official in CBOE's Control Room or two Floor Officials may
grant intra-day relief by widening the acceptable price range for one
or more option series. If intra-day relief is granted, it will be
announced via verbal message to the trading crowd, printer message to
member organizations on the trading floor, and electronic message to
members that request to receive such messages. The granting of this
intra-day relief will be for no more than the duration of the
particular trading day. Any decision to extend relief beyond an intra-
day basis would be announced to the membership via Regulatory Circular.
Market orders that trigger the applicable price check parameter and,
thus, that are not eligible for automatic execution, will be routed on
a class by class basis to PAR or BART or, at the order entry firm's
discretion, to the order entry firm's booth printer.
---------------------------------------------------------------------------
\3\ CBOE Rule 8.7(b)(iv)(A) sets forth the bid/ask differentials
for open outcry trading, which are as follows: No more than $0.25
between the bid and offer for each option contract for which the bid
is less than $2, no more than $0.40 where the bid is at least $2 but
does not exceed $5, no more than $0.50 where the bid is more than $5
but does not exceed $10, no more than $0.80 where the bid is more
than $10 but does not exceed $20, and no more than $1.00 where the
bid is more than $20.
---------------------------------------------------------------------------
For example, the Exchange may determine to set a price check
parameter that provides that market orders would not automatically
execute if the width between the Exchange's best bid and best offer is
$0.40 or more in a series where the bid is less than $2 ($0.40 is more
than 1.5 x the standard bid/ask differential of $0.25). Assume that the
market in the series is $1.65-$1.85; the bid is for 10 contracts, the
next best bid is $1.50 for 10 contracts, and the next best bid is $0.50
for 10 contracts. An incoming sell order for 50 contracts would trade
against the $1.65 for 10 contracts and the $1.50 for 10 contracts.\4\
When the bid moves to $0.50, the price check parameter would be
triggered because the width between the best bid ($0.50) and best offer
($1.85) is wider than the acceptable $0.40 price range. As a result,
the remaining 30 contracts would route to PAR, BART, or the booth.\5\
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\4\ This example assumes that CBOE is at the national best bid
or offer (``NBBO'') at each price point. If CBOE is not at the NBBO,
the order would not be automatically executed at prices inferior to
the NBBO and instead would route to PAR, BART, or the Hybrid Agency
Liaison (``HAL''), which is a feature within Hybrid that provides
automated handling in designated Hybrid option classes for
qualifying electronic orders that are not automatically executed.
See CBOE Rules 6.13(b)(iv) and 6.14.
\5\ Following from the example above, on an intra-day basis the
senior official or two Floor Officials may determine based on market
conditions to grant relief by widening the acceptable price range
from $0.40 (e.g., the range might be temporarily widened so that
automatic executions would not occur if the width between the best
bid and best offer is $0.80 or more).
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The Exchange believes that the proposed rule change is consistent
with the firm quote requirements of CBOE's Rule 8.51, Firm Disseminated
Market Quotes, and the Commission's Rule 602 under Regulation NMS.\6\
In that regard, the Exchange notes that the Quote Rule does not require
an automatic execution.\7\ The Exchange also notes that it would not be
disengaging its auto-ex system by this proposed rule change, but merely
amending the rule to provide for certain circumstances in which market
orders may not receive an automatic execution.
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\6\ 17 CFR 242.602.
\7\ See Securities Exchange Act Release No. 47959 (May 30,
2003), 68 FR 34441 (June 9, 2003) (SR-CBOE-2002-05) (order approving
Hybrid, including Hybrid's automatic execution feature).
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act \8\ and the rules and regulations under the Act applicable to
national securities exchanges and, in particular, the requirements of
section 6(b) of the Act.\9\ Specifically, the Exchange believes the
proposed rule change is consistent with section 6(b)(5) of the Act,\10\
which requires that the rules of an exchange be designed to promote
just and equitable principles of trade, to prevent fraudulent and
manipulative acts, to remove impediments to and to perfect the
mechanism for a free and open market and a national market system, and,
in general, to protect investors and the public interest.
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\8\ 15 U.S.C. 78s(b)(1).
\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
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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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
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 self-regulatory organization consents, the Commission will:
(A) By order approve such 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:
[[Page 46527]]
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File No. SR-CBOE-2006-104 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2006-104. 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-2006-104 and should be
submitted on or before September 10, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-16331 Filed 8-17-07; 8:45 am]
BILLING CODE 8010-01-P
