Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Granting Approval of a Proposed Rule Change as Modified by Amendment No. 1 Thereto Amending Its Obvious Error Rule for Equity Options, 54956-54957 [E7-19080]
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Federal Register / Vol. 72, No. 187 / Thursday, September 27, 2007 / Notices
Section 6(b)(5) of the Act,28 in that they
are designed to promote just and
equitable principles of trade, to prevent
fraudulent and manipulative acts and
practices, to remove impediments to
and perfect the mechanisms of a free
and open market and a national market
system, and in general, to protect
investors and the public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
CBOE does not believe that the
proposed rule change will impose any
burden on competition not necessary or
appropriate in furtherance of 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:
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–CBOE–2007–106. 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 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–2007–106 and
should be submitted on or before
October 18, 2007.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.29
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–19079 Filed 9–26–07; 8:45 am]
BILLING CODE 8010–01–P
Electronic Comments
rwilkins on PROD1PC63 with NOTICES
• 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–2007–106 on the
subject line.
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29 17
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Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Order Granting Approval
of a Proposed Rule Change as
Modified by Amendment No. 1 Thereto
Amending Its Obvious Error Rule for
Equity Options
September 20, 2007.
I. Introduction
On February 21, 2007, the Chicago
Board Options Exchange, Incorporated
(‘‘CBOE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend CBOE Rule 6.25, Nullification
and Adjustment of Equity Options
Transactions, to revise its obvious error
provision related to ‘‘no bid series’’ and
to make a non-substantive change by
adding a cross-reference within the text
of Rule 6.25. On July 2, 2007, the CBOE
submitted Amendment No. 1 to the
proposed rule change. The proposed
rule change, as amended, was published
for comment in the Federal Register on
August 9, 2007.3 The Commission
received no comment letters on the
proposal. This order approves the
proposed rule change as modified by
Amendment No. 1.
II. Description of the Proposed Rule
Change
The Exchange proposes to amend
Rule 6.25 by modifying the nullification
provisions for ‘‘no bid series’’ options.4
Currently, Rule 6.25 provides that
electronic transactions in series that are
quoted no bid are subject to
nullification if at least one strike price
below (for calls) or above (for puts) in
the same options class was quoted no
bid at the time of execution. Under the
proposed revision to Rule 6.25,
electronic transactions in a series
quoted no bid on the Exchange could be
nullified if: (i) The bid in that series
immediately preceding the execution
was, and for five (5) seconds prior to the
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release No. 56190
(August 2, 2007), 72 FR 44892.
4 The proposed rule change also would add a
cross-reference to paragraph (a)(5) to the
introductory language of Rule 6.25. According to
the CBOE, this proposed change is non-substantive
because the text of Rule 6.25(a)(5) currently
provides that the provision is not applicable to
trades executed in open outcry.
2 17
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
U.S.C. 78f(b)(5).
[Release No. 34–56487; File No. SR–CBOE–
2007–04]
1 15
Paper Comments
28 15
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COMMISSION
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Federal Register / Vol. 72, No. 187 / Thursday, September 27, 2007 / Notices
execution remained, zero; and (ii) at
least one strike price below (for calls) or
above (for puts) in the same options
class was quoted no bid at the time of
execution.
The proposed rule change would
require that for purposes of the ‘‘no bid
series’’ provision, bids and offers of the
parties to the subject trade that are in
any of the series in the same options
class would not be considered. In
addition, the proposed rule change
would provide that each group of series
in an options class with a non-standard
deliverable would be treated as a
separate options class. Finally, the
proposed rule change would clarify that
the ‘‘no bid series’’ provision is
intended to apply to series quoted no
bid on the Exchange (as opposed to
series for which the national best bid is
quoted no bid).5
III. Discussion
rwilkins on PROD1PC63 with NOTICES
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 6 and, in particular, the
requirements of Section 6(b) of the Act 7
and the rules and regulations
thereunder. Specifically, the
Commission finds that the proposal is
consistent with Section 6(b)(5) of the
Act,8 in that the proposal promotes just
and equitable principles of trade,
prevents fraudulent and manipulative
acts, removes impediments to and
perfects the mechanism of a free and
open market and a national market
system, and, in general, protects
investors and the public interest.
The Commission considers that in
most circumstances trades that are
executed between parties should be
honored. On rare occasions, the price of
the executed trade indicates an
‘‘obvious error’’ may exist, suggesting
that it is unrealistic to expect that the
parties to the trade had come to a
meeting of the minds regarding the
terms of the transaction. In the
Commission’s view, the determination
of whether an ‘‘obvious error’’ has
occurred should be based on specific
5 Consistent with the existing provisions, for a
nullification to be granted, any member or person
associated with a member that believes it
participated in a transaction that falls within the
‘‘no bid series’’ parameters must also satisfy the
notification procedures set forth in paragraph (b) of
Rule 6.25.
6 In approving this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
7 15 U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(5).
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and objective criteria and subject to
specific and objective procedures.
The Exchange represented that the
proposed changes to the ‘‘no bid series’’
provision are intended to address the
Exchange’s experience in applying this
provision to particular trading scenarios
that have occurred. The Commission
believes that the proposed rule change
is designed to clarify the application of
Rule 6.25 to ‘‘no bid series’’ options and
thus is an appropriate modification of
the Exchange’s obvious error rule.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,9 that the
proposed rule change(SR–CBOE–2007–
04), as amended, is hereby approved.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.10
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–19080 Filed 9–26–07; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56491; File No. SR–FINRA–
2007–015]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating to Changes in
the Functionality of the NASD/NYSE
Trade Reporting Facility
September 21, 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
September 19, 2007, the Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) (f/k/a the National
Association of Securities Dealers, Inc.
(‘‘NASD’’)) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I and II below, which Items
have been prepared substantially
FINRA. FINRA has submitted the
proposed rule change under Section
19(b)(3)(A) of the Act 3 and Rule 19b–
4(f)(6) thereunder,4 which renders the
proposal effective upon filing with the
9 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6).
10 17
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54957
Commission.5 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
FINRA proposes to amend its rules to
reflect a change in the functionality of
the NASD/NYSE Trade Reporting
Facility (the ‘‘NASD/NYSE TRF’’) 6 to
permit Participants to submit trades to
the NASD/NYSE TRF for submission to
the National Securities Clearing
Corporation (‘‘NSCC’’) for clearance and
settlement.
The text of the proposed rule change
is available at https://www.finra.org, at
the principal offices of FINRA, 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,
FINRA 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. FINRA 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
The NASD/NYSE TRF provides
FINRA members with a mechanism for
reporting locked-in trades in NMS
stocks, as defined in Rule 600(b)(47) of
Regulation NMS under the Act,7
effected otherwise than on an exchange.
NASD Rules 6130E(a) and 6140E
currently provide that the NASD/NYSE
TRF will not submit trades to clearing
and, where appropriate, Participants
must have a valid Qualified Service
Representative (‘‘QSR’’) agreement with
the NSCC or similar arrangement to
5 FINRA has asked the Commission to waive the
30-day operative delay provided in Rule 19b–
4(f)(6)(iii). 17 CFR 240.19b–4(f)(6)(iii).
6 Effective July 30, 2007, FINRA was formed
through the consolidation of NASD and the member
regulatory functions of NYSE Regulation, Inc.
Accordingly, the NASD/NYSE TRF is now doing
business as the FINRA/NYSE TRF. The formal
name change of each of FINRA’s Trade Reporting
Facilities (‘‘TRFs’’) is pending and, once completed,
FINRA will file a separate proposed rule change to
reflect those changes in the Manual.
7 17 CFR 242.600(b)(47).
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]]>Agencies
[Federal Register Volume 72, Number 187 (Thursday, September 27, 2007)]
[Notices]
[Pages 54956-54957]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-19080]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56487; File No. SR-CBOE-2007-04]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Granting Approval of a Proposed Rule Change as
Modified by Amendment No. 1 Thereto Amending Its Obvious Error Rule for
Equity Options
September 20, 2007.
I. Introduction
On February 21, 2007, the Chicago Board Options Exchange,
Incorporated (``CBOE'' or ``Exchange'') filed with the Securities and
Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend CBOE Rule 6.25,
Nullification and Adjustment of Equity Options Transactions, to revise
its obvious error provision related to ``no bid series'' and to make a
non-substantive change by adding a cross-reference within the text of
Rule 6.25. On July 2, 2007, the CBOE submitted Amendment No. 1 to the
proposed rule change. The proposed rule change, as amended, was
published for comment in the Federal Register on August 9, 2007.\3\ The
Commission received no comment letters on the proposal. This order
approves the proposed rule change as modified by Amendment No. 1.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 56190 (August 2, 2007),
72 FR 44892.
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The Exchange proposes to amend Rule 6.25 by modifying the
nullification provisions for ``no bid series'' options.\4\ Currently,
Rule 6.25 provides that electronic transactions in series that are
quoted no bid are subject to nullification if at least one strike price
below (for calls) or above (for puts) in the same options class was
quoted no bid at the time of execution. Under the proposed revision to
Rule 6.25, electronic transactions in a series quoted no bid on the
Exchange could be nullified if: (i) The bid in that series immediately
preceding the execution was, and for five (5) seconds prior to the
[[Page 54957]]
execution remained, zero; and (ii) at least one strike price below (for
calls) or above (for puts) in the same options class was quoted no bid
at the time of execution.
---------------------------------------------------------------------------
\4\ The proposed rule change also would add a cross-reference to
paragraph (a)(5) to the introductory language of Rule 6.25.
According to the CBOE, this proposed change is non-substantive
because the text of Rule 6.25(a)(5) currently provides that the
provision is not applicable to trades executed in open outcry.
---------------------------------------------------------------------------
The proposed rule change would require that for purposes of the
``no bid series'' provision, bids and offers of the parties to the
subject trade that are in any of the series in the same options class
would not be considered. In addition, the proposed rule change would
provide that each group of series in an options class with a non-
standard deliverable would be treated as a separate options class.
Finally, the proposed rule change would clarify that the ``no bid
series'' provision is intended to apply to series quoted no bid on the
Exchange (as opposed to series for which the national best bid is
quoted no bid).\5\
---------------------------------------------------------------------------
\5\ Consistent with the existing provisions, for a nullification
to be granted, any member or person associated with a member that
believes it participated in a transaction that falls within the ``no
bid series'' parameters must also satisfy the notification
procedures set forth in paragraph (b) of Rule 6.25.
---------------------------------------------------------------------------
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 \6\ and, in
particular, the requirements of Section 6(b) of the Act \7\ and the
rules and regulations thereunder. Specifically, the Commission finds
that the proposal is consistent with Section 6(b)(5) of the Act,\8\ in
that the proposal promotes just and equitable principles of trade,
prevents fraudulent and manipulative acts, removes impediments to and
perfects the mechanism of a free and open market and a national market
system, and, in general, protects investors and the public interest.
---------------------------------------------------------------------------
\6\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission considers that in most circumstances trades that are
executed between parties should be honored. On rare occasions, the
price of the executed trade indicates an ``obvious error'' may exist,
suggesting that it is unrealistic to expect that the parties to the
trade had come to a meeting of the minds regarding the terms of the
transaction. In the Commission's view, the determination of whether an
``obvious error'' has occurred should be based on specific and
objective criteria and subject to specific and objective procedures.
The Exchange represented that the proposed changes to the ``no bid
series'' provision are intended to address the Exchange's experience in
applying this provision to particular trading scenarios that have
occurred. The Commission believes that the proposed rule change is
designed to clarify the application of Rule 6.25 to ``no bid series''
options and thus is an appropriate modification of the Exchange's
obvious error rule.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\9\ that the proposed rule change(SR-CBOE-2007-04), as amended, is
hereby approved.
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\9\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
---------------------------------------------------------------------------
\10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-19080 Filed 9-26-07; 8:45 am]
BILLING CODE 8010-01-P
