Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Approving a Proposed Rule Change To Amend the Minimum Quote Size Requirements for Hybrid Opening System Rotations, 68919-68920 [E7-23608]
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Federal Register / Vol. 72, No. 234 / Thursday, December 6, 2007 / Notices
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 Exchange proposes to waive
transaction fees for all market
participants in XSP options beginning
on November 19, 2007.
CBOE intends to undertake a
marketing ‘‘re-launch’’ of the XSP
product due in part to the fact that XSP
options are now traded in penny
increments in conjunction with the
expanded penny pilot program recently
approved by the Commission.3 In
conjunction with the re-launch, CBOE
has decided to waive all XSP
transaction fees for an indefinite period
of time. The Exchange may determine to
reevaluate the fee waiver at a future
time.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the Act,4
in general, and furthers the objectives of
Section 6(b)(4) 5 of the Act in particular,
in that it is designed to provide for the
equitable allocation of reasonable dues,
fees, and other charges among CBOE
members and other persons using its
facilities.
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 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.
mstockstill on PROD1PC66 with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing rule change
establishes or changes a due, fee, or
other charge imposed by the Exchange,
it has become effective pursuant to
Section 19(b)(3)(A) of the Act 6 and
3 See Securities and Exchange Act Release No.
56565 (September 27, 2007), 72 FR 56403 (October
3, 2007).
4 15 U.S.C. 78f(b).
5 15 U.S.C. 78f(b)(4).
6 15 U.S.C. 78s(b)(3)(A).
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18:57 Dec 05, 2007
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subparagraph (f)(2) of Rule 19b–4 7
thereunder. 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,
or otherwise in furtherance of the
purposes of the Act.8
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 rulecomments@sec.gov. Please include File
Number SR–CBOE–2007–135 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–2007–135. 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 CBOE. All
comments received will be posted
without change; the Commission does
7 17
CFR 240.19b–4(f)(2).
8 Id.
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68919
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–2007–135 and
should be submitted on or before
December 27, 2007.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–23590 Filed 12–5–07; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56860; File No. SR–CBOE–
2007–59]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Order Approving a
Proposed Rule Change To Amend the
Minimum Quote Size Requirements for
Hybrid Opening System Rotations
November 29, 2007.
On September 17, 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 its minimum quote size
requirements that are applicable to
trading rotations conducted via the
Hybrid Opening System (‘‘HOSS’’). The
proposed rule change was published for
comment in the Federal Register on
October 25, 2007.3 The Commission
received no comments on the proposal.
This order approves the proposed rule
change.
Currently, CBOE Rule 8.7 generally
requires that the initial size a market
maker electronically quotes must be at
least ten contracts (undecremented size)
(the ‘‘10-up’’ requirement).4 The
Exchange proposes to amend CBOE
Rule 6.2B to modify the minimum quote
size requirements applicable to Market9 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 56680
(October 19, 2007), 72 FR 60697 (‘‘Notice’’).
4 If, however, the underlying primary market
disseminates a 100-share best bid or offer quote
(which is the equivalent of one option contract), a
Market-Maker’s undecremented quote may be for as
low as one contract (‘‘1-up’’) if the process is
automated and the quote automatically returns to at
least 10-up when the underlying market no longer
disseminates a 100-share quote. See, e.g., CBOE
Rule 8.7(d)(ii)(B).
1 15
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68920
Federal Register / Vol. 72, No. 234 / Thursday, December 6, 2007 / Notices
mstockstill on PROD1PC66 with NOTICES
Makers, Remote Market-Makers,
Designated Primary Market-Makers,
Electronic Designated Primary MarketMakers and Lead Market-Makers
(collectively referred to as ‘‘MarketMakers’’) 5 with respect to opening
rotations in CBOE Hybrid Trading
System (‘‘Hybrid’’) classes. Specifically,
the 10-up requirement would continue
to apply, except that a Market-Maker
would be permitted to enter an opening
quote for as low as one contract if the
underlying primary market 6
disseminates less than a 1000-share best
bid or offer quote (which is the
equivalent of ten contracts) immediately
prior to an option series opening. In
contrast to the intra-day quoting
requirements under CBOE Rule 8.7, this
exception would not require that the
opening quote process be automated or
that the Market-Maker’s quote size
automatically return to at least 10-up
when the underlying primary market no
longer disseminates a minimum 1000share quote.
The Commission notes that, while the
Exchange believes that the existing
opening quote size requirement imposes
a reasonable obligation on MarketMakers who receive certain benefits for
satisfying this and other obligations, the
Exchange also believes that there are
instances where requiring MarketMakers to quote 10-up during an
opening rotation imposes a heightened
level of risk on them.7 Accordingly,
CBOE’s proposal would provide limited
relief from this quoting requirement
during the opening rotation only.
The Commission finds that the
proposed rule change is consistent with
the requirements of Section 6 of the
Act 8 and the rules and regulations
thereunder applicable to a national
securities exchange.9 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,10 which requires that
a national securities exchange’s rules be
5 Currently, Designated Primary Market-Makers,
Electronic Designated Primary Market-Makers and
Lead Market-Makers are required to enter opening
quotes in accordance with CBOE Rule 6.2B in 100%
of the series of each appointed class; other MarketMakers and Remote Market-Makers are permitted,
but not required, to enter opening quotes in
accordance with CBOE Rule 6.2B. See CBOE Rules
6.2B, 8.15A (subparagraph (b)(iv) of this rule has
been interpreted by the Exchange to require an
LMM to enter opening quotes in 100% of the series
of each appointed class), 8.85, and 8.93.
6 CBOE Rule 1.1(v) defines the term ‘‘primary
market’’ of an underlying security as ‘‘the principal
market in which the underlying security is traded.’’
7 See Notice, supra note 3, at 60698.
8 15 U.S.C. 78(f)(b).
9 In approving this rule change, the Commission
notes that it has considered the proposal’s impact
on efficiency, competition, and capital formation.
See 15 U.S.C. 78c(f).
10 15 U.S.C. 78f(b)(5).
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18:57 Dec 05, 2007
Jkt 214001
designed to facilitate transactions in
securities, to promote just and equitable
principles of trade, to prevent
fraudulent and manipulative acts and,
in general, to protect investors and the
public interest. The Commission notes
that Market-Makers hedge their options
transactions by buying and/or selling
the underlying securities. When the
underlying primary market for the
particular equity security on which a
CBOE option is based disseminates less
than a 1000-share quote during CBOE’s
opening rotation in the respective
option series, the amount of readilyaccessible liquidity available to a CBOE
Market-Maker in the underlying security
on that particular side of the market to
hedge a 10-up quote in the respective
option may potentially be limited.
Correspondingly, Market-Makers’ ability
to hedge their positions at the open
might be restricted, increasing their
financial exposure and risk, particularly
when the Market-Maker is required to
quote over multiple series during the
typically active open rotation period.11
While the Commission continues to
believe that CBOE’s existing quote size
requirements are appropriate, given the
benefits that are provided to MarketMakers such as favorable margin
treatment, the Commission also believes
that it is reasonable to allow a limited
exception for Market-Makers to lower
their quote sizes to as low as one
contract during opening rotations on
HOSS when there is a diminished
amount of liquidity in the underlying
primary market. By permitting MarketMakers to limit their exposure at the
opening, the Commission believes that
this proposal may encourage MarketMakers to quote more competitively
during HOSS opening rotations.12 The
Commission notes that CBOE’s proposal
would permit Market-Makers to submit
an opening quote for as low as one
contract only in connection with
opening rotations on HOSS, though a
Market-Maker would be free to quote
more if it so choose. Further, the
proposal would permit a Market-Maker
to maintain its 1-up quote during the
opening rotation until it is decremented
or the Market-Maker updates its quote,
at which point CBOE’s continuous
quoting obligation rules would apply.
Finally, the Commission believes that
the proposal should not detract from
11 According to the Exchange, an options
exchange may list 20 or more options series for an
underlying stock. For example, if a Market-Maker
posts 10-up markets in twenty series, that MarketMaker would provide liquidity equivalent to 20,000
shares.
12 Nothing in this proposal would affect a MarketMaker’s obligation to honor its firm quote
obligations imposed by CBOE Rule 8.51.
PO 00000
Frm 00064
Fmt 4703
Sfmt 4703
CBOE’s ability to maintain fair and
orderly openings on HOSS because, to
the extent that there may be a market
order imbalance on the opening, such
imbalances would continue to be
addressed in the same manner as they
are currently handled under existing
CBOE rules.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,13 that the
proposed rule change (SR–CBOE–2007–
59) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–23608 Filed 12–5–07; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56863; File No. SR–DTC–
2007–06]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing of Proposed Rule Change To
Amend the Hearing Procedures
Afforded to an Interested Person and
Harmonize Them With Similar Rules of
Its Affiliates
November 29, 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 April 30,
2007, The Depository Trust Company
(‘‘DTC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change described in
Items I, II, and III below, which items
have been prepared primarily by DTC.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
parties.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The proposed rule change seeks (1) to
modify DTC’s rules regarding hearing
procedures afforded to Interested
Persons 3 and (2) where practicable or
beneficial, to harmonize them with
similar rules of DTC’s affiliates, the
National Securities Clearing Corporation
13 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 ‘‘A Participant or Pledgee, [or] applicant to
become a Participant or Pledgee or issuer of a
Security.’’ Rule 22, Section 1.
14 17
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]]>Agencies
[Federal Register Volume 72, Number 234 (Thursday, December 6, 2007)]
[Notices]
[Pages 68919-68920]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-23608]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56860; File No. SR-CBOE-2007-59]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Approving a Proposed Rule Change To Amend the
Minimum Quote Size Requirements for Hybrid Opening System Rotations
November 29, 2007.
On September 17, 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 its minimum quote size
requirements that are applicable to trading rotations conducted via the
Hybrid Opening System (``HOSS''). The proposed rule change was
published for comment in the Federal Register on October 25, 2007.\3\
The Commission received no comments on the proposal. This order
approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 56680 (October 19,
2007), 72 FR 60697 (``Notice'').
---------------------------------------------------------------------------
Currently, CBOE Rule 8.7 generally requires that the initial size a
market maker electronically quotes must be at least ten contracts
(undecremented size) (the ``10-up'' requirement).\4\ The Exchange
proposes to amend CBOE Rule 6.2B to modify the minimum quote size
requirements applicable to Market-
[[Page 68920]]
Makers, Remote Market-Makers, Designated Primary Market-Makers,
Electronic Designated Primary Market-Makers and Lead Market-Makers
(collectively referred to as ``Market-Makers'') \5\ with respect to
opening rotations in CBOE Hybrid Trading System (``Hybrid'') classes.
Specifically, the 10-up requirement would continue to apply, except
that a Market-Maker would be permitted to enter an opening quote for as
low as one contract if the underlying primary market \6\ disseminates
less than a 1000-share best bid or offer quote (which is the equivalent
of ten contracts) immediately prior to an option series opening. In
contrast to the intra-day quoting requirements under CBOE Rule 8.7,
this exception would not require that the opening quote process be
automated or that the Market-Maker's quote size automatically return to
at least 10-up when the underlying primary market no longer
disseminates a minimum 1000-share quote.
---------------------------------------------------------------------------
\4\ If, however, the underlying primary market disseminates a
100-share best bid or offer quote (which is the equivalent of one
option contract), a Market-Maker's undecremented quote may be for as
low as one contract (``1-up'') if the process is automated and the
quote automatically returns to at least 10-up when the underlying
market no longer disseminates a 100-share quote. See, e.g., CBOE
Rule 8.7(d)(ii)(B).
\5\ Currently, Designated Primary Market-Makers, Electronic
Designated Primary Market-Makers and Lead Market-Makers are required
to enter opening quotes in accordance with CBOE Rule 6.2B in 100% of
the series of each appointed class; other Market-Makers and Remote
Market-Makers are permitted, but not required, to enter opening
quotes in accordance with CBOE Rule 6.2B. See CBOE Rules 6.2B, 8.15A
(subparagraph (b)(iv) of this rule has been interpreted by the
Exchange to require an LMM to enter opening quotes in 100% of the
series of each appointed class), 8.85, and 8.93.
\6\ CBOE Rule 1.1(v) defines the term ``primary market'' of an
underlying security as ``the principal market in which the
underlying security is traded.''
---------------------------------------------------------------------------
The Commission notes that, while the Exchange believes that the
existing opening quote size requirement imposes a reasonable obligation
on Market-Makers who receive certain benefits for satisfying this and
other obligations, the Exchange also believes that there are instances
where requiring Market-Makers to quote 10-up during an opening rotation
imposes a heightened level of risk on them.\7\ Accordingly, CBOE's
proposal would provide limited relief from this quoting requirement
during the opening rotation only.
---------------------------------------------------------------------------
\7\ See Notice, supra note 3, at 60698.
---------------------------------------------------------------------------
The Commission finds that the proposed rule change is consistent
with the requirements of Section 6 of the Act \8\ and the rules and
regulations thereunder applicable to a national securities exchange.\9\
In particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(5) of the Act,\10\ which requires that a
national securities exchange's rules be designed to facilitate
transactions in securities, to promote just and equitable principles of
trade, to prevent fraudulent and manipulative acts and, in general, to
protect investors and the public interest. The Commission notes that
Market-Makers hedge their options transactions by buying and/or selling
the underlying securities. When the underlying primary market for the
particular equity security on which a CBOE option is based disseminates
less than a 1000-share quote during CBOE's opening rotation in the
respective option series, the amount of readily-accessible liquidity
available to a CBOE Market-Maker in the underlying security on that
particular side of the market to hedge a 10-up quote in the respective
option may potentially be limited. Correspondingly, Market-Makers'
ability to hedge their positions at the open might be restricted,
increasing their financial exposure and risk, particularly when the
Market-Maker is required to quote over multiple series during the
typically active open rotation period.\11\
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78(f)(b).
\9\ In approving this rule change, the Commission notes that it
has considered the proposal's impact on efficiency, competition, and
capital formation. See 15 U.S.C. 78c(f).
\10\ 15 U.S.C. 78f(b)(5).
\11\ According to the Exchange, an options exchange may list 20
or more options series for an underlying stock. For example, if a
Market-Maker posts 10-up markets in twenty series, that Market-Maker
would provide liquidity equivalent to 20,000 shares.
---------------------------------------------------------------------------
While the Commission continues to believe that CBOE's existing
quote size requirements are appropriate, given the benefits that are
provided to Market-Makers such as favorable margin treatment, the
Commission also believes that it is reasonable to allow a limited
exception for Market-Makers to lower their quote sizes to as low as one
contract during opening rotations on HOSS when there is a diminished
amount of liquidity in the underlying primary market. By permitting
Market-Makers to limit their exposure at the opening, the Commission
believes that this proposal may encourage Market-Makers to quote more
competitively during HOSS opening rotations.\12\ The Commission notes
that CBOE's proposal would permit Market-Makers to submit an opening
quote for as low as one contract only in connection with opening
rotations on HOSS, though a Market-Maker would be free to quote more if
it so choose. Further, the proposal would permit a Market-Maker to
maintain its 1-up quote during the opening rotation until it is
decremented or the Market-Maker updates its quote, at which point
CBOE's continuous quoting obligation rules would apply. Finally, the
Commission believes that the proposal should not detract from CBOE's
ability to maintain fair and orderly openings on HOSS because, to the
extent that there may be a market order imbalance on the opening, such
imbalances would continue to be addressed in the same manner as they
are currently handled under existing CBOE rules.
---------------------------------------------------------------------------
\12\ Nothing in this proposal would affect a Market-Maker's
obligation to honor its firm quote obligations imposed by CBOE Rule
8.51.
---------------------------------------------------------------------------
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\13\ that the proposed rule change (SR-CBOE-2007-59) be, and hereby
is, approved.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
---------------------------------------------------------------------------
\14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-23608 Filed 12-5-07; 8:45 am]
BILLING CODE 8011-01-P
