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 Options on Indices, ETFs, and HOLDRS, 8383-8384 [E8-2613]
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Federal Register / Vol. 73, No. 30 / Wednesday, February 13, 2008 / Notices
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
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
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.
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:
rwilkins on PROD1PC63 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–CBOE–2008–10 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–2008–10. 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
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–2008–10 and should
be submitted on or before March 5,
2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–2612 Filed 2–12–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57286; File No. SR–CBOE–
2007–122]
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
Options on Indices, ETFs, and
HOLDRS
February 7, 2008.
On October 31, 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 24.16 (‘‘Rule 24.16’’
or ‘‘Rule’’), which is the Exchange’s rule
applicable to the nullification and
adjustment of transactions in index
options, options on exchange-traded
funds (‘‘ETFs’’), and options on
HOLding Company Depository ReceiptS
(‘‘HOLDRS’’), to change the manner in
which the Rule applies the obvious
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
8383
price error provision to transactions
occurring as part of the Hybrid Opening
System (‘‘HOSS’’) process. On December
14, 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 December 28,
2007.3 The Commission received no
comment letters on the proposal. This
order approves the proposed rule
change, as amended.
Currently, Rule 24.16 provides that an
obvious price error will be deemed to
have occurred when the execution price
of a buy (sell) transaction is above
(below) the fair market value of the
option by at least the prescribed
minimum error amount, as set forth in
the Rule. For purposes of transactions
occurring on HOSS, ‘‘fair market value’’
is currently defined as the midpoint of
the first quote after the transaction(s) in
question that does not reflect the
erroneous transaction(s). The Exchange
proposes to revise the definition of fair
market value to provide additional
conditions that would apply during
regular HOSS rotations and during
HOSS rotations in index options series
that are being used to calculate the final
settlement price of volatility indexes on
the final settlement day. According to
CBOE, the additional conditions are
intended to reasonably factor the
amount of available liquidity into the
fair market value calculation during
these rotations.
With respect to regular HOSS
rotations, the Exchange proposes to add
a condition that the option contract
quantity subject to nullification or
adjustment cannot exceed the size of the
first quote after the transaction(s) in
question that does not reflect the
erroneous transaction(s). Any
nullification or adjustment would occur
on a pro rata basis and would take into
account the overall size of the HOSS
opening trade.
With respect to HOSS rotations in
index options series that are used to
calculate the final settlement price of a
volatility index on the final settlement
day, the Exchange proposes to add a
condition that the first quote after the
transaction(s) in question that does not
reflect the erroneous transaction(s) must
be for at least the overall size of the
HOSS opening trade. If the size of the
quote is less than the overall size of the
HOSS opening trade, then the obvious
price error provision shall not apply.
The Commission finds that the
proposed rule change is consistent with
the requirements of the Act and the
8 17
6 15
U.S.C. 78s(b)(3)(A).
7 17 CFR 240.19b–4(f)(2).
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3 Securities Exchange Act Release No. 57005
(December 20, 2007), 72 FR 73919.
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8384
Federal Register / Vol. 73, No. 30 / Wednesday, February 13, 2008 / Notices
rules and regulations thereunder
applicable to a national securities
exchange 4 and, in particular, the
requirements of section 6(b) of the Act 5
and the rules and regulations
thereunder. Specifically, the
Commission finds that the proposal is
consistent with section 6(b)(5) of the
Act,6 in that the proposal is designed to
promote just and equitable principles of
trade, remove impediments and perfect
the mechanisms of a free and open
market, and to protect 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 and the process for reviewing
such a determination should be based
on specific and objective criteria and
subject to specific and objective
procedures.
The Commission believes that the
Exchange’s proposal to revise Rule
24.16 by modifying the manner in
which the Rule applies its obvious price
error provision to transactions in index
options, options on ETFs, and options
on HOLDRS that occur as part of the
HOSS process during regular opening
rotations and during opening rotations
on the final settlement day for volatility
indexes is appropriate. The proposal
provides for an objective standard
because in each of the foregoing
situations, the fair market value
calculation must take into account the
size of the quote.
It is therefore ordered, pursuant to
section 19(b)(2) of the Act,7 that the
proposed rule change (SR–CBOE–2007–
122), as amended, is hereby approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–2613 Filed 2–12–08; 8:45 am]
rwilkins on PROD1PC63 with NOTICES
BILLING CODE 8011–01–P
4 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).
5 15 U.S.C. 78f(b).
6 15 U.S.C. 78f(b)(5).
7 15 U.S.C. 78s(b)(2).
8 17 CFR 200.30–3(a)(12).
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17:45 Feb 12, 2008
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SECURITIES AND EXCHANGE
COMMISSION
requirements for an issue to become and
remain DTC eligible.
[Release No. 34–57283; File No. SR–DTC–
2007–11]
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing of Amendment No. 1 to
Proposed Rule Change To Amend Its
Operational Arrangements as It
Applies to Structured Securities
February 6, 2008.
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 7, 2007, The Depository
Trust Company (‘‘DTC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change. The proposed rule change was
published for comment in the Federal
Register on November 26, 2007.3 The
Commission received four comments on
the original proposal.4 On December 14,
2007, DTC filed Amendment No. 1 to
the proposed rule change.5 The filing, as
amended, is 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, as amended, from interested
parties.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The proposed rule change seeks
approval to amend DTC’s ‘‘Operational
Arrangements Necessary for an Issue to
Become and Remain Eligible for DTC
Services’’ (‘‘Operational Arrangements’’)
as it applies to Structured Securities.
DTC’s Operational Arrangements is a
contractual agreement between DTC,
issuers, and paying agents that outlines
the procedural and operational
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release No. 34–56795
(November 15, 2007), 72 FR 66009.
4 Simon Griffiths, Vice President, JP Morgan
(December 10, 2007); Tom Migneron, Principal,
Edward Jones (December 11, 2007); Dan W.
Schneider, Baker & McKenzie LLP, Counsel to the
Association of Global Custodians, Chicago, Illinois
(December 12, 2007); Norman Eaker, Chairman,
Securities Industry and Financial Markets
Association, Operations Committee, Gussie Tate,
President, Securities Industry and Financial
Markets Association, Dividend Division, and
Thomas Hamilton, Vice Chairman, Securities
Industry and Financial Markets Association, MBS
and Securitized Products Division Executive
Committee (December 19, 2007).
5 Amendment No. 1 replaces and supersedes the
original filing in its entirety. Amendment No. 1
corrects an inadvertent reference to ‘‘issuer’’ instead
of ‘‘underwriter’’ in Section 2(ii).
2 17
PO 00000
Frm 00122
Fmt 4703
Sfmt 4703
In its filing with the Commission,
DTC 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. DTC has prepared
summaries, set forth in sections (A), (B),
and (C) below, of the most significant
aspects of these statements.6
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
The proposed rule change seeks to
amend DTC’s Operational Arrangements
as it applies to Structured Securities in
order to: extend the deadline by which
paying agents of such securities must
submit periodic payment rate
information to DTC; establish an
exception processing fee applied to
certain Structured Securities whose
features prevent paying agents from
complying with the extended deadline;
and provide that DTC track and make
publicly available reports on paying
agent performance as it relates to
timeliness and accuracy of Structured
Securities payment rate information
submitted to DTC.
1. Background
On September 7, 2007, DTC filed with
the Commission proposed rule change
DTC–2007–11. Amendment No. 1
removes reference to the imposition of
a processing fee on January 1, 2008, and
corrects the identity of the party that
will identify an issue as conforming or
non-conforming and will submit a
written attestation giving the reason for
non-conformance.
A Structured Security, such as a
collateralized mortgage obligation or
asset-backed security (‘‘ABS’’), is a bond
backed by a pool of underlying financial
assets. The underlying assets generally
consist of receivables such as mortgages,
credit card receivables, or student or
other bank loans for which the timing of
principal payments by the underlying
obligors may be variable and
unpredictable. A Structured Security
may also incorporate credit
enhancements or other rights that affect
6 The Commission has modified the text of the
summaries prepared by DTC.
E:\FR\FM\13FEN1.SGM
13FEN1
]]>Agencies
[Federal Register Volume 73, Number 30 (Wednesday, February 13, 2008)]
[Notices]
[Pages 8383-8384]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-2613]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57286; File No. SR-CBOE-2007-122]
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
Options on Indices, ETFs, and HOLDRS
February 7, 2008.
On October 31, 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 24.16 (``Rule
24.16'' or ``Rule''), which is the Exchange's rule applicable to the
nullification and adjustment of transactions in index options, options
on exchange-traded funds (``ETFs''), and options on HOLding Company
Depository ReceiptS (``HOLDRS''), to change the manner in which the
Rule applies the obvious price error provision to transactions
occurring as part of the Hybrid Opening System (``HOSS'') process. On
December 14, 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 December 28, 2007.\3\ The Commission
received no comment letters on the proposal. This order approves the
proposed rule change, as amended.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 57005 (December 20,
2007), 72 FR 73919.
---------------------------------------------------------------------------
Currently, Rule 24.16 provides that an obvious price error will be
deemed to have occurred when the execution price of a buy (sell)
transaction is above (below) the fair market value of the option by at
least the prescribed minimum error amount, as set forth in the Rule.
For purposes of transactions occurring on HOSS, ``fair market value''
is currently defined as the midpoint of the first quote after the
transaction(s) in question that does not reflect the erroneous
transaction(s). The Exchange proposes to revise the definition of fair
market value to provide additional conditions that would apply during
regular HOSS rotations and during HOSS rotations in index options
series that are being used to calculate the final settlement price of
volatility indexes on the final settlement day. According to CBOE, the
additional conditions are intended to reasonably factor the amount of
available liquidity into the fair market value calculation during these
rotations.
With respect to regular HOSS rotations, the Exchange proposes to
add a condition that the option contract quantity subject to
nullification or adjustment cannot exceed the size of the first quote
after the transaction(s) in question that does not reflect the
erroneous transaction(s). Any nullification or adjustment would occur
on a pro rata basis and would take into account the overall size of the
HOSS opening trade.
With respect to HOSS rotations in index options series that are
used to calculate the final settlement price of a volatility index on
the final settlement day, the Exchange proposes to add a condition that
the first quote after the transaction(s) in question that does not
reflect the erroneous transaction(s) must be for at least the overall
size of the HOSS opening trade. If the size of the quote is less than
the overall size of the HOSS opening trade, then the obvious price
error provision shall not apply.
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the
[[Page 8384]]
rules and regulations thereunder applicable to a national securities
exchange \4\ and, in particular, the requirements of section 6(b) of
the Act \5\ and the rules and regulations thereunder. Specifically, the
Commission finds that the proposal is consistent with section 6(b)(5)
of the Act,\6\ in that the proposal is designed to promote just and
equitable principles of trade, remove impediments and perfect the
mechanisms of a free and open market, and to protect investors and the
public interest.
---------------------------------------------------------------------------
\4\ 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).
\5\ 15 U.S.C. 78f(b).
\6\ 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 and the process for reviewing such a
determination should be based on specific and objective criteria and
subject to specific and objective procedures.
The Commission believes that the Exchange's proposal to revise Rule
24.16 by modifying the manner in which the Rule applies its obvious
price error provision to transactions in index options, options on
ETFs, and options on HOLDRS that occur as part of the HOSS process
during regular opening rotations and during opening rotations on the
final settlement day for volatility indexes is appropriate. The
proposal provides for an objective standard because in each of the
foregoing situations, the fair market value calculation must take into
account the size of the quote.
It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\7\ that the proposed rule change (SR-CBOE-2007-122), as amended,
is hereby approved.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
---------------------------------------------------------------------------
\8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-2613 Filed 2-12-08; 8:45 am]
BILLING CODE 8011-01-P
