Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of Proposed Rule Change To Establish a Solicitation Auction Mechanism and To Amend Its Automated Improvement Mechanism, 10837-10839 [E8-3729]
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Federal Register / Vol. 73, No. 40 / Thursday, February 28, 2008 / Notices
change, as amended, is consistent with
the Act. Comments may be submitted by
any of the following methods:
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
[Release No. 34–57357; File No. SR–CBOE–
2008–14]
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
No. SR–Amex–2008–09 on the subject
line.
Paper Comments
rwilkins on PROD1PC63 with NOTICES
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street, NE.,
Washington, DC 20549–1090.
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing of
Proposed Rule Change To Establish a
Solicitation Auction Mechanism and To
Amend Its Automated Improvement
Mechanism
February 20, 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 February
7, 2008, the Chicago Board Options
All submissions should refer to File
Exchange, Incorporated (‘‘CBOE’’ or
Number SR–Amex–2008–09. This file
‘‘Exchange’’) filed with the Securities
number should be included on the
and Exchange Commission
subject line if e-mail is used. To help the (‘‘Commission’’) the proposed rule
Commission process and review your
change as described in Items I, II, and
comments more efficiently, please use
III below, which items have been
only one method. The Commission will substantially prepared by the CBOE.
post all comments on the Commission’s The Commission is publishing this
Internet Web site (https://www.sec.gov/
notice to solicit comments on the
rules/sro.shtml). Copies of the
proposed rule change from interested
submission, all subsequent
persons.
amendments, all written statements
I. Self-Regulatory Organization’s
with respect to the proposed rule
Statement of the Terms of Substance of
change that are filed with the
the Proposed Rule Change
Commission, and all written
communications relating to the
CBOE proposes to establish a new
proposed rule change between the
automated mechanism for auctioning
Commission and any person, other than
larger-sized orders and to modify its
those that may be withheld from the
existing automated improvement
public in accordance with the
mechanism (‘‘AIM’’) to permit its use for
provisions of 5 U.S.C. 552, will be
the execution of complex orders. The
available for inspection and copying in
text of the proposed rule change is
the Commission’s Public Reference
available on the Exchange’s Web site at
Room, on official business days between
(https://www.cboe.org/Legal), at the
the hours of 10 a.m. and 3 p.m. Copies
Office of the Secretary, and at the
of such filing also will be available for
Commission’s Public Reference Room.
inspection and copying at the principal
office of Amex. All comments received
II. Self-Regulatory Organization’s
will be posted without change; the
Statement of the Purpose of, and
Commission does not edit personal
Statutory Basis for, the Proposed Rule
identifying information from
Change
submissions. You should submit only
In its filing with the Commission, the
information that you wish to make
Exchange included statements
available publicly. All submissions
concerning the purpose of, and basis for,
should refer to File Number SR–Amex–
2008–09 and should be submitted on or the proposed rule change and discussed
any comments it received on the
before March 20, 2008.
proposed rule change. The text of these
For the Commission, by the Division of
statements may be examined at the
Trading and Markets, pursuant to delegated
places specified in Item IV below. The
authority.7
Exchange has prepared summaries, set
Florence E. Harmon,
forth in Sections A, B, and C below, of
Deputy Secretary.
the most significant aspects of such
[FR Doc. E8–3735 Filed 2–27–08; 8:45 am]
statements.
BILLING CODE 8011–01–P
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7 17
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10837
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Under CBOE Rules 6.45A, Priority
and Allocation of Equity Option Trades
on the CBOE Hybrid System, and 6.45B,
Priority and Allocation of Trades in
Index Options and Options on ETFs on
the CBOE Hybrid System, order entry
firms that electronically enter orders are
required to expose an unsolicited
agency order (‘‘Agency Order’’) for at
least 3 seconds before crossing it against
an order that it has solicited from other
broker-dealers.3 Currently, an order
entry firm can comply with this
requirement by entering the Agency
Order on the Exchange, waiting 3
seconds, and then entering the solicited
order. The Exchange states that, due to
the 3-second exposure requirement,
order entry firms have no level of
assurance that they will be able to
electronically pair solicited orders
against Agency Orders for executions.
As an alternative, CBOE has developed
AIM, which permits an Agency Order to
be electronically executed against
principal or solicited interest.4
To better compete with various other
electronic alternatives available at other
options exchanges, CBOE has also
developed an enhanced auction
mechanism for larger-sized simple and
complex Agency Orders that are to be
executed against solicited orders (the
‘‘Auction’’). The proposed rule change
would implement this functionality in
options classes designated by the
Exchange. Such orders would be
required to be for at least 500 contracts,
must be entered as all-or-none limit
(‘‘AON’’) orders,5 and would be
executed only if the price is at or better
than the CBOE best bid or offer
(‘‘BBO’’).
When a proposed solicited cross is
entered into the Auction, the Exchange
would send a Request for Responses
(‘‘RFR’’) message to all members that
have elected to receive such messages.
Members would then have 3 seconds to
3 See
CBOE Rule 6.45A.02 and 6.45B.02.
CBOE Rule 6.74A, Automated Improvement
Mechanism (‘‘AIM’’).
5 The Exchange’s existing rules provide that an
AON order may be crossed with another AON order
if all bids or offers at the same price at which the
cross is to be effected have been filled. See, e.g.,
Interpretation and Policy .01 to CBOE Rule 6.44,
Bids and Offers in Relation to Units of Trading. The
proposed Auction system is modeled after this
principle, except that it would allow the crossing
of large-sized AON orders to take place so long as
there are no public customer orders at the proposed
price and there is insufficient size at an improved
price to accommodate the Agency Order.
4 See
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Federal Register / Vol. 73, No. 40 / Thursday, February 28, 2008 / Notices
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respond with a price that would
improve the proposed execution price
for the Agency Order, except that
responses would not be entered for the
account of an options market maker
from another options exchange.
Responses may be entered and executed
at prices that are in a multiple of the
applicable minimum price increment
that has been designated by the
Exchange for the series, which
increment may not be less than $0.01.
The Exchange believes this would allow
for greater flexibility in pricing largesized orders and provide for a greater
opportunity for price improvement.
The Auction will conclude at the
sooner of various conditions.6 At the
conclusion of the Auction, the Agency
Order would be executed against the
solicited order unless there is sufficient
size to execute the entire Agency Order
at a price (or prices) that improves the
proposed crossing price. In the case
where there is one or more public
customer orders resting in the book at
the proposed execution price on the
opposite side of the Agency Order, the
solicited order would be cancelled and
the Agency Order would be executed
against other bids (offers) if there is
sufficient size at the bid (offer) to
execute the entire size of the Agency
Order (size would be measured
considering resting orders and quotes
and responses).7 If there is not sufficient
size to execute the entire Agency Order,
the proposed cross would not be
executed and both the Agency Order
and solicited order would be cancelled.
Additionally, the proposed cross would
not be executed and both the Agency
Order and solicited order would be
6 The Auction shall conclude at the sooner of: (i)
The end of the response period, (ii) upon receipt
by the Hybrid Trading System (‘‘Hybrid’’) of an
unrelated order (in the same series as the Agency
Order) that is marketable against either the
Exchange’s disseminated quote (when such quote is
the NBBO) or the responses, (iii) upon receipt by
Hybrid of an unrelated limit order (in the same
series as the Agency Order and on the opposite side
of the market as the Agency Order) that improves
any response, (iv) any time a response matches the
Exchange’s disseminated quote on the opposite side
of the market from the responses, or (v) any time
there is a quote lock on the Exchange pursuant to
CBOE Rule 6.45A(d) or 6.45B(d). See paragraph
(b)(2) of proposed CBOE Rule 6.74B, Solicitation
Auction Mechanism.
7 When the Agency Order is executed at an
improved price(s) or at the proposed execution
price against electronic orders, quotes and
responses, priority would be pursuant to the
allocation algorithm in effect pursuant to CBOE
Rule 6.45A or 6.45B, as applicable. The allocation
for simple and complex orders would be the same,
except that complex orders would also be subject
to the complex order priority rules applicable to
bids and offers in the individual series legs of a
complex order contained in paragraphs (d) or .06
of CBOE Rule 6.53C, Complex Orders on the Hybrid
System, as applicable.
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cancelled if the execution price would
be inferior to the BBO.
The proposed rule would also require
members to deliver to customers a
written document describing the terms
and conditions of the Auction
mechanism prior to executing Agency
Orders using the Auction mechanism.
Such written document would be
required to be in a form approved by the
Exchange.
The proposed rule would also specify
that members may not use the Auction
mechanism to circumvent the
Exchange’s rules limiting principal
order transactions.8 Additionally, the
Exchange notes that for purposes of
paragraph (e) to CBOE Rule 6.9,
Solicited Transactions, which paragraph
prohibits anticipatory hedging activities
prior to the entry of an order on the
Exchange, the terms of an order would
be considered ‘‘disclosed’’ to the trading
crowd on the Exchange when the order
is entered into the Auction mechanism.
Finally, the Exchange is proposing to
expand its existing AIM auction, which
currently only applies to simple orders,
to cover complex orders. Thus, complex
orders would be eligible for execution
through AIM at a net debit or net credit
price provided the Auction eligibility
requirements of the AIM rule are
satisfied and the Agency Order is
eligible for AIM considering its complex
order type, order origin code (i.e., nonbroker-dealer public customer, brokerdealers that are not Market-Makers or
specialists on an options exchange, and/
or Market-Makers or specialists on an
options exchange), class, and
marketability as determined by the
Exchange. Allocation of complex orders
that are subject to AIM will be the same
as the existing allocation procedures,
provided that the complex order priority
rules applicable to bids and offers in the
individual series legs of a complex order
contained in CBOE Rule 6.53C(d) or
6.53C.06, as applicable, will continue to
apply. In addition, the Exchange is
proposing to provide in its rules that it
may determine on a class-by-class basis
that orders of 500 or more contracts may
be executed through AIM without
considering prices that might be
available on other options exchanges.
All other aspects of the AIM auction
will continue to apply unchanged.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,9 in general, and
furthers the objectives of Section 6(b)(5)
8 See CBOE Rules 6.45A.01, 6.45B.01, 6.74,
Crossing Orders, and 6.74A.
9 15 U.S.C. 78f(b).
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of the Act,10 in particular, in that it is
designed to prevent fraudulent and
manipulative acts and practices,
promote just and equitable principles of
trade, remove impediments to and
perfect the mechanism 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
The Exchange 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
Written comments on the proposed
rule change were neither solicited nor
received.
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 Exchange 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:
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–2008–14 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.
10 15
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U.S.C. 78f(b)(5).
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Federal Register / Vol. 73, No. 40 / Thursday, February 28, 2008 / Notices
All submissions should refer to File
Number SR–CBOE–2008–14. 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–2008–14 and should
be submitted on or before March 20,
2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–3729 Filed 2–27–08; 8:45 am]
rwilkins on PROD1PC63 with NOTICES
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57365; File No. SR–CBOE–
2007–109]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Order Granting Accelerated Approval
of a Proposed Rule Change, as
Modified by Amendment No. 1 Thereto,
Adopting Generic Listing Standards
for Exchange-Traded Funds Based on
International or Global Indexes or
Portfolios, or Indexes or Portfolios
Described in Exchange Rules
Previously Approved by the
Commission as Underlying
Benchmarks for Derivative Securities
February 21, 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 10, 2007, the Chicago Board
Options Exchange, Incorporated
(‘‘Exchange’’ or ‘‘CBOE’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been
substantially prepared by the Exchange.
On February 19, 2008, CBOE filed
Amendment No. 1 to the proposed rule
change. This order provides notice of
the proposal, as amended, and approves
the proposal on an accelerated basis.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to revise its
listing standards, adopted pursuant to
Rule 19b–4(e) under the Act, in CBOE
Rules 31.5(L) and 31.5(M) to include
generic listing standards for Index
Portfolio Receipts (‘‘IPRs’’) and Index
Portfolio Shares (‘‘IPSs,’’ together with
IPRs, referred to herein with as
‘‘exchange-traded funds’’ or ‘‘ETFs’’)
that are based on international or global
indexes or portfolios, or on indexes or
portfolios described in exchange rules
that have been previously approved by
the Commission for the trading of ETFs
or other specified index-based
securities.
The text of the proposed rule change
is available from the Exchange’s Web
site (https://www.cboe.org/Legal), at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
1 15
11 17
CFR 200.30–3(a)(12).
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10839
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 III below. The
Exchange 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 Exchange proposes to list and
trade ETFs pursuant to Rule 19b–4(e)
under the Act 3 if each of the conditions
set forth in CBOE Rules 31.5(L) or (M)
is satisfied. Rule 19b–4(e) provides that
the listing and trading of a new
derivative securities product by a selfregulatory organization (‘‘SRO’’) shall
not be deemed a proposed rule change,
pursuant to paragraph (c)(1) of Rule
19b–4, if the Commission has approved,
pursuant to Section 19(b) of the Act, the
SRO’s trading rules, procedures, and
listing standards for the product class
that would include the new derivatives
securities product, and the SRO has a
surveillance program for the product
class.4 This proposed rule change is
based on SR–Phlx–2007–20, which was
approved by the Commission on July 11,
2007.5
a. Background
CBOE Rules 31.5(L) and (M) provide
standards for listing Index Portfolio
Receipts and Index Portfolio Shares,
respectively, on CBOE. An Index
Portfolio Receipt is a security that
represent an interest in a unit
investment trust that holds securities
that comprise a stock index on which a
series of IPR is based.6 An Index
Portfolio Share is a security that is
issued by an open-end management
investment company and based on a
portfolio of stocks or fixed income
3 17
CFR 240.19b–4(e).
relying on Rule 19b–4(e), the SRO must
submit Form 19b–4(e) to the Commission within
five business days after the exchange begins trading
the new derivative securities products. See 17 CFR
240.19b–4(e)(2)(ii).
5 See Securities Exchange Act Release No. 56049
(July 11, 2007), 72 FR 39121 (July 17, 2007) (SR–
Phlx–2007–20).
6 The complete definition of IPRs is set forth in
CBOE Rule 1.1.02.
4 When
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]]>Agencies
[Federal Register Volume 73, Number 40 (Thursday, February 28, 2008)]
[Notices]
[Pages 10837-10839]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-3729]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57357; File No. SR-CBOE-2008-14]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing of Proposed Rule Change To Establish a
Solicitation Auction Mechanism and To Amend Its Automated Improvement
Mechanism
February 20, 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 February 7, 2008, 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 CBOE. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
CBOE proposes to establish a new automated mechanism for auctioning
larger-sized orders and to modify its existing automated improvement
mechanism (``AIM'') to permit its use for the execution of complex
orders. The text of the proposed rule change is available on the
Exchange's Web site at (https://www.cboe.org/Legal), at the Office of
the Secretary, 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.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Under CBOE Rules 6.45A, Priority and Allocation of Equity Option
Trades on the CBOE Hybrid System, and 6.45B, Priority and Allocation of
Trades in Index Options and Options on ETFs on the CBOE Hybrid System,
order entry firms that electronically enter orders are required to
expose an unsolicited agency order (``Agency Order'') for at least 3
seconds before crossing it against an order that it has solicited from
other broker-dealers.\3\ Currently, an order entry firm can comply with
this requirement by entering the Agency Order on the Exchange, waiting
3 seconds, and then entering the solicited order. The Exchange states
that, due to the 3-second exposure requirement, order entry firms have
no level of assurance that they will be able to electronically pair
solicited orders against Agency Orders for executions. As an
alternative, CBOE has developed AIM, which permits an Agency Order to
be electronically executed against principal or solicited interest.\4\
---------------------------------------------------------------------------
\3\ See CBOE Rule 6.45A.02 and 6.45B.02.
\4\ See CBOE Rule 6.74A, Automated Improvement Mechanism
(``AIM'').
---------------------------------------------------------------------------
To better compete with various other electronic alternatives
available at other options exchanges, CBOE has also developed an
enhanced auction mechanism for larger-sized simple and complex Agency
Orders that are to be executed against solicited orders (the
``Auction''). The proposed rule change would implement this
functionality in options classes designated by the Exchange. Such
orders would be required to be for at least 500 contracts, must be
entered as all-or-none limit (``AON'') orders,\5\ and would be executed
only if the price is at or better than the CBOE best bid or offer
(``BBO'').
---------------------------------------------------------------------------
\5\ The Exchange's existing rules provide that an AON order may
be crossed with another AON order if all bids or offers at the same
price at which the cross is to be effected have been filled. See,
e.g., Interpretation and Policy .01 to CBOE Rule 6.44, Bids and
Offers in Relation to Units of Trading. The proposed Auction system
is modeled after this principle, except that it would allow the
crossing of large-sized AON orders to take place so long as there
are no public customer orders at the proposed price and there is
insufficient size at an improved price to accommodate the Agency
Order.
---------------------------------------------------------------------------
When a proposed solicited cross is entered into the Auction, the
Exchange would send a Request for Responses (``RFR'') message to all
members that have elected to receive such messages. Members would then
have 3 seconds to
[[Page 10838]]
respond with a price that would improve the proposed execution price
for the Agency Order, except that responses would not be entered for
the account of an options market maker from another options exchange.
Responses may be entered and executed at prices that are in a multiple
of the applicable minimum price increment that has been designated by
the Exchange for the series, which increment may not be less than
$0.01. The Exchange believes this would allow for greater flexibility
in pricing large-sized orders and provide for a greater opportunity for
price improvement.
The Auction will conclude at the sooner of various conditions.\6\
At the conclusion of the Auction, the Agency Order would be executed
against the solicited order unless there is sufficient size to execute
the entire Agency Order at a price (or prices) that improves the
proposed crossing price. In the case where there is one or more public
customer orders resting in the book at the proposed execution price on
the opposite side of the Agency Order, the solicited order would be
cancelled and the Agency Order would be executed against other bids
(offers) if there is sufficient size at the bid (offer) to execute the
entire size of the Agency Order (size would be measured considering
resting orders and quotes and responses).\7\ If there is not sufficient
size to execute the entire Agency Order, the proposed cross would not
be executed and both the Agency Order and solicited order would be
cancelled. Additionally, the proposed cross would not be executed and
both the Agency Order and solicited order would be cancelled if the
execution price would be inferior to the BBO.
---------------------------------------------------------------------------
\6\ The Auction shall conclude at the sooner of: (i) The end of
the response period, (ii) upon receipt by the Hybrid Trading System
(``Hybrid'') of an unrelated order (in the same series as the Agency
Order) that is marketable against either the Exchange's disseminated
quote (when such quote is the NBBO) or the responses, (iii) upon
receipt by Hybrid of an unrelated limit order (in the same series as
the Agency Order and on the opposite side of the market as the
Agency Order) that improves any response, (iv) any time a response
matches the Exchange's disseminated quote on the opposite side of
the market from the responses, or (v) any time there is a quote lock
on the Exchange pursuant to CBOE Rule 6.45A(d) or 6.45B(d). See
paragraph (b)(2) of proposed CBOE Rule 6.74B, Solicitation Auction
Mechanism.
\7\ When the Agency Order is executed at an improved price(s) or
at the proposed execution price against electronic orders, quotes
and responses, priority would be pursuant to the allocation
algorithm in effect pursuant to CBOE Rule 6.45A or 6.45B, as
applicable. The allocation for simple and complex orders would be
the same, except that complex orders would also be subject to the
complex order priority rules applicable to bids and offers in the
individual series legs of a complex order contained in paragraphs
(d) or .06 of CBOE Rule 6.53C, Complex Orders on the Hybrid System,
as applicable.
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The proposed rule would also require members to deliver to
customers a written document describing the terms and conditions of the
Auction mechanism prior to executing Agency Orders using the Auction
mechanism. Such written document would be required to be in a form
approved by the Exchange.
The proposed rule would also specify that members may not use the
Auction mechanism to circumvent the Exchange's rules limiting principal
order transactions.\8\ Additionally, the Exchange notes that for
purposes of paragraph (e) to CBOE Rule 6.9, Solicited Transactions,
which paragraph prohibits anticipatory hedging activities prior to the
entry of an order on the Exchange, the terms of an order would be
considered ``disclosed'' to the trading crowd on the Exchange when the
order is entered into the Auction mechanism.
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\8\ See CBOE Rules 6.45A.01, 6.45B.01, 6.74, Crossing Orders,
and 6.74A.
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Finally, the Exchange is proposing to expand its existing AIM
auction, which currently only applies to simple orders, to cover
complex orders. Thus, complex orders would be eligible for execution
through AIM at a net debit or net credit price provided the Auction
eligibility requirements of the AIM rule are satisfied and the Agency
Order is eligible for AIM considering its complex order type, order
origin code (i.e., non-broker-dealer public customer, broker-dealers
that are not Market-Makers or specialists on an options exchange, and/
or Market-Makers or specialists on an options exchange), class, and
marketability as determined by the Exchange. Allocation of complex
orders that are subject to AIM will be the same as the existing
allocation procedures, provided that the complex order priority rules
applicable to bids and offers in the individual series legs of a
complex order contained in CBOE Rule 6.53C(d) or 6.53C.06, as
applicable, will continue to apply. In addition, the Exchange is
proposing to provide in its rules that it may determine on a class-by-
class basis that orders of 500 or more contracts may be executed
through AIM without considering prices that might be available on other
options exchanges. All other aspects of the AIM auction will continue
to apply unchanged.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\9\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\10\ in particular, in that it
is designed to prevent fraudulent and manipulative acts and practices,
promote just and equitable principles of trade, remove impediments to
and perfect the mechanism of a free and open market and a national
market system, and, in general, to protect investors and the public
interest.
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\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
The Exchange 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
Written comments on the proposed rule change were neither solicited
nor received.
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 Exchange 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:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-CBOE-2008-14 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.
[[Page 10839]]
All submissions should refer to File Number SR-CBOE-2008-14. 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-2008-14 and should be
submitted on or before March 20, 2008.
For the Commission, by the Division of Trading and Markets,
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. E8-3729 Filed 2-27-08; 8:45 am]
BILLING CODE 8011-01-P
