Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Relating to Customer-to-Customer Immediate Crosses, 15546-15548 [E8-5795]
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15546
Federal Register / Vol. 73, No. 57 / Monday, March 24, 2008 / Notices
are accurate, and based on valid
assumptions and methodology; and
• Ways in which we can minimize
the burden of the collection of
information on those who are to
respond, through the use of appropriate
technological collection techniques or
other forms of information technology.
For copies of this proposal, contact
Mary Beth Smith-Toomey on (202) 606–
8358, FAX (202) 418–3251 or e-mail to
mbtoomey@opm.gov. Please be sure to
include a mailing address with your
request.
DATES: Comments on this proposal
should be received within 60 calendar
days from the date of this publication.
ADDRESSES: Send or deliver comments
to: Marie L’Etoile, Group Manager,
Work/Life Group, U.S. Office of
Personnel Management, 1900 E Street,
NW., Washington, DC 20415.
Office of Personnel Management.
Howard C. Weizmann,
Deputy Director.
[FR Doc. E8–5863 Filed 3–21–08; 8:45 am]
BILLING CODE 6325–39–P
SECURITIES AND EXCHANGE
COMMISSION
Release No. 34–57512; File No. SR–CBOE–
2008–19]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change, as Modified by
Amendment No. 1 Thereto, Relating to
Customer-to-Customer Immediate
Crosses
mstockstill on PROD1PC66 with NOTICES
March 17, 2008.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 4,
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 and II
below, which Items have been prepared
substantially by CBOE. On March 14,
2008, CBOE submitted Amendment No.
1 to the proposed rule change. CBOE
filed the proposed rule change as a
‘‘non-controversial’’ proposed rule
change pursuant to Section 19(b)(3)(A)
of the Act 3 and Rule 19b–4(f)(6)
thereunder,4 which renders it effective
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).
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16:33 Mar 21, 2008
Jkt 214001
upon filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change, as amended, from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
CBOE proposes to amend its
Automated Improvement Mechanism
(‘‘AIM’’) Rule to permit customer-tocustomer orders to be entered paired
and to be crossed without any AIM
auction exposure period. The text of the
proposed rule change is available at
CBOE, the Commission’s Public
Reference Room, and https://
www.cboe.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
CBOE included statements concerning
the purpose of, and basis for, the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. CBOE
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
CBOE proposes to amend Rule 6.74A
to permit customer-to-customer orders
to be entered paired and to be crossed
without any AIM auction exposure
period. Currently, CBOE Rules provide
for a minimum exposure time of three
seconds for crossing orders on the
Hybrid Trading System (‘‘Hybrid’’)
when an order entry firm (i) executes as
principal against orders it represents as
agent, or (ii) executes orders it
represents as agent against orders
solicited from members and nonmember broker-dealers to transact with
such orders.5 However, the three second
exposure period is not applicable when
crossing two orders that are both for the
accounts of non-broker-dealer
customers. Thus, two non-broker-dealer
customer orders may be entered
separately into Hybrid by the same
order entry firm to trade against each
other without waiting three seconds. To
enhance and automate order entry firms’
5 See CBOE Rule 6.45A, Priority and Allocation
of Equity Option Trades on the CBOE Hybrid
System, Interpretations and Policies .01 and .02,
and Rule 6.45B, Priority and Allocation of Trades
in Index Options and Options on ETFs on the CBOE
Hybrid System.
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ability to submit two contra-side
customer orders, the Exchange is
proposing to introduce and to codify a
new feature in its AIM Rule 6 that the
Exchange refers to as a ‘‘customer-tocustomer immediate cross.’’
When using the AIM customer-tocustomer immediate cross feature, the
proposed rule will provide that an order
entry firm (‘‘Initiating Member’’) may
enter an agency order for the account of
a non-broker-dealer customer in AIM,
paired with a solicited order for the
account of a non-broker-dealer
customer. Under the rule proposal,
those paired orders will be
automatically executed without an
exposure period so long as the
execution price: (i) Is in the applicable
standard increment (i.e., $0.10 for series
quoted at or above $3, $0.05 for series
quotes below $3, $0.01 for series
participating in the Penny Pilot
Program, and the applicable standard or
$0.01 increment for complex orders as
designated pursuant to Rule 6.53C); (ii)
will not trade at the same price as any
resting customer order; and (iii) subject
to certain exceptions, is not at a price
that trades through the national best bid
or offer (‘‘NBBO’’). If the Exchange
determines on a class-by-class basis to
(i) designate complex orders as eligible
for AIM customer-to-customer
immediate crosses or (ii) permit orders
of 500 or more contracts and that have
a premium value of at least $150,000 to
be executed without considering prices
that might be available on other options
exchanges, the NBBO condition shall
not apply to such orders and instead the
execution price will not trade through
CBOE’s best bid or offer (‘‘BBO’’).7 In
addition, the execution price must be in
the applicable standard increment and
will not trade at the same price as any
resting customer order. In the case of a
complex order, this means that the
execution price will not trade at the
same price as any customer complex
order resting in the CBOE’s electronic
complex order book. To be eligible to
use the customer-to-customer
immediate cross feature, the proposed
rule will also provide that the agency
6 AIM is an automated auction mechanism
through which a member that represents agency
orders may electronically execute an order it
represents as agent (‘‘agency order’’) against
principal or solicited interest. When the Exchange
receives an agency order properly designated for an
AIM auction, a request for responses (‘‘RFR’’) is
initiated and, subject to certain exceptions
delineated in Rule 6.74A, the RFR lasts for a
random time determined by the system between
three and five seconds. Once the AIM auction
concludes, the agency order is allocated at the best
prices pursuant to allocation procedures in the
Rule. See CBOE Rule 6.74A.
7 See proposed paragraph .09(b) to CBOE Rule
6.74A.
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Federal Register / Vol. 73, No. 57 / Monday, March 24, 2008 / Notices
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order must be in a class designated by
the Exchange as eligible for the feature
and within the designated order
eligibility size parameters, as such
parameters are determined by the
Exchange.
Lastly, the proposed rule will contain
a cross-reference to Interpretation and
Policy .01 to CBOE Rules 6.45A and
6.45B. Specifically, the proposed rule
will note that Interpretation and Policy
.01 to CBOE Rules 6.45A and 6.45B
prevent an order entry firm from
executing agency orders to increase its
economic gain from trading against the
order without first giving other trading
interests on the Exchange an
opportunity to either trade with the
agency order or to trade at the execution
price when the member was already
bidding or offering on the book.
However, as the proposed rule will also
note, the Exchange recognizes that it
may be possible for a firm to establish
a relationship with a customer or other
person to deny agency orders the
opportunity to interact on the Exchange
and to realize similar economic benefits
as it would achieve by executing agency
orders as principal. Therefore, the
proposed rule will provide that it would
be a violation of Interpretation and
Policy .01 to Rule 6.45A or 6.45B, as
applicable, for a firm to circumvent
Interpretation and Policy .01 to Rule
6.45A or 6.45B, as applicable, by
providing an opportunity for (i) a
customer affiliated with the firm, or (ii)
a customer with whom the firm has an
arrangement that allows the firm to
realize similar economic benefits from
the transaction as the firm would
achieve by executing agency orders as
principal, to regularly execute against
agency orders handled by the firm
immediately upon their entry as AIM
customer-to-customer immediate
crosses. The Exchange believes that this
provision should help prevent a firm
from doing indirectly what it is
prohibited from doing directly as
principal. This provision of CBOE’s
proposed rule is substantially similar to
a provision in ISE’s Rules.8
2. Statutory Basis
The basis under the Act for this
proposed rule change is the requirement
under Section 6(b)(5) of the Act 9 that an
exchange have rules that are designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
8 See
9 15
Supplemental Material .01 to ISE Rule 717.
U.S.C. 78f(b)(5).
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16:33 Mar 21, 2008
Jkt 214001
general, to protect investors and the
public interest. In particular, the
proposed rule change will provide
members with a more efficient means of
executing their customer option orders
subject to the Exchange’s existing
requirements limiting principal
transactions, and will allow CBOE to
effectively compete with ISE.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
CBOE does not believe that the
proposed rule change will impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
CBOE neither solicited nor received
comments on the proposal.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 10 and Rule 19b–
4(f)(6) thereunder.11
A proposed rule change filed under
19b–4(f)(6) normally may not become
operative prior to 30 days after the date
of filing.12 However, Rule 19b–
4(f)(6)(iii) 13 permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange has requested that the
Commission waive the 30-day operative
delay. The Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest
because it will allow customers to
benefit from the proposed rule change
without delay.14 The Commission
10 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
12 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change at least five business
days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. CBOE has complied with this
requirement.
13 Id.
14 For purposes only of waiving the 30-day
operative delay of this proposal, the Commission
has considered the proposed rule’s impact on
11 17
PO 00000
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Fmt 4703
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15547
hereby grants the Exchange’s request
and designates the proposal as operative
upon filing.
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, as amended, 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
No. SR–CBOE–2008–19 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CBOE–2008–19. 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, on official business days between
the hours of 10 a.m. and 3 p.m. Copies
of such filing also will be available for
inspection and copying at the principal
office of CBOE. All comments received
will be posted without change; the
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
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15548
Federal Register / Vol. 73, No. 57 / Monday, March 24, 2008 / Notices
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–
2008–19 and should be submitted on or
before April 14, 2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–5795 Filed 3–21–08; 8:45 am]
BILLING CODE 8011–01–P
Section 6(b)(5) of the Act 6 because the
rules it would establish regarding stop
and stop-limit orders are similar to
requirements set forth in the rules of
other self-regulatory organizations.7
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,8 that the
proposed rule change (SR–CHX–2007–
09), be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–5794 Filed 3–21–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57509; File No. SR–CHX–
2007–09]
Self-Regulatory Organizations;
Chicago Stock Exchange, Inc.; Order
Granting Approval to a Proposed Rule
Change To Amend the Exchange’s
Institutional Broker Rules To Add
Provisions Relating to the Handling of
Stop and Stop-Limit Orders
March 17, 2008.
On March 21, 2007, the Chicago Stock
Exchange, Inc. (‘‘CHX’’ 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 rules to add new
provisions relating to the handling of
stop and stop-limit orders by
institutional brokers. The proposed rule
change was published for comment in
the Federal Register on October 19,
2007.3 The Commission received no
comment letters on the proposal. This
order approves the proposed rule
change.
After careful review of the proposal,
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, and, in
particular, is consistent with Section
6(b) of the Act,4 and the rules and
regulations thereunder.5
The Commission finds specifically
that the proposal is consistent with
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. 56657
(October 12, 2007), 72 FR 59316.
4 15 U.S.C. 78f(b).
5 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57513; File No. SR–DTC–
2007–10]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing of Amended Proposed Rule
Change To Implement the New Issue
Information Dissemination Service for
Municipal Securities
March 17, 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 August
16, 2007, The Depository Trust
Company (‘‘DTC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) and on September 12,
2007, and March 3, 2008, amended 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, 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 implement the New Issue
Information Dissemination System
(‘‘NIIDS’’) for municipal securities.
NIIDS is an automated system
developed by DTC at the request of the
Securities Industry and Financial
15 17
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1 15
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16:33 Mar 21, 2008
Jkt 214001
6 15
U.S.C. 78f(b)(5).
Rules of New York Stock Exchange LLC,
Rule 13; and Rules of Financial Industry Regulatory
Authority, Inc. (f/k/a National Association of
Securities Dealers, Inc.), Rule 5120(h).
8 15 U.S.C. 78s(b)(2).
9 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
7 See
PO 00000
Frm 00076
Fmt 4703
Sfmt 4703
Markets Association (‘‘SIFMA’’) 3 in
order to improve the mechanism for
disseminating new issue information
regarding municipal securities.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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.4
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
Currently, Municipal Securities
Rulemaking Board (‘‘MSRB’’) Rule G–14
generally requires municipal securities
dealers to report municipal securities
transactions to the MSRB within 15
minutes of the time of the trade.5 Interdealer trades eligible for comparison by
a clearing agency are required to be
submitted through NSCC’s Real Time
Trade Matching System (‘‘RTTM’’)
within the time frame in Rule G–14.
These trades are subsequently reported
to the MSRB by NSCC. NSCC requires
certain securities information in order to
process and report transactions
involving those securities. Therefore, it
is necessary that dealers trading newly
issued municipal securities have the
securities information needed for trade
submission by the time the trade
reporting is required.
Pursuant to current practice in the
municipal securities market, each
information vendor works separately to
obtain information from offering
documents and underwriters. Each
information vendor’s success depends
in large part upon the voluntary
cooperation of the underwriters. It is not
unusual for information vendors to have
inconsistent information or for some
information vendors to receive
information before others.
Consequently, critical new issue
information may be missing or
inaccurate in the automated trade
processing systems used by dealers to
report the initial trades in new issues.
3 The request originated from The Bond Market
Association (‘‘BMA’’), which has since merged with
the Securities Industry Association to form SIFMA.
4 The Commission has modified the text of the
summaries prepared by DTC.
5 MSRB Rule G–14 RTRS Procedures (a)(ii).
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]]>Agencies
[Federal Register Volume 73, Number 57 (Monday, March 24, 2008)]
[Notices]
[Pages 15546-15548]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-5795]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
Release No. 34-57512; File No. SR-CBOE-2008-19]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change, as Modified by Amendment No. 1 Thereto, Relating to
Customer-to-Customer Immediate Crosses
March 17, 2008.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on March 4, 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 and II below, which Items have been prepared substantially by
CBOE. On March 14, 2008, CBOE submitted Amendment No. 1 to the proposed
rule change. CBOE filed the proposed rule change as a ``non-
controversial'' proposed rule change pursuant to Section 19(b)(3)(A) of
the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders it
effective upon filing with the Commission. The Commission is publishing
this notice to solicit comments on the proposed rule change, as
amended, from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
CBOE proposes to amend its Automated Improvement Mechanism
(``AIM'') Rule to permit customer-to-customer orders to be entered
paired and to be crossed without any AIM auction exposure period. The
text of the proposed rule change is available at CBOE, the Commission's
Public Reference Room, and https://www.cboe.com.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, CBOE included statements
concerning the purpose of, and basis for, the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. CBOE 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
CBOE proposes to amend Rule 6.74A to permit customer-to-customer
orders to be entered paired and to be crossed without any AIM auction
exposure period. Currently, CBOE Rules provide for a minimum exposure
time of three seconds for crossing orders on the Hybrid Trading System
(``Hybrid'') when an order entry firm (i) executes as principal against
orders it represents as agent, or (ii) executes orders it represents as
agent against orders solicited from members and non-member broker-
dealers to transact with such orders.\5\ However, the three second
exposure period is not applicable when crossing two orders that are
both for the accounts of non-broker-dealer customers. Thus, two non-
broker-dealer customer orders may be entered separately into Hybrid by
the same order entry firm to trade against each other without waiting
three seconds. To enhance and automate order entry firms' ability to
submit two contra-side customer orders, the Exchange is proposing to
introduce and to codify a new feature in its AIM Rule \6\ that the
Exchange refers to as a ``customer-to-customer immediate cross.''
---------------------------------------------------------------------------
\5\ See CBOE Rule 6.45A, Priority and Allocation of Equity
Option Trades on the CBOE Hybrid System, Interpretations and
Policies .01 and .02, and Rule 6.45B, Priority and Allocation of
Trades in Index Options and Options on ETFs on the CBOE Hybrid
System.
\6\ AIM is an automated auction mechanism through which a member
that represents agency orders may electronically execute an order it
represents as agent (``agency order'') against principal or
solicited interest. When the Exchange receives an agency order
properly designated for an AIM auction, a request for responses
(``RFR'') is initiated and, subject to certain exceptions delineated
in Rule 6.74A, the RFR lasts for a random time determined by the
system between three and five seconds. Once the AIM auction
concludes, the agency order is allocated at the best prices pursuant
to allocation procedures in the Rule. See CBOE Rule 6.74A.
---------------------------------------------------------------------------
When using the AIM customer-to-customer immediate cross feature,
the proposed rule will provide that an order entry firm (``Initiating
Member'') may enter an agency order for the account of a non-broker-
dealer customer in AIM, paired with a solicited order for the account
of a non-broker-dealer customer. Under the rule proposal, those paired
orders will be automatically executed without an exposure period so
long as the execution price: (i) Is in the applicable standard
increment (i.e., $0.10 for series quoted at or above $3, $0.05 for
series quotes below $3, $0.01 for series participating in the Penny
Pilot Program, and the applicable standard or $0.01 increment for
complex orders as designated pursuant to Rule 6.53C); (ii) will not
trade at the same price as any resting customer order; and (iii)
subject to certain exceptions, is not at a price that trades through
the national best bid or offer (``NBBO''). If the Exchange determines
on a class-by-class basis to (i) designate complex orders as eligible
for AIM customer-to-customer immediate crosses or (ii) permit orders of
500 or more contracts and that have a premium value of at least
$150,000 to be executed without considering prices that might be
available on other options exchanges, the NBBO condition shall not
apply to such orders and instead the execution price will not trade
through CBOE's best bid or offer (``BBO'').\7\ In addition, the
execution price must be in the applicable standard increment and will
not trade at the same price as any resting customer order. In the case
of a complex order, this means that the execution price will not trade
at the same price as any customer complex order resting in the CBOE's
electronic complex order book. To be eligible to use the customer-to-
customer immediate cross feature, the proposed rule will also provide
that the agency
[[Page 15547]]
order must be in a class designated by the Exchange as eligible for the
feature and within the designated order eligibility size parameters, as
such parameters are determined by the Exchange.
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\7\ See proposed paragraph .09(b) to CBOE Rule 6.74A.
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Lastly, the proposed rule will contain a cross-reference to
Interpretation and Policy .01 to CBOE Rules 6.45A and 6.45B.
Specifically, the proposed rule will note that Interpretation and
Policy .01 to CBOE Rules 6.45A and 6.45B prevent an order entry firm
from executing agency orders to increase its economic gain from trading
against the order without first giving other trading interests on the
Exchange an opportunity to either trade with the agency order or to
trade at the execution price when the member was already bidding or
offering on the book. However, as the proposed rule will also note, the
Exchange recognizes that it may be possible for a firm to establish a
relationship with a customer or other person to deny agency orders the
opportunity to interact on the Exchange and to realize similar economic
benefits as it would achieve by executing agency orders as principal.
Therefore, the proposed rule will provide that it would be a violation
of Interpretation and Policy .01 to Rule 6.45A or 6.45B, as applicable,
for a firm to circumvent Interpretation and Policy .01 to Rule 6.45A or
6.45B, as applicable, by providing an opportunity for (i) a customer
affiliated with the firm, or (ii) a customer with whom the firm has an
arrangement that allows the firm to realize similar economic benefits
from the transaction as the firm would achieve by executing agency
orders as principal, to regularly execute against agency orders handled
by the firm immediately upon their entry as AIM customer-to-customer
immediate crosses. The Exchange believes that this provision should
help prevent a firm from doing indirectly what it is prohibited from
doing directly as principal. This provision of CBOE's proposed rule is
substantially similar to a provision in ISE's Rules.\8\
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\8\ See Supplemental Material .01 to ISE Rule 717.
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2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) of the Act \9\ that an exchange have
rules that are designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to 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. In particular, the proposed rule change will provide
members with a more efficient means of executing their customer option
orders subject to the Exchange's existing requirements limiting
principal transactions, and will allow CBOE to effectively compete with
ISE.
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\9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE does not believe that the proposed rule change will impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
CBOE neither solicited nor received comments on the proposal.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6) thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under 19b-4(f)(6) normally may not
become operative prior to 30 days after the date of filing.\12\
However, Rule 19b-4(f)(6)(iii) \13\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange has requested that the
Commission waive the 30-day operative delay. The Commission believes
that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest because it will allow
customers to benefit from the proposed rule change without delay.\14\
The Commission hereby grants the Exchange's request and designates the
proposal as operative upon filing.
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\12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
CBOE has complied with this requirement.
\13\ Id.
\14\ For purposes only of waiving the 30-day operative delay of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
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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, as amended, 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 No. SR-CBOE-2008-19 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2008-19. 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, on official business
days between the hours of 10 a.m. and 3 p.m. Copies of such filing also
will be available for inspection and copying at the principal office of
CBOE. All comments received will be posted without change; the
[[Page 15548]]
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-2008-19 and should be submitted on or before April 14, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-5795 Filed 3-21-08; 8:45 am]
BILLING CODE 8011-01-P
