Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to DPMs and LMMs, 25067-25068 [E8-9908]

Download as PDF Federal Register / Vol. 73, No. 88 / Tuesday, May 6, 2008 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–57742; File No. SR–CBOE– 2008–50] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to DPMs and LMMs April 30, 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 April 25, 2008, 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. The Exchange filed the proposal as a ‘‘non-controversial’’ proposed rule change pursuant to section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend CBOE rules relating to Designated Primary Market-Makers (‘‘DPMs’’) and Lead Market-Makers (‘‘LMMs’’). The text of the proposed rule change is available on the Exchange’s Web site (http://www.cboe.org/Legal), at the Exchange’s Office of the Secretary and at the Commission. rwilkins on PROD1PC63 with NOTICES 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 those 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 parts of such statements. 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(6). 2 17 VerDate Aug<31>2005 17:11 May 05, 2008 Jkt 214001 A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose CBOE is proposing to amend Rules 8.3—Appointment of Market-Makers, 8.85—DPM Obligations, and 8.91— Limitations on Dealings of DPMs and Affiliated Persons of DPMs, to permit Market-Maker(s) affiliated with a DPM to hold an appointment and submit electronic quotations in the same class provided CBOE uses an allocation algorithm in the class that does not allocate electronic trades, in whole or in part, in an equal percentage based on the number of market participants quoting at the best bid or offer. Similarly, CBOE is proposing to amend Rules 8.3 and 8.15A—Lead MarketMakers in Hybrid Classes, to make it clear that it is permissible for MarketMaker(s) affiliated with an LMM to hold an appointment and submit electronic quotations in the same class provided CBOE uses an allocation algorithm in the class that does not allocate electronic trades, in whole or in part, in an equal percentage based on the number of market participants quoting at the best bid or offer.5 These changes are the same as and consistent with CBOE rules that already permit affiliated Market-Makers as well as Market-Maker(s) affiliated with an Electronic DPM (‘‘e-DPM’’) to hold appointments and submit electronic quotes in the same class under the same conditions.6 CBOE believes this rule change will provide more flexibility for DPMs and their Market-Maker affiliates, as well as for LMMs and their MarketMaker affiliates, commensurate with what is already available for other Market-Maker participants. Accordingly, CBOE believes that the proposed rule change is designed to promote just and equitable principles of trade. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations under the 5 LMMs and their affiliated Market Makers will remain subject to CBOE Rule 4.18 (and Rule 8.15A(b)(vii) in the case of LMMs) regarding the prevention of the misuse of material non-public information. DPMs and their affiliated MarketMakers will remain subject to ‘‘Guidelines for Exemptive Relief Under Rule 8.91(e) for Members Affiliated with DPMs,’’ set forth in CBOE Rule 8.91, as well as CBOE Rule 4.18. Telephone conversation between Sonia Trocchio, Special Counsel, Division of Trading and Markets, Commission, and Patrick Sexton, Associate General Counsel, CBOE, on April 28, 2008. 6 See CBOE Rule 8.3(c)(vii)(3). PO 00000 Frm 00130 Fmt 4703 Sfmt 4703 25067 Act applicable to a national securities exchange and, in particular, the requirements of section 6(b) of the Act.7 Specifically, the Exchange believes the proposed rule change is consistent with the section 6(b)(5) Act 8 requirements that the rules of an exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts and, in general, to protect investors and the public interest. In particular, CBOE believes this rule change will provide more flexibility for DPMs and their Market-Maker affiliates, as well as LMMs and their Market-Maker affiliates, commensurate with what is already available for other Market-Maker participants. It also places these various types of market participants (DPM, LMM, e-DPM) on equal footing as it relates to allowing Market-Makers affiliated with those market participants to hold appointments and submit electronic quotes in the same option classes under the same conditions. 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 The Exchange 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 rule 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 if consistent with the protection of investors and the public interest, provided that the selfregulatory organization has given 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,9 the proposed rule change has become effective pursuant to section 19(b)(3)(A) of the Act 10 and Rule 19b– 7 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 9 CBOE fulfilled this requirement. 10 15 U.S.C. 78s(b)(3)(A). 8 15 E:\FR\FM\06MYN1.SGM 06MYN1 25068 Federal Register / Vol. 73, No. 88 / Tuesday, May 6, 2008 / Notices 4(f)(6) thereunder.11 At any time within 60 days of the filing of such 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. Under Rule 19b–4(f)(6) of the Act,12 the proposal does not become operative for 30 days after the date of its filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the 30-day operative date. The Exchange states that the proposed rule change provides the same flexibility to DPMs and LMMs that e-DPMs have in terms of allowing affiliated Market-Makers to hold an appointment and to submit electronic quotations in the same class. Moreover, CBOE believes that it would be unfair to DPMs and LMMs to have to wait 30 days for this rule change to take effect, given that such restriction is not in place for e-DPMs, and that DPMs have expressed an interest in having this rule change take effect immediately. Thus, waiving the 30-day operative period will allow the rule change to be implemented immediately and place these types of market participants on equal footing with e-DPMs. Based on these reasons, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest, and thus designates the proposal effective upon filing.13 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 Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. Deputy Secretary. [FR Doc. E8–9908 Filed 5–5–08; 8:45 am] BILLING CODE 8010–01–P rwilkins on PROD1PC63 with NOTICES CFR 240.19b–4(f)(6). 12 Id. 13 For purposes only of waiving the operative date of this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). VerDate Aug<31>2005 17:11 May 05, 2008 Jkt 214001 [Release No. 34–57734; File No. SR–CHX– 2008–05] Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness All submissions should refer to File of a Proposed Rule Change to Change Number SR–CBOE–2008–50. This file the Composition of its Regulatory number should be included on the subject line if e-mail is used. To help the Oversight Committee Commission process and review your April 29, 2008. comments more efficiently, please use Pursuant to Section 19(b)(1) of the only one method. The Commission will Securities Exchange Act of 1934 post all comments on the Commission’s (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 Internet Web site (http://www.sec.gov/ notice is hereby given that on April 21, rules/sro.shtml). Copies of the 2008, the Chicago Stock Exchange, Inc. submission, all subsequent (‘‘CHX’’ or ‘‘Exchange’’) filed with the amendments, all written statements Securities and Exchange Commission (‘‘Commission’’) the proposed rule with respect to the proposed rule change as described in Items I and II change that are filed with the below, which Items have been Commission, and all written substantially prepared by the Exchange. communications relating to the The Exchange has designated this proposed rule change between the Commission and any person, other than proposal as non-controversial under Section 19(b)(3)(A)(iii) of the Act 3 and those that may be withheld from the Rule 19b–4(f)(6) thereunder.4 The public in accordance with the Commission is publishing this notice to provisions of 5 U.S.C. 552, will be solicit comments on the proposed rule available for inspection and copying in change from interested persons. the Commission’s Public Reference Room, on official business days between I. Self-Regulatory Organization’s the hours of 10 a.m. and 3 p.m. Copies Statement of the Terms of Substance of the Proposed Rule Change of such filing also will be available for inspection and copying at the principal The Exchange proposes to amend its office of the CBOE. All comments rules to change the composition of the received will be posted without change; Regulatory Oversight Committee the Commission does not edit personal (‘‘ROC’’ or ‘‘Committee’’) so that this identifying information from group consists of at least five Public submissions. You should submit only Directors and to allow the Exchange’s information that you wish to make Vice Chairman to appoint, and the Public Directors on the Exchange’s available publicly. All submissions Board of Directors to approve, up to two should refer to File Number SR–CBOE– 2008–50 and should be submitted on or Participant Directors to serve as nonvoting advisors to the Committee. The before May 27, 2008. text of this proposed rule change is For the Commission, by the Division of available at the CHX, on the Exchange’s Trading and Markets, pursuant to delegated Web site at http://www.chx.com/rules/ 14 authority. proposed_rules.html, and in the Florence E. Harmon, Commission’s Public Reference Room. • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–CBOE–2008–50 on the subject line. 11 17 SECURITIES AND EXCHANGE COMMISSION 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 CHX 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. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(6). 2 17 14 17 PO 00000 CFR 200.30–3(a)(12). Frm 00131 Fmt 4703 Sfmt 4703 E:\FR\FM\06MYN1.SGM 06MYN1

Agencies

[Federal Register Volume 73, Number 88 (Tuesday, May 6, 2008)]
[Notices]
[Pages 25067-25068]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-9908]



[[Page 25067]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57742; File No. SR-CBOE-2008-50]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Related to DPMs and LMMs

April 30, 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 April 25, 2008, 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. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend CBOE rules relating to Designated 
Primary Market-Makers (``DPMs'') and Lead Market-Makers (``LMMs''). The 
text of the proposed rule change is available on the Exchange's Web 
site (http://www.cboe.org/Legal), at the Exchange's Office of the 
Secretary and at the Commission.

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 those 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 parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    CBOE is proposing to amend Rules 8.3--Appointment of Market-Makers, 
8.85--DPM Obligations, and 8.91--Limitations on Dealings of DPMs and 
Affiliated Persons of DPMs, to permit Market-Maker(s) affiliated with a 
DPM to hold an appointment and submit electronic quotations in the same 
class provided CBOE uses an allocation algorithm in the class that does 
not allocate electronic trades, in whole or in part, in an equal 
percentage based on the number of market participants quoting at the 
best bid or offer. Similarly, CBOE is proposing to amend Rules 8.3 and 
8.15A--Lead Market-Makers in Hybrid Classes, to make it clear that it 
is permissible for Market-Maker(s) affiliated with an LMM to hold an 
appointment and submit electronic quotations in the same class provided 
CBOE uses an allocation algorithm in the class that does not allocate 
electronic trades, in whole or in part, in an equal percentage based on 
the number of market participants quoting at the best bid or offer.\5\ 
These changes are the same as and consistent with CBOE rules that 
already permit affiliated Market-Makers as well as Market-Maker(s) 
affiliated with an Electronic DPM (``e-DPM'') to hold appointments and 
submit electronic quotes in the same class under the same 
conditions.\6\ CBOE believes this rule change will provide more 
flexibility for DPMs and their Market-Maker affiliates, as well as for 
LMMs and their Market-Maker affiliates, commensurate with what is 
already available for other Market-Maker participants. Accordingly, 
CBOE believes that the proposed rule change is designed to promote just 
and equitable principles of trade.
---------------------------------------------------------------------------

    \5\ LMMs and their affiliated Market Makers will remain subject 
to CBOE Rule 4.18 (and Rule 8.15A(b)(vii) in the case of LMMs) 
regarding the prevention of the misuse of material non-public 
information. DPMs and their affiliated Market-Makers will remain 
subject to ``Guidelines for Exemptive Relief Under Rule 8.91(e) for 
Members Affiliated with DPMs,'' set forth in CBOE Rule 8.91, as well 
as CBOE Rule 4.18. Telephone conversation between Sonia Trocchio, 
Special Counsel, Division of Trading and Markets, Commission, and 
Patrick Sexton, Associate General Counsel, CBOE, on April 28, 2008.
    \6\ See CBOE Rule 8.3(c)(vii)(3).
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations under the Act applicable to a 
national securities exchange and, in particular, the requirements of 
section 6(b) of the Act.\7\ Specifically, the Exchange believes the 
proposed rule change is consistent with the section 6(b)(5) Act \8\ 
requirements that the rules of an exchange be designed to promote just 
and equitable principles of trade, to prevent fraudulent and 
manipulative acts and, in general, to protect investors and the public 
interest. In particular, CBOE believes this rule change will provide 
more flexibility for DPMs and their Market-Maker affiliates, as well as 
LMMs and their Market-Maker affiliates, commensurate with what is 
already available for other Market-Maker participants. It also places 
these various types of market participants (DPM, LMM, e-DPM) on equal 
footing as it relates to allowing Market-Makers affiliated with those 
market participants to hold appointments and submit electronic quotes 
in the same option classes under the same conditions.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 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

    The Exchange 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 rule 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 if consistent with the protection of investors 
and the public interest, provided that the self-regulatory organization 
has given 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,\9\ the proposed rule change has become effective 
pursuant to section 19(b)(3)(A) of the Act \10\ and Rule 19b-

[[Page 25068]]

4(f)(6) thereunder.\11\ At any time within 60 days of the filing of 
such 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.
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    \9\ CBOE fulfilled this requirement.
    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    Under Rule 19b-4(f)(6) of the Act,\12\ the proposal does not become 
operative for 30 days after the date of its filing, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interest. The Exchange has requested that 
the Commission waive the 30-day operative date. The Exchange states 
that the proposed rule change provides the same flexibility to DPMs and 
LMMs that e-DPMs have in terms of allowing affiliated Market-Makers to 
hold an appointment and to submit electronic quotations in the same 
class. Moreover, CBOE believes that it would be unfair to DPMs and LMMs 
to have to wait 30 days for this rule change to take effect, given that 
such restriction is not in place for e-DPMs, and that DPMs have 
expressed an interest in having this rule change take effect 
immediately. Thus, waiving the 30-day operative period will allow the 
rule change to be implemented immediately and place these types of 
market participants on equal footing with e-DPMs. Based on these 
reasons, the Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest, and thus designates the proposal effective upon filing.\13\
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    \12\ Id.
    \13\ For purposes only of waiving the operative date 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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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 (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2008-50 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-2008-50. 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 (http://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 
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-2008-50 and should be submitted on or before May 27, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-9908 Filed 5-5-08; 8:45 am]
BILLING CODE 8010-01-P