Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of Proposed Rule Change Relating to the Automated Improvement Auction, 29796-29797 [E8-11419]

Download as PDF 29796 Federal Register / Vol. 73, No. 100 / Thursday, May 22, 2008 / Notices Securities Products that are U.S. Component Stocks comprising, at least in part, an index or portfolio underlying a series of Units must meet the definition of NMS Stock 12 and already have been listed and trading on a national securities exchange pursuant to a proposed rule change approved by the Commission pursuant to Section 19(b)(2) of the Act 13 or submitted by a national securities exchange pursuant to Section 19(b)(3)(A) of the Act,14 or would have been listed by a national securities exchange pursuant to the requirements of Rule 19b–4(e) under the Act.15 Component Derivative Securities Products that are Non-U.S. Component Stocks comprising, at least in part, an international or global index or portfolio underlying a series of Units must already have been listed and trading on an exchange that has last-sale reporting. The Commission believes that the proposed rule change will facilitate the listing and trading of additional types of exchange-traded products that will enhance competition among market participants, to the benefit of investors and the marketplace. In addition, the listing and trading criteria set forth in the proposal are intended to protect investors and the public interest. The Commission notes that it has approved a substantively identical proposal of another national securities exchange.16 The Commission is not aware of any regulatory issue that should cause it revisit that finding and, as such, believes it is reasonable and consistent with the Act for the Exchange to modify the index component eligibility criteria for ETFs in the manner described in the proposal. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,17 that the proposed rule change (SR–Amex–2008– 30), as modified by Amendment No. 1 thereto, be, and it hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Florence E. Harmon, Deputy Secretary. [FR Doc. E8–11424 Filed 5–21–08; 8:45 am] BILLING CODE 8010–01–P 12 See supra note 7. U.S.C. 78s(b)(2). 14 15 U.S.C. 78s(b)(3)(A). 15 See supra note 4. 16 See Securities Exchange Act Release No. 57751 (May 1, 2008), 73 FR 25818 (May 7, 2008) (SR– NYSEArca–2008–29). 17 15 U.S.C. 78s(b)(2). 18 17 CFR 200.30–3(a)(12). rwilkins on PROD1PC63 with NOTICES 13 15 VerDate Aug<31>2005 17:03 May 21, 2008 Jkt 214001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–57816; File No. SR–CBOE– 2008–41] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of Proposed Rule Change Relating to the Automated Improvement Auction May 14, 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 15, 2008, 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 Exchange. 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 allow orders for less than 50 contracts to be entered into the Automated Improvement Mechanism (‘‘AIM’’) at a price that matches the national best bid or offer (‘‘NBBO’’). The text of the proposed rule change is available at the Exchange, on the Exchange’s Web site (http://www.cboe.org/Legal), and in 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 In order to provide additional opportunities for price improvement, 1 15 2 17 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00063 Fmt 4703 Sfmt 4703 the Exchange proposes to expand the application of its electronic AIM auction process. Under the AIM auction process, a member that represents agency orders may submit an order it represents as agent (‘‘Agency Order’’) along with a second order (a principal order or a solicited order for the same amount as the Agency Order) into the AIM auction where other participants can compete with the submitting member’s second order to execute against the Agency Order. A member (the ‘‘Initiating Member’’) may initiate the AIM auction process provided certain requirements are met. These requirements include a condition that the Initiating Member stop the entire Agency Order as principal or with a solicited order at the following price: (i) If the Agency Order is for 50 contracts or more, at the better of the NBBO or the Agency Order’s limit price (if the order is a limit order); and (ii) if the Agency Order is for less than 50 contracts, at the better of (A) the NBBO price improved by one minimum price improvement increment, which increment shall be determined by the Exchange but may not be smaller than one cent; or (B) the Agency Order’s limit price (if the order is a limit order). The Exchange is now proposing to modify this condition with respect to the stop price for orders of less than 50 contracts. Under the proposed rule change, such orders would be stopped at the better of the NBBO or the Agency Order’s limit price (if the order is a limit order). Thus, orders for less than 50 contracts would be treated the same as orders for 50 contracts or more for purposes of the AIM stop price requirement. The Exchange believes this is a reasonable modification designed to provide additional flexibility for members to obtain executions on behalf of their customers while continuing to provide a meaningful, competitive auction. The Exchange believes this expansion of AIM would have the added benefit of providing members with an alternative method of achieving an execution at the NBBO for their customers without having to pay taker fees that may be associated with routing an order to another market in those scenarios where CBOE’s best bid or offer is inferior to the NBBO.3 3 Several options exchanges have adopted a fee structure in which firms receive a rebate for the execution of orders resting in the limit order book (i.e., posting liquidity) and pay a fee for the execution of orders that trade against liquidity resting on the limit order book (i.e., taking liquidity). Taker fees currently range up to $0.45 per contract and are charged without consideration of the order origin category, including public customer orders. In contrast, CBOE does not generally charge a fee for the execution of public customer orders. The effective price paid by a E:\FR\FM\22MYN1.SGM 22MYN1 Federal Register / Vol. 73, No. 100 / Thursday, May 22, 2008 / Notices 2. Statutory Basis The Exchange believes the proposed rule change is consistent with Section 6(b) of the Act,4 in general, and furthers the objectives of Section 6(b)(5) of the Act,5 in particular, in that it is designed to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, 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 Exchange believes that the proposed rule change will provide additional opportunities for price improvement and guaranteed executions at a price at least as good as the NBBO. Additionally, it will allow members to avoid paying taker fees. 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 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 No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action rwilkins on PROD1PC63 with NOTICES 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 customer purchasing an option can be considerably higher on an exchange that charges a taker fee. For example, a customer that enters a marketable limit order to buy 10 contracts for $0.10 would pay $100 on CBOE and $104.50 if executed on an exchange that charges a $0.45 taker fee (an effective 4.5% increase). Because orders cannot be executed at prices inferior to the NBBO, members are effectively forced to pay taker fees when an exchange with a taker fee structure is at the NBBO and the members’ orders are directly routed to such an exchange or indirectly routed to such an exchange through the Intermarket Options Linkage (where the fees are passed through). 4 15 U.S.C. 78f(b). 5 15 U.S.C. 78f(b)(5). VerDate Aug<31>2005 17:03 May 21, 2008 Jkt 214001 (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: 29797 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.6 Florence E. Harmon, Deputy Secretary. [FR Doc. E8–11419 Filed 5–21–08; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION Electronic Comments [Release No. 34–57821; File No. SR–FICC– 2008–03] • 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–2008–41 on the subject line. Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change, as Modified, To Eliminate the Coverage Component and Margin Requirement Differential From the Mortgage-Backed Securities Division Participants Fund Calculation Paper Comments May 15, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 notice is hereby given that on April 18, 2008, the Fixed Income Clearing Corporation (‘‘FICC’’) filed with the Securities and Exchange All submissions should refer to File Commission (‘‘Commission’’) and on Number SR–CBOE–2008–41. This file April 21, 2008, amended the proposed number should be included on the rule change described in Items I, II, and subject line if e-mail is used. To help the III below, which items have been Commission process and review your prepared primarily by FICC. The comments more efficiently, please use Commission is publishing this notice to only one method. The Commission will solicit comments on the proposed rule post all comments on the Commission’s change from interested parties. Internet Web site (http://www.sec.gov/ I. Self-Regulatory Organization’s rules/sro.shtml). Copies of the Statement of the Terms of Substance of submission, all subsequent the Proposed Rule Change amendments, all written statements The purpose of the proposed rule with respect to the proposed rule change is to modify FICC’s Mortgagechange that are filed with the Backed Securities Division (‘‘MBSD’’) Commission, and all written participant fund calculation as set forth communications relating to the in Article IV, Rule 1 (Total Required proposed rule change between the Commission and any person, other than Fund Deposit) by eliminating the Coverage Component and the Margin those that may be withheld from the Requirement Differential from the public in accordance with the calculation. provisions of 5 U.S.C. 552, will be available for inspection and copying in II. Self-Regulatory Organization’s the Commission’s Public Reference Statement of the Purpose of, and Room on official business days between Statutory Basis for, the Proposed Rule the hours of 10 a.m. and 3 p.m. Copies Change of such filing also will be available for In its filing with the Commission, inspection and copying at the principal FICC included statements concerning office of the CBOE. All comments the purpose of and basis for the received will be posted without change; proposed rule change and discussed any the Commission does not edit personal comments it received on the proposed identifying information from rule change. The text of these statements submissions. You should submit only may be examined at the places specified information that you wish to make in Item IV below. FICC has prepared available publicly. All submissions summaries, set forth in sections (A), (B), should refer to File Number SR–CBOE– 2008–41 and should be submitted on or 6 17 CFR 200.30–3(a)(12). before June 12, 2008. 1 15 U.S.C. 78s(b)(1). • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549–1090. PO 00000 Frm 00064 Fmt 4703 Sfmt 4703 E:\FR\FM\22MYN1.SGM 22MYN1

Agencies

[Federal Register Volume 73, Number 100 (Thursday, May 22, 2008)]
[Notices]
[Pages 29796-29797]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-11419]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57816; File No. SR-CBOE-2008-41]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of Proposed Rule Change Relating to the 
Automated Improvement Auction

May 14, 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 15, 2008, 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 Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to allow orders for less than 50 contracts to 
be entered into the Automated Improvement Mechanism (``AIM'') at a 
price that matches the national best bid or offer (``NBBO''). The text 
of the proposed rule change is available at the Exchange, on the 
Exchange's Web site (http://www.cboe.org/Legal), and in 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
    In order to provide additional opportunities for price improvement, 
the Exchange proposes to expand the application of its electronic AIM 
auction process. Under the AIM auction process, a member that 
represents agency orders may submit an order it represents as agent 
(``Agency Order'') along with a second order (a principal order or a 
solicited order for the same amount as the Agency Order) into the AIM 
auction where other participants can compete with the submitting 
member's second order to execute against the Agency Order. A member 
(the ``Initiating Member'') may initiate the AIM auction process 
provided certain requirements are met. These requirements include a 
condition that the Initiating Member stop the entire Agency Order as 
principal or with a solicited order at the following price: (i) If the 
Agency Order is for 50 contracts or more, at the better of the NBBO or 
the Agency Order's limit price (if the order is a limit order); and 
(ii) if the Agency Order is for less than 50 contracts, at the better 
of (A) the NBBO price improved by one minimum price improvement 
increment, which increment shall be determined by the Exchange but may 
not be smaller than one cent; or (B) the Agency Order's limit price (if 
the order is a limit order).
    The Exchange is now proposing to modify this condition with respect 
to the stop price for orders of less than 50 contracts. Under the 
proposed rule change, such orders would be stopped at the better of the 
NBBO or the Agency Order's limit price (if the order is a limit order). 
Thus, orders for less than 50 contracts would be treated the same as 
orders for 50 contracts or more for purposes of the AIM stop price 
requirement. The Exchange believes this is a reasonable modification 
designed to provide additional flexibility for members to obtain 
executions on behalf of their customers while continuing to provide a 
meaningful, competitive auction. The Exchange believes this expansion 
of AIM would have the added benefit of providing members with an 
alternative method of achieving an execution at the NBBO for their 
customers without having to pay taker fees that may be associated with 
routing an order to another market in those scenarios where CBOE's best 
bid or offer is inferior to the NBBO.\3\
---------------------------------------------------------------------------

    \3\ Several options exchanges have adopted a fee structure in 
which firms receive a rebate for the execution of orders resting in 
the limit order book (i.e., posting liquidity) and pay a fee for the 
execution of orders that trade against liquidity resting on the 
limit order book (i.e., taking liquidity). Taker fees currently 
range up to $0.45 per contract and are charged without consideration 
of the order origin category, including public customer orders. In 
contrast, CBOE does not generally charge a fee for the execution of 
public customer orders. The effective price paid by a customer 
purchasing an option can be considerably higher on an exchange that 
charges a taker fee. For example, a customer that enters a 
marketable limit order to buy 10 contracts for $0.10 would pay $100 
on CBOE and $104.50 if executed on an exchange that charges a $0.45 
taker fee (an effective 4.5% increase). Because orders cannot be 
executed at prices inferior to the NBBO, members are effectively 
forced to pay taker fees when an exchange with a taker fee structure 
is at the NBBO and the members' orders are directly routed to such 
an exchange or indirectly routed to such an exchange through the 
Intermarket Options Linkage (where the fees are passed through).

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[[Page 29797]]

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act,\4\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act,\5\ in particular, in that it is designed to 
foster cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, 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 Exchange believes that the proposed rule change will 
provide additional opportunities for price improvement and guaranteed 
executions at a price at least as good as the NBBO. Additionally, it 
will allow members to avoid paying taker fees.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    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 (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2008-41 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-2008-41. 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-2008-41 and should be submitted on or before June 12, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
---------------------------------------------------------------------------

    \6\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-11419 Filed 5-21-08; 8:45 am]
BILLING CODE 8010-01-P