Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 8.3A Pertaining to Class Quoting Limits, 54188-54189 [E8-21766]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 73, Number 182 (Thursday, September 18, 2008)]
[Notices]
[Pages 54188-54189]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-21766]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58519; File No. SR-CBOE-2008-84]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Amend Rule 8.3A Pertaining to Class Quoting Limits

September 11, 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 September 8, 2008, the Chicago Board Options Exchange, 
Incorporated (``Exchange'' or ``CBOE'') filed with the Securities and 
Exchange Commission (the ``Commission'') the proposed rule change as 
described in Items I, II, and III below, which Items have been 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 Rule 8.3A pertaining to Class 
Quoting Limits. The text of the proposed rule change is available on 
the Exchange's Web site (https://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 self-regulatory organization 
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 Rule 8.3A establishes the upper limit, i.e., Class Quoting 
Limit (``CQL''), on the number of members that may quote electronically 
in a particular product traded on CBOE's Hybrid Trading System. The 
purpose of this rule change is to amend Interpretations .01 and .03 of 
CBOE Rule 8.3A.
    First, CBOE proposes to amend Interpretation .01(b) which generally 
provides that CBOE's President may increase the CQL when ``exceptional 
circumstances'' warrant. Interpretation .01(b) states that 
``exceptional circumstances'' refers to substantial trading volume, 
whether actual or expected (e.g., in the case of a new product or a 
major news announcement). Interpretation .01(b) also provides that when 
the ``exceptional circumstances'' cease, the President can reduce the 
CQL, and includes fair procedures for how such a reduction would occur. 
CBOE believes that there may be circumstances in which it would be 
appropriate to increase the CQL in a particular product even though it 
may not be apparent that there has been, or will be, a substantial 
change in trading volume in the product. For example, there may be 
circumstances in which a product is not experiencing a substantial 
change in trading volume and yet additional members may want to quote 
electronically in the product. Provided CBOE's trading systems can 
handle the increase and CBOE's President determines that it would be 
appropriate, CBOE should be permitted to increase the CQL in that 
product.\5\ Similarly, CBOE believes that the President should be 
allowed to decrease the CQL in appropriate circumstances, particularly 
in those cases where the CQL previously has been increased and provided 
such increase is no longer needed.
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    \5\ CBOE notes that it increases the CQL in products 
infrequently, and when it does, members on the wait-list have first 
priority.
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    Accordingly, CBOE proposes to amend Interpretation .01(b) to 
provide that CBOE's President (or his designee) can increase or 
decrease the CQL in an existing or new product when he/she determines 
it would be appropriate. One of the factors that would be considered is 
the trading volume of the product. CBOE believes that amending 
Interpretation .01(b) as proposed is procompetitive, as it provides 
more flexibility in determining when to increase the CQL and thus allow 
more electronic quoters in a particular product. It is also consistent 
with the purpose of maintaining a CQL, which is to limit the number of 
members that are quoting electronically in a particular product to 
ensure that the Exchange has the ability to effectively handle all 
quotes generated by members. CBOE's President certainly can determine 
whether CBOE's systems can effectively handle the increase in quote 
message traffic caused by an increase in the CQL when the President 
determines that the increase would be appropriate. CBOE is not 
proposing to change the procedures for decreasing a CQL that are 
currently contained in Interpretation .01(b).
    Second, CBOE proposes to clarify and amend Interpretation .03, 
which provides that in the event a Market-Maker has not submitted any 
electronic quotations in an appointed option class during the preceding 
30 calendar days, then the Market-Maker's appointment in that option 
class will be terminated effective immediately. Interpretation .03 
expressly states that it only applies to those option classes in which 
the CQL for the option class is full and there is a wait-list of 
member(s) requesting the ability to quote electronically in the option 
class, and that CBOE will notify the Market-Maker prior to terminating 
its appointment.
    In adopting the interpretation, it was not CBOE's intention to 
allow a Market-Maker, who has chosen not to submit any electronic 
quotations in an appointed option class during the preceding 30 
calendar days, to be able to preserve the Market-Maker's appointment in 
the option class by submitting one or more electronic quotes and then 
to discontinue quoting, thereby avoiding the termination.

[[Page 54189]]

Accordingly, CBOE proposes to amend Interpretation .03 to provide that 
CBOE will notify the Market-Maker that the Market-Maker's appointment 
has been terminated, as opposed to providing notification prior to 
termination. The rule text itself provides effective notification to 
Market-Makers that their appointment in an option class will be 
terminated if they have not submitted any electronic quotations in the 
appointed option class during the preceding 30 calendar days. CBOE 
notes that the circumstances giving rise to this Interpretation do not 
occur frequently. CBOE also believes that amending Interpretation .03 
as proposed promotes competition, as it would allow other members who 
are ready and willing to provide competitive quotations and liquidity 
in an option class, in the place of a Market-Maker who chooses not to 
submit any electronic quotations in the option class for at least 30 
calendar days.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (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. 
Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) Act\6\ 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. Granting CBOE's President 
the authority to increase or decrease the CQL in an option class when 
he deems it appropriate promotes competition and also ensures that the 
integrity of CBOE's trading systems are protected. Similarly, 
terminating a Market-Maker's appointment when the Market-Maker has 
elected not to submit electronic quotations in an option class for 30 
calendar days also promotes competition in that it will provide an 
opportunity to other Market-Makers who are ready and willing to provide 
competitive quotations and liquidity in the option class.
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    \6\ 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 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,\7\ the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) 
thereunder.\9\ 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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    \7\ CBOE fulfilled this requirement.
    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
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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 (https://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2008-84 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
    All submissions should refer to File Number SR-CBOE-2008-84. 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-2008-84 and should be 
submitted on or before October 9, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-21766 Filed 9-17-08; 8:45 am]
BILLING CODE 8010-01-P