Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Approving a Proposed Rule Change To Amend its Rules Prohibiting Members From Functioning as Market Makers, 16246-16247 [E9-8002]

Download as PDF 16246 Federal Register / Vol. 74, No. 67 / Thursday, April 9, 2009 / Notices floating monthly rates for the month of April 2009. The Exchange believes that the process used to set the proposed Temporary Member access fee and the proposed Temporary Member access fee itself are appropriate for the same reasons set forth in CBOE rule filing SR– CBOE–2008–12 with respect to the original Temporary Member access fee.6 Similarly, the Exchange believes that the process used to set the proposed ITP access fee and the proposed ITP access fee itself are appropriate for the same reasons set forth in CBOE rule filing SR– CBOE–2008–77 with respect to the original ITP access fee.7 Each of the proposed access fees will remain in effect until such time either that the Exchange submits a further rule filing pursuant to Section 19(b)(3)(A)(ii) of the Act 8 to modify the applicable access fee or the applicable status (i.e., the Temporary Membership status or the ITP status) is terminated. Accordingly, the Exchange may, and likely will, further adjust the proposed access fees in the future if the Exchange determines that it would be appropriate to do so taking into consideration lease rates for transferable CBOE memberships prevailing at that time. The procedural provisions of the CBOE Fee Schedule related to the assessment of each proposed access fee are not proposed to be changed and will remain the same as the current procedural provisions relating to the assessment of that access fee. 2. Statutory Basis dwashington3 on PROD1PC60 with NOTICES The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,9 in general, and furthers the objectives of Section 6(b)(4) of the Act,10 in particular, in that it is designed to provide for the equitable allocation of reasonable dues, fees, and other charges among persons using its facilities. 6 See Securities Exchange Act Release No. 57293 (February 8, 2008), 73 FR 8729 (February 14, 2008) (SR–CBOE–2008–12), which established the original Temporary Member access fee, for detail regarding the rationale in support of the original Temporary Member access fee and the process used to set that fee, which is also applicable to this proposed change to the Temporary Member access fee as well. 7 See Securities Exchange Act Release No. 58200 (July 21, 2008), 73 FR 43805 (July 28, 2008) (SR– CBOE–2008–77), which established the original ITP access fee, for detail regarding the rationale in support of the original ITP access fee and the process used to set that fee, which is also applicable to this proposed change to the ITP access fee as well. 8 15 U.S.C. 78s(b)(3)(A)(ii). 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(4). VerDate Nov<24>2008 15:28 Apr 08, 2009 Jkt 217001 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 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 Because the foregoing rule change establishes or changes a due, fee, or other charge imposed by the Exchange, it has become effective pursuant to Section 19(b)(3)(A) of the Act 11 and subparagraph (f)(2) of Rule 19b–4 12 thereunder. 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 is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–CBOE–2009–023 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington DC 20549–1090. All submissions should refer to File Number SR–CBOE–2009–023. 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 Exchange. 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 No. SR–CBOE–2009–023 and should be submitted on or before April 30, 2009. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–8000 Filed 4–8–09; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–59700; File No. SR–CBOE– 2009–009] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Approving a Proposed Rule Change To Amend its Rules Prohibiting Members From Functioning as Market Makers April 2, 2009. I. Introduction On February 18, 2009, the Chicago Board Options Exchange, Incorporated (‘‘CBOE’’ 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 revise CBOE Rule 6.8C to eliminate certain restrictions prohibiting members 13 17 11 15 U.S.C. 78s(b)(3)(A). 12 17 CFR 240.19b–4(f)(2). PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\09APN1.SGM 09APN1 Federal Register / Vol. 74, No. 67 / Thursday, April 9, 2009 / Notices from functioning as market makers. The proposed rule change was published for comment in the Federal Register on February 26, 2009.3 The Commission received no comments on the proposal. This order approves the proposal. dwashington3 on PROD1PC60 with NOTICES II. Description of the Proposal The Exchange proposes to amend Rule 6.8C, Prohibition Against Members Functioning as Market Makers, to eliminate certain of its restrictions. Rule 6.8C currently provides that a member, acting either as principal or agent, may neither enter nor permit the entry of orders into the Exchange’s electronic order routing system if (i) the orders are limit orders for the account or accounts of the same beneficial owner(s); and (ii) the limit orders are entered in such a manner that the beneficial owner(s) effectively is operating as a market maker by holding itself out as willing to buy and sell such securities on a regular or continuous basis. The Exchange proposes that these restrictions be amended to apply only to customer orders (i.e., non-broker-dealer orders) that are not Voluntary Professional orders.4 The restrictions would no longer be applicable to instances where a member is acting as principal on its own behalf or is acting as agent on behalf of other broker-dealer orders or Voluntary Professional orders. The Exchange noted that it is retaining the restriction for customers who are not Voluntary Professionals because such customers have priority at any price over the bids and offers of market makers, other broker-dealers, and Voluntary Professionals. In addition, in those instances where its restrictions are applicable, Rule 6.8C currently provides that, in determining whether a beneficial owner effectively is operating as a market maker, the Exchange will consider, among other things, the simultaneous or near simultaneous entry of limit orders to buy and sell the same security, the entry of multiple limit orders at different prices in the same security, and the multiple acquisition and liquidation of 3 See Securities Exchange Act Release No. 59425 (February 19, 2009), 74 FR 8829. 4 The term ‘‘Voluntary Professional’’ is defined in CBOE’s rules as any person or entity that is not a broker or dealer in securities that elects, in writing, to be treated in the same manner as a broker or dealer in securities for purposes of specified rules relating to priority in the execution of orders, and for cancellation fee calculation purposes. See Rule 1.1(fff) and Securities Exchange Act Release No. 58327 (August 7, 2008), 73 FR 47988 (August 15, 2008) (SR–CBOE–2008–09). As part of this proposed rule change, the Exchange is proposing to amend Rule 1.1(fff) to provide that a Voluntary Professional will be treated in the same manner as a broker or dealer in securities for purposes of Rule 6.8C. VerDate Nov<24>2008 15:28 Apr 08, 2009 Jkt 217001 positions in the security during the same day. The Exchange proposes to remove the last condition pertaining to the multiple acquisition and liquidation of positions from its list of factors used for determining whether a beneficial owner is operating as a market maker. The Exchange noted that this activity no longer should be considered as a factor in determining whether a beneficial owner is effectively acting as a market maker. III. Discussion After careful review, 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 5 and, in particular, the requirements of Section 6 of the Act.6 Specifically, the Commission finds that the proposal is consistent with Section 6(b)(5) of the Act,7 in that the proposal has been designed to promote just and equitable principles of trade, and to protect investors and the public interest. The Commission believes that it is consistent with the Act for an options exchange not to prohibit a user of its market from operating as a market maker without registering as such. The Commission previously approved rules at other options exchanges that do not impose such a prohibition,8 or impose such a prohibition on customers only.9 The Commission notes that while the Exchange will continue to prohibit 5 The Commission has considered the proposed rule change’s impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f). 6 15 U.S.C. 78f. 7 15 U.S.C. 78f(b)(5). 8 See Securities Exchange Act Release No. 57478 (March 12, 2008), 73 FR 14521 (March 18, 2008) (approving rules governing the trading of options on the NASDAQ Options Market). 9 See Securities Exchange Act Release No. 59472 (February 27, 2009), 74 FR 9843 (March 6, 2009) (approval of rules for the trading of listed options on NYSEAlternext). The Commission notes that any entity that acts as ‘‘dealer,’’ as defined in Section 3(a)(5) of the Act, 15 U.S.C. 78c(a)(5), would be required to register with the Commission under Section 15 of the Act, 15 U.S.C. 78o, and the rules and regulations thereunder, or qualify for any exception or exemption from registration. Activity that may cause a person to be deemed a dealer includes ‘‘ ‘quoting a market in or publishing quotes for securities (other than quotes on one side of the market on a quotations system generally available to non-broker-dealers, such as a retail screen broker for government securities).’ ’’ See Definitions of Terms in and Specific Exemptions for Banks, Savings Associations, and Savings Banks Under Sections 3(a)(4) and 3(a)(5) of the Securities Exchange Act of 1934, Securities Exchange Act Release No. 47364, 68 FR 8686, 8689, note 26 (February 24, 2003) (quoting OTC Derivatives Dealers, Securities Exchange Act Release No. 40594 (October 23, 1998), 63 FR 59362, 59370, note 61 (November 3, 1998)). PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 16247 customers who are not Voluntary Professionals from operating as market makers, those customers will continue to have priority over the bids and offers of market makers, other broker-dealers, and Voluntary Professionals. The Commission also believes that the Exchange’s proposal to remove the condition pertaining to the multiple acquisition and liquidation of positions from its list of factors used for determining whether a beneficial owner is operating as a market maker is consistent with the Act. The Commission believes that the remaining factors are sufficient to enable the Exchange to determine whether a user of its market is operating as a market maker. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,10 that the proposed rule change (SR–CBOE–2009– 09) is approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–8002 Filed 4–8–09; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–59701; File No. SR–ISE– 2009–15] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Quoting Obligations of Second Market Competitive Market Makers April 3, 2009. 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 25, 2009, the International Securities Exchange, LLC (the ‘‘Exchange’’ or the ‘‘ISE’’) filed with the Securities and Exchange Commission the proposed rule change as described in Items I, II, and III below, which items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 10 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 11 17 E:\FR\FM\09APN1.SGM 09APN1

Agencies

[Federal Register Volume 74, Number 67 (Thursday, April 9, 2009)]
[Notices]
[Pages 16246-16247]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-8002]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59700; File No. SR-CBOE-2009-009]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Approving a Proposed Rule Change To Amend its Rules 
Prohibiting Members From Functioning as Market Makers

April 2, 2009.

I. Introduction

    On February 18, 2009, the Chicago Board Options Exchange, 
Incorporated (``CBOE'' 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 revise CBOE Rule 6.8C to 
eliminate certain restrictions prohibiting members

[[Page 16247]]

from functioning as market makers. The proposed rule change was 
published for comment in the Federal Register on February 26, 2009.\3\ 
The Commission received no comments on the proposal. This order 
approves the proposal.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 59425 (February 19, 
2009), 74 FR 8829.
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II. Description of the Proposal

    The Exchange proposes to amend Rule 6.8C, Prohibition Against 
Members Functioning as Market Makers, to eliminate certain of its 
restrictions. Rule 6.8C currently provides that a member, acting either 
as principal or agent, may neither enter nor permit the entry of orders 
into the Exchange's electronic order routing system if (i) the orders 
are limit orders for the account or accounts of the same beneficial 
owner(s); and (ii) the limit orders are entered in such a manner that 
the beneficial owner(s) effectively is operating as a market maker by 
holding itself out as willing to buy and sell such securities on a 
regular or continuous basis. The Exchange proposes that these 
restrictions be amended to apply only to customer orders (i.e., non-
broker-dealer orders) that are not Voluntary Professional orders.\4\ 
The restrictions would no longer be applicable to instances where a 
member is acting as principal on its own behalf or is acting as agent 
on behalf of other broker-dealer orders or Voluntary Professional 
orders. The Exchange noted that it is retaining the restriction for 
customers who are not Voluntary Professionals because such customers 
have priority at any price over the bids and offers of market makers, 
other broker-dealers, and Voluntary Professionals.
---------------------------------------------------------------------------

    \4\ The term ``Voluntary Professional'' is defined in CBOE's 
rules as any person or entity that is not a broker or dealer in 
securities that elects, in writing, to be treated in the same manner 
as a broker or dealer in securities for purposes of specified rules 
relating to priority in the execution of orders, and for 
cancellation fee calculation purposes. See Rule 1.1(fff) and 
Securities Exchange Act Release No. 58327 (August 7, 2008), 73 FR 
47988 (August 15, 2008) (SR-CBOE-2008-09). As part of this proposed 
rule change, the Exchange is proposing to amend Rule 1.1(fff) to 
provide that a Voluntary Professional will be treated in the same 
manner as a broker or dealer in securities for purposes of Rule 
6.8C.
---------------------------------------------------------------------------

    In addition, in those instances where its restrictions are 
applicable, Rule 6.8C currently provides that, in determining whether a 
beneficial owner effectively is operating as a market maker, the 
Exchange will consider, among other things, the simultaneous or near 
simultaneous entry of limit orders to buy and sell the same security, 
the entry of multiple limit orders at different prices in the same 
security, and the multiple acquisition and liquidation of positions in 
the security during the same day. The Exchange proposes to remove the 
last condition pertaining to the multiple acquisition and liquidation 
of positions from its list of factors used for determining whether a 
beneficial owner is operating as a market maker. The Exchange noted 
that this activity no longer should be considered as a factor in 
determining whether a beneficial owner is effectively acting as a 
market maker.

III. Discussion

    After careful review, 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 \5\ 
and, in particular, the requirements of Section 6 of the Act.\6\ 
Specifically, the Commission finds that the proposal is consistent with 
Section 6(b)(5) of the Act,\7\ in that the proposal has been designed 
to promote just and equitable principles of trade, and to protect 
investors and the public interest.
---------------------------------------------------------------------------

    \5\ The Commission has considered the proposed rule change's 
impact on efficiency, competition and capital formation. 15 U.S.C. 
78c(f).
    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission believes that it is consistent with the Act for an 
options exchange not to prohibit a user of its market from operating as 
a market maker without registering as such. The Commission previously 
approved rules at other options exchanges that do not impose such a 
prohibition,\8\ or impose such a prohibition on customers only.\9\ The 
Commission notes that while the Exchange will continue to prohibit 
customers who are not Voluntary Professionals from operating as market 
makers, those customers will continue to have priority over the bids 
and offers of market makers, other broker-dealers, and Voluntary 
Professionals.
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release No. 57478 (March 12, 
2008), 73 FR 14521 (March 18, 2008) (approving rules governing the 
trading of options on the NASDAQ Options Market).
    \9\ See Securities Exchange Act Release No. 59472 (February 27, 
2009), 74 FR 9843 (March 6, 2009) (approval of rules for the trading 
of listed options on NYSEAlternext).
    The Commission notes that any entity that acts as ``dealer,'' as 
defined in Section 3(a)(5) of the Act, 15 U.S.C. 78c(a)(5), would be 
required to register with the Commission under Section 15 of the 
Act, 15 U.S.C. 78o, and the rules and regulations thereunder, or 
qualify for any exception or exemption from registration. Activity 
that may cause a person to be deemed a dealer includes `` `quoting a 
market in or publishing quotes for securities (other than quotes on 
one side of the market on a quotations system generally available to 
non-broker-dealers, such as a retail screen broker for government 
securities).' '' See Definitions of Terms in and Specific Exemptions 
for Banks, Savings Associations, and Savings Banks Under Sections 
3(a)(4) and 3(a)(5) of the Securities Exchange Act of 1934, 
Securities Exchange Act Release No. 47364, 68 FR 8686, 8689, note 26 
(February 24, 2003) (quoting OTC Derivatives Dealers, Securities 
Exchange Act Release No. 40594 (October 23, 1998), 63 FR 59362, 
59370, note 61 (November 3, 1998)).
---------------------------------------------------------------------------

    The Commission also believes that the Exchange's proposal to remove 
the condition pertaining to the multiple acquisition and liquidation of 
positions from its list of factors used for determining whether a 
beneficial owner is operating as a market maker is consistent with the 
Act. The Commission believes that the remaining factors are sufficient 
to enable the Exchange to determine whether a user of its market is 
operating as a market maker.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-CBOE-2009-09) is approved.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-8002 Filed 4-8-09; 8:45 am]
BILLING CODE 8010-01-P
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