Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change Related to the Hybrid Matching Algorithms, 39989-39991 [E9-19018]
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Federal Register / Vol. 74, No. 152 / Monday, August 10, 2009 / Notices
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 19 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6) 20
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. NYSE requests that the
Commission waive the 30-day operative
delay because the Exchange believes
that the absence of such a rule in an
automated and fast-paced trading
environment poses a danger to the
integrity of the markets and the public
interest. NYSE notes that immediate
effectiveness of the proposed rule
change will immediately and timely
enable NYSE to cancel or adjust clearly
erroneous trades that may present a risk
to the integrity of the equities markets
and all related markets. The
Commission believes that waiving the
30-day operative delay 21 is consistent
with the protection of investors and the
public interest because such waiver will
permit the Exchange to continue
operation of interim NYSE Rule 128 on
an uninterrupted basis, and therefore
designates the proposal 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 is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
rmajette on DSK29S0YB1PROD with NOTICES
• 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–NYSE–2009–79 on the
subject line.
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Commission has determined to
waive the five-day pre-filing period in this case.
19 17 CFR 240.19b–4(f)(6).
20 17 CFR 240.19b–4(f)(6).
21 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
VerDate Nov<24>2008
15:09 Aug 07, 2009
Jkt 217001
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–NYSE–2009–79. 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 publicly available. All
submissions should refer to File
Number SR–NYSE–2009–79 and should
be submitted on or before August 31,
2009.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–19033 Filed 8–7–09; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–60420; File No. SR–CBOE–
2009–052]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing of a
Proposed Rule Change Related to the
Hybrid Matching Algorithms
August 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 July 17,
2009, the Chicago Board Options
Exchange, Incorporated (the ‘‘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
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
Rules 6.45A, Priority and Allocation of
Equity Option Trades on the CBOE
Hybrid System, and 6.45B, Priority and
Allocation of Trades in Index Options
and Options on ETFs on the CBOE
Hybrid System, to adopt a modified
participation entitlement priority
overlay. The text of the proposed rule
change is available on the Exchange’s
Web site (https://www.cboe.org/Legal), at
the Office of the Secretary, CBOE 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.
1 15
22 17
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39989
2 17
E:\FR\FM\10AUN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
10AUN1
39990
Federal Register / Vol. 74, No. 152 / Monday, August 10, 2009 / Notices
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
CBOE Rules 6.45A and 6.45B set
forth, among other things, the manner in
which electronic Hybrid System trades
in options are allocated. Paragraph (a) of
each rule essentially governs how
incoming orders received electronically
by the Exchange are electronically
executed against interest in the CBOE
quote. Paragraph (a) of each rule
currently provides a ‘‘menu’’ of
matching algorithms to choose from
when executing incoming electronic
orders. The menu format allows the
Exchange to utilize different matching
algorithms on a class-by-class basis. The
menu includes, among other choices,
price-time and pro-rata priority
matching algorithms with additional
priority overlays.3 The priority overlays
currently include: Public customer
priority for public customer orders
resting on the Hybrid System,
participation entitlements for certain
qualifying market-makers, and a market
turner priority for participants that are
first to improve CBOE’s disseminated
quote. These overlays are optional.
The purpose of this rule filing is to
adopt an additional priority overlay for
the price-time and pro-rata matching
algorithms, which the Exchange will
refer to as the ‘‘modified participation
entitlement.’’ The modified
participation entitlement will operate in
the same manner as the existing
participation entitlement with a few
exceptions described below.4 In
rmajette on DSK29S0YB1PROD with NOTICES
3 The
menu also includes a matching algorithm
called the Ultimate Matching Algorithm (‘‘UMA’’).
CBOE is not proposing any changes to the UMA
matching algorithm at this time.
4 Under the existing participation entitlement, the
Exchange may determine to grant Market-Makers
participation entitlements pursuant to the
provisions of Rules 8.87, Participation Entitlement
of DPMs and e-DPMs, 8.13, Preferred Market-Maker
Program, or 8.15B, Participation Entitlement of
LLMs. More than one such participation
entitlements may be activated for an option class
(including at different priority sequences), however
in no case may more than one participation
entitlement be applied on the same trade. In
allocating the participation entitlement, all of the
following apply: (i) To be entitled to their
participation entitlement, the Market-Maker’s order
and/or quote must be at the best price on the
Exchange. (ii) The Market-Maker may not be
allocated a total quantity greater than the quantity
that it is quoting (including orders not part of
quotes) at that price. If pro-rata priority is in effect,
and Market-Maker’s allocation of an order pursuant
to its participation entitlement is greater than its
percentage share of quotes/orders at the best price
at the time that the participation entitlement is
granted, the Market-Maker shall not receive any
further allocation of that order. (iii) In establishing
the counterparties to a particular trade, the
participation entitlement must first be counted
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15:09 Aug 07, 2009
Jkt 217001
particular, if the modified participation
entitlement is in effect for an option
class, then the following would apply:
• If at the time of execution there are
no public customer orders resting at the
execution price, then the Market-Maker
participation entitlement would be
applied. This outcome is no change
from how the existing participation
entitlement works today.
• If at the time of execution there is
a public customer order that was
entered first in time sequence among all
other resting trading interest at the
execution price, then the Market-Maker
participation entitlement would be
applied after public customer orders are
satisfied. This outcome is no change
from how the existing participation
entitlement works today.
• In all other cases involving the
allocation of an incoming electronic
order, i.e., if at the time of execution
there is one or more public customer
orders resting at the execution price but
none was entered first in time sequence,
then the Market-Maker participation
entitlement and public customer
priority overlays would not be applied
to the allocation. This outcome is a
change from how the existing
participation entitlement works today.5
• The modified participation
entitlement would not be used for any
electronic auctions; instead, the existing
participation entitlement parameters
would be applied.6 Thus, the outcome
would be no change from how the
against that Market-Maker’s highest priority bids or
offers. (iv) The participation entitlement shall not
be in effect unless the public customer priority is
in effect in a priority sequence ahead of the
participation entitlement and then the participation
entitlement shall only apply to any remaining
balance. See Rules 6.45A(a)(ii)(2) and 6.45B(a)(i)(2).
5 For example, assume the matching algorithm for
an options class is established so that public
customer orders have first priority, the modified
participation entitlement has second priority, and
any remaining balance is allocated using the prorata matching algorithm. If at the time of execution
there is one or more public customer orders at the
execution price but none is first in time sequence
(say because a Market-Maker quote was the first
trading interest posted at the execution price), then
the Market-Maker participation entitlement and
public customer priority overlays would not be
applied and the incoming order would be allocated
solely on a pro-rata basis.
6 CBOE has various electronic auctions that are
described under Rules 6.13A, Simple Auction
Liaison (‘‘SAL’’), 6.14, Hybrid Agency Liaison
(HAL), 6.53C(d), Process for Complex Order RFR
Auction (‘‘COA’’), 6.74A, Automated Improvement
Mechanism (‘‘AIM’’), and 6.74B, Solicitation
Auction Mechanism (‘‘AIM SAM’’). Each of these
auctions generally allocates executions pursuant to
the matching algorithm in effect for the options
class with certain exceptions noted in the
respective rules. For example, no participation
entitlement is applied to orders executed through
HAL or AIM.
PO 00000
Frm 00076
Fmt 4703
Sfmt 4703
existing participation entitlement works
today for electronic auctions.
Lastly, it should be noted that, like
the existing priority overlays, the
modified participation entitlement is
optional. As with the existing
procedures, the Exchange will continue
to determine whether one or more of the
priority overlays shall apply to an
option class and if more than one is
selected, the sequence in which they
shall apply (consistent with applicable
rules). All determinations would be set
forth in a regulatory circular.
2. Statutory Basis
This change will allow the Exchange
another method to reward aggressive
pricing in options trading on the Hybrid
System. Accordingly, CBOE believes the
proposed rule change is consistent with
Section 6(b) of the Act 7 in general and
furthers the objectives of Section 6(b)(5)
of the Act 8 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.
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 self-regulatory
organization consents, the Commission
will:
(A) By order approve such proposed
rule change, or
7 15
8 15
E:\FR\FM\10AUN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
10AUN1
Federal Register / Vol. 74, No. 152 / Monday, August 10, 2009 / Notices
(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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
No. SR–CBOE–2009–052 on the subject
line.
Paper Comments
rmajette on DSK29S0YB1PROD with NOTICES
• 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 No.
SR–CBOE–2009–052. 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 changes 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 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 No.
SR–CBOE–2009–052 and should be
submitted on or before August 31, 2009.
VerDate Nov<24>2008
15:09 Aug 07, 2009
Jkt 217001
39991
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–19018 Filed 8–7–09; 8:45 am]
DEPARTMENT OF TRANSPORTATION
BILLING CODE 8010–01–P
Reports, Forms, and Recordkeeping
Requirements
SMALL BUSINESS ADMINISTRATION
Reporting and Recordkeeping
Requirements Under OMB Review
Small Business Administration.
ACTION: Notice of Reporting
Requirements Submitted for OMB
Review.
AGENCY:
SUMMARY: Under the provisions of the
Paperwork Reduction Act (44 U.S.C.
Chapter 35), agencies are required to
submit proposed reporting and
recordkeeping requirements to OMB for
review and approval, and to publish a
notice in the Federal Register notifying
the public that the agency has made
such a submission.
DATES: Submit comments on or before
September 9, 2009. If you intend to
comment but cannot prepare comments
promptly, please advise the OMB
Reviewer and the Agency Clearance
Officer before the deadline.
Copies: Request for clearance (OMB
83–1), supporting statement, and other
documents submitted to OMB for
review may be obtained from the
Agency Clearance Officer.
ADDRESSES: Address all comments
concerning this notice to: Agency
Clearance Officer, Jacqueline White,
Small Business Administration, 409 3rd
Street, SW., 5th Floor, Washington, DC
20416; and OMB Reviewer, Office of
Information and Regulatory Affairs,
Office of Management and Budget, New
Executive Office Building, Washington,
DC 20503.
FOR FURTHER INFORMATION CONTACT:
Jacqueline White, Agency Clearance
Officer, (202) 205–7044.
SUPPLEMENTARY INFORMATION:
Title: Application for Small Business
Size Determination.
SBA Form Number: 355.
Frequency: On Occasion.
Description of Respondents: Small
Businesses.
Responses: 600.
Annual Burden Hours: 2,400.
Jacqueline White,
Chief, Administrative Information Branch.
[FR Doc. E9–19013 Filed 8–7–09; 8:45 am]
BILLING CODE P
9 17
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National Highway Traffic Safety
Administration
[U.S. DOT Docket No. NHTSA–2009–0142]
AGENCY: National Highway Traffic
Safety Administration (NHTSA), DOT.
ACTION: Request for public comment on
proposed collection of information.
SUMMARY: Before a Federal agency can
collect certain information from the
public, it must receive approval from
the Office of Management and Budget
(OMB). Under procedures established
by the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), before seeking
OMB approval, Federal agencies must
solicit public comment on proposed
collections of information, including
extensions and reinstatements of
previously approved collections.
This document describes one
collection of information for which
NHTSA intends to seek OMB approval.
DATES: Comments must be submitted on
or before October 9, 2009.
ADDRESSES: Direct all written comments
to the U.S. Department of
Transportation Dockets, 1200 New
Jersey Ave, SE., W46–474, Washington,
DC 20590. Docket No. NHTSA–2009–
0142.
FOR FURTHER INFORMATION CONTACT:
Scott Roberts, PhD, Contracting Officer’s
Technical Representative, Office of
Behavioral Safety Research (NTI–132),
National Highway Traffic Safety
Administration, 1200 New Jersey Ave,
SE., W46–495, Washington, DC 20590.
Dr. Roberts’ phone number is 202–366–
5594 and his e-mail address is
Scott.Roberts@dot.gov.
SUPPLEMENTARY INFORMATION:
Under the Paperwork Reduction Act
of 1995, before an agency submits a
proposed collection of information to
OMB for approval, it must publish a
document in the Federal Register
providing a 60-day comment period and
otherwise consult with members of the
public and affected agencies concerning
each proposed collection of information.
The OMB has promulgated regulations
describing what must be included in
such a document. Under OMB’s
regulations (at 5 CFR 1320.8(d)), an
agency must ask for public comment on
the following:
(i) Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
agency, including whether the
information will have practical utility;
E:\FR\FM\10AUN1.SGM
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]]>Agencies
[Federal Register Volume 74, Number 152 (Monday, August 10, 2009)]
[Notices]
[Pages 39989-39991]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-19018]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-60420; File No. SR-CBOE-2009-052]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing of a Proposed Rule Change Related to the
Hybrid Matching Algorithms
August 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 July 17, 2009, the Chicago Board Options Exchange, Incorporated
(the ``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 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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rules 6.45A, Priority and Allocation
of Equity Option Trades on the CBOE Hybrid System, and 6.45B, Priority
and Allocation of Trades in Index Options and Options on ETFs on the
CBOE Hybrid System, to adopt a modified participation entitlement
priority overlay. The text of the proposed rule change is available on
the Exchange's Web site (https://www.cboe.org/Legal), at the Office of
the Secretary, CBOE 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.
[[Page 39990]]
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
CBOE Rules 6.45A and 6.45B set forth, among other things, the
manner in which electronic Hybrid System trades in options are
allocated. Paragraph (a) of each rule essentially governs how incoming
orders received electronically by the Exchange are electronically
executed against interest in the CBOE quote. Paragraph (a) of each rule
currently provides a ``menu'' of matching algorithms to choose from
when executing incoming electronic orders. The menu format allows the
Exchange to utilize different matching algorithms on a class-by-class
basis. The menu includes, among other choices, price-time and pro-rata
priority matching algorithms with additional priority overlays.\3\ The
priority overlays currently include: Public customer priority for
public customer orders resting on the Hybrid System, participation
entitlements for certain qualifying market-makers, and a market turner
priority for participants that are first to improve CBOE's disseminated
quote. These overlays are optional.
---------------------------------------------------------------------------
\3\ The menu also includes a matching algorithm called the
Ultimate Matching Algorithm (``UMA''). CBOE is not proposing any
changes to the UMA matching algorithm at this time.
---------------------------------------------------------------------------
The purpose of this rule filing is to adopt an additional priority
overlay for the price-time and pro-rata matching algorithms, which the
Exchange will refer to as the ``modified participation entitlement.''
The modified participation entitlement will operate in the same manner
as the existing participation entitlement with a few exceptions
described below.\4\ In particular, if the modified participation
entitlement is in effect for an option class, then the following would
apply:
---------------------------------------------------------------------------
\4\ Under the existing participation entitlement, the Exchange
may determine to grant Market-Makers participation entitlements
pursuant to the provisions of Rules 8.87, Participation Entitlement
of DPMs and e-DPMs, 8.13, Preferred Market-Maker Program, or 8.15B,
Participation Entitlement of LLMs. More than one such participation
entitlements may be activated for an option class (including at
different priority sequences), however in no case may more than one
participation entitlement be applied on the same trade. In
allocating the participation entitlement, all of the following
apply: (i) To be entitled to their participation entitlement, the
Market-Maker's order and/or quote must be at the best price on the
Exchange. (ii) The Market-Maker may not be allocated a total
quantity greater than the quantity that it is quoting (including
orders not part of quotes) at that price. If pro-rata priority is in
effect, and Market-Maker's allocation of an order pursuant to its
participation entitlement is greater than its percentage share of
quotes/orders at the best price at the time that the participation
entitlement is granted, the Market-Maker shall not receive any
further allocation of that order. (iii) In establishing the
counterparties to a particular trade, the participation entitlement
must first be counted against that Market-Maker's highest priority
bids or offers. (iv) The participation entitlement shall not be in
effect unless the public customer priority is in effect in a
priority sequence ahead of the participation entitlement and then
the participation entitlement shall only apply to any remaining
balance. See Rules 6.45A(a)(ii)(2) and 6.45B(a)(i)(2).
---------------------------------------------------------------------------
If at the time of execution there are no public customer
orders resting at the execution price, then the Market-Maker
participation entitlement would be applied. This outcome is no change
from how the existing participation entitlement works today.
If at the time of execution there is a public customer
order that was entered first in time sequence among all other resting
trading interest at the execution price, then the Market-Maker
participation entitlement would be applied after public customer orders
are satisfied. This outcome is no change from how the existing
participation entitlement works today.
In all other cases involving the allocation of an incoming
electronic order, i.e., if at the time of execution there is one or
more public customer orders resting at the execution price but none was
entered first in time sequence, then the Market-Maker participation
entitlement and public customer priority overlays would not be applied
to the allocation. This outcome is a change from how the existing
participation entitlement works today.\5\
---------------------------------------------------------------------------
\5\ For example, assume the matching algorithm for an options
class is established so that public customer orders have first
priority, the modified participation entitlement has second
priority, and any remaining balance is allocated using the pro-rata
matching algorithm. If at the time of execution there is one or more
public customer orders at the execution price but none is first in
time sequence (say because a Market-Maker quote was the first
trading interest posted at the execution price), then the Market-
Maker participation entitlement and public customer priority
overlays would not be applied and the incoming order would be
allocated solely on a pro-rata basis.
---------------------------------------------------------------------------
The modified participation entitlement would not be used
for any electronic auctions; instead, the existing participation
entitlement parameters would be applied.\6\ Thus, the outcome would be
no change from how the existing participation entitlement works today
for electronic auctions.
---------------------------------------------------------------------------
\6\ CBOE has various electronic auctions that are described
under Rules 6.13A, Simple Auction Liaison (``SAL''), 6.14, Hybrid
Agency Liaison (HAL), 6.53C(d), Process for Complex Order RFR
Auction (``COA''), 6.74A, Automated Improvement Mechanism (``AIM''),
and 6.74B, Solicitation Auction Mechanism (``AIM SAM''). Each of
these auctions generally allocates executions pursuant to the
matching algorithm in effect for the options class with certain
exceptions noted in the respective rules. For example, no
participation entitlement is applied to orders executed through HAL
or AIM.
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Lastly, it should be noted that, like the existing priority
overlays, the modified participation entitlement is optional. As with
the existing procedures, the Exchange will continue to determine
whether one or more of the priority overlays shall apply to an option
class and if more than one is selected, the sequence in which they
shall apply (consistent with applicable rules). All determinations
would be set forth in a regulatory circular.
2. Statutory Basis
This change will allow the Exchange another method to reward
aggressive pricing in options trading on the Hybrid System.
Accordingly, CBOE believes the proposed rule change is consistent with
Section 6(b) of the Act \7\ in general and furthers the objectives of
Section 6(b)(5) of the Act \8\ 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.
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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 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 self-regulatory organization consents, the Commission will:
(A) By order approve such proposed rule change, or
[[Page 39991]]
(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 (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File No. SR-CBOE-2009-052 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 No. SR-CBOE-2009-052. 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 changes 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 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 No. SR-CBOE-2009-052 and should be
submitted on or before August 31, 2009.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-19018 Filed 8-7-09; 8:45 am]
BILLING CODE 8010-01-P
