Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Approving a Proposed Rule Change Related to the Hybrid Matching Algorithms, 48114-48115 [E9-22683]
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48114
Federal Register / Vol. 74, No. 181 / Monday, September 21, 2009 / Notices
immediately effective under Rule 19b–
4(f)(6) 13 of the Act.
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:
mstockstill on DSKH9S0YB1PROD with NOTICES
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–2009–062 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–2009–062. 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 CBOE. All
comments received will be posted
without change; the Commission does
13 17
CFR 240.19b–4(f)(6).
VerDate Nov<24>2008
17:24 Sep 18, 2009
Jkt 217001
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–2009–062 and
should be submitted on or before
October 13, 2009.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–22684 Filed 9–18–09; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–60665; File No. SR–CBOE–
2009–052]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Order Approving a
Proposed Rule Change Related to the
Hybrid Matching Algorithms
September 14, 2009.
On July 17, 2009, the Chicago Board
Options Exchange, Incorporated (the
‘‘Exchange’’ or ‘‘CBOE’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’), pursuant to
Section 19(b)(1) of the Securities
Exchange Act of 1934 (the ‘‘Act’’),1 and
Rule 19b–4 thereunder,2 a proposed rule
change to amend CBOE Rules 6.45A and
6.45B to adopt a modified participation
entitlement overlay to orders executed
electronically on the CBOE Hybrid
System (‘‘Hybrid System’’). The
proposed rule change was published for
comment in the Federal Register on
August 10, 2009.3 The Commission
received no comments on the proposed
rule change. This order approves the
proposed rule change.
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 both rules
currently provides for several different
matching algorithms, including pricetime and pro-rata priority matching
algorithms with additional priority
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 60420
(August 3, 2009), 74 FR 39989.
1 15
PO 00000
Frm 00064
Fmt 4703
Sfmt 4703
overlays.4 The priority overlays
currently include: public customer
priority, market turner priority, and
participation entitlements for certain
qualifying market-makers.5 These
overlays are optional.
The purpose of the rule filing is to
adopt the ‘‘modified participation
entitlement,’’ an additional optional
priority overlay for the price-time and
pro-rata matching algorithms. The
modified participation entitlement will
operate in the same manner as the
existing participation entitlement for
certain qualifying market-makers;
however, 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—i.e. the allocation
would revert back to the price-time or
pro-rata methods. The participation
entitlement for certain qualifying
market-makers would therefore only be
applied to the execution of an inbound
order if there are no public customer
orders resting on the Hybrid System at
the best price or if a public customer
was the first to rest interest at the best
price, in which case the public customer
order would have priority over the order
of the market maker. This outcome is a
4 Rules 6.45A and 6.45B also include the Ultimate
Matching Algorithm (‘‘UMA’’). CBOE did not
propose any changes to the UMA in this filing.
5 Under the existing participation entitlements,
the Exchange may determine to grant marketmakers 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
entitlement 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 its
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 the 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; and (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).
E:\FR\FM\21SEN1.SGM
21SEN1
Federal Register / Vol. 74, No. 181 / Monday, September 21, 2009 / Notices
mstockstill on DSKH9S0YB1PROD with NOTICES
change from how the existing
participation entitlement works today.6
The Commission has carefully
reviewed the proposed rule change and
finds that it is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange.7 In
particular, the Commission finds that
the proposed rule change is consistent
with Section 6(b)(5) of the Act,8 which
requires, among other things, that the
rules of an exchange be designed to
promote just and equitable principles of
trade, 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; and
are not designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The new priority overlay is the same
as the current market-maker
participation entitlement overlay,
except that the participation entitlement
will only be applied if there are no
public customer orders resting at the
best price or if a public customer was
the first to rest interest at the best price.
Otherwise, neither the current public
customer priority overlay nor the
market-maker participation entitlement
priority overlay will be in effect. Thus,
public customer orders will have
priority over the orders of other market
participants if they are the first orders
entered at the best price; if they are not
the first orders at the best price, then the
order will be allocated among market
participants using the underlying
matching algorithm—price-time or prorate—both of which the Commission
already has found as consistent with the
Act.9 The Commission therefore
believes that the modified participation
entitlement priority overlay is
consistent with the Act.
6 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
(for instance, 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.
7 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
8 15 U.S.C. 78f(b)(5).
9 See Securities Exchange Act Release No. 51822
(June 10, 2005), 70 FR 35321 (June 17, 2005)
(Adopting CBOE Rule 6.45B).
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17:24 Sep 18, 2009
Jkt 217001
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,10 that the
proposed rule change (SR–CBOE–2009–
052), be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–22683 Filed 9–18–09; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–60668; File No. SR–BX–
2009–043]
Self-Regulatory Organizations;
NASDAQ OMX BX, Inc.; Order
Approving Proposed Rule Change To
Extend a Holiday for Certain
Registration and Processing Fees for
Associated Persons
September 14, 2009.
I. Introduction
On July 23, 2009, NASDAQ OMX BX,
Inc. (‘‘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
extend a fee holiday for initial
registration and processing and/or
transfer and relicensing fees collected
by the Exchange via Web CRD for the
registration of associated persons of
Exchange members. The proposed rule
change was published for comment in
the Federal Register on August 10,
2009.3 The Commission received no
comments on the proposal. This order
approves the proposed rule change.
II. Description of the Proposal
The Exchange (as the Boston Stock
Exchange), before its purchase by The
NASDAQ OMX Group, Inc. in 2008,4
had ceased the trading of equity
securities in 2007.5 In January 2009,
when the Exchange’s market center was
launched, the Exchange adopted a new
10 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(l).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 60427
(August 4, 2009), 74 FR 39986 (August 10, 2009)
(‘‘Notice’’).
4 See Securities Exchange Act Release No. 58183
(July 17, 2008), 73 FR 42850 (July 23,
2008).
5 See Securities Exchange Act Release No. 57757
(May 1, 2008), 73 FR 26159 (May 8,
2008).
11 17
PO 00000
Frm 00065
Fmt 4703
Sfmt 4703
48115
set of Equity Rules, which include rules
governing fees charged to members for
registration of associated persons with
the Exchange. Equity Rule 7003(b) sets
forth the fees collected by the Exchange
via the Web CRD system for initial
registration and transfer or re-licensing:
$60 for each initial Form U4 filed for the
registration of a representative or
principal,6 and $40 for each transfer or
re-licensing of a representative or
principal.7
The Exchange recognized that, in
connection with the resumption of
equities trading, additional firms might
wish to become members of the
Exchange, and if so, would need to
register associated persons. Similarly,
additional representatives or principals
of pre-existing members might wish to
trade equities on the Exchange and
would thus need to register with the
Exchange. Therefore, the Exchange
waived these initial registration and
transfer or re-licensing fees from January
1, 2009 to July 1, 2009.8 The Exchange
proposed to extend this fee waiver
period to cover the period from July 1,
2009 until October 1, 2009, to provide
more time for associated persons that
are new to equity trading through the
Exchange to register, transfer, or relicense without incurring these costs.
Registration events occurring after
October 1, 2009 will be subject to the
initial registration and/or transfer or relicensing fees.9
III. Discussion and Commission
Findings
The Commission has reviewed the
proposed rule change and finds that it
is consistent with the requirements of
the Act and the rules and regulations
thereunder applicable to a national
securities exchange.10 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(4) of the Act 11 in that it provides
for an equitable allocation of reasonable
dues, fees, and other charges among the
Exchange’s members and other persons
using its facilities. The fee waiver
applies to initial registration, transfer,
6 Rule
7003(b)(1).
7003(b)(2).
8 See Securities Exchange Act Release No. 59337
(February 2, 2009), 74 FR 6441
(February 9, 2009).
9 Rule 7003(b)(3) sets forth an annual fee of $50
for each registered representative and principal for
system processing. This annual fee was suspended
on January 1, 2009 and will continue to be
suspended until the Exchange submits a proposed
rule change to reinstate it. See id. See also Notice.
10 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
11 15 U.S.C. 78f(b)(4).
7 Rule
E:\FR\FM\21SEN1.SGM
21SEN1
]]>Agencies
[Federal Register Volume 74, Number 181 (Monday, September 21, 2009)]
[Notices]
[Pages 48114-48115]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-22683]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-60665; File No. SR-CBOE-2009-052]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Approving a Proposed Rule Change Related to the
Hybrid Matching Algorithms
September 14, 2009.
On July 17, 2009, the Chicago Board Options Exchange, Incorporated
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange
Commission (the ``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the ``Act''),\1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend CBOE Rules 6.45A and
6.45B to adopt a modified participation entitlement overlay to orders
executed electronically on the CBOE Hybrid System (``Hybrid System'').
The proposed rule change was published for comment in the Federal
Register on August 10, 2009.\3\ The Commission received no comments on
the proposed rule change. This order approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 60420 (August 3,
2009), 74 FR 39989.
---------------------------------------------------------------------------
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 both
rules currently provides for several different matching algorithms,
including price-time and pro-rata priority matching algorithms with
additional priority overlays.\4\ The priority overlays currently
include: public customer priority, market turner priority, and
participation entitlements for certain qualifying market-makers.\5\
These overlays are optional.
---------------------------------------------------------------------------
\4\ Rules 6.45A and 6.45B also include the Ultimate Matching
Algorithm (``UMA''). CBOE did not propose any changes to the UMA in
this filing.
\5\ Under the existing participation entitlements, 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
entitlement 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 its 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 the 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; and (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).
---------------------------------------------------------------------------
The purpose of the rule filing is to adopt the ``modified
participation entitlement,'' an additional optional priority overlay
for the price-time and pro-rata matching algorithms. The modified
participation entitlement will operate in the same manner as the
existing participation entitlement for certain qualifying market-
makers; however, 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--i.e. the allocation would revert back to the price-
time or pro-rata methods. The participation entitlement for certain
qualifying market-makers would therefore only be applied to the
execution of an inbound order if there are no public customer orders
resting on the Hybrid System at the best price or if a public customer
was the first to rest interest at the best price, in which case the
public customer order would have priority over the order of the market
maker. This outcome is a
[[Page 48115]]
change from how the existing participation entitlement works today.\6\
---------------------------------------------------------------------------
\6\ 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 (for instance, 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 Commission has carefully reviewed the proposed rule change and
finds that it is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\7\ In particular, the Commission finds that the proposed rule
change is consistent with Section 6(b)(5) of the Act,\8\ which
requires, among other things, that the rules of an exchange be designed
to promote just and equitable principles of trade, 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; and are not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\7\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The new priority overlay is the same as the current market-maker
participation entitlement overlay, except that the participation
entitlement will only be applied if there are no public customer orders
resting at the best price or if a public customer was the first to rest
interest at the best price. Otherwise, neither the current public
customer priority overlay nor the market-maker participation
entitlement priority overlay will be in effect. Thus, public customer
orders will have priority over the orders of other market participants
if they are the first orders entered at the best price; if they are not
the first orders at the best price, then the order will be allocated
among market participants using the underlying matching algorithm--
price-time or pro-rate--both of which the Commission already has found
as consistent with the Act.\9\ The Commission therefore believes that
the modified participation entitlement priority overlay is consistent
with the Act.
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 51822 (June 10,
2005), 70 FR 35321 (June 17, 2005) (Adopting CBOE Rule 6.45B).
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-CBOE-2009-052), be, and
hereby is, approved.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78s(b)(2).
\11\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-22683 Filed 9-18-09; 8:45 am]
BILLING CODE 8010-01-P
