Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify CBSX Rule 51.8 To Add Pegged Cross Orders, To Add an Interpretation Regarding Pricing of Cross Orders, and To Add Greater Flexibility to Intermarket Sweep Orders, 175-176 [E9-31164]

Download as PDF Federal Register / Vol. 75, No. 1 / Monday, January 4, 2010 / Notices should refer to File Number SR– NYSEArca–2009–113 and should be submitted on or before January 25, 2010. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.30 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–31162 Filed 12–31–09; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–61241; File No. SR–CBOE– 2009–100] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify CBSX Rule 51.8 To Add Pegged Cross Orders, To Add an Interpretation Regarding Pricing of Cross Orders, and To Add Greater Flexibility to Intermarket Sweep Orders December 24, 2009. pwalker on DSK8KYBLC1PROD with NOTICES Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on December 23, 2009, the Chicago Board Options Exchange, Incorporated (‘‘Exchange’’ or ‘‘CBOE’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to modify CBSX Rule 51.8 to add a new ordertype, to add an interpretation regarding CBSX pricing of cross orders, and to add greater flexibility to the CBSX intermarket sweep order process. The text of the proposed rule change is available on the Exchange’s Web site (https://www.cboe.org/Legal), on the Commission’s Web site (https:// www.sec.gov), at the Exchange’s 30 17 CFR 200.30–3(a)(12). 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). principal office, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the CBOE 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 The filing proposes to make three changes to CBSX Rule 51.8. First, the proposal would allow users the ability to have any unexecuted balance of an intermarket sweep order (ISO) be booked and displayed. Currently, any unexecuted balance is cancelled. Thus, if the NBBO is 20–20.04 (500 × 100) and CBSX represents the best offer, an ISO (that is not labeled as immediate or cancel) to buy 200 shares would get filled on 100 shares at 20.04 and the balance would book as a 20.04 bid for 100 shares. Second, the filing proposes to adopt a ‘‘Pegged Cross Order’’. This order type would allow users to send both sides of a cross with an execution price that is pegged to the national best offer or national best bid. In fast moving markets this gives users greater certainty in executing crosses while ensuring that such executions honor Protected Quotations. Pegged Cross orders are entered with a penny or subpenny amount higher (lower) than the national best bid (offer). By way of example, if the NBBO is 20–20.04 and a 7000 share Pegged Cross order priced at the bid plus .01 is received, CBSX will execute the 7000 share cross at 20.01. If, however, a Pegged Cross is priced in a way that would cause a tradethrough of a Protected Quotation, then the system will re-price the cross to a permissible trade price (i.e. the nearest price to the originally requested price that would not cause a trade-through and that would not conflict with the priority provisions of CBSX Rule 52.11.5 1 15 VerDate Nov<24>2008 17:11 Dec 31, 2009 5 CBSX Rule 52.11 provides that a cross can only establish priority at the disseminated CBSX bid/ offer if it (i) is for at least 5000 shares, (ii) is for Jkt 220001 PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 175 For example, if the NBBO is 20–20.04 and a 7000 share Pegged Cross order priced at the bid plus .05 is received while the CBSX offer is 20.04 for 100 shares, CBSX will execute the 7000 share cross at 20.04. If the cross were only for 2000 shares, CBSX would effect the cross at 20.03 because it could not establish priority at 20.04 pursuant to Rule 52.11. In addition, if a Pegged Cross is received when the national best offer is crossed with the national best bid, the system will cancel the order. If a Pegged Cross is received when the national best bid is locked with the national best offer, the system will attempt to execute the cross at the lock price provided such execution would not conflict with the priority provisions of Rule 52.11. The last change proposed in this filing is to adopt language substantially similar to a provision contained in Chicago Stock Exchange Article XX, Rule 4.a.(7)(b) which allows for cross transactions to be priced in subpennies. The proposed provision, which would be contained in an interpretation to CBSX Rule 51.8 would allow crosses to be priced in increments as small as 0.0001 provided the execution is more than $0.01 better than the prevailing BBO unless the cross would already be allowed priority at the BBO pursuant to Rule 52.11. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with Section 6(b) of the Act 6 in general and furthers the objectives of Section 6(b)(5) of the Act 7 in particular in that, by offering users an enhanced price improvement features and greater control over order routing, it is designed to promote just and equitable principles of trade, serve to remove impediments to and perfect the mechanism of a free and open market and a national market system. Further, the filing is consistent with the Exchange’s priority principles in that it complies with Exchange Rule 52.11, and the filing is consistent with existing exemption 8 to the subpenny restrictions of SEC rule 612 in that any subpenny executions effected pursuant to the proposal will occur at least one penny better than any resting customer interest in the CBSX book that has priority order a cross pursuant to CBSX Rule 52.11. a principal amount of at least $100,000, and (iii) is greater in size than any single public customer order at the proposed cross price. 6 15 U.S.C. 78f(b). 7 15 U.S.C. 78f(b)(5). 8 See Exchange Act Release No. 34–54714 (November 6, 2006), 71 FR 66352 (November 14, 2006). E:\FR\FM\04JAN1.SGM 04JAN1 176 Federal Register / Vol. 75, No. 1 / Monday, January 4, 2010 / Notices B. Self-Regulatory Organization’s Statement on Burden on Competition or otherwise in furtherance of the purposes of the Act. 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. IV. Solicitation of Comments C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Electronic Comments The Exchange neither solicited nor received comments on the proposal. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action pwalker on DSK8KYBLC1PROD with NOTICES 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,9 the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 10 and Rule 19b–4(f)(6) thereunder.11 The Exchange has requested the Commission to waive the 30-day operative delay. The Commission hereby grants such request and believes that such action is consistent with the protection of investors and the public interest.12 The proposed changes to adopt the pegged cross order type and the interpretation regarding sub-penny pricing of cross orders are similar to rules of other national securities exchanges.13 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, 9 In addition, Rule 19b–4(f)(6) requires the Exchange to provide the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of 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. The Commission has waived the pre-filing requirement in this case. 10 15 U.S.C. 78s(b)(3)(A). 11 17 CFR 240.19b–4(f)(6). 12 For purposes only of waiving the operative delay for this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 13 See, e.g., NYSE Arca Equities Rule 7.31(cc) (Pegged Order); ISE Stock Exchange Trading Rule 2104(i) (Pegged Orders); Chicago Stock Exchange Article 20 Rule 4(a)(7)(b) (sub-penny provision). VerDate Nov<24>2008 17:11 Dec 31, 2009 Jkt 220001 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: • 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–2009–100 on the subject line. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–31164 Filed 12–31–09; 8:45 am] BILLING CODE 8011–01–P OFFICE OF SPECIAL COUNSEL Agency Information Collection Activities; Request for Comment Office of Special Counsel. Notice. AGENCY: ACTION: SUMMARY: In accordance with the Paperwork Reduction Act of 1995 (44U.S.C. Chapter 35), and implementing regulations at 5 CFR part 1320, the U.S. Office of Special Counsel (OSC), plans to request approval from Paper Comments the Office of Management and Budget (OMB) for use of a previously approved • Send paper comments in triplicate information collection consisting of a to Elizabeth M. Murphy, Secretary, customer survey form. Securities and Exchange Commission, OSC is required by law to conduct an 100 F Street, NE., Washington, DC annual survey of those who seek its 20549–1090. assistance. The information collection is All submissions should refer to File used to carry out that mandate. The Number SR–CBOE–2009–100. This file current OMB approval for this number should be included on the collection of information expired on subject line if e-mail is used. To help the March 31, 2009. Current and former Commission process and review your Federal employees, employee comments more efficiently, please use representatives, other Federal agencies, only one method. The Commission will state and local government employees, post all comments on the Commission’s and the general public are invited to Internet Web site (https://www.sec.gov/ comment on this information collection rules/sro.shtml). Copies of the for the first time. submission, all subsequent Comments are invited on: amendments, all written statements (a) whether the proposed collection of with respect to the proposed rule information is necessary for the proper change that are filed with the performance of OSC functions, Commission, and all written including whether the information will communications relating to the have practical utility; proposed rule change between the (b) the accuracy of OSC’s estimate of Commission and any person, other than the burden of the proposed collections those that may be withheld from the of information; (c) ways to enhance the quality, public in accordance with the utility, and clarity of the information to provisions of 5 U.S.C. 552, will be be collected; and available for inspection and copying in (d) ways to minimize the burden of the Commission’s Public Reference the collection of information on Room, 100 F Street, NE., Washington, respondents, including through the use DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. of automated collection techniques or other forms of information technology. Copies of such filing also will be DATES: Comments should be received by available for inspection and copying at February 16, 2010. the principal office of the CBOE. All comments received will be posted ADDRESSES: Roderick Anderson, CFO, without change; the Commission does U.S. Office of Special Counsel, 1730 M not edit personal identifying Street, N.W., Suite 218, Washington, DC information from submissions. You 20036-4505. should submit only information that FOR FURTHER INFORMATION CONTACT: you wish to make available publicly. All Roderick Anderson, Chief Financial submissions should refer to File Officer, at the address shown above; by Number SR–CBOE–2009–100 and facsimile at (202) 254-3715. The survey should be submitted on or before January 25, 2009. 14 17 CFR 200.30–3(a)(12). PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 E:\FR\FM\04JAN1.SGM 04JAN1

Agencies

[Federal Register Volume 75, Number 1 (Monday, January 4, 2010)]
[Notices]
[Pages 175-176]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-31164]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61241; File No. SR-CBOE-2009-100]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Modify CBSX Rule 51.8 To Add Pegged Cross Orders, To Add 
an Interpretation Regarding Pricing of Cross Orders, and To Add Greater 
Flexibility to Intermarket Sweep Orders

December 24, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 23, 2009, the Chicago Board Options Exchange, Incorporated 
(``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to modify CBSX Rule 51.8 to add a new order-
type, to add an interpretation regarding CBSX pricing of cross orders, 
and to add greater flexibility to the CBSX intermarket sweep order 
process. The text of the proposed rule change is available on the 
Exchange's Web site (https://www.cboe.org/Legal), on the Commission's 
Web site (https://www.sec.gov), at the Exchange's principal office, and 
at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the CBOE 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
    The filing proposes to make three changes to CBSX Rule 51.8. First, 
the proposal would allow users the ability to have any unexecuted 
balance of an intermarket sweep order (ISO) be booked and displayed. 
Currently, any unexecuted balance is cancelled. Thus, if the NBBO is 
20-20.04 (500 x 100) and CBSX represents the best offer, an ISO (that 
is not labeled as immediate or cancel) to buy 200 shares would get 
filled on 100 shares at 20.04 and the balance would book as a 20.04 bid 
for 100 shares.
    Second, the filing proposes to adopt a ``Pegged Cross Order''. This 
order type would allow users to send both sides of a cross with an 
execution price that is pegged to the national best offer or national 
best bid. In fast moving markets this gives users greater certainty in 
executing crosses while ensuring that such executions honor Protected 
Quotations. Pegged Cross orders are entered with a penny or subpenny 
amount higher (lower) than the national best bid (offer). By way of 
example, if the NBBO is 20-20.04 and a 7000 share Pegged Cross order 
priced at the bid plus .01 is received, CBSX will execute the 7000 
share cross at 20.01.
    If, however, a Pegged Cross is priced in a way that would cause a 
trade-through of a Protected Quotation, then the system will re-price 
the cross to a permissible trade price (i.e. the nearest price to the 
originally requested price that would not cause a trade-through and 
that would not conflict with the priority provisions of CBSX Rule 
52.11.\5\ For example, if the NBBO is 20-20.04 and a 7000 share Pegged 
Cross order priced at the bid plus .05 is received while the CBSX offer 
is 20.04 for 100 shares, CBSX will execute the 7000 share cross at 
20.04. If the cross were only for 2000 shares, CBSX would effect the 
cross at 20.03 because it could not establish priority at 20.04 
pursuant to Rule 52.11.
---------------------------------------------------------------------------

    \5\ CBSX Rule 52.11 provides that a cross can only establish 
priority at the disseminated CBSX bid/offer if it (i) is for at 
least 5000 shares, (ii) is for a principal amount of at least 
$100,000, and (iii) is greater in size than any single public 
customer order at the proposed cross price.
---------------------------------------------------------------------------

    In addition, if a Pegged Cross is received when the national best 
offer is crossed with the national best bid, the system will cancel the 
order. If a Pegged Cross is received when the national best bid is 
locked with the national best offer, the system will attempt to execute 
the cross at the lock price provided such execution would not conflict 
with the priority provisions of Rule 52.11.
    The last change proposed in this filing is to adopt language 
substantially similar to a provision contained in Chicago Stock 
Exchange Article XX, Rule 4.a.(7)(b) which allows for cross 
transactions to be priced in subpennies. The proposed provision, which 
would be contained in an interpretation to CBSX Rule 51.8 would allow 
crosses to be priced in increments as small as 0.0001 provided the 
execution is more than $0.01 better than the prevailing BBO unless the 
cross would already be allowed priority at the BBO pursuant to Rule 
52.11.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act \6\ in general and furthers the objectives of 
Section 6(b)(5) of the Act \7\ in particular in that, by offering users 
an enhanced price improvement features and greater control over order 
routing, it is designed to promote just and equitable principles of 
trade, serve to remove impediments to and perfect the mechanism of a 
free and open market and a national market system. Further, the filing 
is consistent with the Exchange's priority principles in that it 
complies with Exchange Rule 52.11, and the filing is consistent with 
existing exemption \8\ to the subpenny restrictions of SEC rule 612 in 
that any subpenny executions effected pursuant to the proposal will 
occur at least one penny better than any resting customer interest in 
the CBSX book that has priority order a cross pursuant to CBSX Rule 
52.11.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ See Exchange Act Release No. 34-54714 (November 6, 2006), 71 
FR 66352 (November 14, 2006).

---------------------------------------------------------------------------

[[Page 176]]

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,\9\ the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6) thereunder.\11\
---------------------------------------------------------------------------

    \9\ In addition, Rule 19b-4(f)(6) requires the Exchange to 
provide the Commission written notice of its intent to file the 
proposed rule change, along with a brief description and text of 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. The Commission has waived the pre-
filing requirement in this case.
    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    The Exchange has requested the Commission to waive the 30-day 
operative delay. The Commission hereby grants such request and believes 
that such action is consistent with the protection of investors and the 
public interest.\12\ The proposed changes to adopt the pegged cross 
order type and the interpretation regarding sub-penny pricing of cross 
orders are similar to rules of other national securities exchanges.\13\
---------------------------------------------------------------------------

    \12\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \13\ See, e.g., NYSE Arca Equities Rule 7.31(cc) (Pegged Order); 
ISE Stock Exchange Trading Rule 2104(i) (Pegged Orders); Chicago 
Stock Exchange Article 20 Rule 4(a)(7)(b) (sub-penny provision).
---------------------------------------------------------------------------

    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.

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-2009-100 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-2009-100. 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-2009-100 and should be 
submitted on or before January 25, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-31164 Filed 12-31-09; 8:45 am]
BILLING CODE 8011-01-P
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