Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Approving Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Related to the Hybrid Matching Algorithms, 36147-36148 [2010-15279]
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Federal Register / Vol. 75, No. 121 / Thursday, June 24, 2010 / Notices
governing documents.31 Moreover, as
the ROC would continue to be
composed solely of Non-Industry
Directors, the Commission does not
believe C2’s proposal to decreased size
of the committee compromises its
ability to monitor the adequacy and
effectiveness of C2’s regulatory program.
Finally, the Commission believes that a
new voting agreement, as proposed by
C2, is appropriate to ensure that C2
meet its statutory obligation to provide
for the fair representation of its
members in the administration of C2.32
As the Commission has previously
noted in the context of other exchange
governance proposals, this requirement
helps to ensure that an exchange’s
members have a voice in the governing
body of the exchange and the
corresponding exercise by the exchange
of its self-regulatory authority, and that
the exchange is administered in a way
that is equitable to all who trade on its
market or through its facilities.33
III. Conclusion
emcdonald on DSK2BSOYB1PROD with NOTICES
For the foregoing reasons, the
Commission believes that the proposed
rule changes in connection with the
transfer of ownership of C2 from CBOE
to CBOE Holdings is consistent with the
Act and that C2 will be so organized and
have the capacity to be able to carry out
the purposes of the Act. The provisions
in the applicable governing documents,
discussed above, should minimize the
potential that any person could interfere
with or restrict the ability of C2 or the
Commission to effectively carry out
their respective regulatory oversight
responsibilities. Further, the
Commission notes that CBOE Holding
has undertaken to ensure and maintain
the regulatory independence of C2 to
enable C2 to operate in a manner that
complies with the federal securities
laws, including the objectives of
Sections 6(b) of the Act.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,34 that the
proposed rule change (SR–C2–2010–
002) be, and it hereby is, approved.
31 See, e.g., Section 7 of the Amended and
Restated By-Laws of BATS Exchange, Inc. and
Section 7 of the Amended and Restated Bylaws of
EDGX Exchange, Inc.
32 Section 6(b)(3) of the Act, 15 U.S.C. 78f(b)(3).
33 See, e.g., Securities Exchange Act Release Nos.
53128 (January 13, 2006), 71 FR 3550, 3553 (January
23, 2006) (File No. 10–131); 53382 (February 27,
2006), 71 FR 11251, 11259 (March 6, 2006) (File No.
SR–NYSE–2005–77); and 58375 (August 18, 2008),
73 FR 49498, 49501 (August 21, 2008) (File No. 10–
182).
34 15 U.S.C. 78s(b)(2).
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16:47 Jun 23, 2010
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.35
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–15281 Filed 6–23–10; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62317; File No. SR–CBOE–
2010–038]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Order Approving
Proposed Rule Change, as Modified by
Amendment No. 1 Thereto, Related to
the Hybrid Matching Algorithms
June 17, 2010.
On April 22, 2010, 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 its market turner and modified
participation entitlement priority
overlays. On May 6, 2010, CBOE filed
Amendment No. 1 to the proposed rule
change. The proposed rule change was
published for comment in the Federal
Register on May 18, 2010.3 The
Commission received no comment
letters on the proposal. This order
approves the proposed rule change, as
modified by Amendment No. 1.
CBOE 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) set forth,
among other things, the manner in
which incoming electronic orders in
options are allocated on the Hybrid
System. Each rule currently provides
allocation algorithms the Exchange can
utilize when executing incoming
electronic orders, including the
Ultimate Matching Algorithm (‘‘UMA’’),
and price-time and pro-rata priority
allocation algorithms. The price-time
and pro-rata priority overlays currently
include: public customer priority for
public customer orders resting on the
Hybrid System; participation
entitlements for certain qualifying
market-makers (the ‘‘original
35 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. 62083
(May 12, 2010), 75 FR 27850.
1 15
PO 00000
Frm 00090
Fmt 4703
Sfmt 4703
36147
participation entitlement(s)’’); a market
turner priority for participants that are
the first to improve CBOE’s
disseminated quote; and a modified
participation entitlement overlay 4 in
which the original participation
entitlement would apply only if there
are no public customer orders resting at
the best price or a public customer was
the first to rest interest at the best price.
In addition, a small order participation
entitlement overlay for Designated
Primary Market-Makers (‘‘DPMs’’) and
Lead Market-Makers (‘‘LMMs’’) can be
applied to each of the three allocation
algorithms (i.e., price-time, pro-rata or
UMA).5 These overlays are all optional.
The proposed rule change would
amend the Exchange’s priority overlays.
CBOE proposes to make the market
turner overlay available for classes
utilizing any of the priority methods
offered by the Exchange. The Exchange
also proposes to amend the application
of the modified participation
entitlement overlay. Under the proposal,
a Market-Maker that is the subject of a
participation entitlement would only
receive an entitlement if the amount it
is entitled to pursuant to the
participation entitlement is greater than
the amount the Market-Maker would
otherwise receive pursuant to the
algorithm. In all other cases, the
participation entitlement and public
customer priority would not be applied.
This allocation would be subject to the
following:
• The Market-Maker’s entitlement
share would be calculated based on any
remaining balance after all public
customer orders at the best price are
satisfied. For options classes using the
pro-rata method, the Exchange may
determine on a class-by-class basis to
calculate the Market-Maker’s
entitlement share using the UMA
methodology or the pro-rata
methodology. For options classes using
the price-time method, the MarketMaker’s entitlement share would be
calculated using the price-time
methodology only.6
4 Securities Exchange Act Release No. 60665
(September 14, 2009), 74 FR 48114 (September 21,
2009) (SR–CBOE–2009–052).
5 If the small order priority overlay is in effect for
an option class, then orders for five (5) contracts or
fewer will be executed first by the DPM or LMM,
as applicable, appointed to the option class. This
participation entitlement is subject to certain
conditions, including a condition that public
customer priority must be in effect in priority
sequence ahead of the participation entitlement.
See Rules 6.45A(a)(iii) and 6.45B(a)(iii).
6 This modified participation entitlement overlay
would only be applicable to automatic executions
and would not be applicable for executions of
incoming electronic orders initiated from PAR or
from electronic auctions. Instead, the original
E:\FR\FM\24JNN1.SGM
Continued
24JNN1
36148
Federal Register / Vol. 75, No. 121 / Thursday, June 24, 2010 / Notices
emcdonald on DSK2BSOYB1PROD with NOTICES
• When calculating the amount the
Market-Maker would otherwise receive
pursuant to the operation of the
algorithm, the participation entitlement
and public customer priority overlays
would not be considered. Instead the
calculation would be based on a pricetime or pro-rata basis, as applicable, and
subject to any other applicable priority
overlays, such as market turner priority.
In addition, the Exchange proposes
that the modified participation
entitlement overlay would be available
to modify the application of the small
order participation entitlement.
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; as well as
Section 6(b)(8) of the Act, which
requires the rules of an exchange not to
impose any burden on competition not
necessary or in furtherance of the Act.9
The Commission believes that the
proposed rule change amending the
market turner and modified
participation entitlement overlays is
consistent with the Act. All public
customer orders at the best price will
continue to be satisfied before a
participation entitlement will be
applied. If an entitlement is not applied,
then the incoming order will be
allocated among all market participants
using the underlying matching
algorithm—price-time or pro-rata—both
of which the Commission already has
participation entitlement parameters would be
applied for PAR and electronic auctions. In pro-rata
classes where the UMA method is selected to
calculate the Market-Maker’s modified participation
entitlement share, executions of incoming
electronic orders initiated from PAR and electronic
auctions would be allocated using the UMA
method. Therefore, in such classes, the MarketMaker’s original participation entitlement share of
a PAR or electronic auction execution would be
calculated using the UMA method.
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 15 U.S.C. 78f(b)(8).
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16:47 Jun 23, 2010
Jkt 220001
found consistent with the Act.10 In
addition, the Exchange’s overlay
determinations will be distributed via
regulatory circular. For these reasons,
the Commission believes that the
proposed rule change is consistent with
the Act.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,11 that the
proposed rule change (SR–CBOE–2010–
038), as modified by Amendment No. 1,
be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–15279 Filed 6–23–10; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62322; File No. SR–MSRB–
2010–04]
Self-Regulatory Organizations;
Municipal Securities Rulemaking
Board; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change Relating to the
Discontinuation of the MSRB Public
Access Facility
June 17, 2010.
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 June 14,
2010, the Municipal Securities
Rulemaking Board (‘‘MSRB’’), filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II and III below, which Items
have been prepared by the MSRB. The
MSRB has filed the proposal pursuant to
Section 19(b)(3)(A)(iii) of the Act,3 and
Rule 19b–4(f)(3) thereunder,4 which
renders the proposal effective upon
filing with the Commission. 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 MSRB has filed with the
Commission a proposed rule change
10 See Securities Exchange Act Release No. 51822
(June 10, 2005), 70 FR 35321 (June 17, 2005)
(Adopting CBOE Rule 6.45B).
11 15 U.S.C. 78s(b)(2).
12 17 CFR 200.30–3(a)(12).
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)(3).
PO 00000
Frm 00091
Fmt 4703
Sfmt 4703
relating to its public access facility and
access to printed copies of certain
documents made available by the MSRB
to the public.
The text of the proposed rule change
is available on the MSRB’s Web site at
https://www.msrb.org/msrb1/sec.asp, at
the MSRB’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
MSRB 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 these statements
may be examined at the places specified
in Item IV below. The MSRB has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The proposed rule change would
(a) terminate the public access facility
created under the MSRB’s Municipal
Securities Information Library (‘‘MSIL’’)
system 5 and (b) revise a related Rule G–
37 interpretive Question & Answer to
delete a reference to the public access
facility. The public access facility is
physically located at the offices of the
MSRB and makes official statements
and advance refunding documents
available to the public for viewing and
photocopying. Over the years, the MSRB
has undertaken to make other items
available through the public access
facility including, but not limited to,
copies of Forms G–37, G–37x and G–
38t, certain transaction data and
comment letters received in connection
with requests for comment. All current
information that is accessible to the
public through the public access facility
is now readily accessible through the
MSRB Web site or the EMMA Web site.
Accordingly, the MSRB will discontinue
the public access facility but will retain
the ability to provide photocopies of the
documents for members of the public
without Internet access, upon written
5 The MSIL system, originally established by the
MSRB in 1990 to collect official statements and
advance refunding documents, was discontinued
for purposes of accepting submissions of such
documents upon the establishment by the MSRB of
its Electronic Municipal Market Access (EMMA)
System’s Primary Market Disclosure Service. The
MSIL system continues to operate in a limited
capacity for internal MSRB purposes only.
E:\FR\FM\24JNN1.SGM
24JNN1
]]>Agencies
[Federal Register Volume 75, Number 121 (Thursday, June 24, 2010)]
[Notices]
[Pages 36147-36148]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-15279]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62317; File No. SR-CBOE-2010-038]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Approving Proposed Rule Change, as Modified by
Amendment No. 1 Thereto, Related to the Hybrid Matching Algorithms
June 17, 2010.
On April 22, 2010, 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 its market turner and
modified participation entitlement priority overlays. On May 6, 2010,
CBOE filed Amendment No. 1 to the proposed rule change. The proposed
rule change was published for comment in the Federal Register on May
18, 2010.\3\ The Commission received no comment letters on the
proposal. This order approves the proposed rule change, as modified by
Amendment No. 1.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 62083 (May 12,
2010), 75 FR 27850.
---------------------------------------------------------------------------
CBOE 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)
set forth, among other things, the manner in which incoming electronic
orders in options are allocated on the Hybrid System. Each rule
currently provides allocation algorithms the Exchange can utilize when
executing incoming electronic orders, including the Ultimate Matching
Algorithm (``UMA''), and price-time and pro-rata priority allocation
algorithms. The price-time and pro-rata priority overlays currently
include: public customer priority for public customer orders resting on
the Hybrid System; participation entitlements for certain qualifying
market-makers (the ``original participation entitlement(s)''); a market
turner priority for participants that are the first to improve CBOE's
disseminated quote; and a modified participation entitlement overlay
\4\ in which the original participation entitlement would apply only if
there are no public customer orders resting at the best price or a
public customer was the first to rest interest at the best price. In
addition, a small order participation entitlement overlay for
Designated Primary Market-Makers (``DPMs'') and Lead Market-Makers
(``LMMs'') can be applied to each of the three allocation algorithms
(i.e., price-time, pro-rata or UMA).\5\ These overlays are all
optional.
---------------------------------------------------------------------------
\4\ Securities Exchange Act Release No. 60665 (September 14,
2009), 74 FR 48114 (September 21, 2009) (SR-CBOE-2009-052).
\5\ If the small order priority overlay is in effect for an
option class, then orders for five (5) contracts or fewer will be
executed first by the DPM or LMM, as applicable, appointed to the
option class. This participation entitlement is subject to certain
conditions, including a condition that public customer priority must
be in effect in priority sequence ahead of the participation
entitlement. See Rules 6.45A(a)(iii) and 6.45B(a)(iii).
---------------------------------------------------------------------------
The proposed rule change would amend the Exchange's priority
overlays. CBOE proposes to make the market turner overlay available for
classes utilizing any of the priority methods offered by the Exchange.
The Exchange also proposes to amend the application of the modified
participation entitlement overlay. Under the proposal, a Market-Maker
that is the subject of a participation entitlement would only receive
an entitlement if the amount it is entitled to pursuant to the
participation entitlement is greater than the amount the Market-Maker
would otherwise receive pursuant to the algorithm. In all other cases,
the participation entitlement and public customer priority would not be
applied. This allocation would be subject to the following:
The Market-Maker's entitlement share would be calculated
based on any remaining balance after all public customer orders at the
best price are satisfied. For options classes using the pro-rata
method, the Exchange may determine on a class-by-class basis to
calculate the Market-Maker's entitlement share using the UMA
methodology or the pro-rata methodology. For options classes using the
price-time method, the Market-Maker's entitlement share would be
calculated using the price-time methodology only.\6\
---------------------------------------------------------------------------
\6\ This modified participation entitlement overlay would only
be applicable to automatic executions and would not be applicable
for executions of incoming electronic orders initiated from PAR or
from electronic auctions. Instead, the original participation
entitlement parameters would be applied for PAR and electronic
auctions. In pro-rata classes where the UMA method is selected to
calculate the Market-Maker's modified participation entitlement
share, executions of incoming electronic orders initiated from PAR
and electronic auctions would be allocated using the UMA method.
Therefore, in such classes, the Market-Maker's original
participation entitlement share of a PAR or electronic auction
execution would be calculated using the UMA method.
---------------------------------------------------------------------------
[[Page 36148]]
When calculating the amount the Market-Maker would
otherwise receive pursuant to the operation of the algorithm, the
participation entitlement and public customer priority overlays would
not be considered. Instead the calculation would be based on a price-
time or pro-rata basis, as applicable, and subject to any other
applicable priority overlays, such as market turner priority.
In addition, the Exchange proposes that the modified participation
entitlement overlay would be available to modify the application of the
small order participation entitlement.
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; as well as Section 6(b)(8) of
the Act, which requires the rules of an exchange not to impose any
burden on competition not necessary or in furtherance of the Act.\9\
---------------------------------------------------------------------------
\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\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
The Commission believes that the proposed rule change amending the
market turner and modified participation entitlement overlays is
consistent with the Act. All public customer orders at the best price
will continue to be satisfied before a participation entitlement will
be applied. If an entitlement is not applied, then the incoming order
will be allocated among all market participants using the underlying
matching algorithm--price-time or pro-rata--both of which the
Commission already has found consistent with the Act.\10\ In addition,
the Exchange's overlay determinations will be distributed via
regulatory circular. For these reasons, the Commission believes that
the proposed rule change is consistent with the Act.
---------------------------------------------------------------------------
\10\ See Securities Exchange Act Release No. 51822 (June 10,
2005), 70 FR 35321 (June 17, 2005) (Adopting CBOE Rule 6.45B).
---------------------------------------------------------------------------
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\11\ that the proposed rule change (SR-CBOE-2010-038), as modified
by Amendment No. 1, be, and hereby is, approved.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
---------------------------------------------------------------------------
\12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-15279 Filed 6-23-10; 8:45 am]
BILLING CODE 8010-01-P
