[Federal Register Volume 69, Number 137 (Monday, July 19, 2004)]
[Notices]
[Pages 43028-43032]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-16324]
[[Page 43028]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-50003; File No. SR-CBOE-2004-24]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Approving Proposed Rule Change and Amendment No. 1
Thereto and Notice of Filing and Order Granting Accelerated Approval to
Amendment No. 2 to the Proposed Rule Change Allowing a New Type of
Designated Primary Market-Maker--e-DPMs
July 12, 2004.
I. Introduction
On April 22, 2004, 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 amend its rules to allow
remote competing Designated Primary Market-Makers (``DPMs''). On April
30, 2004, the CBOE filed Amendment No. 1 to the proposed rule
change.\3\ On May 7, 2004, the CBOE's rule proposal, as amended, was
published for comment in the Federal Register.\4\ No comment letters
were received on the proposal. On June 15, 2004, the CBOE filed
Amendment No. 2 to the proposed rule change.\5\ The Commission is
approving the proposed rule change and Amendment No. 1 thereto, and is
publishing notice of and granting accelerated approval to Amendment No.
2 to the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1 replaced and superceded the CBOE's original
19b-4 filing in its entirety.
\4\ See Securities Exchange Act Release No. 49643 (April 30,
2004), 69 FR 25647.
\5\ See letter from Angelo Evangelou, Managing Senior Attorney,
Legal Division, CBOE, to Deborah L. Flynn, Assistant Director, and
Sapna Patel, Special Counsel, Division of Market Regulation
(``Division''), Commission, dated June 14, 2004 (``Amendment No.
2''). In Amendment No. 2, the CBOE proposes technical changes to the
proposed rule text to indicate proposed new rule language and to
clarify e-DPM obligations and performance review standards. In
connection with the CBOE's proposal to reduce the ``counting
period'' to one second, the CBOE proposes to modify CBOE Rule
6.45A(d) to delete the requirement that when Market-Maker quotes
interact with other Market-Maker quotes and result in quote locks
that last one second or less, the Market-Markers locking the market
are obligated to trade one contract in open outcry. The CBOE has, in
conjunction with its proposed changes to CBOE Rule 6.45A(d),
requested an exemption from Rule 11Ac1-1 under the Act (``Quote
Rule'') for Market-Maker quote locks that do not exceed one second.
See letter from Joanne Moffic-Silver, General Counsel and Corporate
Secretary, CBOE, to Annette Nazareth, Director, Division,
Commission, dated July 9, 2004 (``CBOE Exemption Request Letter'').
Under separate cover, the Commission has granted Market-Makers an
exemption pursuant to paragraph (e) of the Quote Rule from their
obligations under paragraph (c)(2) of the Quote Rule with respect to
interlocking Market-Maker quotations in Hybrid classes that last for
no more than one second, provided that such Market-Makers' quotes
are firm for all customer and broker-dealer orders, including orders
for the accounts of other options market makers. See letter from
David Shillman, Associate Director, Division, Commission, to Angelo
Evangelou, Managing Senior Attorney, Legal Division, CBOE, dated
July 12, 2004 (``SEC Exemption Letter'').
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II. Description of Proposal
The CBOE's Hybrid Trading System is an electronic trading platform
integrated with its floor-based open-outcry auction market.\6\ The CBOE
proposes to enhance the Hybrid platform by adding a new category of
CBOE market-making participant--electronic DPMs (``e-DPMs''). e-DPMs
would be member organizations appointed to operate on the CBOE as
competing DPMs/specialists in a broad number of option classes, and
would therefore be permitted to share in the DPM participation right in
their allocated option classes. e-DPMs would enter bids and offers
electronically from locations other than the trading crowds where the
applicable option classes are traded, and would not be required to have
traders physically present in the trading crowd.
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\6\ See Securities Exchange Act Release No. 47959 (May 30,
2003), 68 FR 34441 (June 9, 2003).
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A. Appointment, Allocation, and Membership Requirements for e-DPMs
Under the proposal, e-DPMs may apply for and be granted an
appointment in any option classes on the Hybrid Trading System other
than those in which they are already operating as the DPM on the floor
of the Exchange.\7\ The CBOE also proposes to require e-DPMs to accept
allocations in a broad number of option classes. All classes allocated
by the Exchange to an e-DPM would constitute the e-DPM's appointment.
e-DPMs would be required to own or lease CBOE or Chicago Board of
Trade (exercised) memberships to operate as e-DPMs on the Exchange.
Each membership that an e-DPM owns would entitle the e-DPM to stream
quotes into 30 allocated classes. Each membership that an e-DPM leases
would entitle the e-DPM to stream quotes into 20 allocated classes. At
the end of three years, the CBOE would require every e-DPM to own seats
to satisfy this requirement and thereafter the e-DPM would no longer be
allowed to use leased seats for this purpose.
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\7\ The process and rules by which e-DPMs would be appointed was
submitted to the Commission as a separate proposed rule change (File
No. SR-CBOE-2004-17). The Commission approved the CBOE's appointment
criteria for e-DPMs on April 19, 2004. See Securities Exchange Act
Release 49577, 69 FR 22576 (April 26, 2004) (``e-DPM Appointment
Criteria Approval Order'').
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B. e-DPM Obligations
e-DPMs would have specific obligations governing all classes
comprising their appointments. Specifically, proposed CBOE Rule 8.93(i)
would require each e-DPM to provide continuous, two-sided quotations in
at least 90% of the series of each allocated class with a minimum size
of at least 10 contracts.\8\ In addition, the proposal would require
all e-DPM quotations to be firm and to comply with the maximum bid-ask
width requirements contained in CBOE Rule 8.7(b)(iv). Each e-DPM also
would be required to make competitive markets on the Exchange and
otherwise to promote the Exchange in a manner that is likely to enhance
the ability of the Exchange to compete successfully for order flow in
the classes it trades. Each e-DPM would be required to notify the
Exchange immediately of any material operational or financial changes
to the e-DPM organization and to obtain the Exchange's approval prior
to effecting changes to the ownership, capital structure, voting
authority, distribution of profits/losses, or control of the e-DPM
organization. Moreover, each e-DPM would be obligated to maintain
information barriers that are reasonably designed to prevent the misuse
of material, non-public information with any affiliates that may
conduct a brokerage business in option classes allocated to the e-DPM
or act as specialist or market maker in any security underlying options
allocated to the e-DPM. Other proposed e-DPM obligations are set forth
in proposed CBOE Rule 8.93.
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\8\ If an electronic request-for-quote (``RFQ'') functionality
is activated for Hybrid classes, e-DPMs would have additional or
alternative obligations regarding RFQs, including the obligation to
respond to at least 98% of RFQs in their appointed classes. The RFQ
functionality currently exists for trading on CBOEdirect, the
Exchange's purely screen-based trading platform.
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C. Affiliated Floor-Market Maker Pilot Program
The CBOE also proposes, as a pilot program for an 18-month period
commencing on Commission approval of this proposal, to allow an e-DPM
to choose to have a separate affiliated Market-Maker physically present
in trading crowds where it operates as an e-DPM, provided that such
Market-Maker trades on a separate
[[Page 43029]]
membership.\9\ The CBOE represents that this affiliated Market-Maker
would be allowed all the privileges of any other Market-Maker and would
have all of the responsibilities of any other Market-Maker.
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\9\ As part of the pilot program, the CBOE states that it would
confidentially provide the Commission with data on: (1) The size of
orders that e-DPMs and affiliated Market-Makers both trade with
electronically; (2) the price and size of the e-DPM's and the
affiliated Market-Maker's respective quotes; (3) the price and size
of quotes of other participants in classes where an e-DPM and an
affiliate are quoting; and (4) a breakdown of how orders are
allocated to the e-DPM, the affiliated Market-Maker, and any other
participants.
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D. Participation Entitlement
The CBOE proposes to modify certain aspects of the DPM
participation entitlement--rights granted to a DPM when the DPM is
quoting on the prevailing bid or offer--to accommodate the e-DPM
program. The CBOE's current DPM participation rights are 30%, 40%, or
50%.\10\ Under this proposal, the CBOE proposes that DPMs and e-DPMs
(the ``DPM Complex'') would share in the existing DPM participation
entitlement with the e-DPM participation right coming out of the
existing DPM participation right established under CBOE Rule 8.87.
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\10\ If there is one Market-Maker quoting with the DPM, the DPM
entitlement is 50%. If there are two Market-Makers quoting with the
DPM, the DPM entitlement is 40%. If there are three or more Market-
Makers quoting with the DPM, the DPM entitlement is 30%. See CBOE
Regulatory Circular RG00-193.
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The CBOE proposes that the DPM participation entitlement to the DPM
Complex would be allocated in the following manner: If the DPM and one
or more e-DPMs were quoting at the best bid/offer on the CBOE, the e-
DPM participation entitlement would be one-half (50%) of the total DPM
Complex entitlement and would be divided equally by the number of e-
DPMs quoting at the best bid/offer on the CBOE, while the DPM would
retain the other half of the entitlement. If the DPM were not quoting
at the best bid/offer on the Exchange and one or more e-DPMs were
quoting at the best bid/offer on the Exchange, then the e-DPM(s) would
be allocated the entire participation entitlement, which would be
divided up equally between them. If, however, only the DPM and/or e-
DPM(s) were quoting at the best bid/offer on the CBOE and there were no
Market-Makers quoting with them, there would be no DPM/e-DPM
participation entitlement and instead the allocation procedures under
CBOE Rule 6.45A would apply. Pursuant to proposed CBOE Rule 6.45A, e-
DPMs would receive allocations based on the greater of the
participation entitlement or what the e-DPM would otherwise receive via
the CBOE's Ultimate Matching Algorithm (``UMA''), and an e-DPM would
never receive an allocation greater than the size of its quote.
E. Proposed Extra ``A'' Component in UMA for DPMs
In addition, the CBOE proposes to allow a DPM that uses more than
one membership in any given trading crowd to increase its ability to
participate via UMA by increasing the DPM's ``A'' component in the UMA
calculation by one.\11\ The CBOE represents that on many exchanges the
specialist receives a 40% guarantee when there are at least three other
market makers quoting the best price. On the CBOE, the DPM is entitled
to only 30% in such cases. To the extent this extra ``A'' component
could be considered a ``guarantee'' (and even though a DPM would not
receive an allocation on any trade pursuant to both the participation
entitlement and UMA), the CBOE represents that it would not allow the
incremental amount a DPM receives because of the proposed second ``A''
component to cause the DPM to exceed a 40% ``guarantee'' threshold.
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\11\ The ``A'' component of UMA represents 1 over the total
number of market participants on the market. UMA currently gives
equal weighting to the ``A'' and ``B'' components. When the DPM is
given credit for the additional memberships, both the numerator and
the denominator would be increased by no more than 1 (e.g., \1/4\
would become \2/5\).
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F. Performance and Operations Review for e-DPMs
Reviews of e-DPM performance would be conducted under proposed new
CBOE Rule 8.94(a). Furthermore, proposed CBOE Rule 8.94(b) would
provide that the Exchange may, pursuant to a proposed rule change filed
with the Commission under Section 19(b) of the Act, adopt rules
detailing objective criteria upon which e-DPMs' fee rates shall be
reviewed. Such objective criteria, if approved by the Commission, may
include average quote size, average quote width, the percentage of time
an e-DPM is quoting at the National Best Bid or Offer, and other
objective performance related measurements. The proposed rule further
states that e-DPMs that fail to meet the objective standards could be
summarily required to adhere to fee rates applicable to certain non-e-
DPM Market-Makers. Proposed CBOE Rule 8.94(c) provides that the
Exchange may terminate, place conditions upon, or otherwise limit a
member organization's approval to act as an e-DPM on the same basis
that DPM privileges may be terminated and/or conditioned under CBOE
Rules 8.60 and 8.90, and that if a member organization's approval to
act as an e-DPM were terminated, conditioned, or otherwise limited by
the Exchange pursuant to this Rule, the member organization would be
permitted to seek review of that decision under Chapter XIX of the CBOE
Rules.
G. Limitations on Access Due to Systems Constraints
The CBOE is also proposing new CBOE Rule 6.23A, which provides that
the Exchange may limit the number of messages sent by members accessing
the Exchange electronically to ensure proper performance of the system,
to protect the integrity of the Hybrid Trading System. However,
proposed CBOE Rule 6.23A explicitly states that any such restrictions
must be objectively determined and submitted to the Commission for
approval pursuant to a proposed rule change under Section 19 of the
Act.\12\
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\12\ 15 U.S.C. 78s.
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III. Description of Amendment No. 2 to the Proposed Rule Change
In Amendment No. 2 to the proposed rule change, the CBOE proposes
changes to CBOE Rule 6.45A(d) to delete the requirement that when
Market-Maker quotes interact with other Market-Maker quotes and result
in quote locks that last one second or less, the Market-Markers locking
the market are obligated to trade one contract in open outcry.\13\ In
addition, the CBOE proposes to limit the ``counting period''
established by the rule to one second, during which time such Market-
Makers would be obligated to execute customer and broker-dealer orders
eligible for automatic execution. Quote locks that last more than one
second would execute against each other for the full size.
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\13\ The CBOE has, in conjunction with its proposed changes to
Rule 6.45A(d), requested an exemption from the Quote Rule for
Market-Maker quote locks that do not exceed one second. See CBOE
Exemption Request Letter, supra note 5.
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning whether the Amendment No. 2 to 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 (http://www.sec.gov/rules/sro.shtml); or
[[Page 43030]]
Send an e-mail to [email protected]. Please include
File Number SR-CBOE-2004-24 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609.
All submissions should refer to File Number SR-CBOE-2004-24. 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 (http://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 Section, 450 Fifth
Street, NW., Washington, DC 20549. 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-2004-24 and should be submitted on or before August 9, 2004.
V. Discussion
After careful review, the Commission finds that the proposed rule
change, as amended, is consistent with the requirements of the Act and
the rules and regulations thereunder applicable to a national
securities exchange \14\ and, in particular, the requirements of
Section 6 of the Act.\15\ Specifically, the Commission finds that the
proposal to add a new category of CBOE market making participant, e-
DPMs, to the CBOE's Hybrid platform is consistent with Section 6(b)(5)
of the Act,\16\ in that the proposal has been designed to promote just
and equitable principles of trade, and to protect investors and the
public interest.
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\14\ The Commission has considered the amended proposed rule
change's impact on efficiency, competition and capital formation. 15
U.S.C. 78c(f).
\15\ 15 U.S.C. 78f.
\16\ 15 U.S.C. 78f(b)(5).
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The Commission notes that e-DPMs would essentially operate as
remote, electronic competing specialists on the CBOE. As such, e-DPMs
would have additional responsibilities and obligations compared to
other CBOE Market-Makers, including an obligation to participate as an
e-DPM in a broad number of option classes and an enhanced continuous
quoting requirement for the quotes that they stream to the Exchange
from locations outside of the trading crowd. In return for undertaking
these additional responsibilities, e-DPMs would receive the benefit of
sharing in the DPM's participation entitlement in their appointed
option classes. The Commission further notes that the CBOE has proposed
special rules and requirements to accommodate the introduction of e-
DPMs on the Exchange, including rules on the allocation of option
classes based on memberships, heightened obligations in connection with
their allocated option classes, and specific operations and performance
review criteria. The Commission believes that these proposed new rules
for e-DPMs should place affirmative obligations on e-DPMs. The
Commission therefore finds that, for the reasons discussed more fully
below, the CBOE's proposal to allow e-DPMs to operate as competing
specialists on its Hybrid system is consistent with the Act.
A. Appointment, Allocation, and Membership Requirements for e-DPMs
The Commission notes that e-DPMs may not quote in option classes
other than their appointed/allocated classes. Moreover, although there
could be more than one e-DPM in a particular option class (from
separate member organizations), the Commission notes that an e-DPM may
not be allocated an option class in which its member organization
serves as a DPM. The Commission believes that these limitations should
help to reduce the opportunity for conflicts of interest detrimental to
the interests of investors.
B. e-DPM Obligations
The Commission further notes that proposed CBOE Rule 8.93 provides
a list of obligations that an e-DPM would be required to fulfill in
addition to (or, in certain cases, in lieu of) those of a CBOE Market-
Maker or DPM. One particular obligation would require e-DPMs to provide
two-sided quotations in at least 90% of the series of each of its
allocated option classes, or if the RFQ functionality is utilized by
the Exchange, to respond to 98% of the RFQs. Another proposed
obligation would require e-DPMs to ``make competitive markets on the
Exchange and otherwise to promote the Exchange in a manner that is
likely to enhance the ability of the Exchange to compete successfully
for order flow in the classes it trades.'' The Commission emphasizes
that the CBOE should not interpret this proposed obligation to in any
way directly or indirectly attempt to restrict a market participant
that is appointed as an e-DPM on the CBOE from performing market-making
or specialist activities on other markets.
The Commission notes that e-DPMs, in addition to complying with the
requirements of CBOE Rule 4.18, also would be obligated to maintain
information barriers that are reasonably designed to prevent the misuse
of material, non-public information with any affiliates that may
conduct a brokerage business in option classes allocated to the e-DPM
or act as specialist or market maker in any security underlying options
allocated to the e-DPM. The Commission believes that the requirement
that there be an information barrier between an e-DPM and its
affiliates with respect to transactions in its allocated option classes
and the related underlying securities should serve to reduce the
opportunity for unfair trading advantages or misuse of material, non-
public information.
C. Affiliated Floor Market-Maker Pilot Program
The Commission is permitting the CBOE, for an 18-month pilot period
commencing on Commission approval of this proposal, to allow an e-DPM
to choose to have an affiliated Market-Maker, trading on a separate
membership, physically present in trading crowds where it operates as
an e-DPM. The CBOE has committed to, during this pilot period, provide
to the Commission data relating to: (1) The size of orders that e-DPMs
and affiliated Market-Makers both trade with electronically; (2) the
price and size of the e-DPM's and the affiliated Market-Maker's
respective quotes; (3) the price and size of quotes of other
participants in classes where an e-DPM and an affiliate are quoting;
and (4) a breakdown of how orders are allocated to the e-DPM, the
affiliated Market-Maker, and any other participants. The Commission
expects to use this data to determine if the practice of allowing a
member organization to receive more of an allocation of orders based
simply on the number of Market-Makers that it has
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quoting in an option class is unfairly discriminatory in any way to
other quoting market participants, and to determine whether to extend
or permanently approve this practice.
D. Participation Entitlement
The Commission notes that the CBOE proposes to allow e-DPMs to
share in the DPM's participation entitlement. If the DPM and one or
more e-DPMs were quoting at the best bid/offer on the CBOE in a
particular option class, the e-DPM(s) would be entitled to share 50% of
the DPM's participation entitlement, which would then be divided
equally by the number of e-DPMs quoting at the best bid/offer on the
CBOE.\17\ e-DPMs would receive allocations based only on the greater of
the participation entitlement or what the e-DPM would otherwise receive
through UMA, but in no event greater than the size of its quote. The
Commission notes, however, that if only the DPM and/or e-DPM(s) were
quoting at the best bid/offer on the CBOE with no other Market-Makers
quoting with them, there would be no participation entitlement and
instead the allocation procedures under CBOE Rule 6.45A would apply.
The Commission believes that because e-DPMs have certain obligations
greater than those of other Market-Makers on the CBOE, it would not be
inappropriate for e-DPMs that are quoting at the CBOE's best bid/offer
with the DPM to be permitted to receive a portion of the DPM's
participation entitlement.
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\17\ The Commission notes that proposed CBOE Rule
8.87(b)(1)(iii) provides that the participation entitlement is based
on the number of contracts remaining after all public customer
orders in the book at the best bid/offer on the Exchange have been
satisfied.
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E. Proposed Extra ``A'' Component in UMA for DPMs
Furthermore, the Commission notes that the CBOE proposes to allow
DPMs that use more than one membership in any given trading crowd to
increase their ability to participate via UMA by increasing the DPM's
``A'' component in the UMA calculation by one. The CBOE represents that
this extra ``A'' component would not have an impact on the DPM's
participation guarantee, and that it would not allow the incremental
amount a DPM receives because of a second ``A'' component to cause the
DPM to exceed a 40% ``guarantee'' threshold. While the CBOE represents
that the reason DPMs should receive an extra ``A'' component is because
they would receive less of a participation guarantee with the
introduction of e-DPMs on the Exchange and would continue to need
multiple memberships to effectively operate as a DPM in the trading
crowd, the Commission notes that the number of memberships needed to
operate as a DPM is not a factor that it is considering in determining
whether allowing DPMs an extra ``A'' component is consistent with the
Act.
F. Performance and Operations Reviews for e-DPMs
The Commission notes that the CBOE has proposed performance review
standards pursuant to proposed CBOE Rule 8.94(a), which would take into
account how well an e-DPM has fulfilled its obligations under proposed
CBOE Rule 8.93. Furthermore, the Commission notes that proposed CBOE
Rule 8.94(b) provides that the CBOE may adopt rules in the future,
subject to Commission approval, with detailed objective criteria upon
which e-DPMs' fee rates could be reviewed. Moreover, the Commission
believes that proposed CBOE Rule 8.94(c) should provide guidance
regarding the termination or limitation of a member organization's
approval to act as an e-DPM, and the ability of the member organization
to appeal such decision.
G. Limitations on Access Due to Systems Constraints
In addition, the Commission notes that proposed new CBOE Rule
6.23A, which would allow the Exchange to limit the number of messages
sent by members accessing the Exchange to protect the Hybrid Trading
System, grants the Exchange no authority at this time and therefore,
would not permit the CBOE to place any limitations on its members under
this rule unless such limitations were objectively determined and
submitted as a proposed rule change to the Commission for approval
pursuant to Section 19(b) of the Act.\18\
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\18\ 15 U.S.C. 78s(b).
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H. Quote Locks
In Amendment No. 2, the CBOE proposes changes to CBOE Rule 6.45A(d)
to delete the requirement that when Market-Maker quotes interact with
other Market-Maker quotes and result in quote locks that last one
second or less, the Market-Markers locking the market are obligated to
trade one contract in open outcry. In addition, the CBOE proposes
limiting the ``counting period'' to one second during which time
Market-Makers whose quotes are locked may eliminate the locked market.
Quote locks that last more than one second would result in the quotes
executing against each other for the full size. The CBOE represents
that quote locks that occur between Market-Makers are mainly due to
technological disparities. The CBOE has therefore, in conjunction with
its proposed changes to CBOE Rule 6.45A(d), requested an exemption from
the Quote Rule for Market-Maker quote locks that do not exceed one
second.\19\ The Commission has granted the CBOE an exemption from the
Quote Rule solely under this limited circumstance, provided that
Market-Makers' quotes are firm for all customer and broker-dealer
orders, including orders for the accounts of other options market
makers.\20\ The Commission believes a requirement that an e-DPM trade
one contract in open outcry if it locks the quote of another Market-
Maker would be impractical in an environment in which market-making
participants can stream quotes electronically from locations outside of
the trading crowd in their allocated option classes without physically
being present on the trading floor, especially if such a quote lock
occurs due to technological differences.
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\19\ See CBOE Exemption Request Letter, supra note 5.
\20\ See SEC Exemption Letter, supra note 5.
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VI. Accelerated Approval of Amendment No. 2 to the Proposed Rule Change
Finally, the Commission finds good cause for approving Amendment
No. 2 to the proposed rule change prior to the thirtieth day after the
amendment is published for comment in the Federal Register pursuant to
Section 19(b)(2) of the Act.\21\ In Amendment No. 2, the CBOE proposes
technical changes to the proposed rule text to indicate proposed new
rule language and to clarify e-DPM obligations and performance review
standards. Furthermore, the CBOE proposes amendments to CBOE Rule
6.45A(d) to reduce the ``counting period'' to one second and to delete
the requirement that when Market-Maker quotes interact with other
Market-Maker quotes and result in quote locks that last one second or
less, the Market-Markers locking the market are obligated to trade one
contract in open outcry. The Commission believes that the proposed
changes in Amendment No. 2 are necessary to the efficient and orderly
introduction of remote e-DPMs and to the proper operation of the CBOE's
Hybrid Trading System and, therefore, believes that accelerated
approval of Amendment No. 2 is appropriate.
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\21\ 15 U.S.C. 78s(b)(2).
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[[Page 43032]]
VII. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\22\ that the proposed rule change (File No. SR-CBOE-2004-24) and
Amendment No. 1 are hereby approved, and that Amendment No. 2 is
approved on an accelerated basis.
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\22\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
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pursuant to delegated authority.\23\
\23\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 04-16324 Filed 7-16-04; 8:45 am]
BILLING CODE 8010-01-P