[Federal Register Volume 70, Number 11 (Tuesday, January 18, 2005)]
[Notices]
[Pages 2910-2911]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-150]
[[Page 2910]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51007; File No. SR-CBOE-2005-03]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Chicago Board Options
Exchange, Inc. Relating to Allocations of Securities
January 10, 2005.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on
January 7, 2005, the Chicago Board Options Exchange, Inc. (``CBOE'' or
``Exchange'') 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 CBOE. The Exchange
has filed this proposed rule change pursuant to Section 19(b)(3)(A) of
the Act \3\ and Rule 19b-4(f)(1) 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(1).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to adopt an Interpretation to CBOE Rule 8.95
relating to temporary allocations of securities. The text of the
proposed rule change is available at the CBOE's Office of the Secretary
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 Exchange 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 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
CBOE Rule 8.95 governs the allocation of securities on the Exchange
and generally provides a framework by which the Allocation or Special
Product Assignment Committee determines whether to allocate a security
to a trading crowd or a Designated Primary Market-Maker (``DPM'').
Paragraph (b) gives these Committees the ability to consider any
factors they believe to be relevant in making such determinations. The
purpose of this rule filing is to adopt Interpretations and Policies
.05 (``I&P .05'') to CBOE Rule 8.95 to clarify that the Exchange has
the authority to grant a temporary allocation.
In this regard, the Exchange anticipates listing on the Hybrid
Trading System (``Hybrid'') new option classes on ETFs and possibly
indexes in the very near future. Currently, index options and options
on ETFs (``index-based products'') may only trade on Hybrid if they
have an assigned DPM, which precludes the trading of an index-based
product on Hybrid using an LMM system or a trading crowd with only
Market-Makers. In December, the Exchange filed SR-CBOE-2004-87, which
would allow it to trade these index-based products without a DPM. Upon
approval of that rule filing, the Exchange would like the ability to
reconsider changing the trading platform \5\ with respect to these
index-based products in order to determine if the product should trade
in a non-DPM environment.
---------------------------------------------------------------------------
\5\ The term ``trading platform,'' for purposes of this rule
filing, refers to the system by which a security trades. A security
may trade using a DPM system, an LMM system, or upon approval of SR-
CBOE-2004-87, with a Market-Maker system without a DPM or LMM.
---------------------------------------------------------------------------
Accordingly, proposed I&P .05 provides the ability to grant initial
allocations on a temporary basis and at any point within one year to
reallocate the security such that it trades on a different trading
platform (e.g., from a DPM to a non-DPM trading crowd or vice versa).
The proposed I&P provides that the Special Product Assignment or
Allocation Committee may make temporary allocations of securities
either to a DPM or a non-DPM trading crowd by explicitly indicating to
such DPM or non-DPM trading crowd at the time of allocation that the
allocation is temporary. The Committee that made the temporary
allocation may, at any time during the first twelve months following
the granting of the temporary allocation, determine it is in the best
interest of the Exchange to reallocate the security such that: (i) A
security initially allocated to a DPM is reallocated to a non-DPM
trading crowd; or (ii) a security initially allocated to a non-DPM
trading crowd is reallocated to a DPM. While proposed I&P .05
establishes the right to make temporary allocations, nothing in this
proposal eliminates the ability of the appropriate committee to take
action in accordance with existing paragraphs (c) and (d) of CBOE Rule
8.95.
2. Statutory Basis
CBOE believes the proposed rule change is consistent with the Act
and the rules and regulations under the Act applicable to a national
securities exchange and, in particular, the requirements of Section
6(b) of the Act.\6\ Specifically, the Exchange believes the proposed
rule change is consistent with the Section 6(b)(5) of the Act,\7\ which
requires, among other things, that the rules of an exchange be designed
to promote just and equitable principles of trade, to prevent
fraudulent and manipulative acts and, in general, to protect investors
and the public interest.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78(f)(b)(5).
---------------------------------------------------------------------------
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 written comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change is immediately effective
pursuant to Section 19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(1)
thereunder,\9\ because it constitutes a stated policy, practice, or
interpretation with respect to the meaning, administration, or
enforcement of an existing rule. 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
[[Page 2911]]
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(1).
---------------------------------------------------------------------------
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 (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-CBOE-2005-03 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-2005-03. 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-2005-03 and should be submitted on or before February 8, 2005.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
---------------------------------------------------------------------------
\10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-150 Filed 1-14-05; 8:45 am]
BILLING CODE 8010-01-P