[Federal Register Volume 75, Number 186 (Monday, September 27, 2010)]
[Notices]
[Pages 59309-59310]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-24055]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62951; File No. SR-CBOE-2010-087]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing of a Proposed Rule Change Related to
CBSX Market-Maker Obligations
September 20, 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 September 17, 2010, Chicago Board Options Exchange, Incorporated
(``CBOE'' or the ``Exchange'') 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 Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposing to amend CBOE Stock Exchange's (``CBSX'',
the CBOE's stock trading facility) rules to enhance quotation
requirements. The text of the rule proposal is available on the
Exchange's Web site (http://www.cboe.org/legal), at the Exchange's
Office of the Secretary and at the Commission.
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 self-regulatory organization
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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to adopt rules to enhance minimum quotation
requirements for CBSX Remote Market-Makers, CBSX Designated Primary
Market-Makers (``CBSX DPMs''), and CBSX Lead Market-Makers (``CBSX
LMMs'') (collectively ``CBSX Market-Makers''). Under the proposal, the
Exchange will amend Rules 53.23, Obligations of CBSX Remote Market-
Makers, and Rule 53.56, CBSX DPM Obligations,\3\ to require CBSX
Market-Makers for each stock in which they are registered to
continuously maintain a two-sided quotation within a designated
percentage of the National Best Bid and National Best Offer as
appropriate during CBSX Regular Trading Hours after the primary listing
market has disseminated an opening quote in the stock on a given
trading day.\4\ These enhanced market maker quotation obligations and
[sic] are intended to eliminate trade executions against market maker
placeholder quotations traditionally priced far away from the inside
market, commonly known as ``stub quotes.'' They are also intended to
augment and work in relation to the single stock pause standards
already in place on a pilot basis for stocks in the S&P 500, the
Russell 1000 and certain exchange-trade products.\5\
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\3\ The Exchange notes that no change is necessary to the text
related to CBSX LMM obligations as existing Rule 53.51, CBSX LMM
Defined, already provides that CBSX LMMs will have the same
obligations of CBSX Remote Market-Makers plus those additional
obligations of CBSX DPMs.
\4\ A CBSX Remote Market-Maker would be obligated to provide
continuous quotes only when the CBSX Remote Market-Maker is quoting
in a particular security during CBSX Regular Trading Hours after the
primary listing market has disseminated an opening quote in the
stock on a given trading day. See proposed Rule 53.23.01(a), which
is similar to CBOE's existing rule for options Market-Makers, Rule
8.7(d)(iii). A CBSX DPM or CBSX LMM would be obligated to provide
continuous quotes during the CBSX Regular Trading Hours after the
primary listing market has disseminated an opening quote in the
stock on a given trading day. See proposed Rule 53.56.01(a), which
is similar to CBOE's existing rules for options DPMs and LMMs, Rules
8.85(a)(i) and 8.15A(b)(i).
\5\ See Exchange Act Release Nos. 62252 (June 10, 2010), 75 FR
34186 (June 16, 2010) and 62886 (September 10, 2010).
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Under the proposal, the Exchange will require CBSX Market-Makers to
enter and maintain quotes priced at no more than a certain percentage
away from the national inside bid and offer. Permissible quotes are
determined by the individual character of the security, the time of day
in which the quote is entered, and other factors which are summarized
below:
For issues subject to an individual stock trading trigger pause, a
permissible quote is determined by first looking at the applicable
stock trading pause trigger percentage of the security and then
reducing that number by 2%. Since currently the stock pause trigger
percentage across all exchanges is 10%, a CBSX Market-Maker's quote in
a such a security may not be more than 8% away from the national best
bid or best offer as appropriate. Once a compliant quote is entered, it
may rest without adjustment until such time as it moves to within \1/2\
of 1% of the applicable trigger pause percentage (i.e., currently 9.5%)
whereupon the CBSX Market-Maker must immediately move its quote back to
at least the permissible default level of 8% away from the national
best bid or best offer. During times in which a trigger pause
percentage is not applicable (e.g., before 8:45 a.m. and after 2:35
p.m. Chicago Time), a market maker must maintain a quote no further
than 20% away from the inside (i.e., it may rest without adjustment
until it reaches 21.5%). In the absence of national best or best offer,
the above calculations will remain the same, but will use the national
last sale instead of the absent bid or offer.
For securities not subject to any individual stock pause trigger,
the proposal will a [sic] assume a hypothetical 32% trigger pause,
apply a 2% reduction, and require CBSX Market-Makers in those issues to
maintain quotes no more than 30% away from the national best and
national best offer. Like securities subject to stock trading pauses,
once a compliant quote is entered, it may rest without adjustment until
such time as it moves to within \1/2\ of 1% of its
[[Page 59310]]
applicable trigger pause percentage (31.5%) whereupon the CBSX Market-
Maker must immediately move its quote back to at least the permissible
default level of 30%. These requirements shall apply to Regulation NMS
stocks during CBSX Regular Trading Hours after the primary listing
market has disseminated an opening quote in the stock for the given
trading day.
Nothing in the above precludes a CBSX Market-Maker from voluntarily
quoting at price levels that are closer to the national best bid and
best offer than required under the proposal.
2. Statutory Basis
The statutory basis for the proposed rule change is Section 6(b)(5)
of the Act,\6\ which requires the rules of an exchange to promote just
and equitable principles of trade, to 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. The
proposed rule change also is designed to support the principles of
Section 11A(a)(1) \7\ of the Act in that it seeks to assure fair
competition among brokers and dealers and among exchange markets. The
Exchange believes that the proposed rule meets these requirements in
that it promotes transparency and uniformity across markets concerning
minimum market maker quotation requirements.
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\6\ 15 U.S.C. 78f(b)(5).
\7\ 15 U.S.C. 78k-1(a)(1).
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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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
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-2010-087 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2010-087. 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 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 Exchange. 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 publicly available. All
submissions should refer to File Number SR-CBOE-2010-087 and should be
submitted on or before October 18, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-24055 Filed 9-24-10; 8:45 am]
BILLING CODE 8010-01-P