[Federal Register Volume 75, Number 211 (Tuesday, November 2, 2010)]
[Notices]
[Pages 67411-67412]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-27589]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63191; File No. SR-CBOE-2010-094]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Related to the Hybrid Automatic Execution Feature
October 27, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\notice is hereby given
that on October 19, 2010, the Chicago Board Options Exchange,
Incorporated (``Exchange'' or ``CBOE'') filed with the Securities and
Exchange Commission (the ``Commission'') the proposed rule change as
described in Items I and II below, which Items have been prepared by
the Exchange. The Exchange has designated 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.
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\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).
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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 Rule 6.13, CBOE Hybrid
System's Automatic Execution Feature, to provide additional clarity on
the operation of the automatic execution feature. The text of the
proposed rule change 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'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 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 purpose of this filing is to amend Rule 6.13 to provide
additional clarity on the operation of CBOE's Hybrid System automatic
execution feature. In particular, the Exchange is proposing to amend
the rule as follows:
First, the Exchange is proposing to include additional cross
references in Rule 6.13 to Rules 6.13A, Simple Auction Liaison (SAL),
6.14, Hybrid Agency Liaison (HAL), 6.14A, Hybrid Agency Liaison 2
(HAL2) and 6.45B, Priority and Allocation of Trades in Index Options
and Options on ETFs on the CBOE Hybrid System. While Rule 6.13 already
contains cross references to these four rules, the Exchange believes
the inclusion of the added cross references will provide additional
clarity on the existing operation and interaction of the various
processes within in [sic] the Hybrid System.
Second, Rule 6.13 provides that the Exchange will designate the
order size and order origin codes that are eligible for automatic
execution. The Exchange is proposing to amend the rule to clarify that
the Exchange will also designate the order types (e.g., market, limit,
contingency, etc.) that are eligible for automatic execution. The
inclusion of this order type provision is consistent with various other
CBOE Rules under which the Exchange designates order size, origin code
and order type, e.g., Rules 6.14, 6.14A and 6.53, Certain Types of
Orders Defined.
Third, the Exchange is proposing to replace specific references in
Rule 6.13 to routing order to BART (the booth
[[Page 67412]]
automated routing terminal) and an order entry firm's booth printer
with a general reference to an order entry firm's booth. The Exchange
no longer utilizes the particular system that it had referred [sic] as
BART and believes that the general reference to routing an order to an
order entry firm's booth is more appropriate for its rules.
Fourth, Rule 6.13 provides for certain price check parameters for
HAL and HAL2 classes under which the Hybrid System will not
automatically execute orders if the width between the Exchange's best
bid and best offer are not within an acceptable price range. The
acceptable price range is no less than 1.5 times the corresponding bid/
ask differential requirements determined by the Exchange on a class-by-
class basis. The Exchange is proposing to clarify that the Exchange may
determine to apply these price check parameters to market orders and/or
marketable limit orders. In addition, rather than cross reference
corresponding bid/ask differential requirements, the Exchange is
proposing to specify the minimum acceptable price range within Rule
6.13. Specifically, the acceptable price range will be no less than:
$0.375 between the bid and offer for each option contract for which the
bid is less than $2, $0.60 where the bid is at least $2 but does not
exceed $5, $0.75 where the bid is more than $5 but does not exceed $10,
$1.20 where the bid is more than $10 but does not exceed $20, and $1.50
where the bid is more than $20. These amounts are equal to 1.5 times
the bid/ask differential requirements that the Exchange had in its
rules at the time the price check parameters were adopted.
Finally, the Exchange is making some non-substantive changes to
simplify the language in the text and to make miscellaneous
typographical changes, such as uncapitalizing the word ``class,''
deleting an extra word (``Eligibility:'') which appeared in the text
twice, and renumbering certain paragraphs and revising certain headers
so that the format is consistent with the remainder of the Rule.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder and, in particular,
the requirements of Section 6(b) of the Act.\5\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \6\ in that it is designed to promote just and
equitable principles of trade, to prevent fraudulent and manipulative
acts, to remove impediments to and to perfect the mechanism for a free
and open market and a national market system, and, in general, to
protect investors and the public interest, by providing additional
clarity on the operation of CBOE Hybrid System automatic execution
feature.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
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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 that is 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 proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative prior to 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, the proposed rule
change has become effective pursuant to Section 19(b)(3)(A) of the
Act\7\ and Rule 19b-4(f)(6)(iii) thereunder.\8\
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the self-regulatory organization to give the
Commission 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. CBOE has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend 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 (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-CBOE-2010-094 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-2010-094. 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 Web site viewing and
printing 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 the filing also will be available for
inspection and copying at the principal office of the self-regulatory
organization. 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-2010-094 and should be submitted on or before November 23, 2010.
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\9\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-27589 Filed 11-1-10; 8:45 am]
BILLING CODE 8011-01-P