[Federal Register Volume 76, Number 20 (Monday, January 31, 2011)]
[Notices]
[Pages 5415-5417]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-1984]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63763; File No. SR-CBOE-2011-005]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Related to Short Sell Order Handling
January 25, 2011.
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 January 14, 2011, 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 substantially
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
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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 Stock Exchange, LLC's
(``CBSX,'' the CBOE's stock trading facility) rules to describe the
manner in which the CBSX System \5\ will handle short sell orders for
openings and reopenings in relation to Rule 201 of Regulation SHO.\6\
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.
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\5\ The ``CBSX System'' means the electronic system which
performs the functions set out in the CBSX rules including
controlling, monitoring, and recording trading by CBSX Traders
through CBSX Workstations and trading between CBSX Traders. See Rule
50.1(a). A ``CBSX Trader'' means an individual who or organization
which has the right to trade on CBSX. See Rules 50.1(f) and 50.3. A
``CBSX Workstation'' means a computer connected to CBSX for the
purposes of trading pursuant to the CBSX rules. See Rule 50.1(d).
\6\ 17 CFR 242.201. See Securities Exchange Act Release Nos.
61595 (February 26, 2010), 75 FR 11232 (March 10, 2010) and 63247
(November 4, 2010), 75 FR 68702 (November 9, 2010). In connection
with the adoption of Rule 201, Rule 200(g) of Regulation SHO, 17 CFR
242.200(g), was amended to include a ``short exempt'' marking
requirement. The amendments to Rule 201 and Rule 200(g) have a
compliance date of February 28, 2011.
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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
Rule 201 of Regulation SHO under the Act \7\ sets forth a short
sale-related circuit breaker that, if triggered, will impose a
restriction on the prices at which NMS stocks \8\ may be sold short. In
anticipation of the upcoming February 28, 2011 compliance date for Rule
201,\9\ the Exchange is proposing to amend CBSX's rules to describe the
manner in which the CBSX System will handle short sell orders during
opening rotations when a circuit breaker is triggered under Rule 201 of
Regulation SHO.\10\
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\7\ Id.
\8\ 17 CFR 242.201(a)(1).
\9\ See Securities Exchange Act Release No. 63247, note 6,
supra, which extended the compliance date for Rule 201, 17 CFR
242.201 and Rule 200(g), 17 CFR 242.200(g), from November 10, 2010
to February 28, 2011.
\10\ Opening and reopening rotations are conducted pursuant to
Rule 52.2, Opening Procedures. Rule 52.2 provides that the CBSX
System shall automatically open each security at the price that
provides the highest matched quantity of order volume. Subsequent to
any such opening prints, or immediately if there are no pre-opening
orders in a security, the CBSX System shall disseminate regular
quotations.
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In particular, the Exchange is proposing to amend Interpretation
and Policy .02 to its Rule 51.8, Types of Orders Handled, to provide
that, if a short sale-related circuit breaker is triggered under
Regulation SHO, orders marked ``short'' that are received by the CBSX
System after the time a circuit breaker is triggered but prior to the
opening of trading or reopening of trading following a halt, suspension
or pause in the NMS stock will be cancelled/rejected.\11\ Consistent
with the existing text of the rule and a proposed clarifying amendment
to that text, (1) short sell orders that are resting in the CBSX Book
\12\ at the time a circuit breaker is triggered will be permitted to
continue resting and/or execute,\13\ and (2) short sell orders that are
received by the CBSX System after the time a circuit breaker is
triggered and while the NMS stock is open for trading on CBSX that are
(A) priced above the National Best Bid will be permitted to rest and/or
execute or (B) priced at or below the National Best Bid will be
rejected/cancelled.\14\
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\11\ See proposed paragraph (a)(3) of Rule 51.8.02.
\12\ The ``CBSX Book'' means all unexecuted orders currently
held by the CBSX System. See Rule 50.1(c).
\13\ Short sell orders that are resting in the CBSX Book at the
time a circuit breaker is triggered by definition are priced above
the National Best Bid at the time of initial display and therefore
will be permitted to continue resting and/or execute intra-day and
during any opening/reopening rotations that occur while a circuit
breaker is in effect. 17 CFR 242.201(b)(1).
\14\ See existing paragraphs (a)(1) through (2) of Rule 51.8.02
and proposed changes to clarify that subparagraph (2) (which is also
numbered as item (2) in the description above) applies to short sale
orders received while the NMS stock is open for trading on CBSX.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) of the Act,\15\ in general, and, in particular, furthers
the objectives of Section 6(b)(5) of the Act,\16\ which requires that
an exchange have rules that are designed to promote just and equitable
principles of trade and, in general, to protect investors and the
public interest. In particular, the Exchange believes the proposed
change will provide clarity on the short sell order handling procedures
that the CBSX System will apply for openings and reopenings when a
short sale-related circuit breaker is triggered under Rule 201 of
Regulation SHO.
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\15\ 15 U.S.C. 78f(b).
\16\ 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 rule does not (i) significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 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, provided that the self-regulatory organization
has given the Commission written notice of its intent to file 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, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \17\ and Rule 19b-4(f)(6)
thereunder.\18\
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of such 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
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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-2011-005 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-2011-005. 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 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-2011-005 and should be
submitted on or before February 22, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-1984 Filed 1-28-11; 8:45 am]
BILLING CODE 8011-01-P