Federal Register: December 29, 2004 (Volume 69, Number 249)
DOCID: FR Doc 04-28480
SECURITIES AND EXCHANGE COMMISSION
Securities and Exchange Commission
DOCUMENT ID: [Release No. 34-50915; File No. SR-CBOE-2004-52]
NOTICE: NOTICES
ACTION: Self-regulatory organizations; proposed rule changes:
SUBJECT CATEGORY:
Self-Regulatory Organizations; Order Granting Approval of a Proposed Rule Change and Amendment No. 1 Thereto by the Chicago Board Options Exchange, Incorporated to Amend its ``Trigger'' Rule to Permit RAES Orders to Automatically Execute Against Orders Resting on the Exchange's Limit Order Book
DOCUMENT SUMMARY:
December 22, 2004.
On July 30, 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 19b4
thereunder,\2\ a proposed rule change relating to the Exchange's
AutoQuote Triggered Ebook Execution system (``Trigger''). On September 23, 2004, the Exchange amended the proposed rule
[[Page 78070]]
change.\3\ The proposed rule change, as amended, was published for
comment in the Federal Register on November 22, 2004.\4\ The Commission
received no comments on the proposal. This order approves the proposed rule change.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
\3\ See letter from David Doherty, CBOE, to Nancy J. Sanow,
Assistant Director, Division of Market Regulation, Commission, dated
September 22, 2004, and accompanying Form 19b4 (``Amendment No.
1''). Amendment No. 1 replaced and superseded the original filing in its entirety.
\4\ See Securities Exchange Act Release No. 50673 (November 16, 2004), 69 FR 67971.
Trigger allows orders resting in CBOE's electronic book to
automatically execute in the limited situation where the bid or offer
for a series of options generated by the Exchange's AutoQuote system
(or any Exchange approved proprietary quote generation system used in
lieu of the Exchange's Autoquote system) crosses or locks the
Exchange's best bid or offer for that series as established by a booked
order. Currently, Trigger provides for automatic executions of orders
resting in the book \5\ up to the maximum number of contracts permitted
to be entered into RAES for that series (``Trigger Volume''). The
trading crowd has the ability, but not the obligation, to execute
manually the remaining contracts in the book that exceed the Trigger
Volume. Any unexecuted contracts in the booked order in excess of the
Trigger Volume remain in the book, and the bid or offer generated by
Autoquote is one tick inferior to the price of the booked order, so
that the disseminated quote does not cross or lock the Autoquote bid or offer.
\5\ Such orders are executed against market makers participating
in the Exchange's Retail Automated Execution System (``RAES''). CBOE Rule 6.8(d).
The Exchange proposes to amend CBOE Rule 6.8(d)(v) to provide that where contracts remain in the book after an execution (or partial execution), or for any series where Trigger has not yet been implemented, orders in RAES for options of that series may, as determined by the appropriate FPC on a class by class basis, be (1) Automatically executed; or (2) rerouted on the Exchange's Order Routing System to the crowd PAR terminal (or to another location in the event of system problems or contrary firm routing instructions).
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange \6\ and, in
particular, the requirements of section 6(b) of the Act \7\ and the
rules and regulations thereunder. The Commission finds specifically
that the proposed rule change is consistent with section 6(b)(5) of the
Act,\8\ because, in the Commission's view, the proposed rule change
should help facilitate the execution of incoming RAES orders submitted
during the Trigger process by making such orders eligible for automatic
execution against the book orders that are crossed or locked by the
Exchange's Autoquote system (or any Exchange approved proprietary quote
generation system used in lieu of the Exchange's Autoquote system). The
Commission notes that the proposed rule change would not change the
existing execution process for incoming RAES orders that are submitted prior to a locked or crossed market.\91\
\6\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5). Section 6(b)(5) of the Act requires
that the rules of a national securities exchange be ``designed to
prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanisms of a free and open market and a national market system,
and in general, to protect investors and the public interest; and
are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers.''
\9\ These orders would continue to be executed in accordance with the RAES procedures set forth in CBOE Rule 6.8.
It is therefore ordered, pursuant to section 19(b)(2) of the Act,\10\ that the proposed rule change (SRCBOE200452) is approved. \10\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\11\
\11\ 17 CFR 200.303(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 0428480 Filed 122804; 8:45 am]
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SUMMARY:
Chicago Board Options Exchange, Inc.,
DOCUMENT BODY 2:
December 22, 2004.
On July 30, 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 19b4
thereunder,\2\ a proposed rule change relating to the Exchange's
AutoQuote Triggered Ebook Execution system (``Trigger''). On September 23, 2004, the Exchange amended the proposed rule
[[Page 78070]]
change.\3\ The proposed rule change, as amended, was published for
comment in the Federal Register on November 22, 2004.\4\ The Commission
received no comments on the proposal. This order approves the proposed rule change.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
\3\ See letter from David Doherty, CBOE, to Nancy J. Sanow,
Assistant Director, Division of Market Regulation, Commission, dated
September 22, 2004, and accompanying Form 19b4 (``Amendment No.
1''). Amendment No. 1 replaced and superseded the original filing in its entirety.
\4\ See Securities Exchange Act Release No. 50673 (November 16, 2004), 69 FR 67971.
Trigger allows orders resting in CBOE's electronic book to
automatically execute in the limited situation where the bid or offer
for a series of options generated by the Exchange's AutoQuote system
(or any Exchange approved proprietary quote generation system used in
lieu of the Exchange's Autoquote system) crosses or locks the
Exchange's best bid or offer for that series as established by a booked
order. Currently, Trigger provides for automatic executions of orders
resting in the book \5\ up to the maximum number of contracts permitted
to be entered into RAES for that series (``Trigger Volume''). The
trading crowd has the ability, but not the obligation, to execute
manually the remaining contracts in the book that exceed the Trigger
Volume. Any unexecuted contracts in the booked order in excess of the
Trigger Volume remain in the book, and the bid or offer generated by
Autoquote is one tick inferior to the price of the booked order, so
that the disseminated quote does not cross or lock the Autoquote bid or offer.
\5\ Such orders are executed against market makers participating
in the Exchange's Retail Automated Execution System (``RAES''). CBOE Rule 6.8(d).
The Exchange proposes to amend CBOE Rule 6.8(d)(v) to provide that where contracts remain in the book after an execution (or partial execution), or for any series where Trigger has not yet been implemented, orders in RAES for options of that series may, as determined by the appropriate FPC on a class by class basis, be (1) Automatically executed; or (2) rerouted on the Exchange's Order Routing System to the crowd PAR terminal (or to another location in the event of system problems or contrary firm routing instructions).
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange \6\ and, in
particular, the requirements of section 6(b) of the Act \7\ and the
rules and regulations thereunder. The Commission finds specifically
that the proposed rule change is consistent with section 6(b)(5) of the
Act,\8\ because, in the Commission's view, the proposed rule change
should help facilitate the execution of incoming RAES orders submitted
during the Trigger process by making such orders eligible for automatic
execution against the book orders that are crossed or locked by the
Exchange's Autoquote system (or any Exchange approved proprietary quote
generation system used in lieu of the Exchange's Autoquote system). The
Commission notes that the proposed rule change would not change the
existing execution process for incoming RAES orders that are submitted prior to a locked or crossed market.\91\
\6\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5). Section 6(b)(5) of the Act requires
that the rules of a national securities exchange be ``designed to
prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanisms of a free and open market and a national market system,
and in general, to protect investors and the public interest; and
are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers.''
\9\ These orders would continue to be executed in accordance with the RAES procedures set forth in CBOE Rule 6.8.
It is therefore ordered, pursuant to section 19(b)(2) of the Act,\10\ that the proposed rule change (SRCBOE200452) is approved. \10\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\11\
\11\ 17 CFR 200.303(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 0428480 Filed 122804; 8:45 am]
BILLING CODE 801001M