Federal Register: December 29, 2004 (Volume 69, Number 249)

DOCID: FR Doc E4-3880

SECURITIES AND EXCHANGE COMMISSION

Securities and Exchange Commission

DOCUMENT ID: [Release No. 34-50909; File No. SR-CBOE-2004-85]

NOTICE: NOTICES

ACTION: Self-regulatory organizations; proposed rule changes:

SUBJECT CATEGORY:

Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto by the Chicago Board Options Exchange, Incorporated Regarding Designated Primary Market-Makers' Handling of Non-Public Customer Orders

DOCUMENT SUMMARY:

December 22, 2004.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b4 thereunder,\2\ notice is hereby given that on December 15, 2004, the Chicago Board Options Exchange, Incorporated (``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. On December 21, 2004, the CBOE submitted Amendment No. 1 to the proposed rule change.\3\ The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
\3\ Amendment No. 1 made technical corrections to the propose rule text of the proposed rule change.
I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The CBOE proposes to modify CBOE Rule 8.85(b)(iii) regarding Designated Primary MarketMakers' (``DPMs'') handling of nonpublic customer orders. Below is the text of the proposed rule change, as amended. Proposed deletions are in [brackets].
* * * * *
Rule 8.85 DPMs Obligations
(a) No change.
(b) Agency Transactions. Each DPM shall fulfill all of the obligations of a Floor Broker (to the extent that the DPM acts as a Floor Broker) and of an Order Book Official under the Rules, and shall satisfy each of the following requirements, in respect of each of the securities allocated to the DPM:
(i)(ii) No change.
(iii) accord priority to any [public] customer order which the DPM represents as agent over the DPM's principal transactions, unless the customer who placed the order has consented to not being accorded such priority;
(iv)(vii) No change.
(c)(e) No change.
* * * Interpretations and Policies:
.01.04 No change.
* * * * *
II. SelfRegulatory 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, as amended. 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 aspects of such statements.
A. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

1. Purpose

On January 25, 2002 the Commission approved a CBOE rule change filing eliminating the obligation of DPMs to accord priority to non public customer orders.\4\ In approving the filing, the Commission expressly stated that it was making no determination as to whether a DPM's failure to accord priority to nonpublic customer orders, when the DPM is acting as an agent, is consistent with the federal securities laws or any other applicable law. The Commission further stated that the approval does not affect a DPM's fiduciary obligations under federal securities laws or agency law principles when it acts as agent.
\4\ Securities Exchange Act Release No. 45341 (January 25, 2002), 67 FR 5016 (February 1, 2002) (approving SRCBOE0042).

The Exchange now proposes to change the rule in question, CBOE Rule [[Page 78073]]
8.85(b)(iii), to revert back to the original language so that the rule applies to both public customer and nonpublic customer orders. 2. Statutory Basis

The Exchange believes that the proposed rule change, as amended, is consistent with Section 6(b) of the Act \5\ in general, and furthers the objectives of Section 6(b)(5) \6\ in particular, in that it is designed 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.
\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
B. SelfRegulatory Organization's Statement on Burden on Competition

The Exchange does not believe that the proposed rule change, as amended, will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
C. SelfRegulatory Organization's Statement on Comments on the Proposed Rule Change Received from Members, Participants, or Others

No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

Within 35 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 Exchange consents, the Commission will:
(A) By order approve 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 email to rulecomments@sec.gov. Please include File Number SRCBOE200485 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 205490609.

    All submissions should refer to File Number SRCBOE200485. This file number should be included on the subject line if email 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 CBOE200485 and should be submitted on or before January 19, 2005.

    For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\7\
    \7\ 17 CFR 200.303(a)(12).
    Margaret H. McFarland,
    Deputy Secretary.
    [FR Doc. E43880 Filed 122804; 8:45 am]
    BILLING CODE 801001P

    SUMMARY:

    Chicago Board Options Exchange, Inc.,

    DOCUMENT BODY 2:

    December 22, 2004.

    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b4 thereunder,\2\ notice is hereby given that on December 15, 2004, the Chicago Board Options Exchange, Incorporated (``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. On December 21, 2004, the CBOE submitted Amendment No. 1 to the proposed rule change.\3\ The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons.
    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b4.
    \3\ Amendment No. 1 made technical corrections to the propose rule text of the proposed rule change.
    I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

    The CBOE proposes to modify CBOE Rule 8.85(b)(iii) regarding Designated Primary MarketMakers' (``DPMs'') handling of nonpublic customer orders. Below is the text of the proposed rule change, as amended. Proposed deletions are in [brackets].
    * * * * *
    Rule 8.85 DPMs Obligations
    (a) No change.
    (b) Agency Transactions. Each DPM shall fulfill all of the obligations of a Floor Broker (to the extent that the DPM acts as a Floor Broker) and of an Order Book Official under the Rules, and shall satisfy each of the following requirements, in respect of each of the securities allocated to the DPM:
    (i)(ii) No change.
    (iii) accord priority to any [public] customer order which the DPM represents as agent over the DPM's principal transactions, unless the customer who placed the order has consented to not being accorded such priority;
    (iv)(vii) No change.
    (c)(e) No change.
    * * * Interpretations and Policies:
    .01.04 No change.
    * * * * *
    II. SelfRegulatory 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, as amended. 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 aspects of such statements.
    A. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

    1. Purpose

    On January 25, 2002 the Commission approved a CBOE rule change filing eliminating the obligation of DPMs to accord priority to non public customer orders.\4\ In approving the filing, the Commission expressly stated that it was making no determination as to whether a DPM's failure to accord priority to nonpublic customer orders, when the DPM is acting as an agent, is consistent with the federal securities laws or any other applicable law. The Commission further stated that the approval does not affect a DPM's fiduciary obligations under federal securities laws or agency law principles when it acts as agent.
    \4\ Securities Exchange Act Release No. 45341 (January 25, 2002), 67 FR 5016 (February 1, 2002) (approving SRCBOE0042).

    The Exchange now proposes to change the rule in question, CBOE Rule [[Page 78073]]
    8.85(b)(iii), to revert back to the original language so that the rule applies to both public customer and nonpublic customer orders. 2. Statutory Basis

    The Exchange believes that the proposed rule change, as amended, is consistent with Section 6(b) of the Act \5\ in general, and furthers the objectives of Section 6(b)(5) \6\ in particular, in that it is designed 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.
    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    B. SelfRegulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change, as amended, will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
    C. SelfRegulatory Organization's Statement on Comments on the Proposed Rule Change Received from Members, Participants, or Others

    No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

    Within 35 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 Exchange consents, the Commission will:
    (A) By order approve 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 email to rulecomments@sec.gov. Please include File Number SRCBOE200485 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 205490609.

    All submissions should refer to File Number SRCBOE200485. This file number should be included on the subject line if email 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 CBOE200485 and should be submitted on or before January 19, 2005.

    For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\7\
    \7\ 17 CFR 200.303(a)(12).
    Margaret H. McFarland,
    Deputy Secretary.
    [FR Doc. E43880 Filed 122804; 8:45 am]
    BILLING CODE 801001P