Federal Register: November 26, 2008 (Volume 73, Number 229)
DOCID: fr26no08-110 FR Doc E8-28045
SECURITIES AND EXCHANGE COMMISSION
Securities and Exchange Commission
DOCUMENT ID: [Release No. 34-58978; File No. SR-CBOE-2008-116]
NOTICE: NOTICES
DOCID: fr26no08-110
ACTION: Self-Regulatory Organizations; Proposed Rule Changes:
SUBJECT CATEGORY:
Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend CBOE Rules Relating to an Expansion of the SPX Trading Crowd
DOCUMENT SUMMARY:
November 19, 2008.
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 November 19, 2008, 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 and II below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ``non
controversial'' proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b4(f)(6) thereunder.\4\ The
Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b4(f)(6).
I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to amend its rules relating to the physical
expansion of a trading crowd. 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. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the selfregulatory 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.
[[Page 72090]]
A. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
1. Purpose
CBOE recently completed an expansion of the back area of the SPX options trading crowd, which will result in a number of new trading spaces opening up in the trading crowd. In anticipation of the expansion, CBOE is filing this proposed rule change to describe the objective processes that it may utilize to determine which individuals can use one of the new trading spaces that are available, provided the demand for trading spaces in the trading crowd exceeds the supply.
Historically, an order in time process has generally been applied
to determine which individuals can use new trading spaces in a crowd
located on the CBOE trading floor. Recently CBOE codified in its rules
pursuant to Commission approval objective processes pertaining to the
issuance of new Interim Trading Permits (``ITPs'') through either a
random lottery process or order in time process, in anticipation that
the demand for the ITPs would exceed the supply.\5\ In the event the
demand for trading spaces in the back area of the SPX trading crowd
exceeds the supply, CBOE is adopting similar processes to determine
which individuals can use one of the new trading spaces. Specifically,
CBOE may choose to utilize either a random lottery process or an order
in time process, which are the two objective processes that CBOE
recently codified for the issuance of ITPs. CBOE notes that when it
adopted these two processes for the issuance of ITPs, the rule filing
did not receive any negative comments from its members relating to
these objective processes. Instead, CBOE believes that the issuance of
ITPs using the random lottery process was a positive experience, and
now seeks to apply one of these two processes in the context of the physical expansion of the SPX trading crowd.
\5\ See Securities Exchange Act Release No. 58178 (July 17,
2008), 73 FR 42634 (July 22, 2008), approving SRCBOE200840.
Under either of the processes that it chooses to utilize, CBOE
would announce a deadline by which an approved individual CBOE member
who desires to use the trading space can submit an indication of
interest for one of the available trading spaces in the back area of
the SPX trading crowd. Only those individuals who are approved members
of CBOE would be eligible to submit an indication of interest, and the
individual who would be using the trading space must be an effective
member under CBOE Rule 3.10 (i.e., must be on a membership \6\), a
temporary member, or ITP Holder at the time of the random lottery
process or the order in time process. If an existing member of the SPX
trading crowd submits an indication of interest, is ``selected''
through the random lottery process or the order in time process and
chooses a new trading space in the back area of the SPX trading crowd, that member's prior trading space would be deemed vacant.
\6\ Being ``on a membership'' means that the member has
satisfied the applicable requirements to obtain a membership and a
membership has been released to that member by the Exchange's Membership Department.
After the deadline for indications of interest has passed, the
available trading spaces in the back area of the SPX trading crowd
would be allocated through a random lottery process or an order in time
process.\7\ Each individual member who is ``selected'' through either
the random lottery process (based on the lottery selection sequence) or
the order in time process (based on time sequence) would choose the new trading space where he or she would like to stand.
\7\ A member who selects a trading space following the random
lottery process or the order in time process does not obtain any
ownership right in that particular trading space. In the event a
space dispute should arise, the crowd space dispute resolution procedures in Rule 24.21 will continue to apply.
CBOE believes that these processes would provide for the issuance of new trading spaces in an objective manner and consequently would provide for fair access to the Exchange.
2. Statutory Basis
The proposed rule change would permit the Exchange to allocate new
trading spaces in the SPX trading crowd pursuant to one of two
objective processes: a random lottery process or an order in time
process. CBOE notes that both of these processes have been codified in
connection with the issuance of ITPs in a prior filing that was
approved by the Commission. As a result, the Exchange believes the
proposed rule change is consistent with the Act and the rules and
regulations under the Act applicable to a national securities exchange
and, in particular, the requirements of Section 6(b) of the Act.\8\
Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) Act \9\ requirements that the rules
of an exchange be designed to promote just and equitable principles of
trade, to prevent fraudulent and manipulative acts and, in general, to
protect investors and the public interest. CBOE believes that these
processes would provide for the issuance of new trading spaces in an
objective manner and consequently would provide for fair access to the Exchange.
\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
B. SelfRegulatory 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. SelfRegulatory 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, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b 4(f)(6) thereunder.\11\
\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b4(f)(6). In addition, Rule 19b4(f)(6)(iii)
requires a selfregulatory organization to give 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 Exchange has satisfied this requirement.
A proposed rule change filed under Rule 19b4(f)(6) normally may
not become operative prior to 30 days after the date of filing.\12\
However, Rule 19b4(f)(6)(iii) \13\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange has requested that the
Commission waive the 30day operative delay because it has now
completed the expansion of its SPX trading crowd and has recently come
to believe that the demand for additional trading spaces may exceed the
newly available supply. To respond to this possibility, CBOE would like the flexibility to utilize a
[[Page 72091]]
lottery process when it allocates the additional space in the next
several days. CBOE notes that its proposed rule change is a copy of its
current lottery process applicable to the allocation of ITPs, which the
Commission previously approved, and would apply that methodology in the context of expanding its SPX trading crowd.
\12\ Id.
\13\ 17 CFR 240.19b4(f)(6)(iii).
The Commission believes that waiving the 30day operative delay is
consistent with the protection of investors and the public
interest.\14\ In particular, the Commission believes that waiver of the
operative delay will promote competition and efficiency by providing
CBOE with the option to utilize its new lottery process to manage the
expansion of the SPX trading crowd, which it anticipates allocating in
the next several days. Waiving the operative delay will enable CBOE to
use either this new process or the historicallyutilized first in time
process as it deems appropriate, and will enable CBOE to allocate the
new space promptly through a fair and objective methodology. For these
reasons, the Commission designates the proposed rule change as operative upon filing.
\14\ For purposes only of waiving the 30day operative delay,
the Commission has considered the proposed rule's effect on
efficiency, competition, and capital formation. See 15 U.S.C. 78c(f).
At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate 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
Paper Comments
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\15\
\15\ 17 CFR 200.303(a)(12).
Florence E. Harmon,
Acting Secretary.
[FR Doc. E828045 Filed 112508; 8:45 am]
BILLING CODE 801101P
SUMMARY:
Chicago Board Options Exchange, Inc.,
DOCUMENT BODY 2:
November 19, 2008.
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 November 19, 2008, 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 and II below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ``non
controversial'' proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b4(f)(6) thereunder.\4\ The
Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b4(f)(6).
I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to amend its rules relating to the physical
expansion of a trading crowd. 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. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the selfregulatory 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.
[[Page 72090]]
A. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
1. Purpose
CBOE recently completed an expansion of the back area of the SPX options trading crowd, which will result in a number of new trading spaces opening up in the trading crowd. In anticipation of the expansion, CBOE is filing this proposed rule change to describe the objective processes that it may utilize to determine which individuals can use one of the new trading spaces that are available, provided the demand for trading spaces in the trading crowd exceeds the supply.
Historically, an order in time process has generally been applied
to determine which individuals can use new trading spaces in a crowd
located on the CBOE trading floor. Recently CBOE codified in its rules
pursuant to Commission approval objective processes pertaining to the
issuance of new Interim Trading Permits (``ITPs'') through either a
random lottery process or order in time process, in anticipation that
the demand for the ITPs would exceed the supply.\5\ In the event the
demand for trading spaces in the back area of the SPX trading crowd
exceeds the supply, CBOE is adopting similar processes to determine
which individuals can use one of the new trading spaces. Specifically,
CBOE may choose to utilize either a random lottery process or an order
in time process, which are the two objective processes that CBOE
recently codified for the issuance of ITPs. CBOE notes that when it
adopted these two processes for the issuance of ITPs, the rule filing
did not receive any negative comments from its members relating to
these objective processes. Instead, CBOE believes that the issuance of
ITPs using the random lottery process was a positive experience, and
now seeks to apply one of these two processes in the context of the physical expansion of the SPX trading crowd.
\5\ See Securities Exchange Act Release No. 58178 (July 17,
2008), 73 FR 42634 (July 22, 2008), approving SRCBOE200840.
Under either of the processes that it chooses to utilize, CBOE
would announce a deadline by which an approved individual CBOE member
who desires to use the trading space can submit an indication of
interest for one of the available trading spaces in the back area of
the SPX trading crowd. Only those individuals who are approved members
of CBOE would be eligible to submit an indication of interest, and the
individual who would be using the trading space must be an effective
member under CBOE Rule 3.10 (i.e., must be on a membership \6\), a
temporary member, or ITP Holder at the time of the random lottery
process or the order in time process. If an existing member of the SPX
trading crowd submits an indication of interest, is ``selected''
through the random lottery process or the order in time process and
chooses a new trading space in the back area of the SPX trading crowd, that member's prior trading space would be deemed vacant.
\6\ Being ``on a membership'' means that the member has
satisfied the applicable requirements to obtain a membership and a
membership has been released to that member by the Exchange's Membership Department.
After the deadline for indications of interest has passed, the
available trading spaces in the back area of the SPX trading crowd
would be allocated through a random lottery process or an order in time
process.\7\ Each individual member who is ``selected'' through either
the random lottery process (based on the lottery selection sequence) or
the order in time process (based on time sequence) would choose the new trading space where he or she would like to stand.
\7\ A member who selects a trading space following the random
lottery process or the order in time process does not obtain any
ownership right in that particular trading space. In the event a
space dispute should arise, the crowd space dispute resolution procedures in Rule 24.21 will continue to apply.
CBOE believes that these processes would provide for the issuance of new trading spaces in an objective manner and consequently would provide for fair access to the Exchange.
2. Statutory Basis
The proposed rule change would permit the Exchange to allocate new
trading spaces in the SPX trading crowd pursuant to one of two
objective processes: a random lottery process or an order in time
process. CBOE notes that both of these processes have been codified in
connection with the issuance of ITPs in a prior filing that was
approved by the Commission. As a result, the Exchange believes the
proposed rule change is consistent with the Act and the rules and
regulations under the Act applicable to a national securities exchange
and, in particular, the requirements of Section 6(b) of the Act.\8\
Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) Act \9\ requirements that the rules
of an exchange be designed to promote just and equitable principles of
trade, to prevent fraudulent and manipulative acts and, in general, to
protect investors and the public interest. CBOE believes that these
processes would provide for the issuance of new trading spaces in an
objective manner and consequently would provide for fair access to the Exchange.
\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
B. SelfRegulatory 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. SelfRegulatory 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, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b 4(f)(6) thereunder.\11\
\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b4(f)(6). In addition, Rule 19b4(f)(6)(iii)
requires a selfregulatory organization to give 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 Exchange has satisfied this requirement.
A proposed rule change filed under Rule 19b4(f)(6) normally may
not become operative prior to 30 days after the date of filing.\12\
However, Rule 19b4(f)(6)(iii) \13\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange has requested that the
Commission waive the 30day operative delay because it has now
completed the expansion of its SPX trading crowd and has recently come
to believe that the demand for additional trading spaces may exceed the
newly available supply. To respond to this possibility, CBOE would like the flexibility to utilize a
[[Page 72091]]
lottery process when it allocates the additional space in the next
several days. CBOE notes that its proposed rule change is a copy of its
current lottery process applicable to the allocation of ITPs, which the
Commission previously approved, and would apply that methodology in the context of expanding its SPX trading crowd.
\12\ Id.
\13\ 17 CFR 240.19b4(f)(6)(iii).
The Commission believes that waiving the 30day operative delay is
consistent with the protection of investors and the public
interest.\14\ In particular, the Commission believes that waiver of the
operative delay will promote competition and efficiency by providing
CBOE with the option to utilize its new lottery process to manage the
expansion of the SPX trading crowd, which it anticipates allocating in
the next several days. Waiving the operative delay will enable CBOE to
use either this new process or the historicallyutilized first in time
process as it deems appropriate, and will enable CBOE to allocate the
new space promptly through a fair and objective methodology. For these
reasons, the Commission designates the proposed rule change as operative upon filing.
\14\ For purposes only of waiving the 30day operative delay,
the Commission has considered the proposed rule's effect on
efficiency, competition, and capital formation. See 15 U.S.C. 78c(f).
At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate 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
Paper Comments
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\15\
\15\ 17 CFR 200.303(a)(12).
Florence E. Harmon,
Acting Secretary.
[FR Doc. E828045 Filed 112508; 8:45 am]
BILLING CODE 801101P