[Federal Register Volume 65, Number 240 (Wednesday, December 13, 2000)]
[Notices]
[Pages 77945-77946]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-31683]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-43667; File No. SR-CBOE-00-63]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Chicago Board Options
Exchange, Inc. Permitting the Use of the Exchange's AutoQuote System or
a Proprietary Autoquote System in the Operation of the Exchange's Rapid
Opening System
December 4, 2000.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 1, 2000, the Chicago Board Options Exchange, Inc. (``CBOE''
or ``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange proposes to adopt Interpretation .02 of its Rapid
Opening System (``ROS'') rule (CBOE Rule 6.2A) \3\ to clarify that for
purposes of the rule, ``AuoQuote'' means either the Exchange's
AutoQuote system or a proprietary autoquote system operated by a member
of the trading crowd where the particular ROS class is traded. The text
of the proposed rule change is available at the Office of the
Secretary, the Exchange, and at the Commission.
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\3\ The rule text for the CBOE's proposed rule change was
identified as ``Interpretation .01'' to Rule 6.2A instead of
``Interpretation .02'' and has been corrected in this notice.
Interpretation 0.01 to Rule 6.2A was added in Securities Exchange
Act Release No. 43666 (December 4, 2000). Telephone conversation
between Timothy Thompson, Assistant General Counsel and Vice
President, CBOE, and Susie Cho, Attorney, Division, SEC, December 4,
2000.
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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 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. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
In February 1999, the Exchange implemented a Rapid Opening System
(``ROS'') that has facilitated the expedited openings of options
classes on the Exchange.\4\ Since that time, ROS has been used in a
number of equity option trading crowds to open options classes within
seconds of the opening of the underlying security. The Exchange
believes that by entering into open trading more quickly using ROS,
customer orders have been addressed in open trading in a timelier
manner.
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\4\ The ROS pilot program was first approved by the Commission
in February 1999. See Securities Exchange Act Release No. 41033
(February 9, 1999), 64 FR 8156 (February 18, 1999). The ROS pilot
has been extended through September 2001. See Securities Exchange
Act Release No. 43395 (September 29, 2000), 65 FR 60706 (October 12,
2000).
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ROS determines a single opening price for each series by applying
an algorithm that takes into account the AutoQuote values fed into ROS
as well as those orders contained in the customer limit order book (and
that are otherwise represented in the crowd pursuant to the ROS rule).
The algorithm is generally designed to maximize the number of customer
orders able to be traded at or between the bid-ask values submitted
from AutoQuote. When the Exchange first implemented ROS, the system was
designed to operate only with the Exchange's AutoQuote system. The
Exchange noted, however, that ``[l]ater versions of ROS may accommodate
inputs from systems other than AutoQuote.'' \5\ The CBOE now represents
that ROS is able to accept inputs from various proprietary quote
systems that are operated on the floor of the Exchange.\6\ The Exchange
is thus proposing to add Interpretation .02 to CBOE Rule 6.2A to make
it clear that, for purposes of the Rule, the term ``AutoQuote'' means
either the Exchange's AutoQuote system or a proprietary autoquote
system operated by a member of the trading crowd.
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\5\ Id.
\6\ In lieu of using the Exchange's own AutoQuote system, some
DPMs and trading crowds employ proprietary autoquote systems which
serve the same function that operate in much the same manner as the
Exchange's own system. These systems generally employ the same
general mathematical formulas for determining the quotes although
with certain proprietary refinements.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act \7\ in general and furthers the objectives
of section 6(b)(5) \8\ in particular in that it is designed to promote
just and equitable principles of trade and to protect investors and the
public interest.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The CBOE does not believe that the proposed rule change will impose
any burden on competition that is not necessary or appropriate in
furtherance of purposes of the Act.
[[Page 77946]]
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants or Others
The CBOE has neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
The foregoing rule change constitutes a stated policy, practice, or
interpretation with respect to the meaning, administration, or
enforcement of an existing rule of the Exchange and, therefore, has
become effective pursuant to section 19(b)(3)(A) of the Act \9\ and
Rule 19b-4(f)(1) \10\ thereunder. 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.
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(1).
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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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609.
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 at the
Commission's Public Reference Room. Copies of such filing will also be
available for inspection and copying at the principal office of the
Exchange. All submissions should refer to File No. SR-SBOE-00-63 and
should be submitted by January 3, 2001.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
Margaret H. McFarland,
Deputy Secretary.
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\11\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 00-31683 Filed 12-12-00; 8:45 am]
BILLING CODE 8010-01-M