[Federal Register: April 10, 2008 (Volume 73, Number 70)]
[Notices]
[Page 19537]
[DOCID:fr10ap08-100]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57615; File No. SR-CBOE-2007-120]

Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Approving Proposed Rule Change and Amendments No. 1
and No. 2 Thereto Relating to Market-Makers and Remote Maker-Makers

April 3, 2008.
    On October 11, 2007, 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 19b-4
thereunder,\2\ a proposed rule change relating to Market-Makers and
Remote Market-Makers (``RMMs''). On February 13, 2008, the Exchange
submitted Amendment No. 1 to the proposed rule change.\3\ The proposed
rule change was published for comment in the Federal Register on
February 29, 2008.\4\ On April 2, 2008, the Exchange submitted
Amendment No. 2 to the proposed rule change.\5\ The Commission received
no comments regarding the proposal. This order approves the proposed
rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment 1 replaced the original filing in its entirety.
    \4\ See Securities Exchange Act Release No. 57367 (February 21,
2008), 73 FR 11168 (``Notice'').
    \5\ In Amendment No. 2, CBOE made minor revisions to the
proposed rule text to reflect changes made in a subsequent rule
filing that extended two of the Exchange's pilot programs. See
Securities Exchange Act Release No. 57519 (March 18, 2008) 73 FR
15805 (March 25, 2008) (``Pilot Extension''). These changes are
technical and are not subject to public comment.
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    CBOE proposes to amend its rules relating to Market-Makers and
RMMs. The Exchange notes that, since the time the RMM rules were
adopted, the ability of Market-Makers to quote from a location outside
of the trading crowd or trading floor has expanded. CBOE also states
that the existing obligations of Market-Makers and RMMs are generally
the same. CBOE therefore does not see a reason to maintain the RMM
category of market participant and proposes to delete all references to
RMMs in its rules. In connection with this change, CBOE's proposal
also: (i) Amends the definition of Market-Maker to include member
organizations; (ii) amends CBOE Rule 3.3 to clarify that the member
organization membership statuses that are approved by the Membership
Committee include Market-Maker; and (iii) deletes Interpretation and
Policy .02 to CBOE Rule 3.8, and amends CBOE Rule 3.8(a)(ii), to allow
any member organization that is the owner or lessee of more than one
membership to designate one individual to be the nominee for all
memberships utilized by the organization (except that, for each
membership utilized for trading in open outcry on the trading floor,
the organization must designate a different individual to be the
nominee for each of the memberships).
    CBOE also proposes to reorganize the text of two of the Exchange's
pilot programs relating to the ability of e-DPMs, Off-Floor DPMs, and
RMMs to have affiliated Market-Makers in the same class and clarify
that they would no longer apply to RMMs.\6\ The Exchange also is adding
a new provision to CBOE Rule 8.3 that provides that there is no
restriction on affiliated Market-Makers holding an appointment and
submitting electronic quotations in the same class, provided CBOE uses
an allocation algorithm in the class that does not allocate electronic
trades, in whole or in part, in an equal percentage based on the number
of market participants quoting at the best bid or offer.\7\
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    \6\ In the Notice, the Exchange indicated that it proposed
extending these pilot programs for an additional year. This
extension was subsequently made in a separate filing. See Pilot
Extension in note 5, supra.
    \7\ CBOE's proposal also: (i) Amends CBOE Rule 8.3 to provide
that the appointment of a Market-Maker to a certain option class can
be made by the Market-Maker's selection or by CBOE, consistent with
certain criteria set forth in CBOE Rule 8.3; (ii) amends CBOE Rule
8.3 to delete the requirement that a Market-Maker may hold an
appointment in an appropriate number of Hybrid option classes that
are located at one trading station; (iii) amends CBOE Rule 8.7 to
delete references to RMMs and other outdated references, and (iv)
updates or deletes outdated provisions in other CBOE Rules,
including CBOE Rule 8.3A relating to Class Quoting Limits.
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    The Commission finds that the proposal, as amended, is consistent
with section 6(b)(5) of the Act,\8\ which requires, among other things,
that the rules of a national securities exchange be 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.\9\ Specifically, the Commission finds that it is consistent
with the Act for CBOE to clarify, update, and consolidate the
Exchange's rules related to Market-Makers and their obligations on the
Exchange.
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    \8\ 15 U.S.C. 78f(b)(5).
    \9\ 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).
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    It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-CBOE-2007-120), as amended,
is approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-7512 Filed 4-9-08; 8:45 am]

BILLING CODE 8011-01-P