

[Federal Register: January 24, 2006 (Volume 71, Number 15)]
[Notices]               
[Page 3908-3909]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24ja06-132]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53135; File No. SR-CBOE-2005-83]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Approving Proposed Rule Change Relating to the 
SizeQuote Mechanism

January 17, 2006.
    On October 11, 2005, 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 to modify its pilot SizeQuote 
Mechanism for the execution of large-sized orders in open outcry.\3\ 
The proposed rule change was published for comment in the

[[Page 3909]]

Federal Register on December 12, 2005.\4\ The Commission received no 
comments regarding the proposal. This order approves the proposed rule 
change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ CBOE Rule 6.74(f), which sets forth the rules and procedures 
for use of the SizeQuote Mechanism, was approved by the Commission 
in February 2005 for adoption on a pilot basis. See Securities 
Exchange Act Release No. 51205 (February 15, 2005), 70 FR 8647 
(February 22, 2005).
    In brief, a floor broker seeking to use the SizeQuote Mechanism 
to facilitate a customer's large-sized order (``SizeQuote Order) 
must request a ``SizeQuote'' from in-crowd market participants 
(``ICMPs''), who may respond with indications of the price and size 
at which they would be willing to trade with the order. ICMPs who 
respond at the best price have priority to trade with the order at 
that best price and at one trading increment better (the ``improved 
best price''). If the ICMPs do not execute the entire SizeQuote 
Order, the floor broker must be prepared to execute the remaining 
contracts against a facilitation order at the best price or the 
improved best price, as applicable. However, the floor broker has 
priority to facilitate the entire SizeQuote Order at a price two 
trading increments better than the best price provided by the ICMPs. 
For a more complete description, see Securities Exchange Act Release 
No. 50967 (January 5, 2005), 70 FR 2197 (January 12, 2005).
    \4\ See Securities Exchange Act Release No. 52888 (December 5, 
2005), 70 FR 73492.
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    The proposed rule change would establish that, in addition to a 
floor broker crossing a SizeQuote Order with a facilitation order in 
accordance with the SizeQuote Mechanism's procedures, a floor broker 
also may cross the SizeQuote order with one or more solicited orders or 
a combination of solicited and facilitation orders.
    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, and, in 
particular, with the requirements of Section 6(b)(5) of the Act.\5\ The 
Commission believes that, by giving floor brokers the alternative of 
crossing customers' SizeQuote Orders with solicited orders, the 
proposed rule change is intended to expand the potential benefits of 
the SizeQuote Mechanism. The Commission notes that the proposal does 
not alter the procedures a floor broker must follow in executing 
SizeQuote Orders.
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    \5\ 15 U.S.C. 78f(b)(5). In approving this proposed rule change, 
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,\6\ that the proposed rule change (SR-CBOE-2005-83) is approved 
until the expiration of the current SizeQuote pilot program on February 
15, 2006.\7\
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    \6\ 15 U.S.C. 78s(b)(2).
    \7\ The Commission notes that the current SizeQuote pilot 
program expires on February 15, 2006. The Exchange has indicated to 
Commission staff its intent to propose an extension of the pilot 
program, as amended by the instant proposal, for an additional year. 
Telephone Conversation between Jennifer Lamie, Managing Senior 
Attorney, CBOE and Ira Brandriss, Special Counsel, Division of 
Market Regulation, Commission on January 13, 2006.
    \8\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6-778 Filed 1-23-06; 8:45 am]

BILLING CODE 8010-01-P
