

[Federal Register: September 27, 2006 (Volume 71, Number 187)]
[Notices]               
[Page 56571]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27se06-145]                         

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SECURITIES AND EXCHANGE COMMISSION

[(Release No. 34-54475; File No. SR-CBOE-2005-103)]

 
 Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Granting Approval of Proposed Rule Change and 
Amendment No. 1 Thereto To Amend CBOE Rules Relating to the Electronic 
Designated Primary Market Maker Program

September 20, 2006.

I. Introduction

    On December 5, 2005, the Chicago Board Options Exchange, 
Incorporated (``CBOE'' or ``Exchange'') filed with the Securities and 
Exchange Commission (``Commission'') a proposed rule change, pursuant 
to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') 
\1\ and Rule 19b-4 thereunder,\2\ to amend CBOE rules relating to the 
Electronic Designated Primary Market Maker Program (``e-DPM Program''). 
On August 11, 2006, CBOE amended the proposed rule change.\3\ The 
proposed rule change, as modified by Amendment No. 1, was published for 
comment in the Federal Register on August 18, 2006.\4\ The Commission 
received no comments on 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    \3\ Amendment No. 1 replaced and superseded the original 
proposal in its entirety.
    \4\ See Securities Exchange Act Release No. 54311 (August 11, 
2006), 71 FR 47834.
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II. Description of the Proposal

    The Exchange's e-DPM Program allows e-DPMs to operate remotely as 
competing DPMs by entering bids and offers electronically from 
locations other than the trading floor. Exchange rules provide that the 
Exchange will determine which option classes to include in the e-DPM 
Program and, accordingly, which classes to allocate to each respective 
e-DPM. The proposed rule change would give the Exchange the 
corresponding authority to remove any e-DPM option class from the e-DPM 
Program if certain factors no longer warranted the continued inclusion 
of that option class in the e-DPM Program. The factors used in making 
this determination would relate to the option class itself and would 
include only the following: (i) Market share; (ii) number of exchanges 
trading the product; (iii) average daily trading volume; and (iv) 
liquidity in the product. The Exchange would consider any one or all of 
these factors in determining whether to remove an option class from the 
e-DPM Program. Persons who are aggrieved by the removal of an option 
class from the e-DPM Program would be permitted to appeal the decision 
in accordance with the Exchange's standard procedures on review of 
Exchange actions, as set forth in Chapter XIX of the Exchange's rules.

III. Discussion

    After careful consideration, the Commission finds that the proposed 
rule change, as amended, is consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to a national 
securities exchange.\5\ In particular, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the Act,\6\ in that it 
is designed to promote just and equitable principles of trade and to 
remove impediments to and perfect the mechanism of a free and open 
market. The Commission also finds that the proposal is consistent with 
Section 6(b)(7) of the Act,\7\ in that it provides a fair procedure for 
the limitation by the Exchange of any person with respect to access to 
services offered by the Exchange.
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    \5\ In approving the proposed rule change, the Commission has 
considered its impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ 15 U.S.C. 78f(b)(7).
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    The proposed rule change permits the Exchange to remove option 
classes from the e-DPM Program only if certain factors no longer 
warrant the continued inclusion of that class in the program. The 
Commission notes that the factors to be considered by the Exchange 
(i.e., market share, number of exchanges trading the product, trading 
volume, and liquidity) are objective and would limit the Exchange's 
ability to act in this area. The proposed factors to be considered by 
the Exchange in determining whether to remove an option class from the 
e-DPM Program, coupled with the right to appeal the Exchange's 
determination, should help to protect persons from an unfair limitation 
of access to services offered by the Exchange, while permitting the 
Exchange to further the competitive goals of the e-DPM Program. 
Accordingly, the Commission believes that the amended proposal is 
consistent with the Act.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-CBOE-2005-103), as amended, 
be, and it hereby is, approved.
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    \8\ 15 U.S.C. 78s(b)(2).
    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
Nancy M. Morris,
Secretary.
 [FR Doc. E6-15794 Filed 9-26-06; 8:45 am]

BILLING CODE 8010-01-P
