
[Federal Register Volume 77, Number 32 (Thursday, February 16, 2012)]
[Notices]
[Pages 9274-9275]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-3607]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66375; File No. SR-CBOE-2011-117]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Approving Proposed Rule Change Relating to Its 
Automated Improvement Mechanism

February 10, 2012.
    On December 14, 2011, the Chicago Board Options Exchange, 
Incorporated (``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 amend CBOE Rule 6.74A, which 
relates to the Exchange's Automated Improvement Mechanism (``AIM''). 
The proposal would permit a Trading Permit Holder (``TPH''), when 
submitting an agency order to AIM to initiate an

[[Page 9275]]

auction, to elect to have last priority in the AIM auction's order 
allocation.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In an AIM auction, described here generally, a TPH submits 
into the mechanism an order that it represents as agent (``Agency 
Order'') along with a contra-side order at a specified price (which 
must comply with parameters set forth in Rule 6.74A) and for the 
same size that either represents principal interest of the TPH or is 
a solicited order. Certain Exchange participants, as set forth in 
Rule 6.74A, then can compete with the contra-side order by 
submitting bids (offers) to execute against the Agency Order. After 
better-priced orders are filled and public customers competing at 
the best price receive their allocations, the TPH is granted 
priority ahead of other participants to execute against 40% (in some 
circumstances 50%) of the original size of the Agency Order. Under 
the proposed rule change, the initiating TPH will be able to elect 
to have last priority.
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    The proposed rule change was published for comment in the Federal 
Register on December 29, 2011.\4\ The Commission received no comments 
on the proposal.
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    \4\ See Securities Exchange Act Release No. 66038 (December 22, 
2011), 76 FR 82016.
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    After careful review, 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 \5\ 
and, in particular, the requirements of Section 6(b)(5) of the Act,\6\ 
in that it is designed to provide additional flexibility for TPHs to 
obtain executions on behalf of their customers through AIM because the 
initiating TPH may elect to have last priority. The Commission believes 
that, as a result of this flexibility, there may be increased usage of 
AIM auctions and the mechanism may attract new participants, thereby 
helping to further competition and to enhance the possibility of price 
improvement on behalf of customers.\7\
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    \5\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ The Commission notes that Chapter V, Section 18(f)(v) of the 
Rules of the Boston Exchange Group, LLC, ``The Price Improvement 
Period'' (``PIP''), includes a similar provision that permits an 
options participant initiating a PIP auction to designate a lower 
amount than the 40% to which it is otherwise entitled upon the 
conclusion of the PIP auction.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-CBOE-2011-117) be, and it 
hereby is, approved.
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    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-3607 Filed 2-15-12; 8:45 am]
BILLING CODE 8011-01-P


