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Notice

Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Chicago Board Options Exchange, Inc. Relating to CBOE Rule 8.51

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Start Preamble April 17, 2002.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) [1] and Rule 19b-4 thereunder,[2] notice is hereby given that on April 15, 2002, 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 CBOE. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The CBOE proposes to adopt a new interpretation and policy under CBOE Rule 8.51. Below is the text of the proposed rule change. Additions are italicized.

Rule 8.51 Trading Crowd Firm Disseminated Market Quotes

(a)-(b) No change.

* * * Interpretations and Policies:

.01-.08 No change.

.10 For purposes of determining when the firm quote obligations under Rule 8.51 attach in respect of orders received at a PAR workstation in a DPM trading crowd and how the exemptions to that obligation provided in paragraph (e) of that Rule apply, the responsible broker or dealer shall be deemed to receive an order, and an order shall be deemed to be presented to the responsible broker or dealer, at the time the order is received on the DPM's PAR workstation.

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 CBOE 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 CBOE 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

The proposed rule change provides an interpretation of CBOE Rule 8.51 to clarify when the firm quotation obligation of the trading crowd under that rule arises in the case of orders received at PAR workstations in DPM trading crowds, and to interpret how the exemptions from that obligation apply in the case of such orders. CBOE Rule 8.51(b)(1) obligates “the responsible broker or dealer to sell (buy) at least the established number of contracts at the offer (bid) which is displayed when the responsible broker or dealer receives a buy (sell) order at the trading station where the reported security is located for trading.” Paragraph (e) of CBOE Rule 8.51 provides certain exemptions from the firm quote obligation that are tied to when an order is “presented.” For purposes of CBOE Rule 8.51 “the responsible broker or dealer” is defined as the trading crowd in a series or class of option.[3] This proposed rule change adds Interpretation and Policy .10 to make it clear that for the purposes of CBOE Rule 8.51 in respect of orders received at a PAR workstation in a DPM trading crowd, the responsible broker or dealer is deemed to receive an order, and an order is deemed to be presented to the responsible broker or dealer, at the time the order is received on the DPM's PAR workstation.[4]

2. Statutory Basis

By clarifying the time when firm quote obligations attach under CBOE Rule 8.51 in respect of orders received over PAR workstations in DPM trading crowds, the Exchange believes that the proposed rule change will promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and protect investors and the public interest, and will not permit unfair discrimination between customers, issuers, brokers or dealers, in furtherance of the objectives of Section 6(b)(5) of the Exchange Act.[5]

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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others

No written comments were solicited or received with respect to the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

Because the foregoing rule change constitutes a stated policy, practice, or interpretation with respect to the Start Printed Page 20562meaning, administration, or enforcement of an existing rule of the Exchange, it has become effective pursuant to Section 19(b)(3)(A)(i) of the Act [6] and subparagraph (f)(1) of Rule 19b-4 [7] thereunder. At any time within 60 days of the filing of the 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.

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 in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the CBOE. All submissions should refer to File No. SR-CBOE-2002-15 and should be submitted by May 16, 2002.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[8]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  The Commission noted in the approval order of SR-CBOE-2002-07 that “any member of the trading crowd who submits a manual quote that improves the Exchange's disseminated quote would be considered to be the responsible broker or dealer pursuant to Rule 11Ac1-1(c) under the Act.” Exchange Act Release No. 45677 (March 29, 2002), 67 FR 16476, 16477 (April 5, 2002).

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4.  In SR-CBOE-01-67 filed with the Commission in December 2001, the Exchange proposed an Interpretation and Policy .09, which makes clear that a trading crowd may voluntarily agree to honor its disseminated quotes for a larger number of contracts than required by rule.

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6.  15 U.S.C. 78s(b)(3)(A)(i).

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[FR Doc. 02-10150 Filed 4-24-02; 8:45 am]

BILLING CODE 8010-01-P