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Self-Regulatory Organizations; Order Approving Proposed Rule Change by the Chicago Board Options Exchange, Incorporated To Amend Its Rules To Eliminate the “Book Indicator”

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Start Preamble October 25, 2002.

On August 19, 2002, the Chicago Board Options Exchange, Incorporated (“CBOE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission” or “SEC”) 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 its rules to eliminate the “Book Indicator.”[3] The proposed rule change was published for comment in the Federal Register on August 28, 2002.[4] The Commission received no comments on the proposed rule change.

The Commission has reviewed carefully the CBOE's proposed rule change and finds that the proposal is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange,[5] and with the requirements of section 6(b).[6] In particular, the Commission finds the Start Printed Page 66693proposed is consistent with section 6(b)(5) [7] of the Act in that it is 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.

The Commission notes that the Book Indicator was adopted as part of the CBOE's initiative to provide split-price Retail Automatic Execution System (“RAES”) executions for incoming customer orders when the prevailing best bid (offer) is generated by a existing customer order in the CBOE book.[8] At the time split-price execution functionality was adopted, CBOE's disseminated quote did not display size. Thus, the Book Indicator served to alert a customer that a RAES eligible order might not be executed in its entirety at CBOE's displayed price, and that he might receive a split-price execution. Now that CBOE disseminates quotes with size, the Commission believes that the Book Indicator is no longer necessary. Therefore, the Commission believes that it is appropriate for the Exchange to eliminate the Book Indicator, and remove all references to the Book Indicator from the CBOE rules. The Commission believes that the proposed rule change will streamline and clarify the Exchange rules by eliminating reference to an indicator that no longer is necessary.

It is therefore ordered, pursuant to section 19(b)(2) of the Act,[9] that the proposed rule change (SR-CBOE-2002-44) is approved.

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For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[10]

Margaret H. McFarland,


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3.  This indicator is affixed to the CBOE disseminated quotation when an order in the Exchange's book represents the best bid or offer on the Exchange.

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4.  See Securities Exchange Act Release No. 46397 (August 21, 2002), 67 FR 55443 (August 29, 2002).

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5.  In approving this rule proposal, the Commission notes that it has also considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

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8.  See Securities Exchange Act Release No. 43932 (February 6, 2001), 66 FR 10332 (February 14, 2001).

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[FR Doc. 02-27808 Filed 10-31-02; 8:45 am]