Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), and Rule 19b-4 thereunder, notice is hereby given that on December 15, 2006, the Chicago Board Options Exchange, Incorporated (“Exchange” or “CBOE”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a “non-controversial” proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act  and Rule 19b-4(f)(6) thereunder. 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
CBOE proposes amend its rules relating to CBOE's determination to trade certain option classes on Hybrid. The text of the proposed rule change is available on CBOE's Web site (http://www.cboe.com), at the CBOE's Office of the Secretary, and at the Commission's public reference room. Start Printed Page 356
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 Exchange 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 Exchange 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
The purpose of this rule change is to amend CBOE Rules 8.3 and 8.4 in connection with CBOE's determination to trade options on the Russell 2000 Index (RUT) on the Hybrid 2.0 Platform. Additionally, CBOE proposes to amend Rule 8.3 in connection with CBOE's determination to trade options on the iShares Russell 2000 Index Fund (IWM) on the Hybrid Trading System, and options on the NASDAQ 100 Index (NDX) on the Hybrid Trading System.
RUT options currently has an appointment cost of .25, and CBOE intends to maintain that appointment cost when RUT options trade on the Hybrid 2.0 Platform. As a result, RUT options would be classified as an A+ Tier option class. CBOE intends to trade RUT options on the Hybrid 2.0 Platform beginning on December 19, 2006.
CBOE proposes to amend Rule 8.3(c)(ii) to specifically reference IWM options and NDX options as option classes trading on the Hybrid Trading System. IWM options would have an appointment cost of .50, and NDX options would have an appointment cost of 1.0. CBOE proposes to amend CBOE Rule 8.3(c)(iv) to delete reference to IWM options and NDX options in the table listing the non-Hybrid option classes and their related appointment costs. CBOE notes that the new appointment cost for IWM is lower than its current non-Hybrid appointment cost of .85. CBOE intends to trade IWM options on the Hybrid Trading System beginning on December 19, 2006, and NDX options on the Hybrid Trading System beginning on January 9, 2007.
Finally, CBOE proposes to amend Rule 8.3A to expressly include a reference to the “AA” tier in Interpretation and Policy .01. Currently, Interpretation .01 references the “A+” tier, but not the “AA” tier. Products designated as “A+” tier products have a class quoting limit (“CQL”) of 40 as provided in Interpretation .01 of Rule 8.3A. By including reference to the “AA” tier option in Interpretation.01, products designated as “AA” tier products (presently options on the CBOE Volatility Index (VIX)), would have a CQL of 40, which is consistent with the current CQL for VIX options.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations under the Act applicable to a national securities exchange and, in particular, the requirements of Section 6(b) of the Act. Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) of the Act, which requires that the rules of an exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts and, in general, to protect investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
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
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act  and subparagraph (f)(6) of Rule 19b-4  thereunder because it does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate; and the Exchange has given the Commission written notice of its intention to file the proposed rule change at least five business days prior to filing. At any time within 60 days of the filing of such 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.
Under Rule 19b-4(f)(6) of the Act, the proposal does not become operative for 30 days after the date of its filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the 30-day operative date, so that the proposal may take effect on December 19, 2006 with respect to IWM options and RUT options, and January 9, 2007, with respect to NDX options. The Exchange believes that the proposed rule change does not raise any new regulatory issues. The Commission agrees and, consistent with the protection of investors and the public interest, has determined to waive the 30-day operative date, which renders the proposal effective on December 19, 2006 with respect to IWM options and RUT options, and January 9, 2007, with respect to NDX options.
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. Comments may be submitted by any of the following methods:
- Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
- Send an e-mail to email@example.com. Please include File Number SR-CBOE-2006-108 on the subject line. Start Printed Page 357
- Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2006-108. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 Section, 100 F Street, NE., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of the CBOE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CBOE-2006-108 and should be submitted on or before January 25, 2007.Start Signature
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.
Jill M. Peterson,
5. CBOE Rule 1.1(aaa) defines Hybrid Trading System and Hybrid 2.0 Platform.Back to Citation
6. Because not all option classes traded on the Hybrid Trading System have an appointment cost of .01, CBOE proposes to modify Rule 8.85(e)(ii) to state that the appointment cost for option classes traded on the Hybrid Trading System is as set forth in Rule 8.3(c)(ii). Currently, Rule 8.85(e)(ii) states that the appointment cost of Hybrid option classes is .01.Back to Citation
11. Id.Back to Citation
12. For purposes only of accelerating the operative date of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f).Back to Citation
[FR Doc. E6-22544 Filed 1-3-07; 8:45 am]
BILLING CODE 8011-01-P