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Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change Regarding Appointments and Obligations of CBSX DPMs

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Information about this document as published in the Federal Register.

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Start Preamble May 11, 2009.

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 May 7, 2009, the Chicago Board Options Exchange, Incorporated (“CBOE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

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

The filing proposes to modify the CBOE Stock Exchange (“CBSX”) Designated Primary Market-Maker (“DPM”) appointment and obligation rules. The text of the proposed rule change is available on the Exchange's Web site (​legal), at the Exchange's principal office, and at the Commission's Public Reference Room.

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

1. Purpose

The purpose of this proposed rule change is to modify CBSX Rule 53.54 to provide CBSX with flexibility to commence trading a security without an assigned CBSX DPM.[3] Several stock exchanges provide a trading venue for equity securities without assigned specialists or primary market makers. On CBSX, CBSX DPMs do not act as agent for orders submitted to CBSX and the matching of trades is handled by the CBSX system. Accordingly, trading can occur on the CBSX platform without participation by a CBSX DPM. The proposed rule change is not intended to in any way affect existing DPM appointments, instead it will allow CBSX to offer for trading a broader range of national market system securities. There are currently securities not traded on CBSX because CBSX DPMs have opted to not seek assignments in such securities (these are typically low volume securities). The proposed filing will allow CBSX users the ability to trade these stocks on CBSX. The Exchange does not believe that allowing trading in these stocks without a DPM will have an adverse impact on the Exchange's market in these securities. CBSX will notify participants, via circular, when stocks without assigned DPMs are added for trading.

The filing also proposes to modify the CBSX DPM obligations in Rule 53.56 to not require CBSX DPMs to quote until 8:30 a.m. Chicago time. Currently, CBSX DPMs are obligated to provide opening quotes (trading starts at 8:15 a.m. Chicago time) and to continuously quote throughout the day. As proposed, CBSX DPMs desiring to submit opening quotes could continue to do so, but would not be required to continuously quote until 8:30 Chicago time when trading volumes are more meaningful.

Lastly, the filing proposes to eliminate Rule 53.54(c) which governed the allocation process used by CBSX prior to its initial launch.

2. Statutory Basis

The Exchange believes the proposed rule change is consistent with Section 6(b) of the Act [4] in general and furthers the objectives of Section 6(b)(5) of the Act [5] in particular 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

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 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

The Exchange neither solicited nor received comments on the proposal.

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

Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which CBOE consents, the Commission will:

A. By order approve such proposed rule change, or

B. institute proceedings to determine whether the proposed rule change should be disapproved.

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:

Electronic Comments

Paper Comments

  • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2009-030. 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 (​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 Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. 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-2009-030 and should be submitted on or beforeJune 5, 2009.

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For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.[6]

Florence E. Harmon,

Deputy Secretary.

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3.  A DPM is a Market-Maker with heightened responsibilities for assigned securities.

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[FR Doc. E9-11360 Filed 5-14-09; 8:45 am]