01-24974. Self-Regulatory Organizations; Order Approving Proposed Rule Change by the Chicago Board Options Exchange, Incorporated Relating To Step-Up From the Designated Primary Market Maker's Autoquote Price

September 27, 2001.

On June 14, 2001, the Chicago Board Options Exchange, Incorporated (“CBOE” or “Exchange”) filed a proposed rule change with the Securities and Exchange Commission (“SEC” or “Commission”) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),^[1] and Rule 19b-4 thereunder.^[2] On August 16, 2001, the Exchange submitted Amendment No. 1 to the proposed rule change.^[3] The proposed rule change would clarify, for purposes of automatic step-up, that the term “Exchange's best bid or offer” would refer to the Designated Primary Market Maker's (“DPM”) Autoquote price or the price from the DPM's proprietary automated quotation updating system.

The proposed rule change was published for comment in the Federal Register on August 23, 2001.^[4] The Commission received no comments on the proposal.

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 of the Act ^[6] and the rules and regulations thereunder. The Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act ^[7] because, by limiting the Exchange's best bid or offer for purposes of the step-up feature of the Exchange's Retail Automatic Execution System to the Autoquote price as established by the DPM or the DPM's proprietary automated quotation updating system, the proposal should ensure that the step-up feature uses a quote that more accurately reflects the prevailing market. Therefore, the Commission finds the proposed rule change is 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.

It is therefore ordered, pursuant to Section 19(b)(2) of the Act,^[8] that the proposed rule change (SR-CBOE-2001-33) be, and it hereby is, approved.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.^[9]

Margaret H. McFarland,

Deputy Secretary.

Footnotes

1.  15 U.S.C. 78(b)(1).

2.  17 CFR 240.19b-4.

3.  See letter to Debby Flynn, Assistant Director, Division of Market Regulation, Commission, from Steve Youhn, Attorney, CBOE, dated August 15, 2001 (“Amendment No. 1)”

4.  See Securities Exchange Act Release No. 44718 (August 17, 2001), 66 FR 44391.

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

6.  15 U.S.C. 78f.

7.  15 U.S.C. 78f(b)(5).

8.  15 U.S.C. 78s(b)(2).

9.  17 CFR 200.30-3(a)(12).