[Federal Register Volume 66, Number 74 (Tuesday, April 17, 2001)]
[Notices]
[Pages 19819-19820]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-9430]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44173; File No. SR-CBOE-2001-10]


Self-Regulatory Organizations; Notice of Filing of a Proposed 
Rule Change by the Chicago Board Options Exchange, Incorporated 
Adopting Formal Procedures for Members To Submit Proposals To List 
Option Classes on the Exchange

April 10, 2001.

    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 March 13, 2001, the Chicago Board Options Exchange, Inc. (``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 prepared by the CBOE. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The CBOE proposes to amend its rules to adopt formal procedures for 
members to submit proposals to list option classes on the Exchange, and 
to codify the Exchange's current procedures for considering whether to 
list an option class. The text of the proposed rule change is set forth 
below. Additions are in italics.
* * * * *

Rule 5.3. Criteria for Underlying Securities

    (a)-(b) No change.
. . . Interpretations and Policies
    .01-.06 Unchanged.
    .07  A member may submit to the Secretary of the Exchange a written 
request that the Exchange list a particular option class whether or not 
the option class is traded on any other exchange or market. The request 
shall specify the reasons why the member believes the Exchange should 
list the option class. The appropriate Exchange committee shall make 
every reasonable effort to consider and make a decision regarding the 
request at its next meeting and in any event shall consider and make a 
decision regarding the request within 35 days of its receipt. If the 
appropriate Exchange committee denies the request or approves the 
request subject to conditions or limitations, the appropriate Exchange 
committee shall provide the member that submitted the request with a 
written response setting forth the rationale for its decision within 10 
days of making the decision. If, in denying a request or approving a 
request subject to conditions or limitations, the appropriate Exchange 
committee relies upon a factor of other bona fide business 
considerations, the Exchange shall maintain a record of the bona fide 
business considerations supporting its decision. In the event the 
Exchange determines to list an option class requested to be listed 
pursuant to this paragraph, the allocation of the option class shall be 
governed by Rule 8.95.
    .08  In deciding whether or not to list an option class, or to 
place any conditions or limitations on such listing, the Exchange will 
consider one or more of the following factors: (i) Whether the proposed 
option class satisfies applicable listing criteria; (ii) processing 
capacity; (iii) cost to the Exchange of listing the option class; (iv) 
legal or regulatory impediments to listing the option class; (v) the 
anticipated level of Exchange contract volume and market share in the 
option class; (vi) member and customer interest in trading the option 
class; (vii) operational factors; and (viii) other bona fide business 
considerations. These criteria shall apply to all option classes 
considered by the Exchange for listing, whether based on a member 
request or otherwise.

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
    CBOE Rule 5.3 specifies criteria applied by the CBOE in identifying 
underlying securities on which the Exchange may want to trade options. 
In addition, from time to time, CBOE members request that the Exchange 
list specific option classes. Recommendations for listing, whether 
based on member requests or otherwise, are made by the Exchange's Stock 
Selection Committee, which is charged with recommending products for 
listing and trading on the Exchange, to the Exchange's Office of the 
Chairman and/or Board of Directors. In making recommendations, the 
Stock Selection Committee currently considers one or more of the 
following uncodified factors: (i) Whether the proposed option class 
satisfies applicable listing criteria detailed in CBOE Rule 5.3; (ii) 
processing capacity; (iii) cost to the Exchange of listing the option 
class; (iv) legal or regulatory impediments to listing the option 
class; (v) the anticipated level of Exchange contract volume and market 
share in the option class; (vi) member and customer interest in trading 
the option class; (vii) operational factors; and (viii) other bona fide 
business considerations.
    The proposed rule change would adopt formal procedures for members 
to submit proposals to list option classes on the Exchange, and would 
codify the factors considered by the Exchange in listing option 
classes.\3\ The Exchange believes that formalizing the existing 
procedures, including them in an interpretation to CBOE Rule 5.3, would 
provide members with more readily available and visible procedures in

[[Page 19820]]

connection with the submission of listing proposals to the Exchange.
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    \3\ As part of a settlement of an enforcement action by the 
Commission, four of the options exchanges, including the CBOE, are 
required to adopt rules to codify listing procedures to be carried 
out when a member or member organization requests the exchange to 
list options not currently trading on the exchange. See Order 
Instituting Public Administration Proceeding Pursuant to Section 
19(h)(1) of the Securities Exchange Act of 1934, Making Findings and 
Imposing Remedial Sanctions. Securities Exchange Act Release No. 
43268 (September 11, 2000).
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    The proposed rule would permit a member to submit to the Secretary 
of the Exchange a written request that the Exchange list a particular 
option class, whether or not the option class is traded on any other 
exchange or market. The written request would be required to specify 
the reasons why the member believes the Exchange should list the option 
class. The Stock Selection Committee (or whichever Exchange committee 
is designated as the ``appropriate Exchange committee'' by CBOE's Board 
of Directors) would be required to make every reasonable effort to 
consider and make a decision regarding the request at its next meeting 
and, in any event, would be required to consider and make a decision 
regarding the request within 35 days of its receipt. If the Stock 
Selection Committee denies the request or approves the request subject 
to conditions or limitations, it would be required to provide the 
member that submitted the request with a written response setting forth 
the rationale for the decision within 10 days of making the decision. 
If, in denying a request or approving a request subject to conditions 
or limitations, the appropriate Exchange committee relies upon a factor 
of other bona fide business considerations, the Exchange would be 
required to maintain a record of the bona fide business considerations 
supporting its decision.
    The proposed rule also would codify the factors used to determine 
whether to list an option class, whether based upon a member request or 
otherwise. These factors would be: (i) Whether the proposed option 
class satisfies applicable listing criteria; (ii) processing capacity; 
(iii) cost to the Exchange of listing the option class; (iv) legal or 
regulatory impediments to listing the option class; (v) the anticipated 
level of Exchange contract volume and market share in the option class; 
(vi) member and customer interest in trading the option class; (vii) 
operational factors; and (viii) other bona fide business 
considerations.
2. Statutory Basis
    The Exchange believes that the proposed rule change ensures that 
listing proposals by members are submitted and handled pursuant to 
formalized procedures. Accordingly, the Exchange believes that 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) \5\ in 
particular in that it is designed to promote just and equitable 
principles of trade, remove impediments to a free and open market and a 
national market system, and protect investors and the public interest.
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    \4\ 15 U.S.C. 78f(b).
    \1\ 15 U.S.C. 78f(b)(5)
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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 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 CBOE did not solicit or receive written comments on the 
proposed rule change.

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 the 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. 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 filings will also be 
available for inspection and copying at the principal office of the 
CBOE. All submissions should refer to the File No. SR-CBOE-2001-10 and 
should be submitted by May 8, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-9430 Filed 4-16-01; 8:45 am]
BILLING CODE 8010-01-M