[Federal Register Volume 66, Number 128 (Tuesday, July 3, 2001)]
[Notices]
[Pages 35302-35303]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-16675]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44478; File No. SR-CBOE-2001-10]


Self-Regulatory Organizations; Order Approving a Proposed Rule 
Change and Notice of Filing and Order Granting Accelerated Approval of 
Amendment No. 1 Thereto by the Chicago Board Options Exchange, 
Incorporated Adopting Formal Procedures for Members To Submit Proposals 
To List Option Classes on the Exchange

June 27, 2001.

I. Introduction

    On March 13, 2001, the Chicago Board Options Exchange, Inc. 
(``CBOE'' or the ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission''), 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 adopting formal procedures for 
members to submit proposals to list option classes on the Exchange. The 
Federal Register published the proposed rule change for comment on 
April 17, 2001.\3\ The Commission received no comments on the proposal. 
The Exchange filed Amendment No. 1 to the proposed rule change on May 
25, 2001.\4\ This order approves the proposed rule change and grants 
accelerated approval to Amendment No. 1. The Commission also is 
soliciting comment on Amendment No. 1 to the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 44173 (April 10, 2001), 
66 FR 19819.
    \4\ See letter from Angelo Evangelou, Legal Division, CBOE, to 
Sonia Patton, Attorney, Division of Market Regulation, Commission, 
dated May 24, 2001 (``Amendment No. 1''). Amendment No. 1 revises 
Interpretation and Policy .07 to CBOE Rule 5.3 to clarify that when 
the Exchange relies upon other bona fide business considerations in 
denying or placing conditions or limitations upon a member listing 
proposal, the Exchange must provide the member with a written 
response specifying that the Exchange has relied upon other bona 
fide business considerations, in addition to maintaining a record of 
the bona fide business considerations supporting its decision.
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II. Description of Proposal

    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.\5\ The proposed

[[Page 35303]]

rule would permit a member to submit a written request that the 
Exchange list a particular option class, specifying the reasons why the 
member believes the Exchange should list the option class. The Stock 
Selection Committee would be required to make a decision regarding the 
request within 35 days of its receipt and to provide the member that 
submitted the request with a written response setting forth the 
rationale for the decision within ten days of making the decision.
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    \5\ 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 Administrative Proceedings Pursuant to section 
19(h)(1) of the Securities Exchange Act of 1934, Making Findings and 
Imposing Remedial Sanctions (``Settlement Order''). Securities 
Exchange Act Release No. 43268 (September 11, 2000).
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III. Discussion

    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.\6\ 
Specifically, the Commission believes that the proposed rule change is 
consistent with the section 6(b)(5) \7\ requirements that the rules of 
an exchange be designed to promote just and equitable principles of 
trade, to remove impediments to and perfect the mechanisms of a free 
and open market and a national market system, and, in general, to 
protect investors and the public interest.
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    \6\ In approving the proposal, the Commission has considered its 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposed rule change will remove 
impediments to and perfect the mechanisms of a free and open market by 
providing formal procedures for members to request the listing of 
options on the Exchange. The proposal would require the Exchange to 
respond in writing within 45 days to requests by members to list 
options. The Commission believes that the proposed procedures and time 
frames set forth in the proposed rule change are reasonable and 
adequately balance the Exchange's need to thoroughly examine proposed 
listings before making its determination with its members' need for a 
prompt and specific response to its listing recommendation.
    In addition, the proposed rule change codifies the factors to be 
considered by the Exchange in determining whether to list a recommended 
option. The Commission believes that the proposed factors represent 
legitimate issues that the Exchange may consider when making a listing 
decision. The Commission notes that if the Exchange denies or places 
conditions or limitations upon a proposed listing, it must include its 
reasons in the letter notifying the member of its decision. The 
Commission believes that this requirement should help to ensure that 
the Exchange relies only upon the factors codified in its rules when 
making a listing decision.
    The Commission finds good cause for accelerating approval of 
Amendment No. 1 to the proposed rule change prior to the thirtieth day 
after publication in the Federal Register. The Commission notes that 
Amendment No. 1 provides useful clarification to the proposed rules. 
Accordingly, the Commission finds that good cause exists, consistent 
with sections 6(b)(5) \8\ and 19(b) of the Act,\9\ to accelerate 
approval of Amendment No. 1 to the proposed rule change.
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    \8\ 15 U.S.C. 78f(b)(5).
    \9\ 15 U.S.C. 78s(b).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning Amendment No. 1, including whether the amendment 
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 at the Commission's 
Public Reference Room. Copies of such filing 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 July 24, 2001.

V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-CBOE-2001-10), as amended, 
is approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-16675 Filed 7-2-01; 8:45 am]
BILLING CODE 8010-01-M