[Federal Register Volume 67, Number 117 (Tuesday, June 18, 2002)]
[Notices]
[Pages 41552-41554]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-15253]



[[Page 41552]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46062; File No. SR-CBOE-2001-66]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment Nos. 1 and 2 Thereto by the Chicago Board Options 
Exchange, Inc. Relating to Registration Filing Requirements of 
Associated Persons of Member Organizations

June 11, 2002.
    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 December 17, 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 
Exchange. The Exchange filed an amendment to its proposal on April 22, 
2002.\3\ The Exchange filed a second amendment to its proposal on May 
29, 2002.\4\ The Commission is publishing this notice to solicit 
comments on the proposed rule change as amended from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter from Nancy L. Nielsen, Director of Arbitration 
and Assistant Secretary, CBOE, to Nancy Sanow, Assistant Director, 
Division of Market Regulation, Commission (April 19, 2002) 
(``Amendment No. 1'').
    \4\ See Letter from Christopher R. Hill, Attorney II, Legal 
Department, CBOE, to Nancy Sanow, Assistant Director, Division of 
Market Regulation, Commission (May 29, 2002) (``Amendment No. 2'').
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the CBOE Fee Schedule and Rules 2.22 
(Other Fees or Charges), 3.6A (Qualification and Registration of 
Certain Associated Persons), 9.2 (Registration of Options Principals), 
and 9.3 (Registration and Termination of Representatives) relating to 
the registration filing requirements of associated persons of member 
organizations. The amended rules will allow for all Exchange members 
and member firms, who are not members of the NASD to file a Uniform 
Application for Securities Industry Registration or Transfer (``Form U-
4'') and a Uniform Termination Notice for Securities Industry 
Registration (``Form U-5'') and fingerprint information on behalf of 
their registered persons directly with Web CRD. The text of the 
proposed rule change is below. Proposed new language is in italics; 
proposed deletions are in brackets.
* * * * *

Chapter II

* * * * *
Organization and Administration
    Rule 2.22--In addition to the dues and charges provided for by 
Rules 2.20 and 2.21 of this Chapter, the Board may, from time to time, 
fix and impose other fees, assessments or charges to be paid to the 
Exchange or to an organization designated by the Exchange by members or 
by categories of members with respect to applications, registrations, 
approvals, use of Exchange facilities, or other services or privileges 
granted.
    (a) Regulatory Oversight Service Fees. Member Organizations that 
are subject to the SEC Net Capital Rule and for which the Exchange has 
been assigned as the Designated Examining Authority (``DEA'') pursuant 
to SEC Rule 17d-1 shall be required to pay quarterly Regulatory 
Oversight Service Fees. The fee shall be $0.40 per $1,000 gross revenue 
as reported on the member organization's quarterly FOCUS Report, 
provided that, upon application to the [Financial Compliance] 
Department of Financial and Sales Practice Compliance, accompanied by 
appropriate documentation, fees shall not be assessed against 
commission revenue generated from the conduct of a retail commodities 
future business.
    (b) No changes

* * * Interpretations and Policies:

    .01 No changes
* * * * *

Chapter III

* * * * *
Membership
Rule 3.6A  Qualification and Registration of Certain Associated Persons

    (a) Financial/Operations Principal. No changes.
    (b) Associated Person Statuses Under Chapter IX. No changes.

* * * Interpretations and Policies:

    .01 Each person in an associated person status enumerated in 
paragraph (a) or (b) of this Rule shall, electronically submit to the 
NASD's Web Central Registration Depository (``CRD'') System [in a form 
and manner prescribed by the Exchange] (i) [submit to the Exchange] a 
Uniform Application for Securities Industry Registration or Transfer 
(Form U-4) and (ii) [promptly submit to the Exchange ] any required 
amendments to Form U-4.
    .02 No Change.
    .03 No Change.
* * * * *

Chapter IX

* * * * *
Rule 9.2  Registration of Options Principals

    No member organization shall be approved to transact options 
business with the public until those persons associated with it who are 
designated as Options Principals have been approved by and registered 
with the Exchange. Persons engaged in the management of the member 
organization's business pertaining to option contracts shall be 
designated as Options Principals. In connection with their 
registration, Options Principals shall electronically file [an 
application] a Uniform Application for Securities Industry Registration 
or Transfer (Form U-4) with the NASD's Web CRD System [Secretary of the 
Exchange on a form prescribed by the Exchange], shall successfully 
complete an examination prescribed by the Exchange for the purpose of 
demonstrating an adequate knowledge of the options business and of the 
Rules of the Exchange, and shall [sign an agreement] further agree in 
the U-4 filing to abide by the Constitution and Rules of the Exchange 
and the Rules of the Clearing Corporation. Any person required to 
complete Form U-4 shall promptly electronically file any required 
amendments to Form U-4 with the NASD's Web CRD system. Termination of 
employment or affiliation of any Registered Options Principal in such 
capacity shall be promptly electronically reported [promptly] to the 
NASD's Web CRD System [Secretary of the Exchange] together with a brief 
statement of the reason for such termination on Form U-5.

Rule 9.3  Registration and Termination of Representatives

    (a) Registration. No member organization shall be approved to 
transact business with the public until those persons associated with 
it who are designated as Representatives have been approved by and 
registered with the Exchange. Persons who perform duties for the member 
organization which are customarily performed by sales representatives, 
solicitors, [customers' men] or branch office managers shall be 
designated as Representatives. In connection with their registration, 
Representatives shall electronically file a Uniform Application for 
Securities Industry Registration or Transfer (Form U-4) [an 
application] with the NASD's Web CRD System [on a form prescribed

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by the Exchange] by appropriately checking the CBOE as a requested 
registration on the electronic U-4 filing, and [,] shall successfully 
complete [a training course and] an examination for the purpose of 
demonstrating an adequate knowledge of the securities business, and 
shall further agree in the U-4 filing [sign an agreement] to abide by 
the Constitution and Rules of the Exchange and the Rules of the 
Clearing Corporation.[; provided, however, that Representatives of 
member organizations that are members of another national securities 
exchange or association which has standards of approval acceptable to 
the Exchange may be deemed to be approved by and registered with such 
other exchange or association. Member organizations whose 
Representatives are deemed registered pursuant to the last clause of 
the preceding sentence shall inform their Representatives of their 
obligation to adhere to the Constitution and Rules of the Exchange and 
the Rules of the Clearing Corporation.] Any person required to complete 
Form U-4 shall promptly electronically file any required amendments to 
Form U-4 with the NASD's Web CRD system.
    (b) Termination--Filing of U-5's. The discharge or termination of 
employment of any registered person, together with the reasons 
therefore, shall be electronically reported to the NASD's Web CRD 
System by a member organization immediately following the date of 
termination, but in no event later than thirty (30) days following 
termination,[to the Exchange's Department of Financial and Sale 
Practice Compliance] on a Uniform Termination Notice for Securities 
Industry Registration (Form U-5). A copy of said termination notice 
shall be provided concurrently to the person whose association has been 
terminated.
    (c) Termination--Filing of amended U-5's. The member organization 
shall electronically report to the NASD's Web CRD system [Exchange], by 
means of an amendment to the Form U-5 filed pursuant to paragraph (b) 
above, in the event that the member organization learns of facts or 
circumstances causing any information set forth in the notice to become 
inaccurate or incomplete. Such amendment shall be [filed with the 
Exchange's Department of Financial and Sales Practice Compliance and] 
provided concurrently to the person whose association has been 
terminated no later than thirty (30) days after the member organization 
learns of the facts or circumstances giving rise to the amendment.
* * * [Interpretations and Policies:
    .01 The application prescribed by the Exchange pursuant to 
paragraph (a) of this Rule is the Uniform Application for Securities 
Industry Registration or Transfer (Form U-4). Any person required to 
complete Form U-4 shall promptly file any required amendments to Form 
U-4.
    .02 Any filing or submission requirement under this Rule shall be 
deemed to be satisfied if such filing or submission is made with the 
North American Securities Administrators Association/National 
Association of Securities Dealers, Inc. Central Registration Depository 
(CRD) within the applicable time period set forth in this Rule.]
* * * * *

Fee Schedule

* * * * *
12. REGULATORY FEES:
    (A) No change.
    (B) No change.
    (C) No change.
    (D) Web CRDSM Fees.
    The following fees will be collected and retained by NASD via the 
Web CRDSM registration system for the registration of 
associated persons of Exchange members/member organizations who are not 
also NASD members:
(i) GENERAL REGISTRATION FEES:
    $85.00  NASD Non-Member Processing Fee*
    $95.00  NASD Disclosure Processing Fee** (U-4, U-5, & amendments)
    $30.00  NASD Annual System Processing Fee assessed only during 
Renewals
    *For all Initial, Transfer, Relicense, Dual registration Form U-4 
filings. This fee will also be generated upon refiling to Web 
CRDSM of CBOE--only registered individuals.
**For all registration, transfer, or termination filings with new or 
amended disclosure information or that require certification as well as 
any amendment to disclosure information.
(ii) FINGERPRINT PROCESSING FEES:
    $32.00  per card Initial Submission
    $10.00  per card Second Submission w/ initial Fingerprint Card 
attached
    $32.00  per card Second Submission w/o initial Fingerprint Card 
attached
    $32.00  per card Third Submission
    Please also note that effective within 60 days after the CBOE 
receives approval from the SEC and reaches agreement with the NASD, the 
CBOE REGISTRATION FEES listed in Section 12(A) above will be collected 
by NASD from associated persons of CBOE member firms that are not 
members of NASD. (Advance notification of the specific date will be 
provided to CBOE member firms.) Please note further that these fees are 
already being collected by the NASD on behalf of the CBOE from CBOE 
members that are also members of the NASD.
* * * * *

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 is to allow for associated 
persons of CBOE member firms that are not members of the National 
Association of Securities Dealers, Inc. (``NASD'') to register their 
qualification status electronically via the NASD's Web CRD. Currently, 
the Exchange requires those associated persons of member organizations 
that are members of the CBOE, but not NASD members, to manually 
register for a qualification status by filing a hard copy Form U-4. In 
addition, a hard copy Form U-5 must be filed with the Exchange within 
30 days of the registered person's termination or within 30 days after 
the member organization learns of any facts or circumstances that would 
give rise to an amendment. The CBOE has established an arrangement with 
NASD Regulation (``NASDR'') to allow CBOE members that are not NASD 
members to register associated persons electronically with the NASDR in 
place of the CBOE as a CRD participant. The CBOE believes that this 
revision to the current registration process will benefit those persons 
seeking and/or maintaining registrations with the CBOE in that hard 
copy filings will no longer need to be sent to the Exchange. Further, 
all registration and disclosure data will be consolidated into one 
database, Web CRD, thus allowing members and member organizations 
access to the member's associated persons' records.

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Further, processing associated persons of these non-NASD member firms 
in Web CRD will make information about them more readily available to 
regulators and allow for closer monitoring of these firms. In addition, 
this agreement will establish a method to allow registered persons to 
be notified and satisfy the Continuing Education Regulatory Requirement 
pursuant to CBOE Rule 9.3A.
    This proposed rule change implements the following fees to be 
imposed upon non-NASD Exchange members and member organizations, which 
members will be instructed to pay directly to NASDR through the Web CRD 
system at the time the Exchange member/member organization effects a 
registration transaction through Web CRD:
    (a) Non-Member Processing Fee--This $85.00 fee will be assessed 
upon establishing a record on the Web CRD system for any associated 
person of a non-NASD CBOE member. Accordingly, this fee will be 
assessed for all initial, transfer, relicense and dual registration 
Form U-4 filings. In addition, this fee will be assessed when NASDR 
establishes a record for any associated person of a non-member who 
already maintains a registration capacity at the CBOE (e.g., NASDR will 
assess this fee when establishing CRD records for individuals who 
previously were manually tracked at the CBOE).
    (b) Disclosure Processing Fee--This $95.00 fee will be assessed for 
any initial, transfer, relicense and dual registration Form U-4 or Form 
U-5 filing that contains new or amended disclosure information (i.e., 
an initial affirmative response to current Question 23 on the Form U-4 
or a change to any information previously reported in response to 
Question 23).
    (c) Annual System Processing Fee--This $30.00 fee will be assessed 
during the yearly renewals cycle and covers system processing costs for 
the year.
    (d) Fingerprint Processing Fees--These fees, as specified in the 
CBOE Fee Schedule, will be assessed for processing fingerprint cards 
submitted with Form U-4 filings.\5\
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    \5\ By letter to Elizabeth King, Associate Director, Division of 
Market Regulation, SEC, from Joanne Moffic-Silver, General Counsel 
and Corporate Secretary, Legal Department, CBOE, dated March 1, 
2002, the Exchange submitted an amended Fingerprint Plan pursuant to 
SEC Rule 17f-2(c), 17 CFR 240.17f-2(c), under the Act.
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    Once the transition to the Web CRD is completed all Exchange 
members and member organizations that are not members of the NASD will 
be subject to these Web CRD fees, which will be set forth on the 
Exchange Fee Schedule. In addition, all registered persons will 
continue to be assessed CBOE registration fees as outlined in CBOE Rule 
2.22(b)--Other Fees or Charges, (Registration Fees).
    Rule 9.3(a) is being edited to eliminate obsolete language (i.e., 
``customers' men''), and to clarify the requirements for registration 
by associated persons of members of other national securities 
exchanges, by deleting language that will no longer be applicable when 
such associated persons effect their registration via Web CRD 
(``provided, however, that Representatives of member organizations * * 
* of the Clearing Corporation.'') This deleted language is obsolete and 
has had no practical effect since the CBOE began coordinating the 
registration of its members with the CRD. The former Interpretations 
.01 and .02 to Rule 9.3 are being eliminated, as the appropriate 
portions have been incorporated into Rule 9.3 itself.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) of the Act,\6\ in general, and 
Section 6(b)(5) of the Act,\7\ in particular, which requires, among 
other things, that the rules of an exchange be designed to promote just 
and equitable principles of trade and to protect investors and the 
public interest.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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

    The Exchange has neither solicited nor received 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 Exchange 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 filing will also be 
available for inspection and copying at the principal office of the 
Exchange. All submissions should refer to File No. SR-CBOE-2001-66 and 
should be submitted by July 9, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-15253 Filed 6-17-02; 8:45 am]
BILLING CODE 8010-01-P