[Federal Register Volume 67, Number 139 (Friday, July 19, 2002)]
[Notices]
[Pages 47584-47585]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-18220]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46183; File No. SR-CBOE-2002-32]


Self-Regulatory Organizations; Notice of Filing of a Proposed 
Rule Change by the Chicago Board Options Exchange, Inc. Relating to the 
Time and Manner in Which the Appropriate Allocation Committee May 
Reallocate a Security

July 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 June 11, 2002, 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 CBOE Rule 8.95 (``Allocation of 
Securities and Location of Trading Crowds and DPMs'') to extend, from 
six months to one year, the time in which the appropriate Allocation 
Committee may reallocate a security if the trading crowd or Designated 
Primary Market-Maker (``DPM'') to which the security had been allocated 
fails to adhere to any market performance commitments made by the 
trading crowd or DPM in connection with receiving the allocation. The 
text of the proposed rule change is available at the CBOE and at the 
Commission.

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 8.95(c) currently provides that during the first six 
months following the allocation of a security to a trading crowd or 
DPM, the appropriate Allocation Committee may remove the allocation and 
reallocate the security, if the trading crowd or DPM fails to adhere to 
any market performance commitments made by the trading crowd or DPM in 
connection with receiving the allocation. CBOE now proposes to amend 
CBOE Rule 8.95(c) to extend the initial review period from six months 
to one year under which the appropriate Allocation Committee may 
exercise this authority.
    According to CBOE, the appropriate Allocation Committee typically 
requests that trading crowds and DPMs make market performance 
commitments as part of their applications to receive allocations of 
particular securities. These commitments may relate to pledges to keep 
bid-ask spreads within a particular width, or pledges to make every 
effort possible to become the exchange of choice in a particular option 
class, as measured during the initial months of trading by consistently 
achieving a certain market share if the class is listed on more than 
one options exchange. CBOE Rule 8.95(c) permits the appropriate 
Allocation Committee to remove an allocation if these commitments are 
not met, thus giving trading crowds and DPMs an incentive to abide by 
these commitments.
    CBOE believes that extending the initial review period from six 
months to one year is appropriate because it will provide the 
appropriate Allocation Committee additional time to evaluate whether a 
particular DPM or trading crowd has adhered to any market performance 
commitments it made in connection with being allocated the security.
    Following this initial review period after an allocation is made, 
CBOE notes that all the responsibility for monitoring market 
performance with respect to that security is vested in the appropriate 
Market Performance Committee or MTS Appointments Committee, which 
continually evaluate trading crowd and DPM market performance, as 
applicable, and are authorized pursuant to CBOE Rule 8.60, CBOE Rule 
8.90, and other Exchange Rules to take remedial action for failure to 
satisfy minimum market performance standards.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with and furthers the objectives of section 6(b)(5) of the Act \3\ in 
that it is designed to remove impediments to a free and open market and 
protecting investors and the public interest.
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    \3\ 15 U.S.C. 78f(b)(5).
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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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    Within 35 days of the publication of this notice in the Federal 
Register or

[[Page 47585]]

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-2002-32 and should 
be submitted by August 9, 2002.


    For the Commission, by the Division of Market Regulation, 
pursuant to the delegated authority.\4\
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    \4\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-18220 Filed 7-18-02; 8:45 am]
BILLING CODE 8010-01-P