[Federal Register Volume 67, Number 200 (Wednesday, October 16, 2002)]
[Notices]
[Pages 63949-63953]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-26202]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46629; File No. SR-CBOE-2002-24]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment Nos. 1 and 2 by Chicago Board Options Exchange, 
Incorporated Amending Listing Standards for Options on Narrow-Based and 
Broad-Based Security Indexes

October 9, 2002.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1034 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on May 7, 2002, the Chicago Board Options 
Exchange, Incorporated (``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 CBOE filed Amendments No. 1 and 2 to the 
proposed rule change on August 6, 2002 \3\ and August 29, 2002,\4\ 
respectively. The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter dated August 6, 2002 from Madge Hamilton, Legal 
Division, CBOE, to Kelly Riley, Senior Special Counsel, Division of 
Market Regulation (``Division''), Commission (``Amendment No. 1''). 
Amendment No. 1 makes certain technical corrections to the proposed 
rule change.
    \4\ See Letter dated August 29, 2002 from Madge Hamilton, Legal 
Division, CBOE, to Florence Harmon, Senior Special Counsel, 
Division, Commission (``Amendment No. 2''). Amendment No. 2 makes 
certain technical corrections to the proposed rule text and adds a 
requirement that component securities be registered under Section 12 
of the Act. Amendment No. 2 also adds a requirement that the total 
number of securities in an index may not increase or decrease by 
more than 33\1/3\% from the number of component securities in the 
index at the time of its initial listing. Amendment No. 2 also adds 
a requirement that cash settled index options be designated as AM-
settled index options. Finally, Amendment No. 2 adds a new index 
weighting methodology known as ``share weighting.''
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its rules regarding listing 
standards for options on narrow-based and broad-based security indexes. 
The text of the proposed rule change is set forth below. Additions are 
in italics; deletions are in brackets.

CHAPTER XXIV

Index Options
* * * * *
Rule 24.2 Designation of the Index
    (a) The component securities of an index underlying an index option 
contract need not meet the requirements of Rule 5.3. Except as set 
forth in subparagraph (b) and (c) below, the listing of a class of 
index options on a new underlying index will be treated by the Exchange 
as a proposed rule change subject to filing with and approval by the 
Securities and Exchange Commission (``Commission'') under Section 19(b) 
of the Exchange Act.
    (b) Notwithstanding paragraph (a) above, the Exchange may trade 
options on a narrow-based security index pursuant to Rule 19b-4(e) of 
the Securities Exchange Act of 1934, if each of the following 
conditions is satisfied:
    (1) The index is a security index. [The options are designated as 
A.M.-settled index options:]
    (i) that has 9 or fewer component securities; or
    (ii) in which a component security comprises more than 30 percent 
of the index's weighting; or
    (iii) in which the 5 highest weighted component securities in the 
aggregate comprise more than 60 percent of the index's weighting or
    (iv) in which the lowest weighted component securities comprising, 
in the aggregate, 25 percent of the index's weighting have an aggregate 
dollar value of average daily trading volume of less than $50,000,000 
(or in the case of an index with 15 or more component securities, 
$30,000,000), except that if there are two or more securities with 
equal weighting that could be included in the calculation of the lowest 
weighted component securities comprising, in the aggregate, 25 percent 
of the index's weighting, such securities shall be ranked from lowest 
to highest dollar value of average daily trading volume and shall be 
included in the calculation based on their ranking starting with the 
lowest ranked security;

[[Page 63950]]

    (2) The index is capitalization-weighted, modified capitalization-
weighted, price-weighted, share weighted, [or] equal dollar-weighted, 
or modified equal-dollar weighted[, and consist of ten or more 
component securities:];
    (3) Each component security in the index has a minimum market 
capitalization of at lest $75 million, except that [for] each of the 
lowest weighted [component] securities in the index that in the 
aggregate account for no more than 10% of the weight of the index[,] 
may have a minimum [the] market capitalization of only [is at least] 
$50 million[:];
    (4) The average daily trading [Trading] volume in each of the 
preceding six months for each component security in the index is at 
least 45,500 shares, [has been at least one million shares for each of 
the last six months,] except that [for] each of the lowest weighted 
component securities in the index that in the aggregate account for no 
more than 10% of the weight of the index[,] may have an average daily 
trading volume of only 22,750 [has been at least 500,000] shares for 
each of the last six months[:];
    (5) In a capitalization-weighted index the lesser of: (1) the five 
highest weighted component securities in the index each have had an 
average daily trading volume of at least 90,000 shares over the past 
six months; or (2) the highest weighted component securities in the 
index that in the aggregate represent at least 30% of the total number 
of component securities in the index each have had an average daily 
[monthly] trading volume of at least 90,000 [2,000,000] shares over the 
past six months[:];
    [(6) No single component security represents more than 25% of the 
weight of the index, and the five highest weighted component securities 
in the index do not in the aggregate account for more than 50% (60% for 
an index consisting of fewer than 25 component securities) of the 
weight of the index:]
    [(7)] (6) Subject to subparagraphs (4) and (5) above, the 
c[C]omponent securities that account for at least 90% of the total 
index weight [of the index] and at least 80% of the total number of 
component securities in the index [satisfy] must meet the requirements 
of Rule 5.3 applicable to individual underlying securities[:];
    [(8)] (7)(i) Each [All] component [securities] security in the 
index is a [are] ``reported security [securities]'' as defined in Rule 
11Aa3-1 under the Exchange Act[:]; or
    [(9)] (ii) [Non-U.S. component] Foreign securities [(stocks or 
ADRs)] or ADRs thereon that are not subject to comprehensive 
surveillance sharing agreements do not [in the aggregate] represent 
more than 20% of the weight of the index[:];
    [(10)] (8) The current underlying index value will be reported at 
least once every fifteen seconds during the time the index options are 
traded on the Exchange[:];
    [(11)] (9) An equal dollar-weighted index will be rebalanced at 
least once every calendar [quarter] year[:];
    [(12)] (10) If [an] the underlying index is maintained by a broker-
dealer, the index is calculated by an third party who is not a broker-
dealer, and the broker-dealer has in place an information barrier 
[erected a ``Chinese Wall''] around its personnel who have access to 
information concerning changes in and adjustments to the index[.];
    (11) Each component security in the index is registered pursuant to 
section 12 of the Exchange Act; and
    (12) Cash settled index options are designated as Am-settled index 
options.
    (c) Notwithstanding paragraph (a) above, the Exchange may trade 
options on a broad-based security index pursuant to Rule 19b-4(e) of 
the Securities Exchange Act of 1934, if each of the following 
conditions is satisfied;
    (1) The index is a security index
    (i) that has 10 or more component securities;
    (ii) in which no component security comprises less than 30 percent 
of the index's weighting;
    (iii) in which the 5 highest weighted component securities in the 
aggregate comprise less than 60 percent of the index's weighting; and
    (iv) in which the lowest weighted component securities comprising, 
in the aggregate, 25 percent of the index's weighting have an aggregate 
dollar value of average daily trading volume of more than $50,000,000 
(or in the case of an index with 15 or more component securities, 
$30,000,000), except that if there are two or more securities with 
equal weighting that could be included in the calculation of the lowest 
weighted component securities comprising, in the aggregate, 25 percent 
of the index's weighting, such securities shall be ranked from lowest 
to highest dollar value of average daily trading volume and shall be 
included in the calculation based on their ranking starting with the 
lowest ranked security;
    (2) The index is capitalization-weighted, modified capitalization-
weighted, price-weighted, share-weighted, equal dollar-weighted, or 
modified equal-dollar weighted;
    (3) Each component security in the index has a minimum market 
capitalization of at least $75 million, except that each of the lowest 
weighted securities in the index that in the aggregate account for no 
more than 10% of the weight of the index may have a minimum market 
capitalization of only $50 million;
    (4) The average daily trading volume in each of the preceding six 
months for each component security in the index is at least 45,500 
shares, except that each of the lowest weighted component securities in 
the index that in the aggregate account for no more than 10% of the 
weight of the index may have an average daily trading volume of only 
22,750 shares for each of the last six months;
    (5) In a capitalization-weighted index the lesser of: (1) the five 
highest weighted component securities in the index each have had an 
average daily trading volume of at least 90,000 shares over the past 
six months; or (2) the highest weighted component securities in the 
index that in the aggregate represent at least 30% of the total number 
of component securities in the index each have had an average daily 
trading volume of at least 90,000 shares over the past six months;
    (6) Subject to subparagraphs (4) and (5) above, the component 
securities that account for at least 90% of the total index weight and 
at least 80% of the total number of component securities in the index 
must meet the requirements of Rule 5.3 applicable to individual 
underlying securities;
    (7)(i) Each component security in the index is a ``reported 
security'' as defined in Rule 11a 3-1 under the Exchange Act; or
    (ii) Foreign securities or ADRs thereon that are not subject to 
comprehensive surveillance sharing agreements do not represent more 
than 20% of the weight of the index;
    (8) The current underlying index value will be reported at least 
once every fifteen seconds during the time the index options are traded 
on the Exchange;
    (9) An equal dollar-weighted index will be rebalanced at least once 
every calendar year;
    (10) If the underlying index is maintained by a broker-dealer, the 
index is calculated by a third party who is not a broker-dealer, and 
the broker-dealer has in place an information barrier around its 
personnel who have access to information concerning changes in and 
adjustments to the index;

[[Page 63951]]

    (11) Each component security in the index is registered pursuant to 
Section 12 of the Exchange Act; and
    (12) Cash settled index options are designated as AM-settled index 
options.
    [(c)](d) The following maintenance listing standards shall apply to 
each class of index options originally listed pursuant to paragraph (b) 
or (c) above:
    (1) The index meets the criteria of paragraph (b)(1) or (c)(1) of 
this Rule; [The conditions stated in subparagraphs (b)(1), (3), (6), 
(7), (8), (9), (10), (11) and (12) must continue to be satisfied, 
provided that the conditions stated in subparagraphs (b)(6) must be 
satisfied only as of the first day of January and July in each year:]
    (2) Subject to subparagraphs (4) and (9) below, the component 
securities that account for at least 90% of the total index weight and 
at least 80% of the total number of component securities in the index 
must meet the requirements of Rule 5.3;
    (3) Each component security in the index has a market 
capitalization of at least $75 million, except that each of the lowest 
weighted component securities that in the aggregate account for no more 
than 10% of the weight of the index may have a market capitalization of 
only $50 million;
    (4) The average daily trading volume in each of the preceding six 
months for each component security in the index is at least 22,750 
shares, except that each of the lowest weighted component securities in 
the index that in the aggregate account for not more than 10% of the 
weight of the index may have an average daily trading volume of at 
least 18,200 shares for each of the last six months;
    (5) Each component security in the index is
    (i) a ``reported security'' as defined in Rule 11A3-1 under the 
Exchange Act; or
    (ii) Foreign securities or ADRs thereon that are not subject to 
comprehensive surveillance sharing agreements do not represent more 
than 20$ of the weight of the index;
    (6) The current underlying index value will be reported at least 
once every fifteen seconds during the time the index options are traded 
on the Exchange;
    (7) An equal dollar-weighted index will be rebalanced at least once 
every calendar year;
    (8) If the underlying index is maintained by a broker-dealer, the 
index is calcualted by a third party who is not a broker-dealer, and 
the broker-dealer has in place an information barrier around its 
personnel who have access to information concerning changes in and 
adjustments to the index;
    (9) In a capitalization-weighted index the lesser of: (1) the five 
highest weighted component securities in the index each have had an 
average daily trading volume of at least 45,500 shares over the past 
six months; or (2) the highest weighted component securities in the 
index that in the aggregate represent at least 30% of the total number 
of stocks in the index each have had an average daily trading volume of 
at least 45,500 shares over the past six months;
    [(2)](10) The total number of component securities in the index may 
not increase nor decrease by more than 33\1/3\% from the number of 
component securities in the index at the time of its initial listing; 
[and in no event may be less than nine component securities:
    (3) Trading volume of each component security in the index must be 
at least 500,000 shares for each of the last six months, except that 
for each of the lowest weighted component securities in the index that 
in the aggregate account for no more than 10% of the weight of the 
index, trading volume must be at least 400,000 shares for each of the 
last six months:
    (4) In a capitalization-weighted index, the lesser of the five 
highest weighted component securities in the index or the highest 
weighted component securities in the index that in the aggregate 
represent at least 30% of the total number of stocks in the index each 
have had an average monthly trading volume of at least 1,000,000 shares 
over the past six months.]
    (11) Each component security in the index is registered pursuant to 
Section 12 of the Exchange Act; and
    (12) In the event a class of index options listed on the Exchange 
fails to satisfy the maintenance listing standards set forth herein, 
the Exchange shall not open for trading any additional series of 
options of that class unless such failure is determined by the Exchange 
not to be significant and the Commission concurs in that determination, 
or unless the continued listing of that class of index options has been 
approved by the Commission under section 19(b)(2) of the Exchange Act.
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, 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
    The CBOE states that the proposed rule change amends CBOE Rule 24.2 
to make it consistent with listing standards applicable to futures on 
narrow-based security indexes, as defined and permitted under the 
Commodity Futures Modernization Act of 2000 (``CFMA''), and adds 
listing standards for options on broad-based security indexes. The CBOE 
states that the proposed rule change adopts criteria, which follows, 
for the most part, the definition of ``narrow-based security index'' in 
the CFMA and makes changes to CBOE's current listing standards for 
options on narrow-based security indexes to conform with the Bulletin 
issued by the Division that suggested listing standards for futures on 
a narrow-based security index (``Division's Bulletin'').\5\ The 
proposed rule change would amend the current initial listing standards 
for options on narrow-based security indexes in CBOE Rule 24.2, amend 
CBOE Rule 24.2 to add new initial listing standards for options on 
broad-based security indexes, and provide for maintenance standards for 
both narrow-based security indexes and broad-based security indexes.
---------------------------------------------------------------------------

    \5\ U.S. Securities and Exchange Commission, Division of Market 
Regulation: Staff Legal Bulletin No. 15: Listing Standards for 
Trading Security Futures Products (September 5, 2001).
---------------------------------------------------------------------------

    The CBOE states that the proposed rule change incorporates the 
definition of a narrow-based security index in the CFMA \6\ into the 
listing standards for options on a narrow-based security index. Thus, 
the proposed rule change would require that the index be a narrow-based 
security index:
---------------------------------------------------------------------------

    \6\ Section 201 of the CFMA; 15 U.S.C. 78c(a)(55)(B).
---------------------------------------------------------------------------

    (1) That has 9 or fewer component securities, or
    (2) In which a component security comprises more than 30% of the 
index's weighting, or
    (3) In which the 5 highest weighted component securities in the 
aggregate comprise more than 60% of the index's weighting, or
    (4) In which the lowest weighted component securities comprising, 
in the

[[Page 63952]]

aggregate, 25% of the index's weighting have an aggregate dollar value 
of averaged daily trading volume of less than $50 million (or in the 
case of an index with 15 or more component securities, $30 million), 
except that if there are 2 or more securities with equal weighting that 
could be included in the calculation of the lowest weighted component 
securities comprising, in the aggregate, 25% of the index's weighting, 
such securities shall be ranked from lowest to highest dollar value of 
average daily trading volume and shall be included in the calculation 
based on their ranking starting with the lowest ranked security.
    The CBOE states that the proposed rule change also makes other 
modifications to be consistent with the Division's Bulletin. The 
proposed rule change requires that all component securities of a 
narrow-based and broad-based security index be registered pursuant to 
Section 12 of the Act. Consistent with the Division's Bulletin, the 
proposed rule change would also permit an index to be modified 
capitalization-weighted index. The Division's Bulletin lists modified 
capitalization-weighted in its sample initial eligibility criteria for 
a security futures product based on an index composed of two or more 
securities as comparable to listing standards for options traded on a 
national securities exchange or national securities association.\7\ The 
proposed rule change proposes two additional weighting methodologies, 
modified equal-dollar weighted and share-weighted. The CBOE states that 
it is relevant that Commission has approved options on certain 
individual modified equal-dollar weighted indexes.\8\
---------------------------------------------------------------------------

    \7\ See III.A.(ii)(a) of the Division's of Market Regulation: 
Staff Legal Bulletin No. 15: Listing Standards for Trading Security 
Futures Products (September 5, 2001). See also Securities Exchange 
Act Release No. 42787, 65 FR 33598 (May 24, 2000) (amending Rule 
1000A to permit the index underlying a series of Index Fund Shares 
to be calculated based on modified market capitalization weighting 
methodology, among others); Securities Exchange Act Release No. 
43912 (January 31, 2001), 66 FR 9401 (February 7, 2001) (permitting 
an index underlying a series of Index Fund Shares to be calculated 
on modified market capitalization); and Philadelphia Stock Exchange 
Rule 1009A(b)(2), which permits a narrow-based index to be modified 
capitalization-weighted.
    \8\ Securities Exchange Act Release No. 36623 (December 21, 
1995), 60 FR 67379 (December 29, 1995) (approving options on the 
CBOE Automotive Index, which is modified equal-dollar weighted). In 
the Commission's release adopting final rules regarding new 
derivative securities products, it noted that ``[t]he index 
underlying a new derivative securities product should be constructed 
according to established criteria for initial inclusion of new 
component securities. SROs seeking to rely on the proposed amendment 
should employ objective index construction standards that include a 
minimum number of component securities and a fixed and objective 
weighting methodology (e.g., capitalization weighted, price 
weighted, equal-dollar weighted or modified equal-dollar 
weighted.'') (footnote omitted.) Securities Exchange Act Release No. 
40761, 63 FR 70952, 70961) (December 22, 1998). See also Securities 
Exchange Act Release No. 42787, 65 FR 33598 (May 24, 2000) (amending 
Rule 1000A to permit the index underlying a series of Index Fund 
Shares to be calculated based on modified equal-dollar weighting 
methodology, among others).
---------------------------------------------------------------------------

    The CBOE states that a share-weighted index is designed to mimic 
the value of a portfolio consisting of two or more securities. The 
weight of each component security is calculated by multiplying the 
price of the component security by an adjustment factor. Adjustment 
factors are chosen to reflect the investment objective deemed 
appropriate by the designer of the index.\9\ The value of the index is 
calculated by adding the weight of each component security and dividing 
the total by an index divisor.\10\
---------------------------------------------------------------------------

    \9\ For example, an index designer might want to apply an 
adjustment factor in order to prevent one or a few components from 
dominating the weight of the index. This is similar to an adjustment 
factor in other types of weighting methods such as modified 
capitalization weighted indexes.
    \10\ The index ``divisor'' is calculated to yield a benchmark 
index level (50, 100, 200, etc. as of a particular date.
---------------------------------------------------------------------------

    Unlike other indexes currently available, share-weighted indexes do 
not require divisor changes in order to adjust for corporate actions. 
Rather, a change is made to the adjustment factor for a particular 
stock undergoing the corporate action. Thus, only the stock undergoing 
the corporate action is affected, which mimics the impact on a 
replicating portfolio. For example, the index is adjusted for a stock 
split by multiplying the adjustment factor of the affected stock by its 
split ratio. The index is adjusted for spin-offs and other 
distributions, excluding regular cash dividends, by taking the value of 
the property being distributed and then changing the adjustment factor 
to reflect the purchase of additional shares of the index component. 
Unlike a capitalization-weighted index, share-weighted indexes are not 
adjusted to reflect changes in the number of outstanding shares of its 
constituents. For example, if a company issued additional shares, this 
would not impact a share-weighted index. Example: Adjusting a share-
weighted index to reflect a 2-for-1 stock split in the shares of one of 
its components.
    Consider the following share-weighted index. Stock 2 has declared a 
2-for-1 split and the prices listed below represent the closing prices 
for each index component on the business day immediately prior to the 
ex-distribution date. The index divisor, which was chosen to yield a 
benchmark level of 100, is 1.00. Therefore, the closing index level 
prior to the ex-date is 91.00.

----------------------------------------------------------------------------------------------------------------
                                                                                                      Component
                         Component                          Price  (Pi)   Adjustment      Pi x Ai    weight  (in
                                                                         factor  (Ai)                  percent)
----------------------------------------------------------------------------------------------------------------
Stock 1...................................................          $23         $1.25         28.75        31.59
Stock 2...................................................           92          0.5          46           50.55
Stock 3...................................................            5          1.25          6.25         6.87
Stock 4...................................................            8          1.25         10           10.99
                                                           --------------
    Total.................................................  ...........  ............         91          100.00
----------------------------------------------------------------------------------------------------------------

    As shown in the table below, the adjustment to reflect the 2-for-1 
split would require that the Adjustment Factor for Stock 2 be 
multiplied by the split ratio (2), thereby changing it from 0.5 to 1.0. 
The post-split price of Stock 2 ($46) is adjusted by dividing the pre-
split price ($92) by the split ratio.
    The product of the new Adjustment Factor and the post-split price 
of Stock 2 is exactly the same as product of the old Adjustment Factor 
and pre-split price of Stock 2. Furthermore, the sum of the products 
(Pi x Ai and individual component weights are 
exactly the same as before the split, and the index divisor remains 
unchanged at 1.00.

[[Page 63953]]



----------------------------------------------------------------------------------------------------------------
                                                                                                      Component
                         Component                          Price  (Pi)   Adjustment      Pi x Ai    weight  (in
                                                                         factor  (Ai)                  percent)
----------------------------------------------------------------------------------------------------------------
Stock 1...................................................          $23          1.25         28.75        31.59
Stock 2...................................................           46          1.0          46           50.55
Stock 3...................................................            5          1.25          6.25         6.87
Stock 4...................................................            8          1.25         10           10.99
                                                           --------------
    Total.................................................  ...........  ............         91          100.00
----------------------------------------------------------------------------------------------------------------

    The proposed rule change also amends paragraph (c) to add listing 
standards for options on a broad-based security index. The CBOE states 
that these listing standards follow, for the most part, the listing 
standards for options on narrow-based security indexes. However, the 
criteria specifically discussed above, regarding the composition of a 
narrow-based security index, was reversed for the composition of a 
broad-based security index. For example, for a broad-based security 
index the index must have 10 or more component securities.
    The proposed rule change amends the maintenance standards by moving 
them to new paragraph (d) and making them applicable to both the 
narrow-based security indexes and the broad-based security indexes. The 
CBOE states that the maintenance standards listed in the proposed rule 
change also follows the Division's Bulletin for the most part. CBOE 
believes that the proposed rule change would assist CBOE in providing 
new products to the marketplace in an efficient and expeditious manner. 
The CBOE states that this in turn would benefit investors by providing 
them with new products, in a more timely fashion and provide more 
competition.
2. Statutory Basis
    CBOE believes the proposed rule change, as amended, is consistent 
with Section 6(b) of the Act \11\ in general and furthers the 
objectives of Section 6(b)(5) \12\ in particular in that it should 
promote just and equitable principles of trade, remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and protect investors and the public interest. CBOE 
believes that the adoption of the proposed rule change will enable CBOE 
to act expeditiously in listing new options on narrow-based and broad-
based security indexes. In addition, CBOE believes that the proposed 
rule change would remove impediments to a free and open market place by 
providing competition for new products. CBOE states that the proposed 
rule change would permit CBOE to more effectively bring new products to 
the marketplace for competition, as well as permit CBOE to compete with 
other new products in the marketplace, such as security futures.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE states that this proposed rule change, as amended, does not 
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

    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 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, as amended, is consistent with the Act. The Commission solicits 
comment on whether the existing position limits are adequate to address 
manipulation concerns for both cash settled and physically settled 
index options, particularly narrow-based index options. 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 CBOE. All submissions should refer to File No. SR-
CBOE-2002-24 and should be submitted by November 6, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 02-26202 Filed 10-15-02; 8:45 am]
BILLING CODE 8010-01-M