[Federal Register Volume 68, Number 24 (Wednesday, February 5, 2003)]
[Notices]
[Pages 5945-5947]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-2674]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47290; File No. SR-CBOE-2003-02]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Board Options Exchange, Inc., Relating to the 
Reporting of Other Affiliations of Associated Persons to the Exchange

January 30, 2003.
    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 January 9, 2003, the Chicago Board Options Exchange, Inc. (``CBOE'' 
or ``Exchange''), filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') 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 Exchange proposes to amend Rule 3.6A--``Qualification and 
Registration of Certain Associated Persons,'' and Rule 9.4--``Other 
Affiliations of Registered Representatives,'' to (i) eliminate the need 
for member organizations to seek prior Exchange approval for Registered 
Representatives, employed in a non-supervisory capacity, to engage in 
business practices during business

[[Page 5946]]

hours for other than the business of the member organization with which 
the person is associated; and (ii) to require prompt notice, but not 
Exchange approval, of persons registered as Registered Options 
Principals, Sales Supervisors or Financial and Operations Principals 
with member organizations for which the CBOE is the firm's Designated 
Examining Authority who are acting as a part-time employee or 
independent contractor of the member or engaged in outside business 
activities. Below is the text of the proposed rule change. Proposed new 
language is italicized. Proposed deletions are in [brackets].
* * * * *

Chicago Board Options Exchange, Inc. Rules

* * * * *

Rule 3.6A. Qualification and Registration of Certain Associated Persons

    (a) Financial/Operations Principal. Each individual member or 
member organization subject to Exchange Act Rule 15c3-1 shall designate 
a Financial/Operations Principal. The duties of a Financial/Operations 
Principal shall include taking appropriate actions to assure that the 
member complies with applicable financial and operational requirements 
under the Rules and the Exchange Act, including but not limited to 
those requirements relating to the submission of financial reports and 
the maintenance of books and records. Each Financial/Operations 
Principal is required to have successfully completed the Financial and 
Operations Principal Examination (Series 27 Exam). Each Financial/
Operations Principal designated by a member shall be registered in that 
capacity with the Exchange in a form and manner prescribed by the 
Exchange. A Financial/Operations Principal of a member may be a full-
time employee [of the member], [or with the prior written approval of 
the Exchange, may be] a part-time employee or independent contractor of 
the member. Member firms for which the Exchange is the Designated 
Examining Authority (``DEA'') must provide prompt written notice to the 
Exchange's Department of Financial and Sales Practice Compliance for 
each person designated as a Financial/Operations Principal reporting 
whether such person is a full-time employee, part-time employee, 
independent contractor or has any outside business affiliations.
    (b) No change.
    * * * Interpretations and Policies:
    .01-.03 No change.
* * * * *

Chapter IX

* * * * *

Doing Business With the Public

Rule 9.4. Other Affiliations of Registered [Representatives] Associated 
Persons
    (a) No person associated with a member in any registered capacity 
shall be employed by, or accept compensation from, any other person or 
entity as a result of any business activity, other than a passive 
investment, outside the scope of his/her relationship with his/her 
employer firm, unless the person has provided prompt written notice to 
the member and has received prior written consent of the member.
    (b) Except with the prior written consent of the member and 
[express] prompt written notice to [permission of] the Exchange, every 
Registered Options Principal, Sales Supervisor, and Financial/
Operations Principal registered with a member for which the Exchange is 
the Designated Examining Authority (``DEA'') and Registered 
Representative shall devote his/her entire time during business hours 
to the business of the member organization employing [him] or 
compensating him/her. [or to the business of its affiliates which are 
engaged in the transaction of business as a broker or dealer in 
securities or commodities or in such other businesses as have been 
approved by the Exchange.]
* * * * *

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
    The purpose of this proposed rule is to bring the outside business 
affiliation reporting requirements of registered persons of CBOE 
members in line with those of the other major securities exchanges. 
Current National Association of Securities Dealers (``NASD''), New York 
Stock Exchange (``NYSE''), American Stock Exchange (``AMEX''), Pacific 
Exchange (``PCX''), and Philadelphia Stock Exchange (``PHLX'') rules do 
not require SRO approval for the outside business activities of 
registered persons operating in a non-supervisory capacity but rather 
require such notification be made to and receive the approval from the 
member organization employing or compensating the registered person.\3\ 
PHLX Rule 793 requires such member organization approvals be filed with 
their Office of the Secretary.
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    \3\See AMEX Rule 342(b), NASD Rule 3030, NYSE Rule 346(b), PCX 
Rule 1.26(d) and PHLX Rule 793.
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    CBOE Rule 9.4 is proposed to be amended to reduce the current 
reporting burden of member organizations by eliminating the need for 
member organizations to seek prior Exchange approval for Registered 
Representatives, employed in a non-supervisory capacity, to engage in 
business practices during business hours for other than the business of 
the member organization with which the person is associated. Proposed 
Rule 9.4(a) instead would require that each associated person in any 
registered capacity with a member organization provide written 
notification to the member organization and receive written approval 
from the member organization prior to becoming employed by, or 
accepting compensation from, any other person or entity as a result of 
business activity, other than a passive investment, outside the scope 
of his/her relationship with the member organization.
    Proposed Rule 9.4(b) would specifically require the prior written 
consent of the member and prompt written notice to the Exchange for 
outside affiliations of persons registered with a member, for which the 
CBOE is the DEA, in the capacity of a Registered Options Principal, 
Sales Supervisor, or Financial and Operations Principal. This proposed 
amendment to Rule 9.4 would also require a corresponding amendment to 
Exchange Rule 3.6A(a) to require prompt notice to the Exchange, rather 
than prior written approval of the Exchange, of a Financial and 
Operations Principal acting as a part-time employee or independent 
contractor or engaged in outside business activities. NYSE and AMEX 
rules require Exchange approval for registered persons delegated 
supervisory responsibilities and performing such duties on a part-time 
basis, however, the NASD does not have a comparable rule.\4\ Therefore, 
the

[[Page 5947]]

Exchange believes that it is appropriate to replace the current 
Exchange approval process with a notice requirement only where the 
employing member is designated to the CBOE for financial oversight.
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    \4\ See NYSE Rule 346(e) and AMEX Rule 342(a).
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the Act 
\5\ in general and furthers the objectives of Section 6(b)(5) \6\ in 
particular, in that it is designed to promote just and equitable 
principles of trade and to protect investors and the public interest.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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 that is not necessary or appropriate in 
furtherance of 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 self-regulatory organization 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 proposal 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 CBOE. All submissions 
should refer to File No. CBOE-2003-02 and should be submitted by 
February 26, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-2674 Filed 2-4-03; 8:45 am]
BILLING CODE 8010-01-P