[Federal Register Volume 68, Number 42 (Tuesday, March 4, 2003)]
[Notices]
[Pages 10286-10287]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-4952]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47400; File No. SR-CBOE-2003-03]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Board Options Exchange, Inc. Relating to the 
Withdrawal of Approval for Securities Underlying Options Traded on the 
Exchange

February 25, 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 27, 2003, 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 5.4, which governs the 
withdrawal of approval for securities underlying options traded on the 
Exchange. The text of the proposed rule change is available at the 
Office of the Secretary, 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 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
    CBOE Rule 5.4 sets forth the guidelines to be considered by the 
Exchange in determining whether an underlying security previously 
approved for Exchange option transactions no longer meets its 
requirements for the continuance of such approval. Specifically, 
Interpretation and Policy .01(a) to CBOE Rule 5.4 provides that absent 
exceptional circumstances, the Exchange may not list additional series 
on an option class if there are fewer than 6,300,000 shares of the 
underlying security held by persons other than those who are required 
to report their security holdings under section 16(a) of Act \3\ (the 
``float'' requirement). Interpretation and Policy .01(b) to CBOE Rule 
5.4 provides that, absent exceptional circumstances, the Exchange may 
not list additional series on an option class if there are fewer than 
1,600 holders of the underlying security (the ``holders'' requirement).
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    \3\ 15 U.S.C. 78p(a).
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    The Exchange is now proposing to add new Interpretation and Policy 
.11 to CBOE Rule 5.4 to clarify the manner in which the Exchange 
determines whether the so-called ``float'' of the underlying security 
was fewer than 6.3 million shares or the number of ``holders'' of the 
underlying security was fewer than 1,600.
    Specifically, the Exchange proposes to expressly state that in 
determining whether any of the events specified in Interpretation and 
Policy .01(a) or (b) to CBOE Rule 5.4 have occurred, the Exchange would 
monitor on a daily basis news sources for information of corporate 
actions, including stock splits, mergers and acquisitions, distribution 
of special cash dividends, recapitalizations, and stock buy backs. If a 
corporate action indicates that an underlying security no longer meets 
the Exchange's requirements for continued approval under Interpretation 
and Policy .01(a) or (b) to CBOE Rule 5.4, the Exchange would not open 
additional series of option contracts of the class covering the 
underlying security. If, however, information of a corporate action 
does not indicate that any of the events specified in Interpretation 
and Policy .01(a) or (b) to CBOE Rule 5.4 have occurred, the Exchange 
shall consider the events specified in

[[Page 10287]]

Interpretation and Policy .01(a) and (b) to have been satisfied.\4\
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    \4\ The Exchange represents that existing Interpretation and 
Policy .03 to CBOE Rule 5.4 would continue to apply when the 
Exchange considers whether any of the events specified in 
Interpretation and Policy .01 have occurred with respect to an 
underlying security. Specifically, Interpretation and Policy .03 to 
CBOE Rule 5.4 provides that the Exchange shall ordinarily rely on 
information made publicly available by the issuer and/or markets in 
which such security is traded. Telephone conversation between 
Patrick Sexton, CBOE, and Frank N. Genco, Attorney, Division of 
Market Regulation, Commission, on February 11, 2003.
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2. Statutory Basis
    The Exchange believes that the current proposal will allow it to 
provide investors with those options that are most useful and demanded 
by them without sacrificing any investor protection. As such, the 
Exchange believes that 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) of the Act,\6\ in particular, in that it is designed to 
promote just and equitable principles of trade, to facilitate 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, 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

    The Exchange does not believe that the proposed rule change will 
impose any unnecessary or inappropriate burdens on competition.

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 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 the filing will also be 
available for inspection and copying at the principal offices of the 
Exchange. All submissions should refer to File No. SR-CBOE-2003-03 and 
should be submitted by March 25, 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. 03-4952 Filed 3-3-03; 8:45 am]
BILLING CODE 8010-01-P