[Federal Register Volume 68, Number 47 (Tuesday, March 11, 2003)]
[Notices]
[Pages 11595-11597]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-5772]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47445; File No. SR-OC-2003-04]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by OneChicago, LLC Relating to 
Maintenance Standards for a Security Futures Product Based on a Single 
Security

March 5, 2003.
    Pursuant to section 19(b)(7) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-7 under the Act,\2\ notice is hereby given 
that on February 24, 2003, OneChicago, LLC (``OneChicago'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule changes described in 
Items I, II, and III below, which Items have been prepared by 
OneChicago. 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)(7).
    \2\ 17 CFR 240.19b-7.
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    OneChicago also has filed the proposed rule change with the 
Commodity Futures Trading Commission (``CFTC''). OneChicago filed a 
written certification with the CFTC under Section 5c(c) of the 
Commodity Exchange Act \3\ on February 20, 2003.
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    \3\ 7 U.S.C. 7a-2(c).
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I. Self-Regulatory Organization's Description of the Proposed Rule 
Change

    OneChicago proposes to amend the maintenance standards requirement 
(``Maintenance Standards'') for a security futures product based on a 
single security (``Single Stock Future'') relating to the market price 
of the underlying security. The text of the proposed rule change 
appears below.

[[Page 11596]]

New text is in italics. Deleted text is in brackets.

Eligibility and Maintenance Criteria for Security Futures Products

I. No Change

II. Maintenance Standards for a Security Futures Product Based on a 
Single Security

    A. OneChicago will not open for trading any security futures 
product that is physically settled with a new delivery month, and may 
prohibit any opening purchase transactions in the security futures 
product already trading, to the extent it deems such action necessary 
or appropriate, unless the underlying security meets each of the 
following maintenance requirements; provided that, if the underlying 
security is an ETF Share, TIR or Closed-End Fund Share, the applicable 
requirements for initial listing of the related security futures 
product (as described in I.A. above) shall apply in lieu of the 
following maintenance requirements:
    (i)-(iv) No Change.
    (v) [It must have had a market price per security of at least 
$5.00, as measured by the highest closing price reported in any market 
in which it has traded, for a majority of business days during the 
preceding six calendar months; provided, however, that OneChicago may 
waive this requirement and open for trading a security futures product 
with a new delivery month, if:
    (a) The aggregate market value of the underlying security equals or 
exceeds $50 million;
    (b) Customer open interest (reflected on a two-sided basis) equals 
or exceeds 4,000 contracts for all delivery months;
    (c) Its average daily trading volume (in all markets in which the 
underlying security is traded) has been at least 109,000 shares or 
receipts evidencing the underlying security in each of the preceding 12 
months; and
    (d) The market price per share or receipt of the underlying 
security closed at $3.00 or above on a majority of the business days 
during the preceding six calendar months, as measured by the highest 
closing price for the underlying security reported in any market in 
which the underlying security traded, and the market price per share or 
receipt of the underlying security is at least $3.00 at the time such 
additional series are authorized for trading. During the next 
consecutive six calendar month period, to satisfy this paragraph, the 
market price per share or receipt of the underlying security must be at 
least $4.00.]
    The market price per share of the underlying security closed below 
$3.00 on the previous trading day to the Expiration Day of the nearest 
expiring Contract on the underlying security. The market price per 
share of the underlying security will be measured by the closing price 
reported in the primary market in which the underlying security traded.
    Requirement (v) as Applied to Restructure Securities:
    If a Restructure Security is approved for security futures product 
trading under the initial listing standards in Section I, the market 
price history of the Original Equity Security prior to the commencement 
of trading in the Restructure Security, including ``when-issued'' 
trading, may be taken into account in determining whether this 
requirement is satisfied.
    (vi) No Change.
    B-D No Change.

III. No Change

IV. No Change

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

    OneChicago has prepared statements concerning the purpose of, and 
basis for, the proposed rule change, burdens on competition, and 
comments received from members, participants, and others. The text of 
these statements may be examined at the places specified in Item IV 
below. These statements are set forth in Sections A, B, and C below.

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

1. Purpose
    OneChicago proposes to amend Maintenance Standard II.A.v to reduce 
the market price per share of the underlying security from $5.00 to 
$3.00. Under the proposed rule change, OneChicago would not open for 
trading a new delivery month for a Single Stock Future trading on 
OneChicago if the market price per share of the underlying security 
closed below $3.00 on the previous trading day to the expiration of the 
nearest expiring Contract on the underlying security.\4\ The market 
price per share of the underlying security would be determined by the 
closing price reported in the primary market in which the underlying 
security traded.
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    \4\ OneChicago states that under the comparable equity options 
listing standard requirement, the market price per share of the 
underlying security must be at or above a $3.00 last reported trade 
in the primary market in which the underlying security trades at the 
time a new series is added intraday, or for next-day or expiration 
series additions, at or above a $3.00 primary market closing price 
on the previous trading day. Since Single Stock Futures do not 
operate in the same manner as options, this requirement was modified 
to accommodate Single Stock Futures. OneChicago states that it only 
adds a new delivery month for trading once a month. Upon the 
expiration of the near term delivery month, OneChicago will open a 
new delivery month for trading. For example, when the February 
contract for XYZ expires on Friday, February 21, 2003, OneChicago 
would open for trading the May contract for XYZ, on Monday, February 
24, 2003. All May contracts for all Single Stock Futures would be 
added on this date. Since new delivery months for Single Stock 
Futures are only added once a month, the proposed rule change 
requires that the market price (e.g., primary market closing price) 
per share of the underlying security be at or above $3.00 on the day 
prior to the expiration of the nearest expiring Contract on the 
underlying security. In the example above, the market price of XYZ 
would have to be at or above $3.00 on Thursday, February 20, 2003 in 
order for OneChicago to open the May contract for XYZ on Monday, 
February 24, 2003. OneChicago proposes this date because it 
represents the previous trading day to the date OneChicago would be 
required to notify the clearing authorities that it intends to open 
a new delivery month for trading.
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    Currently, under OneChicago Maintenance Standard II.A.v., 
OneChicago may not open for trading a new delivery month unless the 
market price of the underlying security is at least $5.00, as measured 
by the highest closing price reported in any market in which it has 
traded for a majority of business days during the preceding six 
calendar months. OneChicago may waive this requirement and open for 
trading a security future with a new delivery month only if certain 
criteria are met.\5\
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    \5\ OneChicago Maintenance Standard II.A.v. permits OneChicago 
to waive the market price per share requirement of at least $5.00 if 
the following criteria are met: (a)The aggregate market value of the 
underlying security equals or exceeds $50 million;
    (b) Customer open interest (reflected on a two-sided basis) 
equals or exceeds 4,000 contracts for all delivery months;
    (c) Its average daily trading volume (in all markets in which 
the underlying security is traded) has been at least 109,000 shares 
or receipts evidencing the underlying security in each of the 
preceding 12 months; and
    (d) The market price per share or receipt of the underlying 
security closed at $3.00 or above on a majority of the business days 
during the preceding six calendar months, as measured by the highest 
closing price for the underlying security reported in any market in 
which the underlying security traded, and the market price per share 
or receipt of the underlying security is at least $3.00 at the time 
such additional series are authorized for trading. During the next 
consecutive six calendar month period, to satisfy this paragraph, 
the market price per share or receipt of the underlying security 
must be at least $4.00.
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    OneChicago believes that opening of new contract months for trading 
in underlying securities that have a market price per share of $3.00 or 
above is appropriate. The proposed rule change is reasonably designed 
to assure that security futures are not traded on securities that lack 
the sufficient liquidity needed to maintain fair and

[[Page 11597]]

orderly markets, while at the same time, removing unnecessarily complex 
requirements. In addition, OneChicago believes that it is not necessary 
or desirable to restrict the ability of investors to trade Single Stock 
Futures that have underlying security trading between $3.00 and $5.00.
    Section 6(h)(3)(C) of the Act requires that Listing Standards for 
security futures ``be no less restrictive than comparable Listing 
Standards for options traded on a national securities exchange''. * * 
*''\6\ The Commission has approved similar rule changes for the Chicago 
Board Options Exchange, Inc. (``CBOE''),\7\ the American Stock Exchange 
LLC (``Amex''),\8\ the International Stock Exchange, Inc. (``ISE''),\9\ 
the Philadelphia Stock Exchange, Inc. (``Phlx''),\10\ and the Pacific 
Exchange, Inc. (``PCX'').\11\ Since CBOE, Amex, ISE, Phlx and PCX have 
comparable maintenance Listing Standards, the proposed rule change 
meets the requirement of section 6(h)(3)(C) of the Act.\12\
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    \6\ 15 U.S.C. 78f(h)(3)(C).
    \7\ See Securities Exchange Act Release No. 44964 (October 19, 
2001), 66 FR 54559 (October 29, 2001).
    \8\ See Securities Exchange Act Release No. 59278 (November 16, 
2001), 66 FR 59278 (November 27, 2001).
    \9\ See Securities Exchange Act Release No. 45087 (November 20, 
2001), 66 FR 60232 (December 3, 2001).
    \10\ See Securities Exchange Act Release No. 45086 (November 19, 
2001), 66 FR 59832 (November 30, 2001).
    \11\ See Securities Exchange Act Release No. 45038 (November 6, 
2001), 66 FR 57764 (November 16, 2003).
    \12\ 15 U.S.C. 17f(h)(3)C).
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b)(5) of the 
Act \13\ in that it is reasonably designed to prevent fraudulent and 
manipulative acts and practices, and promote just and equitable 
principles of trade. The proposed rule change would also promote 
competition and is designed to protect investors and the public 
interest by providing products that could be used by investors for 
hedging and speculative purposes, while at the same time providing 
investor protection through the design of the proposed rule change and 
the Maintenance Standard requirement that would be applicable.
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    \13\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    OneChicago does not believe that the proposed rule change will have 
a negative impact on competition. In fact, OneChicago believes the 
proposed rule change would promote competition since the proposed rule 
change is no less restrictive than comparable options exchanges.

C. Self-Regulatory Organization's Statement of Comments on the Proposed 
Rule Change Received from Members, Participants, or Others

    Comments on the proposed rule change have not been solicited and 
none have been received.\14\
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    \14\ Telephone conversation between Madge M. Hamilton, Deputy 
General Counsel, OneChicago, and Christopher Solgan, Attorney, 
Division of Market Regulation, Commission, on February 27, 2003.
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III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change has become effective on February 24, 2003. 
Within 60 days of the date of effectiveness of the proposed rule 
change, the Commission, after consultation with the CFTC, may summarily 
abrogate the proposed rule change and require that the proposed rule 
change be refiled in accordance with the provisions of section 19(b)(1) 
of the Act.\15\
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    \15\ 15 U.S.C. 78s(b)(1).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change conflicts with the Act. Persons making written submissions 
should file nine copies of the submission with the Secretary, 
Securities and Exchange Commission, 450 Fifth Street, NW, Washington, 
DC 20549-0609. Comments also may be submitted electronically to the 
following e-mail address: [email protected]. 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 these filings also will be available 
for inspection and copying at the principal office of OneChicago. All 
submissions should refer to File No. SR-OC-2003-04 and should be 
submitted by April 1, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(75).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-5772 Filed 3-10-03; 8:45 am]
BILLING CODE 8010-01-P