[Federal Register Volume 68, Number 73 (Wednesday, April 16, 2003)]
[Notices]
[Page 18717]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-9318]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47651; File No. SR-CBOE-2003-03]


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

April 8, 2003.
    On January 27, 2003, the Chicago Board Options Exchange, Inc. 
(``CBOE'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'')\1\ and rule 19b-4 thereunder,\2\ a 
proposed rule change to amend CBOE rule 5.4, which governs the 
withdrawal of approval for securities underlying options traded on the 
Exchange.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The Exchange proposed 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 (``float'' requirement) or the number of 
``holders'' of the underlying security was fewer than 1,600 
(``holders'' requirement). Specifically, the Exchange proposed 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 requirements 
set forth in Interpretation and Policy .01(a) and (b) to have been 
satisfied.\3\
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    \3\ 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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    The proposed rule change was published for comment in the Federal 
Register on March 4, 2003.\4\ The Commission received no comments on 
the proposal.
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    \4\ See Securities Exchange Act Release No. 47400 (February 25, 
2003), 68 FR 10286.
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    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange \5\ and, in 
particular, the requirements of section 6 of the Act \6\ and the rules 
and regulations thereunder. The Commission finds that the proposed rule 
change is consistent with section 6(b)(5) of the Act,\7\ because it 
clarifies how the Exchange determines whether the ``float'' and 
``holder'' requirements set forth in Interpretation and Policy .01(a) 
and (b) to CBOE rule 5.4 respectively are satisfied. Specifically, the 
Commission believes it is reasonable to permit the Exchange to monitor 
on a daily basis news sources for information of corporate actions 
indicating whether the events specified in Interpretation and Policy 
.01(a) and (b) to CBOE rule 5.4 have occurred to establish whether an 
underlying security of a class of options no longer meets the 
Exchange's requirements for continued approval.
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    \5\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(5).
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    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act\8\, that the proposed rule change (File No. SR-CBOE-2003-03) be, 
and it hereby is, approved. 
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    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-9318 Filed 4-15-03; 8:45 am]
BILLING CODE 8010-01-P