[Federal Register Volume 68, Number 141 (Wednesday, July 23, 2003)]
[Notices]
[Pages 43555-43564]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-18736]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48191; File No. SR-OC-2003-06]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by OneChicago, LLC Relating to 
MicroSector Futures

July 17, 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 June 20, 2003, OneChicago, LLC (``OneChicago'') filed with the 
Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change described in Items I and II below, which Items 
have been prepared

[[Page 43556]]

by OneChicago.\3\ The Commission is publishing this notice to solicit 
comments on the proposed rule changes from interested persons. 
OneChicago also filed the proposed rule change with the Commodity 
Futures Trading Commission (``CFTC''), together with written 
certifications under Section 5c(c) of the Commodity Exchange Act 
(``CEA'')\4\ on June 19, 2003.
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    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 17 CFR 240.19b-7.
    \3\ With the permission of OneChicago, the Commission made a 
typographical, non-substantive correction to the text of the 
proposed rule change. See telephone conversation between Madge 
Hamilton, Deputy General Counsel, OneChicago and Andrew Shipe, 
Special Counsel, Division of Market Regulation, Commission, July 7, 
2003.
    \4\ 7 U.S.C. 7a-2(c).
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I. Self-Regulatory Organization's Description of the Proposed Rule 
Change

    OneChicago is proposing to establish listing standards and amend 
its rules providing position limits, final settlement prices for 
futures on cash-settled narrow-based security indices, and employee 
confidentiality all of which are attached to the proposed rule change. 
The text of the proposed rule change follows; additions are italicized; 
deletions are [bracketed].
* * * * *

LISTING STANDARDS

For MicroSectors

CASH SETTLED NARROW-BASED INDEX FUTURES

    V. Initial eligibility criteria for a MicroSector security futures 
product, based on an index composed of two or more securities.
    A. For a cash settled Dow Jones MicroSector security futures 
product, the Dow Jones MicroSector Index must:
    (i) Meet the definition of a narrow-based security index in Section 
1a(25) of the Commodity Exchange Act and Section 3(a)(55) of the 
Exchange Act; and
    (ii) Meet the following requirements:
    (a) It must be approximately equal dollar-weighted composed of one 
or more securities in which each component security will be weighted 
equally based on its market price on the Selection Date.
    (b) Each of its component securities must be registered under 
Section 12 of the Exchange Act.
    (c) Each of its component securities must be a component security 
in the Dow Jones U.S. Total Market Index or an ADR linked to a security 
in the Dow Jones Global Index.
    (d) Each of its component securities must be the subject of a U.S. 
exchange-traded option on the date of selection for inclusion in the 
index.
    (e) Each of its component securities must have a trading history on 
a U.S. exchange for at least 12 months.
    (f) Each of its component securities must have a ``float market 
capitalization'' of at least one billion dollars.
    (g) Each of its component securities close at or above $7.50 for 
each of the trading days in the three months prior to selection for the 
index.
    (h) Subject to (g), (i) and (k) below, component securities that 
account for at least 90 per cent of the total index weight and at least 
80 per cent of the total number of component securities in the index 
must meet the requirements for listing a single-security future 
contract, as set forth in Section I.
    (i) Each of its component securities must have an average daily 
trading volume in each of the preceding 12 months prior to selection 
for inclusion in the index greater than 109,000 shares (an ADR must 
have an average daily trading volume greater than 100,000 receipts).
    (j) Each of its component securities must be (1) listed on an 
Exchange or traded through the facilities of an Association and (2) 
reported as an NMS security.
    (k)(1) OneChicago must have in place an effective surveillance 
sharing agreement with the primary exchange in the home country where 
the stock underlying each component ADR is traded;
    (2) The combined trading volume of each component ADR and other 
related ADRs and securities in the U.S. ADR market, or in markets with 
which OneChicago has in place an effective surveillance sharing 
agreement, represents (on a share equivalent basis) at least 50% of the 
combined worldwide trading volume in the ADR, the security underlying 
the ADR, other classes of common stock related to the underlying 
security, and ADRs overlying such other stock over the three-month 
period preceding the dates of selection of the ADR for futures trading 
(``Selection Date'');
    (3)(A) The combined trading volume of each component ADR and other 
related ADRs and securities in the U.S. ADR market, and in markets with 
which OneChicago has in place an effective surveillance sharing 
agreement, represents (on a share equivalent basis) at least 20% of the 
combined worldwide trading volume in the ADR and in other related ADRs 
and securities over the three-month period preceding the Selection 
Date;
    (B) The average daily trading volume for the ADR in the U.S. 
markets over the three-month period preceding the Selection Date is at 
least 100,000 receipts; and
    (C) The daily trading volume for the ADR is at least 60,000 
receipts in the U.S. markets on a majority of the trading days for the 
three-month period preceding the Selection Date;
    (4) The Securities and Exchange Commission and Commodity Futures 
Trading Commission have otherwise authorized the listing; or
    (5) Foreign securities or ADRs thereon that are not subject to 
comprehensive surveillance sharing agreements must not represent more 
than 20% of the weight of the index.
    (l) The current underlying index value must be reported at least 
once every 15 seconds during the time the MicroSector futures product 
is traded on OneChicago.
    (m) An index underlying a MicroSector future must be reconstituted 
and rebalanced if the notional value of the largest component is at 
least twice the notional volume of the smallest component for 50 per 
cent or more of the trading days in the three months prior to December 
31 of each year. For purposes of this provision the ``notional value'' 
is the market price of the component times the number of shares of the 
underlying component in the index. Reconstitution and rebalancing are 
also mandatory if the number of component securities in the index is 
greater than five at the time of rebalancing. In addition, OneChicago 
reserves the right to rebalance quarterly at its discretion.
    (n) The MicroSector futures products will be AM settled.
    (o) The initial indexes underlying MicroSector futures products 
will be created only for industry groups that have five or more 
qualifying securities.
    VI. Maintenance standards for a MicroSector futures product based 
on an index composed of two or more securities.
    A. OneChicago will not open for trading MicroSector futures 
products that are cash settled based on an index composed of two or 
more securities with a new delivery month unless the underlying index:
    (i) Meets the definition of a narrow-based security index in 
Section 1a(25) of the Commodity Exchange Act and Section 3(a)(55) of 
the Exchange Act; and
    (ii) Meets the following requirements:
    (a) All of its component securities must be registered under 
Section 12 of the Exchange Act;
    (b) Subject to (d) and (i) below, component securities that account 
for at least 90 per cent of the total index weight and at least 80 per 
cent of the

[[Page 43557]]

total number of component securities in the index must meet the 
requirements for listing a single-security future, as set forth in 
Section I.
    (c) Each component security in the index must have 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 per cent of the weight of the index may have a market 
capitalization of only $50 million.
    (d) The average daily trading volume in each of the preceding six 
months for each component security in the index must be at least 22,750 
shares or receipts, except that each of the lowest weighted component 
securities in the index that in the aggregate account for no more than 
10 per cent 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.
    (e) Each component security in the index must be (1) listed on an 
Exchange or traded through the facilities of an Association and (2) 
reported as an NMS security.
    (f) The current underlying index value must be reported at least 
once every 15 seconds during the time the security futures product is 
traded on OneChicago.
    (g) An approximately equal dollar weighted index underlying a 
MicroSector future must be reconstituted and rebalanced if the notional 
value of the largest component is at least twice the notional volume of 
the smallest component for 50 per cent or more of the trading days in 
the three months prior to December 31 of each year. For purposes of 
this provision the ``notional value'' is the market price of the 
component times the number of shares of the underlying component in the 
index. Reconstitution and rebalancing are also mandatory if the number 
of component securities in the index is greater than five at the time 
of rebalancing. In addition, OneChicago reserves the right to rebalance 
quarterly at its discretion.
    (h) The total number of component securities in the index must 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.
    (i)(1) OneChicago must have in place an effective surveillance 
sharing agreement with the primary exchange in the home country where 
the stock underlying each component ADR is traded;
    (2) The combined trading volume of each component ADR and other 
related ADRs and securities in the U.S. ADR market, or in markets with 
which OneChicago has in place an effective surveillance sharing 
agreement, represents (on a share equivalent basis) at least 50 per 
cent of the combined worldwide trading volume in the ADR, the security 
underlying the ADR, other classes of common stock related to the 
underlying security, and ADRs overlying such other stock over the 
three-month period preceding the dates of selection of the ADR for 
futures trading (``Selection Date'');
    (3)(a) The combined trading volume of the ADR and other related 
ADRs and securities in the U.S. ADR market, and in markets with which 
OneChicago has in place an effective surveillance sharing agreement, 
represents (on a share equivalent basis) at least 20 per cent of the 
combined worldwide trading volume in the ADR and in other related ADRs 
and securities over the three-month period preceding the Selection 
Date;
    (b) The average daily trading volume for the ADR in the U.S. 
markets over the three-month period preceding the Selection Date is at 
least 100,000 receipts; and
    (c) The daily trading volume for the ADR is at least 60,000 
receipts in the U.S. markets on a majority of the trading days for the 
three-month period preceding the Selection Date;
    (4) The Securities and Exchange Commission and Commodity Futures 
Trading Commission have otherwise authorized the listing, or
    (5) Foreign securities or ADRs thereon that are not subject to 
comprehensive surveillance sharing agreements must not represent more 
than 20 per cent of the weight of the index.
    B. (1) If the foregoing maintenance standards are not satisfied 
prior to opening a MicroSector futures product with a new delivery 
month, OneChicago will either (i) replace the component security or 
securities that fail to meet the maintenance standards with a security 
or securities that qualify under the initial listing standards for 
MicroSector futures products set forth in Section V, or (ii) receive 
the approval of the Securities and Exchange Commission and the 
Commodity Futures Trading Commission.
* * * * *
210. Confidentiality
    (a) No member of the Board or any committee established by the 
Board or the Rules of the Exchange shall use or disclose any material 
non-public information, obtained in connection with such member's 
participation in the Board or such committee, for any purpose other 
than the performance of his or her official duties as a member of the 
Board or such committee.
    (b) No officer, employee or agent of the Exchange shall (i) trade 
in any commodity interest or security if such officer, employee or 
agent has access to material non-public information concerning such 
commodity interest or security (ii) disclose to any other Person 
material non public information obtained in connection with such 
employee's, officer's or agent's employment, if such employee, officer 
or agent could reasonably expect that such information may assist 
another Person in trading any commodity interest.
    (c) For purposes of this Rule 210, the terms ``employee,'' 
``material information,'' ``non-public information'' and ``commodity 
interest'' shall have the meanings ascribed to them in Commission 
Regulation Sec.  1.59. For purposes of this Rule 210, the term 
``security'' shall have the meaning ascribed to it in Section 3(a)(10) 
of the Exchange Act.
* * * * *
Rule 1002 Contract Specifications
    (a)-(d) No Change
    (e) Position Limit. (1) Pursuant to [For purposes of] Rule 414(a), 
[the position limit applicable to positions in any] the Exchange shall 
establish speculative position limits for each cash-settled Stock Index 
Future held during the last five trading days of an expiring contract 
month, [shall be] determined according to the methodology set forth in 
subparagraph (2).
    (2) The position limit for each cash-settled Stock Index Future 
shall be the number of contracts calculated according to formula (A) 
``Market Cap Position Limit'' or (B) ``SSF Position Limit'' below, 
whichever is less, rounded to the nearest multiple of 1,000 contracts; 
provided, however, that if formula (A) or (B), whichever is less, 
calculates a number less than 500 but not less than 400 for any such 
Future, the position limit will be 1,000 contracts.
    (A) ``Market Cap Position Limit''
    i. The Exchange will determine the market capitalization of the 
Standard & Poor's 500 index (the ``S&P 500'') as of the selection date 
for the component securities in an underlying Stock Index (the 
``Selection Date'') (the ``S&P 500 Market Cap''); then
    ii. The Exchange will calculate the notional value of a future 
position in CME's S&P 500 futures contract at its maximum limit (the 
``S&P 500 Notional Value Limit'') by multiplying the S&P 500 by the 
position limit for Chicago Mercantile Exchange's (``CME'') S&P 500 
futures (20,000 contracts in all

[[Page 43558]]

months combined) and by the S&P 500 contract multiplier ($250) to 
calculate:

S&P 500 Notional Value Limit = S&P 500 * 20,000 * $250; then
    iii. The Exchange will divide the S&P 500 Market Cap by the S&P 500 
Notional Value Limit to calculate the ``Market Cap Ratio'':

Market Cap Ratio =
S&P 500 Market Cap
S&P 500 Notional Value Limit then

    iv. The Exchange will calculate the market capitalization of the 
Stock Index by adding together the market capitalization of each stock 
comprising the Stock Index (the ``Stock Index Market Cap''); then
    v. The Exchange will calculate the notional value of the Stock 
Index Future (the ``Notional Value'') as follows:

Notional Value =
Stock Index level * contract multiplier

    vi. The Exchange will calculate the Market Cap Position Limit of 
the Stock Index by dividing the Stock Index Market Cap by the product 
of the Notional Value of the Stock Index Future and the Market Cap 
Ratio:

Market Cap Position Limit = Stock Index Market Cap
Notional Value * Market Cap Ratio

    (B) ``SSF Position Limit''
    i. The Exchange will calculate the notional value of the Stock 
Index Future (same as (A)(v) above):

Notional Value = Stock Index level * contract multiplier

    ii. For each component security in the Stock Index, the Exchange 
will multiply its index weight* by the Notional Value to determine that 
security's proportion of the Stock Index Future.
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    *Index weight of the component security = (assigned shares * 
price) of the component security / the sum of (assigned shares * 
price) for each component security.
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    iii. For each component security, the Exchange will divide the 
result in (B)(ii) by the security's price. This equals the number of 
shares of that security represented in the Stock Index contract.
    iv. For each component security, the Exchange will divide the 
number of shares calculated in (B)(iii) by 100 to obtain the implied 
number of 100-share contracts per Stock Index Future contract.
    v. The Exchange will divide the applicable single stock futures 
contract speculative position limit set in Commission Regulation 
41.25(a)(3) (either 13,500 or 22,500 contracts) by the number of 
implied 100-share contracts. This provides the number of Stock Index 
Futures contracts that could be held without violating the speculative 
position limit on a futures contract on that component security (if 
such single stock futures contract existed). If the security qualifies 
for position accountability, ignore that security for purposes of this 
calculation.
    vi. The Exchange will list the results of (B)(iv) and (B)(v). The 
SSF Position Limit is the minimum number of implied contracts based on 
this list.
    (f)-(h) No Change
    (i) Settlement Price.
    (1) Daily Settlement Price. The daily settlement price for cash-
settled Stock Index Futures will be calculated in the same manner as 
Rule 902(j).
    (2) Final Settlement Price. (A) The final settlement price for 
cash-settled Stock Index Futures shall be determined on the third 
Friday of the contract month. If the Exchange is not open for business 
on the third Friday of the contract month, the final settlement price 
shall be determined on the Business Day prior to the third Friday of 
the contract month. The final settlement price for cash-settled Stock 
Index Futures shall be based on a special opening quotation of the 
underlying stock index (``Stock Index'').
    (B) Notwithstanding subparagraph (2)(A) of this Rule, if an opening 
price for one or more securities underlying a Stock Index Future is not 
readily available, the Chief Executive Officer of the Exchange or his 
designee for such purpose (referred to hereafter in this Rule 1002(i) 
as the ``Designated Officer'') will determine whether the security or 
securities are likely to open within a reasonable time.
    (i) If the Designated Officer determines that one or more component 
securities are not likely to open within a reasonable time, then for 
the component security or securities which the Designated Officer 
determined were not likely to open within a reasonable time, the last 
trading price of the underlying security or securities during the most 
recent regular trading session for such security or securities will be 
used to calculate the special opening quotation.
    (ii) If the Designated Officer determines that the security or 
securities are likely to open within a reasonable time, then for the 
component security or securities which the Designated Officer 
determined were likely to open within a reasonable time, the next 
available opening price of such security or securities will be used to 
calculate the special opening quotation.
    (C) For purposes of this provision:
    (i) ``Opening price'' means the official price at which a security 
opened for trading during the regular trading session of the national 
securities exchange or national securities association that lists the 
security. If the security is not listed on a national securities 
exchange or a national securities association, then ``opening price'' 
shall mean the price at which a security opened for trading on the 
primary market for the security. Under this provision, if a component 
security is an American Depository Receipt (``ADR'') traded on a 
national securities exchange or national securities association, the 
opening price for the ADR would be derived from the national securities 
exchange or national securities association that lists it.
    (ii) ``Special opening quotation'' means the Stock Index value that 
is derived from the sum of the opening prices of each security of the 
Stock Index.
    (iii) ``Regular trading session'' of a security means the normal 
hours for business of a national securities exchange or national 
securities association that lists the security.
    (iv) The price of a security is ``not readily available'' if the 
national securities exchange or national securities association that 
lists the security does not open on the day scheduled for determination 
of the final settlement price, or if the security does not trade on the 
securities exchange or national securities association that lists the 
security during regular trading hours.
    (D) Notwithstanding any other provision of this Rule, this Rule 
shall not be used to calculate the final settlement price of a Stock 
Index Future if The Options Clearing Corporation fixes the final 
settlement price of such Stock Index Future in accordance with its 
rules and by-laws and as permitted by Commission Regulation Sec.  
41.25(b) and SEC Rule 6h-1(b)(3).
* * * * *

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 
statutory basis for, the proposed rules, burdens on competition, and 
comments received from members, participants, and others. 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
    The proposed rule change would establish listing standards 
(``Listing Standards'') for cash-settled futures on

[[Page 43559]]

narrow-based security indices that would trade under the brand name 
``OneChicago Dow Jones MicroSector Futures'' (``MicroSector Futures''). 
The proposed rule change would also amend OneChicago Rule 1002(e) 
relating to position limits, Rule 1002(i) relating to the final 
settlement price of MicroSector Futures and Rule 210 relating to 
employee confidentiality.
    Dow Jones & Company, Inc. (``Dow Jones'') with the assistance of 
OneChicago will maintain the Dow Jones MicroSector Index on which each 
MicroSector Futures is based in a manner consistent with the proposed 
Listing Standards.\5\ Each Dow Jones MicroSector Index will initially 
be comprised of five component securities, which will be approximately 
equal dollar weighted. The five component securities will be selected 
based on their market capitalization, option volume, dollar volume and 
correlation to one another within an industry group as defined by the 
Dow Jones Global Classification Standard.
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    \5\ In conjunction with the proposed rule change, OneChicago is 
amending Rule 210 to prevent potential misuse by OneChicago staff of 
material, non-public information in connection with the maintenance 
of the Dow Jones MicroSector Indexes.
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Weighting of Dow Jones MicroSectors

    The initial notional value of each Dow Jones MicroSector Index will 
be $40,000. Share lots will be created to ``approximate equal dollar 
weighting'' for each component security in a Dow Jones MicroSector 
Index. Therefore, the aggregate market value of the shares in each 
share lot will initially equal $8,000.\6\
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    \6\ The number of shares will be calculated by dividing the 
initial notional dollar value of each share lot ($8,000) by the 
closing price of the stock on the date on which the terms of the Dow 
Jones MicroSector Index are finalized or adjusted (the ``Selection 
Date'') carried out to eight decimal places.
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Composition of Dow Jones MicroSector Indexes

    The proposed Listing Standards require each security to meet all of 
the following qualifications to be included in a Dow Jones MicroSector 
Index:
    [sbull] Be registered under section 12 of the Exchange Act;* \7\
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    \7\ OneChicago (not the index calculation agent, Dow Jones) is 
responsible for ensuring that the components of the Dow Jones 
MicroSector Indexes comply with the criteria identified by an 
asterisk (*).
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    [sbull] Be a common stock or an American Depositary Receipt 
(``ADR'') representing common stock or ordinary shares;
    [sbull] Be a component security in the Dow Jones U.S. Total Market 
Index or an ADR linked to a company in the Dow Jones Global Index \SM\ 
;\8\
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    \8\ Component securities in these indices are listed on the New 
York Stock Exchange, Inc. (``NYSE''), the American Stock Exchange 
LLC (``Amex'') or the Nasdaq Stock Market, Inc. (``Nasdaq'').
---------------------------------------------------------------------------

    [sbull] Have U.S. exchange-traded options on the security;
    [sbull] Have a trading history on a U.S. exchange for at least 12 
months;
    [sbull] Have a ``float market capitalization'' \9\ of at least one 
billion dollars; \10\
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    \9\ ``Float market capitalization'' is the aggregate market 
value of the outstanding shares of the issuer which are available 
for trading by the public and does not include the market value of 
shares which are subject to trading restrictions.
    \10\ All market capitalization data is based on closing prices, 
number of outstanding shares, and number of shares available for 
trading by the public as of the Selection Date.
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    [sbull] Have at least seven million shares or receipts evidencing 
the underlying security outstanding that are owned by persons other 
than those required to report their security holdings pursuant to 
Section 16(a) of the Act; \11\ *
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    \11\ 15 U.S.C. 78p(a).
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    [sbull] Have at least 2,000 security holders;*
    [sbull] Close at or above $7.50 for each of the trading days in the 
three months prior to the Selection Date; and
    [sbull] Have an average daily trading volume (``ADTV'') for each of 
the 12 months prior to the Selection Date greater than 109,000 shares 
(an ADR must have an ADTV greater than 100,000 receipts).
    A Dow Jones MicroSector will only be created if five or more 
securities in an eligible industry group qualify under the foregoing 
criteria.

Reconstitution and Rebalancing the Index

    Under the proposed Listing Standards, a Dow Jones MicroSector Index 
will be reconstituted and rebalanced if the aggregate market value of 
the largest component is at least twice the aggregate market value of 
the smallest component for 50 percent or more of the trading days in 
the three months prior to the Selection Date. Reconstitution and 
rebalancing are mandatory if, as a result of spin-offs or other 
corporate action, the number of component securities in the index 
exceeds five. OneChicago also reserves the right to rebalance quarterly 
at its discretion.

Corporate Actions

    In the event Dow Jones needs to remove a stock from a Dow Jones 
MicroSector as a result of a bankruptcy, ten consecutive no-trade days, 
delisting from NYSE, Nasdaq, or Amex, or financial distress, Dow Jones 
will add a replacement security on the effective date of the removal to 
maintain a total of five component securities in the index. If a Dow 
Jones MicroSector falls below four stocks, either Dow Jones will 
replace the component securities to bring the number of component 
securities in the index back up to five or OneChicago will delist the 
related MicroSector Future.
    Corporate actions affecting the price of the component securities 
in a Dow Jones MicroSector (e.g., splits and dividends) will require an 
adjustment of the share lots to maintain index integrity. The 
adjustments will be made before the open of trade on the effective date 
of the action. All adjustments to the share lots will preserve the 
weighting prior to and after the corporate event, causing no change to 
the index level or divisor. When a component security is removed from a 
Dow Jones MicroSector due to a merger, the common stock of the 
acquiring company will replace the component security in the index and 
will be kept in the index until the next Selection Date.
    The following is a chart of how corporate actions will be handled:

                                                Corporate Actions
----------------------------------------------------------------------------------------------------------------
                       Type                                      Adjustments
-----------------------------------------------------------------------------------------
                                                       Close price/                                Notes
             Action                   Company             action           Share lot
----------------------------------------------------------------------------------------------------------------
Special Cash Dividend..........  Component of       Adj. Close=Prev.   Adj. Share         ......................
                                  Index.             Close - Dividend.  Lot=(Share Lot*
                                                                        Prev Close)/Adj.
                                                                        Close.
--------------------------------
Stock Split or Dividend........  Component of       Adj. Close=Prev.   Adj. Share         Adjustment
                                  Index.             Close/Adjustment   Lot=Prev. Share    Factor=number of new
                                                     Factor.            Lot* Adjustment    shares for one old
                                                                        Factor.            share
--------------------------------

[[Page 43560]]

 
Spin Off.......................  Component of       Adj. Close=Close-                     Ratio=number of shares
                                  Index (A).         (Ratio * Spun                         of spun-off company
                                                     off company's                         received for every
                                                     Price).                               share of parent
                                                                                           company owned. Spun-
                                                                                           off company be added
                                                                                           at a weight such that
                                                                                           the market
                                                                                           capitalization of the
                                                                                           two companies after
                                                                                           the event is equal to
                                                                                           the market
                                                                                           capitalization of the
                                                                                           parent prior to the
                                                                                           event.
                                ---------------------------------------------------------
                                 Spun Off Company   ADDED............  Share Lot=((Share  ......................
                                  (B).                                  Lot A* Prev.
                                                                        Close A)-(Adj.
                                                                        Share Lot A*Adj.
                                                                        Close A))/Close
                                                                        B.
--------------------------------
Two Components Merge in an All   Remaining                             Adj. Share         All remaining
 Stock, Cash or Combination       Companies (A).                        Lot=Share Lot +    companies will be
 Deal.                                                                  B's Share Lot)/    adjusted using the
                                                                        number of          formula to the left.
                                                                        remaining          Their shares will
                                                                        components)/A's    increase based on
                                                                        Close.             their price so as to
                                                                                           distribute the weight
                                                                                           of the acquired
                                                                                           company evenly.
                                ---------------------------------------------------------
                                 Acquired Company   DELETED                               ......................
                                  (B).
--------------------------------
A Non-Component Takes Over a     Acquirer (A).....  ADDED............  Adj. Share         The acquiring company
 Component.                                                             Lot=(B's Share     will replace the
                                                                        Lot * B's Close)/  acquired company in
                                                                        A's Close.         the index and the
                                                                                           share lot will be
                                                                                           adjusted.
                                ---------------------------------------------------------
                                 Acquired           DELETED                               ......................
                                  Component of
                                  Index (B).
--------------------------------
Rights Issue...................  Component of       Adj.               Adj. Share         Ratio=number of rights
                                  Index (A).         Close=(Close+(Ra   Lot=(Close *       received for 1 share
                                                     tio *              Share Lot)/Adj.    of A.
                                                     Subscription       Close.
                                                     Price))/
                                                     (1+Ratio).
--------------------------------
Extraordinary Removal..........  Replacement        ADDED............  Adj. Share         Component B may be
                                  Company (A).                          Lot=(B's Share     removed for:
                                                                        Lot * B's Close)   Bankruptcy
                                                                        A's Close.         proceedings,
                                                                                           financial distress
                                                                                           (as determined by Dow
                                                                                           Jones), delisting
                                                                                           from a primary
                                                                                           exchange (NYSE,
                                                                                           Nasdaq, Amex), or
                                                                                           illiquidity (10
                                                                                           consecutive no-trade
                                                                                           days). Replacement A
                                                                                           would be the highest
                                                                                           ranked (as of the
                                                                                           most recent Selection
                                                                                           Date) of the
                                                                                           remaining securities
                                                                                           in the industry group
                                                                                           which qualify for
                                                                                           inclusion.
                                ---------------------------------------------------------
                                 Component of       DELETED                               ......................
                                  Index (B).
----------------------------------------------------------------------------------------------------------------

Position Limits

    The proposed rule change to Rule 1002(e) provides the methodology 
to calculate position limits \12\ for any cash-settled futures contract 
on a narrow-based security index (``Stock Index''), including the 
MicroSector Futures. The Exchange would calculate two numbers: One is 
based on the market capitalization of each Stock Index future and the 
notional value compared to the market capitalization of the Chicago 
Mercantile Exchange (``CME'') position limit for its futures contract 
on the S&P 500 Index (referred to herein as the ``Market Cap Method''), 
and the other is based on the current position limit permitted for 
single stock futures under CFTC Regulation 41.25\13\ (referred to 
herein as the ``SSF Limit Method''). The Exchange would impose a 
position limit on each Stock Index future equal to the lower number 
calculated by the two methods rounded to the nearest 1,000 contracts; 
provided, however, that if the result of either calculation is less 
than 500, but not less than 400 for any such Future, the position limit 
will be rounded up to 1,000 contracts.
---------------------------------------------------------------------------

    \12\ Consistent with CFTC Regulation 41.25, position limits 
apply to positions in any cash-settled stock index future held 
during the last five trading days of an expiring contract.
    \13\ 17 CFR 41.25.
---------------------------------------------------------------------------

    Under the Market Cap Method, the Exchange would determine the 
market capitalization of the S&P 500 Index,\14\ then calculate the 
notional value of a position at the limit of the CME's S&P 500 Index 
futures contract (the ``S&P 500 Notional Value Limit'') \15\ and

[[Page 43561]]

divide the first amount by the second to determine the market 
capitalization ratio (the ``Ratio'').\16\ The Exchange would then 
determine the market capitalization and the Notional Value of the Stock 
Index. To calculate the Market Cap Method number, the Exchange would 
divide the market capitalization of the Stock Index by the contract 
size of the Stock Index futures multiplied by the Ratio.\17\
---------------------------------------------------------------------------

    \14\ The Exchange will calculate the market capitalization as of 
the Selection Date.
    \15\ The speculative position limit for the CME's S&P 500 Index 
futures contract is 20,000 contracts (in all months combined) and 
the contract multiplier is $250. S&P 500 Notional Value Limit = 
Index * 20,000 * 250.
    \16\ Ratio = Market Capitalization of S&P 500 Index / S&P 500 
Notional Value Limit.
    \17\ Market Capitalization Methodology number = market 
capitalization of the Stock Index / (contract size of the Stock 
Index Future * Ratio).
---------------------------------------------------------------------------

    Under the SSF Limit Method, the Exchange would calculate the 
Notional Value of the Stock Index Future.\18\ For each component 
security in the Stock Index, the Exchange would multiply the index 
weight of the component security \19\ by the Notional Value to 
determine the security's proportion of the Stock Index futures (``Share 
Weighting''). The Exchange would then divide each security's Share 
Weighting by its price to calculate the number of shares of that 
security represented in the Stock Index futures contract (``Implied 
Shares''). The Exchange would then, for each component security in the 
Stock Index, divide the Implied Shares by 100 to obtain the implied 
number of 100-share contracts of each component security in each Stock 
Index future contract. The Exchange would divide the applicable single 
stock futures position limit permitted under CFTC Regulation 
41.25(a)(3) \20\ (either 13,500 or 22,500 contracts) for each component 
security by the number of implied 100-share contracts. This equals the 
number of Stock Index futures contracts that could be held without 
exceeding the speculative position limit on a futures contract on the 
component security (``Implied SSF Speculative Limit''). If a component 
security qualified for position accountability under CFTC Regulation 
41.25(a)(3),\21\ this step would be ignored for that security for 
purposes of this calculation. After calculating the Implied SSF 
Speculative Limit for each security in the Stock Index, the Exchange 
identifies the lowest Implied SSF Speculative Limit as the position 
limit for such futures contract under the SSF Limit Method.
---------------------------------------------------------------------------

    \18\ Notional Value = index level * contract multiplier.
    \19\ Index weight of the component security = (assigned shares * 
price) of the component security / the sum of (assigned shares * 
price) for each component security.
    \20\ 17 CFR 41.25(a)(3).
    \21\ 17 CFR 41.25(a)(3).
---------------------------------------------------------------------------

    Final Settlement Price
    OneChicago also proposes to add paragraph (i) to Rule 1002 to 
establish how the final settlement price will be calculated for Stock 
Index futures, including MicroSector Futures. Under the proposed rule 
change to Rule 1002(i), a special opening quotation (``SOQ'') of the 
relevant Stock Index will be calculated using the opening price of each 
component stock. When all of the component stocks have opened, the 
final SOQ will be calculated and disseminated.
    If the price of a component security or securities is not readily 
available \22\ on the day scheduled for determination of the final 
settlement price, the price of the component security or securities 
shall be based on the next available opening price of that security 
unless the Chief Executive Officer or his designee for such purposes 
(``Designated Officer'') determines that such security or securities 
will not open within a reasonable time. If the Designated Officer makes 
such a determination, the price of the relevant component security or 
securities for purposes of calculating the final settlement price, will 
be the price of the security or securities during the most recent 
regular trading session for such security or securities.
---------------------------------------------------------------------------

    \22\ Under proposed Rule 1002(i)(2)(C)(iv), the price of a 
security is ``not readily available'' if the underlying market does 
not open on the date set for determination of the final settlement 
price or if the security does not trade on such securities exchange 
or national securities association during regular trading hours.
---------------------------------------------------------------------------

    Proposed Rule 1002(i) also provides that the Rule shall not be used 
to calculate the final settlement price of a Stock Index futures if The 
Options Clearing Corporation (``OCC'') fixes the final settlement price 
of the Stock Index future in accordance with OCC's rules and By-Laws 
and as permitted under the Commission's Rule 6h-1(b)(3) \23\ and CFTC 
Regulation 41.25.\24\
---------------------------------------------------------------------------

    \23\ 17 CFR 240.6h-1(b)(3).
    \24\ 17 CFR 240.41.25(b).
---------------------------------------------------------------------------

    CFMA Listing Standard Requirements for Security Futures
    Section 6(h) of the Act \25\ requires that certain standards be met 
for an exchange to trade security futures products (``SFPs''). The 
proposed rule change meets these standards. First, section 6(h)(3)(A) 
of the Act \26\ requires that each security underlying a SFP must be 
registered pursuant to section 12 of the Act. Both the initial and 
maintenance Listing Standards for MicroSector Futures meet this 
requirement.\27\
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78f(h)(3)(A).
    \26\ 15 U.S.C. 78l.
    \27\ See proposed Listing Standards requirements V.A.ii.b. and 
VI.A.ii.a.
---------------------------------------------------------------------------

    Section 6(h)(3)(C) of the Act \28\ requires that OneChicago's 
Listing Standards for MicroSector Futures be no less restrictive than 
comparable listing standards for options traded on a national 
securities exchange. On September 5, 2001, the SEC Division of Market 
Regulation (the ``Division'') published Staff Legal Bulletin No. 15 
(``Bulletin No. 15'') \29\ to offer guidance on how a securities 
exchange can satisfy this requirement. One Chicago states that the 
proposed Listing Standards follow the model listing standards in 
Bulletin No. 15 with a few modifications to tailor the Listing 
Standards to this particular product.
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 78f(h)(3)(C).
    \29\ U.S. Securities and Exchange Commission, Division of Market 
Regulation: Staff Legal Bulletin No. 15 (September 5, 2001).
---------------------------------------------------------------------------

    First, under the proposed Listing Standards, OneChicago notes that 
the component securities of the Dow Jones MicroSector Indices must have 
a ``float market capitalization'' of at least one billion dollars.\30\ 
In contrast, the model listing standards in Bulletin No. 15 state that 
component securities of an index have a minimum market capitalization 
of only $75 million.\31\ Second, OneChicago notes that the proposed 
Listing Standards require that the component securities of a Dow Jones 
MicroSector Index have an ADTV of 109,000 shares in each of the 
preceding 12 months,\32\ whereas the model listing standards in 
Bulletin No. 15 suggest that each component security have an ADTV of 
only 45,500 shares for each of the preceding six months.\33\
---------------------------------------------------------------------------

    \30\ See proposed Listing Standard requirement V.A.ii.f.
    \31\ See Bulletin No. 15 model listing standard III.A.ii.d. 
Under this listing standard, each of the lowest weighted securities 
in the index that in the aggregate account for no more than 10 per 
cent of the weight of the index may have a minimum market 
capitalization of $50 million.
    \32\ See proposed Listing Standard requirement V.A.ii.i.
    \33\ See Bulletin No. 15 listing standard III.A.ii.e. Under this 
listing standard, each of the lowest weighted securities in the 
index that in the aggregate account for no more than 10 per cent of 
the weight of the index may have an ADTV of only 22,750 shares for 
each of the last six months.
---------------------------------------------------------------------------

    Since the only index weighting methodology that will be permitted 
for Dow Jones MicroSector Indices is approximate equal dollar weighted, 
no references to other types of index weighting methodologies in the 
model listing standards in Bulletin No. 15 were incorporated into the 
Proposed Listing Standards.\34\ Another modification from the model 
listing standards in Bulletin No. 15 was made in the proposed

[[Page 43562]]

Listing Standards for ADRs. Under both the Bulletin No. 15 model 
listing standards and the proposed Listing Standards, a large portion 
of component securities must meet the listing standard requirements for 
single stock futures.\35\ The ADR requirement for single stock futures 
deviates from what is suggested for ADRs under the Bulletin No. 15 
model listing standard for a security futures product based on narrow-
based security index.\36\ OneChicago states that the listing standard 
requirement for single stock futures relating to ADRs \37\ was 
incorporated into the proposed Listing Standard requirement for 
MicroSector Futures as an alternative.\38\ In addition, eight new 
requirements were added to the proposed Listing Standards to 
accommodate this unique product.\39\
---------------------------------------------------------------------------

    \34\ The following model listing standard requirements in 
Bulletin No. 15 were not adopted in the proposed Listing Standards 
III.A.ii.a, i and k, and IV.A.ii.j.
    \35\ See Bulletin No. 15 model listing standard III.A.ii.c and 
IV.A.ii.b and proposed Listing Standard V.A.ii.h and VI.A.ii.b, 
which require that except for ADTV, the component securities that 
account for at least 90 percent of the total index weight and at 
least 80 percent of the total number of component securities in the 
index must meet the requirements for listing a single-security 
future, as set forth in Section I.
    \36\ See Bulletin No. 15 model listing standard III.A.ii.g and 
IV.A.ii.f.
    \37\ See OneChicago listing standard I.A.x.
    \38\ See proposed Listing Standards V.A.ii.k and VI.A.ii.k.
    \39\ See proposed Listing Standards V.A.ii.a (approximate equal 
dollar-weighted), V.A.ii.c. (component securities must be component 
securities in the Dow Jones U.S. Total Market Index or an ADR linked 
to a security in the Dow Jones Global Index), V.A.ii.d. (component 
securities must have U.S. exchange-traded options on the 
securities), V.A.ii.e. (component securities must have a trading 
history on a U.S. exchange for at least 12 months), V.A.ii.g 
(component securities must close at or above $7.50 for each of the 
trading days in the three months prior to Selection), V.A.ii.m 
(rebalancing of the index), V.A.ii.o (indexes will only be created 
for industry groups having five or more qualifying securities) and 
VI.A.ii.i (rebalancing of the index).
---------------------------------------------------------------------------

    One Chicago states that the proposed Listing Standards incorporate 
the standards annunciated by the Division in Bulletin No. 15. 
Therefore, OneChicago believes that the proposed Listing Standards meet 
the requirement of section 6(h)(3)(C) of the Act.\40\
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 78f(h)(3)(C).
---------------------------------------------------------------------------

    Section 6(h)(3)(D) of the Act \41\ requires that all SFPs be based 
on common stock and such other equity securities as SEC and CFTC have 
jointly determined is appropriate. The SEC and CFTC have jointly 
permitted that SFPs may also be based on depositary shares.\42\ Under 
the OneChicago Listing Standards, each component security must meet the 
initial listing standard requirement for security futures that it be a 
common stock or an American Depositary Receipt.\43\ Therefore, 
OneChicago's Listing Standards meet this requirement.
---------------------------------------------------------------------------

    \41\ 15 U.S.C. 78f(h)(3)(D).
    \42\ Securities Exchange Act Release No. 44725 (August 20, 
2001). ``A depositary share is defined as a security evidenced by an 
American Depository Receipt that represents a foreign security or a 
multiple or factions thereof. See 17 CFR 240.12b-2.'' Id. at 
footnote 14.
    \43\ Proposed Listing Standard V.A.ii.h requires that except for 
the ADTV, ``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 for 
listing a single-security futures contract, as set forth in Section 
I.'' Section I.A.i. requires that the security underlying futures 
product based on a single security be a common stock or an American 
Depositary Receipt representing common stock.
---------------------------------------------------------------------------

    Section 6(h)(3)(E) of the Act \44\ requires that each security 
futures product be cleared by a clearing agency that has in place 
provisions for linked and coordinated clearing with other clearing 
agencies that clear security futures products, which permits the 
security futures product to be purchased on one market and offset on 
another market that trades such product. OneChicago notes that pursuant 
to section 6(h)(7) of the Act,\45\ the foregoing requirement is 
deferred until the ``compliance date'' (as defined therein). OneChicago 
expects that both The Options Clearing Corporation and the Chicago 
Mercantile Exchange (``CME'') clearinghouse will have in place 
procedures complying with the requirements of clause (E) after such 
``compliance date.''
---------------------------------------------------------------------------

    \44\ 15 U.S.C. 78f(h)(3)(D).
    \45\ 15 U.S.C. 78f(h)(7).
---------------------------------------------------------------------------

    Section 6(h)(3)(F) of the Act \46\ requires that broker-dealers 
must be subject to suitability rules comparable to those of a national 
securities association to effect transactions in SFPs. OneChicago 
satisfies this requirement through its Rule 605 which requires members 
to comply with the sales practice rules of the National Futures 
Association (``NFA'') or the National Association of Securities 
Dealers, Inc. (``NASD''), which include suitability rules. Therefore, 
OneChicago meets this listing standard requirement.
---------------------------------------------------------------------------

    \46\ 15 U.S.C. 78f(h)(3)(F).
---------------------------------------------------------------------------

    Section 6(h)(3)(G) of the Act requires that SFPs be subject to the 
prohibition against dual trading in section 4j of the CEA \47\ and CFTC 
regulations. Pursuant to section 4j of the CEA,\48\ CFTC promulgated 
Regulation 41.27, which states that an electronic futures exchange is 
subject to the dual trading rule if the exchange provides market 
participants with a time or place advantage or the ability to override 
a predetermined algorithm.\49\ Market participants have no such 
advantage or ability, so the dual trading rule does not apply to 
OneChicago.
---------------------------------------------------------------------------

    \47\ 7 U.S.C. 6i.
    \48\ Id.
    \49\ 17 C.F.R. 41.27(b)(2).
---------------------------------------------------------------------------

    Section 6(h)(3)(H) of the Act provides that SFPs must not be 
readily susceptible to manipulation of the price of the SFP, the price 
of the underlying security, the price of the option on such security, 
or options on a group or index including such securities. OneChicago 
believes that the design of the MicroSector futures fulfills this 
requirement. OneChicago states that the proposed Listing Standards 
require that component securities be highly capitalized with 
substantial daily trading volumes for the 12 months preceding the 
stocks' selection into the Dow Jones MicroSector Index. In addition, 
the proposed rule change to OneChicago Rule 1002(e) and (i) regarding 
the final settlement price and position limits of MicroSector Futures 
are also designed to deter manipulation.
    The proposed rule change to Rule 1002(e) proposes a methodology to 
calculate position limits for cash-settled futures on narrow-based 
security indices. While OneChicago believes that these limits are 
appropriate for the launch of these products, because this product is 
unique and there is no other similar product to look to for guidance as 
to the appropriate position limit, once trading has begun OneChicago 
will monitor trading patterns in the MicroSector Futures and reassess 
the appropriateness of these position limits. OneChicago undertakes 
that if trading patterns indicate the position limits are not set at 
levels appropriate to deter manipulation, OneChicago will make the 
necessary adjustments to the position limits. In addition, OneChicago 
undertakes to coordinate surveillance with the relevant underlying 
stock markets to monitor for manipulation.
    OneChicago has also proposed a final settlement rule that is 
designed to deter manipulation. Under proposed Rule 1002(i) the final 
settlement price of MicroSector Futures would be based on the opening 
price of each component stock. OneChicago believes that since the 
termination of MicroSector Futures will coincide with the expiration or 
termination of stock indices, options on stock indices and futures on 
stock indices, using the opening prices of each component security will 
reflect the price of the underlying securities when they are very 
liquid and thus more difficult to manipulate. The calculation of the 
final settlement price for these MicroSector Futures will be done on 
the same day and in a similar manner to the final settlement price for 
the options on the S&P 500 and the futures on the S&P 500. The 
expiration or termination of

[[Page 43563]]

these large S&P 500 contracts will provide more liquidity to the 
opening of the underlying markets. Thus, the final settlement price 
based on opening prices is designed to deter manipulation.
    In addition, OneChicago Rule 603 specifically prohibits market 
manipulation, and OneChicago Rule 604 prohibits members or access 
persons from violating applicable laws. Therefore, OneChicago believes 
that it meets this requirement.
    Section 6(h)(3)(I)\50\ of the Act requires that procedures be in 
place for coordinated surveillance among the market on which the SFP is 
traded, any market on which any security underlying the SFP is traded 
and other markets on which any related security is traded to detect 
manipulation and insider trading. OneChicago is an affiliate member of 
the Intermarket Surveillance Group through which it has an agreement to 
share market surveillance and regulatory information with other members 
of the group, which includes all of the predominant U.S. securities 
exchanges. OneChicago is also a member of the Joint Audit Committee, in 
which the futures self-regulatory organizations have an agreement to 
share information for regulatory purposes. Therefore, OneChicago 
believes it meets this requirement.
---------------------------------------------------------------------------

    \50\ 15 U.S.C. 78f(h)(3)(I).
---------------------------------------------------------------------------

    Section 6(h)(3)(J) of the Act \51\ requires that an exchange have 
audit trails that are necessary or appropriate to facilitate the 
coordinated surveillance required under Section 6(h)(3)(I) of the 
Act.\52\ The audit trail capability provided by CBOEdirect[reg], the 
trade matching engine used by OneChicago, will create and maintain an 
electronic transaction history database that contains information with 
respect to all orders, whether executed or not, and resulting 
transactions on the Exchange. This applies to orders entered through 
CBOEdirect[reg] terminals as well as to orders routed to 
CBOEdirect[reg] through CME's Globex[reg] system. The information 
recorded with respect to each order includes: time received (by 
CBOEdirect'' or Globex''), terms of the order, order type, instrument 
and contract month, price quantity, account type, account designation, 
user code and clearing firm.
---------------------------------------------------------------------------

    \51\ 15 U.S.C. 78f(h)(3)(J).
    \52\ 15 U.S.C. 78f(h)(3)(I).
---------------------------------------------------------------------------

    OneChicago's electronic audit trail will consist of data recorded 
by CBOEdirect'' and Globex[reg], and OneChicago will have full access 
to all such data. Information logged by CBOEdirect[reg], including in 
respect of orders received through CBOEdirect[reg] terminals, will be 
archived and provided to OneChicago each day. Orders received through 
Globex[reg] will be archived and maintained at CME. Together these data 
sets will enable OneChicago to trace each order back to the clearing 
firm by or through which it was submitted. If any question or issue 
arises as to the source of an order prior to submission by or through a 
clearing firm, OneChicago will request that the clearing firm provide 
an electronic or other record of the order.
    For orders that cannot be immediately entered into either 
CBOEdirect[reg] and Globex[reg], and therefore will not be recorded 
electronically at the time they are placed, OneChicago Rule 403(b) 
requires that the Clearing Member or, if applicable, the Exchange 
Member or the Access Person receiving such order must prepare an order 
form in a non-alterable written medium, which must be time-stamped when 
received and include the account designation, date and other required 
information (i.e., order terms, order type, instrument and contract 
month, price and quantity). Each such form must be retained for at 
least five years from the time it is prepared. In addition, OneChicago 
Rule 501 establishes a general recordkeeping requirement pursuant to 
which each Clearing Member, Exchange Member and Access Person must keep 
all books and records as required to be kept by it pursuant to the 
Commodity Exchange Act, CFTC regulations, the Act, regulations under 
the Act and the Rules of the Exchange. OneChicago Rule 501 also 
requires that such books and records be made available to the Exchange 
upon request. Current CFTC regulations require books and records to be 
maintained for a period of five years. OneChicago believes that its 
audit trail meets the requirement of section 6(h)(3)(J) of the Act.\53\
---------------------------------------------------------------------------

    \53\ 15 U.S.C. 78f(f)(3)(J).
---------------------------------------------------------------------------

    Block trades will be entered in CBOEdirect[reg] by OneChicago's 
operations management after they are verbally reported by designated 
individuals at the Clearing Member for the selling party. At the time 
of each such verbal report, a trade identification number will be 
assigned and provided to the caller. Both the buyer and the seller in 
each trade will then follow up the verbal report by submitting a block 
trade reporting form via facsimile or email to OneChicago. Generally, 
the same procedures apply to exchange of futures for physical (``EFP'') 
transactions, except that no verbal report is required for such 
transactions. Since block trades and EFP transactions involve orders 
that cannot be immediately entered into either CBOE's or CME's systems, 
the Clearing Members or, if applicable, Exchange Members or Access 
Persons involved must comply with the procedures specified in the 
preceding paragraph.
    Section 6(h)(3)(K) of the Act \54\ requires that a market on which 
a security futures product is traded have in place procedures to 
coordinate trading halts between such market and any market on which 
any security underlying the security futures product is traded and 
other markets on which any related security is traded. OneChicago Rule 
419 requires that trading in a security future be halted at all times 
that a regulatory halt has been instituted for the relevant underlying 
security or securities.
---------------------------------------------------------------------------

    \54\ 15 U.S.C. 78(h)(3)(K).
---------------------------------------------------------------------------

    Section 6(h)(3)(L) of the Act \55\ requires that the margin 
requirements for a security futures product comply with the regulations 
prescribed pursuant to section 7(c)(2)(B) of the Act.\56\ The 
Commission approved OneChicago Rule 515, which fulfills this 
requirement.\57\
---------------------------------------------------------------------------

    \55\ 15 U.S.C. 78f(h)(3)(L).
    \56\ 15 U.S.C. 78g(c)(2)(B).
    \57\ Securities Exchange Act Release No. 46787 (November 7, 
2002), 67 FR 69059 (Nobember 14, 2002) (SR-OC-2002-01).
---------------------------------------------------------------------------

2. Statutory Basis
    OneChicago states that the proposed rule change is consistent with 
section 6(b)(5) of the Act \58\ in that it promotes competition, is 
designed to prevent fraudulent and manipulative acts and practices, and 
is designed to protect investors and the public interest. OneChicago 
states that the proposed rule change would promote competition by 
making new products available to the public. OneChicago also states 
that the proposed rule change is also designed to deter manipulation of 
MicroSector Futures and to prevent using the product for fraudulent or 
manipulative trading in the component securities and their derivatives. 
In addition, the proposed position limit and final settlement rules 
along with surveillance and enforcement of these proposed rules are 
intended to deter manipulative activity in this product. In this 
manner, OneChicago states that the proposed rule change is designed to 
protect investors and the public interest.
---------------------------------------------------------------------------

    \58\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    OneChicago does not believe that the proposed rule change will have 
an impact on competition because it

[[Page 43564]]

believes that the proposed rule change will promote competition by 
permitting OneChicago to bring new products to the market.

C. Self-Regulatory Organization's Statement on Comments on Proposed 
Rules Received From Members, Participants, or Others

    Comments on the OneChicago proposed rule change have not been 
solicited and none have been received.

III. Date of Effectiveness of the Proposed Rules and Timing for 
Commission Action

    Pursuant to section 19(b)(7)(B) of the Act,\59\ the proposed rule 
change became effective on June 20, 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.\60\
---------------------------------------------------------------------------

    \59\ 15 U.S.C. 78s(b)(7)(B).
    \60\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed 
rules conflict 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 rules that are filed with the 
Commission, and all written communications relating to the proposed 
rules 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 will also 
be available for inspection and copying at the principal office of 
OneChicago. Electronically submitted comments will be posted on the 
Commission's Internet Web site (http://www.sec.gov). All submissions 
should refer to File No. SR-OC-2003-06 and should be submitted by 
August 13, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\61\
---------------------------------------------------------------------------

    \61\ 17 CFR 200.30-3(a)(75).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-18736 Filed 7-22-03; 8:45 am]
BILLING CODE 8010-01-P