[Federal Register Volume 68, Number 197 (Friday, October 10, 2003)]
[Notices]
[Pages 58728-58732]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-25674]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48591; File No. SR-CBOE-2003-17]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of a Proposed Rule Change and Amendment 
No. 1 Thereto by the Chicago Board Options Exchange, Inc. Relating to 
the Listing and Trading of Options on Russell Indexes

October 2, 2003.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on May 5, 2003, the Chicago Board Options Exchange, Inc. (``CBOE'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the CBOE. On September 24, 2003, the CBOE filed 
an amendment to the proposed rule change.\3\ The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons, and to approve the proposed rule change, as 
amended, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from James Flynn, Esq., Legal Division, CBOE, to 
Nancy Sanow, Assistant Director, Division of Market Regulation, 
Commission, dated September 23, 2003 (``Amendment No. 1''). 
Amendment No. 1 replaces the original filing in its entirety, and: 
(1) Clarifies that the CBOE will monitor each Russell Index on an 
annual basis and notify the Commission in the event that certain 
specified standards are not satisfied; (2) notes in the purpose 
section of the proposal that the CBOE will have complete access to 
the trading information of the component securities of the Russell 
Indexes; and (3) amends the strike prices for options on the Russell 
Indexes.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The CBOE proposes to amend certain rules to provide for the listing 
and trading on the Exchange of options on several different Russell 
Indexes. The text of the proposed rule change is available at the 
Office of the Secretary, CBOE, and at the Commission.

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

    In its filing with the Commission, the CBOE included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements

[[Page 58729]]

may be examined at the places specified in Item IV below. The CBOE has 
prepared summaries, set forth in Sections A, B, and C below, of the 
most significant aspects of such statements.

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

1. Purpose
    The purpose of the proposed rule change is to permit the Exchange 
to list and trade cash-settled, European-style, stock index options on 
the Russell 1000[reg] Index, Russell 1000[reg] Growth Index, Russell 
1000[reg] Value Index, Russell 2000[reg] Growth Index, Russell 
2000[reg] Value Index, Russell 3000[reg] Index, Russell 3000[reg] 
Growth Index, Russell 3000[reg] Value Index, Russell Midcap[reg] Index, 
Russell Midcap[reg] Growth Index, Russell Midcap[reg] Value Index 
(``Russell Indexes'' or ``Indexes''). Each Russell Index is a 
capitalization-weighted index containing various groups of stocks drawn 
from the largest 3,000 companies incorporated in the U.S. and its 
territories. All component securities of the Russell Indexes are traded 
on the New York Stock Exchange, Inc. (``NYSE''), the American Stock 
Exchange LLC (``AMEX''), or the NASDAQ. The CBOE currently is approved 
to trade options on the Russell 2000[reg] Index.\4\
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    \4\ See Securities Exchange Act Release No. 31382 (October 30, 
1992), 57 FR 52802 (November 5, 1992) (order approving the listing 
and trading of options on the Russell 2000 Index).
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    Index Design. The Russell Indexes are designed to be a 
comprehensive representation of the investable U.S. equity market. 
These Indexes are capitalization-weighted and include only common 
stocks belonging to corporations domiciled in the U.S. and its 
territories and that are traded on the NYSE, NASDAQ or the AMEX. The 
component securities are weighted by their ``available'' market 
capitalization, which is calculated by multiplying the primary market 
price by the ``available'' shares; that is, total shares outstanding 
less corporate cross-owned shares, ESOP and LESOP-owned shares 
comprising 10% or more of shares outstanding, unlisted share classes 
and shares held by an individual, a group of individuals acting 
together, or a corporation not in the index that owns 10% or more of 
the shares outstanding. The following is a brief description of each 
index:

Russell 3000[reg].................  Measures the performance of the
                                     3,000 largest U.S. companies based
                                     on total market capitalization,
                                     which represents approximately 98%
                                     of the investable U.S. equity
                                     market.
Russell 1000[reg].................  Measures the performance of the
                                     1,000 largest companies in the
                                     Russell 3000 Index, which
                                     represents approximately 92% of the
                                     total market capitalization of the
                                     Russell 3000 Index.
Russell Midcap[reg]...............  Measures the performance of the 800
                                     smallest companies in the Russell
                                     1000 Index, which represent
                                     approximately 26% of the total
                                     market capitalization of the
                                     Russell 1000 Index.
Russell 1000[reg] Growth..........  Measures the performance of those
                                     Russell 1000 companies with higher
                                     price-to-book ratios and higher
                                     forecasted growth values.
Russell 1000[reg] Value...........  Measures the performance of those
                                     Russell 1000 companies with lower
                                     price-to-book ratios and lower
                                     forecasted growth values.
Russell 2000[reg] Growth..........  Measures the performance of those
                                     Russell 2000 companies with higher
                                     price-to-book ratios and higher
                                     forecasted growth values.
Russell 2000[reg] Value...........  Measures the performance of those
                                     Russell 2000 companies with lower
                                     price-to-book ratios and lower
                                     forecasted growth values.
Russell 3000[reg] Growth..........  Measures the performance of those
                                     Russell 3000 Index companies with
                                     higher price-to-book ratios and
                                     higher forecasted growth values.
                                     The stocks in this index are also
                                     members of either the Russell 1000
                                     Growth or the Russell 2000 Growth
                                     indexes.
Russell 3000[reg] Value...........  Measures the performance of those
                                     Russell 3000 Index companies with
                                     lower price-to-book ratios and
                                     lower forecasted growth values. The
                                     stocks in this index are also
                                     members of either the Russell 1000
                                     Value or the Russell 2000 Value
                                     indexes.
Russell Midcap[reg] Growth........  Measures the performance of those
                                     Russell Midcap companies with
                                     higher price-to-book ratios and
                                     higher forecasted growth values.
                                     The stocks are also members of the
                                     Russell 1000 Growth index.
Russell Midcap[reg] Value.........  Measures the performance of those
                                     Russell Midcap companies with lower
                                     price-to-book ratios and lower
                                     forecasted growth values. The
                                     stocks are also members of the
                                     Russell 1000 Value index.
 

    All companies listed on the NYSE, AMEX or NASDAQ are considered for 
inclusion in the universe of stocks that comprise the Russell Indexes, 
with the following exceptions: (1) Stocks trading less than $1.00 per 
share on May 31; (2) non-U.S. incorporated companies; and (3) preferred 
and convertible preferred stock, redeemable shares, participating 
preferred stock, warrants and rights, trust receipts, royalty trusts, 
limited liability companies, bulletin board, pink sheet stocks, closed-
end investment companies, limited partnerships, and foreign stocks. The 
Russell 3000 Index is comprised of the top 3,000 eligible stocks ranked 
by available market capitalization. The CBOE represents that all of 
these components are ``reported securities'' as defined in Rule 11Aa3-1 
under the Act.
    All of the remaining Russell Indexes are subsets of the Russell 
3000 Index. The Growth and Value versions of each primary Index 
(Russell 1000, Russell 2000, Russell 3000 and Russell Midcap) may 
contain common components, but the capitalization of those components 
is apportioned so that the sum of the total capitalization of the 
Growth and Value indexes equals the total capitalization of the 
respective primary index.
    As provided in Exhibit B to the proposed rule change, on February 
28, 2003, the stocks comprising the Russell 3000 Index (and the other 
Russell Indexes) had an average market capitalization of $2.93 billion 
ranging from a high of $239 billion (General Electric Co.) to a low of 
$2 million (Deltagen, Inc.). The number of available shares outstanding 
ranged from a high of 9.95 billion (General Electric Co.) to a low of 
310,000 (Seaboard Corp.), and averaged 123.4 million shares. The six-
month average daily trading volume for Russell 3000 Index components 
was 977,000 shares per day, ranging from a high of 82.6 million shares 
per day (Cisco Systems, Inc.) to a low of 433 shares per day (Seaboard 
Corp.). Component securities that averaged less than 50,000 shares per 
day for the previous six months accounted for 1.3% of the index weight. 
Over 83% of the Russell 3000 Index components satisfied CBOE's listing 
criteria for equity options as set forth in CBOE Rule 5.3, representing 
over 99% of the index weight.
    The Russell Indexes themselves range in capitalization from a high 
of $8.6

[[Page 58730]]

trillion (Russell 3000) to a low of $278 billion (Russell 2000 Growth). 
The number of index components range from a high of 2,933 (Russell 
3000) to a low of 453 (Russell Midcap Growth). The Russell 1000 Growth 
Index has the highest percentage of options-eligible components with 
99.8% by weight and 97.7% by number. The Russell 2000 Value index has 
the lowest percentage of options-eligible components with 90.7% by 
weight and 74.8% by number.
    Calculation. The values of each Index are currently being 
calculated by Reuters on behalf of the Frank Russell Company and will 
be disseminated at 15-second intervals during regular CBOE trading 
hours to market information vendors via the Options Price Reporting 
Authority (``OPRA'').
    The CBOE notes that the methodology used to calculate the value of 
the Russell Indexes is similar to the methodology used to calculate the 
value of other well-known market-capitalization weighted indexes. The 
level of each Index reflects the total market value of the component 
stocks relative to a particular base period and is computed by dividing 
the total market value of the companies in each Index by its respective 
index divisor. The divisor is adjusted periodically to maintain 
consistent measurement of each Index. The following is a table of base 
dates and the respective Index levels as of February 28, 2003:

------------------------------------------------------------------------
                                      Base date/base      2/28/03 Index
              Index                    index value            value
------------------------------------------------------------------------
Russell 3000[reg]................    12/31/86 = 140.00            468.15
Russell 1000[reg]................    12/31/86 = 130.00            446.96
Russell Midcap[reg]..............    12/31/86 = 200.00            464.62
Russell 1000[reg] Growth.........     8/31/92 = 200.00            354.20
Russell 1000[reg] Value..........     8/31/92 = 200.00            430.96
Russell 2000[reg] Growth.........     3/16/00 = 500.00            190.56
Russell 2000[reg] Value..........     3/16/00 = 500.00            522.72
Russell 3000[reg] Growth.........     3/16/00 = 700.00            282.42
Russell 3000[reg] Value..........     3/16/00 = 700.00            558.95
Russell Midcap[reg] Growth.......     3/16/00 = 500.00            202.01
Russell Midcap[reg] Value........     3/16/00 = 500.00            506.05
------------------------------------------------------------------------

    Index Option Trading. According to the CBOE, options on these 
indexes shall be A.M.-settled. In addition to regular Index options, 
the Exchange may provide for the listing of long-term index option 
series (``LEAPS[reg]'') in accordance with CBOE Rule 24.9.
    For options on each Index, strike prices will be set to bracket the 
respective index in 2.5-point increments for strikes below $200 and 5 
point increments for strikes at or above $200. The minimum tick size 
for series trading below $3 will be 0.05 and for series trading above 
$3 the minimum tick will be 0.10. The trading hours for options on the 
Indexes will be from 8:30 a.m. to 3:15 p.m. Chicago time. Exhibit C to 
the proposed rule change represents the proposed contract 
specifications for the options on the Russell Indexes.
    Maintenance. The Russell Indexes will be monitored and maintained 
by the Frank Russell Company. The Frank Russell Company will be 
responsible for making all necessary adjustments to the Indexes to 
reflect component deletions, share changes, stock splits, stock 
dividends (other than an ordinary cash dividend), and stock price 
adjustments due to restructuring, mergers, or spin-offs involving the 
underlying components. Some corporate actions, such as stock splits and 
stock dividends, require simple changes to the available shares 
outstanding and the stock prices of the component securities. Other 
corporate actions, such as share issuances, change the market value of 
the Indexes and would require the use of an index divisor to effect 
adjustments.
    The CBOE represents that the Russell Indexes are re-constituted 
annually on June 30th, based on prices and available shares outstanding 
as of the preceding May 31st. New components securities to the Indexes 
are added only as part of the annual re-constitution and, after which, 
should a component security be removed from an Index for any reason, it 
cannot be replaced until the next re-constitution.
    The CBOE represents that it will monitor each Russell Index on an 
annual basis, at which point the Exchange will notify the Commission 
if: (1) The number of securities in each index drops by \1/3\rd or 
more; (2) 10% or more of the weight of each index is represented by 
component securities having a market value of less than $75 million; 
(3) less than 80% of the weight of each Index is represented by 
component securities that are eligible for options trading pursuant to 
CBOE Rule 5.3; (4) 10% or more of the weight of each Index is 
represented by component securities trading less than 20,000 shares per 
day; or (5) the largest component security accounts for more than 15% 
of the weight of each Index or the largest five components in the 
aggregate account for more than 50% of the weight of the Index.
    Surveillance. The Exchange represents that CBOE's surveillance 
procedures are adequate to monitor the trading in options and LEAPS on 
the Russell Indexes. Further, the CBOE shall have complete access to 
the information regarding the trading activity of the underlying 
securities.
    Exercise and Settlement. The proposed options on each Index will 
expire on the Saturday following the third Friday of the expiration 
month. Trading in the expiring contract month will normally cease at 
3:15 p.m. (Chicago time) on the business day preceding the last day of 
trading in the component securities of the Index (ordinarily the 
Thursday before expiration Saturday, unless there is an intervening 
holiday). The exercise settlement value of the Index at option 
expiration will be calculated by Reuters on behalf of the Frank Russell 
Company based on the opening prices of the component securities on the 
last business day prior to expiration. If a component security fails to 
open for trading, the exercise settlement value will be determined in 
accordance with CBOE Rules 24.7(e) and 24.9(a)(4). When the last 
trading day is moved because of Exchange holidays (such as when CBOE is 
closed on the Friday before expiration), the last trading day for 
expiring options will be Wednesday and the exercise settlement value of 
index options at expiration will be determined at the opening of 
regular trading on Thursday.
    Position Limits. The Exchange proposes to establish position limits 
for options on the Russell Indexes at 50,000 contracts on either side 
of the market, and no more than 30,000 of such contracts may be in the 
series in the

[[Page 58731]]

nearest expiration month. These limits are identical to the limits 
applicable to options on the Russell 2000 Index as specified under CBOE 
Rule 24.4(a).
    Exchange Rules Applicable. Except as modified herein, the Rules in 
Chapter XXIV will govern the trading of options on the aforementioned 
Russell Indexes on the Exchange. Additionally, CBOE affirms that it 
possesses the necessary systems capacity to support new series that 
would result from the introduction of the Russell Index options. CBOE 
also has been informed that OPRA has the capacity to support such new 
series.\5\
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    \5\ See Exhibit D to this filing.
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2. Statutory Basis
    The proposed rule change is consistent with section 6(b) of the Act 
in general,\6\ and furthers the objectives of section 6(b)(5) of the 
Act in particular,\7\ in that it will permit trading in options on a 
broad range of indexes pursuant to rules designed to prevent fraudulent 
and manipulative acts and practices and to protect investors and the 
public interest.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    This proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of CBOE. 
All submissions should refer to File No. SR-CBOE-2003-17 and should be 
submitted by October 31, 2003.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    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, and, in 
particular, the proposal is consistent with section 6(b)(5) of the 
Act.\8\ Specifically, the Commission believes that the listing and 
trading of options on the Russell Indexes will serve to promote the 
public interest, as well as to help remove impediments to a free and 
open securities market. The Commission also believes that the trading 
of options on the Indexes will allow investors holding positions in 
some or all of the securities underlying the Indexes to hedge the risks 
associated with their portfolios more efficiently and effectively. 
Accordingly, the Commission believes that the options on the Russell 
Indexes will provide investors with an important trading and hedging 
mechanism that should reflect accurately the overall movement of stocks 
in the large capitalization range of U.S. equity securities.\9\ By 
broadening the hedging and investment opportunities of investors, the 
Commission believes that the trading of options on the Russell Indexes 
will service to protect investors, promote the public interest and 
contribute to the maintenance of fair and orderly markets.\10\
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    \8\ 15 U.S.C. 78f(b)(5).
    \9\ Pursuant to Section 6(b)(5) of the Act, the Commission must 
predicate approval of any new securities product upon a finding that 
the introduction of such product is in the public interest. Such a 
finding would be difficult with respect to a product that served no 
hedging or other economic function, because any benefits that might 
be derived by market participants likely would be outweighed by the 
potential for manipulation, diminished public confidence in the 
integrity of the markets, and other valid regulatory concerns. In 
this regard, the trading of listed index options will provide 
investors with a hedging vehicle that should reflect the overall 
market of stocks representing a substantial segment of the U.S. 
securities market.
    \10\ In approving this rule, the Commission notes that it has 
also considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
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    The trading of options on the Russell Indexes, however, raises 
several issues related to the design and structure of the Indexes, 
customer protection, surveillance, and market impact. For the reasons 
discussed below, the Commission believes that the CBOE has adequately 
addressed these issues.

A. Index Design and Structure

    The Commission finds it is appropriate and consistent with the Act 
to classify the Indexes as broad-based, and thus, to permit Exchange 
rules applicable to the trading of broad-based index options to apply 
to the Russell Indexes options. Specifically, the Commission believes 
that the Indexes are broad-based because they reflect a substantial 
segment of the U.S. equities market, in general, and the largest 3,000 
U.S. securities, in particular. The Russell Indexes cumulatively range 
in market capitalization from a high of $8.6 trillion (Russell 3000) to 
a low of $278 billion (Russell 2000 Growth). The number of index 
components range from a high of 2,933 (Russell 3000) to a low of 453 
(Russell Midcap Growth). As of February 28, 2003, the stocks comprising 
the Russell 3000 Index had an average market capitalization of $2.93 
billion ranging from a high of $239 billion to a low of $2 million. All 
of the remaining Russell Indexes are subsets of the Russell 3000 Index. 
The component securities are diverse, actively traded, and represent a 
broad cross-section of highly capitalized securities in the U.S. equity 
market. CBOE has also represented that all of the component securities 
of the Russell Indexes are reported securities, and over 83% of the 
Russell 3000 Index components satisfied CBOE's listing criteria for 
equity options as set forth in CBOE Rule 5.3, representing over 99% of 
the index weight.\11\ Accordingly, the Commission believes that it is 
appropriate for the Exchange to classify the Indexes as broad-based and 
apply its rules governing broad-based index options.
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    \11\ The CBOE's option listing standards, which are uniform 
among the options exchanges, provide that a security underlying an 
option must, among other things, meet the following requirements: 
(1) The public float must be at least 7 million shares; (2) there 
must be a minimum of 2,000 stockholders; (3) trading volume must 
have been at least 2.4 million shares over the preceding twelve 
months; and (4) the market price per share must have been at least $ 
7.50 for a majority of business days during the preceding three 
calendar months. See Interpretations and Policies.01 to CBOE Rule 
5.3.
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B. Potential for Manipulation

    The Commission also believes that the large number of component 
securities, the capitalization and weighting methodology of the 
Indexes, and the depth of liquidity of the component securities 
comprising the Indexes,

[[Page 58732]]

significantly minimize the potential for manipulation of the Indexes. 
First, as noted above, the Indexes represent a broad cross-section of 
domestic highly capitalized U.S. companies. Second, the Commission 
notes that the Index is a capitalization-weighted index whose value is 
more difficult to affect than that of a price-weighted index. Third, 
CBOE has represented that it will notify the Commission when: (1) The 
number of securities in each index drops by one-third or more; (2) 10% 
or more of the weight of each index is represented by component 
securities having a market value of less than $75 million; (3) less 
than 80% of the weight of each Index is represented by component 
securities that are eligible for options trading pursuant to CBOE Rule 
5.3; (4) 10% or more of the weight of each Index is represented by 
component securities trading less than 20,000 shares per day; or (5) 
the largest component security accounts for more than 15% of the weight 
of each Index or the largest five components in the aggregate account 
for more than 50% of the weight of the Index. Fourth, the CBOE has 
proposed reasonable position and exercise limits for the Index options 
that will serve to minimize potential manipulation and other market 
impact concerns. Accordingly, the Commission believes that these 
factors minimize the potential for manipulation because it would affect 
significantly the Indexes values. Moreover, the surveillance procedures 
discussed below should detect as well as deter potential manipulation 
and other trading abuses.

C. Customer Protection

    The Commission believes that a regulatory system designed to 
protect public customers must be in place before the trading of 
sophisticated financial instruments, such as the options on the Russell 
Indexes (including full-value and reduced value Index LEAPS), can 
commence on a national securities exchange. The Commission notes that 
the trading of standardized exchange-traded options occurs in an 
environment that is designed to ensure, among other things, that: (1) 
The special risks of options are disclosed to public customers; (2) 
only investors capable of evaluating and bearing the risk of options 
trading are engaged in such trading; and (3) special compliance 
procedures are applicable to options accounts. Accordingly, because the 
index options and index LEAPS will be subject to the same regulatory 
regime as the other standardized options traded on the CBOE, the 
Commission believes that adequate safeguards are in place to ensure the 
protection of investors in the Russell Indexes options.\12\
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    \12\ In addition, CBOE has represented that it and OPRA have the 
necessary systems capacity to support these new series of options 
that would result from the introduction of Index options and Index 
LEAPS. See Exhibit D to the proposed rule change (letter from Joe 
Corrigan, Executive Director, OPRA, to Bill Speth, Director of 
Research, CBOE, dated March 24, 2003).
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D. Surveillance

    The Commission generally believes that a surveillance sharing 
agreement between an exchange proposing to list a stock index 
derivative product and the exchange(s) trading the stocks underlying 
the derivative product is an important measure for surveillance of the 
derivative and underlying securities markets. Such agreements ensure 
the availability of information necessary to detect and deter potential 
manipulations and other trading abuses, thereby making the stock index 
product less readily susceptible to manipulation. In this regard, the 
NYSE, AMEX, and the NASD are all members of ISG. In addition, the CBOE 
will apply the same surveillance procedures as those used for existing 
broad-based index options trading on the CBOE. Further, CBOE has 
represented that it will have complete access to the information 
regarding the trading activity of the underlying securities.

E. Market Impact

    The Commission believes that the listing and trading of options on 
the Russell Indexes on the Exchange will not adversely impact the 
underlying securities markets. First, as described above, the Indexes 
are broad-based and no one stock or industry group dominates any 
particular Index. Second, as noted above, the stocks contained in the 
Indexes generally are not inactively traded. Third, existing CBOE stock 
index options rules and surveillance procedures will apply to Russell 
Indexes options. Fourth, the Exchange has established reasonable 
position and exercise limits for the Russell Indexes options that will 
serve to minimize potential manipulation and market impact concerns. 
Fifth, the risk to investors of contra-party non-performance will be 
minimized because the Index options will be issued and guaranteed by 
the Options Clearing Corporation just like any other standardized 
option traded in the U.S. Lastly, the Commission believes that settling 
options on the Russell Indexes based on the opening prices of component 
securities is reasonable and consistent with the Act because it may 
contribute to the orderly unwinding of Index options positions upon 
expiration.
    The Commission finds good cause for approving the proposed rule 
change, and Amendment No. 1 thereto, prior to the thirtieth day after 
the date of publication of notice in the Federal Register. The 
Commission believes that the trading of options on the Russell Indexes 
does not raise novel regulatory issues that were not addressed in 
previous filings regarding the listing and trading of similar 
instruments on the CBOE. The Commission further believes that the 
options on the Russell Indexes will provide investors with an 
additional investment choice and that accelerated approval of the 
proposal will allow investors to begin trading these index options 
promptly.

V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\13\ that the proposed rule change (SR-CBOE-2003-17), as amended, 
is approved on an accelerated basis.
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    \13\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
---------------------------------------------------------------------------
pursuant to delegated authority.\14\

    \14\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-25674 Filed 10-9-03; 8:45 am]
BILLING CODE 8010-01-P