[Federal Register Volume 68, Number 205 (Thursday, October 23, 2003)]
[Notices]
[Pages 60731-60747]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-26746]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48650; File No. SR-BSE-2003-19]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Boston Stock Exchange, Inc. Relating to the LLC Operating 
Agreement of the Proposed New Exchange Facility To Be Operated by the 
Boston Options Exchange Group LLC

October 17, 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 October 16, 2003, the Boston Stock Exchange, Inc. (``BSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    As discussed in detail in the BOX Proposing Release,\3\ the BSE 
proposes to establish rules for BOX,\4\ a new Exchange facility, as 
that term is defined in Section 3(a)(2) of the Act.\5\ BOX would be 
operated by Boston Options Exchange Group LLC (``BOX LLC''), a Delaware 
limited liability company (``LLC''). The BSE is filing the Operating 
Agreement of BOX LLC (``Operating Agreement'' or ``Agreement'') to 
establish BOX LLC's governance and operating authority for the 
facility. The Operating Agreement functions as the source of the 
company's governance and operating authority and, therefore, functions 
in a similar manner as by-laws or articles of incorporation function 
for a corporation. The BSE is requesting confidential treatment of the 
sections of the Operating Agreement which are confidential business 
information and which do not relate to the control and governance of 
BOX LLC. The redacted text of the Operating Agreement appears below; 
redacted portions are noted in brackets.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 47186 (January 14, 
2003), 68 FR 3062 (January 22, 2003) (SR-BSE-2002-15) (``BOX 
Proposing Release'').
    \4\ The term ``BOX'' means the Boston Options Exchange or Boston 
Stock Exchange Options Exchange, an options trading facility of the 
Exchange under Section 3(a)(2) of the Act. See proposed BOX Rules, 
Chapter I, General Provisions, Sec.  1(a)(6) (definition of 
``BOX'').
    \5\ 15 U.S.C. 78c(a)(2).
---------------------------------------------------------------------------

* * * * *
Boston Options Exchange Group LLC
Second Amended and Restated Operating Agreement
    This AMENDED AND RESTATED OPERATING AGREEMENT is made as of July 
25, 2003, by and among Bourse de Montreal Inc., a company incorporated 
in Quebec, Canada (the ``Bourse''), Boston Stock Exchange, Inc., a 
company incorporated in Delaware, USA (``BSE''), Interactive Brokers 
Group LLC, a limited liability company organized under the laws of 
Connecticut (``IB''), Boston Options Exchange Group LLC, a limited 
liability company organized under the laws of Delaware (``BOX'') and 
all other Persons who become a party hereto as Members of BOX in 
accordance with the terms hereof, for the purpose of recording their 
agreement regarding the affairs of BOX and the conduct of its business.
    WHEREAS, on January 16, 2002 the Bourse, BSE and IB caused a 
Certificate of Formation (the ``Certificate'') in the form of Exhibit 1 
hereto to be filed with the Office of the Secretary of State of the 
State of Delaware for the purpose of commencing the existence of BOX 
pursuant to the Act (as defined below);
    WHEREAS, the Bourse, BSE, and IB formed BOX for the purpose of 
developing and operating an electronic market as a facility of the BSE 
for trading (i) options on Individual U.S. Equities, U.S. equity 
indices and U.S. Exchange traded funds and (ii) single stock futures; 
and
    WHEREAS, subsequent to the execution of this Agreement, it is 
anticipated that BOX will enter into each of the Related Agreements;
    WHEREAS, the Bourse, BSE, IB and BOX are parties to that certain 
Operating Agreement of BOX, dated as of January 17, 2002 ( the 
``Original Operating Agreement''), as amended by an Amended and 
Restated Operating Agreement dated as of June 21, 2002 (the ``Amended 
Operating Agreement''); and
    WHEREAS, the Members desire to amend and restate the Amended 
Operating Agreement upon the terms and conditions hereinafter set 
forth.
    Accordingly, the parties hereby agree to amend and restate the 
Amended Operating Agreement as follows:

Article 1--Definitions

    1.1 Certain Defined Terms: As used in this Agreement, the following 
capitalized terms have the following meanings.
    ``Act'' means the Delaware Limited Liability Company Act, 6 Del. 
G.L. Sec.  18-101, et seq., as amended and in effect from time to time, 
and any successor statute.
    ``Additional Capital Contribution'' means any Capital Contribution 
effected after completion of the Initial Capital Contributions pursuant 
to Section 7.3 hereof.
    ``Advisors'' means, with respect to any Person, any of such 
Person's attorneys, accountants or consultants.
    ``Affiliate'' means, with respect to any Person, any other Person 
controlling, controlled by or under common control with, such Person. 
As used in this definition, the term ``control'' means the possession, 
directly or indirectly, of the power to direct or cause the direction 
of the management and policies of a Person, whether through the 
ownership of voting securities, by contract or otherwise with respect 
to such Person. A Person is presumed to control any other Person, if 
that Person: (i) Is a director, general partner, or officer exercising 
executive responsibility (or having similar status or performing 
similar functions); (ii) directly or indirectly has the right to vote 
25 percent or more of a class of voting security or has the power to 
sell or direct the sale of 25 percent or more of a class of voting 
securities of the Person; or (iii) in the case of a partnership, has 
contributed, or has the right to receive upon dissolution, 25 percent 
or more of the capital of the partnership.
    ``Agreement'' means this Operating Agreement, including all 
exhibits and schedules hereto, as amended, restated or supplemented 
from time to time.
    ``Bankruptcy'' has the meaning ascribed thereto in Section 18-304 
of the Act.
    ``Board'' has the meaning set forth in Section 4.1 hereof.
    ``Bourse'' has the meaning set forth in the preamble.

[[Page 60732]]

    ``Bourse License'' means the license, to be entered into between 
the Bourse and BOX, from the Bourse to BOX of the right to use the name 
``Bourse de Montreal'' in connection with the business of BOX.
    ``BOX'' has the meaning set forth in the preamble.
    ``BOX Confidential Information'' means any confidential or 
proprietary information of BOX, including any confidential or 
proprietary information conveyed to BOX pursuant to this Agreement or 
any Related Agreements.
    ``BOX Market'' means the market that will be developed and operated 
by BOX pursuant to Section 3.1 hereof.
    ``BOX Products'' means (i) option contracts on Individual U.S. 
Equities, (ii) option contracts on U.S. Equity indices, (iii) option 
contracts on U.S. Exchange traded funds, (iv) single stock futures on 
Individual U.S. Equities and (v) such other products as the Board may 
from time to time approve for Trading on the BOX Market.
    ``BSE'' has the meaning set forth in the preamble.

[Business confidential]
    ``BSE License'' means the license, to be entered into between BSE 
and BOX, from BSE to BOX of the right to use the name ``Boston Stock 
Exchange'' in connection with the name and business of BOX.

[Business confidential]
    ``Capital Contribution'' means the amount of cash and the fair 
market value of all property and/or services contributed to BOX by a 
Member in its capacity as such at any point in time, including any 
Additional Capital Contributions. All such amounts contributed shall be 
reflected on the books and records of BOX. Any reference in this 
Agreement to the Capital Contribution of a Member shall include the 
Capital Contribution of any prior Member in respect of the same Unit or 
Units.
    ``Certificate'' has the meaning set forth in the recitals hereto.
    ``Code'' means the United States Internal Revenue Code of 1986, as 
amended and in effect from time to time.
    ``Company Minimum Gain'' means partnership minimum gain with 
respect to BOX, as determined under Treasury Regulations Sec.  1.704-
2(d).
    ``Competing Business'' means any electronic market for the Trading 
of any of the BOX Products.
    ``DGCL'' has the meaning set forth in Section 4.2(b) hereof.
    ``Directors'' has the meaning set forth in Section 4.1(a) hereof.
    ``Disclosing Member'' has the meaning set forth in Section 16.6 
hereof.
    ``Distributable Cash'' has the meaning set forth in Section 9.1 
hereof.
    ``Effective Date'' means the date hereof.
    ``Fiscal Year'' has the meaning set forth in Section 12.3 hereof.
    ``Government Authority'' means any federal, national, state, 
municipal, local, foreign, territorial, provincial or other 
governmental department, commission, board, bureau, agency, regulatory 
authority, instrumentality, judicial or administrative body, domestic 
or foreign.
    ``IB'' has the meaning set forth in the preamble.
    ``IB License'' means the license, to be entered into by IB and BOX, 
from IB to BOX of the right to use the name IB in connection with the 
business of BOX.
    ``IB Offer Period'' has the meaning set forth in Section 8.5(b)(ii) 
hereof.
    ``IB Transfer'' has the meaning set forth in Section 8.5(b)(i) 
hereof.
    ``IB Transfer Notice'' has the meaning set forth in Section 
8.5(b)(i) hereof.
    ``Indemnitees'' has the meaning set forth in Section 14.1 hereof.
    ``Individual U.S. Equities'' means (i) U.S. ordinary shares, (ii) 
foreign shares trading as U.S. dollar-denominated, U.S. registered 
American depository receipts, (iii) single stock futures and (iv) 
foreign ordinary shares trading in the U.S. as foreign ordinary shares 
whether or not these also trade as U.S. dollar denominated U.S. 
registered American Depository Receipts.
    ``Initial BSE Asset Contribution'' has the meaning set forth in 
Section 7.1(b) hereof.
    ``Initial Capital Contributions'' has the meaning set forth in 
Section 7.1(d).
    ``Initial Chairman'' has the meaning set forth in Section 4.5 
hereof.
    ``Initial IB Asset Contribution'' has the meaning set forth in 
Section 7.1(a) hereof.
    ``Initial Operating Budget'' has the meaning set forth in Article 6 
hereof.
    ``Launch Date'' means the date on which Trading on the BOX Market 
shall have commenced.
    ``Liquidator'' has the meaning set forth in Section 11.1(b) hereof.
    ``Major Action'' has the meaning set forth in Section 4.4(b) 
hereof.
    ``Member'' means each Person named as a Member on Schedules hereto, 
their successors and assigns, and any additional members admitted as 
provided by this Agreement.
    ``Member Entities'' has the meaning set forth in Section 5.6 
hereof.
    ``Member Information'' has the meaning set forth in Section 16.6 
hereof.
    ``Member Nonrecourse Deductions'' means partner nonrecourse 
deductions with respect to a Member, as determined under Treasury 
Regulations Sec.  1.704-2(i)(2).
    ``Member Nonrecourse Debt Minimum Gain'' means partner nonrecourse 
debt minimum gain with respect to a Member, within the meaning of 
Treasury Regulations Sec.  1.704-2(i)(2).
    ``Neutral Arbitrators'' has the meaning set forth in Section 
13.1(a) hereof.
    ``New Issuance'' has the meaning set forth in Section 8.5(c)(i) 
hereof.
    ``New Issuance Notice'' has the meaning set forth in Section 
8.5(c)(i) hereof.
    ``New Issuance Period'' has the meaning set forth in Section 
8.5(c)(ii) hereof.

[Business confidential]
[Business confidential]
    ``Non-Transferring Member'' has the meaning set forth in Section 
8.2 hereof.
    ``Percentage Interest'' with respect to a Member means the ratio of 
the number of Units held by the Member to the total of all of the 
issued Units, expressed as a percentage.
    ``Person'' means any individual, partnership, corporation, 
association, trust, limited liability company, joint venture, 
unincorporated organization and any government, governmental department 
or agency or political subdivision thereof.
    ``Proposed IB Transferee'' has the meaning set forth in Section 
8.5(b)(i) hereof.
    ``Proposed New Member'' has the meaning set forth in Section 8.5(c) 
hereof.
    ``Regulatory Services Agreement'' means the Regulatory Services 
Agreement to be entered into between BSE or an Affiliate of BSE and 
BOX, or its duly adopted and executed replacement between a Regulatory 
Services Provider and BOX, as in effect from time to time.
    ``Regulatory Services Provider'' shall initially mean BSE or an 
Affiliate of BSE and thereafter the provider of regulatory services 
contemplated by the Regulatory Services Agreement.
    ``Related Agreements'' means the Technical and Operational Services 
Agreement, the Regulatory Services Agreement, the Bourse License, the 
BSE License, the IB License and any other agreement among or between 
any of the Members and BOX, or to which the Members or BOX are 
otherwise parties, in all cases necessary for the conduct of the 
business of BOX.
    ``SEC'' means the United States Securities Exchange Commission.
    ``Senior Executive'' has the meaning set forth in Section 4.7 
hereof.
    ``System'' means the technology, know-how, software, equipment,

[[Page 60733]]

communication lines or services, services and other deliverables or 
materials of any kind to be provided by Bourse (or any applicable third 
party) as may be necessary or desirable for the operation of the BOX 
Market.
    ``Tax Amount'' of a Member for a fiscal year or other period shall 
mean the product of (a) the Member's Tax Rate for such fiscal year or 
other period, and (b) the Member's Tax Amount Base for such fiscal year 
or other period, and shall be reduced by (c) any United States federal, 
state or local income tax credits allocated to the Member by BOX for 
such Fiscal Year or other period, all as estimated in good faith by the 
Board.
    ``Tax Amount Base'' of a Member for a fiscal year or other period 
shall mean the taxable income (for U.S. federal income tax purposes) 
allocated to the Member by BOX for such fiscal year or other period; 
provided that such taxable income shall be computed (i) without regard 
to the application of Code Sec.  704(c) with respect to any variation 
between the fair market value and tax basis of any assets at the time 
such assets were contributed to BOX and (ii) without regard to any 
taxable income or loss recognized by a Member in connection with the 
dissolution, initial public offering, sale of substantially all equity 
or assets of BOX or any similar event.
    ``Tax Rate'' of a Member for a fiscal year or other period shall 
mean the highest effective marginal combined United States federal, 
state and local income tax rate applicable during such fiscal year to 
business entities of the same type as the Member that do business 
exclusively in the Commonwealth of Massachusetts, giving proper effect 
to the federal deduction for state and local income taxes and taking 
into account any special tax rates (such as special capital gains tax 
rates) applicable to any portion or portions of the Member's Tax Amount 
Base.
    ``Technical and Operational Services Agreement'' means that 
agreement or agreements to be entered into by the Bourse or an 
Affiliate of the Bourse and BOX, or its or their duly adopted and 
executed replacement agreement or agreements, as in effect from time to 
time relating to the System.
    ``Total Votes'' has the meaning set forth in Section 4.3.
    ``Trading'' means the availability of the System to authorized 
users for entering, modifying, and canceling orders concerning the BOX 
products.
    ``Transferee'' has the meaning set forth in Section 8.2 hereof.
    ``Transfer Notice'' has the meaning set forth in Section 8.2(a) 
hereof.
    ``Transferring Member'' has the meaning set forth in Section 8.2 
hereof.
    ``Treasury Regulations'' means the regulations promulgated under 
the Code, as amended and in effect from time to time.
    ``Units'' shall mean the units of interest in the ownership and 
profits and losses of BOX and such Member's right to receive 
distributions in its capacity as a Member.
    ``Unpermitted Deficit'' has the meaning set forth in Section 10.3 
hereof.
1.2. Other Definitions
    The words ``include,'' ``includes,'' and ``including'' where used 
in this agreement are deemed to be followed by the words ``without 
limitation.''
    Any reference to ``Dollars'' or ``$'' in this Agreement refers to 
U.S. Dollars.
    Except as otherwise provided in this Agreement or unless the 
context otherwise clearly requires, (a) terms used in this Agreement 
that are defined in the Act will have the meaning set forth in the Act; 
(b) all references in this Agreement to one gender also include, where 
appropriate, the other gender, the singular includes the plural and the 
plural includes the singular; and (c) references in this Agreement to 
the preamble, Sections, Schedules, and Exhibits shall be deemed to mean 
the preamble and sections of, and schedules and exhibits to, this 
Agreement.

Article 2--Organization

    2.1. Formation of BOX. Each of the Bourse, BSE and IB hereby (a) 
authorizes and ratifies the formation of BOX as a limited liability 
company under the Act, the execution of the Certificate and the filing 
of the Certificate in the Office of the Secretary of State of the State 
of Delaware and (b) agrees that the rights, duties and liabilities of 
the Members shall be as provided in the Act, except as otherwise 
provided herein. The name of BOX shall be Boston Options Exchange Group 
LLC. The principal place of business of BOX shall be located at 100 
Franklin Street, Boston, MA 02110. The Board may, at any time, change 
the name or the principal place of business of BOX and shall give 
notice thereof to the Members.
    2.2. Registered Agent and Office. The registered agent for service 
of process on BOX in the State of Delaware required to be maintained by 
Sec.  18-104 of the Act shall be Corporation Service Company, 2711 
Centerville Road, Suite 400, Wilmington, New Castle County, Delaware 
19808 and the registered office of BOX in the State of Delaware shall 
be c/o Corporation Service Company at the same address. The Board may 
at any time change the registered agent of BOX or the location of such 
registered office and shall give notice thereof to the Members.
    2.3. Term. The legal existence of BOX shall be perpetual, unless 
BOX is sooner dissolved as a result of an event specified in the Act or 
pursuant to a provision of this Agreement.
    2.4. Interest of Members; Property of Company. Units held by a 
Member shall be personal property for all purposes. All real and other 
property owned by BOX shall be deemed BOX property owned by BOX as an 
entity, and no Member, individually, shall own any such property. The 
name and mailing address of each initial Member and the number of Units 
held by each and the Percentage Interest represented thereby shall be 
as listed on Schedule A attached hereto. The Board shall be required to 
update said Schedule A from time to time as necessary to accurately 
reflect the information contained therein upon (i) the withdrawal of a 
Member, (ii) the admission of a new Member or (iii) any change in the 
number of Units owned by a Member, in each case pursuant to the terms 
and conditions specified in this Agreement.
    2.5. The Units.
    (a) Except as otherwise provided in this Agreement, all Units are 
identical to each other and accord the holders thereof the same 
obligations, rights and privileges as are accorded to each other holder 
thereof. Except as otherwise provided in this Agreement, BOX will not 
subdivide or combine any Units, or make or pay any distribution on any 
Units, or accord any other payment, benefit or preference to any Units, 
except by extending such subdivision, combination, distribution, 
payment, benefit or preference equally to all Units.
    (b) Units have no par value. To the extent that any Units must be 
cancelled or any Units shall be issued, the amount of such Units shall 
be rounded to the nearest whole number, to the extent feasible, as 
determined by the Board.
    2.6. Intent. It is the intent of the Members that BOX (a) shall 
always be operated in a manner consistent with its treatment as a 
partnership for United States federal income tax purposes (and, to the 
extent possible, for state income tax purposes within the United 
States), and (b) to the extent not inconsistent with the foregoing 
clause (a) shall not be operated or treated as a partnership for 
purposes of Sec.  303 of the Federal Bankruptcy Code (11 U.S.C. Sec.  
303). Neither BOX nor any Member shall take any action inconsistent 
with the express intent of the parties hereto as set forth in the 
immediately preceding sentence.

[[Page 60734]]

Article 3--Purpose

    3.1. Purpose. The purpose of BOX is to develop an electronic market 
for Trading BOX Products and to engage in all related activities 
arising therefrom or relating thereto or necessary, desirable, 
advisable, convenient, or appropriate in connection therewith as the 
Members may determine. BOX shall not engage in any other business or 
activity except as approved in accordance with Section 4.4(b)(ii) 
hereof.
    3.2. Roles of Founding Members. It is the intention of the Bourse, 
BSE, IB and BOX that the Bourse, BSE and IB will initially provide the 
following products and services to BOX:
    (a) Pursuant to the Regulatory Services Agreement, BSE will provide 
U.S. Securities and Exchange Commission approved self-regulatory 
organization (``SRO'') services and status as the regulatory framework 
for the BOX Market. As the Regulatory Services Provider, BSE will have 
the sole regulatory responsibility for the activities of BOX. BSE will 
also provide certain administrative services.
    (b) [Business confidential]
    (c) [Business confidential]

Article 4--Governance

    4.1. Board of Directors.
    (a) The Members shall establish a Board of Directors of BOX (the 
``Board'' or ``Directors'') to implement this Agreement. The Board 
shall be comprised of from six (6) to thirteen (13) Directors. The 
Board will manage the development, operations, business and affairs of 
BOX.
    (b) IB, Bourse and the BSE shall initially be entitled to designate 
two (2) Directors each. Thereafter, if IB, Bourse or BSE maintains a 
Percentage Interest of [business confidential] or greater, it shall 
have the right to designate two (2) Directors. If IB, Bourse or BSE 
maintains a Percentage Interest of from [business confidential], it 
shall have the right to designate one (1) Director. Additionally, as 
long as BOX remains a facility of the BSE pursuant to Section 3(a)(2) 
of the Exchange Act of 1934, the BSE shall have the right to designate 
one (1) Director, whether or not the BSE maintains any Percentage 
Interest.
    (c) Transferee Members [business confidential] who purchase and 
hold a Percentage Interest of [business confidential] or greater shall 
have the right to designate one (1) Director each.
    (d) Each Director shall serve at the pleasure of the Member which 
designated such Director and may from time to time be replaced by such 
Member. Any such replacement must be a member of senior management or 
Board of Directors of the designating party or an Affiliate of such 
designating party or of its principal owner or owners. Each Member 
shall notify the other Members in writing of any person designated by 
it to serve as a Director and any replacement for such person promptly 
following such designation or replacement. A Director shall be 
terminated by the Board: (i) in the event such Director has violated 
any provision of this Agreement, or (ii) if the Board determines that 
such action is necessary or appropriate in the public interest or for 
the protection of investors.
    (e) Subject to the provisions of paragraph (c) above, in the event 
of the addition of any New Members or the transfer of interest from a 
Member to a Transferee Member, the Board shall determine the number of 
Board seats, if any, to be held by the New or Transferee Member and 
will determine the disposition of the Board seats held by any 
Transferring Member.

[Business confidential]
    4.2. Authority and Duties of Board; Committees.
    (a) Authority and Conduct. The Board shall have the specific 
authority delegated to it pursuant to this Agreement. Each Director 
agrees to comply with the federal securities laws and the rules and 
regulations thereunder and to cooperate with the U.S. Securities and 
Exchange Commission and the BSE pursuant to their regulatory authority 
and the provisions of this Agreement. Furthermore, each Director shall 
take into consideration whether his or her actions as a Director would 
cause BOX to engage in conduct that fosters and does not interfere with 
BOX's ability to prevent fraudulent and manipulative acts and 
practices, promote just and equitable principles of trade, foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, protect investors and the public interest.
    (b) Duties of Board. Without limiting the general duties and 
authority of the Board as set forth in this Article 4, the Board shall 
have all of the powers of the Board of Directors of a corporation 
organized under the General Corporation Law of the State of Delaware, 
as from time to time in effect (the ``DGCL''), including the power and 
responsibility to manage the business of BOX, select, and evaluate the 
performance of, the Senior Executive, and establish and monitor capital 
and operating budgets.
    (c) Executive Committee. There may be an executive committee of the 
Board consisting of at least one or more Directors designated by each 
of IB, BSE and the Bourse, as long as such Person is still a Member, 
such executive committee to be formed by resolution passed by the 
Board. The act of a majority of the members of such committee shall be 
the act of the committee. Said committee may meet at stated times or on 
notice to all by any of their own number, and, subject to Section 
4.2(g) below, shall have and may exercise those powers of the Board in 
the management of the business affairs of the Company as are provided 
by this Agreement. Vacancies in the membership of the committee shall 
be filled by the Board in accordance with this Section 4.2(c) at a 
regular meeting or at a special meeting of the Board called for that 
purpose.
    (d) [deleted]
    (e) Other Committees. The Board may also designate one or more 
committees in addition to the executive committee, by resolution or 
resolutions passed by a majority of the whole Board; such committee or 
committees shall consist of one or more Directors of BOX, and, subject 
to Section 4.2(g) below, to the extent provided in the resolution or 
resolutions designating them, shall have and may exercise specific 
powers of the Board in the management of the business and affairs of 
BOX to the extent permitted by this Agreement. Such committee or 
committees shall have such name or names as may be determined from time 
to time by resolution adopted by the Board.
    (f) Powers Denied to Committees. Committees of the Board shall not, 
in any event, have any power or authority to transact any Major Action 
or an action specifically covered by Section 4.4(c) or 4.4(d).
    (g) Substitute Committee Member; Minutes. In the absence or on the 
disqualification of a member of a committee, the Member or members 
thereof present at any meeting and not disqualified from voting, 
whether or not he or they constitute a quorum, may unanimously appoint, 
in accordance with the provisions of this Section 4.2, another 
individual to act at the meeting in the place of such absent or 
disqualified member. All committees shall keep regular minutes of its 
proceedings and report the same to the Board as may be required by the 
Board.
    4.3 (a) Meetings. The Board will meet as often as the members 
thereof deem necessary, but not less frequently than every three (3) 
months. Meetings may be

[[Page 60735]]

conducted in person or by telephone or in any other manner agreed to by 
the Board. Any of the Members may call a meeting of the Board upon 
reasonable prior written notice. No notice of a meeting shall be 
necessary when all members of the Board are present. In the event that 
the Board consists of less than eight (8) Directors, the attendance of 
at least four (4) Directors shall constitute a quorum for purposes of 
any meeting of the Board. In the event that the Board consists of eight 
(8) or more Directors, the attendance of at least a majority of all the 
Directors shall constitute a quorum for purposes of any meeting of the 
Board. Except as may otherwise be provided by this Agreement, each of 
the Directors will be entitled to vote on any action to be taken by the 
Board, except that the Senior Executive (if a Director) shall not be 
entitled to vote on matters relating to his or her powers, compensation 
or performance. There shall be a total of 100 votes (the ``Total 
Votes'') available to be voted on any action to be taken by the Board. 
Each Director, except as limited by the provisions of Section 8.4(h), 
below, shall be entitled to vote that percentage of the Total Votes 
equal to the quotient obtained by dividing (i) the quotient of (A) the 
number of Units held by the Member that designated such Director (if 
applicable, rounded down to the nearest whole Unit) divided by (B) the 
aggregate number of Units held by all Members that designated Directors 
by (ii) the number of Directors designated by such Member. All quorum 
and voting requirements shall be adjusted accordingly for the 
suspension of any Member made pursuant to Section 5.9, 8.4(g) or 
8.4(h). Any Director shall be entitled to vote the votes allocated to 
another Director after having received such Director's proxy in 
writing. Any action to be taken by the Board shall be considered 
effective only if approved by at least a majority of the votes entitled 
to be voted on such action. Meetings of the Board may be attended by 
other representatives of the Members and other persons related to BOX 
as agreed to from time to time by the Board. The Board will set up 
procedures relating to the recording of minutes of its meetings. 
Actions of the Board may also be taken without a meeting by written 
consent of the Board.
    (b) Voting Trusts. Members are prohibited from entering into voting 
trust agreements with respect to their Units.
    4.4. Special Voting Requirements. (a) Notwithstanding the 
provisions of Section 4.3 regarding voting requirements, no action with 
respect to any Major Action (as defined in paragraph (b) below), shall 
be effective unless (i) at all times when IB, BSE and the Bourse are 
the only Members of BOX, approved by unanimous consent of the Board, or 
(ii) at all times when IB, BSE and the Bourse are not the only Members 
of BOX, approved by a majority of the Board including the affirmative 
vote of all of the votes of Directors designated by each of IB, BSE and 
the Bourse, in each case acting at a meeting or by unanimous written 
consent as provided in Section 4.3. In addition, unless unanimously 
approved by the Board as provided above, none of the Members on behalf 
of BOX shall enter into or permit BOX to enter into any Major Action.
    (b) For purposes of this Agreement, ``Major Action'' means any of 
the following:
    (i) Merger or consolidation of BOX with any other entity or the 
sale by BOX of any material portion of its assets;
    (ii) Entry by BOX into any line of business other than the business 
described in Article 3;
    (iii) Conversion of BOX from a Delaware limited liability company 
into any other type of entity;
    (iv) Except as expressly contemplated by this Agreement and the 
Related Agreement, entering into any agreement, commitment, or 
transaction with the Bourse or any of its Affiliates, BSE or any of its 
Affiliates, or IB or any of its Affiliates or any other Member or any 
of its Affiliates other than transactions or agreements upon 
commercially reasonable terms that are no less favorable to BOX than 
BOX would obtain in a comparable transaction or agreement with a third 
party;
    (v) Taking any action to effect the voluntary, or which would 
precipitate an involuntary, dissolution or winding-up of BOX;
    (vi) Except as otherwise provided in the Technical and Operational 
Services Agreement, operating the BOX Market utilizing any other 
software system other than the System;
    (vii) Except as otherwise provided in the Regulatory Services 
Agreement, operating the BOX Market utilizing any other Regulatory 
Services Provider other than BSE or an Affiliate of BSE;
    (viii) Entering into any partnership, joint venture or other 
similar joint business undertaking;
    (ix) Making any fundamental change in the market structure of BOX 
from that contemplated by the Members as of the date hereof;
    (x) Subject to Article 8, the acquisition of any Percentage 
Interest by any Member that results in such Member, alone or together 
with any Affiliate of such Member, newly holding an aggregate 
Percentage Interest equal to or greater than twenty percent (20%);
    (xi) [Business confidential]
    (xii) Altering the provisions for Board membership for IB, BSE or 
Bourse, specified in Section 4.1(b); or
    (xiii) Purchasing Units pursuant to Section 8.2.
    (c) [Business confidential]
    (d) [Business confidential]
    4.5. Officers. One of the Bourse designees to the Board of 
Directors shall initially be the Chairman of the Board of BOX (the 
``Initial Chairman''), subject to the approval of BSE and IB, which 
approval shall not be unreasonably withheld. The Board will appoint 
such other officers and agents of BOX, including a Senior Executive, as 
it shall from time to time deem necessary. Such officers and agents 
shall have such terms of employment, shall receive such compensation 
and shall exercise such powers and perform such duties as the Board 
shall from time to time determine.
    4.6. Duties of the Chairman of the Board. The Chairman of the Board 
shall preside at all meetings of the Members and at all meetings of the 
Board. The Chairman of the Board shall have the general powers and 
duties of management usually vested in the office of Chairman of the 
Board, and shall have such other duties and responsibilities related to 
the development of BOX as the Board shall from time to time direct. The 
Initial Chairman of the Board shall be designated by the Bourse and 
will serve until the commencement of Trading on the BOX Market and 
thereafter until his or her successor is duly elected by the Board.
    4.7. Duties of the Senior Executive. Subject to the supervision and 
direction of the Board, a senior executive (referred to herein as the 
``Senior Executive'') shall have general supervision, direction and 
control of the business and the officers of BOX. The Senior Executive 
shall have the general powers and duties of management usually vested 
in the office of Chief Executive Officer, and shall have such other 
duties and responsibilities related to BOX as the Board shall from time 
to time direct. The Senior Executive shall be responsible for advising 
the Board on the status of BOX on a regular basis or more frequently as 
requested by the Board.
    4.8. No Management by Members. Except as otherwise expressly 
provided herein or as requested by the Board, no Member shall take part 
in the day-to-day management or operation of the business and affairs 
of BOX. Except and

[[Page 60736]]

only to the extent expressly provided for in this Agreement and the 
Related Agreements and as delegated by the Board to duly appointed 
officers or agents of BOX, no Member or other Person other than the 
Board shall be an agent of BOX or have any right, power or authority to 
transact any business in the name of BOX or to act for or on behalf of 
or to bind BOX.
    4.9. Reliance by Third Parties. Any Person dealing with BOX or the 
Board may rely upon a certificate signed by the Chairman of the Board, 
or such other officer of BOX designated by the Board of the Company, as 
to:
    (a) The identity of the members of the Board, any officer or agent 
of BOX or any Member hereof;
    (b) The existence or non-existence of any fact or facts which 
constitute a condition precedent to acts by the Board or in any other 
manner germane to the affairs of BOX;
    (c) The Persons who are authorized to execute and deliver any 
agreement, instrument or document of or on behalf of BOX; or
    (d) Any act or failure to act by BOX or any other matter whatsoever 
involving BOX or any Member.

Article 5--Powers, Duties, and Restrictions of BOX and the Members

    5.1. Powers of BOX. In furtherance of the purposes set forth in 
Section 3, and subject to the provisions of Section 4, BOX, acting 
through the Board, will possess the power to do anything not prohibited 
by the Act, by other applicable law, or by this Agreement, including 
but not limited to the following powers: (i) To undertake any of the 
activities described in Section 3; (ii) to make, perform, and enter 
into any contract, commitment, activity, or agreement relating thereto; 
(iii) to open, maintain, and close bank and money market accounts, to 
endorse, for deposit to any such account or otherwise, checks payable 
or belonging to BOX from any other Person, and to draw checks or other 
orders for the payment of money on any such account; (iv) to hold, 
distribute, and exercise all rights (including voting rights), powers, 
and privileges and other incidents of ownership with respect to assets 
of BOX; (v) to borrow funds, issue evidences of indebtedness, and 
refinance any such indebtedness in furtherance of any or all of the 
purposes of BOX, to guarantee the obligations of others, and to secure 
any such indebtedness or guarantee by mortgage, security interest, 
pledge, or other lien on any property or other assets of BOX, (vi) to 
employ or retain such agents, employees, managers, accountants, 
attorneys, consultants and other Persons necessary or appropriate to 
carry out the business and affairs of BOX, and to pay such fees, 
expenses, salaries, wages and other compensation to such Persons as the 
Board shall determine, (vii) to bring, defend, and compromise actions, 
in its own name, at law or in equity, and (viii) to take all actions 
and do all things necessary or advisable or incident to the carrying 
out of the purposes of BOX, so far as such powers and privileges are 
necessary or convenient to the conduct, promotion, or attainment of 
BOX's business, purpose, or activities.
    5.2. Powers of Members. Except as otherwise specifically provided 
by this Agreement or required by the Act or by the U.S. Securities and 
Exchange Commission pursuant to the Securities Exchange Act of 1934, no 
Member shall have the power to act for or on behalf of, or to bind, 
BOX, and unless otherwise determined by the Board, all Members shall 
constitute one class or group of members of BOX for all purposes of the 
Act.
    5.3. Member Conduct. Each Member agrees to comply with the federal 
securities laws and the rules and regulations thereunder; to cooperate 
with the U.S. Securities and Exchange Commission and the BSE pursuant 
to their regulatory authority and the provisions of this Agreement; and 
to engage in conduct that fosters and does not interfere with BOX's 
ability to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest.
    5.4. Member's Compensation. Except as otherwise specifically 
provided in this Agreement or in any of the Related Agreements, the 
Members shall not be entitled to any compensation for their services 
hereunder.
    5.5. Withdrawal. Except as contemplated by Section 8, no Member 
shall withdraw from BOX unless and until such Member's required Initial 
Capital Contribution has been satisfied or specifically assumed by 
another Person and such Person has become a Member.
    5.6. Cessation of Status as a Member. A Member will cease to be a 
member of BOX upon the Bankruptcy or the involuntary dissolution of 
such Member.
    5.7. Claims Against or By Members. Except as set forth in the 
Related Agreements or required by the U.S. Securities and Exchange 
Commission pursuant to the Securities Exchange Act of 1934, as amended, 
any and all matters relating to claims (i) by BOX against a Member or a 
former Member or any Affiliate of a Member or a former Member 
(collectively the ``Member Entities'') or (ii) by a Member Entity 
against BOX shall be controlled by the Member or Members that are not 
affiliated with such Member Entity. No Director shall be entitled to 
vote on (A) whether to initiate a claim by BOX against the Member that 
appointed such Director or an Affiliate of such Member, (B) any matter 
concerning a claim initiated by BOX against the Member that appointed 
such Director or a Member Entity affiliated with such Member, or (C) 
any matter concerning a claim initiated against BOX by the Member that 
appointed such Director or a Member Entity affiliated with such Member. 
Any action to be taken by the Board with respect to any such claim 
shall be considered effective only if approved by at least a majority 
of the Directors that are not affiliated with such Member Entity.
    5.8. Purchased Services. Except as set forth in the Related 
Agreements, all products and services to be obtained by BOX will be 
evaluated by BOX's management with a view to best practices and all 
such products and services will be obtained from Members, their 
Affiliates or third-parties based upon arms-length negotiations, 
including obtaining quotes for such products or services from third-
parties, as appropriate. Notwithstanding the forgoing, Members and 
their Affiliates will be given preference over third-parties if such 
Members or Affiliates are willing and able to provide services and 
terms at least as favorable to BOX as those offered by the third 
parties.
    5.9. Suspension of Voting Privileges and Termination of Membership. 
After appropriate notice and opportunity for hearing, the Board, by a 
two-thirds vote, including the affirmative vote of the BSE and 
excluding the vote of such Member subject to sanction, may suspend or 
terminate a Member's voting privileges or membership: (i) in the event 
such Member has violated any provision of this Agreement, or (ii) if 
the Board determines that such action is necessary or appropriate in 
the public interest or for the protection of investors.

Section 6--Initial Operating Budget

    The Members have agreed on an initial budget (the ``Initial 
Operating

[[Page 60737]]

Budget'') for the estimated costs and expenses anticipated to be 
incurred from initial startup activities, document and rule 
preparation, acquisition of rights to software, preparation of 
modifications to same, equipment acquisition, other steps relating to 
preparation for the commencement of operations through the point at 
which profitability will be achieved. Exhibit 2 hereto sets forth (i) 
the Initial Operating Budget and (ii) the aggregate anticipated capital 
contributions of the Members (in kind and in cash) which the Members do 
hereby agree to make.

Section 7--Members; Financing BOX

    7.1. [Business confidential]
    7.2. [Business confidential]
    7.3. [Business confidential]
    7.4. [Business confidential]
    7.5. [Business confidential]
    7.6. Liability of the Members and Directors. Except as otherwise 
provided by the Act, the debts, obligations and liabilities of BOX, 
whether arising in contract, tort or otherwise, will be solely the 
debts, obligations and liabilities of BOX and not that of any Member or 
Director.

Article 8--Transferability of Units

    8.1. Restrictions on Transfer
    (a) Except for (i) transfers among Members; (ii) transfers by IB 
permitted under Section 8.5 hereof; or (iii) transfers to Affiliates of 
a Member, including officers of a Member or such Member's Affiliates, 
no Member shall have the right to dispose of, sell, alienate, assign, 
participate, subparticipate, encumber, or otherwise transfer all or any 
portion of its Units (other than assignments by operation of law) 
unless prior to such transfer the transferee is approved by the Board. 
To be eligible for such Board approval, the proposed transferee must 
(i) be of high professional and financial standing, (ii) be able to 
carry out their duties as a Member hereunder, and (iii) be under no 
regulatory or governmental bar or disqualification. Notwithstanding the 
foregoing, registration as a broker-dealer or self-regulatory 
organization is not required to be eligible for such Board approval.
    (b) In addition to the foregoing requirements, the admission of a 
transferee Member shall be conditioned upon the transferee's written 
acceptance of the terms and provisions of this Agreement and its 
written assumption of the obligations hereunder of its assignor. 
Whether or not a transferee who acquired any Units has accepted in 
writing the terms and provisions of this Agreement and assumed in 
writing the obligations hereunder of its predecessor in interest, such 
transferee shall be deemed, by the acquisition of such Units, to have 
agreed to be subject to and bound by all the obligations of this 
Agreement with the same effect and to the same extent as any 
predecessor in interest of such transferee.
    (c) All costs incurred by BOX in connection with the admission to 
BOX of a substituted Member pursuant to this Article 8 shall be borne 
by the transferor Member (and if not timely paid, by the substituted 
Member), including, without limitation, costs of any necessary 
amendment hereof, filing fees, if any, and reasonable attorneys' fees.
    (d) [Business confidential]
    8.2. [Business confidential]
    8.3 [Business confidential]
    8.4. Additional Restrictions. Anything contained in the foregoing 
provisions of this Article 8 expressed or implied to the contrary 
notwithstanding:
    (a) In no event shall a sale, transfer, assignment, exchange, or 
other disposition of any Member's Units take place if such sale, 
transfer, assignment, exchange, or other disposition is: (i) In the 
opinion of tax counsel to BOX, cause a termination of BOX within the 
meaning of Section 708 of the Code or, (ii) in the opinion of the 
Board, based on advice of tax counsel, that such transaction could 
cause a termination of BOX's status as a partnership or cause BOX to be 
treated as a publicly traded partnership for federal income tax 
purposes, (iii) prohibited by any state, federal or provincial 
securities laws, or (iv) prohibited by this Agreement.
    (b) In no event shall all or any part of a Member's Units be 
assigned or transferred to a minor or incompetent.
    (c) The Members may, in addition to any other requirement that the 
Members may impose, require as a condition of any sale, transfer, 
assignment, exchange, or other disposition of any Units that the 
transferor furnish to BOX an opinion of counsel satisfactory (both as 
to such opinion and as to such counsel) to counsel to BOX that such 
sale, transfer, assignment, exchange, or other disposition complies 
with applicable federal and state securities laws.
    (d) Any sale, transfer, assignment, exchange, or other disposition 
in contravention of any of the provisions of this Article 8 shall be 
void and ineffectual and shall not bind or be recognized by BOX.
    (e) Beginning after SEC approval of BOX, BOX shall provide the U.S. 
Securities and Exchange Commission with written notice ten (10) days 
prior to the Closing Date of any acquisition that results in a Member's 
Percentage Interest, alone or together with any Affiliate of such 
Member, meeting or crossing the threshold level of 5% or the successive 
5% Percentage Interest levels of 10% and 15%.
    (f) Beginning after SEC approval of BOX, in addition to the notice 
requirement in subsection (e), the following transfers are subject to 
the rule filing process pursuant to Section 19 of the Securities 
Exchange Act of 1934: (i) any transfer that results in the acquisition 
and holding by any Member, alone or together with any Affiliate of such 
Member, of an aggregate Percentage Interest level which meets or 
crosses the threshold level of 20% or any successive 5% Percentage 
Interest level (i.e. 25%, 30%, etc.); (ii) any transfer that results in 
a reduction of the BSE's aggregate Percentage Interest to below the 20% 
threshold.
    (g) For purposes of this subsection (g): (i) a ``controlling 
interest'' shall be defined as the ownership by any Person, alone or 
together with any Affiliate of such Person, of a 25% or greater 
interest in a Member, and (ii) an ``Acquirer'' shall be defined as a 
Person who, alone or together with any Affiliate of such Person, 
acquires a controlling interest in a Member. An Acquirer shall be 
required to execute an amendment to this Agreement upon establishing a 
controlling interest in any Member who, alone or together with any 
Affiliate of such Member, holds a Percentage Interest in BOX equal to 
or greater than 20%. In such amendment the Acquirer shall agree to 
become a new party to this Agreement and shall agree to abide by all 
the provisions of this Agreement. Beginning after SEC approval of this 
Agreement, any amendment to this Agreement executed pursuant to this 
subsection (g) is subject to the rule filing process pursuant to 
Section 19 of the Securities Exchange Act of 1934. The rights and 
privileges of the Member under this Agreement shall be suspended until 
such time as the amendment executed pursuant to this subsection (g) has 
become effective pursuant to Section 19 of the Securities Exchange Act 
of 1934 or the Acquirer no longer holds a controlling interest in the 
Member.
    (h) In the event that a Member, or any Affiliate of such Member, is 
approved by the BSE as an Options Participant on the BOX Market 
pursuant to the rules of the BSE, and such Member owns more than 20% of 
the Units, alone or together with any Affiliate of such Member, (Units 
owned in excess of 20% being referred to as ``Excess Units''), the 
Member shall have no voting rights nor give any proxy in relation to a 
vote of the Members with respect to the Excess Units held by such 
Member; provided, however, that whether or not such

[[Page 60738]]

Member otherwise participates in a meeting in person or by proxy, such 
Member's Excess Units shall be counted for quorum purposes and shall be 
voted by the person presiding over quorum and vote matters in the same 
proportion as the Units held by the other Members are voted (including 
any abstentions from voting).
    IB shall have a temporary exemption, not to extend past January 1, 
2014, from the voting limitation on Excess Units contained in this 
subsection, but only with respect to any vote regarding any merger, 
consolidation or dissolution of BOX or any sale of all or substantially 
all of the assets of BOX.
    8.5. Continuation of LLC. The liquidation, dissolution, bankruptcy, 
insolvency, death, or incompetency of any Member shall not terminate 
the business of BOX or dissolve BOX, which shall continue to be 
conducted upon the terms of this Agreement by the other Members and by 
the personal representatives and successors in interest of such Member.
    8.6. [Business confidential]
    8.7. New Membership Interests. Upon the issuance of any new Units 
in BOX or the valid transfer of all or any portion of a Member's Units, 
the Board shall amend this Agreement and Schedule A hereto so as to 
specify the class of any new Members, the rights of such class and its 
or their Capital Contributions and make such further adjustments to 
Schedule A as may be necessary to reflect the admission of new Members.
    8.8. No Retroactive Effect. No new Members shall be entitled to any 
retroactive allocation of losses, income or expense deductions incurred 
by BOX. The Board may, at the time an additional Member is admitted, 
close the Company books (as though BOX's Fiscal Year has ended) or make 
pro-rata allocations of loss, income and expense deductions to an 
additional Member for that portion of the BOX's Fiscal Year in which an 
additional Member was admitted in accordance with the provisions of 
Sec.  706(d) of the Code.

Article 9--Distributions

    9.1. Current Distributions. If at any time and from time to time 
the Board determines that BOX has cash that is not required for the 
operations of BOX, the payment of liabilities or expenses of BOX, or 
the setting aside of reserves to meet the anticipated cash needs of BOX 
(``Distributable Cash''), then:
    (a) Within 10 days after the end of each fiscal quarter, BOX shall 
make distributions (``Tax Distributions'') to the Members of their 
respective Tax Amounts for such fiscal quarter (or, in the event that 
Distributable Cash is less than the total of all such Tax Amounts, BOX 
shall distribute the Distributable Cash in proportion to such Tax 
Amounts). If after the end of any fiscal year it is determined that a 
Member's Tax Amount for the fiscal year exceeds the sum of the Tax 
Distributions made to the Member hereunder and the distributions made 
to such member under Section 9.1(b) for such fiscal year (any such 
excess, a ``Shortfall Amount''), then BOX shall, on or before the 75th 
day of the next fiscal year, make an additional Tax Distribution to the 
members of their respective Shortfall Amounts (or, in the event that 
Distributable Cash is less than the total of all such Shortfall 
Amounts, BOX shall distribute the Distributable Cash in proportion to 
such Shortfall Amounts). If the aggregate Tax Distributions to any 
Member pursuant to this subsection for a fiscal year exceed the 
Member's Tax Amount for such fiscal year, such excess shall be deducted 
from the Member's Tax Amount when calculating the Tax Distributions to 
be made to such Member for each subsequent fiscal year until the excess 
has been fully accounted for. All Tax Distributions to a Member shall 
be treated as advances against any subsequent distributions to be made 
to such Member under Section 9.1(b) or Section 11.2. Subsequent 
distributions made to the Member pursuant to Sections 9.1(b) and 11.2 
shall be adjusted so that when aggregated with all prior distributions 
to the Member pursuant to those provisions, and with all prior Tax 
Distributions to the Member, the amount distributed shall be equal, as 
nearly as possible, to the aggregate amount that would have been 
distributable to such member pursuant to Section 9.1(b) and Section 
11.2 if this Agreement contained no provision for Tax Distributions.
    (b) After making the Tax Distributions described in subsection (a) 
hereof, the Board may distribute all or any portion of remaining 
Distributable Cash to the Members in proportion to their Percentage 
Interests, unless the distribution is a liquidating distribution, which 
shall be made in the manner set out in Section 11.1(b).
    9.2. Limitation. BOX, and the Board on behalf of BOX, shall not 
make a distribution to any Member on account of its interest in BOX if 
and to the extent such distribution would violate the Act or other 
applicable law.
    9.3. Withholdings Treated as Distributions. Any amount that BOX is 
required to withhold and pay over to any governmental authority on 
behalf of a Member shall be treated as a distribution made to such 
Member pursuant to Section 9.1(a), 9.1(b) or 11.2, and shall be 
deducted from the amounts next distributable to such Member pursuant to 
any of those provisions until the withholding has been fully accounted 
for. To the extent that such an amount is treated, pursuant to the 
previous sentence, as a distribution under Section 9.1(a), it shall 
also be treated as a Tax Distribution, with the consequences described 
in Section 9.1(a).

Article 10--Allocations of Profits and Losses

    10.1. Allocations of Profits; General. Except as provided in 
Sections 10.3 through 10.9 below, all net profits and credits of BOX 
(for both accounting and tax purposes) for each fiscal year shall be 
allocated to the Members from time to time (but no less often than once 
annually and before making any distribution to the Members) first, in 
proportion to any prior allocations of losses under Section 10.2 not 
previously taken into account pursuant to this clause first, to the 
extent of such losses, and second, in proportion to their Percentage 
Interest.
    10.2. Allocations of Losses; General. Except as provided in 
Sections 10.3 through 10.9 below, all net losses of BOX for each fiscal 
year (for both accounting and tax purposes), and all Nonrecourse 
Deductions, shall be allocated to the Members from time to time (but no 
less often than once annually and before making any distribution to the 
Members) first, in proportion to any prior allocations of profits under 
Section 10.1 not previously taken into account pursuant to this clause 
first, to the extent of such profits, second, in proportion to the 
Members' Capital Contributions, to the extent thereof, and third, in 
proportion to their Percentage Interest.
    10.3. Limitation. Notwithstanding anything otherwise provided in 
Section 10.2, no Member will be allocated any losses not attributable 
to Nonrecourse Debt to the extent such allocation (without regard to 
any allocations based on Nonrecourse Debt), and after taking into 
account any reductions to the Member's Capital Account required by 
Treasury Regulations Sec.  1.704-1(b)(2)(ii)(d) (4), (5), or (6) 
results in a deficit in such Member's Capital Account in excess of such 
Member's actual or deemed obligation, if any, to restore deficits on 
the dissolution of BOX (any such excess, an ``Unpermitted Deficit''). 
Any losses not allocable to a Member under this sentence shall be 
allocated to the other Members. In the event any Member's Capital 
Account is adjusted (by way of distribution,

[[Page 60739]]

allocation or otherwise) to create an Unpermitted Deficit, BOX shall 
allocate to such Member, as soon as possible thereafter, items of 
income or gain sufficient to eliminate the Unpermitted Deficit.
    10.4. Qualified Income Offset. In the event any Member unexpectedly 
receives adjustments, allocations, or distributions described in 
Treasury Regulations Sec.  1.704-1(b)(2)(ii)(d) (4), (5) or (6), items 
of income and gain of BOX shall be specially allocated to such Member 
in an amount and manner sufficient to eliminate the deficit balance in 
such Member's Capital Account created by such adjustments, allocations 
or distributions as promptly as possible. The preceding sentence is 
intended to comply with the ``qualified income offset'' requirement in 
Treasury Regulations Sec.  1.704-1(b)(2)(ii)(d), and shall be 
interpreted consistently therewith.
    10.5. Nonrecourse Debt and Chargebacks. If at the end of any fiscal 
year of BOX, after taking into account all distributions made and to be 
made in respect of such year but prior to any allocation of profits and 
losses for such year except the allocations required by Section 10.3, 
any Member shall have a negative Capital Account by reason (and to the 
extent) of allocations of items of loss or deduction attributable in 
whole or part to Nonrecourse Debt secured by any of the assets of BOX, 
such Member shall be allocated (or if more than one Member has such a 
negative Capital Account, all such Members shall be allocated ratably 
among them in accordance with the respective proportions of such 
negative balances as are attributable to such deductions or losses) 
that portion of any items of income and gain for such year as may be 
equal to the amount by which the negative balance of such Member's 
Capital Account exceeds the sum of (A) such Member's allocable share of 
the aggregate Minimum Gain with respect to all of BOX's assets securing 
such Nonrecourse Debt plus (B) such Member's allocable share of 
aggregate BOX debt which is not Nonrecourse Debt, such allocable share 
to be determined in accordance with the provisions of Section 752 of 
the Code and the Treasury Regulations thereunder. In addition, if there 
is a net decrease in BOX's aggregate Minimum Gain with respect to all 
of its assets for a taxable year, each Member shall be allocated items 
of income and gain ratably in an amount equal to that Member's share of 
such net decrease in the manner and to the extent required by Treasury 
Regulations Section 1.704-2(f) or any successor regulation. The 
preceding sentence is intended to comply with the minimum gain 
chargeback requirement of Treasury Regulations Sec.  1.704-2(f), and 
shall be interpreted and applied in a manner consistent therewith.
    10.6. Member Nonrecourse Deductions. Any Member Nonrecourse 
Deductions for any fiscal year or other period shall be allocated to 
the Member that (in its capacity, directly or indirectly, as lender, 
guarantor, or otherwise) bears the economic risk of loss with respect 
to the loan to which such Member Nonrecourse Deductions are 
attributable in accordance with Treasury Regulations Sec.  1.704-2(i). 
If, during any fiscal year or other period, there is a net decrease in 
Member Nonrecourse Debt Minimum Gain, that decrease shall be charged 
back among the Members in accordance with Treasury Regulations Sec.  
1.704-2(i)(4). The preceding sentence is intended to comply with the 
partner nonrecourse debt minimum gain chargeback requirement of 
Treasury Regulations Sec.  1.704-2(i)(4), and shall be interpreted and 
applied in a manner consistent herewith.
    10.7. Calculation of Profits and Losses. For all purposes hereof, 
BOX's profits and losses shall be determined by taking into account all 
of BOX's items of income and gain (including items not subject to 
federal income tax) and all items of loss, expense, and deduction, in 
each case determined under federal income tax principles.
    10.8. Section 704(c) and Capital Account Revaluation Allocations. 
The Members agree that to the fullest extent possible with respect to 
the allocation of depreciation and gain for U.S. federal income tax 
purposes, Section 704(c) of the Code shall apply with respect to non-
cash property contributed to BOX by any Member. For purposes hereof, 
any allocation of income, loss, gain or any item thereof to a Member 
pursuant to Section 704(c) of the Code shall affect only its tax basis 
in its Percentage Interest and shall not affect its Capital Account. In 
addition to the foregoing, if BOX assets are reflected in the Capital 
Accounts of the Members at a book value that differs from the adjusted 
tax basis of the assets (e.g., because of a revaluation of the Members' 
Capital Accounts under Treasury Regulations Sec.  1.704-
1(b)(2)(iv)(f)), allocations of depreciation, amortization, income, 
gain or loss with respect to such property shall be made among the 
Members in a manner consistent with the principles of Section 704(c) of 
the Code and this Section 10.8.
    10.9. Offset of Regulatory Allocations. The allocations required by 
Sections 10.3 through 10.6 and Section 10.8 are intended to comply with 
certain requirements of the Treasury Regulations. The Board may, in its 
discretion and to the extent not inconsistent with Section 704 of the 
Code, offset any or all such regulatory allocations either with other 
regulatory allocations or with special allocations of income, gain, 
loss or deductions pursuant to this section in whatever manner it 
determines appropriate so that, after such offsetting allocations are 
made, each Member's Capital Account balance is, to the extent possible, 
equal to the Capital Account balance such Member would have had if the 
regulatory allocations were not part of this Agreement.
    10.10. Terminating and Special Allocations. Notwithstanding the 
foregoing allocation provisions, any profits or losses resulting from a 
liquidation, merger or consolidation of BOX, the sale of substantially 
all the assets of BOX in one or a series of related transactions, or 
any similar event (and, if necessary, specific items of gross income, 
gain, loss, or deduction incurred by BOX in the fiscal year of such 
transaction(s)) shall be allocated among the Members so that after such 
allocations and the allocations required by Section 11.3, and 
immediately before the making of any liquidating distributions to the 
Members under Section 11.2, the Members' Capital Accounts equal, as 
nearly as possible, the amounts of the respective distributions to 
which they are entitled under Section 11.2.

Article 11--Dissolution and Winding Up

    11.1. (a) BOX shall be dissolved and its affairs shall be wound up 
upon:
    (i) The election to dissolve BOX made by the Board pursuant to 
Section 4.4(b)(v); or
    (ii) The entry of a decree of judicial dissolution under Sec.  18-
802 of the Act; or
    (iii) The resignation, expulsion, Bankruptcy or dissolution of a 
member, or the occurrence of any other event which terminates the 
continued membership of a Member in BOX, unless the business of BOX is 
continued by the consent of remaining Members holding a majority of the 
issued and outstanding Units given within ninety (90) days following 
the occurrence of any such event; or
    (iv) The occurrence of any other event that causes the dissolution 
of a limited liability company under the Act.
    The legal representatives, if any, of any Member shall succeed as 
assignee to such Member's interest in BOX upon the Bankruptcy, 
insolvency or

[[Page 60740]]

dissolution of such Member, but shall be admitted as a substitute 
Member only with the written consent of the Board (such consent to be 
in the Board's sole discretion); unless and until such consent is 
given, any Percentage Interest in BOX held by such legal 
representatives of a Member shall not be included in calculating the 
Percentage Interests of the Members required to take any action under 
this Agreement.
    (b) Upon dissolution of BOX, the business of BOX shall continue for 
the sole purpose of winding up its affairs. The winding up process 
shall be carried out by all of the Members unless the dissolution is 
caused by an event of withdrawal by the sole remaining Member, in which 
case a liquidating trustee may be appointed for BOX by vote of a 
majority in Percentage Interest of the Members (the Members or such 
liquidating trustee is referred to herein as the ``Liquidator''). In 
winding up BOX's affairs, every effort shall then be made to dispose of 
the assets of BOX in an orderly manner, having regard to the liquidity, 
divisibility and marketability of BOX's assets. If the Liquidator 
determines that it would be imprudent to dispose of any non-cash assets 
of BOX, such assets may be distributed in kind to the Members, in lieu 
of cash, proportionately to their rights to receive cash distributions 
hereunder; provided, that the Liquidator shall in its sole discretion 
determine the relative shares of the Members of each kind of those 
assets that are to be distributed in kind. The Liquidator shall not be 
entitled to be paid by BOX any fee for services rendered in connection 
with the liquidation of BOX, but the Liquidator (whether one or more 
Members or a liquidating trustee) shall be reimbursed by BOX for all 
third-party costs and expenses incurred by it in connection therewith 
and shall be indemnified by BOX with respect to any action brought 
against it in connection therewith by applying, mutatis mutandis, the 
provisions of Article 14.
    11.2. Application and Distribution of Assets.
    (a) [Business confidential]
    (b) [Business confidential]
    (c) Reserve. A reasonable reserve for contingent, conditional and 
unmatured liabilities in connection with the winding up of the business 
of BOX shall be retained by BOX until such winding up is completed or 
such reserve is otherwise deemed no longer necessary by the Liquidator.
    11.3. Capital Account Adjustments. For purposes of determining a 
Member's Capital Account, if, on liquidation and dissolution, some or 
all of the assets of BOX are distributed in kind, BOX profits (or 
losses) shall be increased by the profits (or losses) that would have 
been realized had such assets been sold for their fair market value on 
the date of dissolution of BOX, as determined by the Liquidator. Such 
increase (i) shall be allocated to the Members in accordance with 
Article 10 hereof and (ii) shall increase (or decrease) the Members' 
Capital Account balances accordingly, it being the general intent that 
the adjustments contemplated by this subsection shall have the effect, 
as nearly as possible, of causing the Members' Capital Account balances 
to be in proportion to their Percentage Interests.
    11.4. Termination of the LLC.
    Subject to Section 19.1 of this Agreement, the separate legal 
existence of BOX shall terminate when all assets of BOX, after payment 
of or due provision for all debts, liabilities and obligations of BOX, 
shall have been distributed to the Members in the manner provided for 
in this Article 11, and a Certificate of Cancellation shall have been 
filed in the manner required by Section 18-203 of the Act.

Article 12--Books, Records and Accounting

    12.1. Books of Account. The Board shall cause to be entered in 
appropriate books, kept at BOX's principal place of business, all 
transactions of or relating to BOX. Each Member shall have access to 
and the right, at such Member's sole cost and expense, to inspect and 
copy such books and all other BOX records during normal business hours; 
provided that the inspecting Member shall be responsible for any out-
of-pocket costs or expenses incurred by BOX in making such books and 
records available for inspection. Notwithstanding the foregoing, the 
books and records of BOX shall be subject at all times to inspection 
and copying by the Regulatory Services Provider and the SEC at no 
additional cost to the Regulatory Services Provider or the SEC. The 
books, records, premises, officers, directors, agents, and employees of 
BOX shall be deemed to be the books, records, premises, officers, 
directors, agents, and employees of the Regulatory Services Provider 
and its Affiliates for the purpose of and subject to oversight pursuant 
to the Securities Exchange Act of 1934, as amended. The Board shall not 
have the right to keep confidential from the Members any information 
that the Board would otherwise be permitted to keep confidential 
pursuant to Sec.  18-305(c) of the Act.
    12.2. Deposits of Funds. All funds of BOX shall be deposited in its 
name in such checking, money market, or other account or accounts as 
the Board may from time to time designate; withdrawals shall be made 
therefrom on such signature or signatures as the Board shall determine.
    12.3. Fiscal Year. The fiscal year of BOX shall be the calendar 
year (the ``Fiscal Year'').
    12.4. Financial Statements; Reports to Members. BOX, at its cost 
and expense, shall prepare and furnish to each of the Members, within 
ninety (90) days after the close of each taxable year, financial 
statements of BOX, and all other information necessary to enable such 
Member to prepare its tax returns, including without limitation a 
statement showing the balance in such Member's Capital Account.
    12.5. Tax Elections. The Members may, by unanimous agreement and in 
their absolute discretion, make all tax elections (including, but not 
limited to, elections relating to depreciation and elections pursuant 
to Section 754 of the Code) as they deem appropriate. Notwithstanding 
anything contained in Article 10 of this Agreement, any adjustments 
made pursuant to Section 754 of the Code shall affect only the 
successor in interest to the transferring Member. Each Member will 
furnish BOX with all information necessary to give effect to any such 
election and will pay the costs of any election applicable as to it.
    12.6. Tax Matters Member. BSE shall be the tax matters Member of 
BOX for purposes of the Code, and shall be entitled to take such 
actions on behalf of BOX in any and all proceedings with the Internal 
Revenue Service as it, in its absolute discretion, deems appropriate 
without regard to whether such actions result in a settlement of tax 
matters favorable to some Members and adverse to other Members. 
Notwithstanding the foregoing, BSE shall (a) promptly deliver to the 
Bourse and IB copies of any notices, letters or other documents 
received by BSE as the tax matters Member of BOX, (b) keep the Bourse 
and IB informed with respect to all matters involving BSE as the tax 
matters Member of BOX, and (c) consult with the Bourse and IB and 
obtain the approval of the Bourse and IB prior to taking any actions as 
tax matters Member of BOX. The tax matters Member shall not be entitled 
to be paid by BOX any fee for services rendered in connection with any 
tax proceeding, but shall be reimbursed by BOX for all third-party 
costs and expenses incurred by it in connection with any such 
proceeding and shall be indemnified by BOX with respect to any action 
brought against it in connection with the settlement of any such 
proceeding by

[[Page 60741]]

applying, mutatis mutandis, the provisions of Article 14.

Article 13--Arbitration

    13.1. (a) All disputes, claims, or controversies between Members or 
between BOX and any Member(s) arising under or in any way relating to 
this Agreement shall be (x) settled by arbitration before a panel of 
three neutral arbitrators (the ``Neutral Arbitrators'') appointed in 
accordance with the Commercial Arbitration Rules of the American 
Arbitration Association, each having experience with and knowledge of 
the general field related to the dispute, claim or controversy (with at 
least one being an attorney), and (y) administered by the American 
Arbitration Association in accordance with its Commercial Arbitration 
Rules as in effect at the time a request for arbitration is made. For 
the purposes of this Section 13.1, the following persons shall be 
deemed not to be a Neutral Arbitrator (i) a director, officer, 
employee, agent, partner or shareholder of any party to the dispute or 
BOX, (ii) a consultant to BOX or any party to the dispute, (iii) a 
person with a direct or indirect financial interest in any contract 
with any party to the dispute, (iv) a director, officer or key employee 
of a company at a time when such company was party to a contract with 
any party to the dispute, or (v) a relative of any person referred to 
in clauses (i), (ii), (iii) or (iv) above. Arbitration may be commenced 
at any time by any party to the dispute giving written notice to the 
other party or parties to the dispute that such dispute has been 
referred to arbitration under this Section 13.1. Any determination or 
award rendered by the Neutral Arbitrators shall be conclusive and 
binding upon the parties to such dispute and judgment on the award 
rendered by the Neutral Arbitrators may be entered and enforced in any 
court having jurisdiction thereof; provided, however, that any such 
determination or award shall be accompanied by a reasoned award of the 
Neutral Arbitrators giving the reasons for the determination or award. 
The parties hereby consent to the non-exclusive jurisdiction of the 
courts of the Commonwealth of Massachusetts or to any federal court 
located within the Commonwealth of Massachusetts for any action (i) to 
compel arbitration, (ii) to enforce the award of the Neutral 
Arbitrators or (iii) prior to the appointment and confirmation of the 
Neutral Arbitrators, for temporary, interim or provisional equitable 
remedies, and to service of process in any such action by registered 
mail, return receipt requested, or by any other means provided by law. 
Any provisional or equitable remedy which would be available from a 
court of law shall be available from the arbitrators to the parties. In 
making any determination or award, the Neutral Arbitrators shall be 
authorized to award interest on any amount awarded. This provision for 
arbitration shall be specifically enforceable by the parties to the 
disputes and the determination or award of the Neutral Arbitrators in 
accordance herewith shall be final and binding and there shall be no 
right of appeal therefrom. Each of the parties to the dispute shall pay 
its own expenses of arbitration and the expenses of the Neutral 
Arbitrators shall be equally shared; provided, however, that if in the 
opinion of the Neutral Arbitrators any claim was frivolous or in bad 
faith, the Neutral Arbitrators may assess, as part of the determination 
or award, all or any part of the arbitration expenses of the other 
party or parties (including reasonable attorneys' fees) and of the 
Neutral Arbitrators against any party so acting in bad faith or raising 
such frivolous claim.
    (b) The place of arbitration shall be Boston, Massachusetts and the 
language of the arbitral proceedings shall be English.

Article 14--Exculpation and Indemnification

    14.1. Members Generally. Except as set forth in the second sentence 
of this Section 14.1, no Member nor any of its shareholders, directors, 
employees, Advisors or other agents, nor any Directors, officers, 
agents, Advisors or employees of BOX (collectively, the 
``Indemnitees''), shall have any liability to BOX, to any other Member, 
or to any third party for any loss suffered by BOX, such other Member 
or such third party that arises out of any action or inaction of such 
Member (or any other Indemnitee), (a) with respect to its activities 
under this Agreement or the Related Agreements, unless otherwise 
specified in the Technical and Operational Services Agreement or the 
Regulatory Services Agreement or (b) otherwise in its capacity as a 
Member, if such Member or such other Indemnitee, in good faith, 
determined that such course of conduct was in the best interests of BOX 
and such course of conduct did not constitute gross negligence or 
willful misconduct of such Member (or other Indemnitees) or a material 
breach by such Member of this Agreement. To the fullest extent 
permitted by law, each Member (and such other Indemnitees) shall be 
indemnified by BOX against any losses, judgments, liabilities, expenses 
(including, without limitation, reasonable attorneys' fees and court 
costs) and amounts paid in settlement of any claims sustained by it in 
connection with BOX, provided that the same were not the result of 
gross negligence or willful misconduct of such Member (or such other 
Indemnitee) or a breach by such Member of this Agreement or any Related 
Agreement. Any Person claiming reimbursement of expenses under this 
Article 14 shall be paid amounts to which he or it would be entitled 
hereunder as such expenses are incurred upon presentation of 
appropriate documentation to BOX, subject to providing a written 
undertaking to repay any such amounts to which such Person ultimately 
turns out not to be entitled under the standards herein set forth. The 
indemnification and advancement of expenses provided by this Article 
shall continue as to an Indemnitee who has ceased to be a Member (or 
otherwise an Indemnitee), and shall inure to the benefit of the heirs, 
executors, administrators, and successors of such Member (and the other 
Indemnitees). Any indemnification pursuant to this Section 14.1 shall 
be solely out of the assets of BOX and shall not be a personal 
obligation of any Member.
    14.2. Duties of Indemnitee. To the extent that, at law or in 
equity, an Indemnitee has duties (including fiduciary duties) and 
liabilities relating thereto to BOX or to the Members, the Members and 
any other Indemnitee acting in connection with BOX's business or 
affairs shall not be liable to BOX or to any Member for its good faith 
reliance on the provisions of this Agreement and any Related Agreement. 
The provisions of this Agreement and any Related Agreement, to the 
extent that they restrict the duties and liabilities of an Indemnitee 
otherwise existing at law or in equity, are agreed by the Members to 
replace such other duties and liabilities of such Indemnitee.
    14.3. BOX Market Participant Indemnity. The rules and regulations 
of BOX shall contain procedures whereby BOX shall require all BOX 
Market participants to execute an agreement before becoming 
participants in the BOX Market concerning such Person's participation 
in the BOX Market, which agreement shall include, among other things, 
the agreement of such Person to waive liability of BOX, its Members and 
their respective Affiliates with respect to such Person's participation 
in the BOX Market.

[[Page 60742]]

Article 15--Maintenance of Separate Business

    BOX shall at all times (a) to the extent that any of BOX's offices 
are located in the offices of an Affiliate, pay fair market rent for 
its office space located therein, (b) maintain BOX's books, financial 
statements, accounting records and other partnership documents and 
records separate from those of any Affiliate or any other Person, (c) 
not commingle BOX's assets with those of any Affiliate or any other 
Person, (d) maintain BOX's books of account, bank accounts and payroll 
separate from those of any Affiliate, (e) act solely in its name and 
through its own authorized agents, and in all respects hold itself out 
as a legal entity separate and distinct from any other Person, (f) make 
investments directly or by brokers engaged and paid by BOX or its 
agents (provided that if any agent is an Affiliate of BOX it shall be 
compensated at a fair market rate for its services), (g) manage BOX's 
liabilities separately from those of any Affiliate and pay its own 
liabilities, including all administrative expenses and compensation to 
employees, consultants or agents, and all operating expenses, from its 
own separate assets, except that an Affiliate may pay the 
organizational expenses of BOX, and (h) pay from BOX's assets all 
obligations and indebtedness of any kind incurred by BOX. 
Notwithstanding the foregoing, the books, records, premises, officers, 
directors, agents and employees of BOX shall be deemed to be those of 
the Regulatory Services Provider and its Affiliates for purpose of and 
subject to oversight pursuant to the Securities Exchange Act of 1934, 
as amended. In addition, the books and records of BOX shall be subject 
at all times to inspection and copying by the Regulatory Services 
Provider and its Affiliates and the SEC without charge to such Persons. 
BOX shall abide by all Act formalities, including the maintenance of 
current records of BOX affairs, and BOX shall cause its financial 
statements to be prepared in accordance with generally accepted 
accounting principles in a manner that indicates the separate existence 
of BOX. BOX shall (i) pay all its liabilities, (ii) not assume the 
liabilities of any Affiliate unless approved by unanimous consent of 
the Board and (iii) not guarantee the liabilities of any Affiliate 
unless approved by unanimous consent of the Board. The Board shall make 
decisions with respect to the business and daily operations of BOX 
independent of and not dictated by any Affiliate.

Article 16--Confidentiality and Related Matters

    16.1. Disclosure and Publicity. The parties hereto agree that the 
initial public disclosures concerning the transactions contemplated by 
this Agreement and the Related Agreements shall require prior approval 
of all Members.
    16.2. Confidentiality Obligations of Members.
    (a) Each Member agrees that it will use BOX Confidential 
Information only in connection with the activities contemplated by this 
Agreement and the Related Agreements, and it will not disclose any BOX 
Confidential Information to any Person except as expressly permitted by 
this Section 16.2 and the Related Agreements.
    (b) The Members may disclose BOX Confidential Information:
    (i) To its directors, officers and employees who have a reasonable 
need to know the contents thereof;
    (ii) On a confidential basis to those Advisors of the Member who 
have a reasonable need to know the contents thereof, so long as such 
disclosure is made pursuant to the procedures referred to in Section 
16.4(b);
    (iii) To the extent required by applicable statute, rule or 
regulation including, without limitation, any rules promulgated under 
the Securities Exchange Act of 1934, as amended; or in response to a 
valid request from the U.S. Securities and Exchange Commission pursuant 
to the Securities and Exchange Act of 1934 and the rules thereunder or 
the BSE (or Boston Options Exchange Regulation through delegated 
authority); or any court of competent jurisdiction; provided that the 
Member has made reasonable efforts to conduct its relevant business 
activities in a manner such that the disclosure requirements of such 
statute, rule or regulation or court of competent jurisdiction do not 
apply, and provided further that BOX is given notice and an adequate 
opportunity to contest such disclosure or to use any means available to 
minimize such disclosure (e.g., the ``confidential treatment'' 
provisions of Rule 24b-2 promulgated under the Securities Exchange Act 
of 1934, as amended); and
    (iv) To the extent such BOX Confidential Information has become 
generally available publicly through no fault of the Bourse or its 
directors, officers, employees or Advisors.
    16.3. Member Information Confidentiality Obligation. Each Member 
shall hold, and shall cause its respective Affiliates and their 
directors, officers, employees, agents, consultants and Advisors to 
hold, in strict confidence, unless disclosure to an applicable 
regulatory authority is necessary or appropriate or unless compelled to 
disclose by judicial or administrative process or, in the written 
opinion of its counsel, by other requirement of law or the applicable 
requirements of any regulatory agency or relevant stock exchange, all 
non-public records, books, contracts, reports, instruments, computer 
data and other data and information (collectively, ``Member 
Information'') concerning the other Members (or, if required under a 
contract with a third party, such third party) furnished it by such 
other Member or its representatives pursuant to this Agreement or any 
other Related Agreement, except to the extent that such Member 
Information can be shown to have been (a) previously known by such 
Member on a non-confidential basis, (b) available to such Member on a 
non-confidential basis from a source other than the disclosing Member, 
(c) in the public domain through no fault of such Members or (d) later 
lawfully acquired from other sources by the Member to which it was 
furnished, and none of the Members shall release or disclose such 
Member Information to any other person, except its auditors, attorneys, 
financial advisors, bankers, other consultants and Advisors and, to the 
extent permitted above, to regulatory authorities. In the event that a 
Member becomes compelled to disclose any Member Information in 
connection with any necessary regulatory approval or by judicial or 
administrative process, such party shall provide the Member who 
provided such Member Information (the ``Disclosing Member'') with 
prompt prior written notice of such requirement so that the Disclosing 
Member may seek a protective order or other appropriate remedy and/or 
waive the terms of any applicable confidentiality arrangements. In the 
event that such protective order, other remedy or waiver is not 
obtained, only that portion of the Member Information which is legally 
required to be disclosed shall be so disclosed.
    16.4. Ongoing Confidentiality Program.
    (a) In order to ensure that the parties hereto comply with their 
obligations in Article 16, representatives designated by the Members 
and BOX shall meet from time to time as required to discuss issues 
relating to confidentiality and disclosure and other matters addressed 
by this Article 16.
    (b) With respect to any disclosure by any of the parties hereto to 
any of their Advisors pursuant to Article 16, the representatives 
referred to in paragraph (a) above will institute procedures

[[Page 60743]]

designed to maintain the confidentiality of BOX Confidential 
Information while facilitating the business activities contemplated by 
this Agreement and the Related Agreements.

Article 17--Non-Competition

    17.1. [Business confidential]
    17.2. Referrals. Each of the Members shall, and shall cause each of 
their Affiliates to, refer all inquiries about the businesses conducted 
by BOX to BOX.

Article 18--Intellectual Property

    Except as provided otherwise in the Related Agreements each of the 
Members shall retain all rights, title, and interests to all of its 
intellectual property. In addition to the Bourse License, the BSE 
License and the IB License, the parties shall enter into such other 
licenses involving the System and such other intellectual property of 
the Members as shall permit the use of such property by BOX in the 
manner intended by the Members.

Article 19--General

    19.1. Entire Agreement; Integration, Amendments. This Agreement and 
the Related Agreements contain the sole and entire agreement of the 
parties with respect to the subject matter hereof and supersede all 
prior agreements and understandings, including, without limitation, the 
Original Operating Agreement, relating to such subject matter. This 
Agreement may only be changed or terminated by a written agreement 
signed by all of the parties hereto. Each of the Members further 
acknowledges and agrees that, in entering into this Agreement, such 
Member has not in any way relied upon any oral or written agreements, 
statements, promises, information, arrangements, understandings, 
representations or warranties, express or implied, not specifically set 
forth in this Agreement or the exhibits and schedules hereto.
    19.2. Binding Agreement. The covenants and agreements herein 
contained shall inure to the benefit of and be binding upon the parties 
hereto and their respective representatives, successors in interest and 
permitted assigns.
    19.3. Notices. Any and all notices contemplated by this Agreement 
shall be deemed adequately given if in writing and delivered in hand, 
or upon receipt when sent by telecopy confirmed by one of the other 
methods for providing notice set forth herein, or one (1) business day 
after being sent, postage prepaid, by nationally recognized overnight 
courier (e.g., Federal Express), or five (5) days after being sent by 
certified or registered mail, return receipt requested, postage 
prepaid, to the party or parties for whom such notices are intended. 
All such notices to Members shall be addressed to the last address of 
record on the books of BOX; all such notices to BOX shall be addressed 
to BOX at the address set forth in Section 2.1 or at such other address 
as BOX may have designated by notice given in accordance with the terms 
of this subsection.
    19.4. Captions. Captions contained in this Agreement are inserted 
only as a matter of convenience and in no way define, limit, extend or 
describe the scope of this agreement or the intent of any provisions 
hereof.
    19.5. Governing Law, Etc. This Agreement shall be governed by, and 
construed and enforced in accordance with, the laws of the State of 
Delaware, all rights and remedies being governed by such laws, without 
regard to its conflict of laws rules. All disputes, claims, or 
controversies between Members or between BOX and any Member(s) arising 
under or in any way relating to this Agreement shall be settled 
pursuant to Article 13 hereof.
    19.6. Member Books, Records, and Jurisdiction.
    (a) The Member acknowledges that to the extent they are directly 
related to BOX activities, the books, records, premises, officers, 
directors, agents, and employees of Members shall be deemed to be the 
books, records, premises, officers, directors, agents, and employees of 
the Regulatory Services Provider and its Affiliates for the purpose of 
and subject to oversight pursuant to the Securities Exchange Act of 
1934, as amended.
    (b) The Members, officers, directors, agents, and employees of 
Members irrevocably submit to the exclusive jurisdiction of the U.S. 
federal courts, U.S. Securities and Exchange Commission, and the Boston 
Stock Exchange, for the purposes of any suit, action or proceeding 
pursuant to U.S. federal securities laws, the rules or regulations 
thereunder, directly arising out of, or directly relating to, BOX 
activities or Section 19.6(a), and hereby waives, and agrees not to 
assert by way of motion, as a defense or otherwise in any such suit, 
action or proceeding, any claims that it is not personally subject to 
the jurisdiction of the U.S. Securities and Exchange Commission, that 
the suit, action or proceeding is an inconvenient forum or that the 
venue of the suit, action or proceeding is improper, or that the 
subject matter hereof may not be enforced in or by such courts or 
agency.
    19.7. Waiver of Certain Damages. EACH OF THE MEMBERS, TO THE 
FULLEST EXTENT PERMITTED BY LAW, IRREVOCABLY WAIVES ANY RIGHTS THAT 
THEY MAY HAVE TO PUNITIVE, SPECIAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES 
IN RESPECT OF ANY LITIGATION BASED UPON, OR ARISING OUT OF, THIS 
AGREEMENT OR ANY RELATED AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF 
DEALING, STATEMENTS OR ACTIONS OF ANY OF THEM RELATING THERETO.
    19.8. Construction. The language used in this Agreement will be 
deemed to be the language chosen by the parties to express their mutual 
intent, and no rule of strict construction will be applied against any 
party.
    19.9. Severability. The invalidity or unenforceability of any 
particular provision of this Agreement or any Related Agreement shall 
not affect the other provisions hereof or thereof, and this Agreement 
shall be construed in all respects as if such invalid or unenforceable 
provision was omitted.
    19.10. Counterparts. This Agreement may be executed in multiple 
counterparts, each of which shall be deemed an original, but all of 
which together shall constitute one and the same instrument.
    19.11. Survival. The provisions of Article 13, 14, 16, 17, and 19 
shall survive the termination of this Agreement for any reason. All 
other rights and obligations of the Members shall cease upon the 
termination of this Agreement.
    IN WITNESS WHEREOF, the parties hereto have executed this agreement 
as of July ----, 2003.

Boston Options Exchange Group LLC.

By: Bourse de Montreal Inc., an authorized person
By: Boston Stock Exchange, Inc., an authorized person
By: Interactive Brokers Group LLC, an authorized person

[All attachments and exhibits deemed Business confidential, except 
below.]

[[Page 60744]]



       Scheduled--Members Number of Units and Percentage Interests
                         [As of August 6, 2003]
------------------------------------------------------------------------
                                            Number  of      Percentage
            Name and address                   units         interest
------------------------------------------------------------------------
Interactive Brokers Group LLC, One                 2,375           22.41
 Pickwick Plaza, Greenwich, CT 06830....
Bourse de Montr[eacute]al Inc., Tour de            3,325           31.37
 la Bourse, P.O. Box 61, 800 Victoria
 Square, Montr[eacute]al, Quebec H4Z 1A9
Boston Stock Exchange, Inc., 100                   2,850           26.89
 Franklin Street, Boston, Massachusetts
 02110..................................
------------------------------------------------------------------------

* * * * *

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 BSE included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The BSE 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
    As discussed in detail in the BOX Proposing Release, the BSE 
proposes to establish rules for BOX, a new Exchange facility, as that 
term is defined in Section 3(a)(2) of the Act. BOX would be operated by 
BOX LLC. BOX would administer a fully automated trading system for 
standardized equity options intended for the use of Options 
Participants.\6\
---------------------------------------------------------------------------

    \6\ The term ``Options Participant'' or ``Participant'' means a 
firm or organization that is registered with the Exchange pursuant 
to Chapter II of the BOX Rules for purposes of participating in 
options trading on BOX as an ``Order Flow Provider'' or ``Market 
Maker.'' See proposed BOX Rules, Chapter I, General Provisions, 
Sec.  1(a)(39) (definition of ``Options Participant'').
---------------------------------------------------------------------------

    The BSE is a founding and controlling member of BOX LLC. In 
addition to its ownership stake in BOX LLC, the BSE has entered into 
various agreements with BOX LLC under which BOX LLC would operate BOX 
as a facility of the BSE. As discussed in detail in the BOX Delegation 
Plan Proposal, \7\ pursuant to these agreements, the BSE, through 
Boston Options Exchange Regulation, LLC (``BOXR''), would maintain 
responsibility for all regulatory functions related to the facility, 
and BOX LLC would be responsible for the business operations of the 
facility to the extent those activities are not inconsistent with the 
regulatory and oversight functions of the BSE and BOXR. This means that 
BOX LLC would not interfere with the BSE's self-regulatory 
responsibilities or those delegated to BOXR.
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 48229 (July 25, 
2003), 68 FR 45284 (August 1, 2003) (SR-BSE-2003-04) (``BOX 
Delegation Plan Proposal'').
---------------------------------------------------------------------------

    In this filing, the BSE is submitting those provisions of the 
Operating Agreement specifically relating to the control and governance 
of BOX LLC that would ensure that the BSE has the authority within BOX 
LLC to maintain its responsibility for all regulatory functions related 
to the BOX facility. These sections of the BOX Operating Agreement 
would ensure that the Commission and the BSE would have regulatory 
authority over the owners and Directors of BOX LLC. The sections of the 
BOX Operating Agreement the Exchange deems relevant to its authority 
for all regulatory functions of its proposed BOX facility are set forth 
below, as well as a majority of the other provisions of the Agreement. 
Moreover, due to the fact that the purpose of this filing is to focus 
on only those provisions of the Operating Agreement which are directly 
related to the BSE's authority for all regulatory functions of its 
proposed BOX facility, the Exchange will herein likewise focus its 
discussion on only those provisions.

Operating Agreement, Article 4

    Under Section 4.1(b), as long as BOX remains a facility of the BSE 
pursuant to Section 3(a)(2) of the Act, the BSE would have the right to 
designate at least one (1) Director on the BOX Board, whether or not 
the BSE maintains any ownership interest in BOX LLC. The BSE currently 
owns an interest in BOX LLC of over 26%. Nevertheless, the BSE believes 
that this provision, in conjunction with other provisions discussed 
herein (e.g., Section 4.4(b), which guarantees the right of the BSE to 
have veto power over all Major Actions of the BOX Board) would ensure 
that the Exchange exercises control on the BOX Board in matters related 
to the BSE's regulatory responsibilities, regardless of its level of 
ownership interest in BOX LLC.
    Under Section 4.1(d)(i) and (ii), a BOX LLC Director would be 
removed from the BOX Board in the event such Director (i) has violated 
any provision of the Operating Agreement, or (ii) if the BOX Board 
determines that such action is necessary or appropriate in the public 
interest or for the protection of investors. In addition, under Section 
4.2(a), each Director must comply with the federal securities laws and 
the rules and regulations thereunder and cooperate with the Commission 
and the BSE pursuant to their regulatory authority, and shall take into 
consideration whether his or her actions as a Director would cause BOX 
to engage in conduct that fosters and does not interfere with BOX's 
ability to prevent fraudulent and manipulative acts and practices, 
promote just and equitable principles of trade, foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, 
protect investors and the public interest.
    The BSE believes that these rules would require all BOX LLC 
Directors, regardless of the nature of their association with the BSE, 
to adhere to regulatory responsibilities in that they must comply with 
federal securities laws and the rules and regulations thereunder, and 
cooperate with the Commission and the BSE pursuant to their regulatory 
authority. In addition, all Directors would be required to take into 
consideration and facilitate the BSE's and BOX's responsibility to 
comply with the requirements under Section 6(b)(5) of the Act. 
Directors that do not adhere to these requirements face termination 
from the BOX Board and possible sanctions by regulatory authorities.
    Moreover, under Section 4.3(b), the owners of BOX LLC (``Members'') 
are prohibited from entering into voting trust agreements with respect 
to their ownership interest. The BSE believes that this rule protects 
the ability of the BSE, as well as other Members, to exercise its full 
ownership rights. In addition, as set forth in Section 4.4(a), no 
action with respect to any Major

[[Page 60745]]

Action (as defined in Section 4.4(b)), shall be effective unless 
approved by a majority of the BOX Board, including the affirmative vote 
of all of the Directors designated by BSE. Thus, the BSE would have the 
authority to control the Major Actions of BOX LLC, especially as they 
relate to the regulatory responsibilities of the Exchange.

Article 5

    Each Member shall comply with the federal securities laws and the 
rules and regulations thereunder; cooperate with the Commission and the 
BSE pursuant to their regulatory authority and the provisions of these 
BOX Rules; and engage in conduct that fosters and does not interfere 
with BOX's ability to prevent fraudulent and manipulative acts and 
practices; promote just and equitable principles of trade; foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities; remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system; and, in general, protect investors and the public interest.
    Under Section 5.9, after appropriate notice and opportunity for 
hearing, the BOX Board, by a two-thirds vote, including the affirmative 
vote of the BSE Directors and excluding the vote of the Directors of 
such Member subject to sanction, may suspend or terminate a Member's 
voting privileges or ownership in the event such Member: (i) has 
violated any provision of the Agreement, or (ii) if the BOX Board 
determines that such action is necessary or appropriate in the public 
interest or for the protection of investors. The BSE believes that 
these provisions would require Members, regardless of the nature of 
their association with the BSE, to adhere to regulatory 
responsibilities in that they must comply with federal securities laws 
and the rules and regulations thereunder, and cooperate with the 
Commission and the BSE pursuant to their regulatory authority or face 
severe consequences such as termination of voting rights or ownership. 
In addition, the Members would be required to take into consideration 
and facilitate the BSE's and BOX's ability to comply with the 
requirements under Section 6(b)(5) of the Act.

Section 8.4(e)-(h)

    BOX LLC shall provide the Commission with written notice ten (10) 
days prior to the closing date of any acquisition that results in a 
Member of BOX LLC's percentage ownership interest, alone or together 
with any Affiliate \8\ of such Member, meeting or crossing the 
threshold level of 5% or the successive 5% percentage ownership 
interest levels of 10% and 15%. Under Section 8.4(f), any transfer of 
ownership interest that results in the acquisition and holding by any 
Member of BOX LLC, alone or together with any Affiliate of such Member, 
of an aggregate percentage ownership interest level which meets or 
crosses the threshold level of 20% or any successive 5% percentage 
ownership interest level (i.e., 25%, 30%, etc.), is subject to the rule 
filing process pursuant to Section 19 of the Act. Further, any transfer 
of ownership interest that results in a reduction of the BSE's 
aggregate percentage ownership interest below the 20% threshold is also 
subject to the rule filing process pursuant to Section 19 of the Act.
---------------------------------------------------------------------------

    \8\ ``Affiliate'' means, with respect to any Person, any other 
Person controlling, controlled by or under common control with, such 
Person. As used in this definition, the term ``control'' means the 
possession, directly or indirectly, of the power to direct or cause 
the direction of the management and policies of a Person, whether 
through the ownership of voting securities, by contract or otherwise 
with respect to such Person. A Person is presumed to control any 
other Person, if that Person: (i) Is a director, general partner, or 
officer exercising executive responsibility (or having similar 
status or performing similar functions); (ii) directly or indirectly 
has the right to vote 25 percent or more of a class of voting 
security or has the power to sell or direct the sale of 25 percent 
or more of a class of voting securities of the Person; or (iii) in 
the case of a partnership, has contributed, or has the right to 
receive upon dissolution, 25 percent or more of the capital of the 
partnership. See Operating Agreement, Sec.  1.1, ``Definitions.''
---------------------------------------------------------------------------

    Under this Section, whenever a Person \9\ seeks to acquire an 
ownership interest in BOX LLC of 20% or greater, or a current Member 
seeks to increase its ownership interest to the 20% threshold or 
greater, such an acquisition must be subject to the rule filing process 
pursuant to Section 19 of the Act. In addition, when a Member who 
already holds over a 20% interest increases its ownership interest to 
the 25% threshold or any successive 5% percentage ownership interest 
level, such an acquisition must also be subject to the rule filing 
process pursuant to Section 19 of the Act. For example, if an entity 
owned a 28% interest in BOX LLC and bought an additional interest of 
3%, then the acquisition would be subject to the rule filing process 
pursuant to Section 19 of the Act because the entity would hold a 31% 
interest after the transaction, thereby crossing the 30% ownership 
threshold. The BSE believes that this rule provides the Commission with 
the authority to review and subject to public comment any substantial 
transfer of ownership which the Commission may deem to have the 
potential to impact the Exchange's self-regulatory responsibilities 
regarding its proposed BOX facility.
---------------------------------------------------------------------------

    \9\ The term ``Person'' means any individual, partnership, 
corporation, association, trust, limited liability company, joint 
venture, unincorporated organization and any government, 
governmental department or agency or political subdivision thereof. 
See Operating Agreement, Sec.  1.1, ``Definitions.''
---------------------------------------------------------------------------

    Under Section 8.4(g), a ``controlling interest'' would be defined 
as the ownership by any Person, alone or together with any Affiliate of 
such Person, of a 25% or greater interest in a Member, and an 
``Acquirer'' would be defined as a Person who, alone or together with 
any Affiliate of such Person, acquires a controlling interest in a 
Member. An Acquirer would be required to execute an amendment to the 
Agreement upon establishing a controlling interest in any Member who, 
alone or together with any Affiliate of such Member, holds a Percentage 
Interest in BOX equal to or greater than 20%. In such amendment, the 
Acquirer would agree to become a new party to the Operating Agreement 
and would agree to abide by all the provisions of the Agreement. 
Beginning after Commission approval of this filing, any amendment to 
the Agreement executed pursuant to this Section 8.4(g) would be subject 
to the rule filing process pursuant to Section 19 of the Act. The 
rights and privileges of the Member under the Agreement would be 
suspended until such time as the amendment has become effective 
pursuant to Section 19 of the Act or the Person no longer holds a 
controlling interest in the Member. For example, if Company XYZ owned a 
20% interest in BOX LLC and Firm ABC acquired 25% of the shares of 
Company XYZ, then Firm ABC must sign an amendment to the Agreement 
whereby Firm ABC agrees to become a new party to the Agreement and 
abide by all the provisions of the Agreement. The amendment would be 
subject to the rule filing process pursuant to Section 19 of the Act.
    The BSE believes that this provision provides the Commission with 
the authority to review and subject to public comment any substantial 
transfer of ownership that may effect the indirect control of BOX LLC 
and which the Commission may deem to have the potential to impact the 
Exchange's self-regulatory responsibilities regarding its proposed BOX 
facility.
    Under Section 8.4(h) the BSE is specifically imposing a limit on 
voting rights (``voting collar'') on any Member who, alone or together 
with an Affiliate,

[[Page 60746]]

owns in excess of 20% of the ownership units (``Units'') of BOX LLC and 
is approved by the BSE as an Options Participant on the BOX Market 
pursuant to the rules of the BSE. The Units owned by a Member in excess 
of 20% of the Units are referred to as ``Excess Units.'' No Member who 
is also an Options Participant would be permitted to vote or give proxy 
rights to vote with respect to the Excess Units. However, the Excess 
Units may be considered for quorum purposes of any meeting of the BOX 
Board, and shall be voted in the same proportion as the Units held by 
other Members are voted.
    The BSE believes that this provision would specifically prevent any 
Member from exercising undue control over BOX LLC. By specifically 
imposing a voting collar on any Member who owns more than 20% of the 
Units of BOX LLC and who is also an Options Participant, the Exchange 
is ensuring that it is, in all cases, able to maintain proper control 
over the exercise of its regulatory functions in relation to BOX, and 
is not subject to influence that may be adverse to its regulatory 
responsibilities from a Member who may own a substantial number of the 
outstanding Units of BOX LLC. This provision, along with other related 
provisions relating to notice and rule filing requirements for any 
Member who acquires certain Percentage Interests in BOX LLC (e.g., 
Section 8.4(g)) will serve to protect the sanctity of the Exchange's 
self-regulatory responsibilities and will allow the Commission to 
periodically review the ownership of BOX LLC.
    Additionally, the BSE is proposing to extend a temporary exemption, 
until January 1, 2014, for Interactive Brokers, a Founding Member who 
is also an Options Participant of BOX, from the voting limitation on 
Excess Units, but only with respect to any vote regarding any merger, 
consolidation or dissolution of BOX or any sale of all or substantially 
all of the assets of BOX. This exemption is substantially similar to an 
exemption permitted for holders of Class A Common Stock on the 
International Securities Exchange when that organization restructured 
from an LLC to a Corporation.\10\ The BSE believes that such an 
exemption provides IB with reasonable voting participation in Board 
matters concerning any merger, consolidation, or dissolution of BOX or 
any sale of all or substantially all of the assets of BOX, in light of 
IB's ownership interest in BOX LLC. Regardless of this exemption, 
however, as previously discussed, the BSE has the ultimate authority to 
veto any actions of the Board which conflict with its regulatory 
responsibilities.
---------------------------------------------------------------------------

    \10\ See Securities Exchange Act Release No. 45529 (March 8, 
2002), 67 FR 11732 (March 15, 2002) (SR-ISE-2002-01).
---------------------------------------------------------------------------

Section 19.6(b)

    The Members of BOX LLC, officers, directors, agents, and employees 
of such Members, including non-U.S. entities, irrevocably submit to the 
exclusive jurisdiction of the U.S. federal courts, the Commission, and 
the BSE, for the purposes of any suit, action or proceeding pursuant to 
U.S. federal securities laws, the rules or regulations thereunder, 
directly arising out of, or directly relating to, BOX activities or 
this proposed Chapter XIV of the BOX Rules, and hereby waives, and 
agrees not to assert by way of motion, as a defense or otherwise in any 
such suit, action, or proceeding, any claims that it is not personally 
subject to the jurisdiction of the Commission, that the suit, action, 
or proceeding is an inconvenient forum or that the venue of the suit, 
action, or proceeding is improper, or that the subject matter hereof 
may not be enforced in or by such courts or agency.
    The Exchange believes that this provision would serve as notice to 
Members that they will be subject to the jurisdiction of the U.S. 
courts, the Commission, and the BSE. While Members may represent a 
diverse group of business interests, the BSE believes that it is 
imperative that regulatory cooperation is assured from all Members, 
regardless of each Member's business location, country of domicile, or 
other circumstance which the Commission may deem to have the potential 
to be adverse to the regulatory responsibilities and interests of the 
Exchange, the Commission, or the U.S. courts. Accordingly, this 
proposed provision, as also set forth in the Operating Agreement and 
ratified by each Member, ensures that, should an occasion arise which 
requires regulatory cooperation or jurisdictional submission from a 
Member, it would be forthcoming and uncontested.
2. Statutory Basis
    The Exchange believes that this filing is consistent with Section 
6(b) of the Act, in general, and furthers the objectives of Section 
6(b)(1),\11\ in particular, in that it enables the Exchange to be 
organized so as to have the capacity to be able to carry out the 
purposes of the Act and to comply, and (subject to any rule or order of 
the Commission pursuant to Section 17(d) or 19(g)(2) of the Act) to 
enforce compliance by its exchange members and persons associated with 
its exchange members, with the provisions of the Act, the rules and 
regulations thereunder, and the rules of the Exchange. The Exchange 
also believes that this filing furthers the objectives of Section 
6(b)(5),\12\ in particular, in that it is designed to facilitate 
transactions in securities; to prevent fraudulent and manipulative acts 
and practices; to promote just and equitable principles of trade; to 
foster cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities; to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system; and in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b)(1).
    \12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change would 
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 either solicited or received.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding, or (ii) as to 
which the Exchange consents, the Commission will:
    (A) By order approve such proposed rule change; or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exhange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. 
Copies of

[[Page 60747]]

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 filings will also be available 
for inspection and copying at the principal office of the Exchange. All 
submissions should refer to File No. SR-BSE-2003-19 and should be 
submitted by November 13, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-26746 Filed 10-22-03; 8:45 am]
BILLING CODE 8010-01-P