[Federal Register Volume 68, Number 243 (Thursday, December 18, 2003)]
[Notices]
[Pages 70551-70552]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31167]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48913; File No. SR-CBOE-2003-37]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by the Chicago Board Options 
Exchange, Inc. Relating to Appointment of the Members and Chairman of 
Its Governance Committee

December 11, 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 September 5, 2003, the Chicago Board Options Exchange, Inc. 
(``CBOE'' 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 CBOE. 
On November 6, 2003, the CBOE filed Amendment No. 1 to the proposed 
rule change.\3\ The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Patrick Sexton, Assistant General Counsel, 
CBOE, to Gordon Fuller, Counsel to the Assistant Director, Division 
of Market Regulation, Commission, dated November 6, 2003 
(``Amendment No. 1''). In Amendment No. 1, CBOE clarified the 
current procedure by which Governance Committee members are 
appointed, explained the reason for the proposed rule change, and 
revised a portion of the original proposed rule text. These changes 
are more fully described in Section II below.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The CBOE proposes to amend Exchange Rule 2.1 pertaining to the 
appointment of the members and Chairman of the Exchange's Governance 
Committee. Below is the text of the proposed rule change. Proposed new 
language is in italics; proposed deletions are in [brackets].
CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED
RULES
* * * * *
CHAPTER II--Organization and Administration
Part-A--Committees
Committees of the Exchange
Rule 2.1. Committees of the Exchange
(a) Establishment of Committees. In addition to committees specifically 
provided for in the Constitution, there shall be the following 
committees: Appeals, Arbitration, Business Conduct, appropriate Floor 
Procedure Committees, Floor Officials, appropriate Market Performance 
Committees, Membership, Product Development and such other committees 
as may be established in accordance with the Constitution. Except as 
may be otherwise provided in the Constitution or the Rules, the Vice 
Chairman of the Board, with the approval of the Board, shall appoint 
the chairmen and members of such committees to serve for terms expiring 
at the regular meeting of the Board following the next succeeding 
Annual Election Meeting or until successors are appointed. 
Consideration shall be given to continuity and to having, where 
appropriate, a cross section of the membership represented on each 
committee. Except as may be otherwise provided in the Constitution or 
the Rules, the Vice Chairman of the Board may, at any time, with or 
without cause, remove any member of such committees. Any vacancy 
occurring in one of these committees shall be filled by the Vice 
Chairman of the Board for the remainder of the term. Notwithstanding 
the foregoing, the Chairman of the Board, with the approval of the 
Board, shall appoint Directors to serve on the [Audit and Compensation 
Committees,] Governance Committee, whose members shall not be subject 
to removal except by the Board. The Chairman of the Governance 
Committee shall be appointed by the Chairman of the Board. Whenever the 
Vice Chairman of the Board is, or has reason to believe he may become, 
a party to any proceeding of an Exchange committee, he shall not 
exercise his power to appoint or remove members of that committee, and 
the Chairman of the Board shall have such power.
(b)-(d) No change.
* * * * *

[[Page 70552]]

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

    In its filing with the Commission, the CBOE included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The CBOE has prepared summaries, set forth in Sections 
A, B, and C below, of the most significant aspects of such statements.

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

1. Purpose
    The purpose of the proposed rule change is to amend Exchange Rule 
2.1 to state that the Chairman of the Board shall have the authority to 
appoint the members of the Exchange's Governance Committee, and also to 
appoint the Chairman of the Governance Committee. The CBOE Governance 
Committee is a standing committee of the CBOE's Board of Directors. The 
CBOE believes that the proposed amendment to Rule 2.1 granting to the 
Chairman of the Board the authority to appoint the members and the 
Chairman of the Governance Committee is consistent with other 
provisions in CBOE's Constitution that grant the Chairman of the Board 
the authority to appoint the members and Chairman of other standing 
committees of the Board of Directors, such as the Audit and 
Compensation Committees.\4\
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    \4\ See CBOE Constitution, Sections 7.3 and 7.4.
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    In addition to the foregoing proposed change to Rule 2.1, the 
Exchange proposes a ``housekeeping'' amendment to Rule 2.1--namely, to 
delete the reference to the Audit Committee and Compensation Committee 
in Rule 2.1 as these two committees are specifically codified in 
Sections 7.3 and 7.4, respectively, of the CBOE's Constitution.
    In Amendment No. 1, the CBOE clarified that currently the Vice 
Chairman of the Exchange, with the approval of the Board of Directors, 
has the authority to appoint the Chairman and members of the Governance 
Committee. The CBOE explained that it believes it is appropriate that 
the Chairman have this authority, as the Governance Committee, which is 
a standing Board committee, reviews and evaluates the Exchange's 
governance structure and makes recommendations to the Board concerning 
the governance of the Exchange, and assures that as an on-going matter, 
questions pertaining to governance that may arise from time to time 
will be reviewed promptly and brought to the Board's attention. The 
Exchange further noted that its proposal is consistent with other 
provisions in CBOE's Constitution, which grant the Chairman the 
authority to appoint the members and the chairmen of other standing 
committees of the Board of Directors. Finally, the CBOE deleted a 
reference in the proposed rule's text to the term ``members'' in 
reference to the Governance Committee, and replaced it with the term 
``directors,'' which is the term used in the current rule. CBOE 
explained that the Governance Committee is comprised currently only of 
directors and will continue to be comprised only of directors in the 
future.
2. Statutory Basis
    The Exchange believes that, by providing that the members of the 
Exchange's Governance Committee and the Chairman of the Governance 
Committee shall be appointed by the Chairman of the Board, the proposed 
rule change furthers the objectives of section 6(b)(5) of the Act \5\ 
to protect investors and the public interest.
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    \5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.

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

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

I. 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 self-regulatory organization consents, the Commission will:
    A. By order approve the 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, as amended, is consistent with the Act. Persons making written 
submissions should file six copies thereof with the Secretary, 
Securities and Exchange Commission, 450 Fifth Street NW., Washington, 
DC 20549. Comments may also be submitted electronically at the 
following e-mail address: [email protected]. All comment letters 
should refer to File No. SR-CBOE-2003-37. This file number should be 
included on the subject line if e-mail is used. To help the Commission 
process and review comments more efficiently, comments should be sent 
in hardcopy or by e-mail but not by both methods. Copies of the 
submission, all subsequent amendments, all written statements with 
respect to the proposed rule change that are filed with the Commission, 
and all written communications relating to the proposed rule change 
between the Commission and any person, other than those that may be 
withheld from the public in accordance with the provisions of 5 U.S.C. 
552, will be available for inspection and copying in the Commission's 
Public Reference Room. Copies of such filing will also be available for 
inspection and copying at the principal office of the CBOE. All 
submissions should refer to file number SR-CBOE-2003-37 and should be 
submitted by January 8, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority. \6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-31167 Filed 12-17-03; 8:45 am]
BILLING CODE 8010-01-P