[Federal Register Volume 69, Number 62 (Wednesday, March 31, 2004)]
[Notices]
[Page 17004]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-7210]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49472; File No. SR-CBOE-2003-35]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change, and Amendment Nos. 1, 2, and 3 Thereto by the Chicago Board 
Options Exchange, Inc. Relating to Non-Aggregation Treatment of Trading 
Units of Member Firms for Position and Exercise Limits

March 25, 2004.
    On August 26, 2003, the Chicago Board Options Exchange, Inc. 
(``CBOE'' or ``Exchange'') submitted to the Securities and Exchange 
Commission (``Commission''), pursuant to section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to issue a regulatory circular 
containing additional guidance for member firms requesting that one or 
more of their internal trading units be treated as a separate 
aggregation unit for purposes of determining aggregate position and 
exercise limits for a particular option contract. On September 29 2003, 
the CBOE submitted Amendment No. 1 to the proposed rule change. On 
January 29, 2004, the CBOE submitted Amendment No. 2 to the proposed 
rule change. On February 9, 2004 the CBOE submitted Amendment No. 3 to 
the proposed rule change. The Federal Register published the proposed 
rule change, as amended, for comment on February 19, 2004.\3\ The 
Commission received no comments on the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 49213 (February 9, 
2004), 69 FR 7829.
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    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulations thereunder, applicable to a national securities 
exchange.\4\ In particular, the Commission believes that the proposed 
rule change is consistent with section 6(b)(5) of the Act,\5\ which 
requires, among other things, that the rules of the Exchange be 
designed to prevent fraudulent and manipulative acts and practices, 
promote just and equitable principles of trade, 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.
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    \4\ In approving this rule, the Commission notes that it has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \5\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposed rule change establishes 
reasonable conditions for the Exchange to determine whether separate 
trading units within the same member firm may receive non-aggregation 
treatment with respect to position and exercise limits. The Commission 
notes that the proposed rule change will require that a CBOE member 
seeking non-aggregation treatment create internal firewalls and 
information barriers between trading units that are sufficient to 
prevent the flow of information (e.g., trades, positions, and trading 
strategies) between trading units that receive non-aggregation 
treatment and other trading units controlled by the member. In 
addition, the Commission believes that the proposed rule change should 
promote accountability of member firms receiving non-aggregation 
treatment. Moreover, the Commission believes that the procedures that 
the Exchange employs to consult with members of the Intermarket 
Surveillance Group before granting non-aggregation treatment to a 
member should promote consistent determinations of whether or not to 
grant non-aggregation treatment.
    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\6\ that the proposed rule change (SR-CBOE-2003-35), as amended, 
be, and it hereby is, approved.
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    \6\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-7210 Filed 3-30-04; 8:45 am]
BILLING CODE 8010-01-P