[Federal Register Volume 69, Number 182 (Tuesday, September 21, 2004)]
[Notices]
[Pages 56470-56472]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2265]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50373; File No. SR-OC-2004-02]


Self-Regulatory Organizations; OneChicago, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change Relating to 
Initial Listing Standards of Single Stock Futures

September 14, 2004.
    Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-7 thereunder,\2\ notice is hereby given that 
on August 25, 2004, OneChicago, LLC (``OneChicago'' 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 OneChicago. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons. On August 24, 2004, OneChicago filed the proposed 
rule change with the Commodity Futures Trading Commission (``CFTC''), 
together with a written certification under Section 5c(c) of the 
Commodity Exchange Act \3\ (``CEA'') in which OneChicago indicated that 
the effective date of the proposed rule change would be August 26, 
2004.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change
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    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 17 CFR 240.19b-7.
    \3\ 7 U.S.C. 7a-2(c).
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    OneChicago proposes to amend the initial listing standards for a 
security futures product based on a single security (``single stock 
future'') relating to the trading volume of the underlying security. 
The text of the proposed rule change appears below. New language is in 
italics. Deleted text is in brackets.
* * * * *

Eligibility and Maintenance Criteria for Security Futures Products

    I. Initial listing standards for a security futures product based 
on a single security.
    A. For a security futures product that is physically settled to be 
eligible for initial listing, the security underlying the futures 
contract must meet each of the following requirements:
    (i)-(v) No Change.
    (vi) In the case of an underlying security other than an ETF Share, 
TIR or Closed-End Fund Share, it must have [had an average daily] 
trading volume (in all markets in which the underlying security [has] 
is traded) of at least [109,000 shares or receipts evidencing the 
underlying security in each of the preceding 12 months] 2,400,000 
shares in the preceding 12 months.
    Requirement (vi) as Applied to Restructure Securities:
    Look-Back Test: In determining whether a Restructure Security that 
is issued or distributed to the shareholders of an Original Equity 
Security (but not a Restructure Security that is issued pursuant to a 
public offering or rights distribution) satisfies this requirement, 
OneChicago may ``look back'' to the trading volume history of the 
Original Equity Security prior to the ex-date of the Restructuring 
Transaction if the following Look-Back Test is satisfied:
    (1) The Restructure Security has an aggregate market value of at 
least $500 million;
    (2) The aggregate market value of the Restructure Security equals 
or exceeds the Relevant Percentage (defined below) of the aggregate 
market value of the Original Equity Security;
    (3) The aggregate book value of the assets attributed to the 
business represented by the Restructure Security equals or exceeds $50 
million and the Relevant Percentage of the aggregate book value of the 
assets attributed to the business represented by the Original Equity 
Security; or
    (4) The revenues attributed to the business represented by the 
Restructure Security equal or exceed $50 million and the Relevant 
Percentage of the

[[Page 56471]]

revenues attributed to the business represented by the Original Equity 
Security.
    For purposes of determining whether the Look-Back Test is 
satisfied, the term ``Relevant Percentage'' means: (i) 25%, when the 
applicable measure determined with respect to the Original Equity 
Security or the business it represents includes the business 
represented by the Restructure Security; and (ii) 33\1/3\%, when the 
applicable measure determined with respect to the Original Equity 
Security or the business it represents excludes the business 
represented by the Restructure Security.
    In calculating comparative aggregate market values, OneChicago will 
use the Restructure Security's closing price on its primary market on 
the last business day prior to the date on which the Restructure 
Security is selected as an underlying security for a security futures 
product (``Selection Date''), or the Restructure Security's opening 
price on its primary market on the Selection Date, and will use the 
corresponding closing or opening price of the related Original Equity 
Security.
    Furthermore, in calculating comparative asset values and revenues, 
OneChicago will use the issuer's (i) latest annual financial statements 
or (ii) most recently available interim financial statements (so long 
as such interim financial statements cover a period of not less than 
three months), whichever are more recent. Those financial statements 
may be audited or unaudited and may be pro forma.
    Limitation on Use of Look-Back Test: Except in the case of a 
Restructure Security that is distributed pursuant to a public offering 
or rights distribution, OneChicago will not rely upon the trading 
volume history of an Original Equity Security for any trading day 
unless it also relies upon the market price history for that trading 
day. In addition, once OneChicago commences to rely upon a Restructure 
Security's trading volume and market price history for any trading day, 
OneChicago will not rely upon the trading volume and market price 
history of the Original Equity Security for any trading day thereafter.
    (vii)-(xi) No Change.
* * * * *

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

    In its filing with the Commission, OneChicago 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. OneChicago 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
    OneChicago proposes to amend its Eligibility and Maintenance 
Criteria for Security Futures Products (``Listing Standards'') with 
respect to the trading volume requirement of an underlying security for 
the initial listing of a single stock future. OneChicago's current 
initial Listing Standards require, among other things, that the 
security underlying a single stock future must have had an average 
daily trading volume (in all markets in which the underlying security 
has traded) of at least 109,000 shares in each of the preceding 12 
months.\4\ The proposed rule change adopts the standard used by some 
option exchanges \5\ and allows OneChicago to list a single stock 
future on an underlying security that had trading volume of at least 
2,400,00 shares in the preceding 12 months.
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    \4\ OneChicago Listing Standard I.A.(vi).
    \5\ See, e.g., Chicago Board Options Exchange, Inc. (``CBOE'') 
Rule 5.3, Interpretation .01(b)(1); American Stock Exchange LLC 
(``Amex'') Rule 915, commentary .01(3); and International Securities 
Exchange, Inc. (``ISE'') Rule 502(b)(4).
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    According to OneChicago, the proposed rule change allows the 
Exchange to list single stock futures that are beneficial to investors, 
for hedging and speculative purposes, while still providing adequate 
protection for investors. OneChicago believes that the proposed listing 
standard is well established on option exchanges. In conjunction with 
the other listing standard criteria, the proposed listing standard also 
permits derivatives to trade on securities that have sufficient 
liquidity and provides adequate customer protection.
    Section 6(h)(3)(C) of the Act \6\ requires that OneChicago's 
Listing Standards be no less restrictive than comparable listing 
standards for options traded on a national securities exchange. The 
Commission has approved a similar rule for the CBOE, Amex and ISE.\7\ 
Since CBOE, Amex and ISE have a comparable listing standard, OneChicago 
believes that the proposed rule change meets the requirement of Section 
6(h)(3)(C) of the Act.\8\
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    \6\ 15 U.S.C. 78f(h)(3)(C).
    \7\ See supra note 5.
    \8\ 15 U.S.C. 78f(h)(3)(C).
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2. Statutory Basis
    OneChicago believes that the proposed rule change is consistent 
with Section 6(b)(5) of the Act \9\ in that it promotes competition, is 
designed to prevent fraudulent and manipulative acts and practices, and 
is designed to protect investors and the public interest. OneChicago 
also believes that the proposed rule change promotes competition and is 
designed to protect investors and the public interest by providing 
products that could be used by investors for hedging and speculative 
purposes. The proposed rule change is an established criterion used by 
other option exchanges. According to OneChicago, the experience of 
those option exchanges establish that the proposed rule change, along 
with the other Listing Standard requirements, are designed to provide 
investor protection.
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    \9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    OneChicago believes that the proposed rule change will not unduly 
burden competition. In fact, the OneChicago believes that the proposed 
rule change will promote competition by allowing OneChicago to list a 
broader array of single stock futures, without jeopardizing investor 
protection.

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

    Written comments were neither solicited nor received with respect 
to the proposed rule change.

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

    The proposed rule change became effective on August 26, 2004. 
Within 60 days of the date of effectiveness of the proposed rule 
change, the Commission, after consultation with the CFTC, may summarily 
abrogate the proposed rule change and require that the proposed rule 
change be refiled in accordance with the provisions of Section 19(b)(1) 
of the Act.\10\
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    \10\ 15 U.S.C. 78s(b)(1).
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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.

[[Page 56472]]

Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml);
     Send an e-mail to [email protected]. Please include 
File Number SR-OC-2004-02 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-OC-2004-02. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 also will be available for inspection and copying at the 
principal office of OneChicago. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-OC-2004-02 and should be submitted on or before October 
12, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(75).
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Margaret H. McFarland,
Deputy Secretary.
 [FR Doc. E4-2265 Filed 9-20-04; 8:45 am]
BILLING CODE 8010-01-P