[Federal Register Volume 69, Number 249 (Wednesday, December 29, 2004)]
[Notices]
[Pages 78068-78069]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-28476]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50920; File No. SR-CBOE-2004-81]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Board of Options 
Exchange, Incorporated Relating to Amending Rule 30.20 To Conform to 
the Requirements of Regulation SHO

December 22, 2004.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act''),\1\ notice is hereby given that on December 8, 2004, 
the Chicago Board Options Exchange, Incorporated (``CBOE'' or 
``Exchange'') filed with the Securities Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the CBOE. 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. 78(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CBOE proposes to amend CBOE Rule 30.20 to conform to the 
requirements of Regulation SHO.\2\ The text of the proposed rule change 
is available at the Office of the Secretary, CBOE and at the 
Commission.\3\
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    \2\ See Securities Exchange Act Release No. 50103 (July 28, 
2004), 69 FR 48008 (August 6, 2004) (``Adopting Release'').
    \3\ Exhibit A is available at http://www.sec.gov/rules/sro.shtml.
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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 Exchange 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 Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant parts of such 
statements.

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

    The Commission on July 23, 2004 adopted Regulation SHO (``Reg 
SHO'') to address short sales of securities and to create uniform rules 
relating to the short selling of securities.\4\ The purpose of this 
rule is to amend existing Exchange rules relating to short sales to 
bring them into conformity with the requirements of Reg SHO.
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    \4\ Id.
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    The Exchange proposes to amend Rule 30.20, as described below.
    Rule 30.20(a): The Exchange amends this paragraph to require that 
all orders to sell a security be market either long, short, or short 
exempt.
    Rule 30.20(b): The Exchange amends this paragraph to incorporate a 
reference to Exchange Act Rule 242.202T.\5\
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    \5\ Rule 202T provides a procedure for the Commission to 
suspend, on a pilot basis, the trading restrictions of the 
Commission's short sale price test, as well as any short sale price 
test of any exchange or national securities association, for short 
sales in such securities as the Commission designates by order as 
necessary or appropriate in the public interest and consistent with 
the protection of investors, after giving due consideration to the 
security's liquidity, volatility, market depth and trading market. 
Rule 202T makes explicit that no SRO ``shall have a rule that is not 
in conformity with or conflicts with'' the suspension of a price 
test for the securities selected for the pilot.
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    Rule 30.20(c): The Exchange eliminates the entire text of paragraph 
(c) in favor of language referencing the Commission's ``Locate and 
Delivery Requirements for Short Sales.'' As amended, new paragraph (c) 
provides that no member or member organization shall accept, represent 
or execute for his or its own account or the account of any other 
person an order to sell a security subject to the rules in this Chapter 
unless such member or member organization complies with Exchange Act 
Rule 242.203.
    Rule 30.20.02: The Exchange amends this Interpretation to provide 
that the terms long, short, and short exempt will have the same meaning 
as in Exchange Act Rule 242.200.
    Rule 30.20.03: The Exchange proposes to delete existing 
Interpretation .03, which is specific to a product (SuperShares) that 
the Exchange never traded.
    Rule 30.20.04: The Exchange proposes to revise current 
Interpretation .04 to include new text referencing the Exchange Act 
Rules governing the requirements for long sales (Exchange Act Rule 
242.203(a)) and short sales (Exchange Act Rule 242.203(b)). The 
Exchange also proposes to clarify that the requirements members 
currently must satisfy in order to make an affirmative determination 
for short sales shall continue to be required for documenting 
compliance with Exchange Act Rule 242.203(b)(1). In this respect, the 
requirements remain the same.

[[Page 78069]]

    Rule 30.20.05: The Exchange proposes to delete this Interpretation, 
which is specific to an expired product (S&P 500 Index Bear market 
Warrants), and replace it with language from Exchange Act Rule 
242.203(b)(3) relating to threshold securities.
    Rule 30.20.06: The Exchange proposes to adopt this new 
Interpretation to remind members that even if a security is expected 
from any short sale price test under any Pilot program (or any order 
issued pursuant to Exchange Act Rule 242.202T), members or member 
organizations must still comply with the marking and locate 
requirements in Exchange Act Rule 242.200 and 203.
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations under the Act applicable to a 
national securities exchange and, in particular, the requirements of 
section 6(b) of the Exchange Act. Specifically, the Exchange believes 
the proposed rule change is consistent with the Section 6(b)(5) \6\ 
requirements that the rules of an exchange be designed to promote just 
and equitable principles of trade, to prevent fraudulent and 
manipulative acts and, in general, to protect investors and the public 
interest.
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    \6\ 15 U.S.C. 78(f)(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE 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 Exchange Act.

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

    The Exchange neither solicited nor received comments on the 
proposal.

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

    The foregoing rule change has become effective pursuant to section 
19(b)(3) of the Exchange Act \7\ and subparagraph (f)(6) of Exchange 
Act Rule 19b-4.\8\ CBOE has designated the proposed rule change as one 
that: (i) Does not significantly affect the protection of investors or 
the public interest; (ii) does not significantly burden on competition; 
and (iii) does not become operative for 30 days from the date on which 
it was filed, or such shorter time as the Commission may designate. 
CBOE requests that the Commission waive the 30-day pre-operative delay 
requirement contained in Rule 19b-4(f)(6)(iii). CBOE believes that good 
cause exists to grant such waiver because of the importance of short 
sale regulation to the protection of investors and compliance with Reg 
SHO.\9\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ The compliance date for Reg SHO is January 3, 2005. See 
Adopting Release, supra note 2. The operative date of the proposed 
filing is January 3, 2005. See CBOE Regulatory Circular RG04-127, 
December 21, 2004, available at http://www.cboe.org/Legal/.
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    The Commission believes that waiving the 30-day pre-operative delay 
is consistent with the protection of investors and the public interest. 
The Commission believes that accelerating the operative date does not 
raise any new regulatory issues, significantly affect the protection of 
investors or the public interest, or impose any significant burden on 
competition. For these reasons, the Commission designates the proposed 
rule change effective and operative immediately.
    At any time within 60 days of the filing of such proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Exchange Act.

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 Exchange Act. 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); or
     Send an e-mail to [email protected]. Please include 
File Number SR-CBOE-2004-81 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-CBOE-2004-81. 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 Section, 450 Fifth 
Street, NW., Washington, DC 20549. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
CBOE. 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-
CBOE-2004-81 and should be submitted on or before January 19, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-28476 Filed 12-28-04; 8:45 am]
BILLING CODE 8010-01-M