[Federal Register Volume 70, Number 51 (Thursday, March 17, 2005)]
[Notices]
[Pages 13058-13059]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-1165]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51361; File No. SR-CBOE-2005-10]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Inc.; Notice of Filing of Proposed Rule Change To Revise Certain 
Membership Rules Related to the Testing and Orientation Requirements 
for Nominees of Member Organizations Approved Solely as Clearing 
Members

March 11, 2005.
    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 January 25, 2005, 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 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. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    CBOE proposes to revise certain membership rules related to the 
testing and orientation requirements for certain members and to make 
certain other non-substantive changes. Below is the text of the 
proposed rule change. Proposed new language is in italics, proposed 
deletions are in brackets.

Rule 3.2. Qualifications and Membership Statuses of Individual Members

    (a) No change.
    (b) The individual membership statuses that are approved by the 
Membership Committee (along with the primary Exchange Rule that 
provides for such approval if it is not Rule 3.9) include: (i) 
owner[*]; (ii) lessor[*]; (iii) lessee[*]; (iv) Chicago Board of Trade 
exerciser[*]; (v) sole proprietor[*]; (vi) individual with a membership 
that has been registered for a member organization[*]; (vii) nominee of 
a member organization[*]; (viii) Market-Maker (Rule 8.2); (ix) Floor 
Broker (Rule 6.71); (x) member eligible to trade securities traded 
pursuant to Chapter XXX (Rule 30.2); and (xi) Trust Member (Rule 3.25). 
[Those individual membership statuses noted with an asterisk are also 
referred to in the Rules as membership capacity statuses. ]
    (c) No change

* * * Interpretations and Policies:

    No change.

Rule 3.3. Qualifications and Membership Statuses of Member 
Organizations

    (a) No change
    (b) The member organization membership statuses that are approved 
by the Membership Committee (along with the primary Exchange Rule that 
provides for such approval if it is not Rule 3.9) include: (i) 
owner[*]; (ii) lessor[*]; (iii) lessee[*]; (iv) member organization for 
which an individual member has registered his or her membership[*]; (v) 
member organization approved to transact business with the public[*] 
(Rule 9.1); (vi) Clearing Member; and (vii) order service firm[*] (Rule 
6.77). [Those individual membership status noted with an asterisk are 
also referred to in the Rules as membership capacity statuses.]
    (c)-(d) No change.

* * * Interpretations and Policies:
    No change

Rule 3.8. Nominees and Members Who Register Their Memberships for 
Member Organizations

    (a)(i)-(ii) No change
    (iii) each nominee of a member organization designated pursuant to 
subparagraph (a)(i) of this Rule, except for a nominee of a member 
organization approved solely as a Clearing Member and/or to transact 
business with the public pursuant to Rule 9.1, is required to have an 
authorized trading function[, except that a nominee of a member 
organization that is approved solely to transact business with the 
public pursuant to Rule 9.1 is not required to comply with this 
requirement];
    (iv)-(v) No change.
    (b)-(g) No change.

* * * Interpretations and Policies:

    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, 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. 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 proposed rule change makes certain clarifications to the 
Exchange's membership rules that relate to membership status 
categories. The Exchange is also proposing to amend its rules to 
provide an exemption from the general requirement that nominees of 
member organizations be required to attend the Exchange's Member 
Orientation Program and to pass the Exchange's Trading Member 
Qualification Exam.
    The Exchange proposes to clarify certain information set forth in 
Exchange Rules 3.2(b) and 3.3(b) by

[[Page 13059]]

removing the explanatory information relating to ``membership capacity 
statuses.'' The membership capacity statuses in Rules 3.2(b) and 3.3(b) 
delineate the membership classifications that member individuals and 
firms may have on the Exchange. In addition, asterisks are attached to 
certain membership capacity statuses in Rules 3.2(b) and 3.3(b). Rules 
3.2(b) and 3.3(b) explain that the membership statuses noted with an 
asterisk are referred to in the Exchange rules as membership capacity 
statuses. In practice, this simply means that a membership applicant 
must elect on the Exchange's membership application form one of the 
statuses designated with an asterisk. Since the material related to the 
asterisks, and the asterisks themselves, only reflect internal Exchange 
procedures for categorizing its members, the proposed deletions reflect 
technical changes that are intended to simplify Exchange rules.
    The Exchange proposes to revise Exchange Rule 3.8(a)(iii) to 
provide that a nominee of a member organization approved solely as a 
Clearing Member is not required to have an authorized trading function. 
The effect of the proposed rule is to eliminate the requirement that a 
nominee of a Clearing Member be required to attend the Exchange's 
Member Orientation Program and to pass the Exchange's Trading Member 
Qualification Exam. Nominees of Clearing Members originally were 
required to attend the Exchange's Member Orientation Program and pass 
the Member Qualification Exam because Exchange Clearing Members 
generally engaged in both clearing and trading activities. A Clearing 
Member conducting trading activities would have been required to have a 
nominee on the Exchange trading floor acting as a Floor Broker and/or 
Market-Maker. Certain Exchange Clearing Members have disposed of their 
trading activities and currently only engage in clearing activities on 
the Exchange. The proposed rule is intended to accommodate Clearing 
Members that only engage in clearing activities and do not otherwise 
engage in trading activities. Clearing Members that wish to engage in 
trading activities on the Exchange would still be required to designate 
a nominee who has an authorized trading function, and therefore would 
have to attend the Exchange's Member Orientation Program and to pass 
the Exchange's Trading Member Qualification Exam.
2. Statutory Basis
    CBOE believes that the proposed rule change is consistent with the 
provisions of Section 6(b) of the Act,\3\ in general, and with Section 
6(b)(5) of the Act,\4\ in particular, which requires that CBOE rules be 
designed to promote just and equitable principles of trade, to prevent 
fraudulent and manipulative acts and, to protect investors and the 
public interest.
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    \3\ 15 U.S.C. 78f(b).
    \4\ 15 U.S.C. 78f(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 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 solicited or received with respect to the 
proposed rule change.

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 self-regulatory organization 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, as amended, is consistent with the 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-2005-10 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-2005-10. 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 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-2005-10 and should be submitted on or before April 
7, 2005.
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    \5\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5-1165 Filed 3-16-05; 8:45 am]
BILLING CODE 8010-01-P