[Federal Register Volume 70, Number 100 (Wednesday, May 25, 2005)]
[Notices]
[Pages 30156-30158]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2602]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51704; File No. SR-CBOE-2005-29]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of a Proposed Rule Change Relating to 
the Composition of the Exchange's Modified Trading System Appointments 
Committee

May 18, 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 April 19, 2005, the Chicago Board Options Exchange, Incorporated 
(``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 
Exchange. 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 Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend CBOE Rule 8.82 relating to the 
composition of the Exchange's Modified Trading System Appointments 
Committee (``MTS Committee'' or ``Committee''). Below is the text of 
the proposed rule change. Proposed new language is in italics; proposed 
deletions are in [brackets].
* * * * *

Chapter VIII

Market-Makers, Trading Crowds and Modified Trading Systems

* * * * *

Section C: Designated Primary Market Makers

* * * * *
Rule 8.82--MTS Committee
    [(a)] The selection of MTS Committee members and the determination 
of the composition of the MTS Committee shall be made in accordance 
with Rule 2.1. [consist of the Vice-Chairman of the Exchange, the 
Chairman of the Market Performance Committee, and nine persons elected 
by the membership of the Exchange.
    (b) The nine elected MTS Committee members shall include: three 
members

[[Page 30157]]

whose primary business is as a Market-Maker; three members whose 
primary business is as a Market-Maker or as a DPM Designee; and three 
members whose primary business is as a Floor Broker, at least two of 
whom represent public customer orders in the course of their activities 
as a Floor Broker. One of the nine elected positions on the MTS 
Committee may instead be filled by a person (i) who directly or 
indirectly owns and controls a membership with respect to which the 
person acts as a lessor, (ii) whose primary business is not as a 
Market-Maker, DPM Designee, or Floor Broker, and (iii) whose primary 
residence is located within 80 miles of the Exchange's trading floor. 
No elected member of the MTS Committee may be affiliated (as defined 
under Rule 1.1(j)) with any other elected member of the MTS Committee. 
The nine elected MTS Committee members shall have three-year terms, 
three of which shall expire each year.
    (c) The election procedures for the nine elected MTS Committee 
members shall be the same as the election procedures for elected 
Directors that are set forth in Article IV and Article V of the 
Exchange Constitution. Accordingly, the following shall occur as part 
of these procedures: The Nominating Committee shall select nominees to 
fill expiring terms and vacancies on the MTS Committee. Nominations may 
also be made by petition, signed by not less than 100 voting members 
and filed with the Secretary of the Exchange no later than 5 p.m. 
(Chicago time) on the Monday preceding the 1st Friday in November, or 
the first business day thereafter in the event that Monday occurs on a 
holiday. The election to fill the expiring terms and vacancies on the 
MTS Committee shall be held as part of the annual election. The term of 
office of each MTS Committee member elected at an annual election 
meeting shall commence at the time of the first regular Board of 
Directors meeting of the calendar year following that annual election 
meeting and shall continue until the first regular Board meeting of the 
third succeeding calendar year. Elected MTS Committee members shall 
hold office for the terms for which they are elected and until their 
successors are duly elected and qualified or until their earlier death, 
resignation, or removal.
    (d) Candidates for election to the MTS Committee, whether nominated 
by the Nominating Committee or by petition, shall be eligible for 
election in any of the categories for which they qualify both at the 
time of their nomination and at the time of their election. The sole 
judge of whether a candidate satisfies the applicable qualifications 
for election to the MTS Committee in a designated category shall be the 
Nominating Committee in the case of candidates nominated by the 
Nominating Committee, and shall be the Executive Committee in the case 
of candidates nominated by petition, and the decision of the respective 
committee shall be final. In the event a person's status changes 
following election to the MTS Committee, the sole judge of whether the 
person continues to satisfy the applicable qualifications for service 
on the MTS Committee shall be the Board of Directors.
    (e) In the event of the refusal, failure, neglect, or inability of 
any MTS Committee member to discharge that person's duties, or for any 
cause affecting the best interests of the Exchange, the sufficiency of 
which the Board of Directors shall be the sole judge, the Board shall 
have the power, by the affirmative vote of at least two-thirds of the 
Directors then in office, to remove that MTS Committee member from the 
Committee.
    (f) Any vacancy occurring among the members of the MTS Committee 
may be filled by a qualified person appointed by the Vice Chairman of 
the Board with the approval of the Board of Directors. The term of any 
MTS Committee member so chosen shall be from the date of appointment 
until the first regular Board meeting of the calendar year following 
the next annual election meeting and until the person's successor is 
duly elected and qualified, or until the person's earlier death, 
resignation, or removal. The remaining portion of the unexpired term of 
an MTS Committee member, if any, shall be served by a person elected at 
the next annual election meeting.]
* * * * *

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 those 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 aspects of such 
statements.

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

1. Purpose
    The Exchange proposes to revise the manner in which the members of 
the Exchange's MTS Committee \3\ are chosen, as governed by existing 
CBOE Rule 8.82. Currently, members of the MTS Committee are elected to 
serve on the Committee by the Exchange's membership at the Exchange's 
annual election.\4\ Committee candidates are nominated by the 
Exchange's Nominating Committee (or by petition).\5\ The Committee's 
composition, terms of the Committee's members, procedures for filling 
vacancies on the Committee and other matters relating to the 
Committee's structure also are specifically provided for in CBOE Rule 
8.82.
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    \3\ Generally, under CBOE rules, the MTS Committee is assigned 
the authority to make determinations concerning whether to grant or 
withdraw the approval to act as a designated primary market maker 
(``DPM'' ), among other things. See, specifically, CBOE Rule 8.80 
and, generally, CBOE Rules 8.80 through 8.94, which provide the 
scope of the MTS Committee's authority over DPMs.
    \4\ See Articles IV and V (Conduct of Annual Election) of the 
Exchange's Constitution.
    \5\ See CBOE Rule 8.82.
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    The Exchange asserts that in the interest of efficiency and 
uniformity, the Exchange now proposes to amend CBOE Rule 8.82 to 
provide that the members of the MTS Committee should be appointed in a 
manner consistent with other Exchange committees, specifically, in 
accordance with CBOE Rule 2.1 (Committees of the Exchange). CBOE Rule 
2.1 provides, in part, that the Vice Chairman of the Board of Directors 
(``Vice Chairman''), with the approval of the Board of Directors, shall 
appoint the chairmen and members of certain committees provided for in 
CBOE Rule 2.1, or any other committee established in accordance with 
the Exchange's Constitution, to serve for terms expiring at the first 
regular meeting of the Board of Directors in each calendar year. CBOE 
Rule 2.1 also provides that the Vice Chairman has the authority to 
remove any member of such committees and to fill any vacancies for the 
remainder of the pertinent committee term. This rule change proposes to 
have the appointment of MTS Committee members covered under the 
provisions of CBOE Rule 2.1.
    Additionally, other than the MTS Committee, the Nominating 
Committee and the Board-level committees, the Exchange's rules do not 
define the composition of the Exchange's

[[Page 30158]]

committees. Consistent with that approach, CBOE Rule 8.82 would no 
longer mandate a particular composition for the MTS Committee and, 
instead, would provide that the MTS Committee's composition shall also 
be determined in accordance with CBOE Rule 2.1.
2. Statutory Basis
    The Exchange believes that this proposed rule change is consistent 
with Section 6(b) of the Act,\6\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\7\ in particular, in that the 
proposal should promote just and equitable principles of trade, serve 
to remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and protect investors and the 
public interest.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 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

    The Exchange neither solicited nor received written comments on 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 findings or (ii) as to 
which the Exchange 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 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-2005-29 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-2005-29. 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 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-2005-29 
and should be submitted on or before June 15, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-2602 Filed 5-24-05; 8:45 am]
BILLING CODE 8010-01-P