[Federal Register Volume 70, Number 150 (Friday, August 5, 2005)]
[Notices]
[Pages 45464-45476]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-4233]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52180; File No. SR-OC-2005-02]


Self-Regulatory Organization; OneChicago, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change Relating to 
Listing Standards for Security Futures Products and the Final 
Settlement Price for Futures on Narrow-Based Security Indexes

July 29, 2005.
    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 July 20, 2005 OneChicago, LLC (``OneChicago'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change described in items I, II, and III below, which 
Items have been prepared by OneChicago.\3\ 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)(7).
    \2\ 17 CFR 240.19b-7.
    \3\ With the permission of OneChicago, the Commission made 
typographical, non-substantive corrections to the text of the 
proposed rule change. Telephone conversations between Madge Piro, 
Counsel for OneChicago, and Jennifer Dodd, Special Counsel, Division 
of Market Regulation (``Division''), Commission, July 21 and 29, 
2005.
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    OneChicago also has filed the proposed rule change with the 
Commodity Futures Trading Commission (``CFTC''). OneChicago filed a 
written certification with CFTC under Section 5c(c) of the Commodity 
Exchange Act (``CEA'') \4\ on July 18, 2005.
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    \4\ 7 U.S.C. 7a-2(c).
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I. Self-Regulatory Organization's Description of the Proposed Rule 
Change

    OneChicago is proposing to amend its listing standards for security 
futures products (``SFPs'') and its rule relating to the final 
settlement price for futures on narrow-based security indexes 
(``NBIs''). The text of the proposed rule change follows; additions are 
italicized; deletions are [bracketed].

[Eligibility and Maintenance Criteria for Security Futures Products]

906 [I.]Listing Standards

    (a) 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)] (1) It must be a common stock, an American Depositary Receipt 
(``ADR'') representing common stock or ordinary shares, a share of an 
exchange traded fund (``ETF Share''), a trust issued receipt (``TIR'') 
or a share of a registered closed-end management investment company 
(``Closed-End Fund Share'').
    [(ii)] (2) It must be registered under Section 12 of the Securities 
Exchange Act of 1934 (as amended from time to time, the ``Exchange 
Act''), and its issuer must be in compliance with any applicable 
requirements of the Exchange Act.
    [(iii)] (3) It must be listed on a national securities exchange 
(``Exchange'') or traded through the facilities of a national 
securities association (``Association'') and reported as a ``national 
market system'' security as set forth in Rule 11Aa3-1 under the 
Exchange Act (``NMS security'').
    [(iv)] (4) There must be at least seven million shares or receipts 
evidencing the underlying security outstanding that are owned by 
persons other than those required to report their security holdings 
pursuant to Section 16(a) of the Exchange Act.
    Requirement [(iv)] (4) as Applied to Restructure Securities:
    In the case of an equity security that a company issues or 
anticipates issuing as the result of a spin-off, reorganization, 
recapitalization, restructuring or similar corporate transaction 
(``Restructure Security''), [OneChicago, LLC (``OneChicago'')] the 
Exchange may assume that this requirement is satisfied if, based on a 
reasonable investigation, it determines that, on the product's intended 
listing date: (A) at least 40 million shares of the Restructure 
Security will be issued and outstanding; or (B) the Restructure 
Security will be listed on an Exchange or automated quotation system 
that is subject to an initial listing requirement of no less than seven 
million publicly owned shares.
    In the case of a Restructure Security issued or distributed to the 
holders of the equity security that existed prior to the ex-date of a 
spin-off, reorganization, recapitalization, restructuring or similar 
corporate transaction (``Original Equity Security''), [OneChicago] the 
Exchange may consider the number of outstanding shares of the Original 
Equity Security prior to the spin-off, reorganization, 
recapitalization, restructuring or similar corporate transaction 
(``Restructuring Transaction'').
    [(v)] (5) In the case of an underlying security other than an ETF 
Share, TIR or Closed-End Fund Share, there must be at least 2,000 
securityholders.
    Requirement [(v)] (5) as Applied to Restructure Securities:
    If the security under consideration is a Restructure Security, 
[OneChicago] the Exchange may assume that this requirement is satisfied 
if, based on a reasonable investigation,[OneChicago] the Exchange 
determines that, on the product's intended listing date: (A) at least 
40 million shares of the Restructure Security will be issued and 
outstanding; or (B) the Restructure Security will be listed on an 
Exchange or automated quotation system that is subject to an initial 
listing requirement of at least 2,000 shareholders. In the case of a 
Restructure Security issued or distributed to the holders of the 
Original Equity Security, [OneChicago]the Exchange may consider the 
number of shareholders of the Original Equity Security prior to the 
Restructuring Transaction.
    [(vi)] (6) In the case of an underlying security other than an ETF 
Share, TIR or Closed-End Fund Share, it must have trading volume (in 
all markets in which the underlying security is traded) of at least 
2,400,000 shares in the preceding 12 months.
    Requirement [(vi)] (6) 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] the Exchange 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)] (A) The Restructure Security has an aggregate market value of 
at least $500 million;
    [(2)] (B) 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)] (C) The aggregate book value of the assets attributed to the 
business represented by the Restructure Security equals or exceeds $50 
million and the

[[Page 45465]]

Relevant Percentage of the aggregate book value of the assets 
attributed to the business represented by the Original Equity Security; 
or
    [(4)] (D) The revenues attributed to the business represented by 
the Restructure Security equal or exceed $50 million and the Relevant 
Percentage of the 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] 
the Exchange 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] the Exchange 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] the Exchange 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] the Exchange commences to rely upon 
a Restructure Security's trading volume and market price history for 
any trading day,[OneChicago] the Exchange will not rely upon the 
trading volume and market price history of the Original Equity Security 
for any trading day thereafter.
    [(vii)] (7) In the case of an underlying security that is an ETF 
Share, TIR or Closed-End Fund Share, it must have had a total trading 
volume (in all markets in which the underlying security has traded) of 
at least 2,400,000 shares or receipts evidencing the underlying 
security in the preceding 12 months.
    [(viii)] (8) If the underlying security is a ``covered security'' 
as defined under Section 18(b)(1)(A) of the Securities Act of 1933, the 
market price per share of the underlying security has been at least 
$3.00 for the previous five consecutive business days preceding the 
date on which the Exchange submits a certificate to The Options 
Clearing Corporation for listing and trading. For purposes of this 
provision, the market price of such underlying security is measured by 
the closing price reported in the primary market in which the 
underlying security is traded.
    Requirement [(viii)] (8) 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] the Exchange may ``look back'' to the market price history 
of the Original Equity Security prior to the ex-date of the 
Restructuring Transaction if the following Look-Back Test is satisfied:
    [(a)] (A) The Restructure Security has an aggregate market value of 
at least $500 million;
    [(b)] (B) 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;
    [(c)] (C) The aggregate book value of the assets attributed to the 
business represented by the Restructure Security equals or exceeds both 
$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
    [(d)] (D) The revenues attributed to the business represented by 
the Restructure Security equals or exceeds both $50 million and the 
Relevant Percentage of the 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] the 
Exchange will use the Restructure Security's closing price on its 
primary market on the last business day prior to the 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] the Exchange 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.
    Restructure Securities Issued in Public Offering or Rights 
Distribution: In determining whether a Restructure Security that is 
distributed pursuant to a public offering or a rights distribution 
satisfies requirement [(viii)] (8), [OneChicago] the Exchange may look 
back to the market price history of the Original Equity Security if: 
(i) the foregoing Look-Back Test is satisfied; (ii) the Restructure 
Security trades ``regular way'' on an Exchange or automatic quotation 
system for at least five trading days immediately preceding the 
Selection Date; and (iii) at the close of trading on each trading day 
on which the Restructure Security trades ``regular way'' prior to the 
Selection Date, as well as at the opening of trading on Selection Date, 
the market price of the Restructure Security was at least $3.00.
    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] the Exchange will not rely upon 
the market price history of an Original Equity Security for any trading 
day unless it also relies upon the trading volume history for that 
trading day. In addition, once [OneChicago] the Exchange commences to 
rely upon a Restructure Security's trading volume and market price 
history for any trading day, [OneChicago] the Exchange will not rely 
upon the trading volume and market price history of the related 
Original Equity Security for any trading day thereafter.
    [(ix)] (9) If the underlying security is not a ``covered security'' 
as defined under Section 18(b)(1)(A) of the Securities Act of 1933, it 
must have had

[[Page 45466]]

a market price per security of at least $7.50, as measured by the 
lowest closing price reported in any market in which it has traded, for 
the majority of business days during the three calendar months 
preceding the date of selection.
    Requirement [(ix)] (9) 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] the Exchange may ``look back'' to the market price history 
of the Original Equity Security prior to the ex-date of the 
Restructuring Transaction if the following Look-Back Test is satisfied:
    [(a)] (A) The Restructure Security has an aggregate market value of 
at least $500 million;
    [(b)] (B) 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;
    [(c)] (C) The aggregate book value of the assets attributed to the 
business represented by the Restructure Security equals or exceeds both 
$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
    [(d)] (D) The revenues attributed to the business represented by 
the Restructure Security equals or exceeds both $50 million and the 
Relevant Percentage of the 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] 
the Exchange will use the Restructure Security's closing price on its 
primary market on the last business day prior to the 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] the Exchange 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.
    Restructure Securities Issued in Public Offering or Rights 
Distribution: In determining whether a Restructure Security that is 
distributed pursuant to a public offering or a rights distribution 
satisfies requirement [(ix)] (9), [OneChicago] the Exchange may look 
back to the market price history of the Original Equity Security if: 
(i) the foregoing Look-Back Test is satisfied; (ii) the Restructure 
Security trades ``regular way'' on an Exchange or automatic quotation 
system for at least five trading days immediately preceding the 
Selection Date; and (iii) at the close of trading on each trading day 
on which the Restructure Security trades ``regular way'' prior to the 
Selection Date, as well as at the opening of trading on Selection Date, 
the market price of the Restructure Security was at least $7.50.
    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] the Exchange will not rely upon the 
market price history of an Original Equity Security for any trading day 
unless it also relies upon the trading volume history for that trading 
day. In addition, once [OneChicago] the Exchange commences to rely upon 
a Restructure Security's trading volume and market price history for 
any trading day, [OneChicago] the Exchange will not rely upon the 
trading volume and market price history of the related Original Equity 
Security for any trading day thereafter.
    [(x)] (10) If the underlying security is an ADR:
    [(a)] (A) [OneChicago] The Exchange must have in place an effective 
surveillance sharing agreement with the primary exchange in the home 
country where the stock underlying the ADR is traded;
    [(b)] (B) The combined trading volume of the ADR and other related 
ADRs and securities in the U.S. ADR market, or in markets with which 
[OneChicago] the Exchange has in place an effective surveillance 
sharing agreement, represents (on a share equivalent basis) at least 
50% of the combined worldwide trading volume in the ADR, the security 
underlying the ADR, other classes of common stock related to the 
underlying security, and ADRs overlying such other stock over the 
three-month period preceding the dates of selection of the ADR for 
futures trading (``Selection Date'');
    [(c)(1)] (C)(i) The combined trading volume of the ADR and other 
related ADRs and securities in the U.S. ADR market, and in markets with 
which [OneChicago] the Exchange has in place an effective surveillance 
sharing agreement, represents (on a share equivalent basis) at least 
20% of the combined worldwide trading volume in the ADR and in other 
related ADRs and securities over the three-month period preceding the 
Selection Date;
    [(2)] (ii) The average daily trading volume for the ADR in the U.S. 
markets over the three-month period preceding the Selection Date is at 
least 100,000 receipts; and
    [(3)] (iii) The daily trading volume for the ADR is at least 60,000 
receipts in the U.S. markets on a majority of the trading days for the 
three-month period preceding the Selection Date; or
    [(d)] (D) The Securities and Exchange Commission and Commodity 
Futures Trading Commission have otherwise authorized the listing.
    [(xi)] (11) [OneChicago] The Exchange will not list for trading any 
security futures product where the underlying security is a Restructure 
Security that is not yet issued and outstanding, regardless of whether 
the Restructure Security is trading on a ``when issued'' basis or on 
another basis that is contingent upon the issuance or distribution of 
securities.
    [II.] (b) Maintenance standards for a security futures product 
based on a single security.
    [A] (1) The Exchange [OneChicago] will not open for trading any 
security futures product that is physically settled with a new delivery 
month, and may prohibit any opening purchase transactions in the 
security futures product already trading, to the extent it deems such 
action necessary or appropriate, unless the underlying security meets 
each of the following maintenance requirements; provided that, if the 
underlying security is an ETF Share, TIR or Closed-End Fund Share, the 
applicable requirements for initial listing of the related security 
futures product (as described in [I.A.] 906(a) above) shall apply in 
lieu of the following maintenance requirements:
    [(i)] (A) It must be registered under Section 12 of the Exchange 
Act.
    [(ii)] (B) There must be at least 6,300,000 shares or receipts 
evidencing the underlying security outstanding that are owned by 
persons other than those who are required to report their security

[[Page 45467]]

holdings pursuant to Section 16(a) of the Exchange Act.
    [(iii)] (C) There must be at least 1,600 securityholders.
    [(iv)] (D) It must have had an average daily trading volume (across 
all markets in which the underlying security is traded) of least 82,000 
shares or receipts evidencing the underlying security in each of the 
preceding 12 months.
    Requirement [(iv)] (D) as Applied to Restructure Securities:
    If a Restructure Security is approved for a security futures 
product trading under the initial listing standards in [Section I] 
paragraph (a) of this Rule, the average daily trading volume history of 
the Original Equity Security (as defined in [Section I] paragraph (a) 
of this Rule) prior to the commencement of trading in the Restructure 
Security (as defined in [Section I] paragraph (a) of this Rule), 
including ``when-issued'' trading, may be taken into account in 
determining whether this requirement is satisfied.
    [Requirement (v) as Applied to Restructure Securities:
    If a Restructure Security is approved for security futures product 
trading under the initial listing standards in Section I, the market 
price history of the Original Equity Security prior to the commencement 
of trading in the Restructure Security, including ``when-issued'' 
trading, may be taken into account in determining whether this 
requirement is satisfied.]
    [(v)] (E) The market price per share of the underlying security has 
not closed below $3.00 on the previous trading day to the Expiration 
Day of the nearest expiring Contract on the underlying security. The 
market price per share of the underlying security will be measured by 
the closing price reported in the primary market in which the 
underlying security traded.
    Requirement [(v)] (E) as Applied to Restructure Securities:
    If a Restructure Security is approved for security futures product 
trading under the initial listing standards in [Section I] paragraph 
(a) of this Rule, the market price history of the Original Equity 
Security prior to the commencement of trading in the Restructure 
Security, including ``when-issued'' trading, may be taken into account 
in determining whether this requirement is satisfied.
    [(vi)] (F) If the underlying security is an ADR and was initially 
deemed appropriate for security futures product trading under paragraph 
[(x)(b)] (10)(B) or [(x)(c)] (10)(C) in [Section I] paragraph (a) of 
this Rule, [OneChicago] the Exchange will not open for trading security 
futures products having additional delivery months on the ADR unless:
    [(a)] (i) The percentage of worldwide trading volume in the ADR and 
other related securities that takes place in the U.S. and in markets 
with which [OneChicago] the Exchange has in place an effective 
surveillance sharing agreement for any consecutive three-month period 
is: [(1)] (I) at least 30%, without regard to the average daily trading 
volume in the ADR; or [(2)] (II) at least 15% when the average U.S. 
daily trading volume in the ADR for the previous three months is at 
least 70,000 receipts;
    [(b)] (ii) The Exchange [OneChicago] has in place an effective 
surveillance sharing agreement with the primary exchange in the home 
country where the security underlying the ADR is traded; or
    [(c)] (iii) The Securities and Exchange Commission and Commodity 
Futures Trading Commission have otherwise authorized the listing.
    [B.] (2) The Exchange [OneChicago] will not open trading in a 
security futures product with a new delivery month unless:
    [(i)] (A) The issuer of the underlying security satisfies 
applicable Exchange Act reporting requirements, or corrects any failure 
within 30 days after the date the report was due to be filed; and
    [(ii)] (B) The underlying security is listed on a national 
securities exchange or is principally traded through the facilities of 
a national securities association and is designated as an NMS security.
    [C.] (3) If prior to the withdrawal from trading of a security 
futures product covering an underlying security that has been found not 
to meet [OneChicago's] the Exchange's requirements for continued 
approval, [OneChicago] the Exchange determines that the underlying 
security again meets [OneChicago's] the Exchange's requirements, 
[OneChicago] the Exchange may open for trading new delivery months in 
such security futures product and may lift any restriction on opening 
purchase transactions.
    [D.] (4) Whenever [OneChicago] the Exchange announces that approval 
of an underlying security has been withdrawn for any reason or that 
[OneChicago] the Exchange has been informed that the issuer of an 
underlying security has ceased to be in compliance with Exchange Act 
reporting requirements, each Clearing Member and Exchange Member (as 
such terms are defined in the Rules of [OneChicago] the Exchange as in 
effect from time to time) shall, prior to effecting any transaction in 
security futures products with respect to such underlying security for 
any customer, inform such customer of such fact and that [OneChicago] 
the Exchange may prohibit further transactions in such security futures 
products as it determines is necessary and appropriate.

1006 [III.] Listing Standards

    (a) Initial eligibility criteria for a security futures product 
based on an index composed of two or more securities.
    [A.] For a security futures product [that is physically settled] 
based on an index composed of two or more securities to be eligible for 
initial listing, the index must:
    [(i)] (1) Meet the definition of a narrow-based security index in 
Section 1a(25) of the Commodity Exchange Act and Section 3(a)(55) of 
the Exchange Act; [and]
    [(ii)] (2) Meet the following requirements:
    [(a)](A)(i) It must be capitalization-weighted, modified 
capitalization-weighted, price-weighted, share-weighted, equal dollar-
weighted [or], [in the case of an index underlying physically settled 
security futures products only,] approximately equal dollar-weighted, 
or modified equal-dollar weighted.
    (ii) [Weighting Methodology for Approximately Equal Dollar-Weighted 
Indices Underlying Physically Settled Security Futures Products:]
    In the case of a [physically settled] security futures product 
based on an approximately equal dollar-weighted index composed of one 
or more securities, each component security will be weighted equally 
based on its market price on the index [S]selection [D]date, subject to 
rounding up or down the number of shares or receipts evidencing such 
security to the nearest multiple of 100 shares or receipts.
    (iii) In the case of a modified equal-dollar weighted index, each 
underlying component represents a pre-determined weighting percentage 
of the entire index. Each component is assigned a weight that takes 
into account the relative market capitalization of the securities 
comprising the index.
    (iv) In the case of a share-weighted index, the index is calculated 
by multiplying the price of the component security by an adjustment 
factor. Adjustment factors are chosen to reflect the investment 
objective deemed appropriate by the designer of the index and will be 
published by the Exchange as part of the contract specifications. The 
value of the index is calculated by adding the weight of each component 
security and dividing the total by an

[[Page 45468]]

index divisor, calculated to yield a benchmark index level as of a 
particular date. A share-weighted index is not adjusted to reflect 
changes in the number of outstanding shares of its components.
    [(b)] (B) Its component securities must be registered under Section 
12 of the Exchange Act.
    [(c)] (C) Subject to Subparagraphs [(e)] (E) and [(l)] (O) below, 
the component securities that account for at least 90% of the total 
index weight and at least 80% of the total number of component 
securities in the index must meet the requirements for listing a 
single-security future, as set forth in [Section I] Rule 906(a).
    [(d)] (D) Each component security in the index must have a minimum 
market capitalization of at least $75 million, except that each of the 
lowest weighted securities in the index that in the aggregate account 
for no more than 10% of the weight of the index may have a minimum 
market capitalization of only $50 million.
    [(e)] (E) The average daily trading volume in each of the preceding 
six months for each component security in the index must be at least 
45,500 shares or receipts, except that each of the lowest weighted 
component securities in the index that in the aggregate account for no 
more than 10% of the weight of the index may have an average daily 
trading volume of only 22,750 shares or receipts for each of the last 
six months.
    [(f)] (F) Each component security in the index must be [(1)] (i) 
listed on an Exchange or traded through the facilities of an 
Association and [(2)] (ii) reported as an NMS security.
    [(g)] (G) Foreign securities or ADRs thereon that are not subject 
to comprehensive surveillance sharing agreements must not represent 
more than 20% of the weight of the index.
    [(h)] (H) The current underlying index value must be reported at 
least once every 15 seconds during the time the security futures 
product is traded on [OneChicago] the Exchange.
    [(i)] (I) An equal dollar-weighted index must be rebalanced at 
least once every calendar quarter, except that an approximately equal 
dollar-weighted index underlying a [physically settled] security 
futures product need only be rebalanced as provided in [(j)] (L) below.
    (J) A modified equal-dollar weighted index must be rebalanced 
quarterly.
    (K) A share-weighted index will not be rebalanced.
    [(j)] (L) An approximately equal dollar-weighted index underlying a 
[physically settled] security futures product must be rebalanced 
annually on December 31 of each year if the [aggregate value (i.e., the 
original number of shares multiplied by their current price) of the 
security position with the highest value is two or more times greater 
than the aggregate value of the security position with the lowest value 
in the index for any period of 10 consecutive trading days within the 
last month preceding the date of determination. In addition, OneChicago 
may from time to time, but no more frequently than quarterly, elect to 
rebalance any approximately equal dollar-weighted index underlying a 
physically settled security futures product depending on several 
factors, including the relative price changes of the component 
securities, the levels of volume and open interest in the contracts and 
input from market participants.] notional value of the largest 
component is at least twice the notional value of the smallest 
component for 50 per cent or more of the trading days in the three 
months prior to December 31 of each year. For purposes of this 
provision the ``notional value'' is the market price of the component 
times the number of shares of the underlying component in the index. In 
addition, the Exchange reserves the right to rebalance quarterly at its 
discretion.
    [Procedure for Rebalancing under (j):
    The date of determination for the mandatory annual rebalancing of 
an approximately equal dollar-weighted index underlying a physically 
settled security futures product as described in the first sentence of 
(j) will be the last trading day of the year. New contracts issued on 
or after a date on which the corresponding index is rebalanced in 
accordance with (j) will be based on an index consisting of the 
original component securities, weighted applying the methodology 
described under (a) above on the basis of security prices on the 
rebalancing date. Outstanding contracts will not be affected by any 
rebalancing.]
    (M) An underlying index may be rebalanced on interim basis if 
warranted as a result of extraordinary changes in the relative values 
of the component securities. To the extent investors with open position 
must rely upon the continuity of the security futures Contract on the 
index, outstanding Contracts are unaffected by rebalancings.
    [(k)] (N) If the underlying index is maintained by a broker-dealer, 
the index must be calculated by a third party who is not a broker-
dealer, and the broker-dealer must have in place an information barrier 
around its personnel who have access to information concerning changes 
in and adjustments to the index.
    [(l)] (O) In a capitalization-weighted index, the lesser of: [(1)] 
(i) the five highest weighted component securities in the index each 
have had an average daily trading volume of at least 90,000 shares or 
receipts over the past six months; or [(2)] (ii) the highest weighted 
component securities in the index that in the aggregate represent at 
least 30% of the total number of securities in the index each have had 
an average daily trading volume of at least 90,000 shares or receipts 
over the past six months.
    (P) If a security future on an index is cash settled, it must be 
designated as AM-settled.
    [IV.] ((b)) Maintenance standards for a security futures product 
based on an index composed of two or more securities.
    [A.] (1)[OneChicago] The Exchange will not open for trading 
security futures products [that are physically settled based] on an 
index composed of two or more securities with a new delivery month 
unless the underlying index:
    [(i)] (A.) Meets the definition of a narrow-based security index in 
Section 1a(25) of the Commodity Exchange Act and Section 3(a)(55) of 
the Exchange Act; and
    [(ii)] (B.) Meets the following requirements:
    [(a)] (i) Its component securities must be registered under Section 
12 of the Exchange Act;
    [(b)] (ii) Subject to [(d)] (iv) and [(k)] (xiii) below, the 
component securities that account for at least 90% of the total index 
weight and at least 80% of the total number of component securities in 
the index must meet the requirements for listing a single-security 
future, as set forth in [Section I] Rule 906(a).
    [(c)] (iii) Each component security in the index must have a market 
capitalization of at least $75 million, except that each of the lowest 
weighted component securities that in the aggregate account for no more 
than 10% of the weight of the index may have a market capitalization of 
only $50 million.
    [(d)] (iv) The average daily trading volume in each of the 
preceding six months for each component security in the index must be 
at least 22,750 shares or receipts, except that each of the lowest 
weighted component securities in the index that in the aggregate 
account for no more than 10% of the weight of the index may have an 
average daily trading volume of at least 18,200 shares or receipts for 
each of the last six months.

[[Page 45469]]

    [(e)] (v) Each component security in the index must be [(1)] (I) 
listed on an Exchange or traded through the facilities of an 
Association and [(2)] (II) reported as an NMS security.
    [(f)] (vi) Foreign securities or ADRs thereon that are not subject 
to comprehensive surveillance sharing agreements must not represent 
more than 20% of the weight of the index.
    [(g)](vii) The current underlying index value must be reported at 
least once every 15 seconds during the time the security futures 
product is traded on [OneChicago] the Exchange.
    [(h)] (viii) An equal dollar-weighted index must be rebalanced at 
least once every calendar quarter, except that an approximately equal 
dollar-weighted index underlying a [physically settled] security 
futures product need only be rebalanced as provided in [(i)] (I) below.
    [(i)] (ix) An approximately equal dollar-weighted index underlying 
a physically settled security futures product must be rebalanced 
annually on December 31 of each year if [the aggregate value (i.e., the 
original number of shares multiplied by their current price) of the 
security position with the highest value is two or more times greater 
than the aggregate value of the security position with the lowest value 
in the index for any period of 10 consecutive trading days within the 
last month preceding the date of determination. In addition, OneChicago 
may from time to time, but no more frequently than quarterly, elect to 
rebalance any approximately equal dollar-weighted index underlying a 
physically settled security futures product depending on several 
factors, including the relative price changes of the component 
securities, the levels of volume and open interest in the contracts and 
input from market participants.] the notional value of the largest 
component is at least twice the notional value of the smallest 
component for 50 per cent or more of the trading days in the three 
months prior to December 31 of each year. For purposes of this 
provision the ``notional value'' is the market price of the component 
times the number of shares of the underlying component in the index. In 
addition, the Exchange reserves the right to rebalance quarterly at its 
discretion.
    [Procedure for Rebalancing under (i):
    See under III.A.(ii)(j) above.]
    (x) In a modified equal-dollar weighted index the Exchange will re-
balance the index quarterly.
    (xi) In a share-weighted index, if a share-weighted Index fails to 
meet the maintenance listing standards under Rule 1006(b), the Exchange 
will not re-balance the index and will not issue Contracts for new 
delivery months for that index.
    [(j)] (xii) If the underlying index is maintained by a broker-
dealer, the index must be calculated by a third party who is not a 
broker-dealer, and the broker-dealer must have in place an information 
barrier around its personnel who have access to information concerning 
changes in and adjustments to the index.
    [(k)] (xiii) In a capitalization-weighted index, the lesser of: 
[(1)] (I) the five highest weighted component securities in the index 
each have had an average daily trading volume of at least 45,500 shares 
or receipts over the past six months; [and] or [(2)] (II) the highest 
weighted component securities in the index that in the aggregate 
represent at least 30% of the total number of stocks in the index each 
have had an average daily trading volume of at least 45,500 shares or 
receipts over the past six months.
    [(l)] (xiv) The total number of component securities in the index 
must not increase or decrease by more than 33-1/3% from the number of 
component securities in the index at the time of its initial listing.
    [E.] (2) If the foregoing maintenance standards in subparagraph (b) 
are not satisfied, [OneChicago] the Exchange will not open for trading 
a security futures product based on an index composed of two or more 
securities with a new delivery month, unless it receives the approval 
of the Securities and Exchange Commission and the Commodity Futures 
Trading Commission.

1007 LISTING STANDARDS

For MicroSectors

Cash Settled narrow-based index futures

    [V.] (a) Initial eligibility criteria for a MicroSector security 
futures product, based on an index composed of two or more securities.
    [A.] Notwithstanding Rule 1006, [F]for a cash settled Dow Jones 
MicroSector security futures product, the Dow Jones MicroSector Index 
must:
    [(i)] (1) Meet the definition of a narrow-based security index in 
Section 1a(25) of the Commodity Exchange Act and Section 3(a)(55) of 
the Exchange Act; and
    [(ii)] (2) Meet the following requirements:
    [(a)] (A) It must be approximately equal dollar-weighted composed 
of one or more securities in which each component security will be 
weighted equally based on its market price on the Selection Date.
    [(b)] (B) Each of its component securities must be registered under 
Section 12 of the Exchange Act.
    [(c)] (C) Each of its component securities must be a component 
security in the Dow Jones U.S. Total Market Index or an ADR linked to a 
security in the Dow Jones Global Index.
    [(d)] (D) Each of its component securities must be the subject of a 
U.S. exchange-traded option on the date of selection for inclusion in 
the index.
    [(e)] (E) Each of its component securities must have a trading 
history on a U.S. exchange for at least 12 months.
    [(f)] (F) Each of its component securities must have a ``float 
market capitalization'' of at least one billion dollars.
    [(g)] (G) Each of its component securities close at or above $7.50 
for each of the trading days in the three months prior to selection for 
the index.
    [(h)] (H) Subject to [(g), (i) and (k)] (G), (I) and (K) below, 
component securities that account for at least 90 per cent of the total 
index weight and at least 80 per cent of the total number of component 
securities in the index must meet the requirements for listing a 
single-security future contract, as set forth in [Section I] Rule 
906(a).
    [(i)] (I) Each of its component securities must have an average 
daily trading volume in each of the preceding 12 months prior to 
selection for inclusion in the index greater than 109,000 shares (an 
ADR must have an average daily trading volume greater than 100,000 
receipts).
    [(j)] (J) Each of its component securities must be [(1)] (i) listed 
on an Exchange or traded through the facilities of an Association and 
[(2)] (ii) reported as an NMS security.
    [(k)] (K)[(1)] (i) [OneChicago] The Exchange must have in place an 
effective surveillance sharing agreement with the primary exchange in 
the home country where the stock underlying each component ADR is 
traded;
    [(2)] (ii) The combined trading volume of each component ADR and 
other related ADRs and securities in the U.S. ADR market, or in markets 
with which [OneChicago] the Exchange has in place an effective 
surveillance sharing agreement, represents (on a share equivalent 
basis) at least 50% of the combined worldwide trading volume in the 
ADR, the security underlying the ADR, other classes of common stock 
related to the underlying security, and ADRs overlying such other stock 
over the three-month period preceding the dates of selection of the ADR 
for futures trading (``Selection Date'');

[[Page 45470]]

    [(3)(A)] (iii) (I) The combined trading volume of each component 
ADR and other related ADRs and securities in the U.S. ADR market, and 
in markets with which [OneChicago] the Exchange has in place an 
effective surveillance sharing agreement, represents (on a share 
equivalent basis) at least 20% of the combined worldwide trading volume 
in the ADR and in other related ADRs and securities over the three-
month period preceding the Selection Date;
    [(B)] (II) The average daily trading volume for the ADR in the U.S. 
markets over the three-month period preceding the Selection Date is at 
least 100,000 receipts; and
    [(C)] (III) The daily trading volume for the ADR is at least 60,000 
receipts in the U.S. markets on a majority of the trading days for the 
three-month period preceding the Selection Date;
    [(4)] (iv) The Securities and Exchange Commission and Commodity 
Futures Trading Commission have otherwise authorized the listing; or
    [(5)] (v) Foreign securities or ADRs thereon that are not subject 
to comprehensive surveillance sharing agreements must not represent 
more than 20% of the weight of the index.
    [(l)] (L) The current underlying index value must be reported at 
least once every 15 seconds during the time the MicroSector futures 
product is traded on [OneChicago] the Exchange.
    [(m)] (M) An index underlying a MicroSector future must be 
reconstituted and rebalanced if the notional value of the largest 
component is at least twice the notional [volume] value of the smallest 
component for 50 per cent or more of the trading days in the three 
months prior to December 31 of each year. For purposes of this 
provision the ``notional value'' is the market price of the component 
times the number of shares of the underlying component in the index. 
Reconstitution and rebalancing are also mandatory if the number of 
component securities in the index is greater than five at the time of 
rebalancing. In addition, [OneChicago] the Exchange reserves the right 
to rebalance quarterly at its discretion.
    [(n)] (N) The MicroSector futures products will be AM settled.
    [(o)] (O) The initial indexes underlying MicroSector futures 
products will be created only for industry groups that have five or 
more qualifying securities.
    [VI] (b) Maintenance standards for a MicroSector futures product 
based on an index composed of two or more securities.
    [A.] [OneChicago] The Exchange will not open for trading 
MicroSector futures products that are cash settled based on an index 
composed of two or more securities with a new delivery month unless the 
underlying index:
    [(i)] (1) Meets the definition of a narrow-based security index in 
Section 1a(25) of the Commodity Exchange Act and Section 3(a)(55) of 
the Exchange Act; and
    [(ii)] (2) Meets the following requirements:
    [(a)] (A) All of its component securities must be registered under 
Section 12 of the Exchange Act;
    [(b)] (B) Subject to [(d) and (k)] (D) and (K) below, component 
securities that account for at least 90 per cent of the total index 
weight and at least 80 per cent of the total number of component 
securities in the index must meet the requirements for listing a 
single-security future, as set forth in [Section I] Rule 906(a).
    [(c)] (C) Each component security in the index must have a market 
capitalization of at least $75 million, except that each of the lowest 
weighted component securities that in the aggregate account for no more 
than 10 per cent of the weight of the index may have a market 
capitalization of only $50 million.
    [(d)] (D) The average daily trading volume in each of the preceding 
six months for each component security in the index must be at least 
22,750 shares or receipts, except that each of the lowest weighted 
component securities in the index that in the aggregate account for no 
more than 10 per cent of the weight of the index may have an average 
daily trading volume of at least 18,200 shares for each of the last six 
months
    [(e)] (E) Each component security in the index must be [(1)] (i) 
listed on an Exchange or traded through the facilities of an 
Association and [(2)] (ii) reported as an NMS security.
    [(f)] (F) The current underlying index value must be reported at 
least once every 15 seconds during the time the security futures 
product is traded on [OneChicago] the Exchange.
    [(g)] (G) An approximately equal dollar weighted index underlying a 
MicroSector future must be reconstituted and rebalanced if the notional 
value of the largest component is at least twice the notional volume of 
the smallest component for 50 per cent or more of the trading days in 
the three months prior to December 31 of each year. For purposes of 
this provision the ``notional value'' is the market price of the 
component times the number of shares of the underlying component in the 
index. Reconstitution and rebalancing are also mandatory if the number 
of component securities in the index is greater than five at the time 
of rebalancing. In addition, [OneChicago] the Exchange reserves the 
right to rebalance quarterly at its discretion.
    [(h)] (H) The total number of component securities in the index 
must not increase or decrease by more than 33-\1/3\% from the number of 
component securities in the index at the time of its initial listing.
    [(i)] (I) [(1)] (i) The Exchange [OneChicago] must have in place an 
effective surveillance sharing agreement with the primary exchange in 
the home country where the stock underlying each component ADR is 
traded;
    [(2)] (ii) The combined trading volume of each component ADR and 
other related ADRs and securities in the U.S. ADR market, or in markets 
with which [OneChicago] the Exchange has in place an effective 
surveillance sharing agreement, represents (on a share equivalent 
basis) at least 50 per cent of the combined worldwide trading volume in 
the ADR, the security underlying the ADR, other classes of common stock 
related to the underlying security, and ADRs overlying such other stock 
over the three-month period preceding the dates of selection of the ADR 
for futures trading (``Selection Date'');
    [(3)] (iii)[(a)] (I)The combined trading volume of the ADR and 
other related ADRs and securities in the U.S. ADR market, and in 
markets with which [OneChicago] the Exchange has in place an effective 
surveillance sharing agreement, represents (on a share equivalent 
basis) at least 20 per cent of the combined worldwide trading volume in 
the ADR and in other related ADRs and securities over the three-month 
period preceding the Selection Date;
    [(b)] (II) The average daily trading volume for the ADR in the U.S. 
markets over the three-month period preceding the Selection Date is at 
least 100,000 receipts; and
    [(c)] (III) The daily trading volume for the ADR is at least 60,000 
receipts in the U.S. markets on a majority of the trading days for the 
three-month period preceding the Selection Date;
    [(4)] (iv) The Securities and Exchange Commission and Commodity 
Futures Trading Commission have otherwise authorized the listing, or
    [(5)] (v) Foreign securities or ADRs thereon that are not subject 
to comprehensive surveillance sharing agreements must not represent 
more than 20 per cent of the weight of the index.

[[Page 45471]]

    [B.] (2) If the foregoing maintenance standards are not satisfied 
prior to opening a MicroSector futures product with a new delivery 
month, [OneChicago] the Exchange will either (i) replace the component 
security or securities that fail to meet the maintenance standards with 
a security or securities that qualify under the initial listing 
standards for MicroSector futures products set forth in [Section V] 
paragraph (a) of this Rule, or (ii) receive the approval of the 
Securities and Exchange Commission and the Commodity Futures Trading 
Commission.
* * * * *

1002. Contract Specifications

* * * * *
    (i)(1) No Change
    (2) Final Settlement Price. (A) No Change
    (B) Notwithstanding subparagraph (2)(A) of this Rule, if an opening 
price for one or more securities underlying a Stock Index Future is not 
readily available, [the Chief Executive Officer of the Exchange or his 
designee for such purpose (referred to hereafter in this Rule 1002(i) 
as the ``Designated Officer'')] the Exchange will determine whether the 
security or securities are likely to open within a reasonable time.
    (i) If the [Designated Officer] Exchange determines that one or 
more component securities are not likely to open within a reasonable 
time, then for the component security or securities which the 
[Designated Officer] Exchange determined were not likely to open within 
a reasonable time, the last trading price of the underlying security or 
securities during the most recent regular trading session for such 
security or securities will be used to calculate the special opening 
quotation.
    (ii) If the [Designated Officer] Exchange determines that the 
security or securities are likely to open within a reasonable time, 
then for the component security or securities which the [Designated 
Officer] Exchange determined were likely to open within a reasonable 
time, the next available opening price of such security or securities 
will be used to calculate the special opening quotation.
    (C) No Change
    (D) 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, 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 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'') by 
incorporating them into the rules of the Exchange, deleting all 
references to ``physically settled'' in the Listing Standards 
pertaining to NBIs, permitting futures on modified equal-dollar 
weighted and share-weighted indexes, amending provisions related to the 
rebalancing of various NBIs, requiring AM settlement for cash settled 
security futures, and other conforming changes. The proposed rule 
change would also amend OneChicago Rule 1002(i)(2)(B) regarding the 
determination of when an opening price for one or more securities 
underlying a futures on an NBI (``Stock Index Futures'') is not 
available to determine the final settlement price of the Stock Index 
Future.
    The proposed rule change would amend the numbering of the Listing 
Standards to incorporate them into the rules of the Exchange. The 
Listing Standards pertaining to futures on a single security would be 
incorporated without changes (other than numbering) into new OneChicago 
Rule 906. The Listing Standards pertaining to NBIs would be 
incorporated into new OneChicago Rule 1006, and the Listing Standards 
for MicroSectors would be new OneChicago Rule 1007.
    The proposed rule change would delete all references to 
``physically settled'' NBIs, making OneChicago Rules 1006(a) and (b) 
generic as to the type of settlement process. Thus, the Listing 
Standards in OneChicago Rule 1006 would apply to cash settled and 
physically settled NBI contracts.\5\ This proposed change is consistent 
with the listing standards for options on NBIs.\6\
---------------------------------------------------------------------------

    \5\ All futures on NBIs would be subject to the applicable 
position limits in OneChicago Rules 414 and 1002(e). The position 
limit for each cash settled future on an NBI would be calculated 
according to the Market Cap Position Limit or SSF Position Limit 
formula in OneChicago Rule 1002(e)(2). The position limit for 
physically settled futures on NBIs would be established by the 
Exchange in conformance with CFTC Regulation 41.25 as required in 
OneChicago Rule 414(a). See 17 CFR 41.25.
    \6\ See Chicago Board Options Exchange (``CBOE'') Rules 24.2(d) 
and (e).
---------------------------------------------------------------------------

    The proposed rule change would add share-weighted and modified 
equal-dollar weighted to the list of permissible indexes. New 
provisions would also be added to define modified equal-dollar weighted 
and share-weighted indexes. These provisions are consistent with 
options listing standards previously approved by the Commission.\7\ A 
modified equal-dollar weighted index is designed to be a fair 
measurement of a particular industry or sector but without assigning an 
excessive weight to one or more index component(s) that have a large 
market capitalization relative to other index components. In a modified 
equal-dollar weighted index, each underlying component security 
represents a pre-determined weighting percentage of the entire index. 
Each security in the index is assigned a weight that takes into account 
the relative market capitalization of the securities comprising the 
index.
---------------------------------------------------------------------------

    \7\ Securities Exchange Act Release No. 49932 (June 28, 2004), 
69 FR 40994 (July 7, 2004) (SRCBOE-2002-24).
---------------------------------------------------------------------------

    A share-weighted index is calculated by multiplying the price of 
the component security by an adjustment factor. Adjustment factors are 
chosen to reflect the investment objective deemed appropriate by the 
designer of the index and would be published by the Exchange as part of 
the contract specifications. The value of the index is calculated by 
adding the weight of each component security and dividing the total by 
an index divisor, calculated to yield a benchmark index level as of a 
particular date. A share-weighted index is not adjusted to reflect 
changes in the number of outstanding shares of its components.
    New provisions would also be added regarding rebalancing of these 
indexes. Under the proposed rule change, a modified equal-dollar 
weighted index must be rebalanced quarterly and a share-weighted index 
would not be rebalanced. The proposed rule change would also amend the 
rebalancing language pertaining to approximately equal dollar-weighted 
index. Under the proposed rule change, an approximately equal dollar-
weighted index would be required to be rebalanced annually on December 
31 of each year if the notional value of the largest component is at 
least twice the notional value of the smallest component for 50 percent 
or more of the trading days in the three months prior to December 31 of 
each year. The

[[Page 45472]]

Exchange would retain the right to rebalance quarterly at its 
discretion. This rebalancing requirement was adopted by the Exchange 
for MicroSector futures.\8\
---------------------------------------------------------------------------

    \8\ See Section V.A.ii.m of the Listing Standards for 
MicroSectors Cash Settled Narrow-Based Index Futures. In addition to 
rebalancing, the NBIs may be adjusted due to corporate events. 
Attached as Exhibit A is the Corporate Action Summary A for 
Approximately Equal Dollar-Weighted Indexes and Exhibit B is the 
Corporate Action Summary B for Share-Weighted Indexes. Depending on 
the index design, the Corporate Action Summary A or B may be 
modified. The Exchange would notify the public of the Corporate 
Actions that would be taken in regards to an index before the index 
begins trading.
---------------------------------------------------------------------------

    The proposed rule change would also permit the Exchange to 
rebalance an index on an interim basis if there are extraordinary 
changes in the relative values of the component securities. To the 
extent investors with open position must rely upon the continuity of 
the security futures contract on the index, the proposed rule change 
would leave outstanding contracts unaffected by the rebalancing.
    Consistent with OneChicago Rule 1002(i), the proposed rule change 
adds a provision that requires AM settlement for cash settled security 
futures on NBIs.
    Under the proposed rule change, OneChicago Rule 1002(i)(2)(B), 
which relates to the final settlement price of a Stock Index Future, 
would be amended by permitting the Exchange to make a determination 
when an opening price for one or more securities underlying a Stock 
Index Future is not readily available. Under the current OneChicago 
Rule, only the Chief Executive Officer of the Exchange or his designee, 
referred to as the Designated Officer, may make the determination 
whether the security or securities are likely to open within a 
reasonable time. The Exchange believes that it is more appropriate and 
provides more flexibility to state that the Exchange would make this 
determination.
    CFMA Listing Standard Requirements for Security Futures. Section 
6(h) of the Act \9\ requires that certain standards be met in order for 
an exchange to trade SFPs. OneChicago previously established that it 
met those standards in the proposed rule change submitted to the 
Commission.\10\ OneChicago also established that it met those standards 
in the proposed rule change it submitted to the Commission regarding 
listing standards for MicroSectors.\11\ The Exchange believes that the 
proposed rule change OneChicago submits at this time merely amends the 
current OneChicago Listing Standards and does not alter its ability to 
meet the standards required under section 6(h) of the Act.\12\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(h).
    \10\ Securities Exchange Act Release No. 47114 (December 31, 
2002), 68 FR 837 (January 7, 2003) (SR-OC-2002-24).
    \11\ Securities Exchange Act Release No. 48191 (July 17, 2003), 
68 FR 43555 (July 23, 2003) (SR-OC-2003-06).
    \12\ 15 U.S.C. 78f(h).
---------------------------------------------------------------------------

    Section 6(h)(3)(A) of the Act \13\ requires that each security 
underlying an SFP must be registered pursuant to section 12 of the 
Act.\14\ OneChicago believes that the Listing Standards continue to 
meet this requirement.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(h)(3)(A).
    \14\ 15 U.S.C. 781.
---------------------------------------------------------------------------

    Section 6(h)(3)(B) of the Act \15\ requires the market on which a 
physically settled SFP is traded have arrangements in place with a 
registered clearing agency for the payment and delivery of the 
securities underlying the SFP. The proposed rule change would not make 
amendments related to this requirement. OneChicago has entered into 
arrangements with both The Options Clearing Corporation (``OCC'') and 
the clearinghouse of the Chicago Mercantile Exchange Inc. (``CME''), 
both of which are registered clearing agencies, relating to the 
clearing of SFPs. By virtue of the CME clearinghouse being an 
associated clearinghouse of OCC, and OCC having in place arrangements 
with the National Securities Clearing Corporation for the delivery of 
securities underlying physically settled SFPs, One Chicago believes 
that it meets the requirements of section 6(h)(3)(B) of the Act.\16\
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(h)(3)(B).
    \16\ Id.
    The Exchange clarified its belief that the proposed rule change 
meets the requirement of Section 6(h)(3)(B) of the Act. Telephone 
conversation between Madge Piro, Counsel for OneChicago, and 
Jennifer Dodd, Special Counsel, Division, Commission, July 28, 2005.
---------------------------------------------------------------------------

    Section 6(h)(3)(C) of the Act \17\ requires Listing Standards for 
security futures be no less restrictive than comparable Listing 
Standards for options traded on a national securities exchange. The 
Commission has approved a similar rule for CBOE.\18\ Since CBOE has 
comparable listing standards, OneChicago believes that the proposed 
rule change meets the requirement of section 6(h)(3)(C) of the Act.\19\
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f(h)(3)(C).
    \18\ See note 6 supra.
    \19\ 15 U.S.C. 78f(h)(3)(C).
---------------------------------------------------------------------------

    Section 6(h)(3)(D) of the Act \20\ requires that all SFPs be based 
on common stock and such other equity securities as the Commission and 
CFTC have jointly determined is appropriate. The Commission and CFTC 
have jointly permitted that SFPs be based on depositary shares,\21\ a 
share of an exchange traded fund, a trust issued receipt, or a share of 
a registered closed-end management investment company.\22\ The proposed 
rule change would not amend the provisions in the Listing Standards 
pertaining to this requirement. Therefore, OneChicago believes that it 
continues to meet this requirement.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78f(h)(3)(D).
    \21\ See Securities Exchange Act Release No. 44725 (August 20, 
2001), 67 FR 42670 (June 25, 2002).
    \22\ See Securities Exchange Act Release No. 46090 (June 19, 
2002), 67 FR 42670 (June 25, 2002).
---------------------------------------------------------------------------

    Section 6(h)(3)(E) of the Act \23\ requires that each SFP be 
cleared by a clearing agency that has in place provisions for linked 
and coordinated clearing with other clearing agencies that clear SFPs, 
which permits an SFP to be purchased on one market and offset on 
another market that trades such product. OneChicago notes that pursuant 
to section 6(h)(7) of the Act,\24\ the foregoing requirement is 
deferred until the ``compliance date'' (as defined therein). OneChicago 
expects that both OCC and CME clearinghouses would have in place 
procedures complying with the requirements of clause (E) after such 
``compliance date.'' Therefore, OneChicago believes that it continues 
to meet this requirement.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78f(h)(3)(E).
    \24\ 15 U.S.C. 78f(h)(7).
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    Section 6(h)(3)(F) of the Act \25\ requires that broker-dealers 
must be subject to suitability rules comparable to those of a national 
securities association to effect transactions in SFPs. OneChicago 
believes it continues to satisfy this requirement through OneChicago 
Rule 605 which requires members to comply with the sales practice rules 
of the National Futures Association (``NFA'') or the National 
Association of Securities Dealers, Inc. (``NASD''), which include 
suitability rules.
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    \25\ 15 U.S.C. 78f(h)(3)(F).
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    Section 6(h)(3)(G) of the Act \26\ requires that SFPs be subject to 
the prohibition against dual trading in Section 4j of CEA \27\ and CFTC 
regulations. Pursuant to section 4j of CEA,\28\ CFTC promulgated 
Regulation 41.27,\29\ which states that an electronic futures exchange 
is subject to the dual trading rule if the exchange provides market 
participants with a time or place advantage or the ability to override 
a predetermined algorithm. OneChicago market participants have no such 
advantage or ability. Therefore, OneChicago believes that the dual

[[Page 45473]]

trading rule does not apply to OneChicago.
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    \26\ 15 U.S.C. 78f(h)(3)(G).
    \27\ 7 U.S.C. 4j.
    \28\ Id.
    \29\ 17 CFR 41.27.
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    Section 6(h)(3)(H) of the Act \30\ provides that SFPs must not be 
readily susceptible to manipulation of the price of the SFP, the price 
of the underlying security, the price of the option on such security, 
or options on a group or index including such securities. Nothing in 
the proposed rule change would alter OneChicago's fulfillment of this 
requirement. Therefore, OneChicago believes that it continues to meet 
this requirement. OneChicago Rule 603 specifically prohibits market 
manipulation, and OneChicago Rule 604 prohibits OneChicago members or 
access persons from violating applicable laws.
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    \30\ 15 U.S.C. 78f(h)(3)(H).
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    Section 6(h)(3)(I) \31\ of the Act requires that procedures be in 
place for coordinated surveillance among the markets on which an SFP is 
traded, any market on which any security underlying an SFP is traded, 
and other markets on which any related security is traded to detect 
manipulation and insider trading. OneChicago believes that it continues 
to meet this requirement through its affiliation with the Intermarket 
Surveillance Group, under which it has an agreement to share market 
surveillance and regulatory information with other members of the 
group, which includes all of the predominant U.S. securities exchanges. 
OneChicago is also a member of the Joint Audit Committee, in which the 
futures self-regulatory organizations have an agreement to share 
information for regulatory purposes. Therefore, OneChicago believes it 
continues to meet this requirement.
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    \31\ 15 U.S.C. 78f(h)(3)(I).
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    Section 6(h)(3)(J) of the Act \32\ requires that an exchange have 
audit trails that are necessary or appropriate to facilitate the 
coordinated surveillance required under section 6(h)(3)(I) of the 
Act.\33\ OneChicago believes that it continues to meet this 
requirement. The audit trail capability provided by CBOEdirect[supreg], 
the trade matching engine used by OneChicago, creates and maintains an 
electronic transaction history database that contains information with 
respect to all orders, whether executed or not, and resulting 
transactions on the Exchange. This applies to orders entered through 
CBOEdirect[supreg] terminals as well as to orders routed to 
CBOEdirect[supreg] through CME's Globex[supreg] system. The information 
recorded with respect to each order includes: time received (by 
CBOEdirect[supreg] or Globex[supreg]), terms of the order, order type, 
instrument and contract month, price quantity, account type, account 
designation, user code, and clearing firm.
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    \32\ 15 U.S.C. 78f(h)(3)(J).
    \33\ 15 U.S.C. 78f(h)(3)(I).
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    OneChicago's electronic audit trail consists of data recorded by 
CBOEdirect[supreg] and Globex[supreg], and OneChicago has full access 
to all such data. Information logged by CBOEdirect[supreg], including 
orders received through CBOEdirect[supreg] terminals, are archived and 
provided to OneChicago each day. Orders received through Globex[supreg] 
are archived and maintained at CME. Together, these data sets enable 
OneChicago to trace each order back to the clearing firm by or through 
which it was submitted. If any question or issue arises as to the 
source of an order prior to submission by or through a clearing firm, 
OneChicago would request that the clearing firm provide an electronic 
or other record of the order.
    For orders that cannot be immediately entered into either 
CBOEdirect[supreg] and Globex[supreg], and therefore would not be 
recorded electronically at the time they are placed, OneChicago Rule 
403(b) requires that the Clearing Member or, if applicable, the 
Exchange Member or the Access Person receiving such order must prepare 
an order form in a non-alterable written medium, which must be time-
stamped when received and include the account designation, date, and 
other required information (i.e., order terms, order type, instrument 
and contract month, price, and quantity). Each such form must be 
retained for at least five years from the time it was prepared. In 
addition, OneChicago Rule 501 establishes a general recordkeeping 
requirement pursuant to which each Clearing Member, Exchange Member, 
and Access Person must keep all books and records as required to be 
kept by it pursuant to CEA, CFTC regulations, the Act, regulations 
under the Act, and OneChicago Rules. OneChicago Rule 501 also requires 
that such books and records be made available to the Exchange upon 
request. Current CFTC regulations require books and records to be 
maintained for a period of five years. OneChicago believes that its 
audit trail continues to meet the requirement of section 6(h)(3)(J) of 
the Act.\34\
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    \34\ 15 U.S.C. 78f(h)(3)(J).
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    Block trades are entered in CBOEdirect[reg] by 
OneChicago's operations management after they are reported by 
designated individuals at the Clearing Member for the selling party. 
Similar procedures apply to the exchange of futures for physical 
(``EFP'') transactions. Since block trades and EFP transactions involve 
orders that cannot be immediately entered into either CBOE's or CME's 
systems, the Clearing Members or, if applicable, Exchange Members or 
Access Persons involved must comply with the relevant OneChicago policy 
and procedures regarding these transactions.
    Section 6(h)(3)(K) of the Act \35\ requires that a market on which 
an SFP is traded have in place procedures to coordinate trading halts 
between such market and any market on which any security underlying an 
SFP is traded and other markets on which any related security is 
traded. OneChicago believes that it continues to meet this requirement 
through OneChicago Rule 419, which requires that trading in a security 
future be halted at all times that a regulatory halt has been 
instituted for the relevant underlying security or securities.
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    \35\ 15 U.S.C. 78f(h)(3)(K).
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    Section 6(h)(3)(L) of the Act \36\ requires that the margin 
requirements for an SFP comply with the regulations prescribed pursuant 
to section 7(c)(2)(B) of the Act.\37\ OneChicago believes that its 
current Rule 515 continues to fulfill this requirement.\38\
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    \36\ 15 U.S.C. 78f(h)(3)(L).
    \37\ 15 U.S.C. 78g(c)(2)(B).
    \38\ Securities Exchange Act Release No. 46787 (November 7, 
2002), 67 FR 69059 (November 14, 2002) (SR-OC-2002-01); Securities 
Exchange Act Release No. 47810 (May 7, 2003), 68 FR 26369 (May 15, 
2003) (SR-OC-2003-05); Securities Exchange Act Release No. 50115 
(July 29, 2004), 69 FR 48261 (August 9, 2004) (SR-OC-2004-01).
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2. Statutory Basis
    OneChicago believes that the proposed rule change is consistent 
with section 6(b)(5) of the Act \39\ in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, and to remove impediments to and perfect 
the mechanism of a free and open market and a national market system, 
and, in general, to protect investors and the public interest. 
OneChicago further believes that the proposed changes would promote 
competition and are designed to protect investors and the public 
interest by permitting investors to use new, competitive, and 
innovative products for hedging and speculative purposes.
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    \39\ 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 would not unduly 
burden competition. In fact, OneChicago believes that the proposed rule 
change would promote competition by permitting OneChicago to list a 
broader

[[Page 45474]]

array of futures, without jeopardizing investor protection.

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

    Comments on the proposed rule change have not been solicited nor 
received.

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

    The proposed rule change has become effective on July 20, 2005. 
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.\40\
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    \40\ 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. 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-OC-2005-02 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.

All submissions should refer to File Number SR-OC-2005-02. 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-2005-02 and should be submitted on or before August 
26, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\41\
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    \41\ 17 CFR 200.30-3(a)(15).
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Jill M. Peterson,
Assistant Secretary.
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[FR Doc. E5-4233 Filed 8-4-05; 8:45 am]
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