[Federal Register Volume 71, Number 45 (Wednesday, March 8, 2006)]
[Notices]
[Pages 11691-11693]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-3270]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53393; File No. SR-CBOE-2006-18]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change and Amendment No. 2 Thereto Relating to Implementation of 
the PAR Official Program

 March 1, 2006.
    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 February 17, 2006, the Chicago Board Options Exchange, Incorporated 
(``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
On February 24, 2006, CBOE filed Amendment No. 1 to the proposed rule 
change. On February 28, 2006, CBOE withdrew Amendment No. 1 and filed 
Amendment No. 2 to the proposed rule change.\3\ CBOE has designated 
this proposal as non-controversial under Section 19(b)(3)(A)(iii) of 
the Act \4\ and Rule 19b-4(f)(6) thereunder,\5\ which renders the 
proposed rule change effective upon filing with the Commission. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 2, CBOE resubmitted Exhibit 1, the 
Exchange's draft Notice of Proposed Rule Change, in order to replace 
a corrupted version of that document submitted with the original 
filing.
    \4\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \5\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its rules relating to the 
implementation of the PAR Official program to extend the deadline for 
implementation to March 24, 2006. In addition, the Exchange proposes to 
amend and re-issue regulatory circular RG05-116, DPM Obligations Until 
the Implementation of the PAR Official Program, to incorporate the 
revised deadline. The text of the proposed rule change follows, with 
additions in italics and deletions in [brackets]. The text of the 
proposed regulatory circular is available at CBOE's Web site (http://www.cboe.org/legal/default.aspx), at CBOE's principal office, and at 
the Commission's Public Reference Room.

Chicago Board Options Exchange, Incorporated

Rules
* * * * *
Rule 7.12. PAR Official
    (a)-(e). No Change.
* * * Interpretations and Policies:
    .01 The Exchange shall assign a PAR Official to all applicable 
trading stations on or before [February 16] March 24, 2006.
* * * * *
Rule 8.85. DPM Obligations
    (a)-(d). No Change.
    (e) Requirement to Own Membership. Each DPM organization shall own 
at least one Exchange membership for each trading location in which the 
organization serves as a DPM. For purposes of this Rule, a trading 
location is defined as any separate identifiable unit of a DPM 
organization that applies for and is allocated option classes by the 
appropriate Allocation Committee. An Exchange membership shall include 
a transferable regular membership or a Chicago Board of Trade full 
membership that has effectively been exercised pursuant to Article 
Fifth(b) of the Certificate of Incorporation. The same Exchange 
membership(s) may not be used to satisfy this ownership requirement for 
different DPM organizations or different trading locations operated by 
the same DPM organization.
    A DPM organization shall be exempt from the membership requirement 
under Rule 8.85(e) for the period of November 18, 2005 to [February 16] 
March 24, 2006 if the DPM organization falls out of compliance with 
Rule 8.85(e) because the Exchange membership used to satisfy Rule 
8.85(e) was, at the time the DPM organization fell out of compliance 
with Rule 8.85(e), held by an individual whose affiliation with the DPM 
organization has been terminated as a result of the implementation of 
Rule 7.12.
* * * Interpretations and Policies
    .01-.03 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
    The purpose of this proposed rule change is to extend the 
Exchange's deadline for assigning a PAR Official to all applicable 
trading stations from February 16, 2006 to March 24, 2006.\6\ On 
November 18, 2005 (``approval date''), the Commission approved

[[Page 11692]]

CBOE's proposal to remove a DPM's obligation to execute orders as an 
agent, including as a floor broker, in its allocated securities on the 
Exchange in any trading station and to allow the Exchange to appoint an 
Exchange employee or independent contractor (``PAR Official'') to 
assume many of the functions and obligations that DPMs previously held 
(``PAR Official Rule Change'').\7\
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    \6\ See CBOE Rule 7.12, Interpretation and Policy .01.
    \7\ See Securities Exchange Act Release No. 52798 (November 18, 
2005), 70 FR 71344 (November 28, 2005).
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    Among other things, the PAR Official Rule Change gave the Exchange 
ninety days after the approval date to implement the PAR Official Rule 
Change or, more specifically, to ensure that a PAR Official was 
assigned to each DPM trading station. The 90-day implementation period 
ended on February 16, 2006.\8\ In addition, the PAR Official Rule 
Change exempted DPM organizations for the same period of time from 
complying with the seat ownership requirement of CBOE Rule 8.85(e) 
under certain circumstances.\9\ Specifically, CBOE Rule 8.85(e) 
provides, in part, that a DPM organization will be exempt until 
February 16, 2006 from the requirement to own at least one Exchange 
membership for each trading location that the DPM organization is the 
appointed DPM.
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    \8\ See supra note 6.
    \9\ CBOE Rule 8.85(e) provides in part that a DPM organization 
will be exempt from the seat ownership requirement under Rule 
8.85(e) if the DPM organization fell out of compliance because the 
Exchange membership used to satisfy the requirement was, at the time 
the DPM organization fell out of compliance, held by an individual 
whose affiliation with the DPM organization was terminated as a 
result of the implementation of the PAR Official Rule; Rule 7.12.
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    The Exchange has determined that, primarily due to the lengthy 
process involved in hiring and properly training a sufficient number of 
personnel to adequately assume all PAR Official functions, the Exchange 
will require additional time to assign PAR Officials to each DPM 
trading station. As such, the Exchange proposes to extend both the PAR 
Official implementation deadline and the seat ownership exemption 
deadline to March 24, 2006.
    Because the Exchange anticipated that PAR Officials would not be 
assigned to all DPM trading stations immediately upon the approval of 
the PAR Official Rule Change, the Exchange issued a regulatory circular 
that had the effect of subjecting any such DPMs to the same rules and 
obligations that governed DPM operations and that were eliminated with 
the approval of the rule change.\10\ Concurrent with the filing of this 
proposed rule change, the Exchange also proposes to reissue the 
aforementioned regulatory circular, amended to reflect the new March 
24, 2006 deadline.
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    \10\ See CBOE Regulatory Circular RG05-116, DPM Obligations 
Until the Implementation of the PAR Official Program, dated November 
18, 2005. Immediately upon approval of the PAR Official Rule Change, 
the Exchange filed the regulatory circular with the Commission 
pursuant to Section 19(b)(3)(A)(iii) of the Act, 15 U.S.C. 
78s(b)(3)(A)(iii), and Rule 19b-4(f)(6) thereunder, 17 CFR 240.19b-
4(f)(6). See Securities Exchange Act Release No. 52860 (November 30, 
2005), 70 FR 72867 (December 7, 2005) (Notice of filing for 
immediate effectiveness of SR-CBOE-2005-100). The regulatory 
circular governed the operations of those DPMs that were not 
immediately included in the PAR Official conversion as of November 
18, 2005, and the rules and obligations set forth therein were 
adopted directly from the former (that is, the pre-PAR Official Rule 
Change) DPM rules.
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2. Statutory Basis
    The Exchange believes that, because the proposed rule change will 
refine and enhance its members' abilities to meet certain regulatory 
requirements, the proposed rule change is consistent with Section 6(b) 
\11\ of the Act in general, and furthers the objectives of Section 
6(b)(5) \12\ in particular, in that it is designed to promote just and 
equitable principles of trade and, in general, to protect investors and 
the public interest.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 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 that is not necessary or appropriate 
in furtherance of the purposes of the Act.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    The foregoing proposed rule change, as amended, has become 
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6) \14\ thereunder because it (i) does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and (iii) does not become 
operative for 30 days from the date on which it was filed, or such 
shorter time as the Commission may designate, provided that the self-
regulatory organization has given the Commission written notice of its 
intent to file the proposed rule change at least five business days 
prior to the filing date of the proposed rule change, or such shorter 
time as the Commission may designate.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 19b-4(f)(6).
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    The Exchange has requested that the Commission waive the five-day 
pre-filing requirement and the 30-day operative delay of Rule 19b-
4(f)(6)(iii) so that the proposed rule change may become effective 
immediately. The Commission believes that waiving the pre-filing 
requirement and the operative delay is consistent with the protection 
of investors and the public interest because it would allow the 
Exchange's transition to the use of PAR Officials to continue. In 
addition, this proposed rule change is necessary for those DPMs that 
continue to operate under the pre-PAR Official program rules. 
Therefore, the Commission has determined to waive the pre-filing 
requirement and the operative delay and allow the proposed rule change 
to become operative immediately.\15\
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    \15\ For purposes only of waiving the operative delay of this 
proposal, the Commission notes that it has considered the proposed 
rule's impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, is consistent with the Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File No. SR-CBOE-2006-18 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

[[Page 11693]]

    All submissions should refer to File Number SR-CBOE-2006-18. 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 Commissions Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the CBOE. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-CBOE-2006-18 and should be submitted on or before March 
29, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-3270 Filed 3-7-06; 8:45 am]
BILLING CODE 8010-01-P