[Federal Register Volume 72, Number 68 (Tuesday, April 10, 2007)]
[Notices]
[Pages 17961-17962]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-6671]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55570; File No. SR-CBOE-2007-15]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of Proposed Rule Change To Amend CBOE's 
Membership Application Procedures To Incorporate Individuals Who Are 
Acting in an Exchange Trading Floor Capacity

April 2, 2007.
    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 14, 2007, The Chicago Board Options Exchange, Incorporated 
(``CBOE'' or ``Exchange''), filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been substantially 
prepared by CBOE. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend its membership application 
procedures to incorporate those individuals who are acting in an 
Exchange trading floor capacity. Set forth below are the proposed 
changes to the rule text with additions in italic.
Chicago Board Options Exchange, Incorporated
Rules
* * * * *
Rule 3.9. Application Procedures and Approval or Disapproval

    (a)-(f) No Change.
    (g) Any person applying pursuant to paragraph (a) of this Rule to 
have an authorized trading function is required to have completed the 
Exchange's Member Orientation Program and to have passed an Exchange 
Trading Member Qualification Exam. Additionally, any person who has 
completed the Member Orientation Program and taken and passed the 
applicable Trading Member Qualification Exam and who then does not 
possess an authorized trading function or Exchange trading floor 
capacity for more than 1 year is required to complete the Member 
Orientation Program and to re-pass the applicable Trading Member 
Qualification Exam in order to once again become eligible to have an 
authorized trading function. A person must score 75% or better on the 
applicable Trading Member Qualification Exam in order to pass the Exam. 
Any person who fails the applicable Trading Member Qualification Exam 
must wait 30 days to re-take the Exam after failing the Exam for the 
first time, must wait 60 days to re-take the Exam after failing the 
Exam for the second time, and must wait 120 days to re-take the Exam 
after failing the Exam for a third or subsequent time. The Exchange may 
not waive any of the requirements set forth in this paragraph (g).
    (h)-(l) No Change.
    * * * Interpretations and Policies:
    .01 No Change.
    .02 No Change.
    .03 For purposes of this rule, ``Exchange trading floor capacity'' 
means any person who is acting on behalf of the Exchange in an Exchange 
trading floor capacity, such as a PAR Official, Order Book Official, or 
other similar function.
* * * * *

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

    In its filing with the Commission, CBOE included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. CBOE has prepared summaries, set forth in Sections A, B, 
and C below, of the most significant aspects of such statements.

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

1. Purpose
    Exchange Rule 3.9, entitled ``Application Procedures and Approval 
or Disapproval,'' outlines, among other things, the application 
procedures for an individual who desires to become a member of the 
Exchange. Paragraph (g) of Exchange Rule 3.9 currently requires any 
person applying to the Exchange to (i) have completed the Exchange's 
Member Orientation Program (``Orientation Program'') and (ii) passed an 
Exchange Trading Member Qualification Exam (``Qualification Exam''). 
However, a person who has completed the Orientation Program and taken 
and passed the Qualification Exam but does not possess an authorized 
trading function for more than one year must again complete the 
Orientation Program and re-pass the Qualification Exam.
    This filing proposes to amend CBOE's rules to provide that PAR 
Officials and Order Book Officials, as described in CBOE's rules and 
discussed below, as well as others acting in a similar capacity (i.e., 
an Exchange trading floor capacity), shall be included in the rule, in 
addition to those who possess an authorized trading function, since 
both functions are similar.
    On November 18, 2005, the Commission approved a filing which

[[Page 17962]]

created a new category of market participant called ``PAR Officials.'' 
\3\ The PAR Official was established in response to the elimination of 
CBOE's rules as applied to Designated Primary Market-Makers (``DPMs'') 
executing orders as agents or Floor Brokers in their allocated option 
classes. The PAR Official is responsible for operating the PAR 
workstation trading stations, including handling and executing orders 
that are routed to the PAR workstation.
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    \3\ See Securities Exchange Act Release No. 52798 (November 18, 
2005), 70 FR 71344 (November 28, 2005) (SR-CBOE-2005-46).
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    Specifically, the PAR Official is an Exchange employee or 
independent contractor designated by the Exchange to be responsible for 
(i) operating the PAR workstation; (ii) when applicable, maintaining 
the customer limit order book for the assigned option classes; \4\ and 
(iii) effecting proper executions of orders placed with him.
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    \4\ This provision will not apply to option classes that are on 
the CBOE's Hybrid System.
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    In addition to PAR Officials, the Exchange also employs ``Order 
Book Officials'' (``OBOs'') whose responsibilities include, among other 
things, (i) maintaining the book with respect to the classes of options 
assigned to him, (ii) effecting proper executions of orders placed with 
him, (iii) displaying bids and offers, and (iv) monitoring the market 
for the classes of options assigned to him.
    The Exchange may employ former members, who previously acted in the 
capacity of a DPM before the initiation of the PAR Official, to act on 
behalf of the Exchange in a trading floor capacity. If these PAR 
Officials and OBOs become members of the Exchange after working for the 
Exchange in a trading floor capacity for longer than one year, these 
individuals would have to again complete the Orientation Program and 
re-pass the Qualification Exam under current CBOE Rule 3.9, since they 
would have not possessed an authorized trading function for longer than 
one year.
    These PAR Officials and OBOs, while acting in an Exchange trading 
floor capacity, are ultimately acting in the same capacity as when they 
were operating in a DPM capacity prior to the initiation of the PAR 
Official trading floor capacity. Therefore, the Exchange feels that it 
is appropriate to amend its procedures to allow for the one year period 
under CBOE Rule 3.9(g) to be applied to not only an individual who has 
possessed an authorized trading function, but also to an individual who 
has acted in an Exchange trading floor capacity, since both functions 
are similar.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\5\ in general and furthers the objectives 
of Section 6(b)(5) of the Act,\6\ in particular, in that it should 
promote just and equitable principles of trade, serve to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system and protect investors and the public interest.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    This proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.

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

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

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding, or (ii) as to 
which CBOE consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-CBOE-2007-15 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.

All submissions should refer to File Number SR-CBOE-2007-15. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the CBOE. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-CBOE-2007-15 and should be submitted on or before May 1, 
2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-6671 Filed 4-9-07; 8:45 am]
BILLING CODE 8010-01-P