[Federal Register: December 2, 2005 (Volume 70, Number 231)]
[Notices]
[Page 72318-72320]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02de05-67]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-52824; File No. SR-CBOE-2005-69]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change and Amendment No. 1 Thereto To Delete Certain
Exchange Rules, or Portions Thereof, Which Have Been Determined by the
Exchange To Be Obsolete or Unnecessary
November 22, 2005.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on September 1, 2005, the Chicago Board Options Exchange, Incorporated
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the CBOE.
On November 8, 2005, the Exchange filed Amendment No. 1 to the
proposal.\3\ The Exchange filed the proposed rule change, as amended,
as a ``non-controversial'' rule change under Rule 19b-4(f)(6) under the
Act,\4\ which renders the proposal 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Form 19b-4 dated November 8, 2005, which replaced the
original filing in its entirety (``Amendment No. 1'').
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The CBOE proposes to delete certain rules, or portions thereof,
which have been determined by the Exchange to be obsolete or
unnecessary. The text of the proposed rule change is available on
Exchange's Web site (http://www.cboe.com), at the CBOE's Office of the
Secretary, and at the Commission's Public Reference Room.
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 CBOE included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed
[[Page 72319]]
rule change. The text of these statements may be examined at the places
specified in Item IV below. The 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, Proposed Rule Change
1. Purpose
The Exchange proposes to delete the rules, or portions thereof,
that pertain to the former Joint Venture Participation Agreement
(``Agreement'') between CBOE and the Chicago Board of Trade (``CBOT'').
The Exchange represents that the Agreement, among other things,
provided that CBOE would waive certain dues and fees for CBOT Exercise
members who made no trades in CBOE contracts in a given quarter. In
addition, the Agreement waived all membership application fees and
technology fees for CBOT Exercise members. The Exchange represents that
the Agreement terminated on December 29, 1998, and the Exchange has no
intention of initiating this program in the future. On December 10,
1998, CBOE issued Regulatory Circular RG98-140 to its members informing
them that the Agreement would terminate effective December 29, 1998 and
that the Agreement would not be renewed. In addition, the Commission
issued Securities Exchange Act Release No. 40973, which pertained to
the termination of the Agreement and the initiation of fees that would
ultimately be charged to the CBOT Exercise members pursuant to the
termination of the Agreement.\5\ The proposed CBOE rules that pertain
to the obsolete Agreement, or the portions thereof, that are to be
deleted are: CBOE Rule 1.1, Rule 6.7, Rule 6.20, Rule 6.70, Rule 9.1,
Rule 19.1, and Rule 30.12.
---------------------------------------------------------------------------
\5\ Securities Exchange Act Release No. 40973 (January 25,
1999), 64 FR 4915 (February 1, 1999) (SR-CBOE-98-55).
---------------------------------------------------------------------------
Also, the Exchange proposes to delete the rules, or portions
thereof, that pertain to Board Brokers. A Board Broker is an individual
member, a nominee of a member organization or a member organization who
or which is registered with the Exchange for the purposes of (i) acting
as a ``broker's broker'' for specified classes of options, at the post
at which such classes of options are traded, by accepting and
attempting to execute orders placed with him by other members, and (ii)
monitoring the market for such classes of options at the post. The
Exchange represents that it has not used Board Brokers for
approximately 22 years, and does not intend to use them in the future.
The proposed CBOE rules pertaining to Board Brokers, or the portions
thereof, that are to be deleted are: CBOE Rule 6.43, Rule 6.46, Rule
6.47, Rule 6.54, Rule 6.70, Rule 7.1, Rule 7.2, Rule 7.3, Rule 7.4,
Rule 7.5, Rule 7.7, Rule 7.8, Rule 7.9, Rule 7.10, and Rule 7.11.
In addition to the deletions of the above-referenced ``Joint
Venture'' and ``Board Broker'' rules, or portions thereof, the Exchange
proposes to delete each of the following rules, or portions thereof:
CBOE Rule 2.21--This rule allows the Exchange to impose a
charge upon Exchange members measured by their respective net
commissions. The Exchange represents that Exchange members have not
assessed the commissions that such charges are measured by since the
early 1970s, and such commissions will not be assessed by Exchange
members in the future. For this reason, the Exchange has not imposed
and will not impose such charges upon its members, since there is no
commission to base it upon, therefore making this rule obsolete and
unnecessary.
CBOE Rule 2.25 and CBOE Rule 2.30--These rules allow the
Exchange to assess fees for the delayed submission of trade
information. Specifically, these rules allow the Exchange to assess
fees to members who failed to submit trade information for at least 80%
of all of that member's transactions. Currently, over 98% of all trade
information is disseminated within one hour after the time of
execution. The Exchange represents that it no longer assesses such
fees, since 98% of all trade information is disseminated within one
hour after the time of execution, and does not intend to assess them in
the future.
CBOE Rule 14.2, CBOE Rule 14.3, and CBOE Rule 14.5--The
rules in Chapter 14 of the CBOE rulebook were created for the purpose
of charging and collecting commissions. Specifically, CBOE Rule 14.1
made it mandatory for commissions to be charged and collected upon the
execution of all orders, for the accounts of members and non-members,
of securities dealt on CBOE. CBOE Rule 14.1 stated that the commissions
would be no less than the rates established by CBOE and such
commissions shall be ``net and free from any rebate, return, discount
or allowance.'' The Exchange represents that CBOE Rule 14.1 was deleted
from CBOE's rules on May 15, 1975, since such fixed commissions would
no longer be charged and would not be charged in the future.
For this reason, at this time, the Exchange proposes to delete CBOE
Rules 14.2, 14.3, and 14.5, since the Exchange believes that there is
no need for these rules since they pertained specifically to the
commissions discussed in CBOE Rule 14.1 and which are no longer
necessary.
Specifically, CBOE Rule 14.2 involves reciprocal arrangements. The
Exchange states that reciprocal arrangements were agreements that
brokers used with other brokers to permit such brokers to participate
in the commissions that were generated from the execution of orders.
The Exchange represents that reciprocal arrangements have not been used
since the early 1970s. Specifically, CBOE Rule 14.2(a) states that any
such arrangement had to be reported to CBOE and subject to CBOE's
approval. CBOE Rule 14.2(b) states that no member, in consideration of
the receipt of business, shall make any payments, or give up any work
or give up any part of any commission to which such member is or will
be entitled. Since such arrangements as described in CBOE Rule 14.2(b)
were never permitted, the Exchange would not approve such arrangements
pursuant to CBOE Rule 14.2(a), if and when an Exchange member reported
such an arrangement to the Exchange. Further, since the commissions as
discussed in CBOE Rule 14.1 are no longer charged, and have not been
charged since the early 1970s, the Exchange believes that there is no
need to have a rule pertaining to reciprocal arrangements, since the
commissions that the arrangements were based on are no longer charged
and will not be charged in the future. Specifically, CBOE Rule 14.2
prohibited those arrangements that were used to circumvent the
commissions referred to in CBOE Rule 14.1, and therefore, since CBOE
Rule 14.1 was deleted on May 15, 1975, there is no need for CBOE Rule
14.2.
CBOE Rule 14.3 deals with commissions charged on non-member orders.
This rule specifically sets forth that the commissions to be charged on
non-member orders shall be mutually agreed upon. Again, the Exchange
represents that this rule is obsolete, since the commissions that this
rule pertains to are no longer charged and have not been charged since
the early 1970s. Therefore, the Exchange believes that there is no need
for this rule.
CBOE Rule 14.5 deals with intra-member rates for floor brokerage.
This rule states that for those orders that are executed when a
principal is given up, the commission shall be mutually
[[Page 72320]]
agreed upon. As with CBOE Rule 14.3, the Exchange believes that this
rule is obsolete, since the commissions that this rule pertains to have
not been charged since the early 1970s and the Exchange does not plan
to charge such commissions in the future. For this reason, the Exchange
believes that there is no need for this rule.
CBOE Rule 15.4--This rule pertains to a monthly commission
report that the Exchange required certain individual members and member
organizations to submit to the Treasurer of the Exchange. Specifically,
this rule required certain members to disclose commissions on business
done on the Exchange for each month. The Exchange believes that this
rule is obsolete, since such a report is no longer necessary given that
such commissions are no longer charged and collected.
2. Statutory Basis
By deleting certain Exchange rules, or portions thereof, which have
been determined to be obsolete or unnecessary, the Exchange believes
that the proposed rule change is consistent with Section 6(b) of the
Act \6\ in general, and furthers the objectives of Section 6(b)(5) of
the Act \7\ in particular, in that 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 national market system, and, in
general, protect investors and the public interest.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The CBOE does not believe that the proposed rule change will impose
any burden on competition not necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments on the proposed rule change were neither solicited
nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change, as amended: (i) Does not
significantly affect the protection of investors or the public
interest; (ii) does not impose any significant burden on competition;
and (iii) by its terms, does not become operative for 30 days after the
date of filing, the proposed rule change has become effective pursuant
to Section 19(b)(3)(A) of the Act \8\ and subparagraph (f)(6) of Rule
19b-4 thereunder.\9\ As required under Rule 19b-4(f)(6)(iii),\10\ the
Exchange provided the Commission with written notice of its intent to
file the proposed rule change, along with a brief description and text
of the proposed rule change, at least five business days prior to the
date of the filing of the proposed rule change.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6).
\10\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
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 the furtherance of the purposes of the Act.\11\
---------------------------------------------------------------------------
\11\ The effective date of Amendment No. 1 is November 8, 2005.
For purposes of calculating the 60-day period within which the
Commission may summarily abrogate the proposal, the Commission
considers the period to commence on November 8, 2005, the date on
which the Exchange submitted Amendment No. 1.
---------------------------------------------------------------------------
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 rule-comments@sec.gov. Please include
File Number SR-CBOE-2005-69 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-9309.
All submissions should refer to File Number SR-CBOE-2005-69. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for inspection
and copying in the Commission's Public Reference Section. Copies of
such filing also will be available for inspection and copying at the
principal office of the CBOE. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-CBOE-2005-69 and should be submitted on or before
December 23, 2005.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
---------------------------------------------------------------------------
\12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jonathan G. Katz,
Secretary.
[FR Doc. E5-6751 Filed 12-1-05; 8:45 am]
BILLING CODE 8010-01-P