[Federal Register: June 1, 2006 (Volume 71, Number 105)]
[Notices]
[Page 31239-31241]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01jn06-118]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53869; File No. SR-CBOE-2006-38]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing of Proposed Rule Change and Amendment
No. 1 Thereto Regarding Transfer of Designated Primary Market Maker
Appointments
May 25, 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 April 17, 2006, 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 CBOE. On
May 11, 2006, the Exchange filed Amendment No. 1 to the proposed rule
change.\3\ The Commission is publishing this notice to solicit comments
on the proposed rule
[[Page 31240]]
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\3\ Amendment No. 1 replaced and superseded the original filing
in its entirety. In Amendment No. 1, CBOE corrected a reference in
the rule text and elaborated on the purpose of and rationale for the
proposed rule change.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
CBOE proposes to amend its rules relating to the transfer of
Designated Primary Market Maker (``DPM'') appointments. The text of the
proposed rule change, as amended, is available on CBOE's Web site
(http://www.cboe.com), at CBOE's principal office, 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, CBOE included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it had 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
The Exchange proposes to amend Exchange rules applicable to the
transfer of DPM appointments between CBOE members, which is governed by
CBOE Rule 8.89. Generally, any DPM proposing a sale, transfer, or
assignment of any ownership interest or a change to the DPM's capital
structure, voting authority, or distribution of profits or losses
(collectively, a ``transfer proposal'') must provide the appropriate
Exchange committee with the specifics and terms of the transfer
proposal in a form and manner specified under CBOE Rule 8.89(c). The
appropriate Exchange committee then will undergo a review process,
which includes a publication of notice of the transfer proposal and a
subsequent publication of the notice of the decision by the committee
on the transfer proposal.\4\ Currently, the appropriate Exchange
committee that reviews transfer proposals under CBOE Rule 8.89 is the
Allocation Committee.
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\4\ See CBOE Rules 8.89(d) and (e).
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The Exchange proposes to eliminate section (f) of CBOE Rule 8.89,
which subjects any transfer proposal decision made by the appropriate
Exchange committee (``transfer proposal decision'') to a 10-day review
period in which any transfer proposal decision may be directly reviewed
by the Board of Directors upon: (1) A written application by a party
claiming to be aggrieved \5\ by the DPM transfer decision, or (2) a
request for review by any five Directors.
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\5\ Under CBOE Rule 8.89, a person must be ``aggrieved'' as
described in Chapter XIX of Exchange Rules.
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The Exchange believes that, with the expiration of the DPM
appointment transfer fee in June 2004 \6\ and the fact that DPM
transfers, in general, have become more routine, the Board review
process under CBOE Rule 8.89(f) is no longer necessary. The Exchange
also believes that the elimination of CBOE Rule 8.89(f) will improve
the efficiency of the Exchange's decision-making processes. Currently,
because of the review process under CBOE Rule 8.89(f), a memo is
forwarded to the Board of Directors after each decision regarding a
transfer proposal is made. This requires Directors to take time to
review each of these matters so that they can determine whether to make
a request for review of the decision by the Board. Because transfer
proposal decisions have become more routine, the Exchange no longer
sees a need to have Directors devote special attention to these
decisions or for there to be a special review process for these
decisions that is different from the review processes and procedures
that are generally applicable to other Exchange decisions.
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\6\ Until it expired on June 30, 2004, Interpretation and Policy
.02 of CBOE Rule 8.89 applied a transfer fee to certain types of DPM
transfers.
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Further, any member aggrieved by a decision regarding a transfer
proposal decision could still seek a review of the decision through the
hearing and review process provided for under Chapter XIX of CBOE's
rules.\7\ In any such appeal proceeding under Chapter XIX, the decision
regarding a transfer proposal by the appropriate Exchange committee
under CBOE Rule 8.89 would be subject to review by the CBOE Appeals
Committee. Additionally, the Appeals Committee decision in the matter
would be subject to review by the CBOE Board of Directors on its own
motion, or could be appealed to the Board of Directors, pursuant to
CBOE Rule 19.5.
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\7\ Chapter XIX of CBOE Rules governs the process by which
persons, including members, claiming to be economically aggrieved by
Exchange action may seek a review of such a decision.
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Finally, as a matter of housekeeping, the Exchange proposes to
delete Interpretation and Policy .02 of CBOE Rule 8.89, which provided
for the application of a transfer fee on any DPM appointment transfer.
As this provision expired on June 30, 2004, continued inclusion in CBOE
Rules is unnecessary.
2. Statutory Basis
Because it believes that the proposed rule change, as amended, will
make the review process for DPM appointment transfer proposals more
efficient, the Exchange believes that the proposed rule change, as
amended, is consistent with section 6(b) of the Act,\8\ in general, and
furthers the objectives of section 6(b)(5),\9\ in particular, in that
it is designed to promote just and equitable principles of trade, to
remove impediments to and perfect the mechanism of a free and open
market, and to protect investors and the public interest.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE does not believe that the proposed rule change, as amended,
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, as amended.
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, as amended; or
(B) Institute proceedings to determine whether the proposed rule
change, as amended, 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, 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
[[Page 31241]]
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-CBOE-2006-38 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2006-38. 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 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 publicly available. All submissions should refer to File Number
SR-CBOE-2006-38 and should be submitted on or before June 22, 2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-8480 Filed 5-31-06; 8:45 am]
BILLING CODE 8010-01-P