Document Headings

                    Document headings vary by document type but may contain                    the following:                  
                -                       the agency or agencies that issued and signed a document                    
                -                       the number of the CFR title and the number of each part                      the document amends, proposes to amend, or is directly                      related to                    
                -                       the agency docket number / agency internal file number                    
                -                       the RIN which identifies each regulatory action listed in                      the Unified Agenda of Federal Regulatory and Deregulatory                      Actions                    

                    See the                                          Document Drafting Handbook                                        for more details.                  

###### Securities and Exchange Commission

          - [Release No. 34-44385; File No. SR-CBOE-2001-17] 

                    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 5, 2001, 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. The CBOE submitted an amendment to the proposed rule change on May 22, 2001.[3]                                          The Commission is publishing this notice to solicit comments from interested persons on the proposed rule change, as amended, and to approve the proposal, as amended, on an accelerated basis.                

## I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The CBOE proposes to change the voting requirement for approval of CBOE membership applications and to clarify a notice requirement relating to the exercise of an Authorization to Sell a membership. Below is the text of the proposed rule change. New language is italicized, and deletions are bracketed.

* * * * *

## Chicago Board Options Exchange, Incorporated Rules

* * * * *

## Chapter III—Membership

* * * * *

## Application Procedures and Approval or Disapproval

#### Rule 3.9.

(a)-(j) Unchanged. 

(k) [Approval of an application requires a vote of the majority of the members of the Membership Committee then in office.] Any applicant that is approved to be a member by the Membership Committee must be approved by the Membership Committee to perform in at least one of the recognized capacities of a member as stated in Rule 3.1(b). Written notice of the action of the Membership Committee, specifying in the case of disapproval of an application the grounds therefore, shall be provided to the applicant.

* * * * *

## Sale and Transfer of Membership

#### Rule 3.14.

(a)-(c) Unchanged. 

                    (d) Authorizations to Sell. The owner of a transferable membership may voluntarily grant to another Exchange member an Authorization to Sell the membership. Authorizations to Sell shall be subject to the following provisions:                          ( print page 30969)    

(i) An Authorization to Sell shall be effective only if it has been executed on a form prescribed by the Exchange and filed with the Membership Department.

(ii) A membership owner may not grant an Authorization to Sell a particular membership to more than one member.

                    (iii) The grantee of an Authorization to Sell shall have all of the authority granted under the Constitution and Rules relating to the sale of the membership that would otherwise be vested in the membership owner, including the sole authority to determine whether and when to submit an offer to sell the membership in accordance with the provisions of paragraph (a) of this Rule. Notwithstanding the foregoing,                     *unless the following notice requirement is waived as described below,*                     a grantee of an Authorization to Sell must (A) notify the membership owner in writing at least 3 business days prior to exercising the grantee's right to sell the membership of any decision by the grantee to exercise that right and (B) provide the Membership Department with written verification in a form and manner prescribed by the Exchange that the required notice has been provided to the membership owner.                     *The membership owner may waive the foregoing notice requirement in a form and manner prescribed by the Exchange.*

* * * * *

## 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 rule change. The text of these statements may be examined at the places specified in Item III 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, the Proposed Rule Change

#### 1. Purpose

The proposed rule change would (i) change the voting requirement for approval of CBOE membership applications by CBOE's Membership Committee to the same voting requirement that applies to other CBOE committee decisions and (ii) clarify that a membership owner that grants to another member an Authorization to Sell the membership may waive the requirement that the grantee of the Authorization to Sell provide at least 3 business days notice to the membership owner prior to exercising the grantee's right to sell the membership.

With respect to the proposed voting requirement change, CBOE Rule 3.9(k) currently requires a vote of the majority of the members of CBOE's Membership Committee then in office to approve a membership application. However, CBOE Rule 2.1(b) provides that, except as provided in CBOE's Constitution, CBOE's Rules, or by resolution of CBOE's Board of Directors, the vote of a majority of the members of a committee present at a meeting at which a quorum is present will be the act of the committee. The voting requirement set forth in CBOE Rule 2.1(b) is generally applicable to other CBOE committees and even to votes of the Membership Committee regarding issues other than whether to approve a membership application. In order to make the Membership Committee voting requirement for the approval of membership applications consistent with the voting requirement for other CBOE committee decisions, the Exchange is proposing to delete the special voting requirement for membership applications currently contained in CBOE Rule 3.9(k). by virtue of this deletion, the voting requirement contained in CBOE Rule 2.1(b) would apply to the approval of membership applications. 

With respect to waiving the notice requirement that must be satisfied in order to exercise an Authorization to Sell a membership, CBOE Rule 3.14(d) currently permits an owner of a transferable membership to voluntarily grant to another member an Authorization to Sell the membership. The grantee of an Authorization to Sell is vested with all of the authority provided for under the Exchange's Constitution and Rules relating to the sale of the membership. The grantee of an Authorization to Sell also has the right upon the sale of the membership to submit claims against the membership owner pursuant to CBOE Rule 3.15(b), to be satisfied out of the proceeds of the sale of the membership, that are related to the membership owner's Exchange business activities. CBOE Rule 3.14(d)(iii) requires a grantee of an Authorization to Sell a membership (i) to notify the membership owner in writing at least 3 business days prior to exercising the grantee's right to sell the membership of any decision by the grantee to exercise that right, and (ii) to provide the Membership Department with written verification in a form and manner prescribed by the Exchange that the required notice has been provided to the membership owner. However, a membership owner may wish to waive this notice requirement if the grantee of the Authorization to Sell is exercising the grantee's right to sell the membership and the membership owner believes a higher sale price will be obtained if the membership is sold right away instead of three business days later. Because this notice requirement is for the sole benefit of the membership owner, the Exchange believes that it is fairly and reasonably implied that the membership owner may waive this notice requirement.

The Exchange is now proposing to amend CBOE Rule 3.14(d)(iii) to make explicit that the membership owner may waive the foregoing notice requirement in a form and manner prescribed by the Exchange. The Exchange believes that this codification would benefit members and would help to ensure that members are aware of the ability to waive the notice requirement.

#### 2. Statutory Basis

                    The CBOE believes the proposed rule change is consistent with Section 6(b) of the Act [4]                                          in general, and furthers the objectives of Section 6(b)(5) [5]                                          in particular, in that it is designed to remove impediments to and perfect the mechanism of a free and open market and to protect investors and the public interest by improving the Exchange's approval process for membership applicants and by clarifying the Exchange's membership rules.                

### B. Self-Regulatory Organization's Statement on Burden on Competition

The CBOE does not believe that the proposed rule change will result in 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. 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                           ( print page 30970)                        the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, D.C. 20549-0609. 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 will also be available for inspection and copying at the principal office of the CBOE. All submissions should refer to file number SR-CBOE-17 and should be submitted by June 29, 2001.                

## IV. Commission's Findings and Order Granting Accelerated Approval of Proposed Rule Change

                    After careful review, the Commission finds that the proposed rule change. as amended, is consistent with the requirements of the act and the rules and regulations thereunder applicable to a national securities exchange [6]                                          and, in particular, the requirements of Section 6(b)(5) of the Act.[7]                                          Specifically, the Commission finds that the proposed rule change will make the Exchange's approval process for membership applications consistent with the Exchange's generally applicable committee voting process. In addition, the Commission believes that clarifying that membership owners are permitted to waive the notice requirement relating to the exercise of an Authorization to Sell a membership will help ensure that members are aware of this right.                

                    The Commission finds good cause for approving the proposed rule change prior to the thirtieth day after date of publication of the notice of filing thereof in the                     **Federal Register**                     pursuant to Section 19(b)(2) of the Act.[8]                                          Accelerated approval will permit the Exchange to use its generally applicable committee voting process in approving membership applications, and will put membership owners on notice of their right to waive the notice requirement relating to Authorizations to Sell, without undue delay. Accordingly the Commission finds that it is consistent with Section 6(b)(5) of the Act [9]                                          to approve the proposal on an accelerated basis.                

*It is therefore ordered,*                     pursuant to Section 19(b)(2) of the Act,[10]                                          that the proposed rule change (SR-CBOE-2001-17), as amended, is hereby approved on an accelerated basis.                

                        For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[11] 

Margaret H. McFarland,

Deputy Secretary.

# Footnotes

1.                             15 U.S.C. 78s(b)(1).                    
        Back to Citation      

2.                             17 CFR 240.19b-4.                    
        Back to Citation      

3.                                                     *See*                         letter from Arthur B. Reinstein, Deputy General Counsel, CBOE, to Sonia Patton, Attorney, Division of Market Regulation, Commission, dated May 22, 2001 (“Amendment No. 1”). Amendment No. 1 designated the proposed rule change for submission to the Commission under Section 19(b)(2) of the Act instead of under Section 19(b)(3)(A) of the Act.                    
        Back to Citation      

4.                             15 U.S.C. 78f(b).                    
        Back to Citation      

5.                             15 U.S.C. 78f(b)(5).                    
        Back to Citation      

6.                             In approving this rule, the Commission has considered its impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).                    
        Back to Citation      

7.                             15 U.S.C. 78f(b)(5).                    
        Back to Citation      

8.                             15 U.S.C. 78s(b)(2).                    
        Back to Citation      

9.                             15 U.S.C. 78f(b)(5).                    
        Back to Citation      

10.                             15 U.S.C. 78s(b)(2).                    
        Back to Citation      

11.                                 17 CFR 200.30-3(a)(12).                        
        Back to Citation      

[FR Doc. 01-14460 Filed 6-7-01; 8:45 am]

BILLING CODE 8010-01-M