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Joannr Moffic-Silvcr 

Executive Vio:e President 

General Counsel & 

Corporate Secretary 

Phone: J 12-781.>-741.>2 

Fax: 312-786-7919 

rnoflic}t£ choc.com 

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Via Electronic M<til 

Ms. Eileen A. Donovan 

Acting Secretary 

May 29, 2007 

COMMENT 

Received CFTC 

Records Section 

tJT/3o/o? 

Commotlity Futures Trading Commission 

Three Latayctte Centre 

11552lstStrcct N.W. 

Washington, DC 205& I 

Rc: Commodity Futures Trading Commission ("CFTC'') Notice of Proposed Order 

and Request for Comment Re~arding OCC Filing on Credit Default Products 

Dear Ms. Donovan: 

This letter is suhmi:ued by Chicago Board Options Exchange, lncorpomlctl 

(''CBOE"'), in response to the CFTC's Not-ice of Proposed Order und Request for Comment 

("Notice"), regarding certain credit delauh products to be listed by CBOE and dcarcd through 

The Options Clearing Corporation (''OCC") as securities. 1 The specific securrty pwducts to be 

listed by CDOE und cleared through OCC urc Cretlit Default Options ("COOs'') and Cn.:dit 

Default. Basket Options (' CDBOs"). 

Cl30E hns submitted rule 1ilings to the Securities ~nd Exchange Commission 

(''SEC") in CI30E s cnpacity as a national securities exchange in order to list the CDOs anJ 

CDBOs as securities on CBOE. Similar;Jy, OCC, in its capacity as a securities clearing agency, 

has submittctl rule lilings to the SEC t.o clear these products as securities through OCC. As set 

fi.lrth in the Notice, OCC has also requested CFTC approval of the rules and mle amendments 

that would enable OCC to clear the CDOs and CDllOs as securitil~S in its capacity as a securities 

clearing agency.::! 

1 See Proposal to E.xempt the Trat!ing and Ch:aring of Certain Credit Defa ult Product Traded on the Chicago Bu<ml 

Options Exchang and Clear d Through Tht: Options Clearing Corporation 72 FR 2709t (May 14, 2007). 

:! OCC is unique in that it is currently the only cl aring agency that is dually registered as au SEC -regu i;Jtl~J 

securities learing agency and a Ff -regu ~:d derivatives clearing organi2ation. Given its tlual registration 

status, OCC has submitted the rule changes relating to COOs and CDBOs to both the SE and CI-TC, even though 

the rule changes relate solely to securities products. 

40ll South LaSaih StreF>t Chicago. lllino1s 60605-1023 www.cboe com 
Ms. Eilc~n A. Donovan 

May.29, 2007 

Page 1 of 2 

Consistent w·ith CUOE s previous comment letters to the CFTC in response to 

proposals by lhc Chicago Mercantile Exchange to list certain credit default products ol' this kind. 

we believe that the CDOs and COBOs proposed to be traded by CBOE arc securities under the 

Securities Act of 1933 and the Securities Exchange Act of 1934. and arc not subject to the 

Commodity Exchange ,.\ct ("CEA''). As such. the COOs and CDBOs will be appropriately and 

fully regulated as securities by the SEC. 

Pursuant to Section 4(c) of the CEA, the CFTC can issue an exemptive order 

permitting CDOs and COBOs to trade on CBOE and be cleared by OCC as securities ,without 

reaching the issue of whether the COOs and COBOs are or nrc not subject to the CEA._~ In the 

context of these particular products and in this particular circumstance. CBOE has no objection 

to an exemptive order as proposed in the Notice since it docs not address this issue. In this 

regard we agree, recognjzing that the CFTC may issue an exemptive order without implicating 

the jur,isdictional nature of COOs and CDBOs. 

CBOE appreciates the opportunity to submit this letter. Should you require any 

further inlt1fmation, please do not hesitate to contact the undersigned. 

Sin~crdv 

9-~~M~ Joanne Moftic-Silvcr 

1 ee Notice at 72 FR 27092. " In proposing this exempt ion the CFTC n~ J not anJ Joes not- li11d that CDOs and 

CDR s are (or are not) subjL'Ct to the CE/\. During the legislative process leading to the t.'n<tctmcnt of Section 4(c l 

of the EA, the Housc,Scnatc Conference Committee noted that: The Cont(·rees do not intend that the ~\. rc.: c l l l. 

cxt·mptive authority by the Commission would require any determination beforehand that the agreement. instrument 

or transactions for which an exemption is sought is subject to the /\ct .. . " (.quotino II.R. Rep. 102-978. l9l)1 

U.S.C.C.A.N. 3179. 32 14- 15).