51324 Federal Register / Vol. 73, No. 170 / Tuesday, September 2, 2008 / Notices 

1 15 U.S.C. 78s(b)(1). 

2Under Section 1.1(b) of the CBOE Constitution, 

the term ‘‘member’’ includes both an individual 

member and a member organization. 

3Current Rule 3.4 provides that an organization 

that is not organized under the laws of one of the 

states of the United States must satisfy the 

following requirements in order to be a member 

organization: (i) The organization must be a 

corporation or partnership organized under the 

laws of a country other than the United States with 

respect to which an information sharing agreement, 

memorandum of understanding, or treaty is in effect 

that provides the Commission with access to 

information concerning securities trading activity in 

that country; (ii) the organization must disclose to 

the Exchange all persons associated with the 

organization and all parents of the organization, 

through all tiers of ownership, until the ultimate 

individual beneficial owners of the organization are 

disclosed; (iii) the organization must maintain in 

English and at a location in the United States (A) 

the books and records of the organization that relate 

to its business on the Exchange, including, but not 

limited to, any trading records relating to trading 

activity on the Exchange and (B) any other books 

and records of the organization that an organization 

registered as a broker or dealer pursuant to Section 

15 of the Securities Exchange Act of 1934 (‘‘Act’’) 

(15 U.S.C. 78o) is required to maintain at a location 

in the United States; (iv) the organization must 

maintain its financial records in accordance with 

United States accounting standards; (v) the 

organization must agree to permit inspections by 

the Exchange and the Commission of the foreign 

operations of the organization related to its 

securities business; (vi) the organization must waive 

any applicable secrecy laws and be exempted from 

any applicable blocking statutes in the domiciliary 

jurisdiction of the organization; (vii) the 

organization must provide to the Exchange an 

opinion of legal counsel of the domiciliary 

jurisdiction of the organization which certifies that 

(A) there are no applicable secrecy laws or blocking 

statutes in that jurisdiction or (B) that the 

organization has effectively waived any applicable 

secrecy laws or is exempted from any applicable 

blocking statutes in that jurisdiction; (viii) any 

customer of the organization that utilizes the 

organization to execute orders on the Exchange 

must have waived any applicable secrecy laws and 

be exempted from any applicable blocking statutes 

in the domiciliary jurisdiction of the organization; 

(ix) the organization must agree to submit to the 

jurisdiction of the federal courts of the United 

States and the courts of Illinois and to irrevocably 

waive, to the fullest extent permitted by law, any 

objection which the organization may have based 

on venue or forum non conveniens with respect to 

any action initiated in such courts; (x) the 

organization must appoint a process agent in 

Illinois to receive, on the behalf of the organization, 

process which may be served in any legal action or 

proceeding; (xi) the organization must own its 

Exchange membership(s); (xii) the organization 

must be registered as a broker or dealer pursuant 

to Section 15 of the Act (15 U.S.C. 78o); (xiii) the 

organization must satisfy the foregoing 

requirements in a manner and form prescribed by 

the Exchange and must satisfy such additional 

requirements that the Exchange reasonably deems 

appropriate; and (xiv) the organization must meet 

the other qualification requirements for 

membership under the Constitution and Rules 

(except that a foreign member organization that is 

approved to act solely as a lessor is not required to 

comply with items (iii)(B) and (xii) above). 

investment company under Section 

3(c)(1) or Section 3(c)(7) of the 

Investment Company Act of 1940 (the 

‘‘1940 Act’’) will continue to be exempt 

from such registration. At all times no 

Related Entity will be required to 

register as an investment company 

under the 1940 Act. 

For the SEC, by the Division of Investment 

Management, under delegated authority. 

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–20247 Filed 8–29–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58414; File No. SR–CBOE–

2008–87] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to Foreign 

Members 

August 22, 2008. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 notice is hereby given that on 

August 20, 2008, the Chicago Board 

Options Exchange, Incorporated 

(‘‘CBOE’’ or the ‘‘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. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested parties. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

CBOE proposes to adopt a new rule 

regarding foreign members in place of 

its current rule regarding qualifications 

of foreign member organizations. The 

text of the proposed rule change is 

available on the Exchange’s Web site 

(http://www.cboe.org/Legal/), at the 

Exchange’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, 

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. 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 purpose of this proposed rule 

change is to adopt a new rule regarding 

foreign members in place of CBOE’s 

current rule regarding qualifications of 

foreign member organizations. CBOE’s 

current rule regarding qualifications of 

foreign member organizations is set 

forth in CBOE Rule 3.4. The new rule 

regarding foreign members is proposed 

to be included in Rule 3.4 in place of 

the current provisions of that Rule. 

Under the new rule, a CBOE member 2

that does not maintain an office in the 

United States responsible for preparing 

and maintaining financial and other 

reports required to be filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) and the Exchange 

would be required to: (i) Prepare all 

such reports, and maintain a general 

ledger chart of account and any 

description thereof, in English and U.S. 

dollars; (ii) reimburse the Exchange for 

any expense incurred in connection 

with examination of the member to the 

extent that such expenses exceed the 

cost of examining a member located 

within the continental United States; 

and (iii) ensure the availability of an 

individual fluent in English 

knowledgeable in securities and 

financial matters to assist the 

representatives of the Exchange during 

examinations. 

The foregoing requirements would 

take the place of the current provisions 

of Rule 3.4 relating to qualifications of 

foreign member organizations.3 The 

Exchange believes that it has and will 

continue to have adequate regulatory 

jurisdiction over foreign members by 

virtue of the CBOE rule provisions that 

are generally applicable to all CBOE 

members and does not believe that the 

existing additional requirements in Rule 

3.4 for foreign member organizations are 

necessary for the effective regulation of 

those organizations. 

For example, each CBOE member 

organization is required under CBOE 

Rule 3.7(e) to execute a consent to 

jurisdiction pledging to abide by the 

Constitution and Rules of the Exchange, 

as from time to time amended, and by 

all circulars, notices, directives, or 

decisions adopted pursuant to or made 

in accordance with the Constitution and 

Rules. Similarly, direct owners and 

executive officers of each member 

organization are also required pursuant 


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Federal Register / Vol. 73, No. 170 / Tuesday, September 2, 2008 / Notices 51325 

4 15 U.S.C. 78a et seq. 

5 15 U.S.C. 78a et seq. 

6See International Securities Exchange (‘‘ISE’’) 

Rule 301(b), Boston Options Exchange (‘‘BOX’’) 

Section 2(g), NASD Rule 1090 of the Financial 

Industry Regulatory Authority (‘‘FINRA’’) Rules, 

and Chicago Stock Exchange (‘‘CHX’’) Rule 1(f). The 

proposed rule change uses the formulation of these 

rules utilized by ISE and BOX. The FINRA and CHX 

rules are equivalent to the ISE and BOX rules in this 

regard, except that the FINRA and CHX rules have 

an additional provision which requires a foreign 

member to utilize, directly or indirectly, the 

services of a broker-dealer registered with the 

Commission, a bank, or clearing agency registered 

with the Commission located in the United States 

in clearing all transactions involving members of 

FINRA or CHX, as applicable, except where both 

parties to a transaction agree otherwise. CBOE is not 

proposing to include a similar provision in Rule 3.4 

because CBOE already has rules that impose a 

similar requirement, in that all CBOE members are 

required to clear their CBOE transactions through 

a CBOE Clearing Member and through The Options 

Clearing Corporation (which is a clearing agency 

that is registered with the Commission and that is 

located in the United States). (See, e.g., CBOE Rules 

3.28 and 6.50.) 

to CBOE Rules 3.6(b) and 3.7(e) to 

execute such a consent to jurisdiction. 

In addition, CBOE Rule 3.6(a) subjects 

all associated persons of a member 

organization to the Constitution and 

Rules of the Exchange. Rule 3.6(a) also 

requires associated persons to provide 

information to the Exchange with 

respect to their relationship and 

dealings with their associated member 

organization and securities business and 

to permit the Exchange to examine their 

books and records in this regard. 

The authority of the Exchange over 

member organizations and their 

associated persons is further enlarged by 

CBOE Rule 17.1, which subjects 

members and associated persons to the 

disciplinary jurisdiction of the 

Exchange. Specifically, pursuant to Rule 

17.1, any member organization or 

person associated with a member 

organization that is alleged to have 

violated or aided and abetted a violation 

of any provision of the Act,4 the rules 

and regulations promulgated 

thereunder, any constitutional 

provision, bylaw, or rule of the 

Exchange, or any interpretation thereof 

or resolution of the CBOE Board of 

Directors regulating the conduct of 

business on the Exchange is subject to 

the disciplinary jurisdiction of the 

Exchange. 

Additionally, if there are issues of 

concern with respect to a particular 

foreign applicant for Exchange 

membership, the Exchange has broad 

authority in granting or denying 

Exchange membership and association 

with an Exchange member. In 

particular, under CBOE Rule 3.5(b), the 

Exchange may deny (or may condition) 

membership or may prevent a person 

from becoming associated (or may 

condition an association) with a 

member for the same reasons that the 

Commission may deny or revoke a 

broker-dealer registration and for those 

reasons required or allowed under the 

Act.5 The Exchange may also deny or 

condition membership or association for 

various reasons under CBOE Rule 3.5(c), 

including, among other reasons, if the 

applicant is unable to satisfactorily 

demonstrate a capacity to adhere to all 

applicable Exchange, Commission, 

Options Clearing Corporation, and 

Federal Reserve Board policies, rules, 

and regulations, including those 

concerning record-keeping, reporting, 

finance, and trading procedures. 

The Exchange believes that the 

proposed new provisions of Rule 3.4 

will further enhance this existing 

authority by helping to facilitate 

examinations of foreign members. In 

particular, the Exchange believes that it 

and its representatives will be better 

able to conduct such examinations 

because foreign members will be 

required to maintain records in English 

and U.S. dollars, to have available 

during such examinations a 

knowledgeable person who speaks 

English, and to cover the incremental 

cost of such examinations beyond what 

it would cost to conduct an examination 

within the continental United States. 

The Exchange also notes that this 

approach is consistent with the 

approach taken in this regard by various 

other self-regulatory organizations 

(‘‘SROs’’) which do not have rule 

provisions like those set forth in current 

CBOE Rule 3.4 and which instead have 

rule provisions which are substantially 

the same as the new provisions of Rule 

3.4 proposed by this rule change.6

In this era of increased 

internationalization of the securities 

markets when foreign participation in 

the U.S. securities markets has become 

more and more prevalent, the Exchange 

does not believe that its rules should 

create undue barriers to member 

participation on the Exchange by foreign 

organizations. However, the Exchange 

has found that the existing extensive 

requirements in Rule 3.4 have tended to 

either discourage foreign organizations 

from becoming members of the 

Exchange or made it more difficult for 

them to do so. The Exchange believes 

that the proposed rule change will 

enhance competition on the Exchange 

and between SROs by facilitating 

foreign member participation on the 

Exchange, which in turn will inure to 

the benefit of the securities markets, 

while at the same time maintaining 

broad regulatory authority over foreign 

members, consistent with the authority 

in this regard possessed by other SROs. 

In addition to the proposed changes to 

Rule 3.4, the Exchange is proposing to 

make conforming changes to CBOE Rule 

3.3. Rule 3.3 addresses qualifications of 

member organizations and its 

applicability is currently limited to U.S. 

organizations because current Rule 3.4 

separately addresses qualifications of 

foreign member organizations. Rule 3.3 

is proposed to be revised to eliminate all 

references that limit its current 

applicability to U.S. organizations. 

Accordingly, going forward both U.S. 

and foreign organizations would need to 

satisfy the qualification requirements 

under Rule 3.3, and in addition, foreign 

members would be required to comply 

with the new requirements of Rule 3.4 

as described above. 

2. Statutory Basis 

In light of the extensive regulatory 

authority of the Exchange over all 

Exchange members, that Exchange 

members are subject to the 

comprehensive regulation under 

Exchange rules and federal and state 

securities laws, and that the proposed 

rule change will enhance this authority 

and regulation by helping to facilitate 

the examination of foreign members, the 

Exchange believes that the proposed 

rule change is consistent with Section 

6(b) of the Act in general, and furthers 

the objectives of Sections 6(b)(2) and 

6(b)(5) in particular, by facilitating 

member participation on the Exchange 

by foreign organizations and by 

removing impediments to a free and 

open market, without diminishing the 

protection of investors and the public 

interest. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

CBOE does not believe that the 

proposed rule change will impose any 

burden on competition that is not 

necessary or appropriate in furtherance 

of 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 

Because the foregoing proposed rule 

change (i) does not significantly affect 

the protection of investors or the public 

interest; (ii) does not impose any 

significant burden on competition; and 


erowe on PROD1PC64 with NOTICES
51326 Federal Register / Vol. 73, No. 170 / Tuesday, September 2, 2008 / Notices 

7 15 U.S.C. 78s(b)(3)(A). 

8 17 CFR 240.19b–4(f)(6). 

9 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2The exact text of the DTC’s proposed rule 

change can be found at http://www.dtcc.com/legal/ 

rule_filings/dtc/2008. 

3The Commission has modified portions of the 

text of the summaries prepared by the DTC. 

4For more information on DRS, see Securities 

Exchange Act Release No. 37931 (November 7, 

1996) 61 FR 58600 (November 15, 1996) (File No. 

SR–DTC–96–15). 

(iii) by its terms, does not become 

operative for thirty days after the date of 

the filing, or such shorter time as the 

Commission may designate if consistent 

with the protection of investors and the 

public interest; provided that the selfregulatory organization has given the 

Commission 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 filing 

of the proposed rule change, or such 

shorter time as designated by the 

Commission, the proposed rule change 

has become effective pursuant to 

Section 19(b)(3)(A) of the Act 7 and Rule 

19b–4(f)(6) thereunder.8 At any time 

within sixty days of the filing of such 

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 furtherance of the purposes of the 

Act. 

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 rulecomments@sec.gov. Please include File 

Number SR–CBOE–2008–87 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–CBOE–2008–87. 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 100 F Street, NE., Washington, DC 

20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of such filing also will be 

available for inspection and copying at 

the principal office of the self-regulatory 

organization. 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–

2008–87, and should be submitted on or 

before September 23, 2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–20229 Filed 8–29–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58404; File No. SR–DTC–

2008–08] 

Self-Regulatory Organizations; The 

Depository Trust Company; Notice of 

Filing of Proposed Rule Change To 

Eliminate the Ability To Obtain a 

Physical Certificate From DTC for 

Issues That Are Eligible and 

Participating in the Direct Registration 

System 

August 21, 2008. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 notice is hereby given that on 

July 9, 2008, The Depository Trust 

Company (‘‘DTC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) proposed rule change 

No. SR–DTC–2008–08. The Commission 

is publishing this notice to solicit 

comments from interested parties on the 

proposed rule change as described in 

Items I, II, and III below, which items 

have been prepared primarily by the 

DTC.2

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

DTC is proposing to amend its 

Withdrawal-by-Transfer (‘‘WT’’) service 

to eliminate the ability of participants to 

receive physical certificates for 

securities positions withdrawn from 

participants’ accounts at DTC when the 

issue of such securities is eligible and 

participating in the Direct Registration 

System. 

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 

DTC 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. DTC has prepared 

summaries, set forth in sections (A), (B), 

and (C) below, of the most significant 

aspects of these statements.3

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Over the last four decades, securities 

ownership has evolved from investors 

holding physical certificates to evidence 

their ownership to investors having 

book-entry positions. The Direct 

Registration System (‘‘DRS’’) was 

implemented in support of an industry 

initiative to eliminate physical 

certificates in equity securities, 

paralleling the evolution of book-entry 

form of ownership in other investment 

instruments, such as mutual funds, 

treasury and government agency 

securities, municipal bonds, and 

options. DRS permits an investor to 

hold a securities position in book-entry 

form on the books of the issuer rather 

than in certificated form or indirectly 

through a financial intermediary in 

street name. DRS allows an investor to 

transfer at any time his or her DRS 

position from the issuer to a financial 

intermediary or vice versa through the 

facilities of DTC. Additionally, an 

investor holding a DRS position may 

obtain a physical certificate if the issuer 

provides for the issuance of certificates.4


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