Document ID: SEC-2006-0115-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2006-01-31T05:00Z

[Federal Register: January 31, 2006 (Volume 71, Number 20)]
[Notices]               
[Page 5092-5093]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31ja06-77]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53175; File No. SR-CBOE-2005-101]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Inc.; Order Approving a Proposed Rule Change Relating to Membership 
Rules

January 25, 2006.

I. Introduction

    On November 29, 2005, the Chicago Board Options Exchange, 
Incorporated (``CBOE'' or ``Exchange'') filed with the Securities and 
Exchange Commission (``Commission'' or ``SEC''), pursuant to Section 
19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 
19b-4 thereunder,\2\ a proposed rule change seeking to modify CBOE Rule 
3.9, relating to investigation of membership applicants.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The proposed rule change was published in the Federal Register on 
December 22, 2005.\3\ The Commission received no comments on the 
proposed rule change. On January 23, 2006, the Exchange submitted 
Amendment No. 1 to the proposed rule change.\4\ This order approves the 
proposed rule change, as amended by Amendment No 1.

II. Description

    The Exchange is proposing to amend CBOE Rule 3.9 (``Application 
Procedures and Approval or Disapproval'') subsection (f), which 
currently requires CBOE's Membership Department to investigate each 
applicant applying to be a member organization, each associated person 
required to be approved by the Membership Committee pursuant to CBOE 
Rule 3.6(b), and each applicant applying to be an individual member 
(collectively ``Membership Applicants''). As part of the current 
application process, Membership Applicants are required to submit 
fingerprints to the Exchange,\5\ which CBOE then forwards to the 
Federal Bureau of Investigation.
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    \3\ See Securities Exchange Act Release No. 52952 (December 14, 
2005), 70 FR 76087.
    \4\ In Amendment No. 1, the Exchange proposed an additional 
modification to CBOE Rule 3.9(f). Specifically, the Exchange 
proposed a change so that, as amended, the proposed rule would 
permit the Exchange to rely on the results of a fingerprint-based 
criminal records check of an applicant conducted by the Exchange 
itself, in addition to a check conducted by another self-regulatory 
organization (``SRO''), within the prior year. Amendment No. 1 is a 
technical amendment and therefore not subject to notice and comment.
    \5\ See CBOE Rule 3.7(c).
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    The Exchange currently requires Membership Applicants to submit new 
fingerprints to the Exchange for processing, as part of the 
investigation process pursuant to CBOE Rule 3.9(f), even if the 
Membership Applicant was recently fingerprinted at the Exchange or 
another SRO. The proposed rule change would change this requirement to 
permit the Exchange to accept the results of a fingerprint-based 
criminal records check of the Membership Applicant conducted by the 
Exchange or another SRO within the prior year pursuant to that 
investigation process.

III. Discussion

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\6\ 
In particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act \7\ which requires, among 
other things, that the rules of an exchange be 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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    \6\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(5).
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    In approving this proposed rule change, the Commission notes that 
as part of the application process, in addition to a fingerprint-based 
criminal records check, CBOE requires that a Membership Applicant also 
submit a Form U-4 (Uniform Application for Securities Industry 
Registration or Transfer). Form U-4 requires disclosure of events that 
would constitute a statutory disqualification under the Act. Because 
the Exchange obtains this information as part of the application 
process, and because CBOE Rule 3.9(d) requires Membership Applicants to 
promptly update membership application materials if the information 
provided in the materials becomes inaccurate or incomplete after the 
date of submission, the Commission believes that it is reasonable for 
the Exchange to expect that its Membership Department would have access 
to information that would reveal whether a Membership Applicant became 
subject to a statutory disqualification subsequent to the date of the 
results of a fingerprint-based criminal records check conducted either 
by the Exchange or by another SRO on which CBOE would be relying.

IV. Conclusion

    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulations thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-CBOE-2005-101) is approved, 
as amended.
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    \8\ 15 U.S.C. 78s(b)(2).

[[Page 5093]]

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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
Nancy M. Morris,
Secretary.
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    \9\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E6-1163 Filed 1-30-06; 8:45 am]

BILLING CODE 8010-01-P