Document ID: SEC-2006-0212-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2006-02-16T05:00Z

[Federal Register: February 16, 2006 (Volume 71, Number 32)]
[Notices]               
[Page 8324-8326]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16fe06-95]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53260; File No. SR-CBOE-2006-04]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Amend CBOE Membership Rules Relating to Membership Sale 
Process

February 9, 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 January 9, 2006, the Chicago Board Options Exchange, Incorporated 
(``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
The Exchange filed the proposal as a ``non-controversial'' proposed 
rule change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and 
Rule 19b-4(f)(6) thereunder,\4\ which renders it effective upon filing 
with the Commission.\5\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ The CBOE provided the Commission with written notice of its 
intent to file the proposed rule change on December 7, 2005. CBOE 
asked the Commission to waive the 30-day operative delay. See 
Section 19(b)(3)(A) of the Act, and Rule 19b-4(f)(6)(iii) 
thereunder. 15 U.S.C. 78s(b)(1), 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CBOE proposes to revise Exchange membership rules related to the 
membership sale process. The text of the proposed rule change is 
available on CBOE's Web site, http://www.cboe.com, at CBOE's principal 

office, and at the Commission's Public Reference Room.

[[Page 8325]]

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 Exchange 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 Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant parts 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 is revising CBOE Rules 3.13(b) and 3.14(a) to 
implement new provisions that would take effect in the event of a 
``crossed'' membership market. Specifically, the proposed rule change 
would provide that (i) when a bid is submitted that exceeds the best 
offer posted on the Exchange, a seat sale transaction will occur at the 
best offer posted on the Exchange, and (ii) when an offer is submitted 
that is less than the best bid posted on the Exchange, a seat sale 
transaction will occur at the best bid posted on the Exchange. For 
example, if the seat market is a $500,000 bid and a $525,000 offer, and 
subsequently a properly submitted bid is received by the CBOE 
Membership Department for $530,000, a seat sale transaction will occur 
at the posted offer of $525,000. Likewise, if the seat market is a 
$500,000 bid and a $525,000 offer, and thereafter a properly submitted 
offer is received by the CBOE Membership Department for $495,000, a 
seat sale transaction will occur at the posted bid of $500,000. The 
Exchange expects this rule would be used rarely since the Exchange 
provides prompt updates of all properly submitted bids and offers on 
the Exchange Bulletin Board, the Exchange ``seat market'' telephone 
hotline, and the Exchange's Web site. However, it is possible for a bid 
or offer to be submitted that ``crosses'' the current membership 
market. Current CBOE Rules 3.13 and 3.14 only explicitly address what 
occurs in the event that the bid and offer are matched with the same 
price. The Exchange believes that this rule filing will improve those 
rules by explicitly addressing what shall occur when a bid is submitted 
that exceeds the best offer or an offer is submitted that is less than 
the best bid.
    The proposed rule change also makes clear that bids and offers must 
be submitted in writing during seat market hours.\6\ The purpose of 
this proposed rule change is to ensure that all bids and offers are 
received by the Membership Department and processed in an orderly 
manner. The Exchange will issue an information circular to the 
Exchange's membership to inform them of the hours that will constitute 
seat market hours.
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    \6\ Seat market hours, as specified on the forms for submitting 
a bid or offer for membership purchase, are currently 7 a.m. to 4 
p.m. Central time.
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    The Exchange notes that the proposed rule change was reviewed and 
endorsed by the Exchange's Membership Committee, which is comprised of 
a cross-section of Exchange members and representatives of member 
organizations.
2. Statutory Basis
    The Exchange states that the proposed rule change is designed to 
improve the operation of the CBOE seat market thereby benefiting both 
the Exchange and its members. Therefore, the Exchange believes that the 
proposed rule change is consistent with the requirements of Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Section 
6(b)(5),\8\ in particular, in that it is designed to promote just and 
equitable principles of trade, to prevent fraudulent and manipulative 
acts and, in general, to protect investors and the public interest.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change 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

    The Exchange neither solicited nor received comments on the 
proposal.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing rule does not (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest, provided that the Exchange has given the 
Commission written notice of its intent to file 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,\9\ the proposed rule change has become effective pursuant 
to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) 
thereunder.\11\
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    \9\ As required under Rule 19b-4(f)(6)(iii) under the Act, the 
Exchange provided the Commission with written notice of its intent 
to file the proposed rule change at least five business days prior 
to the date of filing of the proposal.
    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) under the Act 
\12\ normally may not become operative prior to 30 days after the date 
of filing. However, Rule 19b-4(f)(6)(iii) \13\ permits the Commission 
to designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The CBOE has requested 
that the Commission waive the 30-day operative delay, which would make 
the rule change operative immediately. The Commission believes that 
such waiver is consistent with the protection of investors and the 
public interest, for it will allow the CBOE to clarify CBOE Rules 3.13 
and 3.14 to address what shall occur with respect to trading in CBOE 
memberships in the event of a ``crossed'' membership market. In 
addition, the proposed rule change clarifies that bids and offers for 
CBOE memberships must be submitted in writing during CBOE's seat market 
hours. For these reasons, the Commission designates that the proposal 
become operative immediately.\14\
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    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ For purposes only of waiving the 30-day pre-operative 
period, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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    At any time within 60 days of the filing of the 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.\15\
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    \15\ See 15 U.S.C. 78s(b)(3)(C).
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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:

[[Page 8326]]

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File Number SR-CBOE-2006-04 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2006-04. 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 the filing 
also will be available for inspection and copying at the principal 
office of the 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 available publicly. All submissions should refer to File Number 
SR-CBOE-2006-04 and should be submitted on or before March 9, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
 [FR Doc. E6-2201 Filed 2-15-06; 8:45 am]

BILLING CODE 8010-01-P