Document ID: SEC-2005-0428-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2005-12-22T05:00Z

[Federal Register: December 22, 2005 (Volume 70, Number 245)]
[Notices]               
[Page 76087-76088]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22de05-102]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52952; File No. SR-CBOE-2005-101]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of a Proposed Rule Change Relating to 
Membership Rules

December 14, 2005.
    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 November 29, 2005, 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 CBOE. 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
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to revise a CBOE membership rule that relates 
to CBOE's investigation of membership applicants. The text of the 
proposed rule change is available on CBOE's Web site (http://www.cboe.com
), at CBOE'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 proposal and discussed any 
comments it received on the proposal. The text of these statements may 
be examined at the places specified in Item IV below. 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 Exchange is proposing to revise CBOE Rule 3.9(f), which 
currently provides that the Membership Department shall 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),\3\ 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, which then forwards the 
fingerprints to the Federal Bureau of Investigation.
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    \3\ Pursuant to CBOE Rule 3.6(b), the Membership Committee 
generally investigates all persons who are listed on Form BD as a 
direct owner or executive officer of a CBOE member organization.
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    To conduct its investigation, CBOE's Membership Department 
currently accepts fingerprints from Membership Applicants in two forms: 
Electronic fingerprints that are taken at the Exchange and fingerprints 
that are taken manually on Exchange hardcopy fingerprints cards at a 
location other than the Exchange. The Exchange currently requires 
Membership Applicants to submit new fingerprints to the Exchange for 
processing pursuant to the investigation process under Rule 3.9(f) even 
if the Membership Applicant was recently fingerprinted at another self-
regulatory organization (``SRO'').
    The proposed rule change would permit the Exchange to accept the 
results of a fingerprint-based criminal records check of the Membership 
Applicant conducted by another SRO within the prior year pursuant to 
that investigation process. The Exchange believes that the proposed 
rule change will lessen the administrative burden imposed on Membership 
Applicants having to obtain fingerprints on multiple occasions within a 
relatively short time period, while still preserving the Exchange's 
ability to conduct a thorough investigation of the Membership 
Applicant.
    The Exchange notes that, in addition to a fingerprint-based 
criminal records check, a Form U-4 (Uniform Application for Securities 
Industry Registration or Transfer) is required to be submitted to the 
Exchange by Membership Applicants as part of the application process 
solely for informational purposes. Form U-4 contains disclosure 
questions that ask whether the Membership Applicant is subject to 
events that would constitute a statutory disqualification. Since the 
Exchange obtains this information as part of the application process, 
and since CBOE Rule 3.9(d) \4\ 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 Exchange believes that the Membership 
Department would still receive notice if a Membership Applicant became 
subject to a statutory disqualification subsequent to the date of the 
results of the fingerprint-based criminal records check conducted by 
another SRO.
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    \4\ CBOE Rule 3.9(d) states as follows: ``Each applicant shall 
promptly update the application materials submitted to the 
Membership Department if any of the information provided in these 
materials becomes inaccurate or incomplete after the date of 
submission of the application to the Membership Department and prior 
to any approval of the application.''
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2. Statutory Basis
    The Exchange believes that the proposed rule change improves the 
Exchange's investigation process by streamlining the fingerprinting 
portion of the process, and therefore reducing the administrative 
burdens on Membership Applicants, while still allowing for the Exchange 
to obtain the information it needs to determine whether the Exchange's 
qualification criteria under its membership rules are satisfied. 
Therefore, the Exchange believes the proposed rule change is consistent 
with the Act and the rules and regulations thereunder applicable to a 
national securities exchange and, in particular, the requirements of 
Section 6(b) of the Act.\5\ Specifically, the Exchange believes the 
proposed rule change is consistent with the Section 6(b)(5) \6\ 
requirements that the rules of an exchange be designed to promote just

[[Page 76088]]

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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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change would not 
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

    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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 rule-comments@sec.gov. Please include 

File Number SR-CBOE-2005-101 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.

All submissions should refer to File Number SR-CBOE-2005-101. 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 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-2005-101 and should be submitted on or before January 12, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
 [FR Doc. E5-7669 Filed 12-21-05; 8:45 am]

BILLING CODE 8010-01-P