Document ID: SEC-2007-1558-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2007-11-16T05:00Z

[Federal Register: November 16, 2007 (Volume 72, Number 221)]
[Notices]               
[Page 64694-64696]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16no07-163]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56774; File No. SR-CBOE-2007-114]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Order Granting Accelerated Approval 
of a Proposed Rule Change and Amendment No. 1 Thereto To List and Trade 
Options Already Listed on Another National Securities Exchange

November 8, 2007.
    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 September 21, 2007, 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 and II below, which Items have been substantially prepared by 
the Exchange. On October 26, 2007, CBOE filed Amendment No. 1 to the 
proposed rule change.\3\ This order provides notice of the proposal, as 
amended, and approves the proposal on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 supercedes the original filing and replaces 
it in its entirety.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to add new Interpretation .01(c) to CBOE Rule 
5.3 (Criteria for Underlying Securities) for the purpose of permitting 
the Exchange to list and trade individual equity options on the 
Exchange that are

[[Page 64695]]

otherwise ineligible for listing and trading if such options are listed 
and traded on another national securities exchange. The text of the 
proposed rule change is available on the Exchange's Web site (http://www.cboe.org/legal
), at CBOE's principal office 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, 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 III below. The Exchange 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to revise the Exchange's 
options listing standards so that as long as the continued listing 
criteria set forth in CBOE Rule 5.4 (Withdrawal of Approval of 
Underlying Securities) are met and the option is listed and traded on 
another national securities exchange, the Exchange would be able to 
list and trade the option. CBOE Rule 5.3 sets forth the requirements 
that an underlying equity security must meet before the Exchange may 
initially list options on that security. The Exchange notes that these 
requirements are relatively uniform among the options exchanges.
    Interpretation .01 to CBOE Rule 5.3 relates to the minimum market 
price at which an underlying security must trade for an option to be 
listed on it, and applies to the listing of individual equity options 
on both ``covered'' and ``uncovered'' underlying securities.\4\ In the 
case of an underlying security that is a ``covered security'' as 
defined under section 18(b)(1)(A) of the Securities Act, the closing 
market price of the underlying security must be at least $3.00 for the 
five previous consecutive business days preceding the date on which the 
Exchange submits a certification to The Options Clearing Corporation 
(``OCC'') for listing and trading.\5\
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    \4\ Section 18(b)(1)(A) of the Securities Act of 1933 
(``Securities Act'') provides, ``[a] security is a covered security 
if such security is--A. listed, or authorized for listing, on the 
New York Stock Exchange or the American Stock Exchange, or listed, 
or authorized for listing, on the National Market System of the 
Nasdaq Stock Market (or any successor to such entities) * * * .'' 
See 15 U.S.C. 77r(b)(1)(A).
    \5\ See Interpretation .01(b)(2)(A) of Rule 5.3. For purposes of 
this Interpretation, the market price of an underlying security is 
measured by the closing price reported in the primary market in 
which the underlying security is traded.
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    In connection with an underlying security deemed to be 
``uncovered,'' Exchange rules require that the market price per share 
of the underlying security be at least $7.50 for the majority of 
business days during the three calendar months preceding the date of 
selection, as measured by the lowest closing price reported in any 
market in which the underlying security traded on each of the subject 
days.
    CBOE Rule 5.4 sets forth the Exchange's continued listing criteria, 
which the Exchange notes are less stringent than the initial listing 
criteria contained in CBOE Rule 5.3. This is due largely because, in 
total, the Exchange's listing criteria assure that options will be 
listed and traded on securities of companies that are financially sound 
and subject to adequate minimum standards. The Exchange believes that 
the continued listing criteria are uniform among the options exchanges.
    To address the circumstance in which an options class is currently 
ineligible for listing on the Exchange, while at the same time such 
option is listed and trading on another options exchange(s), the 
Exchange proposes to amend CBOE Rule 5.3. Specifically, the Exchange 
proposes to add new paragraph (c) to Interpretation .01 to CBOE Rule 
5.3 to provide that notwithstanding that a particular underlying 
security may not meet the requirements set forth in paragraphs (a)(1), 
(a)(2), (b)(1) and (b)(2) of that Interpretation, the Exchange 
nonetheless could list and trade an option on such underlying security 
if (1) the underlying security meets the criteria for continued listing 
in CBOE Rule 5.4, and (2) options on such underlying security are 
listed and traded on at least one other registered national securities 
exchange. In connection with the proposed changes, the Exchange 
represents that the procedures currently employed to determine whether 
a particular underlying security meets the initial listing criteria 
will similarly be applied to the continued listing criteria.
    The Exchange believes that this proposal is narrowly tailored to 
address the circumstances where an options class is currently 
ineligible for listing on the Exchange while at the same time, such 
option is trading on another options exchange(s). The Exchange notes 
that when an underlying security meets the Exchange's continued listing 
criteria and at least one other exchange trades options on the 
underlying security, the option is already available to the investing 
public. Therefore, the Exchange notes that the current proposal will 
not introduce any inappropriate additional listed options classes. 
Further, the adoption of the proposal is for competitive purposes and 
to promote a free and open market for the benefit of investors.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
section 6(b) of the Act \6\ and the rules and regulations under the Act 
applicable to national securities exchanges. Specifically, the Exchange 
believes the proposed rule change is consistent with the section 
6(b)(5) \7\ requirements that the rules of an exchange be designed to 
promote just and equitable principles of trade, to prevent fraudulent 
and manipulative acts, to remove impediments to and to perfect the 
mechanism for a free and open market and a national market system, and, 
in general, to protect investors and the public interest.
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    \6\ 15 U.S.C. 78s(b).
    \7\ 15 U.S.C. 78f(b)(5).
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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 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. 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-2007-114 on the subject line.

[[Page 64696]]

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-2007-114. 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 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-2007-114 and should be 
submitted on or before December 7, 2007.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    After careful consideration, 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.\8\ In particular, the Commission finds that the proposed rule 
change is consistent with section 6(b)(5) of the Act,\9\ which requires 
that the rules of an exchange be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and, in 
general, to protect investors and the public interest. The proposal is 
narrowly tailored to address the circumstances where an equity option 
class is currently ineligible for initial listing on the Exchange even 
though it meets the Exchange's continued listing standards and is 
trading on another options exchange. Allowing CBOE to list and trade 
options on such underlying securities should help promote competition 
among the exchanges that list and trade options. The Commission notes, 
and the Exchange represents, that the procedures that the Exchange 
currently employs to determine whether a particular underlying security 
meets the initial equity option listing criteria for the Exchange will 
similarly be applied when determining whether an underlying security 
meets the Exchange's continued listing criteria.
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    \8\ In approving this rule change, the Commission notes that it 
has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Commission finds good cause, pursuant to section 19(b)(2)(B) of 
the Act,\10\ for approving the proposed rule change prior to the 30th 
day after the publication of the notice of the filing thereof in the 
Federal Register. The Commission notes that the proposed rule change is 
substantially identical to the proposed rule change submitted by the 
American Stock Exchange LLC,\11\ which was previously approved by the 
Commission after an opportunity for notice and comment, and therefore 
does not raise any new regulatory issues.
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    \10\ 15 U.S.C. 78s(b)(2)(B).
    \11\ See Securities Exchange Act Release No. 56598 (October 2, 
2007), 72 FR 57615 (October 10, 2007) (SR-Amex-2007-48). See also 
Securities Exchange Act Release Nos. 56647 (October 11, 2007), 72 FR 
58702 (October 16, 2007) (SR-ISE-2007-80) (substantially identical 
proposed rule change approved on an accelerated basis) and 56717 
(October 29, 2007), 72 FR 62508 (November 5, 2007) (SR-Phlx-2007-73) 
(substantially identical proposed rule change approved on an 
accelerated basis).
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-CBOE-2007-114), as amended, 
be, and it hereby is, approved on an accelerated basis.
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    \12\ Id.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E7-22412 Filed 11-15-07; 8:45 am]

BILLING CODE 8011-01-P