Document ID: SEC-2006-0713-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.
Posted Date: 2006-06-01T04:00Z

[Federal Register: June 1, 2006 (Volume 71, Number 105)]
[Notices]               
[Page 31239-31241]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01jn06-118]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53869; File No. SR-CBOE-2006-38]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of Proposed Rule Change and Amendment 
No. 1 Thereto Regarding Transfer of Designated Primary Market Maker 
Appointments

May 25, 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 April 17, 2006, 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. On 
May 11, 2006, the Exchange filed Amendment No. 1 to the proposed rule 
change.\3\ The Commission is publishing this notice to solicit comments 
on the proposed rule

[[Page 31240]]

change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaced and superseded the original filing 
in its entirety. In Amendment No. 1, CBOE corrected a reference in 
the rule text and elaborated on the purpose of and rationale for the 
proposed rule change.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CBOE proposes to amend its rules relating to the transfer of 
Designated Primary Market Maker (``DPM'') appointments. The text of the 
proposed rule change, as amended, is available on CBOE's Web site 
(http://www.cboe.com), 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, CBOE included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it had received on the proposed rule change. 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 proposes to amend Exchange rules applicable to the 
transfer of DPM appointments between CBOE members, which is governed by 
CBOE Rule 8.89. Generally, any DPM proposing a sale, transfer, or 
assignment of any ownership interest or a change to the DPM's capital 
structure, voting authority, or distribution of profits or losses 
(collectively, a ``transfer proposal'') must provide the appropriate 
Exchange committee with the specifics and terms of the transfer 
proposal in a form and manner specified under CBOE Rule 8.89(c). The 
appropriate Exchange committee then will undergo a review process, 
which includes a publication of notice of the transfer proposal and a 
subsequent publication of the notice of the decision by the committee 
on the transfer proposal.\4\ Currently, the appropriate Exchange 
committee that reviews transfer proposals under CBOE Rule 8.89 is the 
Allocation Committee.
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    \4\ See CBOE Rules 8.89(d) and (e).
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    The Exchange proposes to eliminate section (f) of CBOE Rule 8.89, 
which subjects any transfer proposal decision made by the appropriate 
Exchange committee (``transfer proposal decision'') to a 10-day review 
period in which any transfer proposal decision may be directly reviewed 
by the Board of Directors upon: (1) A written application by a party 
claiming to be aggrieved \5\ by the DPM transfer decision, or (2) a 
request for review by any five Directors.
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    \5\ Under CBOE Rule 8.89, a person must be ``aggrieved'' as 
described in Chapter XIX of Exchange Rules.
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    The Exchange believes that, with the expiration of the DPM 
appointment transfer fee in June 2004 \6\ and the fact that DPM 
transfers, in general, have become more routine, the Board review 
process under CBOE Rule 8.89(f) is no longer necessary. The Exchange 
also believes that the elimination of CBOE Rule 8.89(f) will improve 
the efficiency of the Exchange's decision-making processes. Currently, 
because of the review process under CBOE Rule 8.89(f), a memo is 
forwarded to the Board of Directors after each decision regarding a 
transfer proposal is made. This requires Directors to take time to 
review each of these matters so that they can determine whether to make 
a request for review of the decision by the Board. Because transfer 
proposal decisions have become more routine, the Exchange no longer 
sees a need to have Directors devote special attention to these 
decisions or for there to be a special review process for these 
decisions that is different from the review processes and procedures 
that are generally applicable to other Exchange decisions.
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    \6\ Until it expired on June 30, 2004, Interpretation and Policy 
.02 of CBOE Rule 8.89 applied a transfer fee to certain types of DPM 
transfers.
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    Further, any member aggrieved by a decision regarding a transfer 
proposal decision could still seek a review of the decision through the 
hearing and review process provided for under Chapter XIX of CBOE's 
rules.\7\ In any such appeal proceeding under Chapter XIX, the decision 
regarding a transfer proposal by the appropriate Exchange committee 
under CBOE Rule 8.89 would be subject to review by the CBOE Appeals 
Committee. Additionally, the Appeals Committee decision in the matter 
would be subject to review by the CBOE Board of Directors on its own 
motion, or could be appealed to the Board of Directors, pursuant to 
CBOE Rule 19.5.
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    \7\ Chapter XIX of CBOE Rules governs the process by which 
persons, including members, claiming to be economically aggrieved by 
Exchange action may seek a review of such a decision.
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    Finally, as a matter of housekeeping, the Exchange proposes to 
delete Interpretation and Policy .02 of CBOE Rule 8.89, which provided 
for the application of a transfer fee on any DPM appointment transfer. 
As this provision expired on June 30, 2004, continued inclusion in CBOE 
Rules is unnecessary.
2. Statutory Basis
    Because it believes that the proposed rule change, as amended, will 
make the review process for DPM appointment transfer proposals more 
efficient, the Exchange believes that the proposed rule change, as 
amended, is consistent with section 6(b) of the Act,\8\ in general, and 
furthers the objectives of section 6(b)(5),\9\ in particular, in that 
it is 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 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, as amended, 
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

    No written comments were solicited or received with respect to the 
proposed rule change, as amended.

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 CBOE consents, the Commission will:
    (A) By order approve such proposed rule change, as amended; or
    (B) Institute proceedings to determine whether the proposed rule 
change, as amended, 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, as amended, 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

[[Page 31241]]

     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2006-38 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.
    All submissions should refer to File Number SR-CBOE-2006-38. 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 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 publicly available. All submissions should refer to File Number 
SR-CBOE-2006-38 and should be submitted on or before June 22, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-8480 Filed 5-31-06; 8:45 am]

BILLING CODE 8010-01-P