Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change and Amendment Nos. 1, 2, and 3 Thereto by the Chicago Board Options Exchange, Incorporated Relating to Back-up Trading Arrangements, 19812-19820 [E5-1758]

Download as PDF 19812 Federal Register / Vol. 70, No. 71 / Thursday, April 14, 2005 / Notices fee waivers and expense reimbursements) and subaccount expenses for the fiscal year preceding the date of the proposed substitution. In addition, for twenty-four months following the proposed substitutions, John Hancock and JHVLICO will not increase asset-based fees or charges for Contracts outstanding on the date of the proposed substitutions. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Margaret H. McFarland, Deputy Secretary. [FR Doc. 05–7496 Filed 4–11–05; 12:35 pm] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. IC–26831A; File No. 812– 13129] John Hancock Life Insurance Company, et al. April 12, 2005. Securities and Exchange Commission. ACTION: This is to amend and restate the ‘‘Hearing of Notification’’ section in a notice issued April 11, 2005 on an application authorizing the substitution of shares of certain series of John Hancock Trust for shares of certain series of various registered investment companies under Section 26(c) of the Investment Company Act of 1940 (Investment Company Act Release No. 26831). AGENCY: The amended and restated ‘‘Hearing of Notification’’ section now reads as follows: Hearing of Notification: An order granting the application will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Secretary of the Commission and serving Applicants with a copy of the request personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on April 28, 2005 and should be accompanied by proof of service on Applicants, in the form of an affidavit or for lawyers a certificate of service. Hearing requests should state the nature of the writer’s interest, the reason for the request and the issues contested. Persons may request notification of a hearing by writing to the Secretary of the Commission. For the Commission, by the Division of Investment Management, under delegated authority. Jonathan G. Katz, Secretary. [FR Doc. 05–7602 Filed 4–12–05; 3:34 pm] BILLING CODE 8010–01–P VerDate jul<14>2003 19:36 Apr 13, 2005 Jkt 205001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–51510; File No. SR–CBOE– 2004–59] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change and Amendment Nos. 1, 2, and 3 Thereto by the Chicago Board Options Exchange, Incorporated Relating to Back-up Trading Arrangements April 8, 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 August 27, 2004, 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 the Exchange. On October 21, 2004, the Exchange amended its proposal.3 On October 26, 2004, the Exchange further amended its proposal.4 On March 23, 2005, the Exchange submitted a third amendment.5 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is filing with the Commission proposed new rules that will facilitate the CBOE entering into arrangements with one or more other exchanges that would provide back-up trading facilities for CBOE listed options at another exchange if CBOE’s facility becomes disabled and trading is prevented for an extended period of time, and similarly provide trading facilities at CBOE for another exchange U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See letter from Jaime Galvan, Attorney, CBOE, to Nancy Sanow, Assistant Director, Division of Market Regulation (‘‘Division’’), Commission, dated October 20, 2004 (‘‘Amendment No. 1’’). In Amendment No. 1, the Exchange modified the text of proposed CBOE Rule 6.16 and made certain other clarifying changes to the original submission. Amendment No. 1 replaced CBOE’s original filing in its entirety. 4 See letter from Jaime Galvan, Attorney, CBOE, to Brian Trackman, Special Counsel, Division, Commission, dated October 25, 2004 (‘‘Amendment No. 2’’). In Amendment No. 2, the Exchange corrected typographical errors in the proposed rule text. 5 See Amendment No. 3, dated March 23, 2005 (‘‘Amendment No. 3’’) In Amendment No. 3, the Exchange modified portions of the proposed rule text and corresponding sections of the Form 19b– 4 describing the rule proposal. Amendment No. 3 replaces CBOE’s previously amended filing in its entirety. PO 00000 1 15 2 17 Frm 00086 Fmt 4703 Sfmt 4703 to trade its listed options if that exchange’s facility becomes disabled. The Exchange also proposes to adopt a rule addressing general Exchange procedures under emergency conditions and to eliminate a rule adopted following the events of September 11, 2001. Additionally, the Exchange has submitted a corresponding back-up trading agreement between itself and the Philadelphia Stock Exchange as Exhibit B to its Form 19b–4 filing. This back-up trading agreement is available for viewing on the Commission’s Web site, https://www.sec.gov/rules/sro.shtml, and at the Exchange and the Commission.6 The text of the proposed rule change, as amended, is set forth below. Proposed new language is in italics; proposed deletions are in [brackets]. * * * * * Chicago Board Options Exchange, Inc. Rules * * * * * CHAPTER III MEMBERSHIP Temporary Access Rule 3.22 [Until emergency conditions in the aftermath of the terrorist on New York City on September 11, 2001 cease, the Exchange may permit a person or organization to conduct business on the Exchange provided that the person or organization (i) is a member in good standing of the American Stock Exchange ‘‘AMEX’’, (ii) is not subject to a statutory disqualification under the Exchange Act, and (iii) is not subject to an investigation conducted by any selfregulatory organization under the Exchange Act that may involve the fitness for membership on the Exchange of that person or organization. Any such person or organization granted temporary access to conduct business on the Exchange ‘‘TPO’’ shall only be permitted (i) to act in those Exchange capacities that are authorized by the Exchange and that are comparable to capacities which TPO has been authorized to act on the AMEX and (ii) to trade in those securities in which the TPO is authorized to trade on the AMEX. Each TPO shall be subject to, and obligated to comply with, the rules of the Exchange that are applicable to exchange members, but shall have none of the rights of a member of the Exchange except the right to conduct business on the Exchange to the extent 6 See infra note 10. The Commission notes that the text of the back-up trading agreement that appears on the Commission’s Web site was filed as part of Amendment No. 3. E:\FR\FM\14APN1.SGM 14APN1 Federal Register / Vol. 70, No. 71 / Thursday, April 14, 2005 / Notices permitted by this Rule. In the event that an individual TPO is associated with an organization, the TPO shall provide to the Exchange, in a form and manner prescribed by the Exchange, an agreement by the organization to be responsible for all obligations arising out of that person’s activities on or relating to the Exchange.] Reserved. * * * * * CHAPTER VI DOING BUSINESS ON THE EXCHANGE TRADING FLOOR * * * * * Section A: General Back-up Trading Arrangements Rule 6.16 (a) CBOE is Disabled Exchange. (1) CBOE Exclusively Listed Options. A. For purposes of this Rule 6.16, the term ‘‘exclusively listed option’’ means an option that is listed exclusively by an exchange (because the exchange has an exclusive license to use, or has proprietary rights in, the interest underlying the option). B. The Exchange (‘‘CBOE’’) may enter into arrangements with one or more other exchanges (each a ‘‘Back-up Exchange’’) to permit CBOE and its members to use a portion of the Backup Exchange’s facilities to conduct the trading of some or all of CBOE’s exclusively listed options in the event that the functions of CBOE are severely and adversely affected by an emergency or extraordinary circumstances (a ‘‘Disabling Event’’). Such option classes shall trade as listings of CBOE. The facility of the Back-up Exchange used by CBOE for this purpose will be deemed to be a facility of CBOE. C. Trading of CBOE exclusively listed options on CBOE’s facility at the Backup Exchange shall be conducted in accordance with the rules of the Backup Exchange, except that (i) such trading shall be subject to CBOE rules with respect to doing business with the public, margin requirements, net capital requirements, listing requirements and position limits, (ii) CBOE members that are trading on CBOE’s facility at the Back-up Exchange (not including members of the Back-up Exchange who become temporary members of CBOE pursuant to paragraph (a)(1)(F)) will be subject to CBOE rules governing or applying to the maintenance of a person’s or a firm’s status as a member of CBOE, and (iii) CBOE Rule 8.87.01 may be utilized to establish a lower DPM participation rate applicable to trading on CBOE’s facility on the Backup Exchange than the rate that is VerDate jul<14>2003 19:36 Apr 13, 2005 Jkt 205001 applicable under the rules of the Backup Exchange if agreed to by CBOE and the Back-up Exchange. In addition, CBOE and the Back-up Exchange may agree that other CBOE rules will apply to such trading. CBOE and the Back-up Exchange have agreed to communicate to their respective members which rules apply in advance of trading. The Backup Exchange rules that govern trading on CBOE’s facility at the Back-up Exchange shall be deemed to be CBOE rules for purposes of such trading. D. The Back-up Exchange has agreed to perform the related regulatory functions with respect to trading of CBOE exclusively listed options on CBOE’s facility at the Back-up Exchange, in each case except as CBOE and the Back-up Exchange may specifically agree otherwise. The Backup Exchange and CBOE have agreed to coordinate with each other regarding surveillance and enforcement respecting trading of CBOE exclusively listed options on CBOE’s facility at the Backup Exchange. CBOE shall retain the ultimate legal responsibility for the performance of its self-regulatory obligations with respect to CBOE’s facility at the Back-up Exchange. E. CBOE shall have the right to designate its members that will be authorized to trade CBOE exclusively listed options on CBOE’s facility at the Back-up Exchange and, if applicable, its member(s) that will be an LMM or DPM in those options. If the Back-up Exchange is unable to accommodate all CBOE members that desire to trade on CBOE’s facility at the Back-up Exchange, CBOE may determine which members shall be eligible to trade at that facility. Factors to be considered in making such determinations may include, but are not limited to, any one or more of the following: Whether the member is a DPM or LMM in the applicable product(s), the number of contracts traded by the member in the applicable product(s), market performance, and other factors relating to a member’s contribution to the market in the applicable product(s). F. Members of the Back-up Exchange shall not be authorized to trade in any CBOE exclusively listed options, except that (i) CBOE may deputize willing floor brokers of the Back-up Exchange as temporary CBOE members to permit them to execute orders as brokers in CBOE exclusively listed options traded on CBOE’s facility at the Back-up Exchange, and (ii) the Back-up Exchange has agreed that it will, at the instruction of CBOE, select members of the Back-up Exchange that are willing to be deputized by CBOE as temporary CBOE members authorized to trade PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 19813 CBOE exclusively listed options on CBOE’s facility at the Back-up Exchange for such period of time following a Disabling Event as CBOE determines to be appropriate, and CBOE may deputize such members of the Back-up Exchange as temporary CBOE members for that purpose. (2) CBOE Singly Listed Options. A. For purposes of this Rule 6.16, the term ‘‘singly listed option’’ means an option that is not an ‘‘exclusively listed option’’ but that is listed by an exchange and not by any other national securities exchange. B. CBOE may enter into arrangements with a Back-up Exchange under which the Back-up Exchange will agree, in the event of a Disabling Event, to list for trading singly listed option classes that are then singly listed only by CBOE and not by the Back-up Exchange. Any such option classes listed by the Back-up Exchange shall trade on the Back-up Exchange and in accordance with the rules of the Back-up Exchange. Such option classes shall be traded by members of the Back-up Exchange and by CBOE members selected by CBOE to the extent the Back-up Exchange can accommodate CBOE members in the capacity of temporary members of the Back-up Exchange. If the Back-up Exchange is unable to accommodate all CBOE members that desire to trade singly listed options at the Back-up Exchange, CBOE may determine which members shall be eligible to trade such options at the Back-up Exchange. Factors to be considered in making such determinations may include, but are not limited to, any one or more of the following: Whether the member is a DPM or LMM in the applicable product(s), the number of contracts traded by the member in the applicable product(s), market performance, and other factors relating to a member’s contribution to the market in the applicable product(s). C. Any options class listed by the Back-up Exchange pursuant to paragraph (a)(2)(B) that does not satisfy the standard listing and maintenance criteria of the Back-up Exchange will be subject, upon listing by the Back-up Exchange, to delisting (and, thus, restrictions on opening new series, and engaging in opening transactions in those series with open interest, as may be provided in the rules of the Backup Exchange). (3) Multiply Listed Options. CBOE may enter into arrangements with a Back-up Exchange to permit CBOE members to conduct trading on a Back-up Exchange of some or all of CBOE’s multiply listed options in the event of a Disabling Event. Such options E:\FR\FM\14APN1.SGM 14APN1 19814 Federal Register / Vol. 70, No. 71 / Thursday, April 14, 2005 / Notices shall trade as a listing of the Back-up Exchange and in accordance with the rules of the Back-up Exchange. Such options shall be traded by members of the Back-up Exchange and by CBOE members selected by CBOE to the extent the Back-up Exchange can accommodate CBOE members in the capacity of temporary members of the Back-up Exchange. If the Back-up Exchange is unable to accommodate all CBOE members that desire to trade multiply listed options at the Back-up Exchange, CBOE may determine which members shall be eligible to trade such options at the Back-up Exchange. Factors to be considered in making such determinations may include, but are not limited to, any one or more of the following: Whether the member is a DPM or LMM in the applicable product(s), the number of contracts traded by the member in the applicable product(s), market performance, and other factors relating to a member’s contribution to the market in the applicable product(s). (b) CBOE is Back-up Exchange. (1) Disabled Exchange Exclusively Listed Options. A. CBOE may enter into arrangements with one or more other exchanges (each a ‘‘Disabled Exchange’’) to permit the Disabled Exchange and its members to use a portion of CBOE’s facilities to conduct the trading of some or all of the Disabled Exchange’s exclusively listed options in the event of a Disabling Event. Such option classes shall trade as listings of the Disabled Exchange. The facility of CBOE used by the Disabled Exchange for this purpose will be deemed to be a facility of the Disabled Exchange. B. Trading of the Disabled Exchange’s exclusively listed options on the Disabled Exchange’s facility at CBOE shall be conducted in accordance with CBOE rules, except that (i) such trading shall be subject to the Disabled Exchange’s rules with respect to doing business with the public, margin requirements, net capital requirements, listing requirements and position limits, and (ii) members of the Disabled Exchange that are trading on the Disabled Exchange’s facility at CBOE (not including CBOE members who become temporary members of the Disabled Exchange pursuant to paragraph (b)(1)(D)) will be subject to the rules of the Disabled Exchange governing or applying to the maintenance of a person’s or a firm’s status as a member of the Disabled Exchange. In addition, the Disabled Exchange and CBOE may agree that other Disabled Exchange rules will apply to such trading. The Disabled VerDate jul<14>2003 19:36 Apr 13, 2005 Jkt 205001 Exchange and CBOE have agreed to communicate to their respective members which rules apply in advance of trading. C. CBOE will perform the related regulatory functions with respect to trading of the Disabled Exchange’s exclusively listed options on the Disabled Exchange’s facility at CBOE, in each case except as the Disabled Exchange and CBOE may specifically agree otherwise. CBOE and the Disabled Exchange have agreed to coordinate with each other regarding surveillance and enforcement respecting trading of the Disabled Exchange’s exclusively listed options on the Disabled Exchange’s facility at CBOE. The Disabled Exchange has agreed that it shall retain the ultimate legal responsibility for the performance of its self-regulatory obligations with respect to the Disabled Exchange’s facility at CBOE. D. CBOE members shall not be authorized to trade in any exclusively listed options of the Disabled Exchange, except (i) that the Disabled Exchange may deputize willing CBOE floor brokers as temporary members of the Disabled Exchange to permit them to execute orders as brokers in exclusively listed options of the Disabled Exchange traded on the facility of the Disabled Exchange at CBOE, and (ii) at the instruction of the Disabled Exchange, CBOE shall select CBOE members that are willing to be deputized by the Disabled Exchange as temporary members of the Disabled Exchange authorized to trade the Disabled Exchange’s exclusively listed options on the facility of the Disabled Exchange at CBOE for such period of time following a Disabling Event as the Disabled Exchange determines to be appropriate, and the Disabled Exchange may deputize such CBOE members as temporary members of the Disabled Exchange for that purpose. (2) Disabled Exchange Singly Listed Options. A. CBOE may enter into arrangements with a Disabled Exchange under which CBOE will agree, in the event of a Disabling Event, to list for trading singly listed option classes that are then singly listed only by the Disabled Exchange and not by CBOE. Any such option classes listed by CBOE shall trade on CBOE and in accordance with CBOE rules. Such option classes shall be traded by CBOE members and by members of the Disabled Exchange selected by the Disabled Exchange to the extent CBOE can accommodate members of the Disabled Exchange in the capacity of temporary members of CBOE. CBOE may allocate such option PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 classes to a CBOE DPM in advance of a Disabling Event, without utilizing the allocation process under CBOE Rule 8.95, to enable CBOE to quickly list such option classes upon the occurrence of a Disabling Event. B. Any options class listed by CBOE pursuant to paragraph (b)(2)(A) that does not satisfy the listing and maintenance criteria under CBOE rules will be subject, upon listing by CBOE, to delisting (and, thus, restrictions on opening new series, and engaging in opening transactions in those series with open interest, as may be provided in CBOE rules). (3) Multiply Listed Options. CBOE may enter into arrangements with a Disabled Exchange to permit the Disabled Exchange’s members to conduct trading on CBOE of some or all of the Disabled Exchange’s multiply listed options in the event of a Disabling Event. Such options shall trade as a listing of CBOE and in accordance with CBOE rules. Such options shall be traded by CBOE members and by members of the Disabled Exchange to the extent CBOE can accommodate members of the Disabled Exchange in the capacity of temporary members of CBOE. (c) Member Obligations. (1) Temporary Members of the Disabled Exchange A. A CBOE member acting in the capacity of a temporary member of the Disabled Exchange pursuant to paragraph (b)(1)(D) shall be subject to, and obligated to comply with, the rules that govern the operation of the facility of the Disabled Exchange at CBOE, including the rules of the Disabled Exchange to the extent applicable during the period of such trading. Additionally, (i) such CBOE member shall be deemed to have satisfied, and the Disabled Exchange has agreed to waive specific compliance with, rules governing or applying to the maintenance of a person’s or a firm’s status as a member of the Disabled Exchange, including all dues, fees and charges imposed generally upon members of the Disabled Exchange based on their status as such, (ii) such CBOE member shall have none of the rights of a member of the Disabled Exchange except the right to conduct business on the facility of the Disabled Exchange at CBOE to the extent described in this Rule, (iii) the member organization associated with such CBOE member, if any, shall be responsible for all obligations arising out of that CBOE member’s activities on or relating to the Disabled Exchange, and (iv) the Clearing Member of such CBOE member shall guarantee and clear the E:\FR\FM\14APN1.SGM 14APN1 Federal Register / Vol. 70, No. 71 / Thursday, April 14, 2005 / Notices transactions of such CBOE member on the Disabled Exchange. B. A member of a Back-up Exchange acting in the capacity of a temporary member of CBOE pursuant to paragraph (a)(1)(F) shall be subject to, and obligated to comply with, the rules that govern the operation of the facility of CBOE at the Back-up Exchange, including CBOE rules to the extent applicable during the period of such trading. Additionally, (i) such temporary member shall be deemed to have satisfied, and CBOE will waive specific compliance with, rules governing or applying to the maintenance of a person’s or a firm’s status as a member of CBOE, including all dues, fees and charges imposed generally upon CBOE members based on their status as such, (ii) such temporary member shall have none of the rights of a CBOE member except the right to conduct business on the facility of CBOE at the Back-up Exchange to the extent described in this Rule, (iii) the member organization associated with such temporary member, if any, shall be responsible for all obligations arising out of that temporary member’s activities on or relating to CBOE, and (iv) the Clearing Member of such temporary member shall guarantee and clear the transactions on CBOE of such temporary member. (2) Temporary Members of the Backup Exchange A. A CBOE member acting in the capacity of a temporary member of the Back-up Exchange pursuant to paragraphs (a)(2)(B) or (a)(3) shall be subject to, and obligated to comply with, the rules of the Back-up Exchange that are applicable to the Back-up Exchange’s own members. Additionally, (i) such CBOE member shall be deemed to have satisfied, and the Back-up Exchange has agreed to waive specific compliance with, rules governing or applying to the maintenance of a person’s or a firm’s status as a member of the Back-up Exchange, including all dues, fees and charges imposed generally upon members of the Back-up Exchange based on their status as such, (ii) such CBOE member shall have none of the rights of a member of the Backup Exchange except the right to conduct business on the Back-up Exchange to the extent described in this Rule, (iii) the member organization associated with such CBOE member, if any, shall be responsible for all obligations arising out of that CBOE member’s activities on or relating to the Back-up Exchange, (iv) the Clearing Member of such CBOE member shall guarantee and clear the transactions of such CBOE member on the Back-up Exchange, and (v) such VerDate jul<14>2003 19:36 Apr 13, 2005 Jkt 205001 CBOE member shall only be permitted (x) to act in those capacities on the Back-up Exchange that are authorized by the Back-up Exchange and that are comparable to capacities in which the CBOE member has been authorized to act on CBOE, and (y) to trade in those option classes in which the CBOE member is authorized to trade on CBOE. B. A member of a Disabled Exchange acting in the capacity of a temporary member of CBOE pursuant to paragraphs (b)(2)(A) or (b)(3) shall be subject to, and obligated to comply with, CBOE rules that are applicable to CBOE’s own members. Additionally, (i) such temporary member shall be deemed to have satisfied, and CBOE will waive specific compliance with, rules governing or applying to the maintenance of a person’s or a firm’s status as a member of CBOE, including all dues, fees and charges imposed generally upon CBOE members based on their status as such, (ii) such temporary member shall have none of the rights of a CBOE member except the right to conduct business on CBOE to the extent described in this Rule, (iii) the member organization associated with such temporary member, if any, shall be responsible for all obligations arising out of that temporary member’s activities on or relating to CBOE, (iv) the Clearing Member of such temporary member shall guarantee and clear the transactions of such temporary member on the CBOE, and (v) such temporary member shall only be permitted (x) to act in those CBOE capacities that are authorized by CBOE and that are comparable to capacities in which the temporary member has been authorized to act on the Disabled Exchange, and (y) to trade in those option classes in which the temporary member is authorized to trade on the Disabled Exchange. (d) Member Proceedings. (1) If CBOE initiates an enforcement proceeding with respect to the trading during a back-up period of the singly or multiply listed options of the Disabled Exchange by a temporary member of CBOE or the exclusively listed options of the Disabled Exchange by a member of the Disabled Exchange (other than a CBOE member who is a temporary member of the Disabled Exchange), and such proceeding is in process upon the conclusion of the back-up period, CBOE may transfer responsibility for such proceeding to the Disabled Exchange following the conclusion of the back-up period. Arbitration of any disputes with respect to any trading during a back-up period of singly or multiply listed options of the Disabled Exchange or of exclusively listed options of the Disabled Exchange on the Disabled PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 19815 Exchange’s facility at CBOE will be conducted in accordance with CBOE rules, unless the parties to an arbitration agree that it shall be conducted in accordance with the rules of the Disabled Exchange. (2) If the Back-up Exchange initiates an enforcement proceeding with respect to the trading during a back-up period of CBOE singly or multiply listed options by a temporary member of the Back-up Exchange or CBOE exclusively listed options by a CBOE member (other than a member of the Back-up Exchange who is a temporary member of CBOE), and such proceeding is in process upon the conclusion of the back-up period, the Back-up Exchange may transfer responsibility for such proceeding to CBOE following the conclusion of the back-up period. Arbitration of any disputes with respect to any trading during a back-up period of CBOE singly or multiply listed options on the Backup Exchange or of CBOE exclusively listed options on the facility of CBOE at the Disabled Exchange will be conducted in accordance with the rules of the Back-up Exchange, unless the parties to an arbitration agree that it shall be conducted in accordance with CBOE rules. (e) Member Preparations. CBOE members are required to take appropriate actions as instructed by CBOE to accommodate CBOE’s back-up trading arrangements with other exchanges and CBOE’s own back-up trading arrangements. * * * Interpretations and Policies: .01 This Rule 6.16 reflects back-up trading arrangements that CBOE has entered into or may enter into with one or more other exchanges. To the extent that this Rule provides that another exchange will take certain action, the Rule is reflecting what that exchange has agreed to do by contractual agreement with CBOE, but the Rule itself is not binding upon the other exchange. * * * * * Authority to Take Action Under Emergency Conditions Rule 6.17 The Chairman of the Board, the President or such other person or persons as may be designated by the Board shall have the power to halt or suspend trading in some or all securities traded on the Exchange, to close some or all Exchange facilities, to determine the duration of any such halt, suspension or closing, to take one or more of the actions permitted to be taken by any person or body of the Exchange under Exchange rules, or to E:\FR\FM\14APN1.SGM 14APN1 19816 Federal Register / Vol. 70, No. 71 / Thursday, April 14, 2005 / Notices take any other action deemed to be necessary or appropriate for the maintenance of a fair and orderly market or the protection of investors, or otherwise in the public interest, due to emergency conditions or extraordinary circumstances, such as (1) actual or threatened physical danger, severe climatic conditions, natural disaster, civil unrest, terrorism, acts of war, or loss or interruption of facilities utilized by the Exchange, or (2) a request by a governmental agency or official, or (3) a period of mourning or recognition for a person or event. The person taking the action shall notify the Board of actions taken pursuant to this Rule, except for a period of mourning or recognition for a person or event, as soon thereafter as is feasible. * * * * * CHICAGO BOARD OPTIONS EXCHANGE, INC. APRIL 1, 2005 1. Option Transaction Fees (1)(3)(4)(7)(17): Remainder unchanged. 2. Market-Maker, e-DPM & DPM Marketing Fee (in option classes in which a DPM has been appointed) (6)(17): Remainder unchanged. 3. Floor Brokerage Fee (1)(5)(17): Remainder unchanged. 4. RAES Access Fee (Retail Automatic Execution System) (1)(4)(17): Remainder unchanged. 5. ETFs, Structured Products, Rights, Warrants (per round lot) (17): Remainder unchanged. 6. Indexes Customer Order Book Official (OBO) Execution Fees (17): Remainder unchanged. Footnotes: (1)–(16) Unchanged. (17) If CBOE exclusively listed options are traded at CBOE’s facility on a Backup Exchange pursuant to CBOE Rule 6.16, the Back-up Exchange has agreed to apply the per contract and per contract side fees in this fee schedule to such transactions. If any other CBOE listed options are traded on the Back-up Exchange (such as CBOE singly listed options that are listed by the Back-up Exchange) pursuant to CBOE Rule 6.16, the fee schedule of the Back-up Exchange shall apply to such trades. If the exclusively listed options of a Disabled Exchange are traded on the Disabled Exchange’s facility at CBOE pursuant to CBOE Rule 6.16, CBOE will apply the per contract and per contract side fees in the fee schedule of the Disabled Exchange to such transactions. If any other options classes of the Disabled Exchange are traded on CBOE 19:36 Apr 13, 2005 Jkt 205001 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule In its filing with the Commission, CBOE included statements concerning the purpose of, and basis for, the proposed rule and discussed any comments it received on the proposed rule. The text of these statements may be examined at the places specified in Item IV below. The 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 FEE SCHEDULE VerDate jul<14>2003 (such as singly listed options of the Disabled Exchange) pursuant to CBOE Rule 6.16, the fees set forth in the CBOE fee schedule shall apply to such trades. Remainder of Fee Schedule: Unchanged. * * * * * 1. Purpose a. Introduction. The Exchange proposes to adopt new CBOE Rule 6.16, Back-Up Trading Arrangements, which will facilitate the CBOE entering into arrangements with one or more other exchanges (each a ‘‘Back-up Exchange’’) to permit CBOE and its members to use a portion of a Back-up Exchange’s facilities to conduct the trading of CBOE exclusively listed options 7 in the event of a Disabling Event, and similarly will permit the CBOE to provide trading facilities at CBOE for another exchange’s exclusively listed options if that exchange (a ‘‘Disabled Exchange’’) is prevented from trading due to a Disabling Event. Proposed Rule 6.16 would also permit the CBOE to enter into arrangements with a Back-up Exchange to provide for the listing and trading of CBOE singly listed options 8 by the Back-up Exchange if CBOE’s facility becomes disabled, and conversely provide for the listing and trading by CBOE of the singly listed options of a Disabled Exchange. The Exchange also proposes an amendment to its Fee Schedule relative to the fees that shall apply to transactions in the options of a Disabled Exchange effected on a Back-up 7 For purposes of proposed CBOE Rule 6.16, the term ‘‘exclusively listed option’’ means an option that is listed exclusively by an exchange (because the exchange has an exclusive license to use, or has proprietary rights in, the interest underlying the option). 8 For purposes of proposed Rule 6.16, the term ‘‘singly listed option’’ means an option that is not an ‘‘exclusively listed option’’ but that is listed by an exchange and not by any other national securities exchange. PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 Exchange. Additionally, the Exchange proposes to adopt a new Rule 6.17, which addresses Exchange procedures under emergency conditions and is similar to rules that have been adopted by other exchanges. Finally, the rule proposal will replace and supersede current CBOE Rule 3.22, which the Exchange adopted following the events of September 11, 2001. b. Background. The back-up trading arrangements contemplated by proposed Rule 6.16 represent CBOE’s immediate plan to ensure that CBOE’s exclusively listed and singly listed options will have a trading venue if a catastrophe renders its primary facility inaccessible or inoperable. The Commission has suggested measures that CBOE should undertake to expedite reopening of CBOE’s exclusively listed securities if a catastrophic event prevents trading at CBOE for an extended period of time.9 Proposed Rule 6.16 would facilitate CBOE entering into back-up trading arrangements with other exchanges that would address the measures suggested by the Commission. In addition to these back-up trading arrangements, CBOE is currently working on other back-up trading plans. In September 2003, CBOE entered into separate Memoranda of Understanding with the American Stock Exchange LLC (‘‘Amex’’), Pacific Exchange (‘‘PCX’’) and Philadelphia Stock Exchange (‘‘Phlx’’) to memorialize their mutual understanding to work together to develop bi-lateral back-up trading arrangements in the event that trading is prevented at one of the exchanges. Since then, CBOE has been working with each of these exchanges to put in place written agreements outlining essential commercial terms with respect to the arrangements as well as operational plans that describe the operational and logistical aspects of the arrangements. CBOE and Phlx have signed an agreement relative to back-up trading arrangements and are in the process of completing the operational plan for those arrangements. The Exchange submitted a copy of this agreement as Exhibit 3.A to its Form 19b–4 for the rule change proposal, together with a copy of a first amendment to the agreement as Exhibit 3.B.10 9 See letter from Annette L. Nazareth, Director, Division of Market Regulation, Commission, to William J. Brodsky, Chairman and Chief Executive Officer, CBOE, dated April 17, 2003. The Exchange states that comparable letters were also sent to the other options exchanges. 10 These exhibits are available for viewing on the Commission’s Web site, https://www.sec.gov/rules/ sro.shtml, and at the Exchange and the Commission. The Exchange states that the first amendment to the E:\FR\FM\14APN1.SGM 14APN1 Federal Register / Vol. 70, No. 71 / Thursday, April 14, 2005 / Notices c. Proposed Rule 6.16: If CBOE is the Disabled Exchange. The Exchange proposes to adopt Rule 6.16 to make effective its back-up trading arrangements with other exchanges. Section (a) of proposed Rule 6.16 describes the back-up trading arrangements that would apply if CBOE were the Disabled Exchange. Under proposed paragraph (a)(1)(B), the facility of the Back-up Exchange used by CBOE to trade some or all of CBOE’s exclusively listed options will be deemed to be a facility of CBOE, and such option classes shall trade as listings of CBOE. This approach of deeming a portion of the Back-up Exchange’s facilities to be a facility of the Disabled Exchange is an approach approved by the Commission in previous emergency situations.11 Since the trading of CBOE exclusively listed options will be conducted using the systems of the Back-up Exchange, proposed paragraph (a)(1)(C) provides that the trading of CBOE exclusively listed options on CBOE’s facility at the Back-up Exchange shall be conducted in accordance with the rules of the Backup Exchange, except that (i) such trading shall be subject to CBOE rules with respect to doing business with the public, margin requirements, net capital requirements, listing requirements and position limits, (ii) CBOE members that are trading on CBOE’s facility at the Back-up Exchange (not including members of the Back-up Exchange who become temporary members of CBOE pursuant to paragraph (a)(1)(F)) will be subject to CBOE rules governing or applying to the maintenance of a person’s or a firm’s status as a member of CBOE, and (iii) CBOE Rule 8.87.01 may be utilized to establish a lower DPM participation rate applicable to trading on CBOE’s facility on the Backup Exchange than the rate that is applicable under the rules of the Backup Exchange if agreed to by CBOE and the Back-up Exchange. In addition, CBOE and the Back-up Exchange may agree that other CBOE rules will apply to such trading. The Back-up Exchange rules that govern trading on CBOE’s facility at the Back-up Exchange shall be deemed to be CBOE rules for purposes of such trading. agreement between CBOE and Phlx has been agreed to in principle by the parties but remains subject to final approval by Phlx. 11 The Commission approved a similar approach when options listed on the Pacific Stock Exchange were physically moved to other exchanges in October 1989 due to an earthquake (See Exchange Act Release No. 27365 (October 19, 1989), 54 FR 43511 (October 25, 1989)), and when Dell options were relocated from Phlx to Amex on a temporary basis in June 1998 (See Exchange Act Release No. 40088 (June 12, 1998), 63 FR 33426 (June 18, 1998)). VerDate jul<14>2003 19:36 Apr 13, 2005 Jkt 205001 Proposed paragraph (a)(1)(D) reflects that the Back-up Exchange has agreed to perform the related regulatory functions with respect to trading of CBOE exclusively listed options on CBOE’s facility at the Back-up Exchange, in each case except as CBOE and the Back-up Exchange may specifically agree otherwise. The Back-up Exchange and CBOE will coordinate with each other regarding surveillance and enforcement respecting such trading. CBOE shall retain the ultimate legal responsibility for the performance of its self-regulatory obligations with respect to CBOE’s facility at the Back-up Exchange. Under proposed paragraph (a)(1)(E), CBOE shall have the right to designate its members that will be authorized to trade CBOE exclusively listed options on CBOE’s facility at the Back-up Exchange and, if applicable, its member(s) that will be a Lead MarketMaker (‘‘LMM’’) or Designated Primary Market-Maker (‘‘DPM’’) in those options. If the Back-up Exchange is unable to accommodate all CBOE members that desire to trade on CBOE’s facility at the Back-up Exchange, CBOE may determine which members shall be eligible to trade at that facility by considering factors such as whether the member is a DPM or LMM in the applicable product(s), the number of contracts traded by the member in the applicable product(s), market performance, and other factors relating to a member’s contribution to the market in the applicable product(s). Under proposed paragraph (a)(1)(F), members of the Back-up Exchange shall not be authorized to trade in any CBOE exclusively listed options, except that (i) CBOE may deputize willing floor brokers of the Back-up Exchange as temporary CBOE members to permit them to execute orders as brokers in CBOE exclusively listed options traded on CBOE’s facility at the Back-up Exchange,12 and (ii) the Back-up Exchange has agreed that it will, at the instruction of CBOE, select members of the Back-up Exchange that are willing to be deputized by CBOE as temporary CBOE members authorized to trade CBOE exclusively listed options on CBOE’s facility at the Back-up Exchange for such period of time following a Disabling Event as CBOE determines to be appropriate, and CBOE may deputize such members of the Back-up Exchange as temporary CBOE members for that purpose. The second of the foregoing exceptions would permit members of 12 The exchanges that acted as Back-up Exchanges in the emergency situations noted above also deputized its floor brokers in this manner. See supra note 11. PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 19817 the Back-up Exchange to trade CBOE exclusively listed options on the CBOE facility on the Back-up Exchange if, for example, circumstances surrounding a Disabling Event result in CBOE members being delayed in arriving at the Back-up Exchange in time for prompt resumption of trading. Section (a)(2) of the proposed rule provides for the continued trading of CBOE singly listed options at a Back-up Exchange in the event of a Disabling Event at CBOE. Proposed paragraph (a)(2)(B) provides that CBOE may enter into arrangements with a Back-up Exchange under which the Back-up Exchange will agree, in the event of a Disabling Event, to list for trading option classes that are then singly listed only by CBOE. Such option classes would trade on the Back-up Exchange as listings of the Back-up Exchange and in accordance with the rules of the Backup Exchange. Under proposed paragraph (a)(2)(C), any such options class listed by the Back-up Exchange that does not satisfy the standard listing and maintenance criteria of the Back-up Exchange will be subject, upon listing by the Back-up Exchange, to delisting (and, thus, restrictions on opening new series, and engaging in opening transactions in those series with open interest, as may be provided in the rules of the Back-up Exchange). CBOE singly listed option classes would be traded by members of the Back-up Exchange and by CBOE members selected by CBOE to the extent the Back-up Exchange can accommodate CBOE members in the capacity of temporary members of the Back-up Exchange. If the Back-up Exchange is unable to accommodate all CBOE members that desire to trade CBOE singly listed options at the Back-up Exchange, CBOE may determine which members shall be eligible to trade such options at the Back-up Exchange by considering the same factors used to determine which CBOE members are eligible to trade CBOE exclusively listed options at the CBOE facility at the Backup Exchange. Proposed Section (a)(3) provides that CBOE may enter into arrangements with a Back-up Exchange to permit CBOE members to conduct trading on a Backup Exchange of some or all of CBOE’s multiply listed options in the event of a Disabling Event. While continued trading of multiply listed options upon the occurrence of a Disabling Event is not likely to be as great a concern as the continued trading of exclusively and singly listed options, CBOE nonetheless believes a provision for multiply listed options should be included in the rule so that the exchanges involved will have E:\FR\FM\14APN1.SGM 14APN1 19818 Federal Register / Vol. 70, No. 71 / Thursday, April 14, 2005 / Notices the option to permit members of the Disabled Exchange to trade multiply listed options on the Back-up Exchange. Such options shall trade as a listing of the Back-up Exchange and in accordance with the rules of the Backup Exchange. If CBOE Is the Back-Up Exchange Section (b) of proposed Rule 6.16 describes the back-up trading arrangements that would apply if CBOE were the Back-up Exchange. In general, the provisions in Section (b) are the converse of the provisions in Section (a). With respect to the exclusively listed options of the Disabled Exchange, the facility of CBOE used by the Disabled Exchange to trade some or all of the Disabled Exchange’s exclusively listed options will be deemed to be a facility of the Disabled Exchange, and such option classes shall trade as listings of the Disabled Exchange. Trading of the Disabled Exchange’s exclusively listed options on the Disabled Exchange’s facility at CBOE shall be conducted in accordance with CBOE rules, except that (i) such trading shall be subject to the Disabled Exchange’s rules with respect to doing business with the public, margin requirements, net capital requirements, listing requirements and position limits, and (ii) members of the Disabled Exchange that are trading on the Disabled Exchange’s facility at CBOE (not including CBOE members who become temporary members of the Disabled Exchange pursuant to paragraph (b)(1)(D)) will be subject to the rules of the Disabled Exchange governing or applying to the maintenance of a person’s or a firm’s status as a member of the Disabled Exchange. In addition, the Disabled Exchange and CBOE may agree that other Disabled Exchange rules will apply to such trading. CBOE will perform the related regulatory functions with respect to such trading, in each case except as the Disabled Exchange and CBOE may specifically agree otherwise. Proposed paragraph (b)(1)(C) reflects that the Disabled Exchange has agreed to retain the ultimate legal responsibility for the performance of its self-regulatory obligations with respect to the Disabled Exchange’s facility at CBOE. Sections (b)(2) and (b)(3) describe the arrangements applicable to trading of the Disabled Exchange’s singly and multiply listed options at CBOE, and are the converse of Sections (a)(2) and (a)(3). One difference is in paragraph (b)(2)(A), which includes a provision that would permit CBOE to allocate singly listed option classes of the VerDate jul<14>2003 19:36 Apr 13, 2005 Jkt 205001 Disabled Exchange to a CBOE DPM in advance of a Disabling Event, without utilizing the allocation process under CBOE Rule 8.95, to enable CBOE to quickly list such option classes upon the occurrence of a Disabling Event. Member Obligations Section (c) describes the obligations of members and member organizations with respect to the trading by ‘‘temporary members’’ on the facilities of another exchange pursuant to Rule 6.16. Section (c)(1) sets forth the obligations applicable to members of a Back-up Exchange who act in the capacity of temporary members of the Disabled Exchange on the facility of the Disabled Exchange at the Back-up Exchange. Section (c)(1) provides that a temporary member of the Disabled Exchange shall be subject to, and obligated to comply with, the rules that govern the operation of the facility of the Disabled Exchange at the Back-up Exchange. This would include the rules of the Disabled Exchange to the extent applicable during the period of such trading, including the rules of the Disabled Exchange limiting its liability for the use of its facilities that apply to members of the Disabled Exchange. Additionally, (i) such temporary member shall be deemed to have satisfied, and the Disabled Exchange has agreed to waive specific compliance with, rules governing or applying to the maintenance of a person’s or a firm’s status as a member of the Disabled Exchange, including all dues, fees and charges imposed generally upon members of the Disabled Exchange based on their status as such, (ii) such temporary member shall have none of the rights of a member of the Disabled Exchange except the right to conduct business on the facility of the Disabled Exchange at the Back-up Exchange to the extent described in the Rule, (iii) the member organization associated with such temporary member, if any, shall be responsible for all obligations arising out of that temporary member’s activities on or relating to the Disabled Exchange, and (iv) the Clearing Member of such temporary member shall guarantee and clear the transactions of such temporary member on the Disabled Exchange. Section (c)(2) sets forth the obligations applicable to members of a Disabled Exchange who act in the capacity of temporary members of the Back-up Exchange for the purpose of trading singly and multiply listed options of the Disabled Exchange. Such temporary members shall be subject to, and obligated to comply with, the rules of PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 the Back-up Exchange that are applicable to the Back-up Exchange’s own members, including the rules of the Back-up Exchange limiting its liability for the use of its facilities that apply to members of the Back-up Exchange. Temporary members of the Back-up Exchange have the same obligations as those set forth in Section (c)(1) that apply to temporary members of the Disabled Exchange, except that, in addition, temporary members of the Back-up Exchange shall only be permitted (i) to act in those capacities on the Back-up Exchange that are authorized by the Back-up Exchange and that are comparable to capacities in which the temporary member has been authorized to act on the Disabled Exchange, and (ii) to trade in those option classes in which the temporary member is authorized to trade on the Disabled Exchange. Member Proceedings As noted above, proposed Rule 6.16 provides that the rules of the Back-up Exchange shall apply to the trading of the singly and multiply listed options of the Disabled Exchange traded on the Back-up Exchange’s facilities, and (with certain limited exceptions) the trading of exclusively listed options of the Disabled Exchange traded on the facility of the Disabled Exchange at the Back-up Exchange. The Back-up Exchange has agreed to perform the related regulatory functions with respect to such trading (except as the Back-up Exchange and the Disabled Exchange may specifically agree otherwise). Section (d) of proposed Rule 6.16 provides that if a Back-up Exchange initiates an enforcement proceeding with respect to the trading during a back-up period of singly or multiply listed options of the Disabled Exchange by a temporary member of the Back-up Exchange or exclusively listed options of the Disabled Exchange by a member of the Disabled Exchange (other than a member of the Back-up Exchange who is a temporary member of the Disabled Exchange), and such proceeding is in process upon the conclusion of the back-up period, the Back-up Exchange may transfer responsibility for such proceeding to the Disabled Exchange following the conclusion of the back-up period. This approach to the exercise of enforcement jurisdiction is also consistent with past precedent. With respect to arbitration jurisdiction, proposed Section (d) provides that arbitration of any disputes with respect to any trading during a back-up period of singly or multiply listed options of the Disabled Exchange or of exclusively listed options of the E:\FR\FM\14APN1.SGM 14APN1 Federal Register / Vol. 70, No. 71 / Thursday, April 14, 2005 / Notices Disabled Exchange on the Disabled Exchange’s facility at the Back-up Exchange will be conducted in accordance with the rules of the Backup Exchange, unless the parties to an arbitration agree that it shall be conducted in accordance with the rules of the Disabled Exchange. Member Preparations To ensure that members are prepared to implement CBOE’s back-up trading arrangements, proposed Section (e) requires CBOE members to take appropriate actions as instructed by CBOE to accommodate CBOE’s back-up trading arrangements with other exchanges and CBOE’s own back-up trading arrangements. Interpretations and Policies Proposed Interpretation and Policy .01 to Rule 6.16 clarifies that to the extent Rule 6.16 provides that another exchange will take certain action, the Rule is reflecting what that exchange has agreed to do by contractual agreement with CBOE, but Rule 6.16 itself is not binding on the other exchange. d. Fee Schedule The Exchange proposes to add a footnote to its Fee Schedule to inform its members regarding what fees will apply to transactions in the listed options of a Disabled Exchange effected on a Backup Exchange under Rule 6.16. The footnote provides that if CBOE is the Disabled Exchange, the Back-up Exchange has agreed to apply the per contract and per contract side fees in the CBOE fee schedule to transactions in CBOE exclusively listed options traded on the CBOE facility on the Back-up Exchange.13 If any other CBOE listed options are traded on the Back-up Exchange (such as CBOE singly listed options that are listed by the Back-up Exchange) pursuant to CBOE Rule 6.16, the fee schedule of the Back-up Exchange shall apply to such trades. The footnote contains a second paragraph stating the converse if CBOE is the Back-up Exchange under Rule 6.16. e. Proposed Rule 6.17 The Exchange proposes to adopt a general emergency rule in proposed Rule 6.17. Although not directly related to the implementation of the back-up trading arrangements, the Exchange believes that it is appropriate to adopt such a rule in conjunction with implementing the back-up trading arrangements. Currently, there is no Exchange rule that 13 When Phlx Dell options relocated to Amex in June 1998, Phlx fees applied to transactions in Dell options on the Amex. See supra note 11. VerDate jul<14>2003 19:36 Apr 13, 2005 Jkt 205001 grants specific authority in an emergency to any person or persons to take all actions necessary or appropriate for the maintenance of a fair and orderly market or the protection of investors. Authority to take actions affecting trading or the operation of CBOE systems is currently granted to the Board of Directors, floor officials and other individuals under several Exchange rules (e.g., CBOE Rules 4.16, 6.3, 6.6 and 24.7). Several other exchanges already have adopted general emergency rules (e.g., NYSE Rule 51). Finally, the Exchange proposes to delete CBOE Rule 3.22, which is a temporary rule adopted in response to the events of September 11, 2001. 2. Statutory Basis The Exchange states that the proposed rule change is intended to ensure that CBOE’s exclusively listed and singly listed products will have a trading venue in the event that trading at CBOE is prevented due to a Disabling Event, thus minimizing potential disruptions for the markets and investors under those circumstances. The Exchange thus believes that the proposed rule change is consistent with and furthers the objectives of Section 6(b)(5) of the Act,14 in that it is designed to perfect the mechanisms of a free and open market and to protect investors and the public interest. 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 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: PO 00000 14 15 U.S.C. 78f(b)(5). Frm 00093 Fmt 4703 Sfmt 4703 19819 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 (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–CBOE–2004–59 on the subject line. Paper Comments: • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549–0609. All submissions should refer to File Number SR–CBOE–2004–59. 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 (https://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 Section, 450 Fifth Street, NW, Washington, DC 20549. Copies of such 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– 2004–59 and should be submitted on or before May 5, 2005. E:\FR\FM\14APN1.SGM 14APN1 19820 Federal Register / Vol. 70, No. 71 / Thursday, April 14, 2005 / Notices For the Commission, by the Division of Market Regulation, pursuant to delegated authority.15 Margaret H. McFarland, Deputy Secretary. [FR Doc. E5–1758 Filed 4–13–05; 8:45 am] BILLING CODE 8010–01–P SOCIAL SECURITY ADMINISTRATION Agency Information Collection Activities: Proposed Request and Comment Request The Social Security Administration (SSA) publishes a list of information collection packages that will require clearance by the Office of Management and Budget (OMB) in compliance with Pub. L. 104–13, the Paperwork Reduction Act of 1995, effective October 1, 1995. The information collection packages that may be included in this notice are for new information collections, approval of existing information collections, revisions to OMB-approved information collections, and extensions (no change) of OMBapproved information collections. SSA is soliciting comments on the accuracy of the agency’s burden estimate; the need for the information; its practical utility; ways to enhance its quality, utility, and clarity; and on ways to minimize burden on respondents, including the use of automated collection techniques or other forms of information technology. Written comments and recommendations regarding the information collection(s) should be submitted to the OMB Desk Officer and the SSA Reports Clearance Officer. The information can be mailed and/or faxed to the individuals at the addresses and fax numbers listed below: (OMB): Office of Management and Budget, Attn: Desk Officer for SSA, Fax: (202) 395–6974. (SSA): Social Security Administration, DCFAM, Attn: Reports Clearance Officer, 1338 Annex Building, 6401 Security Blvd., Baltimore, MD 21235, Fax: (410) 965–6400. I. The information collections listed below are pending at SSA and will be submitted to OMB within 60 days from the date of this notice. Therefore, your comments should be submitted to SSA within 60 days from the date of this publication. You can obtain copies of the collection instruments by calling the SSA Reports Clearance Officer at (410) 965–0454 or by writing to the address listed above. 15 17 CFR 200.30–3(a)(12). VerDate jul<14>2003 19:36 Apr 13, 2005 Jkt 205001 1. Farm Arrangement Questionnaire— 20 CFR 404.1082(c)—0960–0064. SSA uses the information collected on the SSA–7157–F4 to determine if farm rental income may be considered selfemployment income for Social Security benefits coverage purposes. The respondents are individuals alleging self-employment income from the renting of land for farming activities. Type of Request: Extension of an OMB-approved information collection. Number of Respondents: 38,000. Frequency of Response: 1. Average Burden per Response: 30 minutes. Estimated Annual Burden: 19,000 hours. 2. Application for Benefits Under a U.S. International Social Security Agreement—20 CFR 404.1925—0960– 0448. The information collected on the SSA–2490–BK is required to determine entitlement to old-age, survivors or disability benefits from the United States or from a country that has entered into a Social Security agreement with the United States. The respondents are individuals who are applying for benefits from the U.S. or from a totalization agreement country. Type of Request: Extension of an OMB-approved information collection. Number of Respondents: 23,200. Frequency of Response: 1. Average Burden per Response: 30 minutes. Estimated Average Burden: 11,600 hours. 3. Letter to Landlord Requesting Rental Information—20 CFR 416.1130(b)—0960–0454. Form SSA– L5061 provides a nationally uniform vehicle for collecting information from landlords for use in making rental subsidy determinations in the Supplemental Security Income (SSI) program. The information is used in deciding whether income limits are met for SSI eligibility. Respondents are landlords who provide subsidized rental arrangements to SSI applicants and recipients. Type of Request: Extension of an OMB-approved information collection. Number of Respondents: 49,000. Frequency of Response: 1. Average Burden per Response: 10 minutes. Estimated Annual Burden: 8,167 hours. 4. Plan for Achieving Self-Support— 20 CFR 416.1180–1182, 416.1225–1227, 416.110(e)—0960–0559. The information on form SSA–545 is collected by SSA when a Supplemental Security Income (SSI) applicant/ recipient desires to use available income and resources to obtain education and/ PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 or training in order to become selfsupportive. The information is used to evaluate the recipient’s plan for achieving self-support to determine whether the plan may be approved under the provisions of the SSI program. The respondents are SSI applicants/ recipients who are blind or disabled. Type of Request: Revision of an OMBapproved information collection. Number of Respondents: 7,000. Frequency of Response: 1. Average Burden per Response: 2 hours. Estimated Annual Burden: 14,000 hours. 5. Disability Update Report—20 CFR 404.1589–404.1595, 20 CFR 416.988– 416.996—0960–0511. Forms SSA–455 and SSA–455–OCR–SM are used by SSA to collect information when the continuing disability review (CDR) diary of a recipient of SSA-administered payments, based on disability, has matured or there is an indication of possible medical improvement. The information collected from beneficiaries is reviewed by specialists in the evaluation of work and earnings and in disability adjudication. The respondents are recipients of benefits, based on disability, under title II and/or XVI of the Social Security Act. Type of Request: Extension of an OMB-approved information collection. Number of Respondents: 981,000. Frequency of Response: 1. Average Burden per Response: 15 minutes. Estimated Annual Burden: 245,250 hours. II. The information collections listed below have been submitted to OMB for clearance. Your comments on the information collections would be most useful if received by OMB and SSA within 30 days from the date of this publication. You can obtain a copy of the OMB clearance packages by calling the SSA Reports Clearance Officer at (410) 965–0454, or by writing to the address listed above. 1. Statement Regarding Contributions—20 CFR 360–366 and 404.736—0960–0020. The determination of one-half support or contributions to support must be made to entitle certain child applicants to social security benefits. SSA uses Form SSA–783 to collect the information necessary to make such a determination. The respondents are persons giving information about a child’s sources of support for entitlement to child’s benefits. Type of Request: Extension of an OMB-approved information collection. Number of Respondents: 30,000. Frequency of Response: 1. E:\FR\FM\14APN1.SGM 14APN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 70, Number 71 (Thursday, April 14, 2005)]
[Notices]
[Pages 19812-19820]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-1758]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51510; File No. SR-CBOE-2004-59]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment Nos. 1, 2, and 3 Thereto by the Chicago Board 
Options Exchange, Incorporated Relating to Back-up Trading Arrangements

April 8, 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 August 27, 2004, 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 the 
Exchange. On October 21, 2004, the Exchange amended its proposal.\3\ On 
October 26, 2004, the Exchange further amended its proposal.\4\ On 
March 23, 2005, the Exchange submitted a third amendment.\5\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule 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\ See letter from Jaime Galvan, Attorney, CBOE, to Nancy 
Sanow, Assistant Director, Division of Market Regulation 
(``Division''), Commission, dated October 20, 2004 (``Amendment No. 
1''). In Amendment No. 1, the Exchange modified the text of proposed 
CBOE Rule 6.16 and made certain other clarifying changes to the 
original submission. Amendment No. 1 replaced CBOE's original filing 
in its entirety.
    \4\ See letter from Jaime Galvan, Attorney, CBOE, to Brian 
Trackman, Special Counsel, Division, Commission, dated October 25, 
2004 (``Amendment No. 2''). In Amendment No. 2, the Exchange 
corrected typographical errors in the proposed rule text.
    \5\ See Amendment No. 3, dated March 23, 2005 (``Amendment No. 
3'') In Amendment No. 3, the Exchange modified portions of the 
proposed rule text and corresponding sections of the Form 19b-4 
describing the rule proposal. Amendment No. 3 replaces CBOE's 
previously amended filing 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 is filing with the Commission proposed new rules that 
will facilitate the CBOE entering into arrangements with one or more 
other exchanges that would provide back-up trading facilities for CBOE 
listed options at another exchange if CBOE's facility becomes disabled 
and trading is prevented for an extended period of time, and similarly 
provide trading facilities at CBOE for another exchange to trade its 
listed options if that exchange's facility becomes disabled. The 
Exchange also proposes to adopt a rule addressing general Exchange 
procedures under emergency conditions and to eliminate a rule adopted 
following the events of September 11, 2001. Additionally, the Exchange 
has submitted a corresponding back-up trading agreement between itself 
and the Philadelphia Stock Exchange as Exhibit B to its Form 19b-4 
filing. This back-up trading agreement is available for viewing on the 
Commission's Web site, https://www.sec.gov/rules/sro.shtml, and at the 
Exchange and the Commission.\6\ The text of the proposed rule change, 
as amended, is set forth below. Proposed new language is in italics; 
proposed deletions are in [brackets].
---------------------------------------------------------------------------

    \6\ See infra note 10. The Commission notes that the text of the 
back-up trading agreement that appears on the Commission's Web site 
was filed as part of Amendment No. 3.
---------------------------------------------------------------------------

* * * * *
Chicago Board Options Exchange, Inc.
Rules
* * * * *
CHAPTER III
MEMBERSHIP
Temporary Access
Rule 3.22
    [Until emergency conditions in the aftermath of the terrorist on 
New York City on September 11, 2001 cease, the Exchange may permit a 
person or organization to conduct business on the Exchange provided 
that the person or organization (i) is a member in good standing of the 
American Stock Exchange ``AMEX'', (ii) is not subject to a statutory 
disqualification under the Exchange Act, and (iii) is not subject to an 
investigation conducted by any self-regulatory organization under the 
Exchange Act that may involve the fitness for membership on the 
Exchange of that person or organization. Any such person or 
organization granted temporary access to conduct business on the 
Exchange ``TPO'' shall only be permitted (i) to act in those Exchange 
capacities that are authorized by the Exchange and that are comparable 
to capacities which TPO has been authorized to act on the AMEX and (ii) 
to trade in those securities in which the TPO is authorized to trade on 
the AMEX. Each TPO shall be subject to, and obligated to comply with, 
the rules of the Exchange that are applicable to exchange members, but 
shall have none of the rights of a member of the Exchange except the 
right to conduct business on the Exchange to the extent

[[Page 19813]]

permitted by this Rule. In the event that an individual TPO is 
associated with an organization, the TPO shall provide to the Exchange, 
in a form and manner prescribed by the Exchange, an agreement by the 
organization to be responsible for all obligations arising out of that 
person's activities on or relating to the Exchange.] Reserved.
* * * * *
CHAPTER VI
DOING BUSINESS ON THE EXCHANGE TRADING FLOOR
* * * * *
Section A: General

Back-up Trading Arrangements

Rule 6.16

    (a) CBOE is Disabled Exchange.
    (1) CBOE Exclusively Listed Options.
    A. For purposes of this Rule 6.16, the term ``exclusively listed 
option'' means an option that is listed exclusively by an exchange 
(because the exchange has an exclusive license to use, or has 
proprietary rights in, the interest underlying the option).
    B. The Exchange (``CBOE'') may enter into arrangements with one or 
more other exchanges (each a ``Back-up Exchange'') to permit CBOE and 
its members to use a portion of the Back-up Exchange's facilities to 
conduct the trading of some or all of CBOE's exclusively listed options 
in the event that the functions of CBOE are severely and adversely 
affected by an emergency or extraordinary circumstances (a ``Disabling 
Event''). Such option classes shall trade as listings of CBOE. The 
facility of the Back-up Exchange used by CBOE for this purpose will be 
deemed to be a facility of CBOE.
    C. Trading of CBOE exclusively listed options on CBOE's facility at 
the Back-up Exchange shall be conducted in accordance with the rules of 
the Back-up Exchange, except that (i) such trading shall be subject to 
CBOE rules with respect to doing business with the public, margin 
requirements, net capital requirements, listing requirements and 
position limits, (ii) CBOE members that are trading on CBOE's facility 
at the Back-up Exchange (not including members of the Back-up Exchange 
who become temporary members of CBOE pursuant to paragraph (a)(1)(F)) 
will be subject to CBOE rules governing or applying to the maintenance 
of a person's or a firm's status as a member of CBOE, and (iii) CBOE 
Rule 8.87.01 may be utilized to establish a lower DPM participation 
rate applicable to trading on CBOE's facility on the Back-up Exchange 
than the rate that is applicable under the rules of the Back-up 
Exchange if agreed to by CBOE and the Back-up Exchange. In addition, 
CBOE and the Back-up Exchange may agree that other CBOE rules will 
apply to such trading. CBOE and the Back-up Exchange have agreed to 
communicate to their respective members which rules apply in advance of 
trading. The Back-up Exchange rules that govern trading on CBOE's 
facility at the Back-up Exchange shall be deemed to be CBOE rules for 
purposes of such trading.
    D. The Back-up Exchange has agreed to perform the related 
regulatory functions with respect to trading of CBOE exclusively listed 
options on CBOE's facility at the Back-up Exchange, in each case except 
as CBOE and the Back-up Exchange may specifically agree otherwise. The 
Back-up Exchange and CBOE have agreed to coordinate with each other 
regarding surveillance and enforcement respecting trading of CBOE 
exclusively listed options on CBOE's facility at the Back-up Exchange. 
CBOE shall retain the ultimate legal responsibility for the performance 
of its self-regulatory obligations with respect to CBOE's facility at 
the Back-up Exchange.
    E. CBOE shall have the right to designate its members that will be 
authorized to trade CBOE exclusively listed options on CBOE's facility 
at the Back-up Exchange and, if applicable, its member(s) that will be 
an LMM or DPM in those options. If the Back-up Exchange is unable to 
accommodate all CBOE members that desire to trade on CBOE's facility at 
the Back-up Exchange, CBOE may determine which members shall be 
eligible to trade at that facility. Factors to be considered in making 
such determinations may include, but are not limited to, any one or 
more of the following: Whether the member is a DPM or LMM in the 
applicable product(s), the number of contracts traded by the member in 
the applicable product(s), market performance, and other factors 
relating to a member's contribution to the market in the applicable 
product(s).
    F. Members of the Back-up Exchange shall not be authorized to trade 
in any CBOE exclusively listed options, except that (i) CBOE may 
deputize willing floor brokers of the Back-up Exchange as temporary 
CBOE members to permit them to execute orders as brokers in CBOE 
exclusively listed options traded on CBOE's facility at the Back-up 
Exchange, and (ii) the Back-up Exchange has agreed that it will, at the 
instruction of CBOE, select members of the Back-up Exchange that are 
willing to be deputized by CBOE as temporary CBOE members authorized to 
trade CBOE exclusively listed options on CBOE's facility at the Back-up 
Exchange for such period of time following a Disabling Event as CBOE 
determines to be appropriate, and CBOE may deputize such members of the 
Back-up Exchange as temporary CBOE members for that purpose.
    (2) CBOE Singly Listed Options.
    A. For purposes of this Rule 6.16, the term ``singly listed 
option'' means an option that is not an ``exclusively listed option'' 
but that is listed by an exchange and not by any other national 
securities exchange.
    B. CBOE may enter into arrangements with a Back-up Exchange under 
which the Back-up Exchange will agree, in the event of a Disabling 
Event, to list for trading singly listed option classes that are then 
singly listed only by CBOE and not by the Back-up Exchange. Any such 
option classes listed by the Back-up Exchange shall trade on the Back-
up Exchange and in accordance with the rules of the Back-up Exchange. 
Such option classes shall be traded by members of the Back-up Exchange 
and by CBOE members selected by CBOE to the extent the Back-up Exchange 
can accommodate CBOE members in the capacity of temporary members of 
the Back-up Exchange. If the Back-up Exchange is unable to accommodate 
all CBOE members that desire to trade singly listed options at the 
Back-up Exchange, CBOE may determine which members shall be eligible to 
trade such options at the Back-up Exchange. Factors to be considered in 
making such determinations may include, but are not limited to, any one 
or more of the following: Whether the member is a DPM or LMM in the 
applicable product(s), the number of contracts traded by the member in 
the applicable product(s), market performance, and other factors 
relating to a member's contribution to the market in the applicable 
product(s).
    C. Any options class listed by the Back-up Exchange pursuant to 
paragraph (a)(2)(B) that does not satisfy the standard listing and 
maintenance criteria of the Back-up Exchange will be subject, upon 
listing by the Back-up Exchange, to delisting (and, thus, restrictions 
on opening new series, and engaging in opening transactions in those 
series with open interest, as may be provided in the rules of the 
Backup Exchange).
    (3) Multiply Listed Options.
    CBOE may enter into arrangements with a Back-up Exchange to permit 
CBOE members to conduct trading on a Back-up Exchange of some or all of 
CBOE's multiply listed options in the event of a Disabling Event. Such 
options

[[Page 19814]]

shall trade as a listing of the Back-up Exchange and in accordance with 
the rules of the Back-up Exchange. Such options shall be traded by 
members of the Back-up Exchange and by CBOE members selected by CBOE to 
the extent the Back-up Exchange can accommodate CBOE members in the 
capacity of temporary members of the Back-up Exchange. If the Back-up 
Exchange is unable to accommodate all CBOE members that desire to trade 
multiply listed options at the Back-up Exchange, CBOE may determine 
which members shall be eligible to trade such options at the Back-up 
Exchange. Factors to be considered in making such determinations may 
include, but are not limited to, any one or more of the following: 
Whether the member is a DPM or LMM in the applicable product(s), the 
number of contracts traded by the member in the applicable product(s), 
market performance, and other factors relating to a member's 
contribution to the market in the applicable product(s).
    (b) CBOE is Back-up Exchange.
    (1) Disabled Exchange Exclusively Listed Options.
    A. CBOE may enter into arrangements with one or more other 
exchanges (each a ``Disabled Exchange'') to permit the Disabled 
Exchange and its members to use a portion of CBOE's facilities to 
conduct the trading of some or all of the Disabled Exchange's 
exclusively listed options in the event of a Disabling Event. Such 
option classes shall trade as listings of the Disabled Exchange. The 
facility of CBOE used by the Disabled Exchange for this purpose will be 
deemed to be a facility of the Disabled Exchange.
    B. Trading of the Disabled Exchange's exclusively listed options on 
the Disabled Exchange's facility at CBOE shall be conducted in 
accordance with CBOE rules, except that (i) such trading shall be 
subject to the Disabled Exchange's rules with respect to doing business 
with the public, margin requirements, net capital requirements, listing 
requirements and position limits, and (ii) members of the Disabled 
Exchange that are trading on the Disabled Exchange's facility at CBOE 
(not including CBOE members who become temporary members of the 
Disabled Exchange pursuant to paragraph (b)(1)(D)) will be subject to 
the rules of the Disabled Exchange governing or applying to the 
maintenance of a person's or a firm's status as a member of the 
Disabled Exchange. In addition, the Disabled Exchange and CBOE may 
agree that other Disabled Exchange rules will apply to such trading. 
The Disabled Exchange and CBOE have agreed to communicate to their 
respective members which rules apply in advance of trading.
    C. CBOE will perform the related regulatory functions with respect 
to trading of the Disabled Exchange's exclusively listed options on the 
Disabled Exchange's facility at CBOE, in each case except as the 
Disabled Exchange and CBOE may specifically agree otherwise. CBOE and 
the Disabled Exchange have agreed to coordinate with each other 
regarding surveillance and enforcement respecting trading of the 
Disabled Exchange's exclusively listed options on the Disabled 
Exchange's facility at CBOE. The Disabled Exchange has agreed that it 
shall retain the ultimate legal responsibility for the performance of 
its self-regulatory obligations with respect to the Disabled Exchange's 
facility at CBOE.
    D. CBOE members shall not be authorized to trade in any exclusively 
listed options of the Disabled Exchange, except (i) that the Disabled 
Exchange may deputize willing CBOE floor brokers as temporary members 
of the Disabled Exchange to permit them to execute orders as brokers in 
exclusively listed options of the Disabled Exchange traded on the 
facility of the Disabled Exchange at CBOE, and (ii) at the instruction 
of the Disabled Exchange, CBOE shall select CBOE members that are 
willing to be deputized by the Disabled Exchange as temporary members 
of the Disabled Exchange authorized to trade the Disabled Exchange's 
exclusively listed options on the facility of the Disabled Exchange at 
CBOE for such period of time following a Disabling Event as the 
Disabled Exchange determines to be appropriate, and the Disabled 
Exchange may deputize such CBOE members as temporary members of the 
Disabled Exchange for that purpose.
    (2) Disabled Exchange Singly Listed Options.
    A. CBOE may enter into arrangements with a Disabled Exchange under 
which CBOE will agree, in the event of a Disabling Event, to list for 
trading singly listed option classes that are then singly listed only 
by the Disabled Exchange and not by CBOE. Any such option classes 
listed by CBOE shall trade on CBOE and in accordance with CBOE rules. 
Such option classes shall be traded by CBOE members and by members of 
the Disabled Exchange selected by the Disabled Exchange to the extent 
CBOE can accommodate members of the Disabled Exchange in the capacity 
of temporary members of CBOE. CBOE may allocate such option classes to 
a CBOE DPM in advance of a Disabling Event, without utilizing the 
allocation process under CBOE Rule 8.95, to enable CBOE to quickly list 
such option classes upon the occurrence of a Disabling Event.
    B. Any options class listed by CBOE pursuant to paragraph (b)(2)(A) 
that does not satisfy the listing and maintenance criteria under CBOE 
rules will be subject, upon listing by CBOE, to delisting (and, thus, 
restrictions on opening new series, and engaging in opening 
transactions in those series with open interest, as may be provided in 
CBOE rules).
    (3) Multiply Listed Options.
    CBOE may enter into arrangements with a Disabled Exchange to permit 
the Disabled Exchange's members to conduct trading on CBOE of some or 
all of the Disabled Exchange's multiply listed options in the event of 
a Disabling Event. Such options shall trade as a listing of CBOE and in 
accordance with CBOE rules. Such options shall be traded by CBOE 
members and by members of the Disabled Exchange to the extent CBOE can 
accommodate members of the Disabled Exchange in the capacity of 
temporary members of CBOE.
    (c) Member Obligations.
    (1) Temporary Members of the Disabled Exchange
    A. A CBOE member acting in the capacity of a temporary member of 
the Disabled Exchange pursuant to paragraph (b)(1)(D) shall be subject 
to, and obligated to comply with, the rules that govern the operation 
of the facility of the Disabled Exchange at CBOE, including the rules 
of the Disabled Exchange to the extent applicable during the period of 
such trading. Additionally, (i) such CBOE member shall be deemed to 
have satisfied, and the Disabled Exchange has agreed to waive specific 
compliance with, rules governing or applying to the maintenance of a 
person's or a firm's status as a member of the Disabled Exchange, 
including all dues, fees and charges imposed generally upon members of 
the Disabled Exchange based on their status as such, (ii) such CBOE 
member shall have none of the rights of a member of the Disabled 
Exchange except the right to conduct business on the facility of the 
Disabled Exchange at CBOE to the extent described in this Rule, (iii) 
the member organization associated with such CBOE member, if any, shall 
be responsible for all obligations arising out of that CBOE member's 
activities on or relating to the Disabled Exchange, and (iv) the 
Clearing Member of such CBOE member shall guarantee and clear the

[[Page 19815]]

transactions of such CBOE member on the Disabled Exchange.
    B. A member of a Back-up Exchange acting in the capacity of a 
temporary member of CBOE pursuant to paragraph (a)(1)(F) shall be 
subject to, and obligated to comply with, the rules that govern the 
operation of the facility of CBOE at the Back-up Exchange, including 
CBOE rules to the extent applicable during the period of such trading. 
Additionally, (i) such temporary member shall be deemed to have 
satisfied, and CBOE will waive specific compliance with, rules 
governing or applying to the maintenance of a person's or a firm's 
status as a member of CBOE, including all dues, fees and charges 
imposed generally upon CBOE members based on their status as such, (ii) 
such temporary member shall have none of the rights of a CBOE member 
except the right to conduct business on the facility of CBOE at the 
Back-up Exchange to the extent described in this Rule, (iii) the member 
organization associated with such temporary member, if any, shall be 
responsible for all obligations arising out of that temporary member's 
activities on or relating to CBOE, and (iv) the Clearing Member of such 
temporary member shall guarantee and clear the transactions on CBOE of 
such temporary member.
    (2) Temporary Members of the Back-up Exchange
    A. A CBOE member acting in the capacity of a temporary member of 
the Back-up Exchange pursuant to paragraphs (a)(2)(B) or (a)(3) shall 
be subject to, and obligated to comply with, the rules of the Back-up 
Exchange that are applicable to the Back-up Exchange's own members. 
Additionally, (i) such CBOE member shall be deemed to have satisfied, 
and the Back-up Exchange has agreed to waive specific compliance with, 
rules governing or applying to the maintenance of a person's or a 
firm's status as a member of the Back-up Exchange, including all dues, 
fees and charges imposed generally upon members of the Back-up Exchange 
based on their status as such, (ii) such CBOE member shall have none of 
the rights of a member of the Back-up Exchange except the right to 
conduct business on the Back-up Exchange to the extent described in 
this Rule, (iii) the member organization associated with such CBOE 
member, if any, shall be responsible for all obligations arising out of 
that CBOE member's activities on or relating to the Back-up Exchange, 
(iv) the Clearing Member of such CBOE member shall guarantee and clear 
the transactions of such CBOE member on the Back-up Exchange, and (v) 
such CBOE member shall only be permitted (x) to act in those capacities 
on the Back-up Exchange that are authorized by the Back-up Exchange and 
that are comparable to capacities in which the CBOE member has been 
authorized to act on CBOE, and (y) to trade in those option classes in 
which the CBOE member is authorized to trade on CBOE.
    B. A member of a Disabled Exchange acting in the capacity of a 
temporary member of CBOE pursuant to paragraphs (b)(2)(A) or (b)(3) 
shall be subject to, and obligated to comply with, CBOE rules that are 
applicable to CBOE's own members. Additionally, (i) such temporary 
member shall be deemed to have satisfied, and CBOE will waive specific 
compliance with, rules governing or applying to the maintenance of a 
person's or a firm's status as a member of CBOE, including all dues, 
fees and charges imposed generally upon CBOE members based on their 
status as such, (ii) such temporary member shall have none of the 
rights of a CBOE member except the right to conduct business on CBOE to 
the extent described in this Rule, (iii) the member organization 
associated with such temporary member, if any, shall be responsible for 
all obligations arising out of that temporary member's activities on or 
relating to CBOE, (iv) the Clearing Member of such temporary member 
shall guarantee and clear the transactions of such temporary member on 
the CBOE, and (v) such temporary member shall only be permitted (x) to 
act in those CBOE capacities that are authorized by CBOE and that are 
comparable to capacities in which the temporary member has been 
authorized to act on the Disabled Exchange, and (y) to trade in those 
option classes in which the temporary member is authorized to trade on 
the Disabled Exchange.
    (d) Member Proceedings.
    (1) If CBOE initiates an enforcement proceeding with respect to the 
trading during a back-up period of the singly or multiply listed 
options of the Disabled Exchange by a temporary member of CBOE or the 
exclusively listed options of the Disabled Exchange by a member of the 
Disabled Exchange (other than a CBOE member who is a temporary member 
of the Disabled Exchange), and such proceeding is in process upon the 
conclusion of the back-up period, CBOE may transfer responsibility for 
such proceeding to the Disabled Exchange following the conclusion of 
the back-up period. Arbitration of any disputes with respect to any 
trading during a back-up period of singly or multiply listed options of 
the Disabled Exchange or of exclusively listed options of the Disabled 
Exchange on the Disabled Exchange's facility at CBOE will be conducted 
in accordance with CBOE rules, unless the parties to an arbitration 
agree that it shall be conducted in accordance with the rules of the 
Disabled Exchange.
    (2) If the Back-up Exchange initiates an enforcement proceeding 
with respect to the trading during a back-up period of CBOE singly or 
multiply listed options by a temporary member of the Back-up Exchange 
or CBOE exclusively listed options by a CBOE member (other than a 
member of the Back-up Exchange who is a temporary member of CBOE), and 
such proceeding is in process upon the conclusion of the back-up 
period, the Back-up Exchange may transfer responsibility for such 
proceeding to CBOE following the conclusion of the back-up period. 
Arbitration of any disputes with respect to any trading during a back-
up period of CBOE singly or multiply listed options on the Back-up 
Exchange or of CBOE exclusively listed options on the facility of CBOE 
at the Disabled Exchange will be conducted in accordance with the rules 
of the Back-up Exchange, unless the parties to an arbitration agree 
that it shall be conducted in accordance with CBOE rules.
    (e) Member Preparations.
    CBOE members are required to take appropriate actions as instructed 
by CBOE to accommodate CBOE's back-up trading arrangements with other 
exchanges and CBOE's own back-up trading arrangements.
    * * * Interpretations and Policies:
    .01 This Rule 6.16 reflects back-up trading arrangements that CBOE 
has entered into or may enter into with one or more other exchanges. To 
the extent that this Rule provides that another exchange will take 
certain action, the Rule is reflecting what that exchange has agreed to 
do by contractual agreement with CBOE, but the Rule itself is not 
binding upon the other exchange.
* * * * *

Authority to Take Action Under Emergency Conditions

Rule 6.17

    The Chairman of the Board, the President or such other person or 
persons as may be designated by the Board shall have the power to halt 
or suspend trading in some or all securities traded on the Exchange, to 
close some or all Exchange facilities, to determine the duration of any 
such halt, suspension or closing, to take one or more of the actions 
permitted to be taken by any person or body of the Exchange under 
Exchange rules, or to

[[Page 19816]]

take any other action deemed to be necessary or appropriate for the 
maintenance of a fair and orderly market or the protection of 
investors, or otherwise in the public interest, due to emergency 
conditions or extraordinary circumstances, such as (1) actual or 
threatened physical danger, severe climatic conditions, natural 
disaster, civil unrest, terrorism, acts of war, or loss or interruption 
of facilities utilized by the Exchange, or (2) a request by a 
governmental agency or official, or (3) a period of mourning or 
recognition for a person or event. The person taking the action shall 
notify the Board of actions taken pursuant to this Rule, except for a 
period of mourning or recognition for a person or event, as soon 
thereafter as is feasible.
* * * * *
CHICAGO BOARD OPTIONS EXCHANGE, INC.
FEE SCHEDULE
APRIL 1, 2005
    1. Option Transaction Fees (1)(3)(4)(7)(17): Remainder unchanged.
    2. Market-Maker, e-DPM & DPM Marketing Fee (in option classes in 
which a DPM has been appointed) (6)(17): Remainder unchanged.
    3. Floor Brokerage Fee (1)(5)(17): Remainder unchanged.
    4. RAES Access Fee (Retail Automatic Execution System) (1)(4)(17): 
Remainder unchanged.
    5. ETFs, Structured Products, Rights, Warrants (per round lot) 
(17): Remainder unchanged.
    6. Indexes Customer Order Book Official (OBO) Execution Fees (17): 
Remainder unchanged.
Footnotes:
    (1)-(16) Unchanged.
    (17) If CBOE exclusively listed options are traded at CBOE's 
facility on a Back-up Exchange pursuant to CBOE Rule 6.16, the Back-up 
Exchange has agreed to apply the per contract and per contract side 
fees in this fee schedule to such transactions. If any other CBOE 
listed options are traded on the Back-up Exchange (such as CBOE singly 
listed options that are listed by the Back-up Exchange) pursuant to 
CBOE Rule 6.16, the fee schedule of the Back-up Exchange shall apply to 
such trades. If the exclusively listed options of a Disabled Exchange 
are traded on the Disabled Exchange's facility at CBOE pursuant to CBOE 
Rule 6.16, CBOE will apply the per contract and per contract side fees 
in the fee schedule of the Disabled Exchange to such transactions. If 
any other options classes of the Disabled Exchange are traded on CBOE 
(such as singly listed options of the Disabled Exchange) pursuant to 
CBOE Rule 6.16, the fees set forth in the CBOE fee schedule shall apply 
to such trades.
    Remainder of Fee Schedule: Unchanged.
* * * * *

 II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule

    In its filing with the Commission, CBOE included statements 
concerning the purpose of, and basis for, the proposed rule and 
discussed any comments it received on the proposed rule. The text of 
these statements may be examined at the places specified in Item IV 
below. The 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

1. Purpose
    a. Introduction. The Exchange proposes to adopt new CBOE Rule 6.16, 
Back-Up Trading Arrangements, which will facilitate the CBOE entering 
into arrangements with one or more other exchanges (each a ``Back-up 
Exchange'') to permit CBOE and its members to use a portion of a Back-
up Exchange's facilities to conduct the trading of CBOE exclusively 
listed options \7\ in the event of a Disabling Event, and similarly 
will permit the CBOE to provide trading facilities at CBOE for another 
exchange's exclusively listed options if that exchange (a ``Disabled 
Exchange'') is prevented from trading due to a Disabling Event. 
Proposed Rule 6.16 would also permit the CBOE to enter into 
arrangements with a Back-up Exchange to provide for the listing and 
trading of CBOE singly listed options \8\ by the Back-up Exchange if 
CBOE's facility becomes disabled, and conversely provide for the 
listing and trading by CBOE of the singly listed options of a Disabled 
Exchange.
---------------------------------------------------------------------------

    \7\ For purposes of proposed CBOE Rule 6.16, the term 
``exclusively listed option'' means an option that is listed 
exclusively by an exchange (because the exchange has an exclusive 
license to use, or has proprietary rights in, the interest 
underlying the option).
    \8\ For purposes of proposed Rule 6.16, the term ``singly listed 
option'' means an option that is not an ``exclusively listed 
option'' but that is listed by an exchange and not by any other 
national securities exchange.
---------------------------------------------------------------------------

    The Exchange also proposes an amendment to its Fee Schedule 
relative to the fees that shall apply to transactions in the options of 
a Disabled Exchange effected on a Back-up Exchange. Additionally, the 
Exchange proposes to adopt a new Rule 6.17, which addresses Exchange 
procedures under emergency conditions and is similar to rules that have 
been adopted by other exchanges. Finally, the rule proposal will 
replace and supersede current CBOE Rule 3.22, which the Exchange 
adopted following the events of September 11, 2001.
    b. Background. The back-up trading arrangements contemplated by 
proposed Rule 6.16 represent CBOE's immediate plan to ensure that 
CBOE's exclusively listed and singly listed options will have a trading 
venue if a catastrophe renders its primary facility inaccessible or 
inoperable. The Commission has suggested measures that CBOE should 
undertake to expedite reopening of CBOE's exclusively listed securities 
if a catastrophic event prevents trading at CBOE for an extended period 
of time.\9\ Proposed Rule 6.16 would facilitate CBOE entering into 
back-up trading arrangements with other exchanges that would address 
the measures suggested by the Commission. In addition to these back-up 
trading arrangements, CBOE is currently working on other back-up 
trading plans.
---------------------------------------------------------------------------

    \9\ See letter from Annette L. Nazareth, Director, Division of 
Market Regulation, Commission, to William J. Brodsky, Chairman and 
Chief Executive Officer, CBOE, dated April 17, 2003. The Exchange 
states that comparable letters were also sent to the other options 
exchanges.
---------------------------------------------------------------------------

    In September 2003, CBOE entered into separate Memoranda of 
Understanding with the American Stock Exchange LLC (``Amex''), Pacific 
Exchange (``PCX'') and Philadelphia Stock Exchange (``Phlx'') to 
memorialize their mutual understanding to work together to develop bi-
lateral back-up trading arrangements in the event that trading is 
prevented at one of the exchanges. Since then, CBOE has been working 
with each of these exchanges to put in place written agreements 
outlining essential commercial terms with respect to the arrangements 
as well as operational plans that describe the operational and 
logistical aspects of the arrangements.
    CBOE and Phlx have signed an agreement relative to back-up trading 
arrangements and are in the process of completing the operational plan 
for those arrangements. The Exchange submitted a copy of this agreement 
as Exhibit 3.A to its Form 19b-4 for the rule change proposal, together 
with a copy of a first amendment to the agreement as Exhibit 3.B.\10\
---------------------------------------------------------------------------

    \10\ These exhibits are available for viewing on the 
Commission's Web site, https://www.sec.gov/rules/sro.shtml, and at 
the Exchange and the Commission. The Exchange states that the first 
amendment to the agreement between CBOE and Phlx has been agreed to 
in principle by the parties but remains subject to final approval by 
Phlx.

---------------------------------------------------------------------------

[[Page 19817]]

    c. Proposed Rule 6.16: If CBOE is the Disabled Exchange. The 
Exchange proposes to adopt Rule 6.16 to make effective its back-up 
trading arrangements with other exchanges. Section (a) of proposed Rule 
6.16 describes the back-up trading arrangements that would apply if 
CBOE were the Disabled Exchange. Under proposed paragraph (a)(1)(B), 
the facility of the Back-up Exchange used by CBOE to trade some or all 
of CBOE's exclusively listed options will be deemed to be a facility of 
CBOE, and such option classes shall trade as listings of CBOE. This 
approach of deeming a portion of the Back-up Exchange's facilities to 
be a facility of the Disabled Exchange is an approach approved by the 
Commission in previous emergency situations.\11\
---------------------------------------------------------------------------

    \11\ The Commission approved a similar approach when options 
listed on the Pacific Stock Exchange were physically moved to other 
exchanges in October 1989 due to an earthquake (See Exchange Act 
Release No. 27365 (October 19, 1989), 54 FR 43511 (October 25, 
1989)), and when Dell options were relocated from Phlx to Amex on a 
temporary basis in June 1998 (See Exchange Act Release No. 40088 
(June 12, 1998), 63 FR 33426 (June 18, 1998)).
---------------------------------------------------------------------------

    Since the trading of CBOE exclusively listed options will be 
conducted using the systems of the Back-up Exchange, proposed paragraph 
(a)(1)(C) provides that the trading of CBOE exclusively listed options 
on CBOE's facility at the Back-up Exchange shall be conducted in 
accordance with the rules of the Back-up Exchange, except that (i) such 
trading shall be subject to CBOE rules with respect to doing business 
with the public, margin requirements, net capital requirements, listing 
requirements and position limits, (ii) CBOE members that are trading on 
CBOE's facility at the Back-up Exchange (not including members of the 
Back-up Exchange who become temporary members of CBOE pursuant to 
paragraph (a)(1)(F)) will be subject to CBOE rules governing or 
applying to the maintenance of a person's or a firm's status as a 
member of CBOE, and (iii) CBOE Rule 8.87.01 may be utilized to 
establish a lower DPM participation rate applicable to trading on 
CBOE's facility on the Back-up Exchange than the rate that is 
applicable under the rules of the Back-up Exchange if agreed to by CBOE 
and the Back-up Exchange. In addition, CBOE and the Back-up Exchange 
may agree that other CBOE rules will apply to such trading. The Back-up 
Exchange rules that govern trading on CBOE's facility at the Back-up 
Exchange shall be deemed to be CBOE rules for purposes of such trading.
    Proposed paragraph (a)(1)(D) reflects that the Back-up Exchange has 
agreed to perform the related regulatory functions with respect to 
trading of CBOE exclusively listed options on CBOE's facility at the 
Back-up Exchange, in each case except as CBOE and the Back-up Exchange 
may specifically agree otherwise. The Back-up Exchange and CBOE will 
coordinate with each other regarding surveillance and enforcement 
respecting such trading. CBOE shall retain the ultimate legal 
responsibility for the performance of its self-regulatory obligations 
with respect to CBOE's facility at the Back-up Exchange.
    Under proposed paragraph (a)(1)(E), CBOE shall have the right to 
designate its members that will be authorized to trade CBOE exclusively 
listed options on CBOE's facility at the Back-up Exchange and, if 
applicable, its member(s) that will be a Lead Market-Maker (``LMM'') or 
Designated Primary Market-Maker (``DPM'') in those options. If the 
Back-up Exchange is unable to accommodate all CBOE members that desire 
to trade on CBOE's facility at the Back-up Exchange, CBOE may determine 
which members shall be eligible to trade at that facility by 
considering factors such as whether the member is a DPM or LMM in the 
applicable product(s), the number of contracts traded by the member in 
the applicable product(s), market performance, and other factors 
relating to a member's contribution to the market in the applicable 
product(s).
    Under proposed paragraph (a)(1)(F), members of the Back-up Exchange 
shall not be authorized to trade in any CBOE exclusively listed 
options, except that (i) CBOE may deputize willing floor brokers of the 
Back-up Exchange as temporary CBOE members to permit them to execute 
orders as brokers in CBOE exclusively listed options traded on CBOE's 
facility at the Back-up Exchange,\12\ and (ii) the Back-up Exchange has 
agreed that it will, at the instruction of CBOE, select members of the 
Back-up Exchange that are willing to be deputized by CBOE as temporary 
CBOE members authorized to trade CBOE exclusively listed options on 
CBOE's facility at the Back-up Exchange for such period of time 
following a Disabling Event as CBOE determines to be appropriate, and 
CBOE may deputize such members of the Back-up Exchange as temporary 
CBOE members for that purpose. The second of the foregoing exceptions 
would permit members of the Back-up Exchange to trade CBOE exclusively 
listed options on the CBOE facility on the Back-up Exchange if, for 
example, circumstances surrounding a Disabling Event result in CBOE 
members being delayed in arriving at the Back-up Exchange in time for 
prompt resumption of trading.
---------------------------------------------------------------------------

    \12\ The exchanges that acted as Back-up Exchanges in the 
emergency situations noted above also deputized its floor brokers in 
this manner. See supra note 11.
---------------------------------------------------------------------------

    Section (a)(2) of the proposed rule provides for the continued 
trading of CBOE singly listed options at a Back-up Exchange in the 
event of a Disabling Event at CBOE. Proposed paragraph (a)(2)(B) 
provides that CBOE may enter into arrangements with a Back-up Exchange 
under which the Back-up Exchange will agree, in the event of a 
Disabling Event, to list for trading option classes that are then 
singly listed only by CBOE. Such option classes would trade on the 
Back-up Exchange as listings of the Back-up Exchange and in accordance 
with the rules of the Back-up Exchange. Under proposed paragraph 
(a)(2)(C), any such options class listed by the Back-up Exchange that 
does not satisfy the standard listing and maintenance criteria of the 
Back-up Exchange will be subject, upon listing by the Back-up Exchange, 
to delisting (and, thus, restrictions on opening new series, and 
engaging in opening transactions in those series with open interest, as 
may be provided in the rules of the Back-up Exchange).
    CBOE singly listed option classes would be traded by members of the 
Back-up Exchange and by CBOE members selected by CBOE to the extent the 
Back-up Exchange can accommodate CBOE members in the capacity of 
temporary members of the Back-up Exchange. If the Back-up Exchange is 
unable to accommodate all CBOE members that desire to trade CBOE singly 
listed options at the Back-up Exchange, CBOE may determine which 
members shall be eligible to trade such options at the Back-up Exchange 
by considering the same factors used to determine which CBOE members 
are eligible to trade CBOE exclusively listed options at the CBOE 
facility at the Back-up Exchange.
    Proposed Section (a)(3) provides that CBOE may enter into 
arrangements with a Back-up Exchange to permit CBOE members to conduct 
trading on a Back-up Exchange of some or all of CBOE's multiply listed 
options in the event of a Disabling Event. While continued trading of 
multiply listed options upon the occurrence of a Disabling Event is not 
likely to be as great a concern as the continued trading of exclusively 
and singly listed options, CBOE nonetheless believes a provision for 
multiply listed options should be included in the rule so that the 
exchanges involved will have

[[Page 19818]]

the option to permit members of the Disabled Exchange to trade multiply 
listed options on the Back-up Exchange. Such options shall trade as a 
listing of the Back-up Exchange and in accordance with the rules of the 
Back-up Exchange.

If CBOE Is the Back-Up Exchange

    Section (b) of proposed Rule 6.16 describes the back-up trading 
arrangements that would apply if CBOE were the Back-up Exchange. In 
general, the provisions in Section (b) are the converse of the 
provisions in Section (a). With respect to the exclusively listed 
options of the Disabled Exchange, the facility of CBOE used by the 
Disabled Exchange to trade some or all of the Disabled Exchange's 
exclusively listed options will be deemed to be a facility of the 
Disabled Exchange, and such option classes shall trade as listings of 
the Disabled Exchange. Trading of the Disabled Exchange's exclusively 
listed options on the Disabled Exchange's facility at CBOE shall be 
conducted in accordance with CBOE rules, except that (i) such trading 
shall be subject to the Disabled Exchange's rules with respect to doing 
business with the public, margin requirements, net capital 
requirements, listing requirements and position limits, and (ii) 
members of the Disabled Exchange that are trading on the Disabled 
Exchange's facility at CBOE (not including CBOE members who become 
temporary members of the Disabled Exchange pursuant to paragraph 
(b)(1)(D)) will be subject to the rules of the Disabled Exchange 
governing or applying to the maintenance of a person's or a firm's 
status as a member of the Disabled Exchange. In addition, the Disabled 
Exchange and CBOE may agree that other Disabled Exchange rules will 
apply to such trading.
    CBOE will perform the related regulatory functions with respect to 
such trading, in each case except as the Disabled Exchange and CBOE may 
specifically agree otherwise. Proposed paragraph (b)(1)(C) reflects 
that the Disabled Exchange has agreed to retain the ultimate legal 
responsibility for the performance of its self-regulatory obligations 
with respect to the Disabled Exchange's facility at CBOE.
    Sections (b)(2) and (b)(3) describe the arrangements applicable to 
trading of the Disabled Exchange's singly and multiply listed options 
at CBOE, and are the converse of Sections (a)(2) and (a)(3). One 
difference is in paragraph (b)(2)(A), which includes a provision that 
would permit CBOE to allocate singly listed option classes of the 
Disabled Exchange to a CBOE DPM in advance of a Disabling Event, 
without utilizing the allocation process under CBOE Rule 8.95, to 
enable CBOE to quickly list such option classes upon the occurrence of 
a Disabling Event.

Member Obligations

    Section (c) describes the obligations of members and member 
organizations with respect to the trading by ``temporary members'' on 
the facilities of another exchange pursuant to Rule 6.16. Section 
(c)(1) sets forth the obligations applicable to members of a Back-up 
Exchange who act in the capacity of temporary members of the Disabled 
Exchange on the facility of the Disabled Exchange at the Back-up 
Exchange.
    Section (c)(1) provides that a temporary member of the Disabled 
Exchange shall be subject to, and obligated to comply with, the rules 
that govern the operation of the facility of the Disabled Exchange at 
the Back-up Exchange. This would include the rules of the Disabled 
Exchange to the extent applicable during the period of such trading, 
including the rules of the Disabled Exchange limiting its liability for 
the use of its facilities that apply to members of the Disabled 
Exchange. Additionally, (i) such temporary member shall be deemed to 
have satisfied, and the Disabled Exchange has agreed to waive specific 
compliance with, rules governing or applying to the maintenance of a 
person's or a firm's status as a member of the Disabled Exchange, 
including all dues, fees and charges imposed generally upon members of 
the Disabled Exchange based on their status as such, (ii) such 
temporary member shall have none of the rights of a member of the 
Disabled Exchange except the right to conduct business on the facility 
of the Disabled Exchange at the Back-up Exchange to the extent 
described in the Rule, (iii) the member organization associated with 
such temporary member, if any, shall be responsible for all obligations 
arising out of that temporary member's activities on or relating to the 
Disabled Exchange, and (iv) the Clearing Member of such temporary 
member shall guarantee and clear the transactions of such temporary 
member on the Disabled Exchange.
    Section (c)(2) sets forth the obligations applicable to members of 
a Disabled Exchange who act in the capacity of temporary members of the 
Back-up Exchange for the purpose of trading singly and multiply listed 
options of the Disabled Exchange. Such temporary members shall be 
subject to, and obligated to comply with, the rules of the Back-up 
Exchange that are applicable to the Back-up Exchange's own members, 
including the rules of the Back-up Exchange limiting its liability for 
the use of its facilities that apply to members of the Back-up 
Exchange. Temporary members of the Back-up Exchange have the same 
obligations as those set forth in Section (c)(1) that apply to 
temporary members of the Disabled Exchange, except that, in addition, 
temporary members of the Back-up Exchange shall only be permitted (i) 
to act in those capacities on the Back-up Exchange that are authorized 
by the Back-up Exchange and that are comparable to capacities in which 
the temporary member has been authorized to act on the Disabled 
Exchange, and (ii) to trade in those option classes in which the 
temporary member is authorized to trade on the Disabled Exchange.

Member Proceedings

    As noted above, proposed Rule 6.16 provides that the rules of the 
Back-up Exchange shall apply to the trading of the singly and multiply 
listed options of the Disabled Exchange traded on the Back-up 
Exchange's facilities, and (with certain limited exceptions) the 
trading of exclusively listed options of the Disabled Exchange traded 
on the facility of the Disabled Exchange at the Back-up Exchange. The 
Back-up Exchange has agreed to perform the related regulatory functions 
with respect to such trading (except as the Back-up Exchange and the 
Disabled Exchange may specifically agree otherwise).
    Section (d) of proposed Rule 6.16 provides that if a Back-up 
Exchange initiates an enforcement proceeding with respect to the 
trading during a back-up period of singly or multiply listed options of 
the Disabled Exchange by a temporary member of the Back-up Exchange or 
exclusively listed options of the Disabled Exchange by a member of the 
Disabled Exchange (other than a member of the Back-up Exchange who is a 
temporary member of the Disabled Exchange), and such proceeding is in 
process upon the conclusion of the back-up period, the Back-up Exchange 
may transfer responsibility for such proceeding to the Disabled 
Exchange following the conclusion of the back-up period. This approach 
to the exercise of enforcement jurisdiction is also consistent with 
past precedent.
    With respect to arbitration jurisdiction, proposed Section (d) 
provides that arbitration of any disputes with respect to any trading 
during a back-up period of singly or multiply listed options of the 
Disabled Exchange or of exclusively listed options of the

[[Page 19819]]

Disabled Exchange on the Disabled Exchange's facility at the Back-up 
Exchange will be conducted in accordance with the rules of the Back-up 
Exchange, unless the parties to an arbitration agree that it shall be 
conducted in accordance with the rules of the Disabled Exchange.

Member Preparations

    To ensure that members are prepared to implement CBOE's back-up 
trading arrangements, proposed Section (e) requires CBOE members to 
take appropriate actions as instructed by CBOE to accommodate CBOE's 
back-up trading arrangements with other exchanges and CBOE's own back-
up trading arrangements.

Interpretations and Policies

    Proposed Interpretation and Policy .01 to Rule 6.16 clarifies that 
to the extent Rule 6.16 provides that another exchange will take 
certain action, the Rule is reflecting what that exchange has agreed to 
do by contractual agreement with CBOE, but Rule 6.16 itself is not 
binding on the other exchange.
    d. Fee Schedule The Exchange proposes to add a footnote to its Fee 
Schedule to inform its members regarding what fees will apply to 
transactions in the listed options of a Disabled Exchange effected on a 
Back-up Exchange under Rule 6.16. The footnote provides that if CBOE is 
the Disabled Exchange, the Back-up Exchange has agreed to apply the per 
contract and per contract side fees in the CBOE fee schedule to 
transactions in CBOE exclusively listed options traded on the CBOE 
facility on the Back-up Exchange.\13\ If any other CBOE listed options 
are traded on the Back-up Exchange (such as CBOE singly listed options 
that are listed by the Back-up Exchange) pursuant to CBOE Rule 6.16, 
the fee schedule of the Back-up Exchange shall apply to such trades. 
The footnote contains a second paragraph stating the converse if CBOE 
is the Back-up Exchange under Rule 6.16.
---------------------------------------------------------------------------

    \13\ When Phlx Dell options relocated to Amex in June 1998, Phlx 
fees applied to transactions in Dell options on the Amex. See supra 
note 11.
---------------------------------------------------------------------------

    e. Proposed Rule 6.17 The Exchange proposes to adopt a general 
emergency rule in proposed Rule 6.17. Although not directly related to 
the implementation of the back-up trading arrangements, the Exchange 
believes that it is appropriate to adopt such a rule in conjunction 
with implementing the back-up trading arrangements. Currently, there is 
no Exchange rule that grants specific authority in an emergency to any 
person or persons to take all actions necessary or appropriate for the 
maintenance of a fair and orderly market or the protection of 
investors. Authority to take actions affecting trading or the operation 
of CBOE systems is currently granted to the Board of Directors, floor 
officials and other individuals under several Exchange rules (e.g., 
CBOE Rules 4.16, 6.3, 6.6 and 24.7). Several other exchanges already 
have adopted general emergency rules (e.g., NYSE Rule 51).
    Finally, the Exchange proposes to delete CBOE Rule 3.22, which is a 
temporary rule adopted in response to the events of September 11, 2001.
2. Statutory Basis
    The Exchange states that the proposed rule change is intended to 
ensure that CBOE's exclusively listed and singly listed products will 
have a trading venue in the event that trading at CBOE is prevented due 
to a Disabling Event, thus minimizing potential disruptions for the 
markets and investors under those circumstances. The Exchange thus 
believes that the proposed rule change is consistent with and furthers 
the objectives of Section 6(b)(5) of the Act,\14\ in that it is 
designed to perfect the mechanisms of a free and open market and to 
protect investors and the public interest.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 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 (https://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2004-59 on the subject line.
    Paper Comments:
     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-CBOE-2004-59. 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 (https://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 Section, 450 Fifth 
Street, NW, Washington, DC 20549. Copies of such 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-2004-59 and should be submitted on or before May 5, 2005.


[[Page 19820]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-1758 Filed 4-13-05; 8:45 am]
BILLING CODE 8010-01-P

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