Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of Proposed Rule Change Relating to the CBOE's Membership Rules for Foreign Member Organizations, 2963-2965 [E6-465]
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Federal Register / Vol. 71, No. 11 / Wednesday, January 18, 2006 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53092; File No. SR–CBOE–
2005–105]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing of
Proposed Rule Change Relating to the
CBOE’s Membership Rules for Foreign
Member Organizations
January 10, 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 December
7, 2005, the Chicago Board Options
Exchange, Incorporated (‘‘CBOE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the CBOE. The Commission
is publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
rule regarding the qualifications of
foreign member organizations in
relation to foreign organizations seeking
to become members of the Exchange in
a lessor-only capacity. The text of the
proposed rule change appears below.
Additions are italicized.
*
*
*
*
*
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Rule 3.4. Qualifications of Foreign
Member Organizations
(a) An organization that is not
organized under the laws of one of the
states of the United States must satisfy
the following requirements in order to
be a member organization:
(i) The organization must be a
corporation or partnership organized
under the laws of a country other than
the United States with respect to which
an information sharing agreement,
memorandum of understanding, or
treaty is in effect that provides the
Securities and Exchange Commission
with access to information concerning
securities trading activity in that
country;
(ii) The organization must disclose to
the Exchange all persons associated
with the organization and all parents of
the organization, through all tiers of
ownership, until the ultimate individual
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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beneficial owners of the organization are
disclosed;
(iii) The organization must maintain
in English and at a location in the
United States (A) the books and records
of the organization that relate to its
business on the Exchange, including,
but not limited to, any trading records
relating to trading activity on the
Exchange and (B) any other books and
records of the organization that an
organization registered as a broker or
dealer pursuant to Section 15 of the
Exchange Act is required to maintain at
a location in the United States;
(iv) The organization must maintain
its financial records in accordance with
United States accounting standards;
(v) The organization must agree to
permit inspections by the Exchange and
the Securities and Exchange
Commission of the foreign operations of
the organization related to its securities
business;
(vi) The organization must waive any
applicable secrecy laws and be
exempted from any applicable blocking
statutes in the domiciliary jurisdiction
of the organization;
(vii) The organization must provide to
the Exchange an opinion of legal
counsel of the domiciliary jurisdiction
of the organization which certifies that
(A) there are no applicable secrecy laws
or blocking statutes in that jurisdiction
or (B) that the organization has
effectively waived any applicable
secrecy laws or is exempted from any
applicable blocking statutes in that
jurisdiction;
(viii) Any customer of the
organization that utilizes the
organization to execute orders on the
Exchange must have waived any
applicable secrecy laws and be
exempted from any applicable blocking
statutes in the domiciliary jurisdiction
of the organization;
(ix) The organization must agree to
submit to the jurisdiction of the Federal
courts of the United States and the
courts of Illinois and to irrevocably
waive, to the fullest extent permitted by
law, any objection which the
organization may have based on venue
or forum non conveniens with respect to
any action initiated in such courts;
(x) The organization must appoint a
process agent in Illinois to receive, on
the behalf of the organization, process
which may be served in any legal action
or proceeding;
(xi) The organization must own its
Exchange membership(s);
(xii) The organization must be
registered as a broker or dealer pursuant
to Section 15 of the Exchange Act;
(xiii) The organization must satisfy
the foregoing requirements in a manner
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2963
and form prescribed by the Exchange
and must satisfy such additional
requirements that the Exchange
reasonably deems appropriate; and
(xiv) The organization must meet the
other qualification requirements for
membership under the Constitution and
Rules.
* * * Interpretations and Policies
.01 For purposes of eligibility for
membership, an entity organized as a
limited liability company under the
laws of a country other than the United
States shall be deemed a corporation, its
members shall be deemed principal
shareholders, and its members with
management responsibility and its
managers shall be deemed executive
officers.
.02 A foreign member organization
that is approved to act solely as a lessor
is not required to comply with Rules
3.4(a)(iii)(B) and 3.4(a)(xii).
*
*
*
*
*
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
CBOE included statements concerning
the purpose of, and basis for, the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. The CBOE has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Pursuant to CBOE Rule 3.4,
‘‘Qualifications of Foreign Member
Organizations,’’ an organization that is
not organized under the laws of one of
the states of the United States (‘‘foreign
member organization’’) must satisfy,
among other things, the requirements
set forth in CBOE Rule 3.4 in order to
become a CBOE member. The purpose
of this proposed rule change is to amend
CBOE Rule 3.4 to exempt a foreign
member organization that is approved
by the Exchange to act solely as a lessor
from the requirements set forth in: (i)
CBOE Rule 3.4(a)(xii), which requires a
foreign member organization to be
registered as a broker or dealer pursuant
to Section 15 of the Act; and (ii) CBOE
Rule 3.4(a)(iii)(B), which requires a
foreign member organization to
maintain, in English and at a location in
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Federal Register / Vol. 71, No. 11 / Wednesday, January 18, 2006 / Notices
the United States, any books and
records of the foreign member
organization that an organization
registered as a broker or dealer pursuant
to Section 15 of the Act is required to
maintain at a location in the United
States.
CBOE member organizations, whether
organized under the laws of one of the
states of the United States (‘‘U.S.
member organizations’’) or otherwise,
that are approved to act solely as lessors
have no trading functions on the
Exchange. In other words, the sole
business function that may be
performed by a U.S. member
organization or a foreign member
organization approved to act solely as a
lessor is to lease the CBOE membership
it owns to another Exchange member,
which member would be required to be
a registered broker-dealer that has been
approved for membership under the
CBOE’s membership rules.
The foreign member organization
application requirements set forth in
CBOE Rule 3.4 apply equally to all
foreign member organizations, whether
or not the foreign member organization
is applying to act solely as a lessor. In
contrast, the application requirements
for U.S. member organizations, as set
forth in CBOE Rule 3.3, ‘‘Qualifications
and Membership Statuses of Member
Organizations,’’ distinguish, in certain
cases, between organizations applying
as lessor-only members and other
member organizations. Specifically,
CBOE Rule 3.3(a)(ii) requires U.S.
member organizations to be registered as
a broker or dealer pursuant to Section
15 of the Exchange Act, except that a
U.S. member organization that is
approved to act solely as a lessor is not
required to comply with that
requirement. The effect of the disparate
treatment between foreign member
organizations, as set forth in CBOE Rule
3.4, and U.S. member organizations, as
set forth in CBOE Rule 3.3, is that a U.S.
member organization that is approved
by the Exchange to act solely as a lessor
is not required to register as a broker or
dealer, while a foreign member
organization that is approved to act
solely as a lessor is required to register
as a broker or dealer pursuant to Section
15 of the Act.
The Exchange believes that a foreign
member organization that is approved
by the Exchange to act solely as a lessor
should not be required to register as a
broker or dealer. In this regard, the
Exchange has received a no-action letter
from the staff of the Commission that
supports the notion that persons not
engaging in securities activities for
which broker or dealer registration is
required (i.e., a lessor) would not be
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required to register as a broker or dealer
merely because that person has acquired
and leased a membership on the
Exchange.3 Because foreign member
organizations approved to act solely as
lessors conduct no activities on the
Exchange that would otherwise require
them to register as a broker or dealer,
the Exchange believes that it is
appropriate not to require them to do so.
U.S. member organizations that are
approved to act solely as lessors are
generally subject to the same
application requirements as other
member organizations. The only
distinctions that currently exist for these
organizations are the exemptions set
forth in CBOE Rule 3.3(a)(ii), as stated
above, and the exemption from the
Exchange’s orientation and testing
requirements.4 Thus, for example, the
Exchange would conduct an
investigation of a foreign organization
applying to be approved to act solely as
a lessor in accordance with CBOE Rule
3.9, ‘‘Application Procedures and
Approval or Disapproval.’’ Furthermore,
the additional application requirements
set forth in CBOE Rule 3.4 for foreign
member organizations, other than those
that are proposed to be revised in this
filing, would ensure that the Exchange
would have both access to the
information it would need to review the
foreign member organization’s
application for membership and, if
necessary, the requisite jurisdiction to
litigate matters related to the foreign
member organization’s business on the
Exchange. The Exchange also notes that
CBOE Rule 3.6(b) requires each
associated person of a member
organization that is required to be
disclosed on Form BD as a direct owner
or executive officer to submit an
application to the Exchange for approval
to become associated with the member
organization in that capacity. CBOE
Rule 3.6(b) also provides that if the
member organization is not required to
be a registered broker-dealer, an
application to become associated with
the member organization in the
applicable capacity is required of each
associated person of the organization
that would be required to be disclosed
on Form BD as a direct owner or
executive officer in the event that the
organization was a registered brokerdealer. Therefore, the Exchange would
3 See letter from Jeffrey L. Steele, Assistant Chief
Counsel, Division of Market Regulation,
Commission, to Arne R. Rode, Associate General
Counsel, CBOE, dated Jan. 3, 1980.
4 See CBOE Rule 3.9(g). The Exchange’s testing
and orientation requirements apply to members
required to have authorized trading functions.
Members approved to act solely as lessors are not
permitted to have authorized trading functions.
PO 00000
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Fmt 4703
Sfmt 4703
have the ability, through the associated
person application process, to examine
the senior persons in charge of the
foreign member organization to ensure
that those that are not qualified under
the CBOE rules and the Act to be
associated with a CBOE member are not
associated with the foreign member
organization.
Because the foreign member
organization approved by the Exchange
to act solely as a lessor would be
conducting activities that would
otherwise not require it to be registered
as a broker or dealer, the Exchange also
believes that the requirement set forth in
CBOE Rule 3.4(a)(iii)(B) imposes
obligations on the foreign member
organization that do not reflect its
activities on the Exchange. As noted
above, CBOE Rule 3.4(a)(iii)(B) currently
requires a foreign member organization
approved solely as a lessor to maintain,
in English and at a location in the
United States, any books and records of
the organization that an organization
registered as a broker or dealer pursuant
to Section 15 of the Act is required to
maintain at a location in the United
States. The Exchange believes that if the
only activities conducted by the foreign
member organization on the Exchange
relate to its lease activities, the
provisions set forth in CBOE Rule
3.4(a)(iii)(A), which require the foreign
member organization to maintain, in
English and at a location in the United
States, the books and records of the
organization that relate to its business
on the Exchange, should ensure that the
Exchange will have the ability to have
access to adequate information with
respect to the foreign member
organization.
2. Statutory Basis
The proposed rule change implements
certain application standards for foreign
member organizations that are approved
to act solely as lessors that currently
exist for U.S. member organizations
approved to act solely as lessors, while
still allowing for the Exchange to obtain
the information it needs to determine
whether the Exchange’s membership
qualifications are satisfied. Therefore,
the Exchange believes the proposed rule
change is consistent with the Act and
the rules and regulations under the Act
applicable to a national securities
exchange and, in particular, the
requirements of Section 6(b) of the Act.5
Specifically, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 6 requirements that
the rules of an exchange be designed to
5 15
6 15
E:\FR\FM\18JAN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
18JAN1
Federal Register / Vol. 71, No. 11 / Wednesday, January 18, 2006 / Notices
promote just and equitable principles of
trade, to prevent fraudulent and
manipulative acts and, in general, to
protect investors and the public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange believes that the
proposed rule change does not impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Exchange 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.
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
Room. Copies of the filing also will be
available for inspection and copying at
the principal office of the Exchange. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–CBOE–2005–105 and
should be submitted on or before
February 8, 2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.7
Nancy M. Morris,
Secretary.
[FR Doc. E6–465 Filed 1–17–06; 8:45 am]
BILLING CODE 8010–01–P
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:
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53067; File No. SR–NASD–
2005–153]
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–2005–105 on the
subject line.
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the
Procedures for Review of Listing
Determinations
January 6, 2006.
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Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–9303.
All submissions should refer to File
Number SR–CBOE–2005–105. 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
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15:06 Jan 17, 2006
Jkt 208001
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 December
23, 2005, the National Association of
Securities Dealers, Inc. (‘‘NASD’’),
through its subsidiary, The Nasdaq
Stock Market, Inc. (‘‘Nasdaq’’), 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 Nasdaq. Nasdaq
filed this proposal pursuant to Section
19(b)(3)(A) of the Act 3 and Rule 19b–
4(f)(6) thereunder 4 as non-controversial,
and therefore the proposed rule change
is effective immediately upon filing.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
Nasdaq proposes to amend the rules
governing delisting proceedings to
permit delivery of documents by handdelivery, overnight mail, facsimile, or email in all instances. The text of the
proposed rule change is below.
Proposed new language is italicized;
proposed deletions are in [brackets].5
*
*
*
*
*
4813. Delivery of Documents
Delivery of any document under this
Rule 4800 Series [by an issuer, Nasdaq,
or the NASD] may be made by electronic
delivery, hand delivery [to the
designated address], [by] facsimile [to
the designated facsimile number], or
[and] overnight courier [to the
designated address, to Nasdaq or the
NASD by e-mail, or to an issuer by email if the issuer consents to such
method of delivery]. Delivery shall be
considered timely if the electronic
delivery, hand delivery, fax, or overnight
courier is received on or before the
relevant deadline. [hand delivered prior
to the relevant deadline or upon being
e-mailed or faxed and/or sent by
overnight courier service prior to the
relevant deadline.] If an issuer has not
specified a facsimile number, e-mail
address, or street address, delivery shall
be made to the last known facsimile
number, e-mail address, and street
address. If an issuer is represented by
counsel or a representative, delivery
[shall] may be made to the counsel or
representative.
*
*
*
*
*
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
Nasdaq included statements concerning
the purpose of, and basis for, the
proposed rule change and discussed any
comments it received on the proposed
3 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
5 The proposed rule change is marked to show
changes from the rule as it appears in the electronic
NASD Manual available at https://www.nasdr.com.
4 17
7 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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]]>Agencies
[Federal Register Volume 71, Number 11 (Wednesday, January 18, 2006)]
[Notices]
[Pages 2963-2965]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-465]
[[Page 2963]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53092; File No. SR-CBOE-2005-105]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing of Proposed Rule Change Relating to the
CBOE's Membership Rules for Foreign Member Organizations
January 10, 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 December 7, 2005, the Chicago Board Options Exchange, Incorporated
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the CBOE.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its rule regarding the
qualifications of foreign member organizations in relation to foreign
organizations seeking to become members of the Exchange in a lessor-
only capacity. The text of the proposed rule change appears below.
Additions are italicized.
* * * * *
Rule 3.4. Qualifications of Foreign Member Organizations
(a) An organization that is not organized under the laws of one of
the states of the United States must satisfy the following requirements
in order to be a member organization:
(i) The organization must be a corporation or partnership organized
under the laws of a country other than the United States with respect
to which an information sharing agreement, memorandum of understanding,
or treaty is in effect that provides the Securities and Exchange
Commission with access to information concerning securities trading
activity in that country;
(ii) The organization must disclose to the Exchange all persons
associated with the organization and all parents of the organization,
through all tiers of ownership, until the ultimate individual
beneficial owners of the organization are disclosed;
(iii) The organization must maintain in English and at a location
in the United States (A) the books and records of the organization that
relate to its business on the Exchange, including, but not limited to,
any trading records relating to trading activity on the Exchange and
(B) any other books and records of the organization that an
organization registered as a broker or dealer pursuant to Section 15 of
the Exchange Act is required to maintain at a location in the United
States;
(iv) The organization must maintain its financial records in
accordance with United States accounting standards;
(v) The organization must agree to permit inspections by the
Exchange and the Securities and Exchange Commission of the foreign
operations of the organization related to its securities business;
(vi) The organization must waive any applicable secrecy laws and be
exempted from any applicable blocking statutes in the domiciliary
jurisdiction of the organization;
(vii) The organization must provide to the Exchange an opinion of
legal counsel of the domiciliary jurisdiction of the organization which
certifies that (A) there are no applicable secrecy laws or blocking
statutes in that jurisdiction or (B) that the organization has
effectively waived any applicable secrecy laws or is exempted from any
applicable blocking statutes in that jurisdiction;
(viii) Any customer of the organization that utilizes the
organization to execute orders on the Exchange must have waived any
applicable secrecy laws and be exempted from any applicable blocking
statutes in the domiciliary jurisdiction of the organization;
(ix) The organization must agree to submit to the jurisdiction of
the Federal courts of the United States and the courts of Illinois and
to irrevocably waive, to the fullest extent permitted by law, any
objection which the organization may have based on venue or forum non
conveniens with respect to any action initiated in such courts;
(x) The organization must appoint a process agent in Illinois to
receive, on the behalf of the organization, process which may be served
in any legal action or proceeding;
(xi) The organization must own its Exchange membership(s);
(xii) The organization must be registered as a broker or dealer
pursuant to Section 15 of the Exchange Act;
(xiii) The organization must satisfy the foregoing requirements in
a manner and form prescribed by the Exchange and must satisfy such
additional requirements that the Exchange reasonably deems appropriate;
and
(xiv) The organization must meet the other qualification
requirements for membership under the Constitution and Rules.
* * * Interpretations and Policies
.01 For purposes of eligibility for membership, an entity organized
as a limited liability company under the laws of a country other than
the United States shall be deemed a corporation, its members shall be
deemed principal shareholders, and its members with management
responsibility and its managers shall be deemed executive officers.
.02 A foreign member organization that is approved to act solely as
a lessor is not required to comply with Rules 3.4(a)(iii)(B) and
3.4(a)(xii).
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the CBOE included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The CBOE has prepared summaries, set forth in Sections
A, B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Pursuant to CBOE Rule 3.4, ``Qualifications of Foreign Member
Organizations,'' an organization that is not organized under the laws
of one of the states of the United States (``foreign member
organization'') must satisfy, among other things, the requirements set
forth in CBOE Rule 3.4 in order to become a CBOE member. The purpose of
this proposed rule change is to amend CBOE Rule 3.4 to exempt a foreign
member organization that is approved by the Exchange to act solely as a
lessor from the requirements set forth in: (i) CBOE Rule 3.4(a)(xii),
which requires a foreign member organization to be registered as a
broker or dealer pursuant to Section 15 of the Act; and (ii) CBOE Rule
3.4(a)(iii)(B), which requires a foreign member organization to
maintain, in English and at a location in
[[Page 2964]]
the United States, any books and records of the foreign member
organization that an organization registered as a broker or dealer
pursuant to Section 15 of the Act is required to maintain at a location
in the United States.
CBOE member organizations, whether organized under the laws of one
of the states of the United States (``U.S. member organizations'') or
otherwise, that are approved to act solely as lessors have no trading
functions on the Exchange. In other words, the sole business function
that may be performed by a U.S. member organization or a foreign member
organization approved to act solely as a lessor is to lease the CBOE
membership it owns to another Exchange member, which member would be
required to be a registered broker-dealer that has been approved for
membership under the CBOE's membership rules.
The foreign member organization application requirements set forth
in CBOE Rule 3.4 apply equally to all foreign member organizations,
whether or not the foreign member organization is applying to act
solely as a lessor. In contrast, the application requirements for U.S.
member organizations, as set forth in CBOE Rule 3.3, ``Qualifications
and Membership Statuses of Member Organizations,'' distinguish, in
certain cases, between organizations applying as lessor-only members
and other member organizations. Specifically, CBOE Rule 3.3(a)(ii)
requires U.S. member organizations to be registered as a broker or
dealer pursuant to Section 15 of the Exchange Act, except that a U.S.
member organization that is approved to act solely as a lessor is not
required to comply with that requirement. The effect of the disparate
treatment between foreign member organizations, as set forth in CBOE
Rule 3.4, and U.S. member organizations, as set forth in CBOE Rule 3.3,
is that a U.S. member organization that is approved by the Exchange to
act solely as a lessor is not required to register as a broker or
dealer, while a foreign member organization that is approved to act
solely as a lessor is required to register as a broker or dealer
pursuant to Section 15 of the Act.
The Exchange believes that a foreign member organization that is
approved by the Exchange to act solely as a lessor should not be
required to register as a broker or dealer. In this regard, the
Exchange has received a no-action letter from the staff of the
Commission that supports the notion that persons not engaging in
securities activities for which broker or dealer registration is
required (i.e., a lessor) would not be required to register as a broker
or dealer merely because that person has acquired and leased a
membership on the Exchange.\3\ Because foreign member organizations
approved to act solely as lessors conduct no activities on the Exchange
that would otherwise require them to register as a broker or dealer,
the Exchange believes that it is appropriate not to require them to do
so.
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\3\ See letter from Jeffrey L. Steele, Assistant Chief Counsel,
Division of Market Regulation, Commission, to Arne R. Rode,
Associate General Counsel, CBOE, dated Jan. 3, 1980.
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U.S. member organizations that are approved to act solely as
lessors are generally subject to the same application requirements as
other member organizations. The only distinctions that currently exist
for these organizations are the exemptions set forth in CBOE Rule
3.3(a)(ii), as stated above, and the exemption from the Exchange's
orientation and testing requirements.\4\ Thus, for example, the
Exchange would conduct an investigation of a foreign organization
applying to be approved to act solely as a lessor in accordance with
CBOE Rule 3.9, ``Application Procedures and Approval or Disapproval.''
Furthermore, the additional application requirements set forth in CBOE
Rule 3.4 for foreign member organizations, other than those that are
proposed to be revised in this filing, would ensure that the Exchange
would have both access to the information it would need to review the
foreign member organization's application for membership and, if
necessary, the requisite jurisdiction to litigate matters related to
the foreign member organization's business on the Exchange. The
Exchange also notes that CBOE Rule 3.6(b) requires each associated
person of a member organization that is required to be disclosed on
Form BD as a direct owner or executive officer to submit an application
to the Exchange for approval to become associated with the member
organization in that capacity. CBOE Rule 3.6(b) also provides that if
the member organization is not required to be a registered broker-
dealer, an application to become associated with the member
organization in the applicable capacity is required of each associated
person of the organization that would be required to be disclosed on
Form BD as a direct owner or executive officer in the event that the
organization was a registered broker-dealer. Therefore, the Exchange
would have the ability, through the associated person application
process, to examine the senior persons in charge of the foreign member
organization to ensure that those that are not qualified under the CBOE
rules and the Act to be associated with a CBOE member are not
associated with the foreign member organization.
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\4\ See CBOE Rule 3.9(g). The Exchange's testing and orientation
requirements apply to members required to have authorized trading
functions. Members approved to act solely as lessors are not
permitted to have authorized trading functions.
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Because the foreign member organization approved by the Exchange to
act solely as a lessor would be conducting activities that would
otherwise not require it to be registered as a broker or dealer, the
Exchange also believes that the requirement set forth in CBOE Rule
3.4(a)(iii)(B) imposes obligations on the foreign member organization
that do not reflect its activities on the Exchange. As noted above,
CBOE Rule 3.4(a)(iii)(B) currently requires a foreign member
organization approved solely as a lessor to maintain, in English and at
a location in the United States, any books and records of the
organization that an organization registered as a broker or dealer
pursuant to Section 15 of the Act is required to maintain at a location
in the United States. The Exchange believes that if the only activities
conducted by the foreign member organization on the Exchange relate to
its lease activities, the provisions set forth in CBOE Rule
3.4(a)(iii)(A), which require the foreign member organization to
maintain, in English and at a location in the United States, the books
and records of the organization that relate to its business on the
Exchange, should ensure that the Exchange will have the ability to have
access to adequate information with respect to the foreign member
organization.
2. Statutory Basis
The proposed rule change implements certain application standards
for foreign member organizations that are approved to act solely as
lessors that currently exist for U.S. member organizations approved to
act solely as lessors, while still allowing for the Exchange to obtain
the information it needs to determine whether the Exchange's membership
qualifications are satisfied. Therefore, the Exchange believes the
proposed rule change is consistent with the Act and the rules and
regulations under the Act applicable to a national securities exchange
and, in particular, the requirements of Section 6(b) of the Act.\5\
Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \6\ requirements that the rules of
an exchange be designed to
[[Page 2965]]
promote just and equitable principles of trade, to prevent fraudulent
and manipulative acts and, in general, to protect investors and the
public interest.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposed rule change does not impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange 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-2005-105 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-9303.
All submissions should refer to File Number SR-CBOE-2005-105. 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 Room. Copies of the filing
also will be available for inspection and copying at the principal
office of the Exchange. All comments received will be posted without
change; the Commission does not edit personal identifying information
from submissions. You should submit only information that you wish to
make available publicly. All submissions should refer to File Number
SR-CBOE-2005-105 and should be submitted on or before February 8, 2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-465 Filed 1-17-06; 8:45 am]
BILLING CODE 8010-01-P
