Joint Industry Plan; Notice of Filing of Options Regulatory Surveillance Authority Plan by the American Stock Exchange LLC, Boston Stock Exchange, Inc., Chicago Board Options Exchange, Incorporated, International Securities Exchange, Inc., Pacific Exchange, Inc. (n/k/a NYSE Arca, Inc.) and Philadelphia Stock Exchange, Inc., 18120-18122 [E6-5147]
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18120
Federal Register / Vol. 71, No. 68 / Monday, April 10, 2006 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53589; File No. 4–516]
Joint Industry Plan; Notice of Filing of
Options Regulatory Surveillance
Authority Plan by the American Stock
Exchange LLC, Boston Stock
Exchange, Inc., Chicago Board
Options Exchange, Incorporated,
International Securities Exchange, Inc.,
Pacific Exchange, Inc. (n/k/a NYSE
Arca, Inc.) and Philadelphia Stock
Exchange, Inc.
April 4, 2006.
I. Introduction
On January 31, 2006, pursuant to Rule
608 under the Securities Exchange Act
of 1934 (‘‘Act’’),1 the American Stock
Exchange LLC, Boston Stock Exchange,
Inc., Chicago Board Options Exchange,
Incorporated (‘‘CBOE’’), International
Securities Exchange, Inc., Pacific
Exchange, Inc. (n/k/a NYSE Arca, Inc.) 2
and Philadelphia Stock Exchange, Inc.
(collectively, ‘‘Exchanges’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
Options Regulatory Surveillance
Authority Plan, a plan providing for the
joint surveillance, investigation and
detection of insider trading on the
markets maintained by the Exchanges
(‘‘ORSA Plan’’).3 Pursuant to Rule
608(b)(1),4 the Commission is
publishing this notice of, and soliciting
comments on, the ORSA Plan.
The purpose of the ORSA Plan is to
permit the Exchanges to act jointly in
the administration, operation, and
maintenance of a regulatory system for
the surveillance, investigation, and
detection of the unlawful use of
undisclosed, material information in
trading on one or more of their markets.
By sharing the costs of these regulatory
activities and by sharing the regulatory
information generated under the ORSA
Plan, the Exchanges believe they will be
able to enhance the effectiveness and
efficiency with which they regulate
their respective markets and the
1 17
CFR 240.608.
March 6, 2006, the Pacific Exchange, Inc.
(‘‘PCX’’), filed with the Commission a proposed rule
change, which was effective upon filing, to change
the name of PCX, as well as several other related
entities, to reflect the recent acquisition of PCX
Holdings, Inc., the parent company of PCX, by
Archipelago Holdings, Inc. (‘‘Archipelago’’) and the
merger of the New York Stock Exchange, Inc. with
Archipelago. See File No. SR–PCX–2006–24. All
references herein have been changed to reflect these
transactions.
3 The Exchanges initially filed the ORSA Plan
with the Commission on May 5, 2005. The
Exchanges filed revised versions of the ORSA Plan
on July 6, 2005 and September 29, 2005.
4 17 CFR 240.608(b)(1).
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national market system for options. The
Exchanges also believe that the ORSA
Plan will avoid duplication of certain
regulatory efforts on the part of the
Exchanges.
A summary of the ORSA Plan is
provided below. The full text of the
ORSA Plan is available on the
Commission’s Web site at https://
www.sec.gov, at the principal offices of
the Exchanges, and at the Commission.
II. Description of the ORSA Plan
A. Policy Committee
The ORSA Plan provides for the
establishment of a Policy Committee, on
which each Exchange will have one
representative and one vote. The Policy
Committee is responsible for overseeing
the operation of the ORSA Plan and for
making all policy decisions pertaining
to the ORSA Plan, including, among
other things, the following:
1. Determining the extent to which
regulatory, surveillance, and
investigative functions will be
conducted on behalf of the Exchanges;
2. Making all determinations
pertaining to contracts with (i) persons
who provide goods and services under
the ORSA Plan, including parties to the
ORSA Plan who provide such goods and
services, and (ii) parties to the ORSA
Plan and other self-regulatory
organizations who engage in regulatory,
surveillance, or investigative activities
under the ORSA Plan;
3. Reviewing and approving
surveillance standards and other
parameters to be used by self-regulatory
organizations who perform regulatory
and surveillance functions under the
ORSA Plan; and
4. Determining budgetary and
financial matters.
All decisions by the Policy
Committee, except as otherwise
indicated, will be by majority vote,
subject to any required approval of the
Commission. Regular meetings of the
Policy Committee may be attended by
one or more nonvoting representatives
of the Exchanges.
B. Delegation of Functions
The ORSA Plan permits the
Exchanges, as and to the extent
determined by the Policy Committee, to
delegate all or part of the regulatory and
surveillance functions under the ORSA
Plan (other than the Policy Committee’s
own functions) to one or more
Exchanges or other self-regulatory
organizations. The Policy Committee
has determined to delegate the
operation of the surveillance and
investigative facility contemplated by
the ORSA Plan to CBOE. The Exchanges
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have entered into a Regulatory Services
Agreement (‘‘RSA’’) with CBOE, as
service provider, pursuant to which
CBOE will perform certain regulatory
and surveillance functions under the
ORSA Plan and use its automated
insider trading surveillance system to
perform these functions on behalf of the
Exchanges. The Exchanges have not
filed the RSA for Commission approval.
Although CBOE will be delegated
responsibility for these activities, the
ORSA Plan specifically provides that
each Exchange will remain responsible
for the regulation of its market and for
bringing enforcement proceedings
whenever it appears that persons subject
to its regulatory jurisdiction may have
violated the Exchange’s own rules, the
Act, or the rules of the Commission
thereunder.
C. Review of Service Provider
The ORSA Plan provides that the
Policy Committee must periodically, but
not less frequently than annually,
review the performance of persons to
whom regulatory and surveillance
activities have been delegated under the
ORSA Plan. The Policy Committee must
evaluate whether such activities have
been performed by the service provider
in a reasonably acceptable manner
consistent with any contract governing
the performance of such services and
whether the costs of such services are
reasonable. The ORSA Plan also
provides that, if the Policy Committee
determines that the performance of
delegated activities is not reasonably
acceptable or that the costs are
unreasonable, the Policy Committee
may terminate the delegation of
activities to such persons subject to
applicable contractual terms.
D. Potential Insider Trading Violations
When in the course of performing
regulatory and surveillance functions
the Exchanges acting under the ORSA
Plan, or a self-regulatory organization to
whom such functions have been
delegated, obtain information indicating
that there may have been an insider
trading violation by members or
associated persons of one or more of the
Exchanges, the Exchanges or such
delegatee will promptly inform all such
parties of the relevant facts. The
Exchanges acting jointly will not have
authority to take disciplinary action
against members or associated persons
of any individual Exchange. All such
authority will remain that of the
Exchanges acting in their individual
capacities.
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Federal Register / Vol. 71, No. 68 / Monday, April 10, 2006 / Notices
E. Dispute Resolution
Disputes arising in connection with
the operation of the ORSA Plan will be
resolved by the Policy Committee acting
by majority vote. As stated above, each
Exchange will have one representative
and one vote on the Policy Committee.
F. Other Regulatory or Surveillance
Functions
The ORSA Plan permits the
Exchanges to provide for the joint
performance of any other regulatory or
surveillance functions or activities that
the Exchanges determine to bring within
the scope of the ORSA Plan, but any
determination to expand the functions
or activities under the ORSA Plan
would be an amendment to the ORSA
Plan subject to the requirements for
amendments described below.
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G. Allocation of Costs
The costs under the ORSA Plan to be
allocated among the Exchanges will
consist of all costs duly incurred by any
Exchange as a direct result of its
performing regulatory or surveillance
functions under the ORSA Plan,
together with any amounts charged
under the ORSA Plan (or charged to any
Exchange authorized to incur such
charges under the ORSA Plan) by any
other person for goods or services
provided under the ORSA Plan. The
costs incurred by CBOE in developing
the insider trading surveillance system
to be used by CBOE as the ORSA Plan
service provider will be borne by CBOE
without reimbursement. Costs incurred
by CBOE in maintaining and upgrading
its system going forward will be
allocated among the Exchanges,
provided that such costs have been
authorized by the Exchanges.
Costs in each calendar quarter will be
allocated among the Exchanges in
accordance with a three element
formula: (i) Fifty percent of costs will be
allocated equally among the Exchanges
(with a pro rata adjustment for any
exchange that was not an Exchange for
the entire calendar quarter); (ii) twentyfive percent of costs will be allocated
among the Exchanges in accordance
with their respective contract volume
market shares during the calendar
quarter; and (iii) twenty-five percent of
costs will be allocated among the
Exchanges in accordance with their
respective numbers of classes of
securities options traded at any time
during the calendar quarter.
H. New Parties to the ORSA Plan;
Participation Fee
Any other self-regulatory organization
that maintains a market for the trading
of securities options in accordance with
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rules approved by the Commission may
become a party to the ORSA Plan,
subject to agreeing to the terms and
conditions of the ORSA Plan, agreeing
to the terms and conditions of any
contract pursuant to which the parties
to the ORSA Plan have delegated
regulatory and surveillance functions
under the ORSA Plan, and payment of
a participation fee.
The participation fee will be an
amount determined by a majority of the
Exchanges to be fair and reasonable
compensation for the costs incurred in
developing and maintaining the
facilities used under the ORSA Plan and
in providing for participation by the
new party. In determining the amount of
the participation fee, the Exchanges
must consider the following factors:
1. The portion of costs previously
paid for the development, expansion
and maintenance of facilities used
under the ORSA Plan which, under
generally accepted accounting
principles, would have been treated as
capital expenditures and would have
been amortized over the five years
preceding the admission of the new
party;
2. An assessment of costs incurred
and to be incurred, if any, to
accommodate the new party, which are
not otherwise required to be paid by the
new party; and
3. Previous participation fees paid by
other new parties.
If the Exchanges and a new party cannot
agree on the amount of the participation
fee, the matter will be subject to review
by the Commission.
A self-regulatory organization that
does not maintain a market for the
trading of securities options may
become a party to the ORSA Plan, and
a self-regulatory organization that ceases
to maintain such a market may continue
to be a party to the ORSA Plan, only if
permitted by a majority of the other
parties.
I. Term and Termination
The ORSA Plan will remain in effect
for so long as there are two or more
parties to the ORSA Plan. Any Exchange
may withdraw from the ORSA Plan at
any time on not less than six months
prior written notice to each of the other
parties. Any Exchange withdrawing
from the ORSA Plan will remain liable
for its proportionate share of costs
allocated to it for the period during
which it was a party, but it will have no
further obligations under the ORSA Plan
or to any of the other Exchanges with
respect to the period following the
effectiveness of its withdrawal. The
right of an Exchange to participate in
joint regulatory services under the
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18121
ORSA Plan is not transferable without
the consent of the other Exchanges.
J. Amendments
The ORSA Plan may be amended by
the affirmative vote of all of the parties,
provided that the provisions pertaining
to the allocation of costs may be
amended by the affirmative vote of not
less than two-thirds of the parties,
subject in each case to any required
approval of the Commission.
III. Phases of Development
The automated insider trading
surveillance system proposed to be used
under the ORSA Plan has been
developed by CBOE and is currently
being used by CBOE for the
surveillance, investigation, and
detection of insider trading on its own
market. The system is available for
immediate use by the Exchanges under
the ORSA Plan. If the ORSA Plan is
approved by the Commission, CBOE
intends to supplement its database of
options subject to surveillance by the
system to include those relatively few
options that are traded on the markets
of one or more of the other Exchanges
but not on CBOE. CBOE has represented
that this supplementation will be
accomplished promptly after the ORSA
Plan has been approved by the
Commission.
IV. Impact on Competition
The Exchanges do not believe that the
operation of the ORSA Plan will have
any impact on competition.
V. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the ORSA Plan 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 4–516 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
20549–1090.
All submissions should refer to File
Number 4–516. This file number should
be included on the subject line if e-mail
is used. To help the Commission
process and review your comments
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Federal Register / Vol. 71, No. 68 / Monday, April 10, 2006 / Notices
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 ORSA
Plan that are filed with the Commission,
and all written communications relating
to the ORSA Plan between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Room. Copies of such filing also will be
available for inspection and copying at
the principal offices of the Exchanges.
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 4–516 and should be submitted
on or before May 1, 2006.
By the Commission.
Nancy M. Morris,
Secretary.
[FR Doc. E6–5147 Filed 4–7–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release Nos. 33–8674; 34–53595, File No.
265–23]
Advisory Committee on Smaller Public
Companies
Securities and Exchange
Commission.
ACTION: Notice of meeting of SEC
Advisory Committee on Smaller Public
Companies.
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AGENCY:
The Securities and Exchange
Commission Advisory Committee on
Smaller Public Companies is providing
notice that it will hold a public meeting
on Thursday, April 20, 2006, in MultiPurpose Room L006 of the
Commission’s headquarters, 100 F
Street, NE., Washington, DC 20549,
beginning at 10 a.m., EDT. The meeting
will be audio Webcast on the
Commission’s Web site at https://
www.sec.gov.
The agenda for the meeting includes
adoption of the Advisory Committee’s
Final Report to the Commission. The
Advisory Committee may also discuss
written statements received and other
matters of concern. The public is invited
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18:48 Apr 07, 2006
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to submit written statements for the
meeting.
SECURITIES AND EXCHANGE
COMMISSION
DATES:
Written statements should be
received on or before April 16, 2006.
[Release No. 34–53588; File No. SR–Amex–
2006–28]
Written statements may be
submitted by any of the following
methods:
Self-Regulatory Organizations;
American Stock Exchange LLC; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change To Adopt
Rules and Procedures Governing the
Execution of Complex Orders
Involving Options and Securities
Futures
ADDRESSES:
Electronic Statements
• Use the Commission’s Internet
submission form (https://www.sec.gov/
info/smallbus/acspc.shtml); or
• Send an e-mail message to rulecomments@sec.gov. Please include File
Number 265–23 on the subject line; or
Paper Statements
• Send paper statements in triplicate
to Nancy M. Morris, Committee
Management Officer, Securities and
Exchange Commission, 100 F Street,
NE., Washington, DC 20549–1090.
All submissions should refer to File No.
265–23. This file number should be
included on the subject line if e-mail is
used. To help us process and review
your statement more efficiently, please
use only one method. The Commission
staff will post all statements on the
Advisory Committee’s Web site (https://
www.sec.gov./info/smallbus/
acspc.shtml).
Statements also will be available for
public inspection and copying in the
Commission’s Public Reference Room,
100 F Street, NE., Room 1580,
Washington, DC 20549. All statements
received will be posted without change;
we do not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly.
FOR FURTHER INFORMATION CONTACT:
Kevin M. O’Neill, Special Counsel, at
(202) 551–3260, Office of Small
Business Policy, Division of Corporation
Finance, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549–3628.
In
accordance with Section 10(a) of the
Federal Advisory Committee Act, 5
U.S.C.–App. 1, § 10(a), and the
regulations thereunder, Gerald J.
Laporte, Designated Federal Officer of
the Committee, has ordered publication
of this notice.
SUPPLEMENTARY INFORMATION:
Dated: April 4, 2006.
Nancy M. Morris,
Committee Management Officer.
[FR Doc. E6–5182 Filed 4–7–06; 8:45 am]
BILLING CODE 8010–01–P
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April 3, 2006.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 24,
2006, the American Stock Exchange LLC
(‘‘Amex’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Amex. The Exchange has filed
the proposal as a ‘‘non-controversial’’
rule change pursuant to Section
19(b)(3)(A) of the Act 3 and Rule 19b–
4(f)(6) thereunder,4 which renders it
effective upon filing with the
Commission. 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 seeks to adopt rules
governing the execution of complex
orders 5 involving stock-option orders
and security future-option orders, and to
adopt definitions of additional types of
complex orders. Below is the text of the
proposed rule change. Proposed new
language is in italics; proposed
deletions are in [brackets].
Rule 900—ANTE
Applicability, Definitions and
References
(a) Applicability—The Exchange’s
new trading system (known as the
ANTE System or ANTE) will be rolledout over a period of time (approximately
eighteen months) on a specialist postby-specialist post basis. The roll-out
began on May 25, 2004 and will
continue until June 30, 2006 at which
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6).
5 Complex orders include those orders which are
defined in 950—ANTE(e)(i)–(iii) and 950—
ANTE(e)(vii), and proposed 950—ANTE(e)(viii)–
(xii).
2 17
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]]>Agencies
[Federal Register Volume 71, Number 68 (Monday, April 10, 2006)]
[Notices]
[Pages 18120-18122]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-5147]
[[Page 18120]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53589; File No. 4-516]
Joint Industry Plan; Notice of Filing of Options Regulatory
Surveillance Authority Plan by the American Stock Exchange LLC, Boston
Stock Exchange, Inc., Chicago Board Options Exchange, Incorporated,
International Securities Exchange, Inc., Pacific Exchange, Inc. (n/k/a
NYSE Arca, Inc.) and Philadelphia Stock Exchange, Inc.
April 4, 2006.
I. Introduction
On January 31, 2006, pursuant to Rule 608 under the Securities
Exchange Act of 1934 (``Act''),\1\ the American Stock Exchange LLC,
Boston Stock Exchange, Inc., Chicago Board Options Exchange,
Incorporated (``CBOE''), International Securities Exchange, Inc.,
Pacific Exchange, Inc. (n/k/a NYSE Arca, Inc.) \2\ and Philadelphia
Stock Exchange, Inc. (collectively, ``Exchanges'') filed with the
Securities and Exchange Commission (``Commission'') the Options
Regulatory Surveillance Authority Plan, a plan providing for the joint
surveillance, investigation and detection of insider trading on the
markets maintained by the Exchanges (``ORSA Plan'').\3\ Pursuant to
Rule 608(b)(1),\4\ the Commission is publishing this notice of, and
soliciting comments on, the ORSA Plan.
---------------------------------------------------------------------------
\1\ 17 CFR 240.608.
\2\ On March 6, 2006, the Pacific Exchange, Inc. (``PCX''),
filed with the Commission a proposed rule change, which was
effective upon filing, to change the name of PCX, as well as several
other related entities, to reflect the recent acquisition of PCX
Holdings, Inc., the parent company of PCX, by Archipelago Holdings,
Inc. (``Archipelago'') and the merger of the New York Stock
Exchange, Inc. with Archipelago. See File No. SR-PCX-2006-24. All
references herein have been changed to reflect these transactions.
\3\ The Exchanges initially filed the ORSA Plan with the
Commission on May 5, 2005. The Exchanges filed revised versions of
the ORSA Plan on July 6, 2005 and September 29, 2005.
\4\ 17 CFR 240.608(b)(1).
---------------------------------------------------------------------------
The purpose of the ORSA Plan is to permit the Exchanges to act
jointly in the administration, operation, and maintenance of a
regulatory system for the surveillance, investigation, and detection of
the unlawful use of undisclosed, material information in trading on one
or more of their markets. By sharing the costs of these regulatory
activities and by sharing the regulatory information generated under
the ORSA Plan, the Exchanges believe they will be able to enhance the
effectiveness and efficiency with which they regulate their respective
markets and the national market system for options. The Exchanges also
believe that the ORSA Plan will avoid duplication of certain regulatory
efforts on the part of the Exchanges.
A summary of the ORSA Plan is provided below. The full text of the
ORSA Plan is available on the Commission's Web site at https://
www.sec.gov, at the principal offices of the Exchanges, and at the
Commission.
II. Description of the ORSA Plan
A. Policy Committee
The ORSA Plan provides for the establishment of a Policy Committee,
on which each Exchange will have one representative and one vote. The
Policy Committee is responsible for overseeing the operation of the
ORSA Plan and for making all policy decisions pertaining to the ORSA
Plan, including, among other things, the following:
1. Determining the extent to which regulatory, surveillance, and
investigative functions will be conducted on behalf of the Exchanges;
2. Making all determinations pertaining to contracts with (i)
persons who provide goods and services under the ORSA Plan, including
parties to the ORSA Plan who provide such goods and services, and (ii)
parties to the ORSA Plan and other self-regulatory organizations who
engage in regulatory, surveillance, or investigative activities under
the ORSA Plan;
3. Reviewing and approving surveillance standards and other
parameters to be used by self-regulatory organizations who perform
regulatory and surveillance functions under the ORSA Plan; and
4. Determining budgetary and financial matters.
All decisions by the Policy Committee, except as otherwise
indicated, will be by majority vote, subject to any required approval
of the Commission. Regular meetings of the Policy Committee may be
attended by one or more nonvoting representatives of the Exchanges.
B. Delegation of Functions
The ORSA Plan permits the Exchanges, as and to the extent
determined by the Policy Committee, to delegate all or part of the
regulatory and surveillance functions under the ORSA Plan (other than
the Policy Committee's own functions) to one or more Exchanges or other
self-regulatory organizations. The Policy Committee has determined to
delegate the operation of the surveillance and investigative facility
contemplated by the ORSA Plan to CBOE. The Exchanges have entered into
a Regulatory Services Agreement (``RSA'') with CBOE, as service
provider, pursuant to which CBOE will perform certain regulatory and
surveillance functions under the ORSA Plan and use its automated
insider trading surveillance system to perform these functions on
behalf of the Exchanges. The Exchanges have not filed the RSA for
Commission approval.
Although CBOE will be delegated responsibility for these
activities, the ORSA Plan specifically provides that each Exchange will
remain responsible for the regulation of its market and for bringing
enforcement proceedings whenever it appears that persons subject to its
regulatory jurisdiction may have violated the Exchange's own rules, the
Act, or the rules of the Commission thereunder.
C. Review of Service Provider
The ORSA Plan provides that the Policy Committee must periodically,
but not less frequently than annually, review the performance of
persons to whom regulatory and surveillance activities have been
delegated under the ORSA Plan. The Policy Committee must evaluate
whether such activities have been performed by the service provider in
a reasonably acceptable manner consistent with any contract governing
the performance of such services and whether the costs of such services
are reasonable. The ORSA Plan also provides that, if the Policy
Committee determines that the performance of delegated activities is
not reasonably acceptable or that the costs are unreasonable, the
Policy Committee may terminate the delegation of activities to such
persons subject to applicable contractual terms.
D. Potential Insider Trading Violations
When in the course of performing regulatory and surveillance
functions the Exchanges acting under the ORSA Plan, or a self-
regulatory organization to whom such functions have been delegated,
obtain information indicating that there may have been an insider
trading violation by members or associated persons of one or more of
the Exchanges, the Exchanges or such delegatee will promptly inform all
such parties of the relevant facts. The Exchanges acting jointly will
not have authority to take disciplinary action against members or
associated persons of any individual Exchange. All such authority will
remain that of the Exchanges acting in their individual capacities.
[[Page 18121]]
E. Dispute Resolution
Disputes arising in connection with the operation of the ORSA Plan
will be resolved by the Policy Committee acting by majority vote. As
stated above, each Exchange will have one representative and one vote
on the Policy Committee.
F. Other Regulatory or Surveillance Functions
The ORSA Plan permits the Exchanges to provide for the joint
performance of any other regulatory or surveillance functions or
activities that the Exchanges determine to bring within the scope of
the ORSA Plan, but any determination to expand the functions or
activities under the ORSA Plan would be an amendment to the ORSA Plan
subject to the requirements for amendments described below.
G. Allocation of Costs
The costs under the ORSA Plan to be allocated among the Exchanges
will consist of all costs duly incurred by any Exchange as a direct
result of its performing regulatory or surveillance functions under the
ORSA Plan, together with any amounts charged under the ORSA Plan (or
charged to any Exchange authorized to incur such charges under the ORSA
Plan) by any other person for goods or services provided under the ORSA
Plan. The costs incurred by CBOE in developing the insider trading
surveillance system to be used by CBOE as the ORSA Plan service
provider will be borne by CBOE without reimbursement. Costs incurred by
CBOE in maintaining and upgrading its system going forward will be
allocated among the Exchanges, provided that such costs have been
authorized by the Exchanges.
Costs in each calendar quarter will be allocated among the
Exchanges in accordance with a three element formula: (i) Fifty percent
of costs will be allocated equally among the Exchanges (with a pro rata
adjustment for any exchange that was not an Exchange for the entire
calendar quarter); (ii) twenty-five percent of costs will be allocated
among the Exchanges in accordance with their respective contract volume
market shares during the calendar quarter; and (iii) twenty-five
percent of costs will be allocated among the Exchanges in accordance
with their respective numbers of classes of securities options traded
at any time during the calendar quarter.
H. New Parties to the ORSA Plan; Participation Fee
Any other self-regulatory organization that maintains a market for
the trading of securities options in accordance with rules approved by
the Commission may become a party to the ORSA Plan, subject to agreeing
to the terms and conditions of the ORSA Plan, agreeing to the terms and
conditions of any contract pursuant to which the parties to the ORSA
Plan have delegated regulatory and surveillance functions under the
ORSA Plan, and payment of a participation fee.
The participation fee will be an amount determined by a majority of
the Exchanges to be fair and reasonable compensation for the costs
incurred in developing and maintaining the facilities used under the
ORSA Plan and in providing for participation by the new party. In
determining the amount of the participation fee, the Exchanges must
consider the following factors:
1. The portion of costs previously paid for the development,
expansion and maintenance of facilities used under the ORSA Plan which,
under generally accepted accounting principles, would have been treated
as capital expenditures and would have been amortized over the five
years preceding the admission of the new party;
2. An assessment of costs incurred and to be incurred, if any, to
accommodate the new party, which are not otherwise required to be paid
by the new party; and
3. Previous participation fees paid by other new parties.
If the Exchanges and a new party cannot agree on the amount of the
participation fee, the matter will be subject to review by the
Commission.
A self-regulatory organization that does not maintain a market for
the trading of securities options may become a party to the ORSA Plan,
and a self-regulatory organization that ceases to maintain such a
market may continue to be a party to the ORSA Plan, only if permitted
by a majority of the other parties.
I. Term and Termination
The ORSA Plan will remain in effect for so long as there are two or
more parties to the ORSA Plan. Any Exchange may withdraw from the ORSA
Plan at any time on not less than six months prior written notice to
each of the other parties. Any Exchange withdrawing from the ORSA Plan
will remain liable for its proportionate share of costs allocated to it
for the period during which it was a party, but it will have no further
obligations under the ORSA Plan or to any of the other Exchanges with
respect to the period following the effectiveness of its withdrawal.
The right of an Exchange to participate in joint regulatory services
under the ORSA Plan is not transferable without the consent of the
other Exchanges.
J. Amendments
The ORSA Plan may be amended by the affirmative vote of all of the
parties, provided that the provisions pertaining to the allocation of
costs may be amended by the affirmative vote of not less than two-
thirds of the parties, subject in each case to any required approval of
the Commission.
III. Phases of Development
The automated insider trading surveillance system proposed to be
used under the ORSA Plan has been developed by CBOE and is currently
being used by CBOE for the surveillance, investigation, and detection
of insider trading on its own market. The system is available for
immediate use by the Exchanges under the ORSA Plan. If the ORSA Plan is
approved by the Commission, CBOE intends to supplement its database of
options subject to surveillance by the system to include those
relatively few options that are traded on the markets of one or more of
the other Exchanges but not on CBOE. CBOE has represented that this
supplementation will be accomplished promptly after the ORSA Plan has
been approved by the Commission.
IV. Impact on Competition
The Exchanges do not believe that the operation of the ORSA Plan
will have any impact on competition.
V. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the ORSA Plan 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 4-516 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 20549-1090.
All submissions should refer to File Number 4-516. This file number
should be included on the subject line if e-mail is used. To help the
Commission process and review your comments
[[Page 18122]]
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 ORSA Plan that are filed
with the Commission, and all written communications relating to the
ORSA Plan between the Commission and any person, other than those that
may be withheld from the public in accordance with the provisions of 5
U.S.C. 552, will be available for inspection and copying in the
Commission's Public Reference Room. Copies of such filing also will be
available for inspection and copying at the principal offices of the
Exchanges. 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 4-516
and should be submitted on or before May 1, 2006.
By the Commission.
Nancy M. Morris,
Secretary.
[FR Doc. E6-5147 Filed 4-7-06; 8:45 am]
BILLING CODE 8010-01-P
