Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Granting Approval of Proposed Rule Change Regarding the Review Authority of the Board of Directors, 42142-42143 [E6-11793]

Download as PDF 42142 Federal Register / Vol. 71, No. 142 / Tuesday, July 25, 2006 / Notices 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–Amex–2006–62 and should be submitted on or before August 15, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.11 Nancy M. Morris, Secretary. [FR Doc. E6–11795 Filed 7–24–06; 8:45 am] IV. Commission’s Findings and Order Granting Accelerated Approval of the Proposed Rule Change [Release No. 34–54169; File No. SR–CBOE– 2006–45] After careful consideration, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange,6 and, in particular, the requirements of Section 6(b) of the Act 7 and the rules and regulations thereunder. The Commission finds that the proposed rule change is consistent with Section 6(b)(4) of the Act, 8 which requires that the rules of the Exchange provide for the equitable allocation of reasonable dues, fees and other charges among its members and other persons using its facilities. The Commission believes that the extension of the Linkage fee pilot until July 31, 2007 will give the Exchange and the Commission further opportunity to evaluate whether such fees are appropriate. The Commission finds good cause, pursuant to Section 19(b)(2) of the Act,9 for approving the proposed rule change prior to the thirtieth day after publication of notice thereof in the Federal Register. The Commission believes that granting accelerated approval of the proposed rule change will preserve the Exchange’s existing pilot program for Linkage fees without interruption as the Exchange and the Commission further consider the appropriateness of Linkage fees. V. Conclusion sroberts on PROD1PC70 with NOTICES It is therefore ordered, pursuant to Section 19(b)(2) of the Act,10 that the proposed rule change (SR–Amex–2006– 62) is hereby approved on an accelerated basis for a pilot period to expire on July 31, 2007. 6 In approving this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(4). 9 15 U.S.C. 78s(b)(2). 10 Id. VerDate Aug<31>2005 18:02 Jul 24, 2006 Jkt 208001 BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Granting Approval of Proposed Rule Change Regarding the Review Authority of the Board of Directors July 18, 2006. I. Introduction On May 5, 2006, the Chicago Board Options Exchange, Incorporated (‘‘CBOE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend its rules to clarify the authority of CBOE’s Board of Directors (‘‘Board’’) with respect to actions or inactions of CBOE committees and CBOE officers, representatives, or designees. The proposed rule change was published for comment in the Federal Register on June 2, 2006.3 The Commission received one comment letter regarding the proposal 4 and a response to the comment letter from the Exchange.5 This order approves the proposed rule change. II. Description of the Proposed Rule Change The Exchange proposes to add new CBOE Rule 2.2, Power of the Board to Review Exchange Decisions, which would provide that, in connection with any delegation to a committee or committees pursuant to Article EIGHTH of CBOE’s Certificate of Incorporation (‘‘Certificate’’), the Board would retain the power and authority to review, CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 53872 (May 25, 2006), 71 FR 32156. 4 See letter to Nancy M. Morris, Secretary, Commission, from Lawrence J. Blum, Member, CBOE, dated June 5, 2006 (‘‘Blum Letter’’). 5 See letter to Nancy Sanow, Assistant Director, Division of Market Regulation (‘‘Division’’), Commission, from Jennifer M. Lamie, Managing Senior Attorney, Legal Division, CBOE, dated July 7, 2006 (‘‘CBOE Response Letter’’). PO 00000 11 17 1 15 Frm 00068 Fmt 4703 Sfmt 4703 affirm, modify, suspend, or overrule any and all actions or inactions of CBOE committees, and of all officers, representatives, or designees of CBOE. Proposed CBOE Rule 2.2 would not apply to actions taken (or inactions) pursuant to Chapters XVII (Discipline), XVIII (Arbitration), and XIX (Hearings and Review) of the Exchange’s Rules, unless specifically provided for in those Rules, or to actions taken by (or inactions of) the Nominating Committee or Executive Committee pursuant to Article IV of the Exchange’s Constitution, which sets forth the Exchange’s nominations process. In addition, the proposed rule change would amend CBOE Rule 2.1, Committees of the Exchange, to clarify that CBOE committees would have, in addition to the powers and duties that are specifically granted in the Exchange’s Constitution or Rules, only such other powers and duties as may be delegated to them by the Board. III. Discussion and Commission Findings The Commission has carefully reviewed the proposed rule change, the comment letter received, and the CBOE Response Letter, and finds that the proposed rule change is consistent with the requirements of the Act,6 and, in particular, the requirements of Section 6 of the Act.7 Specifically, the Commission finds that the proposed rule change is consistent with Section 6(b)(1) of the Act,8 which requires that an exchange be so organized and have the capacity to be able to carry out the purposes of the Act and to comply, and (subject to any rule or order of the Commission pursuant to Section 17(d) 9 or 19(g)(2) 10 of the Act) to enforce compliance by its members and persons associated with its members, with the provisions of the Act, the rules and regulations thereunder, and the rules of the Exchange. The commenter asserted that the proposed rule change is unnecessary and generally in conflict with the CBOE Constitution.11 The commenter also expressed concern that the aim of the proposed rule change is to reduce the influence of member/owners.12 In response, the Exchange noted that CBOE is a membership corporation formed 6 In approving this proposed rule change the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 7 15 U.S.C. 78f. 8 15 U.S.C. 78f(b)(1). 9 15 U.S.C. 78q(d). 10 15 U.S.C. 78s(g)(2). 11 See Blum Letter at 1, supra note 4. 12 Id. at 2. E:\FR\FM\25JYN1.SGM 25JYN1 sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 71, No. 142 / Tuesday, July 25, 2006 / Notices under Delaware’s General Corporation Law, which provides that ‘‘the business and affairs of every corporation shall be managed by or under the direction of a board of directors, except as may be otherwise * * * provided in its certificate of incorporation * * * * ’’ 13 CBOE stated that its Certificate provides that the Board is CBOE’s governing body and is vested with all powers necessary for the management of the Exchange’s business and affairs, except to the extent that the authority, powers, and duties of such management are delegated to a committee or committees established pursuant to CBOE’s Constitution or Rules. According to CBOE, its Certificate and Constitution provide that the Board may establish one or more committees, each of which has the authority, powers, and duties as may be prescribed in the Constitution, Exchange Rules, or by resolution of the Board.14 CBOE advised that, under these provisions, it has established various committees and has delegated to those committees specific authority, powers, and duties. CBOE further noted that its Rules provide that each committee ‘‘is subject to the control and supervision of the Board.’’ 15 CBOE stated, however, that such supervisory power alone does not make explicit the power of the Board to directly modify or overrule the action (or inaction) of a committee when the decision-making authority with respect to the action has been delegated to the committee. CBOE pointed out that the specific delegations contained in its Constitution, Rules, and resolutions vary in scope: Some involve a complete delegation and others involve a limited delegation where the Board has explicitly or implicitly reserved certain authorities. CBOE noted that, although the specific delegations contained in its Constitution, Rules, and Board resolutions vary in describing the scope of the authority delegated, its Board retains the power to revoke, limit, or change a committee delegation, either by rule change or by resolution as appropriate. The purpose of the proposed rule change, CBOE asserted, is to apply an explicit, uniform standard of review by the Board to the general organizational and administrative structure of CBOE’s committees and to resolve any ambiguity that may exist. Thus, CBOE contended that the proposed rule change would clarify that the Board retains the power and authority to review, affirm, modify, suspend or 13 See CBOE Response Letter, supra note 5, at 1. 14 Id. 15 CBOE Rule 2.1(d). VerDate Aug<31>2005 18:02 Jul 24, 2006 Jkt 208001 overrule any and all actions or inactions of CBOE committees and officers, representatives, or designees, except as otherwise specified. In CBOE’s view, the proposal is consistent with its Certificate and Constitution. CBOE also advised that the proposed rule change is consistent with the provisions of its Constitution pertaining to the Executive Committee. CBOE stated that the Executive Committee is a committee of the Board that performs the functions of the Board when the Board is not in session or it is not practicable to arrange a meeting of the Board within the time reasonably available. Thus, to the extent that the Executive Committee would take any action pursuant to Article VII, Section 7.2 of its Constitution, CBOE asserted that the Board retains jurisdiction over those matters and may later determine to review, affirm, modify, suspend or overrule any and all actions of the Executive Committee. In the Commission’s view, the Exchange has provided a sufficient basis on which the Commission can find that, as a federal matter under the Act, the Exchange is complying with its own Certificate and Constitution. Further, in approving this proposal, the Commission is relying on CBOE’s representation that the proposed rule change is appropriate under Delaware state law.16 Thus, the Commission believes that the proposed rule change clarifies the Board’s review authority by providing an explicit, uniform standard to be applied to any delegation of Board authority, powers, and duties and is consistent with the Act. IV. Conclusion For the foregoing reasons, the Commission finds that the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to a national securities exchange, and in particular, with Section 6(b)(1) of the Act.17 It is therefore ordered, pursuant to Section 19(b)(2) of the Act,18 that the proposed rule change (File No. SR– CBOE–2006–45) is hereby approved. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.19 Nancy M. Morris, Secretary. [FR Doc. E6–11793 Filed 7–24–06; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54164; File No. SR–CBOE– 2006–60] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend the Duration of CBOE Rule 6.45A(b) Pertaining to Orders Represented in Open Outcry July 17, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on July12, 2006, the Chicago Board Options Exchange, Inc. (‘‘CBOE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the CBOE. The Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder,4 which renders it effective upon filing with the Commission.5 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 CBOE proposes to extend the duration of CBOE Rule 6.45A(b) (the ‘‘Rule’’), which relates to the allocation of orders represented in open outcry in equity option classes designated by the Exchange to be traded on the CBOE Hybrid Trading System (‘‘Hybrid’’) through October 31, 2006. No other substantive changes are being made to the Rule. The text of the proposed rule change is available on the CBOE’s Internet Web site (http:// www.cboe.com), at the CBOE’s principal 19 17 conference among Jennifer M. Lamie, Managing Senior Attorney, Legal Division, CBOE; Leah Mesfin, Special Counsel, Division, Commission; and Jan Woo, Attorney, Division, Commission, on July 18, 2006. 17 15 U.S.C. 78f(b)(1). 18 15 U.S.C. 78s(b)(2). PO 00000 16 Telephone Frm 00069 Fmt 4703 Sfmt 4703 42143 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(6). 5 The Exchange has asked the Commission to waive the 30-day operative delay required by Rule 19b–4(f)(6)(iii), 17 CFR 240.19b–4(f)(6)(iii). See discussion infra Section III. 1 15 E:\FR\FM\25JYN1.SGM 25JYN1

Agencies

[Federal Register Volume 71, Number 142 (Tuesday, July 25, 2006)]
[Notices]
[Pages 42142-42143]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-11793]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54169; File No. SR-CBOE-2006-45]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Granting Approval of Proposed Rule Change Regarding 
the Review Authority of the Board of Directors

July 18, 2006.

I. Introduction

    On May 5, 2006, the Chicago Board Options Exchange, Incorporated 
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend its rules to clarify the 
authority of CBOE's Board of Directors (``Board'') with respect to 
actions or inactions of CBOE committees and CBOE officers, 
representatives, or designees. The proposed rule change was published 
for comment in the Federal Register on June 2, 2006.\3\ The Commission 
received one comment letter regarding the proposal \4\ and a response 
to the comment letter from the Exchange.\5\ This order approves the 
proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 53872 (May 25, 
2006), 71 FR 32156.
    \4\ See letter to Nancy M. Morris, Secretary, Commission, from 
Lawrence J. Blum, Member, CBOE, dated June 5, 2006 (``Blum 
Letter'').
    \5\ See letter to Nancy Sanow, Assistant Director, Division of 
Market Regulation (``Division''), Commission, from Jennifer M. 
Lamie, Managing Senior Attorney, Legal Division, CBOE, dated July 7, 
2006 (``CBOE Response Letter'').
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II. Description of the Proposed Rule Change

    The Exchange proposes to add new CBOE Rule 2.2, Power of the Board 
to Review Exchange Decisions, which would provide that, in connection 
with any delegation to a committee or committees pursuant to Article 
EIGHTH of CBOE's Certificate of Incorporation (``Certificate''), the 
Board would retain the power and authority to review, affirm, modify, 
suspend, or overrule any and all actions or inactions of CBOE 
committees, and of all officers, representatives, or designees of CBOE. 
Proposed CBOE Rule 2.2 would not apply to actions taken (or inactions) 
pursuant to Chapters XVII (Discipline), XVIII (Arbitration), and XIX 
(Hearings and Review) of the Exchange's Rules, unless specifically 
provided for in those Rules, or to actions taken by (or inactions of) 
the Nominating Committee or Executive Committee pursuant to Article IV 
of the Exchange's Constitution, which sets forth the Exchange's 
nominations process. In addition, the proposed rule change would amend 
CBOE Rule 2.1, Committees of the Exchange, to clarify that CBOE 
committees would have, in addition to the powers and duties that are 
specifically granted in the Exchange's Constitution or Rules, only such 
other powers and duties as may be delegated to them by the Board.

III. Discussion and Commission Findings

    The Commission has carefully reviewed the proposed rule change, the 
comment letter received, and the CBOE Response Letter, and finds that 
the proposed rule change is consistent with the requirements of the 
Act,\6\ and, in particular, the requirements of Section 6 of the 
Act.\7\ Specifically, the Commission finds that the proposed rule 
change is consistent with Section 6(b)(1) of the Act,\8\ which requires 
that an exchange be so organized and have the capacity to be able to 
carry out the purposes of the Act and to comply, and (subject to any 
rule or order of the Commission pursuant to Section 17(d) \9\ or 
19(g)(2) \10\ of the Act) to enforce compliance by its members and 
persons associated with its members, with the provisions of the Act, 
the rules and regulations thereunder, and the rules of the Exchange.
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    \6\ In approving this proposed rule change the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(1).
    \9\ 15 U.S.C. 78q(d).
    \10\ 15 U.S.C. 78s(g)(2).
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    The commenter asserted that the proposed rule change is unnecessary 
and generally in conflict with the CBOE Constitution.\11\ The commenter 
also expressed concern that the aim of the proposed rule change is to 
reduce the influence of member/owners.\12\ In response, the Exchange 
noted that CBOE is a membership corporation formed

[[Page 42143]]

under Delaware's General Corporation Law, which provides that ``the 
business and affairs of every corporation shall be managed by or under 
the direction of a board of directors, except as may be otherwise * * * 
provided in its certificate of incorporation * * * * '' \13\ CBOE 
stated that its Certificate provides that the Board is CBOE's governing 
body and is vested with all powers necessary for the management of the 
Exchange's business and affairs, except to the extent that the 
authority, powers, and duties of such management are delegated to a 
committee or committees established pursuant to CBOE's Constitution or 
Rules. According to CBOE, its Certificate and Constitution provide that 
the Board may establish one or more committees, each of which has the 
authority, powers, and duties as may be prescribed in the Constitution, 
Exchange Rules, or by resolution of the Board.\14\ CBOE advised that, 
under these provisions, it has established various committees and has 
delegated to those committees specific authority, powers, and duties.
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    \11\ See Blum Letter at 1, supra note 4.
    \12\ Id. at 2.
    \13\ See CBOE Response Letter, supra note 5, at 1.
    \14\ Id.
---------------------------------------------------------------------------

    CBOE further noted that its Rules provide that each committee ``is 
subject to the control and supervision of the Board.'' \15\ CBOE 
stated, however, that such supervisory power alone does not make 
explicit the power of the Board to directly modify or overrule the 
action (or inaction) of a committee when the decision-making authority 
with respect to the action has been delegated to the committee. CBOE 
pointed out that the specific delegations contained in its 
Constitution, Rules, and resolutions vary in scope: Some involve a 
complete delegation and others involve a limited delegation where the 
Board has explicitly or implicitly reserved certain authorities. CBOE 
noted that, although the specific delegations contained in its 
Constitution, Rules, and Board resolutions vary in describing the scope 
of the authority delegated, its Board retains the power to revoke, 
limit, or change a committee delegation, either by rule change or by 
resolution as appropriate.
---------------------------------------------------------------------------

    \15\ CBOE Rule 2.1(d).
---------------------------------------------------------------------------

    The purpose of the proposed rule change, CBOE asserted, is to apply 
an explicit, uniform standard of review by the Board to the general 
organizational and administrative structure of CBOE's committees and to 
resolve any ambiguity that may exist. Thus, CBOE contended that the 
proposed rule change would clarify that the Board retains the power and 
authority to review, affirm, modify, suspend or overrule any and all 
actions or inactions of CBOE committees and officers, representatives, 
or designees, except as otherwise specified. In CBOE's view, the 
proposal is consistent with its Certificate and Constitution.
    CBOE also advised that the proposed rule change is consistent with 
the provisions of its Constitution pertaining to the Executive 
Committee. CBOE stated that the Executive Committee is a committee of 
the Board that performs the functions of the Board when the Board is 
not in session or it is not practicable to arrange a meeting of the 
Board within the time reasonably available. Thus, to the extent that 
the Executive Committee would take any action pursuant to Article VII, 
Section 7.2 of its Constitution, CBOE asserted that the Board retains 
jurisdiction over those matters and may later determine to review, 
affirm, modify, suspend or overrule any and all actions of the 
Executive Committee.
    In the Commission's view, the Exchange has provided a sufficient 
basis on which the Commission can find that, as a federal matter under 
the Act, the Exchange is complying with its own Certificate and 
Constitution. Further, in approving this proposal, the Commission is 
relying on CBOE's representation that the proposed rule change is 
appropriate under Delaware state law.\16\ Thus, the Commission believes 
that the proposed rule change clarifies the Board's review authority by 
providing an explicit, uniform standard to be applied to any delegation 
of Board authority, powers, and duties and is consistent with the Act.
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    \16\ Telephone conference among Jennifer M. Lamie, Managing 
Senior Attorney, Legal Division, CBOE; Leah Mesfin, Special Counsel, 
Division, Commission; and Jan Woo, Attorney, Division, Commission, 
on July 18, 2006.
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IV. Conclusion

    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the Act and the rules and regulations 
thereunder applicable to a national securities exchange, and in 
particular, with Section 6(b)(1) of the Act.\17\
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    \17\ 15 U.S.C. 78f(b)(1).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\18\ that the proposed rule change (File No. SR-CBOE-2006-45) is 
hereby approved.
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    \18\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-11793 Filed 7-24-06; 8:45 am]
BILLING CODE 8010-01-P