Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend CBOE's Rules Related to Credit Default Basket Options, 50131-50133 [E7-17163]

Download as PDF rfrederick on PROD1PC67 with NOTICES Federal Register / Vol. 72, No. 168 / Thursday, August 30, 2007 / Notices electronically, to FR0705@ustr.eop.gov, with ‘‘Agricultural Subsidies (Brazil) (DS365)’’ in the subject line, or (ii) by fax, to Sandy McKinzy at (202) 395– 3640. For documents sent by fax, USTR requests that the submitter provide a confirmation copy to the electronic mail address listed above. USTR encourages the submission of documents in Adobe PDF format as attachments to an electronic mail. Interested persons who make submissions by electronic mail should not provide separate cover letters; information that might appear in a cover letter should be included in the submission itself. Similarly, to the extent possible, any attachments to the submission should be included in the same file as the submission itself, and not as separate files. Comments must be in English. A person requesting that information contained in a comment submitted by that person be treated as confidential business information must certify that such information is business confidential and would not customarily be released to the public by the submitter. Confidential business information must be clearly designated as such and the submission must be marked ‘‘Business Confidential’’ at the top and bottom of the cover page and each succeeding page. Information or advice contained in a comment submitted, other than business confidential information, may be determined by USTR to be confidential in accordance with section 135(g)(2) of the Trade Act of 1974 (19 U.S.C. 2155(g)(2)). If the submitter believes that information or advice may qualify as such, the submitter— (1) Must clearly so designate the information or advice; (2) Must clearly mark the material as ‘‘Submitted in Confidence’’ at the top and bottom of the cover page and each succeeding page; and (3) Is encouraged to provide a nonconfidential summary of the information or advice. Pursuant to section 127(e) of the URAA (19 U.S.C. 3537(e)), USTR will maintain a file on this dispute settlement proceeding, accessible to the public, in the USTR Reading Room, which is located at 1724 F Street, NW., Washington, DC 20508. The public file will include non-confidential comments received by USTR from the public with respect to the dispute; if a dispute settlement panel is convened or in the event of an appeal from such a panel, the U.S. submissions, the submissions, or non-confidential summaries of submissions, received from other participants in the dispute; the report of VerDate Aug<31>2005 14:38 Aug 29, 2007 Jkt 211001 the panel; and, if applicable, the report of the Appellate Body. An appointment to review the public file (Docket WTO/ DS–365, Brazil Ag Subsidies Dispute) may be made by calling the USTR Reading Room at (202) 395–6186. The USTR Reading Room is open to the public from 9:30 a.m. to noon and 1 p.m. to 4 p.m., Monday through Friday. Daniel Brinza, Assistant United States Trade Representative for Monitoring and Enforcement. [FR Doc. E7–17233 Filed 8–29–07; 8:45 am] 50131 The Office of the Secretary at (202) 551–5400. Dated: August 27, 2007. Nancy M. Morris, Secretary. [FR Doc. E7–17167 Filed 8–29–07; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–56317; File No. SR–CBOE– 2007–93] BILLING CODE 3190–W7–P SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meeting Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Pub. L. 94–409, that the Securities and Exchange Commission will hold the following meeting during the week of August 27, 2007: A Closed Meeting will be held on Thursday, August 30, 2007 at 2 p.m. Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the Closed Meeting. Certain staff members who have an interest in the matters may also be present. The General Counsel of the Commission, or his designee, has certified that, in his opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (7), (9)(B), and (10) and 17 CFR 200.402(a)(3), (5), (7), 9(ii) and (10), permit consideration of the scheduled matters at the Closed Meeting. Commissioner Nazareth, as duty officer, voted to consider the items listed for the closed meeting in closed session, and determined that no earlier notice thereof was possible. The subject matter of the Closed Meeting scheduled for Thursday, August 30, 2007 will be: Formal orders of investigations; Institution and settlement of injunctive actions; Institution and settlement of administrative proceedings of an enforcement nature; Resolution of litigation claims; Other matters related to enforcement proceedings; and An adjudicatory matter. At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact: PO 00000 Frm 00036 Fmt 4703 Sfmt 4703 Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend CBOE’s Rules Related to Credit Default Basket Options August 24, 2007. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on August 21, 2007, the Chicago Board Options Exchange, Incorporated (‘‘Exchange’’ or ‘‘CBOE’’) 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 substantially by the Exchange. The Exchange has designated the proposed rule change as one constituting a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule under Section 19(b)(3)(A)(i) of the Act 3 and Rule 19b–4(f)(1) thereunder,4 which renders the proposal 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 proposes to amend its rules pertaining to Credit Default Basket Options (‘‘CDBOs’’) in order to conform the Exchange’s Succession Event confirmation process for CDBOs with that currently codified for single-name Credit Default Options (‘‘CDOs’’).5 The text of the proposed rule change is available on the Exchange’s Web site (http://www.cboe.org/legal), at the 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(i). 4 17 CFR 240.19b–4(f)(1). 5 See Securities Exchange Act Release No. 56114 (July 20, 2007), 72 FR 41367 (July 27, 2007) (SR– CBOE–2007–81). 2 17 E:\FR\FM\30AUN1.SGM 30AUN1 50132 Federal Register / Vol. 72, No. 168 / Thursday, August 30, 2007 / Notices Exchange’s principal office, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange 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 those statements may be examined at the places specified in Item IV below. The Exchange 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 the Statutory Basis for, the Proposed Rule Change rfrederick on PROD1PC67 with NOTICES 1. Purpose The Exchange has received approval from the Commission to list and trade CDOs and CDBOs, which are different types of binary options, based on debt securities, that pay a fixed amount in the event a Credit Event is confirmed during the life of the option.6 Recently the Exchange amended CBOE Rule 29.4, Adjustments, in order to set out certain parameters that the Exchange intends to use for determining the applicable share to be allocated to a Successor Reference Entity if there is a CDO contract adjustment due to a Succession Event.7 The Exchange currently seeks to establish the same parameters for CDBOs. CBOE Rule 29.4(b)(1) provides that, if the Exchange confirms a Succession Event in a Basket Component, that component may be replaced by one or more Basket Components (‘‘Successor Basket Components’’) consisting of Successor Reference Entity(ies).8 Currently, the rule does not provide a framework for determining the allocation among Successor Basket Component(s). As it applies to CDOs, CBOE Rule 29.4(a)(1) makes clear that, if the Exchange confirms a Succession Event, the allocation among Successor 6 See Securities Exchange Act Release No. 55871 (June 6, 2007), 72 FR 32372 (June 12, 2007) (order approving SR–CBOE–2006–84 to list and trade CDOs); Securities Exchange Act Release No. 56275 (August 17, 2007) (order approving SR–CBOE– 2007–26 to list and trade CDBOs). 7 See supra note 5. As to CDOs, a ‘‘Successor Reference Entity’’ and a ‘‘Succession Event’’ are defined in accordance with the terms of the Relevant Obligation(s). See CBOE Rule 29.4(a)(1)(i). 8 As to CDBOs, a ‘‘Successor Basket Component’’ and a ‘‘Succession Event’’ are defined in accordance with the terms of the Relevant Obligation(s). See CBOE Rule 29.4(b)(1)(i). VerDate Aug<31>2005 14:38 Aug 29, 2007 Jkt 211001 Reference Entities will be based on the applicable share of each Successor Reference Entity. In order to conform the Exchange’s Succession Event confirmation process for CDBOs with the process used for CDOs, the Exchange first proposes to amend CBOE Rule 29.4(b)(1) to clarify that, if the Exchange confirms a Succession Event in a Basket Component, that component will be replaced by one or more Basket Components (‘‘Successor Basket Component(s)’’) that have succeeded the original Basket Component based on the applicable share of each Successor Basket Component.9 Second, the Exchange proposes to specify how the ‘‘applicable share’’ would be calculated. Consistent with CDOs, the term ‘‘applicable share’’ would be a percentage amount used to determine the adjusted cash settlement amount applicable to each Successor Basket Component.10 As set out in the proposed revisions to CBOE Rule 29.4(b)(1)(i), in determining the applicable share, the Exchange as a general rule would allocate an equal share to each Successor Basket Component that has succeeded the original Basket Component as issuer and guarantor of (i) at least one Relevant Obligation and (ii) at least 25% of the principal amount of the original Basket Component’s outstanding debt obligations other than non-recourse indebtedness. If no Successor Basket Component satisfies the ‘‘at least 25%’’ requirement and the original Basket Component does not survive following the Succession Event, an equal share will be allocated to the Successor Basket Component(s) that succeeded to the largest percentage of the original Basket Component’s outstanding debt obligations other than non-recourse indebtedness.’’ 11 These proposed ‘‘applicable share’’ parameters would 9 The Exchange also proposes to change the word ‘‘may’’ to ‘‘will’’ in CBOE Rule 29(b)(1) to provide additional clarity and certainty with respect to the Exchange’s Succession Event confirmation process. 10 Every determination by the Exchange pursuant to CBOE Rule 29.4 is within the Exchange’s sole discretion, is conclusive and binding on all holders and sellers, and is not subject to review. See CBOE Rule 29.4(e). 11 If no Successor Basket Component satisfies the ‘‘at least 25%’’ requirement and the original Basket Component survives, then no Succession Event will be deemed to have occurred and the CDBO contract will not be adjusted. As provided in CBOE Rule 29.4(b)(1)(ii), in the event of an adjustment for succession, the Exchange would specify the Reference Obligation, the recovery rate, and the basket weight of each Successor Basket Component, and the newly specified weight(s) would equal the weight of the predecessor Basket Component replaced by the Successor Basket Component(s). PO 00000 Frm 00037 Fmt 4703 Sfmt 4703 override any contradictory provision in the terms of the Relevant Obligation(s). As with CDOs, the Exchange believes that setting forth these same conforming parameters would clarify how the Exchange intends to administer the Succession Event confirmation process, thereby affording investors with additional clarity and certainty regarding the impact of a Succession Event on an outstanding CDBO contract. The Exchange also understands that these parameters would be substantially similar to and generally consistent with the practice in the over-the-counter market. Finally, the Exchange is also proposing two technical changes to CBOE Rule 29.4. Specifically, the Exchange proposes to substitute the term ‘‘Reference Entity’’ with the term ‘‘Basket Component’’ in two places in the rule text. With respect to CDBOs, the term ‘‘Reference Entity’’ and ‘‘Basket Component’’ have identical meanings and are defined as the issuer or guarantor of one of the Reference Obligations that underlies a CDBO.12 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations under the Act applicable to national securities exchanges. Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 13 which requires that the rules of an exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts, to remove impediments to and to perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. As indicated above, the Exchange believes conforming the Succession Event confirmation process for CDBOs with the existing process for CDOs would afford investors additional clarity and certainty regarding the impact of a Succession Event on an outstanding CDBO contract. B. Self-Regulatory Organization’s Statement on Burden on Competition CBOE does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. 12 See 13 15 E:\FR\FM\30AUN1.SGM CBOE Rules 29.1(f) and (h). U.S.C. 78f(b)(5). 30AUN1 Federal Register / Vol. 72, No. 168 / Thursday, August 30, 2007 / Notices 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 III. Date of Effectiveness of the the Commission’s Public Reference Proposed Rule Change and Timing for Room, 100 F Street, NE., Washington, Commission Action DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Because the foregoing rule change Copies of such filing also will be constitutes a stated policy, practice, or available for inspection and copying at interpretation with respect to the the principal office of CBOE. All meaning, administration, or comments received will be posted enforcement of an existing rule, it has without change; the Commission does become effective pursuant to Section 19(b)(3)(A)(i) of the Act 14 and Rule 19b– not edit personal identifying 4(f)(1) thereunder.15 At any time within information from submissions. You 60 days of the filing of the proposed rule should submit only information that change, the Commission may summarily you wish to make available publicly. All submissions should refer to File abrogate such rule change if it appears Number SR–CBOE–2007–93 andshould to the Commission that such action is be submitted on or before September 20, necessary or appropriate in the public 2007. interest, for the protection of investors, or otherwise in furtherance of the For the Commission, by the Division of purposes of the Act. Market Regulation, pursuant to delegated C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposal. 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: rfrederick on PROD1PC67 with NOTICES Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–CBOE–2007–93 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 SR–CBOE–2007–93. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written 14 15 15 17 U.S.C. 78s(b)(3)(A)(i). CFR 240.19b–4(f)(1). VerDate Aug<31>2005 14:38 Aug 29, 2007 Jkt 211001 authority.16 Nancy M. Morris, Secretary. [FR Doc. E7–17163 Filed 8–29–07; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–56311; File No. SR–CBOE– 2006–99] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change and Amendment No. 1 Thereto Related to FLEX Options Trading August 23, 2007. 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 November 27, 2006, the Chicago Board Options Exchange, Incorporated (‘‘Exchange’’ or ‘‘CBOE’’) 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 substantially prepared by the Exchange. On August 17, 2007, CBOE filed Amendment No. 1 to the proposed rule change.3 The Commission is publishing this notice to solicit 16 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 In Amendment No. 1, the Exchange replaced the proposed rule change in its entirety. 1 15 PO 00000 Frm 00038 Fmt 4703 Sfmt 4703 50133 comments on the proposed rule change, as amended, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to adopt rules to provide for the trading of Flexible Exchange Options (‘‘FLEX Options’’) 4 on the Exchange’s new FLEX Hybrid Trading System platform and to make certain corresponding revisions to its existing open-outcry based FLEX RFQ System platform. The text of the proposed rule change is available on the Exchange’s Web site (http:// www.cboe.org/legal), at CBOE, and at the Commission’s Public Reference Room.5 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, CBOE included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose i. Description of the FLEX Hybrid Trading System Currently, FLEX Options are traded on the Exchange through an openoutcry-based, Request for Quotes (‘‘RFQ’’) process (referred to herein as the ‘‘FLEX RFQ System’’ platform). The purpose of the proposed rule change is to amend Exchange rules to provide for an alternate framework to trade FLEX 4 FLEX Options provide investors with the ability to customize basic option features including size, expiration date, exercise style, and certain exercise prices. 5 The Exchange notes that unrelated changes are being proposed to the text of Rule 24A.7 in a separate rule filing. See Securities Exchange Act Release No. 56191 (August 2, 2007), 72 FR 44894 (August 9, 2007) (SR–CBOE–2007–79). If that rule filing becomes effective before this instant rule filing, the Exchange intends to submit an amendment to reflect conforming changes to the text to Rules 24A.7 and 24A.8, as well as proposed Rules 24B.7 and 24B.8. Telephone conversation between Jennifer Lamie, Assistant General Counsel, CBOE, and Terri Evans, Special Counsel, Division of Market Regulation (‘‘Division’’), Commission on August 20, 2007. E:\FR\FM\30AUN1.SGM 30AUN1

Agencies

[Federal Register Volume 72, Number 168 (Thursday, August 30, 2007)]
[Notices]
[Pages 50131-50133]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-17163]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56317; File No. SR-CBOE-2007-93]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Amend CBOE's Rules Related to Credit Default Basket 
Options

August 24, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on August 21, 2007, the Chicago Board Options Exchange, Incorporated 
(``Exchange'' or ``CBOE'') 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 
substantially by the Exchange. The Exchange has designated the proposed 
rule change as one constituting a stated policy, practice, or 
interpretation with respect to the meaning, administration, or 
enforcement of an existing rule under Section 19(b)(3)(A)(i) of the Act 
\3\ and Rule 19b-4(f)(1) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(i).
    \4\ 17 CFR 240.19b-4(f)(1).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its rules pertaining to Credit 
Default Basket Options (``CDBOs'') in order to conform the Exchange's 
Succession Event confirmation process for CDBOs with that currently 
codified for single-name Credit Default Options (``CDOs'').\5\ The text 
of the proposed rule change is available on the Exchange's Web site 
(http://www.cboe.org/legal), at the

[[Page 50132]]

Exchange's principal office, and at the Commission's Public Reference 
Room.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 56114 (July 20, 
2007), 72 FR 41367 (July 27, 2007) (SR-CBOE-2007-81).
---------------------------------------------------------------------------

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 Exchange 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 those statements may be examined at the places specified in 
Item IV below. The Exchange 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange has received approval from the Commission to list and 
trade CDOs and CDBOs, which are different types of binary options, 
based on debt securities, that pay a fixed amount in the event a Credit 
Event is confirmed during the life of the option.\6\ Recently the 
Exchange amended CBOE Rule 29.4, Adjustments, in order to set out 
certain parameters that the Exchange intends to use for determining the 
applicable share to be allocated to a Successor Reference Entity if 
there is a CDO contract adjustment due to a Succession Event.\7\ The 
Exchange currently seeks to establish the same parameters for CDBOs.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 55871 (June 6, 
2007), 72 FR 32372 (June 12, 2007) (order approving SR-CBOE-2006-84 
to list and trade CDOs); Securities Exchange Act Release No. 56275 
(August 17, 2007) (order approving SR-CBOE-2007-26 to list and trade 
CDBOs).
    \7\ See supra note 5. As to CDOs, a ``Successor Reference 
Entity'' and a ``Succession Event'' are defined in accordance with 
the terms of the Relevant Obligation(s). See CBOE Rule 
29.4(a)(1)(i).
---------------------------------------------------------------------------

    CBOE Rule 29.4(b)(1) provides that, if the Exchange confirms a 
Succession Event in a Basket Component, that component may be replaced 
by one or more Basket Components (``Successor Basket Components'') 
consisting of Successor Reference Entity(ies).\8\ Currently, the rule 
does not provide a framework for determining the allocation among 
Successor Basket Component(s). As it applies to CDOs, CBOE Rule 
29.4(a)(1) makes clear that, if the Exchange confirms a Succession 
Event, the allocation among Successor Reference Entities will be based 
on the applicable share of each Successor Reference Entity. In order to 
conform the Exchange's Succession Event confirmation process for CDBOs 
with the process used for CDOs, the Exchange first proposes to amend 
CBOE Rule 29.4(b)(1) to clarify that, if the Exchange confirms a 
Succession Event in a Basket Component, that component will be replaced 
by one or more Basket Components (``Successor Basket Component(s)'') 
that have succeeded the original Basket Component based on the 
applicable share of each Successor Basket Component.\9\
---------------------------------------------------------------------------

    \8\ As to CDBOs, a ``Successor Basket Component'' and a 
``Succession Event'' are defined in accordance with the terms of the 
Relevant Obligation(s). See CBOE Rule 29.4(b)(1)(i).
    \9\ The Exchange also proposes to change the word ``may'' to 
``will'' in CBOE Rule 29(b)(1) to provide additional clarity and 
certainty with respect to the Exchange's Succession Event 
confirmation process.
---------------------------------------------------------------------------

    Second, the Exchange proposes to specify how the ``applicable 
share'' would be calculated. Consistent with CDOs, the term 
``applicable share'' would be a percentage amount used to determine the 
adjusted cash settlement amount applicable to each Successor Basket 
Component.\10\ As set out in the proposed revisions to CBOE Rule 
29.4(b)(1)(i), in determining the applicable share, the Exchange as a 
general rule would allocate an equal share to each Successor Basket 
Component that has succeeded the original Basket Component as issuer 
and guarantor of (i) at least one Relevant Obligation and (ii) at least 
25% of the principal amount of the original Basket Component's 
outstanding debt obligations other than non-recourse indebtedness. If 
no Successor Basket Component satisfies the ``at least 25%'' 
requirement and the original Basket Component does not survive 
following the Succession Event, an equal share will be allocated to the 
Successor Basket Component(s) that succeeded to the largest percentage 
of the original Basket Component's outstanding debt obligations other 
than non-recourse indebtedness.'' \11\ These proposed ``applicable 
share'' parameters would override any contradictory provision in the 
terms of the Relevant Obligation(s).
---------------------------------------------------------------------------

    \10\ Every determination by the Exchange pursuant to CBOE Rule 
29.4 is within the Exchange's sole discretion, is conclusive and 
binding on all holders and sellers, and is not subject to review. 
See CBOE Rule 29.4(e).
    \11\ If no Successor Basket Component satisfies the ``at least 
25%'' requirement and the original Basket Component survives, then 
no Succession Event will be deemed to have occurred and the CDBO 
contract will not be adjusted.
    As provided in CBOE Rule 29.4(b)(1)(ii), in the event of an 
adjustment for succession, the Exchange would specify the Reference 
Obligation, the recovery rate, and the basket weight of each 
Successor Basket Component, and the newly specified weight(s) would 
equal the weight of the predecessor Basket Component replaced by the 
Successor Basket Component(s).
---------------------------------------------------------------------------

    As with CDOs, the Exchange believes that setting forth these same 
conforming parameters would clarify how the Exchange intends to 
administer the Succession Event confirmation process, thereby affording 
investors with additional clarity and certainty regarding the impact of 
a Succession Event on an outstanding CDBO contract. The Exchange also 
understands that these parameters would be substantially similar to and 
generally consistent with the practice in the over-the-counter market.
    Finally, the Exchange is also proposing two technical changes to 
CBOE Rule 29.4. Specifically, the Exchange proposes to substitute the 
term ``Reference Entity'' with the term ``Basket Component'' in two 
places in the rule text. With respect to CDBOs, the term ``Reference 
Entity'' and ``Basket Component'' have identical meanings and are 
defined as the issuer or guarantor of one of the Reference Obligations 
that underlies a CDBO.\12\
---------------------------------------------------------------------------

    \12\ See CBOE Rules 29.1(f) and (h).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations under the Act applicable to 
national securities exchanges. Specifically, the Exchange believes the 
proposed rule change is consistent with the Section 6(b)(5) \13\ which 
requires that the rules of an exchange be designed to promote just and 
equitable principles of trade, to prevent fraudulent and manipulative 
acts, to remove impediments to and to perfect the mechanism of a free 
and open market and a national market system, and, in general, to 
protect investors and the public interest. As indicated above, the 
Exchange believes conforming the Succession Event confirmation process 
for CDBOs with the existing process for CDOs would afford investors 
additional clarity and certainty regarding the impact of a Succession 
Event on an outstanding CDBO contract.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE does not believe that the proposed rule change will impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act.

[[Page 50133]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposal.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing rule change constitutes a stated policy, 
practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule, it has become 
effective pursuant to Section 19(b)(3)(A)(i) of the Act \14\ and Rule 
19b-4(f)(1) thereunder.\15\ At any time within 60 days of the filing of 
the proposed rule change, the Commission may summarily abrogate such 
rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A)(i).
    \15\ 17 CFR 240.19b-4(f)(1).
---------------------------------------------------------------------------

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 (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2007-93 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 SR-CBOE-2007-93. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of CBOE. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CBOE-2007-93 and should be 
submitted on or before September 20, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E7-17163 Filed 8-29-07; 8:45 am]
BILLING CODE 8010-01-P