Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding Continuation of Temporary Membership Status From and After Commission Approval of a Pending Rule Interpretation Concerning Exercise Right Eligibility, 54309-54312 [E7-18730]
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Federal Register / Vol. 72, No. 184 / Monday, September 24, 2007 / Notices
SECURITIES AND EXCHANGE
COMMISSION
Rule 3.19 is completely new, its text is
italicized).
[Release No. 34–56458; File No. SR–CBOE–
2007–107]
Chicago Board Options Exchange,
Incorporated Rules
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Regarding Continuation
of Temporary Membership Status From
and After Commission Approval of a
Pending Rule Interpretation
Concerning Exercise Right Eligibility
September 18, 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
September 10, 2007, the Chicago Board
Options Exchange, Incorporated
(‘‘CBOE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
substantially prepared by the CBOE.
The Exchange has designated this
proposal 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
CBOE proposes to adopt new
Interpretation and Policy .02 of CBOE
Rule 3.19 that continues the temporary
membership status provided to certain
persons under existing Interpretation
and Policy .01 of CBOE Rule 3.19 from
and after any approval of SR–CBOE–
2006–106.5 The text of proposed
Interpretation and Policy .02 of CBOE
Rule 3.19 is set forth below (since
Interpretation and Policy .02 of CBOE
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. 55190
(January 29, 2007), 72 FR 5472 (February 6, 2007).
The Exchange filed SR–CBOE–2006–106 on
December 12, 2006. On January 17, 2007, the
Exchange filed Amendment No. 1 to the proposed
rule change. Numerous comments were received,
and the Exchange responded to those comments on
June 15, 2007. On June 29, 2007, the Exchange filed
a partial amendment, Amendment No. 2, to the
proposed rule change.
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*
*
*
*
*
Rule 3.19. No change.
* * * Interpretations and Policies:
.01 No change.
.02 A person (‘‘Temporary Member’’)
who has been granted temporary
membership (‘‘Temporary
Membership’’) status at the Exchange
pursuant to Interpretation and Policy
.01 of this Rule 3.19 shall continue in
that Temporary Membership status after
the Commission’s approval of SR–
CBOE–2006–106, if and only if such
person (i) has not previously terminated
that Temporary Membership status and
remains in good standing as of the close
of business on the trading day
immediately before the date of that
approval, (ii) thereafter remains in good
standing and continues to pay all
applicable fees, dues, assessments and
other like charges that are assessed
against CBOE members, and (iii) pays to
the Exchange a monthly access fee set
by the Exchange, which shall be due
and payable in accordance with the
provisions of the Exchange Fee
Schedule. Such access fee shall be paid
directly to the Exchange and shall not
be escrowed.
The Temporary Membership status
granted to a Temporary Member
pursuant to this Interpretation and
Policy .02 shall terminate upon the
earlier of (i) the voluntary termination of
that Temporary Membership status by
the Temporary Member, (ii) the
approval by the Commission of a further
proposed rule change that provides for
the termination of that status and the
granting of trading permits or another
form of trading access to Temporary
Members, or (iii) the consummation of a
transaction pursuant to which either
CBOE is converted into a stock
corporation or memberships in CBOE
are converted into stock. Temporary
Members shall be subject to the
regulatory jurisdiction of CBOE under
the Act, the Constitution and the Rules,
including CBOE’s disciplinary
jurisdiction under Chapter XVII.
*
*
*
*
*
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
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54309
rule change. The text of these statements
may be examined at the places specified
in Item IV below. CBOE has prepared
summaries, set forth in Sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange filed this proposed rule
change with the Commission to
continue the temporary membership
(‘‘Temporary Membership’’) status,
including trading access, of persons
(‘‘Temporary Members’’) who currently
enjoy that status pursuant to
Interpretation and Policy .01 of CBOE
Rule 3.19 from and after the time their
current Temporary Membership status
would otherwise terminate if the
Commission were to approve SR–
CBOE–2006–106. The underlying
purpose of this proposed rule change is
to ensure fair and orderly markets at the
Exchange when as many as 229 former
exerciser members cease to be eligible to
remain members of the Exchange under
Interpretation and Policy .01 of CBOE
Rule 3.19, upon an approval of SR–
CBOE–2006–106 by the Commission.6
Continuation of Temporary Membership
Status
In SR–CBOE–2006–106, CBOE
proposed an interpretation of paragraph
(b) of Article Fifth of the CBOE
Certificate of Incorporation (‘‘Article
Fifth(b)’’) to address the impact of the
then-proposed acquisition of The Board
of Trade of the City of Chicago, Inc.
(‘‘CBOT’’) by Chicago Mercantile
Exchange Holdings Inc. (‘‘CME
Holdings’’) on the eligibility of persons
who were members of CBOE (‘‘exerciser
members’’) pursuant to Article Fifth(b)
(the right provided under this provision
is sometimes referred to as the ‘‘exercise
right’’).7 Under that interpretation, the
consummation of the CME/CBOT
Transaction resulted in no person any
longer qualifying as a member of the
CBOT within the meaning of Article
Fifth(b) and therefore resulted in the
elimination of any person’s eligibility to
qualify thereafter to become or remain
an exerciser member of the Exchange.
6 According to the Exchange, there currently are
229 former exerciser members that qualify for
temporary membership status under Interpretation
and Policy .01 of CBOE Rule 3.19.
7 CME Holdings proposed to acquire CBOT by
merging CME Holdings with CBOT Holdings, Inc.
(‘‘CBOT Holdings’’), of which CBOT was a whollyowned subsidiary (the ‘‘CME/CBOT Transaction’’).
The CME/CBOT Transaction was consummated on
July 12, 2007.
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Thus, if the Commission were to
approve SR–CBOE–2006–106, and in
the absence of any provision for
continuing the membership status of
such persons on a temporary basis after
that approval, former exerciser members
would cease to be entitled, among other
things, to trade on the Exchange.
In SR–CBOE–2006–106, the Exchange
stated that it was prepared to maintain
the status quo for some period of time
after the exercise right was terminated,
in order to control the risk that the loss
of exerciser members upon the
termination of the exercise right might
adversely affect liquidity in CBOE’s
market. The Exchange also stated that
this result would be accomplished by
staying, for an interim period of time,
the impact of the termination of the
exercise right on the trading access of
those individuals who were exerciser
members of CBOE on a designated cutoff date, and that this action would
permit those individuals to continue to
trade on CBOE in the capacity of CBOE
members during that interim period.
The Exchange indicated that this
decision to stay the effectiveness of
what otherwise would result in a
termination of trading access was
analogous to the right of the Exchange
under CBOE Rule 3.19. The Exchange
also indicated that this interim period
would continue for so long as necessary
to avoid any disruption to the market as
a result of the loss of exerciser members,
which could involve the Exchange
adopting a plan to provide some form of
trading access to such persons in the
absence of the exercise right. In other
words, the Exchange envisioned that
this interim period would start upon the
approval of SR–CBOE–2006–106, with
the Exchange initially maintaining the
status quo for former exerciser members,
and could eventually involve the
adoption of a plan to provide some form
of trading access to former exerciser
members through trading permits or
some other form of substitute trading
access rights, at which point the interim
period would terminate and trading
access would be provided under such
substitute trading access rights. SR–
CBOE–2006–106 contemplated that any
such substitute trading access rights
would require the approval of CBOE
members under Section 2.1 of the
Exchange’s Constitution, and would be
subject to the approval of the
Commission under Section 19(b) of the
Act.8
While SR–CBOE–2006–106 was
pending before the Commission, the
Exchange was faced with a situation
that was not addressed in that filing,
8 15
U.S.C. 78s(b).
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when the CME/CBOT Transaction was
consummated before the Commission
had acted on SR–CBOE–2006–106. In
response to that impending situation,
the Exchange adopted Interpretation
and Policy .01 of CBOE Rule 3.19 to
provide temporary trading access to
certain former exerciser members.
Under that interpretation, these
Temporary Members have been granted
continued membership status on a
temporary basis—including the right to
trade—following the consummation of
the CME/CBOT Transaction on July 12,
2007. However, under the express terms
of that interpretation, that Temporary
Membership status will terminate upon
any approval of SR–CBOE–2006–106.9
The Exchange also indicated in the rule
filing adopting Interpretation and Policy
.01 that, as contemplated in SR–CBOE–
2006–106, there would be a different
temporary access plan to address
transitional issues that would arise from
the approval of SR–CBOE–2006–106.10
The Exchange is filing this proposed
rule change to implement its original
intention, as reflected in SR–CBOE–
2006–106, to maintain the status quo for
former exerciser members by providing
them with an interim period of trading
access after the approval of that filing.
The Exchange believes that this rule
change is appropriate to prevent any
disruption that might occur in the
Exchange’s markets if former exerciser
members suddenly lost all rights to
trade on the Exchange if the
Commission were to approve SR–
CBOE–2006–106. To avoid the
possibility of such a disruption, the
Exchange proposes to provide interim
trading access by adopting
Interpretation and Policy .02 of CBOE
Rule 3.19. This interpretation will
extend the Temporary Membership
status provided to Temporary Members
under Interpretation and Policy .01 of
CBOE Rule 3.19.11 Under Interpretation
9 Interpretation and Policy .01 allows a
Temporary Member to maintain Temporary
Membership status at the Exchange if and only if
such person (i) remains in good standing and
continues to pay all applicable fees, dues,
assessments and other like charges that are assessed
against CBOE members, and (ii) pays to the
Exchange a monthly access fee. A person who has
voluntarily terminated a Temporary Membership is
no longer a member in good standing, and
consequently would cease to be eligible for the
Temporary Membership status provided under that
interpretation. If that person seeks to access the
Exchange as a member of the Exchange after such
a termination, that person will need to lease or
purchase a transferable Exchange membership.
10 See Securities Exchange Act Release No. 56016
(July 5, 2007), 72 FR 38106 (July 12, 2007) (SR–
CBOE–2007–77).
11 As long as they remain Temporary Members,
these persons will continue to possess all of the
rights, and be subject to all of the obligations, of
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and Policy .02, this Temporary
Membership status will be conditioned
on the Temporary Member: (i) Not
having previously terminated that
Temporary Membership status and
thereafter remaining in good standing,
(ii) continuing to pay all applicable fees,
dues, assessments and other like charges
that are assessed against CBOE
members, and (iii) paying to the
Exchange a monthly access fee.12
The interim trading access plan
contained in Interpretation and Policy
.02 of CBOE Rule 3.19 addresses the
extenuating circumstances that would
be faced by the Exchange if SR–CBOE–
2006–106 were approved and, by virtue
of that approval, Interpretation and
Policy .01 of Rule 3.19 ceases to apply.
Although the Exchange in SR–CBOE–
2006–106 indicated that its decision to
stay the effectiveness of the termination
of trading access upon the approval of
that filing was ‘‘analogous’’ to the right
of the Exchange under CBOE Rule 3.19,
the Exchange subsequently has
determined that it is appropriate to rely
on CBOE Rule 3.19 itself to provide
trading access to Temporary Members.
Rule 3.19 allows the Exchange, if the
Exchange finds extenuating
circumstances, to permit a member to
retain the member’s membership status
for such period of time as the Exchange
deems reasonably necessary to enable
that person to obtain a membership
under those extenuating circumstances.
Because the Exchange’s goal in
providing interim trading access under
Interpretation and Policy .02 of CBOE
Rule 3.19 is to avoid any disruption to
the Exchange’s markets as a result of the
sudden loss of Temporary Members, the
Exchange proposes to continue the
Temporary Membership status of
Temporary Members without requiring
any action by them and without
requiring that they hold any particular
interests in CBOT. Rather, the Exchange
will determine who is an eligible
Temporary Member under the
provisions of this interpretation and
will take appropriate action to ensure
that those persons retain their
Temporary Membership status. Of
exerciser members prior to the CME/CBOT
Transaction.
12 Interpretation and Policy .01 of CBOE Rule 3.19
requires, among other things, persons to have been
exerciser members of the Exchange as of July 1,
2007 to qualify for the Temporary Membership
status provided under that interpretation. This cutoff date was chosen to ensure that only those
persons who had a bona fide interest in trading on
CBOE qualified for the Temporary Membership
status in Interpretation and Policy .01. For this
reason, as well as the reasons given for adopting
Interpretation and Policy .01, the Exchange believes
that this cut-off date also is appropriate for
Interpretation and Policy .02.
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course, Temporary Members will be
subject to the regulatory jurisdiction of
CBOE under the Act, the Constitution
and the Rules, including CBOE’s
disciplinary jurisdiction under Chapter
XVII.
The Exchange states that
Interpretation and Policy .02 of CBOE
Rule 3.19 does not trigger the
membership vote provision found in
Section 2.1 of the Exchange’s
Constitution. That provision applies
only when the Exchange issues ‘‘new’’
memberships. In contrast, Interpretation
and Policy .02 temporarily preserves the
membership rights of existing
Temporary Members if and as of the
time that the Commission approves SR–
CBOE–2006–106. Because the
interpretation would not create any new
memberships or trading rights, no
membership approval is required under
Section 2.1 of the Exchange’s
Constitution or otherwise.
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Duration of Temporary Membership
Status
CBOE Rule 3.19 provides CBOE with
the authority to allow members to retain
their membership status for such time as
is reasonably necessary for such persons
to obtain a membership under the
extenuating circumstances that
necessitated application of CBOE Rule
3.19. There are several extenuating
circumstances that would continue to
exist if the Commission were to approve
SR–CBOE–2006–106. Most importantly,
but for Interpretation and Policy .02 of
CBOE Rule 3.19, any approval of SR–
CBOE–2006–106 would cause the
sudden loss of as many as 229
Temporary Members who then would
be providing liquidity to the Exchange’s
markets.13 In addition, there is a strong
likelihood that there will be an
insufficient number of transferable
Exchange memberships available for
purchase or lease by Temporary
Members upon that approval. In
accordance with its original plan, as
reflected in SR–CBOE–2006–106, the
Exchange intends to offer trading
permits or some other form of substitute
trading access rights to Temporary
Members after the approval of SR–
CBOE–2006–106. However, given the
current legal controversy surrounding
the effect of that approval on the rights
claimed by former exerciser members
and by persons who assert the right to
13 According to the Exchange, as of September 6,
2007, approximately 17 of these Temporary
Members were registered to trade on behalf of
Designated Primary Market-Makers (‘‘DPMs’’),
while 154 of them were registered to trade as
Market-Makers, and 46 were registered to trade as
either Remote Market-Makers or on behalf of
Electronic DPMs.
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become exerciser members,14 the
Exchange does not believe it is possible
at this time to formulate prudently such
a trading rights plan and to submit it for
Exchange membership approval, as
required under Section 2.1 of the
Exchange’s Constitution. Instead, the
Exchange intends to design that trading
access rights plan after Commission
approval of SR–CBOE–2006–106 should
such approval be given, and possibly
other developments, provide the
Exchange with appropriate guidance
about the legal backdrop that may affect
the structure of that trading access rights
plan. In light of these extenuating
circumstances, the Exchange believes
that it is reasonably necessary for
Temporary Memberships to continue in
place until such a well-defined trading
access rights plan could be developed
and put in place if the Commission were
to approve SR–CBOE–2006–106.
Accordingly, under Interpretation and
Policy .02 of CBOE Rule 3.19, the
Temporary Membership status granted
to a Temporary Member would
continue, absent voluntary termination
of that Temporary Membership status by
the Temporary Member, until the earlier
of (i) the approval by the Commission of
a further proposed rule change that
provides for the termination of that
status and for the granting of trading
permits or other form of substitute
trading access rights to Temporary
Members or (ii) the consummation of a
transaction pursuant to which either
CBOE is converted into a stock
corporation or memberships in CBOE
are converted into stock (collectively, a
‘‘Demutualization Transaction’’). Each
of these events would grant trading
permits or other form of substitute
trading access rights to Temporary
Members, and each would be subject to
the approval of CBOE members under
Section 2.1 of the Exchange’s
Constitution and to the approval of the
Commission under Section 19(b) of the
Act.15
Trading Access Fees
Currently, pursuant to Interpretation
and Policy .01 of CBOE Rule 3.19 and
the Exchange Fee Schedule, Temporary
Members are required to pay a monthly
access fee of $4700 per month.16 The
amount of this fee was based on the
then-current monthly lease fees being
paid to lessors of the interest that CBOT
14 In current litigation, purported representatives
of such persons have claimed that their rights
survive the CME/CBOT Transaction and would not
be affected by approval of SR–CBOE–2006–106.
15 15 U.S.C. 78s(b).
16 See Securities Exchange Act Release No. 56197
(August 3, 2007), 72 FR 44897 (August 9, 2007)
(SR–CBOE–2007–91).
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54311
denominates as a full CBOT
membership, as reflected in published
lease fee information. Because the
Commission has not yet determined
whether to approve SR–CBOE–2006–
106, those fees are being held in an
interest-bearing escrow account
maintained by the Exchange, and will
be distributed in a manner consistent
with any Commission action on SR–
CBOE–2006–106.17
If the Commission approves SR–
CBOE–2006–106, former exerciser
members no longer would have any
right of trading access in the capacity of
an exerciser member. However,
pursuant to Interpretation and Policy
.02, they would continue to have trading
access to the Exchange as Temporary
Members. Accordingly, it is appropriate
that these persons pay the Exchange a
fee for the temporary continued trading
access that they will be granted, and an
escrow no longer will be appropriate
because the Commission will have
approved SR–CBOE–2006–106. The
Exchange therefore proposes that these
monthly access fees be paid directly to
the Exchange and that they not be
escrowed.
The Exchange will modify the amount
of the monthly access fee if SR–CBOE–
2006–106 is approved. In this regard,
absent Interpretation and Policy .02 of
CBOE Rule 3.19, Temporary Members
would need to lease (or purchase)
transferable Exchange memberships to
continue to have trading access to the
Exchange after the approval of SR–
CBOE–2006–106. The Exchange
therefore believes that the appropriate
amount of the monthly access fee after
such approval should be an amount
reasonably related to the current lease
market rate for transferable Exchange
memberships. The Exchange will file a
rule change relating to that amount in a
separate proposed rule change that will
be filed with the Commission under
Section 19(b)(3)(A) of the Act.18
Filing Pursuant to Section 19(b)(3)(A) of
the Act 19
The Exchange is filing Interpretation
and Policy .02 of CBOE Rule 3.19
pursuant to Section 19(b)(3)(A) of the
Act.20 As was the case in respect of
Interpretation and Policy .01,
Interpretation and Policy +.02
17 Under its proposed rule change, the Exchange
would retain the access fees if the Commission
approves SR–CBOE–2006–106, and the fees would
be returned to the payor with interest if the
Commission disapproves SR–CBOE–2006–106. See
Securities Exchange Act Release No. 56016 (July 5,
2007), 72 FR 38106 (July 12, 2007) (SR–CBOE–
2007–77).
18 15 U.S.C. 78s(b)(3)(A).
19 15 U.S.C. 78s(b)(3)(A).
20 15 U.S.C. 78s(b)(3)(A).
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constitutes a stated policy, practice, or
interpretation with respect to the
meaning, administration, or
enforcement of an existing rule and
therefore qualifies for filing under
Section 19(b)(3)(A).21 According to
Commission Rule 19b–4(b)(2)(ii),22 a
‘‘stated policy, practice or
interpretation’’ means, among other
things, ‘‘[a]ny statement made generally
available to the membership of * * * or
to persons having or seeking access
* * * to the facilities of [the Exchange]
* * * with respect to * * * the
meaning * * * of an existing rule.’’
Interpretation and Policy .02 of CBOE
Rule 3.19 is such a statement made to
the entire membership of CBOE, and to
those who are ‘‘seeking access’’ to
CBOE, ‘‘with respect to the meaning of
an existing rule’’—namely, CBOE Rule
3.19. CBOE Rule 3.19 provides in
general for the temporary continuation
of a person’s membership status when
that membership status is lost under
‘‘extenuating circumstances’’ and
provides that the membership status
may be continued for a period of time
that the Exchange determines to be
‘‘reasonably necessary’’ to allow a
substitute membership to be obtained.
Interpretation and Policy .02 applies
those general standards to the present
situation. In particular, as more fully set
forth above, the interpretation identifies
several circumstances that would exist
if the Commission were to approve SR–
CBOE–2006–106 as qualifying as
‘‘extenuating circumstances’’ that make
it appropriate to allow Temporary
Members to continue in that
membership status after that approval.
In addition, the interpretation construes
the duration of that continued
Temporary Membership status that is
‘‘reasonably necessary’’ in light of those
extenuating circumstances. The
interpretation of those elements of
CBOE Rule 3.19 is an interpretation of
the ‘‘meaning of an existing rule’’ and
therefore is appropriately submitted
under Section 19(b)(3)(A).23
Although the proposed rule change
will be effective upon filing, it will not
become operative, in accordance with
its terms, unless the Commission were
to approve SR–CBOE–2006–106.
Accordingly, the actual implementation
of Interpretation and Policy .02 of CBOE
Rule 3.19 is dependent on Commission
action on SR–CBOE–2006–106.
General Reasons Supporting the
Proposed Rule Change
The Exchange believes that the
proposed rule change preserves fair and
orderly markets at CBOE by avoiding
the sudden loss of as many as 229
Temporary Members who presently are
contributing liquidity to CBOE’s
markets. Moreover, the proposed rule
change treats these Temporary Members
fairly by avoiding the immediate
termination of their trading access on
the Exchange upon the approval of SR–
CBOE–2006–106.
2. Statutory Basis
For the reasons discussed above, the
Exchange believes that the proposed
rule change is consistent with Section
6(b) of the Act,24 in general, and furthers
the particular objectives of Section
6(b)(5) of the Act.25 In particular, the
proposed rule change is designed to
promote just and equitable principles of
trade, to remove impediments to, and
perfect the mechanism of a free and
open market, and, in general, to protect
investors and the public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 26 and paragraph (f) of Rule
19b–4 thereunder.27 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.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
24 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
26 15 U.S.C. 78s(b)(3)(A).
27 17 CFR 240.19b–4(f).
21 15
U.S.C. 78s(b)(3)(A).
22 17 CFR 240.19b–4(b)(2)(ii).
23 15 U.S.C. 78s(b)(3)(A).
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14:43 Sep 21, 2007
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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–2007–107 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–2007–107. 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, on official business days between
the hours of 10 am and 3 pm. Copies of
the 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–
2007–107 and should be submitted on
or before October 15, 2007.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.28
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–18730 Filed 9–21–07; 8:45 am]
BILLING CODE 8010–01–P
25 15
Jkt 211001
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:
28 17
Sfmt 4703
E:\FR\FM\24SEN1.SGM
CFR 200.30–3(a)(12).
24SEN1
]]>Agencies
[Federal Register Volume 72, Number 184 (Monday, September 24, 2007)]
[Notices]
[Pages 54309-54312]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-18730]
[[Page 54309]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56458; File No. SR-CBOE-2007-107]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Regarding Continuation of Temporary Membership Status From
and After Commission Approval of a Pending Rule Interpretation
Concerning Exercise Right Eligibility
September 18, 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 September 10, 2007, the Chicago Board Options Exchange, Incorporated
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been substantially
prepared by the CBOE. The Exchange has designated this proposal 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.
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\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
CBOE proposes to adopt new Interpretation and Policy .02 of CBOE
Rule 3.19 that continues the temporary membership status provided to
certain persons under existing Interpretation and Policy .01 of CBOE
Rule 3.19 from and after any approval of SR-CBOE-2006-106.\5\ The text
of proposed Interpretation and Policy .02 of CBOE Rule 3.19 is set
forth below (since Interpretation and Policy .02 of CBOE Rule 3.19 is
completely new, its text is italicized).
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\5\ See Securities Exchange Act Release No. 55190 (January 29,
2007), 72 FR 5472 (February 6, 2007). The Exchange filed SR-CBOE-
2006-106 on December 12, 2006. On January 17, 2007, the Exchange
filed Amendment No. 1 to the proposed rule change. Numerous comments
were received, and the Exchange responded to those comments on June
15, 2007. On June 29, 2007, the Exchange filed a partial amendment,
Amendment No. 2, to the proposed rule change.
---------------------------------------------------------------------------
Chicago Board Options Exchange, Incorporated Rules
* * * * *
Rule 3.19. No change.
* * * Interpretations and Policies:
.01 No change.
.02 A person (``Temporary Member'') who has been granted temporary
membership (``Temporary Membership'') status at the Exchange pursuant
to Interpretation and Policy .01 of this Rule 3.19 shall continue in
that Temporary Membership status after the Commission's approval of SR-
CBOE-2006-106, if and only if such person (i) has not previously
terminated that Temporary Membership status and remains in good
standing as of the close of business on the trading day immediately
before the date of that approval, (ii) thereafter remains in good
standing and continues to pay all applicable fees, dues, assessments
and other like charges that are assessed against CBOE members, and
(iii) pays to the Exchange a monthly access fee set by the Exchange,
which shall be due and payable in accordance with the provisions of the
Exchange Fee Schedule. Such access fee shall be paid directly to the
Exchange and shall not be escrowed.
The Temporary Membership status granted to a Temporary Member
pursuant to this Interpretation and Policy .02 shall terminate upon the
earlier of (i) the voluntary termination of that Temporary Membership
status by the Temporary Member, (ii) the approval by the Commission of
a further proposed rule change that provides for the termination of
that status and the granting of trading permits or another form of
trading access to Temporary Members, or (iii) the consummation of a
transaction pursuant to which either CBOE is converted into a stock
corporation or memberships in CBOE are converted into stock. Temporary
Members shall be subject to the regulatory jurisdiction of CBOE under
the Act, the Constitution and the Rules, including CBOE's disciplinary
jurisdiction under Chapter XVII.
* * * * *
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 these statements may be examined at the places specified in
Item IV below. CBOE has prepared summaries, set forth in Sections A, B,
and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange filed this proposed rule change with the Commission to
continue the temporary membership (``Temporary Membership'') status,
including trading access, of persons (``Temporary Members'') who
currently enjoy that status pursuant to Interpretation and Policy .01
of CBOE Rule 3.19 from and after the time their current Temporary
Membership status would otherwise terminate if the Commission were to
approve SR-CBOE-2006-106. The underlying purpose of this proposed rule
change is to ensure fair and orderly markets at the Exchange when as
many as 229 former exerciser members cease to be eligible to remain
members of the Exchange under Interpretation and Policy .01 of CBOE
Rule 3.19, upon an approval of SR-CBOE-2006-106 by the Commission.\6\
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\6\ According to the Exchange, there currently are 229 former
exerciser members that qualify for temporary membership status under
Interpretation and Policy .01 of CBOE Rule 3.19.
---------------------------------------------------------------------------
Continuation of Temporary Membership Status
In SR-CBOE-2006-106, CBOE proposed an interpretation of paragraph
(b) of Article Fifth of the CBOE Certificate of Incorporation
(``Article Fifth(b)'') to address the impact of the then-proposed
acquisition of The Board of Trade of the City of Chicago, Inc.
(``CBOT'') by Chicago Mercantile Exchange Holdings Inc. (``CME
Holdings'') on the eligibility of persons who were members of CBOE
(``exerciser members'') pursuant to Article Fifth(b) (the right
provided under this provision is sometimes referred to as the
``exercise right'').\7\ Under that interpretation, the consummation of
the CME/CBOT Transaction resulted in no person any longer qualifying as
a member of the CBOT within the meaning of Article Fifth(b) and
therefore resulted in the elimination of any person's eligibility to
qualify thereafter to become or remain an exerciser member of the
Exchange.
[[Page 54310]]
Thus, if the Commission were to approve SR-CBOE-2006-106, and in the
absence of any provision for continuing the membership status of such
persons on a temporary basis after that approval, former exerciser
members would cease to be entitled, among other things, to trade on the
Exchange.
---------------------------------------------------------------------------
\7\ CME Holdings proposed to acquire CBOT by merging CME
Holdings with CBOT Holdings, Inc. (``CBOT Holdings''), of which CBOT
was a wholly-owned subsidiary (the ``CME/CBOT Transaction''). The
CME/CBOT Transaction was consummated on July 12, 2007.
---------------------------------------------------------------------------
In SR-CBOE-2006-106, the Exchange stated that it was prepared to
maintain the status quo for some period of time after the exercise
right was terminated, in order to control the risk that the loss of
exerciser members upon the termination of the exercise right might
adversely affect liquidity in CBOE's market. The Exchange also stated
that this result would be accomplished by staying, for an interim
period of time, the impact of the termination of the exercise right on
the trading access of those individuals who were exerciser members of
CBOE on a designated cut-off date, and that this action would permit
those individuals to continue to trade on CBOE in the capacity of CBOE
members during that interim period. The Exchange indicated that this
decision to stay the effectiveness of what otherwise would result in a
termination of trading access was analogous to the right of the
Exchange under CBOE Rule 3.19. The Exchange also indicated that this
interim period would continue for so long as necessary to avoid any
disruption to the market as a result of the loss of exerciser members,
which could involve the Exchange adopting a plan to provide some form
of trading access to such persons in the absence of the exercise right.
In other words, the Exchange envisioned that this interim period would
start upon the approval of SR-CBOE-2006-106, with the Exchange
initially maintaining the status quo for former exerciser members, and
could eventually involve the adoption of a plan to provide some form of
trading access to former exerciser members through trading permits or
some other form of substitute trading access rights, at which point the
interim period would terminate and trading access would be provided
under such substitute trading access rights. SR-CBOE-2006-106
contemplated that any such substitute trading access rights would
require the approval of CBOE members under Section 2.1 of the
Exchange's Constitution, and would be subject to the approval of the
Commission under Section 19(b) of the Act.\8\
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78s(b).
---------------------------------------------------------------------------
While SR-CBOE-2006-106 was pending before the Commission, the
Exchange was faced with a situation that was not addressed in that
filing, when the CME/CBOT Transaction was consummated before the
Commission had acted on SR-CBOE-2006-106. In response to that impending
situation, the Exchange adopted Interpretation and Policy .01 of CBOE
Rule 3.19 to provide temporary trading access to certain former
exerciser members. Under that interpretation, these Temporary Members
have been granted continued membership status on a temporary basis--
including the right to trade--following the consummation of the CME/
CBOT Transaction on July 12, 2007. However, under the express terms of
that interpretation, that Temporary Membership status will terminate
upon any approval of SR-CBOE-2006-106.\9\ The Exchange also indicated
in the rule filing adopting Interpretation and Policy .01 that, as
contemplated in SR-CBOE-2006-106, there would be a different temporary
access plan to address transitional issues that would arise from the
approval of SR-CBOE-2006-106.\10 \
---------------------------------------------------------------------------
\9\ Interpretation and Policy .01 allows a Temporary Member to
maintain Temporary Membership status at the Exchange if and only if
such person (i) remains in good standing and continues to pay all
applicable fees, dues, assessments and other like charges that are
assessed against CBOE members, and (ii) pays to the Exchange a
monthly access fee. A person who has voluntarily terminated a
Temporary Membership is no longer a member in good standing, and
consequently would cease to be eligible for the Temporary Membership
status provided under that interpretation. If that person seeks to
access the Exchange as a member of the Exchange after such a
termination, that person will need to lease or purchase a
transferable Exchange membership.
\10\ See Securities Exchange Act Release No. 56016 (July 5,
2007), 72 FR 38106 (July 12, 2007) (SR-CBOE-2007-77).
---------------------------------------------------------------------------
The Exchange is filing this proposed rule change to implement its
original intention, as reflected in SR-CBOE-2006-106, to maintain the
status quo for former exerciser members by providing them with an
interim period of trading access after the approval of that filing. The
Exchange believes that this rule change is appropriate to prevent any
disruption that might occur in the Exchange's markets if former
exerciser members suddenly lost all rights to trade on the Exchange if
the Commission were to approve SR-CBOE-2006-106. To avoid the
possibility of such a disruption, the Exchange proposes to provide
interim trading access by adopting Interpretation and Policy .02 of
CBOE Rule 3.19. This interpretation will extend the Temporary
Membership status provided to Temporary Members under Interpretation
and Policy .01 of CBOE Rule 3.19.\11\ Under Interpretation and Policy
.02, this Temporary Membership status will be conditioned on the
Temporary Member: (i) Not having previously terminated that Temporary
Membership status and thereafter remaining in good standing, (ii)
continuing to pay all applicable fees, dues, assessments and other like
charges that are assessed against CBOE members, and (iii) paying to the
Exchange a monthly access fee.\12 \
---------------------------------------------------------------------------
\11\ As long as they remain Temporary Members, these persons
will continue to possess all of the rights, and be subject to all of
the obligations, of exerciser members prior to the CME/CBOT
Transaction.
\12\ Interpretation and Policy .01 of CBOE Rule 3.19 requires,
among other things, persons to have been exerciser members of the
Exchange as of July 1, 2007 to qualify for the Temporary Membership
status provided under that interpretation. This cut-off date was
chosen to ensure that only those persons who had a bona fide
interest in trading on CBOE qualified for the Temporary Membership
status in Interpretation and Policy .01. For this reason, as well as
the reasons given for adopting Interpretation and Policy .01, the
Exchange believes that this cut-off date also is appropriate for
Interpretation and Policy .02.
---------------------------------------------------------------------------
The interim trading access plan contained in Interpretation and
Policy .02 of CBOE Rule 3.19 addresses the extenuating circumstances
that would be faced by the Exchange if SR-CBOE-2006-106 were approved
and, by virtue of that approval, Interpretation and Policy .01 of Rule
3.19 ceases to apply. Although the Exchange in SR-CBOE-2006-106
indicated that its decision to stay the effectiveness of the
termination of trading access upon the approval of that filing was
``analogous'' to the right of the Exchange under CBOE Rule 3.19, the
Exchange subsequently has determined that it is appropriate to rely on
CBOE Rule 3.19 itself to provide trading access to Temporary Members.
Rule 3.19 allows the Exchange, if the Exchange finds extenuating
circumstances, to permit a member to retain the member's membership
status for such period of time as the Exchange deems reasonably
necessary to enable that person to obtain a membership under those
extenuating circumstances.
Because the Exchange's goal in providing interim trading access
under Interpretation and Policy .02 of CBOE Rule 3.19 is to avoid any
disruption to the Exchange's markets as a result of the sudden loss of
Temporary Members, the Exchange proposes to continue the Temporary
Membership status of Temporary Members without requiring any action by
them and without requiring that they hold any particular interests in
CBOT. Rather, the Exchange will determine who is an eligible Temporary
Member under the provisions of this interpretation and will take
appropriate action to ensure that those persons retain their Temporary
Membership status. Of
[[Page 54311]]
course, Temporary Members will be subject to the regulatory
jurisdiction of CBOE under the Act, the Constitution and the Rules,
including CBOE's disciplinary jurisdiction under Chapter XVII.
The Exchange states that Interpretation and Policy .02 of CBOE Rule
3.19 does not trigger the membership vote provision found in Section
2.1 of the Exchange's Constitution. That provision applies only when
the Exchange issues ``new'' memberships. In contrast, Interpretation
and Policy .02 temporarily preserves the membership rights of existing
Temporary Members if and as of the time that the Commission approves
SR-CBOE-2006-106. Because the interpretation would not create any new
memberships or trading rights, no membership approval is required under
Section 2.1 of the Exchange's Constitution or otherwise.
Duration of Temporary Membership Status
CBOE Rule 3.19 provides CBOE with the authority to allow members to
retain their membership status for such time as is reasonably necessary
for such persons to obtain a membership under the extenuating
circumstances that necessitated application of CBOE Rule 3.19. There
are several extenuating circumstances that would continue to exist if
the Commission were to approve SR-CBOE-2006-106. Most importantly, but
for Interpretation and Policy .02 of CBOE Rule 3.19, any approval of
SR-CBOE-2006-106 would cause the sudden loss of as many as 229
Temporary Members who then would be providing liquidity to the
Exchange's markets.\13\ In addition, there is a strong likelihood that
there will be an insufficient number of transferable Exchange
memberships available for purchase or lease by Temporary Members upon
that approval. In accordance with its original plan, as reflected in
SR-CBOE-2006-106, the Exchange intends to offer trading permits or some
other form of substitute trading access rights to Temporary Members
after the approval of SR-CBOE-2006-106. However, given the current
legal controversy surrounding the effect of that approval on the rights
claimed by former exerciser members and by persons who assert the right
to become exerciser members,\14\ the Exchange does not believe it is
possible at this time to formulate prudently such a trading rights plan
and to submit it for Exchange membership approval, as required under
Section 2.1 of the Exchange's Constitution. Instead, the Exchange
intends to design that trading access rights plan after Commission
approval of SR-CBOE-2006-106 should such approval be given, and
possibly other developments, provide the Exchange with appropriate
guidance about the legal backdrop that may affect the structure of that
trading access rights plan. In light of these extenuating
circumstances, the Exchange believes that it is reasonably necessary
for Temporary Memberships to continue in place until such a well-
defined trading access rights plan could be developed and put in place
if the Commission were to approve SR-CBOE-2006-106. Accordingly, under
Interpretation and Policy .02 of CBOE Rule 3.19, the Temporary
Membership status granted to a Temporary Member would continue, absent
voluntary termination of that Temporary Membership status by the
Temporary Member, until the earlier of (i) the approval by the
Commission of a further proposed rule change that provides for the
termination of that status and for the granting of trading permits or
other form of substitute trading access rights to Temporary Members or
(ii) the consummation of a transaction pursuant to which either CBOE is
converted into a stock corporation or memberships in CBOE are converted
into stock (collectively, a ``Demutualization Transaction''). Each of
these events would grant trading permits or other form of substitute
trading access rights to Temporary Members, and each would be subject
to the approval of CBOE members under Section 2.1 of the Exchange's
Constitution and to the approval of the Commission under Section 19(b)
of the Act.\15\
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\13\ According to the Exchange, as of September 6, 2007,
approximately 17 of these Temporary Members were registered to trade
on behalf of Designated Primary Market-Makers (``DPMs''), while 154
of them were registered to trade as Market-Makers, and 46 were
registered to trade as either Remote Market-Makers or on behalf of
Electronic DPMs.
\14\ In current litigation, purported representatives of such
persons have claimed that their rights survive the CME/CBOT
Transaction and would not be affected by approval of SR-CBOE-2006-
106.
\15\ 15 U.S.C. 78s(b).
---------------------------------------------------------------------------
Trading Access Fees
Currently, pursuant to Interpretation and Policy .01 of CBOE Rule
3.19 and the Exchange Fee Schedule, Temporary Members are required to
pay a monthly access fee of $4700 per month.\16\ The amount of this fee
was based on the then-current monthly lease fees being paid to lessors
of the interest that CBOT denominates as a full CBOT membership, as
reflected in published lease fee information. Because the Commission
has not yet determined whether to approve SR-CBOE-2006-106, those fees
are being held in an interest-bearing escrow account maintained by the
Exchange, and will be distributed in a manner consistent with any
Commission action on SR-CBOE-2006-106.\17\
---------------------------------------------------------------------------
\16\ See Securities Exchange Act Release No. 56197 (August 3,
2007), 72 FR 44897 (August 9, 2007) (SR-CBOE-2007-91).
\17\ Under its proposed rule change, the Exchange would retain
the access fees if the Commission approves SR-CBOE-2006-106, and the
fees would be returned to the payor with interest if the Commission
disapproves SR-CBOE-2006-106. See Securities Exchange Act Release
No. 56016 (July 5, 2007), 72 FR 38106 (July 12, 2007) (SR-CBOE-2007-
77).
---------------------------------------------------------------------------
If the Commission approves SR-CBOE-2006-106, former exerciser
members no longer would have any right of trading access in the
capacity of an exerciser member. However, pursuant to Interpretation
and Policy .02, they would continue to have trading access to the
Exchange as Temporary Members. Accordingly, it is appropriate that
these persons pay the Exchange a fee for the temporary continued
trading access that they will be granted, and an escrow no longer will
be appropriate because the Commission will have approved SR-CBOE-2006-
106. The Exchange therefore proposes that these monthly access fees be
paid directly to the Exchange and that they not be escrowed.
The Exchange will modify the amount of the monthly access fee if
SR-CBOE-2006-106 is approved. In this regard, absent Interpretation and
Policy .02 of CBOE Rule 3.19, Temporary Members would need to lease (or
purchase) transferable Exchange memberships to continue to have trading
access to the Exchange after the approval of SR-CBOE-2006-106. The
Exchange therefore believes that the appropriate amount of the monthly
access fee after such approval should be an amount reasonably related
to the current lease market rate for transferable Exchange memberships.
The Exchange will file a rule change relating to that amount in a
separate proposed rule change that will be filed with the Commission
under Section 19(b)(3)(A) of the Act.\18\
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78s(b)(3)(A).
---------------------------------------------------------------------------
Filing Pursuant to Section 19(b)(3)(A) of the Act \19\
The Exchange is filing Interpretation and Policy .02 of CBOE Rule
3.19 pursuant to Section 19(b)(3)(A) of the Act.\20\ As was the case in
respect of Interpretation and Policy .01, Interpretation and Policy
+.02
[[Page 54312]]
constitutes a stated policy, practice, or interpretation with respect
to the meaning, administration, or enforcement of an existing rule and
therefore qualifies for filing under Section 19(b)(3)(A).\21\ According
to Commission Rule 19b-4(b)(2)(ii),\22\ a ``stated policy, practice or
interpretation'' means, among other things, ``[a]ny statement made
generally available to the membership of * * * or to persons having or
seeking access * * * to the facilities of [the Exchange] * * * with
respect to * * * the meaning * * * of an existing rule.''
Interpretation and Policy .02 of CBOE Rule 3.19 is such a statement
made to the entire membership of CBOE, and to those who are ``seeking
access'' to CBOE, ``with respect to the meaning of an existing rule''--
namely, CBOE Rule 3.19. CBOE Rule 3.19 provides in general for the
temporary continuation of a person's membership status when that
membership status is lost under ``extenuating circumstances'' and
provides that the membership status may be continued for a period of
time that the Exchange determines to be ``reasonably necessary'' to
allow a substitute membership to be obtained. Interpretation and Policy
.02 applies those general standards to the present situation. In
particular, as more fully set forth above, the interpretation
identifies several circumstances that would exist if the Commission
were to approve SR-CBOE-2006-106 as qualifying as ``extenuating
circumstances'' that make it appropriate to allow Temporary Members to
continue in that membership status after that approval. In addition,
the interpretation construes the duration of that continued Temporary
Membership status that is ``reasonably necessary'' in light of those
extenuating circumstances. The interpretation of those elements of CBOE
Rule 3.19 is an interpretation of the ``meaning of an existing rule''
and therefore is appropriately submitted under Section 19(b)(3)(A).\23\
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 15 U.S.C. 78s(b)(3)(A).
\22\ 17 CFR 240.19b-4(b)(2)(ii).
\23\ 15 U.S.C. 78s(b)(3)(A).
---------------------------------------------------------------------------
Although the proposed rule change will be effective upon filing, it
will not become operative, in accordance with its terms, unless the
Commission were to approve SR-CBOE-2006-106. Accordingly, the actual
implementation of Interpretation and Policy .02 of CBOE Rule 3.19 is
dependent on Commission action on SR-CBOE-2006-106.
General Reasons Supporting the Proposed Rule Change
The Exchange believes that the proposed rule change preserves fair
and orderly markets at CBOE by avoiding the sudden loss of as many as
229 Temporary Members who presently are contributing liquidity to
CBOE's markets. Moreover, the proposed rule change treats these
Temporary Members fairly by avoiding the immediate termination of their
trading access on the Exchange upon the approval of SR-CBOE-2006-106.
2. Statutory Basis
For the reasons discussed above, the Exchange believes that the
proposed rule change is consistent with Section 6(b) of the Act,\24\ in
general, and furthers the particular objectives of Section 6(b)(5) of
the Act.\25\ In particular, the proposed rule change is designed to
promote just and equitable principles of trade, to remove impediments
to, and perfect the mechanism of a free and open market, and, in
general, to protect investors and the public interest.
---------------------------------------------------------------------------
\24\ 15 U.S.C. 78f(b).
\25\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \26\ and paragraph (f) of Rule 19b-4
thereunder.\27\ 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.
---------------------------------------------------------------------------
\26\ 15 U.S.C. 78s(b)(3)(A).
\27\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------
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-2007-107 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-2007-107. 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, on official business
days between the hours of 10 am and 3 pm. Copies of the 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-2007-107 and should be submitted on or before October 15, 2007.
---------------------------------------------------------------------------
\28\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\28\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-18730 Filed 9-21-07; 8:45 am]
BILLING CODE 8010-01-P
