Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend CBOE's Membership Rules As Applied To Statutory Disqualification Hearings, 58132-58133 [E7-20080]

Download as PDF 58132 Federal Register / Vol. 72, No. 197 / Friday, October 12, 2007 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–56614; File No. SR–CBOE– 2007–14] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend CBOE’s Membership Rules As Applied To Statutory Disqualification Hearings October 4, 2007. Pursuant to section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Exchange Act’’ or ‘‘Act’’), and Rule 19b–4 thereunder,2 notice is hereby given that on February 14, 2007, the Chicago Board Options Exchange, Incorporated (‘‘CBOE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. jlentini on PROD1PC65 with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend CBOE Rule 3.18 of its membership rules, titled Members and Associated Persons Who Are or Become Subject to a Statutory Disqualification, to modify the requirement that the Exchange hold a hearing to determine whether an associated person subject to a statutory disqualification under the Exchange Act may continue in association with an Exchange member. In particular, the Exchange proposes to allow its Membership Committee to waive the hearing provisions of Rule 3.18(c) when determining whether to allow such persons to continue in association with an Exchange member in those instances where Exchange Act Rule19h–1(a)(2) 3 does not require the Exchange to make a filing with the Commission on behalf of that person and where the Exchange intends to grant the associated person’s application for continued association. The text of the proposed rule change is available at the Exchange, the Commission’s Public Reference Room, and at http://www.cboe.org/Legal. 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 17 CFR 240.19h–1(a)(2). 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 and is set forth in sections (A), (B), and (C) below. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose In accordance with Rule 3.18(a), the Exchange may determine not to permit an associated person of a member who is or becomes subject to a statutory disqualification under Exchange Act section 3(a)(39) 4 to continue in association with that member. Under CBOE Rule 3.18(b), an associated person who is or becomes subject to a statutory disqualification and wishes to continue in association with a member must submit an application to the Exchange to do so. When the Exchange receives such an application, or otherwise becomes aware that the associated person is subject to a statutory disqualification, the Exchange’s Membership Committee is required to conduct a hearing, under procedures set forth in Rules 3.18(c) through 3.18(i), to determine whether to allow the associated person to continue in association with that member. The purpose of this rule filing is to allow the Exchange’s Membership Committee to waive the requirement to conduct the hearing if Exchange Act Rule 19h– 1(a)(2) does not require the Exchange to make a filing with the Commission on behalf of that associated person, and if the Exchange intends to grant the associated person’s application for continued association. In many instances, CBOE members conduct both securities activities at the Exchange as registered brokers or dealers, and futures activities at a commodities exchange as registered futures commission merchants with the Commodities Futures Trading Commission (‘‘CFTC’’). Typically, these member firms have employees who are only involved in the futures side of the member’s business. However, because the member must be registered with the Commission as a broker-dealer to 2 17 VerDate Aug<31>2005 16:35 Oct 11, 2007 4 15 Jkt 214001 PO 00000 U.S.C. 78c(a)(39). Frm 00087 Fmt 4703 Sfmt 4703 conduct its securities activities, under the Exchange Act the member’s employees, including those involved only in futures and other non-securitiesrelated activities, may also be considered persons associated with a broker-dealer under Exchange Act section 3(a)(18).5 Even though, as discussed below, Rule 19h–1(a)(2) would not require a notice filing with the Commission on behalf of many of these persons, current CBOE rules require the Exchange to hold a hearing for each such associated person who becomes subject to a statutory disqualification, even if their activities are not securities-related. These hearings are time consuming, both for CBOE staff and for member firms that comprise the Membership Committee. Exchange Act Rule 19h–1 prescribes the form and content of, and establishes the mechanism by which the Commission reviews, proposals submitted by self-regulatory organizations (‘‘SROs’’), such as the Exchange, to allow persons subject to statutory disqualification to become or remain associated with member firms. Among other things, Rule 19h–1 provides for Commission review of notices filed by SROs proposing to admit to, or continue any person in, membership or association with a member, notwithstanding a statutory disqualification. However, in several instances, Rule 19h–1 provides that for certain persons, no such notice need be filed. In particular, Rule 19h–1(a)(2) 6 provides that no notice filing is required for associated persons who, among other things, are not control persons, partners, officers, or employees engaged in securities-related activities. In proposing this rule change, the Exchange notes that the CFTC 5 15 U.S.C. 78c(a)(18). These employees may also be considered to be associated with a member under Exchange Act Section 3(a)(21). 6 Exchange Act Rule 19h–1(a)(2) provides that, with respect to a person subject to a statutory disqualification and who is associated with a member of a national securities exchange or registered securities association, notices need to be filed with the Commission pursuant to Exchange Act Rule 19h–1 only if such person: (i) Controls such member, is a general partner or officer (or person occupying a similar status or performing similar functions) of such member, is an employee who, on behalf of such member, is engaged in securities advertising, public relations, research, sales, trading, or training or supervision of other employees who engage or propose to engage in such activities, except clerical and ministerial persons engaged in such activities, or is an employee with access to funds, securities or books and records, or (ii) Is a broker or dealer not registered with the Commission, or controls such (unregistered) broker or dealer or is a general partner or officer (or person occupying a similar status or performing similar functions) of such broker or dealer. E:\FR\FM\12OCN1.SGM 12OCN1 Federal Register / Vol. 72, No. 197 / Friday, October 12, 2007 / Notices administers and enforces a statutory disqualification scheme under the Commodity Exchange Act 7 in connection with employees of members involved in futures activities that is similar to the statutory disqualification scheme under the Exchange Act. The Exchange believes that this proposed rule change would better enable the Exchange to focus resources on applications for continuance involving associated persons who are engaged in securities-related activities and who are required by Exchange Act Rule 19h–1 to have filings with the Commission made on their behalf. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with Exchange Act section 6(b)(5),8 which requires, among other things, that the Exchange’s rules be designed to remove impediments to and perfect the mechanism of a free and open market and a national market system, and protect investors and the public interest. The Exchange believes that, by permitting it to waive the hearing requirement for persons whose applications it intends to approve, and for whom no notice filing is required under Rule 19h–1(a)(2), the proposed rule change will better enable the Exchange to streamline the administration of its statutory disqualification program and better protect investors and the public interest by focusing its resources on other membership-related matters including continuance applications for associated persons that also require filings with the Commission. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. jlentini on PROD1PC65 with NOTICES 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 Because the foregoing rule does not (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, provided that the selfregulatory organization has given the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change or such shorter time as designated by the Commission, the proposed rule change has become effective pursuant to section 19(b)(3)(A) of the Act 9 and Rule 19b– 4(f)(6) thereunder.10 At any time within 60 days of the filing of such 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 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: 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 Section, 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 the 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–2007–14 and should be submitted on or before November 2, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.11 Nancy M. Morris, Secretary. [FR Doc. E7–20080 Filed 10–11–07; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION 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–2007–14 on the subject line. [Release No. 34–56596; File No. 4–429] 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–2007–14. 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 October 2, 2007. Joint Industry Plan; Notice of Filing of Joint Amendment No. 24 to the Plan for the Purpose of Creating and Operating an Intermarket Option Linkage Regarding Elimination of the Class Gate Pursuant to Section 11A of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 608 of Regulation NMS thereunder,2 notice is hereby given that on September 14, 2007, September 19, 2007, August 29, 2007, August 29, 2007, August 30, 2007, and September 26, 2007, American Stock Exchange, LLC (‘‘Amex’’), Boston Stock Exchange, Inc. (‘‘BSE’’), Chicago Board Options Exchange, Incorporated (‘‘CBOE’’), International Securities Exchange, LLC (‘‘ISE’’), NYSE Arca, Inc. (‘‘NYSE Arca’’), and Philadelphia Stock Exchange, Inc. (‘‘Phlx’’) (collectively, the ‘‘Participants’’), respectively, submitted to the Securities and Exchange Commission (‘‘Commission’’) Amendment No. 24 to the Plan for the Purpose of Creating and Operating an Intermarket Option Linkage (‘‘Linkage 11 17 77 U.S.C. 1 et seq. 8 15 U.S.C. 78f(b)(5). VerDate Aug<31>2005 16:35 Oct 11, 2007 9 15 U.S.C. 78s(b)(3)(A). 10 17 CFR 240.19b–4(f)(6). Jkt 214001 58133 PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 CFR 200.30–3(a)(12). U.S.C. 78k–1. 2 17 CFR 242.608. 1 15 E:\FR\FM\12OCN1.SGM 12OCN1

Agencies

[Federal Register Volume 72, Number 197 (Friday, October 12, 2007)]
[Notices]
[Pages 58132-58133]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-20080]



[[Page 58132]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56614; File No. SR-CBOE-2007-14]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Amend CBOE's Membership Rules As Applied To Statutory 
Disqualification Hearings

October 4, 2007.
    Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Exchange Act'' or ``Act''), and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on February 14, 2007, the Chicago Board 
Options Exchange, Incorporated (``CBOE'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change described in Items I, II, and III below, which Items have 
been prepared by the Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend CBOE Rule 3.18 of its membership 
rules, titled Members and Associated Persons Who Are or Become Subject 
to a Statutory Disqualification, to modify the requirement that the 
Exchange hold a hearing to determine whether an associated person 
subject to a statutory disqualification under the Exchange Act may 
continue in association with an Exchange member. In particular, the 
Exchange proposes to allow its Membership Committee to waive the 
hearing provisions of Rule 3.18(c) when determining whether to allow 
such persons to continue in association with an Exchange member in 
those instances where Exchange Act Rule19h-1(a)(2) \3\ does not require 
the Exchange to make a filing with the Commission on behalf of that 
person and where the Exchange intends to grant the associated person's 
application for continued association. The text of the proposed rule 
change is available at the Exchange, the Commission's Public Reference 
Room, and at http://www.cboe.org/Legal.
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    \3\ 17 CFR 240.19h-1(a)(2).
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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 and is set forth in sections (A), (B), and (C) below.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    In accordance with Rule 3.18(a), the Exchange may determine not to 
permit an associated person of a member who is or becomes subject to a 
statutory disqualification under Exchange Act section 3(a)(39) \4\ to 
continue in association with that member. Under CBOE Rule 3.18(b), an 
associated person who is or becomes subject to a statutory 
disqualification and wishes to continue in association with a member 
must submit an application to the Exchange to do so. When the Exchange 
receives such an application, or otherwise becomes aware that the 
associated person is subject to a statutory disqualification, the 
Exchange's Membership Committee is required to conduct a hearing, under 
procedures set forth in Rules 3.18(c) through 3.18(i), to determine 
whether to allow the associated person to continue in association with 
that member. The purpose of this rule filing is to allow the Exchange's 
Membership Committee to waive the requirement to conduct the hearing if 
Exchange Act Rule 19h-1(a)(2) does not require the Exchange to make a 
filing with the Commission on behalf of that associated person, and if 
the Exchange intends to grant the associated person's application for 
continued association.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78c(a)(39).
---------------------------------------------------------------------------

    In many instances, CBOE members conduct both securities activities 
at the Exchange as registered brokers or dealers, and futures 
activities at a commodities exchange as registered futures commission 
merchants with the Commodities Futures Trading Commission (``CFTC''). 
Typically, these member firms have employees who are only involved in 
the futures side of the member's business. However, because the member 
must be registered with the Commission as a broker-dealer to conduct 
its securities activities, under the Exchange Act the member's 
employees, including those involved only in futures and other non-
securities-related activities, may also be considered persons 
associated with a broker-dealer under Exchange Act section 3(a)(18).\5\ 
Even though, as discussed below, Rule 19h-1(a)(2) would not require a 
notice filing with the Commission on behalf of many of these persons, 
current CBOE rules require the Exchange to hold a hearing for each such 
associated person who becomes subject to a statutory disqualification, 
even if their activities are not securities-related. These hearings are 
time consuming, both for CBOE staff and for member firms that comprise 
the Membership Committee.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78c(a)(18). These employees may also be considered 
to be associated with a member under Exchange Act Section 3(a)(21).
---------------------------------------------------------------------------

    Exchange Act Rule 19h-1 prescribes the form and content of, and 
establishes the mechanism by which the Commission reviews, proposals 
submitted by self-regulatory organizations (``SROs''), such as the 
Exchange, to allow persons subject to statutory disqualification to 
become or remain associated with member firms. Among other things, Rule 
19h-1 provides for Commission review of notices filed by SROs proposing 
to admit to, or continue any person in, membership or association with 
a member, notwithstanding a statutory disqualification. However, in 
several instances, Rule 19h-1 provides that for certain persons, no 
such notice need be filed. In particular, Rule 19h-1(a)(2) \6\ provides 
that no notice filing is required for associated persons who, among 
other things, are not control persons, partners, officers, or employees 
engaged in securities-related activities.
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    \6\ Exchange Act Rule 19h-1(a)(2) provides that, with respect to 
a person subject to a statutory disqualification and who is 
associated with a member of a national securities exchange or 
registered securities association, notices need to be filed with the 
Commission pursuant to Exchange Act Rule 19h-1 only if such person:
    (i) Controls such member, is a general partner or officer (or 
person occupying a similar status or performing similar functions) 
of such member, is an employee who, on behalf of such member, is 
engaged in securities advertising, public relations, research, 
sales, trading, or training or supervision of other employees who 
engage or propose to engage in such activities, except clerical and 
ministerial persons engaged in such activities, or is an employee 
with access to funds, securities or books and records, or
    (ii) Is a broker or dealer not registered with the Commission, 
or controls such (unregistered) broker or dealer or is a general 
partner or officer (or person occupying a similar status or 
performing similar functions) of such broker or dealer.
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    In proposing this rule change, the Exchange notes that the CFTC

[[Page 58133]]

administers and enforces a statutory disqualification scheme under the 
Commodity Exchange Act \7\ in connection with employees of members 
involved in futures activities that is similar to the statutory 
disqualification scheme under the Exchange Act. The Exchange believes 
that this proposed rule change would better enable the Exchange to 
focus resources on applications for continuance involving associated 
persons who are engaged in securities-related activities and who are 
required by Exchange Act Rule 19h-1 to have filings with the Commission 
made on their behalf.
---------------------------------------------------------------------------

    \7\ 7 U.S.C. 1 et seq.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Exchange Act section 6(b)(5),\8\ which requires, among other things, 
that the Exchange's rules be designed to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and protect investors and the public interest. The Exchange 
believes that, by permitting it to waive the hearing requirement for 
persons whose applications it intends to approve, and for whom no 
notice filing is required under Rule 19h-1(a)(2), the proposed rule 
change will better enable the Exchange to streamline the administration 
of its statutory disqualification program and better protect investors 
and the public interest by focusing its resources on other membership-
related matters including continuance applications for associated 
persons that also require filings with the Commission.
---------------------------------------------------------------------------

    \8\ 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 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended.

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

    Because the foregoing rule does not (i) significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest, provided that the self-regulatory organization 
has given the Commission written notice of its intent to file the 
proposed rule change at least five business days prior to the date of 
filing of the proposed rule change or such shorter time as designated 
by the Commission, the proposed rule change has become effective 
pursuant to section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) 
thereunder.\10\ At any time within 60 days of the filing of such 
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.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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-2007-14 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-2007-14. 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 Section, 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 the 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-2007-14 and should be 
submitted on or before November 2, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E7-20080 Filed 10-11-07; 8:45 am]
BILLING CODE 8011-01-P