Federal Register: May 3, 2004 (Volume 69, Number 85)
DOCID: FR Doc 04-9978
SECURITIES AND EXCHANGE COMMISSION
Securities and Exchange Commission
DOCUMENT ID: [Release No. 34-49620; File No. SR-CBOE-2004-16]
NOTICE: NOTICES
ACTION: Self-regulatory organizations; proposed rule changes:
SUBJECT CATEGORY:
Self-Regulatory Organizations; Notice of Filing of a Proposed Rule Change and Amendment No. 1 Thereto by the Chicago Board Options Exchange, Inc. Relating to an Interpretation of Paragraph (b) of Article Fifth of its Certificate of Incorporation and an Amendment to Rule 3.16(b)
DOCUMENT SUMMARY:
April 26, 2004.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b4 thereunder,\2\ notice is hereby given that
on March 4, 2004, the Chicago Board Options Exchange, Inc. (``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 by the CBOE. On April 9, 2004, the CBOE filed an amendment to the proposed rule change.\3\ The
[[Page 24206]]
Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
\3\ See letter from Arthur B. Reinstein, Deputy General Counsel,
CBOE, to Lisa N. Jones, Special Counsel, Division of Market
Regulation (``Division''), Commission, dated April 8, 2004 (``Amendment No. 1''). Amendment No. 1 provides further
clarification to the proposal by including three additional exhibits to the proposed rule change.
I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The CBOE proposes to adopt a proposed rule change consisting of an
interpretation of paragraph (b) of Article Fifth of the CBOE
Certificate of Incorporation (``Article Fifth(b)'') pertaining to the
right of the 1,402 Full Members of CBOT to become members of CBOE
without having to purchase a CBOE membership (``Exercise Right''). The
proposed interpretation of the Exercise Right is embodied in an
agreement dated December 17, 2003 (``2003 Agreement''), between the
CBOE and the Board of Trade of the City of Chicago, Inc. (``CBOT'').
The CBOE also proposes related revisions to CBOE Rule 3.16. Below is
the text of the proposed amendment to CBOE Rule 3.16. Proposed language is in italics; proposed deletions are in brackets.
* * * * *
Rule 3.16 Special Provisions Regarding Chicago Board of Trade Exerciser Memberships
(a) Termination of Nontransferable Memberships. [No change]
(b) Board of Trade Exercisers. For the purpose of entitlement to
membership on the Exchange in accordance with Paragraph (b) of Article
Fifth of the Certificate of Incorporation of the Exchange (``Article
Fifth(b)'') the term ``member of the Board of Trade of the City of
Chicago'' (the ``CBOT''), as used in Article Fifth(b), is interpreted
to mean an individual who is either an ``Eligible CBOT Full Member'' or
an ``Eligible CBOT Full Member Delegate,'' as those terms are defined
in the Agreement entered into on September 1, 1992 (the ``1992
Agreement'') between the CBOT and the Exchange, and in the Agreement
entered into on December 17, 2003, (``the 2003 Agreement'') between the
CBOT and the Exchange, and shall not mean any other person. In order to
permit Eligible CBOT Full Members and Eligible CBOT Full Member
Delegates to participate in an offer, distribution or redemption of the
kind referred to in the last two sentences of Paragraph 3(a) of the
1992 Agreement, and solely for such purpose, the Exchange will waive
all membership dues, fees and other charges and all qualification
requirements, other than those that may be imposed by law, that may be
applicable to the application for membership on the Exchange of each
Eligible CBOT Full Member and Eligible CBOT Full Member Delegate who
wishes to exercise the Exercise Right during the period commencing on
the date the Exchange gives notice to the CBOT pursuant to Paragraph
3(b) of the 1992 Agreement and ending on the date such individual
participates in such offer, distribution or redemption (as the case may
be); provided, however, that (i) no Exerciser Member (as defined in the
1992 Agreement) for whom dues, fees and other charges and qualification
requirements are waived in accordance with the foregoing shall have any
rights as a member of the Exchange other than to participate in such
offer, distribution or redemption, and (ii) the membership on the
Exchange of each such Exerciser Member shall terminate immediately
following the time such individual participates in such offer, distribution or redemption.
* * * * *
II. SelfRegulatory Organization's Statement of the Purpose of and Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the 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. The CBOE has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to provide an
interpretation to the rules of the CBOE as set forth in Article
Fifth(b) that will apply, upon the distribution by the CBOT to each of
its 1,402 Full Members upon their individual request, a separately
transferable interest representing the Exercise Right component of each
CBOT Full Membership. According to the CBOE, the CBOT's willingness to
issue transferable Exercise Right interests is reflected in the 2003
Agreement and recently adopted changes to the CBOT Rules and
Regulations. The CBOE notes that the 2003 Agreement, resulting from
negotiations with the CBOT, is intended to result in the issuance by
the CBOT of a separately transferable interest representing the
Exercise Right component of CBOT Full Membership in advance of the
consummation of the CBOT's proposed corporate restructuring, which
contemplates a similar structure. The CBOE believes that the CBOT's
proposed restructuring has not yet been consummated and it is uncertain as to when such proposed restructuring will occur.\4\
\4\ The CBOE notes that the CBOT's proposal to issue a
separately transferable interest representing the Exercise Right as
part of its restructuring was the subject of a prior proposed
interpretation by the CBOE of Article Fifth(b), which was filed with
the Commission as a proposed rule change in File No. SRCBOE2002
01. On April 7, 2004, the CBOE withdrew this filing. See letter from
Arthur B. Reinstein, Deputy General Counsel, CBOE, to Lisa N. Jones,
Special Counsel, Division, Commission, dated April 6, 2004.
Although the CBOT recently reconfirmed to the CBOE its commitment
to pursue its proposed restructuring, the CBOT also agreed with the
CBOE that, before it implements such restructuring, it is willing to
implement a structure that provides for the issuance of separately
transferable interests representing the Exercise Right component of
CBOT Full Memberships. As described above, the CBOT's membership has
approved changes to the CBOT Rules and Regulations, which were proposed
by the CBOT pursuant to the terms of the 2003 Agreement to give effect
to a structure providing for the issuance of these interests. The CBOE
proposes to interpret how Article Fifth(b) of the CBOE Certificate of
Incorporation will apply once these interests are issued. Such an
interpretation is embodied in the 2003 Agreement, and it constitutes
the substance of the proposed rule change that is the subject of this filing.\5\
\5\ The CBOE notes that the only other change proposed in this
filing is a conforming amendment to CBOE Rule 3.16 that adds a reference to the 2003 Agreement.
According to the CBOE, the interpretation of Article Fifth(b)
embodied in the 2003 Agreement includes definitions of who will be
``Eligible CBOT Full Members'' and ``Eligible CBOT Full Member
Delegates'' entitled to exercise after the CBOT has issued separately
transferable interests representing the Exercise Right component of
CBOT Full Memberships to those CBOT Full Members who request them.
(Such interests are referred to in the 2003 Agreement and in this
filing as ``Exercise Right Privileges.'') Under these definitions, to
be able to become a member of the CBOE by virtue of the Exercise Right,
the holder or delegate (i.e., a lessee under CBOT Rules and
Regulations) of one of the 1,402 outstanding CBOT Full Memberships in which an Exercise
[[Page 24207]]
Right Privilege has been issued must be in possession of one Exercise
Right Privilege, whether bundled or unbundled from the related CBOT
Full Membership. In addition, as holder or delegate of a CBOT Full
Membership, one must also be in possession of all of the other rights
or privileges appurtenant to a CBOT Full Membership and must meet the
applicable membership and eligibility requirements of the CBOT and be
deemed to be a ``CBOT Full Member'' or a ``CBOT Full Member Delegate'' under the CBOT Rules and Regulations.
As noted above, under the proposed interpretation of Article Fifth(b) embodied in the 2003 Agreement, Exercise Right Privileges may be separately bought and sold and bundled and rebundled with the other rights and privileges of CBOT Full Membership for purposes of making the holder of an Exercise Right Privilege eligible to exercise. The 2003 Agreement also provides that the CBOT will adopt and maintain rules and procedures acceptable to the CBOE governing the issuance and subsequent transfer of Exercise Right Privileges and CBOT Full Memberships, to enable the CBOE to administer the operation of the Exercise Right in a manner consistent with the interpretation embodied in the 2003 Agreement. In addition, the CBOT and the CBOE have each agreed to provide to the other certain current information regarding the status of their members, including exercisers and persons who own or lease an Exercise Right Privilege.
The CBOE believes that the proposed interpretation of Article
Fifth(b) is consistent with the language of Article Fifth(b), which
provides in part that ``every present and future member of the [CBOT]
who applies for membership in the [CBOE] and who otherwise qualifies
shall, so long as he remains a member of said Board of Trade, be
entitled to be a member of the [CBOE] notwithstanding any such
limitation on the number of members and without the necessity of
acquiring such membership for consideration or value from the [CBOE],
its members or elsewhere.'' The CBOE believes that this filing does not
propose to amend Article Fifth(b) in any respect, but only to interpret
how it should apply in circumstances that were not envisioned when
Article Fifth(b) was adopted, and therefore were not addressed in the language of Article Fifth(b).\6\
\6\ By its terms, Article Fifth(b) may be amended only with the
approval of 80% of CBOE's members admitted by exercise, and 80% of
CBOE's members admitted other than by exercise, each voting as a separate class.
The CBOE believes that the proposed interpretation of Article
Fifth(b) is also consistent with the interpretation of the Exercise
Right embodied in the 1992 Agreement. According to the CBOE, the 1992
Agreement served to resolve a dispute between the CBOE and the CBOT
concerning the meaning of certain terms in Article Fifth(b) regarding
the Exercise Right and concerning action taken or proposed to be taken
by the CBOT at that time to unbundle certain of the trading rights held
by CBOT members, issue transferable evening trading permits to its
members, and allow CBOT members to ``delegate'' (i.e., lease) the
trading rights associated with their memberships. According to the
CBOE, to preserve the original intent of the Exercise Right, Article
Fifth(b) was interpreted in the 1992 Agreement so that, in the event of
any division of the trading rights and privileges appurtenant to a CBOT
Full Membership, or any division of the CBOT full membership itself, a
CBOT member retained the right to exercise only if he held all of the
parts into which his membership may have been divided and all of the
trading rights and privileges appurtenant thereto. According to the
CBOE, as a result of the interpretation of Article Fifth(b) embodied in
the 1992 Agreement, the number of potential ``exerciser'' members of
the CBOE is limited to the 1,402 Full Members of the CBOT or their
delegates (lessees), but not both in respect of the same CBOT membership.\7\
\7\ The CBOE asserts that the interpretation of Article Fifth(b)
embodied in the 1992 Agreement and an amendment to Rule 3.16
referring to the 1992 Agreement were approved by the Commission in
Securities Exchange Act Release No. 32430 (June 8, 1993), 58 FR 32969 (June 14, 1993).
The CBOE notes that the proposed interpretation of the Exercise Right that is the subject of this filing does not displace the interpretation embodied in the 1992 Agreement, except it provides that if there are any inconsistencies between the interpretation embodied in the 2003 Agreement and the interpretation embodied in the 1992 Agreement, then the interpretation embodied in the 2003 Agreement would control. Because CBOE Rule 3.16 refers to certain terms that were previously interpreted and defined in the 1992 Agreement and are now further interpreted and defined in the modified 2003 Agreement, the proposed rule change also amends Rule 3.16 to include the definitions and interpretations in both Agreements.
According to the CBOE, the interpretation of Article Fifth(b) embodied in the 2003 Agreement is intended to apply solely in the circumstances involving the issuance of Exercise Right Privileges to some or all of its 1,402 Full Members as described in that Agreement, so as to make it clear that such interpretation is not intended to cover any other circumstances that might arise and might also have an impact on the Exercise Right.
2. Statutory Basis
The CBOE believes that the proposed interpretation of the Exercise
Right embodied in the 2003 Agreement and the related proposed amendment
to CBOE Rule 3.16 that together constitute the proposed rule change is
consistent with and furthers the objectives of the Act, and section
6(b)(5) of the Act in particular,\8\ in that it constitutes an
interpretation of, and an amendment to, the rules of the Exchange that
are designed to promote just and equitable principles of trade, to
perfect the mechanisms of a free and open market, and to protect investors and the public interest.
\8\ 15 U.S.C. 78f(b)(5).
B. SelfRegulatory Organization's Statement on Burden on Competition
The CBOE 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 Exchange Act.
C. SelfRegulatory 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
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will:
(A) By order approve such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule [[Page 24208]]
change is consistent with the Act. Comments may be submitted by any of the following methods:
Electronic comments:
Paper comments:
All submissions should refer to File Number SRCBOE200416. This file
number should be included on the subject line if email 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. 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 SRCBOE200416 and should be submitted on or before May 24, 2004.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\9\
\9\ 17 CFR 200.303(a)(12).
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 049978 Filed 43004; 8:45 am]
BILLING CODE 801001P
SUMMARY:
Chicago Board Options Exchange, Inc.,
DOCUMENT BODY 2:
April 26, 2004.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b4 thereunder,\2\ notice is hereby given that
on March 4, 2004, the Chicago Board Options Exchange, Inc. (``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 by the CBOE. On April 9, 2004, the CBOE filed an amendment to the proposed rule change.\3\ The
[[Page 24206]]
Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
\3\ See letter from Arthur B. Reinstein, Deputy General Counsel,
CBOE, to Lisa N. Jones, Special Counsel, Division of Market
Regulation (``Division''), Commission, dated April 8, 2004 (``Amendment No. 1''). Amendment No. 1 provides further
clarification to the proposal by including three additional exhibits to the proposed rule change.
I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The CBOE proposes to adopt a proposed rule change consisting of an
interpretation of paragraph (b) of Article Fifth of the CBOE
Certificate of Incorporation (``Article Fifth(b)'') pertaining to the
right of the 1,402 Full Members of CBOT to become members of CBOE
without having to purchase a CBOE membership (``Exercise Right''). The
proposed interpretation of the Exercise Right is embodied in an
agreement dated December 17, 2003 (``2003 Agreement''), between the
CBOE and the Board of Trade of the City of Chicago, Inc. (``CBOT'').
The CBOE also proposes related revisions to CBOE Rule 3.16. Below is
the text of the proposed amendment to CBOE Rule 3.16. Proposed language is in italics; proposed deletions are in brackets.
* * * * *
Rule 3.16 Special Provisions Regarding Chicago Board of Trade Exerciser Memberships
(a) Termination of Nontransferable Memberships. [No change]
(b) Board of Trade Exercisers. For the purpose of entitlement to
membership on the Exchange in accordance with Paragraph (b) of Article
Fifth of the Certificate of Incorporation of the Exchange (``Article
Fifth(b)'') the term ``member of the Board of Trade of the City of
Chicago'' (the ``CBOT''), as used in Article Fifth(b), is interpreted
to mean an individual who is either an ``Eligible CBOT Full Member'' or
an ``Eligible CBOT Full Member Delegate,'' as those terms are defined
in the Agreement entered into on September 1, 1992 (the ``1992
Agreement'') between the CBOT and the Exchange, and in the Agreement
entered into on December 17, 2003, (``the 2003 Agreement'') between the
CBOT and the Exchange, and shall not mean any other person. In order to
permit Eligible CBOT Full Members and Eligible CBOT Full Member
Delegates to participate in an offer, distribution or redemption of the
kind referred to in the last two sentences of Paragraph 3(a) of the
1992 Agreement, and solely for such purpose, the Exchange will waive
all membership dues, fees and other charges and all qualification
requirements, other than those that may be imposed by law, that may be
applicable to the application for membership on the Exchange of each
Eligible CBOT Full Member and Eligible CBOT Full Member Delegate who
wishes to exercise the Exercise Right during the period commencing on
the date the Exchange gives notice to the CBOT pursuant to Paragraph
3(b) of the 1992 Agreement and ending on the date such individual
participates in such offer, distribution or redemption (as the case may
be); provided, however, that (i) no Exerciser Member (as defined in the
1992 Agreement) for whom dues, fees and other charges and qualification
requirements are waived in accordance with the foregoing shall have any
rights as a member of the Exchange other than to participate in such
offer, distribution or redemption, and (ii) the membership on the
Exchange of each such Exerciser Member shall terminate immediately
following the time such individual participates in such offer, distribution or redemption.
* * * * *
II. SelfRegulatory Organization's Statement of the Purpose of and Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the 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. The CBOE has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to provide an
interpretation to the rules of the CBOE as set forth in Article
Fifth(b) that will apply, upon the distribution by the CBOT to each of
its 1,402 Full Members upon their individual request, a separately
transferable interest representing the Exercise Right component of each
CBOT Full Membership. According to the CBOE, the CBOT's willingness to
issue transferable Exercise Right interests is reflected in the 2003
Agreement and recently adopted changes to the CBOT Rules and
Regulations. The CBOE notes that the 2003 Agreement, resulting from
negotiations with the CBOT, is intended to result in the issuance by
the CBOT of a separately transferable interest representing the
Exercise Right component of CBOT Full Membership in advance of the
consummation of the CBOT's proposed corporate restructuring, which
contemplates a similar structure. The CBOE believes that the CBOT's
proposed restructuring has not yet been consummated and it is uncertain as to when such proposed restructuring will occur.\4\
\4\ The CBOE notes that the CBOT's proposal to issue a
separately transferable interest representing the Exercise Right as
part of its restructuring was the subject of a prior proposed
interpretation by the CBOE of Article Fifth(b), which was filed with
the Commission as a proposed rule change in File No. SRCBOE2002
01. On April 7, 2004, the CBOE withdrew this filing. See letter from
Arthur B. Reinstein, Deputy General Counsel, CBOE, to Lisa N. Jones,
Special Counsel, Division, Commission, dated April 6, 2004.
Although the CBOT recently reconfirmed to the CBOE its commitment
to pursue its proposed restructuring, the CBOT also agreed with the
CBOE that, before it implements such restructuring, it is willing to
implement a structure that provides for the issuance of separately
transferable interests representing the Exercise Right component of
CBOT Full Memberships. As described above, the CBOT's membership has
approved changes to the CBOT Rules and Regulations, which were proposed
by the CBOT pursuant to the terms of the 2003 Agreement to give effect
to a structure providing for the issuance of these interests. The CBOE
proposes to interpret how Article Fifth(b) of the CBOE Certificate of
Incorporation will apply once these interests are issued. Such an
interpretation is embodied in the 2003 Agreement, and it constitutes
the substance of the proposed rule change that is the subject of this filing.\5\
\5\ The CBOE notes that the only other change proposed in this
filing is a conforming amendment to CBOE Rule 3.16 that adds a reference to the 2003 Agreement.
According to the CBOE, the interpretation of Article Fifth(b)
embodied in the 2003 Agreement includes definitions of who will be
``Eligible CBOT Full Members'' and ``Eligible CBOT Full Member
Delegates'' entitled to exercise after the CBOT has issued separately
transferable interests representing the Exercise Right component of
CBOT Full Memberships to those CBOT Full Members who request them.
(Such interests are referred to in the 2003 Agreement and in this
filing as ``Exercise Right Privileges.'') Under these definitions, to
be able to become a member of the CBOE by virtue of the Exercise Right,
the holder or delegate (i.e., a lessee under CBOT Rules and
Regulations) of one of the 1,402 outstanding CBOT Full Memberships in which an Exercise
[[Page 24207]]
Right Privilege has been issued must be in possession of one Exercise
Right Privilege, whether bundled or unbundled from the related CBOT
Full Membership. In addition, as holder or delegate of a CBOT Full
Membership, one must also be in possession of all of the other rights
or privileges appurtenant to a CBOT Full Membership and must meet the
applicable membership and eligibility requirements of the CBOT and be
deemed to be a ``CBOT Full Member'' or a ``CBOT Full Member Delegate'' under the CBOT Rules and Regulations.
As noted above, under the proposed interpretation of Article Fifth(b) embodied in the 2003 Agreement, Exercise Right Privileges may be separately bought and sold and bundled and rebundled with the other rights and privileges of CBOT Full Membership for purposes of making the holder of an Exercise Right Privilege eligible to exercise. The 2003 Agreement also provides that the CBOT will adopt and maintain rules and procedures acceptable to the CBOE governing the issuance and subsequent transfer of Exercise Right Privileges and CBOT Full Memberships, to enable the CBOE to administer the operation of the Exercise Right in a manner consistent with the interpretation embodied in the 2003 Agreement. In addition, the CBOT and the CBOE have each agreed to provide to the other certain current information regarding the status of their members, including exercisers and persons who own or lease an Exercise Right Privilege.
The CBOE believes that the proposed interpretation of Article
Fifth(b) is consistent with the language of Article Fifth(b), which
provides in part that ``every present and future member of the [CBOT]
who applies for membership in the [CBOE] and who otherwise qualifies
shall, so long as he remains a member of said Board of Trade, be
entitled to be a member of the [CBOE] notwithstanding any such
limitation on the number of members and without the necessity of
acquiring such membership for consideration or value from the [CBOE],
its members or elsewhere.'' The CBOE believes that this filing does not
propose to amend Article Fifth(b) in any respect, but only to interpret
how it should apply in circumstances that were not envisioned when
Article Fifth(b) was adopted, and therefore were not addressed in the language of Article Fifth(b).\6\
\6\ By its terms, Article Fifth(b) may be amended only with the
approval of 80% of CBOE's members admitted by exercise, and 80% of
CBOE's members admitted other than by exercise, each voting as a separate class.
The CBOE believes that the proposed interpretation of Article
Fifth(b) is also consistent with the interpretation of the Exercise
Right embodied in the 1992 Agreement. According to the CBOE, the 1992
Agreement served to resolve a dispute between the CBOE and the CBOT
concerning the meaning of certain terms in Article Fifth(b) regarding
the Exercise Right and concerning action taken or proposed to be taken
by the CBOT at that time to unbundle certain of the trading rights held
by CBOT members, issue transferable evening trading permits to its
members, and allow CBOT members to ``delegate'' (i.e., lease) the
trading rights associated with their memberships. According to the
CBOE, to preserve the original intent of the Exercise Right, Article
Fifth(b) was interpreted in the 1992 Agreement so that, in the event of
any division of the trading rights and privileges appurtenant to a CBOT
Full Membership, or any division of the CBOT full membership itself, a
CBOT member retained the right to exercise only if he held all of the
parts into which his membership may have been divided and all of the
trading rights and privileges appurtenant thereto. According to the
CBOE, as a result of the interpretation of Article Fifth(b) embodied in
the 1992 Agreement, the number of potential ``exerciser'' members of
the CBOE is limited to the 1,402 Full Members of the CBOT or their
delegates (lessees), but not both in respect of the same CBOT membership.\7\
\7\ The CBOE asserts that the interpretation of Article Fifth(b)
embodied in the 1992 Agreement and an amendment to Rule 3.16
referring to the 1992 Agreement were approved by the Commission in
Securities Exchange Act Release No. 32430 (June 8, 1993), 58 FR 32969 (June 14, 1993).
The CBOE notes that the proposed interpretation of the Exercise Right that is the subject of this filing does not displace the interpretation embodied in the 1992 Agreement, except it provides that if there are any inconsistencies between the interpretation embodied in the 2003 Agreement and the interpretation embodied in the 1992 Agreement, then the interpretation embodied in the 2003 Agreement would control. Because CBOE Rule 3.16 refers to certain terms that were previously interpreted and defined in the 1992 Agreement and are now further interpreted and defined in the modified 2003 Agreement, the proposed rule change also amends Rule 3.16 to include the definitions and interpretations in both Agreements.
According to the CBOE, the interpretation of Article Fifth(b) embodied in the 2003 Agreement is intended to apply solely in the circumstances involving the issuance of Exercise Right Privileges to some or all of its 1,402 Full Members as described in that Agreement, so as to make it clear that such interpretation is not intended to cover any other circumstances that might arise and might also have an impact on the Exercise Right.
2. Statutory Basis
The CBOE believes that the proposed interpretation of the Exercise
Right embodied in the 2003 Agreement and the related proposed amendment
to CBOE Rule 3.16 that together constitute the proposed rule change is
consistent with and furthers the objectives of the Act, and section
6(b)(5) of the Act in particular,\8\ in that it constitutes an
interpretation of, and an amendment to, the rules of the Exchange that
are designed to promote just and equitable principles of trade, to
perfect the mechanisms of a free and open market, and to protect investors and the public interest.
\8\ 15 U.S.C. 78f(b)(5).
B. SelfRegulatory Organization's Statement on Burden on Competition
The CBOE 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 Exchange Act.
C. SelfRegulatory 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
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will:
(A) By order approve such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule [[Page 24208]]
change is consistent with the Act. Comments may be submitted by any of the following methods:
Electronic comments:
Paper comments:
All submissions should refer to File Number SRCBOE200416. This file
number should be included on the subject line if email 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. 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 SRCBOE200416 and should be submitted on or before May 24, 2004.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\9\
\9\ 17 CFR 200.303(a)(12).
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 049978 Filed 43004; 8:45 am]
BILLING CODE 801001P