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Code · REGISTER · 2005-03-01 · SECURITIES AND EXCHANGE COMMISSION · Notices

Notices. SECURITIES AND EXCHANGE COMMISSION

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BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51234; File No. SR-CBOE-2004-58] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change and Amendments No. 1 and 2 Thereto by the Chicago Board Options Exchange, Incorporated Relating to Market-Maker Quoting and Market-Maker Appointments February 22, 2005. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on August 19, 2004, the Chicago Board Options Exchange, Incorporated (“CBOE” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in items I, II, and III below, which items have been prepared by CBOE.
On February 2, 2005, CBOE filed Amendment No. 1 to the proposed rule change. 3 On February 17, 2005, CBOE filed Amendment No. 2 to the proposed rule change. 4 The 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 240.19b-4. 3 Amendment No. 1 replaces and supercedes CBOE's original 19b-4 filing in its entirety. 4 Amendment No. 2 replaces and supercedes CBOE's original 19b-4 filing and Amendment No. 1 in their entirety.
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change CBOE proposes to amend existing rules and adopt new rules governing quoting by Market-Makers (“Market-Makers” or “MM”). The text of the proposed rule change, as amended, is available on the CBOE's Web site ( *http://www.cboe.com* ), at the CBOE's Office of the Secretary, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change.
The text of these statements may be examined at the places specified in item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On July 12, 2004, the Commission approved a CBOE proposal to add a new category of market-making participant called “e-DPMs,” who function as remote competing specialists in their allocated securities.
By contrast, regular Designated Primary Market-Makers (“DPMs”) and Market Makers (“MMs”) on CBOE are required to operate from within their appointed trading station. The ability to stream quotes electronically from remote locations ( *i.e.* , outside of the individual's appointed trading station) is an option the Exchange believes would enhance the competitiveness of its MMs. 5 Accordingly, the Exchange proposes to grant its MMs the ability to stream quotes from locations other than their appointed trading stations. 6 As such, the Exchange proposes to amend its rules governing the MM appointment process (CBOE Rule 8.3), and MM obligations (CBOE Rule 8.7), and to adopt new CBOE Rule 8.3A to establish an upper limit on the number of members that may quote electronically in a given product. 5 For example, rather than “calling in sick” to work and thereby relinquishing the ability to quote altogether, a MM would be able to stream quotes from his/her home office.
CBOE believes that allowing the MM to continue to quote increases liquidity available in the class, thereby enhancing the competitiveness of the Exchange. 6 This rule filing only allows current MMs to quote remotely ( *i.e.* , from outside of their appointed trading stations). File No. SR-CBOE-2004-75 establishes rules for Remote Market-Makers. *See* Securities Exchange Act Release No. 51107 (January 31, 2005), 70 FR 6051 (February 4, 2005) (“RMM filing”). CBOE Rule 8.1 Market-Maker Defined The Exchange proposes to amend the definition of MM to remove the requirement that transactions be effected on the floor of the Exchange.
As amended, transactions effected in accordance with CBOE Rule 8.7.03 would count as MM transactions. CBOE Rule 8.3 Appointment of Market-Makers Currently, a MM's appointment consists of all classes traded at a particular station, regardless of the number of classes actually trading at that station and regardless of whether the MM owns or leases a membership. In addition, CBOE Rule 8.3(c) currently provides that MMs may have appointments in up to ten trading stations on the floor.
The Exchange proposes to amend these requirements in several respects. First, as proposed, a MM's appointment would confer the right to quote electronically in all classes traded on the Hybrid Trading System that are located in one designated trading station (“appointed trading station”) and it would confer the right to quote in open outcry all classes traded on the Exchange, regardless of the trading station at which they are located. With respect to Hybrid 2.0 Classes (as defined in proposed CBOE Rule 1.1(aaa)), a MM would only be eligible to submit electronic quotations in up to 40 classes for each Exchange membership it owns or up to 30 classes for each Exchange membership it leases, all of which must be located in the MM's appointed trading station. 7 7 If a trading station consists of less than 40
(30)Hybrid 2.0 classes, each MM that owns (leases) a membership would be eligible to submit electronic quotations in each of the Hybrid 2.0 classes at that trading station, in accordance with the requirements of CBOE Rule 8.3A. This means that a MM would only be eligible to submit electronic quotations into classes located at one appointed trading station. A MM also would be eligible to trade in open outcry in any classes on the Exchange, irrespective of the trading station in which such classes are located. 8 A MM that trades in open outcry away from his/her appointed trading station would be restricted to open outcry trading only and would not be eligible to quote electronically in those classes until such time that the MM notifies the Exchange of his/her intent to change his/her appointment. On any day a MM trades in open outcry outside of his/her appointed trading station, that MM may be required to undertake market-making obligations in those classes in which the MM trades in open outcry at the request of the Order Book Official. 9 8 For margin purposes, these transactions would qualify as MM transactions. 9 *See* CBOE Rule 8.7(c), discussed *infra.* The proposal limits a MM's appointments to the classes located at no more than one trading station. In Hybrid, MMs currently may only stream quotes where they are physically present in the trading crowd, which in essence already creates a “one trading station” appointment. 10 As is the case today, MMs would continue to be able to leave one trading station and trade in another appointed trading station; however, they would be required to notify the Exchange prior to switching trading stations and request an appointment in the classes located at a new trading station, which would be granted on a space-available basis (as described in more detail in proposed CBOE Rule 8.3A). A MM's ability to trade in non-appointed classes would be limited to submitting orders for automatic execution pursuant to CBOE Rules 6.8 or 6.13. 11 10 The Exchange represents that it is gradually transferring all equity classes to the Hybrid Trading System and anticipates having all such classes on Hybrid within the first quarter of 2005. 11 As part of its appointment, a MM may trade in open outcry all classes located on the Exchange. *See* proposed CBOE Rule 8.7(b)(iii) for the permissible methods by which MMs may submit quotes and orders in appointed and non-appointed classes. CBOE Rule 6.8 applies to non-Hybrid classes, while CBOE Rule 6.13 applies to Hybrid classes. Proposed changes to CBOE Rule 8.3(c) also allow a MM to quote remotely. In this regard, with respect to Hybrid classes located at his/her appointed trading station, a MM may submit electronic quotations in the classes in his/her appointed trading station from a location other than the appointed trading station. 12 The one proposed restriction on this ability would prohibit a MM affiliated with an e-DPM from submitting electronic quotations from outside of the appointed trading station in any class in which the affiliated e-DPM has an appointment. 13 12 With respect to Hybrid 2.0 classes, a MM would only be permitted to quote electronically into those classes to which it is appointed and no more than 40
(30)for each membership it owns (leases). 13 *See* CBOE Rule 8.93(vii). *See also* proposed CBOE Rule 8.4(c)(i) in the Exchange's proposed RMM filing. The same prohibition would apply to MMs affiliated with RMMs and is contingent upon SEC approval of the Exchange's RMM filing ( *see supra* note 6). Finally, proposed CBOE Rule 8.3(c) provides that a MM would be presumed to have an appointment in all non-Hybrid 2.0 classes located at his/her appointed trading station unless the MM specifically indicates to the Exchange that he/she does not want to include a particular class(es) as part of his/her appointment (“excluded classes”). 14 CBOE represents that the purpose in allowing MMs to exclude classes from their appointments is to allow the Exchange to improve the amount of liquidity provided in these classes. When a MM excludes a class, the Exchange would be able to provide an appointment in that excluded class to a MM that does not currently trade that class but who has an interest in doing so. This situation is much more favorable and beneficial than one of the likely alternatives: Allowing a MM that does not want to trade that class but is required to do so because it is located in his/her appointed trading station to stream wider and less competitive quotes. A MM is not eligible to submit electronic quotations into any class it designates as an excluded class. Any request by a MM to receive a subsequent appointment in a previously excluded class would be handled in accordance with proposed CBOE Rule 8.3A. 14 Because MMs must specifically designate which Hybrid 2.0 classes they would trade as part of their appointment, there is no need to have them designate which Hybrid 2.0 classes they would not trade. CBOE Rule 8.7 Obligations of Market-Makers The Exchange proposes several changes to CBOE Rule 8.7 to allow MMs to quote from outside of their appointed trading stations. The Exchange proposes to revise CBOE Rule 8.7(b)(i) to remove the exclusive physical presence requirement. Accordingly, as revised, MMs would have an obligation to compete with other MMs to improve markets in all series of options classes comprising the MM's appointment, whether trading electronically or in person. The proposed revision to (b)(ii) clarifies that a MM's firm quote obligation applies to all series in which the MM quotes. The Exchange proposes to amend CBOE Rule 8.7(b)(iii) in two primary respects. The first change proposes to remove the exclusive physical presence requirement and states that a MM has an obligation to update quotes in his/her appointed classes at the trading station where the MM quotes (whether in-person or electronically). The second change is designed to clarify the permissible methods by which a MM may submit quotes and orders in both appointed and non-appointed classes. Proposed new paragraph (iii)(A) provides that with respect to trading in appointed classes:
(1)MMs who are physically present in their appointed trading station may enter quotes and orders in their appointed classes by public outcry in response to a request for a quote or, in classes in which Hybrid or Hybrid 2.0 is implemented, through an Exchange-approved electronic interface via an Exchange-approved quote generation device.
(2)MMs may also enter quotes and orders in their appointed Hybrid and Hybrid 2.0 classes from outside of their appointed trading stations (pursuant to CBOE Rule 8.3) through an Exchange-approved electronic interface via an Exchange-approved quote generation device.
(3)MMs, whether in their appointed trading stations or not, may also submit orders for automatic execution in accordance with the requirements of CBOE Rules 6.8 or 6.13. Proposed paragraph (b)(iii) provides that with respect to trading in non-appointed classes, MMs may submit orders for automatic execution in accordance with the requirements of CBOE Rules 6.8 or 6.13. 15 In this regard, CBOE Rule 8.3 also would prohibit a MM from quoting electronically into a non-appointed class. 15 CBOE Rule 6.8 applies to non-Hybrid classes, while CBOE Rule 6.13 applies to Hybrid classes. The Exchange proposes changes to paragraph
(c)to ensure that a MM who trades in classes located outside of his appointed trading station would be required to fulfill all obligations imposed by CBOE Rule 8.7(b) and, for the rest of the trading day, the MM may be called back to that station to make markets in open outcry in the classes in which they traded. Current CBOE Rule 8.7(d) governs market-making obligations in Hybrid classes. Generally, the extent of a MM's obligations is dictated by the amount of volume a MM transacts electronically. The Exchange intends to retain paragraph (d)(i) 16 and amend paragraph (d)(ii). As amended, MMs that transact more than 20% of their volume electronically would be obligated to comply with the bid-ask width requirements of CBOE Rule 8.7(b)(iv), 17 maintain continuous quotes for at least ten contracts in 60% of the series of his/her appointed classes, 18 and respond to all open outcry requests for quotes with a ten-up, legal width market. 19 Proposed for elimination is the tiered continuous quoting requirement that is dependent upon the amount of volume transacted electronically on the Exchange. CBOE believes an across-the-board 60% quoting requirement is simpler and more effective. 16 Paragraph (d)(i) applies to MMs that transact less than 20% of their contract volume electronically. 17 Currently $5 except during the opening rotation. 18 A MM's undecremented quote must be for ten contracts unless the underlying market disseminates a 1-up market, in which case MMs who have automated the process may similarly quote 1-up. This “1-up” pilot program is scheduled to expire on August 17, 2005. *See* CBOE Rules 8.7(d)(i)(B) and (d)(ii)(B). 19 Only MMs physically present in a trading station would have the ability to provide markets in open outcry. The Exchange also proposes changes to Interpretations and Policies .03 to CBOE Rule 8.7. All MMs would still be required to comply with CBOE Rule 8.7.03(A), which requires 75% of a MM's volume to be in his/her appointed classes. The Exchange intends to retain the in-person requirement contained in current paragraph
(B)yet limit its application to non-Hybrid classes. Because MMs would have the ability to quote from outside of their appointed trading stations, CBOE believes that an in-person requirement no longer makes sense. 20 20 A MM's ability to quote electronically from outside of its appointed trading station is limited to appointed Hybrid and Hybrid 2.0 classes, as described and proposed in CBOE Rule 8.3(c). Finally, the Exchange proposes to amend CBOE Rule 8.8.01's definition of “station” to remove the requirement that an appointment must at least include all of the classes of options traded at one station. 21 As proposed in CBOE Rule 8.3, a MM would be presumed to have an appointment in all non-Hybrid 2.0 classes located at his/her appointed trading station unless the MM specifically excludes specific classes. The ability of MMs to exclude classes from their appointments renders necessary the change to CBOE Rule 8.8.01. 21 This same proposed amendment appears in File No. SR-CBOE-2004-75. CBOE Rule 8.3A Maximum Number of Market Participants Quoting Electronically Per Product The Exchange does not have unlimited systems bandwidth capacity to support an unlimited number of electronic quoters in every class. For this reason, the Exchange would limit the number of members quoting electronically in each product (“Class Quoting Limit” or “CQL”) traded on Hybrid or Hybrid 2.0. 22 By limiting the number of quoters in all Hybrid and Hybrid 2.0 classes/products, the Exchange ensures it would have the ability to effectively handle all quotes generated by members. The number of members permitted to quote in each product is specified in proposed CBOE Rule 8.3A.01. The methodology for determining which members would be able to quote electronically in a product is governed by proposed CBOE Rule 8.3A(a)-(c). 22 For purposes of this rule, the term “product” refers to all options of the same single underlying security/value. When a CQL is established for each product, the following criteria govern which members are entitled to quote electronically in that subject product. A MM (excluding the e-DPM) that is not eligible to quote electronically in a product still may quote in open outcry in that product. Products Trading on the Hybrid 2.0 Platform as of January 6, 2005 and Products Trading on the Hybrid Trading System as of January 6, 2005 The DPM and e-DPMs (if applicable 23 ) assigned to the product on January 6, 2005, and MMs who:
(1)Are in good standing with the Exchange; and
(i)have transacted at least 80% of their MM contracts and transactions in-person in each of the three immediately preceding calendar months prior to January 6, 2005 in option products traded in the trading station; or
(ii)were physically present in the trading station acting in the capacity of a MM on January 6, 2005, are entitled to quote electronically in those products for as long as they maintain an appointment those products. 24 23 Non-Hybrid 2.0 classes do not have e-DPMs. 24 CBOE represents that the practical effect of this rule is to ensure that the DPM, all MMs, and all e-DPMs would be guaranteed the ability to quote electronically in products trading at their primary trading stations as of January 6, 2005. There were no products as of this date for which the number of members quoting electronically exceeded the CQL for that product. All other MMs and approved e-DPMs that request the ability to submit quotes electronically in the subject product would be entitled to quote electronically in that product in the order in which they so request provided the number of members quoting electronically in the product does not exceed the CQL. When the number of members in the product quoting electronically equals the CQL, all other members requesting the ability to quote electronically in that product would be wait-listed in the order in which they submitted the request. The waiting list operates based on time priority. When the product can accommodate another electronic quoter (whether due to attrition or an increase in the CQL), the member at the “top” of the list ( *i.e.* , the member that has been on the waiting list the longest amount of time) has priority. Once a member is wait-listed, the Exchange may not alter his/her position on the wait-list other than to improve such position ( *i.e.* , the Exchange may not place other members ahead of a previously wait-listed member). If a wait-listed member is offered, yet refuses, the ability to quote electronically in the subject product, the member would be removed from that waiting list. Products Added to the Hybrid 2.0 Platform After January 6, 2005 With respect to a product that is added to the Hybrid 2.0 Platform after January 6, 2005, the DPM and e-DPMs appointed to the product would be entitled to quote electronically. All MMs quoting in the product prior to its addition to the Hybrid 2.0 Platform would be entitled to quote electronically provided that:
(i)They have transacted at least 80% of their MM contracts and transactions in-person in each of the three immediately preceding calendar months prior to the product being added to the Hybrid 2.0 Platform in option products traded in the trading station; or
(ii)they were physically present in the trading station acting in the capacity of a MM on the day prior to the product being added to the Hybrid 2.0 Platform. These standards, which also are contained in paragraph
(a)of this rule, would ensure that MMs that maintained a presence in the class prior to its conversion to the Hybrid 2.0 Platform would be guaranteed the ability to quote electronically upon conversion to Hybrid 2.0. If at the time a product is added to the Hybrid 2.0 Platform the aggregate number of DPMs, e-DPMs, and MMs entitled to quote electronically in the product exceeds the CQL, then the product would have an “increased CQL,” as described in Interpretations and Policies .01(a). Reduction of any “increased CQL” would be in accordance with the procedures described in Interpretations and Policies .01(a). All other members would be entitled to quote electronically in that product in the order in which they so request provided the number of members quoting electronically in the product does not exceed the CQL. When the number of members quoting electronically in the product equals the CQL, all other members would be wait-listed in the order in which they request the ability to quote electronically. The wait-list would operate as described in CBOE Rule 8.3A(a). Products Added to the Hybrid Trading System After January 6, 2005 With respect to a new product that commences trading on the Hybrid Trading System after January 6, 2005, the assigned DPM would be entitled to quote electronically. Thereafter, all other members would be entitled to quote electronically in that product in the order in which they so request provided the number of members quoting electronically does not exceed the CQL. When the number of members quoting electronically in the product equals the CQL, all other members would be wait-listed in the order in which they request the ability to quote electronically. The wait-list would operate as described in CBOE Rule 8.3A(a). Establishing the Class Quoting Limits There would not be a uniform CQL for each class traded on the Exchange, rather the CQL would vary by product. This section describes the process for affixing CQLs for all products. Products Trading on the Exchange as of January 6, 2005 The proposed CQL for all products trading on the Hybrid Trading System would be twenty-five (25). The twenty-sixth member to request the ability to quote electronically in a Hybrid class would be first on the wait-list for that product. The proposed CQLs for products trading on the Hybrid 2.0 Platform would vary based on trading volume over the preceding calendar quarter. The proposed CQL would be as follows: 40 for the 20% most actively-traded products over the preceding quarter; 35 for the next 20% most actively-traded products; 30 for the next 20% most actively-traded products; and 25 for all other Hybrid 2.0 Platform products. 25 The Exchange selected these levels because they strike the optimum balance between the Exchange's need to not exceed its internal quote capacity by allowing an unlimited number of quoters in every class and the need to provide greater liquidity in the more actively-traded classes. 25 *See* proposed CBOE Rule 8.3A.01. At the end of each calendar quarter, products would be assigned a different CQL based on the revised trading volume statistics (“new CQL”). For example, if a product with 25 electronic quoters then qualifies (based on increased trading volume) for 35 electronic quoters, the CQL increases immediately and those on the wait-list would be added (if applicable). Otherwise, time priority governs who would be entitled to quote electronically in that class. If the number of members quoting electronically in the product on the last day of the quarter equals or is less than the new CQL, then the previous CQL is reduced immediately to the new CQL. 26 If the number of members quoting electronically in the product on the last day of the quarter is greater than the new CQL, then that product would have an “increased” CQL. The reason for the “increased” CQL is to avoid having to prevent members from quoting electronically in a product in which they are already quoting. In this regard, the “increased” CQL would equal the number of members quoting electronically in the product on the last day of the quarter. If a member changes his/her appointment and ceases quoting electronically in that product, the “increased” CQL would decrease by one until such time that the number of remaining members quoting electronically in the product equals the new CQL. 27 From that point forward, the number of members quoting electronically in the product may not exceed the new CQL. 26 *See* proposed CBOE Rule 8.3A.01(i). 27 *See* proposed CBOE Rule 8.3A.01(ii). As an example, assume product ABC's existing CQL is 40, the new CQL on rebalancing date should be 30, and that 33 members are quoting electronically in the product on the last day of the quarter. Rather than prevent three members from quoting, the CQL would be increased to 33. If one of those 33 members “drops” the product from his/her appointment and thus no longer quotes electronically, the “increased” CQL would drop to 32. When two others leave, the CQL becomes 30 and the first member on the wait-list would be entitled to quote electronically when one other member leaves the product. Products Not Traded on the Exchange as of January 6, 2005 The proposed CQL for all products newly-listed on the Exchange after January 6, 2005 would be 25 until such time that the CQL increases in accordance with this Interpretations and Policies .01. In this regard, when the product's trading volume increases such that the product then qualifies for a higher CQL, it would receive a higher CQL. Increasing the Class Quoting Limit in Exceptional Circumstances CBOE believes that having an established upper limit on the number of members that may quote electronically in any given product works effectively for the overwhelming vast majority of products traded on CBOE. Nevertheless, there are bound to be instances in which the demand to quote in a new or existing product greatly exceeds the CQL for that product. For example, more than 150 members trade options on the S&P 500 (“SPX”) index. If the Exchange were to trade SPX options on Hybrid, a CQL of 25 would be low. It is for these rare instances that the Exchange proposes to adopt a rule to allow for a higher CQL. In this regard, when exceptional circumstances warrant, the President of the Exchange (or in his absence his designee, who must be a Senior Vice President of the Exchange or higher) may increase the CQL for an existing or new product. “Exceptional circumstances” refers to substantial trading volume, whether actual or expected ( *e.g.* , in the case of a new product or a major news announcement). The Exchange does not intend for this discretion ( *i.e.* , to increase the CQL) to be exercised on an intra-day basis. Rather, the primary instance for which the Exchange anticipates this discretion being exercised is for the addition of new products to Hybrid or Hybrid 2.0 for where the standard CQL is not high enough to accommodate the anticipated trading volume and member demand. When the CQL increases pursuant to the President exercising his authority in accordance with this paragraph, members on the wait-list (if applicable, with respect to a product already trading on Hybrid), have first priority and remaining capacity would be filled on a time priority basis. 28 28 For new products, proposed CBOE Rule 8.3A(a)-(c) governs. Upon cessation of the exceptional circumstances, the President (or his designee), in his discretion, may determine to reduce the CQL. Any reduction in the CQL must be undertaken in accordance with the procedure established in paragraph .01(a)(ii) above with respect to lowering the “increased CQL.” This means that if the new CQL is less than the number of members quoting electronically in that product, there would be an “increased” CQL. Any actions taken by the President of the Exchange pursuant to this paragraph (to increase or decrease the CQL) would be submitted to the SEC in a rule filing pursuant to Section 19(b)(3)(A) of the Act. The Exchange would announce all changes regarding CQLs to the membership via Information Circular. The Exchange may increase the CQL levels established in paragraphs .01(a) and
(b)by submitting to the SEC a rule filing pursuant to Section 19(b)(3)(A) of the Act. The Exchange may decrease the CQL levels established above upon SEC approval of a rule filing submitted pursuant to Section 19(b)(2) of the Act. Other Minor Rule Changes The Exchange proposes to amend the definition of “market participant” in CBOE Rule 6.45A to remove the in-person requirement from MMs. The Exchange proposes definitions in CBOE Rule 1.1(aaa) for the terms “Hybrid Trading System” and “Hybrid 2.0 Program.” 2. Statutory Basis The Exchange believes that the proposal, as amended, would enhance liquidity on the Exchange. For this reason, the Exchange believes the proposed rule change, as amended, is consistent with the Act and the rules and regulations under the Act applicable to a national securities exchange and, in particular, the requirements of Section 6(b) of the Act. 29 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 30 requirements that the rules of an exchange be designed to promote just and equitable principles of trade, prevent fraudulent and manipulative acts and, in general, to protect investors and the public interest. 29 15 U.S.C. 78f(b). 30 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition CBOE does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange neither solicited nor received comments on the proposal. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action 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 change, as amended, 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-2004-58 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-CBOE-2004-58. 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, 450 Fifth Street, NW., Washington, DC 20549. 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-2004-58 and should be submitted on or before March 22, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 31 31 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-801 Filed 2-28-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51244; File No. SR-CBOE-2003-30] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Order Granting Accelerated Approval to a Proposed Rule Change and Amendment Nos. 1, 2, 3, and 4 Thereto Relating to Position Limits and Exercise Limits February 23, 2005. 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 July 9, 2003, 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 and II below, which Items have been prepared by the Exchange. On January 8, 2004, the CBOE filed Amendment No. 1 to the proposed rule change. 3 On October 29, 2004, the CBOE filed Amendment No. 2 to the proposed rule change. 4 On February 10, 2005, the CBOE filed Amendment No. 3 to the proposed rule change. 5 On February 15, 2005, the CBOE filed Amendment No. 4 to the proposed rule change. 6 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons and is accelerating approval of the proposed rule change, as amended, on a pilot basis. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* letter from James M. Flynn, Attorney II, Legal Division, CBOE, to Sharon Lawson, Senior Special Counsel, Division of Market Regulation (“Division”), Commission, dated January 7, 2004 (“Amendment No. 1”). 4 *See* letter from Edward J. Joyce, President and Chief Operating Officer, CBOE, to Nancy Sanow, Assistant Director, Division, Commission, dated October 28, 2004 (“Amendment No. 2”). 5 Amendment No. 3, which replaced and superseded the original filing and the first and second amendments in their entireties, eliminated, among other things, certain hedge exemptions that were proposed in the original filing, requested that the increases to the standard position and exercise limits proposed in the filing be adopted as a six-month pilot program, and requested accelerated approval of the proposed rule change. 6 Amendment No. 4, which replaced and superseded the original filing and the previous amendments in their entireties, retained the changes made by Amendment No. 3 and made technical corrections to the filing. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The CBOE proposes to amend Exchange Rule 4.11 and Exchange Rule 4.12 to increase the standard position limits and exercise limits for equity option contracts and options on the Nasdaq-100 Index Tracking Stock (“QQQQ”). The text of the proposed rule change is available on the CBOE's Web site ( *http://www.cboe.com* ), at the CBOE's Office of the Secretary, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the 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 III below. The 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 CBOE is proposing several changes to Exchange Rule 4.11 (Position Limits) and, accordingly, to Exchange Rule 4.12 (Exercise Limits). Exchange Rule 4.11 subjects equity options to one of five different position limits depending on the trading volume and outstanding shares of the underlying security. Exchange Rule 4.12 establishes exercise limits for the corresponding options at the same levels as the corresponding security's position limits. 7 7 Exchange Rule 4.12 states “* * * no member shall exercise, for any account in which it has an interest or for the account of any customer, a long position in any options contract where such member or customer, acting alone or in concert with others, directly or indirectly * * * has or will have exercised within any five consecutive business days aggregate long positions in any class of options dealt in on the Exchange in excess of [the established limits set by the Exchange]. * * *” Standard Position and Exercise Limits The Exchange is proposing to adopt a pilot program for a period of six months during which the standard position and exercise limits for options on the QQQQ and for equity option classes traded on the Exchange would be increased to the following levels: Current equity option contract limit Proposed equity option contract limit 13,500 25,000 22,500 50,000 31,500 75,000 60,000 200,000 75,000 250,000 Current QQQQ option contract limit Proposed QQQQ option contract limit 300,000 900,000 The standard position limits were last increased on December 31, 1998. 8 Since that time there has been a steady increase in the number of accounts that,
(a)approach the position limit;
(b)exceed the position limit; and
(c)are granted an exemption to the standard limit. Several member firms have petitioned the Exchange to either eliminate position limits, or in lieu of total elimination, increase the current levels and expand the available hedge exemptions. A review of available data indicates that the majority of accounts that maintain sizable positions are in those option classes subject to the 60,000 and 75,000 tier limits. There also has been an increase in the number of accounts that maintain sizable positions in the lower three tiers. In addition, overall volume in the options market has continually increased over the past five years. The Exchange believes that the increase in options volume and lack of evidence of market manipulation occurrences over the past twenty years justifies the proposed increases in the position and exercise limits. 8 *See* Securities Exchange Act Release No. 40875 (December 31, 1998), 64 FR 1842 (January 12, 1999) (SR-CBOE-98-25) (approval of increase in position limits and exercise limits). The Exchange also proposes the adoption of a new equity hedge exemption to the existing exemptions currently provided under Interpretation and Policy .04 to Exchange Rule 4.11. Specifically, new Interpretation and Policy .04(a)(5) to Exchange Rule 4.11 would allow for a “reverse collar” hedge exemption to apply when a long call position is accompanied by a short put position, and the long call expires with the short put. In addition, the strike price of the long call must equal or exceed the short put, and each long call and short put position must be hedged with 100 shares of the underlying security (or other adjusted number of shares). Neither side of the long call short put can be in-the-money at the time the position is established. The Exchange believes this is consistent with the existing Interpretation and Policy .04(a)(4) to Exchange Rule 4.11, which provides for an exemption for a “collar,” and Interpretation and Policy .04(a)(2) and
(3)to Exchange Rule 4.11, which provide for a hedge exemption for reverse conversions and conversions, respectively. Manipulation The CBOE believes that position and exercise limits, at their current levels, no longer serve their stated purpose. The Commission has previously stated that: Since the inception of standardized options trading, the options exchanges have had rules imposing limits on the aggregate number of options contracts that a member or customer could hold or exercise. These rules are intended to prevent the establishment of options positions that can be used or might create incentives to manipulate or disrupt the underlying market so as to benefit the options position. In particular, position and exercise limits are designed to minimize the potential for mini-manipulations and for corners or squeezes of the underlying market. In addition such limits serve to reduce the possibility for disruption of the options market itself, especially in illiquid options classes. 9 9 *See* Securities Exchange Act Release No. 39489 (December 24, 1997), 63 FR 276 (January 5, 1998) (SR-CBOE-97-11) (approval of increase in position limits and exercise limits for OEX index options). As the anniversary of listed options trading approaches its thirty-second year, the Exchange believes that the existing surveillance procedures and reporting requirements at the CBOE, other options exchanges, and at the several clearing firms are capable of properly identifying unusual and/or illegal trading activity. In addition, routine oversight inspections of CBOE's regulatory programs by the Commission have not uncovered any material inconsistencies or shortcomings in the manner in which the Exchange's market surveillance is conducted. These procedures utilize daily monitoring of market movements via automated surveillance techniques to identify unusual activity in both options and in underlying stocks. Furthermore, the significant increases in unhedged options capital charges resulting from the September 1997 adoption of risk-based haircuts in combination with the Exchange margin requirements applicable to these products under Exchange rules, serve as a more effective protection than do position limits. 10 10 *See* Securities Exchange Act Release No. 38248 (February 6, 1997), 62 FR 6474 (February 12, 1997) (File No. S7-7-94) (adopting risk-based haircuts); and CBOE Rule 12.3 (Margins). Furthermore, large stock holdings must be disclosed to the Commission by way of Schedules 13D or 13G. 11 Options positions are part of any reportable positions and, thus, cannot be legally hidden. In addition, Exchange Rule 4.13, which requires members to file reports with the Exchange for any customer or member who held aggregate long or short positions of 200 or more option contracts of any single class for the previous day, will remain unchanged and will continue to serve as an important part of the Exchange's surveillance efforts. 11 17 CFR 240.13d-1. The Exchange believes that restrictive equity position limits prevent large customers, such as mutual funds and pension funds, from using options to gain meaningful exposure to individual stocks. This can result in lost liquidity in both the options market and the stock market. In addition, the Exchange has found that restrictive limits and narrow hedge exemption relief restrict member firms from adequately facilitating customer order flow and offsetting the risks of such facilitations in the listed options market. The fact that position limits are calculated on a gross rather than a delta basis also is an impediment. Financial Requirements The Exchange believes that the current financial requirements imposed by the Exchange and by the Commission adequately address concerns that a member or its customer may try to maintain an inordinately large unhedged position in an equity option. Current margin and risk-based haircut methodologies serve to limit the size of positions maintained by any one account by increasing the margin and/or capital that a member must maintain for a large position held by itself or by its customer. It also should be noted that the Exchange has the authority under Exchange Rule 12.3(h) and Exchange Rule 12.10 to impose higher margin requirements upon a member or member organization when the Exchange determines that higher requirements are warranted. Also, the Commission's net capital rule, Rule 15c3-1 under the Act, 12 imposes a capital charge on members to the extent of any margin deficiency resulting from the higher margin requirement. 12 17 CFR 240.15c3-1. Finally, equity position limits have been gradually expanded from 1,000 contracts in 1973 to the current level of 75,000 contracts for options on the largest and most active underlying securities. To date, the Exchange believes that there have been no adverse affects on the market as a result of these past increases in the limits for equity option contracts. Housekeeping Changes The Exchange is proposing to amend Exchange Rule 4.11 by deleting the requirement that notice of position limit information be manually posted on the Exchange Bulletin Board. With the advance of technologies, position limits are now communicated to the membership largely through electronic media. Currently, applicable position limits are posted on the CBOE Internet site and on the Options Clearing Corporation Internet site and are sent electronically via e-mail to those member firms that have requested this type of notification. Paper copies of the position limits also are available to the trading floor community upon request. Posting a paper list, which is quite long and consumes a large amount of space, on the Exchange Bulletin Board is an outdated requirement that no longer serves a purpose. Therefore, the Exchange proposes to amend the language to state that position limit information must be posted publicly. The Exchange also proposes a minor change to Interpretation and Policy .06 to Exchange Rule 4.11 to correct the “Example” pertaining to the equity hedge exemption. The current Example inaccurately refers to the equity hedge exemption being limited to two times the standard limit. This limitation was removed in a previous rule filing, 13 and is thus no longer relevant. Currently, there is no position limit restriction for qualified hedge strategies under the equity hedge exemption policy. 13 *See* Securities Exchange Act Release No. 40875 (December 31, 1998), 64 FR 1842 (January 12, 1999) (SR-CBOE-98-25) (approval of increase in position limits and exercise limits). 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with and furthers the objectives of Section 6(b)(5) of the Act, 14 in that it is designed to perfect the mechanisms of a free and open market and to protect investors and the public interest. 14 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 would impose any burden on competition. 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. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, 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-2003-30 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-CBOE-2003-30. 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, 450 Fifth Street, NW., Washington, DC 20549. 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 publicly available. All submissions should refer to File Number SR-CBOE-2003-30 and should be submitted on or before March 22, 2005. IV. Commission's Findings and Order Granting Accelerated Approval of Proposed Rule Change After careful consideration, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder, applicable to a national securities exchange. 15 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act, 16 which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanisms of a free and open market and to protect investors and the public interest. 15 In approving this proposal, the Commission has considered its impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 16 15 U.S.C. 78f(b)(4). The Commission notes that standard position and exercise limits have not been increased in six years, during which time overall options market volume has continually increased, and the number of accounts that approach the current limits, exceed them, and are granted exemptions from the limits has also increased. The CBOE believes, among other things, that restrictive position limits result in lost liquidity by preventing large customers from using options to gain meaningful exposure to individual stocks. In view of the Exchange's representations concerning its surveillance procedures and capabilities of identifying unusual or illegal trading activity, as well as other protections against market manipulation noted in the proposal, the Commission believes that it is appropriate at this time to approve the proposed increases in position and exercise limits for a pilot program of six months. The Commission also believes that the proposal to implement the “reverse collar” hedge exemption is consistent with the existing hedge exemption relating to the “collar” strategy, which has already been approved by the Commission. The additional amendments appropriately adjust the requirement that the Exchange post reasonable notice of new position limits to reflect current technology, and eliminate an inaccuracy in the Exchange rules. The CBOE has requested that the Commission find good cause for approving the proposed rule change prior to the thirtieth day after publication of notice thereof in the **Federal Register** . The Commission believes that it is appropriate to accelerate approval of the proposed rule change so that the pilot program, intended to ease restrictions that inhibit liquidity in the options market, consistent with the protection of investors, may begin without delay. Accordingly, the Commission finds good cause, pursuant to Section 19(b)(2) of the Act, 17 for approving the proposed rule change, as amended, prior to the thirtieth day after the date of publication of notice thereof in the **Federal Register** . 17 15 U.S.C. 78s(b)(2). V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 18 that the proposed rule change (SR-CBOE-2003-30), as amended, is hereby approved on an accelerated basis for a pilot period to expire on August 23, 2005. 18 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 19 19 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-807 Filed 2-28-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51243; File No. SR-PCX-2004-130] Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. Relating to Fees for Late FOCD Forms February 23, 2005. 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 December 23, 2004, the Pacific Exchange, Inc. (“PCX” or “Exchange”), through its wholly owned subsidiary PCX Equities, Inc. (“PCXE”), filed with the Securities and Exchange Commission (“Commission” or “SEC”) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the self-regulatory organization. The PCX has designated this proposal as one establishing or changing a due, fee, or other charge imposed by the PCX under Section 19(b)(3)(A)(ii) of the Act, 3 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(ii). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The PCX proposes to amend the PCXE rules to adopt new fees for late Financial and Operational Compliance Department (“FOCD”) required forms. The text of the proposed rule change is below. Proposed new language is in italics. Proposed deletions are in brackets. Rules of the Pacific Exchange, Inc. Rule 11 Business Conduct Prevention of the Misuse of Material, Nonpublic Information Rule 11.3( *a* ) Every OTP Holder or OTP Firm must establish, maintain and enforce written policies and procedures reasonably designed, taking into consideration the nature of such OTP Holder or OTP Firm's business, to prevent the misuse of material, non-public information by such OTP Holder or OTP Firm or persons associated with such OTP Holder or OTP Firm. OTP Holders or OTP Firms for whom the Exchange is the Designated Examining Authority (“DEA”) that are required, pursuant to Rule 4.5, to file SEC form X-17A-5, with the Exchange on an annual or more frequent basis must file contemporaneously with the submission for the calendar year end ITSFEA compliance acknowledgments stating that the procedures mandated by this Rule have been established, enforced and maintained. Any OTP Holder or OTP Firm or Associated Person who becomes aware of a possible misuse of material, non-public information must promptly notify the Exchange's Options Surveillance Department. *(b) Any OTP Holder or OTP Firm who fails to file a compliance acknowledgment form in a timely manner shall be subject to a late filing charge of $500.00 for each occurrence. Repeated or aggravated failure to file may be referred to the Enforcement Department for appropriate disciplinary action.* Commentary .01-.03—No change. Disclosure of Financial Arrangements of OTP Holders Rule 11.11(a)—No change.
(b)OTP Holders and OTP Firms with financial arrangements must submit to the Exchange notification of the initiation, modification or termination of such financial arrangements in a form, time and manner approved by the Exchange within ten business days of the effective date of such arrangements or within such shorter period of time as the Exchange may require. *Any OTP Holder or OTP Firm who fails to file as such in a timely manner shall be subject to a late filing charge of $500.00 for each occurrence. Repeated or aggravated failure to file may be referred to the Enforcement Department for appropriate disciplinary action.* [Failure to disclose the terms of such financial arrangements to the Exchange may result in disciplinary action.] Rules of PCX Equities, Inc. Rule 6 Business Conduct Prevention of the Misuse of Material, Nonpublic Information Rule 6.3 *(a)* Every ETP Holder must establish, maintain and enforce written policies and procedures reasonably designed, taking into consideration the nature of such ETP Holder's business, to prevent the misuse of material, non-public information by such ETP Holder or persons associated with such ETP Holder. ETP Holders for whom the Corporation is the Designated Examining Authority (“DEA”) that are required, pursuant to Rule 4.5, to file SEC form X-17A-5, with the Corporation on an annual or more frequent basis must file contemporaneously with the submission for the calendar year end ITSFEA compliance acknowledgments stating that the procedures mandated by this Rule have been established, enforced and maintained. Any ETP Holder or Associated Persons who becomes aware of a possible misuse of material, non-public information must promptly notify the Corporation's Surveillance Department. *(b) Any ETP Holder who fails to file a compliance acknowledgment form in a timely manner shall be subject to a late filing charge of $500.00 for each occurrence. Repeated or aggravated failure to file may be referred to the Enforcement Department for appropriate disciplinary action.* Commentary .01-.03—No change. Disclosure of Financial Arrangements Rule 6.11(a)—No change.
(b)ETP Holders with financial arrangements must submit to the Corporation notification of the initiation, modification or termination of such financial arrangements in a form, time and manner approved by the Corporation within ten business days of the effective date of such arrangements or within such shorter period of time as the Corporation may require. *Any ETP Holder who fails to file as such in a timely manner shall be subject to a late filing charge of $500.00 for each occurrence. Repeated or aggravated failure to file may be referred to the Enforcement Department for appropriate disciplinary action.* [Failure to disclose the terms of such financial arrangements to the Corporation may result in disciplinary action.] 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 self-regulatory organization 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 self-regulatory organization 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 Purpose The Exchange proposes to adopt fees for late filings of certain required FOCD forms. Options Trading Permit (“OTP”) Holders and OTP Firms and Equities Trading Permit (“ETP”) Holders (collectively, “Holders”) are required to file a number of FOCD related forms in a timely manner. The Exchange believes that timely submission of FOCD forms is a serious matter and believes it is necessary to assess late fees to encourage Holders to file such forms in a timely manner. The Exchange proposes to adopt late fees for the FOCD related forms described below. 1. Annual Compliance Acknowledgement Form Under PCX Rule 11.3 and PCXE Rule 6.3, every Holder must establish, maintain, and enforce written policies and procedures to prevent the misuse of material, non-public information by the respective Holder or persons associated with such Holder. Holders for whom the Exchange is the Designated Examining Authority that are required, under PCX and PCXE Rule 4.5, to file SEC Form X-17A-5 with the Exchange on an annual basis must file contemporaneously with the submission for the calendar year end ITSFEA compliance acknowledgments stating that the procedures mandated by PCX Rule 11.3 or PCXE 6.3 have been established, enforced and maintained. The Exchange proposes to assess a late filing fee of $500 for each occurrence to any Holder who fails to file the Annual Compliance Acknowledgement Form in a timely manner. Repeated or aggravated failure to file may be referred to the Enforcement Department for appropriate disciplinary action. 2. Financial Arrangement Disclosure Form Under PCX Rule 11.11 and PCXE 6.11, Holders with financial arrangements are required to submit to the Exchange notification of the initiation, modification or termination of such financial arrangements in a form, time and manner approved by the Exchange within ten business days of the effective date of such arrangements. The Exchange proposes to assess a $500 late fee to those Holders who fail to file the Financial Arrangement Disclosure Form in a timely manner. Repeated or aggravated failure to file may be referred to the Enforcement Department for appropriate disciplinary action. Basis The Exchange believes that the proposal is consistent with Section 6(b) 4 of the Act, in general, and Section 6(b)(4) 5 of the Act, in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among its OTP Holders, OTP Firms, ETP Holders, issuers, and other persons using its facilities. 4 15 U.S.C. 78f(b). 5 15 U.S.C. 78f(b)(4). 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 Written comments on the proposed rule change were neither solicited nor received. 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)(ii) 6 of the Act and subparagraph (f)(2) of Act Rule 19b-4 thereunder, 7 because it is concerned solely with the administration of the Exchange. At any time within 60 days of the filing of such proposed rule change, the Commission could have summarily abrogated such rule change if it appeared to the Commission that such action was necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the Act. 6 15 U.S.C. 78s(b)(3)(A)(ii). 7 17 CFR 240.19b-4(f)(2). 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-PCX-2004-130 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-PCX-2004-130. 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. 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 will also be available for inspection and copying at the principal office of the PCX. 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-PCX-2004-130 and should be submitted on or before March 22, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 8 8 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-808 Filed 2-28-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51239; File No. SR-Phlx-2005-13] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to SIG Indices, LLLP February 22, 2005. 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 February 16, 2005, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in items I and II below, which items have been prepared by the Phlx. The Exchange has filed the proposal as a “non-controversial” rule change pursuant to section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 which renders it effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Phlx proposes to amend Phlx Rule 1104A, SIG Indices, LLLP Indexes, to add five new SIG indices licensed by Susquehanna Indices, LLLP (“SI”) to the Exchange. Phlx Rule 1104A provides generally that SI makes no express or implied warranty as to results to be obtained by any person or entity from the use of any of the SIG indexes, and makes no express or implied warranties of merchantability or fitness for a particular purpose with respect to any of the named indexes. The text of the proposed rule change is below. Proposed new language is in *italics;* proposed deletions are in [brackets]. Rule 1104A. SIG Indices, LLLP [Indexes] SIG Indices, LLLP makes no warranty, express or implied, as to results to be obtained by any person or any entity from the use of the SIG Investment Managers Index TM , the SIG Cable, Media & Entertainment Index TM , the SIG Casino Gaming Index TM , the SIG Semiconductor Equipment Index TM , [and ]the SIG Semiconductor Device Index TM *, the SIG Specialty Retail Index* TM *, the SIG Steel Producers Index* TM *, the SIG Footwear & Athletic Index* TM *, the SIG Education Index* TM *, and the SIG Restaurant Index* TM or any data included therein in connection with the trading of option contracts thereon, or for any other use. SIG Indices, LLLP makes no express or implied warranties of merchantability or fitness for a particular purpose for use with respect to the SIG Investment Managers Index TM , the SIG Cable, Media & Entertainment Index TM , the SIG Casino Gaming Index TM , the SIG Semiconductor Equipment Index TM , [and ]the SIG Semiconductor Device Index TM *, the SIG Specialty Retail Index* TM *, the SIG Steel Producers Index* TM *, the SIG Footwear & Athletic Index* TM *, the SIG Education Index* TM *, and the SIG Restaurant Index* TM or any data included therein. 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 Phlx 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 Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to amend Phlx Rule 1104A, which applies to indexes maintained by SIG Indices, LLLP, to include five indexes recently licensed by SI to the Exchange. 5 5 The Exchange currently lists options on the SIG Investment Managers Index TM , the SIG Cable, Media & Entertainment Index TM , the SIG Casino Gaming Index TM , the SIG Semiconductor Equipment Index TM , the SIG Semiconductor Device Index TM , and on newly-licensed indexes—the SIG Steel Producers Index TM , the SIG Specialty Retail Index TM , the SIG Footwear & Athletic Index TM , the SIG Education Index TM , and the SIG Restaurant Index TM , pursuant to a license agreement with Susquehanna Indices, LLLP and Exchange Rule 1009A(b). The indexes are trademarks of SIG Indices, LLLP. The rule currently provides generally that SI makes no warranty, express or implied, as to results to be obtained by any person or entity from the use of the SIG Investment Managers Index TM , the SIG Cable, Media & Entertainment Index TM , the SIG Casino Gaming Index TM , the SIG Semiconductor Equipment Index TM , and the SIG Semiconductor Device Index TM , and that SI makes no express or implied warranties of merchantability or fitness for a particular purpose for use with respect to any of the named indexes or any data included therein. 6 The Exchange is now proposing to amend Phlx Rule 1104A to expand the coverage of the rule to include the five newly-licensed and listed indexes—the SIG Specialty Retail Index TM , the SIG Steel Producers Index TM , the SIG Footwear & Athletic Index TM , the SIG Education Index TM , and the SIG Restaurant Index TM —as required by the license agreement issued to the Exchange. 7 6 The Exchange noted in its filing to adopt Phlx Rule 1104A that the proposed disclaimer was appropriate given that it was similar to disclaimer provisions of American Stock Exchange Rule 902C relating to indexes underlying options listed on that exchange. *See* Securities Exchange Act Release No. 48135 (July 7, 2003), 68 FR 42154 (July 16, 2003)(approving SR-Phlx-2003-21). The Exchange recently amended Phlx Rule 1104A to include the SIG Casino Gaming Index TM , the SIG Semiconductor Equipment Index TM , and the SIG Semiconductor Device Index TM , as required by the license agreement between SI and the Exchange. *See* Securities Exchange Act Release No. 50333 (September 9, 2004), 69 FR 55860 (September 16, 2004)(SR-Phlx-2004-48). 7 The SIG Specialty Retail Index TM , the SIG Footwear & Athletic Index TM , the SIG Education Index TM , and the SIG Restaurant Index TM were listed pursuant to Rule 19b-4(e) under the Act on January 5, 2005, and the SIG Steel Producers Index TM was listed on December 21, 2004 (amended January 13, 2005). 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 8 in general, and furthers the objectives of section 6(b)(5) of the Act 9 in particular, in that it is designed to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Exchange believes that the proposed rule should encourage SI to continue to maintain the SIG Indices so that options on them may be traded on the Exchange, thereby providing investors with enhanced investment opportunities. 8 15 U.S.C. 78f(b). 9 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 inappropriate burden on competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments on the proposed rule change were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The proposed rule change has been designated by the Phlx as a “non-controversial” rule change pursuant to Section 19(b)(3)(A) of the Act 10 and subparagraph (f)(6) of Rule 19b-4 thereunder. 11 10 15 U.S.C. 78s(b)(3)(A). 11 17 CFR 240.19b-4(f)(6). The foregoing rule change:
(1)Does not significantly affect the protection of investors or the public interest,
(2)does not impose any significant burden on competition, and
(3)by its terms does not become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest. As required under Rule 19b-4(f)(6)(iii), the Phlx provided the Commission with written notice of its intent to file the proposed rule change at least five business days prior to filing the proposal with the Commission or such shorter period as designated by the Commission. 12 Consequently, the proposed rule change has become effective pursuant to section 19(b)(3)(A) of the Act 13 and Rule 19b-4(f)(6) thereunder. 14 12 17 CFR 240.19b-4(f)(6)(iii). 13 15 U.S.C. 78s(b)(3)(A). 14 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii), 15 a proposed “non-controversial” rule change does not become operative for 30 days after the date of filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. The Phlx has requested that the Commission waive the 30-day operative delay. The Commission has determined that it would be consistent with the protection of investors and the public interest to waive the 30-day period so that all SIG indices are treated uniformly. 16 15 17 CFR 240.19b-4(f)(6)(iii). 16 For the purposes only of accelerating the operative date of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 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 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 No. SR-Phlx-2005-13 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File No. SR-Phlx-2005-13. 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, 450 Fifth Street, NW., Washington, DC 20549. Copies of such filing will also be available for inspection and copying at the principal office of the Phlx. 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 No. SR-Phlx-2005-13 and should be submitted on or before March 21, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 17 17 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-800 Filed 2-28-05; 8:45 am] BILLING CODE 8010-01-P SOCIAL SECURITY ADMINISTRATION Agency Information Collection Activities: Proposed Request and Comment Request The Social Security Administration
(SSA)publishes a list of information collection packages that will require clearance by the Office of Management and Budget
(OMB)in compliance with Public Law 104-13, the Paperwork Reduction Act of 1995, effective October 1, 1995. The information collection packages that may be included in this notice are for revisions to OMB-approved information collections and extensions (no change) of OMB-approved information collections. SSA is soliciting comments on the accuracy of the agency's burden estimate; the need for the information; its practical utility; ways to enhance its quality, utility, and clarity; and on ways to minimize burden on respondents, including the use of automated collection techniques or other forms of information technology. Written comments and recommendations regarding the information collection(s) should be submitted to the OMB Desk Officer and the SSA Reports Clearance Officer. The information can be mailed and/or faxed to the individuals at the addresses and fax numbers listed below: (OMB), Office of Management and Budget, Fax: 202-395-6974. (SSA), Social Security Administration, DCFAM, Attn: Reports Clearance Officer, 1338 Annex Building, 6401 Security Blvd., Baltimore, MD 21235, Fax: 410-965-6400. I. The information collections listed below are pending at SSA and will be submitted to OMB within 60 days from the date of this notice. Therefore, your comments should be submitted to SSA within 60 days from the date of this publication. You can obtain a copy of the collection instrument by calling the SSA Reports Clearance Officer at
(410)965-0454 or by writing to the address listed above. State Agency Ticket Assignment Form—Ticket to Work and Self Sufficiency Program—0960-0641. SSA uses the information collected on form SSA-1365 to determine proper assignment under the Ticket to Work program and payment option. This will be done through the contracted Program Manager. The State Vocational Rehabilitation Agency
(VRA)completes the form and the beneficiary reviews the data. The beneficiary will sign the form to acknowledge the assignment of their ticket to that agency. Respondents are the State VRAs. *Type of Request:* Revision of an OMB-approved information collection. *Number of Respondents:* 82. *Frequency of Response:* 50. *Average Burden Per Response:* 3 minutes. *Estimated Annual Burden:* 205 hours. II. The information collections listed below have been submitted to OMB for clearance. Your comments on the information collections would be most useful if received by OMB and SSA within 30 days from the date of this publication. You can obtain a copy of the OMB clearance packages by calling the SSA Reports Clearance Officer at
(410)965-0454, or by writing to the address listed above. 1. Application for Survivors Benefits—20 CFR 404.611
(a)and (c)—0960-0062. The information collected by form SSA-24 is needed to satisfy the “Joint Prescribed Application” of Title 38 U.S.C. 5105. That provision requires that survivors who file with either SSA or the Department of Veterans Affairs
(VA)shall be deemed to have filed with both agencies, and that each agency's forms must request sufficient information to constitute an application for both SSA and VA benefits. The respondents are survivors of members or former members of the armed services. When form SSA-24 is received by SSA from the VA, an earnings record is requested to determine if insured status exists so that the claimant will complete the appropriate SSA survivor application. If entitlement does not exist, SSA may disallow the claim. If an SSA survivor application has already been filed, form SSA-24 is treated as a duplicate application. *Type of Request:* Extension of an OMB-approved information collection. *Number of Respondents:* 3,200. *Frequency of Response:* 1. *Average Burden Per Response:* 15 minutes. *Estimated Annual Burden:* 800 hours. 2. Continuing Disability Review Report—20 CFR 404.1589, 20 CFR 416.989—0960-0072. We use form SSA-454-BK to collect information from individuals receiving disability benefits or their representatives. We evaluate the information to determine whether the individuals remain eligible for benefit payments. Adults are considered eligible for payment if they continue to be unable to do substantial gainful activity
(SGA)by reason of their impairments. Title XVI children are considered eligible for payment if they still have marked and severe functional limitations by reason of their impairments. We obtain information concerning sources of medical treatment, participation in vocational rehabilitation programs (if any), attempts to work (if any), and the opinions of individuals regarding whether their conditions have improved. *Type of Request:* Revision of an OMB-approved information collection. *Number of Respondents:* 792,020. *Frequency of Response:* 1. *Average Burden Per Response:* 45 minutes. *Estimated Annual Burden:* 594,015 hours. Quarterly Statistical Report on Recipients and Payments Under State-Administered Assistance Programs for Aged, Blind and Disabled (Individuals and Couples) Recipients—20 CFR 416.2010, 20 CFR 416.2098—0960-0130. The purpose of the statistical report is to obtain State data on expenditures and caseloads of State-administered supplementation under the Supplemental Security Income
(SSI)program. The statistics are needed to complement information available for the federally administered programs and to more fully explain the impact of the public income support programs on the needy, aged, blind, and disabled. In addition, the expenditure data are used to monitor State compliance with the mandatory pass-along provision. States use our publications, which are prepared from data submitted on this statistical report, for administrative purposes to compare their expenditures and caseloads with those of other States, to determine the feasibility of program change, and to keep abreast of program developments in other States. Federal personnel request data about State-administered supplementation programs to compare various State programs, to examine the relationship of State supplementation expenditures and caseloads to federally financed programs such as Medicaid, and to determine the effect of changes in SSI and other Federal programs on State supplementation programs. In addition, Federal and State personnel have used data obtained from this report in developing legislative proposals and budget estimates. *Type of Request:* Extension of an OMB-approved information collection. *Number of Respondents:* 31. *Frequency of Response:* 4. *Average Burden per Response:* 60 minutes. *Estimated Annual Burden:* 124 hours. Dated: February 23, 2005. Elizabeth A. Davidson, Reports Clearance Officer, Social Security Administration. [FR Doc. 05-3892 Filed 2-28-05; 8:45 am]
Connectionstraces to 11
4 references not yet in our index
  • 17 CFR 240.19
  • 17 CFR 240.13
  • 17 CFR 240.15
  • Pub. L. 104-13
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cites case law
Notices
SECURITIES AND EXCHANGE COMMISSION
U.S.C.§ 78s
U.S.C.§ 78f
U.S.C.§ 552
C.F.R.§ 200.30-3
U.S.C.§ 78c
C.F.R.§ 404.611
U.S.C.§ 5105
C.F.R.§ 404.1589
C.F.R.§ 416.989
Cite17 CFR 240.19
Cite17 CFR 240.13
Cite17 CFR 240.15
Cites 15 · showing 12Cited by 0 across 0 sources
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