January 7, 2005
Exchange
Bulletin
Volume 33, Number 1
The Constitution and Rules of the Chicago Options Exchange, Incorporated (“Exchange”), in certain specific instances, require
the Exchange to provide notice to the Exchange membership. To satisfy this requirement, a complimentary copy of the Exchange Bulletin, including the Regulatory Bulletin, is delivered to all effective members on a weekly basis.
CBOE members are encouraged to receive the Exchange and Regulatory Bulletin and Information Circulars via e-mail. E-mail
subscriptions may be obtained by submitting your name, firm, mailing address, e-mail address, and phone number, to
members@cboe.com, or, by contacting the Membership Department by phone, at 312-786-7449. There is no charge for e-mail
delivery of the Exchange and Regulatory Bulletin or for Information Circulars. If you do sign up for e-mail delivery, please
remember to inform the Membership Department of e-mail address changes.
Additional subscriptions for hard copy delivery may be obtained by submitting your name, firm, mailing address, e-mail address and telephone number to: Chicago Board Options Exchange, Accounting Department, 400 South LaSalle, Chicago, Illinois 60605, Attention: Bulletin Subscriptions. The cost of an annual subscription (July 1 through June 30) is $200.00 ($100.00
after January 1), payable in advance. The Exchange reserves the right to limit subscriptions by non-members.
For up-to-date Seat Market Quotes, refer to CBOE.com and click “Seat Market Information” under the “About CBOE” tab. For
access to the CBOE Member Web Site, please also notify the Membership Department using the contact information above.
Copyright © 2004 Chicago Board Options Exchange, Incorporated
SEAT MARKET QUOTES AS OF FRIDAY, JANUARY 7, 2005
CLASS
CBOE/FULL
CBOT/FULL
BID
$270,000.00
$1,150,000.00
OFFER
$300,000.00
$1,375,000.00
LAST SALE AMOUNT
$299,000.00
$1,200,000.00
LAST SALE DATE
January 6, 2005
January 6, 2005
MEMBERSHIP SALES AND TRANSFERS
From
William R. Power
To
Newcastle Financial LLC
Price/Transfer
$299,000.00
Date
1/6/2005
DPM EXPANSION REQUEST - January 7, 2005
On January 4, 2005, the MTS Appointments Committee (“Committee”) reviewed a request from Red Cedar Trading, LLC (“Red
Cedar”) to expand its DPM operation to include a second trading location. The Committee is notifying the membership of Red Cedar’s
request, and encourages members and other affected parties to discuss their views with individual members of the Committee. Additionally, members may submit a written statement to the Committee expressing their views. Please submit any written comments for the
Committee’s consideration to Allison Kile (kilea@cboe.com), Trading Procedures Department, 5th Floor, CBOE, on or before 3:30 p.m. on
Friday, January 14, 2005.
Please contact Daniel Carver, Chairman of the MTS Committee, at Row 4, Booth 3 (ext. 30403), or any other member of the
MTS Committee with any questions.
Thank you.
Page 2
January 7, 2005
Volume 33, Number 1
Chicago Board Options Exchange
MEMBERSHIP INFORMATION FOR 12/30/04 THROUGH 1/5/05
Effective Date
MEMBERSHIP LEASES
New Leases
Effective Date
Lessor: Patrick J. English
Lessee: Cornerstone Partners
William J. O’Keefe, NOMINEE
Rate:
$2,000.00
Term: Monthly
12/30/04
Lessor: Abe J. Matthew
Lessee: Samuelson Trading Corporation
R. James Relihan, NOMINEE
Rate:
0.875%
Term: Monthly
1/3/05
Lessor: Michael M. Mondrus
Lessee: Market Street Securities, Inc.
Stephen W. Quan, NOMINEE
Rate:
0.875%
Term: Monthly
1/3/05
Lessor: UBS Financial Services, Inc.
Lessee: X-Change Financial Access LLC
Timothy G. Weinand, NOMINEE
Rate:
.875%
Term: Monthly
1/3/05
Lessor: Timothy P. Feeney
Lessee: KC-Co. II LLC
Zane Edwin Rigden, NOMINEE
Rate:
0.8920%
Term: Monthly
1/3/05
Lessor: Susan G. Solomon
Lessee: CTC LLC
Mark Purtell, NOMINEE
Rate:
1.00%
Term: Monthly
1/3/05
Lessor: Larkspur Securities, Inc.
Lessee: JT Limited Partnership
Robert J. Pelon, NOMINEE
Rate:
0.75%
Term: Monthly
1/3/05
Lessor: Alan J. Lifchultz
Lessee: Sparta Group Of Chicago, LP
Edward C. Wong, NOMINEE
Rate:
.75%
Term: Monthly
1/3/05
Lessor: KISAY 1, LP
Lessee: Specialists DPM, LLC
Scott D. Force, NOMINEE
Rate:
0.892%
Term: Monthly
1/3/05
Lessor: Jordan-Matthew LLC
Lessee: Belvedere Trading, LLC
Simon Eric Amich, NOMINEE
Rate:
.8920%
Term: Monthly
1/3/05
Lessor: Timothy C. Boyd
Lessee: BBS Partners LLC
Patrick S. Hamilton, NOMINEE
Rate:
.75%
Term: Monthly
1/3/05
Lessor: DRC Corporation
Lessee: Belvedere Trading, LLC
Owen T. O’Neill, NOMINEE
Rate:
.8920%
Term: Monthly
1/3/05
Lessor: Hays Investments
Lessee: Belvedere Trading, LLC
Juhee A. Eun, NOMINEE
Rate:
.8920%
Term: Monthly
1/3/05
Lessor: John A. Downey
Lessee: Belvedere Trading, LLC
Michael J. Grimes, NOMINEE
Rate:
.8920%
Term: Monthly
1/3/05
Lessor: Mem-Lease Co.
Lessee: CTC LLC
Jeremiah Duggan, NOMINEE
Rate:
1%
Term: Monthly
1/3/05
Lessor: Lawrence J. Blum
Lessee: Sallerson-Troob LLC
Mark P. Corman, NOMINEE
Rate:
.75%
Term: Monthly
1/3/05
Lessor: Bershow Options Inc
Lessee: Lakeshore Securities, LP
Brian C. Hayes, NOMINEE
Rate:
.892%
Term: Monthly
1/5/05
Terminated Leases
Termination Date
Lessor: Susan G. Solomon
Lessee: WH Trading, LLC
1/3/05
Lessor: Morgan Stanley DW Inc.
1/3/05
Lessee: X-Change Financial Access LLC
Timothy G. Weinand (MWD), NOMINEE
Lessor: Marshall C. Spiegel
Lessee: Rubicon Investments LLC
1/3/05
Lessor: John J. Conklin
1/3/05
Lessee: KC-Co. II LLC
Zane Edwin Rigden (KWI), NOMINEE
Lessor: Timothy P. Feeney
Lessee: Randy L. Emer (EME)
1/3/05
Lessor: William J. Deevy
Lessee: CTC LLC
Mark Purtell (MMP), NOMINEE
1/3/05
Lessor: Steven V. Taitel
Lessee: Orbit II Partners, LP
1/3/05
Lessor: Daniel A. Gooze
Lessee: John G. Mauk (MAU)
1/3/05
Lessor: Morgan Keegan & Company, Inc.
Lessee: JT Limited Partnership
Robert J. Pelon (MSU), NOMINEE
1/3/05
Lessor: Daniel A. Stucka
1/3/05
Lessee: K & S Trading, LP
Joseph Pondelicek (JOE), NOMINEE
Lessor: Timothy C. Boyd
Lessee: Van der Moolen Options USA LLC
Adam C. Metzger (CAL), NOMINEE
1/3/05
Lessor: James Richardson
1/3/05
Lessee: Saen Options USA Inc.
Christopher A. Lake (LOC), NOMINEE
Lessor: KISAY 1, LP
Lessee: Edge Specialists, LLC
Dave J. Rodgers (REF), NOMINEE
1/3/05
Lessor: Terrel W. Brostoff
Lessee: Capstone Trading LLC
1/3/05
Lessor: Jordan-Matthew LLC
Lessee: Harrison Trading Group, LLC
Simon Eric Amich (SEA), NOMINEE
1/3/05
Page 3
January 7, 2005
Volume 33, Number 1
Termination Date
Lessor: JWG, Inc.
1/3/05
Lessee: Van der Moolen Options U.S.A. LLC
Robert E. Ariss (RXA), NOMINEE
Lessor: DRC Corporation
Lessee: Harrison Trading Group
Owen L. O’Neil, ( OWN)Nominee
1/3/05
Lessor: Larkspur Securities, Inc.
Lessee: Ronin Capital, LLC
Dennis A. Carta (DAX), NOMINEE
1/3/05
Lessor: Gail S. Meyers
Lessee: Orbit II Partners, LP
1/3/05
Lessor: Hays Investments
Lessee: Harrison Trading Group, LLC
Juhee A. Eun (AJE), NOMINEE
1/3/05
Lessor: John A. Downey
1/3/05
Lessee: Harrison Trading Group, LLC
Michael J. Grimes (MJG), NOMINEE
Lessor: Bernard W. Horwich
1/3/05
Lessee: Blenheim-Cesarone, LLC
Jeffrey A. Cesarone (WKU), NOMINEE
Lessor: Sallie Leaf
Lessee: Peter C. Dudman (PCD)
1/3/05
Lessor: Bershow Options Inc.
Lessee: CTC LLC
Jeremiah Duggan (JRY), NOMINEE
1/3/05
Lessor: Rickie R. Lockwood
Lessee: Sallerson-Troob LLC
Mark P. Corman (MEC), NOMINEE
1/3/05
Lessor: Hartz Construction Company, Inc.
1/3/05
Lessee: BOTTA Capital Management LLC
Christopher J. McHugh (CMQ), NOMINEE
Lessor: Henry P. Gosiene
1/3/05
Lessee: Intelligent Market Trading Company LLC
Christopher J. Van Zele (ALE), NOMINEE
Lessor: CMCJL, LLC
Lessee: Kellogg Capital Group LLC
David A. Eglit (DVD), NOMINEE
1/5/05
MEMBERSHIP TERMINATIONS
Individual Members
CBT Registered For:
Termination Date
Joseph A. Mareno (JMM)
Equitec Proprietary Markets, LLC
111 W. Jackson - 20th Fl.
Chicago, IL 60604
12/30/04
Scotlond T. Ernsting (KBC)
Van der Moolen Options USA LLC
32 W. 230 83rd St.
Naperville, IL 60564
1/3/05
Benjamin Weinberger (BNW)
Orbit II Partners, LP
440 S. LaSalle - Ste. 3100
Chicago, IL 60605
1/3/05
Yaron Kim (YPR)
Saen Options USA Inc.
440 S. LaSalle - Ste. 1500
Chicago, IL 60605
1/3/05
Chicago Board Options Exchange
Lessee(s):
Termination Date
John G. Mauk (MAU)
440 S. LaSalle - Ste. 2110
Chicago, IL 60605
1/3/05
Peter C. Dudman (PCD)
985 St Andrews Circle
Geneva, IL 60134
1/3/05
Nominee(s) / Inactive Nominee(s):
Termination Date
Gary R. Silverman (GYS)
Vitale Trading LLC
440 S. LaSalle - Ste. 1822
Chicago, IL 60605
1/3/05
Joseph Pondelicek (JOE)
K & S Trading, LP
440 S. LaSalle - #2500
Chicago, IL 60605
1/3/05
Ioannis S. Moraitis (YNI)
SMC Option Management LLC
440 S. LaSalle, 19th Floor
Chicago, IL 60605
1/3/05
John R. Knuth (HOG)
X-Change Financial Access LLC
128 Hutchins St.
Woodstock, IL 60098
1/3/05
Brent L. Burden (BDN)
Samuelson Trading Corporation
440 S. LaSalle - Ste. 1124
Chicago, IL 60605
1/3/05
Adam C. Metzger (CAL)
Van der Moolen Options USA LLC
440 S. LaSalle St., Ste. 1546
Chicago, IL 60605
1/3/05
Dave J. Rodgers (REF)
Edge Specialists, LLC
440 S. LaSalle, Suite 663
Chicago, IL 60605
1/3/05
Michael B. Frazin (YAS)
BOTTA Capital Management LLC
440 S. LaSalle - Ste. 3400
Chicago, IL 60605
1/3/05
Kathryn A. Ryan (KTE)
Ronin Capital, LLC
3029 N. Oakley
Chicago, IL 60618
1/3/05
Robert E. Ariss (RXA)
Van der Moolen Options USA LLC
440 S. LaSalle, Ste. #1519
Chicago, IL 60605
1/3/05
Jeffrey A. Cesarone (WKU)
Blenheim-Cesarone, LLC
38 W. 255 Heritage Oaks Dr.
St. Charles, IL 60175
1/3/05
Christopher J. Van Zele (ALE)
Intelligent Market Trading Company LLC
175 W. Jackson - Ste. 485
Chicago, IL 60604
1/3/05
Page 4
January 7, 2005
Volume 33, Number 1
Chicago Board Options Exchange
Termination Date
Brian A. Zielinski (BZN)
Third Millennium Trading, LLC
440 S. LaSalle - Ste. 3100
Chicago, IL 60605
1/4/05
David A. Eglit (DVD)
Kellogg Capital Group LLC
440 S. LaSalle - 1600
Chicago, IL 60605
1/5/05
CBT Registered For:
Termination Date
Fimat USA, Inc.
Camile Marra-Rubin
630 5th Avenue - #500
New York, NY 10111
1/3/05
Orbit II Partners, LP
2 Rector St., 3rd Fl.
New York, NY 10006
1/3/05
Lessee(s):
Termination Date
Edge Specialists, LLC
440 S. LaSalle, Ste. 663
Chicago, IL 60605
1/3/05
Blenheim-Cesarone, LLC
Jeffrey Cesarone
440 S. LaSalle - Ste. 661
Chicago, IL 60605
1/3/05
Kellogg Capital Group LLC
14 Wall Street, 27th Floor
New York, NY 10005
1/5/05
Van der Moolen Options USA LLC
Patrick Hamilton
440 S. LaSalle - Ste. 1546
Chicago, IL 60605
1/5/05
Scott D. Force (SKT)
1/3/05
Specialists DPM, LLC
1926 N. Larrabee
Chicago, IL 60614
Type of Business to be Conducted: Market Maker
Andrew S. Troob (ATT)
1/5/05
Sallerson-Troob LLC
440 S. Lasalle-Ste. 950
Chicago, IL 60605
Type of Business to be Conducted: Market Maker/ Floor Broker
Member Organizations
CBT Registered For:
Effective Date
Fimat USA LLC
1/3/05
630 5th Ave, Ste. 500
New York, NY 10111
Type of Business to be Conducted: Floor Broker
Lessee(s):
Effective Date
Belvedere Trading, LLC
1/3/05
440 S. LaSalle, Ste. #615
Chicago, IL 60605
Type of Business to be Conducted: Market Maker/ Floor Broker
JOINT ACCOUNTS
EFFECTIVE MEMBERSHIPS
Individual Members
Effective Date
Joseph G. Kinahan (JJJ)
1/3/05
NOJ Trading, LLC
323 Phillippa
Hinsdale, IL 60521
Type of Business to be Conducted: Market Maker
Todd A. Koster (TKA)
1/3/05
NOJ Trading, LLC
9410 41st Ave.
Pleasant Prairie, WI 53158
Type of Business to be Conducted: Market Maker
Nominee(s) / Inactive Nominee(s):
Stephen W. Quan (ONE)
1/3/05
Market Street Securities, Inc.
545 N. Dearborn - Apt. #1703
Chicago, IL 60610
Type of Business to be Conducted: Market Maker
Edward C. Wong (EDY)
1/3/05
Sparta Group Of Chicago, LP
440 S. LaSalle - Ste. 2101
Chicago, IL 60605
Type of Business to be Conducted: Market Maker
Member Organizations
CBT Registered For:
Effective Date
Effective Date
William J. O’Keefe (BOK)
12/30/04
Cornerstone Partners
440 S. LaSalle, 19th Floor
Chicago, IL 60605
Type of Business to be Conducted: Market Maker
R. James Relihan (RJR)
1/3/05
Samuelson Trading Corporation
440 S. LaSalle - Ste. 1124
Chicago, IL 60605
Type of Business to be Conducted: Market Maker
New Participants
Acronym
Effective Date
William J. O’Keefe
QMV
12/30/04
Warren O. Mayshak
QGS
12/31/04
Warren O. Mayshak
QLO
12/31/04
Warren O. Mayshak
QZT
12/31/04
Jack E. Brothers Jr.
QHD
1/4/05
James C. Kowalski
QHD
1/4/05
Scott C. England
QLN
1/5/05
Jason P. Bristol
QCT
1/5/05
New Accounts
Acronym
Effective Date
Kevin P. Davitt
QMK
1/3/05
Lawrence N. Gage
QMK
1/3/05
Sean P. Kinney
QMK
1/3/05
Stephen W. Quan
QMK
1/3/05
Joseph G. Kinahan
QQE
1/3/05
Page 5
January 7, 2005
Volume 33, Number 1
Chicago Board Options Exchange
New Accounts
Acronym
Effective Date
Terminated Participants Acronym
Termination Date
Todd A. Koster
QQE
1/3/05
Kathryn A. Ryan
QSH
1/3/05
David C-H Ho
QZZ
1/4/05
Christopher J. Van Zele
QDM
1/3/05
Mark E. Westcott
QZZ
1/4/05
Christopher J. Van Zele
QIM
1/3/05
Colby D. Lamberson
QCP
1/4/05
Christopher J. Van Zele
QOT
1/3/05
Martin M. Israel
QZZ
1/4/05
Scott C. England
QTJ
1/5/05
Ilan J. Shalit
QCP
1/4/05
Scott C. England
QSP
1/5/05
Daniel G. Engel
QCP
1/4/05
Terminated Accounts
Acronym
Termination Date
Samuel J. Kruis
QCP
1/4/05
Russell Byrd
QQE
12/30/04
Mei Mei Christine Chan
QCP
1/4/05
Scotlond T. Ernsting
QTS
1/3/05
Gregory I. Wasserman
QCP
1/4/05
Patrick S. Hamilton
QJI
1/3/05
Jacques F. Fernandes
QCP
1/5/05
Patrick S. Hamilton
QTS
1/3/05
Neal P. Fowler
QCP
1/5/05
Adam C. Metzger
QJI
1/3/05
Robert R. Groves
QCP
1/5/05
Adam C. Metzger
QTS
1/3/05
Steven Sowinski
QCP
1/5/05
Robert E. Ariss
QTS
1/3/05
Christopher T. Steiner
QCP
1/5/05
John B. McGuinness
QOX
1/4/05
Terminated Participants Acronym
Termination Date
John P. Reilly Jr.
QDR
1/4/05
Joseph A. Mareno
QAM
12/30/04
CHANGES IN MEMBERSHIP STATUS
Joseph A. Mareno
QFW
12/30/04
Individual Members
Joseph A. Mareno
QFY
12/30/04
Joseph A. Mareno
QJP
12/30/04
Joseph A. Mareno
QRQ
12/30/04
Richard J. Halloran
1/3/05
From:
CBT Registered For Halloran Trading LLC; Market
Maker
To:
CBT Registered For Cutler Group, LP; Market Maker
Joseph A. Mareno
QSC
12/30/04
Joseph Pondelicek
QKS
1/3/05
Yaron Kim
QDH
1/3/05
Yaron Kim
QOS
1/3/05
Brent L. Burden
QSJ
1/3/05
Michael B. Frazin
QBJ
1/3/05
Michael B. Frazin
QBL
1/3/05
Michael B. Frazin
QBN
1/3/05
Michael B. Frazin
QBV
1/3/05
Michael B. Frazin
QBX
1/3/05
Michael B. Frazin
QET
1/3/05
Michael B. Frazin
QLX
1/3/05
Michael B. Frazin
QUZ
1/3/05
Michael B. Frazin
QYX
1/3/05
Kathryn A. Ryan
QKR
1/3/05
Kathryn A. Ryan
QSD
1/3/05
Effective Date
William C. Carlson
1/3/05
From:
Nominee For Harrison Trading Group, LLC; Market
Maker
To:
Nominee For Belvedere Trading, LLC; Market Maker/
Floor Broker
Christopher A. Lake
1/3/05
From:
Nominee For Saen Options USA Inc.; Market Maker
To:
CBT Registered For Saen Options USA Inc.; Market
Maker
Simon Eric Amich
1/3/05
From:
Nominee For Harrison Trading Group, LLC; Market
Maker
To:
Nominee For Belvedere Trading, LLC; Market Maker/
Floor Broker
Owen T. O’Neill
1/3/05
From:
Nominee For Harrison Trading Group, LLC; Market
Maker
To:
Nominee For Belvedere Trading, LLC; Market Maker/
Floor Broker
Christopher T. Steiner
1/3/05
From:
Nominee For Consolidated Trading, LLC; Market Maker
To:
CBT Registered For Consolidated Trading, LLC; Market
Maker
Michael J. Grimes
1/3/05
From:
Nominee For Harrison Trading Group, LLC; Market
Maker
To:
Nominee For Belvedere Trading, LLC; Market Maker/
Floor Broker
Page 6
January 7, 2005
Volume 33, Number 1
Chicago Board Options Exchange
Effective Date
Patrick S. Hamilton
1/3/05
From:
Nominee For Van der Moolen Options USA LLC;
Market Maker/ Floor Broker
To:
Nominee For BBS Partners LLC; Market Maker
Thomas E. Hutchinson Jr.
1/3/05
From:
Nominee For Harrison Trading Group, LLC; Market
Maker
To:
Nominee For Belvedere Trading, LLC; Market Maker/
Floor Broker
Paul C. Hennessy
1/3/05
From:
CBT Registered For Fimat USA, Inc.; Floor Broker
To:
CBT Registered For Fimat USA LLC; Floor Broker
Juhee A. Eun
1/3/05
From:
Nominee For Harrison Trading Group, LLC; Market
Maker
To:
Nominee For Belvedere Trading, LLC; Market Maker/
Floor Broker
Scott C. England
1/5/05
From:
CBT Registered For Ronin Capital, LLC; Market Maker
To:
CBT Registered For Northern Access LLC; Market
Maker
Member Organizations
Effective Date
Northern Access LLC
1/5/05
From:
Lessee; Associated with a Market Maker
To:
Lessee/ Member Organization Affiliated with a CBT
Registered For; Associated with a Market Maker
Effective Date
Van Der Moolen Options USA, LLC
12/30/04
From:
Lessee/Owner/ Member Organization Affiliated with a
CBT Registered For; Associated with a Market Maker /
Floor Broker
To:
Lessee/ Member Organization Affiliated with a CBT
Registered For; Associated with a Market; Associated
with a Market Maker/Floor Broker
MEMBER ADDRESS CHANGES
Individual Members
Effective Date
John T. Lundy
119 S. Columbia St.
Naperville, IL 60540
12/30/04
Rickie R. Lockwood
13645 North Mesquite Lane
Fountain Hills, AZ 85268
12/30/04
Milan Radjenovich
440 S. LaSalle - Ste. 2118
Chicago, IL 60605
1/3/05
Anthony S. Panzeca
900 Forestview Ave.
Park Ridge, IL 60068
1/4/05
James P. Walsh
9731 S. Homan
Evergreen Park, IL 60805
1/4/05
Harvey Silverman
791 Park Ave., Apt. 5-B
New York, NY 10021
1/5/05
RESEARCH CIRCULARS
The following Research Circulars were distributed between December 30 and January 6, 2004. If you wish to read the entire document, please
refer to the CBOE website at www.cboe.com and click on the “Trading Tools” Tab. New listings and series information is also available in the
Trading Tools section of the website. For questions regarding information discussed in a Research Circular, please call The Options Clearing
Corporation at 1-888-OPTIONS.
Research Circular #RS04-723
December 30, 2004
Aventis ADS (“AVE”) Merger
with Sanofi-Synthelabo ADS (“SNY/WFK/OYC”)
to be Automatically Effective After the
Close of Business on December 31, 2004
Research Circular #RS04-724
December 31, 2004
Cameco Corporation (“CCJ”)
3?for?1 Stock Split
Ex-Distribution Date: January 7, 2005
Research Circular #RS04-725
December 31, 2004
*****UPDATE*****UPDATE*****UPDATE*****
PTEK Holdings, Inc. (“PTEK/QTE”)
Name, Stock and Option Symbol Change to
Premiere Global Services, Inc. (“PGI”)
Effective Date: January 3, 2005
Research Circular #RS04-726
December 31, 2004
Napster, Inc. (“ROXI/RXU”)
Underlying Symbol Change to “NAPS”
Effective Date: January 3, 2005
Research Circular #RS05-003
January 4, 2005
M.D.C. Holdings, Inc. (“MDC”)
30% Stock Dividend
Ex-Distribution Date: January 11, 2005
Research Circular #RS05-004
January 4, 2005
Telecomunicacoes Brasileiras S.A.-Telebras
ADS (“TBH & adj. TBW/THJ”)
Determination of Cash-in-Lieu Amount
Research Circular #RS05-005
January 4, 2005
Wireless HOLDRs Trust (“WMH & adj. HTW/WDW”)
Determination of Cash-in-Lieu Amount
Research Circular #RS05-007
January 5, 2005
PeopleSoft, Inc. (“PSFT/PQO/WOZ/VOP”)
Tender Offer FURTHER EXTENDED by Pepper Acquisition
Corp.
Research Circular #RS05-008
January 5, 2005
Argosy Gaming Company (“AGY”) Proposed Merger
with Penn National Gaming, Inc. (“PENN”)
Research Circular #RS05-010
January 6, 2005
Stelmar Shipping Ltd. (“SJH”) Proposed Merger
with Overseas Shipholding Group, Inc. (“OSG”)
January 12, 2005
Regulatory
Bulletin
Volume RB16, Number 2
The Constitution and Rules of the Chicago Board Options Exchange, Incorporated
(“Exchange”), in certain specific instances, require the Exchange to provide notice to the membership. The weekly Regulatory Bulletin is delivered to all effective members to satisfy this
requirement.
Copyright © 2004 Chicago Board Options Exchange, Incorporated
Regulatory
Circulars
Regulatory Circular RG04-131
Date:
December 31, 2004
To:
The Membership
From:
Financial Planning Committee
Subject:
Fee Changes Effective January 1, 2005
The Financial Planning Committee recommended and the Board of Directors recently approved the following fee changes, including a new Communication Review Fee. The fee
changes will be effective January 1, 2005.
1.
Order Routing System (ORS) Order Cancellation Fee – Previously,
CBOE’s policy was to assess an executing clearing firm $1 per cancelled
ORS order if the number of cancelled ORS orders exceeded the number of
executed ORS orders in the same month. The fee assessment methodology has been revised to only assess the cancel fee to each ORS order
cancellation in excess of the total number of ORS orders executed. Similar to the previous policy, the cancel fee will not be assessed if less than
500 orders are cancelled in a month.
2.
Customer Large Trade Discount Program - This program caps the quantity of customer contracts that are assessed transaction fees. This program has operated as a pilot that was scheduled to end December 31,
2004. The program has been made permanent, with an enhancement for
Dow Jones products. The contract volume fee cap for Dow Jones products will be lowered to 5,000 from 7,500 contracts. Details of the program
are as follows:
Regular customer transaction fees are only charged up to the following
quantity of contracts per order, for options based on the following underlying indexes:
•
•
S&P 500 and Dow Jones indexes (including Diamonds)
– charged for the first 5,000 contracts
S&P 100 (including XEO & OEF), NDX & other indexes
– charged for the first 3,000 contracts
MNX is not included in the program since MNX customer fees were significantly reduced to $.20 per contract (including a $.05 trade match fee) in
June 2002. Floor brokerage fees are not subject to the cap on fees.
Regulatory Circulars
continued
Regulatory Circular RG04-131 continued
3.
Indexes and DPMs Floor Broker Workstation (FBW) Fee – CBOE will
soon be incurring significant capital expenditures in support of the rollout
of FBWs to its index options products. The FBWs will help CBOE members comply with the SEC mandated Consolidated Options Audit Trail
System (COATS) requirements.
To partially recover the Exchange’s costs, a $100 fee per month per login
ID will be assessed for FBWs used in index option trading crowds and by
DPMs. CBOE currently assesses $100 per month for the FBW application in booths that already utilize an ILX or TNT device.
4.
Regulatory Fees:
a.
Annual FOCUS Report Filing Fee – Previously, annual FOCUS report filing fees were $100 for a paper filing and $25 for an
electronic filing. The vast majority of reports are filed electronically. The annual filing fee has been increased to $150 for a
paper filing and $50 for an electronic filing.
b.
Communication (advertising) Review Fee - CBOE’s Department of Financial and Sales Practice Compliance (DFSPC) reviews member options-related advertisements, educational
material and sales literature for compliance with applicable rules
of the CBOE, SEC and the Securities Investor Protection Corporation. CBOE will initiate a fee for this service as follows:
i.
ii.
Regular review – 1) for printed material reviewed, $75
per submission, plus $10 for each page reviewed in
excess of 10 pages; and 2) for video and audio media
reviewed, $75 per submission, plus $10 per minute for
each minute of tape reviewed in excess of 10 minutes.
Expedited review – 1) for printed material reviewed, $500
per submission, plus $25 for each page reviewed in
excess of 10 pages; and 2) for video and audio media
reviewed, $500 per submission, plus $25 per minute for
each minute of tape reviewed in excess of 10 minutes.
Expedited review will be completed within three business days,
not including the date the item is received by DFSPC, unless a
shorter or longer period is agreed to by DFSPC. DFSPC may, in
its sole discretion, refuse requests for expedited review.
Similar to other Exchange fees, this fee will be assessed and
collected via a member’s clearing firm.
•
Minimum Monthly Designated Examining Authority (DEA)
Fee - Firms and DPMs that are subject to the SEC Net Capital
Rule and for which the Exchange is the DEA are currently assessed $.40 per $1,000 of gross revenue as reported on the
firm’s FOCUS report (excluding commodity commission revenue).
This fee is subject to monthly minimum fees for clearing firms
and non-clearing member firms. The monthly minimum fee for
non-clearing member firms has been increased by $25 to $275.
The monthly minimum fee for clearing firms is unchanged at
$1,000.
Please contact Ermer Love at 312-786-7032 (lovee@cboe.com) or Don Patton at 312-7867026 (patton@cboe.com) if you have any questions.
RB2
January 12, 2005, Volume RB16, Number 2
Regulatory Circulars
continued
Regulatory Circular RG04-132
(RG03-110 Revised)
To:
Members and Member Firms
From: Research & Planning
Date:
December 30, 2004
Re:
Monthly “Fair Value” Settlement of CME Stock Index Futures and Options and
Year End Closing Rotations.
The Chicago Mercantile Exchange (CME) conducts a special “fair value”1 settlement procedure for domestic stock index futures and options on the last business day of each month.
On these days, the CME calculates the daily settlement price for its domestic stock index
futures and options contracts on the basis of their fair value relative to the daily close of the
underlying cash index as reflected at 3:15 p.m. (Chicago time).
CBOE conducts special “closing rotations” on the days in which special settlement procedures are employed at the CME in order to allow the Exchange’s domestic broad-based
index options to be valued on the same “fair value” basis as related index futures. Accordingly, on December 31, 2004, CBOE shall conduct special closing rotations in the following
options contracts:
S&P 500 Index (SPX)
S&P 100 Index (OEX)
S&P 100 Index (XEO)
Nasdaq-100 Index (NDX)
Mini-NDX Index (MNX)
Russell 2000 Index (RUT)
S&P SmallCap Index (SML)
Special closing rotations are held for the sole purpose of determining theoretical fair values
for these option contracts. No orders, including orders resting in the Exchange’s limit
order book, are allowed to trade during these special closing rotations.
Please be advised that there will be no end of year trading closing rotation in these
option contracts.
Please Note: No special closing rotation will be conducted in the following classes.
Nasdaq-100 Tracking Stock (QQQQ)
Dow Jones Industrial Average Index (DJX)
iShares S&P 100 Index Fund (OEF)
DIAMONDS Trust (DIA)
Also, please be aware that pursuant to Exchange Rule 11.1, as the close of trading for OEX
options will be 3:15 p.m. (CT) on December 31, 2004, “exercise advices” must be submitted
to the Exchange no later than 3:20 p.m. (CT).
“Fair value” of futures represents the price at which futures should theoretically trade in relation to cash
index values in the absence of transaction costs. It is typically calculated as a function of the underlying
index value plus the financing cost of owning the underlying stock portfolio, less dividends paid up to the
futures expiration.
1
January 12, 2005, Volume RB16, Number 2
RB3
Regulatory Circulars
continued
Regulatory Circular RG04-132 continued
Equity Year End Closing Rotation on December 31, 2004
Pursuant to Rule 6.2, Interpretation .05, a closing rotation will be held in all equity and
narrow-based index option classes on Friday, December 31, 2004.
The only orders that may participate in the closing rotation are those orders that are received prior to the normal close of the trading day, i.e. 3:02 p.m. CST for equity and narrowbased index options. However, for equity options, the rotation may commence at or after
the 3:02 p.m. CST close once the closing price of the stock in its primary market has been
established.
Questions concerning the above may be directed to a member of the Floor Officials Committee, Kerry Winters 786-7312 or Rich Pedraza (312) 786-7077.
Regulatory Circular RG05-01
Date:
January 3, 2005
To:
The Membership
From:
Office of the Chairman
Subject:
Fee Reductions for January 2005
CBOE averaged approximately 1,410,000 contracts per day (CPD) during the period July
through December 2004.
Per the Prospective Fee Reduction Program, Market-Maker and DPM transaction fees
and floor brokerage fees will be reduced by 15% per contract from standard rates during
January 2005.
Fee
Standard
Rate
Equities Market-Maker Trans. Fee
Equities DPM Trans. Fee
QQQ & Indexes Market-Maker/DPM Trans. Fee (1)
Floor Brokerage Fee
22 cents
12 cents
24 cents
4 cents
Jan. ‘05
Rate
18.7 cents
10.2 cents
(1) 20.4 cents
3.4 cents
(1) Above rates exclude a license fee surcharge for the following products:
•
Dow Jones indexes – 10 cents
•
Russell 2000 (RUT) cash settled index – 40 cents
•
MNX – 10 cents
Please call Ermer Love (312-786-7032) or Don Patton (312-786-7026) if you have any
questions.
RB4
January 12, 2005, Volume RB16, Number 2
Regulatory Circular RG05-02
(supersedes Regulatory Circular RG04-105)
INTER-EXCHANGE PROCEDURES IN VOLATILE MARKETS
FOR FIRST QUARTER 2005
As of January 1, 2005
CME (S&P 500® FUTURES)
NYSE ACTION
CBOT (DJIASM FUTURES)
CBOE ACTION
60 POINTS (5%) BELOW
PREVIOUS DAY’S SETTLEMENT
Limit comes into effect: On CME opening
(8:30 a.m.)
Trading halt: For 2 minutes if the offer is at
limit 10 minutes after limit is reached or at
2:30 p.m.
Limit no longer in effect: After the
2 minute halt or, if no halt, 10 minutes after
the limit is reached or otherwise at 2:30 p.m.
120 POINTS (10%) BELOW
PREVIOUS DAY’S SETTLEMENT
Under Normal Limits
Limit comes into effect: After the 60 point
(5%) limit or at 2:30 p.m.
Trading halts: Trading will halt for the following time periods if the futures contract
is limit offered under the following
circumstances:
During an NYSE trading halt: Until
NYSE ends its trading halt and 50% of
the underlying stocks (capitalization
weighted) have resumed trading.
When the DJIA advances (or declines)
200 points from the previous day's
close: Index arbitrage orders for S&P 500®
component stocks must be entered with
buy-minus (or sell-plus) instruction until the
advance or decline returns to within 100
points from previous day's close.
None required.
Except on the last business day before
their expiration, CBOE normally will restrict
exercise of American style, cash settled
index options during any trading halt
that occurs prior to 3:00 p.m. CBOE may
restrict exercise in equity options (other
than during the 10 business days before
their expiration), but it normally will not do
so because of trading halts.
Discretionary actions include trading halts
in individual stocks.
1050 DJIA POINTS (10%)
BELOW PREVIOUS DAY'S
CLOSING VALUE
Trading halts: Trading in all stocks halts
for the following time periods when the
DJIA reaches this value at the following
times:
Before 1:00 p.m.: for one hour;
From 1:00 p.m. but before 1:30 p.m.:
for 30 minutes;
From and after 1:30 p.m.:
no mandated trading halt
None required because of CME or CBOT
limit or NYSE actions; discretionary actions
include trading halts and suspensions.
1050 POINTS (10%) BELOW
PREVIOUS DAY'S
SETTLEMENT
Limit comes into effect: On CBOT opening (7:20 a.m.).
Trading halt: If the futures contract is
limit offered during an NYSE trading halt,
futures trading will halt until NYSE ends
its trading halt and 50% of the underlying stocks (capitalization weighted) have
resumed trading.
Limit no longer in effect: After futures
trading has resumed following an NYSE
trading halt or at 1:30 p.m.
Because CME or CBOT limit is reached:
None required; discretionary actions
include trading halts and suspensions (with
the exercise restrictions described above).
Because NYSE declares floor-wide
circuit breaker halt: Trading in all CBOE
securities halted during NYSE circuit
breaker halt (with the exercise
restrictions described above).
After 1:30 p.m., if no NYSE trading
halt is declared: For 2 minutes if the
contract is limit offered 10 minutes after
the limit is reached.
Limit no longer in effect: After a mandated
futures trading halt.
******
Under Second Day Limits (those applicable on a day after the futures contract
was limit offered at the 240 point (20%)
level at the close of trading).
Limit comes into effect: After the 60 point
(5%) limit, unless there is an NYSE trading
halt, in which case only the 20% limit applies
upon reopening.
Trading halts:
During an NYSE trading halt
(regardless whether the futures contract is limit offered): Until NYSE ends
its trading halt and 50% of the underlying
stocks (capitalization
weighted) have resumed trading.
If no NYSE trading halt is declared:
For 2 minutes if the contract is limit
offered 10 minutes after the limit is
reached or at 2:30 p.m.
Limit no longer in effect: After a mandated
futures trading halt or, if no halt, 10 minutes
after the limit is reached or otherwise at 2:30
p.m.
(OVER)
This information has been compiled by CBOE for general information purposes only, an�
the discretion of exchange officials. The rules of the various exchanges are subject to change and may not be reflected in this information. CBOE assumes no responsibility for any errors or omissions in the information
presented. In addition, this circular does not address specialized circumstances, such�
than normal or the rules applicable to Chapter 30 securities. These specialized matters are covered in detail by exchange rules. All times listed are Central times.
“S&P” and “S&P 500” are trademarks of Mc-Graw Hill, Inc., and "DJIA" is a service mark of Dow Jones & Company, Inc., and neither company assumes any liability in connection with the trading of any contract based
on its indexes.
(Date of issuance: January 4, 2005)
INTER-EXCHANGE PROCEDURES IN VOLATILE MARKETS
(continued)
CME (S&P 500 FUTURES)
180 POINTS (15%)
BELOW PREVIOUS DAY'S
CLOSING VALUE
Under Normal Limits
NYSE ACTION
CBOT (DJIA FUTURES)
Regulatory Circular RG05-02
As of 1/1/05
CBOE ACTION
None required; discretionary actions
include trading halts and suspensions
(with the exercise restrictions described
above).
None required; discretionary actions include trading halts in individual stocks.
Limit comes into effect: After the 120
point (10%) limit.
Trading halts: For 2 minutes if the
contract is at limit 10 minutes after limit is
reached.
Limit no longer in effect: After any such
2 minute halt.
******
Under Second Day Limits
Limit comes into effect: After the 120
point (10%) limit, unless there is an NYSE
trading halt, in which case only the 20%
limit applies upon reopening.
Trading halts:
During an NYSE trading halt
(regardless whether the futures
contract is limit offered): Until NYSE
ends its trading halt and 50% of the
underlying stocks (capitalization
weighted) have resumed trading.
If no NYSE trading halt is declared:
For 2 minutes if the contract is limit
offered 10 minutes after the limit is
reached or at 2:30 p.m.
Limit no longer in effect: After a mandated futures trading halt or, if no halt,
10 minutes after the limit is reached or
otherwise at 2:30 p.m.
240 POINTS (20%) BELOW
PREVIOUS DAY'S
SETTLEMENT
Limit comes into effect: After the 180
point (15%) limit or, when Second Day
Limits are in effect, at 2:30 p.m. or after
trading resumes following an NYSE
trading halt.
Limit remains in effect for the remainder
of the trading day.
Trading halt:
2150 DJIA POINTS (20%)
BELOW PREVIOUS DAY'S
CLOSING VALUE
Trading halts: Trading in all stocks halts
for the following time periods when the
DJIA reaches this value at the following
times:
Before 12:00 p.m.: for two hours
From 12:00 p.m. but before 1:00
p.m.: for one hour
From and after 1:00 p.m.: for the
remainder of the day
(Normal Limits): If the futures
contract is limit offered during an
NYSE trading halt.
2150 POINTS (20%) BELOW
PREVIOUS DAY'S
SETTLEMENT
Limit comes into effect: After the 1050
point (10%) limit or at 1:30 p.m.
Trading halt: If the futures contract is
limit offered during an NYSE trading halt,
futures trading will halt until NYSE ends
its trading halt and 50% of the underlying stocks (capitalization weighted) have
resumed trading.
Limit no longer in effect: After futures
trading has resumed following an NYSE
trading halt.
Because CME or CBOT limit is
reached: None required; discretionary
actions include trading halts and suspensions (with the exercise restrictions
described above).
Because NYSE declares a floor wide
circuit breaker halt: Trading in all
CBOE securities halted during NYSE
circuit breaker halt (with the exercise
restrictions described above).
(Second Day Limits): If there is an
NYSE trading halt, regardless whether
the futures contract is limit offered.
Trading will resume when NYSE ends
its trading halt and 50% of the underlying stocks (capitalization weighted) have
resumed trading.
Settlement value will not be less than the
limit value, regardless of the value of the
cash index.
3200 DJIA POINTS (30%)
BELOW PREVIOUS DAY'S
CLOSING VALUE
The 240 point (20%) limit remains in
effect.
Settlement value will not be less than the
limit value, regardless of the value of the
cash index.
Trading halts and does not reopen for the
day.
3200 POINTS (30%)
BELOW PREVIOUS DAY'S
SETTLEMENT
Limit comes into effect: After the 2150
point (20%) limit.
Limit remains in effect for the remainder of
the trading day.
Trading halt: Trading shall halt for the rest
of the day if the futures contract is limit
offered at any time during the trading day
and the NYSE declares a trading halt for
the rest of the trading day.
If NYSE declares floor wide trading
halt for the remainder of the day:
CBOE halts trading for the remainder
of the day (with the exercise restrictions
described above).
Because CBOT limit is reached: None
required; discretionary actions include
trading halts and suspensions (with the
exercise restrictions described above).
For more information, call 1-888-OPTIONS or visit our Web site at www.cboe.com
Regulatory Circulars
continued
Regulatory Circular RG05-03
IMPORTANT MEMORANDUM
To:
All Exchange Members
From:
Department of Financial
and Sales Practice Compliance
Date:
January 5, 2005
Subject:
FOCUS REPORT (Form X-17A-5)
2004 Year-End Filing
Due March 1, 2005
EXCHANGE
Colleen Gilmartin (312) 786-7049
CONTACT:
Kelly Noonan (312) 786-7728
Under SEC Rule 17a-10(a)(1) every registered broker-dealer is required to file FOCUS
Report X-17A-5 Part IIA (CBOE) and Schedule I for the calendar year ended December 31,
2004.
Enclosed you will find a FOCUS Report Part IIA (CBOE) and Schedule I. Every Exchange
member and member organization registered with the SEC as a broker-dealer and whose
designated examining authority is the CBOE, must file a FOCUS Report Part IIA (CBOE)
and Schedule I thereto for calendar year 2004 no later than March 1, 2005, with the
Exchange’s Department of Financial and Sales Practice Compliance.
The CBOE will compile the data and forward a computer file containing the data for all
members to the Securities and Exchange Commission.
In an effort to reduce processing time and errors in the preparation of FOCUS filings, the
CBOE has entered into an agreement with the Chicago Board of Trade, Chicago Mercantile
Exchange, Inc., and the National Futures Association to utilize WinJammer, an electronic
FOCUS filing system. CBOE members are required to use WinJammer, which provides for
the direct electronic submission of FOCUS reports to the CBOE. This program eliminates
the need for a paper copy filing. WinJammer is a personal computer program, which
requires the installation of WinJammer software and a Personal Identification Number
diskette (“PIN” disk). The PIN disk will be provided by the CBOE upon the member’s
completion of the WinJammer Software License Agreement and PIN Agreement (enclosed).
The Department must receive all license agreements, no later than February 18, 2005 in
order to ensure you will receive the PIN in time to meet the March 1, 2005 deadline. To
obtain the software, go to the website at www.wjammer.com, click on the “download” tab at
the top of the page and download the Main WinJammer Program Version 4.0.7. You will
also need to download FOCUS Report IIA (CBOE) Version 1.2 and FOCUS Report Schedule I Version 1.1, if you have not previously filed a FOCUS report. You may click on the
“documentation” tab to download the WinJammer instructions. If you have any questions
regarding WinJammer, and/or would like to request the WinJammer PIN disk, please contact Colleen Gilmartin at (312) 786-7049 or Kelly Noonan (312) 786-7728 with the Department of Financial and Sales Practice Compliance on the 23rd floor of 111 W. Jackson.
*************
January 12, 2005, Volume RB16, Number 2
RB7
Regulatory Circulars
continued
Regulatory Circular RG05-03 continued
WinJammer Version 4.0.7 System Requirements:
In order to run WinJammer 4.0.7 you must be running Windows 95, Windows 98, Windows
2000, Windows NT, or Windows XP.
It is highly recommended that you use at least a Pentium-Class computer with Internet
Explorer with 32 MB of RAM and 130 MB of free disk space. Specific instructions are
listed in the Quick Start Guide or the Internet Transmission instructions, which are provided with the WinJammer software.
In order to obtain a WinJammer PIN number and disk, please contact Colleen Gilmartin at
(312) 786-7049 or Kelly Noonan at (312) 786-7728 with the Department of Financial and
Sales Practice Compliance on the 23rd Floor of 111 W. Jackson. For technical questions
related to WinJammer’s installation and use, please contact the CBOE Systems Help
Desk at (312) 786-8835.
*************
Filing Fees:
Please note that the filing fees for the 2004 FOCUS filing have increased. On December 9,
2004, the Board of Directors approved a rule to raise the FOCUS filing fee to fifty-dollars
($50) for electronically filed FOCUS Reports to partially recover FOCUS report processing
costs. In addition, the Board of Directors also approved an increase to the filing fee for
those CBOE Market-Makers who make their annual FOCUS filing by hard copy to one
hundred and fifty dollars ($150). The Exchange has provided members the opportunity to
file their FOCUS reports electronically through the WinJammer system.
If the FOCUS is filed electronically no later than March 1, 2005, your account at your
clearing firm will be charged $50. If the FOCUS is filed in paper form no later than March
1, 2005, your account at your clearing firm will be charged $150. If you do not have an
active clearing firm account, please submit a check, including your broker dealer number,
made payable to the CBOE, to the Department of Financial and Sales Practice Compliance, located at 400 S. LaSalle, Chicago, IL 60605, no later than March 1, 2005.
*************
Filing Requirements:
It should be noted that every member and member organization registered with the SEC
as a broker/dealer for which the Exchange has regulatory responsibility must file a FOCUS Report Form X-17A-5 Part IIA (CBOE) and Schedule I. Therefore, if you are a
nominee and a registered broker/dealer, you must submit a separate FOCUS Report Form
X-17A-5 Part IIA (CBOE) and Schedule I for your personal broker-dealer activity. Your
member organization must also submit these reports for the firm’s activities. In addition, if
you terminated your broker/dealer registration during 2004 and did not already submit a
terminating FOCUS to the Department of Financial and Sales Practice Compliance, you
are required to file it by March 1, 2005.
ATTENTION: CBT Exercisers and Lessors
Even if you did not execute any trades on the CBOE during calendar year 2004, if you
have a broker/dealer registration with the SEC, you are still required to file the FOCUS
Report Form X-17A-5 Part IIA (CBOE) and Schedule I.
RB8
January 12, 2005, Volume RB16, Number 2
Regulatory Circulars
continued
Regulatory Circular RG05-03 continued
Please Note:
In filling out FOCUS Report Form X-17A-5 and Schedule I, it is very important that the
following points be observed:
1.
Your filing must be accurate. You may wish to consult your accountant for
assistance in satisfying your filing obligations.
2.
All entries should pertain to your business as a broker/dealer.You need not
list assets, liabilities or revenue derived outside your broker/dealer activity.
3.
Line 12 (Total Assets) on page one (1) must equal line 25 (Total Liabilities
and Ownership Equity) on page two (2).
4.
The form must be signed (unless filing electronically) and must contain
your broker/dealer number (SEC file number).
5.
Please be aware that it is your ultimate responsibility to file the FOCUS
Report. Although your clearing firm may provide assistance with regard to
completing the FOCUS Report, it is your responsibility to make sure your
FOCUS Report is filed with the Department of Financial and Sales Practice Compliance on or before March 1, 2005.
*************
Late Filing Fines:
In accordance with CBOE Rule 17.50(g)(2), any member who fails to file Form X-17A-5 and
Schedule I for calendar year 2004 by March 1, 2005 shall be subject to the following fines:
DAYS LATE
AMOUNT
1-30
31-60
61-90
$200
$400
$800
Repeated failure to file FOCUS Report Form X-17A-5 and Schedule I in a timely manner will
be referred to the Exchange’s Business Conduct Committee as will a failure to file more
than ninety (90) days late.
If you are unsure as to whether you are required to file or have any questions, please
contact Colleen Gilmartin at (312) 786-7049 or Kelly Noonan (312) 786-7728 with the Department of Financial and Sales Practice Compliance on the 23rd floor of 111 W. Jackson.
January 12, 2005, Volume RB16, Number 2
RB9
Regulatory Circulars
continued
Regulatory Circular RG05-04
To:
Members and Member Organizations
From: Legal Division
Date:
January 5, 2005
Re:
Amendment to CBOE Rule 6.8(d)(v) – RAES Trigger Functionality
On December 23, 2004, the Securities and Exchange Commission (“SEC”) approved amendments to Exchange Rule 6.8(d)(v), which relates to the “Trigger” functionality on RAES.
Under the approved rule change, incoming RAES orders submitted during the Trigger process would be eligible to execute against those book orders that are crossed or locked by
Autoquote. Specifically, if a balance remains on the book after the Trigger volume is
removed from the book, incoming RAES orders would remain eligible for execution against
the book order instead of routing to the PAR terminal for manual representation. The
proposed rule change does not change the existing process for incoming RAES orders
that are submitted prior to a locked or crossed market; these orders would continue to be
executed in accordance with the RAES procedures set forth in CBOE Rule 6.8 (i.e., if an
order in the Exchange’s book constitutes the best bid or offer on the Exchange, the incoming RAES order will generally execute against the order in the book). The appropriate Floor
Procedure Committee would implement this Trigger enhancement on a class-by-class
basis.
Questions regarding this Regulatory Circular may be directed to Anthony Montesano at
(312) 786-7365 or David Doherty at (312) 786-7466.
RB10
January 12, 2005, Volume RB16, Number 2
Rule Changes,
Interpretations
and Policies
APPROVED RULE CHANGES
The Securities and Exchange Commission (“SEC”) has approved the following change(s) to
Exchange Rules pursuant to Section 19(b) of the Securities Exchange Act of 1934, as
amended (“the Act”). Copies are available from the Legal Division.
The effective date of the rule change is the date of approval unless otherwise noted.
SR-CBOE-2004-81
Regulation SHO
On December 22, 2004, the SEC approved Rule Change File No. SR-CBOE-2004-81, which
filing amends Rule 30.20 to conform to the requirements of Regulation SHO (Securities
Exchange Act Release No. 50920, 69 FR 78068 (December 29, 2004)). Any questions
regarding the rule change may be directed to Rich Lewandowski, CBOE, at 312-786-7183.
The text of the amended rules is set forth below. New language is italicized.
Rule 30.20
“Long” and “Short” Sales
(a) No member or member organization shall accept, represent or execute for his or
its own account or the account of any other person an order to sell a security
subject to the rules in this Chapter unless such order is marked “long,” “short,” or
“short exempt” in accordance with Exchange Act Rule 242.200(g).
(b) No member or member organization shall for his or its own account or the
account of any other person effect on the Exchange any short sale of a security
that is subject to the rules in this Chapter unless such sale is (1) at a price higher
than the price at which the last sale thereof, regular way, was effected on the
Exchange, or (2) at such latest price and such price is above the last different price
at which a sale in the unit of trading of such security, regular way, was effected on
the Exchange; provided, however, that transactions exempted from paragraphs (a)
or (b) of Exchange Act Rule 10a-1 by paragraph (e) thereof, or by action of the
Securities and Exchange Commission pursuant to paragraph (f) thereof, any order
pursuant to Exchange Act Rule 242.202T or otherwise, are also exempted from the
requirements of this paragraph (b).
(c) No member or member organization shall accept, represent or execute for his or
its own account or the account of any other person an order to sell a security
subject to the rules in this Chapter unless such member or member organization
complies with Exchange Act Rule 242.203.
... Interpretations and Policies:
.01 Pursuant to the equalization exemption of paragraph (e)(5) of Exchange Act
Rule 10a-1, a Market-Maker is permitted to sell short for his own account on the
Exchange any security for which he has an appointment at a price equal to the last
regular way sale reported by the consolidated last sale reporting system.
The Exchange may disseminate an offer by a Market-Maker to sell at a price equal
to the last regular way sale reported by the consolidated last sale reporting system,
and a short sale may be effected by the Market-Maker responsible for such offering
without further regard to prices reported by such system.
The Exchange may, by rule, prohibit Market-Makers from availing themselves of
this exemption if it is determined that such action is necessary or appropriate in the
public interest or for the protection of investors.
.02 The terms “long,” “short,” “short exempt,” and “short sale” shall have the same
meaning as in Exchange Act Rule 242.200.
January 12, 2005, Volume RB16, Number 2
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.03 Reserved
.04 Under Exchange Act Rule 242.203(a)(1), no member that knows or has reasonable grounds to believe that the sale of a security subject to the rules in this Chapter was or will be effected pursuant to an order marked “long” shall lend or arrange
for the loan of any security for delivery to the purchaser’s broker after the sale, or
fail to deliver a security on the date delivery is due. Exchange Act Rule 242.203(a)(2)
contains exceptions from this requirement, including an exception in subsection
(a)(2)(ii) for the situation in which the member knows, or has been reasonably informed by the seller, that the seller owns the security, and that the seller would
deliver the security to the member or dealer prior to the scheduled settlement of the
transaction, but the seller failed to do so. To demonstrate reasonableness under
Exchange Act Rule 242.203(a)(2)(ii), the member or person associated with a member
must keep documentation which includes the present location of the securities in
question, whether they are in good deliverable form and the customer’s ability to
deliver them to the member by the settlement date if the customer assures delivery.
Under Exchange Act Rule 242.203(b)(1), no member may accept a short sale order
in an equity security from another person, or effect a short sale in an equity security
for its own account, unless the member: (i) has borrowed the security or entered
into a bona-fide arrangement to borrow the security and has documented compliance; or (ii) has reasonable grounds to believe that the security can be borrowed so
that it can be delivered on the date delivery is due and has documented compliance. Exchange Act Rule 242.203(b)(2) contains exceptions from this requirement, including an exception from its provisions in subsection (b)(2)(iii) for short
sales by Market-Makers so long as such short sales are in connection with bonafide market making activities. In the event that a short sale occurs pursuant to this
Interpretation .04, the burden is on the Market-Maker to show that such sale was in
furtherance of his bona-fide market making activities.
To ensure compliance under Exchange Act Rule 242.203(b)(1), the member or person associated with a member must provide documentation which includes: (1) if a
customer assures delivery, the present location of the securities in question, whether
they are in good deliverable form and the customer’s ability to deliver them to the
member by the settlement date; or (2) if the member or the person associated with
a member locates the stock, the identity of the individual and firm contacted who
offered assurance that the shares would be delivered or that were available for
borrowing by settlement date and the number of shares needed to cover the short
sale.
The manner by which a member or person associated with a member annotates
compliance with the record-keeping requirements in this Interpretation (e.g., marking an order ticket, recording inquiries in a log, etc.) shall be determined by each
member. Members may rely on an “easy to borrow” list that securities will be
available for borrowing on settlement date to satisfy their requirements in Exchange
Act Rule 242.203(b)(1)(ii) under this Interpretation, provided: (1) the information
used to generate the “easy to borrow” list is not more than 24-hours old; and (2) the
member delivers the security on settlement date. Should a member relying on an
“easy to borrow” list fail to deliver the security on settlement date, the Exchange
shall deem such conduct inconsistent with the terms of this Interpretation, absent
mitigating circumstances adequately documented by the member.
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.05 Exchange Act Rule 242.203(b)(3) restricts the ability of a member, including a
Market-Maker, to accept or effect short sales for its account or the account of a
customer in certain “threshold securities.” “Threshold securities” generally are defined as equity securities registered or subject to reporting requirements under the
Exchange Act: (1) for which there is an aggregate fail to deliver position for five
consecutive settlement days at a registered clearing agency of 10,000 shares or
more, and that is equal to at least 0.5% of the issue’s total shares outstanding; and
(2) are included on a list disseminated to its members by a self-regulatory organization.
Exchange Act Rule 242.203(b)(3) prohibits a member, including a Market-Maker
covered by the bona-fide market making exemption in Exchange Act Rule
242.203(b)(2)(iii), from accepting or effecting short sales in a threshold security that
has a fail to deliver position with a registered clearing agency for thirteen consecutive settlement days. However, a member of a registered clearing agency that has
the ability to trace a short sale in a threshold security for which there is a failure to
deliver to a particular account, and to age that failure to deliver, may limit the
application of this restriction to the account with the failure to deliver. This prohibition would not apply if: (1) the member borrows the security or enters into a bonafide arrangement to borrow the security; or (2) the requirements in the rule with
respect to closing out these fail to deliver positions are met. The rule also has a
limited exemption in subsection (b)(3)(ii) for registered options Market-Makers.
Members are expected to monitor which threshold securities have a fail to deliver
position with the member’s clearing firm for thirteen consecutive settlement days.
Registered clearing agency members must close out a fail to deliver position that
remains for thirteen consecutive settlement days by purchasing securities of like
kind and quantity. If a Market-Maker is able to borrow or enter into a bona-fide
arrangement to borrow these securities, the Market-Maker must keep a written
record which includes the identity of the individual and firm contacted who offered
assurance that the shares would be delivered or that were available for borrowing
and the number of shares needed to cover the short sale.
.06 Even if a security is excepted from any short sale price test under any Pilot
program (or any order issued pursuant to Exchange Act Rule 242.202T), members
or member organizations must still comply with the marking and locate requirements in Exchange Act Rules 242.200 and 203.
SR-CBOE-2004-83
Obvious Error Rules for Equities and Indexes
On December 17, 2004, the SEC approved Rule Change File No. SR-CBOE-2004-83, which
filing amends CBOE’s obvious error rule to create separate rules for equities and indexes
(including options on ETFs). This filing replaces SR-CBOE-2004-70. (Securities Exchange
Act Release No. 50880, 69 FR 77790 (December 28, 2004)). Any questions regarding the
rule change may be directed to Steve Youhn, Legal Division, at 312-786-7416. The text of
the amended rules is set forth below. New language is italicized.
Rule 6.25
Nullification and Adjustment of Equity Options Transactions
This Rule governs the nullification and adjustment of transactions involving equity
options. Rule 24.16 governs the nullification and adjustment of transactions involving index options and options on ETFs and HOLDRs. Paragraphs (a)(1), and (2) of
this Rule have no applicability to trades executed in open outcry.
January 12, 2005, Volume RB16, Number 2
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(a) Trades Subject to Review
A member or person associated with a member may have a trade adjusted or
nullified if, in addition to satisfying the procedural requirements of paragraph (b)
below, one of the following conditions is satisfied:
(1) Obvious Price Error: An obvious pricing error occurs when the execution price
of an electronic transaction is above or below the Theoretical Price for the series by
an amount equal to at least the amount shown below:
Theoretical Price
Below $2
$2 to $5
Above $5 to $10
Above $10 to $20
Above $20
Minimum Amount
$0.25
$0.40
$0.50
$0.80
$1.00
Definition of Theoretical Price. For purposes of this Rule only, the Theoretical
Price of an option series is, for series traded on at least one other options exchange, the last bid price with respect to an erroneous sell transaction and the last
offer price with respect to an erroneous buy transaction, just prior to the trade,
disseminated by the competing options exchange that has the most liquidity in that
option class in the previous two calendar months. If there are no quotes for comparison, designated Trading Officials will determine the Theoretical Price. For transactions occurring as part of the Rapid Opening System (“ROS trades”) or Hybrid
Opening System (“HOSS”), Theoretical Price shall be the first quote after the
transaction(s) in question that does not reflect the erroneous transaction(s).
Price Adjustment or Nullification: Obvious Pricing Errors will be adjusted or nullified in accordance with the following:
Transactions Between CBOE Market-Makers: Where both parties to the transaction are CBOE Market-Makers, the execution price of the transaction will be adjusted by Trading Officials to the prices provided in Paragraphs (A) and (B) below,
minus (plus) an adjustment penalty (“adjustment penalty”), unless both parties agree
to adjust the transaction to a different price or agree to bust the trade within fifteen
(15) minutes of being notified by Trading Officials of the Obvious Error.
A. Erroneous buy transactions will be adjusted to their Theoretical Price
plus an adjustment penalty of either $.15 if the Theoretical Price is under
$3 or $.30 if the Theoretical Price is at or above $3.
B. Erroneous sell transactions will be adjusted to their Theoretical Price
minus an adjustment penalty of either $.15 if the Theoretical Price is under
$3 or $.30 if the Theoretical Price is at or above $3.
Transactions Involving at least one non-CBOE Market-Maker: Where one of the
parties to the transaction is not a CBOE Market-Maker, the transactions will be
nullified by Trading Officials unless both parties agree to an adjustment price for the
transaction within thirty (30) minutes of being notified by Trading Officials of the
Obvious Error.
(2) No Bid Series: Electronic transactions in series quoted no bid at a nickel (i.e.,
$0.05 offer) will be nullified provided at least one strike price below (for calls) or
above (for puts) in the same options class was quoted no bid at a nickel at the time
of execution.
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(3) Verifiable Disruptions or Malfunctions of Exchange Systems: Electronic
or open outcry transactions arising out of a “verifiable disruption or malfunction” in
the use or operation of any Exchange automated quotation, dissemination, execution, or communication system will either be nullified or adjusted by Trading
Officials. Transactions that qualify for price adjustment will be adjusted to Theoretical Price, as defined in paragraph (a)(1) above.
(4) Erroneous Print in Underlying: A trade resulting from an erroneous print
disseminated by the underlying market which is later cancelled or corrected by
that underlying market may be nullified. In order to be nullified, however, the trade
must be the result of an erroneous print that is higher or lower than the average
trade in the underlying security during a two-minute period before and after the
erroneous print by an amount at least five times greater than the average quote
width for such underlying security during the same period.
For purposes of this Rule, the average trade in the underlying security shall be
determined by adding the prices of each trade during the four minute time period
referenced above (excluding the trade in question) and dividing by the number of
trades during such time period (excluding the trade in question). For purposes of
this Rule, the average quote width shall be determined by adding the quote widths
of each separate quote during the four minute time period referenced above (excluding the quote in question) and dividing by the number of quotes during such
time period (excluding the quote in question).
(b) Procedures for Reviewing Transactions
(1) Notification: Any member or person associated with a member that believes
it participated in a transaction that may be adjusted or nullified in accordance with
paragraph (a) must notify any Trading Official promptly but not later than fifteen
(15) minutes after the execution in question. Absent unusual circumstances,
Trading Officials shall not grant relief under this Rule unless notification is made
within the prescribed time periods.
In the absence of unusual circumstances, Trading Officials (either on their own
motion or upon request of a member) must initiate action pursuant to paragraph
(a)(3) above within sixty (60) minutes of the occurrence of the verifiable disruption
or malfunction. When Trading Officials take action pursuant to paragraph (a)(3),
the members involved in the transaction(s) shall receive verbal notification as
soon as is practicable.
(2) Review and Determination: Once a party to a transaction has applied to a
Trading Official for review, the transaction shall be reviewed and a determination
rendered, unless both parties to the transaction agree to withdraw the application
for review prior to the time a decision is rendered.
Absent unusual circumstances (e.g., a large number of disputed transactions
arising out of the same incident), Trading Officials must render a determination
within sixty (60) minutes of receiving notification pursuant to paragraph (b)(1)
above. Trading Officials shall promptly provide verbal notification of a determination to the members involved in the disputed transaction and to the control room.
(c) Obvious Error Panel
January 12, 2005, Volume RB16, Number 2
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(i) Composition. An Obvious Error Panel will be comprised of at least one (1)
Trading Floor Liaison (TFL) and four (4) Exchange members. Fifty percent of the
number of Exchange members on the Obvious Error Panel must be directly engaged in market making activity and fifty percent of the number of Exchange members on the Obvious Error Panel must act in the capacity of a non-DPM floor broker.
The Exchange members shall be representatives from any of the following Committees: Equity Options Procedure Committee, Equity Market Performance Committee, and Floor Officials Committee.
(ii) Scope of Review. If a party affected by a determination made under this Rule
so requests within the time permitted in paragraph (b), an Obvious Error Panel will
review decisions made by the Trading Officials under this Rule, including whether
an obvious error occurred, whether the correct Theoretical Price was used, and
whether the correct adjustment was made at the correct price. A party may also
request that the Obvious Error Panel provide relief as required in this Rule in cases
where the party failed to provide the notification required in paragraph (b) and the
Trading Officials declined to grant an extension, but unusual circumstances must
merit special consideration.
(iii) Procedure for Requesting Review. A request for review must be made in
writing within thirty (30) minutes after a party receives verbal notification of a final
determination by the Trading Officials under this Rule, except that if notification is
made after 2:30 p.m. Central Time (“CT”), either party has until 8:30 a.m. CT the
next trading day to request review. The Obvious Error Panel shall review the facts
and render a decision on the day of the transaction, or the next trade day in the
case where a request is properly made the next trade day.
(iv) Panel Decision. The Obvious Error Panel may overturn or modify an action
taken by the Trading Officials under this Rule upon agreement by a majority of the
Panel representatives. All determinations by the Obvious Error Panel may be appealed in accordance with paragraph (d) of this rule.
(d) Review by the Appeals Committee
A member affected by a determination made under this rule may appeal such
determination to the Appeals Committee, in accordance with Chapter XIX of the
Exchange’s rules. For purposes of this Rule, a member must be aggrieved as
described in Rule 19.1. Notwithstanding any provision in Rule 19.2 to the contrary,
a request for review must be made in writing (in a form and manner prescribed by
the Exchange) no later than the close of trading on the next trade date after the
member receives verbal notification of such determination by Trading Officials.
(e) Negotiated Trade Nullification
A trade may be nullified if the parties to the trade agree to the nullification. When all
parties to a trade have agreed to a trade nullification one party must promptly
disseminate cancellation information in OPRA format.
Interpretations and Policies…..
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.01 Applicability: Trading Officials may also allow for the execution of ROS trades
(and assign those trades to participating ROS Market-Makers) that were not executed on the opening but that should have been executed had ROS opened the
series at the non-erroneous quote. The Exchange will endeavor to notify its members as soon as practicable after the correction of an erroneous print and will
indicate that this may result in the adjustment of trades executed pursuant to
ROS. The only trades that will be adjusted are those that were executed on the
opening or those that should have executed on the opening. All adjustments will
be made during the day when the correction of the erroneous print occurred.
.02 Trading Officials: The term “Trading Officials” means two Exchange members designated as Floor Officials and one member of the Exchange’s trading
floor liaison (TFL) staff.
.03 Definitions: For purposes of this Rule, an “erroneous sell transaction” is one
in which the price received by the person selling the option is erroneously low, and
an “erroneous buy transaction” is one in which the price paid by the person purchasing the option is erroneously high.
Rule 24.16
Nullification and Adjustment of Index Option Transactions
This Rule only governs the nullification and adjustment of transactions involving
index options and options on ETFs or HLDRs. Rule 6.25 governs the nullification
and adjustment of transactions involving equity options. Paragraphs (a)(1), (2),
(6) and (7) of this Rule have no applicability to trades executed in open outcry.
(a) Trades Subject to Review
A member or person associated with a member may have a trade adjusted or
nullified if, in addition to satisfying the procedural requirements of paragraph (b)
below, one of the following conditions is satisfied:
(1) Obvious Price Error: An obvious pricing error will be deemed to have occurred when the execution price of a transaction is above or below the fair market
value of the option by at least a prescribed amount. For series trading with normal
bid-ask differentials as established in Rule 8.7(b)(iv), the prescribed amount shall
be: (a) the greater of $0.10 or 10% for options trading under $2.50; (b) 10% for
options trading at or above $2.50 and under $5; or (c) $0.50 for options trading at
$5 or higher. For series trading with bid-ask differentials that are greater than the
widths established in Rule 8.7(b)(iv), the prescribed error amount shall be: (a) the
greater of $0.20 or 20% for options trading under $2.50; (b) 20% for options trading
at or above $2.50 and under $5; or (c) $1.00 for options trading at $5 or higher.
(i) Definition of Fair Market Value: For purposes of this Rule only, the fair market
value of an option is the midpoint of the national best bid and national best offer for
the series (across all exchanges trading the option). In multiply listed issues, if
there are no quotes for comparison purposes, fair market value shall be determined by Trading Officials. For singly-listed issues, fair market value shall be the
first quote after the transaction(s) in question that does not reflect the erroneous
transaction(s). For transactions occurring as part of the Rapid Opening System
(“ROS trades”) or Hybrid Opening System (“HOSS”), fair market value shall be the
first quote after the transaction(s) in question that does not reflect the erroneous
transaction(s).
January 12, 2005, Volume RB16, Number 2
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SR-CBOE-2004-83 continued
(2) Obvious Quantity Error: An obvious error in the quantity term will be deemed
to occur when the transaction size exceeds the responsible broker or dealer’s average disseminated size over the previous four hours by a factor of five (5) times.
The quantity to which a transaction shall be adjusted from an obvious quantity error
shall be the responsible broker or dealer’s average disseminated size over the
previous four trading hours (which may include the previous trading day).
(3) Verifiable Disruptions or Malfunctions of Exchange Systems: Trades arising
out of a “verifiable disruption or malfunction” in the use or operation of any Exchange automated quotation, dissemination, execution, or communication system
may either be nullified or adjusted by Trading Officials.
(4) Erroneous Print in Underlying: A trade resulting from an erroneous print disseminated by the underlying market which is later cancelled or corrected by that
underlying market may be adjusted or nullified. In order to be adjusted or nullified,
however, the trade must be the result of an erroneous print that is higher or lower
than the average trade in the underlying security during a two-minute period before
and after the erroneous print by an amount at least five times greater than the
average quote width for such underlying security during the same period.
For purposes of this Rule, the average trade in the underlying security shall be
determined by adding the prices of each trade during the four minute time period
referenced above (excluding the trade in question) and dividing by the number of
trades during such time period (excluding the trade in question). For purposes of
this Rule, the average quote width shall be determined by adding the quote widths
of each separate quote during the four minute time period referenced above (excluding the quote in question) and dividing by the number of quotes during such
time period (excluding the quote in question).
(5) Erroneous Quote in Underlying: A trade resulting from an erroneous quote in
the underlying security may be adjusted or nullified. An erroneous quote occurs
when the underlying security has a width of at least $1.00 and has a width at least
five times greater than the average quote width for such underlying security on the
primary market during the time period encompassing two minutes before and after
the dissemination of such quote.
(6) Trades Below Intrinsic Value: An obvious pricing error will be deemed to occur
when the transaction price of an equity option is more than $0.10 below the intrinsic
value of the same option (an option that trades at its intrinsic value is sometimes
said to trade at ‘parity’). Paragraph (6) shall not apply to transactions occurring
during the last two minutes of the trading day (which is typically 3:00:01 p.m. (CT)
to 3:02 p.m. (CT) on days with regular trading hours).
(i) Definition of Intrinsic Value: For purposes of this Rule, the intrinsic value of an
equity call option equals the value of the underlying stock (measured from the bid
or offer as described below) minus the strike price, and the intrinsic value of an
equity put option equals the strike price minus the value of the underlying stock
(measured from the bid or offer as described below), provided that in no case is the
intrinsic value of an option less than zero. In the case of purchasing call options
and selling put options, intrinsic value is measured by reference to the bid in the
underlying security, and in the case of purchasing put options and selling call options, intrinsic value is measured by reference to the offer in the underlying security.
RB18
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(7) No Bid Series: Electronic transactions in series quoted no bid at a nickel (i.e.,
$0.05 offer) will be nullified provided at least one strike price below (for calls) or
above (for puts) in the same options class was quoted no bid at a nickel at the
time of execution.
(b) Procedures for Reviewing Transactions
(1) Notification: Any member or person associated with a member that believes
it participated in a transaction that may be adjusted or nullified in accordance with
paragraph (a) must notify any Trading Official promptly but not later than fifteen
(15) minutes after the execution in question. For transactions occurring after 2:45
p.m. (CST), notification must be provided promptly but not later than fifteen (15)
minutes after the close of trading of that security on CBOE. Absent unusual
circumstances, Trading Officials shall not grant relief under this Rule unless notification is made within the prescribed time periods.
In the absence of unusual circumstances, Trading Officials (either on their own
motion or upon request of a member) must initiate action pursuant to paragraph
(a)(3) above within sixty (60) minutes of the occurrence of the verifiable disruption
or malfunction. When Trading Officials take action pursuant to paragraph (a)(3),
the members involved in the transaction(s) shall receive verbal notification as
soon as is practicable.
(2) Review and Determination: Once a party to a transaction has applied to a
Trading Official for review, the transaction shall be reviewed and a determination
rendered, unless both parties to the transaction agree to withdraw the application
for review prior to the time a decision is rendered. Absent unusual circumstances
(e.g., a large number of disputed transactions arising out of the same incident),
Trading Officials must render a determination within sixty (60) minutes of receiving notification pursuant to paragraph (b)(1) above. If the transaction(s) in question
occurred after 2:30 p.m., Trading Officials shall have until 9:30 a.m. the following
morning to render a determination. Trading Officials shall promptly provide verbal
notification of a determination to the members involved in the disputed transaction and to the control room.
(c) Adjustments
Unless otherwise specified in Rule 24.16(a)(1)-(6), transactions will be adjusted
provided the adjusted price does not violate the customer’s limit price. Otherwise,
the transaction will be nullified. With respect to 24.16(a)(1)-(5), the price to which
a transaction shall be adjusted shall be the National Best Bid (Offer) immediately
following the erroneous transaction with respect to a sell (buy) order entered on
the Exchange. For ROS or HOSS transactions, the price to which a transaction
shall be adjusted shall be based on the first non-erroneous quote after the erroneous transaction on CBOE. With respect to 24.16(a)(6), the transaction shall be
adjusted to a price that is $0.10 under parity.
(d) Review by the Appeals Committee
A member affected by a determination made under this rule may appeal such
determination to the Appeals Committee, in accordance with Chapter XIX of the
Exchange’s rules. For purposes of this Rule, a member must be aggrieved as
described in Rule 19.1. Notwithstanding any provision in Rule 19.2 to the contrary, a request for review must be made in writing (in a form and manner prescribed by the Exchange) no later than the close of trading on the next trade date
after the member receives verbal notification of such determination by Trading
Officials.
January 12, 2005, Volume RB16, Number 2
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SR-CBOE-2004-83 continued
(e) Negotiated Trade Nullification
A trade may be nullified if the parties to the trade agree to the nullification. When
all parties to a trade have agreed to a trade nullification one party must promptly
disseminate cancellation information in OPRA format.
Interpretations and Policies…..
.01 Applicability: Trading Officials may also allow for the execution of ROS trades
(and assign those trades to participating ROS Market-Makers) that were not executed on the opening but that should have been executed had ROS opened the
series at the non-erroneous quote. The Exchange will endeavor to notify its members as soon as practicable after the correction of an erroneous print and will
indicate that this may result in the adjustment of trades executed pursuant to
ROS. The only trades that will be adjusted are those that were executed on the
opening or those that should have executed on the opening. All adjustments will
be made during the day when the correction of the erroneous print occurred.
.02 Trading Officials: The term “Trading Officials” means two Exchange members designated as Floor Officials and one member of the Exchange’s trading
floor liaison (TFL) staff.
SR-CBOE-2004-04
Firm Participation Rule
On December 22, 2004, the SEC approved Rule Change File No. SR-CBOE-2004-04,
which filing changes the 20-40% guaranteed firm participation rule to a straight guaranteed
40% rule. (Securities Exchange Act Release No. 50907, 70 FR 128 (January 3, 2005)).
Any questions regarding the rule change may be directed to Steve Youhn, Legal Division,
at 312-786-7416. The text of the amended rules is set forth below. New language is
italicized.
(a) – (c) No change
(d) Notwithstanding the provisions of paragraphs (a) and (b) of this Rule, when a
Floor Broker holds an equity option order of the eligible order size or greater (“original order”), the Floor Broker is entitled to cross a certain percentage of the order
with other orders that he is holding or in the case of a public customer order with
a facilitation order of the originating firm (i.e., the firm from which the original
customer order originated). The appropriate Floor Procedure Committee may determine, on a class by class basis, the eligible size for an order that may be
transacted pursuant to this paragraph (d), however, the eligible order size may not
be less than 50 contracts. In accordance with his responsibilities for due diligence, a Floor Broker representing an order of the eligible order size or greater
which he wishes to cross shall request bids and offers for such option series and
make all persons in the trading crowd, including the Order Book Official, aware of
his request.
(i) No change
(ii) After all public customer orders that were (1) on the limit order book and then
(2) represented in the trading crowd at the time the market was established have
been satisfied, the Floor Broker will be entitled to cross 40% of the remaining
contracts, provided the order trades at or between the best bid or offer given by
the crowd in response to the broker’s initial request for a market.
(iii) – (iv) No change
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SR-CBOE-2004-04 continued
(v) DPMs are not entitled to any guaranteed participation for trades occurring pursuant to this paragraph (d) unless the Floor Broker crosses less than its guaranteed 40%, in which case the DPM’s guarantee will be a percentage that when
combined with the percentage the firm crossed, does not exceed 40% of the order.
(vi) – (vii) No change
(e) No change
Interpretations and Policies . . .
.01 - .08 No change
SR-CBOE-2004-52
Trigger Rule
On December 22, 2004, the SEC approved Rule Change File No. SR-CBOE-2004-52, which
filing amends the Trigger rule to permit incoming RAES orders to automatically execute
against orders resting on the book for any series of options where the bid or offer generated
by Autoquote is equal to or crosses the Exchange’s best bid or offer as established by an
order in the Exchange’s limit order book. (Securities Exchange Act Release No. 50915, 69
FR 249 (December 29, 2004)). Any questions regarding the rule change may be directed to
Dave Doherty, Legal Division, at 312-786-7466. The text of the amended rules is set forth
below. New language is italicized.
Rule 6.8
RAES Operations
(a) – (d)(iv)
No change
(d)(v) Notwithstanding sub-paragraph (d)(iv), for classes of options as determined
by the appropriate Floor Procedure Committee (“FPC”), for any series of options
where the bid or offer generated by Autoquote (Exchange or proprietary) is equal to
or crosses the Exchange’s best bid or offer as established by an order in the
Exchange’s limit order book, orders in the book for options of that series will be
automatically executed against participants on RAES (“Trigger”) up to a size not to
exceed the number of contracts equal to the applicable maximum size of RAESeligible orders for that series of options (“Trigger Volume”). The appropriate FPC is
responsible for determining the Trigger Volume for a particular series of options. In
the event a member in the trading crowd verbally initiates a trade with a book order
prior to the time the book staff announces to the trading crowd that the order has
been removed from the book by Trigger, the book staff will manually endorse the
book order to that member(s). In the event the order in the book is for a larger
number of contracts than the applicable Trigger Volume, the balance of the book
order may be executed manually by the trading crowd. In the limited circumstance
where contracts remain in the book after an execution (or partial execution) of a
book order up to the applicable Trigger Volume, the bid or offer generated by Autoquote
will be one-tick inferior to the price of the book order such that the disseminated
quote will not cross or lock with the Autoquote bid or offer. In addition, where
contracts remain in the book after an execution (or partial execution), or for any
series where Trigger has not yet been implemented by the appropriate FPC, orders
in RAES for options of that series may either be automatically executed or be
rerouted on ORS to the crowd PAR terminal or to another location in the event of
system problems or contrary firm routing instructions, as determined by the appropriate FPC.
January 12, 2005, Volume RB16, Number 2
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Rule Changes,
Interpretations and
Policies continued
PROPOSED RULE CHANGES
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934, as amended (“the
Act”), and Rule 19b-4 thereunder, the Exchange has filed the following proposed rule changes
with the Securities and Exchange Commission (“SEC”). Copies of the rule change filings
are available from the Legal Division. Members may submit written comments to the Legal
Division.
The effective date of a proposed rule change will be the date of approval by the SEC,
unless otherwise noted.
SR-CBOE-2004-89
Reduced-Value Options on the Russell 2000 Index
On December 23, 2004, the Exchange filed Rule Change File No. SR-CBOE-2004-89,
which filing proposes to allow CBOE to list and trade reduced-value options (1/5th and 1/
10th values) on the Russell 2000 Index. Any questions regarding the proposed rule change
may be directed to Jim Flynn, Legal Division, at 312-786-7070. The text of the proposed
rule amendments is set forth below. Proposed new language is underlined. Proposed
deleted language is [stricken out]. A copy of the filing is available from the Legal Division.
Rule 24.4 – Position Limits for Broad-Based Index Options
Rule 24.4 (a) In determining compliance with Rule 4.11, there shall be no position
limit for broad-based index option contracts on the DJX, OEX and SPX classes.
All other broad-based index option contracts shall be subject to a contract limitation fixed by the Exchange, which shall not be larger than the limits provided in the
chart below.
RB22
BROAD-BASED INDEX
OPTION TYPE
STANDARD LIMIT
(on the same side
of the market)
RESTRICTIONS
Nasdaq 100 Index (1/10th) (MNX)
750,000
None
Nasdaq 100 Index (1/10th) (NDX)
75,000
None
Russell 2000 Index (1/10th)
500,000
no more than 300,000
near-term
Dow Jones Equity REIT Index
Russell 2000 Index (1/5th)
250,000 contracts
None
Russell 2000 Index (1/5th)
250,000 contracts
no more than 150,000
near-term
Lipper Analytical/Salomon
Bros. Growth Fund Index
Lipper Analytical/Salomon Bros.
Growth and Income Fund Index
75,000 contracts
no more than 50,000
near-term
S&P 500/Barra Growth or Value
36,000 contracts in the aggregate
no more than 21,500
S&P SmallCap 600
GSTI Composite
100,000 contracts
no more than 60,000
near-term
January 12, 2005, Volume RB16, Number 2
Rule Changes,
Interpretations and
Policies continued
SR-CBOE-2004-89 continued
Russell 2000
50,000 contracts
Russell 1000
Russell 1000 Growth
Russell 1000 Value
Russell 2000 Growth
Russell 2000 Value
Russell 3000
Russell 3000 Growth
Russell 3000 Value
Russell Midcap
Russell Midcap Growth
Russell Midcap Value
Russell Top 200 Index
Russell Top 200 Growth Index
Russell Top 200 Value Index
Mexico 30 Index
Germany 25
Morgan Stanley Multinational Company Index
CBOE Euro 25 Index
CBOE Asian 25 Index
Reduced Value NYSE Composite 45,000 contracts
Other broad-based index
25,000 contracts
no more than 30,000 near-term
no more than 25,000 near-term
no more than 15,000 near-term
(b) - (c) No change
(d)
Positions in reduced-value index options shall be aggregated with positions in full-value indices. For [such purposes] example, if an index is reduced by
one-tenth, ten (10) reduced-value contracts shall equal one contract. If an index is
reduced by one-fifth, five (5) reduced-value contracts shall equal one contract.
. . . Interpretations and Policies:
.01 Broad-Based Index Hedge Exemption
The broad-based index hedge exemption is in addition to the standard limit and
other exemptions available under Exchange rules, interpretations and policies. The
following procedures and criteria must be satisfied to qualify for a broad-based
index hedge exemption:
(a) - (d) No change
(e) Positions in broad-based index options that are traded on the Exchange are
exempt from the standard limits to the extent specified below.
BROAD-BASED INDEX
OPTION TYPE
BROAD-BASED INDEX
HEDGE EXEMPTION
(is in addition to standard limit)
Nasdaq 100 Stock Index
(1/10th value) (MNX)
Russell 2000 Index (1/10th)
Nasdaq 100 Stock Index
(Full Value) (NDX)
Russell 2000 Index (1/5th)
S&P 500/Barra Growth or Value
other broad-based index
1,500,000 contracts
January 12, 2005, Volume RB16, Number 2
750,000 contracts
150,000 contracts
375,000 contracts
65,000 contracts
75,000 contracts
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Rule Changes,
Interpretations and
Policies continued
SR-CBOE-2004-89 continued
(f) - (h) No change
Rule 24.9
Terms of Index Option Contracts
(a) - (c) No change
*****
. . . Interpretations and Policies:
.01
The procedures for adding and deleting strike prices for index options are
provided in Rule 5.5 and Interpretations and Policies related thereto, as otherwise
generally provided by Rule 24.9, and include the following:
(a)
The interval between strike prices will be no less than $5.00; provided,
that in the case of the following classes of index options, the interval between
strike prices will be no less than $2.50:
[Add the following to the end of the current list]
Russell 2000 Index (1/10th value), if the strike price is less than $200.00.
Russell 2000 Index (1/5th value), if the strike price is less than $200.00.
(b) – (d) No change
.02 - .12 No change
SR-CBOE-2004-91
Market-Maker Order Rule Changes
On December 29, 2004, the Exchange filed Rule Change File No. SR-CBOE-2004-91,
which filing proposes to extend the pilot program in Rule 6.13 relating to Market-Maker
access to the Exchange’s automatic execution system and to eliminate its rule prohibiting
the electronic generation of orders. Any questions regarding the proposed rule change
may be directed to Steve Youhn, Legal Division, at 312-786-7416. The text of the proposed
rule amendments is set forth below. Proposed new language is underlined. Proposed
deleted language is [stricken out]. A copy of the filing is available from the Legal Division.
Rule 6.8A.
[Electronically Generated and Communicated Orders]
Reserved
[(a) Members may not enter, nor permit the entry of, orders into the Exchange’s
Order Routing System if those orders are created and communicated electronically without manual input (i.e., order entry must involve manual input such as
entering the terms of an order into an order-entry screen or manually selecting a
displayed order against which an off-setting order should be sent), and if such
orders are eligible for execution on RAES at the time they are sent. Nothing in this
paragraph, however, prohibits members from electronically communicating to the
Exchange orders manually entered by customers into front-end communication
systems (e.g., Internet gateways, online networks, etc.). An order is eligible for
execution on RAES if
(1) its size is equal to or less than the maximum RAES order size for the particular series;
(2) for public customer orders, the order is marketable or is tradable pursuant to
the RAES auto step-up feature at the time it is sent; or for broker-dealer orders,
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January 12, 2005, Volume RB16, Number 2
Rule Changes,
Interpretations and
Policies continued
SR-CBOE-2004-89 continued
the order is otherwise submitted in accordance with Interpretation .01 of Rule 6.8;
and
(3) if the order has either no contingency or has a contingency that is accepted for
execution by the RAES system.
A marketable order is a market order or a limit order where the specified price to
sell is below or at the current bid, or if to buy is above or at the current offer. An
order is tradable pursuant to the RAES auto step-up feature if the appropriate
Floor Procedure Committee has designated the class as an automatic step-up
class and if the National Best Bid or Offer for the particular series is reflected by
the current best bid or offer in another market by no more than the step-up amount
as defined in Interpretation .02 of Rule 6.8.
(b) The Exchange’s Order Routing System ( “ORS”) is the Exchange’s electronic
order routing and delivery system which routes orders to the Exchange’s automatic and electronic execution systems and to other Exchange systems, such
as handheld terminals and trade match systems. The ORS also delivers electronic fill reports and order status reports.]
Rule 6.13: CBOE Hybrid System’s Automatic Execution Feature
(a) No change
(b) Automatic Execution
(i) * * * * *
(A) - (B) No change
(C) Access:
(i) – (ii) No change
(iii) 15-Second Limitation: With respect to orders eligible for submission pursuant to paragraph (b)(i)(C)(ii), members shall neither enter nor permit the entry of multiple orders on the same
side of the market in an option class within any 15-second period for an account or accounts of the same beneficial owner.
The appropriate FPC may shorten the duration of this 15-second period by providing notice to the membership via a Regulatory Circular that is issued at least one day prior to implementation. The effectiveness of this rule shall terminate on [January
12, 2005] October 12, 2005.
*****
(ii) - (iv) No change
(c)
*****
(i)
No change
January 12, 2005, Volume RB16, Number 2
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Rule Changes,
Interpretations and
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SR-CBOE-2004-89 continued
(ii)
*****
(A) No change
(B) [Electronic generation and communication of orders in violation of
Rule 6.8A by non-trading crowd participants.]
[(C)] Effecting transactions that constitute manipulation as provided in
Rule 4.7 and Exchange Act Rule 10b-5.
(d) – (e) No change
SR-CBOE-2005-01
Auto-Ex for Certain Market-Maker Orders
On December 31, 2004, the Exchange filed Rule Change File No. SR-CBOE-2005-01,
which filing proposes to allow in-crowd Market-Makers to submit orders for automatic
execution. Any questions regarding the proposed rule change may be directed to Steve
Youhn, Legal Division, at 312-786-7416. The text of the proposed rule amendments is set
forth below. Proposed new language is underlined. Proposed deleted language is [stricken
out]. A copy of the filing is available from the Legal Division.
Rule 6.13
CBOE Hybrid System’s Automatic Execution Feature
(a)
No change
(b)
Automatic Execution
(i) Eligibility: Orders eligible for automatic execution through the CBOE Hybrid
System may be automatically executed in accordance with the provisions of this
Rule. This section governs automatic executions and split-price automatic executions. The automatic execution and allocation of orders or quotes submitted
by market participants [shall be] also is governed by Rules 6.45A(c) and (d).
(A) – (C)
No change
(ii) – (iv)
No change
(c) – (e)
No change
Rule 6.45A
Priority and Allocation of Trades for CBOE Hybrid System
*****
(a) –(b)
No change
(c) Interaction of Market Participant’s Quotes and/or Orders with Orders in
Electronic Book
Market participants, as defined in Rule 6.45A[(a)(i)], may submit quotes or orders
electronically to trade with orders in the electronic book in accordance with the
requirements of either Rule 6.13 or this paragraph.
With respect to orders or quotes submitted pursuant to this paragraph, a [A] floor
broker market participant may only represent as agent customer orders. When a
market participant’s quote or order interacts with the order in the book, a trade
occurs, CBOE will disseminate a last sale report, and the size of the book order
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January 12, 2005, Volume RB16, Number 2
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SR-CBOE-2005-01 continued
will be decremented to reflect the execution. Allocation of the book order shall be
as follows:
(i) – (iii) No change
(d) –(e)
No change
Interpretations and Policies….
No change
SR-CBOE-2005-02
Reduced-Value Russell 2000 Option Fees
On January 3, 2005, the Exchange filed Rule Change File No. SR-CBOE-2005-02, which
filing proposes to establish fees for reduced-value options on the Russell 2000 Index. Any
questions regarding the proposed rule change may be directed to Jaime Galvan, Legal
Division, at 312-786-7058. The text of the amended Fee Schedule is available from the
Legal Division, or can be accessed online at www.cboe.com, under the “About CBOE” link.
SR-CBOE-2004-90
Delay of SR-CBOE-2004-64
On December 28, 2004, the Exchange filed Rule Change File No. SR-CBOE-2004-90, which
filing proposes to delay the implementation of recently approved CBOE Rule filing SRCBOE-2004-64 until the end of January 2005 (Securities Exchange Act Release No. 50583,
69 FR 63418 (November 1, 2004)). SR-CBOE-2004-64 eliminated the DPM participation
entitlement in “N-second” group trades, as set forth in CBOE Rule 6.45A(c)(iii). Any questions regarding the proposed rule change may be directed to Steve Youhn, Legal Division, at
312-786-7416.
January 12, 2005, Volume RB16, Number 2
RB27