June 3, 2005
Exchange
Bulletin
Volume 33, Number 22
The Constitution and Rules of the Chicago Board 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 by hard copy or e-mail 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 if applicable, 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 after the first complimentary copy may be obtained by submitting your name, firm
if any, 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 nonmembers.
For up-to-date Seat Market Quotes, call 312-786-7456 or 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 by sending an e-mail to
members@cboe.com or by phone at 312-786-7449.
Copyright © 2005 Chicago Board Options Exchange, Incorporated
SEAT MARKET QUOTES AS OF FRIDAY, JUNE 3, 2005
CLASS
CBOE
BID
$505,000.00
OFFER
$625,000.00
LAST SALE AMOUNT
$505,000.00
LAST SALE ATE
May 24, 2005
CBOT FULL MEMBERSHIP
CLASS
BID
OFFER
LAST SALE AMOUNT
LAST SALE DATE
With CBOE
Exercise Right
$1,580,000.00
$1,695,000.00
$1,720,000.00
May 31, 2005
Without CBOE
Exercise Right
__
__
__
__
CBOE Exercise
Right
$101,000.00
$170,000.00
__
__
Page 2
June 3, 2005
Volume 33, Number 22
Chicago Board Options Exchange
MEMBERSHIP INFORMATION FOR 5/26/05 THROUGH 6/1/05
MEMBERSHIP APPLICATIONS RECEIVED FOR
WHICH A POSTING PERIOD IS REQUIRED
Effective Date
Lessor: Goliath Group, LLC
Lessee: Man Securities Inc.
John P. Justic, NOMINEE
Rate:
1.125%
Term: Monthly
6/1/05
Individual Membership Applicants
Date Posted
Benjamin J. Feller, Nominee
Consolidated Trading, LLC
1036 N. Dearborn, #805
Chicago, IL 60610
5/26/05
Lessor: James E. Zechman
Lessee: Cutler Group, LP
Adam J. Zechman, NOMINEE
Rate:
1.00%
Term: Monthly
6/1/05
Donald E. Lapato, Nominee
Navillus, Inc.
3701 Pin Oak Ct.
Lisle, IL 60532
5/26/05
Lessor: Cognitive Capital, LLC
Lessee: Westward Capital LLC
Stephen J. Climo, NOMINEE
Rate:
1.125%
Term: Monthly
6/1/05
Christopher J. Loughlin, Nominee
Wolverine Trading LLC
2510 W. Iowa St., Unit 1
Chicago, IL 60622
5/27/05
Lessor: DNA Ltd. Inc.
Lessee: Timber Hill LLC
Curt Budach, NOMINEE
Rate:
1.00%
Term: Monthly
6/1/05
Andrew D. Little, Nominee
Susquehanna Investment Group
1511 N. Hudson Ave., 1-S
Chicago, IL 60610
5/27/05
Lessor: Robert K. Ellis
6/1/05
Lessee: LaBranche Structured Products LLC
Arthur K. Carrison, NOMINEE
Rate:
1.125%
Term: Monthly
Jonathan R. Garrity, Nominee
Susquehanna Investment Group
1434 W. Diversey Parkway, #2
Chicago, IL 60614
5/27/05
Lessor: Arnold B. and Sima H. Miller
Lessee: TD Options, LLC
Gavin B. Rowe, NOMINEE
Rate:
1.125%
Term: Monthly
6/1/05
Member Organization Applicants
Date Posted
Lessor: CMCJL, LLC
Lessee: SLK-Hull Derivatives LLC
Rate:
1.125%
Term: Monthly
6/1/05
Lessor:
Merrill Lynch, Pierce,
Fenner & Smith, Inc.
Lessee: Optiver US, LLC
Marcel V. Klooss, NOMINEE
Rate:
1.125%
Term: Monthly
6/1/05
Terminated Leases
Termination Date
WDG Trading, LLC
5/26/05
M. Neil Hebb, CBT Registered For
601 S. LaSalle St., #200
Chicago, IL 60605
Harrison Trading Group LLC – Managing Member
Kenneth D. Alpart – Managing Member
Kenneth D. Alpart - Manager
MEMBERSHIP LEASES
New Leases
Effective Date
Lessor: TRO Trading Group LLC
Lessee: Blue Capital Group LLC
Rate:
1.00%
Term: Monthly
5/27/05
Lessor: TRO Trading Group LLC
5/26/05
Lessee: Susquehanna Investment Group
Frederick C. Lorence, Jr. (FCL), NOMINEE
6/1/05
Lessor: Gedon Hertshten
Lessee: Maltman Investments, LP
James S. Maltman, NOMINEE
Rate:
1.125%
Term: Monthly
6/1/05
Lessor: James E. Zechman
Lessee: Citigroup Derivatives Markets Inc.
Carl Galvan (GLV), NOMINEE
Lessor: Mary Jane O’Connor
Lessee: Timber Hill LLC
Curt Budach (CRT), NOMINEE
6/1/05
Lessor: David F. Shawler
Lessee: Wolverine Trading LLC
Rate:
1.125%
Term: Monthly
6/1/05
Lessor: Goliath Group, LLC
Lessee: Mercury Trading, Inc.
Peter Najarian (NFX), NOMINEE
6/1/05
Lessor: Edmund J. O’Connor
Lessee: Quiet Light Securities LLC
Rate:
1.00%
Term: Monthly
6/1/05
Lessor: David F. Shawler
Lessee: Lakeshore Securities, LP
Myles Thompson (MLZ), NOMINEE
6/1/05
Lessor: Geoffrey J. Georgas
Lessee: Brian H. Force
Rate:
1.00%
Term: Monthly
6/1/05
Lessor: Robert K. Ellis
Lessee: Market Street Securities, Inc.
Sean P. Kinney (SPG), NOMINEE
6/1/05
Lessor: Diane F. Ianiro
Lessee: Centurion Securities, LLC
Rate:
1.125%
Term: Monthly
6/1/05
Lessor: Mary Jane O’Connor
Lessee: Quiet Light Securities LLC
Timothy L. Spears, NOMINEE
Rate:
1.00%
Term: Monthly
6/1/05
Lessor: Edmund J. O’Connor
6/1/05
Lessee: Robert C. Sheehan & Associates, LLC
Lessor: CMCJL, LLC
6/1/05
Lessee: RightSide Trading LP
Lincoln W. Brewer (LBW), NOMINEE
Page 3
June 3, 2005
Volume 33, Number 22
Chicago Board Options Exchange
Termination Date
Lessor: Lehman Brothers Inc.
6/1/05
Lessee: Panos Trading Limited Partnership
Michael T. Kalchbrenner (MTK), NOMINEE
Lessor: Joseph Ianiro
Lessee: The Hermitage Group, LLC
Paul C. Strehle (PGS), NOMINEE
6/1/05
Lessor: Anthony M. Mareno
Lessee: Ronin Capital, LLC
Patrick T. Koehler (TOE), NOMINEE
6/1/05
Lessor: Arnold B. and Sima H Miller
Lessee: TJM Investments, LLC
Eric J. Wiejak (HPY), NOMINEE
6/1/05
Lessor: DNA Ltd. Inc.
6/1/05
Lessee: Cornerstone Trading, LLC
Robert J. Mayer, Jr. (RJM), NOMINEE
Lessor: CSS, LLC
6/1/05
Lessee: Quiet Light Securities LLC
Timothy L. Spears (HKT), NOMINEE
Lessor: Cognitive Capital, LLC
Lessee: Wolverine Trading LLC
6/1/05
Lessor: Geoffrey J. Georgas
Lessee: Lance S. O’Donnell (LSO)
6/1/05
Lessor: Lance S. O’Donnell
6/1/05
Lessee: Maltman Investments, LP
James S. Maltman (JSM), NOMINEE
Lessor: Gedon Hertshten
Lessee: Mark G. Eddy (MCS)
6/1/05
Lessor: Diane F. Ianiro
Lessee: Andrew J. Ianiro (NDY)
6/1/05
MEMBERSHIP TERMINATIONS
Individual Members
CBT Exercisers:
Termination Date
Paul G. Benson (BNP)
5617 N. Newark
Chicago, IL 60631
6/1/05
Neil F. Harnen (NEI)
7N960 Columbine West
St. Charles, IL 60175
6/1/05
Jerry Manne (JXM)
111 W. Jackson, Suite 1106
Chicago, IL 60604
6/1/05
CBT Registered For:
Termination Date
Jeffrey A. Ryan (RYN)
Citadel Derivatives Group LLC
131 S. Dearborn Street, 37th Floor
Chicago, IL 60603
6/1/05
Douglas G. Boehm (AFB)
Triangle Trading, LLC
1410 N. State, #26B
Chicago, IL 60610
6/1/05
Termination Date
John A. Possidoni (JAP)
AB Financial LLC
440 S. LaSalle, Suite 3100
Chicago, IL 60605
6/1/05
Lessee(s):
Termination Date
Mark G. Eddy (MCS)
440 S. LaSalle, Suite 1750
Chicago, IL 60605
6/1/05
Nominee(s) / Inactive Nominee(s):
Termination Date
Sestino Milito (SSM)
Everest Trading, LLC
440 S. LaSalle, Suite 3100
Chicago, IL 60605
5/26/05
Jeffrey H. Savage (JIF)
Panos Trading Limited Partnership
440 S. LaSalle, Suite 743
Chicago, IL 60605
5/26/05
Joseph R. Hayes (HYZ)
Wolverine Trading LLC
2014 Crystal
Chicago, IL 60622
5/26/05
Charles E. Strickland III (CUK)
Lehman Brothers Inc.
190 S. LaSalle
Chicago, IL 60605
5/26/05
David M. Johnson (DEJ)
Ronin Capital, LLC
230 S. LaSalle, #400
Chicago, IL 60604
5/27/05
Brian E. Krchmery (BEK)
Navillus, Inc.
440 S. LaSalle, Suite 3909
Chicago, IL 60605
5/27/05
Rachel W. Or (ROR)
CMZ Trading, LLC
141 W. Jackson, Suite 3310
Chicago, IL 60604
5/31/05
Carole Pestien (CBS)
Susquehanna Investment Group
175 W. Jackson, Suite 1700
Chicago, IL 60604
5/31/05
David Creagan (CGN)
Merrill Lynch, Pierce, Fenner & Smith, Inc.
440 S. LaSalle, Suite 2500
Chicago, IL 60605
5/31/05
Travis J. Game (TGM)
Citigroup Global Markets Inc.
111 W. Jackson, 10th Floor
Chicago, IL 60605
5/31/05
Anthony Hozian (HOZ)
RightSide Trading LP
2934 Lakewood Avenue
Chicago, IL 60657
6/1/05
Peter Najarian (NFX)
Mercury Trading, Inc.
411 S. Wells, Penthouse
Chicago, IL 60607
6/1/05
Page 4
June 3, 2005
Volume 33, Number 22
Chicago Board Options Exchange
Termination Date
Sean P. Kinney (SPG)
Market Street Securities, Inc.
1818 Market Street, 18th Floor
Philadelphia, PA 19103
6/1/05
Maureen A. Malloy (IMO)
X-Change Financial Access LLC
3042 Monterey
Flossmoor, IL 60422
6/1/05
Terrence E. Burke (NPL)
X-Change Financial Access LLC
4827 W. Main St.
Monee, IL 60449
6/1/05
Robert J. Mayer, Jr. (RJM)
Cornerstone Trading, LLC
322 Jefferson Ave.
Glencoe, IL 60022
6/1/05
David S. Levinsky (DSL)
Bear Wagner Specialists LLC
141 W. Jackson, Suite 4132
Chicago, IL 60604
6/1/05
Effective Date
Stephen J. Climo (CMO)
6/1/05
Westward Capital LLC
311 S. Wacker, #900
Chicago, IL 60606
Type of Business to be Conducted: Market Maker
Adam J. Zechman (AZK)
6/1/05
Cutler Group, LP
440 S. LaSalle, Suite 3100
Chicago, IL 60605
Type of Business to be Conducted: Market Maker
Brian E. Krchmery (BEK)
6/1/05
X-Change Financial Access LLC
440 S. LaSalle, Suite 3909
Chicago, IL 60605
Type of Business to be Conducted: Floor Broker
Marcel V. Klooss (MVK)
6/1/05
Optiver US, LLC
440 S. LaSalle, Suite 1124
Chicago, IL 60605
Type of Business to be Conducted: Market Maker
Member Organizations
Member Organizations
Lessee(s):
Effective Date
CBT Registered For:
Termination Date
Triangle Trading, LLC
440 S. LaSalle, Suite 2101
Chicago, IL 60605
6/1/05
Optiver US, LLC
6/1/05
440 S. LaSalle, Suite 1121
Chicago, IL 60605
Type of Business to be Conducted: Market Maker
Lessee(s):
Termination Date
JOINT ACCOUNTS
Mercury Trading, Inc.
411 S. Wells, Penthouse
Chicago, IL 60607
6/1/05
New Participants
Acronym
Effective Date
Benjamin W. Phillips
QWG
5/26/05
EFFECTIVE MEMBERSHIPS
Stanton W. Todd
QGO
5/27/05
Individual Members
Stanton W. Todd
QNX
5/27/05
Stanton W. Todd
QOP
5/27/05
Joseph R. Hayes
QVV
5/31/05
Joseph R. Hayes
QTF
5/31/05
Kevin R. Novak
QWQ
5/31/05
Stephen J. Climo
QMW
6/1/05
Lessee(s):
Effective Date
Brian H. Force (FRC)
6/1/05
440 S. LaSalle, Suite 3100
Chicago, IL 60605
Type of Business to be Conducted: Market Maker
Nominee(s) / Inactive Nominee(s):
Effective Date
Gary R. Silverman
5/26/05
Geneva Trading LLC
440 S. LaSalle, Suite 1822
Chicago, IL 60605
Type of Business to be Conducted: Remote Market Maker
Jerrell R. Watts
5/26/05
Lehman Brothers Inc.
745 7th Ave., 2nd Floor
New York, NY 10019
Type of Business to be Conducted: Remote Market Maker
Stanton W. Todd (SJR)
5/27/05
Group One Trading, LP
440 S. LaSalle, Suite 3232
Chicago, IL 60605
Type of Business to be Conducted: Market Maker/Floor Broker
Joseph R. Hayes (HYZ)
5/31/05
Panos Trading Limited Partnership
2014 Crystal
Chicago, IL 60622
Type of Business to be Conducted: Market Maker
Terminated Participants Acronym
Termination Date
Sestino Milito
QAZ
5/26/05
Jeffrey H. Savage
QTF
5/26/05
Joseph R. Hayes
QOW
5/26/05
Joseph R. Hayes
QWV
5/26/05
Joseph R. Hayes
QYW
5/26/05
David Michael Johnson
QAB
5/27/05
Carole Pestien
QZT
5/31/05
Jeffrey Allen Ryan
CIT
6/1/05
Anthony Hozian
QQR
6/1/05
Sean P. Kinney
QMK
6/1/05
Page 5
June 3, 2005
Volume 33, Number 22
Terminated Participants Acronym
Termination Date
Robert J. Mayer Jr.
QFD
6/1/05
David S. Levinsky
QBW
6/1/05
David S. Levinsky
QWS
6/1/05
Terminated Accounts
Acronym
Termination Date
David C-H Ho
QZZ
5/27/05
Martin M. Israel
QZZ
5/27/05
Mark E. Westcott
QZZ
5/27/05
Chicago Board Options Exchange
Effective Date
Lance S. O’Donnell
From:
Lessor/Lessee; Market Maker
To:
Owner; Market Maker
6/1/05
Thomas R. Prainito
6/1/05
From:
Nominee For SMC Option Management LLC; Floor
Broker
To:
Nominee For SMC Option Management LLC; Market
Maker/ Floor Broker
Bruce H. Johnson
From:
Lessor/CBT Exerciser; Market Maker
To:
Lessor
6/1/05
CHANGES IN MEMBERSHIP STATUS
Member Organizations
Effective Date
Individual Members
LaBranche Structured Products LLC
6/1/05
From:
Owner/Member Organization Affiliated with a CBT
Registered For; Associated with a Market Maker/Floor
Broker
To:
Owner/Lessee/Member Organization Affiliated with a
CBT Registered For; Associated with a Market Maker/
Floor Broker
Effective Date
John A. Kinahan
5/27/05
From:
Nominee For Group One Trading, LP; Market Maker/
Floor Broker
To:
CBT Registered For Group One Trading, LP; Market
Maker/Floor Broker
Kevin R. Novak
5/31/05
From:
CBT Exerciser; Market Maker
To:
CBT Registered For CMZ Trading, LLC; Market Maker
David F. Miller, Jr.
5/31/05
From:
CBT Registered For Citigroup Global Markets Inc.; Floor
Broker
To:
Nominee For Citigroup Global Markets Inc.; Floor Broker
Andrew J. Ianiro
From:
Lessee; Market Maker
To:
CBT Exerciser; Market Maker
6/1/05
Joseph S. Sullivan
6/1/05
From:
Nominee For Robert C. Sheehan & Associates, LLC;
Market Maker/Floor Broker
To:
CBT Registered For Robert C. Sheehan & Associates,
LLC; Market Maker/Floor Broker
James B. Burns
6/1/05
From:
Nominee For Blue Capital Group LLC; Market Maker
To:
CBT Registered For Blue Capital Group LLC; Market
Maker
Alan J. Nayder
6/1/05
From:
Nominee For Red Cedar Trading LLC; Market Maker/
Floor Broker
To:
CBT Registered For Red Cedar Trading LLC; Market
Maker/ Floor Broker
Michael T. Kalchbrenner
6/1/05
From:
Nominee For Panos Trading Limited Partnership;
Market Maker
To:
CBT Registered For Panos Trading Limited
Partnership; Market Maker
Blue Capital Group LLC
6/1/05
From:
Owner/Lessee; Associated with a Market Maker/
Remote Market Maker
To:
Owner/Lessee/Member Organization Affiliated with a
CBT Registered For; Associated with a Market Maker/
Remote Market Maker
Quiet Light Securities LLC
6/1/05
From:
Lessee/Member Organization Affiliated with a CBT
Registered For; Associated with a Market Maker
To:
Lessee/Member Organization Affiliated with a CBT
Registered For; Associated with a Market Maker/
Remote Market Maker
MEMBER ADDRESS CHANGES
Individual Members
Effective Date
Adam R. Keslosky
947 W. Oakdale Ave., Apt. 3W
Chicago, IL 60657
6/1/05
Michael R. Moore
P.O. Box 14558
Chicago, IL 60614
6/1/05
Member Organizations
Effective Date
Security National Options Corp.
P.O. Box 411
Kennilworth, IL 60043
5/31/05
Page 6
June 3, 2005
Volume 33, Number 22
Chicago Board Options Exchange
POSITION LIMIT CIRCULARS
Pursuant to Exchange Rule 4.11, the Exchange issued the below listed Position Limit Circulars on May 31, 2005. The complete circulars are available
from the Department of Market Regulation, in the data information bins on the 2nd Floor of the Exchange, and on the CBOE website at cboe.com under
the “Market Data” tab.
To receive regular updates of the position limit list via fax, contact Candice Nickrand at (312) 786-7730. Questions concerning position and exercise
limits may be directed to the Department of Market Regulation to Rich Pedraza at (312) 786-7077 or Tim Mac Donald at (312) 786-7706.
Position Limit Circular PL05-19
May 31, 2005
VISX Incorporated (“EYE”) merger completed
with Advanced Medical Optics, Inc. (“AVO”)
Effective Date May 31, 2005
Position Limit Circular PL05-21
May 31, 2005
USF Corporation (“USFC/CZQ”) merger completed with
Yellow Roadway Corporation (“YELL/YUX/VYX”)
Effective Date May 25, 2005
Position Limit Circular PL05-20
May 31, 2005
International Steel Group Inc. (“ISG/YRW/VOE”) election
merger completed with Mittal Steel Company N.V.
Class A (“MT”)
Effective Date April 18, 2005
RESEARCH CIRCULARS
The following Research Circulars were distributed between May 26 and June 2, 2005. 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 #RS05-354
May 26, 2005
ConocoPhillips (“COP/YRO/OJP”)
2-for-1 Stock Split
Ex-Distribution Date: June 2, 2005
Research Circular #RS05-365
May 27, 2005
Silicon Valley Bancshares (“SIVB/SQU/WVW/OVF”)
Name Change to: SVB Financial Group
Effective Date: May 31, 2005
Research Circular #RS05-356
May 27, 2005
*****UPDATE*****UPDATE*****UPDATE*****
Magnum Hunter Resources, Inc. (“MHR & adj. MHH”)
Proposed Merger with Cimarex Energy Co. (“XEC”)
Research Circular #RS05-366
May 31, 2005
Southwestern Energy Company (“SWN”)
2-for-1 Stock Split
Ex-Distribution Date: June 6, 2005
Research Circular #RS05-358
May 27, 2005
Eon Labs, Inc. (“ELAB/ESQ”)
Tender Offer by Zodnas Acquisition Corp.
Research Circular #RS05-367
May 31, 2005
CVS Corporation (“CVS/WSA/OHS”)
2-for-1 Stock Split
Ex-Distribution Date: June 7, 2005
Research Circular #RS05-359
May 27, 2005
Concord Communications, Inc. (“CCRD/UCD”)
Proposed Merger with Computer Associates (“CA/WOA/VCA”)
Research Circular #RS05-360
May 27, 2005
VISX Incorporated (“EYE”) Merger COMPLETED
with Advanced Medical Optics, Inc. (“AVO”)
Research Circular #RS05-361
May 27, 2005
USF Corporation (“USFC/adj. CTD”)
Determination of Cash-in-Lieu Amount
Research Circular #RS05-364
May 27, 2005
Knight Trading Group, Inc. Class A (“NITE/QTN/OTI”)
Name Change to: Knight Capital Group, Inc. Class A
Effective Date: May 31, 2005
Research Circular #RS05-368
May 31, 2005
Murphy Oil Corporation (“MUR/OBY/YZS”)
2-for-1 Stock Split
Ex-Distribution Date: June 6, 2005
Research Circular #RS05-369
May 31, 2005
bebe stores, inc. (“BEBE/KUO & adj. KVX”)
3-for-2 Stock Split
Ex-Distribution Date: June 6, 2005
Research Circular #RS05-374
June 2, 2005
Cray Inc. (CRAYE/HQC)
Underlying Symbol Change to “CRAY”
Effective Date: June 3, 2005
June 8, 2005
Volume RB16, Number 23
Regulatory
Bulletin
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 RG05-51
Date:
May 23, 2005
To:
Membership
From: Regulatory Services Division,
Legal Division, and
Systems Division
Re:
Opening Rotation Quoting in Hybrid Classes
Opening Quote Width
Opening rotation quotes MUST be consistent with the width requirements of Rule 8.7(b)(iv).
Permissible widths for Hybrid classes during opening rotation are:
Bid Price
Less than $2.00
$2.00 to $5.00
More than $5.00 to $10.00
More than $10.00 to $20.00
More than $20.00
Permissible Quote Width
$0.25
$0.40
$0.50
$0.80
$1.00
Members should also be aware that this Rule 8.7(b)(iv) and these widths apply to all standard listed options, including series that still have LEAPS symbols but that are within nine
months of expiration. The Market Performance Committee has also directed that LEAPS
series, i.e. series with more than nine months until expiration, be allowed double the permissible quote width specified above. Once a LEAPS series has nine-months or less until
expiration, the double-width differentials no longer apply, absent additional Market Performance Committee relief, regardless of whether the series symbol has converted to a normal or non-LEAPS symbol. Members must take precautions to not overlook the time to
expiration date, or the resultant bid/ask differentials may be impermissibly wide.
The Regulatory Division considers opening quotes that exceed the permitted width a serious regulatory matter and intends to treat instances uncovered as such.
Hybrid Opening System
The Hybrid Opening System (“HOSS”) currently opens series beginning within 8 seconds of
the initial print of the underlying security. Note that CBOE may soon reduce timers so that
series open in LESS THAN 8 seconds of the initial underlying print. To be certain of compliance, DPMs and e-DPMs may want to consider submitting their quotes as soon as possible
after the initial underlying print. Quotes may also be sent before the underlying print. Quoters
should be aware that HOSS does not require an underlying bid/ask update to open. Those
entering pre-open quotes using underlying bid/ask average should take appropriate steps to
ensure the accuracy of their opening quotes.
Regulatory Circulars
continued
Regulatory Circular RG05-51 continued
End of Opening Rotation
After the opening rotation, for Hybrid classes, the CBOE Hybrid Trading System disseminates a message each time the market transitions from one product state to another.
Market-Makers, including DPMs and e-DPMs, must comply with the opening quote width
requirement throughout the Opening Rotation product state. When the product state changes
to Open, options on classes trading on the Hybrid system may be quoted electronically
with a difference not to exceed $5 between the bid and the offer regardless of the price of
the bid. However, the rules do not provide a safe-harbor that Market-Maker quotes that are
consistently $5-wide will otherwise satisfy the requirements of Rule 8.7(b), including the
requirement to compete with other Market-Makers to improve markets in all series of option
classes at the station where the Market-Maker is present and to update market quotations
in response to changed market conditions.
Notification of Product State Change by the Hybrid System
Market-Makers whose front-end systems comply with the CBOE Market Interface (CMi)
are informed of the transition from Opening Rotation to Open via the CMi message “Product State”.
Market-Makers whose front-end system complies with the Financial Information Exchange
(FIX) protocol are informed of the transition from Opening Rotation to Open via the FIX
message “Security Status”.
Market-Makers or their vendors who provide their electronic quoting applications are encouraged to incorporate the Product State or Security Status message into the electronic
quoting applications to prevent the entry of illegally wide quotes during Opening Rotation.
Market-Makers who use a quote provider service that does not incorporate such messages
must continue to maintain quotes no wider than the Rule 8.7(b)(iv) width parameters until
they have otherwise manually confirmed that the series is open.
Contacts:
Questions regarding the market state transition messages in the CMi and FIX interfaces
should be addressed to API Testing Group at (312) 786-7300, option #2.
Questions regarding application of the rules, please contact Pat Sexton, Legal Division, at
(312) 786-7467 or Tim MacDonald in the Department of Market Regulation at (312) 7867706.
Regulatory Circular RG05-52
Date:
May 20, 2005
To:
Members
From: Department of Financial and Sales Practice Compliance
Re:
Characterization of Pass-Through of CBOE Sales Value Fee to Customers
CBOE assesses a Sales Value Fee to each member for sales of securities on CBOE with
respect to which CBOE is obligated to pay a fee to the Securities and Exchange Commission (“SEC”) under Section 31 of the Securities Exchange Act of 1934, as amended.
The Sales Value Fee is not a new fee. The CBOE Fee Schedule was recently amended to
change the title of the Fee and to include additional description of the Fee and its assessment.
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June 8, 2005, Volume RB16, Number 23
Regulatory Circulars
continued
Regulatory Circular RG05-52 continued
The sales transactions to which the Sales Value Fee applies are sales of options (other than
options on a security index), sales of non-option securities, and sales of securities resulting
from the exercise of physical-delivery options traded on CBOE. CBOE’s Fee Schedule
describes how the Sales Value Fee is calculated and collected by CBOE.
The SEC recently amended its rules relating to Section 31 fees. In the Adopting Release for
these rule amendments (Securities Exchange Act Release No. 34-49928), the SEC observed that, in practice, self-regulatory organizations (“SROs”) obtain funds to meet their
Section 31 obligations by imposing charges on their members, who in turn pass these
charges to their customers. With regard to the pass-through of these fees to customers, the
SEC stated that Section 31 places no obligation on customers and that it is misleading to
suggest through the labeling of these pass-through fees that a customer incurs an obligation
to the SEC under Section 31. In addition, more recently, the SEC requested that each SRO
prohibit its members from characterizing these pass-through charges as a “Section 31 fee”
or “SEC fee” to the extent the SRO has not already done so.
Accordingly, CBOE is implementing the following requirement. Effective July 1, 2005, CBOE
members are prohibited from characterizing the pass-through of the CBOE Sales Value Fee
to their customers as a “Section 31 fee”, “SEC fee”, or other label that implies an SEC rule
or requirement that these funds be collected from broker-dealers or customers.
Any billing questions may be addressed to Ermer Love in the Accounting Department at
(312) 786-7032. Any other questions regarding this circular may be addressed to Lawrence
Bresnahan in the Department of Financial and Sales Practice Compliance at (312) 7867713.
Regulatory Circular RG05-53
Date:
May 31, 2005
To:
The Membership
From:
Accounting
Subject:
Merger Spreads Fee Cap Pilot Program
The Financial Planning Committee recently recommended and the Board of Directors approved a merger spreads fee cap pilot program.
Details of the pilot program are described below:
1.
2.
3.
4.
June 8, 2005, Volume RB16, Number 23
The merger spreads pilot program is in effect for the period May 23 through
August 31, 2005.
Market-Maker, firm and broker-dealer transaction fees are capped at $2,000
for all merger spread transactions executed on the same trading day in the
same options class.
A merger spread is defined as a transaction executed pursuant to a
strategy involving the simultaneous purchase and sale of options of the
same class and expiration date, but with different strike prices, followed by
the exercise of the resulting long options position, each executed prior to
the date on which shareholders of record are required to elect their respective form of consideration, i.e., cash or stock.
To qualify transactions for the cap, a rebate request with supporting documentation must be submitted to the Accounting Department of the Exchange within 30 days of the transactions.
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Regulatory Circulars
continued
Regulatory Circular RG05-53 continued
Rebate request forms are available on the CBOE members website (cboe.com) or on the
6th floor in Accounting.
Rebates will be processed via a credit to the member’s clearing firm at month-end. Clearing firms will see the rebate credits as a separate item on monthly CBOE billing statements.
The $2,000 fee cap applies to CBOE transaction fees and excludes any marketing fee
assessments. As you are aware, certain marketing fees are rebated when a MarketMaker trades with another Market- Maker. This Market-Maker-to-Market-Maker marketing
fee rebate is processed separately.
As a reminder, the Exchange also has a dividend spreads $2,000 fee cap pilot program in
effect until September 1, 2005. Please see Regulatory Circular RG05-36 for details.
Please contact Don Patton at 312-786-7026 or patton@cboe.com if you have any questions.
Regulatory Circular RG05-54
Date:
May 31, 2005
To:
The Membership
From:
Financial Planning Committee
Subject:
Fee Reductions for June 2005
CBOE has averaged approximately 1,555,000 contracts per day (CPD) during the period
July 2004 through May 2005.
Per the Prospective Fee Reduction Program, Market-Maker and DPM transaction fees
and floor brokerage fees will be reduced by 20% per contract from standard rates during
June 2005 (May 2005 discounts were also 20%).
Fee
Equities Market-Maker Trans. Fee
Equities DPM Trans. Fee
QQQQ, SPY & Indexes
Mrkt.-Maker/DPM Trans. Fee
Floor Brokerage Fee
Standard
Rate
June ‘05
Rate
22 cents
12 cents
(1)24 cents
17.6 cents
9.6 cents
(1) 19.2 cents
4 cents
3.2 cents
(1) Above rates exclude a 10 cents license fee surcharge for the following products:
•
Dow Jones indexes
•
Mini Nasdaq 100 (MNX)
•
Nasdaq 100 (NDX)
•
Russell 2000 cash-settled index (RUT)
Please call Ermer Love (312-786-7032) or Don Patton (312-786-7026) if you have any
questions.
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June 8, 2005, Volume RB16, Number 23
Regulatory Circulars
continued
Regulatory Circular RG05-55
To:
Membership
From:
The Equity Options Procedures Committee
Date:
June 1, 2005
Re:
Firm and BD orders in the Complex Order Book (COB)
Beginning June 3, 2005, CBOE will allow Firm and BD orders to be included in the CBOEdirect
Complex Order Book (COB) in selected Hybrid classes where the COB has been activated.
As with the non-strategy book, customer orders will have priority over the Firm and BD
orders that are entered. Complex orders will continue to route initially to PAR where the PAR
broker will represent the orders in open outcry. If an order is not filled in open outcry, the PAR
broker may use the <BOOK> button to re-route qualifying DAY and GTC orders to the COB.
EOPC has determined that qualifying complex orders that are not executed in open outcry
are to be booked by the PAR broker within 30 seconds of PAR receipt.
Complete text from Regulatory Circular RG05-43, is included on the reverse side of this
circular for reference in regard to COB order handling.
General questions regarding the COB may be directed to Mike Trees at (312)786-8408,
Anthony Montesano at (312)786-7365, or the Help Desk at (312)786-7100.
***REISSUE JUNE 1, 2005***
Regulatory Circular RG05-43
From: Equity Options Procedures Committee
Date:
April 28, 2005
Re:
Execution of Complex Orders and Routing of Orders to the Complex Order
Book
On April 1, 2005, CBOE implemented the CBOEdirect Complex Order Book (COB) in selected Hybrid classes. On April 29, 2005, rollout will be expanded to each trading crowd,
with between 1-3 classes in each station being included. Members and staff will discuss the
details of the COB with each crowd, and signs will be posted in each crowd identifying the
classes in which the COB will be activated.
As established by the Equity Options Procedures Committee (EOPC), complex orders will
continue to route initially to PAR where the PAR broker will represent the orders in open
outcry. If an order is not filled in open outcry, the PAR broker may use the <BOOK> button
to re-route qualifying DAY and GTC orders to the COB. EOPC has determined that qualifying complex orders that are not executed in open outcry are to be booked by the PAR broker
within 30 seconds of PAR receipt.
Which orders qualify for booking?:
1)
Only customer, Firm, and BD orders may be booked.
2)
Orders with a ratio of 1:1, 1:2, 1:1:1, 1:2:1 and 1:1:1:1 are bookable. Other
ratios are not currently bookable.
3)
Orders partially executed/endorsed on PAR are not bookable.
4)
Market orders are not bookable.
5)
Orders with a stock leg are not bookable.
June 8, 2005, Volume RB16, Number 23
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Regulatory Circulars
continued
Regulatory Circular RG05-43 continued
Once in the COB, the order will electronically execute if:
1)
the individual series quotes line up to make the resting order marketable;
2)
a Hybrid quoter submits a strategy quote or I-order that touches the resting order;
3)
the PAR broker books an opposing order that touches the resting order.
Through the Hybrid API, CBOEdirect provides functionality for quoters to both read the
resting COB market and send strategy quotes or I-orders to trade against orders in the
COB. The API specifications are available on the CBOE web-site at www.cboe.com.
Those with proprietary systems who are interested in this API functionality should contact
Mike Trees at (312)786-8408, Anthony Montesano at (312)786-7365 or the API Client Relations group at (312)786-7300. Those quoters using a third-party vendor as their autoquote provider should contact their vendor for a status.
CBOEdirect workstations are available in each crowd where the COB has been activated.
These workstations may be used by brokers and Market-Makers to display COB orders on
a class-by-class basis. Later this summer, PAR will be modified to display COB orders for
strategies that match a PAR order.
General questions regarding the COB may be directed to Mike Trees at (312) 786-8408,
Anthony Montesano at (312)786-7365 or the Help Desk at (312)786-7100.
Rule Changes,
Interpretations
and Policies
PROPOSED RULE CHANGE
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 change(s)
with the Securities and Exchange Commission (“SEC”). Copies of the rule change filing(s)
are available at www.cboe.com/legal/submittedsecfilings.aspx. 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-2005-43
Expanded Split Price Priority Rule
On May 25, 2005, the Exchange filed Rule Change File No. SR-CBOE-2005-43, which filing
proposes to expand the split price priority rule to allow a member to receive priority for both
executions that make up a split price transaction when the disseminated quotation width is
at one minimum trading increment, regardless of whether there are resting orders at equivalent prices on both sides of the book. Any questions regarding the 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].
Rule 6.47. Priority on Split-Price Transactions Occurring in Open Outcry
Rule 6.47. (a) Purchase or sale priority. If a member purchases (sells) one or more
option contracts of a particular series at a particular price or prices, he shall, at the
next lower (higher) price at which a member other than the Board Broker or Order
Book Official is bidding (offering), have priority in purchasing (selling) up to the
equivalent number of option contracts of the same series that he purchased (sold)
at the higher (lower) price or prices, but only if his bid (offer) is made promptly and
the purchase (sale) so effected represents the opposite side of a transaction with
the same order or offer (bid) as the earlier purchase or purchases (sale or sales).
This paragraph only applies to transactions effected in open outcry.
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June 8, 2005, Volume RB16, Number 23
Rule Changes,
Interpretations and
Policies continued
SR-CBOE-2005-43 continued
(b) Purchase or sale priority for orders of [100] 50 contracts or more. If a member
purchases (sells) [fifty] twenty-five or more option contracts of a particular series at
a particular price or prices, he shall, at the next lower (higher) price have priority in
purchasing (selling) up to the equivalent number of option contracts of the same
series that he purchased (sold) at the higher (lower) price or prices, but only if his
bid (offer) is made promptly and the purchase (sale) so effected represents the
opposite side of a transaction with the same order or offer (bid) as the earlier purchase or purchases (sale or sales). Further, in instances where the Exchange’s
disseminated quotation width is one minimum increment (i.e. 5 cents or 10 cents),
both executions that constitute the member’s split price transaction shall have
priority at such prices. The appropriate Exchange committee may increase the
“minimum qualifying order size” above [100] 50 contracts for all products under its
jurisdiction. Announcements regarding changes to the minimum qualifying order
size shall be made via Regulatory Circular. This paragraph only applies to transactions effected in open outcry.
(c) Two or more members entitled to priority. If the bids or offers of two or more
members are both entitled to priority in accordance with paragraph (a) or paragraph
(b), it shall be afforded them insofar as practicable, on a pro-rata basis.
... Interpretations and Policies:
.01 No Change.
June 8, 2005, Volume RB16, Number 23
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