June 10, 2005
Exchange
Bulletin
Volume 33, Number 23
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 10, 2005
CLASS
CBOE
BID
$506,000.00
OFFER
$550,000.00
LAST SALE AMOUNT
LAST SALE ATE
$520,000.00
June 9, 2005
CBOT FULL MEMBERSHIP
CLASS
BID
OFFER
LAST SALE AMOUNT
LAST SALE DATE
With CBOE
Exercise Right
$1,720,000.00
$1,740,000.00
$1,720,000.00
June 8, 2005
Without CBOE
Exercise Right
__
__
__
__
CBOE Exercise
Right
$101,000.00
$160,000.00
$101,500.00
June 9, 2005
CBOE MEMBERSHIP SALES AND TRANSFERS
From
Justin Steinberg
Revcon Inc.
Instinet Clearing Services Inc.
To
Robert I. Steinberg
EWT LLC
Arclight Securities LLC
Price/Transfer
Transfer
$515,000.00
$520,000.00
Date
6/8/05
6/9/05
6/9/05
Page 2
June 10, 2005
Volume 33, Number 23
Chicago Board Options Exchange
MEMBERSHIP INFORMATION FOR 6/2/05 THROUGH 6/8/05
MEMBERSHIPAPPLICATIONS RECEIVED FOR
WHICH A POSTING PERIOD IS REQUIRED
Individual Membership Applicants
Date Posted
Carol Jane White, Lessor
1120 Raleigh Rd.
Glenview, IL 60025
6/6/05
Member Organization Applicants
Date Posted
QCL I Trading LLC
Luke O’Donnell, CBT-RF
Paul Stone, Nominee
6626 N. Nokomis
Lincolnwood, IL 60712
Luke G. O’Donnell – Managing Member
Paul Stone - Member
6/2/05
MEMBERSHIP LEASES
MEMBERSHIP TERMINATIONS
Individual Members
CBT Exercisers:
Termination Date
Luis A. Gonzalez (LUI)
6N326 Neva Terrace
Itasca, IL 60143
6/2/05
CBT Registered For:
Termination Date
Justin J. Range (JRJ)
Cornerstone Trading, LLC
440 S. LaSalle, Suite 2500
Chicago, IL 60605
6/6/05
Nominee(s) / Inactive Nominee(s):
Termination Date
Jeffrey D. Ream (REA)
Susquehanna Investment Group
175 W. Jackson – Ste. 1700
Chicago, IL 60604
6/6/05
Terrence J. McGovern (TJM)
Prospect Trading LLC
2S409 Madison St.
Wheaton, IL 60187
6/6/05
Kaj Michael Gartz (KAJ)
Susquehanna Investment Group
175 W. Jackson, #1700
Chicago, IL 60604
6/6/05
Brian R. Gelber (GEL)
Gelber Securities, LLC
141 W. Jackson - Ste. 2150
Chicago, IL 60604
6/6/05
J. Philip Zwick (ZWK)
Prospect Trading LLC
10 E. Ontario, #4508
Chicago, IL 60611
6/6/05
New Leases
Effective Date
Lessor: Anthony M. Mareno
Lessee: PFTC LLC
Rate:
1.00%
Term: Monthly
6/2/05
Lessor: Joseph Ianiro
Lessee: McGowan Investors, LP
Rate:
1.125%
Term: Monthly
6/3/05
Lessor: TRO Trading Group LLC
Lessee: Holland Trading House, LLC
Rate:
1.00%
Term: Monthly
6/3/05
Lessor: Oppenheimer & Co., Inc.
Lessee: DRO WST Trading LLC
Rate:
1.125%
Term: Monthly
6/6/05
Lessor: Mary J. Komparda
Lessee: Third Millennium Trading, LLC
Rate:
1.125%
Term: Monthly
6/8/05
Lessor: Maria A. Mauro
Lessee: Sparta Group Of Chicago, LP
Shaun M. Williams, NOMINEE
Rate:
1.125%
Term: Monthly
6/8/05
Ian M. McCreery (IAN)
Susquehanna Investment Group
175 W. Jackson Blvd., Ste. 1700
Chicago, IL 60604
6/6/05
Lessor: Robert I. Steinberg
Lessee: Vintage Capital LLC
James L. McLaughlin, NOMINEE
Rate:
1.00%
Term: Monthly
6/8/05
John P. Finnegan (JPF)
Susquehanna Investment Group
175 W. Jackson, Ste. 1700
Chicago, IL 60604
6/6/05
Terminated Leases
Termination Date
6/8/05
Lessor: Oppenheimer & Co., Inc.
Lessee: Bear Wagner Specialists LLC
6/3/05
Daniel J. Reinert (BZT)
Citadel Derivatives Group LLC
131 S. Dearborn, 37th Floor
Chicago, IL 60603
Lessor: Credit Suisse First Boston LLC
Lessee: Gelber Securities, LLC
Brian R. Gelber (GEL), NOMINEE
6/6/05
Michael R. Moore (CBY)
Wolverine Trading LLC
PO Box 14558
Chicago, IL 60614
6/8/05
Lessor: Justin Steinberg
6/8/05
Lessee: Vintage Capital LLC
James L. McLaughlin (JMZ), NOMINEE
Lessor: Maria A. Mauro
Lessee: Prospect Trading LLC
6/8/05
Lessor: Mary J. Komparda
Lessee: Everest Trading, LLC
6/8/05
Member Organizations
Lessee(s):
Termination Date
Gelber Securities, LLC
141 W. Jackson, 2150 Annex
Chicago, IL 60604
6/6/05
Page 3
June 10, 2005
Volume 33, Number 23
Chicago Board Options Exchange
Non Member Customer Business:
Termination Date
Terminated Participants Acronym
Termination Date
Gelber Securities, LLC
141 W. Jackson, 2150 Annex
Chicago, IL 60604
6/6/05
Terrence J. McGovern
QRP
6/6/05
Kaj Michael Gartz
QGS
6/6/05
Kaj Michael Gartz
QZT
6/6/05
J. Philip Zwick
QGR
6/6/05
J. Philip Zwick
QPV
6/6/05
J. Philip Zwick
QRP
6/6/05
Ian M. McCreery
QNA
6/6/05
Ian M. McCreery
QEW
6/6/05
Ian M. McCreery
QFS
6/6/05
Ian M. McCreery
QGS
6/6/05
Ian M. McCreery
QIG
6/6/05
Ian M. McCreery
QLO
6/6/05
Ian M. McCreery
QPX
6/6/05
Joseph C. Merrick (JCM)
6/2/05
Cutler Group, LP
737 W. Washington Blvd., #1204
Chicago, IL 60661
Type of Business to be Conducted: Market Maker
Ian M. McCreery
QYH
6/6/05
Ian M. McCreery
QYS
6/6/05
Ian M. McCreery
QZT
6/6/05
Elizabeth A. Resnick (LZD)
6/2/05
Red Cedar Trading LLC
535 N. Michigan Ave.
Chicago, IL 60605
Type of Business to be Conducted: Market Maker/Floor Broker
Ian M. McCreery
QEW
6/6/05
Ian M. McCreery
QIS
6/6/05
Ian M. McCreery
QJY
6/6/05
Shaun M. Williams (AUS)
6/8/05
Sparta Group of Chicago, LP
440 S. LaSalle – Ste. 2101
Chicago, IL 60604
Type of Business to be Conducted: Market Maker
Ian M. McCreery
QMD
6/6/05
Ian M. McCreery
QMP
6/6/05
Ian M. McCreery
QNY
6/6/05
Member Organizations
Ian M. McCreery
QPN
6/6/05
Ian M. McCreery
QPO
6/6/05
Ian M. McCreery
QSM
6/6/05
Ian M. McCreery
QUT
6/6/05
Ian M. McCreery
QVA
6/6/05
Daniel J. Reinert
CIT
6/8/05
QWV
6/8/05
EFFECTIVE MEMBERSHIPS
Individual Members
CBT Registered For:
Effective Date
Chad R. Gramann (CEG)
6/3/05
Harrison Trading Group, LLC
230 S. LaSalle – Ste. 688
Chicago, IL 60604
Type of Business to be Conducted: Market Maker
Lessor(s):
Effective Date
Robert I. Steinberg
1139 Lathrop Ave.
River Forest, IL 60305
Type of Business to be Conducted:
6/8/05
Nominee(s) / Inactive Nominee(s):
Effective Date
CBT Registered For:
Effective Date
Maras Trading LLC
6/8/05
440 S. LaSalle, Suite 1822
Chicago, IL 60605
Type of Business to be Conducted: Market Maker
JOINT ACCOUNTS
New Participants
Acronym
Effective Date
Michael R. Moore
Elizabeth A. Resnick
QLJ
6/2/05
CHANGES IN MEMBERSHIP STATUS
Duncan Robinson
QYW
6/7/05
Individual Members
Shaun M. Williams
QUB
6/8/05
Terminated Participants Acronym
Termination Date
Jeffrey D. Ream
QGS
6/6/05
Jeffrey D. Ream
QZT
6/6/05
Terrence J. McGovern
QGR
6/6/05
Terrence J. McGovern
QPV
6/6/05
Effective Date
Jason S. Maras
6/8/05
From:
CBT Registered For Geneva Stock, LLC; Market Maker
To:
CBT Registered For Maras Trading LLC; Market Maker
Justin Steinberg
6/8/05
From:
Lessor/CBT Registered For McLaughlin Capital, LLC;
Market Maker
To:
CBT Registered For McLaughlin Capital, LLC; Market
Maker
Page 4
June 10, 2005
Member Organizations
Volume 33, Number 23
Effective Date
Third Millennium Trading, LLC
6/8/05
From:
Lessee; Associated with a Market Maker
To:
Lessee; Associated with a Market Maker/Remote
Market Maker
DRO WST Trading, LLC
6/6/05
From:
Lessee/Member Organization Affiliated with a CBTRegistered For; Associated with a Market Maker/Floor
Broker
To:
Lessee/Member Organization Affiliated with a CBTRegistered For; Associated with a Market Maker/Floor
Broker/Remote Market Maker
PFTC LLC
6/2/05
From:
Lessee; Associated with a Market Maker
To:
Lessee; Associated with a Market Maker/Remote
Market Maker
Chicago Board Options Exchange
MEMBER ADDRESS CHANGES
Individual Members
Effective Date
Michael P. Strang
13404 Kerr Street
Plainfield, IL 60544
6/3/05
Kareem Khoury
1730 N. Clark St., Apt. 3405
Chicago, IL 60614
6/6/05
Member Organizations
Effective Date
CMZ Trading, LLC
141 W. Jackson, Ste. 3310
Chicago, IL 60604
6/7/05
POSITION LIMIT CIRCULARS
Pursuant to Exchange Rule 4.11, the Exchange issued the below listed Position Limit Circulars on June 8, 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 PL05-25
June 8, 2005
Magnum Hunter Resources, Inc. (“MHR & MHH”)
merger completed with Cimarex Nevada Acquisition Co.,
a wholly owned subsidiary of Cimarex Energy Co. (“XEC”)
Effective Date June 8, 2005
Page 5
June 10, 2005
Volume 33, Number 23
Chicago Board Options Exchange
RESEARCH CIRCULARS
The following Research Circulars were distributed between June 6 and June 9, 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 #RS05-377
June 6, 2005
iShares Russell 2000 Value Index Fund (“IWN”)
3-for-1 Fund Share Split
Ex-Distribution Date: June 9, 2005
Research Circular #RS05-378
June 6, 2005
iShares MSCI South Africa Index Fund (“EFE/EFA”)
3-for-1 Fund Share Split
Ex-Distribution Date: June 9, 2005
Research Circular #RS05-379
June 7, 2005
Advanced Medical Optics, Inc. (“AVO”)
Stock and Option Symbol Change to (“EYE”)
Effective Date: June 8, 2005
Research Circular #RS05-380
June 7, 2005
iShares Russell 2000 Index Fund
(“IWM/IWT/DIW/IOW/WOU/WOI/WYV/OJM/VAJ”)
2-for-1 Fund Share Split
Ex-Distribution Date: June 9, 2005
Research Circular #RS05-381
June 7, 2005
VISX Incorporated (“EYE/adj. EYC”)
Determination of Cash-in-Lieu Amount
Research Circular #RS05-382
June 7, 2005
Magnum Hunter Resources, Inc.
(“MHR & adj. MHH”) Merger COMPLETED
with Cimarex Energy Co. (“XEC”)
Research Circular #RS05-383
June 7, 2005
PEC Solutions, Inc. (“PECS/PQD”):
Merger Completed — Cash Settlement
Research Circular #RS05-384
June 7, 2005
Concord Communications, Inc. (“CCRD/UCD”) Merger COMPLETED with Computer Associates (“CA/WOA/VCA”)
Research Circular #RS05-385
June 7, 2005
ADC Telecommunications, Inc. (“ADCTD/TLQ & adj. YZR”)
Underlying Symbol Change to “ADCT”
Effective Date: June 8, 2005
Research Circular #RS05-386
June 8, 2005
United Technologies Corporation (“UTX/WXU/VXU”)
2-for-1 Stock Split
Ex-Distribution Date: June 13, 2005
Research Circular #RS05-390
June 8, 2005
NeighborCare, Inc. (“NCRX/QNY”)
Tender Offer FURTHER EXTENDED by Omnicare, Inc. (“OCR/
YZD”)
Research Circular #RS05-391
June 8, 2005
Emmis Communications Corporation Class A (“EMMS/QMJ/
WCQ”)Partial Self Tender Offer
Research Circular #RS05-392
June 9, 2005
Toys “R” Us, Inc. (“TOY/WYT/VTY”) Proposed Merger
with Global Toys Acquisition, LLC
Research Circular #RS05-394
June 9, 2005
*****UPDATE*****UPDATE*****UPDATE*****
Caesars Entertainment, Inc. (“CZR/ODL/YVK”) Proposed
Election Merger
with Harrah’s Entertainment, Inc. (“HET/WBI/VKH”)
Research Circular #RS05-395
June 9, 2005
Taiwan Semiconductor Manufacturing Company Ltd.
(“TSM/OFO/WBB & adj. WOW/VWK”)
4.99971% ADS Dividend
Ex-Distribution Date: June 13, 2005
June 15, 2005
Volume RB16, Number 24
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 RG05-56
To:
Members and Member Firms
From: Index Market Performance Committee
Date:
June 9, 2005
Re:
Minimum Market Share Requirements
CBOE Rule 8.60(c) gives the appropriate Market Performance Committee the authority to,
among other things, relocate or reallocate option classes to other trading crowds upon
finding after a hearing that market participants have failed to satisfy their market responsibilities. In evaluating and determining whether market participants have failed to satisfy
their market responsibilities, the Index Market Performance Committee (“IMPC”) may consider any relevant information, including statistical measures of performance and other
factors and data.
The IMPC has determined that as part of its evaluation, in addition to considering other
relevant measures of performance, it will give considerable weight to a trading crowd’s
market share. In this respect, the IMPC will consider whether the trading crowd has attained
an average market share of at least parity (parity is defined as 50% market share in dual
traded classes, 33% in triple traded classes, 25% in quadruple traded classes, 20% in
quintuple traded classes, and 16.67 in sextuple traded classes), as measured month-tomonth over a rolling three-month period. When considered with other relevant information,
the failure to attain parity over such time frame may trigger a performance review by the
IMPC and may result in remedial action after a hearing as set forth under Exchange Rule
8.60, including, but not limited to the reallocation of option classes to other trading crowds.
The Committee may consider as mitigating or aggravating factors the increase or decrease
in market share during the previous quarter, as well as AQWA scores and historical data.
In order to assist each DPM and trading crowd assess their market share, the Committee
will distribute to each DPM on a monthly basis statistics regarding market share in the
classes traded at the DPM’s station.
The Committee is committed to assisting all DPMs to meet their market share targets by
working with the DPMs and crowds to heighten their awareness of their market share levels
and to develop solid business plans that would result in meeting market share objectives.
If you have any questions regarding the above, please contact either Dennis Carta at 10782
or Daniel Hustad at (312) 786-7715 or any member of the IMPC.
Rule Changes,
Interpretations
and Policies
APPROVED RULE CHANGE(S)
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 on the CBOE public website at www.cboe.com/
legal/effectivefiling.aspx.
The effective date of the rule change is the date of approval unless otherwise noted.
SR-CBOE-2004-54
Margin Rule Change
On May 31, 2005, the SEC approved Rule Change File No. SR-CBOE-2004-54, which filing
eliminates a provision in Rule 12.3 that disallows favorable margin treatment on stock
transactions initiated by options Market-Makers to hedge an option position if the exercise
price of the option is more than two standard exercise price intervals away from the price of
the stock (Securities Exchange Act Release No. 51766, 70 FR 33230 (June 7, 2005)). Any
questions regarding the rule change may be directed to Jaime Galvan, Legal Division, at
312-786-7058. The text of the amended rules is set forth below. New language is italicized.
Rule 12.3 (a) through (e) – No change.
(f) Market-Maker and specialist accounts.
(1) Definitions. For purposes of this section (f), the following terms shall
have the meanings specified below.
(A) The term “related instrument” within an option class or product group
means any related derivative product, including security futures contracts,
that meets the offset level requirements for product groups under Rule
15c3-1 of the Exchange Act, or any applicable SEC staff interpretations
or no-action positions (hereinafter referred to as SEC Rule 15c3-1).
(B) The term “product group” means two or more option classes, related
instruments, and qualified stock baskets for which it has been determined that a percentage of offsetting profits may be applied to losses in
the determination of net capital as set forth in SEC Rule 15c3-1.
(C) The term “option class” refers to all option contracts covering the
same underlying instrument.
(D) The term “underlying instrument” refers to long and short positions
covering the same security, or a security which is exchangeable for or
convertible into the underlying security within a period of 90 days. The
term underlying instrument shall not be deemed to include securities options, futures contracts, options on futures contracts, security futures
contracts, qualified stock baskets, or unlisted instruments.
(E) The term “qualified stock basket” shall have the meaning as defined in
SEC Rule 15c3-1.
(F) The term “net liquidating equity” shall mean the sum of positive cash
balances and long securities positions less negative cash balances and
short securities positions held in the accounts.
(2) The following positions of members may be carried upon a margin
basis that is satisfactory to the member and the carrying broker or dealer:
RB2
June 15, 2005, Volume RB16, Number 24
Rule Changes,
Interpretations and
Policies continued
SR-CBOE-2004-54 continued
(A) positions in which the member makes a market and permitted offset
transactions as defined below and
(B) positions in security futures contracts that qualify for exclusion from
the margin requirements of SEC and Commodity Futures Trading Commission (“CFTC”) regulations pursuant to SEC Rule 400(c)(2)(v) under the
Exchange Act and CFTC Rule 41.42(c)(2)(v), and any permitted offset
transactions designated by the exchange or association upon which the
member trades the security futures contract.
Notwithstanding the other provisions of this paragraph (f), a member organization may clear and carry the Market-Maker permitted offset positions
of one or more registered specialists, registered Market-Makers, or Designated Primary Market-Makers pursuant to the rules of a national securities
exchange (all of which are deemed specialists for all purposes under the
Exchange Act) (hereinafter referred to as “Market-Maker(s)”) upon a margin basis satisfactory to the concerned parties. The amount of any deficiency between the equity maintained by the Market-Maker and the haircuts specified in SEC Rule 15c3-1 shall be considered as a deduction
from net worth in the net capital computation of the carrying broker or
dealer.
(3) Permitted Offset Transactions.
(A) For purposes of this subparagraph (f)(3), a permitted offset position
means, in the case of an option in which a Market-Maker makes a market,
a position in the underlying instrument or other related instrument, and in
the case of other securities in which a Market-Maker makes a market, a
position in options overlying the securities in which a Market-Maker makes
a market, if the account holds the following permitted offset positions:
(i) A long position in the underlying instrument or security futures
contract offset by a short option position;
(ii) A short position in the underlying instrument or security futures contract offset by a long option position;
(iii) A stock position resulting from the assignment of a MarketMaker short option position or delivery in respect of a short security futures contract;
(iv) A stock position resulting from the exercise of a Market-Maker
long option position or taking delivery in respect of a long security
futures contract;
(v) A net long position in a security (other than an option) in which
a Market-Maker makes a market;
(vi) A net short position in a security (other than an option) in
which the Market-Maker makes a market; or
(vii) An offset position as defined in SEC Rule 15c3-1, including
its appendices, or any applicable SEC staff interpretation or noaction position.
June 15, 2005, Volume RB16, Number 24
RB3
Rule Changes,
Interpretations and
Policies continued
SR-CBOE-2004-54 continued
Permitted offset transactions must be effected for market-making purposes such as hedging, risk reduction, rebalancing of positions, liquidation, or accommodation of customer orders, or other similar Market-Maker
purpose. The options Market-Maker must be able to demonstrate compliance with this provision.
For purposes of this subparagraph (f)(3), the term “overlying option” means
a put option purchased or a call option written against a long position in
an underlying instrument, or a call option purchased or a put option written against a short position in an underlying instrument.
(B) Reserved
(C) (1) Reserved
(2) For any member which acts as a Market-Maker on the Exchange, the
carrying member organization may combine all Market-Maker accounts
in which the Market-Maker or its nominee(s) participates, with the exception of joint accounts in which the Market-Maker or its nominee are not
the sole participants, for purpose of computing its requirements as prescribed by SEC Rule 15c3-1.
(3) On any business day on which positive net liquidating equity is not
maintained in the account(s), the carrying member organization must
make a call to the member for additional equity at least equal to the
deficit and must notify the Exchange’s Department of Financial Compliance of the deficit. The carrying member organization may extend no
further credit in the account(s) until the account(s) maintains a positive
net liquidating equity and, if the member organization’s call for additional
equity is not met, steps should be taken promptly to liquidate the positions in the account(s). If the deficit is not resolved by noon of the following business day the carrying member organization must send telegraphic
notice to the Exchange as well as the regional and national offices of the
Securities and Exchange Commission. However, nothing in this subparagraph (C) shall prohibit the carrying firm from effecting hedging transactions in the deficit account with the prior written approval of the carrying
firm’s SEC designated examining authority.
(4) In the case of a joint account carried by a member organization for a
Market-Maker or specialist in which the Member Organization participates, the margin deposited by the other participants may be in any
amount which is mutually satisfactory.
(g) through (k) – No change.
…Interpretations and Policies
.01 - .19 – No change.
RB4
June 15, 2005, Volume RB16, Number 24
Rule Changes,
Interpretations and
Policies continued
SR-CBOE-2005-21
NBBO and Linkage
On May 25, 2005, the SEC approved Rule Change File No. SR-CBOE-2005-21, which filing
amends CBOE Rule 6.13 relating to the calculation of the National Best Bid/Offer (NBBO).
Under the amended rule, the NBBO will not include the quotes from a particular market
when that market has disconnected from the Linkage Hub and is not accepting linkage
orders. (Securities Exchange Act Release No. 51743, 70 FR 32386 (June 2, 2005)). Any
questions regarding the rule change may be directed to Angelo Evangelou, Legal Division,
at 312-786-7464. The text of the amended rules is set forth below. New language is italicized.
Rule 6.13 - CBOE Hybrid System’s Automatic Execution Feature
(a)-(d) No change.
(e) Removal of Unreliable Quotes
Under circumstances where two Floor Officials determine that quotes from one or
more particular markets in one or more classes of options are not reliable, the Floor
Officials may direct the senior person in charge of the Exchange’s Control Room to
exclude the unreliable quotes from the determination of the NBBO in the particular
option class(es).
(i) Two Floor Officials may determine quotes in one or more particular options classes
in a market are not reliable under any of the following circumstances:
(A) QUOTES NOT FIRM: A market’s quotes in a particular options class are not
firm based upon direct communication to the Exchange from the market or the
dissemination through OPRA of a message indicating that disseminated quotes
are not firm; or
(B) CONFIRMED QUOTE PROBLEMS: A market has directly communicated to
the Exchange or otherwise confirmed that the market is experiencing systems or
other problems affecting the reliability of its disseminated quotes. In all such cases,
the situation will be documented by the Exchange Control Room and reported to
regulatory authorities at the appropriate market; or
(C) WITHDRAWAL FROM LINKAGE: A market has ceased to accept orders through
the Intermarket Options Linkage.
(ii) In all cases where floor officials exclude a market or any of its quotes from the
determination of the NBBO due to quote unreliability, the Exchange Control Room
will promptly notify the affected market of the action, continue to monitor the reliability of the excluded quotes in consultation with Floor Officials, and maintain
records showing the date, time, duration, and reasons for each such action, as well
as the identity of the Floor Officials who authorized the action. Any determination to
exclude a market or any of its quotes from the determination of the NBBO pursuant
to paragraph (e)(i) above will expire at the end of the trading day, or at such time as
the quotes are confirmed by the market to be reliable again —whichever occurs
first. Exclusion of a market or its quotes from the determination of the NBBO will be
reported to Exchange member firms.
June 15, 2005, Volume RB16, Number 24
RB5
Rule Changes,
Interpretations and
Policies continued
SR-CBOE-2005-37
$1 Strike Price Pilot Program
On May 31, 2005, the SEC approved Rule Change File No. SR-CBOE-2005-37, which filing
extends the existing CBOE $1 Strike Price Pilot Program for one year to June 5, 2006
(Securities Exchange Act Release No. 51717, 70 FR 30160 (May 25, 2005)). Any questions regarding the rule change may be directed to Jim Flynn, Legal Division, at 312-7867070. The text of the amended rules is set forth below. New language is italicized.
Rule 5.5 (a) – (c)
No Change.
…Interpretations and Policies:
.01 The interval between strike prices of series of options on individual stocks
may be:
a. $1.00 or greater (“$1 strike prices”) provided the strike price is $20.00 or less,
but not less than $3. The listing of $1 strike prices shall be limited to options
classes overlying no more than 5 individual stocks (“The $1 Strike Pilot Program”)
as specifically designated by the Exchange. The Exchange may list $1 strike
prices on any other option classes if those classes are specifically designated by
other securities exchanges that employ a similar $1 Strike Pilot Program under
their respective rules.
To be eligible for inclusion into the $1 Strike Pilot Program, an underlying stock
must close below $20 in its primary market on the previous trading day. After a
stock is added to the $1 Strike Pilot Program, the Exchange may list $1 strike
prices from $3 to $20 that are no more than $5 from the closing price of the
underlying on the preceding day. For example, if the underlying stock closes at
$13, the Exchange may list strike prices from $8 to $18. The Exchange may not
list series with $1.00 intervals within $0.50 of an existing $2.50 strike price (e.g.,
$12.50, $17.50) in the same series. Additionally, the Exchange may not list longterm option series (“LEAPS®”) at $1 strike price intervals for any option class
selected for the $1 Strike Pilot Program.
A stock shall remain in the $1 Strike Pilot Program until otherwise designated by
the Exchange. The $1 Strike Pilot Program shall expire on June 5, 2006.
b. – d.
No Change.
.02 - .08
No Change.
SR-CBOE-2005-32
RMM Transaction Fees
On May 26, 2005, the Exchange filed Rule Change File No. SR-CBOE-2005-32, which
filing amends the Fee Schedule to establish RMM transaction fees and to include in the
current fixed fee program a fixed fee alternative for RMM transaction fees (Securities
Exchange Act Release No. 51746, 70 FR 32855 (June 6, 2005)). Any questions regarding
the 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 http://www.cboe.com/AboutCBOE/FeeSchedule.aspx.
SR-CBOE-2005-33
Class Quoting Limits
On May 19, 2005, the SEC approved Rule Change File No. SR-CBOE-2005-33, which filing
increases Class Quoting Limits (“CQLs”). Specifically, the Exchange increases the CQLs
in these products by the following amounts: AAPL increased by 4; MNX increased by 4;
QQQQ increased by 2; and GOOG increased by 3 (Securities Exchange Act Release No.
51720, 70 FR 30164 (May 25, 2005)). Any questions regarding the rule change may be
directed to Greg Hoogasian, Legal Division, at 312-786-7031.
RB6
June 15, 2005, Volume RB16, Number 24
Rule Changes,
Interpretations and
Policies continued
SR-CBOE-2005-35
RMM Inactivity Fee
On May 18, 2005, the Exchange filed Rule Change File No. SR-CBOE-2005-35, which filing
eliminates the RMM inactivity fee (Securities Exchange Act Release No. 51705, 70 FR
30158 (May 25, 2005)). Any questions regarding the rule change may be directed to Greg
Hoogasian, Legal Division, at 312-786-7031. The text of the amended Fee Schedule is
available from the Legal Division, or can be accessed online at http://www.cboe.com/
AboutCBOE/FeeSchedule.aspx.
EFFECTIVE-ON-FILING RULE CHANGE(S)
The following rule filing(s) were submitted to the SEC “effective-on-filing,” and have taken
effect pursuant to Section 19(b)(3) of the Securities Exchange Act. They will remain in
effect barring further action by the SEC within 60 days after their publication in the Federal
Register. Copies are available on the CBOE public website at www.cboe.com/legal/
effectivefiling.aspx.
SR-CBOE-2005-45
DPM Participation Entitlement
On June 6, 2005, the Exchange filed Rule Change File No. SR-CBOE-2005-45, which filing
proposes to amend CBOE rules regarding the DPM participation entitlement for orders
specifying a Preferred DPM. Any questions regarding the rule change may be directed to
Angelo Evangelou, Legal Division, at 312-786-7464. The text of the proposed rule amendments is set forth below. Proposed new language is underlined. Proposed deleted language
is [stricken out].
Rule 8.87 Participation Entitlements of DPMs and e-DPMs
(a) Subject to the review of the Board of Directors, the MTS Committee may establish from time to time a participation entitlement formula that is applicable to all
DPMs.
(b) The participation entitlement for DPMs and e-DPMs (as defined in Rule 8.92)
shall operate as follows:
(1) Generally.
(i) To be entitled to a participation entitlement, the DPM/e-DPM must be quoting at the best bid/offer on the Exchange.
(ii) A DPM/e-DPM may not be allocated a total quantity greater than the quantity that the DPM/e-DPM is quoting at the best bid/offer on the Exchange.
(iii) The participation entitlement is based on the number of contracts remaining
after all public customer orders in the book at the best bid/offer on the Exchange have been satisfied.
(2) Participation Rates applicable to DPM Complex. The collective DPM/e-DPM
participation entitlement shall be: 50% when there is one Market-Maker also quoting at the best bid/offer on the Exchange; 40% when there are two Market-Makers
also quoting at the best bid/offer on the Exchange; and, 30% when there are three
or more Market-Makers also quoting at the best bid/offer on the Exchange.
June 15, 2005, Volume RB16, Number 24
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Rule Changes,
Interpretations and
Policies continued
SR-CBOE-2005-45 continued
(3) Allocation of Participation Entitlement Between DPMs and e-DPMs. The participation entitlement shall be as follows: If the DPM and one or more e-DPMs are
quoting at the best bid/offer on the Exchange, the e-DPM participation entitlement
shall be one-half (50%) of the total DPM/e-DPM entitlement and shall be divided
equally by the number of e-DPMs quoting at the best bid/offer on the Exchange.
The remaining half shall be allocated to the DPM. If the DPM is not quoting at the
best bid/offer on the Exchange and one or more e-DPMs are quoting at the best
bid/offer on the Exchange, then the e-DPMs shall be allocated the entire participation entitlement (divided equally between them). If no e-DPMs are quoting at
the best bid/offer on the Exchange and the DPM is quoting at the best bid/offer on
the Exchange, then the DPM shall be allocated the entire participation entitlement. If only the DPM and/or e-DPMs are quoting at the best bid/offer on the
Exchange (with no Market-Makers at that price), the participation entitlement shall
not be applicable and the allocation procedures under Rule 6.45A shall apply.
(4) Allocation of Participation Entitlement Between DPMs and e-DPMs for Orders
Specifying a Preferred DPM. Notwithstanding the provisions of subparagraph
(b)(3) above, the Exchange may allow, on a class-by-class basis, for the receipt
of marketable orders, through the Exchange’s Order Routing System when the
Exchange’s disseminated quote is the NBBO, that carry a designation from the
member transmitting the order that specifies a DPM or e-DPM in that class as the
“Preferred DPM” for that order.
In such cases and after the provisions of subparagraph (b)(1)(i) and (iii) above
have been met, then the Preferred DPM participation entitlement shall be 50%
when there is one Market-Maker also quoting at the best bid/offer on the Exchange; 40% when there are two Market-Makers also quoting at the best bid/offer
on the Exchange; and, 30% when there are three or more Market-Makers also
quoting at the best bid/offer on the Exchange, [participation entitlement applicable to the DPM Complex (as set forth in subparagraph (b)(2) above) shall be
allocated to the Preferred DPM] subject to the following:
[(i) if the Preferred DPM is an e-DPM and the DPM is also quoting at the
best bid/offer on the Exchange, then 2/3 of the participation entitlement
shall be allocated to the Preferred DPM and the balance of the participation entitlement shall be allocated to the DPM;
(ii) if the Preferred DPM is an e-DPM and the DPM is not quoting at the
best bid/offer on the Exchange but one or more e-DPMs are also quoting
at the best bid/offer on the Exchange, then 2/3 of the participation entitlement shall be allocated to the Preferred DPM and the balance of the
participation entitlement shall be divided equally between the remaining
e-DPMs also quoting at the best bid/offer on the Exchange;
(iii) if the Preferred DPM is the DPM and one or more e-DPMs are also
quoting at the best bid/offer on the Exchange, then 2/3 of the participation entitlement shall be allocated to the Preferred DPM and the balance
of the participation entitlement shall be divided equally between the eDPMs quoting at the best bid/offer on the Exchange;]
[(iv)] (i) if the Preferred DPM is not quoting at the best bid/offer on the
Exchange then the participation entitlement set forth in subparagraph
(b)(3) above shall apply; and
RB8
June 15, 2005, Volume RB16, Number 24
Rule Changes,
Interpretations and
Policies continued
SR-CBOE-2005-45 continued
[(v) if only members of the DPM Complex are quoting at the best bid/offer
on the Exchange then the participation entitlement applicable to the Preferred DPM shall be: 50% when there is one other member of the DPM
Complex also quoting at the best bid/offer on the Exchange; 40% when
there are two other members of the DPM Complex quoting at the best bid/
offer on the Exchange; and, 30% when there are three or more members of
the DPM Complex also quoting at the best bid/offer on the Exchange. The
other members of the DPM Complex shall not receive a participation entitlement and the allocation procedures under Rule 6.45A shall apply; and]
[(vi)] (ii) in no case shall the Preferred DPM [a DPM/e-DPM] be allocated,
pursuant to this participation right, a total quantity greater than the quantity
that the Preferred DPM [DPM/e-DPM] is quoting at the best bid/offer on
the Exchange.
The Preferred DPM participation entitlement set forth in subparagraph (b)(4)
of this Rule shall be in effect until June 2, 2006 on a pilot basis.
…Interpretations and Policies:
.01
Notwithstanding subparagraph (b)(2) above, the Exchange may
establish a lower DPM Complex Participation Rate on a product-by-product basis for newly-listed products or products that are being allocated to a
DPM trading crowd for the first time. Notification of such lower participation rate shall be provided to members through a Regulatory Circular.
PROPOSED RULE CHANGE(S)
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
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
June 15, 2005, Volume RB16, Number 24
RB9
Rule Changes,
Interpretations and
Policies continued
SR-CBOE-2005-43 continued
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.
(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.
RB10
June 15, 2005, Volume RB16, Number 24