July 15, 2005
Exchange
Bulletin
Volume 33, Number 28
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, JULY 15, 2005
CLASS
BID
CBOE
$675,000.00
OFFER
LAST SALE AMOUNT
LAST SALE DATE
$700,000.00
July 14, 2005
LAST SALE AMOUNT
LAST SALE DATE
July 15, 2005
$740,000.00
CBOT FULL MEMBERSHIP
CLASS
With CBOE Exercise Right
Without CBOE Exercise Right
CBOE Exercise Right
BID
OFFER
$1,975,000.00
$2,125,000.00
$2,050,000.00
$0.00
0.00
N/A
$102,000.00
$145,000.00
N/A
$102,000.00
June 27, 2005
CBOE MEMBERSHIP SALES AND TRANSFERS
From
Thomas L. White
Marshall C. Spiegel
To
Carol Jane White
Michael A. Williams
Price/Transfer
Transfer
$700,000.00
Date
7/8/05
7/14/05
Page 2
July 15, 2005
Volume 33, Number 28
Chicago Board Options Exchange
Information Circular IC05-85
Date:
July 18, 2005
To:
Membership
From:
Nominating Committee
Re:
Selection of Nominees for Board of Directors and Nominating Committee
The Nominating Committee is accepting applications for nominees for the 2005 annual election to fill expiring terms on the Board of
Directors and Nominating Committee. Available positions include:
Board of Directors
1
1
3
Floor Director
Lessor Director
Public Directors
3-year term
3-year term
3-year terms
Nominating Committee
1
1
1
1
Firm Member
Floor Member
Lessor Member
Public Member
3-year term
3-year term
3-year term
3-year term
Please also note that the Exchange has amended its rules to provide for the regular committee appointment process to apply to the
MTS Committee. Accordingly, because the MTS Committee is no longer an elected committee and the Nominating Committee no longer
nominates candidates to fill positions on the MTS Committee, the Nominating Committee is not accepting applications for MTS Committee
positions.
The qualification criteria for the available positions on the Board of Directors and Nominating Committee are described in the attached materials.
The Nominating Committee requests that candidates who wish to be considered for nomination by the Nominating Committee complete and submit the attached Candidate Information Form (“Application”) by Monday, August 29, 2005. (Application forms are
also available on the CBOE Membership website at www.cboe.org and at the 4th and 7th floor reception desks.) The Nominating Committee
strongly encourages candidates to submit a current resume or curriculum vitae along with their Application.
The Nominating Committee will seek to interview all candidates that submit an Application by August 29, 2005. Although the Nominating Committee will continue to accept and consider any Applications submitted after August 29, 2005 up until the Committee meets to
determine its slate of candidates (which it currently plans to do on September 29, 2005), candidates that submit an Application after August 29,
2005 are not guaranteed to have a Committee interview.
You may submit your Application in any of the following ways: (i) by hand, mail, or courier delivery to Arthur Reinstein, CBOE, 400
South LaSalle Street, 7th Floor, Chicago, Illinois 60605; (ii) by e-mail to reinstei@cboe.com; or (iii) by facsimile to Arthur Reinstein at (312) 7867919.
Individuals generally submit their names to the Nominating Committee for consideration by submitting an Application instead of
through the submission of written nominations by others. The names of those who have submitted their names to the Nominating Committee
to be considered for nomination will be posted on the Exchange’s bulletin board and on the Membership website.
The Nominating Committee will hold candidate interviews by appointment in September, 2005. The Nominating Committee
will schedule interviews by contacting candidates to appear before the Nominating Committee for an individual interview at one of its meetings.
During these interviews, the Nominating Committee questions candidates about a broad range of relevant issues and seeks to ascertain the
experience and expertise the candidate would bring to the Board of Directors or Nominating Committee. A candidate’s previous CBOE committee experience and regulatory history is also reviewed. After the interviews, the Nominating Committee selects the nominees that it believes will
most effectively fill the available positions.
A candidate must satisfy the applicable qualification criteria for a position on the Board of Directors or Nominating Committee at the
time of the Nominating Committee slating meeting (currently scheduled for September 29, 2005) in order to be considered for nomination. A
candidate that does not satisfy the qualification criteria at the time the candidate submits an Application may take steps to qualify before the
Nominating Committee slating meeting. The postings listing the candidates that have applied to be considered for nomination will indicate for
each candidate as of the date of the posting whether the candidate satisfies the applicable qualification criteria, does not satisfy the applicable
qualification criteria, or is being reviewed to determine whether or not the candidate satisfies the applicable qualification criteria.
The Nominating Committee expects to post its slate of candidates for available positions on the Board of Directors and Nominating
Committee on or about September 30, 2005.
To run against the slated candidates, an individual must submit to the Office of the Secretary a petition signed by not less than 100
voting members of the Exchange. Any petitions must be received by no later than 5:00 p.m. (Chicago time) on October 31, 2005. The names
of petition candidates, if any, will be posted on the Exchange bulletin board and on the Membership website.
The annual election meeting will be held on Thursday, November 17, 2005. The membership makes the final decisions with respect
to ensuring that CBOE has the best leadership in the industry.
The following persons currently serve on the Nominating Committee: Gerald McNulty (GMC) (Chairman), Terrence Andrews (TAN),
Lawrence Blum, Daniel Carver (DPC), Thomas Durkin, Timothy Feeney (FNY), Donald Jacobs, Kenneth Mueller (OBE), Nickolas Neubauer,
and Christopher Wheaton (WTS).
Please feel free to contact Gerald McNulty, Nominating Committee Chairman, at (312) 347-6328 if you have any questions regarding
the nominating process or Arthur Reinstein, Legal Division, at (312) 786-7570 if you have any procedural questions regarding the nominating
process or regarding how to complete the Application form.
2005 CANDIDATE INFORMATION FORM
Return this form as soon as possible.
The Nominating Committee requests that completed forms be submitted by August 29, 2005.
The Nominating Committee strongly encourages candidates to also attach and submit a current resume or curriculum vitae.
Name: ___________________________________________________________________________________ Acronym: ______________________
Title: ___________________________________________________ Firm:___________________________________________________________
Business Address: ________________________________________________________________________________________________________
City/State/Zip: ____________________________________________________________________________________________________________
Home Address: ___________________________________________________________________________________________________________
City/State/Zip: ____________________________________________________________________________________________________________
Business Phone:
) ____________________________ Home Phone:
(
Trading Floor Phone: (
(
) _________________________ Indicate:
) ______________________________________
Trading Crowd
Trading Booth
Headset
Fax: ____________________________________________________ Pager:__________________________________________________________
Cell Phone:______________________________________________ E-Mail: _________________________________________________________
POSITION(S) APPLIED FOR
1.
Check the position(s) for which you are applying and indicate whether you currently satisfy the qualification criteria for the
position(s) you have checked. (See page 4 for qualification criteria.)
CURRENTLY SATISFY QUALIFICATION CRITERIA
BOARD OF DIRECTORS
Floor Director (3-year term)
Yes
No
Lessor Director (3-year term)
Yes
No
Public Director (3-year term)
Yes
No
Firm Member (3-year term)
Yes
No
Floor Member (3-year term)
Yes
No
Lessor Member (3-year term)
Yes
No
NOMINATING COMMITTEE
Public Member (3-year term)
Yes
No
A candidate must be qualified at the time of the Nominating Committee slating meeting (currently scheduled for October 6, 2005) in order to be
considered for nomination.
MEMBERSHIP STATUS
2.
What are your current membership statuses, if any? (Check all that apply.)
Market-Maker
Owner
Floor Broker
Lessor
Lessee
DPM Designee
CBOT Exerciser (
Remote Market-Maker
CBOT Owner or
Sole Proprietor
CBOT Delegate)
Nominee. Firm: ________________________________________________________________________________________________________
Registered For. Firm: ___________________________________________________________________________________________________
Person Associated with a Member Firm. Explain: ___________________________________________________________________________
________________________________________________________________________________________________________________________
None of the above
DISCIPLINARY HISTORY
3.
Do you have any regulatory or disciplinary history and/or any pending regulatory or disciplinary matters?
Yes
No
EMPLOYMENT HISTORY
4.
Provide your employment history.
Employer
Description of Position/Title
Dates
COMMITTEE SERVICE
5.
List all of your previous CBOE committee experience.
Committee
Approximate Dates
EDUCATION
6.
Provide your educational background.
School
Degree/Concentration
Approximate Dates
BUSINESS AFFILIATIONS
7.
Identify all persons or entities involved in the securities, futures, or banking industry with whom you have a material business
relationship and the nature of that relationship. Entities include, but are not limited to, corporations, partnerships, limited liability
companies, securities exchanges or associations, commodities exchanges, not for profit organizations, and business associations.
A material business relationship includes being a shareholder, partner, director, officer, manager, member, or employee of an entity
and any other business relationship that accounted for 10% or more of your income in the last 12 months or that is otherwise
significant to you. If you are a shareholder or otherwise own an equity interest in a corporation, you need not identify that status
unless you, directly or indirectly, beneficially own, or have the right to acquire, 5% or more of a class of voting security of the
corporation, or unless your ownership may otherwise be deemed a material business relationship.
Person or Entity
8.
Identify all material business relationships that any member of your immediate family has with a person or entity involved in the
securities, futures, or banking industry and the nature of that relationship. A member of your immediate family is defined as (i) a
spouse or (ii) a child who resides with you.
Close Relative
9.
Description of Relationship
Person or Entity
Description of Relationship
Identify any other relationships that you or a member of your immediate family have, or any other activities in which you or a
2 of 4
member of your immediate family are engaged, which could be regarded as constituting a conflict of interest with respect to your
service as a CBOE director or Nominating Committee member.
PREVIOUS APPLICATIONS TO NOMINATING COMMITTEE
10.
Identify all positions on the Board of Directors and Nominating Committee for which you applied to the Nominating Committee to be
considered for nomination in the prior three years.
Year
Position(s)
2004
2003
2002
FLOOR DIRECTOR AND FLOOR MEMBER CANDIDATES ONLY
11.
For Floor Director and Nominating Committee Floor Member candidates: Are you primarily engaged in business on the floor of the
Exchange in the capacity of a member?
No
Yes
PUBLIC AND LESSOR CANDIDATES ONLY
12.
For public and lessor candidates for the Board of Directors and Nominating Committee: Are you individually registered as a brokerdealer?
Yes
No
13.
For public and lessor candidates for the Board of Directors and Nominating Committee: Identify if you have any direct or indirect
affiliation with a broker-dealer or with an entity that is directly or indirectly affiliated with a broker-dealer as a parent, subsidiary,
affiliate, or otherwise.
Person or Entity
Description of Relationship
The Nominating Committee will seek to interview all candidates that submit this form by August 29, 2005. Although the Nominating
Committee will continue to accept and consider forms submitted by candidates after August 29, 2005 up until the Committee meets to
determine its slate of candidates (which it currently plans to do on September 29, 2005), candidates that submit this form after August 29,
2005 are not guaranteed to have a Committee interview. The Nominating Committee will schedule interviews by contacting candidates to
appear before the Nominating Committee for an individual interview at one of its meetings.
Completed forms and any accompanying resume or curriculum vitae should be submitted to:
Arthur Reinstein
Chicago Board Options Exchange, Incorporated
th
400 South LaSalle Street, 7 Floor
Chicago, Illinois 60605
Phone:
Fax:
Email:
(312) 786-7570
(312) 786-7919
reinstei@cboe.com
Please also feel free to contact Gerald McNulty, Nominating Committee Chairman, at (312) 347-6328 if you have any questions regarding the
nominating process or Arthur Reinstein, Legal Division, at (312) 786-7570 if you have any procedural questions regarding the nominating
process or regarding how to complete this form.
Date of Issuance of Form: July 18, 2005
3 of 4
BOARD OF DIRECTORS QUALIFICATION CRITERIA (CBOE Constitution Section 6.1)
The Board of Directors consists of 23 directors – 22 directors who are elected by the membership of the Exchange (as described below) and the
Chairman of the Board, who is a member of the Board by virtue of his office.
2
At-Large Directors
A member who functions as a member in any recognized capacity either individually or on behalf of a member
organization.
4
Floor Directors
A member who directly or indirectly owns and controls a membership and is primarily engaged in business on the
floor of the Exchange in the capacity of a member.
1
Lessor Director
A person who directly or indirectly owns and controls a membership with respect to which s/he acts solely as lessor
and who is not actively engaged in business as a "broker-dealer" or as a "person associated with a broker-dealer" as
those terms are defined in the Securities Exchange Act of 1934.
4
Off-Floor Directors
An executive officer of a member organization that primarily conducts a non-member public customer business and
who is not individually engaged in business on the Exchange floor.
The ordinary place of business of at least one of the two off-floor directors in each Class shall be a location more
than 80 miles from the Exchange's trading floor.
11
Public Directors
A non-member who is not a broker-dealer or person affiliated with a broker-dealer.
For purposes of Section 6.1:
A person is considered to directly own and control a membership only if the person individually and directly owns of record and beneficially all right, title
and interest in the membership.
A person is considered to indirectly own and control a membership only if the person: (A) has the sole and exclusive right to vote the membership and
control its sale, and (B) is in possession of and subject to all of the risks and rewards of a direct owner of at least a fifty percent (50%) interest in a
membership, either through ownership of an equity interest in a member organization or of a beneficial interest in a trust, which in either case is the
owner of one or more memberships as permitted under the Rules.
NOMINATING COMMITTEE QUALIFICATION CRITERIA (CBOE Constitution Section 4.1)
The Nominating Committee consists of 10 elected members, as described below:
2
Firm Members
An officer of a member organization that primarily conducts a non-member public customer business.
4
Floor Members
A member who is primarily engaged in business on the floor of the Exchange in the capacity of a member.
2
Lessor Members
A person who directly or indirectly owns and controls (as defined in Section 6.1) one or more memberships in respect of
which s/he acts solely as lessor.
At least one of the lessor members may not be actively engaged in business as a "broker-dealer" or as a "person
associated with a broker-dealer" as those terms are defined in the Securities Exchange Act of 1934.
For the 2005 annual election: Since the lessor member position that is not expiring is currently held by a person who is
not a broker-dealer or a person associated with a broker-dealer, the open lessor member position may be filled by a
person that directly or indirectly owns and controls one or more memberships in respect of which s/he acts solely as
lessor and the person may or may not be actively engaged in business as a broker-dealer or as a person associated with
a broker-dealer.
2
Public Members
Representative of the public.
4 of 4
Page 7
July 15, 2005
Volume 33, Number 28
Chicago Board Options Exchange
MEMBERSHIP INFORMATION FOR 7/7/05 THROUGH 7/13/05
MEMBERSHIPAPPLICATIONS RECEIVED FOR
WHICH A POSTING PERIOD IS REQUIRED
Individual Membership Applicants
Date Posted
Joan M. Savin, Lessor
11956 Primrose Park
Boynton Beach, FL 33437
7/7/05
Mark S. Lyons, Nominee
Walleye Trading, LLC
2125 Cottonwood Trail
Medina, MN 55356
7/8/05
MEMBERSHIP LEASES
New Leases
Effective Date
Lessor: Carol Jane White
7/8/05
Lessee: Goldman Sachs Execution & Clearing, LP
Peter J. Heinz Jr., NOMINEE
Rate:
1.1486%
Term: Monthly
Lessor: Harry A. Brandt
Lessee: CMZ Trading, LLC
Krista L. Gifford, NOMINEE
Rate:
1.1486%
Term: Monthly
7/12/05
Lessor: William B. Edmiston
Lessee: Group One Trading, LP
Rate:
1.125%
Term: Monthly
7/12/05
Terminated Leases
Termination Date
Lessor(s):
Termination Date
Thomas L. White
1120 Raleigh Road
Glenview, IL 60025
7/8/05
Nominee(s) / Inactive Nominee(s):
Termination Date
Lawrence N. Gage (LNG)
Market Street Securities, Inc.
440 S. LaSalle, 19th Floor
Chicago, IL 60605
7/11/05
Lincoln W. Brewer (LBW)
RightSide Trading LP
440 S. LaSalle, Suite 2101
Chicago, IL 60605
7/12/05
Member Organizations
CBT Registered For:
Termination Date
Blue Star Trading, LLC
440 S. LaSalle, 19th Floor
Chicago, IL 60605
7/7/05
EFFECTIVE MEMBERSHIPS
Individual Members
CBT Exercisers:
Lessor: Thomas L. White
7/8/05
Lessee: Goldman Sachs Execution & Clearing, LP
Peter J. Heinz Jr. (PJH), NOMINEE
Lessor: William B. Edmiston
7/11/05
Lessee: Market Street Securities, Inc.
Lawrence N. Gage (LNG), NOMINEE
Lessor: Harry A. Brandt
7/12/05
Lessee: RightSide Trading LP
Lincoln W. Brewer (LBW), NOMINEE
MEMBERSHIP TERMINATIONS
Individual Members
CBT Exercisers:
Termination Date
Thomas M. Wallace (CAZ)
273 Exmoor
Glen Ellyn, IL 60137
7/7/05
Bruce A. Williams (BAW)
8572 Johnston Rd.
Burr Ridge, IL 60527
7/11/05
CBT Registered For:
Termination Date
Mark J. Cosenza (WZL)
Blue Star Trading, LLC
440 S. LaSalle, 19th Floor
Chicago, IL 60605
7/7/05
Michael E. Sorvillo Jr. (MES)
HGI, Inc.
141 W. Jackson Blvd., Suite 1520
Chicago, IL 60604
7/8/05
Effective Date
Bruce A. Williams (BAW)
7/8/05
8572 Johnston Rd.
Burr Ridge, IL 60527
Type of Business to be Conducted: Market Maker
CBT Registered For:
Effective Date
Henry Y. Choi (HCO)
7/7/05
DRW Securities, LLC
10 S. Riverside Plaza, Suite 2100
Chicago, IL 60606
Type of Business to be Conducted: Market Maker
Lessor(s):
Effective Date
Carol Jane White
800 Waukegan Rd.
Glenview, IL 60025
7/8/05
JOINT ACCOUNTS
New Participants
Acronym
Effective Date
Stephen P. Meadows
QYW
7/8/05
Thomas P. Stapleton
QYW
7/8/05
Brian M. Morgan
QYW
7/8/05
Dave Becket
QOW
7/8/05
Benjamin G. Schneider
QFS
7/11/05
Andrew M. Sullivan
QRR
7/12/05
Andrew M. Sullivan
QXX
7/12/05
Page 8
July 15, 2005
Volume 33, Number 28
Chicago Board Options Exchange
Terminated Participants Acronym
Termination Date
MEMBER ADDRESS CHANGES
Michael E. Sorvillo Jr.
QHG
7/8/05
Individual Members
Effective Date
Lawrence N. Gage
QMK
7/11/05
QQR
7/12/05
Malachi J. Flanagan
565 Locust Street
Winnetka, IL 60093
7/8/05
Lincoln W. Brewer
Matthew P. Beyer
440 S. LaSalle, Suite 2500
Chicago, IL 60605
7/11/05
Sagy S. Sharon
2215 Crestview Lane
Wilmette, IL 60091
7/11/05
David A. Tucker
3201 N. Wolcott Ave., Apt. 3B
Chicago, IL 60657
7/11/05
John V. Phaby
7226 Southwick Court
Frankfort, IL 60423
7/11/05
CHANGES IN MEMBERSHIP STATUS
Individual Members
Effective Date
Barton D. Bergman
7/8/05
From:
CBT Registered For Timber Hill LLC; Market Maker/
Floor Broker
To:
Nominee For Timber Hill LLC; Market Maker/Floor
Broker
Page 9
July 15, 2005
Volume 33, Number 28
Chicago Board Options Exchange
POSITION LIMIT CIRCULARS
Pursuant to Exchange Rule 4.11, the Exchange issued the below listed Position Limit Circulars between July 7 and July 15, 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.
Research Circular #RS05-467
July 7, 2005
Great Lakes Chemical Corporation (“GLK/adj. GFJ”)
Determination of Cash-in-Lieu Amount
Research Circular #RS05-483
July 13, 2005
Shopping.com Ltd. (“SHOP/QSK/VYZ”) Proposed Merger
with eBay Inc. (“EBAY/QXB/XBA/OYI/YEU”)
Research Circular #RS05-468
July 7, 2005
Viisage Technology, Inc. (“VISGE/TUM”)
Underlying Symbol Change to “VISG”
Effective Date: July 8, 2005
Research Circular #RS05-484
July 13, 2005
The Titan Corporation (“TTN”) Proposed Merger
with L-3 Communications Corporation (“LLL/OOY/YOO”)
Research Circular #RS05-470
July 8, 2005
VERITAS Software Corporation (“VRTS/adj. VRI/OXR”)
Determination of Cash-in-Lieu Amount
Research Circular #RS05-485
July 13, 2005
SunGard Data Systems Inc.
(“SDS/OSW/YYK”) Proposed Merger
with Solar Capital Corp.
Research Circular #RS05-471
July 8, 2005
The Gillette Company (“G/WZG/VZG”) Proposed Merger
with The Procter & Gamble Company (“PG/VPG/WPG”)
Research Circular #RS05-486
July 13, 2005
Overnite Corporation (“OVNT/QWQ”) Proposed Merger
with United Parcel Service, Inc. (“UPS/OPS/YUP”)
Research Circular #RS05-472
July 8, 2005
The May Department Stores Company
(“MAY/WJG/VUU”) Proposed Merger
with Federated Department
Stores, Inc. (“FD/VFD/WDF”)
Research Circular #RS05-487
July 13, 2005
Advanced Energy Industries, Inc. (“AEISE/OEQ”)
Underlying Symbol Change to “AEIS”
Effective Date: July 14, 2005
Research Circular #RS05-473
July 11, 2005
******CORRECTION*****CORRECTION*****CORRECTION*****
Caterpillar, Inc. (“CAT/VKT/WKT”)
2-for-1 Stock Split
Ex-Distribution Date: July 14, 2005
Research Circular #RS05-474
July 11, 2005
Ask Jeeves, Inc. (“ASKJ/AUK/VQK”) Proposed Merger
with IAC/InterActiveCorp (“IACI/QTH/VSW/YOY”)
Research Circular #RS05-477
July 12, 2005
Mylan Laboratories Inc. (“MYL/OKL/WYQ”)
Partial Self Tender Offer EXTENDED
Research Circular #RS05-478
July 12, 2005
Nextel Communications, Inc.
(“NXTL/FQC/VFU/WFU”) Proposed Merger
with Sprint Corporation (“FON/VN/WO”)
Research Circular #RS05-480
July 12, 2005
Liberty Media Corporation Series A
(“L/OCG/YCN & adj. YXS/VMZ”)
Distribution of Shares of
Discovery Holding Company Class A (“DISCA”)
Ex-Distribution Date: July 22, 2005
Research Circular #RS05-481
July 12, 2005
Corixa Corporation (“CRXA/CVQ”) Merger COMPLETED
with GlaxoSmithKline plc ADR (“GSK/VLX”)
Research Circular #RS05-482
July 13, 2005
Transkaryotic Therapies, Inc.
(“TKTX/UFT”) Proposed Merger with Shire
Pharmaceuticals Group plc (“SHPGY/UGH/OTK/YKT”)
Research Circular #RS05-488
July 13, 2005
palmOne, Inc. (“PLMO/UPY”)
Name and Underlying Symbol Change to:
Palm, Inc. (“PALM”)
Effective Date: July 14, 2005
Research Circular #RS05-489
July 13, 2005
Texas Industries, Inc. (“TXI”)
Distribution of Shares of
Chaparral Steel Company (“CHAP”)
Ex-Distribution Date: August 1, 2005
Research Circular #RS05-490
July 13, 2005
DoubleClick Inc. (“DCLK/QWE/OVT/YKH”) Merger COMPLETED
with Click Acquisition Corp.
Research Circular #RS05-491
July 14, 2005
América Móvil, S.A. de C.V. Series L (“AMX/OXZ/YXG”)
3-for-1 ADS Split
Ex-Distribution Date: July 21, 2005
Research Circular #RS05-492
July 14, 2005
Sunoco, Inc. (“SUN/VUN/WUD”)
2-for-1 Stock Split
Ex-Distribution Date: August 2, 2005
Research Circular #RS05-494
July 15, 2005
The Shell Transport and Trading Company,
Public Limited Company (“SC”)
Proposed Merger/Scheme of Arrangement
July 20, 2005
Regulatory
Bulletin
Volume RB16, Number 29
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 RG05-60
To:
The Membership
From:
Division of Regulatory Services
Date:
July 7, 2005
Subject:
Margin and Net Capital Requirements for
Options on CBOE PowerPacksSM Indices
Exchange
Contacts:
Margin - James Adams
Net Capital - Robert Gardner
(312) 786-7718
(312) 786-7937
KEY POINTS
•
•
The Chicago Board Options Exchange (“CBOE”) will list and commence trading
options on CBOE PowerPacksSM indices, a family of 12 sector indices, beginning
on July 8, 2005.
For margin and net capital purposes, all of the indices are considered narrowbased.
DISCUSSION
On July 8, 2005, the Chicago Board Options Exchange (“CBOE”) will list and commence
trading options on the following 12 sector indices:
Symbol
CBOE PowerPacksSM Bank Index
PVK
PVP
CBOE PowerPacksSM Biotechnology Index
CBOE PowerPacksSM Gold Index
POU
CBOE PowerPacksSM Internet Index
PVL
CBOE PowerPacksSM Iron & Steel Index
PVF
CBOE PowerPacksSM Oil Index
POY
CBOE PowerPacksSM Oil Services Index
PVO
CBOE PowerPacksSM Pharmaceuticals Index
PFU
CBOE PowerPacksSM Retail Index
RPY
CBOE PowerPacksSM Semiconductor Index
PVU
CBOE PowerPacksSM Technology Index
PVC
CBOE PowerPacksSM Telecom Index
POQ
Options on each index will be cash-settled and European-style exercise.
Regulatory Circulars
continued
Regulatory Circular RG05-60 continued
Each index is composed of 25 securities that are among the largest and most actively
traded companies in their respective industry groups. The securities composing each index
may include U.S. listed common stocks, American Depository Receipts (ADRs), New York
Registered Shares (NYSs) or New York Global Shares (NYGs). The securities composing
each index are traded on the New York Stock Exchange, NASDAQ Stock Market or the
American Stock Exchange.
Each index is calculated using a “modified” capitalization methodology that limits the weight
of individual components to 10% initially, and on subsequent re-balancing dates. Each
index will be rebalanced and reconstituted on a quarterly basis (after the close of trading on
the third Friday of March, June, September and December) and the composition and/or
weighting of the index is subject to change during the interim periods upon occurrence of
corporate events or unusual circumstances.
MARGIN
In accordance with CBOE Rule 12.3(c)(4), for purchases of puts or calls with more than 9
months until expiration, it is required that 75% of the total cost (option current market value)
be deposited (maintained). When time to expiration reaches 9 months, the option no longer
has value for margin purposes. Purchases of puts or calls with 9 months or less until
expiration must be paid for in full.
Each index is considered narrow-based for margin purposes and option writers are subject
to the margin requirements specified in CBOE Rule 12.3 (c)(5). The initial and maintenance
margin requirement for a short put or call on a broad-based index is 100% of the option
proceeds* plus 20% of the aggregate contract value (current index level x $100) minus the
amount by which the option is out-of-the-money, if any, subject to a minimum for calls of
option proceeds* plus 10% of the aggregate contract value and a minimum for puts of
option proceeds* plus 10% of the aggregate exercise price amount. (*For calculating maintenance margin, use current market value instead of option proceeds.)
In a margin account, no margin need be required in respect of a call option carried in a short
position which is covered by a long position in equivalent units of a “underlying stock
basket” as defined in CBOE Rule 12.3(a)(7). Correspondingly, no margin need be required
in respect of a put option carried in a short position which is offset by a short position in
equivalent units of an underlying stock basket. In computing margin on the underlying
stock basket, the current market value used shall not be greater than the exercise price in
the case of a short call. In the case of a short put, in computing margin on the underlying
stock basket, margin shall be the amount required by CBOE Rule 12.3(b)(2), plus any
amount by which the exercise price of the put exceeds the current market value of the
underlying stock basket.
Where a short option contract is covered by an “escrow agreement” meeting the requirements of CBOE Rule 12.3(d)(2), no margin need be required on the short put or call.
Spreads and straddles are permitted for options covering the same number of shares of the
same underlying index. Members should be aware that due to their exercise feature, it is
possible for European-style options to trade at a discount to their intrinsic values. It is
possible that the spread margin held by the carrying broker could become insufficient to
cover the assignment obligation on the short option if the customer is unable to exercise
the long option and it is trading at a discount to its intrinsic value.
OPTION MARKET-MAKER MARGIN REQUIREMENTS
Pursuant to CBOE Rule 12.3(f), Market-Makers in CBOE PowerPacksSM index options are
allowed “permitted offset” treatment for qualified stock baskets. In the case of each index,
the basket must contain no less than 95% of the capitalization in the index, in order to
qualify as a permitted offset. A CBOE PowerPacksSM futures contract (CBOE Futures
Exchange) qualifies as a permitted offset of the corresponding CBOE PowerPacksSM index
option.
RB2
July 20, 2005, Volume RB16, Number 29
Regulatory Circulars
continued
Regulatory Circular RG05-60 continued
NET CAPITAL
Each index is considered narrow-based for net capital purposes. Under risk-based haircuts,
within each option class, the haircut is equal to the maximum potential loss for all option
positions calculated over a range of index movements of +/- 15% for all broker-dealers,
including options Market-Makers. All positions are subject to a minimum charge of $25 per
contract.1
Under risk-based haircuts, an offset is permitted between the options and a qualified stock
basket. The stock basket must represent not less than 95% of the capitalization of the
index. A 95% offset between the qualified stock basket and the options will be applied with
a minimum charge equal to 5% of the market value of a qualified basket. A 100% offset
between a CBOE PowerPacksSM index option and its corresponding CBOE PowerPacksSM
futures contract will be applied. An offset between CBOE PowerPacksSM index options and
other products within their respective product groups will be applied as follows:
CBOE
CBOE
CBOE
CBOE
CBOE
CBOE
CBOE
CBOE
CBOE
CBOE
CBOE
CBOE
PowerPacksSM Bank Index
PowerPacksSM Biotechnology Index
PowerPacksSM Gold Index
PowerPacksSM Internet Index
PowerPacksSM Iron & Steel Index
PowerPacksSM Oil Index
PowerPacksSM Oil Services Index
PowerPacksSM Pharmaceutical Index
PowerPacksSM Retail Index
PowerPacksSM Semiconductor Index
PowerPacksSM Technology Index
PowerPacksSM Telecom Index
OCC Product Group
Banking
Biotech
Gold & Silver
Internet
Iron & Steel
Oil
Oil Services
Pharmaceutical
Retail
Semiconductor
Technology
Telecom
Product Group Offset
85%
90%
90%
80%
New product group
90%
90%
90%
80%
90%
80%
New product group
For more information concerning the product groups maintained by The Options Clearing
Corp. (“OCC”), contact the OCC help desk at 1 (888) 678-4667.
For those firms not utilizing risk-based haircuts, the haircut will be calculated pursuant to
SEC Rule 15c3-1a(b).
Questions regarding the margin and capital treatment of CBOE PowerPacksSM index options
should be directed as follows:
Margin:
Net Capital:
James Adams at (312) 786-7718
Robert Gardner at (312) 786-7937
Regulatory Circular RG05-61
To:
Membership
From: Trading Operations
Date:
July 13, 2005
Re:
Market-Maker (“M” and “N”) Orders
Pursuant to Exchange Rule 6.13(b)(i)(C)(iii), the Floor Procedure Committees have determined to shorten to 5 seconds (from 15-seconds) the period required between entry of
multiple Market-Maker orders (including non-CBOE Market-Maker orders) on the same side
of the market in an option class for an account or accounts of the same beneficial owner
using the Hybrid System. This change shall go into effect on Monday, July 18, 2005.
Please contact Anthony Montesano at 312-786-7365 with any questions regarding this circular.
1
Risk-based haircuts may be applied pursuant to SEC Rule 15c3-1a (Appendix A)
July 20, 2005, Volume RB16, Number 29
RB3
Rule Changes,
Interpretations
and Policies
APPROVED RULE CHANGE
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-2005-44
Obvious Error Rules
On July 5, 2005, the SEC approved Rule Change File No. SR-CBOE-2005-44, which filing
revises the Exchange’s obvious error rules for equity and index options (Securities Exchange Act Release No. 51969, 70 FR 40084 (July 12, 2005)). 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.
Rule 6.25 Nullification and Adjustment of Equity Option 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.
(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)
No change
(2)
No Bid Series: Electronic transactions in series quoted
no bid 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 the time of execution.
(3) - (5) No change
(b) - (e)
No change
*****
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)
RB4
Trades Subject to Review
July 20, 2005, Volume RB16, Number 29
Rule Changes,
Interpretations and
Policies continued
SR-CBOE-2005-44 continued
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) - (6) No change
(7)
No Bid Series: Electronic transactions in series quoted no bid 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 the time of execution.
(b) - (e)
No change
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-2005-53
Temporary Suspension of Membership Purchase and Sale
Transactions
On July 8, 2005, the Exchange filed Rule Change File No. SR-CBOE-2005-53, which filing
allows the Exchange to suspend membership purchase and sale transactions for a limited
period of time. Any questions regarding the rule change may be directed to Greg Hoogasian,
Legal Division, at 312-786-7031. The text of the proposed rule amendments is set forth
below. Proposed new language is underlined.
RULE 3.14 - Sale and Transfer of Membership
(a) - (d)
No change.
. . . Interpretations and Policies:
.01
In circumstances in which the Board of Directors deems it necessary in
the interest of maintaining a fair and orderly market in transferable Exchange memberships, the Board may declare a suspension of membership purchase and sale
transactions to allow for the dissemination of information deemed to be material to
the value of Exchange memberships. Any such suspension shall be limited in
duration to no longer than one business day. During any such suspension, any bid
or offer previously submitted to the Membership Department in accordance with
Rule 3.13(b) or Rule 3.14(a) may be withdrawn by the submission to the Membership Department of a written revocation of the bid or offer. No new bids or offers
may be submitted during any such suspension.
July 20, 2005, Volume RB16, Number 29
RB5
Rule Changes,
Interpretations and
Policies continued
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-2005-55
Linkage Rules
On July 13, 2005, the Exchange filed Rule Change File No. SR-CBOE-2005-55, which filing
amends CBOE’s Linkage rules to modify the definition of “Firm Customer Quote Size” to
conform to a pending Linkage Plan amendment, and to eliminate a 15-second waiting
period between the sending of P/A Orders. 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 6.80 — Definitions
Rule 6.80. The following terms shall have the meaning specified in the Rule solely
for the purpose of this Section E under Chapter VI:
(1)-(8)
No change.
(9) “Firm Customer Quote Size” with respect to a P/A Order means the size of the
disseminated quotation of the Participant receiving the P/A Order. [the lesser of
(a) the number of option contracts that the Participant Exchange sending a P/A
Order guarantees it will automatically execute at its disseminated quotation in a
series of an Eligible Option Class for Customer orders entered directly for execution in that market; or (b) the number of option contracts that the Participant
Exchange receiving a P/A Order guarantees it will automatically execute at its
disseminated quotation in a series of an Eligible Option Class for Customer orders
entered directly for execution in that market. The Firm Customer Quote Size will
be at least 10 contracts for each series of an Eligible Option Class unless the
receiving Participant Exchange is disseminating a quotation of less than 10 contracts, in which case this number may equal such quotation size.]
(10)-(21) No change.
*****
Rule 6.81 — Operation of the Linkage
Rule 6.81. By subscribing to the Plan, the Exchange has agreed to comply with,
and enforce compliance by its members with the Plan. In this regard, the following
shall apply:
RB6
(a)
No change.
(b)
P/A Orders
July 20, 2005, Volume RB16, Number 29
Rule Changes,
Interpretations and
Policies continued
SR-CBOE-2005-55 continued
(1) Sending of P/A Orders for Sizes No Larger than the Firm Customer Quote
Size. A Market-Maker may send through the Linkage a P/A Order that is equal
to or less than the size of [for execution in the automatic execution system of
a Participant Exchange if the size of such P/A Order is no larger than] the Firm
Customer Quote Size for automatic execution. [Except as provided in subparagraph (b)(2)(ii) below, a Market-Maker may not break up an order of a
Customer that is larger than the Firm Customer Quote Size into multiple P/A
Orders, one or more of which is equal to or smaller than the Firm Customer
Quote Size, so that such orders could be represented as multiple P/A Orders
through the Linkage.]
(2) Sending of P/A Orders [for Sizes] Larger than the Firm Customer Quote
Size. If the size of a P/A Order is larger than the Firm Customer Quote Size, a
Market-Maker may send through the Linkage such P/A Order in one of two
ways:
(i) The Market-Maker may send a P/A Order representing the entire Customer order. If a receiving Participant Exchange’s disseminated quotation
is equal to or better than the Reference Price when the P/A Order arrives at
that market, that exchange will execute the P/A Order at its disseminated
quotation for at least the Firm Customer Quote Size (an automatic execution is not required if the P/A Order is larger than the Firm Customer Quote
Size). Within 15 seconds of receipt of such order, the receiving Participant
Exchange will inform the Market-Maker of the amount of the order executed and the amount, if any, that was canceled.
(ii) Alternatively, the Market-Maker may send an initial P/A Order for the
Firm Customer Quote Size pursuant to subparagraph (b)(1) above. If one
or more of the Participant Exchanges that executed the P/A Order continues to disseminate the same quotation at the NBBO [15 seconds] after
reporting the execution of the initial P/A Order, the Market-Maker may
send an additional P/A Order to such Participant Exchanges. If sent, such
additional P/A Order must be for at least the lesser of:
(i) the size of the disseminated quotation;
(ii) 100 contracts; or
(iii) the entire remainder of the Customer order.
If the sending Participant Exchange initially sent P/A Orders to more than
one Participant Exchange for up to the Firm Customer Quote Size, the
sending Participant Exchange may send additional P/A Orders to the same
Participant Exchanges as long as such orders are, in the aggregate, for at
least the lesser of 100 contracts or the entire remainder of the Customer
Order; provided that the sending Participant Exchange may limit the size
of any single additional P/A Order to the size of the Participant Exchange’s
currently-disseminated quotation.
In any situation where a receiving Participant Exchange does not execute
a P/A Order in full, such exchange is required to move its quotation to a
price inferior to the Reference Price of the P/A Order.
(c)- (e)
July 20, 2005, Volume RB16, Number 29
No change.
RB7
Rule Changes,
Interpretations and
Policies continued
ARBITRATION
AWARDS
SR-CBOE-2005-54
Extension of Linkage Fee Pilot Program
On July 12, 2005, the Exchange filed Rule Change File No. SR-CBOE-2005-54, which filing
amends the Fee Schedule to extend the Linkage fee pilot program for one year, until July
31, 2006. 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.
ARBITRATION AWARDS
Pursuant to Exchange Rule 18.31, Arbitration Awards, for claims filed after September 1,
1989, are publicly available, provided that the name of a public customer will be withheld
upon the written request of the customer. Upon written request, copies of Awards are
available from the Arbitration Department.
Summaries of all Awards are published in the Regulatory Bulletin. In addition, all Awards
are provided to the Securities Arbitration Commentator and Glasser Legal Works. Awards
involving public customers are reported to the Central Registration Depository (CRD).
Questions regarding arbitration may be directed to the Arbitration Department at 312-7867070 or 312-786-7461.
RB8
Case Name:
First Options of Chicago, Inc. v. ETJ Partners, Ltd.
and E. Thomas Jung
Case Number:
98M006
Date Received:
November 11, 1998
Summary of Issues:
Breach of Contract, Misrepresentation/Non-Disclosure
Amount in Dispute:
$1,021,069
Award:
$1,109,900.90 in compensatory damages
$352,921.27 in interest on the sum of the deficit balance
Award Issued:
06/16/05
July 20, 2005, Volume RB16, Number 29