November 18, 2005
Exchange
Bulletin
Volume 33, Number 46
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 (January 1 through
December 31) is $200.00 ($100.00 after July 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, NOVEMBER 18, 2005
CLASS
CBOE
BID
OFFER
$705,000.00
LAST SALE AMOUNT
$745,000.00
LAST SALE DATE
$725,000.00
November 17, 2005
CBOT FULL MEMBERSHIP
CLASS
BID
OFFER
LAST SALE AMOUNT
LAST SALE DATE
With CBOE Exercise Right
$2,750,000.00
$2,950,000.00
$2,900,000.00
November 15, 2005
Without CBOE Exercise Right
$2,400,000.00
$3,300,000.00
$2,850,000.00
October 24, 2005
$70,000.00
$90,000.00
$90,000.00
October 28, 2005
CBOE Exercise Right
CBOE MEMBERSHIP SALES AND TRANSFERS
From
Mont R. Wickham
To
Cassandra Trading Group LLC
Price/Transfer
$725,000.00
Date
11/17/05
DPM APPOINTMENT TRANSFER APPROVAL – November 15, 2005
The MTS Committee has conditionally approved pursuant to CBOE Rule 8.89 a proposal from Botta Capital Management, LLC (“BCM”),
a member organization, and Botta Specialists, LLC (“BSP”) and Susquehanna Investment Group (“SIG”), both member organizations
approved to operate as DPMs, regarding a transfer of a BSP DPM appointment, which is located at Post 2, Station 9.
Under the proposal, the BSP DPM located at Post 2, Station 9 will be transferred to SIG, who will be responsible for the management and
operation of the DPM. The respective ownership structures of BSP and SIG will not change as a result of this proposed transfer.
Page 2
November 18, 2005
Volume 33, Number 46
Chicago Board Options Exchange
MEMBERSHIP INFORMATION FOR 11/10/05 THROUGH 11/16/05
MEMBERSHIP APPLICATIONS RECEIVED FOR MEMBERSHIP LEASES
WHICH A POSTING PERIOD IS REQUIRED
New Leases
Effective Date
Lessor: Seats Exchange Inc.
Lessee: Timber Hill LLC
Rate:
1.25%
Term: Monthly
11/15/05
11/15/05
11/11/05
Lessor: LBS Options Inc.
Lessee: Roepe Rosenfeld Trading, LLC
Rate:
$5,000
Term: Monthly
11/15/05
James V. Vicars, Lessor
2a Holt Street
Double Bay, New South Wales 2028
Australia
11/11/05
Lessor: TRO Trading Group LLC
Lessee: Cutler Group, LP
Justin J. Biebel, NOMINEE
Rate:
0.75%
Term: Monthly
Terminated Leases
Termination Date
Member Organization Applicants
Date Posted
Individual Membership Applicants
Date Posted
James T. Ebert, Nominee
PTR Inc.
105 Pee Dee Lane
Piedmont, SC 29673
11/16/05
Robert M.P. Luciano, Lessor
18 Beaconsfield Road
Mosman, New South Wales 2088
Australia
Goldenberg, Hehmeyer & Co.
11/16/05
Christopher K. Hehmeyer, CBT-RF
600 W. Chicago Ave., Suite 775
Chicago, IL 60610
Goldenberg LLC – General Partner
Ralph I. Goldenberg – Owner
Hehmeyer LLC – General Partner
Christopher K. Hehmeyer – Owner
Ralph I. Goldenberg – Co-Chairman
Christopher K. Hehmeyer – Co-Chairman
GH Trader LLC – General Partner
Edith M. Adamski – Chief Financial Officer
Gregory L. Burdett – Co-Chief Financial Officer
GHCO Partners LLC – General Partner
Carl W. Gilmore – Chief Compliance Officer/Chief Legal
Counsel
McAllister Investments, LLC
1218 Hawthorne Lane
Hinsdale, IL 60521
Mary Kay McAllister - Member
11/15/05
VTrader Pro, LLC
11/14/05
Herbert C. Kurlan, Nominee
220 Bush St., Suite 650
San Francisco, CA 94104
VTrader LLC – Member
Green Tree Capital Markets LLC – Managing Member
Talon Fund LLC – Managing Member
Jeffrey J. Gustaveson – Managing Member
Jeffrey J. Gustaveson – Managing Member
Herbert C. Kurlan - President
Alfred Street Nominees PTY Limited
1 Alfred Street
Sydney, New South Wales 2000
Australia
Ian D. Darling – Shareholder
Michael G. Darling – Shareholder
Frederick J. MacLeod – Shareholder
Mark A. Nelson – Shareholder
Bernard D. Stanton – Shareholder
James W. Vicars - Shareholder
11/11/05
Lessor: Lawrence Novak
11/10/05
Lessee: Merrill Lynch, Pierce, Fenner & Smith, Inc.
Ronald A. Myers (CPT), NOMINEE
Lessor: LBS Options Inc.
11/14/05
Lessee: JAG Trading LLC
Christopher P. Makowski (CPM), NOMINEE
Lessor: BNY Brokerage Inc.
Lessee: Cutler Group, LP
Justin J. Biebel (BIB), NOMINEE
11/15/05
Lessor: Citigroup Derivatives
Markets Inc.
Lessee: Timber Hill LLC
11/15/05
MEMBERSHIP TERMINATIONS
Individual Members
CBT Exercisers:
Termination Date
David P. Brennan (DPB)
141 W. Jackson, Suite 3720
Chicago, IL 60604
11/11/05
CBT Registered For:
Termination Date
Heath H. Gerdes (HTH)
Sparta Group Of Chicago, LP
440 S. LaSalle, Suite 2101
Chicago, IL 60605
11/11/05
Lessor(s):
Termination Date
Lawrence Novak
754 Stonegate Dr.
Highland Park, IL 60035
11/14/05
Nominee(s) / Inactive Nominee(s):
Termination Date
Daniel P. Koutris (KOU)
Citigroup Global Markets Inc.
111 W. Jackson, 10th Floor
Chicago, IL 60604
11/10/05
Matthew T. Garrity (MAT)
Citigroup Derivatives Markets Inc.
111 W. Jackson, 10th Floor
Chicago, IL 60604
11/11/05
Christopher P. Makowski (CPM)
JAG Trading LLC
32300 Northwestern Hwy., Suite 234
Farmington Hills, MI 48334-1571
11/14/05
Page 3
November 18, 2005
Volume 33, Number 46
Member Organizations
Chicago Board Options Exchange
JOINT ACCOUNTS
Lessee(s):
Termination Date
New Participants
Acronym
Effective Date
JAG Trading LLC
32300 Northwestern Hwy., Suite 234
Farmington Hills, MI 48334-1571
11/14/05
Cem A. Karsan
QUB
11/11/05
James P. Fitzgibbons
QNY
11/14/05
Lessor(s):
Termination Date
Kathleen A. McCullough
QNY
11/14/05
BNY Brokerage Inc.
1633 Broadway, 48th Floor
New York, NY 10019
11/15/05
Jeffrey D. Ream
QNY
11/14/05
Terrence J. Moran
QHS
11/16/05
EFFECTIVE MEMBERSHIPS
Terrence J. Moran
QRV
11/16/05
Individual Members
Terminated Participants Acronym
Termination Date
Heath H. Gerdes
QUB
11/11/05
Matthew T. Garrity
QCM
11/11/05
Matthew T. Garrity
QCX
11/11/05
Matthew T. Garrity
QKD
11/11/05
Matthew T. Garrity
QNT
11/11/05
Matthew T. Garrity
QPZ
11/11/05
Matthew T. Garrity
QUN
11/11/05
Terminated Accounts
Acronym
Termination Date
John E. Smollen, Jr.
QCA
11/16/05
John H. Waterfield, III
QCA
11/16/05
John E. Smollen, Jr.
QLL
11/16/05
John H. Waterfield, III
QLL
11/16/05
CBT Exercisers:
Effective Date
David P. Brennan (DPB)
11/10/05
141 W. Jackson, Suite 3720
Chicago, IL 60604
Type of Business to be Conducted: Market Maker
Jerry Manne (JXM)
11/15/05
839 Ashland Ave.
River Forest, IL 60305
Type of Business to be Conducted: Market Maker
Matthew C. Johnson (LUG)
11/16/05
1641 Wickham Court
Green Oaks, IL 60048
Type of Business to be Conducted: Market Maker
CBT Registered For:
Effective Date
Cem A. Karsan (JEM)
11/11/05
Sparta Group Of Chicago, LP
440 S. LaSalle, Suite 2101
Chicago, IL 60605
Type of Business to be Conducted: Market Maker
Alexander Ackerhalt (ACK)
11/11/05
WDG Trading, LLC
601 S. LaSalle, Suite 200
Chicago, IL 60605
Type of Business to be Conducted: Market Maker
Nominee(s) / Inactive Nominee(s):
Effective Date
Jonathan Roepe
11/15/05
Roepe Rosenfeld Trading, LLC
26 Chapel Ct.
Pine Bush, NY 12566
Type of Business to be Conducted: Market Maker
CHANGES IN MEMBERSHIP STATUS
Individual Members
Effective Date
Gerald T. McNulty
11/10/05
From:
Nominee For Merrill Lynch, Pierce, Fenner & Smith,
Inc.; Market Maker/Floor Broker
To:
Nominee For Merrill Lynch Professional Clearing Corp.;
Floor Broker
Michael L. Rodnick
11/10/05
From:
Nominee For Merrill Lynch Professional Clearing Corp.;
Floor Broker
To:
Nominee For Merrill Lynch, Pierce, Fenner & Smith,
Inc.; Floor Broker
Member Organizations
Lessee(s):
MEMBER ADDRESS CHANGES
Effective Date
Roepe Rosenfeld Trading, LLC
11/15/05
26 Chapel Court
Pine Bush, NY 12566
Type of Business to be Conducted: Market Maker/Remote Market
Maker
Individual Members
Effective Date
Ryan Michael Kole
175 W. Jackson, Suite 400
Chicago, IL 60604
11/14/05
Sharon S. King
175 W. Jackson, Suite 400
Chicago, IL 60604
11/14/05
Gavin M. Lowrey
141 W. Jackson, Suite 500
Chicago, IL 60604
11/14/05
Joseph D. Mueller
141 W. Jackson, Suite 500
Chicago, IL 60604
11/14/05
Page 4
November 18, 2005
Volume 33, Number 46
Chicago Board Options Exchange
POSITION LIMIT CIRCULARS
Pursuant to Exchange Rule 4.11, the Exchange issued the below listed Position Limit Circular on November 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 Dan Earner at (312) 786-7059 or Tim Mac Donald at (312) 786-7706.
Position Limit Circular PL05-50
November 15, 2005
Eyetech Pharmaceuticals, Inc. (“EYET/QUJ”) merger
completed with Merger EP Corporation, a wholly
owned subsidiary of OSI Pharmaceuticals, Inc.
(“OSIP/GHU/OIG/YIJ”)
Effective Date November 15, 2005
RESEARCH CIRCULARS
The following Research Circulars were distributed between November 11 and November 17, 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 #RS05-811
Research Circular #RS05-799
November 15, 2005
November 11, 2005
York International Corporation (“YRK”) Proposed Merger
C.H. Robinson Worldwide, Inc. (“CHRWD/CJQ”)
with Johnson Controls, Inc. (“JCI”)
Underlying Symbol Change to “CHRW”
Effective Date: November 14, 2005
Research Circular #RS05-812
November 15, 2005
Research Circular #RS05-803
PalmSource, Inc. (“PSRC/MQS”) Merger COMPLETED
November 14, 2005
with ACCESS Co., Ltd.
Eyetech Pharmaceuticals, Inc.
(“EYET/QUJ”) Merger COMPLETED
Research Circular #RS05-813
with OSI Pharmaceuticals, Inc. (“OSIP/GHU/GHW/OIG/YIJ”)
November 15, 2005
Immucor, Inc. (“BLUDE/QMQ/ZII/LMA”)
Research Circular #RS05-806
Underlying Symbol Change to “BLUD”
November 14, 2005
Effective Date: November 16, 2005
AT&T Corp. (“T/VT/WT”)
NO CONTRACT ADJUSTMENT FOR CASH DIVIDEND
Research Circular #RS05-816
November 16, 2005
Research Circular #RS05-807
Navarre Corporation (“NAVR/QIG”)
November 15, 2005
Underlying Symbol Change to “NAVRE”
*****UPDATE*****UPDATE*****UPDATE*****
Effective Date: November 17, 2005
AT&T Corp. (“T/VT/WT”) Proposed Merger
with SBC Communications Inc. (“SBC/VFE/WFE”)
Research Circular #RS05-818
November 17, 2005
Research Circular #RS05-808
Eyetech Pharmaceuticals, Inc. (“EYET/adj. TPB”)
November 15, 2005
Determination of Cash-in-Lieu Amount
Royal Dutch Petroleum Company (“RD/OWG/YXD”) Proposed
Merger with Royal Dutch Shell plc.
Research Circular #RS05-819
November 17, 2005
Research Circular #RS05-809
Advanced Neuromodulation Systems, Inc. (“ANSI/UAI”)
November 15, 2005
Tender Offer EXTENDED by St. Jude Medical, Inc.
Metris Companies Inc. (“MXT/VLV/WKW”) Proposed Merger
(“STJ/VJJ/WRU”)
with HSBC Finance Corporation
Research Circular #RS05-810
November 15, 2005
Spinnaker Exploration Company (“SKE”) Proposed Merger
with Norsk Hydro ASA
Research Circular #RS05-820
November 17, 2005
Agilent Technologies, Inc. (“A/OAE/YA”)
Partial Self Tender Offer
November 23, 2005
Volume RB16, Number 47
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 RG05-106
Date:
November 10, 2005
To:
PAR Operators – Members and Member Organizations
From: Regulatory Services Division
RE:
PAR Operator Log On/Log Off Responsibilities
This Regulatory Circular is intended to remind PAR Operators of certain obligations with
respect to PAR machines. PAR Operators must log on PAR under their own acronym and
must log off PAR upon leaving the trading crowd. The Exchange’s audit trail and surveillance programs are dependent on accurately determining the individual responsible for
performance and compliance with Exchange order handling obligations. Failure to log on
PAR under an individual’s own acronym may result in formal disciplinary action that may
include significant sanctions.
Questions concerning this subject can be directed to Doug Beck at (312) 786-7959.
Regulatory Circular RG05-107
Date:
November 11, 2005
To:
Members and Member Firms
From: Regulatory Services Division
RE:
Opening Procedure for DJX Options on the Settlement Dates of CBOE DJIA
Volatility Index Futures Contracts
As a result of the transfer of the DJX option class to the Hybrid Trading System
platform, the Hybrid Opening System (HOS) will be used to settle the CBOE DJIA Volatility
Index (VXD) futures contract beginning with the November 2005 VXD futures contract settlement date on November 16, 2005. In all cases, the settlement date for any VXD futures
contract is on the Wednesday that is thirty days prior to the third Friday of the calendar
month immediately following the month in which the VXD futures contract expires. In the
case of the November 2005 VXD futures contract, November 16, 2005 is thirty days prior to
the third Friday of December 2005 (December 16, 2005).
The Exchange notes that (i) no special HOS opening procedures apply to the
opening of the DJX option class on VXD futures contract settlement dates and (ii) the
modified ROS opening procedure set forth in CBOE Rule 6.2A.03, which previously applied
to the DJX option class on the settlement dates of VXD futures, is no longer applicable with
respect to DJX options.
Regulatory Circulars
continued
Regulatory Circular RG05-107 continued
For more information on the HOS opening process, please refer to CBOE Rule
6.2B and related CBOE regulatory circulars.
Any questions regarding this circular may be directed to Steve Slawinski of the
Regulatory Division at 312-786-7744 or Patrick Fay of the CBOE Futures Exchange at 312786-7925.
Regulatory Circular RG05-108
Date:
November 11, 2005
To:
Members and Member Firms
From: Regulatory Services Division
RE:
Description of Procedures for the ROS Opening on Volatility Index Futures
and Options Contract Settlement Days
This regulatory circular describes procedures for the modified Rapid Opening
System (ROS) opening procedure on the settlement days of volatility index futures and
option contracts for which the index options used to calculate the volatility index do not
trade on the Hybrid Trading System. CBOE notes that it currently does not trade volatility
index options. This circular will be applicable to options that do not trade on Hybrid that are
used to calculate a volatility index at such time that CBOE lists options on that volatility
index.
The modified ROS opening procedure is currently used for SPX options on settlement days for CBOE Volatility Index (VIX) futures. Since DJX options trade on Hybrid, the
Hybrid Opening System (HOS) is used for DJX options on settlement days for CBOE
DJIA Volatility Index futures contracts and the modified ROS opening procedure has no
applicability to the DJX option class.
The settlement date for listed volatility index futures and options contracts is on
the Wednesday that is thirty days prior to the third Friday of the calendar month immediately following the month in which the applicable volatility index futures or options contract
expires. On the settlement dates, CBOE Rule 6.2A.03 provides for a modified ROS
opening procedure only in those index option series (i) whose prices are used to calculate
a volatility index on which a future or option is traded and (ii) that are not traded on Hybrid.
The normal ROS opening procedure will occur on all other days in those index options and
on the volatility index futures and options settlement date in all contract months whose
prices are not used to calculate the applicable volatility index.
Orders Eligible for Participation in the Modified ROS Opening Procedure
On the final settlement date of a volatility index future or option with respect to
which the modified ROS opening procedure is utilized, all index option orders (including
public customer, broker-dealer, CBOE Market-Maker and away Market-Maker and specialist orders), other than contingency orders, may be placed in the electronic book only in
those series of the index option contract month whose prices are used to calculate the
applicable volatility index. The option contract prices used in the volatility index on the final
settlement date will always be the prices in the contract month immediately following the
month of the final settlement date for the applicable volatility index futures or options
contract (e.g., a June 05 final settlement date for volatility index futures and options contracts will use July 05 option prices to calculate the volatility index). Since the other option
contract months are never used in the calculation of a volatility index on the final settle-
RB2
November 23, 2005, Volume RB16, Number 47
Regulatory Circulars
continued
Regulatory Circular RG05-108 continued
ment date, Market-Maker and broker-dealer orders may not be placed in the electronic book
for those months in options contracts for which ROS is utilized. In addition, in order to
participate in the modified ROS opening procedure, all orders for placement in the electronic
book, and any change to or cancellation of any such order, must be received prior to 8:25
a.m. (or 8:00 a.m. if the circumstances described below are applicable).
Order Submission Deadlines for Participation in Modified ROS Opening Procedure
All index option orders for participation in the modified ROS opening procedure that
are related to positions in, or a trading strategy involving, volatility index options or futures,
and any change to or cancellation of any such order
(A) must be received prior to 8:00 a.m. and
(B) may not be cancelled or changed after 8:00 a.m., except that any such order
may be changed or cancelled after 8:00 a.m. and prior to 8:25 a.m. in order to correct a
legitimate error, in which case the member submitting the change or cancellation shall prepare and maintain a memorandum setting forth the circumstances that resulted in the change
or cancellation and shall file a copy of the memorandum with the CBOE Department of
Market Regulation no later than the next business day.
In general, the Exchange shall consider index option orders to be related to positions in, or a trading strategy involving, volatility index options or futures for purposes of
Rule 6.2A.03 if the orders possess the following three characteristics:
(1)
The orders are for options series with the expiration month that will be used
to calculate the settlement price of the applicable volatility index option or
futures contract. (For example, in the case of VIX futures, the orders
would be in SPX option series that expire one month following the settlement date of the expiring VIX futures contract).
(2)
The orders are for options series spanning the full range of strike prices in
the appropriate expiration month for options series that will be used to
calculate the settlement price of the applicable volatility index option or
futures contract, but not necessarily every available strike price.
(3)
The orders are for put options with strike prices less than the “at-the-money”
strike price and for call options with strike prices greater than the “at-themoney” strike price. The orders may also be for put and call options with
“at-the-money” strike prices.
Whether index option orders are related to positions in, or a trading strategy involving, volatility index options or futures for purposes of Rule 6.2A.03 depends upon the specific facts and circumstances. This circular is intended to provide guidance regarding what
types of orders would generally be considered to fall within this category of orders. Other
types of orders may also be deemed by the Exchange to fall within this category of orders
if the Exchange determines that to be the case based upon the applicable facts and circumstances.
November 23, 2005, Volume RB16, Number 47
RB3
Regulatory Circulars
continued
Regulatory Circular RG05-108 continued
Market-Maker and Broker-Dealer Order Submission Procedures
Market-Makers not in the applicable index option pits and broker-dealers must
electronically submit orders for placement in the electronic book for the modified ROS
opening procedure. Market-Makers in the applicable index option pits may submit orders
for placement in the electronic book for the modified ROS opening via one of the following
methods:
1.
2.
3.
Submit the order to a floor broker that has access to CBOE’s Order
Routing System (ORS).
Submit the order through a hand-held terminal that has futures/options
routing functionality (e.g., FOC, REDI).
Submit a paper ticket to the Order Book Official (Note: Only paper tickets
for market orders will be accepted – limit orders may not be submitted via
paper ticket for placement in the electronic book for participation in the
ROS opening).
All Market-Maker orders should designate the Market-Maker account in the CMTA
field of the order.
CBOE’s trading systems automatically cancel Market-Maker and broker-dealer
orders that are entered in the electronic book for the modified ROS opening procedure but
are not executed at the opening in the option contract months whose prices are used to
calculate a volatility index. Therefore, Market-Makers and broker-dealers are not required
to cancel these orders immediately following the opening.
Market-Maker Requirements in the Modified ROS Opening Procedure
All Market-Makers, including LMMs, who are required to log on to ROS or RAES
for the current expiration cycle are required to log on to ROS during the modified ROS
opening procedure if the Market-Maker is physically present in the applicable trading crowd.
On the Wednesday of a volatility index futures or options contract settlement only, all
LMMs will collectively set the Autoquote values that will be used by ROS to calculate the
opening prices for all series in the applicable index options contracts whose prices are
used to calculate the volatility index. ROS contracts to trade in the applicable index
options will be assigned equally, to the greatest extent possible, to all logged-on MarketMakers, including the LMMs.
LMMs are required to set Autoquote values for the modified ROS opening procedure consistent with their obligation to price option contracts fairly. In addition, members
submitting orders for placement on the electronic book may not do so for the purpose of
creating or inducing a false, misleading, or artificial appearance of activity or for the purpose of unduly or improperly influencing the opening price or settlement or for the purpose
of making a price which does not reflect the true state of the market. Violations of these
requirements are subject to disciplinary action.
Signing on to ROS for the Modified ROS Opening Procedure
All Market-Makers who are required to log on to ROS for the modified ROS opening procedure must do so prior to 8:25 a.m.
Signing on to ROS requires a change in the Market-Maker’s profile found on the
RAES sign-in terminal. All Market-Makers signed on to RAES that are not LMMs are
signed on using the letter ‘Z’ in the field before the affected class symbol. Signing on to
ROS as well as RAES requires that the letter ‘Z’ be changed to a ‘B’ for both (ROS &
RAES).
RB4
November 23, 2005, Volume RB16, Number 47
Regulatory Circulars
continued
Regulatory Circular RG05-108 continued
Prior to signing on for the day, type in the Market-Maker’s acronym and password
and hit F15 once. Change the ‘Z’ in front of the necessary symbols to ‘B’ and hit F15 again.
At some point after the opening and prior to the next ROS opening, Market-Makers
that are not LMMs must change their profile to once again show a ‘Z’ indicating RAES only.
Any questions regarding this circular may be directed to Steve Slawinski of the
Regulatory Division at 312-786-7744 or Patrick Fay of the CBOE Futures Exchange at 312786-7925.
(Replaces RG05-86)
Regulatory Circular RG05-109
Date:
November 11, 2005
To:
Market-Maker Firms and DPM Firms
From: Legal Division
Re:
Relief from Commodity Pool Operator and Commodity Trading Advisor
Registration Requirements for Security Futures Trading
The Commodity Futures Trading Commission (CFTC) issued a No-Action Letter to
CBOE in 2002 related to Commodity Pool Operator (CPO) and Commodity Trading Advisor
(CTA) registration requirements under the Commodity Exchange Act (CEA) in the context of
trading security futures products. (CFTC No-Action Letter 02-103 (August 21, 2002)). CPOs
and CTAs are generally required to register with the CFTC.1 The No-Action Letter grants
certain relief with respect to these two registration requirements. The relief granted only
applies to trading in security futures products and does not apply to trading in other future
products, including those that are currently traded on CBOE Futures Exchange, LLC.
As further explained below, a CBOE Market-Maker firm or DPM firm that desires to take advantage of the relief granted by the No-Action Letter in 2005 must file a
claim form with the CFTC between December 1, 2005 and January 15, 2006.
Relief from CPO Registration Requirements
The No-Action Letter grants relief from CPO registration requirements to operators
of CBOE Market-Maker firms and DPM firms that trade security futures products on a
proprietary basis provided that certain criteria are satisfied. CBOE Market-Maker firms and
DPM firms are collectively referred to in this circular as Market Maker Firms.
The operator of a Market-Maker Firm is a person or entity with authority to bind the
Firm. The operator of a Market-Maker Firm organized as a general partnership or a limited
partnership would be a general partner. The operator of a Market-Maker Firm organized as
a limited liability company would be a managing member or manager. The operator of a
Market-Maker Firm organized as a corporation would be the chief executive officer or president of the corporation (or another officer with authority to bind the corporation).
1
See CEA Sections 1a(5) and 1a(6) (defining CPO and CTA) and CEA Sections 4m and 4n (describing CPO
and CTA registration requirements).
November 23, 2005, Volume RB16, Number 47
RB5
Regulatory Circulars
continued
Regulatory Circular RG05-109 continued
Pursuant to the No-Action Letter, the operator of a Market-Maker Firm that trades
security futures products is not required to register as a CPO if the Firm meets the following criteria:
1.
The Market-Maker Firm is registered with the Securities and Exchange
Commission as a broker-dealer;
2.
The Market-Maker Firm is a member in good standing of CBOE;
3.
Anyone who participates in the profits/losses associated with the trading
of security futures products by the Market-Marker Firm is not statutorily
disqualified under Section 8a(2) or (3) of the CEA and is one of the following:
(a)
(b)
(c)
a “knowledgeable employee” (as defined in Investment Company Act Rule 3c-5(a)(4)) of the Market-Maker Firm or an immediate family member of a such a person (defined as a child,
parent, sibling, or spouse, or family trust for the benefit of one or
more immediate family members);
a retired knowledgeable employee of the Market-Maker Firm or
of another CBOE member firm, or an immediate family member
of such a person; or
one of up to ten natural persons who does not qualify under
subparagraphs (a) or (b) above and who is either (i) an officer,
director, employee, or principal of a registered broker-dealer or
(ii) a “qualified eligible person” (as defined in CEA Rule 4.7(a));
4.
The Market-Maker Firm does not solicit public investors in the Firm; and
5.
In no event does or will an interest in the Market-Maker Firm represent an
indirect investment by another individual, except in the case that the
beneficial owner of the interest is a natural person who meets the criteria
of paragraph 3 above.
These criteria are referred to in the No-Action Letter as the Market-Maker Criteria.
Relief from CTA Registration Requirements
The No-Action Letter also grants relief from CTA registration requirements to CBOE
Market-Makers that trade security futures products on a proprietary basis on behalf of
Market- Maker Firms provided that certain criteria are satisfied.
Specifically, pursuant to the No-Action Letter, an individual CBOE Market-Maker
trader that trades security futures products on behalf of a Market-Maker Firm is not required to register as a CTA if the trader meets the following criteria:
1.
2.
3.
4.
RB6
The trader is an associated person of a Market-Maker Firm that meets
the Market-Maker Criteria and is operating pursuant to the terms of the
No-Action Letter without CPO registration;
The trader will provide commodity interest trading advice solely to the
Market-Maker Firm and to persons associated with the Firm whose trading, in whole or in part, is for the benefit of the Firm;
The trader does not hold himself or herself out generally to the public as
a CTA; and
The trader is not statutorily disqualified under Section 8a(2) or (3) of the
CEA.
These criteria are referred to in the No-Action Letter as the Trader Criteria.
November 23, 2005, Volume RB16, Number 47
Regulatory Circulars
continued
Regulatory Circular RG05-109 continued
Filing Requirement
In order for a Market-Maker Firm’s operator and Market-Maker traders to receive
the benefit of the relief granted by the No-Action Letter, the Market-Marker Firm must file
with the CFTC a “Claim of CPO and CTA Registration No-Action Position” prior to entering
into a transaction involving a security futures product. In order to continue to receive the
benefit of the No-Action Letter, the Market-Maker Firm must annually file an updated Claim
with the CFTC by January 15th of each year. The updated Claim may be filed no earlier than
December 1st of the year prior to the year for which the Claim is being filed.
The No-Action Letter requires that the Claim provide the name, main business
address and main business telephone number of the Market-Maker Firm and its operator;
provide the name and CBOE acronym of each of the Firm’s Market-Maker traders; and be
signed and dated by a duly authorized representative of the Firm. If the Market-Maker Firm
has more than one operator, only one operator needs to be identified in the Claim. The NoAction Letter also requires that the Market-Maker Firm represent in the Claim that:
1.
The Market-Maker Firm meets the Market-Maker Criteria and the MarketMaker Firm’s traders meet the Trader Criteria (collectively referred to in the
No-Action Letter as the Criteria);
2.
The Market-Maker Firm will permit the CFTC or its delegee to inspect the
Market-Maker Firm’s books and records to confirm that the Criteria are
being met without the need for a formal CFTC-issued order of investigation
or other judicial process; and
3.
The Market-Maker Firm will advise the CFTC in writing within thirty days
when it or any previously identified trader is statutorily disqualified under
Section 8a(2) or (3) of the CEA.
A Claim form that may be completed by Market-Maker Firms and submitted to the
CFTC in order to receive the benefit of the No-Action Letter is attached to this circular.
Generally Applicable Provisions
Each CBOE member with trading rights on CBOE is a member of OneChicago,
LLC, and to the extent provided in OneChicago rules, becomes bound by OneChicago rules
and subject to the jurisdiction of OneChicago by accessing or entering any order into the
OneChicago System. Accordingly, CBOE members that trade security futures products on
OneChicago will be subject to OneChicago rules and to applicable CFTC and SEC regulations relating to the trading of security futures products even if relieved from CPO or CTA
registration requirements. For example, even if relieved of CPO or CTA registration requirements, CBOE Market-Maker Firms and their Market-Maker traders will remain subject to the
antifraud provisions of the CEA and CFTC regulations and to CFTC large trader reporting
requirements.
Sole Proprietor Market-Makers and Single Shareholder/LLC Member Market-Maker
Firms
Individual sole proprietor Market-Makers and Market-Maker Firms with a single
shareholder or LLC member that do not solicit, accept, or receive funds, securities, or
property from others for the purpose of trading futures products (including security futures
products) and do not trade futures products through a joint account arrangement are not
commodity pools. Accordingly, neither they nor their operators are required to register with
the CFTC as CPOs, and they have no need to seek to receive the benefit of the No-Action
Letter.
November 23, 2005, Volume RB16, Number 47
RB7
Regulatory Circulars
continued
Regulatory Circular RG05-109 continued
Contact Information and Resources
This circular is not intended to provide a complete description of the provisions of
the No-Action Letter and related CEA provisions and CFTC regulations. Market-Maker
Firms are advised to consult the No-Action Letter and these related provisions and regulations for additional detail. Market-Maker Firms may also wish to consult with their own
legal counsel to discuss how the No-Action Letter and the related provisions and regulations may apply to their particular circumstances.
Copies of the No-Action Letter and the specific legal provisions cited in this circular are available from the Legal Division.
Any questions regarding this circular may be directed to Arthur Reinstein of the
Legal Division at (312) 786-7570.
(Regulatory Circular RG04-117 Revised)
RB8
November 23, 2005, Volume RB16, Number 47
Claim of CPO and CTA Registration No-Action Position Form
Regulatory Circulars
continued
Date:
Commodity Futures Trading Commission
Central Region
Division of Clearing and Intermediary Oversight
525 Monroe Street
Suite 1100
Chicago, Illinois 60661
Attn:
Branch Chief
Re:
Claim Pursuant to No-Action Letter dated August 21, 2002
under Section 4m of the Commodity Exchange Act (“CEA”)
Dear Sir or Madam:
As a duly authorized representative, I write on behalf of the operator1 and Traders
(as defined below) of
(“MarketMaker Firm”) to claim relief pursuant to the No-Action Letter dated August 21, 2002 from the
requirements to register as a commodity pool operator and/or commodity trading advisor.
Market-Maker Firm acts as a Market-Maker firm or a designated primary Market-Maker firm
on the Chicago Board Options Exchange (“CBOE”). Please be advised of the following
information:
Main business address of Market-Maker Firm:
Main business telephone number:
Operator of Market-Maker Firm:
Attached to this letter as Annex A are the names and unique CBOE acronyms of
each of the Market-Maker Firm’s traders who act as Market-Makers (“Traders”) who desire to
claim the relief available under the No-Action Letter.
Market-Maker Firm hereby represents that: (1) it meets the Market-Maker Criteria
(as defined in the No-Action Letter) and the Traders meet the Trader Criteria (as defined in the
No-Action Letter) (together, the “Criteria”); (2) it will permit the Commodity Futures Trading
Commission or its delegee to inspect the Market-Maker Firm’s books and records to confirm
that the Criteria are being met without the need for a formal Commission-issued order of
investigation or other judicial process; and (3) it will advise the Commission in writing within
thirty days when it or any previously identified Trader is statutorily disqualified under Section
8a(2) or (3) of the CEA. Market-Maker Firm understands that the No-Action Letter provides
that in order to take advantage of the relief described in the No-Action Letter, it is required to
re-file this claim annually between December 1 and January 15.
1
The operator of a Market-Maker Firm is a person or entity with authority to bind the firm. The operator of a
Market-Maker Firm organized as a general partnership or limited partnership is a general partner. The
operator of a Market-Maker Firm organized as a limited liability company is a managing member or a manager
of the limited liability company. The operator of a Market Maker Firm organized as a corporation is the Chief
Executive Officer or President of the corporation (or another officer with authority to bind the corporation).
November 23, 2005, Volume RB16, Number 47
RB9
Regulatory Circulars
continued
Please contact
should you have any questions about this notice.
at
Sincerely,
Name:
Title:
RB10
November 23, 2005, Volume RB16, Number 47
Regulatory Circulars
continued
Annex A
Name of Market-Maker Firm:
Date of Claim:
Names and CBOE Acronyms of Firm Market-Maker Traders:
Name
November 23, 2005, Volume RB16, Number 47
CBOE Acronym
RB11
Regulatory Circulars
continued
Regulatory Circular RG05-110
Date:
November 14, 2005
To:
Members and Member Organizations
From:
Market Services
Research Department
Subject:
Reduced Value S&P 500 Index LEAPS Expiring December 2005
The purpose of this circular is to inform you that on November 15, 2005, the open interest
in the December 2005 reduced value S&P 500 Index LEAPS (“Reduced SPX LEAPS”) will
roll into the December 2005 Mini-SPX Index option (“Mini-SPX option”) open interest and,
accordingly, the symbols for the December 2005 Reduced SPX LEAPS will be identical to
the symbol for the corresponding December 2005 Mini-SPX option series. The attached
document provides a table for converting the symbols of each outstanding December 2005
Reduced SPX LEAP. Also, as Mini-SPX options trade on the Hybrid Trading System
(“Hybrid”), the converted December 2005 Reduced SPX LEAPS shall also trade on Hybrid.
The roll of open interest in the December 2005 Reduced SPX LEAPS will be effective at
12:00 a.m. Chicago time on November 15, 2005. Therefore, market participants who retain
positions in December 2005 Reduced SPX LEAPS through November 14, 2005 and who
also wish to close out or increase positions in that contract after 12:00 a.m. November 15,
2005 must enter the appropriate closing orders in the Mini-SPX option class. For example,
an individual who holds 10 contracts in the LSY LK/XK DEC 05 series (series in the
December 2005 Reduced SPX LEAPS) as of November 11, 2005 and wishes to sell those
contracts on November 18, 2005 would enter a sell order on November 18, 2005 for 10
contracts in the XSO LX/XX DEC 05 series (series in the December 2005 Mini-SPX options).
Members and Member Organizations should communicate this information to their compliance departments, out-of-town branches, and correspondents. Members and Member
Organizations are also urged to notify customers having open interest in December 2005
Reduced LEAPS SPX of the changes noted in this circular.
Please contact Bill Speth, Research, at (312) 786-7141 or Charlie Hullihan, Market Services, at (312) 786-7176 if you have additional questions.
RB12
November 23, 2005, Volume RB16, Number 47
Regulatory Circulars
continued
Regulatory Circular RG05-110
Reduced Value S&P 500 Index LEAPS
Expiring December 2005
The following changes will be effective Tuesday, November 15, 2005.
EXISTING SERIES
LSY LK/XK
DEC
LSY LW/XW DEC
50
60
NEW SERIES
XSO LX/XX*
XSO LH/XH*
DEC
DEC
50
60
LSY LX/XX
LSY LZ/XZ
DEC
DEC
70
80
XSC LR/XR*
XSC LB/XB*
DEC
DEC
70
80
LSY
LSY
LSY
LSY
LS/XS
LY/XY
LT/XT
LA/XA
DEC
DEC
DEC
DEC
90
95
100
105
XSE
XSE
XSE
XSE
LL/XL*
LQ/XQ*
LV/XV*
LA/XA
DEC
DEC
DEC
DEC
90
95
100
105
LSY
LSY
LSY
LSY
LB/XB
LC/XC
LD/XD
LE/XE
DEC
DEC
DEC
DEC
110
115
120
125
XSP
XSP
XSP
XSP
LF/XF*
LK/XK*
LP/XP*
LU/XU*
DEC
DEC
DEC
DEC
110
115
120
125
LSY LF/XF
LSY LH/XH
DEC
DEC
130
140
XSK LZ/XZ*
XSK LJ/XJ*
DEC
DEC
130
140
*Denotes code change
The symbol XSO will represent strike below 70
The symbol XSC will represent strike prices 70 to 89
The symbol XSE will represent strike prices 90 to 109
The symbol XSP will represent strike prices 110 to 129
The symbol XSK will represent strike prices 130 to 149
The symbol XSL will represent strike prices 150 and above
Regulatory Circular RG05-111
To:
Members and Associated Persons
From: Office of the Secretary
Date:
November 15, 2005
Re:
Campaign Materials
Members and associated persons of members are advised that creation or distribution of
unsigned, defamatory, false, or other inappropriate election or campaign materials may be
viewed as conduct inconsistent with just and equitable principles of trade in violation of
CBOE Rule 4.1. Violation of this Rule could lead to Exchange disciplinary proceedings or
other Exchange action.
If you have any questions regarding this circular, please contact the Office of the Secretary
at (312) 786-7462.
November 23, 2005, Volume RB16, Number 47
RB13
Regulatory Circulars
continued
Regulatory Circular RG05-112
Date:
November 15, 2005
To:
Membership
From: Election Committee
Re:
Electioneering
This is to remind the membership of the following Exchange policy with respect to Exchange elections:
Persons are prohibited from campaigning for or against a candidate or issue and
from distributing any election or campaign materials within 25 feet of the Exchange voting tables on the north and south ends of the trading floor (or a voting
table located at any other location that may be established by the Election Committee). Only Election Committee members or their designees may distribute
official Exchange election materials within the designated 25 feet of the voting
tables. Election materials include the ballot, proxy, notice, biographical sketches,
ballot envelope and Exchange information or regulatory circulars distributed with
the notice. The Board may determine to make other material issued by the Board
of Directors available at the voting tables.
If you have any questions regarding this circular, please contact Jaime Galvan at 312-7867058 or Joanne Moffic-Silver at 312-786-7462.
Regulatory Circular RG05-113
Date:
November 16, 2005
To:
Members and Member Organizations
From: Office of the Secretary
Re:
Gratuities Policy – Rule 4.4
This circular addresses the Exchange’s policy regarding the permissibility of members and
member organizations giving gratuities to employees of the Exchange and employees of
financial concerns (“Gratuities Policy”). The Gratuities Policy restates limitations on gifts
that are reflected in Exchange Rule 4.4 (“Rule”) and the Exchange’s Conflict of Interest
Policy.
Gifts and Gratuities to CBOE Employees
In pertinent part, the Exchange’s Gratuities Policy with respect to CBOE employees provides:
•
RB14
CBOE employees may not accept any gift or gifts (including a gratuity,
loan, discount, free service not generally available to the public, or other
thing) valued in excess of $50 (in the aggregate) during any calendar year
from the same member or person associated with a member or any person or entity with whom the employee is directly and/or substantially
involved in conducting business on behalf of CBOE.
November 23, 2005, Volume RB16, Number 47
Regulatory Circulars
continued
Regulatory Circular RG05-113 continued
•
A gift to the spouse or domestic partner of a CBOE employee from any
member or person associated with a member or from any CBOE business
contact of the employee shall also be considered a gift to the employee
under this policy, with the following exception. If a spouse or domestic
partner of a CBOE employee is an employee of a CBOE member or person associated with a member, any salary or other gift from the member or
person associated with a member to the spouse or domestic partner shall
not be considered a gift to the CBOE employee under this policy.
•
If an employee receives gifts from more than one person associated with
the same member or member firm, these gifts are considered to be from
the same member and are aggregated for the purposes of this Policy.
•
Legal Division and Regulatory Services Division employees may not accept any gift that has more than a nominal value (such as a coffee mug)
from the same member or any person or entity with whom the employee is
directly and/or substantially involved in conducting business on behalf of
CBOE.
There are no exceptions to this restriction, without obtaining prior written consent from the
Division Head in charge of the employee’s division. In the case of Division Heads, this prior
written consent must be obtained from the President; in the case of the President, this prior
written consent must be obtained from the Chairman; and in the case of the Chairman, this
prior written consent must be obtained from the Chairperson of the Audit Committee.
Gratuities or Compensation to Employees of Financial Concerns
Where gratuities or compensation from a member to an employee of a financial concern
(including another member or a non-member broker, dealer, bank or institution) exceed $100
in any given calendar year, the donor must obtain the prior consent of the recipient’s employer and of the Exchange.
Procedure to Request Gift Approval
No member should make a gift in excess of the limits indicated above, without first obtaining
Exchange approval. Requests for Exchange approval may be made on the attached form.
Additional copies of the form may be obtained from the Exchange’s Office of the Secretary.
To obtain approval for a gift to an Exchange employee that exceeds the limits indicated
above, the request should be submitted to the employee’s Division Head. (Upon granting or
denying the request, Division Heads will submit the information to the Office of the Secretary.) To obtain Exchange approval for a gift to an employee of a financial concern (including
another member), the request should be submitted to the Office of the Secretary. The
request should also reflect the consent of the financial concern.
The Gratuities Policy is set forth in the CBOE Employee Handbook under the “Workplace
Policies” tab (p. 27). Questions regarding the Gratuities Policy may be directed to Patrick
Sexton at 312-786-7467 or sexton@cboe.com.
November 23, 2005, Volume RB16, Number 47
RB15
Regulatory Circulars
continued
Form to Request Prior Approval of Gratuities and Compensation
Under Exchange Rule 4.4
This form may be used to request prior approval of the Exchange for gratuities or compensation to an:
•
•
•
employee of the Exchange in an amount greater than $50 in any calendar year,
employee of the Exchange’s Legal Division or Regulatory Services Division that
has more than a nominal value (such as a coffee mug), or
employee of a financial concern in an amount greater than $100 in any calendar
year.
1. Name of Recipient
2. Recipient’s Employer
3. Recipient’s Position/Title
4. Nature of gratuity or compensation
5. Dollar value of gratuity or compensation __________________
6. Total dollar value and nature of other gratuities or compensation to recipient during
calendar year
7. Reason for gratuity or compensation
8. Person Giving the Gratuity or Compensation
Name of Member: (Print)
Firm, if any
Signature:
Date:
9. Consent of Employer:
Granted
Denied
(for employees of CBOE obtain consent from the employee’s Division Head)
Name: (Print)
Firm or CBOE Division
Signature:
Date:
10. Consent of Exchange:
Granted
(for gifts to employees of financial concerns)
Denied
Name: (Print)
Signature:
RB16
Date:
November 23, 2005, Volume RB16, Number 47