November 25, 2005
Exchange
Bulletin
Volume 33, Number 47
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 25, 2005
CLASS
CBOE
BID
OFFER
$705,000.00
LAST SALE AMOUNT
$775,000.00
LAST SALE DATE
$745,000.00
November 22, 2005
CBOT FULL MEMBERSHIP
CLASS
BID
OFFER
With CBOE Exercise Right
$2,760,000.00
Without CBOE Exercise Right
$2,400,000.00
$70,000.00
CBOE Exercise Right
$2,900,000.00
LAST SALE AMOUNT
LAST SALE DATE
$2,830,000.00
November 22, 2005
No Offer
$2,850,000.00
October 24, 2005
$90,000.00
$90,000.00
October 28, 2005
CBOE MEMBERSHIP SALES AND TRANSFERS
From
Jeffrey Kutchin
To
William L. McCarthy
Price/Transfer
$745,000.00
Date
11/22/05
Page 2
November 25, 2005
Volume 33, Number 47
Chicago Board Options Exchange
MEMBERSHIP INFORMATION FOR 11/17/05 THROUGH 11/23/05
MEMBERSHIP APPLICATIONS RECEIVED FOR MEMBERSHIP LEASES
WHICH A POSTING PERIOD IS REQUIRED
Individual Membership Applicants
Date Posted
Song Luke Kim Kamm, Nominee
LaBranche Structured Products LLC
4848 N. California, #2
Chicago, IL 60625
11/23/05
Michael R. Woodham, Nominee
Geneva Capital Investments LLC
1613 N. Hudson Ave., Apt. 202
Chicago, IL 60614
11/23/05
Member Organization Applicants
Date Posted
CTC XS LLC
11/23/05
Joseph Landy, Nominee
Adrian Velazquez, Nominee
141 W. Jackson, 8th Floor
Chicago, IL 60604
CTC Holdings LLC – Sole Member
Eric H. Chern – Managing Director
Andrew W. Hall – Managing Director
Paul Kepes – Managing Director
Erich W. Tengelesen – Managing Director
John J. Watrous – Managing Director
Paul Kepes – Managing Director
Margaret Wiermanski - COO
ST Capital LLC
11/22/05
Kurt J. Steib, Nominee
S. Trigg Thorstenson
3449 N. Janssen
Chicago, IL 60657
Kurt J. Steib – Managing Director
S. Trigg Thorstenson – Managing Director
New Leases
Effective Date
Lessor: Henry S. Traum
Lessee: Ronin Capital, LLC
Rate:
0.75%
Term: Monthly
11/21/05
Lessor: Ilene M. Resnick Garber
Lessee: Susquehanna Investment Group
William R. Bergey, NOMINEE
Rate:
1.125%
Term: Monthly
11/22/05
Terminated Leases
Termination Date
Lessor: Ilene M. Resnick Garber
Lessee: Botta Specialist, LLC
William R. Bergey (BLY), NOMINEE
11/22/05
MEMBERSHIP TERMINATIONS
Individual Members
CBT Exercisers:
Termination Date
Matthew C. Johnson (LUG)
1641 Wickham Court
Green Oaks, IL 60048
11/17/05
CBT Registered For:
Termination Date
Keir S. Collins (KIR)
Wellington Capital Markets, LLC
440 S. LaSalle, Ste. 2910
Chicago, IL 60605
11/23/05
Timothy G. McMahon (ERE)
Consolidated Trading, LLC
230 S. LaSalle - Ste. 688
Chicago, IL 60604
11/23/05
Joseph C. Barnas (GIO)
Holland Trading House, LLC
440 S. LaSalle, Ste. #1578
Chicago, IL 60603
11/22/05
Caldwell Growth Opportunities
11/17/05
Trust, Lessor
150 King Street West, Suite 1702
Nominee(s) / Inactive Nominee(s):
Termination Date
PO Box 46
Toronto, Ontario M5H 1J9
John B. Niemann (JBN)
11/22/05
Canada
Merrill Lynch, Pierce, Fenner & Smith, Inc.
Thomas S. Caldwell – Trustee
821 Hillside
Brendan T.N. Caldwell – Trustee
Glenn Ellyn, IL 60137
J. Dennis Freeman – Trustee
Angela T. Stirpe – Trustee
11/22/05
Caldwell New York Limited Partnership – Limited Partner Anthony B. Marti (ANT)
Ronin Capital, LLC
Thomas S. Caldwell – General Partner
230 S. LaSalle, Suite 400
Caldwell New York LP II – Limited Partner
Chicago, IL 60604
Thomas S. Caldwell – General Partner
Caldwell Investment Trust #1 – Limited Partner
Russell Byrd (LKA)
11/22/05
Thomas S. Caldwell – General Partner
Capstone
Trading
LLC
Urbana Corporation – Limited Partner
440 S. LaSalle Ste., #1600
Thomas S. Caldwell – General Partner
Chicago, IL 60605
Caldwell Balanced Fund, Lessor
150 King Street West, Suite 1702
PO Box 46
Toronto, Ontario M5H 1J9
Canada
Thomas S. Caldwell – Trustee
John R. Campbell, QC – Trustee
J. Dennis Freeman – Trustee
Jean Mary Lee – Trustee
John Skirving – Trustee
J. Donald Wiley – Trustee
11/17/05
Page 3
November 25, 2005
Volume 33, Number 47
Chicago Board Options Exchange
EFFECTIVE MEMBERSHIPS
JOINT ACCOUNTS
Individual Members
New Participants
Acronym
Effective Date
Effective Date
Jonathan Ryan Garrity
QEW
11/21/05
Elizabeth C. Steigmann (LBY)
11/17/05
Susquehanna Investment Group
175 W. Jackson - Ste. 1700
Chicago, IL 60604
Type of Business to be Conducted: Market Maker/ Floor Broker
Jonathan Ryan Garrity
QFS
11/21/05
Jonathan Ryan Garrity
QIS
11/21/05
Jonathan Ryan Garrity
QJY
11/21/05
Karl D. Fruecht (KDF)
11/21/05
HSBC Securities (USA) Inc.
1 N. Wacker Drive, #4080
Chicago, IL 60606
Type of Business to be Conducted: Floor Broker
Jonathan Ryan Garrity
QLO
11/21/05
Jonathan Ryan Garrity
QMD
11/21/05
Jonathan Ryan Garrity
QNA
11/21/05
Scott C. England (SCE)
11/22/05
Gargoyle Strategic Investments LLC
440 S. LaSalle, Suite 3100
Chicago, IL 60605
Type of Business to be Conducted: Market Maker
Jonathan Ryan Garrity
QNY
11/21/05
Jonathan Ryan Garrity
QPO
11/21/05
Jonathan Ryan Garrity
QUT
11/21/05
Nominee(s) / Inactive Nominee(s):
Jonathan Ryan Garrity
QVA
11/21/05
Frank L. Catris (FNK)
11/18/05
Merrill Lynch Professional Clearing Corp.
440 S. LaSalle, Suite 1124
Chicago, IL 60605
Type of Business to be Conducted:
Jonathan Ryan Garrity
QYH
11/21/05
Jonathan Ryan Garrity
QYS
11/21/05
Elizabeth C. Steigmann
QEW
11/21/05
Mark L. Elafros
11/21/05
Ronin Capital, LLC
230 S. LaSalle, Ste. 400
Chicago, IL 60604
Type of Business to be Conducted: Market Maker
Elizabeth C. Steigmann
QFS
11/21/05
Elizabeth C. Steigmann
QGS
11/21/05
Elizabeth C. Steigmann
QIS
11/21/05
William D. Baedke (BXC)
11/22/05
UBS Securities, LLC
677 Washington Ave.
Stanford, CT 06901
Type of Business to be Conducted: Market Maker
Elizabeth C. Steigmann
QJY
11/21/05
Elizabeth C. Steigmann
QLO
11/21/05
Elizabeth C. Steigmann
QMD
11/21/05
David S. Fleming (DSF)
11/22/05
G-Bar Limited Partnership
1040 Oak Knoll Drive
Lake Forest, IL 60045
Type of Business to be Conducted: Market Maker
Elizabeth C. Steigmann
QNA
11/21/05
Elizabeth C. Steigmann
QNY
11/21/05
Elizabeth C. Steigmann
QPO
11/21/05
J. Bradley Lloyd (JBL)
11/22/05
Capstone Trading LLC
44 Wall Street
New York, NY 10005
Type of Business to be Conducted: Market Maker
Elizabeth C. Steigmann
QUT
11/21/05
Elizabeth C. Steigmann
QVA
11/21/05
Elizabeth C. Steigmann
QYH
11/21/05
Member Organizations
Elizabeth C. Steigmann
QYS
11/21/05
Tony Aimone
QIS
11/22/05
William R. Bergey
QIS
11/22/05
Erik Bolinder
QIS
11/22/05
Benjamin Dekker
QIS
11/22/05
Scotlond T. Ernsting
QIS
11/22/05
Geoffrey D. Fahy
QIS
11/22/05
James P. Fitzgibbons
QIS
11/22/05
Michael F. Fong
QIS
11/22/05
David A. Goldsmith
QIS
11/22/05
CBT Registered For:
CBT Registered For:
Effective Date
Effective Date
HSBC Securities (USA) Inc.
11/21/05
452 Fifth Avenue
New York, NY 10018
Type of Business to be Conducted: Floor Broker
Gargoyle Strategic Investments LLC
11/22/05
285 Grand Ave. Bldg. 3 - 2nd Fl.
Englewood, NJ 07631
Type of Business to be Conducted: Market Maker
Page 4
November 25, 2005
Volume 33, Number 47
Chicago Board Options Exchange
New Participants
Acronym
Effective Date
CHANGES IN MEMBERSHIP STATUS
Sean W. Haggerty
QIS
11/22/05
Individual Members
Brian W. Hansen
QIS
11/22/05
Christopher G. Larkin
QIS
11/22/05
Kathleen A. McCullough
QIS
11/22/05
Jeffrey D. Ream
QIS
11/22/05
Max W. Sung
QIS
11/22/05
Charles Floyd
Thompson Jr.
QIS
11/22/05
Patrick W. Wagoner
QIS
11/22/05
Spencer D. Worley
QIS
11/22/05
Brian R. Tobin
QUN
11/22/05
New Accounts
Acronym
Effective Date
Jonathan Ryan Garrity
QSM
11/21/05
Elizabeth C. Steigmann
QSM
11/21/05
UBS Securities RMM
QUS
11/22/05
Terminated Participants Acronym
Termination Date
Anthony B. Marti
QAB
11/22/05
William R. Bergey
QLZ
11/22/05
William R. Bergey
QYZ
11/22/05
Joseph C. Barnas
QBG
11/22/05
Joseph C. Barnas
QHL
11/22/05
Joseph C. Barnas
QQL
11/22/05
Joseph C. Barnas
QRW
11/22/05
Keir S. Collins
QWC
11/23/05
Timothy G. McMahon
QCI
11/23/05
Timothy G. McMahon
QCO
11/23/05
Timothy G. McMahon
QCC
11/23/05
Timothy G. McMahon
QCP
11/23/05
Timothy G. McMahon
QWZ
11/23/05
Terminated Accounts
Acronym
Termination Date
Timothy G. McMahon
QCE
11/23/05
Effective Date
Gerald T. McNulty
11/18/05
From:
Nominee For Merrill Lynch Professional Clearing Corp.;
Floor Broker
To:
Nominee For Merrill Lynch, Pierce, Fenner & Smith,
Inc.; Floor Broker
Benjamin G. Schneider
11/21/05
From:
Nominee For Susquehanna Investment Group; Market
Maker/ Floor Broker
To:
CBT Registered For Susquehanna Investment Group;
Market Maker/ Floor Broker
Steven T. Romanchuk
11/21/05
From:
Nominee For Susquehanna Investment Group; Market
Maker/ Floor Broker
To:
CBT Registered For Susquehanna Investment Group;
Market Maker/ Floor Broker
William R. Bergey
11/22/05
From:
Nominee For Botta Specialist, LLC; Market Maker/ Floor
Broker
To:
Nominee For Susquehanna Investment Group; Market
Maker/ Floor Broker
Member Organizations
Effective Date
Botta Specialist, LLC
11/22/05
From:
Lessor/ Owner/ Lessee; Associated with a Market
Maker/ Floor Broker
To:
Lessor/ Owner; Associated with a Market Maker/
Floor Broker
UBS Securities, LLC
11/22/05
From:
Lessor/ Non-Member Customer Business/ Member
Organization Affiliated with a CBT Registered For;
Associated with a Market Maker/ Floor Broker
To:
Lessor/ Owner/ Non-Member Customer Business/
Member Organization Affiliated with a CBT Registered
For; Associated with a Market Maker/ Floor Broker/
Remote Market Maker
Cassandra Trading Group, LLC
11/21/05
From:
Lessee/ Member Organization Affiliated with a CBT
Registered For; Associated with a Market Maker/ Floor
Broker
To:
Lessor/ Lessee/ Member Organization Affiliated with a
CBT Registered For; Associated with a Market Maker/
Floor Broker
MEMBER ADDRESS CHANGES
Individual Members
Effective Date
Hector Godinez
737 W. Washington, #3002
Chicago, IL 60661
11/18/05
Lance S. O’Donnell
338 Kenilworth Ave.
Kenilworth, IL 60043
11/22/05
Member Organizations
Effective Date
Nomura Securities International Inc.
Attn: Richard Kenna
77 W. Wacker Drive, Suite 700
Chicago, IL 60601
11/21/05
Page 5
November 25, 2005
Volume 33, Number 47
Chicago Board Options Exchange
POSITION LIMIT CIRCULARS
Pursuant to Exchange Rule 4.11, the Exchange issued the below listed Position Limit Circular on November 21, 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 PL05-51
November 21, 2005
AT&T Corp. (“T/VT/WT”) merger completed with
Tau Merger Sub Corporation, a wholly owned subsidiary
of SBC Communications, Inc. (“SBC/VFE/WFE”)
Effective Date November 21, 2005
RESEARCH CIRCULARS
The following Research Circulars were distributed between November 18 and November 23, 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 #RS05-822
November 18, 2005
AT&T Corp. (“T/VT/WT”) Merger COMPLETED
with SBC Communications Inc. (“SBC/VFE/WFE”)
Research Circular #RS05-829
November 23, 2005
AT&T Inc. (“SBC”)
Stock and Option Symbol Change to (“T”)
Effective Date: December 1, 2005
Research Circular #RS05-824
November 18, 2005
Nuance Communications Inc. (SSFT/SSQ)
Underlying Symbol Change to “NUAN”
Effective Date: November 21, 2005
Research Circular #RS05-830
November 23, 2005
Georgia-Pacific Corporation (“GP/VGP/WGP”)
Tender Offer by Koch Forest Products, Inc.
November 30, 2005
Volume RB16, Number 48
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 RG05-114
Date:
November 22, 2005
To:
Members and Member Organizations
From:
Legal Division
Market Services
Re:
Repeal of Maintenance Listing Standard
On November 16, 2005, the Securities and Exchange Commission (“SEC”) approved a
CBOE rule change (SR-CBOE-2004-37), which proposed to eliminate Interpretation and
Policy .01(e) to CBOE Rule 5.4 (“Rule 5.4.01(e)”). Rule 5.4.01(e) prohibited the Exchange
from listing new option series on any security in which the issuer (1) failed to make timely
reports (i.e. 10K, 10Q) as required under the Securities Exchange Act of 1934, and (2) did
not comply with such reporting requirements within 30 days after falling out of compliance.
This rule change is now effective. Please visit the Exchange website at http://www.cboe.org/
Legal/filings.aspx to review this rule change and the SEC approval order.
Additionally, prior to the approval of this rule change and in accordance with Rule 5.4.01(e),
the Exchange did restrict the listing of new series on several option classes.1 With the
elimination of Rule 5.4.01(e), the Exchange may now determine to list new series on these
classes, provided that each of these underlying securities meets all other required listing
criteria under CBOE Rule 5.4. A list of these formerly restricted option classes are provided
on the attached list:
1
Note that Rule 5.4.01(e) did not require the Exchange to delist option series that were listed prior to the date
on which the issuer of the underlying security failed to comply with the reporting requirements and many of
these series remain open and are actively traded.
Regulatory Circulars
continued
Regulatory Circular RG05-114 continued
Name
99 Cents Only Stores
Able Laboratories, Inc.
AES Corporation
Alliance Gaming Corporation
The BISYS Group, Inc.
Doral Financial Corp
Fannie Mae
First Bancorp.
Imergent, Inc.
Impax Laboratories, Inc.
Kinross Gold Corporation
Krispy Kreme Doughnuts, Inc.
Ligand Pharmaceuticals
Incorporated (Class B)
Mercury Interactive Corporation
Petroleum Development Corporation
R&G Financial Corporation
SVB Financial Group
Terex Corporation
Tommy Hilfiger Corporation
United Rentals, Inc.
Visteon Corp.
Underlying Symbol
NDN
ABRXQ
AES
AGI
BSG
DRL
FNM
FBP
IIG
IPXL
KGC
KKD
LGND
Option Symbols(s)
NDN/OAU
QAF
AES/VNU/WGC
AGI/VHA/WIU
BSG/OSY
DRL/OVL
WFN/VFN
FBP
IIG
UPR
KGC
KKD/OKK
LQP/OIN
MERQE
PETDE
RGF
SIVBE
TEX
TOM
URI
VC
RQB/VRD/YQR
PHQ
RGF
SQU/OVF/WVW
TEX/VXQ
WSV/VIH
URI/ORW
VC/OZY
The Exchange will notify the membership of any newly added series in these classes
through a subsequent notice. Please address any questions relating to this regulatory
circular to Jim Flynn at (312) 786-7070 or Charlie Hullihan at (312) 786-7176. This circular
will be made available on the Exchange’s website.
Regulatory Circular RG05-115
Date:
November 23, 2005
To:
Members and Member Firms
From: Legal Division and Trading Operations
Re:
Linkage – Approved Amendments to the Linkage Plan
Three amendments to the Linkage Plan (Plan) have been approved by the SEC. They
apply to a new definition of the Firm Customer Quote Size as the receiving market quote
size, the generation of linkage orders during a “Trade & Ship” or “Book & Ship” scenario, and
a de minimis change to the 80/20 Test under the Plan. The amendments are described
below.
1. The Linkage Firm Customer Quote Size (FCQS) for PA orders has been simplified
to reflect the quote size of the receiving exchange at the point the PA order is
received. The previous definition included a calculation of the lesser of the autoex
sizes between sending and receiving exchanges, which may have been less than
the disseminated quote sizes. All markets are now obligated to automatically
execute a PA order up to their disseminated quote size. If the PA order volume is
greater than the receiving market quote size, the entire PA order can be routed for
manual handling; or if autoex is provided for part of the order, the remaining balance could be immediately canceled. Additionally, this amendment eliminates the
15-second wait between primary and secondary PA orders sent to the same exchange, based on the same customer order.
RB2
November 30, 2005, Volume RB16, Number 48
Regulatory Circulars
continued
Regulatory Circular RG05-115 continued
2. The “Trade & Ship” amendment allows the sending of PA or P orders to NBBO
markets while simultaneously trading at CBOE’s price, as long as CBOE’s quote is
only one tick off the NBBO. If CBOE is more than one tick away from the NBBO
price, this rule does not apply. Printing a trade to the CBOE tape under the conditions of this rule will be exempt from the Linkage Trade Through provision. Under the
proposed Hybrid Agency Liaison (HAL) process, currently under development, every incoming order will automatically be evaluated for “Trade & Ship” eligibility. For
those orders eligible when CBOE is one tick off the NBBO, HAL will coordinate with
AutoLink to simultaneously generate the balance of any underlying order via PA or
P linkage orders to all NBBO exchanges.
The “Book & Ship” aspect of the amendment allows for the sending of PA or P
orders to NBBO markets while simultaneously booking any balance of the underlying order and locking the NBBO. This rule does not apply if booking the order would
create a crossed or inverted NBBO market. Posting an updated quote due to booking under this rule will be exempt from the Linkage NBBO Quote Locking provision.
3. The Linkage 80/20 Test has been amended to provide a de minimis exemption
during any monthly period. If a Market-Maker trades less than 1000 contracts in a
given month, the 80/20 Test will not apply. The 80/20 Test determines that 80% or
more of a Market-Maker’s trades (against customer contracts) must be traded in
his or her home market, and less than 20% can be routed as Principal linkage
orders to away exchanges.
For questions relating to the above Plan changes or linkage in general, please contact Tim
Watkins at (312) 786-7172, Angelo Evangelou at (312) 786-7464, or Roger Mulcahy at (312)
786-7280.
Regulatory Circular RG05-116
Date:
November 22, 2005
To:
Members and Member Firms
From: Legal Division
Regulatory Division
Trading Operations Division
Re:
DPM Obligations Until the Implementation of
the PAR Official Program
On November 18, 2005, the Securities and Exchange Commission (“SEC”) approved a
CBOE rule change, SR-CBOE-2005-46 (“rule change” or “PAR Official rule change”), that,
among other things, (1) prohibits a DPM from executing orders as an agent or Floor Broker
in its allocated option classes and (2) eliminates the authority of a DPM to act in any other
way as a Floor Broker in those classes.1 Rule 8.8 and Rule 8.85(b) now prevent a DPM from
representing or executing orders for other persons in the DPM’s assigned option classes.
Once the rule change goes into effect in a particular options class, the DPM assigned to
that option class will lose the ability to take custody of or handle orders for other persons in
that option class, including through operation of the PAR terminal. The rule change authorizes the Exchange to assign to an Exchange employee or subcontractor known as a PAR
1
Please refer to the rule change and the SEC order approving the rule change, which both can be found on
the Exchange’s website at http://www.cboe.org/Legal/filings.aspx.
November 30, 2005, Volume RB16, Number 48
RB3
Regulatory Circulars
continued
Regulatory Circular RG05-116 continued
Official, the responsibility, among other things, to operate the PAR workstation for designated option classes, to maintain the book in those classes, to represent orders to be sent
via Intermarket Option Linkage in those classes, and to effect executions of agency orders placed with the PAR Official in those classes.
The rule change allows the Exchange to put PAR Officials in place in DPM trading crowds
during a 90-day period after the SEC approves the rule change. This provision is intended
to insure a smooth roll-out of the PAR Official program. Therefore, until a PAR Official is put
in place in a particular DPM trading crowd during this 90-day transition period, the DPM in
that trading crowd will continue to be responsible to operate the PAR workstation and will
continue to be subject to the same agency obligations as set forth under former Rule
8.85(b) and to other obligations applicable to DPMs under current and former Exchange
rules. These rules and regulations are provided below:
*****
DPM Obligations
(a)
General Obligations: Each DPM shall fulfill all of the obligations of a Floor
Broker or Order Book Official (to the extent that the DPM acts as a Floor Broker) under the
Rules, and shall satisfy each of the requirements contained in this paragraph, in respect of
each of the securities allocated to the DPM. To the extent that there is any inconsistency
between the specific obligations of a DPM set forth in subparagraphs (b) through (i) of this
Rule and the general obligations of a Floor Broker or of an Order Book Official under the
Rules, subparagraphs (b) through (i) of this Rule shall govern.
(b)
Display Obligation: Each DPM shall display immediately the full price and size
of any customer limit order that improves the price or increases the size of the best
disseminated CBOE quote. “Immediately” means, under normal market conditions, as
soon as practicable but no later than 30-seconds after receipt (“30-second standard”) by
the DPM. The term “customer limit order” means an order to buy or sell a listed option at a
specified price that is not for the account of either a broker or dealer; provided, however,
that the term customer limit order shall include an order transmitted by a broker or dealer
on behalf of a customer. The following are exempt from the Display Obligation as set forth
under this provision:
(A) An order executed upon receipt;
(B) An order where the customer who placed it requests that it not be displayed,
and upon receipt of the order, the DPM announces in public outcry the information
concerning the order that would be displayed if the order were subject to being
displayed;
(C) An order for which immediately upon receipt a related order for the principal
account of a DPM reflecting the terms of the customer order is routed to another
options exchange that is a participant in the Intermarket Options Linkage Plan;
(D) The following orders as defined in Rule 6.53: contingency orders; one-cancelsthe-other orders; all or none orders; fill or kill orders; immediate or cancel orders;
complex orders (e.g., spreads, straddles, combinations); and stock-option orders;
(E) Orders received before or during a trading rotation (as defined in Rule 6.2,
6.2A, and 6.2B), including Opening Rotation Orders as defined in Rule 6.53(l), are
exempt from the 30-second standard, however, they must be displayed immediately upon conclusion of the applicable rotation; and
(F) Large Sized Orders: Orders for more than 100 contracts, unless the customer
placing such order requests that the order be displayed.
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November 30, 2005, Volume RB16, Number 48
Regulatory Circulars
continued
Regulatory Circular RG05-116 continued
(c) A DPM shall not remove from the public order book any order placed in the book unless
(A) the order is canceled, expires, or is executed or (B) the DPM returns the order to the
member that placed the order with the DPM in response to a request from that member to
return the order;
(d) A DPM shall accord priority to any customer order which the DPM represents as agent
over the DPM’s principal transactions, unless the customer who placed the order has consented to not being accorded such priority;
(e) A DPM shall not charge any brokerage commission with respect to:
(1) the execution of any portion of an order for which the DPM has acted as both
agent and principal, unless the customer who placed the order has consented to
paying a brokerage commission to the DPM with respect to the DPM’s execution of
the order while acting as both agent and principal; or
(2) any portion of an order for which the DPM was not the executing floor broker,
including any portion of the order that is automatically executed through an Exchange system; or
(3) any portion of an order that is automatically cancelled, or;
(4) any portion of an order that is not executed and not cancelled.
(f) A DPM shall act as a Floor Broker to the extent required by the MTS Committee.
(g) A DPM shall not represent discretionary orders as a Floor Broker or otherwise.
(h) Autobook Pilot. A DPM shall maintain and keep active on the DPM’s PAR workstation at
all times the automated limit order display facility (“Autobook”) provided by the Exchange.
The appropriate Exchange Floor Procedure Committee will determine the Autobook timer in
all classes under that Committee’s jurisdiction. A DPM may deactivate Autobook as to a
class or classes provided that Floor Official approval is obtained. The DPM must obtain
such approval no later than three minutes after deactivation.
(i) The Exchange may make personnel available to assist a DPM in the DPM’s performance
of the obligations of an Order Book Official, for which the Exchange may charge the DPM a
reasonable fee.
*****
RAES Operations
DPMs will still be responsible for non-automated handling of orders routed to the PAR workstation pursuant to Rule 6.8(d)(vi) and Interpretation and Policy .02(b) of Rule 6.8.
*****
Priority of Bids and Offers and Priority of Allocation of Trades
DPMs shall be required to comply with those provisions of Rule 6.45, 6.45A, and 6.45B, that
are now assigned to PAR Officials.
November 30, 2005, Volume RB16, Number 48
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*****
Timing of Firm Quote Obligations in a DPM Trading Crowd
With Respect to Firm Disseminated Market Quotes
In Non-Hybrid classes, for purposes of determining when the firm quote obligations under
Rule 8.51 attach in respect of orders received at a PAR workstation in a DPM trading crowd
and how the exemptions to that obligation provided in paragraph (e) of that Rule apply, the
responsible broker or dealer shall be deemed to receive an order, and an order shall be
deemed to be presented to the responsible broker or dealer, at the time the order is received on the DPM’s PAR workstation.
In Hybrid classes, for purposes of determining when the firm quote obligations under Rule
8.51 attach with respect to orders received at a PAR workstation in a DPM trading crowd
and how the exemptions to that obligation provided in paragraph (e) of that rule apply, the
responsible broker or dealer shall be deemed to receive an order, and an order shall be
deemed presented to the responsible broker or dealer:
(i) at the time the order is announced to the trading crowd with respect to each
responsible broker or dealer that is not the DPM for the class; and
(ii) at the time the order is received on PAR with respect to the DPM as the responsible broker or dealer.
As such, firm quote obligations for an order received on a PAR workstation may attach at
two separate times for different responsible broker or dealers: at the time of receipt with
respect to the DPM as a responsible broker or dealer and at the time of announcement with
respect to non-DPM members of the trading crowd as responsible brokers or dealers.
*****
Linkage Rules
Only with respect to any DPM continuing to represent and execute orders as agent pursuant to this Regulatory Circular, Rule 6.80 (“Definitions”) paragraph (12)(i) shall read as
follows:
“Principal Acting as Agent (‘P/A’) Order,” which is an order for the principal account of a
Market-Maker (or equivalent entity on another Participant Exchange that is authorized to
represent Customer orders) reflecting the terms of a related unexecuted Customer order
for which the Market-Maker is acting as agent.
*****
DPM Designees
The DPM must continue to maintain the requisite number of approved DPM Designees, as
defined under Rule 8.81. Additionally, these DPM Designees must continue to be registered as a Floor Broker pursuant to Rule 6.71. A DPM Designee also shall continue to be
restricted from trading as a Floor Broker in securities allocated to the DPM unless acting
on behalf of the DPM in its capacity as a DPM.
Finally, when acting on behalf of a DPM in its capacity as a DPM, the DPM Designee is
exempt from the provisions of Rule 8.8 (“Restriction on Acting as Market-Maker and Floor
Broker”). (See former Rule 8.81(e)).
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November 30, 2005, Volume RB16, Number 48
Regulatory Circulars
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Regulatory Circular RG05-116 continued
*****
Rule 17.50. Imposition of Fines for Minor Rule Violations
DPMs shall be subject to a fine for failure to promptly book and display limit orders that
would improve the disseminated quote or for failure to use due diligence in the execution of
orders for which the DPM maintains an agency obligation.
*****
Summary
After the rule change has been approved and until the end of the 90-day period, neither a
DPM assigned to a trading crowd nor the Exchange shall be subject to the provisions of the
rule change with respect to the operation of that trading crowd until a PAR Official has been
assigned to that trading crowd.
Questions pertaining to this Regulatory Circular should be directed to Jim Flynn at (312)
786-7070; Doug Beck at (312) 786-7959; or John Johnston at (312) 786-7303.
Regulatory Circular RG05-117
Date:
November 22, 2005
To:
Members and Member Firms
From: Legal Division
Regulatory Division
Trading Operations Division
Re:
Separation of DPM Agency and Principal Functions
On November 18, 2005, the Securities and Exchange Commission (“SEC”) approved a
CBOE proposed rule change (SR-CBOE-2005-46) that, among other things, prohibits a DPM
from executing orders as an agent in its allocated option classes, a function DPMs were
allowed and obligated to perform under CBOE Rules prior to the rule change. Please visit
the CBOE website at http://www.cboe.org/Legal to review the proposed rule change and the
corresponding SEC approval order. With the approval of this rule change, existing Rules 8.8
and 6.70 now prevent DPMs from accepting or executing orders from any source. The rule
change also authorizes the Exchange to hire and appoint an Exchange employee or subcontractor, known as a PAR Official, to each DPM trading crowd, and these PAR Officials
are to assume responsibility for many of the functions and obligations that DPM PAR brokers performed under Exchange Rules prior to the rule change. This circular outlines the
significant aspects of the rule change and addresses the DPMs’ obligations and limitations.
1.
ROLLOUT: The Exchange shall have 90 days from November 18, 2005, to put
PAR Officials in place in the trading crowds to which a DPM is appointed. This rule change
shall not affect trading crowds or option classes in which no DPM is appointed. However,
the Exchange may consider appointing a PAR Official or a comparable individual(s) to handle
linkage orders in non-DPM trading crowds that trade option classes that are multiply listed.
November 30, 2005, Volume RB16, Number 48
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Regulatory Circular RG05-117 continued
2.
PAR OFFICIAL STATUS: Each PAR Official shall be an Exchange employee or
independent contractor whom the Exchange may designate as being responsible for (i)
operating the PAR workstation in a DPM trading crowd with respect to the classes of
options assigned to him/her; (ii) when applicable, maintaining the book with respect to the
classes of options assigned to him/her;1 and (iii) effecting proper executions of orders
placed with him/her.
For a complete list of PAR Official functions and obligations, please refer to the proposed
rule change at the locations provided above.
3.
NUMBER OF PAR OFFICIALS: A single PAR Official may be assigned to more
than one DPM trading crowd, and some DPM trading crowds may be assigned two PAR
Officials. Although the Exchange alone shall be responsible for assigning each individual
PAR Official to the respective trading crowd(s), all efforts will be made to ensure that the
quality of service provided in each options class is not affected.
4.
DPM RESTRICTION ON REPRESENTING AND EXECUTING AGENCY ORDERS: Under the rule change, a DPM may not execute orders as an agent in its allocated
securities. Accordingly, DPMs shall become subject to Rule 8.8, which shall prevent them
from acting as a Floor Broker in options traded at their station. Under Rule 6.70(a), this
means that DPMs shall not any longer be able to accept orders from any other persons,
much less execute such orders. In other words, the effect of the proposed rule is to
prohibit DPMs from taking custody of another person’s order or from acting on behalf of
another person with respect to that person’s order, whether or not the DPM participates on
the order as principal. This prohibition shall include taking custody of another person’s
order for even a brief period of time or acting as a conduit to pass an order on to another
person for handling. Such conduct would violate proposed Rule 8.85(b) and thereby would
violate existing Rule 8.8. Moreover, a principal trade that steps ahead of an order over
which the DPM has custody at the time of the principal trade – however brief the time
interval during which the order was in the DPM’s custody – would subject the DPM to
liability for trading ahead of that order.
The Exchange understands that, in the course of business, DPMs may be expected to
respond to telephone inquiries from customers or brokers about whether the trading crowd
is willing to trade at a particular price in a stated quantity. Performing the following functions in response to such inquiries shall not cause the DPM to be deemed to be functioning
as an agent or Floor Broker:
(i) canvassing the trading crowd to determine which participants are prepared to
trade at a certain price and in what quantities;
(ii) disclosing the quantity at which the DPM and the trading crowd as a whole are
prepared to trade; and
(iii) informing the customer or broker that the trading crowd is willing to trade at that
price and quantity and to provide a firm quote for a single bid (offer) on behalf of
the DPM and the trading crowd.
Any such communications over telephone lines may be subject to Rule 6.23 and applicable CBOE telephone policies. In addition, any request for, and providing of, a firm single
bid (offer) quote must comply with Interpretation .11 of Rule 8.7.
If the DPM has communicated directly to a customer the price and quantity at which the
DPM and the trading crowd are prepared to trade, the customer must submit any resulting
order through a CBOE broker, and may not submit that order directly to the DPM or to the
1
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This will not apply to Hybrid classes.
November 30, 2005, Volume RB16, Number 48
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Regulatory Circular RG05-117 continued
PAR Official. When a CBOE broker is the party contacting the DPM for the purpose of
determining the potential interest for a particular order, the broker must systematize any
resulting order for the purposes of COATS compliance, announce the order to the crowd (if
a verbal order), and effect the actual execution of the order.
It should be noted that it is not possible to illustrate every possible scenario in which a DPM
may or may not be deemed to be an agent for an order. This regulatory circular is intended
only to provide general guidance on how certain types of customer orders shall be handled
after the implementation of the PAR Official program. DPMs are responsible for determining
whether certain actions or practices are appropriate.
5.
LIMITATION ON EXECUTING CERTAIN TYPES OF ORDERS: The PAR Official
shall be authorized to execute the same types of orders that DPM brokers currently execute. Note that PAR Officials shall not be allowed to handle “not held” orders.
6.
LINKAGE FUNCTIONS AND OBLIGATIONS: As provided in the proposed rule
change, in connection with the performance of the PAR Official’s Linkage functions, the
following shall apply:
a.
The PAR Official shall be responsible for manually or automatically (1)
routing, through the DPM’s account, linkage Principal Acting as Agent (“P/A”) Orders, Principal (“P”) Orders on behalf of orders in the custody of the PAR Official
that are for the account of a broker-dealer (“P-BD Orders”), and Satisfaction Orders
to other markets based on prior written instructions that must be provided by the
DPM to the PAR Official; and (2) handling all linkage orders or portions of linkage
orders received by the Exchange that are not automatically executed.
b.
When handling outbound P/A Orders, P-BD Orders and Satisfaction Orders, the PAR Official shall use due diligence to execute the orders entrusted to
him/her and shall act in accordance with the prior written instructions provided by
the DPM for P/A Orders, P-BD Orders, and Satisfaction Orders that the PAR Official represents.
c.
A PAR Official also shall act in accordance with CBOE rules regarding P/
A, P, and Satisfaction Orders received through the Linkage.
d.
A PAR Official shall be responsible for diligently handling all linkage orders
or portions of linkage orders received by the Exchange that are not automatically
executed.
The DPM shall not be deemed the agent simply because the DPM’s account is being used
to facilitate these Linkage orders.
7.
COMPENSATION AND LIMITATION ON AFFILIATIONS: The PAR Official shall
be compensated exclusively by the Exchange, which shall determine the amount and form
of compensation for each PAR Official. No DPM, e-DPM, or Market-Maker shall directly or
indirectly compensate or provide any other form of consideration to a PAR Official. The PAR
Official may not be affiliated with any member that is approved to act as a Market-Maker.
8.
EXECUTION BILLING: Currently, the Exchange does not intend to charge brokerage fees for executions performed by a PAR Official for any member firm.
9.
PAR OFFICIAL ERRORS: Errors committed solely by PAR Officials shall be resolved in the same manner as errors committed by OBOs on the Exchange.
November 30, 2005, Volume RB16, Number 48
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10.
EXCHANGE LIABILITY FOR ACTIONS OF PAR OFFICIALS: The Exchange’s
liability to members or persons associated therewith for any loss, expense, damages or
claims arising out of any errors or omissions of a PAR Official or any persons providing
assistance to a PAR Official shall be subject to Exchange rules, including the limitations
set forth in Rule 6.7, Rule 6.7A, and Rule 7.11. Refer to the Exchange website for the full
text of these rules.
The Exchange will update the membership should any new developments arise. Please
direct any questions or comments to Doug Beck at (312) 786-7959, Ed Barry at (312) 7868727, or Jim Flynn at (312) 786-7070.
RB10
November 30, 2005, Volume RB16, Number 48
Rule Changes,
Interpretations
and Policies
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-2005-98
Series 9/10 Examination Program Revisions
On November 16, 2005, the Exchange filed Rule Change File No. SR-CBOE-2005-98, which
filing makes revisions to the study outline and selection specifications for the Limited Principal – General Securities Sales Supervisor (Series 9/10) examination program. Any questions regarding the rule change may be directed to Jaime Galvan, Legal Division, at 312786-7058.
SR-CBOE-2005-97
Series 4 Examination Program Revisions
On November 15, 2005, the Exchange filed Rule Change File No. SR-CBOE-2005-97, which
filing makes revisions to the study outline and selection specifications for the Limited Principal – Registered Options (Series 4) examination program. Any questions regarding the
rule change may be directed to Jaime Galvan, Legal Division, at 312-786-7058.
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-2005-99
Membership Lease Rules
On November 18, 2005, the Exchange filed Rule Change File No. SR-CBOE-2005-99, which
filing proposes to make certain changes to its membership lease rules. Any questions
regarding the rule change may be directed to David Doherty, Legal Division, at 312-7867466. The text of the proposed rule amendments is set forth below. Proposed new language
is underlined. Proposed deleted language is [stricken out].
Rule 3.17 Lease Memberships
(a) The owner of a transferable membership in good standing may lease the membership to an individual or organization, provided that the lessee is approved for
membership in accordance with the Rules, the lease is made pursuant to a written
lease agreement, and the lease is pre-approved by the Exchange. The Exchange
shall bear no liability to a lessor or lessee in connection with the Exchange’s review
and approval of a lease agreement.
(b) A lessor of a membership shall not have any liability for claims against a lessee
of that membership solely by virtue of being a lessor of the membership. Nothing in
this paragraph (b) is intended to limit or define any responsibility a lessor may have
for claims against a lessee by virtue of a contractual obligation or ownership relationship between the lessor and lessee beyond the lease of a membership from the
lessor to the lessee.
November 30, 2005, Volume RB16, Number 48
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Rule Changes,
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Policies continued
SR-CBOE-2005-99 continued
(c) Each membership lease agreement must include such provisions as may be
required by the Exchange and must also include provisions covering the following
subjects: (i) the duration of the lease arrangement; (ii) the consideration to be paid
by the lessee; (iii) the assignability of the respective interests of the lessee and
lessor in the lease agreement; (iv) as between the parties, which party shall exercise the voting rights of the membership; and (v) as between the parties, which
party shall provide the funds necessary to satisfy all applicable Exchange dues,
fees, and other charges.
(d) The lessee and the lessor [under a lease] shall promptly file [the] every lease
agreement and any amendments thereto with the Membership Department and
shall promptly notify the Membership Department of any termination of the lease
on a notice of lease termination form provided by the Membership Department. If
a dispute arises between a lessee and lessor under a lease agreement with respect to one of the subjects listed in paragraph (c) of this Rule, the Director of
Membership may determine a temporary resolution of the dispute until the lessee
and lessor resolve the dispute through arbitration under Chapter XVIII of the Rules
or through other means agreed upon by the lessee and lessor. Determinations
made by the Director of Membership pursuant to the preceding sentence shall not
be subject to appeal under Chapter XIX of the Rules.
(e) – (f) No change.
RB12
*****
(b)
Inapplicable.
(c)
Inapplicable.
November 30, 2005, Volume RB16, Number 48