December 23, 2005
Exchange
Bulletin
Volume 33, Number 51
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, December 23, 2005
CLASS
CBOE
BID
OFFER
$880,000.00
LAST SALE AMOUNT
$940,000.00
LAST SALE DATE
$875,000.00
December 20, 2005
CBOT FULL MEMBERSHIP
CLASS
BID
OFFER
LAST SALE AMOUNT
LAST SALE DATE
With CBOE Exercise Right
$2,200,000.00
$2,700,000.00
$2,350,000.00
December 22, 2005
Without CBOE Exercise Right
$2,250,000.00
$3,400,000.00
$2,850,000.00
October 24, 2005
$67,000.00
$80,000.00
$65,000.00
December 8, 2005
CBOE Exercise Right
CBOE MEMBERSHIP SALES AND TRANSFERS
From
Charles K. Stewart
Susquehanna Investment Group
To
James J. Lazzarini
Caldwell Advantage LP
Price/Transfer
$875,000.00
$850,000.00
Date
12/20/05
12/19/05
Page 2
December 23, 2005
Volume 33, Number 51
Chicago Board Options Exchange
MEMBERSHIP INFORMATION FOR 12/15/05 THROUGH 12/21/05
Effective Date
MEMBERSHIP APPLICATIONS RECEIVED FOR
WHICH A POSTING PERIOD IS REQUIRED
Lessor: Richard G. Bourjaily
Lessee: ST Capital LLC
Kurt J. Steib, NOMINEE
Rate:
0.7975%
Term: Monthly
12/19/05
Individual Membership Applicants
Date Posted
Aaron M. Droba, Nominee
K & S Trading, LP
1208 W. Henderson - Apt. 1
Chicago, IL 60657
12/16/05
Lessor: Caldwell Advantage LP
Lessee: PFTC LLC
Kevin S. Sullivan, NOMINEE
Rate:
0.75%
Term: 8 Days
12/21/05
David W. Demray, Nominee
Geneva Capital Investments LLC
1318 N. Milwaukee Ave., #3
Chicago, IL 60622
12/20/05
Terminated Leases
Termination Date
Lessor: LaBranche Financial Services, Inc.
Lessee: Equitec Proprietary Markets, LLC
12/15/05
Member Organization Applicants
Date Posted
Lessor: Seats Exchange Inc.
Lessee: PFTC LLC
12/15/05
Just Options, LLC
Michael R. Benson, Nominee
Brandon S. Koress, Nominee
Joel J. Stone, Nominee
141 W. Jackson, Suite 500
Chicago, IL 60604
Michael R. Benson - Managing Member
William F. Johnson - Member
William J. O’Keefe - Member
Joel J. Stone - Member
12/16/05
Lessor: S & S Options
Lessee: McGowan Investors, LP
12/15/05
Lessor: Seats Exchange Inc.
Lessee: PFTC LLC
Michael A. Duffin (DFN), NOMINEE
12/15/05
Lessor: Seats Exchange Inc.
Lessee: Timber Hill LLC
Eric J. Beck (RBI), NOMINEE
12/16/05
Lessor: Seats Exchange Inc.
Lessee: PFTC LLC
12/16/05
Lessor: Richard G. Bourjaily
Lessee: Futrex Trading LLC
Kurt J. Steib (KJJ), NOMINEE
12/19/05
Lessor: 164 Associates
Lessee: Futrex Trading LLC
Steven M. Bock (WIN), NOMINEE
12/19/05
Lessor: Geneva Stock, LLC
Lessee: Vitale Trading LLC
Conan J. Vitale (CJV), NOMINEE
12/21/05
12/21/05
Renaissance Trading Group LLC
12/16/05
William J. O’Keefe, Nominee
111 Ann Street
Clarendon Hills, IL 60514
Matthew N. Hulsizer - Manager
PEAK6 Investments LP - Member
PEAK6 LLC - General Partner
Matthew N. Hulsizer - Member
Jennifer Just - Member
Jennifer Just - Manager
Dan Deering - FINOP
MEMBERSHIP LEASES
New Leases
Effective Date
Lessor: Burton P. Bilfeld
Lessee: PFTC LLC
Rate:
$6,000
Term: Monthly
12/15/05
Lessor: Susquehanna Investment Group
Lessee: PFTC LLC
Kevin S. Sullivan (SUL), NOMINEE
Lessor: S & S Options
Lessee: PFTC LLC
Michael A. Duffin, NOMINEE
Rate:
$6,000
Term: Monthly
12/15/05
********Correction to Bulletin Dated 11/25/05********
Lessor: Seats Exchange Inc.
Lessee: PFTC LLC
Michael D. Freund, NOMINEE
Rate:
$6,000
Term: Monthly
12/15/05
Lessor: Seats Exchange Inc.
Lessee: Timber Hill LLC
Eric J. Beck, NOMINEE
Rate:
1.25%
Term: Monthly
12/16/05
Lessor: Anthony D. Partipilo
Lessee: Blue Capital Group LLC
Bernard D. Schwartz, NOMINEE
Rate:
0.7975%
Term: Monthly
12/16/05
Lessor: 164 Associates
12/19/05
Lessee: ST Capital LLC
Scott Trigg Thorstenson, NOMINEE
Rate:
0.7975%
Term: Monthly
New Leases
Effective Date
Lessor: James P. Butler
Lessee: Wolverine Trading LLC
Michael R. Draper, NOMINEE
Rate:
1.2120%
Term: Monthly
11/23/05
Terminated Leases
Termination Date
Lessor: William L. McCarthy
Lessee: Wolverine Trading LLC
Michael R. Draper (MRD), NOMINEE
11/23/05
********Correction to Bulletin Dated 12/16/05********
New Leases
Effective Date
Lessor: Seats Exchange Inc.
Lessee: Man Securities Inc.
Martin H. Galivan, NOMINEE
Rate:
0.750%
Term: Monthly
12/12/05
Page 3
December 23, 2005
Volume 33, Number 51
Terminated Leases
Termination Date
Lessor: Seats Exchange Inc.
Lessee: Man Securities Inc.
Martin H. Galivan, NOMINEE
12/12/05
MEMBERSHIP TERMINATIONS
Individual Members
Chicago Board Options Exchange
Effective Date
Igor Chernomzav
12/20/05
Hard Eight Trading, LLC
209 S. LaSalle, #625
Chicago, IL 60604
Type of Business to be Conducted: Remote Market Maker
Nominee(s) / Inactive Nominee(s):
Effective Date
John B. Niemann (JBN)
CCM Equities, LLC
200 S. Wacker, # 3325
Chicago, IL 60606
Type of Business to be Conducted: Floor Broker
12/16/05
CBT Registered For:
Termination Date
Jason S. Maras (JMA)
Maras Trading LLC
440 S. LaSalle, Suite 1822
Chicago, IL 60605
12/16/05
Nominee(s) / Inactive Nominee(s):
Termination Date
Jeff D. Heitzman (HTS)
CTC LLC
440 S. LaSalle, Ste. 1850
Chicago, IL 60605
12/15/05
Ann L. Bartosz (ANE)
Citigroup Derivatives Markets Inc.
111 W. Jackson - 10th Fl.
Chicago, IL 60604
12/19/05
Steven M. Bock (WIN)
Futrex Trading LLC
3456 N. Hoyne
Chicago, IL 60618
12/19/05
CBT Registered For:
Gregory J. Olson (IGO)
Sling Trading LLC
440 S. LaSalle - Ste. 1822
Chicago, IL 60605
12/20/05
Hard Eight Trading, LLC
12/20/05
209 S. LaSalle, Suite 625
Chicago, IL 60604
Type of Business to be Conducted: Remote Market Maker
Samuel Murante (SMT)
CMZ Trading, LLC
141 W. Jackson Blvd., Suite 3310
Chicago, IL 60604
12/21/05
Davis J. Johnston (DJJ)
12/21/05
CMZ Trading, LLC
141 W. Jackson Blvd., Ste. 3310
Chicago, IL 60604
Type of Business to be Conducted: Market Maker
Member Organizations
Effective Date
Lessee(s):
Member Organizations
CBT Registered For:
Termination Date
Maras Trading LLC
440 S. LaSalle, Suite 1822
Chicago, IL 60605
12/16/05
Effective Date
ST Capital LLC
12/19/05
3449 N. Janssen
Chicago, IL 60657
Type of Business to be Conducted: Market Maker
Lessor(s):
Effective Date
Caldwell Advantage LP
450 Park Avenue, Suite 1900
New York, NY 10022
12/21/05
************Correction to Bulletin Dated 11/25/05************
************Correction to Bulletin Dated 11/25/05************
Lessor(s):
Termination Date
William L. McCarthy
1807 N. 77th Avenue
Elmwood Park, IL 60707
11/23/05
Lessor(s):
Effective Date
Jeffrey J. Kutchin
2051 Burr Oak Lane
Highland Park, IL 60035
11/23/05
JOINT ACCOUNTS
EFFECTIVE MEMBERSHIPS
Individual Members
CBT Registered For:
Francesco Spinnato (SPT)
12/20/05
ST Capital LLC
3449 N. Janssen
Chicago, IL 60657
Type of Business to be Conducted: Market Maker
Effective Date
Stephen A. Lindeke (LND)
12/16/05
Susquehanna Investment Group
175 W. Jackson - Ste. 1700
Chicago, IL 60604
Type of Business to be Conducted: Market Maker/ Floor Broker
New Participants
Acronym
Effective Date
Nathan D. Yackel
QOW
12/15/05
Emily Grandt
QOW
12/15/05
William A. Bannister Jr.
QOW
12/15/05
Michael V. Hoover
QOW
12/15/05
Stephen A. Lindeke
QGS
12/16/05
Davis J. Johnston
QWQ
12/21/05
Page 4
December 23, 2005
Volume 33, Number 51
Chicago Board Options Exchange
New Accounts
Acronym
Effective Date
CHANGES IN MEMBERSHIP STATUS
Kurt J. Steib
QKC
12/19/05
Individual Members
Scott Trigg Thorstenson
QKC
12/19/05
Francesco Spinnato
QKC
12/20/05
Terminated Participants
Acronym
Termination Date
Jeff D. Heitzman
QGQ
12/15/05
Jeff D. Heitzman
QGT
12/15/05
Jeff D. Heitzman
QXY
12/15/05
Ann L. Bartosz
QCM
12/19/05
Ann L. Bartosz
QKD
12/19/05
Steven M. Bock
QED
12/19/05
Scott Trigg Thorstenson
QED
12/19/05
Kurt J. Steib
QED
12/19/05
Terminated Accounts
Acronym
Termination Date
Scott Trigg Thorstenson
QAG
12/19/05
Kurt J. Steib
QAG
12/19/05
Kurt J. Steib
QPF
12/19/05
Effective Date
Scott Trigg Thorstenson
12/19/05
From:
Nominee For Futrex Trading LLC; Market Maker
To:
Nominee For ST Capital LLC; Market Maker
Kurt J. Steib
12/19/05
From:
Nominee For Futrex Trading LLC; Market Maker
To:
Nominee For ST Capital LLC; Market Maker
Conan J. Vitale
12/21/05
From:
Nominee For Vitale Trading LLC; Market Maker
To:
CBT Registered For Vitale Trading LLC; Market Maker
Member Organizations
Effective Date
Andrie Trading LLC
12/19/05
From:
Owner/Lessee/Member Organization Affiliated with a
CBT Registered For; Associated with a Market Maker/
Remote Market Maker
To:
Owner/Lessee/Member Organization Affiliated with a
CBT Registered For; Associated with a Market Maker
Geneva Stock LLC
12/21/05
From:
Lessor/Member Organization Affiliated with a CBT
Registered For; Associated with a Market Maker/Remote
Market Maker
To:
Owner/Lessor/Member Organization Affiliated with a
CBT Registered For; Associated with a Market Maker/
Remote Marker Maker
MEMBER ADDRESS CHANGES
Member Organizations
Effective Date
Grove Securities, Inc.
6893 Balboa Island Ct.
Delray Beach, FL 33446
12/20/05
POSITION LIMIT CIRCULARS
Pursuant to Exchange Rule 4.11, the Exchange issued the below listed Position Limit Circular on December 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 PL05-56
December 21, 2005
Pacific Health Systems, Inc. (“PHS/VHZ/WHZ”) merger
completed with Point Acquistion L.L.C., a wholly owned
subsidiary of UnitedHealth Group Incorporated (“UNH”)
Effective Date December 21, 2005
Page 5
December 23, 2005
Volume 33, Number 51
Chicago Board Options Exchange
RESEARCH CIRCULARS
The following Research Circulars were distributed between December 16 and December 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 #RS05-893
December 16, 2005
Fidelity NASDAQ Composite Tracking Stock
(“ONEQ/IQX/ONQ/NQX”) Cash Distribution
Ex-Distribution Date: December 16, 2005
Research Circular #RS05-894
December 16, 2005
streetTRACKS® SPDR® O-Strip ETF (“OOO”)
Cash Distribution
Ex-Distribution Date: December 16, 2005
Research Circular #RS05-895
December 16, 2005
Viisage Technology, Inc. (“VISG/TUM”)
1-for-2.5 Reverse Stock Split
Ex-Distribution Date: December 19, 2005
Research Circular #RS05-897
December 16, 2005
Insight Communications Company, Inc. Class A (“ICCI/QJQ”)
Merger COMPLETED with Insight Acquisition Corp.
Research Circular #RS05-899
December 19, 2005
WellChoice, Inc. (“WC”) Proposed Merger
with WellPoint, Inc. (“WLP/FLW/OSN/VCZ/YFM”)
Research Circular #RS05-900
December 19, 2005
Maytag Corporation (“MYG/VMY/MWY”) Proposed Merger
with Whirlpool Corporation (“WHR/VOR/YOH”)
Research Circular #RS05-901
December 19, 2005
Verity, Inc. (“VRTY/YQV”) Proposed Merger
with Autonomy Corporation plc
Research Circular #RS05-902
December 19, 2005
The Charles Schwab Corporation (“SCH/SCN/VYS/WWS”)
Stock Symbol and Option Symbol Change
Effective Date: December 20, 2005
Research Circular #RS05-904
December 21, 2005
PacifiCare Health Systems, Inc. (“PHS/VHZ/WHZ”) Merger
COMPLETED with UnitedHealth Group Incorporated (“UNH”)
Research Circular #RS05-907
December 21, 2005
*****UPDATE*****UPDATE*****UPDATE*****
Viacom Inc. Class A (“VIA”) – MANDATORY EXCHANGE
Anticipated Merger/Separation Date: January 3, 2006
Research Circular #RS05-908
December 21, 2005
*****UPDATE*****UPDATE*****UPDATE*****
Viacom Inc. Class B (“VIA.B/VMB/VVM/WVM”)– MANDATORY
EXCHANGE Anticipated Merger/Separation Date:
January 3, 2006
Research Circular #RS05-909
December 22, 2005
*****CORRECTION*****CORRECTION*****CORRECTION*****
Viacom Inc. Class B (“VIA.B/VMB/VVM/WVM”)–
MANDATORY EXCHANGE
Anticipated Merger/Separation Date: January 3, 2006
Research Circular #RS05-910
December 22, 2005
Royal Dutch Petroleum Company
(“RDPL/RD/OWG/YXD”) Merger COMPLETED
with Royal Dutch Shell plc.
Research Circular #RS05-911
December 22, 2005
UNOVA, Inc. (“UNA”)
Name, Stock and Option Symbol Change to
Intermec, Inc. (“IN”)
Effective Date: January 3, 2006
Research Circular #RS05-912
December 22, 2005
Ryerson Tull, Inc. (“RT”)
Name, Stock and Option Symbol Change to
Ryerson Inc. (“RYI”)
Effective Date: January 3, 2006
Research Circular #RS05-913
December 22, 2005
TASER International, Inc. (“TASRE/QUR”)
Underlying Symbol Change to “TASR”
Effective Date: December 23, 2005
Research Circular #RS05-914
December 22, 2005
JetBlue Airways Corporation (“JBLU/JGQ/VYO/WJJ & adj.
WQK”) 3-for-2 Stock Split
Ex-Distribution Date: December 27, 2005
Research Circular #RS05-915
December 22, 2005
Inamed Corporation (“IMDC/UZI”) Exchange Offer EXTENDED by Allergan, Inc. (“AGN/OBO/YOK”)
Research Circular #RS05-916
December 22, 2005
Whole Foods Market, Inc. (“WFMI/FMQ/FQJ/OAW/YDU”)
2-for-1 Stock Split
Ex-Distribution Date: December 28, 2005
Research Circular #RS05-917
December 22, 2005
AmerisourceBergen Corporation (“ABC/OYY/YPP”)
2-for-1 Stock Split
Ex-Distribution Date: December 29, 2005
Research Circular #RS05-918
December 23, 2005
Georgia-Pacific Corporation (“GP/VGP/WGP”):
Merger Completed — Cash Settlement
December 28, 2005
Regulatory
Circulars
Regulatory
Bulletin
Volume RB16, Number 52
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 Circular RG05-129
Date:
December 22, 2005
To:
Members and Member Organizations
From: Index Market Performance Committee
Re:
Maximum Percentages of RAES Transactions and Contract Volume Effective
January 2006
Pursuant to revised Exchange Rule 24.17(b)(vii)(A), the Committee is authorized to
establish and enforce maximum percentages of transaction and contract volume that
Market-Makers in Broad-Based Index Options and Options on Exchange-Traded Funds
on Broad-Based Indexes (collectively, “index-related options”) can execute through RAES
transactions. The Committee believes that establishing maximum RAES percentages
for index-related options will help to ensure that Market-Makers standing in an indexrelated option crowd live up to their obligations to improve, update and honor markets in
their appointed option classes.
This is a reminder that as of January 2006, the Committee established that MarketMakers in the NDX as well as the previously monitored option classes shall be limited to
the following maximum percentages of RAES transactions and contract volume through
RAES transactions:
Class
Max. % of Transactions
Max. % of Contracts
NDX
25%
15%
OEX
25%
15%
SPX
25%
15%
The Committee will monitor the RAES activity of all Market-Makers in the NDX, OEX,
SPX and other index-related option classes to determine if any changes are necessary
in these maximum percentages in the future, and will continue to announce the applicable maximum percentages in advance.
As provided in Exchange Rule 24.17(f)(ii), Market-Makers who exceed the maximum
RAES percentages set by the Committee pursuant to Exchange Rule 24.17(b)(vii) may
be subject to remedial action by the Committee, including but not limited to, suspending
a member’s eligibility for participation on RAES, reducing the number of contracts of
Regulatory Circulars
continued
Regulatory Circular RG05-129 continued
which the member is allowed to be on RAES, and/or such other remedies as may be
appropriate and allowed under Chapter VIII of the Exchange Rules. Members exceeding the maximum percentages may also be subject to disciplinary action under Rules
including but not limited to Exchange Rules 6.20 and Exchange Rules Chapter XVII.
Please contact Dennis Carta at x10782 or Daniel Hustad at (312) 786-7715 with any
questions.
Replaces Regulatory Circular RG03-102
Rule Changes,
Interpretations and
Policies
APPROVED RULE CHANGE(S)
The Securities and Exchange Commission (“SEC”) has approved the following change(s)
to Exchange Rules pursuant to Section 19(b) of the Securities Exchange Act of 1934,
as amended (“the Act”). Copies are available on the CBOE public website at
www.cboe.com/legal/effectivefiling.aspx.
The effective date of the rule change is the date of approval unless otherwise noted.
SR-CBOE-2004-53
Margin Requirements
On December 14, 2005, the SEC approved Rule Change File No. SR-CBOE-2004-53,
which filing proposes to amend CBOE Rule 12.3, to incorporate margin requirements to
complex option spreads. Any questions regarding the rule change may be directed to
Jaime Galvan, Legal Division, at 312-786-7058. New language is italicized.
Rule 12.3. Margin Requirements
12.3 (a) Definitions. For purposes of this Rule, the following terms shall have the
meanings specified below.
(1) through (4) – No change
(5) The term “long butterfly spread” means long put / two short puts / long
put or long call / two short calls / long call where: the options are on the
same underlying instrument, the long options are different option series, the
short options are the same option series, the exercise prices of the positions
are in ascending order, either all options expire at the same time or a long
option expires after the other options expire concurrently, and the interval between exercise prices is equal. In the case of long butterfly spreads composed of cash-settled, European-style index options, all options must expire
at the same time.
(6) The term “short butterfly spread” means short put / two long puts / short
put or short call / two long calls / short call where: the options are on the
same underlying instrument, the short options are different option series, the
long options are the same option series, the exercise prices of the positions
are in ascending order, all options expire at the same time, and the interval
between exercise prices is equal.
(7) The term “long condor spread” means long put / short put / short put /
long put or long call / short call / short call / long call where: the options
are on the same underlying instrument, each option is a different option series,
the exercise prices of the options are in ascending order, either all options
expire at the same time or a long option expires after the other options expire
concurrently, and the interval between exercise prices is equal. In the case of
RB2
December 28, 2005, Volume RB16, Number 52
Rule Changes,
Interpretations and
Policies continued
SR-CBOE-2004-53 continued
long condor spreads composed of cash-settled, European-style index options,
all options must expire at the same time.
(8) The term “short iron butterfly spread” means long put / short put / short
call / long call where: the options are on the same underlying instrument, each
option is a different option series, the exercise prices of the options are in
ascending order, the short options have the same exercise price, either all
options expire at the same time or a long option expires after the other options
expire concurrently, and the interval between exercise prices is equal. In the
case of short iron butterfly spreads composed of cash-settled, European-style
index options, all options must expire at the same time.
(9) The term “short iron condor spread” means long put / short put / short call
/ long call where: the options are on the same underlying instrument, each
option is a different option series, the exercise prices of the options are in
ascending order, either all options expire at the same time or a long option
expires after the other options expire concurrently, and the interval between
exercise prices is equal. In the case of short iron condor spreads composed of
cash-settled, European-style index options, all options must expire at the same
time.
(10) The term “box spread” means an aggregation of positions in a long call
option and short put option with the same exercise price (“buy side”) coupled
with a long put option and short call option with the same exercise price (“sell
side”) all of which have the same underlying component or index and time of
expiration, and are based on the same aggregate current underlying value, and
are structured as either: A) a “long box spread” in which the sell side exercise
price exceeds the buy side exercise price or B) a “short box spread” in which
the buy side exercise price exceeds the sell side exercise price.
(11) The term “underlying stock basket” means a group of securities which
includes each of the component securities of the applicable index and which
meets the following conditions (i) the quantity of each stock in the basket is
proportional to its representation in the index, (ii) the total market value of the
basket is equal to the underlying index value of the index options or warrants to
be covered, (iii) the securities in the basket cannot be used to cover more than
the number of index options or warrants represented by that value and (iv) the
securities in the basket shall be unavailable to support any other option or
warrant transaction in the account.
(12) The term “cash equivalent” is as defined in Section 220.2 of Regulation T
of the Board of Governors of the Federal Reserve System.
(13) The term “listed” for purposes of this Chapter 12 means a security traded
on a registered national securities exchange or automated facility of a registered national securities association.
(14) The term “OTC margin bond” for purposes of this Chapter 12 means (1) any
debt securities not traded on a national securities exchange that meet all of the
following requirements (a) at the time of the original issue, a principal amount of
not less than $25,000,000 of the issue was outstanding; (b) the issue was registered under Section 5 of the Securities Act of 1933 and the issuer either files
periodic reports pursuant to the Act or is an insurance company under Section
12(g)(2)(G) of the Act; or (c) at the time of the extension of credit the creditor
has a reasonable basis for believing that the issuer is not in default on interest
or principal payments; or (2) any private pass-through securities (not guaranteed by a U.S. government agency) that meet all of the following requirements:
(a) an aggregate principal amount of not less than $25,000,000 was issued
pursuant to a registration statement filed with the Commission; and (b) current
December 28, 2005, Volume RB16, Number 52
RB3
Rule Changes,
Interpretations and
Policies continued
SR-CBOE-2004-53 continued
reports relating to the issue have been filed with the Commission; and (c) at
the time of the credit extension, the creditor has a reasonable basis for believing that mortgage interest, principal payments and other distributions are being passed through as required and that the servicing agent is meeting its
material obligations under the terms of the offering.
(b) – No change
(c)(1) through (c)(5)(C)(5) - No change
(6) Long Butterfly Spread or Long Condor Spread. This subparagraph (c)(5)(C)(6)
applies to a long butterfly or condor spread as defined in subparagraphs (a)(5)
and (a)(7), respectively, of this Rule where all option positions are listed or
guaranteed by the carrying broker-dealer. In respect of a long butterfly or long
condor spread as defined in subparagraphs (a)(5) and (a)(7), respectively, of
this Rule, the net debit must be paid in full.
(7) Short Butterfly Spread, Short Iron Butterfly Spread or Short Iron Condor
Spread. This subparagraph (c)(5)(C)(7) applies to a short butterfly, short iron
butterfly or short iron condor spread as defined in subparagraphs (a)(6), (a)(8)
and (a)(9), respectively, of this Rule where all option positions are listed or
guaranteed by the carrying broker-dealer. In respect of a short butterfly, short
iron butterfly or short iron condor spread as defined in subparagraphs (a)(6),
(a)(8) and (a)(9), respectively, of this Rule, margin must be deposited and
maintained equal to at least the amount of the exercise price interval. The net
proceeds from the sale of short option components may be applied to the
requirement.
(8) Box Spread. This subparagraph (c)(5)(C)(8) applies to box spreads as defined in subparagraph (a)(10) of this Rule where all option positions are listed
or guaranteed by the carrying broker-dealer.
(1) In respect of a long box spread as defined in subparagraph (a) (10) of
this Rule, the net debit must be paid in full.
(2) In respect of a short box spread as defined in subparagraph (a) (10) of
this Rule, margin must be deposited and maintained equal to at least the
amount of the aggregate difference between the exercise prices. The net
proceeds from the sale of short option components may be applied to the
requirement.
(9) Long Box Spread in European-Style Options. In respect of a long box
spread as defined in subparagraph (a) (10) of this Rule, in which all component
options have a European-style exercise provision and are listed or guaranteed
by the carrying broker-dealer; margin must be deposited equal to at least 50%
of the aggregate difference in the exercise prices. The net proceeds from the
sale of short option components may be applied to the requirement. For margin purposes, the long box spread may be valued at an amount not to exceed
100% of the aggregate difference in the exercise prices.
(d) – No change
(e) Customer Cash Account —Spreads. A European-style cash-settled index option, stock index warrant or currency index warrant carried in a short position is
deemed a covered position, and eligible for the cash account, provided a long
position in a European-style cash-settled index option, stock index warrant or currency warrant having the same underlying component or index that is based on the
same aggregate current underlying value, is held in or purchased for the account
on the same day provided:
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December 28, 2005, Volume RB16, Number 52
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Interpretations and
Policies continued
SR-CBOE-2004-53 continued
(1) – No change
(2) Long Butterfly Spreads, Short Butterfly Spreads, Long Condor Spreads,
Short Iron Butterfly Spreads or Short Iron Condor Spreads. The captioned
spreads, as defined in subparagraphs (a)(5), (a)(6), (a)(7), (a)(8) and (a)(9), respectively, of this Rule, are permitted in a cash account only if they are composed of cash settled, European-style options and all options expire at the
same time, and provided:
(A) the long options are held in, or purchased for the account on the same
day,
(B) in respect of a long butterfly spread or long condor spread as defined in
subparagraphs (a)(5) and (a)(7), respectively, of this Rule, the net debit is
paid in full,
(C) in respect of a short butterfly spread, short iron butterfly spread or short
iron condor spread as defined in subparagraphs (a)( 6), (a)(8) and (a)(9),
respectively, of this Rule, either there is held in the account at the time the
positions are established or received into the account promptly thereafter:
(1) cash or cash equivalents of not less than the amount of the exercise price interval, to which requirement the net proceeds from the sale
of short option components may be applied, or
(2) an escrow agreement. The escrow agreement must certify that the
bank holds for the account of the customer as security for the agreement 1) cash, 2) cash equivalents or 3) a combination thereof having
an aggregate market value at the time the positions are established of
not less than the amount of the exercise price interval and that the
bank will promptly pay the member organization such amount in the
event the account is assigned an exercise notice.
(D) all component options are listed or guaranteed by the carrying brokerdealer.
(3) – No change.
12.3(f) through (k) – No change.
…Interpretations and Policies:
.01 - .19 – No change.
EFFECTIVE-ON-FILING RULE CHANGE(S)
The following rule filing(s) were submitted to the SEC “effective-on-filing,” and have
taken effect pursuant to Section 19(b)(3) of the Securities Exchange Act. They will
remain in effect barring further action by the SEC within 60 days after their publication in
the Federal Register. Copies are available on the CBOE public website at www.cboe.com/
legal/effectivefiling.aspx.
_____________________________________________________________________________________
SR-CBOE-2005-114
Extension of Prospective Fee Reduction, DPM Linkage
Fee Credit and Fixed Annual Fee Programs
On December 16, 2005, the Exchange filed Rule Change File No. SR-CBOE-2005-114,
December 28, 2005, Volume RB16, Number 52
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SR-CBOE-2005-114 continued
which filing proposes to extend through January 31, 2006 the Prospective Fee Reduction, DPM Linkage Credit and Fixed Annual Fee programs. 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-2005-111
Multiple Representation Exceptions
On December 15, 2005, the Exchange filed Rule Change File No. SR-CBOE-2005-111,
which filing proposes to introduce two additional exceptions to the Exchange’s rules
prohibiting multiple representation. The exceptions pertain to the handling of orders
solicited from Market-Makers and to the handling of Market-Makers’ orders generally.
Any questions regarding the rule change may be directed to Jennifer Lamie, Legal
Division, at 312-786-7576. The text of the proposed rule change is provided below.
Additions are underlined; deletions are [bracketed].
Rule 6.55. Multiple Representation Prohibited
(a) No member, for any account in which the member has an interest or on behalf
of a customer, shall maintain with more than one broker orders for the purchase or
sale of the same option contract or other security, or the same combination of
option contracts or other securities, with the knowledge that such orders are for
the account of the same principal.
(b) Except in accordance with procedures established by the appropriate Floor
Procedure Committee or with such Committee’s permission in individual cases, no
Market-Maker shall enter or be present in a trading crowd while a Floor Broker
present in the trading crowd is holding an order on behalf of the Market-Maker’s
individual account or an order initiated by the Market-Maker for an account in
which the Market-Maker has an interest.
. . . Interpretations and Policies:
.01 A Market-Maker may permissibly enter a trading crowd in which a Floor Broker
is present who holds an order on behalf of the Market-Maker’s individual account
or an order initiated by the Market-Maker for an account in which the Market-Maker
has an interest if one of the following three procedures is followed:
(a) The Market-Maker makes the Floor Broker aware of the Market-Maker’s
intention to enter the trading crowd and the Floor Broker time stamps the order
ticket for the order and writes the notation “Cancel” or “CXL” next to the time stamp.
If the Market-Maker wishes to re-enter the order upon the Market-Maker’s exit from
the trading crowd, the Floor Broker must at that time again time stamp the order
ticket and write the notation “Reentry” or “RNTRY” next to such subsequent time
stamp.
(b) The Market-Maker cancels the order by giving the Floor Broker a written
cancellation of the order which is time-stamped by the Market-Maker immediately
prior to its transmission to the Floor Broker. If the Market-Maker wishes to re-enter
the order upon the Market-Maker’s exit from the trading crowd, a new order ticket
must be used.
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SR-CBOE-2005-111 continued
(c) The Market-Maker cancels the order by taking the order ticket for the order
back from the Floor Broker, provided that the Market-Maker allows the Floor Broker
to retain a copy of the order ticket (which copy the Floor Broker must time-stamp at
the time of cancellation and retain for the Floor Broker’s records). If the MarketMaker wishes to re-enter the order upon the Market-Maker’s exit from the trading
crowd, a new order ticket must be used.
.02 Exchange regulatory circulars concerning joint accounts should be consulted in
connection with procedures governing the simultaneous presence in a trading crowd
of participants in and orders for the same joint account.
.03 Subject to the requirements of Rule 6.9 or 6.74, as applicable, a Market-Maker
may permissibly enter or be present in a trading crowd in which a Floor Broker is
present who holds a solicited order on behalf of the Market-Maker’s individual or
joint account provided that the Market-Maker makes the Floor Broker aware of the
Market-Maker’s intention to enter or to be present in the trading crowd, the Floor
Broker time stamps the order ticket for the solicited order and writes the notation
“Present” or “PRST” next to the time-stamp, and the Market-Maker refrains from also
trading in person with the original order when it is disclosed to the trading crowd. If
the Market-Maker wishes to exit the trading crowd while the solicited order is being
represented by the Floor Broker, the Floor Broker must at that time again timestamp the order ticket and write the notation “Not Present” or “NPRST” next to such
subsequent time stamp.
.04 A Market-Maker may permissibly enter or be present in a trading crowd in which
a Floor Broker is present who holds an order on behalf of the Market-Maker’s individual account or initiated by the Market-Maker for an account in which the MarketMaker has an interest, provided that the Market-Maker makes the Floor Broker
aware of the Market-Maker’s intention to enter or to be present in the trading crowd,
the Floor Broker time-stamps the order ticket for the order and writes the notation
“Present” or “PRST” next to the time stamp, and the Market-Maker refrains from
trading in person in the particular option series at the same time that the order being
represented by the Floor Broker is executed.
*****
Rule 6.74. “Crossing” Orders
(a) – (f) No change.
. . . Interpretations and Policies:
.01 - .06 No change.
[.07 A Floor Broker, pursuant to paragraph (d) of this Rule, may not cross an order
that he is holding with an order from a Market-Maker that is then in the trading
crowd.]Reserved.
.08 No change.
_____________________________________________________________________________________
SR-CBOE-2005-115
Crossing Orders
On December 19, 2005, the Exchange filed Rule Change File No. SR-CBOE-2005-115,
which filing proposes to amend CBOE Rule 6.74 relating to SizeQuote Mechanism. Any
questions regarding the rule change may be directed to Patrick Sexton, Legal Division,
at 312-786-7467. The text of the proposed rule change is provided below. Additions are
underlined; deletions are [bracketed].
December 28, 2005, Volume RB16, Number 52
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Interpretations and
Policies continued
SR-CBOE-2005-115 continued
Rule 6.74 - “Crossing” Orders
(a) – (e) No change.
(f) Open Outcry “SizeQuote” Mechanism
(i) SizeQuotes Generally: The SizeQuote Mechanism is a process by which a
floor broker [(“FB”)] may execute and facilitate large-sized orders in open outcry.
Floor brokers [must be willing to] may facilitate the entire size of the order for
which they request SizeQuotes (the “SizeQuote Order”). The appropriate Market
Performance Committee (“MPC”) shall determine the classes in which the SizeQuote
Mechanism shall apply. The SizeQuote Mechanism will operate as a pilot program
which expires February 15, 2006.
(A) Eligible Order Size: The appropriate MPC shall establish the eligible
order size however such size shall not be less than 250 contracts.
(B) In-crowd Market Participants: The term “in-crowd market participants”
(“ICMPs”) shall be as defined in CBOE Rule 6.45A.
(C) Public Customer Priority: Public customer orders in the electronic book
have priority to trade with a SizeQuote order over any ICMP providing a
SizeQuote response at the same price as the order in the electronic book.
(D) DPM Participation Entitlement [Rights]: [The DPM] No participation
entitlement shall apply to SizeQuote transactions.
(E) [FBs] Floor brokers may not execute a SizeQuote order at a price
inferior to the national best bid or offer (“NBBO”). [Unless a SizeQuote request
is properly canceled in accordance with paragraph (iv), a FB is obligated to
execute the entire SizeQuote order at a price that is not inferior to the NBBO
in situations where there are no SizeQuote responses received or where such
responses are inferior to the NBBO.]
(ii) SizeQuote Procedure: Upon request by a [FB] floor broker for a SizeQuote,
ICMPs may respond with bids and offers [indications of] reflecting the price and
size at which they would be willing to trade with a SizeQuote order. After the
conclusion of time during which interested ICMPs have been given the opportunity
to provide their [indications] bids and offers, the [FB] floor broker may [must]
execute the SizeQuote order with ICMPs and/or with a firm facilitation order in
accordance with the following procedures:
(A) Executing the Order at ICMP’s Best Price: ICMPs that provided
SizeQuote responses at the highest bid or lowest offer (“best price”) have
priority to trade with the SizeQuote Order at that best price. Allocation of the
order among ICMPs shall be prorata, up to the size of each ICMP’s SizeQuote
response. The [FB] floor broker [must] may trade at the best price any contracts remaining in the original SizeQuote Order that were not executed by
ICMPs providing SizeQuote responses.
[(B) Executing the Order at a Price that Improves upon ICMP’s Price by
One Minimum Increment: ICMPs that provided SizeQuote responses at the
best price (“eligible ICMPs”) have priority to trade with the SizeQuote Order at
a price equal to one trading increment better than the best price (“improved
best price”). Allocation of the order among eligible ICMPs at the improved best
price shall be prorata, up to the size of each eligible ICMP’s SizeQuote response. The [FB] floor broker must trade at the improved best price any contracts remaining in the original SizeQuote Order that were not executed by
eligible ICMPs.]
([C]B) Trading at a Price that Improves upon ICMP’s Price by At Least
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SR-CBOE-2005-115 continued
[More than] One Minimum Increment: A [FB] floor broker may execute the
entire SizeQuote order at a price [two] at least one trading increment[s] better
than the best price communicated by the ICMPs in their responses to the
SizeQuote request.
(iii) Definition of Trading Increments: Permissible trading increments are $0.05
for options quoted below $3.00 and $0.10 for all others. In classes in which bid-ask
relief is granted pursuant to CBOE Rule 8.7(b)(iv), the permissible trading increments shall also increase by the corresponding amount. For example, if a series
trading above $3.00 has double-width bid-ask relief, the permissible trading increment for purposes of this rule shall be $0.20.
(iv) It will be a violation of a [FB’s] floor broker’s duty of best execution to its
customer if it were to cancel a SizeQuote order to avoid execution of the order at a
better price. The availability of the SizeQuote Mechanism does not alter a [FB’s]
floor broker’s best execution duty to get the best price for its customer. A SizeQuote
request can be canceled prior to or after the receipt by the [FB] floor broker of
responses to the SizeQuote request. Once the [FB] floor broker receives a response to the SizeQuote request, if he/she were to cancel the order and then subsequently attempt to execute the order at an inferior price to the previous SizeQuote
response, there would be a presumption that the [FB] floor broker did so to avoid
execution of its customer order in whole or in part by others at the better price.
_____________________________________________________________________________________
CORRECTION
Please note that the following proposed rule filing contained an inaccurate description in
the December 14, 2005 Regulatory Bulletin.
SR-CBOE-2005-100
DPM Obligations
On November 22, 2005, the Exchange filed Rule Change File No. SR-CBOE-2005-100,
which filing proposes to issue a regulatory circular that will subject certain DPM’s to
obligations that were removed with the approval of a previous rule change. Specifically,
this filing proposes to issue a regulatory circular that will govern the operations of those
DPMs that were not immediately included in the PAR Official conversion as of November 18, 2005. Any questions regarding the rule change may be directed to James Flynn,
Legal Division, at 312-786-7070.
_____________________________________________________________________________________
December 28, 2005, Volume RB16, Number 52
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