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Self-Regulatory Organizations; Order Granting Approval to a Proposed Rule Change by the Chicago Board Options Exchange, Inc. Relating to Registration Filing Requirements of Associated Persons of Member Organizations

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Information about this document as published in the Federal Register.

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Start Preamble August 2, 2002.

I. Introduction

On December 17, 2001, the Chicago Board Options Exchange, Inc. (“CBOE” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),[1] and Rule 19b-4 thereunder,[2] a proposed rule change to amend the CBOE Fee Schedule and CBOE Rules 2.22 (Other Fees or Charges), 3.6A (Qualification and Registration of Certain Associated Persons), 9.2 (Registration of Options Principals), and 9.3 (Registration and Termination of Representatives) relating to the registration filing requirements of associated persons of member organizations. The Exchange filed an amendment to its proposal on April 22, 2002.[3] The Exchange filed a second amendment to its proposal on May 29, 2002.[4] The proposed rule change and Amendments Nos. 1 and 2 were published for comment in the Federal Register on June 18, 2002.[5] The Commission did not receive any comment letters regarding the proposal. This order approves the proposed rule change, as amended, and sets an effective date for the proposed rule change of September 20, 2002.

II. Description of the Proposed Rule Change

The purpose of the proposed rule change is to allow for associated persons of CBOE member firms that are not members of NASD to register their qualification status electronically via NASD's Web CRD System (“Web CRD”). Currently, the Exchange requires those associated persons of member Start Printed Page 51906organizations that are members of the CBOE, but are not NASD members, to manually register for a qualification status by filing a hard copy Form U-4. In addition, a hard copy Form U-5 must be filed with the Exchange within 30 days of the registered person's termination or within 30 days after the member organization learns of any facts or circumstances that would give rise to an amendment.

The CBOE has established an arrangement with NASD to allow CBOE members that are not NASD members to register associated persons electronically with the CBOE through Web CRD. The CBOE believes that this revision to the current registration process will benefit those persons seeking and/or maintaining registrations with the CBOE in that hard copy filings will no longer need to be sent to the Exchange. In addition, all registration and disclosure data will be consolidated into one database, Web CRD, thus allowing members and member organizations access to the member's associated persons' records. Processing associated persons of these non-NASD member firms in Web CRD should make information about them more readily available to regulators and allow for closer monitoring of these firms and their associated persons. In addition, this arrangement will establish a method to allow registered persons to be notified and satisfy the Continuing Education Regulatory Requirement pursuant to CBOE Rule 9.3A.

The proposed rule change also implements fees to be imposed upon non-NASD Exchange members and member organizations, which members will be instructed to pay directly to NASD through the Web CRD system at the time the Exchange member/member organization effects a registration transaction through Web CRD. These fees include: (a) A Non-Member Processing Fee of $85.00; (b) a Disclosure Processing Fee of $95.00; (c) an Annual System Processing Fee of $30.00; and (d) Fingerprint Processing Fees.

Once the transition to the Web CRD is completed, all Exchange members and member organizations that are not members of the NASD will be subject to these Web CRD fees, which will be set forth on the Exchange Fee Schedule. In addition, all registered persons will continue to be assessed CBOE registration fees as outlined in CBOE Rule 2.22(b)—Other Fees or Charges, (Registration Fees).

The proposed rule change amends Rule 9.3(a) to eliminate obsolete language, and to clarify the requirements for registration by associated persons of members of other national securities exchanges, by deleting language that will no longer be applicable when such associated persons effect their registration via Web CRD. In addition, the proposed rule change eliminates Interpretations .01 and .02 to Rule 9.3, as the appropriate portions have been incorporated into Rule 9.3 itself.

III. Discussion

After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.[6] In particular, the Commission finds that the proposed rule change is consistent with section 6 of the Act.[7] Specifically, the Commission finds that the proposed rule change is consistent with section 6(b)(4) of the Act,[8] which requires that the rules of an Exchange provide for the equitable allocation of reasonable dues, fees, and other charges among its members. In addition, the Commission finds that the proposed rule change is consistent with section 6(b)(5) of the Act,[9] which requires, among other things, that the Exchange's rules be designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons regulating transactions in securities, and, in general, to protect investors and the public interest. The Commission believes that the proposed rule change should enhance the ability of regulators to monitor broker-dealers and their associated persons.

IV. Conclusion

For the foregoing reasons, the Commission finds that the proposal is consistent with the requirements of the Act and rules and regulations thereunder.

It is therefore ordered, pursuant to section 19(b)(2) of the Act,[10] that the proposed rule change (SR-CBOE-2001-66) is approved and shall become effective on September 20, 2002.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[11]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  See letter from Nancy L. Nielsen, Director of Arbitration and Assistant Secretary, CBOE, to Nancy Sanow, Assistant Director, Division of Market Regulation, Commission (April 19, 2002) (“Amendment No. 1”).

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4.  See letter from Christopher R. Hill, Attorney II, Legal Department, CBOE, to Nancy Sanow, Assistant Director, Division of Market Regulation, Commission (May 29, 2002) (“Amendment No. 2”).

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5.  See Securities Exchange Act Release No. 46062 (June 11, 2002), 67 FR 41552.

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6.  In approving this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

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[FR Doc. 02-20183 Filed 8-8-02; 8:45 am]

BILLING CODE 8010-01-P