Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), and Rule 19b-4 thereunder, notice is hereby given that on September 5, 2003, the Chicago Board Options Exchange, Inc. (“CBOE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the CBOE. On November 6, 2003, the CBOE filed Amendment No. 1 to the proposed rule change. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The CBOE proposes to amend Exchange Rule 2.1 pertaining to the appointment of the members and Chairman of the Exchange's Governance Committee. Below is the text of the proposed rule change. Proposed new language is in italics; proposed deletions are in [brackets].
CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED
CHAPTER II—Organization and Administration
Committees of the Exchange
Rule 2.1. Committees of the Exchange
(a) Establishment of Committees. In addition to committees specifically provided for in the Constitution, there shall be the following committees: Appeals, Arbitration, Business Conduct, appropriate Floor Procedure Committees, Floor Officials, appropriate Market Performance Committees, Membership, Product Development and such other committees as may be established in accordance with the Constitution. Except as may be otherwise provided in the Constitution or the Rules, the Vice Chairman of the Board, with the approval of the Board, shall appoint the chairmen and members of such committees to serve for terms expiring at the regular meeting of the Board following the next succeeding Annual Election Meeting or until successors are appointed. Consideration shall be given to continuity and to having, where appropriate, a cross section of the membership represented on each committee. Except as may be otherwise provided in the Constitution or the Rules, the Vice Chairman of the Board may, at any time, with or without cause, remove any member of such committees. Any vacancy occurring in one of these committees shall be filled by the Vice Chairman of the Board for the remainder of the term. Notwithstanding the foregoing, the Chairman of the Board, with the approval of the Board, shall appoint Directors to serve on the [Audit and Compensation Committees,] Governance Committee, whose members shall not be subject to removal except by the Board. The Chairman of the Governance Committee shall be appointed by the Chairman of the Board. Whenever the Vice Chairman of the Board is, or has reason to believe he may become, a party to any proceeding of an Exchange committee, he shall not exercise his power to appoint or remove members of that committee, and the Chairman of the Board shall have such power.
(b)-(d) No change.
II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the CBOE included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The CBOE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
The purpose of the proposed rule change is to amend Exchange Rule 2.1 to state that the Chairman of the Board shall have the authority to appoint the members of the Exchange's Governance Committee, and also to appoint the Chairman of the Governance Committee. The CBOE Governance Committee is a standing committee of the CBOE's Board of Directors. The CBOE believes that the proposed amendment to Rule 2.1 granting to the Chairman of the Board the authority to appoint the members and the Chairman of the Governance Committee is consistent with other provisions in CBOE's Constitution that grant the Chairman of the Board the authority to appoint the members and Chairman of other standing committees of the Board of Directors, such as the Audit and Compensation Committees.
In addition to the foregoing proposed change to Rule 2.1, the Exchange proposes a “housekeeping” amendment to Rule 2.1—namely, to delete the reference to the Audit Committee and Compensation Committee in Rule 2.1 as these two committees are specifically codified in Sections 7.3 and 7.4, respectively, of the CBOE's Constitution.
In Amendment No. 1, the CBOE clarified that currently the Vice Chairman of the Exchange, with the approval of the Board of Directors, has the authority to appoint the Chairman and members of the Governance Committee. The CBOE explained that it believes it is appropriate that the Chairman have this authority, as the Governance Committee, which is a standing Board committee, reviews and evaluates the Exchange's governance structure and makes recommendations to the Board concerning the governance of the Exchange, and assures that as an on-going matter, questions pertaining to governance that may arise from time to time will be reviewed promptly and brought to the Board's attention. The Exchange further noted that its proposal is consistent with other provisions in CBOE's Constitution, which grant the Chairman the authority to appoint the members and the chairmen of other standing committees of the Board of Directors. Finally, the CBOE deleted a reference in the proposed rule's text to the term “members” in reference to the Governance Committee, and replaced it with the term “directors,” which is the term used in the current rule. CBOE explained that the Governance Committee is comprised currently only of directors and will continue to be comprised only of directors in the future.
2. Statutory Basis
The Exchange believes that, by providing that the members of the Exchange's Governance Committee and the Chairman of the Governance Committee shall be appointed by the Chairman of the Board, the proposed rule change furthers the objectives of section 6(b)(5) of the Act  to protect investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others
No written comments were solicited or received with respect to the proposed rule change, as amended.
I. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will:
A. By order approve the proposed rule change, or
B. Institute proceedings to determine whether the proposed rule change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street NW., Washington, DC 20549. Comments may also be submitted electronically at the following e-mail address: firstname.lastname@example.org. All comment letters should refer to File No. SR-CBOE-2003-37. This file number should be included on the subject line if e-mail is used. To help the Commission process and review comments more efficiently, comments should be sent in hardcopy or by e-mail but not by both methods. Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing will also be available for inspection and copying at the principal office of the CBOE. All submissions should refer to file number SR-CBOE-2003-37 and should be submitted by January 8, 2004.Start Signature
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.
Margaret H. McFarland,
3. See letter from Patrick Sexton, Assistant General Counsel, CBOE, to Gordon Fuller, Counsel to the Assistant Director, Division of Market Regulation, Commission, dated November 6, 2003 (“Amendment No. 1”). In Amendment No. 1, CBOE clarified the current procedure by which Governance Committee members are appointed, explained the reason for the proposed rule change, and revised a portion of the original proposed rule text. These changes are more fully described in Section II below.Back to Citation
4. See CBOE Constitution, Sections 7.3 and 7.4.Back to Citation
[FR Doc. 03-31167 Filed 12-17-03; 8:45 am]
BILLING CODE 8010-01-P