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Federal Register / Vol. 70, No.

163 / Wednesday, August 24, 2005 / Notices 49691

without change; the Commission does futures contracts (‘‘Eligibility and since the adoption of SLB 15, which
not edit personal identifying Maintenance Criteria’’) to comply with vary from the Sample Listing Standards
information from submissions. You the requirements under Section 6(h)(3) 5 set forth in SLB 15.
should submit only information that of the Act and the criteria under Section CFE is also filing herewith CFE Rules
you wish to make available publicly. All 2(a)(1)(D)(i) of the CEA.6 The text of the 215, 403, 412–415, 417, 501, 601–605,
submissions should refer to File proposed rule change is available on 610–615, 1801–1806, and 1901–1906,
Number SR–BSE–2005–30 and should CFE’s Web site (http://cfe.cboe.com), at all of which remain unchanged from the
be submitted on or before September 14, CFE’s principal office, and at the CFE Rulebook filed with the
2005. Commission’s Public Reference Room. Commission as part of CFE’s notice
The CFE Listing Standards 7 are, for the registration on Form 1–N. These rules
For the Commission, by the Division of
Market Regulation, pursuant to delegated most part, identical to the sample listing are being filed herewith because they
authority.6 standards (‘‘Sample Listing Standards’’) relate to the listing standard
Margaret H. McFarland, included in the Commission’s Staff requirements set forth in Section 6(h)(3)
Legal Bulletin No. 15 (‘‘SLB 15’’),8 of the Act 11 as further described below.
Deputy Secretary.
except that the CFE Listing Standards: CFE Rule 517 and CFE Policy and
[FR Doc. E5–4628 Filed 8–23–05; 8:45 am] • Reflect the modifications to the Procedure VII, while also referenced in
BILLING CODE 8010–01–P statutory listing standards requirements Item II below, are not filed in this
jointly adopted by the Commission and proposed rule change because they were
the CFTC with respect to shares of the subjects of a separate filing by CFE
SECURITIES AND EXCHANGE exchange-traded funds (‘‘ETFs’’), trust- on SEC Form 19b–4.12
COMMISSION issued receipts (‘‘TIRs’’), shares of
II. Self-Regulatory Organization’s
[Release No. 34–52295; File No. SR–CFE– registered closed-end management
Statement of the Purpose of, and
2005–01] investment companies (‘‘Closed-End
Statutory Basis for, the Proposed Rule
Fund Shares’’), and American
Self-Regulatory Organizations; Notice Change
Depositary Receipts (‘‘ADRs’’);9
of Filing and Immediate Effectiveness • Establish an approximately equal CFE has prepared statements
of Proposed Rule Change by CBOE dollar-weighting methodology for concerning the purpose of, and basis for,
Futures Exchange, LLC Relating to Its physically-settled futures based on the proposed rule change, burdens on
Listing Standards for Security Futures narrow-based security indices (all competition, and comments received
Products narrow-based security index futures are from its members, participants, and
referred to hereafter as ‘‘NBI futures’’),10 others. The text of these statements may
August 18, 2005. be examined at the places specified in
which (i) requires the number of shares
Pursuant to Section 19(b)(7) of the or receipts of each component security Item IV below. These statements are set
Securities Exchange Act of 1934 1 to be rounded up or down to the nearest forth in Sections A, B, and C below.
(‘‘Act’’) and Rule 19b–7 under the Act,2 multiple of 100 in the course of the
notice is hereby given that on July 26, A. Self-Regulatory Organization’s
determination of the initial index Statement of the Purpose of, and
2005, CBOE Futures Exchange, LLC composition and any subsequent
(‘‘CFE’’ or ‘‘Exchange’’) filed with the Statutory Basis for, Proposed Rule
rebalancing; (ii) contemplates Change
Securities and Exchange Commission mandatory annual rebalancing of such
(‘‘SEC’’ or ‘‘Commission’’) the proposed indices under specified circumstances, Section 6(h)(3) of the Act 13 sets forth
rule change described in Items I, II and complemented by CFE’s ability to a number of requirements for listing
III below, which Items have been rebalance indices on an interim basis if standards applicable to security futures
prepared by CFE. The Commission is it so elects; and (iii) ensures that products. Among other things, that
publishing this notice to solicit outstanding contracts will not be Section provides that such listing
comments on the proposed rule change affected by any rebalancing; and standards must (i) be no less restrictive
from interested persons. CFE also filed • Contain certain provisions that than comparable listing standards for
the proposed rule change with the reflect rule changes that have been filed options traded on a national securities
Commodity Futures Trading by other security futures exchanges exchange 14 and (ii) require that trading
Commission (‘‘CFTC’’), together with a in security futures products not be
written certification under Section 5c(c) 5 15
U.S.C. 78f(h)(3). readily susceptible to manipulation of
of the Commodity Exchange Act 67U.S.C. 2(a)(1)(D)(i). the price of such products or of the
(‘‘CEA’’) 3 on July 25, 2005. 7 The CFE Listing Standards are set forth in underlying securities or options on such
proposed Policy and Procedure VIII, Eligibility and securities.15
I. Self-Regulatory Organization’s Maintenance Criteria for Security Futures.
Description of the Proposed Rule 8 SEC, Division of Market Regulation, Staff Legal 1. CFE Listing Standards
Change 4 Bulletin No. 15: Listing Standards for Trading
Security Futures Products (September 5, 2001) Commission staff published SLB 15,
CFE is proposing to adopt rules (available at http://www.sec.gov/interps/legal/ including the Sample Listing Standards
regarding listing standards for security mrslb15.htm). (which were derived from typical listing
9 See Joint Order Granting the Modification of
standards used by exchanges trading
Listing Standards Requirements Securities
6 17 CFR 200.30–3(a)(12). Exchange Act Release No. 46090 (June 19, 2002), 67
options based on securities or security
1 15 U.S.C. 78s(b)(7). FR 42760 (June 25, 2002) (ETFs, TIRs and Closed- indices), to provide guidance as to how
2 17 CFR 240.19b–7.
End Fund Shares); Joint Order Granting the an exchange can comply with the
3 7 U.S.C. 7a–2(c). Modification of Listing Standards Requirements, foregoing requirements. SLB 15 also
4 With the consent of the CFE, the Commission Securities Exchange Act Release No. 44725 (August
has made minor clarifications to the text of the 20, 2001) (ADRs). 11 15 U.S.C. 78f(h)(3).
descriptions in this Part I and to the statement of 10 CFE Policy and Procedures VIII(C) and VIII(D)
12 See
purpose in Part II.A below. Telephone call between contain listing requirements that relate to the initial File No. SR–CFE–2005–02 (filed July 27,
David Doherty, Attorney, CFE, and Ira Brandriss, eligibility criteria and maintenance standards, 2005).
13 15 U.S.C. 78f(h)(3).
Special Counsel, and Nathan Saunders, Special respectively, for approximately equal dollar-
14 15 U.S.C. 78f(h)(3)(C).
Counsel, Division of Market Regulation, weighted, physically-settled narrow-based security
Commission, August 9, 2005. indices. 15 15 U.S.C. 78f(h)(3)(H).

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49692 Federal Register / Vol. 70, No. 163 / Wednesday, August 24, 2005 / Notices

noted that different listing standards futures, and accordingly, are limited in of an immediately effective proposed
could also be consistent with the Act. application to such physically-settled rule change by OneChicago.18 In
The CFE Listing Standards follow the contracts. These modifications are addition, the contents of the CFE Listing
Sample Listing Standards, subject to the designed to enhance the usefulness and Standards, including the approximately
additional modifications relating to effectiveness of physically-settled NBI equal dollar-weighting methodology
ETFs, TIRs, Closed-End Fund Shares, futures in connection with hedging, described above, will be publicly
and ADRs; the establishment of an arbitrage and other investment available and fully disclosed. These
additional weighting methodology for strategies. standards are reflected in Sections
certain physically-settled NBI futures The proposed approximately equal C(1)(ii) and D(1)(ii) of CFE Policy and
described under Item I above; and dollar-weighted methodology Procedure VIII.
certain other rule changes that were contemplates narrow-based security c. Modification of SLB 15 I(A)(vi).
filed with the Commission and the indices consisting of component CFE is adopting the initial listing
CFTC by OneChicago, LLC standard implemented by OneChicago
securities in increments that are no less
(‘‘OneChicago’’) 16 which pertained to in SR–OC–2004–02,19 which would
than 100 shares or receipts, which
OneChicago’s listing standards for permit CFE to list a single stock future
corresponds to customary increments
security futures. Therefore, the CFE on an underlying security that had
for transactions in the markets for those
Listing Standards as set forth herein do trading volume of at least 2,400,000
securities. For this reason, rounding will
not contain any listing standards that shares in the preceding 12 months. This
be a necessary step in the determination
have not already been reviewed by the standard is reflected in Section A(1)(vi)
of the initial index composition and any
Commission. The CFE Listing Standards of CFE Policy and Procedure VIII.
subsequent rebalancing. The underlying d. Modification of SLB 15 I(A)(vii).
permit CFE to trade both cash-settled index of a physically-settled NBI future CFE is adopting the initial listing
and physically-settled NBI futures on that uses an approximately equal dollar- standards implemented by OneChicago
the following types of indices: weighted methodology would be in SR–OC–2003–01,20 which would
capitalization-weighted, modified rebalanced annually, but only if the permit a single stock future to be listed
capitalization-weighted, price-weighted, aggregate value of the security position on a security that is a ‘‘covered
and equal dollar-weighted. The with the highest value is two or more security’’ as defined under Section
modifications to SLB 15, including the times greater than the aggregate value of 18(b)(1)(A) of the Securities Act of
modifications that permit CFE to list the security position with the lowest 1933 21 if the market price of the
approximately equal-dollar weighted, value in the index for a specified time underlying security has been at least
physically-settled NBI futures, are period. CFE will also have the ability to $3.00 for the five consecutive business
explained in further detail below. rebalance any approximately equal days prior to the date on which CFE
2. Modifications of SLB 15 dollar-weighted narrow-based security submits a certificate to The Options
index on an interim basis (but no more Clearing Corporation (‘‘OCC’’) for listing
a. Modification of SLB 15 I(A)(i). frequently than quarterly) should this
The modifications set forth in the CFE and trading the futures contract. The
become necessary as a result of market price of the underlying security
listing standards that relate to shares of exceptional changes in the relative
ETFs, TIRs, Closed-End Fund Shares, would be measured by the closing price
values of the component securities. As reported in the primary market in which
and ADRs reflect the modifications to CFE plans to list only physically-settled the underlying security is traded. CFE
the statutory listing standards NBI futures contracts expiring on the rules would also require that an
requirements adopted by the next two quarterly expiration dates and underlying security that is not a
Commission and the CFTC subsequent the nearest two serial monthly ‘‘covered security’’ meet the price
to the publication of SLB 15.17 These expiration dates that are not quarterly requirement that it have a market price
standards are reflected in Section A(1)(i) expiration dates, CFE will be able to of at least $7.50 for the majority of the
of CFE Policy and Procedure VIII. phase in contracts that are based on a business days for the three calendar
b. Modification of SLB 15 III(A)(ii). rebalanced narrow-based security index,
The modifications that relate to months preceding selection. These
and thereby replace contracts with open standards are reflected in Sections
narrow-based security indices are interest that are based on the previous
intended to allow CFE to provide for an A(1)(viii) and A(1)(ix) of CFE Policy and
narrow-based security index Procedure VIII.
additional weighting methodology, composition within a short period of e. Modification of SLB 15 II(A)(iv).
called an ‘‘approximately equal dollar- time. CFE also believes that investors in CFE is adopting the maintenance
weighted’’ methodology, that would be approximately equal dollar-weighted standard implemented by OneChicago
available only for physically-settled NBI NBI futures contracts should be able to in SR–OC–2003–04 22 (as amended by
16 See SR–OC–2002–04 (Securities Exchange Act
rely on the number of shares or receipts SR–OC–2003–08),23 pursuant to which
Release No. 47114 (December 31, 2002), 68 FR 837 evidencing each component security CFE would not open for trading a new
(January 7, 2003)) (Notice of Filing and Immediate remaining unchanged for the duration of delivery month for a single stock future
Effectiveness of Proposed Rule Change by those contracts. Therefore, the CFE trading on CFE if the market price per
OneChicago, LLC Relating to Listing Standards for Listing Standards state that outstanding share of the underlying security closed
Security Futures Products); see also SR–OC–2003–
01 (Securities Exchange Act Release No. 47356 contracts overlying approximately equal below $3.00 on the previous trading day
(February 12, 2003), 68 FR 8064 (February 19, dollar-weighted narrow-based security to the expiration day of the nearest
2003)); SR–OC–2003–04 (Securities Exchange Act indices will not be affected by any expiring contract on the underlying
Release No. 47445 (March 5, 2003), 68 FR 11595 rebalancing. The proposed listing
(March 11, 2003)); SR–OC–2003–06 (Securities
Exchange Act Release No. 48191 (July 17, 2003), 68 standards for approximately equal 18 See SR–OC–2005–02 (Securities Exchange Act

dollar-weighted narrow-based security Release No. 52180 (July 29, 2005), 70 FR 45464
FR 43555 (July 23, 2003)); SR–OC–2003–08
(August 5, 2005)).
(Securities Exchange Act Release No. 48660 indices are identical to the listing 19 See supra note 16.
(October 20, 2003), 68 FR 61027 (October 24, standards for approximately equal 20 See id.
2003)); and SR–OC–2004–02 (Securities Exchange
Act Release No. 50373 (September 14, 2004), 69 FR dollar-weighted narrow-based security 21 15 U.S.C. 77r(b)(1)(A).

56470 (September 21, 2004)). indices that were set forth in the 22 See supra note 16.
17 See supra note 9. OneChicago rules prior to a recent filing 23 See id.

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Federal Register / Vol. 70, No. 163 / Wednesday, August 24, 2005 / Notices 49693

security. The market price per share of listing standards for exchange-traded Adherence to Law, which requires them
the underlying security would be options. to comply with all applicable law. CFE
determined by the closing price Clause (D) of Section 6(h)(3) of the Rules 610 through 613 contain
reported in the primary market in which Act 30 requires that each security future customary provisions relating to the
the underlying security is traded. This be based on common stock or such other priority of customers’ orders, trading
standard is reflected in Section B(1)(v) equity securities as the Commission and against customers’ orders, withholding
of CFE Policy and Procedure VIII. the CFTC jointly determine appropriate. orders and disclosing orders, consistent
This requirement is addressed in with CFTC Regulations §§ 155.2 through
3. Section 6(h)(3) Requirements 155.4 38 under the CEA. CFE notes,
Sections A(1)(i), C(1)(ii)(c), and
Section 6(h)(3) of the Act 24 contains D(1)(ii)(b) of CFE Policy and Procedure however, that the prohibition of dual
detailed requirements for listing VIII. trading in security futures products as
standards and conditions for trading Clause (E) of Section 6(h)(3) of the set forth in CFTC Regulation § 41.27 39
applicable to security futures products. Act 31 requires that each security futures adopted pursuant to Section 4j(a) of the
Set forth below is a summary of each product be cleared by a clearing agency CEA 40 by its terms only applies to a
such requirement or condition, followed that has in place provisions for linked contract market operating an electronic
by a brief explanation of how CFE will and coordinated clearing with other trading system if such market provides
comply with it, whether by particular clearing agencies that clear security participants with a time or place
provisions in the CFE Listing Standards futures products, which permits the advantage or the ability to override a
or otherwise. security futures product to be purchased predetermined algorithm.41 Since those
Clause (A) of Section 6(h)(3) of the on one market and offset on another conditions do not exist on CFE, CFE has
Act 25 requires that any security market that trades such product. CFE no specific rule prohibiting dual
underlying a security future be notes that pursuant to Section 6(h)(7) of trading.
registered pursuant to Section 12 of the the Act,32 the foregoing requirement is Clause (H) of Section 6(h)(3) of the
Act.26 This requirement is addressed in deferred until the ‘‘compliance date’’ (as Act 42 requires that trading in a security
Sections A(1)(ii), B(1)(i), C(1)(ii)(b), and defined therein). CFE expects OCC will futures product not be readily
D(1)(ii)(a) of CFE Policy and Procedure have in place procedures complying susceptible to manipulation of the price
VIII. with the requirements of clause (E) of such security futures product, nor to
Clause (B) of Section 6(h)(3) of the upon and after such compliance date. causing or being used in the
Act 27 requires that a market on which Clause (F) of Section 6(h)(3) of the manipulation of the price of any
a physically-settled security futures Act 33 requires that only a broker or underlying security, option on such
product is traded have arrangements in dealer subject to suitability rules security, or option on a group or index
place with a registered clearing agency comparable to those of a national including such securities. As discussed
for the payment and delivery of the securities association registered above, the eligibility and maintenance
securities underlying the security pursuant to Section 15A(a) of the Act 34 criteria for security futures products
futures product. CFE has entered into an may effect transactions in a security contained in the CFE Listing Standards
arrangement with OCC, which is a futures product. This requirement is have been designed to ensure that the
registered clearing agency, relating to addressed by CFE Rule 605, Sales products that will be listed on CFE and
the clearing of security futures products. Practice Rules. CFE Rule 605 requires the underlying securities will not be
By virtue of OCC having in place each Trading Privilege Holder readily susceptible to price
arrangements with the National (including its Related Parties) to comply manipulation. In addition, CFE Rules
Securities Clearing Corporation for the with the sales practice rules applicable 415, Block Trading, 603, Market
delivery of securities underlying to such Trading Privilege Holder from Manipulation, 614, Pre-Arranged
physically-settled security futures time to time promulgated by the Trades, and 615, Simultaneous Buying
products, CFE believes that the payment National Futures Association or the and Selling Orders, either prohibit
and delivery of the securities underlying National Association of Securities market manipulation outright (for
CFE’s security futures products in Dealers, both of which are national example, CFE Rule 603 forbids
accordance with the statutory securities associations. generating unnecessary volatility or
requirements should be ensured. Clause (G) of Section 6(h)(3) of the creating a condition where prices do not
Clause (C) of Section 6(h)(3) of the Act 35 requires that each security futures or will not reflect fair market values) or
Act 28 provides that listing standards for product be subject to the prohibition contain standards and limitations that
security futures products must be no against dual trading in Section 4j of the are designed to prevent market
less restrictive than comparable listing CEA 36 and the rules and regulations manipulation.
standards for options traded on a thereunder or the provisions of Section CFE’s position limit standards set
national securities exchange or national 11(a) of the Act 37 and the rules and forth in CFE Rule 412, Position Limits,
securities association registered regulations thereunder. Trading are designed to prevent market
pursuant to Section 15A(a) of the Act.29 Privilege Holders and their Related manipulation with respect to
For the reasons discussed under Item Parties trading on CFE will be subject to physically-settled NBI futures through
II.A.1 above, notwithstanding specified the aforementioned statutory and the adoption of the position limits
differences between the Sample Listing regulatory prohibitions against dual established under CFTC Regulation
Standards and the CFE Listing trading by virtue of CFE Rule 604, § 41.25.43 With respect to cash-settled
Standards, CFE believes that the latter NBI futures, CFE Rule 1902(e),
are no less restrictive than comparable 30 15 U.S.C. 78f(h)(3)(D). Speculative Position Limits, adopts the
31 15 U.S.C. 78f(h)(3)(E).
24 15 U.S.C. 78f(h)(3). 32 15 U.S.C. 78f(h)(7). 38 17 CFR 155.2–155.4.
25 15 U.S.C. 78f(h)(3)(A). 33 15 U.S.C. 78f(h)(3)(F). 39 17 CFR 41.27.
26 15 U.S.C. 78l. 34 15 U.S.C. 78o–3(a). 40 7 U.S.C. 6j(a).
27 15 U.S.C. 78f(h)(3)(B). 35 15 U.S.C. 78f(h)(3)(G). 41 17 CFR 41.27(b)(2).
28 15 U.S.C. 78f(h)(3)(C). 36 7 U.S.C. 6j. 42 15 U.S.C. 78f(h)(3)(H).
29 15 U.S.C. 78o–3(a). 37 15 U.S.C. 78k(a). 43 17 CFR 41.25.

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49694 Federal Register / Vol. 70, No. 163 / Wednesday, August 24, 2005 / Notices

position limit standards set forth in described above.51 Then, for each stock. When all of the component stocks
OneChicago Rule 1002(e)(2) and applies component security in the index have opened, the final special opening
those standards to all cash-settled NBI underlying the NBI future, CFE quotation will be calculated and
futures traded on CFE.44 Under CFE multiplies the index weight of the disseminated.
Rule 1902(e), CFE calculates two component security 52 by the Notional If the price of one or more of the
numbers: the Market Cap Position Limit Value to determine the security’s component securities is not readily
and the SSF Position Limit. The Market proportion of the NBI future (‘‘Share available 57 on the day scheduled for
Cap Position Limit is based on the Weighting’’). CFE then divides each determination of the final settlement
market capitalization of each NBI future security’s Share Weighting by its price price, the price of the component
and the notional value compared to the to calculate the number of shares of that security or securities shall be based on
market capitalization of the Chicago security represented in the NBI futures the next available opening price of that
Mercantile Exchange Inc. (‘‘CME’’) contract (‘‘Implied Shares’’). CFE then, security, unless the President of the
position limit for its futures contract on for each component security in the Exchange or his designee for such
Standard & Poor’s (‘‘S&P’’ 500 Index. index underlying the NBI future, purposes (‘‘Designated Officer’’)
The SSF Position Limit is based on the divides its Implied Shares by 100 to determines that one or more component
current position limit permitted for obtain the implied number of 100-share securities are not likely to open within
single stock futures under CFTC contracts of such component security in a reasonable time. If the Designated
Regulation § 41.25.45 CFE imposes a each NBI futures contract. CFE then Officer makes such a determination, the
position limit on each cash-settled NBI divides the applicable single stock price of the relevant component security
future equal to the lower of the Market futures contract speculative position or securities for purposes of calculating
Cap Position Limit and the SSF Position limit permitted under CFTC Regulation the final settlement price will be the last
Limit, rounded to the nearest multiple § 41.25(a)(3) 53 (either 13,500 or 22,500 trading price of the security or securities
of 1,000 contracts; provided, however, contracts) for each component security during the most recent regular trading
that if the lower of the two limits is less by the number of implied 100-share session for such security or securities.
than 500 but not less than 400, the contracts. This equals the number of CFE Rule 1902(i) also provides that
position limit for such future is rounded NBI futures contracts that could be held the Rule shall not be used to calculate
up to 1,000 contracts. without exceeding the speculative the final settlement price of an NBI
To calculate the Market Cap Position position limit on a futures contract on future if OCC fixes the final settlement
Limit, CFE determines the market that component security (‘‘Implied SSF price of the NBI future in accordance
capitalization of the S&P 500 Index (as Speculative Limit’’). If a component with OCC’s rules and by-laws and as
of the selection date for the component security qualified for position permitted under the Commission’s Rule
securities in the index underlying the accountability under CFTC Regulation 6h–1(b)(3) 58 and CFTC Regulation
NBI future), then calculates the notional 41.25(a)(3),54 that security would be 41.25(b)(3).59
value of a position at the limit of CME’s ignored for purposes of this calculation. Clause (I) of Section 6(h)(3) of the
S&P 500 Index futures contract (‘‘S&P After calculating the Implied SSF Act 60 requires that procedures be in
500 Notional Value Limit’’) 46 and Speculative Limit for each security in place for coordinated surveillance
divides the first amount by the second the index underlying the NBI future, among the market on which a security
to determine the market capitalization CFE identifies the lowest Implied SSF futures product is traded, any market on
ratio (‘‘Market Cap Ratio’’).47 CFE then Speculative Limit as the SSF Position which any security underlying the
determines the market capitalization of Limit for that NBI future. security futures product is traded, and
the index underlying the NBI future CFE Rules 413(b), Price Limits; Final other markets on which any related
(‘‘Stock Index Market Cap’’) 48 and the Settlement Prices, and 417, Regulatory security is traded to detect manipulation
notional value of the index underlying Halts, implement the requirements and insider trading. The relevant
the NBI future (‘‘Notional Value’’).49 To contained in Rule 6h–1 under the Act 55 provisions are CFE Rules 601, 602 and
calculate the Market Cap Position Limit, relating to settlement and regulatory 603, which prohibit fraudulent acts,
CFE divides the Stock Index Market Cap halts with respect to security futures fictitious transactions and market
by the Notional Value multiplied by the products. manipulation, respectively. CFE notes
Market Cap Ratio.50 With respect to final settlement that it is an affiliate member of the
To calculate the SSF Position Limit prices, CFE Rule 1902(i), Settlement Intermarket Surveillance Group (‘‘ISG’’)
for an NBI future, CFE first calculates its Price, establishes how the final and has executed (1) an Agreement to
Notional Value in the same manner as settlement price is determined for cash-
settled NBI futures. Under CFE Rule security. If the security is not listed on a national
44 Consistent with CFTC Regulation 41.25, 1902(i), a special opening quotation of securities exchange or a national securities
position limits apply to positions in any cash- the relevant index underlying the NBI association, then ‘‘opening price’’ shall mean the
settled NBI future held during the last five trading price at which a security opened for trading on the
days of an expiring contract.
future will be derived from the sum of
primary market for the security. Under this
45 17 CFR 41.25. the opening prices 56 of each component provision, if a component security is an [ADR]
46 The speculative position limit for the CME’s traded on a national securities exchange or national
51 See
supra note 49.
S&P 500 Index futures contract is 20,000 contracts securities association, the opening price for the
(in all months combined) and the contract 52 Index
weight of the component security = ADR would be derived from the national securities
multiplier is $250. Thus, S&P 500 Notional Value (assigned shares * price) of the component security exchange or national securities association that lists
Limit = Level of the S&P 500 Index * 20,000 * 250. / the sum of (assigned shares * price) for each it.
47 Market Cap Ratio = Market Capitalization of the component security. 57 Under CFE Rule 1902(i)(II)(C)(4), the price of a

S&P 500 Index / S&P 500 Notional Value Limit. 53 17 CFR 41.25(a)(3). security is ‘‘not readily available’’ if the underlying
48 The Stock Index Market Cap is calculated by 54 Id. market does not open on the date set for
adding the market capitalizations of each stock 55 17 CFR 240.6h–1. determination of the final settlement price, or if the
comprising the underlying narrow-based security 56 Consistent with 17 CFR 41.1(j), CFE Rule security does not trade on the securities exchange
index. 1902(i)(II)(C)(1) defines ‘‘opening price’’ as follows: or national securities association that lists the
49 Notional Value = Level of the index underlying
‘‘Opening price’’ means the official price at which security during regular trading hours.
58 17 CFR 240.6h–1(b)(3).
the NBI future * contract multiplier. a security opened for trading during the regular
50 Market Cap Position Limit = Stock Index 59 17 CFR 41.25(b)(3).
trading session of the national securities exchange
Market Cap / (Notional Value * Market Cap Ratio). or national securities association that lists the 60 15 U.S.C. 78f(h)(3)(I).

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Federal Register / Vol. 70, No. 163 / Wednesday, August 24, 2005 / Notices 49695

Share Market Surveillance and non-alterable written medium, which prescribed pursuant to Section 7(c)(2)(B)
Regulatory Information between CFE must be time-stamped and include the of the Act.65 CFE believes that its
and the full members of ISG; (2) the account designation, date and other proposed CFE Rule 517, Customer
Agreement to Share Market Surveillance required information (including order Margin Requirements for Contracts That
and Regulatory Information between terms, order type, instrument and Are Security Futures, and CFE Policy
CFE and the affiliate members of ISG; contract month, price, and quantity). and Procedure VII, Security Futures
and (3) the Addendum for Security Each such form must be retained for at Market Maker Registration Policy and
Futures Products to agreements between least five years from the time it is Procedures, which have been filed with
the full members of ISG and the affiliate prepared. In addition, CFE Rule 501, the Commission 66 pursuant to Section
members of ISG trading security futures Books and Records, establishes a general
19(b)(2) of the Act,67 together with a
products (including CFE). CFE Rule 215, recordkeeping requirement pursuant to
written certification under Section 5c(c)
Regulatory Cooperation, permits CFE to which each Clearing Member and
enter into these and other agreements Trading Privilege Holder must keep all of the CEA 68 regarding customer
for the exchange of information and books and records required to be kept by margin, are consistent with the
other forms of mutual assistance with it pursuant to the CEA, CFTC requirements of the Act.
domestic or foreign self-regulatory regulations, the Act, regulations under CFE Rules 1801–1806 and 1901–1906
organizations, associations, boards of the Act, and CFE Rules. CFE Rule 501 set forth the contract rule specifications
trade and their respective regulators. also requires that such books and that relate to single stock futures and
Under CFE Rule 215, CFE is authorized records be made available to CFE upon NBI futures, respectively. The contract
to provide information to any such request. Current CFTC regulations rule specifications contain information
organization, association, board of trade require books and records to be that is specific to the trading of those
or regulator that is a party to an maintained for a period of five years.62 products on CFE and some of the
information sharing agreement with Pursuant to CFE Rule 415, Block specification provisions provide
CFE, in accordance with the terms and Trading, block trades will be entered in
additional detail with respect to issues
subject to the conditions set forth in CBOEdirect by CFE’s operations
addressed by rule provisions noted
such agreement. Additional provisions management after they are verbally
reported by designated individuals at above.
related to coordinated surveillance are
contained in Sections A(1)(x)(a), the Clearing Member for the selling For the reasons discussed above, CFE
C(1)(ii)(g), and D(1)(ii)(f) of CFE Policy party. At the time of each such verbal submits that the CFE Listing Standards
and Procedure VIII. report, a trade identification number satisfy the requirements set forth in
Clause (J) of Section 6(h)(3) of the will be assigned and provided to the Section 6(h)(3) of the Act.69
Act 61 requires that a market on which caller. Both the buyer and the seller in
a security futures product is traded have each trade will then follow up the Statutory Basis
in place audit trails necessary or verbal report by submitting a block trade CFE has filed these proposed rules
appropriate to facilitate the coordinated reporting form via facsimile or email to pursuant to Section 19(b)(7) of the
surveillance referred to in the preceding CFE. The same procedures generally
Act.70 CFE believes the CFE Listing
paragraph. The audit trail capability apply to exchange of future for related
Standards are authorized by, and
provided by CBOEdirect, CFE’s trade position (‘‘EFP’’) transactions as
matching engine, will create and consistent with, Section 6(b)(5) of the
provided in CFE Rule 414. Since block
maintain an electronic transaction trades and EFP transactions involve Act 71 because they are designed to
history database that contains orders that cannot be immediately promote just and equitable principles of
information with respect to all orders, entered into CFE’s systems, the Clearing trade.
whether executed or not, and resulting Members or, if applicable, CFE Trading B. Self-Regulatory Organization’s
transactions on CFE. The information Privilege Holders or CFE Authorized Statement on Burden on Competition
recorded with respect to each order Traders, must comply with the
includes: time received, terms of the recordkeeping procedures specified in CFE does not believe that the
order, order type, instrument and the preceding paragraph. proposed rule change will impose any
contract month, price, quantity, account Clause (K) of Section 6(h)(3) of the burden on competition not necessary or
type, account designation, user code Act 63 requires that a market on which appropriate in furtherance of the
and clearing firm. This information will a security futures product is traded have purposes of the Act. Since this rule
enable CFE to trace each order back to in place procedures to coordinate change in conjunction with other
the clearing firm by or through which it trading halts between such market and related regulatory filings being made by
was submitted. If any question or issue any market on which any security CFE will permit CFE to become
arises as to the source of an order prior underlying the security futures product authorized to provide a trading venue
to submission by or through a clearing is traded and other markets on which
firm, CFE will request that the clearing for security futures, this rule change
any related security is traded. CFE Rule
firm provide an electronic or other serves to enhance and promote
417, Regulatory Halts, provides for
record of the order. competition by allowing an additional
trading in a security future to be halted
For orders that cannot be immediately at all times that a regulatory halt has exchange to list and trade security
entered into CFE systems, and therefore been instituted for the relevant futures.
will not be recorded electronically by underlying security or securities.
CBOEdirect at the time they are placed, Clause (L) of Section 6(h)(3) of the 65 15 U.S.C. 78g(c)(2)(B).
CFE Rule 403(b), Order Entry, requires Act 64 requires that the margin 66 See File No. SR–CFE–2005–02 (filed July 27,
that the Clearing Member or, if requirements for a security futures 2005).
applicable, the Trading Privilege Holder product comply with the regulations 67 15 U.S.C. 78s(b)(2).

or the Authorized Trader receiving such 68 7 U.S.C. 7a–2(c).

order must prepare an order form in a 62 17 CFR 1.31(a)(1). 69 15 U.S.C. 78f(h)(3).

6315 70 15 U.S.C. 78s(b)(7).


U.S.C. 78f(h)(3)(K).
61 15 U.S.C. 78f(h)(3)(J). 64 15 U.S.C. 78f(h)(3)(L). 71 15 U.S.C. 78f(b)(5).

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49696 Federal Register / Vol. 70, No. 163 / Wednesday, August 24, 2005 / Notices

C. Self-Regulatory Organization’s with respect to the proposed rule I. Self-Regulatory Organization’s


Statement on Comments on the change that are filed with the Statement of the Terms of Substance of
Proposed Rule Change Received From Commission, and all written the Proposed Rule Change
Members, Participants, or Others communications relating to the The MSRB is filing with the
No written comments were solicited proposed rule change between the Commission a proposed rule change
or received with respect to the proposed Commission and any person, other than consisting of amendments to Rule G–20,
rule change. those that may be withheld from the on gifts and gratuities, and the related
public in accordance with the recordkeeping requirements of Rule G–
III. Date of Effectiveness of the provisions of 5 U.S.C. 552, will be 8.3 The text of the proposed rule change
Proposed Rule Change and Timing for available for inspection and copying in is available on the MSRB’s Web site
Commission Action the Commission’s Public Reference (http://www.msrb.org), at the MSRB’s
Pursuant to Section 19(b)(7)(B) of the Room, 100 F Street, NE., Washington, principal office, and at the
Act,72 the proposed rule change became DC 20549. Copies of such filing also will Commission’s Public Reference Room.
effective on July 26, 2005.73 Within 60 be available for inspection and copying
days of the date of effectiveness of the at the principal office of the Exchange. II. Self-Regulatory Organization’s
proposed rule change, the Commission, All comments received will be posted Statement of the Purpose of, and
after consultation with the CFTC, may without change; the Commission does Statutory Basis for, the Proposed Rule
summarily abrogate the proposed rule not edit personal identifying Change
change and require that the proposed information from submissions. You In its filing with the Commission, the
rule change be re-filed in accordance should submit only information that MSRB included statements concerning
with the provisions of Section 19(b)(1) you wish to make available publicly. All the purpose of and basis for the
of the Act.74 submissions should refer to File proposed rule change and discussed any
Number SR–CFE–2005–01 and should comments it received on the proposed
IV. Solicitation of Comments be submitted on or before September 14, rule change. The text of these statements
Interested persons are invited to 2005. may be examined at the places specified
submit written data, views, and For the Commission, by the Division of in Item IV below. The MSRB has
arguments concerning the foregoing, Market Regulation, pursuant to delegated prepared summaries, set forth in
including whether the proposed rule authority.75 Sections A, B, and C below, of the most
change is consistent with the Act. Margaret H. McFarland, significant aspects of such statements.
Comments may be submitted by any of Deputy Secretary.
the following methods: A. Self-Regulatory Organization’s
[FR Doc. E5–4624 Filed 8–23–05; 8:45 am] Statement of the Purpose of, and
Electronic Comments BILLING CODE 8010–01–P Statutory Basis for, the Proposed Rule
• Use the Commission’s Internet Change
comment form (http://www.sec.gov/ SECURITIES AND EXCHANGE 1. Purpose
rules/sro.shtml); or COMMISSION
• Send an e-mail to rule- MSRB Rule G–20 prohibits dealers
comments@sec.gov. Please include File from directly or indirectly giving or
[Release No. 34–52290; File No. SR–MSRB– permitting to be given any thing or
Number SR–CFE–2005–01 on the
2005–02] service of value in excess of $100 per
subject line.
year to any person other than an
Paper Comments Self-Regulatory Organizations; employee or partner of the dealer in
Municipal Securities Rulemaking
• Send paper comments in triplicate Board; Notice of Filing of Proposed
relation to the municipal securities
to Jonathan G. Katz, Secretary, activities of the recipient’s employer.
Rule Change Relating to Amendments The rule provides certain exemptions
Securities and Exchange Commission, to MSRB Rule G–20, on Gifts and
100 F Street, NE., Washington, DC from the $100 annual limit for ‘‘normal
Gratuities, and MSRB Rule G–8, on business dealings,’’ including (i)
20549. Recordkeeping
All submissions should refer to File occasional gifts of meals or tickets to
Number SR–CFE–2005–01. This file August 18, 2005. theatrical, sporting and other
number should be included on the entertainment; (ii) sponsoring legitimate
Pursuant to Section 19(b)(1) of the business functions that are recognized
subject line if e-mail is used. To help the
Securities Exchange Act of 1934 by the IRS as deductible business
Commission process and review your
(‘‘Act’’), 1 and Rule 19b–4 thereunder, 2 expenses; and (iii) gifts of reminder
comments more efficiently, please use
notice is hereby given that on January advertising. However, such gifts must
only one method. The Commission will
13, 2005, the Municipal Securities not be so frequent or excessive as to
post all comments on the Commission’s
Rulemaking Board (‘‘MSRB’’ or raise a suggestion of unethical conduct.
Internet Web site (http://www.sec.gov/
‘‘Board’’) filed with the Securities and MSRB Rule G–20 currently does not
rules/sro.shtml). Copies of the
Exchange Commission (‘‘SEC’’ or mandate specific requirements with
submission, all subsequent
‘‘Commission’’) the proposed rule respect to non-cash sales incentives,
amendments, all written statements
change as described in Items I, II, and although the general fair practice
72 15
III below, which Items have been
U.S.C. 78s(b)(7)(B).
73 CFE filed the proposed rule change with the
prepared by the MSRB. The 3 The New York Stock Exchange, Inc. (‘‘NYSE’’)
CFTC, together with a written certification under Commission is publishing this notice to has a pending rule filing with the Commission on
Section 5c(c) of the Commodity Exchange Act CEA, solicit comments on the proposed rule gifts and gratuities that is currently being reviewed.
on July 25, 2005. CFE’s written certification change from interested persons. The MSRB has agreed to consider filing further
requested that the proposed rule change become amendments to Rule G–20 or other rules, as
effective on July 26, 2005, the date that the necessary, to make its rules on gifts and gratuities
75 17 CFR 200.30–3(a)(75).
proposed rule change was filed with the consistent with future rule changes made by other
Commission. 1 15 U.S.C. 78s(b)(1). self-regulatory organizations (SROs) overseen by the
74 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. Commission.

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