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Federal Register / Vol. 72, No.

45 / Thursday, March 8, 2007 / Notices 10575

provisions of 5 U.S.C. 552, will be (‘‘CBSX LLC’’). On January 10, 2007, the As a limited liability company,
available for inspection and copying in CBOE filed Amendment No. 1 to the ownership of CBSX LLC is represented
the Commission’s Public Reference proposed rule change. The proposed by limited liability membership
Room. Copies of such filing also will be rule change was published for comment interests. The holders of such interests
available for inspection and copying at in the Federal Register on February 1, are referred to as ‘‘Owners.’’ 8 Initially,
the principal office of the Exchange. All 2007.3 The Commission received no there are five Owners of CBSX LLC.
comments received will be posted comments regarding the proposal. On CBOE is one of the Owners of CBSX
without change; the Commission does March 1, 2007, the CBOE filed LLC, and owns all ‘‘Series A’’ Voting
not edit personal identifying Amendment No. 2 to the proposed rule Shares 9 of CBSX LLC, representing 50%
information from submissions. You change. On March 2, 2007, the CBOE
of CBSX LLC.10 The other four Owners
should submit only information that filed Amendment No. 3 to the proposed
and their respective ownership interests
you wish to make available publicly. All rule change. This order approves the
proposed rule change, grants accelerated are: VDM Chicago, LLC (20%);
submissions should refer to File
approval to Amendment Nos. 2 and 3, LaBranche & Co., Inc. (10%); IB
Number SR–CBOE–2006–112 and
and solicits comments from interested Exchange Corp. (10%); and
should be submitted on or before March
29, 2007. persons on Amendment Nos. 2 and 3. Susquehanna International Group, LLP.
(10%). Each of these four Owners owns
V. Conclusion II. Overview ‘‘Series B’’ Voting Shares of CBSX LLC.
It is therefore ordered, pursuant to The Exchange proposes to establish Under Section 3.2 of the Operating
Section 19(b)(2) of the Act,21 that the CBSX as a facility,4 as that term is Agreement, the CBSX LLC Board of
proposed rule change (File No. SR– defined in Section 3(a)(2) of the Act,5 of Directors (‘‘Board of Directors’’ or
CBOE–2006–112), as modified by CBOE. As the self-regulatory
‘‘Board’’) may authorize the issuance of
Amendment No. 1, be, and it hereby is, organization (‘‘SRO’’) for CBSX, CBOE
‘‘Series C’’ Non-Voting Restricted
approved on an accelerated basis. will have regulatory responsibility for
the activities of CBSX.6 CBSX will be a Shares 11 from time to time to
For the Commission, by the Division of employees, consultants, or officers of
Market Regulation, pursuant to delegated fully automated marketplace for the
trading of securities other than options CBSX LLC, or any other person, each of
authority.22
Florence E. Harmon, by CBOE members. CBSX will be
operated by CBSX LLC, a Delaware 27, 2007). The Commission also approved the
Deputy Secretary. Exchange’s proposed rule change to establish the
limited liability company. In the instant equity trading rules for CBSX. See Securities
[FR Doc. E7–4124 Filed 3–7–07; 8:45 am]
proposed rule change, CBOE seeks the Exchange Act Release No. 34–55392 (March 2,
BILLING CODE 8010–01–P
Commission’s approval of the proposed 2007).
governance structure of CBSX LLC as 8 ‘‘Owner’’ means a limited liability company

reflected in the Operating Agreement of ‘‘member’’ as that term is defined in § 18–101(11)


SECURITIES AND EXCHANGE of the Delaware Limited Liability Company Act
CBSX LLC. CBOE has submitted
COMMISSION (‘‘DLLCA’’), and shall include each Voting Owner
separate proposed rule changes to and each Management Owner, but only so long as
[Release No. 34–55389; File No. SR–CBOE– establish rules relating to listing, such person is shown on CBSX’s books and records
2006–110] membership and trading on CBSX and as the owner of at least one (1) Share (or fraction
of one (1) Share). ‘‘Owner’’ shall include a
to establish a permit program in
Self-Regulatory Organizations; ‘‘Substituted Owner’’ as defined in Section 6.5(a) of
connection with CBSX.7 the Operating Agreement, but only upon
Chicago Board Options Exchange, compliance with all of the requirements of Sections
Incorporated; Order Granting Approval 3 See Securities Exchange Act Release No. 55172 6.4 and 6.5 of the Operating Agreement. For
of Proposed Rule Change as Modified (January 25, 2007), 72 FR 4745. purposes of clarity, no person shall become an
by Amendment No. 1 Thereto and 4 Pursuant to Section 3(a)(2) of the Act, the term ‘‘Owner’’ as to any Shares, if the acquisition of
Notice of Filing and Order Granting ‘‘facility’’ when used with respect to an exchange, those Shares will require a change of ownership
includes ‘‘its premises, tangible or intangible notice to the Commission, or will constitute a
Accelerated Approval to Amendment property whether on the premises or not, any right proposed rule change subject to the requirements of
Nos. 2 and 3 Relating to the to the use of such premises or property or any the rule filing process of Section 19 of the Act, until
Establishment of CBOE Stock service thereof for the purpose of effecting or all of the requirements of such notice or rule filing
Exchange, LLC reporting a transaction on an exchange (including, process have been accomplished and, if necessary,
among other things, any system of communication approved by the Commission. See Section 2.1(16)
March 2, 2007. to or from the exchange, by ticker or otherwise, of the Operating Agreement.
maintained by or with the consent of the exchange), 9 ‘‘Voting Shares’’ means those Shares entitled to

I. Introduction and any right of the exchange to the use of any vote on matters submitted to the Owners, which
property or service.’’ 15 U.S.C. 78c(a)(2). The Voting Shares are held by the Voting Owners. See
On December 26, 2006, the Chicago Commission notes that although the Operating Section 2.1(27) of the Operating Agreement.
Board Options Exchange, Incorporated, Agreement refers to CBSX LLC as a facility of 10 As noted in Section 3.2 of the Operating

(the ‘‘CBOE’’ or ‘‘Exchange’’) filed with CBOE, the scope of the CBSX facility is not limited Agreement, it is the intention of the Owners that no
to CBSX LLC. other members of CBSX LLC (other than Affiliates
the Securities and Exchange 5 15 U.S.C. 78c(a)(2).
of CBOE) be owners of Series A Voting Shares, and
Commission (‘‘Commission’’), pursuant 6 CBOE represents that it has adequate funds to that no additional Series A Voting Shares be
to Section 19(b)(1) of the Securities discharge all regulatory functions related to the authorized, created or issued for such purpose;
Exchange Act of 1934, as amended facility. CBOE further represents that CBSX LLC provided however, that this provision is not
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 a will not be entitled to any revenue generated in intended to limit or restrict any rights of CBOE to
connection with penalties, fines, and regulatory fees transfer any of its Series A Voting Shares with the
proposed rule change relating to the that may be assessed by CBOE against CBOE prior approval of the Commission as provided for
establishment of the CBOE Stock members in connection with trading on CBSX. in Article VI, including Section 6.14 of the
Exchange (‘‘CBSX’’), which will be Rather, all regulatory fines, penalties and fees Operating Agreement, or any other provision
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operated by CBOE Stock Exchange, LLC assessed against and paid by CBOE members to thereof, or any rights to be acquired by a transferee
CBOE in connection with trading on CBSX will of those Shares as provided therein.
remain with CBOE. 11 ‘‘Non-Voting Restricted Share’’ means a Share
21 Id.
7 The Commission approved the Exchange’s held by a Management Owner containing the voting
22 17 CFR 200.30–3(a)(12). proposed rule change relating to the CBSX permit limitations and other restrictions described in the
1 15 U.S.C. 78s(b)(1). program. See Securities Exchange Act Release No. Operating Agreement. See Section 2.1(15) of the
2 17 CFR 240.19b–4. 55326 (February 21, 2007), 72 FR 8816 (February Operating Agreement.

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10576 Federal Register / Vol. 72, No. 45 / Thursday, March 8, 2007 / Notices

whom would become a Management discriminate between customers, pursuant to the respective regulatory
Owner 12 of CBSX LLC. issuers, brokers, or dealers. authority of the Commission and CBOE.
As provided in Section 8.9 of the In addition, each Director will take into
Operating Agreement, the outstanding A. CBSX as a Facility of the Exchange
consideration whether any actions taken
Series A Voting Shares will, in the The Commission believes that the or proposed to be taken as a Director for
aggregate (and without being deemed to proposed rule change is consistent with or on behalf of CBSX LLC, or any failure
be a voting trust), be entitled to a Section 6(b)(1) of the Act 16 in that upon or refusal to act (including a failure to
number of votes equal to 50% of the establishing CBSX as a facility of the be present to constitute a quorum, or to
total number of Voting Shares Exchange and entering into the reasonably provide an affirmative vote
outstanding, on each matter submitted relationship with CBSX LLC described or consent) would constitute
to a vote of the Owners. Each above, CBOE will remain so organized, interference with CBOE’s regulatory
outstanding Series B Voting Share will and have the capacity to be able, to functions and responsibilities in
be entitled to one vote on each matter carry out the purposes of the Act. The violation of the Operating Agreement or
submitted to a vote of the Owners. The Commission notes that it previously the Act. These provisions reinforce the
Series C Non-Voting Restricted Shares approved similar structures with respect notion that CBSX, as a facility of an
will not be entitled to vote on any to the operation of exchange facilities.17 exchange, is not solely a commercial
matter submitted to a vote of the The Commission believes that CBSX enterprise; it is an integral part of an
Owners. LLC can be approved as the operator of SRO registered pursuant to the Act and,
III. Discussion the CBSX facility since CBOE will be as such, is subject to obligations
the SRO for the CBSX facility, and imposed by the Act.
After careful review, the Commission CBSX LLC will conduct the facility’s
finds that the proposed rule change is These obligations endure as long as
business operations in a manner CBSX is a facility of the Exchange,
consistent with the requirements of the consistent with the regulatory and
Act and the rules and regulations regardless of the size of CBOE’s
oversight responsibilities of CBOE.18 ownership interest in CBSX LLC, the
thereunder applicable to a national Although CBSX LLC itself will not
securities exchange.13 In particular, the operator of the facility. The Exchange
carry out any regulatory functions, all currently owns 50% interest in the
Commission finds that the proposed its activities must be consistent with the
rule change is consistent with Section operator of the facility and if, in the
Act. Under Section 5.7 of the Operating future, it wishes to reduce its interest in
6(b)(1) of the Act,14 which requires a Agreement, each CBSX LLC Owner
national securities exchange to be so CBSX LLC to below 20%, pursuant to
agrees to comply with the federal Section 6.12(d) of the Operating
organized and have the capacity to carry securities laws and rules and
out the purposes of the Act and to Agreement the Exchange would be
regulations thereunder; to cooperate required to file a proposed rule change
enforce compliance by its members and
with the Commission and CBOE with the Commission under Section
persons associated with its members
pursuant to their regulatory authority 19(b) of the Act. The Commission
with the provisions of the Act, the rules
and the provisions of the Operating believes that this is a reasonable
or regulations thereunder, and the rules
Agreement; and to engage in conduct measure to alert the Commission to a
of the exchange.
The Commission also finds that the that fosters and does not interfere with significant reduction of CBOE’s interest
proposed rule change is consistent with CBSX LLC’s and CBOE’s ability to in CBSX LLC. Such a reduction in
Section 6(b)(5) of the Act,15 which prevent fraudulent and manipulative ownership could warrant additional
requires that the rules of a national acts and practices; promote just and review of the Operating Agreement to
securities exchange be designed to equitable principles of trade; foster ensure that CBOE’s responsibilities as
prevent fraudulent and manipulative cooperation and coordination with the SRO of the CBSX facility are not
acts and practices; to promote just and persons engaged in regulating, clearing, compromised.
equitable principles of trade; to foster settling, processing information with
respect to, and facilitating transactions The Operating Agreement includes
cooperation and coordination with additional provisions that make special
persons engaged in regulating, clearing, in securities; remove impediments to
and perfect the mechanism of a free and accommodations for CBOE as the SRO
settling, processing information with of the CBSX facility. Section 1.8 of the
respect to, and facilitating transactions open market and a national market
system; and, in general, protect Operating Agreement sets forth CBOE’s
in securities; to remove impediments to authority with respect to any action,
and perfect the mechanism of a free and investors and the public interest. In
addition, under Section 9.16 each transaction or aspect of an action or
open market and a national market transaction that relates to CBOE’s
system; and, in general, to protect Director agrees to comply with the
federal securities laws and the rules and regulatory responsibilities, by requiring
investors and the public interest; and CBOE’s affirmative vote before such
are not designed to unfairly regulations thereunder, and to cooperate
with the Commission and CBOE action or transaction or aspect thereof
12 ‘‘Management Owner’’ means a natural person
can be authorized, undertaken or
who is identified on Exhibit A of the Operating 16 15 U.S.C. 78f(b)(1). effective. For example, Section 9.15(a)
Agreement (Exhibit 5C to the proposed rule change) 17 See Securities Exchange Act Release No. 54399 provides that CBSX LLC may not take
as a Management Owner, who subsequently (September 1, 2006), 71 FR 53728 (September 12, certain specific actions without the
becomes a Management Owner pursuant to the 2006) (order approving the ISE Stock Exchange, approval of a Super Majority of the
provisions of Section 3.2(c) of the Operating LLC as a facility of the International Securities
Agreement, or who is a transferee or assignee of Exchange, Inc.); Securities Exchange Act Release
Owners,19 and the additional approving
Non-Voting Restricted Shares (other than a Voting No. 54364 (August 25, 2006), 71 FR 52185 (order vote of CBOE.
Owner). See Section 2.1(13) of the Operating approving the Boston Equities Exchange as a facility
Agreement.
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of the Boston Stock Exchange, Inc.); and Securities 19 ‘‘Super Majority of the Owners’’ means, subject
13 In approving the proposed rule change, the
Exchange Act Release No. 49065 (January 13, 2004), to the provisions of Section 1.8 of the Operating
Commission has considered its impact on 69 FR 2768 (January 20, 2004) (order approving the Agreement as to Regulatory Requirements, the
efficiency, competition, and capital formation. See Boston Options Exchange as a facility of the Boston affirmative vote of both (i) all of the Owners of the
15 U.S.C. 78c(f). Stock Exchange, Inc.). Series A Voting Shares at the time, and (ii) any two
14 15 U.S.C. 78f(b)(1). 18 As the SRO, CBOE will have regulatory (2) of the Initial Owners of Series B Voting Shares
15 15 U.S.C. 78f(b)(5). responsibility for the facility. who then retain ownership of Series B Voting

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Federal Register / Vol. 72, No. 45 / Thursday, March 8, 2007 / Notices 10577

In addition, Section 9.2(b) of the ownership interest level (e.g., 25%, rule change to be filed with the
Operating Agreement provides that, in 30%, 35%, etc.) would require CBOE to Commission pursuant to Section 19(b)
light of its ownership of the Series A file a proposed rule change with the of the Act. The proposed rule change
Voting Shares, CBOE is entitled to Commission pursuant to Section 19(b) would alert the Commission to the
designate a number of Directors equal to of the Act and be subject to approval by existence of a proposed indirect
the aggregate number of Directors the Commission. Any proposed transfer controlling party and present the
designated by those Owners owning of Series A Voting Shares would also Commission and CBOE with an
Series B Voting Shares. Section 9.2(d) require CBOE to file a proposed rule opportunity to determine what
also gives CBOE the right, as long as change under Section 19(b) of the Act additional measures, if any, might be
CBSX remains a facility of CBOE, to and Rule 19b–4 thereunder. necessary to provide sufficient
designate at least one Director regardless Furthermore, Section 6.13 of the regulatory jurisdiction over the
of whether it maintains any ownership Operating Agreement requires CBOE to proposed indirect controlling party. The
interest in CBSX LLC. In addition, inform the Commission in writing at Commission understands that Section
despite a statement of a general least ten days prior to the closing date 15.16 of the Operating Agreement
prohibition against Owners committing of any transaction that results in a would apply to any ultimate parent of
or acting on behalf of CBSX LLC person’s percentage ownership interest, CBSX LLC, no matter how many levels
contained in Section 5.6 of the alone or together with any Affiliate, in of ownership are involved, provided
Operating Agreement, Section 9.15(a) CBSX LLC that would result in such that a controlling interest exists between
would permit CBOE to act on behalf of person meeting or crossing the 5%, each link of the ownership chain.
CBSX LLC in regulatory matters. 10%, or 15% ownership thresholds. The In conclusion, the Commission
Finally, CBOE has complete access to Commission believes that this approach believes that Sections 6.13, 6.14, and
information through provisions such as is consistent with the Act in that it is 15.16 of the Operating Agreement,
Section 15.2 of the Operating analogous to the ongoing reporting together with the requirements of
Agreement, which allows CBOE, the requirements of Form 1,20 the Section 19(b) of the Act and Rule 19b–
other Owners, and their respective application for (and amendments to the 4 thereunder, provide the Commission
officers, directors, agents, and application for) registration as a national with sufficient authority over changes in
employees, to disclose confidential securities exchange. Exhibit K of Form control of CBSX LLC to enable the
information to the Commission or 1 requires any exchange that is a Commission to carry out its regulatory
CBOE. corporation or partnership to list any oversight responsibilities with respect to
Because the Exchange has proposed to persons that have an ownership interest CBOE and the CBSX facility.
operate CBSX as its facility, CBOE’s of 5% or more in the exchange; 21 and
obligations under the Act extend to its Rule 6a–2(a)(2) under the Act 22 requires C. Regulatory Jurisdiction Over CBSX
members’ activities on CBSX, as well as an exchange to update its Form 1 within LLC Owners
to the operation and administration of ten days after any action that renders The Commission believes that the
CBSX. The Commission believes that inaccurate the information previously terms of the Operating Agreement
the provisions described above are filed in Exhibit K. provide the Commission and CBOE with
consistent with the Act and enhance the Exhibit K imposes no obligation on an sufficient regulatory jurisdiction over
ability of CBOE to carry out its self- exchange to report parties whose the controlling parties and Owners to
regulatory responsibilities with respect ownership interest in the exchange is carry out their responsibilities under the
to its CBSX facility. less than 5%. Similarly, Section 6.13 of Act. In Section 6.15(a), each Owner
the Operating Agreement requires CBOE acknowledges that—to the extent that
B. Changes in Control of CBSX LLC to notify the Commission of an interest they are related to CBSX LLC
The Commission believes that the in CBSX LLC only when that interest activities—the books, records, premises,
restrictions in the Operating Agreement reaches 5% or more. The Commission officers, directors, agents, and
on direct and indirect changes in does not believe that the identity of a employees of the Owner are deemed to
control of CBSX LLC are sufficient so party that has less than a 5% interest in be the books, records, premises, officers,
that CBOE would be able to carry out its a facility of a national securities directors, agents, and employees of
self-regulatory responsibilities and that exchange is a ‘‘rule of the exchange’’ CBOE for the purpose of and subject to
the Commission can fulfill its that must be filed pursuant to Section oversight pursuant to the Act. Moreover,
responsibilities under the Act. 19(b) of the Act and Rule 19b–4(b) in Section 6.15(b) of the Operating
Exhibit A of the Operating Agreement thereunder. Agreement, each Owner acknowledges
lists all CBSX LLC Owners, the Series of In addition, Section 15.16 of the that the books, records, premises,
shares owned, and the percentage Operating Agreement would require an officers, directors, agents, and
ownership interest in CBSX LLC. A indirect controlling party to become a employees of CBSX LLC are deemed to
change to this exhibit (as well as any party to the Operating Agreement upon be the books, records, premises, officers,
other provision of the Operating establishing a controlling interest in any directors, agents, and employees of
Agreement) would need to be filed with Owner who, alone or together with any CBOE for the purpose of and subject to
the Commission if so required under Affiliate, holds a Percentage Interest in oversight pursuant to the Act. These
Section 19(b) of the Act and Rule 19b– CBSX LLC equal to or greater than 20%. provisions would enable the
4 thereunder. In addition, Section 6.14 Any such amendment to the Operating Commission to exercise its authority
of the Operating Agreement provides Agreement would require a proposed under Section 19(h)(4) 23 of the Act with
that any proposed transfer of CBSX LLC
shares that would cause any person, 20 17 CFR 249.1 and 17 CFR 249.1a. 23 15 U.S.C. 78s(h)(4). Section 19(h)(4) authorizes
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21 This reporting requirement applies only to


alone or together with any Affiliate, to the Commission, by order, to remove from office or
exchanges that have one or more owners, censure any officer or director of a national
meet or cross the 20% ownership shareholders, or partners that are not also members securities exchange if it finds, after notice and an
threshold or any subsequent 5% of the exchange. See Form 1, Exhibit K. Exhibit K opportunity for hearing, that such officer or director
applies only to the exchange itself, not to entities has: (1) Willfully violated any provision of the Act
Shares. See Section 2.1(25) of the Operating that operate facilities of the exchange. or the rules and regulations thereunder, or the rules
Agreement. 22 17 CFR 240.6a–2(a)(2). Continued

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10578 Federal Register / Vol. 72, No. 45 / Thursday, March 8, 2007 / Notices

respect to the officers and directors of agents and employees whose principal appropriate disciplinary action in the
CBSX LLC and of all Owners, since all place of business and residence is event a violation of the ownership
such officers and directors—to the outside the United States, consent to the concentration limitation is not cured
extent that they are acting in matters application of these requirements with within a specified time frame. Proposed
related to CBSX LLC activities—would respect to their CBSX LLC-related Rule 3.32 also sets forth restrictions on
be deemed to be the officers and activities. Finally, under Section 5.7 of affiliations between the Exchange and
directors of CBOE itself. Furthermore, the Operating Agreement, CBSX LLC its members.
the records of any Owner—to the extent and each Owner agree to cooperate with The Commission believes that the
that they are related to CBSX LLC the Commission and CBOE pursuant to ownership concentration and voting
activities—are subject to the their respective regulatory authority. limitations contained in the Operating
Commission’s examination authority The Commission also notes that, even Agreement and the provisions of
under Section 17(b)(1) of the Act,24 as in the absence of these provisions of the proposed CBOE Rule 3.32 are
these records would be deemed to be Operating Agreement, Section 20(a) of reasonable and consistent with the Act.
the records of CBOE itself. the Act 26 provides that any person with It is common for members who trade on
In addition, under the terms of a controlling interest in CBSX LLC an exchange to have ownership interests
Section 6.15(c) of the Operating would be jointly and severally liable in the exchange. However, a member’s
Agreement, CBSX LLC and each Owner with and to the same extent that CBSX interest could become so large as to cast
(other than CBOE for so long as CBSX LLC is liable under any provision of the doubt on whether the exchange can
is a facility of CBOE) 25—and their Act, unless the controlling person acted fairly and objectively exercise its self-
respective officers and directors and in good faith and did not directly or regulatory responsibilities with respect
their agents and employees whose indirectly induce the act or acts to that member. A member that is also
principal place of business and constituting the violation or cause of a controlling shareholder of an exchange
residence is outside of the United action. might be tempted to exercise that
States—must irrevocably submit to the The Commission believes that, controlling influence by directing the
jurisdiction of the U.S. federal courts, together, these provisions grant the exchange to refrain from diligently
the Commission, and CBOE for the Commission sufficient jurisdictional surveilling the member’s conduct or
purposes of any suit, action, or authority over CBSX LLC and its from punishing any conduct that
proceeding pursuant to the U.S. federal Owners. Moreover, CBOE is required to violates the rules of the exchange or the
securities laws and the rules or enforce compliance with these federal securities laws. An exchange
regulations thereunder, commenced and provisions because they are ‘‘rules of the also might be reluctant to surveil and
initiated by the Commission arising out exchange’’ within the meaning of enforce its rules zealously against a
of or relating to CBSX LLC activities. In Section 3(a)(27) of the Act.27 A failure member that the exchange relies on as
addition, CBSX LLC and each Owner on the part of CBOE to enforce its rules its largest source of capital.
(other than CBOE for so long as CBSX could result in suspension or revocation Finally, the Commission believes that
LLC is a facility of CBOE)—and their of registration under Section 19(h)(1) of the restriction on voting trust
respective officers and directors and the Act.28 agreements in Section 8.8 of the
their agents and employees whose Operating Agreement is reasonable and
principal place of business and D. Ownership and Voting Restrictions consistent with the Act. In the absence
residence is outside of the United on CBSX LLC Owners of such a provision, unaffiliated parties
States—must waive, and agree not to Section 6.12(a) of the Operating could act in concert and evade the
assert by way of motion, as a defense or Agreement prohibits a person (other Operating Agreement’s provisions
otherwise in any such suit, action, or than CBOE), either alone or together regarding changes in control of CBSX
proceeding, any claim that it is not with its Affiliates, from directly or LLC.29 A voting trust agreement would
personally subject to the jurisdiction of indirectly owning more than a 20% not necessarily be inconsistent with the
the Commission; that the suit, action or Percentage Interest in the Company Act, but any Owner wishing to establish
proceeding is an inconvenient forum; (‘‘Concentration Limitation’’). Although a voting trust agreement first would
that the venue of the suit, action, or Section 6.12(b) permits this limitation to need to have the Operating Agreement
proceeding is improper; or that the be waived by the Board, as long as such amended to enable a voting trust to be
subject matter of the suit, action, or waiver has been filed with and established. Any such amendment
proceeding may not be enforced in or by approved by the Commission, it would require a proposed rule change
such courts or agency. Moreover, precludes such a waiver if the person or under Section 19(b) of the Act, thus
pursuant to Section 6.15(d) of the its Affiliates is a CBOE member. affording the Commission an
Operating Agreement, the CBSX LLC Further, Section 8.10 of the Operating opportunity to review the matter.
and each Owner (other than CBOE for Agreement states that if an Owner of E. Accelerated Approval of Amendment
so long as CBSX LLC is a facility of Voting Shares that is also a CBOE Nos. 2 and 3
CBOE) are required to take such action member owns more than 20% of the
as is necessary to ensure that such Outstanding Voting Shares (‘‘Excess The Commission finds good cause for
Owner’s officers and directors and their Shares’’), alone or together with any approving Amendment Nos. 2 and 3 to
Affiliate, such Owner shall have no the proposed rule change prior to the
of a national securities exchange; (2) willfully voting rights with respect to the Excess thirtieth day after publishing notice of
abused his or her authority; or (3) without
Shares. Amendment Nos. 2 and 3 in the Federal
reasonable justification or excuse, has failed to Register pursuant to Section 19(b)(2) of
enforce compliance with any such provision by a In addition, proposed CBOE Rule 3.32
member or person associated with a member of the sets forth ownership concentration the Act.30
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national securities exchange. limitations for CBOE members and


24 15 U.S.C. 78q(b)(1). 29 The Operating Agreement treats as belonging to

25 The Commission notes that CBOE and its


permits the Exchange to take a single person any shares held by affiliated parties
officers, directors and employees are subject to the of the person. See Sections 6.13, 6.14, and 15.16 of
26 15 U.S.C. 78t(a).
Commission’s jurisdiction because CBOE is an SRO the Operating Agreement.
27 15 U.S.C. 78c(a)(27). 30 15 U.S.C. 78s(b)(2). Pursuant to Section 19(b)(2)
and as such is subject to the Act and the rules and
regulations thereunder. 28 15 U.S.C. 78s(h)(1). of the Act, the Commission may not approve any

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Federal Register / Vol. 72, No. 45 / Thursday, March 8, 2007 / Notices 10579

In Amendment No. 2, CBOE: (i) All submissions should refer to File SECURITIES AND EXCHANGE
Amended Section 1.7 to clarify the role Number SR–CBOE–2006–110. This file COMMISSION
of CBOE, as the SRO, for the activities number should be included on the
[Release No. 34–55365; File No. SR–DTC–
of CBSX LLC; (ii) amended Section 5.7 subject line if e-mail is used. To help the 2006–07]
to add a reference to CBOE; (iii) Commission process and review your
amended Section 6.14 to clarify that any comments more efficiently, please use Self-Regulatory Organizations; The
transfer of Series A Voting Shares would only one method. The Commission will Depository Trust Company; Order
require a rule filing under Section 19 of post all comments on the Commission’s Granting Approval of a Proposed Rule
the Exchange Act, subject to approval by Internet Web site (http://www.sec.gov/ Change Relating to the Wind-Down of
the Commission; (iv) amended Section a Participant
rules/sro.shtml). Copies of the
6.15 by, among other things, revising
submission, all subsequent February 27, 2007.
paragraphs (c) and (d) to indicate that
those paragraphs are inapplicable in the amendments, all written statements
with respect to the proposed rule I. Introduction
case of CBOE and its respective officers,
directors, agents and employees for so change that are filed with the On March 28, 2006, The Depository
long as CBSX LLC is a facility of CBOE Commission, and all written Trust Company (‘‘DTC’’) filed with the
and to clarify the application of these communications relating to the Securities and Exchange Commission
paragraphs in the case of the agents and proposed rule change between the (‘‘Commission’’) and on September 29,
employees of CBSX LLC and its Owners Commission and any person, other than 2006, amended proposed rule change
whose principal place of business and those that may be withheld from the SR–DTC–2006–07 pursuant to Section
residence is outside of the United public in accordance with the 19(b)(1) of the Securities Exchange Act
States; and (v) amended various sections provisions of 5 U.S.C. 552, will be of 1934 (‘‘Act’’).1 Notice of the proposal
of the Operating Agreement to refer to available for inspection and copying in was published in the Federal Register
CBOE rather than ‘‘Regulatory Services the Commission’s Public Reference on December 20, 2006.2 No comment
Provider.’’ Amendment No. 2 also Room. Copies of the filing also will be letters were received. For the reasons
updated Exhibit A–1 of the Operating available for inspection and copying at discussed below, the Commission is
Agreement. Amendment No. 3 amended the principal office of the Exchange. All granting approval of the proposed rule
Section 6.15(c) to clarify the U.S. agent comments received will be posted change as modified by Amendment No.
for service of process. 1.
without change; the Commission does
The Commission believes that II. Description
not edit personal identifying
Amendment Nos. 2 and 3 serve to
information from submissions. You The proposed rule change would add
clarify and enhance the proposal and
that publication of its provisions would should submit only information that a new Rule 32, Wind-Down of a
needlessly delay the implementation of you wish to make available publicly. All Participant, to DTC’s Rules to address a
the proposal. The Commission therefore submissions should refer to Amendment situation where a participant notifies
finds good cause exists to accelerate Nos. 2 and 3 of File Number SR–CBOE– DTC that it intends to wind down its
approval of Amendment Nos. 2 and 3, 2006–110 and should be submitted on activities, and DTC determines in its
pursuant to Section 19(b)(2) of the or before March 29, 2007. discretion that it must take special
Act.31 action in order to protect itself and its
V. Conclusion participants.3
IV. Solicitation of Comments The proposed rule change would
It is therefore ordered, pursuant to
Interested persons are invited to Section 19(b)(2) of the Act,32 that the allow DTC to make a determination that
submit written data, views, and a participant is a wind-down participant
proposed rule change (SR–CBOE–2006–
arguments concerning the foregoing, and would set forth the conditions DTC
110), as modified by Amendment No. 1,
including whether Amendment Nos. 2 using its discretion may place on a
be, and it hereby is approved and
and 3 are consistent with the Act. wind-down participant and the actions
Amendment Nos. 2 and 3 are approved DTC using its discretion may take with
Comments may be submitted by any of
on an accelerated basis. respect to a wind-down participant to
the following methods:
For the Commission, by the Division of protect itself and its participants. Such
Electronic Comments Market Regulation, pursuant to delegated actions may include restricting or
• Use the Commission’s Internet authority.33 modifying the wind-down participant’s
comment form (http://www.sec.gov/ Florence E. Harmon, use of any or all of DTC’s services and
rules/sro.shtml); or Deputy Secretary. requiring the wind-down participant to
• Send an e-mail to rule- post increased participants fund
[FR Doc. E7–4125 Filed 3–7–07; 8:45 am]
comments@sec.gov. Please include File deposits. DTC will retain all of its other
Number SR–CBOE–2006–110 on the BILLING CODE 8010–01–P
rights set forth in its rules and
subject line. participant agreements, including the
Paper Comments right to cease to act for the wind-down
participant.
• Send paper comments in triplicate The rule is designed to ensure that
to Nancy M. Morris, Secretary, DTC has the needed flexibility to
Securities and Exchange Commission, appropriately manage the risks
Station Place, 100 F Street, NE.,
Washington, DC 20549–1090. 1 15 U.S.C. 78s(b)(1).
sroberts on PROD1PC70 with NOTICES

2 SecuritiesExchange Act Release No. 54927


proposed rule change, or amendment thereto, prior (December 13, 2006), 71 FR 76397.
to the thirtieth day after the date of publication of 3 Similar proposed rule changes have been filed
the notice thereof, unless the Commission finds by the Fixed Income Clearing Corporation [File No.
32 15 U.S.C. 78s(b)(2).
good cause for so doing. SR–FICC–2006–05] and the National Securities
31 15 U.S.C. 78s(b)(2). 33 17 CFR 200.30–3(a)(12). Clearing Corporation [File No. SR–NSCC–2006–05].

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