

[Federal Register: March 13, 2006 (Volume 71, Number 48)]
[Notices]               
[Page 12749-12752]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13mr06-89]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53399; File No. SR-CBOE-2005-87]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Inc.; Notice of Filing of Proposed Rule Change and Amendment Nos. 1 and 
2 Thereto Relating to Amending Exchange Delisting Rules To Conform to 
Recent Amendments to Commission Rules Regarding Removal From Listing 
and Withdrawal From Registration

March 2, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on October 21, 2005, the Chicago Board Options Exchange, Inc. 
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange 
Commission ( ``SEC'' or ``Commission'') the proposed rule change as 
described in Items I, II, and III below, which Items have been 
substantially prepared by the Exchange. CBOE filed Amendment No. 1 to 
the proposal on December 14, 2005.\3\ On February 24, 2006, CBOE filed 
Amendment No. 2 to the proposal.\4\ The Commission is publishing this 
notice to solicit comments on the proposed rule change, as amended, 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaced the original filing in its 
entirety.
    \4\ In Amendment No. 2, CBOE amended CBOE Rule 31.94(G)(h) to 
state that in appropriate circumstances, when the Exchange is 
considering delisting because a company no longer meets the 
requirements for continued listing, a company may, with the consent 
of the Exchange, file a Form 25 with the SEC, provided that it 
follows the requirements set forth in SEC Rule 12d2-2(c) and 
discloses that it is no longer eligible for continued listing on the 
Exchange in its written notice to the Exchange and public press 
release, and if it has a publicly accessible Web site, posts such 
notice on that Web site.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to revise its non-option securities listing 
rules to incorporate into the Exchange's delisting rules for non-option 
securities new rule changes promulgated by the Commission in SEC Rule 
12d2-2.
    The text of the proposed rule change is below. Proposed new 
language is in italics; proposed deletions are in [brackets].
* * * * *
Chicago Board Options Exchange, Incorporated
* * * * *
Rule 31.94. Suspension and Delisting Policies
* * * * *
C. Application of Policies
    To assist in the application of these policies, the Exchange has 
adopted certain criteria, outlined below, which a security must meet to 
continue to be listed on the Exchange. However, these minimum 
criteria[,] in no way limit or restrict the Exchange's right to delist 
a security, and the Exchange may at any time, in view of the 
circumstances in each case, suspend dealings in, or remove, a security 
from listing or unlisted trading when in its opinion such security is 
unsuitable for continued trading on the Exchange. Such action will be 
taken regardless of whether the issuer meets any or all of the criteria 
discussed below.
* * * * *
(b) Limited Distribution--Reduced Market Value
    (i) common stock:
    (A) The number of shares publicly held (exclusive of holdings of 
officers, directors, controlling shareholders or other family or 
concentrated holdings) is at least 200,000; and
    (B) The total number of round lot shareholders of record is at 
least 300; and
    (C) The aggregate market value of shares publicly held is at least 
$1,000,000;
    (ii) Preferred stock:
    (A) The number of shares publicly held is at least 50,000; or
    (B) The aggregate market value of shares publicly held is at least 
$1,000,000;
    (iii) Bonds: The delisting of bond and debenture issues will be 
considered on a case by case basis. The Exchange will normally consider 
suspending dealings in, or removing from the list, debt security when 
any one or more of the following conditions exist:
    ([a]A) If the aggregate market value or the principal amount of 
bonds publicly held is less than $400,000; or
    ([b]B) If the issuer is not able to meet its obligations on the 
listed debt securities.
* * * * *
    Rule 31.94(C)(f) in the following form is effective until April 23, 
2006. It will be rescinded after that date and will be replaced as set 
forth below.
    (f) No change.
    Rule 31.94(C)(f) in the following form will be effective on April 
24, 2006. 
    (f) SEC Rule 12d2-2(a) Conditions--The Exchange will remove a class 
of securities from listing whenever the Exchange is reliably informed 
that any of the conditions set forth in Rule 12d2-2(a) under the 
Exchange Act exist with respect to such security, such as a corporate 
action where the entire security class is matured, redeemed, retired or 
extinguished by operation of law, and shall file an application with 
the SEC on Form 25 in accordance with Rule 12d2-2(a) under the Exchange 
Act.
    New paragraph (g) of Rule 31.94(C) in the following form will be 
effective on April 24, 2006.
    (g) Other Events--The Exchange will normally consider suspending 
dealings in, or removing from the list, a security when any one of the 
following events shall occur:
    (i) Registration No Longer Effective--If the registration (or 
exemption from registration thereof) pursuant to the Exchange Act is no 
longer effective.
    (ii) Operations Contrary to Public Interest--If the company or its 
management shall engage in operations which, in the opinion of the 
Exchange, are contrary to the public interest.
    (iii) Failure to Pay Listing Fees--If the company shall fail or 
refuse to pay, when due, any applicable listing fees established by the 
Exchange.
    (iv) Low Selling Price Issues--In the case of a common stock 
selling for a

[[Page 12750]]

substantial period of time at a price less than $3 per share, if the 
issuer shall fail to effect a reverse split of such shares within a 
reasonable time after being notified that the Exchange deems such 
action to be appropriate under all circumstances. In its review of the 
question of whether it deems a reverse split of a given issue to be 
appropriate, the Exchange will consider all pertinent factors 
including, market conditions in general, the number of shares 
outstanding, plans which may have been formulated by management, 
applicable regulations of the state or country of incorporation or of 
any governmental agency having jurisdiction over the company, the 
relationship to other Exchange policies regarding continued listing, 
and, in respect of securities of foreign issuers, the general practice 
in the country of origin of trading in low-selling price issues.
* * * * *
G. Delisting Procedures
    The following introductory sentence of Rule 31.94(G) is effective 
until April 23, 2006.
    Whenever the Exchange determines that it is appropriate to consider 
removing a security from listing (or from unlisted trading) for other 
than routine reasons (redemptions or maturities) it will follow the 
following procedures:
    The following introductory sentence of Rule 31.94(G) will be 
effective on April 24, 2006.
    Whenever the Exchange determines that it is appropriate to consider 
removing a security from listing (or from unlisted trading) for other 
than the reasons set forth in Rule 31.94(C)(f) it will follow the 
following procedures:
    (a)-(g) No change.
    Rule 31.94(G)(h) in the following form is effective until April 23, 
2006. It will be rescinded after that date and will be replaced as set 
forth below.
    (h) No change.
    Rule 31.94(G)(h) in the following form will be effective on April 
24, 2006.
    (h) If the Board of Directors or the Executive Committee, as the 
case may be, shall approve the recommendation of the committee which 
has heard the matter, an application shall be submitted by the Exchange 
to the SEC to strike the security from listing (or unlisted trading) 
and a copy of such application shall be furnished to the issuer in 
accordance with Section 12 of the Exchange Act and the rules 
promulgated thereunder. The Exchange shall also provide public notice 
of its final determination to strike a class of securities from listing 
by issuing a press release and posting notice on the Exchange's website 
at least ten days prior to the date that the delisting is anticipated 
to be effective. The posting will remain on the Exchange's website 
until the delisting is effective. The action required to be taken by 
the Exchange to strike a security from listing and registration for 
corporate actions such as redemption, maturity, and retirement is set 
forth in Exchange Rule 31.94(C)(f) and Rule 12d2-2(a) under the 
Exchange Act. The relevant portions of the Section and Rules under the 
Exchange Act pertaining to the suspension, removal or withdrawal of 
securities for all other reasons, and the requirements of the Exchange 
applicable in certain cases, are summarized below:
    (a) SEC authorization of withdrawal or striking from listing of 
Exchange-listed security--Section 12(d) of Exchange Act;
    (b) Suspension of trading by Exchange--Rule 12d2-1 under the 
Exchange Act;
    (c) Application of Exchange to strike security from listing and 
registration--Rule 12d2-2(a) and (b) under the Exchange Act; or
    (d) Application of issuer to withdraw from listing and 
registration--Rule 12d2-2(c) under the Exchange Act. Pursuant to Rule 
12d2-2(c)(2)(i) under the Exchange Act, an issuer filing an application 
on Form 25 must comply with all applicable laws in effect in the state 
in which it is incorporated. Rule 12d2-2(c)(2)(ii) under the Exchange 
Act provides that an issuer is required to provide written notice to 
the Exchange of its determination to withdraw a class of securities 
from listing and/or registration on the Exchange no fewer than ten days 
before the issuer files an application on Form 25 with the SEC. As 
required by Rule 12d2-2 under the Exchange Act, upon receiving written 
notice from an issuer that such issuer has determined to withdraw a 
class of securities from listing on the Exchange pursuant to this 
paragraph (d), the Exchange will provide notice on its website of the 
issuer's intent to delist its securities beginning on the business day 
following such notice, which will remain on the Exchange's website 
until the delisting on Form 25 is effective. The issuer must also 
notify the Exchange that it has filed Form 25 with the SEC 
contemporaneously with such filing.
    In appropriate circumstances, when the Exchange is considering 
delisting because a company no longer meets the requirements for 
continued listing, a company may, with the consent of the Exchange, 
file a Form 25 with the SEC, provided that it follows the requirements 
set forth in SEC Rule 12d2-2(c) and discloses that it is no longer 
eligible for continued listing on the Exchange in its written notice to 
the Exchange and public press release, and if it has a publicly 
accessible Web site, posts such notice on that Web site.
* * * * *

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. 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

1. Purpose
    The Commission adopted amendments to SEC Rule 12d2-2,\5\ which sets 
forth procedures that national securities exchanges and issuers must 
follow in order to remove from listing, and withdraw from registration, 
securities under Section 12(b) of the Act.\6\ The final rules \7\ 
adopted by the Commission (``SEC Delisting Rules'') generally require 
that national securities exchanges have in place procedures for the 
delisting and/or deregistration of a security that are consistent with 
SEC Rule 12d2-2.\8\ The purpose of the proposed rule change is to 
incorporate into CBOE's non-option securities listing rules the new 
rules set forth in SEC Rule 12d2-2 \9\ so that the Exchange may 
continue to have the authority to suspend or delist securities from 
trading on the Exchange in the event that the issuer and/or securities 
of the issuer fail to adhere to certain of the Exchange's original and 
continued listing standards.
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    \5\ 17 CFR 240.12d2-2.
    \6\ 15 U.S.C. 78l(b).
    \7\ See Securities Exchange Act Release No. 52029 (July 14, 
2005), 70 FR 42456 (July 22, 2005).
    \8\ 17 CFR 240.12d2-2.
    \9\ Id.
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    The provisions of SEC Rule 12d2-2(a),\10\ which generally remain 
unchanged by the SEC Delisting Rules, require national securities 
exchanges to submit an application on SEC Form 25 \11\ within a 
reasonable time after the exchange is reliably informed that any

[[Page 12751]]

of the conditions set forth in SEC Rule 12d2-2(a)(1)-(4) \12\ exist. 
The conditions set forth in SEC Rule 12d2-2(a)(1)-(4) \13\ generally 
relate to the redemption, retirement, or maturity of the entire class 
of securities, or the extinguishment of all rights of an entire class 
of securities of the issuer. Other than a submission by the Exchange to 
the Commission of SEC Form 25,\14\ no other notice requirements or 
appeal rights are required to be provided to the issuer under SEC Rule 
12d2-2(a)(1)-(4).\15\
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    \10\ 17 CFR 240.12d2-2(a).
    \11\ 17 CFR 249.25.
    \12\ 17 CFR 240.12d2-2(a)(1)-(4).
    \13\ Id.
    \14\ 17 CFR 249.25.
    \15\ 17 CFR 240.12d2-2(a)(1)-(4).
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    In the event a national securities exchange determines to strike a 
class of securities from listing and/or withdraw the registration of 
such securities in cases other than as set forth in SEC Rule 12d2-
2(a),\16\ the SEC Delisting Rules require national securities exchanges 
to follow new procedures. Specifically, SEC Rule 12d2-2(b) \17\ 
authorizes national securities exchanges to strike a class of 
securities from listing and/or withdraw the registration of such 
securities provided that the rules of such exchanges provide for the 
following: notification to the issuer of such determination; an 
opportunity for the issuer to appeal the determination; and upon a 
final determination of the Exchange to strike a class of securities 
from listing and/or withdraw the registration of such securities, 
provide public notice of such determination.
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    \16\ 17 CFR 240.12d2-2(a).
    \17\ 17 CFR 240.12d2-2(b).
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    CBOE Chapter 31 sets forth the Exchange's non-option securities 
listing rules. Current CBOE Rule 31.94 generally sets forth the 
policies and procedures that apply to the delisting and suspension of 
listing of non-option securities on the Exchange, including the 
policies that guide the Exchange in determining whether to delist or 
suspend non-option securities. In regard to the process by which the 
Exchange delists non-option securities, current CBOE Rule 31.94(G) 
differentiates between delistings that result from ``routine reasons,'' 
which are referred to in the introductory paragraph of that section as 
``redemptions or maturities,'' and all other types of delistings. The 
Exchange is only required to provide notice and the right to appeal 
delistings resulting from non-routine events, but not routine events.
    To make the Exchange's delisting procedures consistent with SEC 
Rule 12d2-2,\18\ the Exchange is proposing to revise current CBOE Rule 
31.94(G) to clarify that the appeal and notification provisions for 
delistings that are currently set forth in CBOE Rule 31.94(G) will only 
apply to delistings that are based on reasons other than those that are 
set forth in SEC Rule 12d2-2(a)(1)-(4).\19\ As stated above, SEC Rule 
12d2-2(a)(1)-(4) \20\ requires an exchange to file Form 25 \21\ within 
a reasonable time after it is reliably informed that, among other 
things, an entire class of securities has matured or has been redeemed 
or retired. The concept that the Exchange will delist a class of 
securities for the reasons set forth in SEC Rule 12d2-2(a) \22\ is 
currently set forth in Rule 31.94(C)(f)(ii) and effective April 24, 
2006, will be reflected in proposed Rule 31.94(C)(f) as revised. 
Proposed CBOE Rule 31.94(C)(f) also makes clear that the Exchange will 
file SEC Form 25 \23\ with the Commission in connection with any such 
delisting. Effective April 24, 2006, CBOE Rule 31.94(C)(f) in its 
current form will shift to new CBOE Rule 31.94(C)(g), except that the 
substance of current Rule 31.94(C)(f)(ii) will remain in the form of 
proposed Rule 31.94(C)(f).
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    \18\ 17 CFR 240.12d2-2.
    \19\ 17 CFR 240.12d2-2(a)(1)-(4).
    \20\ Id.
    \21\ 17 CFR 249.25.
    \22\ 17 CFR 240.12d2-2(a).
    \23\ 17 CFR 249.25.
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    Likewise, the Exchange is revising CBOE Rule 31.94(G) to 
incorporate the new requirements set forth in SEC Rule 12d2-2(b).\24\ 
The Exchange notes that the provisions set forth in current CBOE Rule 
31.94(G), which provide for notification to the issuer in the event 
that the Exchange determines to delist the issuer's securities and the 
right to appeal the Exchange's determination, satisfy the minimum 
provisions set forth in SEC Rule 12d2-2(b) \25\ except for the 
requirement in SEC Rule 12d2-2(b)(iii) \26\ that requires national 
securities exchanges to provide public notice of determinations to 
delist an issuer's securities. As stated above, the notice and appeal 
requirements only apply to delistings that result from events other 
than those provided pursuant to SEC Rule 12d2-2(a).\27\ Therefore, 
proposed CBOE Rule 31.94(G)(h) would require the Exchange to provide 
public notice, in accordance with SEC Rule 12d2-2(b)(iii),\28\ of a 
final determination by the Exchange to strike an issuer's securities 
from listing and/or withdraw the registration of such securities on the 
Exchange in all cases other than as provided pursuant to SEC Rule 12d2-
2(a).\29\
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    \24\ 17 CFR 240.12d2-2(b).
    \25\ Id.
    \26\ 17 CFR 240.12d2-2(b)(iii).
    \27\ 17 CFR 240.12d2-2(a).
    \28\ 17 CFR 240.12d2-2(b)(iii).
    \29\ 17 CFR 240.12d2-2(a).
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    The Exchange is also proposing to make clear in proposed Rule 
31.94(G) that the issuer is required to notify the Exchange in case it 
elects to delist its securities from the Exchange, and upon such 
notification, the Exchange would be required to issue a public notice 
of such determination. These proposed changes reflect the requirements 
set forth in SEC Rule 12d2-2(c).\30\ The proposed rule filing sets 
forth a requirement in addition to those set forth in SEC Rule 12d2-
2(c) \31\ that would require the issuer to notify the Exchange that it 
has filed Form 25 \32\ with the SEC contemporaneously with such filing.
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    \30\ 17 CFR 240.12d2-2(c).
    \31\ Id.
    \32\ 17 CFR 249.25.
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    In addition, CBOE proposes to amend CBOE Rule 31.94(G)(h) to state 
that in appropriate circumstances, when the Exchange is considering 
delisting because a company no longer meets the requirements for 
continued listing, a company may, with the consent of the Exchange, 
file a Form 25 with the SEC, provided that it follows the requirements 
set forth in SEC Rule 12d2-2(c) and discloses that it is no longer 
eligible for continued listing on the Exchange in its written notice to 
the Exchange and public press release, and if it has a publicly 
accessible Web site, posts such notice on that Web site.\33\
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    \33\ See Amendment No. 2, supra note 4.
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    Lastly, the Exchange is proposing to make housekeeping changes that 
relate to references to the Act and certain rules in the Act.
    The proposed changes, other than the housekeeping changes, will be 
effective as of April 24, 2006 as required by SEC Rule 12d2-2.\34\
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    \34\ 17 CFR 240.12d2-2.
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2. Statutory Basis
    The Exchange believes that the basis under the Act for this 
proposed rule change is found in Section 6(b)(5),\35\ in that the 
proposed rule change is designed to promote just and equitable 
principles of trade, to prevent fraudulent and manipulative acts, to 
remove impediments to and perfect the mechanisms of a free and open 
market and a national market system and, in general, to protect 
investors and the public interest. In particular, the Exchange believes 
that the proposed rule change will enable the Exchange to remain 
competitive in the marketplace.
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    \35\ 15 U.S.C. 78f(b)(5).

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[[Page 12752]]

B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition 
that is 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

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from members or other interested 
parties.

III. 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 Exchange consents, the Commission shall:
    (a) By order approve such 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 is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File No. SR-CBOE-2005-87 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2005-87. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). 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 also will be available for inspection and copying at the 
principal office of the CBOE. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-CBOE-2005-87 and should be submitted on or before April 
3, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\36\
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    \36\ 17 CFR 200.30-3(a)(12).

Nancy M. Morris,
Secretary.
[FR Doc. E6-3486 Filed 3-10-06; 8:45 am]

BILLING CODE 8010-01-P
