

[Federal Register: April 24, 2006 (Volume 71, Number 78)]
[Notices]               
[Page 21058-21060]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24ap06-104]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53665; File No. SR-CBOE-2005-87]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Granting Approval of a Proposed Rule Change and 
Amendment Nos. 1 and 2 To Amend Exchange Delisting Rules to Conform to 
Recent Amendments to Commission Rules Regarding Removal From Listing 
and Withdrawal From Registration

April 17, 2006.

I. Introduction

    On October 21, 2005, the Chicago Board Options Exchange, 
Incorporated (``CBOE'' or ``Exchange'') filed with the Securities and 
Exchange Commission (``Commission'' or ``SEC''), pursuant to section 
19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 
19b-4 thereunder,\2\ a proposed rule change to amend Exchange delisting 
rules to conform to recent amendments to Commission rules regarding 
removal from listing and withdrawal from registration. On December 14, 
2005, CBOE filed Amendment No. 1 to the proposed rule change.\3\ On 
February 24, 2006, CBOE filed Amendment No. 2 to the proposed rule 
change.\4\ The proposed rule change, as amended, was published for 
comment in the Federal Register on March 13, 2006.\5\ No comments were 
received regarding the proposal. This order approves the proposed rule 
change, as amended.
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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 proposed rule change 
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.
    \5\ See Securities Exchange Act Release No. 53399 (March 2, 
2006), 71 FR 12749.
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II. Description of the Proposed Rule Change

    Section 12 of the Act \6\ and SEC Rule 12d2-2 govern the process 
for the delisting and deregistration of securities listed on national 
securities exchanges. Recent amendments to SEC Rule 12d2-2 (``amended 
SEC Rule 12d2-2'') and

[[Page 21059]]

other Commission rules require the electronic filing of revised Form 
25\7\ on the Commission's Electronic Data Gathering, Analysis, and 
Retrieval (``EDGAR'') system by exchanges and issuers for all 
delistings, other than delistings of standardized options and 
securities futures, which are exempted.\8\
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    \6\ 15 U.S.C. 78l.
    \7\ 17 CFR 249.25.
    \8\ See Securities Exchange Act Release No. 52029 (July 14, 
2005), 70 FR 42456 (July 22, 2005).
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    In the case of exchange-initiated delistings, amended SEC Rule 
12d2-2(b) states that a national securities exchange may file an 
application on Form 25 to strike a class of securities from listing 
and/or withdraw the registration of such securities, in accordance with 
its rules, if the rules of such exchange, at a minimum, provide for:
    (i) Notice to the issuer of the exchange's decision to delist its 
securities;
    (ii) An opportunity for appeal to the exchange's board of 
directors, or to a committee designated by the board; and
    (iii) Public notice of the national securities exchange's final 
determination to remove the security from listing and/or registration, 
by issuing a press release and posting notice on its Web site. Public 
notice must be disseminated no fewer than 10 days before the delisting 
becomes effective pursuant to amended SEC Rule 12d2-2(d)(1), and must 
remain posted on its Web site until the delisting is effective.
    CBOE Chapter 31 sets forth the Exchange's non-option securities 
listing rules. The Exchange proposes to revise CBOE Rule 31.94(G) to 
incorporate the new requirements set forth in amended SEC Rule 12d2-
2(b). 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 amended SEC Rule 12d2-2(b), except for the requirement in amended 
SEC Rule 12d2-2(b)(iii) that requires national securities exchanges to 
provide public notice of determinations to delist an issuer's 
securities. 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), 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 amended SEC Rule 12d2-2(a).
    The Exchange also proposes 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 amended SEC Rule 12d2-2(c). The proposed rule filing sets 
forth a requirement in addition to those set forth in amended SEC Rule 
12d2-2(c) that would require the issuer to notify the Exchange that it 
has filed Form 25 \9\ with the SEC contemporaneously with such filing.
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    \9\ 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 amended 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.\10\
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    \10\ 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 amended SEC Rule 12d2-2.

III. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange \11\ and, in 
particular, the requirements of section 6 of the Act.\12\ Specifically, 
as discussed below, the Commission finds that the proposal is 
consistent with section 6(b)(5) of the Act,\13\ which requires, in 
part, that the rules of an exchange be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, and processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. Further, as noted in more 
detail below, the changes being adopted by CBOE meet the requirements 
of amended SEC Rule 12d2-2.
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    \11\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(5).
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A. Exchange Delisting

    Amended SEC Rule 12d2-2(b) states that a national securities 
exchange may file an application on Form 25 to strike a class of 
securities from listing and/or withdraw the registration of such 
securities, in accordance with its rules, if the rules of such 
exchange, at a minimum, provide for notice to the issuer of the 
exchange's decision to delist, opportunity for appeal, and public 
notice of the exchange's final determination to delist. The Commission 
believes that CBOE's current rules and proposal comply with the 
dictates of amended SEC Rule 12d2-2(b).
    CBOE rules currently provide the requisite issuer notice as well as 
an opportunity for appeal to a committee designated by the Board.\14\ 
Specifically, issuers may appeal staff delisting determinations to an 
Exchange committee which may be either a standing committee or a 
committee specially appointed for the purpose and may consist of 
directors, Exchange officials, members, and/or other persons (not 
having an interest in the matter) as the Board of Directors shall 
determine.\15\ In addition, the Board may in its discretion authorize 
the Executive Committee to consider any or all appeals, and in such 
case the decision of the Executive Committee with respect thereto shall 
be final and conclusive.\16\ Finally, the proposed rule change will 
provide for public notice of the exchange's final determination to 
remove the security from listing and/or registration.
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    \14\ See CBOE Rule 31.94(G)(a)-(g).
    \15\ See CBOE Rule 31.94(G)(d).
    \16\ See CBOE Rule 31.94(G)(g).
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B. Issuer Voluntary Delisting

    The Exchange proposes to set forth in its Exchange rules the 
general requirements of amended SEC Rule 12d2-2(c) regarding issuer 
voluntary delisting. For example, the Exchange proposes to clarify 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

[[Page 21060]]

public notice of such determination. The Commission believes that the 
proposal will better inform issuers of the requirements for voluntary 
delisting of their securities under CBOE rules and federal securities 
laws.
    The proposal also sets forth a new requirement not in amended SEC 
Rule 12d2-2 that would require the issuer to notify the Exchange that 
it has filed Form 25 with the Commission contemporaneously with such 
filing. The Commission believes that this requirement will allow the 
Exchange to be fully informed of the filing of a Form 25 and prepared 
to take timely action in accordance with the filing of the Form.
    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.\17\ The 
Commission believes that this requirement will allow shareholders to be 
informed and aware that the issuer has failed to meet Exchange listing 
standards and is voluntarily delisting with the consent of the 
Exchange. Issuers will therefore not be permitted to delist voluntarily 
without public disclosure of their noncompliance with Exchange listing 
standards.
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    \17\ See Amendment No. 2, supra note 4.
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IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\18\ that the proposed rule change (File No. SR-CBOE-2005-87), as 
amended, is approved.
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    \18\ Id.
    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\19\
Nancy M. Morris,
Secretary.
 [FR Doc. E6-6074 Filed 4-21-06; 8:45 am]

BILLING CODE 8010-01-P
