Exchange BulletinMaster Fund, LP Key Say, LLC Croupier Prive Private Equity $2,650,000.00 4/22/08...

CLASS BID OFFER LASTSALEAMOUNT LASTSALEDATE

CBOE $2,550,000.00 $2,700,000.00 $2,650,000.00 April22,2008

CBOTFULLMEMBERSHIP(WITHOUTSTOCK)

CLASS BID OFFER LASTSALEAMOUNT LASTSALEDATE

WithERP $580,000.00 $800,000.00 $650,000.00 April2,2008

WithoutERP $475,000.00 $550,000.00 $500,000.00 April4,2008

ERP $106,000.00 $200,000.00 $150,500.00 April24,2008

ExchangeBulletinApril25,2008Volume36,Number17

The Constitution and Rules of the Chicago Board Options Exchange, Incorporated (“Exchange”), in certain specific instances, requiretheExchangetoprovidenoticetotheExchangemembership.Tosatisfythisrequirement,acopyoftheExchangeBul-letin,includingtheRegulatoryBulletin,isdeliveredbye-mailfreeofchargeorbyhardcopyforafeetoalleffectivemembersonaweeklybasis.

MembersareencouragedtoreceivetheExchangeandRegulatoryBulletinandInformationCircularsviae-mail.E-mailsubscrip-tions may be obtained by submitting your name, firm if applicable, e-mail address, and phone number, to [email protected]. Thereisnochargefore-maildeliveryoftheExchangeandRegulatoryBulletinorforInformationCirculars.Ifyoudosignupfore-maildelivery,pleaseremembertoinformtheMembershipDepartmentofe-mailaddresschanges.

Subscriptions for hard copy delivery may be obtained by submitting your name, firm if any, mailing address and telephone num-berto:ChicagoBoardOptionsExchange,AccountingDepartment,400SouthLaSalle,Chicago,Illinois60605,Attention:BulletinSubscriptions.Thecostofanannualsubscription(January1throughDecember31)is$200.00($100.00afterJuly1),payableinadvance.

Forup-to-dateSeatMarketQuotes,call1-877-THE-CBOEandselectchoice3fromthemainmenu,or,visitwww.CBOE.org,click“CBOEMemberSite”andthen“SeatMarketInformation”onthefollowingpage.ForaccesstotheCBOEMemberWebSite,pleasealso notify the Membership Department by sending an e-mail to [email protected] or by phone at 312-786-7449.

Copyright©2008ChicagoBoardOptionsExchange,Incorporated

SEATMARKETQUOTESASOFFRIDAY,April25,2008

CBOEMEMBERSHIPSALESANDTRANSFERSFrom To Price/Transfer DatePBPartners,LLC CroupierPrivePrivateEquity $2,650,000.00 4/22/08MasterFund,LPKeySay,LLC CroupierPrivePrivateEquity $2,650,000.00 4/22/08MasterFund,LP

Page � April �5, �008 Volume 36, Number 17 Chicago Board Options Exchange

MEMBERSHIPINFORMATIONFOR4/17/08THROUGH4/23/08

MEMBERSHIPTERMINATIONS

IndividualMembers

TemporaryMember: TerminationDate

JerryManne(JXM) 4/23/08

Nominee: TerminationDate

ZaneEdwinRigden(KWI) 4/22/08Kc-CoII,LLC

JonathanThomas(JTE) 4/22/08SusquehannaSecurities

JeffreyW.Sieck(JWS) 4/22/08EquitecStructuredProducts,LLC

WilliamH.MurphyIV(MRF) 4/22/08Kc-CoII,LLC

JamesW.Boland(JWB) 4/22/08MEBOptions,Inc.

MemberOrganizations

Lessor: TerminationDate

KeySay,LLC 4/23/08

EFFECTIVEMEMBERSHIPS

IndividualMembers

Nominee: EffectiveDate

LawrenceM.Shover(LMS) 4/17/08MFGlobalInc.TypeofBusinesstobeConducted:FloorBroker

EdwinF-HLi(EFL) 4/18/08BelvedereTrading,LLCTypeofBusinesstobeConducted:MarketMaker

MichaelP.Lynch(LYH) 4/21/08CTCXS,LLCTypeofBusinesstobeConducted:FloorBroker

MichaelR.Menard(MRM) 4/21/08SusquehannaSecuritiesTypeofBusinesstobeConducted:MarketMaker

EdmundoR.Sanchez(MUN) 4/22/08EquitecStructuredProducts,LLCTypeofBusinesstobeConducted:FloorBroker

CHANGESINMEMBERSHIPSTATUS

IndividualMembers EffectiveDate

EdwardH.BrownIII 4/18/08From: LessorTo: Lessor/Lessee;NoTradingFunctions

EdwardH.BrownIII 4/21/08From: Lessor/Lessee;NoTradingFunctionsTo: Lessor

MEMBERSHIPAPPLICATIONSRECEIVEDFORWHICHAPOSTINGPERIODISREQUIRED

IndividualMembershipApplicants DatePosted

JoshuaS.Lavan,Nominee 4/17/08ConsolidatedTrading,LLC402SpruceSt.Philadelphia,PA19106

HowardS.Goldblatt,Lessor 4/21/08735BlueSpruceDriveDanville,CA94506

KathrynG.Casparian,Nominee 4/23/08CIBCWorldMarketsCorp.1160ParkAvenue,Apt.6CNewYork,NY10128

RichardSasin,Nominee 4/23/08SusquehannaSecurities533MarengoAve.ForestPark,IL60130MEMBERSHIPLEASES

NewLeases EffectiveDate

Lessor: SusquehannaSecurities 4/18/08Lessee: EdwardH.BrownIII(NED)Rate: 0.325%Term:1Day

Lessor: CroupierPrivePrivateEquity 4/23/08 MasterFund,LPLessee: WolverineExecutionServices,LLC RichardR.Huettl,NOMINEERate: 0.35%Term:Monthly

Lessor: CroupierPrivePrivateEquity 4/23/08 MasterFund,LPLessee: SusquehannaInvestmentGroupRate: 0.35%Term:Monthly

TerminatedLeases TerminationDate

Lessor: SusquehannaSecurities 4/18/08Lessee: TimberHill,LLC

Lessor: SusquehannaSecurities 4/21/08Lessee: EdwardH.BrownIII(NED)

Lessor: PBPartners,LLC 4/23/08Lessee: WolverineExecutionServices,LLC RichardR.Huettl(RIK),NOMINEE

Lessor: KeySay,LLC 4/23/08Lessee: SusquehannaInvestmentGroup

April �5, �008 Volume 36, Number 17 Chicago Board Options Exchange

RESEARCHCIRCULARSThefollowingResearchCircularsweredistributedbetweenApril18andApril25,2008.Ifyouwishtoreadtheentiredocument,pleaserefertotheCBOEwebsiteatwww.cboe.comandclickonthe“TradingTools”Tab.NewlistingsandseriesinformationisalsoavailableintheTradingToolssectionofthewebsite.ForquestionsregardinginformationdiscussedinaResearchCircular,pleasecallTheOptionsClearingCorporationat1-888-OPTIONS.

POSITIONLIMITCIRCULARSPursuanttoExchangeRule4.11,theExchangeissuedthebelowlistedPositionLimitCircularonApril22and23,2008.ThecompletecircularsareavailablefromtheDepartmentofMarketRegulation,inthedatainformationbinsonthe2ndFlooroftheExchange,andontheCBOEwebsiteatcboe.comunderthe“MarketData”tab.

Toreceiveregularupdatesofthepositionlimitlistviafax,contactCandiceNickrandat(312)786-7730.QuestionsconcerningpositionandexerciselimitsmaybedirectedtotheDepartmentofMarketRegulationtoJoeAcevedoat(312)786-7602orTimMacDonaldat(312)786-7706.

ResearchCircular#RS08-236April18,2008QuintanaMaritimeLimited(“QMAR/adj.MEF”)DeterminationofCash-in-LieuAmount

ResearchCircular#RS08-237April18,2008Take-TwoInteractiveSoftware,Inc.(“TTWO/TUO/OSR/YSR”)TenderOfferFURTHEREXTENDEDandAMENDEDbyEA08AcquisitionCorp.

ResearchCircular#RS08-238April18,2008Packeteer,Inc.(“PKTR/XOU”)TenderOfferEXTENDEDbyElliottQoSLLC

ResearchCircular#RS08-239April21,2008BladeLogic,Inc.(“BLOG/QGB”):MergerCompleted--CashSettlement

ResearchCircular#RS08-240April21,2008MCGCapitalCorporation(“MCGC/QML&adj.QRM”):RightsExpirationandPositionConsolidation

ResearchCircular#RS08-243April21,2008GrantPrideco,Inc.(“GRP/XUI/KUI”)MergerCOMPLETEDwithNationalOilwellVarco,Inc.(“NOV”)

ResearchCircular#RS08-244April23,2008LifeCellCorporation(“LIFC/QKL/ZXF/LFM”)TenderOfferbyLeopardAcquisitionSub,Inc.

ResearchCircular#RS08-245April24,2008QuanexCorporation(“NX”)Merger/Spin-OffCOMPLETEDwithGerdauS.A.(“GGB”)

ResearchCircular#RS08-246April24,2008PDLBioPharma,Inc.(“PDLI/PQI/ODM/YAV”)CONTRACTADJUSTMENTFORSPECIALCASHDIVIDENDEx-Date:May6,2008

ResearchCircular#RS08-246April24,2008PDLBioPharma,Inc.(“PDLI/PQI/ODM/YAV”)CONTRACTADJUSTMENTFORSPECIALCASHDIVIDENDEx-Date:May6,2008

ResearchCircular#RS08-247April24,2008PetroleoBrasileiroS.A.-Petrobras(“PBR/PMJ/VDW/XVQ/YMO”)2-for-1ADSSplitEx-DistributionDate:May8,2008

ResearchCircular#RS08-248April24,2008OilServiceHOLDRsTrust(“OIH/ODL/ZJO/XVD/LLB/LHF&adj.JVL/JVP/XXG/YYR”)CashDistributionEx-DistributionDate:April25,2008

POSITIONLIMITCIRCULARPL08-17April22,2008ReutersGroupPLC(“RTRSY/RTQ”)PlanofArrangement/MergerCOMPLETEDwithTheThomsonCorporation(“TOC”)Effective:April17,2008

POSITIONLIMITCIRCULARPL08-18April23,2008GrantPrideco,Inc.(“GRP/XUI/KUI”)MergerCOMPLETEDwithNOVSub,Inc.,awhollyownedsubsidiaryofNationalOilwellVarco,Inc.(“NOV”)Effective:April21,2008

April 30, 2008 Volume RB19, Number 17

_________________________________________________________________________________ The Constitution and Rules of the Chicago Board Options Exchange, Incorporated (“Exchange”), in certain specific instances, require the Exchange to provide notice to the membership. The weekly Regulatory Bulletin is delivered to all effective members to satisfy this requirement. Copyright © 2008 Chicago Board Options Exchange, Incorporated.

REGULATORY CIRCULARS

Regulatory Circular RG08-52

To: CBOE Members

From: CBOE Trading Operations

Date: April 18, 2008

Re: Complex Order Priority Changes

A rule change has recently taken effect and the complex order priority requirements have been revised as follows:

• A complex order executed in open outcry has priority provided it would not trade at a price outside the displayed leg market and at least one leg of the complex order would trade at a price that betters the corresponding bid (offer) in the public customer book by at least $0.01. Previously the priority requirement was that at least one leg better the public customer book by at least the standard increment applicable to the series.

• For stock-option orders and security future-option orders (defined in Rules 1.1(ii)(a) and 1.1(zz)(a)), this change means the option leg of the complex order must improve the public customer book by at least $0.01 to have priority.

• Please note that the applicable net debit or credit price increments for open outcry have not changed. Specifically, for OEX, XEO and SPX, the minimum net price increment remains $0.05 except for box/roll spreads (which can be in any net price increment). For all other option classes, a complex order may be executed at any net price. Note also that the individual legs of a complex order may be executed in $0.01 increments in any option class.

• Lastly, complex orders entered into the electronic complex order book (COB) will have

priority over the displayed leg market (including the public customer book) if the net price of the complex order betters the displayed leg market by at least $0.01 (or at least $0.05 in the case of OEX, XEO and SPX).

April 30, 2008 Volume RB19, Number 17 1

For further information, please refer to SR-CBOE-2008-03 (Release 34-57556), which is available at www.cboe.org/legal. Additional questions may be directed to Anthony Montesano at (312) 786-7365/[email protected] or Jennifer Lamie at (312) 786-7576/[email protected]. [This circular updates/replaces parts of Regulatory Circular RG06-109.] _________________________________________________________________________________

REGULATORY CIRCULAR RG08-54

To: Members and Member Organizations

From: Member and Regulatory Services Division

Re: Prearranged Trades

Date: April 24, 2008

This Regulatory Circular restates the Exchange’s policy concerning prearranged trading. Members and Member Organizations are cautioned that any purchase or sale transaction or series of transactions, coupled with an agreement, arrangement or understanding, directly or indirectly to reverse such transaction which is not done for a legitimate economic purpose or without subjecting the transactions to market risk, violate Exchange Rules and may be inconsistent with various provisions of the Securities Exchange Act of 1934, as amended, (the “Act”) and rules thereunder. All transactions must be effected in accordance with applicable trading rules, must be subject to risk of the market, and must be reported for dissemination. Section 9(a)(1) of the Act prohibits any member of a national securities exchange, for the purpose of creating a false or misleading appearance of active trading in any security registered on a national securities exchange, or a false or misleading appearance with respect to the market for any such security, (A) from effecting any transaction in such security which involves no change in the beneficial ownership thereof, or (B) from entering an order or orders for the purchase or sale of such security with the knowledge that an order or orders of substantially the same size, at substantially the same time, and at substantially the same price, for the sale of any such security, has been or will be entered by or for the same or different parties. The Exchange also believes that prearranged trading could result in a violation of CBOE Rule 4.1, which prohibits conduct inconsistent with just and equitable principles of trade, Rule 6.45 which addresses the priority of bids and offers, or Rule 10b-5 of the Act, which prohibits any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security, respectively. Any questions may be directed to Yvonne Sipp at (312) 786-7748. (Regulatory Circulars RG92-51, RG93-36, RG95-48, RG96-99 and RG97-166 Reissued, RG99-129 Revised, RG99-173 Reissued, RG00-91 Revised, RG01-126 Revised, RG05-132 Reissued, RG06-64 Reissued, RG06-122 Revised, RG07-70 Reissued, RG07-127 Reissued) April 30, 2008 Volume RB19, Number 17 2

http://www.cboe.org/legal

mailto:[email protected]

mailto:[email protected]

Regulatory Circular RG08-55 Date: April 24, 2008 To: CBOE Members From: Equity Options Procedure Committee Index Options Procedure Committee Re: Hybrid Agency Liaison (HAL) and Complex Order Auction (COA) timer changes The Equity Options Procedure Committee and the Index Options Procedure Committee have approved changes to the Hybrid Agency Liaison (HAL) and Complex Order Auction (COA) timers for all Hybrid classes. Effective May 6, 2008, the HAL joining period, which begins as soon as the first HAL response is received, will be reduced from 700 milliseconds to 300 milliseconds. The flash period, i.e., the length of time quoters have to respond to the HAL flash, will remain unchanged at 300 milliseconds. On that same date, the COA auction period, i.e., the length of time quoters have to respond to a COA auction message, will be reduced from 2000 milliseconds to 1000 milliseconds. Questions regarding this change may be directed to Anthony Montesano at (312) 786-7365, the Help Desk at (312) 786-7100.

R U L E C H A N G E S

APPROVED RULE CHANGE(S) The Securities and Exchange Commission (“SEC”) has approved the following change(s) to Exchange rules pursuant to Section 19(b) of the Securities Exchange Act of 1934, as amended (“the Act”). Below, any additions to rule text are underlined, and any deletions are [bracketed]. Copies are available on the CBOE public website at www.cboe.com/legal/effectivefiling.aspx. The effective date of the rule change is the date of approval unless otherwise noted. _________________________________________________________________________________ SR-CBOE-2008-14 Electronic Auctions On April 3, 2008, the SEC approved Rule Change File No. SR-CBOE-2008-14, which filing establishes a mechanism for auctioning larger-sized simple and complex orders against solicited orders, and modifies the Automated Improvement Mechanism to permit the execution of complex orders. Any questions regarding the rule change may be directed to Jennifer Lamie, Legal Division, at 312-786-7576. The rule text is shown below and the rule filing is available at http://www.cboe.org/publish/RuleFilingsSEC/SR-CBOE-2008-014.pdf. Rule 6.74A – Automated Improvement Mechanism (“AIM”)


http://www.cboe.com/legal/effectivefiling.aspx

http://www.cboe.org/publish/RuleFilingsSEC/SR-CBOE-2008-014.pdf

* * * * * . . . Interpretations and Policies: .01-.06 No change. .07 Complex orders may be executed through the Auction at a net debit or net credit price provided the Auction eligibility requirements in paragraph (a) of this Rule 6.74A are satisfied and the Agency Order is eligible for the Auction considering its complex order type, order origin code (i.e., non-broker-dealer public customer, broker-dealers that are not Market-Makers or specialists on an options exchange, and/or Market-Makers or specialists on an options exchange), class, and marketability as determined by the Exchange. Order allocation will be the same as in paragraph (b)(3), provided that the complex order priority rules applicable to bids and offers in the individual series legs of a complex order contained in Rule 6.53C(d) or 6.53C.06, as applicable, will continue to apply. .08 Notwithstanding subparagraph (a)(2) above, the Exchange may determine on a class-by-class basis to permit orders of 500 or more contracts to be executed through AIM without considering prices that might be available on other options exchanges.

* * * * * Rule 6.74B – Solicitation Auction Mechanism RULE 6.74B. A member that represents agency orders may electronically execute orders it represents as agent (“Agency Order”) against solicited orders provided it submits the Agency Order for electronic execution into the solicitation auction mechanism (the “Auction”) pursuant to this Rule.

(a) Auction Eligibility Requirements. A member (the “Initiating Member”) may initiate an Auction provided all of the following are met:

(1) The Agency Order is in a class designated as eligible for Auctions as determined by the Exchange and within the designated Auction order eligibility size parameters as such size parameters are determined by the Exchange (however, the eligible order size may not be less than 500 contracts);

(2) Each order entered into the Auction shall be designated as all-or-none; and (3) The minimum price increment for an Initiating Member’s single price submission

shall be determined by the Exchange on a series basis and may not be smaller than one cent. (b) Auction Process. The Auction shall proceed as follows:

(1) Auction Period and Requests for Responses. (A) To initiate the Auction, the Initiating Member must mark the Agency Order for Auction processing, and specify a single price at which it seeks to cross the Agency Order with a solicited order. (B) When the Exchange receives a properly designated Agency Order for Auction processing, a Request for Responses message indicating the price and size will be sent to all members that have elected to receive such messages. (C) Members may submit responses to the Request for Responses (specifying prices and sizes) during the response period (which shall be three (3) seconds), except that responses may not be entered for the account of an options Market-Maker from another options exchange. (D) Responses shall not be visible to other Auction participants, and shall not be disseminated to OPRA.

(E) The minimum price increment for responses shall be the same as provided in subparagraph (a)(3) above.

(F) A response size at any given price point may not exceed the size of the Agency Order.


(G) Responses may be modified or cancelled. (2) Auction Conclusion and Order Allocation. The Auction shall conclude at the

sooner of subparagraphs (b)(2)(A) through (E) of Rule 6.74A. At the conclusion of the Auction, the Agency Order will be automatically executed in full or cancelled and allocated subject to the following:

(A) The Agency Order will be executed against the solicited order at the proposed execution price, provided that:

(I) The execution price must be equal to or better than the BBO. If the execution would take place outside the BBO, the Agency Order and solicited order will be cancelled;

(II) There are no public customer orders resting in the book on the opposite side of the Agency Order at the proposed execution price. If there are public customer orders and there is sufficient size (considering all resting orders, electronic quotes and responses) to execute the Agency Order, the Agency Order will executed against these interests and the solicited order will be cancelled. If there are public customer orders and there is not sufficient size (considering all resting orders, electronic quotes and responses), both the Agency Order and the solicited order will be cancelled; and

(III) There is insufficient size to execute the Agency Order at an improved price(s). If there is sufficient size (considering all resting orders, electronic quotes and responses) to execute the Agency Order at an improved price(s) that is equal or better than the BBO, the Agency Order will execute at the improved price(s) and the solicited order will be cancelled.

(B) Orders of 500 or more contracts executed through the Auction will be executed without considering prices that might be available on other options exchanges.

. . . Interpretations and Policies: .01 Complex orders may be executed through the Auction at a net debit or net credit price provided the Auction eligibility requirements in paragraph (a) of this Rule 6.74B are satisfied and the Agency Order is eligible for the Auction considering its complex order type, order origin code (i.e., non-broker-dealer public customer, broker-dealers that are not Market-Makers or specialists on an options exchange, and/or Market-Makers or specialists on an options exchange), class, and marketability as determined by the Exchange. Order allocation will be the same as in paragraph (b)(2), provided that the complex order priority rules applicable to bids and offers in the individual series legs of a complex order contained in Rule 6.53C(d) or 6.53C.06, as applicable, will continue to apply. .02 Prior to entering Agency Orders into the Auction on behalf of customers, Initiating Members must deliver to the customer a written notification informing the customer that his order may be executed using the Exchange’s Auction. The written notification must disclose the terms and conditions contained in this Rule 6.74B and be in a form approved by the Exchange. .03 Under Rule 6.74B, members may enter contra orders that are solicited. The Auction provides a facility for members that locate liquidity for their customer orders. Members may not use the Auction to circumvent Rules 6.45A.01, 6.45B.01 or 6.74A limiting principal transactions. This may include, but is not limited to, members entering contra orders that are solicited from (a) affiliated broker-dealers, or (b) broker-dealers with which the member has an arrangement that allows the member to realize similar economic benefits from the solicited transaction as it would achieve by executing the customer order in whole or in part as principal. Additionally, solicited contra orders entered by members to trade against Agency Orders may not be for the account of a CBOE Market-Maker assigned to the options class.


_________________________________________________________________________________ SR-CBOE-2007-120 Market-Makers and RMMs On April 3, 2008, the SEC approved Rule Change File No. SR-CBOE-2007-120, which filing amends CBOE rules relating to Market-Makers and Remote Market-Makers. Any questions regarding the rule change may be directed to Patrick Sexton, Legal Division, at 312-786-7467. The rule text is shown below and the rule filing is available at http://www.cboe.org/publish/RuleFilingsSEC/SR-CBOE-2007-120.pdf. Rule 3.2 - Qualifications and Membership Statuses of Individual Members Rule 3.2. (a) No change.

(b) The individual membership statuses that are approved by the Membership Committee (along with the primary Exchange Rule that provides for such approval if it is not Rule 3.9) include: (i) owner; (ii) lessor; (iii) lessee; (iv) Chicago Board of Trade exerciser; (v) sole proprietor; (vi) individual with a membership that has been registered for a member organization; (vii) nominee of a member organization; (viii) Market-Maker (Rule 8.2); (ix) Floor Broker (Rule 6.71); (x) member eligible to trade securities traded pursuant to Chapter XXX (Rule 30.2); (xi) member eligible to trade securities traded pursuant to Chapter L (Rule 50.2); and (xii) Trust Member (Rule 3.25)[; and (xiii) Remote Market-Maker ("RMM")(Rule 8.4)].

(c) Every individual member who is a lessee, a Chicago Board of Trade exerciser, or an owner (who is not a lessor) must have an authorized trading function. An individual member is deemed to have an authorized trading function if the member is approved by the Membership Committee to act as a Market-Maker, Floor Broker, [RMM,] or nominee or person registered for an [RMM or] e-DPM organization.

* * * * * Rule 3.3 - Qualifications and Membership Statuses of Member Organizations Rule 3.3. (a) No change.

(b) The member organization membership statuses that are approved by the Membership Committee (along with the primary Exchange Rule that provides for such approval if it is not Rule 3.9) include: (i) owner; (ii) lessor; (iii) lessee; (iv) member organization for which an individual member has registered his or her membership; (v) member organization approved to transact business with the public (Rule 9.1); (vi) Clearing Member; (vii) order service firm (Rule 6.77); and (viii) [Remote Market-Maker (Rule 8.4)]Market-Maker (Rule 8.1).

(c) No change.

(d) No change. . . . Interpretations and Policies: .01 No change. .02. Member organization membership statuses that are approved by Exchange bodies other than the Membership Committee (along with the primary Exchange Rule that provides for such approval)




include: Lead Market-Maker (Rules 8.15 and 8.15A); Designated Primary Market-Maker (Rule 8.83), Electronic DPMs (Rule 8.92), SBT Designated Primary Market-Makers and SBT Lead Market-Makers (Rule 42.1).

* * * * * Rule 3.8. Nominees and Members Who Register Their Memberships for Member Organizations Rule 3.8. (a) Each member organization that is the owner of a membership for which the member organization will not be acting as a lessor and each member organization that is a lessee of a membership shall be subject to the following provisions:

(i) the member organization must designate an individual nominee to represent the organization with respect to that membership in all matters relating to the Exchange;

(ii) if the member organization is the owner or lessee of more than one such membership, the member organization may designate one individual to be the nominee for all memberships utilized by the organization. However, for each membership utilized for trading in open outcry on the trading floor, the organization must designate a different individual to be the nominee for each of the memberships [(subject to the exceptions set forth in Interpretations and Policies .02 to this Rule)];

(iii) each nominee of a member organization designated pursuant to subparagraph (a)(i) of this Rule, except for a nominee of a member organization approved solely as a Clearing Member and/or to transact business with the public pursuant to Rule 9.1, is required to have an authorized trading function;

(iv) each nominee of a member organization designated pursuant to subparagraph (a)(i) of this Rule must be approved for membership in accordance with the Rules; and

(v) each nominee of a member organization designated pursuant to subparagraph (a)(i) of this Rule who is approved for membership shall be deemed to be an individual member.

(b) – (g) No change. . . . Interpretations and Policies: .01 No change. [.02 The following are exceptions to the subparagraph (a)(ii) of this Rule: (i) A member organization may designate one individual to be the nominee for all memberships utilized by the organization in an RMM capacity, in an e-DPM capacity, and in an Off-Floor DPM capacity provided, however, that a member organization may not have more than one RMM appointment in an option class (except to the extent provided in Rule 8.4(c)) and may not have an RMM appointment in an option class in which the organization serves as a DPM, e-DPM, or Market-Maker on the Exchange (except to the extent provided in Rule 8.4(c)); (ii) An individual may act as a nominee of an organization with respect to one membership utilized in an RMM capacity and a membership not utilized in an RMM or e-DPM capacity in order to allow the nominee to use those memberships to simultaneously trade as an in-crowd Market-Maker and in an RMM capacity (but not in the same class), provided that the RMM trading activity of the nominee is from a location other than the physical trading station for any of the classes traded by the nominee in an RMM capacity.]


* * * * *

Rule 6.45A - Priority and Allocation of Equity Option Trades and the CBOE Hybrid

System Rule 6.45A. Generally: The rules of priority and order allocation procedures set forth in this rule

shall apply only to equity option classes designated by the Exchange to be traded on the CBOE Hybrid System and has no applicability to index option and options on ETF classes. The term "market participant" as used throughout this rule refers to a Market-Maker, a DPM, an e-DPM, [a Remote Market-Maker,] and a floor broker or a PAR Official representing orders in the trading crowd. The term “in-crowd market participant” only includes an in-crowd Market-Maker, in-crowd DPM, and floor broker or PAR Official representing orders in the trading crowd.

(a) – (e) No change. . . . Interpretations and Policies: .01 - .02 No change.

* * * * *

Rule 6.45B - Priority and Allocation of Trades in Index Options and Options on ETFs on the CBOE Hybrid System

Rule 6.45A. Generally: The rules of priority and order allocation procedures set forth in this rule shall apply only to index options and options on ETFs that have been designated for trading on the CBOE Hybrid System. The term "market participant" as used throughout this rule refers to a Market-Maker, [a Remote Market-Maker,] an in-crowd DPM or LMM, an e-DPM with an appointment in the subject class, and a floor broker or PAR Official representing orders in the trading crowd. The term "in-crowd market participant" only includes an in-crowd Market-Maker, in-crowd DPM or LMM, and floor broker or PAR Official representing orders in the trading crowd.

(a) – (d) No change.

. . . Interpretations and Policies: .01 - .02 No change.

* * * * * Rule 8.1 – Market-Maker Defined Rule 8.1. A Market-Maker ("Market-Maker" or "Market-Maker") is an individual [(either a] member [or nominee of a member organization)] or a member organization that[who] is registered with the Exchange for the purpose of making transactions as dealer-specialist on the Exchange in accordance with the provisions of this Chapter. Registered Market-Makers are designated as specialists on the Exchange for all purposes under the Securities Exchange Act of 1934 and the Rules and Regulations thereunder. Only transactions that are effected in accordance with Interpretation and Policy .03 under Rule 8.7 shall count as Market-Maker transactions for the purposes of this Chapter and Rules 3.1 and 12.3(f). [The term Market-Maker includes Remote Market-Makers (as defined in Rule 8.4).]


* * * * *

Rule 8.2 – Registration of Market-Makers

Rule 8.2. (a) An applicant for registration as a Market-Maker shall file [his]an application in writing with the Membership Department on such form or forms as the Exchange may prescribe. Applications shall be reviewed by the Membership Committee, which shall consider an applicant's ability as demonstrated by [his] passing a member's examination prescribed by the Exchange, and such other factors as the Committee deems appropriate. After reviewing the application, the Committee shall either approve or disapprove the applicant's registration as a Market-Maker.

(b) The registration of [any person as] a Market-Maker may be suspended or terminated by

the appropriate Market Performance Committee upon a determination that [such person]the Market-Maker has failed to properly perform as a Market-Maker.

(c) No change.

* * * * * Rule 8.3 – Appointment of Market-Makers

Rule 8.3. [This Rule governs the appointment of Market-Makers other than Remote Market-Makers. Rule 8.4 governs the appointment of Remote Market-Makers.]

(a)(i) [On a form or forms]In a manner prescribed by the Exchange, a registered Market-Maker may [apply]select [for] an Appointment (having the obligations of Rule 8.7(b) or Rule 30.40, as appropriate) in one or more classes of option contracts or [in] securities traded subject to the rules in Chapter XXX. [From among those Market-Makers registered, the Exchange shall ordinarily make two or more Appointments for each class of option contracts or other securities.] The Exchange may also appoint a registered Market-Maker in one or more classes of option contracts or securities traded subject to the rules in Chapter XXX. In making such Appointments, the Exchange shall give attention to (a) the preference of registrants; (b) the maintenance and enhancement of competition among Market-Makers in each class of contracts; (c) assuring that financial resources available to a Market-Maker enable him to satisfy the obligations set forth in Rule 8.7 or Rule 30.40 with respect to each class of option contracts to which he is appointed; and (d) the impact additional Market-Makers will have on Exchange systems capacity. Limitations on appointments due to Exchange systems capacity shall be in accordance with Interpretations and Policies .01 to Rule 8.3A. The Exchange may arrange two or more classes of contracts into groupings based on, among other things, similar trading locations on the floor, and may make Appointments to those groupings rather than to individual classes. The Exchange may suspend or terminate any Appointment of a Market-Maker under this rule and may make additional Appointments whenever, in the Exchange's judgment, the interests of a fair and orderly market are best served by such action.

(ii) In the event a Market-Maker is a nominee of a member organization or has registered the

Market-Maker's membership for a member organization, the member organization with which the Market-Maker is associated can request that the Exchange deem all class appointments be made to the member organization instead of to the individual Market-Maker. If such a request is made, the individual Market-Maker will continue to have all of the obligations of a Market-Maker under


Exchange rules, except that the submission of electronic quotations and orders will be made by and on behalf of the member organization with which the individual Market-Maker is associated.

(b) No Appointment of a Market-Maker shall be made without the Market-Maker's consent to such Appointment, provided that refusal to accept an Appointment may be deemed a sufficient cause for termination or suspension of a Market-Maker's registration. (c) Market-Maker Appointments. Absent an exemption by the Exchange, an appointment of a Market-Maker confers the right to quote electronically [or]and in open outcry in [its] the Market-Maker’s appointed classes as described below. A Market-Maker may [only] change its appointed classes upon advance notification to [with the prior approval of] the Exchange[. Such requests must be made] in a form and manner prescribed by the Exchange. [In determining whether to approve such requests, the Exchange shall consider the factors contained in paragraph (a).]

(i) Hybrid 2.0 Classes. Subject to paragraph (v) below, a Market-Maker can create a Virtual Trading Crowd ("VTC") appointment, which confers the right to quote electronically in an appropriate number of Hybrid 2.0 Classes (as defined in Rule 1.1(aaa)) selected from "tiers" that have been structured according to trading volume statistics. All classes within a specific tier will be assigned an "appointment cost" depending upon its tier location. The following table sets forth the tiers and related appointment costs. Tier

Hybrid 2.0 Option Classes Appointment Cost

AA

• Options on the CBOE Volatility Index (VIX) • Options on the iShares Russell 2000 Index Fund (IWM) • Options on the NASDAQ 100 Index (NDX)

.50

A+

• Options on Standard & Poor's Depositary Receipts • Options on the Russell 2000 Index (RUT) • Options on the S&P 100 (XEO)

.25

A*

Hybrid 2.0 Classes 1 – 60

.10

B*


.05

C*


.04

D*


.02

E*

Hybrid 2.0 Classes 571 - 999

.01

F*

All Remaining Hybrid 2.0 Classes .001

* Excludes Tiers AA and A+ Classes. (ii) Hybrid Classes. Subject to paragraph (v) below, a Market-Maker can quote electronically in an appropriate number of Hybrid Classes [that are located at one trading station]. The appointment cost of each Hybrid Class is .01.


(iii) Open Outcry. A Market-Maker has an appointment to trade open outcry in all Hybrid and Hybrid 2.0 Classes traded on the Exchange. A member organization that is registered as a Market-Maker may only trade in open outcry through one of its nominees. A Market-Maker must be physically present in the trading crowd to trade in open outcry.

(iv) Hybrid 3.0, Non-Hybrid and Non-Hybrid 2.0 Classes (collectively “Non-Hybrid Classes”). In addition to paragraphs (i) through (iii) above, and subject to paragraph (v) below, a Market-Maker can select as [his]the Market-Maker’s appointment one or more Non-Hybrid Classes traded on the Exchange, which confers the right to trade in open outcry in an appropriate number of Non-Hybrid Classes as described below. Each Non-Hybrid Class will be assigned an "appointment cost", which are set forth below.

Non-Hybrid Classes Appointment

Cost

Options on the Standard & Poor's 500 (SPX)

1.0

Options on the S&P 100 (OEX)

.75

Morgan Stanley Retail Index Options (MVR) .25

(v) Each membership owned or leased by a Market-Maker has an appointment credit of 1.0. A Market-Maker may select for each Exchange membership [it]the Market-Maker owns or leases any combination of Hybrid 2.0 Classes, Hybrid Classes [which are located at one trading station], and Non-Hybrid Classes, whose aggregate appointment cost does not exceed 1.0. The Exchange will rebalance the tiers (excluding the "AA" and "A+" tiers) set forth in subparagraph (i) above once each calendar quarter, which may result in additions or deletions to their composition. When a class changes tiers it will be assigned the appointment cost of that tier. Upon rebalancing, each Market-Maker with a VTC appointment will be required to own or lease the appropriate number of Exchange memberships reflecting the revised appointment costs of the Hybrid and Hybrid 2.0 Classes constituting [its]the Market-Maker’s appointment.

(vi) A Market-Maker may submit electronic quotations away from CBOE's trading floor in

[his/her] the Market-Maker’s appointed Hybrid Classes and Hybrid 2.0 Classes. While on the trading floor, a Market-Maker is not required to be present in the trading station where a class is located in order to stream electronic quotations into the class.

(vii) [In connection with the Pilot Programs set forth in Rule 8.4(c)(i) and Rule 8.93(vii), a Market-Maker affiliated with an e-DPM or RMM can only submit electronic quotations in any class in which the affiliated e-DPM or RMM has an appointment if the Market-Maker is present in the trading station where the class is located, unless the Market-Maker and the affiliated e-DPM or affiliated RMM operate as multiple aggregation units under the criteria set forth in Rule 8.4(c)(ii) pursuant to a Pilot Program that expires on March 14, 2009.] Except as provided below, a Market-Maker may not hold an appointment and submit electronic quotations in any class in which an affiliated DPM or e-DPM is appointed, or in which an affiliated Market-Maker holds an appointment and submits electronic quotations.

(1) As part of a pilot program until March 14, 2009, an e-DPM or Off-Floor DPM can

have one affiliated Market-Maker trade on CBOE’s trading floor and submit


electronic quotations in any specific option class allocated to the e-DPM or Off-Floor DPM, provided such affiliated Market-Maker trades on a separate membership and is present in the trading crowd (see Rule 8.85(a)(v) and Rule 8.93(vii));

(2) As part of a pilot program until March 14, 2009, a Market-Maker may have one

affiliated Market-Maker trade in open outcry and submit electronic quotations in any specific option class in which the Market-Maker holds an appointment, provided such affiliated Market-Maker trades on a separate membership and is present in the trading crowd;

(3) There is no restriction on (A) affiliated Market-Makers, or Market-Maker(s) affiliated

with an e-DPM, holding an appointment and submitting electronic quotations in the same class provided CBOE uses an allocation algorithm in the class that does not allocate electronic trades, in whole or in part, in an equal percentage based on the number of market participants quoting at the best bid or offer; or (B) affiliated Market-Makers holding an appointment in the same class for purposes of trading in open outcry; and

(4) A CBOE member or member firm may have, as part of a pilot program until March 14,

2009, multiple aggregation units operating as separate Market-Makers within the same class provided:

(A) The member or member firm has a written plan of organization that identifies each aggregation unit, specifies its trading objective(s), and supports its independent identity. The independence of aggregation units may be evidenced by separate management structures, location, business purpose, or separate profit-and-loss treatment within the member firm. Each aggregation unit must maintain all trading activity of that aggregation unit in a segregated account, which shall be reported to the Exchange as such.

(B) Each aggregation unit must operate independently of other aggregation units of the member or member firm. Moreover, all traders in an aggregation unit may pursue only the trading objectives or strategies of that aggregation unit and may not transmit or otherwise share information relating to those trading objectives or strategies to the member's or member firm's other aggregation units. The member or member firm may have risk management personnel outside of the Market-Maker aggregation units view the positions of the multiple Market-Makers within the entity and direct position adjustments for risk management purposes. However, such persons may not transmit information to traders in an Market-Maker aggregation unit about the trading strategies, objectives, or positions of another Market-Maker aggregation unit.

Senior risk management personnel are prohibited from engaging in any of the following activities with respect to the Aggregation Units for which they oversee: (i) establishing quoting parameters for any trader including but not limited to delta and volatility values; (ii) directing the submission of specific quotes by any trader; or (iii) directing the timing of a trader's trading activities with anything other than general, nonspecific timeframes. Prior to being approved in a Market-Maker capacity, each member or member organization operating multiple Aggregation Units will be required to certify that it is aware of these prohibitions, that it will comply with these prohibitions, and that it will ensure continued compliance with these prohibitions.


(C) Individual traders are assigned to only one aggregation unit at any time.

(D) The member or member firm as part of its compliance and/or internal audit routines establishes and maintains surveillance and audit procedures that facilitate the review and surveillance programs of the firm and CBOE to ensure the independent operation of the separate aggregation units operating as Market-Makers. As part of these routines, the member or member firm must retain written records of information concerning the aggregation units, including, but not limited to, trading personnel, names of personnel making trading decisions, unusual trading activities, disciplinary action resulting from a breach of the member or member firm's systems firewalls and information-sharing policies, and the transfer of securities between the members or member firm's aggregation units, which information shall be promptly made available to the Exchange upon its request. The member or member firm must promptly provide to the Exchange a written report at such time there is any material change with respect to the aggregation units, at which point the Exchange will reexamine its status.

[(viii) Pursuant to a Pilot Program that expires on March 14, 2009, two affiliated Market-

Makers can hold an appointment in the same class provided both Market-Makers operate as multiple aggregation units under the criteria set forth in Rule 8.4(c)(ii).]

(d) A member or prospective member adversely affected by a determination made by the Exchange under this Rule, including the denial of an appointment in a particular class, may obtain a review thereof in accordance with the provisions of Chapter XIX.

[. . . Interpretations and Policies: .01 In the event the aggregate appointment cost for all of the Hybrid 2.0 Classes, Hybrid Classes, and/or Non-Hybrid Classes, constituting a Market-Maker's appointment on 7/20/06 exceeds 1.0, then the Market-Maker shall be granted six months from the date of the approval of this rule change, until 1/22/07, to comply with the provisions of paragraph (c)(v) of this Rule that provide a Market-Maker's appointed classes shall not have an aggregate appointment cost in excess of 1.0. During these six months, any Market-Maker whose aggregate appointment cost exceeds 1.0 is ineligible to request an appointment in any other option class until the Market-Maker's aggregate appointment cost is less than 1.0. The preceding limited exemption to Rule 8.3(c)(v) is only available to a Market-Maker whose aggregate appointment cost for all of the Hybrid 2.0 Classes, Hybrid Classes, and/or Non-Hybrid Classes, constituting the Market-Maker's appointment would have exceeded 1.0 on April 24, 2006, if the rule had been in effect on that date.]

* * * * * Rule 8.3A. Maximum Number of Market Participants Quoting Electronically per Product

Rule 8.3A. With respect to products trading on the Hybrid Trading System or on the Hybrid 2.0 Platform, the Exchange will impose an upper limit on the aggregate number of members that may quote electronically in each product ("Class Quoting Limit" or "CQL"). (For purposes of this Rule, the term "product" refers to all options of the same single underlying security/value.) Interpretations and Policies .01 specifies the Class Quoting Limits for all products trading on Hybrid and the Hybrid 2.0 Platform.

When a CQL is established for each product, the following criteria govern which members are entitled to quote electronically in that subject product. A Market-Maker


(excluding an [RMM and] e-DPM) that is not eligible to quote electronically in a product may quote in open outcry in that product.

(a) Products Trading on the Hybrid 2.0 Platform [as of March 18, 2005] and [Products

Trading on] the Hybrid Trading System [as of March 18, 2005]

The DPM or LMM(s) and e-DPMs (if applicable) assigned to the product [on March 18, 2005,] and Market-Makers who hold an appointment in the product [: (1) are in good standing with the Exchange; and (2) (i) have transacted at least 80% of their Market-Maker contracts and transactions in-person in each of the three immediately preceding calendar months prior to March 18, 2005 in option products traded in the trading station; or (ii) were physically present in the trading station acting in the capacity of a Market-Maker on March 18, 2005,] are entitled to quote electronically in those products for as long as they maintain an appointment in those products.

All other Market-Makers[, RMMs,] and approved e-DPMs that request the ability to submit quotes electronically in the subject product will be entitled to quote electronically in that product in the order in which they so request provided the number of members quoting electronically in the product does not exceed the CQL. When the number of members in the product quoting electronically equals the CQL, all other members requesting the ability to quote electronically in that product will be wait-listed in the order in which they submitted the request.

The waiting list operates based on time priority. When the product can accommodate another electronic quoter (whether due to attrition or an increase in the CQL), the member at the "top" of the list (i.e., the member that has been on the waiting list the longest amount of time) has priority. Once a member is wait-listed, the Exchange may not alter his/her position on the wait-list other than to improve such position (i.e., the Exchange may not place other members ahead of a previously wait-listed member). If a wait-listed member is offered, yet refuses, the ability to quote electronically in the subject product, the member will be removed from that waiting list.

(b) Products Added to the Hybrid 2.0 Platform [After March 18, 2005]: With respect to a product that is added to the Hybrid 2.0 Platform [after March 18, 2005], the DPM or LMM(s) and e-DPMs appointed to the product will be entitled to quote electronically. All Market-Makers holding an appointment [quoting] in the product prior to its addition to the Hybrid 2.0 Platform will be entitled to quote electronically [provided that: (i) they have transacted at least 80% of their Market-Maker contracts and transactions in-person in each of the three immediately preceding calendar months prior to the product being added to the Hybrid 2.0 Platform in option products traded in the trading station; or (ii) they were physically present in the trading station acting in the capacity of a Market-Maker on the day prior to the product being added to the Hybrid 2.0 Platform]. If at the time a product is added to the Hybrid 2.0 Platform the aggregate number of DPMs or LMMs, e-DPMs, and Market-Makers entitled to quote electronically in the product exceeds the CQL, then the product will have an "increased CQL," as described in Interpretations and Policies .01[(a)]. Reduction of any "increased CQL" will be in accordance with the procedures described in Interpretations and Policies .01[(a)].

All other members will be entitled to quote electronically in that product in the order in which they so request provided the number of members quoting electronically in the product does not exceed the CQL. When the number of members quoting electronically in the product equals the CQL, all other members will be wait-listed in the order in which they request the ability to quote electronically. The wait-list will operate as described above in paragraph (a).

(c) Products Added to the Hybrid Trading System [After March 18, 2005]: With respect to a [new] product that commences trading on the Hybrid Trading System [after March 18, 2005], the


assigned DPM will be entitled to quote electronically. All Market-Makers holding an appointment in the product prior to it trading on the Hybrid Trading System will be entitled to quote electronically. [Thereafter, a]All other members will be entitled to quote electronically in that product in the order in which they so request provided the number of members quoting electronically does not exceed the CQL. When the number of members quoting electronically in the product equals the CQL, all other members will be wait-listed in the order in which they request the ability to quote electronically. The wait-list will operate as described above in paragraph (a). . . . Interpretations and Policies: .01 No change. [.02 "Temporary Appointments" for the Period from March 21, 2005 through the end of the Initial RMM Appointment Process The following procedures apply to Market-Makers' requests to change their appointed trading stations during the period commencing March 21, 2005, and lasting until the termination of the Initial Remote Market-Maker ("RMM") Appointment Process ("IRAP"). The IRAP is the mechanism by which electronic appointments will be granted to RMMs and other Market-Makers during the initial allocation process, which is expected to occur during the week of April 18, 2005.

1. Beginning March 21, 2005, until the termination of the IRAP, all Market-Maker requests to change their appointed trading stations will be granted on a temporary basis ("temporary appointment"), provided the CQL for the requisite product has not been met ( i.e., on a space-available basis, as described in Rule 8.3A.01). Each temporary appointment terminates at 3:15 p.m. (CT) on the last day of the IRAP, at which point all Market-Makers' appointed trading stations will revert to the appointed trading station the Market-Maker held on March 18, 2005.

2. In order to receive a permanent appointment in a product in which a Market-Maker previously held a temporary appointment, a Market-Maker must participate in the IRAP and be allocated such product.

3. Upon termination of the IRAP, all Market-Maker (including RMM) requests for appointments and/or appointed trading stations will be handled subject to the requirements of Rule 8.3A (Class Quoting Limits) and in accordance with the appointment procedures of Rules 8.3 (Market-Maker appointments) and 8.4 (RMM appointments), as applicable.] [.03].02 In the event a Market-Maker, who holds an appointment in an option class traded on the Hybrid Trading System or the Hybrid 2.0 Platform pursuant to Rule 8.3, elects not to quote electronically in that option class under the provisions of Rule 8.7(d)(i), then the Market-Maker will not count towards the CQL in that option class. In the event the Market-Maker later determines to quote electronically in that option class, the Marker-Maker may do so and would count towards the CQL for that option class. If the total number of members quoting electronically exceeds the CQL for that option class, the option class would have an "increased CQL" as described in Interpretations and Policies .01[(a)]. Reduction in any "increased CQL" will be in accordance with the procedures described in Interpretations and Policies .01[(a)](b). [04.].03 The following Interpretation and Policy only applies to those option classes traded on the Hybrid Trading System or the Hybrid 2.0 Platform in which the CQL for the option class is full and there is a waiting list of member(s) requesting the ability to quote electronically in the option class. In the event a Market-Maker [or RMM], who holds an appointment in an option class traded on the


Hybrid Trading System or the Hybrid 2.0 Platform, has not submitted any electronic quotations in that option class during the preceding 30 calendar days (measured on a rolling basis), then the Market-Maker’s [or RMM's] appointment in that option class will be terminated effective immediately. The Market-Maker [or RMM] can subsequently request an appointment in the option class. If there is a wait-list of members requesting the ability to quote electronically, then Market-Maker [or RMM] will be placed on the wait-list for the option class. The Exchange will notify the Market-Maker [or RMM] prior to terminating its appointment, and the Exchange can make exceptions to this Interpretation and Policy in unusual circumstances.

* * * * * Rule 8.4[ – Remote Market-Makers] Rule 8.4. Reserved. [(a) Definition: A Remote Market-Maker ("RMM") is an individual member or member organization registered with the Exchange that makes transactions as a dealer-specialist from a location other than the physical trading station for the subject class. Transactions of RMMs that are executed on the Exchange are deemed Market-Maker transactions for purposes of this Chapter and Rules 3.1 and 12.3(f).

(b) Registration and Approval of RMMs: The registration and approval of RMMs shall be in

accordance with Rule 8.2. An RMM shall retain its approval to act as an RMM until the RMM requests the Exchange to relieve it of its approval to act as an RMM and the Exchange grants such approval or until the Exchange terminates its approval to act as an RMM pursuant to Exchange Rules. An RMM may not transfer its approval to act as an RMM unless approved by the Exchange.

(c) Affiliation Limitations: Except as provided in subparagraphs (i) or (ii), an RMM may not

have an appointment as an RMM in any class in which it or its member organization serves as DPM, e-DPM, RMM, or Market-Maker on CBOE.

(i) A CBOE Member or Member Firm operating as an RMM in a class may have, as part of a pilot program until March 14, 2009, one Market-Maker affiliated with the RMM organization trading in open outcry in any specific option class allocated to the RMM, provided such Market-Maker trades on a separate membership.

(ii) A CBOE Member or Member Firm may have, as part of a pilot program until March 14, 2009, multiple aggregation units operating as separate RMMs within the same class provided:

(A) The member or member firm has a written plan of organization that identifies each aggregation unit, specifies its trading objective(s), and supports its independent identity. The independence of aggregation units may be evidenced by separate management structures, location, business purpose, or separate profit-and-loss treatment within the member firm. Each aggregation unit must maintain all trading activity of that aggregation unit in a segregated account, which shall be reported to the Exchange as such.

(B) Each aggregation unit must operate independently of other aggregation units of the member or member firm. Moreover, all traders in an aggregation unit may pursue only the trading objectives or strategy(ies) of that aggregation unit and may not transmit or otherwise share information relating to those trading objectives or strategies to the member's or member firm's other aggregation units. The member or member firm may have risk management personnel outside of the RMM aggregation units view the positions of the multiple RMMs within the entity


and direct position adjustments for risk management purposes. However, such persons may not transmit information to traders in an RMM aggregation unit about the trading strategies, objectives, or positions of another RMM aggregation unit.

Senior risk management personnel are prohibited from engaging in any of the following activities with respect to the Aggregation Units for which they oversee: (i) establishing quoting parameters for any trader including but not limited to delta and volatility values; (ii) directing the submission of specific quotes by any trader; or (iii) directing the timing of a trader's trading activities with anything other than general, nonspecific timeframes. Prior to being approved in an RMM capacity, each member or member organization operating multiple Aggregation Units will be required to certify that it is aware of these prohibitions, that it will comply with these prohibitions, and that it will ensure continued compliance with these prohibitions.

(C) Individual traders are assigned to only one aggregation unit at any time.

(D) The member or member firm as part of its compliance and/or internal audit routines establishes and maintains surveillance and audit procedures that facilitate the review and surveillance programs of the firm and CBOE to ensure the independent operation of the separate aggregation units operating as RMMs. As part of these routines, the member or member firm must retain written records of information concerning the aggregation units, including, but not limited to, trading personnel, names of personnel making trading decisions, unusual trading activities, disciplinary action resulting from a breach of the member or member firm's systems firewalls and information-sharing policies, and the transfer of securities between the members or member firm's aggregation units, which information shall be promptly made available to the Exchange upon its request. The member or member firm must promptly provide to the Exchange a written report at such time there is any material change with respect to the aggregation units, at which point the Exchange will reexamine its status.

(d) Appointment of RMMs: An RMM will have a Virtual Trading Crowd ("VTC") Appointment, which confers the right to quote electronically (and not in open outcry) an appropriate number of Hybrid 2.0 Classes selected from "tiers" that have been structured according to trading volume statistics. All Hybrid 2.0 Classes within a specific tier will be assigned an "appointment cost" depending upon its tier location. The following table sets forth the tiers and related appointment costs.

Tier


AA

• Options on the CBOE Volatility Index (VIX) • Options on the iShares Russell 2000 Index Fund (IWM) • Options on the NASDAQ 100 Index (NDX)

.50

A+

• Options on Standard & Poor's Depositary Receipts • Options on the Russell 2000 Index (RUT) • Options on the S&P 100 (XEO)

.25

A*


.10

B*


.05

C* Hybrid 2.0 Classes 121 – 345 .04


Tier


D*


.02

E*

Hybrid 2.0 Classes 571 - 999

.01

F*

All Remaining Hybrid 2.0 Classes .001

* Excludes Tiers AA and A+ Classes. An RMM as part of its VTC appointment may select for each Exchange membership it owns or leases any combination of Hybrid 2.0 Classes whose aggregate "appointment cost" does not exceed 1.0. For example, an RMM could request five "A Tier" products (5x.10), five "C Tier" products (5x.04), ten "D Tier" products (10x.02) and ten "E Tier" products (10x.01) to constitute its VTC appointment. The Exchange will rebalance the "tiers" (excluding the "AA" and "A+" tiers) once each calendar quarter, which may result in additions or deletions to their composition. When a Hybrid 2.0 Class changes "tiers" it will be assigned the "appointment cost" of that tier. Upon rebalancing, each RMM with a VTC appointment will be required to own or lease the appropriate number of Exchange memberships reflecting the revised "appointment costs" of the Hybrid 2.0 Classes constituting its appointment. An RMM may only change its appointment upon advance notification to the Exchange in a form and manner prescribed by the Exchange. Exchange memberships used to satisfy membership requirements to possess an RMM PTC or VTC appointment may not be used for any other purpose while being used in an RMM capacity, including being leased to another member or for trading on the trading floor. For purposes of this Rule, an Exchange membership shall include a transferable regular membership or a Chicago Board of Trade full membership that has effectively been exercised pursuant to Article Fifth(b) of the Certificate of Incorporation.

(e) The Exchange may suspend or terminate any appointment of an RMM in one or more classes under this Rule whenever, in the Exchange's judgment, the interests of a fair and orderly market are best served by such action. An RMM may seek review of any action taken by the Exchange pursuant to this Rule in accordance with Chapter XIX.

(f) RMMs are subject to Rule 8.7.03A with respect to trading in appointed classes. RMMs may not enter quotations in option classes that are not included within their appointment. RMMs may submit orders in classes that are not included within their appointment.]

* * * * * Rule 8.7 - Obligations of Market-Makers

Rule 8.7. (a) No change. (b) Appointment. With respect to each class of option contracts for which [he]a Market-Maker

holds an Appointment under Rule 8.3, a Market-Maker has a continuous obligation to engage, to a reasonable degree under the existing circumstances, in dealings for [his]the Market-Maker’s own


account when there exists, or it is reasonably anticipated that there will exist, a lack of price continuity, a temporary disparity between the supply of and demand for a particular option contract, or a temporary distortion of the price relationships between option contracts of the same class. Without limiting the foregoing, a Market-Maker is expected to perform the following activities in the course of maintaining a fair and orderly market:

(i) To compete with other Market-Makers to improve markets in all series of options classes comprising the Market-Maker's appointment at the trading station where a Market-Maker is physically present or into which a Market-Maker is quoting electronically;

(ii) No change.

(iii) To update market quotations in response to changed market conditions in [his/her]the

Market-Maker’s appointed options classes at the trading station where a Market-Maker is present or at the trading station into which a Market-Maker quotes electronically and to assure that any market quote it causes to be disseminated is accurate.

A. With respect to trading in appointed classes:

(1) Market-Makers who are physically present in [their appointed]a trading station may enter quotes and orders in their appointed classes by public outcry in response to a request for a quote or, in classes in which Hybrid or Hybrid 2.0 is implemented, through an Exchange-approved electronic interface via an Exchange-approved quote generation device.

(2) Market-Makers may also enter quotes and orders in their appointed Hybrid and Hybrid

2.0 classes [from outside of their appointed trading stations (pursuant to Rule 8.3)] through an Exchange-approved electronic interface via an Exchange-approved quote generation device.

(3) Market-Makers[, whether in their appointed trading stations or not,] may also submit

orders for automatic execution in accordance with the requirements of Rules 6.8 or 6.13.

B. No change.

[C. RMMs may enter quotes and orders remotely (i.e., from outside of the physical trading station for the subject class) through an Exchange-approved electronic interface. RMMs may not quote in open outcry.]

(iv) No change.

(c) Classes of Option Contracts other than those to which appointed. With respect to classes of option contracts in which [he]a Market-Maker does not hold an Appointment, a Market-Maker should not engage in transactions for an account in which [he]the Market-Maker has an interest which are disproportionate in relation to, or in derogation of, the performance of his obligations as specified in paragraph (b) of this Rule with respect to those classes of option contracts to which [he]the Market-Maker does hold Appointments. Whenever a Market-Maker enters the trading station for a class of option contracts [located away from his appointed trading station] in other than a floor brokerage capacity, [he]the Market-Maker shall fulfill the obligations established by paragraph (b) of this Rule and, for the rest of the trading day, such Market-Maker may be required to undertake the obligations specified in paragraph (b) of this Rule upon determination by the Order Book Official in accordance with Rule 7.5. Furthermore, Market-Makers should not:


(i) No change.

(ii) No change.

(iii) No change.

(d) Market-Making Obligations in Applicable Hybrid and Hybrid 2.0 Classes The following obligations in this paragraph (d) are only applicable to Market-Makers trading

classes on the CBOE Hybrid System and only in those Hybrid classes and Hybrid 2.0 Classes. As such, this paragraph has no applicability to non-Hybrid classes. [This paragraph is not applicable to Remote Market-Makers, who instead will be subject to the obligations imposed by Rule 8.7(e).] Unless otherwise provided in this Rule, Market-Makers trading classes on the Hybrid System remain subject to all obligations imposed by CBOE Rule 8.7. To the extent another obligation contained elsewhere in Rule 8.7 is inconsistent with an obligation contained in paragraph (d) of Rule 8.7 with respect to a class trading on Hybrid, this paragraph (d) shall govern trading in the Hybrid class.

These requirements are applicable on a per class basis depending upon the percentage of

volume a Market-Maker transacts electronically versus in open outcry. With respect to making this determination, the Exchange will monitor Market-Makers' trading activity every calendar quarter to determine whether they exceed the thresholds established in this paragraph (d). If a Market-Maker exceeds the threshold established below, the obligations contained in (d)(ii) will be effective the next calendar quarter.

For a period of ninety (90) days commencing immediately after a class begins trading on the

Hybrid system, the provisions of paragraph (d)(i) shall govern trading in that class

(i) Market-Maker Trades Less Than 20% Contract Volume Electronically:

If a Market-Maker on the CBOE Hybrid System never transacts more than 20% (i.e., [he] trades 20% or less) of [his]the Market-Maker’s contract volume electronically in an appointed Hybrid class during any calendar quarter, the following provisions shall apply to that Market-Maker with respect to that class:

(A) Quote Widths: With respect to electronic quoting, the Market-Maker will not be required to comply with the quote width requirements of CBOE Rule 8.7(b)(iv) in that class. The effectiveness of this subparagraph (i)(A) shall be in effect in each Hybrid for a period of one year commencing with the date the class begins trading on the Hybrid System.

(B) Continuous Electronic Quoting Obligation: The Market-Maker will not be obligated

to quote electronically in any designated percentage of series within that class. If a Market-Maker quotes electronically, its undecremented quote must be for at least ten contracts ("10-up"), unless the underlying primary market disseminates a 100-share quote, in which case the Market-Maker's undecremented quote may be for as low as 1-contract ("1-up"). The ability to quote 1-up when the underlying primary quotes 100 shares is expressly conditioned on the process being automated (i.e., a Market-Maker may not manually adjust [his]the Market-Maker’s quotes to reflect 1-up sizes). Quotes must automatically return to at least 10-up when the underlying primary market no longer disseminates a 100-share quote. Market-Makers that have not automated this process may not avail themselves of the relief provided herein.


(C) Continuous Open Outcry Quoting Obligation: In response to any request for quote by a floor broker [or DPM representing an order as agent], in-crowd Market-Makers must provide a two-sided market complying with the quote width requirements contained in Rule 8.7(b)(iv) for a minimum of ten contracts for non-broker-dealer orders and one contract for broker-dealer orders.

[(D) In-Person Quoting Requirement: Any volume transacted electronically will not

count towards the Market-Maker's in-person requirement contained in Rule 8.7.03(B).]

(ii) Market-Maker Trades More Than 20% Contract Volume Electronically:

If a Market-Maker on the CBOE Hybrid System transacts more than 20% of [his]the Market-Maker’s contract volume electronically in an appointed Hybrid class during any calendar quarter, commencing the next calendar quarter [he]the Market-Maker will be subject to the following quoting obligations in that class for as long as he remains in that class:

(A) Quote Widths: The Market-Maker must comply with the quote width requirements

contained in Rule 8.7(b)(iv).

(B) Continuous Quoting Obligation: A Market-Maker will be required to maintain continuous electronic quotes (as defined in Rule 1.1(ccc)) in 60% of the series of [his/her] the Market-Maker’s appointed class that have a time to expiration of less than nine months. The initial size of a Market-Maker’s quote must be for at least ten contracts (undecremented size). If the underlying primary market disseminates a 100-share quote, a Market-Maker's undecremented quote may be for as low as 1-contract ("1-up"), however, this ability is expressly conditioned on the process being automated (i.e., a Market-Maker may not manually adjust [his]the Market-Maker’s quotes to reflect 1-up sizes). Quotes must automatically return to at least 10-up when the underlying primary market no longer disseminates a 100-share quote. Market-Makers that have not automated this process may not avail themselves of the relief provided herein.

(C) Continuous Open Outcry Quoting Obligation: In response to any request for quote by

a member or PAR Official, in-crowd Market-Makers must provide a two-sided market complying with the current quote width requirements contained in Rule 8.7(b)(iv) for a minimum of ten contracts for non-broker-dealer orders and one contract for broker-dealer orders.

(iii) The obligations and duties of Market-Makers set forth in paragraphs (d)(i) and (d)(ii) apply to a Market-Maker on a per class basis and only when the Market-Maker is quoting in a particular class on a given trading day (e.g., if on a given trading day a Market-Maker is quoting in 1 of his/her 10 appointed classes, the Market-Maker has quote width, continuous electronic quoting and, to the extent the Market-Maker is present in the trading crowd, continuous open outcry quoting obligations in that class; the continuous electronic quoting obligation in subparagraph (d)(ii)(B) applies to 60% of the series of that class that have a time to expiration of less than nine months while the Market-Maker is quoting). The obligations and duties are not applicable to an appointed class if a Market-Maker is not quoting in that appointed class.

(iv) A Market-Maker that is in the trading crowd but that is not quoting electronically or in open outcry in an appointed class must provide an open outcry two-sided market complying with the current quote width requirements contained in Rule 8.7(b)(iv) for a minimum of ten contracts for non-broker-dealer orders and one contract for broker-dealer orders in response to a request for


quote by a member or PAR Official directed at that Market-Maker or when, in response to a general request for a quote by a member of PAR Official, a market is not then being vocalized by a reasonable number of Market-Makers. A Market-Maker may also be called upon by an Exchange official designated by the Board of Directors to submit a single quote or maintain continuous quotes in one or more series of a class to which the Market-Maker is appointed whenever, in the judgment of such official, it is necessary to do so in the interest of maintaining a fair and orderly market.

[(e) Obligations of Remote Market-Makers (RMMs): The following obligations apply only to

RMMs: (i) An RMM must provide legal-width, continuous electronic quotes (as defined in Rule 1.1

(ccc)) in 60% of the series of its appointed class that have a time to expiration of less than nine months. The initial size of an RMM's quote must be for at least ten contracts (undecremented size).

If the underlying primary market disseminates a 100-share quote, an RMM's undecremented quote may be for as low as 1-contract ("1-up"), however, this ability is expressly conditioned on the process being automated (i.e., an RMM may not manually adjust its quotes to reflect 1-up sizes). Quotes must automatically return to at least 10-up when the underlying primary market no longer disseminates a 100-share quote. RMMs that have not automated this process may not avail themselves of the relief provided herein.

The obligations and duties of an RMM set forth in this paragraph (e)(i) apply to an RMM on a per class basis and only when the RMM is logged on to the CBOE Hybrid system and quoting electronically in a particular class on a given trading day (e.g., if on a given trading day an RMM is logged in and quoting electronically in 1 of its 10 appointed classes, the RMM has quote width and continuous electronic quoting obligations in that class; the continuous electronic quoting obligation applies to 60% of the series of that class that have a time to expiration of less than nine months while the RMM is logged on to the CBOE Hybrid system and quoting electronically in that class). The obligations and duties are not applicable to an appointed class if an RMM is not logged in and quoting electronically in that appointed class.

(ii) An RMM may be called upon by an Exchange official designated by the Board of Directors to submit a single electronic quote or maintain continuous electronic quotes in one or more series of a class to which the RMM is appointed whenever, in the judgment of such official, it is necessary to do so in the interest of maintaining a fair and orderly market.

(iii) All Exchange rules applicable to Market-Makers will also apply to RMMs unless otherwise provided or unless the context clearly indicates otherwise. RMMs are not considered trading crowd members, except as provided in Rule 8.60 (Evaluation of Trading Crowd Performance) or unless the context clearly indicates otherwise.

(iv) The evaluation of RMM performance shall be pursuant to Rule 8.61.

(v) Failure by an RMM to engage in a course of dealings as specified above will subject the RMM to disciplinary action or suspension or revocation of registration by the Exchange in one or more of the option classes in which the RMM holds an appointment.

(vi) RMMs shall maintain information barriers that are reasonably designed to prevent the

misuse of material, non-public information with any affiliates that may conduct a brokerage business


in option classes allocated to the RMM or that may act as specialist or Market-Maker in any security underlying options allocated to the RMM, and otherwise comply with the requirements of Rule 4.18 regarding the misuse of material non-public information.] . . . Interpretations and Policies: .01 - .02 No change. .03 For purposes of Rule 8.7, the following percentage requirements apply to Market-Maker trading activity for each quarter of a calendar year, except for unusual circumstances as determined by the appropriate Market Performance Committee. The appropriate Market Performance Committee may assign a weighting factor based on volume to one or more classes or series of option contracts in connection with these requirements.

A. Trading in Appointed Classes: Respecting distribution of trading activity, at least 75 percent of a Market-Maker's total contract volume must be in option classes to which [he]the Market-Maker has been appointed pursuant to Rule 8.3. Trading in nonappointed classes of options at the request of a Floor Official, Order Book Official, Board Broker or DPM shall be deemed to be trading in appointed classes for purposes of this Interpretation.

B. In-Person Requirements for Market-Makers in non-Hybrid and Hybrid 3.0 Classes: Respecting the manner in which Market-Maker transactions may be executed in non-Hybrid and Hybrid 3.0 classes, a Market-Maker must execute in person, and not through the use of orders, at least 25 percent of [his]the Market-Maker’s total transactions, provided, however, that for any calendar quarter in which a Market-Maker receives Market-Maker treatment for off-floor orders in accordance with Rule 8.1, in addition to satisfying the requirements of paragraph A of this Interpretation .03, the Market-Maker must execute in person, and not through the use of orders, at least 80 percent of [his]the Market-Maker’s total transactions. The off-floor orders for which a Market-Maker receives Market-Maker treatment shall be subject to the obligations of Rule 8.7(a) and in general shall be effected for the purpose of hedging, reducing risk of, rebalancing or liquidating open positions of the Market-Maker. The appropriate Market Performance Committee may exempt one or more options classes from this calculation. 04. The obligations of a Market-Maker with respect to those classes of option contracts to which [he]the Market-Maker holds an Appointment shall take precedence over his other Market-Maker obligations. .05 - .08 No change. .09 The obligations and duties of Market-Makers set forth in Rule 8.7 paragraphs (a) and (b) apply to an in-crowd Market-Maker only when the in-crowd Market-Maker is present in the trading crowd and to a Market-Maker electronically quoting [from outside of his/her appointed trading station (in accordance with Rule 8.3(c)) or to an RMM] only when the Market-Maker [or RMM] is logged on to the CBOE Hybrid system. Market-Makers remain subject to Rule 7.5 while on the floor of the Exchange. .10 - .12 No change.

* * * * * Rule 8.13 - Preferred Market-Maker Program


Rule 8.13. (a) Generally. The Exchange may allow, on a class-by-class basis, for the receipt of marketable orders, through the Exchange's Order Routing System when the Exchange's disseminated quote is the NBBO, that carry a designation from the member transmitting the order that specifies a Market-Maker in that class as the "Preferred Market-Maker" for that order. A qualifying recipient of a Preferred Market-Maker order shall be afforded a participation entitlement as set forth in subparagraph (c) below.

(b) Eligibility. Any Exchange Market-Maker type (e.g. [Remote Market-Maker,] Lead Market-Maker, and Designated Primary Market-Maker) may be designated as a Preferred Market-Maker, however, a recipient of a Preferred Market-Maker order will only receive a participation entitlement for such order if the following provisions are met:

(i) – (iii) No change.

(c) No change.

* * * * * Rule 8.61 [Evaluation of Remote Market-Makers]

Rule 8.61. Reserved. [a. Review: The appropriate Market Performance Committee ("MPC") will periodically conduct an evaluation of Remote Market-Makers to determine whether they have fulfilled performance standards relating to, among other things, quality of markets, competition among Market-Makers, observance of ethical standards, and administrative factors. The appropriate MPC may consider any relevant information including, but not limited to, the results of a Remote Market-Maker evaluation, trading data, a Remote Market-Maker's regulatory history and such other factors and data as may be pertinent in the circumstances.

b. Termination and other limitations. The appropriate MPC may terminate, place conditions upon, or otherwise limit a member's approval to act as an RMM on the same basis that Market-Maker privileges may be terminated and/or conditioned under Rules 8.60. If a member's approval to act as an RMM is terminated, conditioned, or otherwise limited by the appropriate MPC pursuant to this Rule, the member may seek review of that decision under Chapter XIX of the Rules.]

* * * * * Rule 8.85 – DPM Obligations

Rule 8.85. (a)(i) – (iv) No change. (v) trade in all securities allocated to the DPM only in the capacity of a DPM and not in any other

capacity; except that as part of a pilot program until March 14, 2009, not allow more than one Market-Maker affiliated with an Off-Floor DPM to trade on CBOE's trading floor in any specific option class allocated to the Off-Floor DPM and provided such Market-Maker is trading on a separate membership (absent the pilot program, an Off-Floor DPM may not allow any Market-Makers affiliated with the Off-Floor DPM to trade on CBOE's trading floor in any class allocated to the Off-Floor DPM) and provided the Off-Floor DPM does not have a DPM Designee trading in open outcry in the option classes allocated to the Off-Floor DPM;

(vi) – (xii) No change.


(b) - (d) No change. (e) Requirement to Own Membership. Each DPM organization shall own one Exchange

membership, and own or lease such additional Exchange memberships as may be necessary based on the aggregate "appointment cost" for the classes allocated to the DPM organization. Each membership owned or leased by the DPM organization has an appointment credit of 1.0. The appointment costs for the classes allocated to the DPM organization are:

(i) – (iii) No change;

For example, if the DPM organization has been allocated such number of option classes that its aggregate appointment cost is 1.6, the DPM organization would be required to own at least one Exchange membership, and own or lease one additional Exchange membership. The Exchange will rebalance the "tiers" set forth in Rule 8.3(c)(i), excluding the "AA" and "A+" tiers, once each calendar quarter, which may result in additions or deletions to their composition. When a class changes "tiers" it will be assigned the "appointment cost" of that tier. Upon rebalancing, each DPM organization will be required to own or lease the appropriate number of Exchange memberships reflecting the revised "appointment costs" of the classes that have been allocated to it. Additionally, a DPM organization is required to own or lease the appropriate number of Exchange memberships at the time a new option class allocated to it pursuant to Rule 8.95 begins trading.

An Exchange membership shall include a transferable regular membership or a Chicago Board of Trade full membership that has effectively been exercised pursuant to Article Fifth(b) of the Certificate of Incorporation. The same Exchange membership(s) may not be used to satisfy this ownership requirement for different DPM organizations. In the event the member organization approved as the DPM organization is also approved to act as [an RMM]Market-Maker and/or e-DPM, and has excess membership capacity above the aggregate appointment cost for the classes allocated to it as the DPM, the member organization may utilize the excess membership capacity to quote electronically in an appropriate number of Hybrid 2.0 Classes in the capacity of a [RMM]Market-Maker and not trade in open outcry, or to quote electronically in the Hybrid 2.0 Classes in which it is appointed an e-DPM. For example, if the DPM organization has been allocated such number of option classes that its aggregate appointment cost is 1.6, the member organization could request an appointment as [an RMM]a Market-Maker in any combination of Hybrid 2.0 Classes whose aggregate "appointment cost" does not exceed .40. The member organization will not function as a DPM in any of these additional classes. In the event the member organization utilizes any excess membership capacity to quote electronically in some additional Hybrid 2.0 Classes as a Market-Maker [an RMM] or e-DPM, it must comply with the provisions of Rules [8.4(c)]8.3 and Rule 8.93(vii), respectively.

* * * * * Rule 8.92 - Electronic DPM Program

Rule 8.92. (a) – (c) No change.

(d) Membership Requirement. Each e-DPM organization is required to (i) own one Exchange membership, and (ii) own or lease such additional Exchange memberships as may be necessary based on the aggregate "appointment cost" for the classes allocated to the e-DPM organization. Each membership owned or leased by the e-DPM organization has an appointment credit of 1.0. The appointment costs for Hybrid 2.0 Classes allocated to e-DPMs are categorized by "tiers" and are set forth in Rule 8.3(c)(i) [and Rule 8.4(d)]. For example, if the e-DPM organization has been allocated


such number of option classes that its aggregate appointment cost is 6.6, the e-DPM organization would be required to own at least one Exchange membership, and own or lease six additional Exchange memberships.

As noted in Rule 8.3(c) [and Rule 8.4(d)], the Exchange will rebalance the "tiers" (excluding the "AA" and "A+" tiers) once each calendar quarter, which may result in additions or deletions to their composition. When a class changes "tiers" it will be assigned the "appointment cost" of that tier. Upon rebalancing, each e-DPM organization will be required to own or lease the appropriate number of Exchange memberships reflecting the revised "appointment costs" of the classes that have been allocated to it.

An Exchange membership shall include a transferable regular membership or a Chicago Board of Trade full membership that has effectively been exercised pursuant to Article Fifth(b) of the Certificate of Incorporation. Except as provided below, memberships used to satisfy this requirement may not be used for any other purpose including being leased to another member or for trading on the trading floor. For purposes of this Rule, the term "product" refers to all options of the same single underlying security/value. An e-DPM organization shall be deemed to own or lease an Exchange membership for purposes of this paragraph (d) if its parent company owns or leases seats that are used solely for the e-DPM organization's e-DPM activities. However, in the event the member organization approved as the e-DPM organization is also approved to act as [an RMM]a Market-Maker and/or DPM, and has excess membership capacity above the aggregate appointment cost for the classes allocated to it as the e-DPM, the member organization may utilize the excess membership capacity to quote electronically in an appropriate number of Hybrid 2.0 Classes in the capacity of a [Remote] Market-Maker [("RMM")] and not trade in open outcry, and/or to quote electronically and trade in open outcry in the classes in which it is appointed a DPM. For example, if the member organization has been allocated such number of option classes that its aggregate appointment cost is 6.6, the member organization could request an appointment as [an RMM]a Market-Maker in any combination of Hybrid 2.0 Classes whose aggregate "appointment cost" does not exceed .40. The member organization will not function as an e-DPM in any of these additional classes. In the event the member organization utilizes any excess membership capacity to quote electronically in some additional Hybrid 2.0 Classes as [an RMM]a Market-Maker or DPM, it must comply with the provisions of Rules [8.4(c)]8.3 and Rule 8.85(a)(v), respectively.

* * * * * Rule 8.93 – e-DPM Obligations Rule 8.93. Each e-DPM shall fulfill all of the obligations of a Market-Maker and of a DPM under the Rules (except those contained in Rules 8.85(a)(i), (iv), (v), (vii)- (x), and (xii), 8.85(c)(i) and (v), and 8.85(e)), and shall satisfy each of the following requirements.

(i) – (vi) No change.

(vii) as part of a pilot program until March 14, 2009, not allow more than one Market-Maker affiliated with the e-DPM organization to trade on CBOE's trading floor in any specific option class allocated to the e-DPM and provided such Market-Maker is trading on a separate membership (absent the pilot program, an e-DPM may not allow any Market-Makers affiliated with the e-DPM organization to trade on CBOE's trading floor in any class allocated to the e-DPM);

(viii) – (ix) No change.

_________________________________________________________________________________


EFFECTIVE-ON-FILING RULE CHANGE(S) The following rule filing(s) were submitted to the SEC “effective on filing,” and may have taken effect pursuant to Section 19(b)(3) of the Securities Exchange Act. They will remain in effect barring further action by the SEC within 60 days after their publication in the Federal Register. Below, any additions to rule text are underlined, and any deletions are [bracketed]. Copies are available on the CBOE public website at www.cboe.com/legal/effectivefiling.aspx. _________________________________________________________________________________ SR-CBOE-2008-48 CBOE Stock Exchange On April 22, 2008, the Exchange filed Rule Change File No. SR-CBOE-2008-48, which filing proposes to modify the manner in which odd-lot orders are handled on CBSX. Any questions regarding the rule change may be directed to Angelo Evangelou, Legal Division, at 312-786-7464. The rule text is shown below and the rule filing is available at: http://www.cboe.org/publish/RuleFilingsSEC/SR-CBOE-2008-048.pdf. Rule 52.8 Processing of Odd-Lot Orders [(a) Market Odd-Lot orders. Market Odd-lot orders shall execute at the best price being quoted by CBSX Market-Makers on the CBSX System. All odd-lot market orders entered prior to the opening of trading will automatically receive the opening price. (b) Limit Odd-Lot orders. Odd-lot limit orders shall be maintained by the CBSX System until they become marketable against a CBSX Market-Maker quote.] Upon receipt, Odd-Lot orders (including the Odd-Lot portion of a mixed-lot order) will be displayed to CBSX Traders for a period of time not to exceed 1 second as determined by CBSX. The indication will also provide the applicable NBBO price for that product. Responses to trade against an Odd-Lot order may only be submitted at the applicable NBBO price or better and must be for the full size of the Odd-Lot order. The first CBSX Trader to respond will trade against the Odd-Lot order. If no responses are received, the order shall execute at the best price being quoted by CBSX Market-Makers on the CBSX System. Odd-Lot orders with limit price that are not marketable will be entered into an Odd-Lot Order book where CBSX Traders may submit orders to trade against resting interest. . . . Interpretations and Policies: .01 The odd lot portion of orders/trades will not be disseminated by CBSX for quotations or last sale reporting. .02 Users may also submit Odd-Lot Orders that will cancel if an NBBO or better execution is not attained. _________________________________________________________________________________ SR-CBOE-2008-47 Fee Schedule On April 18, 2008, the Exchange filed Rule Change File No. SR-CBOE-2008-47, which filing proposes to clarify the CBSX DPM maker rebate. Any questions regarding the rule change may be directed to Angelo Evangelou, Legal Division, at 312-786-7464. The rule filing is available at http://www.cboe.org/publish/RuleFilingsSEC/SR-CBOE-2008-047.pdf. _________________________________________________________________________________


http://www.cboe.com/legal/effectivefiling.aspx



SR-CBOE-2008-45 Fee Schedule On April 15, 2008, the Exchange filed Rule Change File No. SR-CBOE-2008-45, which filing proposes to modify the taker fee for intermarket sweep orders and immediate or cancel orders sent to CBSX. Any questions regarding the rule change may be directed to Angelo Evangelou, Legal Division, at 312-786-7464. The rule filing is available at: http://www.cboe.org/publish/RuleFilingsSEC/SR-CBOE-2008-045.pdf. _________________________________________________________________________________ SR-CBOE-2008-44 Equity Linked Term Notes On April 15, 2008, the Exchange filed Rule Change File No. SR-CBOE-2008-44, which filing proposes to make a minor clarification to the listing rule for Equity Linked Term Notes. Any questions regarding the rule change may be directed to Angelo Evangelou, Legal Division, at 312-786-7464. The rule text is shown below and the rule filing is available at http://www.cboe.org/publish/RuleFilingsSEC/SR-CBOE-2008-044.pdf. Rule 31.5. Criteria for Eligibility of Securities

* * * * * I. Equity Linked Term Notes

Notes that are linked, in whole or in part, to the market performance of a common stock or a non-convertible preferred stock will be considered for listing and trading, pursuant to Rule 19b-4(e) under the Exchange Act, if they satisfy the following criteria:

(a) – (i) No change.

. . . Interpretations and Policies:

.01 - .08 No change. _________________________________________________________________________________ PROPOSED RULE CHANGE(S) Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934, as amended (“the Act”), and Rule 19b-4 thereunder, the Exchange has filed the following proposed rule change(s) with the Securities and Exchange Commission (“SEC”). Below, any additions to rule text are underlined, and any deletions are [bracketed]. Copies of the rule change filing(s) are available at www.cboe.com/legal/submittedsecfilings.aspx. Members may submit written comments to the Legal Division. The effective date of a proposed rule change will be the date of approval by the SEC, unless otherwise noted. _________________________________________________________________________________ SR-CBOE-2008-46 Hybrid Agency Liaison On April 16, 2008, the Exchange filed Rule Change File No. SR-CBOE-2008-46, which filing proposes to modify the Hybrid Agency Liaison so that the Exchange may determine on a class-by-class basis to permit electronic exposure of HAL orders to all CBOE members. Any questions




http://www.cboe.com/legal/submittedsecfilings.aspx

regarding the rule change may be directed to Jennifer Yeadon, Legal Division, at 312-786-7466. The rule text is shown below and the rule filing is available at: http://www.cboe.org/publish/RuleFilingsSEC/SR-CBOE-2008-046.pdf.

Rule 6.14 - Hybrid Agency Liaison (HAL)

* * * * *


* * * * *

.03 Notwithstanding paragraphs (b) and (c) above, the Exchange may determine on a class-by-class basis to permit orders received by HAL to be electronically exposed to all members that have elected to receive HAL messages. Each member that submits a response to trade with an order during the exposure or allocation periods shall be entitled to receive an allocation of the order in accordance with the allocation algorithm in effect for the option class pursuant to Rule 6.45A or 6.45B. There shall be no participation entitlement applicable to exposed orders and no public customer priority overlay in effect, and response sizes are limited to the size of the exposed order for allocation purposes. The restriction on disseminating information regarding exposed orders to third parties in Interpretation and Policy .02 shall not apply. _________________________________________________________________________________ SR-CBOE-2008-43 Solicited Auction Mechanism On April 15, 2008, the Exchange filed Rule Change File No. SR-CBOE-2008-43, which filing proposes to modify the Solicitation Auction Mechanism requirements to eliminate the requirement that any solicited contra orders entered to trade against the agency order not be for the account of a CBOE Market-Maker assigned to the option class. Any questions regarding the rule change may be directed to Jennifer Lamie, Legal Division, at 312-786-7476. The rule text is shown below and the rule filing is available at http://www.cboe.org/publish/RuleFilingsSEC/SR-CBOE-2008-043.pdf. Rule 6.74B – Solicitation Auction Mechanism RULE 6.74B. A member that represents agency orders may electronically execute orders it represents as agent (“Agency Order”) against solicited orders provided it submits the Agency Order for electronic execution into the solicitation auction mechanism (the “Auction”) pursuant to this Rule.

* * * * *


* * * * *

.03 Under Rule 6.74B, members may enter contra orders that are solicited. The Auction provides a facility for members that locate liquidity for their customer orders. Members may not use the Auction to circumvent Rules 6.45A.01, 6.45B.01 or 6.74A limiting principal transactions. This may include, but is not limited to, members entering contra orders that are solicited from (a) affiliated broker-dealers, or (b) broker-dealers with which the member has an arrangement that allows the member to realize similar economic benefits from the solicited transaction as it would achieve by executing the customer order in whole or in part as principal. [Additionally, solicited contra orders entered by April 30, 2008 Volume RB19, Number 17 29



members to trade against Agency Orders may not be for the account of a CBOE Market-Maker assigned to the options class.] _________________________________________________________________________________ SR-CBOE-2008-42 Automated Improvement Mechanism On April 15, 2008, the Exchange filed Rule Change File No. SR-CBOE-2008-42, which filing proposes to modify the Automated Improvement Mechanism auction eligibility requirements to eliminate the requirement that there be at least three Market-Makers quoting in the relevant series. Any questions regarding the rule change may be directed to Jennifer Lamie, Legal Division, at 312-786-7576. The rule text is shown below and the rule filing is available at http://www.cboe.org/publish/RuleFilingsSEC/SR-CBOE-2008-042.pdf.

Rule 6.74A – Automated Improvement Mechanism (“AIM”)

* * * * *

(a) Auction Eligibility Requirements. A member (the "Initiating Member") may initiate an Auction provided all of the following are met:

(1) the Agency Order is in a class designated as eligible for AIM Auctions as determined by the appropriate Floor Procedure Committee and within the designated Auction order eligibility size parameters as such size parameters are determined by the appropriate Floor Procedure Committee;

(2) if the Agency Order is for 50 contracts or more, the Initiating member must stop the entire Agency Order as principal or with a solicited order at the better of the NBBO or the Agency Order's limit price (if the order is a limit order); and

(3) if the Agency Order is for less than 50 contracts, the Initiating member must stop the entire Agency Order as principal or with a solicited order at the better of (A) the NBBO price improved by one minimum price improvement increment, which increment shall be determined by the Exchange but may not be smaller than one cent; or (B) the Agency Order's limit price (if the order is a limit order)[; and].

[(4) at least three (3) Market-Makers are quoting in the relevant series.] _________________________________________________________________________________ SR-CBOE-2008-41 Automated Improvement Mechanism On April 15, 2008, the Exchange filed Rule Change File No. SR-CBOE-2008-41, which filing proposes to allow orders for less than 50 contracts to be entered into the Automated Improvement Mechanism at the national best bid or offer. Any questions regarding the rule change may be directed to Jennifer Yeadon, Legal Division, at 312-786-7466. The rule text is shown below and the rule filing is available at http://www.cboe.org/publish/RuleFilingsSEC/SR-CBOE-2008-041.pdf.

Rule 6.74A – Automated Improvement Mechanism (“AIM”)

* * * * *

(a) Auction Eligibility Requirements. A member (the "Initiating Member") may initiate an Auction provided all of the following are met:




(1) the Agency Order is in a class designated as eligible for AIM Auctions as determined by the appropriate Floor Procedure Committee and within the designated Auction order eligibility size parameters as such size parameters are determined by the appropriate Floor Procedure Committee;

(2) [if the Agency Order is for 50 contracts or more,] the Initiating member must stop the entire Agency Order as principal or with a solicited order at the better of the NBBO or the Agency Order's limit price (if the order is a limit order);

[(3) if the Agency Order is for less than 50 contracts, the Initiating member must stop the entire Agency Order as principal or with a solicited order at the better of (A) the NBBO price improved by one minimum price improvement increment, which increment shall be determined by the Exchange but may not be smaller than one cent; or (B) the Agency Order's limit price (if the order is a limit order);] and

[(4)](3) at least three (3) Market-Makers are quoting in the relevant series.

* * * * *

(b) Auction Process. Only one Auction may be ongoing at any given time in a series and Auctions in the same series may not queue or overlap in any manner. The Auction may not be cancelled and shall proceed as follows:

(1) Auction Period and Request for Responses (RFRs). (A) To initiate the Auction, the Initiating Member must mark the Agency Order for

Auction processing, and specify (i) a single price at which it seeks to cross the Agency Order (with principal interest or a solicited order) (a "single-price submission"), or (ii) that it is willing to automatically match as principal the price and size of all Auction responses ("auto-match") in which case the Agency Order will be stopped at the NBBO [(if 50 contracts or greater) or one cent/one minimum increment better than the NBBO (if less than 50 contracts)]. Once the Initiating Member has submitted an Agency Order for processing pursuant to this subparagraph, such submission may not be modified or cancelled.

* * * * *

(G) The minimum price increment for RFR responses and for an Initiating Member's

single price submission shall not be smaller than the minimum price improvement increment, which increment shall be determined by the Exchange but may not be smaller than one cent [established pursuant to subparagraph (a)(3)(A) above].

_________________________________________________________________________________ SR-CBOE-2008-40 Interim Trading Permits On April 9, 2008, the Exchange filed Rule Change File No. SR-CBOE-2008-40, which filing proposes to provide for the issuance of up to 50 interim trading permits. Any questions regarding the rule change may be directed to Arthur Reinstein, Legal Division, at 312-786-7570. The rule text is shown below and the rule filing is available at http://www.cboe.org/publish/RuleFilingsSEC/SR-CBOE-2008-040.pdf.

Chicago Board Options Exchange, Incorporated Constitution ARTICLE I Definitions Section 1.1. Definitions When used in this Constitution, except as expressly otherwise provided or unless the context otherwise requires:




(a) No change. (b) The term "member" means (i) an individual member or a member organization of the Exchange (or a registered nominee of such a member organization) that is a regular member in good standing described in Section 2.1(b) of Article II of the Constitution. [and (ii) a] A CBOE Stock Exchange Permit holder in good standing shall be treated the same as a member except as provided in Sections 2.1(d) and 2.6 of Article II of the Constitution, and except for purposes of paragraph (b) of Article Fifth of the Certificate of Incorporation, Article Tenth of the Certificate of Incorporation, Section 4.1(a) of Article IV of the Constitution, Section 6.1(a) of Article VI of the Constitution, and as may be provided in the Rules. An Interim Trading Permit holder in good standing shall be treated the same as a member except as provided in Sections 2.1(c) and 2.6 of Article II of the Constitution, and except for purposes of paragraph (b) of Article Fifth of the Certificate of Incorporation, Article Tenth of the Certificate of Incorporation, Section 4.1(a) of Article IV of the Constitution, Section 6.1(a) of Article VI of the Constitution, and as may be provided in the Rules. (c) - (e) No change. ARTICLE II Membership Section 2.1. Number of Memberships (a) – (b) No change. (c) [[Reserved for special memberships.]] (1) The Exchange may make available up to 50 Interim Trading Permits in accordance with the Rules. Such permit program may be terminated or modified by the Exchange pursuant to a rule filing submitted to, and approved by, the Commission. (2) Interim Trading Permit holders shall have no interest in the assets or property of the Exchange and no right to share in any distribution by the Exchange. (d) No change.

* * * * * Section 2.6. Voting and Other Rights and Powers Each regular member shall have the voting rights and power provided by law and by the Certificate of Incorporation and the Constitution. Each CBOE Stock Exchange Permit holder and each Interim Trading Permit holder shall have the same voting and petition rights as regular members except that a CBOE Stock Exchange Permit holder and an Interim Trading Permit holder shall have no right to vote or petition concerning [on] (1) issues that relate to Exchange ownership matters, including without limitation [specifically] those matters related to demutualization, mergers, consolidations, dissolution, liquidation, transfer, or conversion of assets of the Exchange, and (2) matters that relate to the Chicago Board of Trade exercise right provided for under paragraph (b) of Article Fifth of the Certificate of Incorporation.

* * * * * ARTICLE IV Nominations Section 4.1. Nominating Committee (a) There shall be a Nominating Committee composed of four members who are primarily engaged in business on the floor of the Exchange in the capacity of a member (floor members); two persons who are officers of member organizations that primarily conduct a non-member public customer business (firm members); two persons each of whom directly or indirectly owns and controls (as defined in Section 6.1(a)) one or more memberships in respect of which he acts solely as lessor (lessor members), at least one of whom is not actively engaged in business as a "broker-dealer" or as a


"person associated with a broker-dealer" as those terms are defined in the Securities Exchange Act of 1934; and two representatives of the public (public members). A CBOE Stock Exchange Permit holder or an officer of a CBOE Stock Exchange Permit holder or an Interim Trading Permit holder or an officer of an Interim Trading Permit holder is eligible for one of the six floor member and firm member positions on the Nominating Committee, provided that the person otherwise satisfies the qualification criteria for the applicable position (notwithstanding that the person is not a regular member or an officer of a regular member). (b) No change.

* * * * *

ARTICLE VI Board of Directors Section 6.1. Number, Election and Term of Office of Directors (a) The Board of Directors shall consist of 22 Directors as described below and the Chairman of the Board, who by virtue of his office shall be a member of the Board. The Directors elected by the membership shall be divided into three classes, which [, commencing with the 2002 annual election meeting,] shall be composed as follows:[1]

Class I shall consist of one member who directly or indirectly owns and controls a membership and is primarily engaged in business on the floor of the Exchange in the capacity of a member (floor director), one person who directly or indirectly owns and controls a membership with respect to which he acts solely as lessor and who is not actively engaged in business as a "broker-dealer" or as a "person associated with a broker-dealer" as those terms are defined in the Securities Exchange Act of 1934, (lessor director), and three persons who are not members and who are not broker-dealers or persons affiliated with broker-dealers (public directors). Class II shall consist of one floor director;[,] one person who functions as a member in any recognized capacity either individually or on behalf of a member organization, [or] who is a CBOE Stock Exchange Permit holder or an executive officer of a CBOE Stock Exchange Permit holder, or who is an Interim Trading Permit holder or executive officer of an Interim Trading Permit holder (at-large director);[,] two persons who are executive officers of member organizations that primarily conduct a non-member public customer business and are not individually engaged in business on the Exchange floor (off-floor directors);[,] and four public directors. Class III shall consist of two floor directors, one at-large director who functions as a member in any recognized capacity either individually or on behalf of a member organization, two off-floor directors and four public directors. The ordinary place of business of at least one of the two off-floor directors in each Class shall be a location more than 80 miles from the Exchange's trading floor. For purposes of this Section 6.1, a person shall be considered to directly own and control a membership only if the person individually and directly owns of record and beneficially all right, title and interest in the membership, and a person shall be considered to indirectly own and control a membership only if the person (A) has the sole and exclusive right to vote the membership and control its sale, and (B) is in possession of and subject to all of the risks and rewards of a direct owner of at least a fifty percent (50%) interest in a membership, either through ownership of an equity

[1 Prior to the 2002 annual election meeting, the three classes of Directors elected by the membership are composed as follows: Class I: one floor director, one at-large director, one lessor director, two off-floor directors, and two public directors; Class II: one floor director, one at-large director, two off-floor directors, and three public directors; Class III: two floor directors, one at-large director, two off-floor directors, and three public directors.] April 30, 2008 Volume RB19, Number 17 33

interest in a member organization or of a beneficial interest in a trust, which in either case is the owner of one or more memberships as permitted under the Rules. (b) No Change.

* * * * * Chicago Board Options Exchange, Incorporated Rules

* * * * *

Rule 2.23. Liability for Payment A member or associated person that does not pay any dues, fees, assessments, charges, fines or other amounts due to the Exchange within 30 days after the same has become payable shall be reported to the Vice Chairman of the Board, who may, after giving reasonable notice to the member or associated person of such arrearages, suspend the member or associated person from membership and association with any member until payment is made. Should payment not be made by a member within 6 months after payment is due, any membership owned by that member may be disposed of by the Exchange in accordance with Rule 3.14(b) and any CBOE Stock Exchange Permit and Interim Trading Permit held by that member may be revoked by the Exchange. A former member or associated person that does not pay any dues, fees, assessments, charges, fines or other amounts due to the Exchange within 30 days after the same has become payable shall be reported to the Vice Chairman of the Board, who may, after giving reasonable notice to the former member or associated person of such arrearages, bar the former member or associated person from becoming a member and associated person until payment is made. . . . Interpretations and Policies: .01 - .02 No Change.

* * * * *

Rule 3.2. Qualifications and Membership Statuses of Individual Members (a) – (b) No change. (c) Every individual member who is a lessee, a Chicago Board of Trade exerciser, a holder of an Interim Trading Permit, or an owner (who is not a lessor) must have an authorized trading function. An individual member is deemed to have an authorized trading function if the member is approved by the Membership Committee to act as a Market-Maker, Floor Broker, or nominee or person registered for an e-DPM organization. In addition, every individual member who is a holder of a CBOE Stock Exchange Permit must have an authorized trading function in accordance with Rule 50.3. . . . Interpretations and Policies: .01 No change. Rule 3.3. Qualifications and Membership Statuses of Member Organizations (a) - (b) No change. (c) A member organization that is a Clearing Member or an order service firm is required either to possess at least one membership for which the organization is not a lessor or to hold at least one Interim Trading Permit. (d) No change.


. . . Interpretations and Policies: .01 - .02 No Change.

* * * * *

Rule 3.8. Nominees and Members Who Register Their Memberships for Member Organizations (a) Each member organization that is the owner of a membership for which the member organization will not be acting as a lessor, each member organization that is the holder of an Interim Trading Permit, and each member organization that is a lessee of a membership shall be subject to the following provisions: (i) the member organization must designate an individual nominee to represent the organization with respect to that membership or Interim Trading Permit in all matters relating to the Exchange; (ii) if the member organization is the owner or lessee of more than one such membership, or the holder of more than one such Interim Trading Permit, the member organization may designate one individual to be the nominee for all memberships and Interim Trading Permits utilized by the organization. However, for each membership and Interim Trading Permit utilized for trading in open outcry on the trading floor, the organization must designate a different individual to be the nominee for each of the memberships or Interim Trading Permits; (iii) each nominee of a member organization designated pursuant to subparagraph (a)(i) of this Rule, except for a nominee of a member organization approved solely as a Clearing Member and/or to transact business with the public pursuant to Rule 9.1, is required to have an authorized trading function; (iv) each nominee of a member organization designated pursuant to subparagraph (a)(i) of this Rule must be approved for membership in accordance with the Rules; and (v) each nominee of a member organization designated pursuant to subparagraph (a)(i) of this Rule who is approved for membership shall be deemed to be an individual member. (b) – (f) No change. (g) A member organization may designate one or more inactive nominees. An "inactive nominee" of a member organization is an individual who is eligible to become an effective nominee of that organization with respect to any Interim Trading Permit held by the organization or any membership for which the organization is either an owner (and not a lessor) or is a lessee. The following requirements shall apply to inactive nominees: (i) - (iv) No changes. . . . Interpretations and Policies: .01 No change.

* * * * * Rule 3.19. Termination from Membership The membership status of a member shall automatically terminate at such time that the member does not either possess a membership through ownership, lease, or registration of a membership to the member or hold a CBOE Stock Exchange Permit or an Interim Trading Permit. The membership of a member organization shall also automatically terminate at such time that the member organization has no nominee or person who has registered his or her membership for the member organization. Notwithstanding the foregoing, if the Exchange determines that there are extenuating circumstances, the Exchange may permit a member to retain the member's membership status for such period of time


as the Exchange deems reasonably necessary to enable the member to obtain a membership, a CBOE Stock Exchange Permit (subject to the requirements in Rule 3.26), an Interim Trading Permit (subject to the requirements in Rule 3.27), a substitute nominee, or a substitute person to register his or her membership for the member, as applicable. . . . Interpretations and Policies: .01 - .02 No change.

* * * * *

Rule 3.24. Member Death Benefit (a) – (b) No change. (c) For the purposes of this Rule, the term "active member" shall mean any individual member who is a nominee of a member organization, a Chicago Board of Trade exerciser, a lessee of an Exchange membership, an individual who is holder of an Interim Trading Permit or an owner of an Exchange membership that is not being leased to a lessee. (d) – (f) No change.

* * * * * Rule 3.26. CBOE Stock Exchange (CBSX) Permit Program (a) – (b) No change. (c) Privileges. CBSX Permit holders have full trading privileges on CBSX. CBSX Permit holders are not entitled to trade options on the Exchange or to enter option trading crowds on the Exchange's trading floor. Except as provided in this Rule and Sections 2.1(d) and 2.6 of the Constitution, [and] except for purposes of Article Fifth(b) and Article Tenth of the Certificate of Incorporation and Sections 4.1(a) and 6.1(a) of the Constitution, and notwithstanding any references in the Rules suggesting that CBSX Permit holders are members under the Rules, CBSX Permit holders are treated the same as members [deemed "members"] for purposes of the Certificate of Incorporation, Constitution, and Rules. An organization that holds a CBSX Permit or that has a CBSX Permit registered for it shall be treated the same as a “member organization” for purposes of the Rules. (d) No change. (e) Limitations. (i) A CBSX Permit holder shall have the same voting and petition rights as regular members except that a CBSX Permit holder shall have no right to vote or petition on (1) issues that relate to Exchange ownership matters, specifically those matters related to demutualization, mergers, consolidations, dissolution, liquidation, transfer, or conversion of assets of the Exchange, and (2) matters that relate to the Chicago Board of Trade exercise right provided for under Article Fifth(b) of the Certificate of Incorporation. The holding of a CBSX Permit does not satisfy the requirement in Section 6.1(a) of the Constitution to own and control a membership for purposes of the definitions of floor director and lessor director in that section. (ii) – (v) No change. Rule 3.27. [Reserved] Interim Trading Permits [Reserved] (a) General. The Exchange shall have the authority to issue up to 50 Interim Trading Permits, which shall be subject to the terms and conditions in paragraphs (c) – (h) of this Rule 3.27. (b) Issuances of Interim Trading Permits. The Exchange may issue one or more Interim Trading Permits in accordance with the procedures set forth in this paragraph. The Exchange may issue an Interim Trading Permit pursuant to this paragraph only if it determines in its sole discretion that there


are insufficient transferable Exchange memberships available for lease at that time at a rate reasonably related to the indicative lease rate to meet existing demand for such leases, and that it would be in the interest of fair and orderly markets to provide additional trading access under the circumstances. The “indicative lease rate” shall be the highest clearing firm floating monthly rate of the Clearing Members that assist in facilitating at least 10% of the transferable membership leases. The “clearing firm floating monthly rate” shall be the floating rate that a Clearing Member designates, in connection with transferable membership leases that the Clearing Member assisted in facilitating, for leases that utilize that monthly rate. In the event the Exchange determines to issue Interim Trading Permits pursuant to this paragraph, the Exchange shall announce the number of Interim Trading Permits that the Exchange determines to make available, that the Exchange is taking applications for such permits, the process the Exchange will follow in issuing such permits, and the beginning and ending dates during which period of time individuals and organizations must submit applications for such permits. An individual or organization must be approved and satisfy all requirements for membership in the Exchange to be eligible to apply for an Interim Trading Permit to be issued pursuant to this paragraph. An individual will be eligible to receive no more than one Interim Trading Permit in connection with an issuance of Interim Trading Permits pursuant to this paragraph, with a maximum of eight such permits for a member organization and individuals and member organizations affiliated with that member organization in connection with that issuance. Each issuance of Interim Trading Permits pursuant to this paragraph shall occur in accordance with one of the following processes: (i) Random Lottery Process. After the deadline for applications has passed, the Exchange through a random lottery process shall issue a number of Interim Trading Permits to applicants equal to the number of Interim Trading Permits that the Exchange announced it would make available. (ii) Order in Time Process. After the deadline for applications has passed, the Exchange shall issue an Interim Trading Permit to each applicant who applied for such a permit in the order in time that such applicant applied, until the number of Interim Trading Permits that the Exchange announced it would make available have been issued. (iii) Other Process. The Exchange shall have the authority to modify the processes described in subparagraphs (b)(i) and (b)(ii) of this Rule 3.27 or to establish any other process to issue Interim Trading Permits pursuant to a rule filing submitted to the Commission under Section 19(b) of the Act. (c) Duration of Interim Trading Permits. An Interim Trading Permit issued pursuant to this Rule 3.27 shall remain in effect until the earlier of one of the following events: (i) a transaction is consummated pursuant to which either the Exchange is converted into a stock corporation or memberships in the Exchange are converted into stock, (ii) the holder of the Interim Trading Permit notifies the Exchange in a form and manner prescribed by the Exchange that the holder is terminating that Interim Trading Permit, (iii) the Interim Trading Permit is terminated as a result of a regulatory action by the Exchange, or (iv) the Exchange terminates all Interim Trading Permits through a rule filing submitted to, and approved by, the Commission pursuant to Section 19(b) of the Act. A holder of an Interim Trading Permit that fails to notify the Exchange that the holder is terminating that Interim Trading Permit by the fifteenth day of the month shall be required to pay to the Exchange an amount equal to the following month’s monthly access fee for an Interim Trading Permit. If an Interim Trading Permit is terminated, the Exchange may reissue that permit under the circumstances and subject to the provisions of paragraph (b) of this Rule 3.27. (d) Transfer to Leases. To the extent that one or more lessors notify the Exchange that they have transferable Exchange memberships available for lease (“open leases”) at a rate reasonably related to the indicative lease rate as determined by the Exchange in its sole discretion, the Exchange shall endeavor to facilitate the transfer of Interim Trading Permit holders to those open leases. In the event


the Exchange receives such a notification, the Exchange shall notify each Interim Trading Permit holder of the number of open leases and the names of the lessors with those open leases. As part of that notification by the Exchange, the Exchange will advise each Interim Trading Permit holder that the holder may contact those lessors if the holder is interested in transferring to an open lease. If, after a reasonable period of time following this process, such a lessor notifies the Exchange that the lessor continues to have an open lease, the Exchange shall compensate that lessor through a monthly payment equal to the indicative lease rate, provided that lessor is offering for lease the transferable membership subject to the open lease at a rate reasonably related to the indicative lease rate as determined by the Exchange in its sole discretion. If the indicative lease rate changes, the Exchange may modify that monthly payment from time to time so that the payment is equal to that rate. In the event the Exchange compensates such a lessor, the Exchange shall not enter into, nor be deemed to have entered into, a lease or other agreement with that lessor, and shall have no rights with respect to that lessor’s membership, including without limitation the right to trade on the Exchange or the right to vote. That lessor may at any time thereafter lease that membership to any qualified individual or organization and shall notify the Exchange in the event of such a lease. The Exchange shall cease compensating that lessor if it receives such a notification or otherwise learns that lessor has leased that membership, and may recoup from that lessor any compensation paid pursuant to this paragraph to that lessor for any period of time during which that lessor has leased that membership. The Exchange also may cease compensating that lessor if the Exchange learns an offer to lease that membership at a rate reasonably related to the indicative lease rate, as determined by the Exchange in its sole discretion, has been declined by that lessor. Notwithstanding the foregoing, in the event that the number of lessors receiving compensation pursuant to this paragraph becomes greater than the number of outstanding Interim Trading Permits, the Exchange shall compensate each such lessor, on a monthly basis, in an amount equal to the current indicative lease rate as determined by the Exchange in its sole discretion times the number of holders of such permits divided by the number of such lessors. The Exchange shall cease compensating such lessors pursuant to this paragraph during any period when there are no Interim Trading Permits currently outstanding. (e) Privileges. (i) An Interim Trading Permit provides the same trading privileges on the Exchange as a transferable Exchange membership, including the right to trade on the CBOE Stock Exchange (CBSX) and, as provided in Rule 3.29, the trading rights on the Exchange necessary to become a member of OneChicago, LLC. Except as provided in this Rule and Sections 2.1(c) and 2.6 of Article II of the Constitution, except for purposes of Article Fifth(b) and Article Tenth of the Certificate of Incorporation and Section 4.1(a) of Article IV and Section 6.1(a) of Article VI of the Constitution, and notwithstanding any references in the Rules suggesting that Interim Trading Permit holders are members under the Rules, Interim Trading Permit holders in good standing are treated the same as members for purposes of the Certificate of Incorporation, Constitution, and Rules. An organization that holds an Interim Trading Permit or that has an Interim Trading Permit registered for it shall be treated the same as a “member organization” for purposes of the Rules. Except as provided in the Constitution, an Interim Trading Permit holder will be eligible to serve on any Exchange committee to the same extent that a member can serve on that committee. (ii) If the Exchange is converted into a stock corporation or if memberships in the Exchange are converted into stock, each holder of an Interim Trading Permit as of the consummation of such transaction shall be entitled to receive a trading permit on the same terms as the holder of a transferable Exchange membership who is eligible to receive a trading permit in connection with that transaction. (f) Obligations. (i) An Interim Trading Permit holder and all of its associated persons shall comply with, and be subject to, Exchange Rules to the same extent that holders of transferable Exchange memberships and all of their associated persons are obligated to comply with, and are subject to, Exchange Rules.


Without limiting the generality of the foregoing, an Interim Trading Permit holder and all of its associated persons shall be subject to the disciplinary, appeals, and arbitration jurisdiction and Rules of the Exchange and shall be entitled to the procedural rights under those rules to the same extent that holders of transferable Exchange memberships and all of their associated persons are subject to such jurisdiction and Rules and are entitled to such procedural rights. (ii) An Interim Trading Permit holder shall remain in good standing and continue to pay all applicable fees, dues, assessments and other like charges that are assessed against Exchange members. An Interim Trading Permit holder shall pay to the Exchange a monthly access fee set by the Exchange. Such access fee shall be due and payable in accordance with the provisions of the Exchange Fee Schedule and shall be the same for all Interim Trading Permit holders. The Exchange shall file a proposed rule change with the Commission under Section 19(b)(3)(A) of the Act to implement the monthly access fee. The Exchange also shall file a proposed rule change with the Commission under Section 19(b)(3)(A) of the Act any time it adjusts that fee. (g) Limitations. (i) An Interim Trading Permit holder shall have the same voting and petition rights as regular members, except that an Interim Trading Permit holder shall have no right to vote or petition on (1) issues that relate to Exchange ownership matters, including without limitation those matters related to demutualization, mergers, consolidations, dissolution, liquidation, transfer, or conversion of assets of the Exchange, or (2) matters that relate to the exercise right provided for under Article Fifth(b) of the Certificate of Incorporation. (ii) Interim Trading Permit holders shall have no interest in the assets or property of the Exchange, and shall have no right to share in any distribution by the Exchange. (iii) Interim Trading Permits are non-transferable, except that in a form and manner prescribed by the Exchange (1) a member organization may change the designation of the nominee in respect of each Interim Trading Permit it holds, and (2) an individual Interim Trading Permit holder at any time after the issuance of that Interim Trading Permit may transfer that Interim Trading Permit to a member organization with which such individual is then associated. (h) Conforming changes. (i)(A) An Interim Trading Permit shall count as one membership for purposes of the Participation Entitlement provisions in Rule 6.45A(a)(i)(C)(1) and Rule 6.45B(a)(ii)(C)(1), except that an Interim Trading Permit shall not satisfy the requirement in Rule 8.85(e) referenced in those provisions that a DPM own at least one membership. (B) An Interim Trading Permit shall count as one membership for purposes of the appointment costs provisions in Rule 8.3(c)(v), Rule 8.85(e) and Rule 8.92(d), except that an Interim Trading Permit shall not satisfy the requirements in Rule 8.85(e) and Rule 8.92(d) that a DPM or an e-DPM own at least one membership. (C) An Interim Trading Permit shall be treated as a separate membership for purposes of the pilot programs referenced in Rule 8.3(c)(vii)(1), Rule 8.3(c)(vii)(2), Rule 8.85(a)(v), Rule 8.93(vii), and subparagraph (b)(viii) of the Guidelines for Exemptive Relief Under Rule 8.91(e) for Members Affiliated with DPMs. (D) An individual Interim Trading Permit holder may satisfy the qualification requirements to be a DPM Designee or SBT DPM Designee as set forth in Rule 8.81(b)(ii) and Rule 44.11(b)(2) by registering the Interim Trading Permit for a DPM or SBT DPM or an affiliate of the DPM or SBT DPM. In addition, a DPM may satisfy the requirement in Rule 8.81(d) by having DPM Designees who have registered their Interim Trading Permits for the DPM. (ii) An individual Interim Trading Permit holder shall have the same ability to register that Interim Trading Permit for a member organization as the holder of a transferable Exchange membership has to register that membership for a member organization under Rule 3.8(c). An Interim Trading Permit holder whose Interim Trading Permit is registered for a member organization shall be subject to the same obligations as an individual member whose transferable Exchange membership is registered for


a member organization. All rules that apply to an individual member registering a membership for a member organization or that apply to a member organization that has a membership registered for it shall also be deemed to apply both to an individual Interim Trading Permit holder who has registered an Interim Trading Permit for a member organization and to a member organization that has an Interim Trading Permit registered for it. (iii) The holding of an Interim Trading Permit does not satisfy the requirement in Section 6.1(a) of the Constitution to own and control a membership for purposes of the definitions of floor director and lessor director in that section.

* * * * * Rule 8.85. No change. . . . Interpretations and Policies: .01 - .03 No change. .04. An Interim Trading Permit does not satisfy the membership ownership requirement of paragraph (e) of this Rule 8.85.

* * * * * Rule 8.92. No change. . . . Interpretations and Policies: .01. An Interim Trading Permit does not satisfy the membership ownership requirement of paragraph (d) of this Rule 8.92.

* * * * * Rule 16.3. Reinstatement (a) - (b) No change. (c) Suspension Due to Financial Difficulty. An applicant who, by reason of financial difficulty, has been suspended or limited or prohibited with respect to Exchange services, must file any application for reinstatement within thirty days of such action. Such application must include a list of all creditors of the applicant, a statement of the amount originally owing and the nature of the settlement in each case, and such other information as may be requested by the Committee. The Exchange membership of a member summarily suspended by reason of financial difficulty may not be disposed of by the Exchange, and the CBOE Stock Exchange Permit or Interim Trading Permit of a member summarily suspended by reason of financial difficulty may not be revoked by the Exchange, until that member has been afforded an opportunity for a hearing respecting such summary suspension pursuant to the provisions of Chapter XIX. Rule 16.4. Failure to Obtain Reinstatement If a member suspended under the provisions of this Chapter fails or is unable to apply for reinstatement in accordance with Rule 16.3, or fails to obtain reinstatement as therein provided, his membership shall be disposed of by the Exchange in accordance with Rule 3.14(b) and any CBOE Stock Exchange Permit or Interim Trading Permit of the member may be revoked by the Exchange.


* * * * * Rule 17.1. Disciplinary Jurisdiction (a) A member or a person associated with a member (the "Respondent") who is alleged to have violated or aided and abetted a violation of any provision of the Securities Exchange Act of 1934, as amended ("Exchange Act"), the rules and regulations promulgated thereunder, or any constitutional provisions by-law or rule of the Exchange or any interpretation thereof or resolution of the Board of the Exchange regulating the conduct of business on the Exchange shall be subject to the disciplinary jurisdiction of the Exchange under this Chapter, and after notice and opportunity for a hearing may be appropriately disciplined by expulsion, suspension, limitation of activities, functions, and operations, fine, censure, being suspended or barred from being associated with a member, suspension or revocation of one or more of the Respondent’s CBOE Stock Exchange Permit(s) and Interim Trading Permit(s) or any other fitting sanction, in accordance with provisions of the Chapter. An individual member, nominee or other person associated with a member organization may be charged with any violation committed by employees under his supervision or by the member organization with which he is associated, as though such violation were his own. A member organization may be charged with any violation committed by its employees or by a member or other person who is associated with such member organization, as though such violation were its own. (b) No change. . . . Interpretations and Policies: .01 - .02 No change. _________________________________________________________________________________

ARBITRATION AWARDS Pursuant to Exchange Rule 18.31, Arbitration Awards, for claims filed after September 1, 1989, are publicly available, provided that the name of a public customer will be withheld upon the written request of the customer. Upon written request, copies of Awards are available from the Arbitration Department. Summaries of all Awards are published in the Regulatory Bulletin. In addition, all Awards are provided to the Securities Arbitration Commentator. Awards involving public customers are reported to the Central Registration Depository (CRD). Questions regarding arbitration may be directed to the Arbitration Department at 312-786-7031 or 312-786-7461. ________________________________________________________________________________ Case Name: Howard Gimbel and Marvin Davis v. UBS Financial Services, Inc. f/k/a/ UBS PaineWebber, Inc. and Charles Nicky Bank Case Number: 06NM001 Date Received: June 22, 2006 Summary of Issues: Breach of Fiduciary Duty, Unsuitable Activity, Supervision Amount in Dispute: Actual Damages in the amount of $60,825,387 - $70,339,017 and punitive damages


Award on Claim: $0 Award Issued: April 14, 2008


Exchange BulletinMaster Fund, LP Key Say, LLC Croupier Prive Private Equity $2,650,000.00 4/22/08...

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Transcript of Exchange BulletinMaster Fund, LP Key Say, LLC Croupier Prive Private Equity $2,650,000.00 4/22/08...