Exchange. Bulletin. March 28, 2008 Volume 36, Number 13. SEAT MARKET QUOTES AS OF FRIDAY, March 28, 2008 CBOE MEMBERSHIP SALES AND TRANSFERS

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1 Exchange March 28, 2008 Volume 36, Number 13 Bulletin The Constitution and Rules of the Chicago Board Options Exchange, Incorporated ( Exchange ), in certain specific instances, require the Exchange to provide notice to the Exchange membership. To satisfy this requirement, a copy of the Exchange Bulletin, including the Regulatory Bulletin, is delivered by free of charge or by hard copy for a fee to all effective members on a weekly basis. Members are encouraged to receive the Exchange and Regulatory Bulletin and Information Circulars via . subscriptions may be obtained by submitting your name, firm if applicable, address, and phone number, to members@cboe.com. There is no charge for delivery of the Exchange and Regulatory Bulletin or for Information Circulars. If you do sign up for delivery, please remember to inform the Membership Department of address changes. Subscriptions for hard copy delivery may be obtained by submitting your name, firm if any, mailing address and telephone number to: Chicago Board Options Exchange, Accounting Department, 400 South LaSalle, Chicago, Illinois 60605, Attention: Bulletin Subscriptions. The cost of an annual subscription (January 1 through December 31) is $ ($ after July 1), payable in advance. For up-to-date Seat Market Quotes, call THE-CBOE and select choice 3 from the main menu, or, visit click CBOE Member Site and then Seat Market Information on the following page. For access to the CBOE Member Web Site, please also notify the Membership Department by sending an to members@cboe.com or by phone at CB CB Copyright 2008 Chicago Board Options Exchange, Incorporated SEAT MARKET QUOTES AS OF FRIDAY, March 28, 2008 CLASS BID OFFER LAST SALE AMOUNT LAST SALE DATE CBOE $2,600, $2,700, $2,700, March 27, 2008 CBOT FULL MEMBERSHIP (WITHOUT STOCK) CLASS BID OFFER LAST SALE AMOUNT LAST SALE DATE With ERP $600, $650, $625, March 11, 2008 Without ERP $451, $550, $500, March 27, 2008 ERP $150, $200, $170, March 6, 2008 CBOE MEMBERSHIP SALES AND TRANSFERS From To Price/ Transfer Date Burton N. Stone LLB Partners Transfer 3/20/08 Burton N. Stone LLB Partners Transfer 3/20/08 Alfred Street Nominees PTY Limited Croupier Prive Private Equity $2,700, /26/08 Master Fund, LP Alfred Street Nominees PTY Limited Croupier Prive Private Equity $2,700, /27/08 Master Fund, LP

2 Page 2 March 28, 2008 Volume 36, Number 13 Chicago Board Options Exchange MEMBERSHIP INFORMATION FOR 3/20/08 THROUGH 3/26/08 MEMBERSHIP APPLICATIONS RECEIVED FOR WHICH A POSTING PERIOD IS REQUIRED Individual Membership Applicants Date Posted Edmundo R. Sanchez, Nominee 3/20/08 Equitec Structured Products, LLC 418 Stonewater Ln. Oswego, IL Jake Settle, Nominee 3/20/08 Consolidated Trading, LLC 328 W. Dickens - #28 Chicago, IL Michael R. Menard, Nominee 3/24/08 Susquehanna Securities 2020 W. Lincoln Park West, Apt. 4L Chicago, IL Christopher J. Chapin, Nominee 3/25/08 Infinium Capital Management, LLC 506 W. Wisconsin St., Apt. 1 Chicago, IL Michael Thomas Filippo, Nominee 3/26/08 TD Professional Execution Inc Marquette Drive South Tinley Park, IL Member Organization Applicants Date Posted MCA Trading, LLC 3/26/08 Mark A. Nashed, Nominee 412 Olive Avenue, #165 Huntington Beach, CA Mark Nashed - Member R & H Securities, LLC 3/26/08 Thomas M. Hearden, Nominee 45 Broadway 32nd Floor New York, NY Mill Bridge IV, LLC Owner Van Der Moolen USA Inc. Member Van Der Moolen Holding IV Shareholder Ann-Marie Blackwood-Harrilal CFO/FINOP/COO William Floyd-Jones Secretary John P. Gilmartin Management Committee Member Thomas M. Hearden CEO/Co-CCO/MCM Benedict P. Willis Co-Chief Compliance Officer Paulus W. Vroling Management Committee Member PB Partners, LLC 3/20/ Hidden Ridge Ln. Highland Park, IL Steven Hirschtritt Managing Member MSM Enterprises Inc. Managing Member Marc S. Mirsky President ***Correction to the Bulletin Dated March 21, 2008*** Member Organization Applicants Date Posted Dart Options, LLC 3/17/08 Timothy P. Feeney, Nominee Daniel F. McHugh, Nominee N. Prestwick Dr. Barrington, IL Timothy P, Feeney Member Daniel F. McHugh - Member MEMBERSHIP LEASES New Leases Effective Date Lessor: LLB Partners 3/20/08 Lessee: Synergy Capital Management, LLC Rate: 0.275% Term: Monthly Lessor: LLB Partners 3/20/08 Lessee: Everest Trading, LLC Gregg S. Shamberg, NOMINEE Rate: 0.30% Term: Monthly Lessor: Susquehanna Securities 3/20/08 Lessee: Timber Hill, LLC Rate: $8,500 Term: 20 Days Lessor: Merrill Lynch, Pierce, Fenner & Smith, Inc. 3/24/08 Lessee: Merrill Lynch Professional Clearing Corp. Rate: 0.275% Term: Monthly Lessor: TRO Trading Group, LLC 3/26/08 Lessee: Jane Street Specialists, LLC Hector Godinez, NOMINEE Rate: % Term: Monthly Lessor: Jane Street Specialists, LLC 3/26/08 Lessee: Jane Street Options, LLC Rate: $7,500 Term: Monthly Terminated Leases Lessor: Burton N. Stone 3/20/08 Lessee: Everest Trading, LLC Gregg S. Shamberg (SHM), NOMINEE Lessor: Burton N. Stone 3/20/08 Lessee: Synergy Capital Management, LLC Lessor: Alan M. Finder 3/20/08 Lessee: Timber Hill, LLC Lessor: TRO Trading Group, LLC 3/26/08 Lessee: Jane Street Options, LLC Termination Date

3 Page 3 March 28, 2008 Volume 36, Number 13 Chicago Board Options Exchange MEMBERSHIP TERMINATIONS Individual Members Member Organizations Lessor: Effective Date Lessor: Burton N. Stone 3/20/08 Alan M. Finder Jr. 3/20/08 Nominee: Sean Crozier (CRZ) 3/24/08 Susquehanna Investment Group Marcel V. Klooss 3/24/08 Optiver US, LLC EFFECTIVE MEMBERSHIPS Individual Members Nominee: Termination Date Termination Date Effective Date Bassil Hussain (BAZ) 3/20/08 Everest Trading, LLC Type of Business to be Conducted: Market Maker Cole R. Beebe (CRB) 3/24/08 Citigroup Derivatives Markets Inc. Type of Business to be Conducted: Market Maker LLB Partners 3/20/08 CHANGES IN MEMBERSHIP STATUS Individual Members Effective Date Gary B. Patzik 3/20/08 From: Lessor/ Nominee For Everest Trading, LLC; Market Maker To: Lessor Paul J. Gnap 3/24/08 From: Temporary Member; Market Maker/ Floor Broker To: Temporary Member For DRO WST Trading, LLC; Market Maker Gavin M. Lowrey 3/25/08 From: Nominee For PEAK6 Capital Management, LLC; Market Maker/ Floor Broker To: Nominee For PEAK6 Capital Management, LLC; Floor Broker Member Organizations Effective Date Jane Street Specialists, LLC 3/26/08 From: Owner/ Lessee; Associated with a Market Maker To: Lessor/ Lessee; Associated with a Market Maker Mark C. Dollard 3/24/08 Optiver US, LLC Type of Business to be Conducted: Remote Market Maker Justin J. Waggoner (JUT) 3/24/08 Andrie Trading, LLC Type of Business to be Conducted: Market Maker Adrian Robert Wendt (ARW) 3/24/08 MF Global Inc. Type of Business to be Conducted: Floor Broker Mani Rad (MNI) 3/25/08 Lehman Brothers Inc. Type of Business to be Conducted: Market Maker Michael J. Walsh (MJW) 3/26/08 Sallerson-Troob, LLC Type of Business to be Conducted: Market Maker Matthew Cavanaugh (MCV) 3/26/08 CMZ Trading, LLC Type of Business to be Conducted: Market Maker

4 Page 4 March 28, 2008 Volume 36, Number 13 Chicago Board Options Exchange RESEARCH CIRCULARS The following Research Circulars were distributed between March 24 and March 27, If you wish to read the entire document, please refer to the CBOE website at and click on the Trading Tools Tab. New listings and series information is also available in the Trading Tools section of the website. For questions regarding information discussed in a Research Circular, please call The Options Clearing Corporation at OPTIONS. Research Circular #RS March 24, 2008 Southwestern Energy Company ( SWN/ZFK/LVX ) 2-for-1 Stock Split Ex-Distribution Date: March 26, 2008 Research Circular #RS March 24, 2008 Steel Dynamics, Inc. ( STLD/RQL/VLM/WAF ) 2-for-1 Stock Split Ex-Distribution Date: March 31, 2008 Research Circular #RS March 24, 2008 Merge Technologies Incorporated ( MRGE/MQP/ZVO/LVO ) Name Change to: Merge Healthcare Incorporated Effective Date: March 25, 2008 Research Circular #RS March 24, 2008 Packeteer, Inc. ( PKTR/XOU ) Tender Offer by Elliott QoS LLC Research Circular #RS March 24, 2008 BladeLogic, Inc. ( BLOG/QGB ) Tender Offer by Bengal Acquisition Corporation Research Circular #RS March 25, 2008 MCG Capital Corporation ( MCGC/QML ) Rights Distribution Ex-Rights Date: March 26, 2008 Research Circular #RS March 26, 2008 Reuters Group PLC ( RTRSY/RTQ ) Proposed Plan of Arrangement/Merger with The Thomson Corporation ( TOC ) Research Circular #RS March 26, 2008 ****UPDATE - ADDITIONAL CASH MERGER CONSIDERATION** ***American Financial Realty Trust ( AFR ) Proposed Merger with Gramercy Capital Corp. ( GKK ) Research Circular #RS March 26, 2008 ***UPDATE - ANTICIPATED MERGER EFFECTIVE DATE - MARCH 31, 2008*** Commerce Bancorp, Inc. ( CBH/OUD/WDE ) Proposed Merger with The Toronto-Dominion Bank ( TD ) Research Circular #RS March 27, 2008 GFI Group Inc. ( GFIG/GQG/OWK/YWK ) 4-for-1 Stock Split Ex-Distribution Date: April 1, 2008 Research Circular #RS March 27, 2008 Hologic, Inc. ( HOLX/QHX/ODA/LRQ ) 2-for-1 Stock Split Ex-Distribution Date: April 3, 2008 Research Circular #RS March 25, 2008 Network Appliance, Inc. ( NTAP/NUL/OHN/YHF ) Name Change to: NetApp, Inc. Effective Date: March 26, 2008

5 April 2, 2008 Volume RB19, Number 13 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 Circular RG08-44 Date: March 25, 2008 REGULATORY CIRCULARS To: CBOE Members From: Legal Division Re: Penny Pilot Expansion The Penny Pilot Program currently in effect in 35 option classes is scheduled to expand on March 28, The following is a list of the 28 additional option classes that will be added to the Pilot Program on that date. Goldman Sachs Group, Inc. (GS) Countrywide Financial Corporation (CFC) Bank of America Corporation (BAC) ishares MSCI Emerging Mkts. Index Fund (EEM) Merrill Lynch & Co., Inc. (MER) Vale (RIO) EMC Corporation (EMC) Exxon Mobil Corporation (XOM) Wal-Mart Stores, Inc. (WMT) The Home Depot, Inc. (HD) Valero Energy Corporation (VLO) Alcoa Inc. (AA) Dell Inc. (DELL) SanDisk Corporation (SNDK) The Bear Stearns Companies, Inc. (BSC) Pfizer Inc. (PFE) ebay Inc. (EBAY) Halliburton Company (HAL) Lehman Brothers Holdings Inc. (LEH) JPMorgan Chase & Co. (JPM) Washington Mutual, Inc. (WM) Ford Motor Company (F) Target Corporation (TGT) American International Group, Inc. (AIG) Newmont Mining Corporation (NEM) Verizon Communications Inc. (VZ) Mini-NDX Index Options (MNX) Starbucks Corporation (SBUX) If you have any questions, please contact Jennifer Lamie at (312) or lamie@cboe.com or Patrick Sexton at (312) or sexton@cboe.com. This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any state or jurisdiction in which an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. No offering April 2, 2008 Volume RB19, Number 13 1

6 of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended. In connection with the proposed restructuring transaction, CBOE Holdings, Inc. ( CBOE Holdings ) has filed certain relevant materials with the United States Securities and Exchange Commission (SEC), including a registration statement on Form S-4. Members are encouraged to read the registration statement, including the proxy statement/prospectus that are a part of the registration statement, because it contains important information about the proposed transaction. Members are able to obtain a free copy of the proxy statement/prospectus, as well as the other filings containing information about CBOE Holdings and the Chicago Board Options Exchange, Incorporated ( CBOE ), without charge, at the SEC s website, and the companies website, In addition, CBOE members may obtain free copies of the proxy statement/prospectus and other documents filed by CBOE Holdings or the CBOE from CBOE Holdings by directing a request to the Office of the Secretary, CBOE Holdings, Inc., 400 South LaSalle Street, Chicago, Illinois CBOE Holdings, the CBOE and their respective directors, executive officers and other employees may be deemed to be participants in the solicitation of proxies in connection with the proposed transaction. Information about the directors and executive officers of CBOE Holdings and of the CBOE is available in the prospectus/proxy statement. Regulatory Circular RG08-46 To: From: Members and Member Organizations Legal Division, Member and Regulatory Services Division Date: March 27, 2008 Re: Delta Position Limit Hedge Exemption CBOE Market-Maker Reporting Requirement This Regulatory Circular addresses the reporting requirement applicable to CBOE ("Exchange") Market-Makers and their affiliates who rely on the delta position limit hedge exemption and who use the Options Clearing Corporation ( OCC ) pricing model. This Regulatory Circular updates Regulatory Circular RG Pursuant to CBOE Rule (c)(F), each member eligible to use the exemption is required to report to the Exchange, on its own behalf or on behalf of a designated aggregation unit, the options contract equivalent of the net delta ("OCEND") of an equity option position that exceeds the applicable position limit level under Rule As explained in RG08-18, members must report the OCEND to the OCC through the OCC's "Delta Position Limit Aggregator Report". The Exchange has determined to exempt from this reporting requirement Exchange Market-Makers relying on the exemption who use the OCC pricing model, as Market-Maker position and delta information can be accessed through the Exchange's market surveillance systems. This is consistent with the current exemption of Exchange Market-Makers from the reporting requirements under CBOE Rule However, the Exchange emphasizes all members are responsible for monitoring their positions for compliance with Exchange position limit rules. Additionally, Exchange Market-Makers that are members of another exchange may be subject to different reporting requirements on such other exchange. OCEND position limit information is available to members by request on the CBOE website at on a trade date + 1 basis. Members can access this information using the same login and procedures that are utilized for accessing quote information. An Exchange Market-Maker that wishes to use the exemption must first provide CBOE with a written certification that it uses a permitted pricing model (such as the OCC pricing model) and is therefore eligible to apply the exemption. An Exchange Market-Maker carrying an account of a non-member affiliate that intends to rely on the exemption must obtain from such non-member a written certification and statement as described in RG08-18 (Pg. 2 number 4). April 2, 2008 Volume RB19, Number 13 2

7 At this time the Exchange expects that Exchange Market-Makers and their non-member affiliates electing to use the exemption will inform the Exchange of the specific account or entity identifying information that it intends to use in connection with its use of the exemption. Questions regarding this circular may be addressed to Tim MacDonald at (312) or or Jaime Galvan at (312) or Regulatory Circular RG08-47 Date: March 27, 2008 To: CBOE Members From: CBOE Trading Operations Re: AIM Customer-to-Customer Immediate Crosses A change to the Automated Improvement Mechanism (AIM) has been implemented, effective immediately. When both the primary and matching AIM orders have an origin of Customer, the orders will cross immediately, without exposure to the AIM 3-second electronic auction. The price on the matching order must be no worse than the NBBO and must improve the price established by any public customers resting on the CBOE BBO. IMPORTANT: Please note that in non-penny classes, the match order on a customer-to-customer AIM transaction must be submitted with a limit price in standard nickel/dime increments (i.e. the user may not enter a penny limit price on the match order). Additionally, if the match order contains a price of MKT, then the transaction will be subject to the standard AIM process, including the auction interval. If either or both the primary or matching orders are non-customer, normal AIM functionality will still apply. Please refer to Rule 6.74A and Regulatory Circulars RG06-29 and RG06-38 for further information on AIM functionality generally. Please also refer to new Interpretation and Policy.09 to Rule 6.74A and SR-CBOE for additional information about the new AIM customer-to-customer immediate cross functionality and regulatory requirements. This information is available at Members should be aware that Rules 6.45A.01 and 6.45B.01 prevent an order entry firm from executing against agency orders as principal unless there has been a 3-second exposure period, which gives other trading interests an opportunity to either trade with the agency order or to trade at the execution price when the member was already bidding or offering on the book. It would be a violation for a firm to circumvent Rule 6.45A.01 or 6.45B.01 by providing an opportunity for (i) a customer affiliated with the firm, or (ii) a customer with whom the firm has an arrangement that allows the firm to realize similar economic benefits from the transaction as the firm would achieve by executing agency orders as principal, to regularly execute against agency orders handled by the firm immediately upon their entry as AIM customer-to-customer immediate crosses. Questions regarding this change may be directed to Anthony Montesano at (312) / montesan@cboe.com, or the Help Desk at (312) April 2, 2008 Volume RB19, Number 13 3

8 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 The effective date of the rule change is the date of approval unless otherwise noted. SR-CBOE Automated Improvement Mechanism On March 17, 2008, the SEC approved Rule Change File No. SR-CBOE , which filing amends the Exchange s rule regarding its Automated Improvement Mechanism ( AIM ) to permit customer-to-customer orders to be entered paired and to be crossed without any AIM auction exposure period. Any questions regarding the rule change may be directed to Jennifer Lamie, Legal Division, at The rule text is shown below and the rule filing is available at Rule 6.74A Automated Improvement Mechanism ( AIM )... Interpretations and Policies:.09 In lieu of the procedures in paragraphs (a) through (b) above, an Initiating Member may enter an Agency Order for the account of a non-broker-dealer customer paired with a solicited order for the account of a non-broker-dealer customer and such paired orders will be automatically executed without an Auction Period provided the execution price is in the applicable standard increment and will not trade through the NBBO or at the same price as any resting customer order, and provided further that: (a) the Agency Order is in a class designated as eligible for AIM customer-to-customer immediate crosses as determined by the Exchange and within the designated Auction order eligibility size parameters as such size parameters are determined by the Exchange; and (b) if the Exchange determines on a class-by-class basis to (i) designate complex orders as eligible for AIM customer-to-customer immediate crosses or (ii) permit orders of 500 or more contracts and that have a premium value of at least $150,000 to be executed without considering prices that might be available on other options exchanges, then the NBBO condition shall not apply to such orders and instead the execution price will not trade through the Exchange s BBO. 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 April 2, 2008 Volume RB19, Number 13 4

9 SR-CBOE Class Quoting Limits On March 26, 2008, the Exchange filed Rule Change File No. SR-CBOE , which filing proposes to increase the class quoting limit in the following option classes: Bear Stearns (BSC), Lehman Brothers (LEH), Petro Bras SA (PBR), and Visa, Inc. (V) from 50 to 60; and Dryships, Inc. (DRYS) from 50 to 65. Any questions regarding the rule change may be directed to Jennifer Lamie, Legal Division, at The rule filing is available at: SR-CBOE Penny Pilot On March 25, 2008, the Exchange filed Rule Change File No. SR-CBOE , which filing proposes to add twenty-eight option classes to the penny pilot program. Any questions regarding the rule change may be directed to Patrick Sexton, Legal Division, at The rule filing is available at SR-CBOE Off-Floor DPMs On March 24, 2008, the Exchange filed Rule Change File No. SR-CBOE , which filing proposes to provide DPMs with the flexibility to operate as an Off-Floor DPM in any option class traded on the Hybrid Trading System and Hybrid 2.0 Platform. Any questions regarding the rule change may be directed to Jennifer Lamie, Legal Division, at The rule text is shown below and the rule filing is available at Rule 6.45B Priority and Allocation of Trades in Index Options and Options on ETFs on the CBOE Hybrid System Rule 6.45B. 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, a[n 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) Allocation of Incoming Electronic Orders: The appropriate Procedure Committee will determine to apply, for each class of options, one of the following rules of trading priority described in paragraphs (i) or (ii). The Exchange will issue a Regulatory Circular periodically specifying which priority rules will govern which classes of options any time the appropriate Exchange committee changes the priority. (i) No change. (ii) (A)(1) (2) No change. (B)(1) (2) No change. (C) Participation Entitlement: If a Market-Maker is eligible for an allocation pursuant to the operation of the Algorithm described in paragraph (a) of Rule 6.45B and is also eligible for an allocation pursuant to a participation entitlement under Rules 8.13, 8.15B, or 8.87, the Market-Maker shall be entitled to receive an allocation (not to exceed the size of its quote) equal to either: April 2, 2008 Volume RB19, Number 13 5

10 (1) the greater of the amount it would be entitled to pursuant to the participation entitlement or the amount it would otherwise receive pursuant to the operation of the Algorithm described above provided, however, that in calculating an On-Floor DPM's or LMM's allocation under the Algorithm, an On-Floor DPM or an LMM may choose to count as two market participants for purposes of Component A of the Algorithm if the On-Floor DPM exclusively uses the portion of a membership(s) representing one-half the total appointment cost of the classes allocated to the On- Floor DPM at a particular trading station in order to count as two market participants, and not for any other purpose; or the LMM exclusively uses the portion of a membership(s) representing one-half the total appointment cost of the class(es) in which it is appointed an LMM at a particular trading station in order to count as two market participants, and not for any other purpose. For example, if an On- Floor DPM's appointment cost is 2.2 for the classes allocated to it at a particular trading station, pursuant to Rule 8.85(e) the On-Floor DPM would be required to own one membership and own or lease two additional memberships. Additionally, the On-Floor DPM may choose to count as two market participants for purposes of Component A of the Algorithm if the On-Floor DPM exclusively utilizes 1.1 (one-half of 2.2) of the membership(s) it owns or leases in order to count as two market participants, and not utilize the 1.1 of the memberships for any other purpose. In this example, to comply with the membership ownership requirements and to count as two market participants for purposes of Component A, the On-Floor DPM would be required to own one membership, and own or lease three additional memberships to satisfy its total cost of 3.3 ( ); or (2) No change. (3) The amount it would be entitled to receive pursuant to the operation of the Algorithm described above provided, however, that in calculating an On-Floor DPM's or LMM's allocation under the Algorithm, an On-Floor DPM or an LMM may choose to count as two market participants for purposes of Component A of the Algorithm if the On-Floor DPM exclusively uses the portion of a membership(s) representing one-half the total appointment cost of the classes allocated to the On-Floor DPM at a particular trading station in order to count as two market participants, and not for any other purpose; or the LMM exclusively uses the portion of a membership(s) representing one-half the total appointment cost of the class(es) in which it is appointed an LMM at a particular trading station in order to count as two market participants, and not for any other purpose. (b) (e) No change.... Interpretations and Policies: No change. Rule 8.80 DPM Defined Rule (a) A "Designated Primary Market-Maker" or "DPM" is a member organization that is approved by the Exchange to function in allocated securities as a Market-Maker (as defined in Rule 8.1) and is subject to the obligations under Rule 8.85 or as otherwise provided under the rules of the Exchange. A DPM generally will operate on CBOE s trading floor ( On-Floor DPM ). However, as provided in Rule 8.83(g), a DPM can request that the appropriate Exchange committee authorize the DPM to function remotely away from CBOE s trading floor ( Off-Floor DPM ) on a class-by-class basis. A DPM can operate as an Off-Floor DPM only in [equity] option classes traded on CBOE s Hybrid Trading System and Hybrid 2.0 Platform. Unless otherwise specified, references to DPM in CBOE s Rules include both On-Floor DPM and Off-Floor DPM. April 2, 2008 Volume RB19, Number 13 6

11 (b) Determinations concerning whether to grant or withdraw the approval to act as a DPM are made by the appropriate Exchange committee in accordance with Rules 8.83 and DPMs are allocated securities by the appropriate Exchange committee in accordance with Rule Rule 8.83 Approval to Act as a DPM Rule (a) (f) No change. (g) An On-Floor DPM can request that the appropriate Exchange committee authorize it to operate as an Off-Floor DPM in one or more [equity] option classes traded on the Hybrid Trading System or Hybrid 2.0 Platform. The appropriate Exchange committee will consider the factors specified in paragraph (b) above in determining whether to permit an On-Floor DPM to operate as an Off-Floor DPM. If an On-Floor DPM is approved to operate as an Off-Floor DPM in one or more option classes [traded on the Hybrid Trading System], the Off-Floor DPM can have a DPM Designee trade in open outcry in the option classes allocated to the Off-Floor DPM, but the Off-Floor DPM shall not receive a participation entitlement under Rule 8.87 with respect to orders represented in open outcry.... Interpretations and Policies:.01 A DPM that is approved to operate as an Off-Floor DPM in one or more option classes traded on the Hybrid Trading System or Hybrid 2.0 Platform can request that the appropriate Exchange Committee authorize it to operate as an On-Floor DPM. In making a determination pursuant to this Interpretation, the appropriate Exchange committee should evaluate whether the change is in the best interests of the Exchange, and the committee may consider any information that it believes will be of assistance to it. Factors to be considered may include, but are not limited to, any one or more of the following: performance, operational capacity of the Exchange or the DPM, efficiency, number and experience of personnel of the DPM who will be performing functions related to the trading of the applicable securities, number of securities involved, number of Market-Makers affected, and trading volume of the securities. 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 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 New Products On March 19, 2008, the Exchange filed Rule Change File No. SR-CBOE , which filing proposes to enable the listing and trading of CBOE S&P 500 Three-Month Realized Variance options and CBOE S&P 500 Three-Month Realized Volatility options. Any questions regarding the rule change may be directed to Jennifer Yeadon, Legal Division, at The rule text is shown below and the rule filing is available at Rule 5.5 Series of Option Contracts Open for Trading April 2, 2008 Volume RB19, Number 13 7

12 RULE 5.5 (a) (e) No change. Interpretations and Policies No change..12 Notwithstanding Interpretation and Policy.01 above, the intervals between strike prices for CBOE S&P 500 Realized Volatility option series shall be determined in accordance with Interpretation and Policy.01(g) to Rule CHAPTER XXIV Index Options Rule 24.1 Definitions RULE (a) - (aa) No change. Indicator (bb) The term "indicator" means a statistical measurement that is an attribute of and based on a broadbased security index (e.g., S&P 500 Index). For purposes of the rules contained in Chapter 24, and any other applicable rules, an indicator shall be treated as an index. Interpretations and Policies:.01 The reporting authorities designated by the Exchange in respect of each index underlying an index option contract traded on the Exchange are as follows: Index Reporting Authority (Add the following to the current list:) CBOE S&P 500 Three-Month Realized Variance Chicago Board Options Exchange CBOE S&P 500 Three-Month Realized Volatility...Chicago Board Options Exchange Rule 24.4 Position Limits for Broad-Based Index Options RULE (a) In determining compliance with Rule 4.11, there shall be no position limit for broadbased index option contracts (including reduced-value option contracts) on CBOE S&P Three-Month Realized Variance, CBOE S&P Three-Month Realized Volatility and on the DJX, OEX, XEO, NDX, RUT, VIX, VXN, VXD, and SPX classes. All other broad-based index option contracts shall be subject to a contract limitation fixed by the Exchange, which shall not be larger than the limits provided in the chart below. (b) (e) No change.... Interpretations and Policies: No change..03 Reporting Requirement Each member (other than CBOE Market-Makers) or member organization that maintains a broad-based index option position on the same side of the market in excess of 100,000 contracts for OEX, XEO, NDX, RUT [or], SPX, CBOE S&P Three-Month Realized Variance or CBOE S&P Three- Month Realized Volatility and 1 million contracts for DJX, for its own account or for the account of a customer, shall report information as to whether the positions are hedged and provide documentation as to how such contracts are hedged, in the manner and form required by the Department of Market April 2, 2008 Volume RB19, Number 13 8

13 Regulation. In calculating the applicable contract-reporting amount, reduced-value contracts will be aggregated with full-value contracts and counted by the amount by which they equal a full-value contract (e.g., 10 XSP options equal 1 SPX full-value contract). The Exchange may specify other reporting requirements of this interpretation as well as the limit at which the reporting requirement may be triggered.. 04 Margin and Clearing Firm Requirements Whenever the Exchange determines, based on a report by the Department of Market Regulation or otherwise, that additional margin is warranted in light of the risks associated with an under-hedged SPX, OEX, XEO, NDX, RUT [or], DJX, CBOE S&P Three-Month Realized Variance or CBOE S&P Three-Month Realized Volatility option position, the Exchange may consider imposing additional margin upon the account maintaining such under-hedged position pursuant to its authority under Exchange Rule Additionally, it should be noted that the clearing firm carrying the account will be subject to capital charges under SEC Rule 15c3-1 to the extent of any margin deficiency resulting from the higher margin requirements. Rule 24.5 Exercise Limits RULE In determining compliance with Rule 4.12, exercise limits for index option contracts shall be equivalent to the position limits prescribed for option contracts with the nearest expiration date in Rule 24.4 or 24.4A. There shall be no exercise limits for broad-based index options (including reduced-value option contracts) on CBOE S&P Three-Month Realized Variance, CBOE S&P Three- Month Realized Volatility and on the DJX, OEX, XEO, NDX, RUT or SPX. Interpretations and Policies: No change. Rule 24.9 Terms of Index Option Contracts RULE (a) General. (1) - (2) No change. (3) "European-Style Exercise". The following European-style index options, some of which are A.M.-settled as provided in paragraph (a)(4), are approved for trading on the Exchange: (i)- (xix) No change. (xx) [-] CBOE S&P 500 Realized Variance. (xxi) CBOE S&P 500 Realized Volatility. (xxii)-(xxvi) [Reserved.] (xxvii) (xcvii) No change. (4) A.M.-Settled Index Options. The last day of trading for A.M.-settled index options shall be the business day preceding the last day of trading in the underlying securities prior to expiration. The current index value at the expiration of an A.M.-settled index option shall be determined, for all purposes under these Rules and the Rules of the Clearing Corporation, on the last day of trading in the underlying securities prior to expiration, by reference to the reported level of such index as derived from the opening prices of the underlying securities on such day, as determined by the market for such security selected by the Reporting Authority pursuant to Interpretation and Policy.12 to Rule 24.9, except that in the event that the primary market for an underlying security does not open for trading, halts trading prematurely, or otherwise experiences a disruption of normal trading on that day, or in the event that the primary market for an underlying security is open for trading on that day, but that particular security does not open for trading, halts trading prematurely, or otherwise experiences a disruption of normal trading on that day, the price of that security shall be determined, for the purposes of calculating the current index value at expiration, as set forth in Rule 24.7(e). April 2, 2008 Volume RB19, Number 13 9

14 The following A.M.-settled index options are approved for trading on the Exchange: (i) (xvii) (xviii) [-] [(xxiv) (xix) (xx-xxiv) (xxv)- (lxxxvi) No change. CBOE S&P 500 Realized Variance. [Reserved.]] CBOE S&P 500 Realized Volatility. [Reserved.] No change. (5) No change. (b) (d) No change. Interpretations and Policies:.01 The procedures for adding and deleting strike prices for index options are provided in Rule 5.5 and Interpretations and Policies related thereto, as otherwise generally provided by Rule 24.9, and include the following: (a) (i) (vii) No change. (viii) [[Reserved.]] CBOE S&P 500 Realized Variance. (ix)-(lxii) No change. (b) - (f) No change. (g) Notwithstanding paragraph (a), the interval between strike prices of series of CBOE S&P 500 Realized Volatility options will $1 or greater, subject to following conditions: (i) Initial Series. The Exchange may list series at $1 or greater strike price intervals on CBOE S&P 500 Realized Volatility options, and will list at least two strike prices above and two strike prices below the current value of the CBOE S&P 500 Realized Volatility indicator at about the time a series is opened for trading on the Exchange. The Exchange shall list strike prices for CBOE S&P 500 Realized Volatility options that are within 5 points from the closing value of the CBOE S&P 500 Realized Volatility indicator on the preceding day. (ii) Additional Series. Additional series of the same class of CBOE S&P 500 Realized Volatility options may be opened for trading on the Exchange when the Exchange deems it necessary to maintain an orderly market, to meet customer demand or when the underlying CBOE S&P 500 Realized Volatility indicator moves substantially from the initial exercise price or prices. To the extent that any additional strike prices are listed by the Exchange, such additional strike prices shall be within thirty percent (30%) above or below the closing value of the CBOE S&P 500 Realized Volatility indicator. The Exchange may also open additional strike prices that are more than 30% above or below the current CBOE S&P 500 Realized Volatility indicator provided that demonstrated customer interest exists for such series, as expressed by institutional, corporate or individual customers or their brokers. Market-Makers trading for their own account shall not be considered when determining customer interest under this provision. In addition to the initial listed series, the Exchange may list up to sixty (60) additional series per expiration month for each series in CBOE S&P 500 Realized Volatility options. (iii) The Exchange shall not list LEAPS on CBOE S&P 500 Realized Volatility options at intervals less than $5. (iv) (A) Delisting Policy. With respect to CBOE S&P 500 Realized Volatility options added pursuant to the above paragraphs, the Exchange will, on a monthly basis, review series that are outside a range of five (5) strikes above and five (5) strikes below the current value of the CBOE S&P 500 Realized Volatility indicator, and delist series with no open interest in both the put and the call series having a: (i) strike higher than the highest strike price with open interest in the put and/or April 2, 2008 Volume RB19, Number 13 10

15 call series for a given expiration month; and (ii) strike lower than the lowest strike price with open interest in the put and/or call series for a given expiration month. (B) Notwithstanding the above referenced delisting policy, customer requests to add strikes and/or maintain strikes in CBOE S&P 500 Realized Volatility option series eligible for delisting shall be granted No change. April 2, 2008 Volume RB19, Number 13 11