SEAT MARKET QUOTES AS OF Friday, July 20, 2007 CLASS BID OFFER LAST SALE AMOUNT LAST SALE DATE CBOT FULL MEMBERSHIP (WITHOUT STOCK)

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1 Exchange July 20, 2007 Volume 35, Number 29 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 Copyright 2007 Chicago Board Options Exchange, Incorporated SEAT MARKET QUOTES AS OF Friday, July 20, 2007 CLASS BID OFFER LAST SALE AMOUNT LAST SALE DATE CBOE $2,650, $2,980, $2,600, July 12, 2007 CBOT FULL MEMBERSHIP (WITHOUT STOCK) CLASS BID OFFER LAST SALE AMOUNT LAST SALE DATE With ERP $950, $975, $975, July 18, 2007 Without ERP $675, $770, $640, June 8, 2007 ERP $260, $282, $275, July 19, 2007 CBOE MEMBERSHIP SALES AND TRANSFERS From To Price/ Transfer Date EWT, LLC Vincent J. Viola Transfer 7/19/07 EWT, LLC Vincent J. Viola Transfer 7/19/07 EWT, LLC Vincent J. Viola Transfer 7/19/07 EWT, LLC Vincent J. Viola Transfer 7/19/07 EWT, LLC David Salomon Transfer 7/19/07 EWT, LLC David Salomon Transfer 7/19/07 EWT, LLC David Salomon Transfer 7/19/07 EWT, LLC David Salomon Transfer 7/19/07 Scott H. Arenstein Alanna R. Arenstein Transfer 7/19/07

2 Page July 20, 2007 Volume 35, Number 29 Chicago Board Options Exchange MEMBERSHIP INFORMATION FOR 7/12/07 THROUGH 7/18/07 MEMBERSHIP LEASES EFFECTIVE MEMBERSHIPS New Leases Effective Date Lessor: Gedon Hertshten 7/13/07 Lessee: Quiet Light Securities LLC Scott M. Kaplan, NOMINEE Rate: 0.25% Term: Monthly Terminated Leases Lessor: Edmund J. O Connor 7/13/07 Lessee: Quiet Light Securities LLC Scott M. Kaplan (SKQ), NOMINEE MEMBERSHIP TERMINATIONS Termination Date Individual Members Nominee(s) / Inactive Nominee(s): Effective Date Christopher J. McHugh (CMQ) 7/12/07 PFTC, LLC Type of Business to be Conducted: Market Maker Christopher P. Farry (CPF) 7/16/07 Brian Ludden, LLC Type of Business to be Conducted: Market Maker Thomas B. Norwood (NOR) 7/16/07 Belvedere Trading, LLC Type of Business to be Conducted: Market Maker Individual Members Nominee(s) / Inactive Nominee(s): Termination Date William P. Litgen (LTG) 7/16/07 Brian Ludden, LLC

3 Page 3 July 20, 2007 Volume 35, Number 29 Chicago Board Options Exchange RESEARCH CIRCULARS The following Research Circulars were distributed between July 13 and July 19, 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 July 13, 2007 The Bank of New York Company, Inc. ( BK/adj. BKM/ZMR/WDZ ) Determination of Cash-in-Lieu Amount Research Circular #RS July 13, 2007 Genesis HealthCare Corporation ( GHCI/QGR ) Merger COM- PLETED with FC-GEN Investment, LLC - Cash Settlement Research Circular #RS July 16, 2007 CBOT Holdings, Inc. Class A ( BOT/adj. BOD ) Determination of Cash-in-Lieu Amount Research Circular #RS July 16, 2007 Agile Software Corporation ( AGIL/IQG ) Proposed Merger with Oracle Corporation ( ORCL ) - Cash Settlement Research Circular #RS July 17, 2007 Diodes Incorporated ( DIOD/DUH/ZOV ) 3for2 Stock Split Ex-Distribution Date: July 31, 2007 Research Circular #RS July 18, 2007 Ctrip.com International, Ltd. ( CTRP/QCT ) 2-for-1 ADS Split Ex-Distribution Date: July 31, 2007 Research Circular #RS July 18, 2007 IPSCO Inc. ( IPS/ISU/OPQ ) Plan of Arrangement/Merger COM- PLETED with SSAB Svenskt Stål AB - Cash Settlement Research Circular #RS July 18, 2007 Accredited Home Lenders Holding Co. ( LEND/QFW/ODQ ) Tender Offer EXTENDED by LSF5 Accredited Merger Co., Inc. Research Circular #RS July 19, 2007 Anglo American plc ( AAUK/QEB ) Demerger/Share Consolidation and Reverse Split Research Circular #RS July 19, 2007 GulfMark Offshore, Inc. ( GMRK/GIU ) Stock and Option Symbol Change to ( GLF ) Effective Date: July 20, 2007 Research Circular #RS July 19, 2007 American Standard Companies Inc. ( ASD/OBT/YBJ ) Distribution of Shares of WABCO Holdings Inc. ( WBC ) Ex-Distribution Date: August 1, 2007 Research Circular #RS July 19, 2007 AmerisourceBergen Corporation ( ABC/OYY/YPP ) Distribution of Shares of PharMerica Corporation ( PMC ) Ex-Distribution Date: August 1, 2007 Research Circular #RS July 19, 2007 Kindred Healthcare, Inc. ( KND/OXK/WKC ) Distribution of Shares of PharMerica Corporation ( PMC ) Ex-Distribution Date: August 1, 2007 Research Circular #RS July 19, 2007 *****UPDATE*****UPDATE*****UPDATE***** TODCO ( THE/adj. FKT/YKB/XDU ) Determination of Contract Deliverable POSITION LIMIT CIRCULARS Pursuant to Exchange Rule 4.11, the Exchange issued the below listed Position Limit Circulars on July 19, The complete circulars are available from the Department of Market Regulation, in the data information bins on the 2nd Floor of the Exchange, and on the CBOE website at cboe.com under the Market Data tab. To receive regular updates of the position limit list via fax, contact Candice Nickrand at (312) Questions concerning position and exercise limits may be directed to the Department of Market Regulation to Joe Acevedo at (312) or Tim MacDonald at (312) Position Limit Circular PL07-31 July 19, 2007 TODCO ( THE/YTH/ZYU ) Election Merger Completed with THE Hercules Offshore Drilling Company, LLC, a wholly-owned subsidiary of Hercules Offshore, Inc. ( HERO/HIQ ) Effective Date July 12, 2007

4 July 25, 2007 Volume RB18, Number 30 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 2007 Chicago Board Options Exchange, Incorporated. REGULATORY CIRCULARS CBOE Regulatory Circular RG07-73 Date: July 16, 2007 To: From: Subject: Members and Member Firms CBOE Research and Product Development Credit Default Options Product Review OVERVIEW On June 19, 2007, CBOE commenced trading Credit Default Options. Listed below are some features of the proposed Credit Default Options: Credit Default Options are cash-settled binary options that pay $100,000 upon the confirmation of a Credit Event (e.g., bankruptcy or failure-to-pay) in a Reference Entity (i.e., debt issuer or guarantor) and $0 if there is no Credit Event prior to the Last Trading Day. The Last Trading Day for Credit Default Options if there is no Credit Event will be the 3rd Friday of the month. If there is a Credit Event confirmed prior to that day, the series will cease trading at the time of confirmation of the Credit Event and the Last Trading Day will be accelerated to the confirmation date. The Expiration Date for Credit Default Options if there is no Credit Event will be the 4th business day after the Last Trading Day. If there is a Credit Event the Expiration Date will be accelerated to the 2nd business day immediately following the Credit Event confirmation date. Up to 41 quarterly expiration months (10.25 years) may be listed at any time. Each calendar year for Credit Default Options will have a unique class symbol. Credit Default Options will have unique class symbols, distinct from equity option classes based on the same company. Credit Default Options will be P.M.-settled. Credit Default Options will trade from 8:30 a.m. 3:00 p.m. (CT). July 25, 2007 Volume RB18, Number 30 1

5 CURRENT CLASS LISTINGS Following are the classes and contract months for series of Credit Default Options currently listed for trading: Credit Default Option Symbols/ Exp. Dates Equity Ticker Company Name Sep 2008 Sep 2012 F Ford Motor Co. FDE FDW GM General Motors Corp. GCB GCY HOV Hovnanian Enterprises Inc. CKA CKJ SPF Standard-Pacific Corp. JSV JSW To the extent they are provided in the terms of the Relevant Obligations (described below), the following are the applicable Credit Events for the above-listed classes: A Failure-to-Pay Default on its Reference Obligation (e.g., Company ABC 8.5% July 2013 bond) or on any other debt security obligations of the Reference Entity other than non-recourse indebtedness (the set of these obligations and the Reference Obligation are referred as the Relevant Obligations ); provided that the minimum Failure-to-Pay amount, individually or in the aggregate, shall be the greater of $750,000 or the amount specified in accordance with the terms of the Relevant Obligation(s). Bankruptcy as defined in the terms of the Relevant Obligation(s). INFORMATION SOURCES CBOE will confirm Credit Events and Special Contingencies based on at least two of the following sources of publicly available information: (1) Wall Street Journal, Bloomberg Service, Reuters, Dow Jones News Wire, Financial Times, New York Times; and/or (2) information submitted to or filed with the courts, the SEC, an exchange or association, the OCC, or another regulatory agency or similar authority. SUCCESSION-RELATED ADJUSTMENTS Each Credit Default Option will be replaced by one or more Credit Default Options derived from Successor Reference Entities that have succeeded the original Reference Entity as a result of a Succession Event based on the applicable share of each Successor Reference Entity. A Successor Reference Entity and a Succession Event will be defined in accordance with the terms of the Relevant Obligation(s). In determining the applicable share, an equal share will be allocated to each Successor Reference Entity that has succeeded the original Reference Entity as issuer or guarantor of at least one Relevant Obligation and at least 25% of the principal amount of the original Reference Entity s outstanding debt obligations other than non-recourse indebtedness. If no Successor Reference Entity satisfies the at least 25% requirement and the original Reference Entity does not survive following the Succession Event, an equal share will be allocated to the Successor Reference Entity(ies) that succeeded to the largest percentage of the original Reference Entity s outstanding debt obligations other than non-recourse indebtedness. In respect of each successor Credit Default Option, the cash settlement amount and contract multiplier will be adjusted based on the applicable share of each Successor Reference Entity. All other terms and conditions of each successor Credit Default Option will be the same as the original Credit Default Option unless the Exchange determines, in its sole discretion, that a modification is necessary and appropriate for the protection of investors and the public interest, July 25, 2007 Volume RB18, Number 30 2

6 including but not limited to the maintenance of fair and orderly markets, consistency of interpretation and practice, and the efficiency of settlement procedures. For additional information regarding Credit Default Option adjustments, please refer to Rule ADDITIONAL INFORMATION Please refer to Chapter XXIX of CBOE s rules and the following CBOE circulars for more information regarding Credit Default Options: RG RG IC IC IC You can also find additional information on our website located at Any questions about this memorandum may be directed to the Help Desk at (312) or Regulatory Circular RG07-74 Date: July 19, 2007 To: Members From: Index Options Procedure Committee Re: OEX Trading on Hybrid 3.0 MVR Update on Hybrid 3.0 On Tuesday, July 24, 2007, OEX, the S&P 100 Index, will be converted to the Index Hybrid trading platform (Hybrid 3.0). Hybrid 3.0 parameters in the OEX will differ from standard Hybrid in the following ways: Streaming quotes are allowed from the LMM only. Manual quoting from crowd members is allowed via PAR and Quote Reporters. Intra-day, only Customer orders may rest in the book. Customer, Firm, Broker-Dealer, and In-Crowd market participant orders may trade with the customer book intra-day. IOC contingency is required for all non-customer orders attempting to trade electronically with the book. Customer, Firm, Broker-Dealer, CBOE Market-Maker, away Market-Maker and Specialist orders are bookable prior to the open to participate in rotation. OPG contingency is required on all noncustomer orders attempting to participate in the rotation. Any unfilled balance on OPG orders will be canceled at the completion of opening rotation. The Quote Trigger (joining period) for Book trades will be one second, with trade allocation among multiple in-crowd participants via CUMA. Complex Orders Complex Order Book (COB) and Complex Order Auction (COA) will be available in $.05 increments. Only Customer orders may rest in COB. Summary of order types for in-crowd Market-Makers To participate in rotation, use orders with origin M and contingency OPG. To trade resting customer simple book orders, use orders with origin I and contingency IOC. July 25, 2007 Volume RB18, Number 30 3

7 To trade resting customer COB orders, use orders with origin M and contingency IOC. To respond to COA auctions, use orders with origin M and contingency type AUCTION RESPONSE. MVR update on Hybrid 3.0: Class MVR is set to a $.01 increment for COB and COA. (This supersedes Regulatory Circular RG07-68 which stated MVR was set to $.05 increments.) Members who use third party auto-quote systems should contact their vendor regarding the Hybrid 3.0 functionality. General questions regarding this matter may be directed to Anthony Montesano at x7365, or the Help Desk at July 25, 2007 Volume RB18, Number 30 4

8 Regulatory Circular RG07-75 To: Members From: Legal Division Date: July 18, 2007 Re: Rule Change Regarding Open Outcry Priority for Non-Crossing Transactions A rule change that amends the open outcry priority provisions for non-crossing transactions contained in Rules 6.45A(b) and 6.45B(b) has become effective (see Release ; SR-CBOE ). The rule change eliminated the book market participant share allocation for broker-dealer orders resting in the book. Under the revised priority provisions, the allocation of an order represented in open outcry for a non-crossing transaction shall be such that, at the same price: public customer orders resting in the book have first priority to trade against the order; the balance of the order, if any, will be allocated among bids and offers of in-crowd market participants; 1 then the balance of the order, if any, will be allocated among broker-dealer orders resting in the book and electronic quotes have third priority. Members are reminded that they must ensure compliance with Section 11(a) of the Securities Exchange Act of 1934 (the Act ). In that regard, notwithstanding the priority provisions described above, members relying on Section 11(a)(1)(G) of the Act and Rule 11a1-1(T) thereunder (commonly known as the G order exemption ) 2 must yield priority to any bid (offer) at the same price of public customer orders and broker-dealer orders (whether member or non-member) resting in the book, as well as any other bids and offers of in-crowd market participants that have priority over broker-dealer orders resting in the book. 3 Members seeking further information regarding the open outcry priority procedures for non-crossing transactions should refer to the rule change, which is available on CBOE s website at It should be noted that this rule change now makes consistent that the in-crowd market participants have priority over broker-dealer orders resting in the book on both crossing and noncrossing transactions. For additional information on the open outcry priority rules applicable to crossing transactions, refer to Rule 6.74 and Regulatory Circular RG For additional information on Section 11(a)(1) requirements, please refer to Regulatory Circular RG For any other questions, please contact Jennifer Lamie, Legal Division, at (312) Multiple bids and offers of in-crowd market participants shall be prioritized based on the allocation algorithm provided in Rule 6.45(a) and (b), which generally provide that priority is afforded to bids (offers) in the sequence in which they are made or, if the bids were made at the same time or in the event the sequence cannot be reasonably determined, priority is apportioned equally. 2 A member relying on the G order exemption must, among other requirements, yield priority to any bid or offer at the same price for the account of a person who is not, or is not associated with, a member (a non-member ), irrespective of the size of any such bid or offer or the time when it is entered. 3 For example, if a Floor Broker is relying on the G order exemption the priority sequence described above is modified so that, at the same price, public customer orders resting in the book would have first priority, then in-crowd market participants, then broker-dealer orders resting in the book, then the Floor Broker s G order (along with any other incrowd market participants also relying on the G order exemption). To the extent there may be any further remaining balance, same priced electronic quotes would have priority to trade next. July 25, 2007 Volume RB18, Number 30 5

9 Regulatory Circular RG07-76 To: Members From: Legal and Regulatory Services Divisions Date: July 18, 2007 Re: Split-Price Priority Rule The Exchange would like to remind members of the requirements relating to split-price priority. 1 Pursuant to Rule 6.47, for transactions effected in open outcry, a member who buys (or sells) one or more options contracts at a particular price shall, at the next lower (higher) price at which a member is bidding (offering), have priority in purchasing (selling) up to the equivalent number of option contracts of the same series that the member purchased at the higher (lower) price or prices. For orders of at least 100 contracts, a member who buys (sells) at least 50 contracts at a particular price shall have priority over all others, including the public customer orders in the book, in purchasing (selling) up to an equivalent number of contracts of the same order at the next lower (higher) price. For orders less than 100 contracts, public customer orders resting in the book at the next lower (higher) price still have priority. Example: Market is $1.00 $1.20, 100-up, which is all customer interest in the book. Floor broker enters crowd with order to buy 100. Market-Maker (MM) A is alone in responding Sell 50 at $1.15 and 50 at $1.20 for a net price of $ By offering at $1.15, MM A has priority over all orders in the book at $1.20 for 50 contracts. If the market is quoted at the minimum increment width (e.g., $ $1.05), split-price priority is not permitted where there are customer orders on both sides of the market. In such a scenario, members must first trade the resting customer orders on one side of the market. If, however, the market is quoted in the minimum increment width (e.g., $ $1.05) and the bid and/or offer represent non-public customer interest, split price priority is permitted. When asserting split price priority, members are also reminded that they must comply with the minimum increments for simple and complex orders set forth in Rule Questions regarding this rule may be addressed to Jennifer Lamie in the Legal Division at (312) A floor broker is able to achieve split-price priority provided, however, the floor broker must ensure compliance with Section 11(a) of the Exchange Act. July 25, 2007 Volume RB18, Number 30 6

10 Regulatory Circular RG07-77 Date: July 18, 2007 To: Membership From: Index Market Performance Committee Re: QQQQ Tier/Cost Revision The Index Market Performance Committee determined to lower the cost for quoting QQQ PRODUCTS/EQUITY (QQQQ). Previously, QQQQ was listed in the A+ Tier at a seat cost of 0.25 and has now been moved to the A Tier for a seat cost of Anyone currently appointed in QQQQ has had his/her seat cost adjusted accordingly. To view the current seat calculator on line, please go to: If you have any questions regarding this change or the appointment process, please contact Daniel Hustad, Vice President of Market Quality Assurance, at (312) or any member of the Market Quality Assurance Department at (312) or mqa@cboe.com. RULE CHANGES 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 SR-CBOE Appointment Costs On July 17, 2007, the Exchange filed Rule Change File No. SR-CBOE , which filing proposes to reduce the appointment cost for options on the Nasdaq-100 Index Tracking Stock (QQQQ) from.25 to.10. Any questions regarding the rule change may be directed to Patrick Sexton, Legal Division, at The rule text is shown below and the rule filing is available at: 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) No change. (b) No change. (c) No change. (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 July 25, 2007 Volume RB18, Number 30 7

11 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).50 Options on the ishares Russell 2000 Index Fund (IWM) Options on the NASDAQ 100 Index (NDX) A+ Options on Standard & Poor's Depositary Receipts [Options on the Nasdaq-100 Index Tracking Stock] Options on the Russell 2000 Index (RUT) Options on the S&P 100 (XEO).25 A* Hybrid 2.0 Classes B* Hybrid 2.0 Classes C* Hybrid 2.0 Classes D* Hybrid 2.0 Classes E* Hybrid 2.0 Classes F* All Remaining Hybrid 2.0 Classes.001 * Excludes Tiers AA and A+ Classes. (ii) - (viii) (d) No change. No change.... Interpretations and Policies:.01 No change. * * * * * Rule 8.4 Remote Market-Makers Rule 8.4. (a) (c) No change. (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. July 25, 2007 Volume RB18, Number 30 8

12 Tier Hybrid 2.0 Option Classes Appointment Cost AA Options on the CBOE Volatility Index (VIX).50 Options on the ishares Russell 2000 Index Fund (IWM) Options on the NASDAQ 100 Index (NDX) A+ Options on Standard & Poor's Depositary Receipts [Options on the Nasdaq-100 Index Tracking Stock] Options on the Russell 2000 Index (RUT) Options on the S&P 100 (XEO).25 A* Hybrid 2.0 Classes B* Hybrid 2.0 Classes C* Hybrid 2.0 Classes D* Hybrid 2.0 Classes E* Hybrid 2.0 Classes F* All Remaining Hybrid 2.0 Classes.001 * Excludes Tiers AA and A+ Classes. * * * * * (e) (f) No change. SR-CBOE Credit Default Options On July 16, 2007, the Exchange filed Rule Change File No. SR-CBOE , which filing proposes to set forth certain parameters that CBOE intends to use for determining the applicable share to be allocated to a Successor Reference Entity if there is a CDO contract adjustment due to a Succession Event. 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 Adjustments RULE (a) Credit Default Option contracts are subject to adjustment in accordance with the following: (1) Adjustment for Succession: Each Credit Default Option will be replaced by one or more Credit Default Options derived from Successor Reference Entities that have succeeded the original Reference Entity as a result of a Succession Event based on the applicable share of each Successor Reference Entity. (i) A Successor Reference Entity and a Succession Event will be defined in accordance with the terms of the Relevant Obligation(s). In determining the applicable share, an equal share will be allocated to each Successor Reference Entity that has succeeded the original Reference Entity as issuer or guarantor of at least one Relevant Obligation and at least 25% of the principal amount of the original Reference Entity s outstanding debt obligations other than nonrecourse indebtedness. If no Successor Reference Entity satisfies the at least 25% requirement July 25, 2007 Volume RB18, Number 30 9

13 and the original Reference Entity does not survive following the Succession Event, an equal share will be allocated to the Successor Reference Entity(ies) that succeeded to the largest percentage of the original Reference Entity s outstanding debt obligations other than non-recourse indebtedness. (ii) In respect of each successor Credit Default Option, the cash settlement amount and contract multiplier will be adjusted based on the applicable share of each Successor Reference Entity. All other terms and conditions of each successor Credit Default Option will be the same as the original Credit Default Option unless the Exchange determines, in its sole discretion, that a modification is necessary and appropriate for the protection of investors and the public interest, including, but not limited to the maintenance of fair and orderly markets, consistency of interpretation and practice, and the efficiency of settlement procedures. (2) Adjustment for Redemption: Once the Exchange has confirmed a Redemption Event, the Credit Default Option contract will cease trading on the confirmation date. If no Credit Event has been confirmed to have occurred prior to the effective date of the Redemption Event, the contract payout will be $0. If a Credit Event has been confirmed to have occurred prior to the effective date of the Redemption Event, the cash settlement amount shall be as provided in Rule 29.1(a). The Credit Event confirmation period will begin when the Credit Default Option contact is listed and will extend to 3:00 p.m. (CT) on the 4th Exchange business day after the effective date of the Redemption Event. (i) A Redemption Event will be defined in accordance with the terms of the Relevant Obligation(s) and will include the redemption or maturity of the Reference Obligation and of all other Relevant Obligations. (ii) If the Reference Obligation is redeemed or matures but other Relevant Obligation(s) remain, a new Reference Obligation will be specified from among the remaining Relevant Obligation(s) and the substitution will not be deemed a Redemption Event. (b) The Exchange will confirm adjustment events based on at least two sources, which may include announcements published via newswire services or information services companies, the names of which will be announced to the membership via Regulatory Circular, and/or information submitted to or filed with the courts, the SEC, an exchange or association, the Clearing Corporation, or another regulatory agency or similar authority. (c) When adjustments have been made, announcement of that fact will be made by the Exchange, and the adjusted [unit of trading and the adjusted exercise price]cash settlement amount(s) and the adjusted contract multiplier(s) will be posted at the post at which the series is traded and will be effective at the time specified in the announcement for all subsequent transactions in [that]the series. (d) Every determination of the Exchange pursuant to this Rule 29.4 will be within its sole discretion and shall be conclusive and binding on all holders and sellers and not subject to review. Rule 29.4 replaces, for purposes of this Chapter XXIX, Rule 5.7. 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. July 25, 2007 Volume RB18, Number 30 10

14 July 25, 2007 Volume RB18, Number 30 11

15 SR-CBOE Minor Rule Violations On July 18, 2007, the Exchange filed Rule Change File No. SR-CBOE , which filing proposes to amend CBOE Rule (Imposition of Fines for Minor Rule Violations) Interpretation and Policy.02(b) regarding fines imposed pursuant to the provisions of Exchange Rule 17.50(g)(4) (Failure to Submit Trade Information on Time and Failure to Submit Trade Information to the Price Reporter). Any questions regarding the rule change may be directed to Andrew Spiwak, Legal Division, at The rule text is shown below and the rule filing is available at CBOE pdf. Rule Imposition of Fines for Minor Rule Violations (a)-(g) No Change.... Interpretations and Policies * * * * *.01 No Change..02(a) The Exchange shall attempt to serve members fined pursuant to subsection (g)(4) of this Rule with a written statement in accordance with section (b) of this Rule within the month immediately following the month in which the violations were alleged to have occurred. Such members may, within fifteen (15) days after such service was effected, request verification of the fine by the Exchange. (b) Notwithstanding the provisions of Interpretation and Policy.02(a) above, there shall be a cap on the number of transactions during a particular month with respect to which a member fined pursuant to subsection (g)(4) of this Rule may request verification. Such cap shall be imposed pursuant to the following schedule: Number of Offenses Within a Rolling [Eighteen]Twenty-Four Month Period Maximum Number of Transactions During a Particular Month With Respect to Which Verification May Be Requested 1-2 No Limit 3+ The greater of (i) 50 transactions or (ii) 10% of the number of transactions deemed not to be in compliance with Rule 17.50(g)(4) No Change. SR-CBOE Expiration Months For Broad-Based Security Index Options On July 17, 2007, the Exchange filed Rule Change File No. SR-CBOE , which filing proposes to allow the Exchange to list up to seven expiration months for broad-based security index options upon which the Exchange calculates a constant three-month volatility index. Any questions regarding the rule change may be directed to Jennifer Klebes, Legal Division, at The rule text is shown below and the rule filing is available at July 25, 2007 Volume RB18, Number 30 12

16 Rule 24.9 Terms of Index Option Contracts RULE (a)(1) No change. (2) Expiration Months. Index option contracts may expire at three-month intervals or in consecutive months. The Exchange may list up to six expiration months at any one time, but will not list index options that expire more than twelve months out. Notwithstanding the preceding restriction, [until the expiration in November 2004,] the Exchange may list up to seven expiration months at any one time for [the SPX, MNX and DJX] any broad-based security index option contracts [, provided one of those expiration months is November 2004] (e.g., DJIA, NDX, RVX and SPX) upon which the Exchange calculates a constant threemonth volatility index. Short Term Option Series Pilot Program. Notwithstanding the preceding restriction, after an index option class has been approved for listing and trading on the Exchange, the Exchange may open for trading on any Friday that is a business day ("Short Term Option Opening Date") series of options on that class that expire on the next Friday that is a business day ("Short Term Option Expiration Date"). If the Exchange is not open for business on a Friday, the Short Term Option Opening Date will be the first business day immediately prior to that Friday. Similarly, if the Exchange is not open for business on a Friday, the Short Term Option Expiration Date will be the first business day immediately prior to that Friday. The Exchange may continue to list Short Term Option Series until the Short Term Option Series Pilot Program expires on July 12, Regarding Short Term Option Series, the Exchange may select up to five currently listed option classes on which Short Term Option Series may be opened on any Short Term Option Opening Date. In addition to the five-option class restriction, the Exchange also may list Short Term Option Series on any option classes that are selected by other securities exchanges that employ a similar Pilot Program under their respective rules. For each index option class eligible for participation in the Short Term Option Series Pilot Program, the Exchange may open up to seven Short Term Option Series on index options for each expiration date in that class. The strike price of each Short Term Option Series will be fixed at a price per share, with approximately the same number of strike prices being opened above and below the calculated value of the underlying index at about the time that the Short Term Option Series are initially opened for trading on the Exchange ( e.g., if seven series are initially opened, there will be at least three strike prices above and three strike prices below the value of the underlying security or calculated index value). If the Exchange has opened less than seven Short Term Option Series for a Short Term Option Expiration Date, additional series 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 current value of the underlying index moves substantially from the exercise price or prices of the series already opened. No Short Term Option Series on an index option class may expire in the same week during which any monthly option series on the same index class expire or, in the case of QIXs, in the same week during which the QIXs expire. Quarterly Options Series Pilot Program. Notwithstanding the preceding restriction, for a one-year pilot period, the Exchange may list and trade options series that expire at the close of business on the last business day of a calendar quarter ("Quarterly Options Series"). The Exchange may list Quarterly Options Series for up to five (5) currently listed options classes that are either index options or options on ETFs. In addition, the Exchange may also list Quarterly Options Series on any options classes that are selected by other securities exchanges that employ a similar pilot program under their respective rules. The one-year pilot will commence either the day the Exchange first initiates trading in a Quarterly Options Series or July 24, 2006, whichever is earlier. The Exchange may list series that expire at the end of the next consecutive four (4) calendar quarters, as well as the fourth quarter of the next calendar year. For example, if the Exchange is trading Quarterly Options Series in the month of May 2006, it may list series that expire at the end of the second, third, and fourth quarters of 2006, as well as the first and fourth quarters of Following the second quarter 2006 expiration, the Exchange could add series that expire at the end of the second quarter of July 25, 2007 Volume RB18, Number 30 13

17 Quarterly Options Series shall be P.M.-settled. The strike price of each Quarterly Options Series will be fixed at a price per share, with at least two, but no more than five, strike prices above and at least two, but no more than five, strike prices below the value of the underlying index at about the time that a Quarterly Options Series is opened for trading on the Exchange. The Exchange shall list strike prices for Quarterly Options Series that are reasonably related to the current index value of the underlying index to which such series relates at about the time such series of options is first opened for trading on the Exchange. The term "reasonably related to the current index value of the underlying index" means that the exercise price is within thirty percent (30%) of the current index value. The Exchange may open for trading additional Quarterly Options Series of the same class when the Exchange deems it necessary to maintain an orderly market, to meet customer demand or when the market price of the underlying security moves substantially from the initial exercise price or prices. The Exchange may also open for trading additional Quarterly Options Series that are more than thirty percent (30%) of the current index value, 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. The Exchange may open additional strike prices of a Quarterly Options Series that are above the value of the underlying index provided that the total number of strike prices above the value of the underlying index is no greater than five. The Exchange may open additional strike prices of a Quarterly Options Series that are below the value of the underlying index provided that the total number of strike prices below the value of the underlying index is no greater than five. The opening of any new Quarterly Options Series shall not affect the series of options of the same class previously opened. (3) (5) No change. Interpretations and Policies No change. SR-CBOE Position and Exercise Limits On July 16, 2007, the Exchange filed Rule Change File No. SR-CBOE , which filing proposes to (1) eliminate position and exercise limits for options on the Russell 2000 Index (RUT), (2) codify that reduced-value options on broad-based security indexes for which full-value options have no position limits similarly have no position and exercise limits, and (3) make technical changes to Rules 24.4, 24.5, and 24.A.7 to specify that there are no position and exercise limits for European-Style Exercise S&P 100 Index options (XEO). Any questions regarding the rule change may be directed to Jennifer Klebes, Legal Division, at The rule text is shown below and the rule filing is available at Rule 24.4 Position Limits or Broad Based Index Options RULE (a) In determining compliance with Rule 4.11, there shall be no position limit for broad-based index option contracts (including reduced-value option contracts) 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. BROAD-BASED INDEX OPTION TYPE STANDARD LIMIT (on the same side of the market) RESTRICTIONS [Nasdaq 100 Index (1/10 th ) (MNX)] [750,000] [None] [Russell 2000 Index (1/10 th )] [500,000] [no more than 300,000 near July 25, 2007 Volume RB18, Number 30 14

18 term] Dow Jones Equity REIT Index 250,000 contracts None [Russell 2000 Index (1/5 th )] [250,000 contracts] [no more than 150,000 near term] Lipper Analytical/Salomon Bros. Growth Fund Index 75,000 contracts no more than 50,000 near-term Lipper Analytical/Salomon Bros. Growth and Income Fund Index S&P 500/Barra Growth or Value 36,000 contracts in the no more than 21,500 near-term aggregate S&P SmallCap ,000 contracts no more than 60,000 near-term GSTI Composite [Russell 2000] Russell 1000 Russell 1000 Growth Russell 1000 Value Russell 2000 Growth Russell 2000 Value Russell 3000 Russell 3000 Growth Russell 3000 Value Russell Midcap Russell Midcap Growth Russell Midcap Value Russell Top 200 Index Russell Top 200 Growth Index Russell Top 200 Value Index Mexico 30 Index Germany 25 Morgan Stanley Multinational Company Index CBOE Euro 25 Index CBOE Asian 25 Index 50,000 contracts no more than 30,000 near-term Reduced Value NYSE Composite 45,000 contracts no more than 25,000 near-term CBOE Russell 2000 Volatility 50,000 contracts no more than 30,000 near-term Index SM ("RVX SM ") Other broad-based index 25,000 contracts no more than 15,000 near-term (b) (e) No Change.... Interpretations and Policies:.01 Broad-based Index Hedge Exemption July 25, 2007 Volume RB18, Number 30 15

19 The broad-based index hedge exemption is in addition to the standard limit and other exemptions available under Exchange rules, interpretations and policies. The following procedures and criteria must be satisfied to qualify for a broad-based index hedge exemption. (a) (d) No Change. (e) Positions in broad-based index options that are traded on the Exchange are exempt from the standard limits to the extent specified below. BROAD-BASED INDEX OPTION TYPE [Nasdaq 100 Stock Index (1/10 th value) (MNX)] [Russell 2000 Index (1/10 th )] [Russell 2000 Index (1/5 th )] S&P 500/Barra Growth or Value other broad-based index BROAD-BASED INDEX HEDGE EXEMPTION (is in addition to standard limit) [1,500,000 contracts] [750,000 contract] [375,000 contracts] 65,000 contracts 75,000 contracts (f) (h) No Change..02 No Change..03 Reporting Requirement Each member (other than CBOE Market-Makers) or member organization that maintains a broadbased index option position on the same side of the market in excess of 100,000 contracts for OEX, XEO, NDX, RUT or SPX 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 Regulation. In calculating the applicable contract-reporting amount, reduced-value contracts will be aggregated with fullvalue 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 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 24.5 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 DJX, OEX, XEO, NDX, RUT or SPX.... Interpretations and Policies: July 25, 2007 Volume RB18, Number 30 16

20 No Change. * * * * * Rule 24A.7 Position Limits for FLEX Narrow-Based Index Options; Reporting Requirements for Flex Broad-Based Index Options and Flex Equity Options Exercise Limits RULE 24A.7. (a) No Change. (b) FLEX Broad-Based Index Options. There shall be no position limits for FLEX DJX, OEX, XEO, NDX, RUT or SPX option contracts. However, each member (other than CBOE Market-Makers) or member organization that maintains a FLEX broad-based index option position on the same side of the market in excess of 100,000 contracts for OEX, NDX, RUT or SPX 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 prescribed by the Department of Market 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. In addition, 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 FLEX DJX, OEX, XEO, NDX, RUT, or SPX 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. (c) (d) No Change. SR-CBOE Dollar Strike On July 10, 2007, the Exchange filed Rule Change File No. SR-CBOE , which filing proposes rules that would permit the Exchange to list $1 strikes for VXD and VXN options and $1 strikes for RVX, VIX, VXD, and VXN LEAPs. Any questions regarding the rule change may be directed to Jennifer Klebes, Legal Division, at The rule text is shown below and the rule filing is available at Rule 24.9 Terms of Index Option Contracts RULE 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) (d) No change. (e) (i) Notwithstanding paragraph (a), the interval between strike prices for options on the [CBOE Volatility Index (VIX) and on the] CBOE Russell 2000 Volatility Index [ SM ] (RVX [ SM ]), the CBOE Volatility Index (VIX), CBOE Dow Jones Industrial Average Volatility Index (VXD) and the CBOE Nasdaq-100 Volatility July 25, 2007 Volume RB18, Number 30 17

21 Index (VXN) will be no less than $2.50; provided, that subject to the following conditions, the interval between strike prices for [VIX and] RVX [ SM ], VIX, VXD and VXN will be no less than $1.00: (A) The Exchange may open for trading series at $1.00 or greater strike price intervals for each expiration on up to 5 [VIX and] RVX [ SM ], VIX,VXD and VXN option and LEAPs series above and 5 [VIX and] RVX [ SM ], VIX, VXD and VXN option and LEAPs series below the current index level; (B) The Exchange may open for trading additional series at $1.00 or greater strike price intervals for each expiration as the current index level of [VIX and] RVX [ SM ], VIX, VXD and VXN moves from the exercise price of those [VIX and] RVX [ SM ], VIX, VXD and VXN options and LEAPs series that already have been opened for trading on the Exchange so as to maintain at least 5 [VIX and] RVX [ SM ], VIX, VXD and VXN option series and LEAPs above and 5 [VIX and] RVX [ SM ], VIX, VXD and VXN option and LEAPs series below the current index level; (C) The Exchange may not open fo r trading series with $1.00 intervals within $0.50 of an existing $2.50 strike price with the same expiration month; and (D) Reserved [The interval between strike prices for VIX and RVX SM LEAPs will be no less than $2.50.] (ii) For the purposes of adding strike prices on options and LEAPs on [VIX and] RVX [ SM ], VIX, VXD and VXN at $1.00 or greater strike price intervals, as well as at $2.50 or greater strike price intervals, the "current index level" shall mean the implied forward level based on [VIX and] RVX [ SM ], VIX, VXD and VXN futures prices No change. July 25, 2007 Volume RB18, Number 30 18

22 Information Circular IC07-96 Date: July 2, 2007 To: Membership From: Nominating Committee Re: Selection of Nominees for Board of Directors and Nominating Committee The Nominating Committee is accepting applications for nominees for the 2007 annual election to fill positions on the Board of Directors and Nominating Committee. Available Positions Available positions include: Board of Directors 1 At-Large Director 3-year term 2 Floor Directors 3-year terms 3 Off-Floor Directors Two 3-year terms and a 2-year term 4 Public Directors 3-year terms Nominating Committee 1 Firm Member 3-year term 3 Floor Members Two 3-year terms and a 1-year term 1 Lessor Member 3-year term 1 Public Member 3-year term The qualification criteria for the available positions on the Board of Directors and Nominating Committee are described in the attached materials. Application Submission Time Frame The Nominating Committee requests that candidates who wish to be considered for nomination by the Nominating Committee complete and submit the attached Candidate Application Form ("Application") by Monday, August 6, The Nominating Committee strongly encourages candidates to submit a current resume or curriculum vitae along with their Applications. The Nominating Committee will seek to interview all candidates that submit an Application by August 6, Although the Nominating Committee will continue to accept and consider any Applications submitted prior to 5:00 p.m. (Chicago time) on September 14, 2007, candidates that submit an Application after August 6, 2007 are not guaranteed to have a Committee interview. Application Submission Process The Application form is attached to this circular and may be obtained on the CBOE Member Website at and at the 4th and 7th floor reception desks at the Exchange. You may print or type the requested information into either the hard copy version or electronic version of the Application form. The electronic version of the Application form is posted on in an interactive pdf format which allows you to type the applicable information into the form and to print the completed form.