On December 26, 2006, the Chicago Board Options Exchange, Incorporated (CBOE) filed with the Securities and Exchange Commission a proposed rule change relating to the establishment of the CBOE Stock Exchange (CBSX), which will be operated by CBOE Stock Exchange, LLC (CBSX LLC). CBOE filed Amendment No. 1 to the proposed rule change on January 10 (the SEC received no comments), Amendment No. 2 and Amendment No. 3 on March 1 and March 2, respectively. On March 2, the SEC granted approval of the proposed rule change, granted accelerated approval to Amendment Nos. 2 and 3 and solicited comments on Amendment Nos. 2 and 3. CBOE proposes to establish CBSX as a “facility” (as that term is defined in Section 3(a)(2) of the Securities Exchange Act of 1934) of CBOE. CBOE will have regulatory responsibility for the activities of CBSX. CBSX will be a fully automated marketplace for the trading of securities other than options by CBOE members. In prior releases, the SEC approved the CBSX rules for listing, trading and membership permits.

CBSX will be owned 50% by the CBOE, 20% by VDM Chicago, LLC, 10% by Labranche & Co., Inc., 10% by an affiliate of Interactive Brokers and 10% by Susquehanna International Group. In the current proposed rule change, CBOE seeks the SEC’s approval of the proposed governance structure of CBSX LLC as reflected in its Operating Agreement.

The filing discusses in detail various provisions of the Operating Agreement of CBSX LLC, which relate to: (i) CBSX being a “facility” of CBOE; (ii) changes in control of CBSX LLC; (iii) regulatory jurisdiction over CBSX LLC owners; and (iv) ownership and voting restrictions on CBSX LLC owners.