| CHICAGO, March 5
CHICAGO, March 5 CBOE Holdings Inc,
which was fined $6 million last year for failing to properly
police its own marketplace, will implement tighter rules for
traders to help prevent fraud, according to a regulatory filing
The changes align CBOE rules with other exchanges and are
not linked to the fine imposed by the U.S. Securities and
Exchange Commission last year, CBOE spokeswoman Gail Osten said.
In an email, she said the exchange operator "did it to make
supervision and control more effective."
CBOE, which operates the Chicago Board Options Exchange,
will require trading firms to write down how they supervise each
of their business activities and to send CBOE an annual report
on regulatory compliance.
The firms, known as trading permit holders (TPH), also must
inspect each of their offices at least once every three years,
according to a SEC filing.
CBOE implemented the measures because it did not "have a
comprehensive rule that directly addresses the obligation of
every TPH to properly supervise its business and employees,"
according to the filing.
The SEC in June charged that the Chicago Board Options
Exchange and an affiliate had "systematic breakdowns in their
regulatory and compliance functions as a self-regulatory
organization." The financial penalties were the first ever
against a U.S. exchange for violating the duty to self-police a
The SEC approved CBOE's new rules because the agency
believed they would help trading firms "prevent fraudulent and
manipulative acts and practices and improve investor protection
by requiring TPHs to clearly delineate their supervisory
obligations," according to the filing.
The measures are a "good first step towards preventing
fraud," said Andrew Stoltmann, a Chicago-based securities
"These are really basic, rudimentary requirements that
should have been in place decades ago," he said. "What matters
is whether the CBOE is serious about policing its members or
whether these steps were just taken to placate and mollify the
Under federal securities laws, exchanges have
responsibilities as "self-regulatory organizations" to monitor
and oversee their markets.
In August, the largest U.S. securities trade group asked the
SEC to end the self-regulatory status of stock exchanges, saying
the structure was outdated and created conflicts of interest
that could be avoided by appointing an independent supervisor.
Later that month, the Chicago Board Options Exchange barred
regulatory staff from receiving compensation tied to the
company's soaring stock price "to reinforce the independence" of
Shares of CBOE on Wednesday were up 1.2 percent at $57.25.