[Federal Register Volume 61, Number 199 (Friday, October 11, 1996)]
[Notices]
[Pages 53472-53473]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26171]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37787; File No. SR-CBOE-96-57]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Chicago Board Options Exchange, Inc., Relating to a Minor
Rule Violation Plan Amendment To Create a Settlement Procedure for
Position Limit Fines
October 4, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'')\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on September 25, 1996, the Chicago Board Options Exchange, Inc.
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. Sec. 78s(b)(1) (1988).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The CBOE, pursuant to Rule 19b-4 of the Act, proposes to amend its
minor rule violation plan to create an offer of settlement procedure
for certain position limit violations.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of and basis for the
proposed rule change, and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
has
[[Page 53473]]
prepared summaries, set forth in Sections A, B, and C below, of the
most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
Under the minor rule violation provisions of Exchange Rule 17.50,
the CBOE currently processes position limit violations not exceeding
$5,000 for any one trade date as summary fines. Exchange members whose
fine for any one trade date does not exceed that threshold are
summarily fined, including instances when consecutive trade dates
violations occurred and significant fine amounts accumulated. If
Exchange members wish to contest the summary fine(s), they are
restricted to the contested fine procedures in the minor rule violation
plan which permit either holding a hearing or presenting a written
submission before the Business Conduct Committee (``Committee'').
Based upon past experience with contested position limit summary
fine matters, as well as an internal regulatory focus study, the
Exchange proposes a new procedure so that members with significant
position limit violations meeting certain criteria will be afforded an
opportunity within the minor rule violation plan process to present one
settlement offer before the Committee. Members with significant
position limit summary fines do not presently have access to the
settlement resolution process available to respondents under Exchange
Rule 17.2 et seq. for regular disciplinary matters pending before the
Committee, including making offers of settlement without admitting or
denying the violations and personal appearances. Some members who
proceeded to a contested fine hearing admitted that the violations
occurred, and used the hearing forum solely to request that the fines
be reduced or removed.
The CBOE proposes to add language to Interpretation and Policy .01
under Exchange Rule 17.50 to define what levels of position limit
summary fines will trigger access to the new settlement procedure. In
general, the CBOE will treat (a) position limit violations resulting in
any one-day fine in excess of $2,500, or (b) position limit violations
resulting in an aggregate fine in excess of $10,000 and involving five
or more consecutive trade dates, as appropriate for an offer of
settlement opportunity before the Committee.
The CBOE proposes to make the new settlement procedure available
only with respect to position limit summary fines until the CBOE can
further review the effects on the minor rule violation plan process. In
this regard, the CBOE notes that it has not experienced significant
accumulations of fines by members for minor rule violations under
Exchange Rule 17.50 other than position limit violations.
By providing an interim step to allow for settlement of position
limit summary fines, the proposed rule change is expected to increase
the efficiency of the minor rule violation plan process by saving the
time and expense of both members and Exchange staff in preparing for
summary fine hearings. According to the CBOE, the proposed rule change
is consistent with and furthers the objectives of Section 6(b)(5) of
the Act in that it is designed to refine and enhance the Exchange's
minor rule violation plan as applied to position limit violations,
thereby removing impediments to a free and open market and protecting
investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The self-regulatory organization does not believe that the proposed
rule change will impose any inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the publication of this notice in the Federal
Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding, or (ii) as to
which the self-regulatory organization consents, the Commission will:
A. By order approve the proposed rule change, or
B. Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. Sec. 552, will be available for inspection and copying at
the Commission's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such filing also will be available
for inspection and copying at the principal office of the CBOE. All
submissions should refer to File No. SR-CBOE-96-57 and should be
submitted by November 1, 1996.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\3\
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\3\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-26171 Filed 10-10-96; 8:45 am]
BILLING CODE 8010-01-M
