[Federal Register Volume 59, Number 190 (Monday, October 3, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24301]
[[Page Unknown]]
[Federal Register: October 3, 1994]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34711; File No. SR-CBOE-94-30]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Chicago Board Options Exchange, Inc., Relating to Storage
of Customer Account Records
September 23, 1994.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on
September 7, 1994, the Chicago Board Options Exchange, Inc. (``CBOE''
or ``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``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.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Currently, paragraph (c) of CBOE Rule 9.8, ``Supervision of
Accounts,'' provides that background and financial information of
customers who have been approved for options transactions must be
maintained at both the branch office servicing the customer's account
and at the principal supervisory office with jurisdiction over the
branch office. In addition, copies of options customer account
statements over the most recent six months must be maintained at both
the branch office supervising the accounts and at the principal
supervisory office with jurisdiction over that branch. The CBOE
proposes to amend CBOE Rule 9.8(c) and Interpretation and Policy .03 to
enable members' supervisory offices to maintain certain customer
account information at off-site locations as long as the records are
readily accessible and promptly retrievable.
The text of the proposal is available at the Office of the
Secretary, CBOE, and at the Commission.
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 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
The CBOE states that the purpose of the proposal is to enable
supervisory offices of CBOE members to store certain customer account
records off-site. CBOE members that elect to do so must ensure that the
records are easily accessible and promptly retrievable.
Currently, under CBOE Rule 9.8, background and financial
information about customers, as well as copies of customer account
statements, must be maintained at the branch office serving the
customer and at that branch's principal supervisory office. The
substance of this rule appears uniformly in the rules of the other
options exchanges and in the options account rules of the National
Association of Securities Dealers, Inc. (``NASD''). According to the
CBOE, on-site storage in major financial centers is expensive, and, in
today's market environment, automated and secure facilities for data
storage and retrieval make it unnecessary to require on-site storage.
The CBOE states that, given those realities, the Options Self-
Regulatory Council (``OSRC'')\1\ has recommended that record retention
requirements be relaxed and that the exchanges and the NASD amend their
rules to permit supervisory offices to store customer records off-
premises as a matter of routine practice.\2\
---------------------------------------------------------------------------
\1\The OSRC, which was created pursuant to a plan submitted by
the options exchanges under Rule 17d-2 (``17d-2 plan'') under the
Act, includes representatives from each of the registered options
exchanges and the NASD. The 17d-2 plan was developed by the
exchanges and approved by the Commission to reduce regulatory
duplication and to coordinate solutions to options-related sales
practice issues common to firms which are members of two or more
self-regulatory organizations.
\2\In connection with the OSRC's recommendation, the designated
options examining authorities, including the CBOE, have committed to
periodic examinations of the document retention and supervisory
practices of firms using off-site storage arrangements.
---------------------------------------------------------------------------
The CBOE concurs with the OSRC's recommendation and believes that
its proposal will afford the CBOE's members the opportunity to
discharge their supervisory responsibilities more efficiently and more
cost-effectively. Accordingly, the CBOE's proposal amends paragraph (c)
and Interpretation and Policy .03 of CBOE Rule 9.8 to enable CBOE
members' supervisory offices to use off-premises storage for certain of
the customer records specified in the rules, provided the records are
easily accessible and promptly retrievable.\3\
---------------------------------------------------------------------------
\3\Interpretation and Policy .03 requires member to maintain, at
the principal supervisory office with jurisdiction over the office
servicing a customer's account, information to permit review of each
customer's account to determine (1) the compatibility of options
transactions with investment objectives and with the types of
transactions for which the account was approved; (2) the size and
frequency of options transactions; (3) commission activity in the
account; (4) profit or loss in the account; (5) undue concentration
in any options class or classes and (6) compliance with the
provisions of Regulation T of the Federal Reserve Board.
---------------------------------------------------------------------------
The CBOE believes that the proposed rule change is consistent with
Section 6(b) of the Act, in general, and furthers the objectives of
Section 6(b)(5), in particular, in that it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, and to protect investors and the public
interest.
(B) Self-Regulatory Organization's Statement of Burden on Competition
The CBOE does not believe that the proposed rule change will impose
any 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 after 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 reason for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(a) by order approve such 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, NW., 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. 552, will be available for inspection and copying at the
Commission's Public Reference Section, 450 Fifth Street, NW.,
Washington, D.C. Copies of such filing will also be available for
inspection and copying at the principal office of the above-mentioned
self-regulatory organization. All submissions should refer to the file
number in the caption above and should be submitted by October 24,
1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\4\
---------------------------------------------------------------------------
\4\17 CFR 200.30-3(a)(12) (1993).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-24301 Filed 9-30-94; 8:45 am]
BILLING CODE 8016-01-M
