[Federal Register Volume 62, Number 221 (Monday, November 17, 1997)]
[Notices]
[Pages 61419-61421]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-30054]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39308; File No. SR-CBOE-97-40]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Chicago Board Options Exchange, Incorporated Relating to
the ``Terms and Conditions of an Order'' for Purposes of the Exchange's
Rules on Solicited Trades and Crossed Trades
November 6, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
[[Page 61420]]
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on August 25, 1997, 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. On October 31, 1997, the Exchange submitted
Amendment No. 1 to the Proposal.\3\ 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. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See letter from Stephanie Mullins, Attorney, CBOE to David
S. Sieradzki, Attorney, SEC dated October 31, 1997 (``Amendment No.
1''). Amendment No. 1 changes the item to be defined from the word
``terms'' to the phrase ``terms and conditions.'' In addition,
Amendment No. 1 makes several non-substantive changes that clarify
the proposal.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its rules governing solicited orders
and ``crossing'' orders by adding to each rule an interpretation which
will define and clarify the phrase ``terms and conditions'' as used in
each rule. The text of the proposed rule change 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
1. Purpose
The purpose of the proposed rule change is to define and clarify
the meaning of the phrases ``terms and conditions'' of an order as used
in Exchange Rules 6.9 and 6.74. Pursuant to Rule 6.9, Solicited
Transactions, a member or member organization representing an order
respecting an option traded on the Exchange (an ``original order''),
including a spread, combination, or straddle order as defined in Rule
6.53 and a stock-option order as defined in Rule 1.1(ii), may solicit a
member or member organization or a non-member customer or broker-dealer
(the ``solicited person'') to transact in-person or by order (a
``solicited order'') with the original order.
Pursuant to Rule 6.74(b), a floor broker may effect a cross of a
customer order and a facilitation order subject to satisfaction of
certain conditions including disclosure on an order ticket for the
public customer order which is subject to facilitation, all of the
terms of such order, including any contingency involving, and all
related transactions in, either options or underlying or related
securities. A facilitation order is defined in Rule 6.53(m) as an order
which is only to be executed in whole or in part in a cross transaction
with an order for a public customer of the member organization and
which is clearly designated as a facilitation order.
The rules relating to both facilitation ``solicited'' and
``crossing'' transactions are designed to ensure that all market
participants have an equal opportunity to participate in trades,
fostering the objective of open outcry in a competitive market. The
proposed rule amendment defines what is meant by the phrase ``terms and
conditions'' as used in these two rules: the volume; the price; any
contingencies; and any components related to the order. Components are
related stock, options, futures or any other instruments or interests.
A contingency order is a limit or market order to buy or sell that is
contingent upon a condition being satisfied while the order is at the
post. Contingent orders include: Market-if-touched orders; market-on-
close-orders; stop (stop-loss) orders; and stop-limit orders.
The Exchange believes that the proposed Interpretations will enable
those who solicit and those who wish to effect ``facilitation'' crosses
to understand and abide by their disclosure obligations. In addition,
the proposed change will aid in achieving uniformity with regard to
trading crowd expectations, as well as to the type and amount of
information disclosed on crossed and solicited orders.
2. Statutory Basis
The Exchange represents that the proposed rule change is consistent
with Section 6(b)(5) of the Act \4\ in that it is designed to prevent
fraudulent and manipulative acts and practices and to perfect the
mechanism of a free and open market.
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\4\ 15 U.S.C. 78f(b).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange 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 either solicited or received.
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. 552, will be available for inspection and copying at the
Commission's Public Reference Room. Copies of such filing will also be
available for inspection and copying at the principal office of the
Exchange.
All submissions should refer to File No. SR-CBOE-97-40 and should
be submitted by December 8, 1997.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\5\
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\5\ 17 C.F.R. 200.30-3(a)(12).
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[[Page 61421]]
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-30054 Filed 11-14-97; 8:45 am]
BILLING CODE 8010-01-M
