[Federal Register Volume 62, Number 226 (Monday, November 24, 1997)]
[Notices]
[Pages 62650-62652]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-30721]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39331; File No. SR-CBOE-97-56]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change and Amendment No.
1 Thereto by the Chicago Board Options Exchange, Inc. Relating to the
Elimination of the Prohibition on the Use of Headsets and Other
Telephone Technology
November 17, 1997.
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 October 20, 1997, the Chicago Board Options Exchange, Inc. (``CBOE''
or ``Exchange'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the CBOE. On
November 3, 1997, the CBOE filed Amendment No. 1 to its proposal.\3\ On
November 13, 1997, the CBOE submitted a letter clarifying its ability
to surveil the use of telephone headsets on its trading floors.\4\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons and to grant accelerated
approval of the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, the CBOE added a sentence to clarify
that the immediate impact of the rule change will be to allow
members in the Standard & Poor's 100 Index pit and in equity pits to
use headsets that are being provided with the Exchange's new
Ericsson wireless telephone system. See Letter from Timothy
Thompson, Senior Attorney, CBOE, to Michael Walinskas, Senior
Special Counsel, Division of Market Regulation, SEC, dated October
31, 1997.
\4\ See Letter from Timothy Thompson, Senior Attorney, CBOE, to
Jerome Roche, Law Clerk, Division of Market Regulation, SEC, dated
November 13, 1997.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The CBOE proposes to eliminate certain restrictions on the types of
telephones that may be used at the trading posts for equity options and
options on the Standard & Poor's 100 Index (``OEX''). The text of the
proposed rule change and Amendment No. 1 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 CBOE 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 III below. The CBOE 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 eliminate the
prohibitions on certain types of telephones that may
[[Page 62651]]
be used by members at the equity option posts and at the OEX trading
post. The Exchange's phone policy for the OEX option trading post is
reflected in Regulatory Circular RG 96-73, and the Exchange's phone
policy for the equity option trading post is contained in Regulatory
Circulars RG 94-26 and RG 97-03.
The Exchange is proposing to eliminate the current prohibition on
the use of headsets and cellular telephones at both the equity and the
OEX option trading posts. The Exchange no longer sees a regulatory
reason for continuing to impose these specific prohibitions. The
Exchange believes that its customary floor surveillance procedures and
the monitoring of trading activities of a member, after a call, by
other self-interested members of the trading post are sufficient. In
place of prohibiting the use of these types of telephones, the Exchange
will issue a circular to its members stating that ``the Exchange may
disapprove the use of any type of telephone technology that interferes
with the normal operation of the Exchange's own systems or facilities
or that the Exchange determines interferes with its regulatory
duties.'' The Exchange believes this constitutes a clarification of the
authority the Exchange already exercises under Exchange Rule 6.23 which
permits the Exchange to ``direct the discontinuance of any
communication facility terminating on the floor of the Exchange.''
Pursuant to Rule 6.23, the Exchange will continue to prohibit the use
of cellular telephones. In addition to distributing the circular, the
Exchange will redistribute a revised version of the OEX and equity
option post telephone circulars with the change in the policy
indicated. As under the current policies, the CBOE's members wishing to
establish a telephone line on the floor must first receive approval of
the Exchange or the appropriate Floor Procedure Committee.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the requirements of Section 6(b)(5) of the Act \5\ that an
Exchange have rules that are designed to promote just and equitable
principles of trade, to remove impediments to and perfect the mechanism
of a free and open market and a national market system, and in general,
to protect investors and the public interest. The Exchange believes
that the elimination of the prohibition on headsets and other telephone
technology is consistent with these objectives in that it is designed
to improve communication to and from the Exchange's trading floor in a
manner that prevents fraudulent and manipulative acts and practices and
maintains fair and orderly markets.
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\5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposed rule change will impose no
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. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing. Persons making written submissions
should filed 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 in the
Commission's Public Reference Room, 450 Fifth Street, N.W., Washington,
D.C. 20549. Copies of such filing will also be available for inspection
and copying at the principal office of the CBOE. All submissions should
refer to File No. SR-CBOE-97-56 and should be submitted by December 15,
1997.
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
The Commission finds that the proposed rule change, as amended, is
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange.\6\
Specifically, the Commission believes the Exchange's proposal to
eliminate the per se prohibition on headsets and other telephone
technology is consistent with Section 6(b)(5) of the Act.\7\ Approval
of this rule change permits the CBOE to extend the use of established
headset communications equipment to the OEX and equity trading
areas.\8\ The Commission believes that the Exchange continues to have
sufficient authority to regulate and restrict the use of communication
devices on its floor under Exchange Rule 6.23 and the phone line
approval process in the Exchange's Regulatory Circulars. The Commission
also believes that the CBOE has adequately represented its ability to
surveil the use of headset communications equipment.
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\6\ In approving this rule, the Commission notes that it has
considered the proposed rule's impact on effciency, competition, and
capital formation. 15 U.S.C. 78c(b)(5).
\7\ U.S.C. 78f(b)(5).
\8\ Headsets are currently being used at the trading posts for
options on the Standard & Poor's 500 Index (``SPX'') and the Dow
Jones Industrial 30 Index (``DJX'') without any reported problems.
Telephone conversation between Timothy Thompson, Senior Attorney,
CBOE, and Mike Walinskas, Senior Special Counsel, Division of Market
Regulation, SEC, on October 30, 1997.
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The Commission nonetheless encourages the Exchange to consider the
adoption of more comprehensive guidelines in the area of communications
equipment approval. The current CBOE telephone policies rely upon the
ability to: (1) Approve new telephone lines; and (2) restrict the use
of communication devices on its floor, pursuant to Exchange Rule 6.23.
This creates a potential loophole whereby a novel communications device
could be brought on to the floor, without Exchange approval, if the
device did not rely on a ``telephone line'' and had not been clearly
restricted pursuant to Exchange Rule 6.23.
The Commission finds good cause for approving the proposed rule
change, including Amendment No. 1, prior to the thirtieth day after the
date of publication of notice thereof in the Federal Register. This
immediate impact of the proposal is to allow the CBOE's members to
utilize headsets that are provided within the Exchange's new Ericsson
wireless telephone system. As noted above, this system is currently in
use in other trading crowds on the Exchange. Accelerated approval will
allow the incorporation of this new technology on the OEX and equity
trading posts without further delay. For the foregoing reasons, the
Commission believes that granting accelerated approval to the proposed
rule change is appropriate and consistent with Section 6 of the Act.\9\
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\9\ 15 U.S.C. 78f.
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-CBOE-97-
[[Page 62652]]
56), including Amendment No. 1, is approved on an accelerated basis.
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\10\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-30721 Filed 11-21-97; 8:45 am]
BILLING CODE 8010-01-M
