[Federal Register Volume 62, Number 242 (Wednesday, December 17, 1997)]
[Notices]
[Pages 66157-66158]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-32920]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39435; File No. SR-CBOE-97-55]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change by the Chicago
Board Options Exchange, Inc., Relating to the Telephone Policy for the
S&P 100 Index (``OEX'') Options Post
December 11, 1997.
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 October
9, 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 and II 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
and approving this proposal on an accelerated basis.
I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The CBOE proposes to amend its current policy governing the use of
member-owned or Exchange-owned telephones located at the post where
Standard & Poor's 100 Index (``OEX'') options are traded to allow
market makers to receive incoming telephone calls from locations
outside the CBOE building on telephones at the OEX post.\1\
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\1\ The Commission approved the Regulatory Circular (Regulatory
Circular 96-73) containing the current OEX telephone policy on July
26, 1996. See Securities Exchange Act Release No. 37487 (July 26,
1996), 61 FR 40686 (August 5, 1996) (order approving File No. SR-
CBOE-96-14).
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The text of the regulatory circular 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 purpose of the proposed rule change is to amend the Exchange's
current regulatory circular (Regulatory Circular 96-73) governing the
use of telephones at the OEX option trading post by eliminating the
restriction against market makers receiving incoming calls at the OEX
post from locations outside of the Exchange building. According to the
CBOE, when the OEX Floor Procedure Committee (``Committee'')
recommended that the Exchange adopt a policy prohibiting market makers
from receiving incoming calls at the OEX post, the Committee was
concerned that the receipt of telephone calls would interfere with the
market makers' fulfillment of their duties to make markets and fill
orders. However, the CBOE notes that all other trading posts on the
CBOE's floor have successfully allowed market makers to receive
incoming calls without any detrimental effects on the conduct of
business at those locations. In fact, the Exchange has found that
allowing market makers to receive incoming calls can allow them to stay
in contact with outside parties who can provide information to the
market makers that may assist them in performing their duties.
The proposed change to allow market makers to receive incoming
calls will make the OEX telephone policy consistent with the telephone
policy at all other trading locations on the CBOE's floor in this
respect. Under the proposal, the Exchange will allow market makers to
have their own dedicated telephone or telephone line if space permits.
The Exchange will retain the discretion to decide whether a market
maker may have its own telephone or a dedicated line on an Exchange
telephone depending on the space restrictions in the post.
The Exchange also is amending the OEX telephone installation
application and agreement to reflect the proposed change.
The Exchange believes the proposed rule change will allow market
makers to better perform their duties by giving them more open access
to outside information. In addition, the proposed change will make the
OEX telephone policy consistent with the policies elsewhere on the
Exchange floor. For the foregoing reasons, the Exchange believes the
rule proposal is consistent with and furthers the objectives of Section
6(b)(5) of the Act, in that it is designed to perfect the mechanisms of
a free and open market and to protect investors and the public interest
by providing better access to the OEX post.
(B) Self-Regulatory Organization's Statement on 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
The CBOE has requested that the proposed rule change be given
accelerated effectiveness pursuant to
[[Page 66158]]
Section 19(b)(2) of the Act. According to the CBOE, the proposed change
is consistent with the use of telephones at other locations on the CBOE
floor, including at the equity option telephone posts, where the use of
telephones is governed by a policy approved by the Commission.\2\
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\2\ The Commission approved the CBOE's proposal to incorporate
its telephone policy for equity options into the rules of the
Exchange in 1994. See Securities Exchange Act Release No. 33701
(March 2, 1994), 59 FR 11336 (March 10, 1994) (order approving File
No. SR-CBOE-93-24) (``Equity Option Approval Order'').
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The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange, and, in
particular, the requirements of Section 6(b)(5) \3\ in that it is
designed to promote just and equitable principles of trade, prevent
fraudulent and manipulative acts and practices, and maintain fair and
orderly markets.\4\ Specifically, the CBOE has represented that
allowing OEX market makers to receive incoming calls from outside the
CBOE building may allow OEX market makers to receive information that
will assist OEX market makers in performing their duties. In addition,
the proposal will make the OEX telephone policy regarding market
makers' receipt of incoming calls consistent with the telephone
policies at all other trading locations on the CBOE floor.
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\3\ 15 U.S.C. 78f(b)(5)(1988).
\4\ In approving this rule, the Commission notes that it has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(b)(5).
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The Commission believes that it is reasonable for the Exchange to
amend its telephone policy for OEX market makers to make the policy
consistent with the procedures applicable to all other trading
locations on the CBOE has indicated that market makers' receipt of
incoming calls at other trading posts on the CBOE floor. In this
regard, the Commission notes that the CBOE floor has produced no
detrimental effect on the conduct of business at those trading posts.
In addition, the CBOE states that the Exchange has not detected any
improper trading activity resulting from its telephone policies.\5\ The
Commission believes, as it found in approving the CBOE's telephone
policy for equity options, that the Exchange's existing surveillance
procedures will ensure that the CBOE is aware of any options
transactions that raise manipulation concerns.\6\ Accordingly, the
Commission believes that the CBOE's modification of its telephone
policy for OEX market makers will not diminish the Exchange's ability
to detect and deter manipulation.
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\5\ Telephone conversation among Timothy Thompson, Senior
Attorney, CBOE, Pat Cerny, Market Surveillance, CBOE, and Yvonne
Fraticelli, Attorney, Office of Market Supervision, Division of
Market Regulation, Commission, on November 18, 1997 (``November 18
Conversation'').
\6\ See Equity Option Approval Order, supra note 2.
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The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of publication of
notice of filing thereof in the Federal Register. Accelerated approval
will allow the CBOE to implement a uniform policy regarding market
makers' receipt of incoming calls at their trading posts. Accordingly,
the Commission believes that granting accelerated approval to the
proposal is appropriate and consistent with Section 6 of the Act.\7\
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\7\ 15 U.S.C. 78f.
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
argument 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 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,
N.W., 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 File No.
SR-CBOE-97-55 and should be submitted by January 7, 1998.
It Is Therefore Ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (File No. SR-CBOE-97-55) is
approved on an accelerated basis.
\8\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-32920 Filed 12-16-97; 8:45 am]
BILLING CODE 8010-01-M
