[Federal Register Volume 59, Number 21 (Tuesday, February 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-2120]
[[Page Unknown]]
[Federal Register: February 1, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33511; File No. SR-CBOE-93-18]
Self-Regulatory Organizations; Chicago Board Options Exchange
Inc.; Order Approving Proposed Rule Change Relating to Floor Broker
Requirements for Trading FLEX Options
January 24, 1994.
On April 19, 1993, the Chicago Board Options Exchange, Inc.
(``CBOE'' or ``Exchange'') submitted to the Securities and Exchange
Commission (``Commission'' or ``SEC''), pursuant to section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act'')\1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to eliminate the minimum net
liquidating equity requirement for floor brokers.
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\1\15 U.S.C. 78s(b)(1) (1982).
\2\17 CFR 240.19b-4 (1993)
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Notice of the proposed rule change appeared in the Federal Register
on April 29, 1993.\3\ No comments were received on the proposed rule
change. This order approves the proposal.
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\3\See Securities Exchange Act Release No. 32198 (April 23,
1993), 58 FR 26013.
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Under current CBOE rule 24A.13(b), any CBOE member acting as a
floor broker must maintain at least $100,000 in net liquidating equity
to be eligible to effect FLEX Option transactions. At the same time,
Rule 24A.15(b) separately requires each floor broker that participates
in FLEX Options trading to obtain a letter of authorization from a
clearing member specifically accepting responsibility for the clearance
of the floor broker's FLEX Options transactions. Based on the CBOE's
experience with FLEX Options trading, the Exchange believes that the
clearing member letter of authorization requirement, by itself, is
sufficient to assure the financial integrity of floor brokers. The
separate minimum net liquidating equity requirement appears to the CBOE
to be unnecessary. There is not a similar requirement that applies to
floor brokers acting with respect to any other currently-traded CBOE
product.\4\ Accordingly, the CBOE maintains that the only effect of the
existing minimum net equity requirement is to give larger floor brokers
exclusive access to the FLEX Options market, without any regulatory
justification. As a result, the CBOE proposes to eliminate the minimum
net liquidating equity requirement applicable to floor brokers.
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\4\Clearing member letters of authorization have proven
sufficient, in the option of the Exchange, for financial
responsibility and performance assurance purposes.
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The purpose of this proposal is to enable the CBOE to increase the
number of its floor brokers who are eligible to facilitate FLEX Options
transactions, and thereby, enhance competition and increase the
potential for exchange member participation in the FLEX Options market.
This change would be achieved by eliminating paragraph (b) from Rule
24A.13.
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).\5\ Specifically, the
Commission believes that the net equity liquidating requirement for
FLEX Options floor brokers is unnecessary given that a letter of
authorization from a clearing member accepting responsibility for
clearance of the floor broker's FLEX Options transactions is required
for each FLEX Options floor broker. Moreover, the letter of
authorization would cover any unmatched trades facilitated by the Flex
Options floor broker.\6\
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\5\15 U.S.C. 78f(b)(5) (1982).
\6\In addition, since the inception of FLEX Options trading on
the Exchange in February, 1993, the Exchange has not experienced any
problems with regard to ``error'' or unmatched trades among FLEX
Options market participants.
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It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\7\ that the proposed rule change (SR-CBOE-93-18) is approved.
\7\15 U.S.C. 78s(b)(2) (1982).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-2120 Filed 1-31-94; 8:45 am]
BILLING CODE 8010-01-M
