[Federal Register Volume 62, Number 34 (Thursday, February 20, 1997)]
[Notices]
[Pages 7812-7814]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4091]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38268; File No. SR-CBOE-97-02]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by Chicago Board Options Exchange, Incorporated, Relating to the
Use of Proprietary Brokerage Order Routing Terminals on the Floor of
the Exchange
February 11, 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 January 21, 1997, the Chicago Board Options Exchange, Inc. (``CBOE''
or ``Exchange'')
[[Page 7813]]
filed with the Securities and Exchange Commission (``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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange proposes to extend from the Standard & Poor's 500
index (``SPX options'') to the trading crowd in options on the Standard
& Poor's 100 index (``OEX options'') its existing policy adopted
pursuant to Exchange Rule 6.23 whereby members are permitted to
establish, maintain and use proprietary hand-held, brokerage order
routing terminals and related systems (``Terminals'') in the trading
crowd with the written approval of the Exchange upon submission of an
``Application & Agreement for Brokerage/Order Routing Terminals in
Trading Crowds'' (``Application Agreement''). At present, members may
apply to use Terminals only in the trading crowd in SPX options. The
Exchange proposes to make changes to the Application Agreement
reflecting its use to apply for Terminals in the OEX crowd as well as
the SPX crowd. 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 Basic 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 extend to floor
brokers in the OEX trading crowd the Exchange's policy pursuant to
which members have the right to use proprietary, wireless, hand-held
terminals for the electronic routing of firm and customer orders
directly to brokers in the crowd (``Terminals''). The Exchange's
general policy concerning the use of Terminals in the SPX trading crowd
was recently approved by the Commission.\3\ Pursuant to this policy,
members may use Terminals in the SPX trading crowd only with the
written approval of the Exchange after submission of the Exchange's
Application Agreement.
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\3\ See Securities Exchange Act Release No. 38054 (Dec. 16,
1996), 61 FR 67365 (Dec. 20, 1996) (``Release No. 38054'').
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In its filing originally proposing the adoption of a policy
pertaining to the use of Terminals on the trading floor, the Exchange
stated that it would initially limit the use of Terminals to the SPX
options trading crowd. To date only one member firm has applied and
been approved to use Terminals in that crowd. The Exchange now proposes
to extend the availability of Terminals to one additional trading crowd
on the floor, the OEX crowd, in response to a request from the same
member firm that has been approved to use Terminals in the SPX crowd.
The Exchange notes that the use of Terminals in the OEX crowd would be
subject to exactly the same terms and conditions that apply in the SPX
crowd, including the use of the same form of Application and Agreement
that was recently approved.\4\
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\4\ In particular, the applicant must agree that its terminal
will be used to receive brokerage orders only, and that it will not
be used to perform a market making function. id.
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The Exchange originally proposed to limit Terminals to the SPX
crowd for an initial evaluation period because the one firm proposing
to use Terminals made its proposal with respect to SPX options only,
and because the Exchange believed it should have some experience with
its Terminals policy before extending the policy beyond the SPX Options
trading crowd. Now that the same firm has expressed a desire to use
Terminal in the OEX crowd as well as the SPX crowd, the Exchange
believes that having Terminals in both crowds will provide a better
evaluation of the Exchange's Terminals policy than if Terminals are
limited to the SPX crowd only. Because OEX options represent a more
retail-oriented product than the largely institutional SPX options, the
Exchange believes that the availability of Terminals in both crowds
will better enable the Exchange to evaluate how Terminals may be used
for both retail and institutional orders, which in turn will be
relevant to deciding when and under what conditions to propose an
extension of the Terminal policy on a floor-wide basis.
2. Statutory Basis
The proposed rule change is consistent with section 6(b) of the Act
\5\ in general, and furthers the objectives of sections 6(b)(1) \6\ and
6(b)(5) \7\ of the Act in particular, in that the proposal is designed
to improve communications to and from the Exchange's OEX trading crowd
in a manner that gives the Exchange necessary monitoring tools and that
is designed to prevent fraudulent and manipulative acts and practices,
promote just and equitable principles of trade, perfect the mechanisms
of a free and open market, and protect investors and the public
interest.
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\5\ 15 U.S.C. 78f(b) .
\6\ 15 U.S.C. 78f(b) (1).
\7\ 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 not impose
any inappropriate burden on competition. To the contrary, the Exchange
believes that the proposed rule change will promote competition among
brokers by encouraging the development and use of new systems designed
to facilitate the execution of customer orders, while at the same time
preserving the benefits of the auction market for all customers.
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 with respect
to the proposal.
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
[[Page 7814]]
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 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-97-02 and should be
submitted by March 13, 1997.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-4091 Filed 2-19-97; 8:45 am]
BILLING CODE 8010-01-M
