[Federal Register Volume 59, Number 38 (Friday, February 25, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-4337]
[[Page Unknown]]
[Federal Register: February 25, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33636; File No. SR-CBOE-93-59]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Chicago Board Options Exchange, Inc. Relating to Narrow-
Based Index Options Listing Standards
February 17, 1994.
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 December
22, 1993, the Chicago Board Options Exchange, Inc. (``CBOE'' or
``Exchange'') 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 CBOE.\1\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\The CBOE originally submitted a filing (SR-CBOE-92-39)
covering the same subject matter of the present filing on December
14, 1992. The CBOE has advised the Commission staff that it intends
to withdraw SR-CBOE-92-39 upon Commission approval of the present
filing. See letter from Michael L. Meyer, Schiff Hardin & Waite, to
Michael A. Walinskas, Options Branch, Division of Market Regulation,
SEC, dated February 11, 1994.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The CBOE proposes to establish generic listing standards for
options on narrow-based (sector) indexes and to adopt a streamlined
procedure for introducing trading in options that satisfy these listing
standards. The text of the proposed rule change is available at the
Office of the Secretary, the 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 placed specified in
Item IV 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
The purpose of the proposed rule change is to enable the CBOE to
list classes of index options on narrow-based (sector) stock indices
that satisfy specified listing standards pursuant to a filing submitted
to the Commission for effectiveness upon filing under section
19(b)(3)(A) of the Act. The proposed rule change includes both the
listing standards that a narrow-based stock index must meet to qualify
for such expedited effectiveness, as well as the procedures and
conditions that will apply to such a filing. These listing standards,
procedures and conditions were developed during the course of
discussions among the Commission staff and representatives of the CBOE
and other options exchanges.
The initial listing standards that must be met to qualify a narrow-
based index option for filing under section 19(b)(3)(A) include that
the options must be designated for A.M.-settlement, that the index must
be capitalization-weighted, price-weighted, of equal-dollar weighted,
and consist of ten or more component securities, and that the component
securities must meet stated minimum market capitalization and trading
volume criteria. In addition, the proposed rule includes ``weight''
limits for individual components securities and for the five highest-
weighted component securities in the subject index, and it requires
that a high percentage of the component securities in the index must
meet the issue-specific listing criteria set forth in CBOE Rule 5.3.
Further, each component security must be a ``reported security'' under
Rule 11Aa3-1 under the Act, and the non-U.S. component securities in a
subject index that are not subject to comprehensive surveillance
agreements may not exceed 20 percent of the index's weight. Finally,
the current index value must be reported at least once every fifteen
seconds during trading hours, any equal dollar-weighted index must be
rebalanced at least once each calendar quarter, and any underlying
index that is maintained by a broker-dealer must be subject to suitable
``Chinese Wall'' arrangements.
The proposed rule change also contains maintenance listing
standards. These include most of the initial listing standards,
somewhat reduced minimum trading volume criteria, and a percentage
limitation respecting changes in the number of component securities in
an index subsequent to initial listing. These maintenance standards
would apply to each class of narrow-based index options listed pursuant
to a section 19(b)(3)(A) filing, unless and until the class of option
is subsequently approved pursuant to a filing made under section
19(b)(2).
The proposed rule change amends CBOE Rule 24.2, which provides that
each new underlying index must be approved by the Commission. Practice
under this rule to date has dictated use of filing and approval
procedures pursuant to a subparagraph (2) of subsection 19(b) of the
Act. Although that process would remain available to the CBOE under
this proposed rule change, this rule change is designed to produce more
expeditious trading of options on new indices that meet the listing
standards.
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act, in general, and furthers the objectives
of section 6(b)(5) in particular, in that it is designed to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities and to protect investors and the public
interest.
(B) Self-Regulatory Organization's Statement on Burden on Competition
The CBOE 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 solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Within 35 days of the date of 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 such 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, 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 5U.S.C. 552, will be available for inspection and copying in the
Commission's Public Reference Section, 450 Fifth Street, NW.,
Washington, DC. 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-93-59 and should be
submitted by March 18, 1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\2\
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\2\17 CF 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-4337 Filed 2-24-94; 8:45 am]
BILLING CODE 8010-01-M
