[Federal Register Volume 60, Number 26 (Wednesday, February 8, 1995)]
[Notices]
[Pages 7606-7607]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3034]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35307; File No. SR-CBOE-95-03]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Chicago Board Options
Exchange, Inc. Relating to Restrictions on the Exercise on Index
Options
January 31, 1995.
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 January
18, 1995, 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 Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its Rule 4.16 to limit the time
period during which restrictions on the exercise of index options may
be in effect, making Rule 4.16 consistent with CBOE Regulatory Circular
RG91-11, dated January 14, 1991. Rule 4.16 would be amended to
substitute the words ``business day'' for the words ``trading day,''
thereby making Rule 4.16 consistent with CBOE's stated policy as set
forth in Regulatory Circular RG91-11. 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. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Section (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 revise Rule 4.16 to
make it consistent with CBOE's stated policy regarding when
restrictions on the exercise of index options may be in effect, as set
forth in Regulatory Circular RG91-11. The Exchange represents that it
promulgated the policies regarding exercise restrictions in Regulatory
Circular RG91-11 to implement a coordinated approach to which all of
the options exchanges had agreed. Regulatory Circular RG91-11 provides,
in part, that, except during ``the last business day prior to
expiration, the (American Stock Exchange, CBOE, New York Stock
Exchange, Pacific Stock Exchange, and the Philadelphia Stock Exchange)
intend to prohibit exercises of cash settled index options during any
time when trading in such options are [[Page 7607]] delayed, halted or
suspended.'' (Emphasis in original). The Exchange represents that by
purporting to restrict exercises of these index options except on the
last business day prior to expiration, RG91-11 conflicts with Rule
4.16, which provides that exercise restrictions on index options are
only allowed until ``the opening of business on the last trading day
before the expiration date.'' (Emphasis added).
The Exchange believes that this terminology creates a problem in
the case of A.M.-settled index options. The ``last business day prior
to expiration'' is, for both A.M.-settled and P.M.-settled index
options, the Friday before expiration. For P.M.-settled options, that
Friday is also the ``last trading day before the expiration date.''
Pursuant to CBOE Rule 24.9(a)(4), however, the ``last trading day''
before the expiration date of A.M.-settled index options is ``the
business day preceding the last day of trading in the underlying
securities prior to expiration''--i.e., Thursday before expiration.
(Emphasis added). The present form of Rule 4.16 therefore would
prohibit restrictions on the exercise of A.M.-settled index options on
expiration Thursday, as well as expiration Friday, even when trading in
such options ``had been delayed, halted or suspended.'' This, the
Exchange believes, is contrary to the policy articulated in Regulatory
Circular RG-11, which would only prohibit restrictions on exercise of
any index option on expiration Friday.
To eliminate this inconsistency, and to implement the policy of
Regulatory Circular RG91-11 that index option exercise restrictions may
be in effect until the opening of business on expiration Friday (i.e.,
the ``last business day'' before expiration), the proposed rule change
would amend Rule 4.16 to substitute the words ``business day'' for the
words ``trading day.''
The CBOE represents 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)\1\ in particular in that it is designed to prevent
fraudulent and manipulative acts and practices and to promote just and
equitable principles of trade.
\1\15 U.S.C. 78f(b)(5) (1988).
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(B) Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose and 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
Because the foregoing rule change constitutes a stated policy,
practice, or interpretation with respect to the meaning,
administration, or enforcement of an existing rule of the Exchange, it
is has become effective pursuant to Section 19(b)(3)(A) of the Act and
subparagraph (e)(1) of Rule 19b-4 thereunder. At any time within 60
days of the filing of the proposed rule change, the Commission may
summarily abrogate such rule change if it appears to the Commission
that such action is necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance of the
purposes of the Act.
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, 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. Sec. 552, will be available for inspection and copying at
the Commission's Public Reference Section, 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-95-03 and should be
submitted by March 1, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\2\
\2\17 CFR 200.30-3(a)(12) (1994).
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[FR Doc. 95-3034 Filed 2-7-95; 8:45 am]
BILLING CODE 8010-01-M
