[Federal Register Volume 62, Number 53 (Wednesday, March 19, 1997)]
[Notices]
[Pages 13201-13203]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-6892]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38393; File No. SR-CBOE-97-12]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Chicago Board Options Exchange, Inc. To Amend the
Exchange's Rule Concerning the Pre-Opening Application of the
Intermarket Trading System
March 12, 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 February
26, 1997, 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 self-regulatory
organization. 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 CBOE proposes to amend CBOE Rule 30.72, Pre-Opening Application
Rule, with respect to the Pre-Opening Application in the Intermarket
Trading System (``ITS''). The proposed amendment is to enhance the
operation of the Pre-Opening Application by effectively including
circuit breakers as a trading halt situation that will trigger the Pre-
Opening Application.\1\
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\1\ The Commission notes that the majority of other ITS
Participants (the American Stock Exchange, Boston Stock Exchange,
Chicago Stock Exchange, Cincinnati Stock Exchange, National
Association of Securities Dealers, New York Stock Exchange, Pacific
Stock Exchange) have filed essentially the same proposals to amend
each of their rules concerning the Pre-Opening Application. See
Securities Exchange Act Release No. 38285 (February 13, 1997), 62 FR
8065 (February 21, 1997).
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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
[[Page 13202]]
on the proposed rule change. The text of these statement 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 enhance the operation
of CBOE Rule 30.72, the ITS Pre-Opening Application. The CBOE's Pre-
Opening Application rule contains basic definitions pertaining to ITS,
prescribes the sorts of transactions that may be effected through ITS
and the pricing of commitments to trade, and specifies the procedures
pertaining to the Pre-Opening Application, whereby an Exchange
Designated Primary Market-Maker (``Exchange DPM'') who wishes to open a
market in an ITS stock may obtain any pre-opening interest in that
stock by other market-makers registered in that stock in other
Participant markets.
CBOE's current Pre-Opening Application prescribes that if an
Exchange DPM anticipates that the opening transaction on the Exchange
will be at a price that represents a change from the security's
previous day's consolidated closing price of more than the ``applicable
price change,'' the Exchange DPM shall notify other Participant markets
by sending a pre-opening notification through the ITS. The ``applicable
price changes'' are:
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Applicable price change (more
Consolidated closing price \2\ than)
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Network A:\3\
Under $15............................ \1/8\ point.
$15 or over.......................... \1/4\ point.
Network B:
Under $5............................. \1/8\ point.
$5 or over........................... \1/4\ point.
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\2\ If the previous day's closing price of an eligible listed security
exceeded $100 and the security does not underlie an individual stock
option contract listed and currently trading on an exchange, the
``applicable price change'' is one point.
\3\ Network A is comprised of New York Stock Exchange securities;
Network B is comprised of American Stock Exchange securities.
Thereafter, the Exchange DPM shall not open the market in the security
until not less than three minutes after the transmission of the pre-
opening notification. Once an Exchange DPM has issued a pre-opening
notification, other Participant markets may transmit ``pre-opening
responses'' to the Exchange DPM through the ITS that contain
``obligations to trade.'' The Exchange DPM is then obligated to combine
these obligations with orders it already holds in the security, and, on
the basis of this aggregated information, decide upon the opening
transaction in the security.
The Pre-Opening Application also applies whenever an ``indication
of interest'' is sent to the Consoldiated Tape Association (``CTA'')
Plan Processor prior to the opening of trading in the relevant security
or prior to the reopening of trading in the relevant security following
the declaration of a trading halt for certain defined reasons, even if
the anticipated opening or re-opening price is not greater than the
``applicable price change.'' The current Pre-Opening Application
provides that the Pre-Opening Application Rule applies when an
indication of interest is disseminated following five defined trading
halt situations; reopenings following order imbalance, order influx,
equipment, communications or technical problems, news pending and news
dissemination, and for a delayed opening.
The purpose of the proposed amendment is to amend the CBOE's Pre-
Opening Application rule to provide that the Pre-Opening Application
would be triggered whenever any ``indication of interest'' (i.e., an
anticipated opening price range) is sent to the Consolidated Tape
System prior to the opening or reopening of trading in the relevant
security. Under the proposed change, the Pre-Opening Application would
also be triggered when indications of interest are disseminated in
situations other than those five defined trading halts, including the
resumption of trading following the activation of market-wide circuit
breakers. In particular, the proposed amendment would delete the
definition of ``Trading Halt,'' which is limited to the five defined
trading halt situations mentioned above, and replace all references to
``Trading Halt'' with ``halt or suspension in trading.'' As a result,
one standard procedure would then goven all trading halt situations and
would include suspensions of trading pursuant to circuit breakers.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b)(5) of the
Act \4\ in that it is designed to promote just and equitable principles
of trade, to remove impediments to and to perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. The proposed rule change is
also consistent with Section 11A(a)(1)(D) \5\ of the Act which provides
that the linking of all markets for qualified securities through
communications and data processing facilities will foster efficiency,
enhance competition, increase the information available to brokers,
dealers, and investors, facilitate the offsetting of investors' orders,
and contribute to the best execution of such orders.
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\4\ 15 U.S.C. 78f(b)(5).
\5\ 15 U.S.C. 78k-1(a)(1)(D).
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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 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 either solicited or received.
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 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
[[Page 13203]]
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-97-12 and
should be submitted by April 9, 1997.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-6892 Filed 3-18-97; 8:45 am]
BILLING CODE 8010-01-M
