[Federal Register Volume 64, Number 63 (Friday, April 2, 1999)]
[Notices]
[Pages 16017-16018]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-8145]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41214; File No. SR-CBOE-99-02]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change and Amendment No.
1 by the Chicago Board Options Exchange, Inc. Relating to the
Definition of Expiration Month for Purposes of Determining Log-On
Obligations for the Retail Automatic Execution System
March 25, 1999.
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 14, 1999, the Chicago Board Options Exchange, Inc. (``CBOE''
or ``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change. The Exchange filed an
amendment to its proposal on February 23, 1999.\3\ The proposed rule
change, as amended, is described in Items I and II below, which Items
have been prepared by the Exchange. The Commission is publishing this
notice and order to solicit comments on the proposed rule change and
Amendment No. 1 from interested persons and to approve the proposal, as
amended, on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Letter from Stephanie C. Mullins, Attorney, CBOE, to
Richard Strasser, Assistant Director, Division of Market Regulation,
Commission, dated February 22, 1999 (``Amendment No. 1''). Amendment
No. 1 redesignated the proposal pursuant to Section 19(b)(2) and
requested accelerated approval of the proposed rule change. In
addition, the amendment added language to CBOE Rule 24.17 defining
expiration month for options on both the Standard & Poor's 100 Index
and the Dow Jones Industrial Average.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange proposes to codify the definition of an expiration
month for purposes of determining compliance with the Retail Automatic
Execution System (``RAES'') log-on requirement for market-makers of
options on the Standard & Poor's 100 Index (``OEX'') and the Dow Jones
Industrial Average (``DJX''), as detailed in Exchange Rule 24.17. 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 Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange 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 III below. The Exchange 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 codify the definition
of an expiration month for purposes of determining compliance with the
RAES log-on requirement for market-makers of OEX and DJX options, as
detailed in Exchange Rule 24.17. Pursuant to Exchange Rule
24.17(b)(iii), once a market-maker has logged on to RAES at any time
during an expiration month, he or she must continue to do so each time
he or she is present in the trading crowd until the next expiration.
For this purpose, the Exchange is codifying the definition of an
expiration month for OEX options as the period from the Monday
immediately following an expiration Saturday through the Friday
immediately preceding the next successive expiration Saturday.\4\
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\4\ See Amendment No. 1.
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When DJX RAES obligations were first established in October 1997,
the Exchange applied the same RAES log-on obligations as those for OEX
options.\5\ In consideration of the fact that expiring DJX options
contracts cease trading at the close of business on the Thursday
immediately preceding an expiration and that the new near-term series
become the RAES eligible series on that Friday, however, the Exchange
has determined that applying the same definition of an expiration month
for options on both OEX and DJX is unworkable. Accordingly, the
Exchange is codifying the definition of an expiration month for DJX
RAES log-on obligation purposes as the period from the Friday
immediately preceding an expiration Saturday through the
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Thursday immediately preceding the next successive expiration Saturday.
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\5\ See Securities Exchange Act Release No. 39202 (October 3,
1997) 62 FR 53358 (October 14, 1997).
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2. Statutory Basis
The Exchange believes the proposed rule change is consisting with
Section 6(b) of the Act,\6\ in general, and furthers the objectives of
Section 6(b)(5),\7\ in particular, in that it is designed to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
and processing information with respect to, and facilitating
transactions in securities, and to protect investors and the public
interest.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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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 burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. 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-
0609. 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 in the
Commission's Public Reference Room. Copies of such filing will also be
available for inspection and copying at the principal office of the
CBOE. All submissions should be refer to File No. SR-CBOE-99-02 and
should be submitted by April 23, 1999.
IV. Commission's Findings and Order Granting Accelerated Approval
of the Proposed Rule Change
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations under the Act applicable to a national securities exchange
and, in particular, with the requirements of Section 6(b) of the
Act.\8\ Specifically, the Commission believes the proposal is
consistent with the Section 6(b)(5)\9\ requirements that the rules of
an exchange be designed to promote just and equitable principles of
trade, to foster cooperation and coordination with persons engaged in
regulating, clearing, settling, processing information with respect to,
and facilitating transactions in securities, to remove impediments to
and perfect the mechanism of a free and open market and national market
system and, in general, to protect investors and the public
interest.\10\
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ In approving this rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
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RAES log-on obligations attempt to ensure continued adequate RAES
participation by market-makers in every type of market situation,
without the Exchange having to assign an inordinate number of RAES
trades to any particular market-maker.\11\ The Commission notes that
market-makers who violate the RAES log-on obligations are subject to
disciplinary action by the Exchange, including fines and suspension
from participation in RAES.\12\ Accordingly, the Commission believes it
is appropriate for the Exchange to provide a precise and appropriate
definition of an expiration month for both OEX and DJX options. Based
on the differing expiration date for OEX and DJX options, the
Commission believes it is reasonable to use different definitions for
expiration month as it relates to RAES obligations.
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\11\ See Securities Exchange Act Release No. 37313 (June 14,
1996) 61 FR 32470 (June 21, 1996).
\12\ See Securities Exchange Act Release No. 37464 (June 22,
1996) 61 FR 39175 (July 26, 1996); Exchange Rules 24.17(f) and (g).
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The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of publication of
notice thereof in the Federal Register. As CBOE notes, the definition
of an expiration month is used solely as an internal rule within the
Exchange to determine whether members are meeting their RAES log-on
requirements.\13\ Accelerated approval of the proposal will help
facilitate the market-makers' compliance with their RAES log-on
obligations and the Exchange's regulatory overview of its members
without delay. The Commission approved a similar rule change by CBOE
regarding options on Standard & Poor's 500 Stock Index.\14\
Accordingly, the Commission does not believe that the current filing
raises any novel regulatory issues. For the foregoing reasons, the
Commission believes it is consistent with Section 6(b)(5)\15\ and
Section 19(b)(2)\16\ of the Act to grant accelerated approval to the
proposed rule change.
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\13\ See Amendment No. 1.
\14\ See Securities Exchange Act Release No. 37349 (June 21,
1996) 61 FR 33787 (June 28, 1996).
\15\ 15 U.S.C. 78f(b)(5).
\16\ 15 U.S.C. 78s(b)(2).
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It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (SR-CBOE-99-02) is approved on an
accelerated basis.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-8145 Filed 4-1-99; 8:45 am]
BILLING CODE 8010-01-M
