[Federal Register Volume 64, Number 117 (Friday, June 18, 1999)]
[Notices]
[Pages 32906-32907]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15487]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41509; File No. SR-CBOE-99-06]
Self-Regulatory Organizations; Order Approving Proposed Rule
Change by the Chicago Board Options Exchange, Inc. Increasing the
Maximum Order Size on the Dow Jones High Yield Select 10 Index Eligible
for Automatic Execution
June 10, 1999.
I. Introduction
On February 10, 1999, the Chicago Board Options Exchange, Inc.
(``CBOE'' or ``Exchange'') submitted to the Securities and Exchange
Commission (``Commission'' or ``SEC''), pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to increase the maximum size of
orders on the Dow Jones High Yield Select 10 Index eligible for
automatic execution. Notice of the proposed rule change appeared in the
Federal Register on May 10, 1999.\3\ The Commission received no
comments on the proposal. This order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 41357 (April 30,
1999), 64 FR 25091.
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II. Description of the Proposal
The Exchange proposes to add an interpretation to CBOE Rule 6.8
allowing the appropriate Floor Procedure Committee (``FPC'') to
increase the maximum size of orders on the Dow Jones High Yield Select
10 Index (``Index'') \4\ eligible for execution through the CBOE's
Retail Automated Execution System (``RAES'') from 20 to 100 contracts.
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\4\ The Index is comprised of the ten highest yielding stocks
from the Dow Jones Industrial Average. See Securities Exchange Act
Release No. 39453 (December 6, 1997), 62 FR 67101 (December 23,
1997).
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The Exchange believes that the proposal will enhance the depth and
liquidity of the market for options on the Index.\5\ Additionally, the
Exchange believes that the proposal will increase the number of timely
and cost-effective executions, enhance information gathering through
the audit trail, enhance fill reporting and price reporting, increase
customer confidence, and increase the efficiency in handling non-RAES
orders by reducing the number of transactions executed manually on the
trading floor.
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\5\ The Exchange expects that increasing the order size limit to
up to 100 contracts for Index options will enhance liquidity by
accommodating through RAES larger institutional and public customer
orders for Index options. Telephone conversation between Debora E.
Barnes, Senior Attorney, CBOE, and John C. Roeser, Attorney,
Division of Market Regulation, Commission, on March 16, 1999.
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III. Discussion
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange.\6\
In particular, the Commission believes that the proposal is consistent
with Section 6(b)(5),\7\ in that it is designed to promote just and
[[Page 32907]]
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system. Specifically, the Commission finds
that the proposal will facilitate transactions in securities and
protect investors and the public interest. The Commission believes that
increasing to up to 100 the maximum number of options contracts on the
Index executable through RAES should enable the Exchange to more
effectively and efficiently manage order flow in options on the Index
consistent with its obligations under the Act. Further, the Commission
believes that the RAES order size limit of 100 contracts for the Index
should result in the efficient and timely execution of customer orders.
The Commission notes that it has approved similar proposals by the
Exchange increasing the number of option contracts eligible for
automatic execution to a maximum of 100 contracts.\8\
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\6\ In approving this rule, the Commission has considered the
proposed rule's impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
\7\ 15 U.S.C. 78f(b)(5).
\8\ See Securities Exchange Act Release No. 38169 (January 14,
1997), 62 FR 3547 (January 23, 1997) (order approving an increase to
the maximum size of interest rate option orders eligible for
automatic execution to up to 100 contracts); Securities Exchange Act
Release No. 39202 (October 3, 1997), 62 FR 53358 (October 14, 1997)
(order approving proposal to allow the Exchange discretion to set
the eligible order size for RAES orders to up to 100 contracts for
options on the Dow Jones Industrial Average).
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Based on representations from the CBOE, the Commission believes
that increasing the size of orders on the Index eligible for execution
through RAES will not expose the CBOE's options markets to risk of
failure or operational breakdown. Specifically, the CBOE represents
that the proposal will not impose any significant burden on the
operation, security, integrity, or capacity of RAES.
IV. Conclusion
For the foregoing reasons, the Commission believes that the
proposed rule change is consistent with the Act and the rules and
regulations thereunder applicable to a national securities exchange,
and, in particular, with Section 6(b)(5).\9\
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\9\ 15 U.S.C. 78f(b)(5).
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-CBOE-99-06) is approved.
\10\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-15487 Filed 6-17-99; 8:45 am]
BILLING CODE 8010-01-M
