[Federal Register Volume 61, Number 145 (Friday, July 26, 1996)]
[Notices]
[Pages 39174-39176]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19033]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37464; File No. SR-CBOE-96-50]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Chicago Board Options
Exchange, Incorporated Relating to the Enforcement of OEX RAES
Participation Requirements
July 22, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934, 15 U.S.C. 78s(b)(1), notice is hereby given that on July 17,
1996, the Chicago Board Options Exchange, Incorporated (``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. 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 establish an interim enforcement procedure for
the Exchange's new log-on requirement for market-makers participating
in the CBOE's Retail Automatic Execution System (``RAES'') for
transactions in Standard & Poor's 100 Index (``OEX'') options.
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, 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 places 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 establish an interim
enforcement mechanism for the Exchange's new log-on requirement for
market-makers participating in RAES for transactions in OEX options.
The new log-on requirement requires individual market-makers who are
eligible to participate on OEX RAES to log onto OEX RAES any time they
are present in the OEX trading crowd until the expiration occurring in
that expiration month if they have logged onto OEX RAES at any earlier
time in that expiration month.\1\ Previously, Rule 24.17(a) only
required individual market-makers to log onto OEX RAES on the business
day prior to expiration to the extent the market-maker was present in
the OEX trading crowd on that day.\2\ The recent rule change also moved
jurisdiction for the rule from the OEX Floor Procedure Committee to the
OEX Market Performance Committee (``OEXMPC''). This change was made so
that the OEXMPC could focus its efforts on the market performance
issues of the OEX trading post, such as market-maker participation in
RAES, thus allowing the OEX Floor Procedure Committee to focus on other
issues.
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\1\ See Securities Exchange Act Release No. 37313 (June 14,
1996), 61 FR 32470 (June 24, 1996).
\2\ The CBOE notes that market-makers participating on RAES in
joint accounts or as nominees of a member organization were already
required to be logged onto OEX RAES each time they were in the
trading crowd before the recent rule change.
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The change to require an individual market-maker to log onto OEX
RAES each time the market-maker is in the trading crowd during an
expiration month is intended to ensure continued adequate RAES
participation by market-makers in every type of market situation. In
addition, the OEXMPC plans to take other actions to secure continued
market-maker participation in RAES including using the discretion
currently permitted under the rule (i) to refer market-makers who
repeatedly violate the log-on and/or log-off requirement for
disciplinary action under Chapter XVII of Exchange rules and (ii) to
suspend members from participation on RAES when the OEXMPC determines
such action is necessary.
In order to facilitate the individual market-makers in their
compliance with the new requirement and in order to facilitate the
efforts of the OEXMPC at implementing the new procedures, the OEXMPC is
recommending to implement a few enforcement procedures for the recent
rule change. First, all prior log-on and log-off failures through July
19 of this year for all market-makers, including those participating in
joint accounts and those participating as nominees of members
organizations, will not be considered in determining the fee amount
under paragraph (f)(i) of Rule 24.17. The Exchange believes this change
is justified by the heightened emphasis that will be placed on
compliance with the rule on a prospective basis. Second, for the first
two lot-on or log-off failures of a particular market-maker in the
August expiration month, i.e., the period from July 22 through August
16, warning letters will be issued in lieu of assessing a fee. After
August 16 or upon the third log-on or log-off failure, whichever comes
first, fees will be assessed according to the schedule set forth in
paragraph (f)(i) of Rule 24.17. A market-maker who has failed to log-on
or to log-off three times in the August expiration period will be
considered to have only one violation for the calendar year for the
purpose of calculating the fee amount. Fee assessments may be appealed
under Chapter XIX of the Exchange's rules.
The Exchange represents to the Commission that it will submit a
report to the Commission regarding the enforcement of the log-on and
log-off requirements on OEX RAES during the August expiration month.
The report will detail how many market-makers received one warning
letter, how many received two warning letters, and how many received
fees.
By adopting enforcement procedures to facilitate market-makers in
complying with new procedures and to facilitate the OEXMPC in enforcing
the new OEX RAES procedures the Exchange believes that the proposed
rule change is consistent with Section 6 of the Act in general and with
Section 6(b)(5) in particular in that it is designed to promote just
and equitable principles of trade, to foster cooperation with persons
engaged in facilitating and clearing transactions in securities, and to
protect investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE does not believe that the proposed rule change will impose any
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
interpretation with respect to the meaning, administration, or
enforcement of an existing rule, it has become effective pursuant to
Section 19(b)(3)(A) of the Act and Rule 19b-4 thereunder. At any time
within 60 days
[[Page 39176]]
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. 552, will be available for inspection and copying in the
Commission's Public Reference Section, 450 Fifth Street, N.W.,
Washington D.C. Copies of all such filing will also be available for
inspection and copying at the principal office of CBOE. All submissions
should refer to File No. SR-CBOE-96-50 and should be submitted by
August 16, 1996.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\3\
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\3\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-19033 Filed 7-25-96; 8:45 am]
BILLING CODE 8010-01-M
