[Federal Register Volume 60, Number 128 (Wednesday, July 5, 1995)]
[Notices]
[Pages 35096-35097]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16395]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35901; File No. CBOE-95-21]
Self-Regulatory Organizations; Order Approving Proposed Rule
Change by the Chicago Board Options Exchange, Inc. Relating to Parents
of Member Organizations.
June 28, 1995.
On April 18, 1995, the Chicago Board Options Exchange, Inc.
(``CBOE'' or ``Exchange'') submitted to the Securities and Exchange
Commission (``SEC'' or ``Commission''), pursuant to Section 19(b) of
the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to rescind Rule 3.7 (``Parents of
Member Organizations''), which requires the Exchange's Board to approve
each country under whose laws non-U.S. parents of member organizations
are organized. The Exchange also proposed to move from Rule 3.7 to Rule
3.5 (``Persons Associated with Member Organizations''), subsection (a),
the requirement that parents of member organizations must furnish
certain information to the Exchange upon request. Notice of the
proposed rule change was published for comment and appeared in the
Federal Register on May 10, 1995.\3\ No comment letters were received
on the proposal. This order approves the CBOE proposal.
\1\15 U.S.C. 78s(b)(1).
\2\17 CFR 240.19b-4.
\3\See Securities Exchange Act Release No. 35666 (May 3, 1995),
60 FR 24936.
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I. Description of the Proposal
The Exchange is proposing to rescind Rule 3.7. The first paragraph
of Rule 3.7 provides that ``[a] member organization shall not be an
affiliate of a parent organization unless the parent organization is
organized under the laws of the United States or such other country as
the Board may approve.'' (``the prohibition''). Additionally, the CBOE
has proposed to move to Rule 3.5 the requirement currently contained in
Rule 3.7 obligating persons who control member organizations to furnish
to the Exchange, upon request, any information reasonably related to
their securities business.
II. Discussion
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, and, in
particular, the requirements of Section 6(b)(2)\4\ in that it
eliminates restrictions on who may be associated with a member of the
Exchange without diminishing the protection of investors and the public
interest. Specifically, the Commission believes that the elimination of
the prohibition will facilitate the Exchange's review of membership
applications submitted by member organizations that have non-U.S.
parents, as well as its review of transactions that would result in the
transfer of control of an existing member organization to a foreign
parent.
\4\15 U.S.C. 78f(b)(2).
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The CBOE represents that it has never adopted standards to govern
the Board's approval of individual countries for purposes of Rule 3.7.
Indeed, the Commission understands the difficulties which may have been
encountered by the Exchange in attempting to distinguish one country
from another for purposes of Board approval pursuant to Rule 3.7.
Eliminating the prohibition is consistent with Section 6(b)(5) of the
Act in that it removes an impediment to a free and open market and is
practically significant in an era of
[[Page 35097]]
increased internationalization of the securities markets.
The Commission believes that the proposed rule change will not
diminish the CBOE's continued and adequate regulatory jurisdiction over
U.S. foreign parents of member organizations. Notably, Rule 3.4
(``Denial of and Conditions to Membership'') provides the Exchange's
Membership Committee with broad discretion in granting or denying an
application for membership to the Exchange. Moreover, Rule 3.5, as
amended by this order, permits the Exchange to bar a person\5\ from
becoming or continuing to be associated with a member organization if
the person does not agree to furnish the Exchange with information
concerning such person's relationship with the member, and information
reasonably related to such person's other securities business. Rule 3.5
also subjects persons associated with the Exchange, including parent
organizations, to the Constitution and Rules of the Exchange and
applicable clearing organization. Finally, the Exchange's authority
over parents of member organizations is further enlarged by Rule 17.1
(``Disciplinary Jurisdiction'') which subjects persons associated with
members to the disciplinary jurisdiction of the Exchange. As a result,
the Commission believes that eliminating the prohibition will not
hinder the Exchange's ability to adequately regulate its members and
associated persons of its members.
\5\The Act defines ``person'' to include a company. 15 U.S.C.
78(c)(9).
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It Therefore Is Ordered, pursuant to Section 19(b)(2) of the
Act,\6\ that the proposed rule change (SR-CBOE-95-21) is approved.
\6\15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\7\
\7\17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-16395 Filed 7-3-95; 8:45 am]
BILLING CODE 8010-01-M
