[Federal Register Volume 62, Number 162 (Thursday, August 21, 1997)]
[Notices]
[Pages 44500-44501]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-22184]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38937; File No. SR-CBOE-97-35]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by Chicago Board Options Exchange, Inc. Relating to Trading
Halts and Suspensions
August 14, 1997.
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 July 25, 1997, the Chicago Board Options Exchange, Inc. (``CBOE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``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 parties.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The CBOE proposes to amend Rule 6.3 to remove the requirement that
a halt declared by Floor Officials may continue for only two
consecutive business days and to delete Rule 6.4 regarding the
suspension of trading by the Board of Directors (``Board''). The CBOE
also proposes to make certain conforming amendments to Rules 21.12 and
23.8 and to Interpretation .02 of Rule 21.19.
The text of the proposed rule change is available at the Office of
the Secretary, the 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 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 amend Rule 6.3 to
remove the requirement that a halt declared by Floor Officials may
continue for only two consecutive business days, to delete Rule 6.4
regarding the suspension of trading by the Board, and to make certain
conforming amendments to Rules 21.12 and 23.8 and to Interpretation .02
of Rule 21.19
Pursuant to existing Rule 6.3, any two Floor Officials may halt
trading in any security in the interests of a fair and orderly market
for a period not in excess of two consecutive business days. Pursuant
to existing Rule 6.4, the CBOE's Board may suspend trading in any
security in the interests of a fair and orderly market. The Exchange
believes that there is no practical difference between a halt in
trading and a suspension in trading, except for the present two-day
limit for a halt and the fact that a halt is declared by two Floor
Officials and a suspension is declared by the Board. The same factors
are considered by the Board in deciding whether to ``suspend'' trading
as are considered by Floor Officials in deciding whether to ``halt''
trading. Rules 6.3 and 6.4 require, however, that trading may be
stopped for more than two consecutive business days only if the Board
acts to ``suspend'' trading.
The CBOE believes it is not necessary to require the Board to
decide whether trading in an options class may be stopped for more than
two days. The Exchange believes that in practice, senior exchange
officials would be aware of and would participate in any decision
concerning a halt that continued in excess of two days. The Exchange
believes this input from senior exchange officials is sufficient and
that Board participation is not necessary. The Exchange also believes
that it is unduly cumbersome and often, impractical, to convene the
Board on short notice just to decide whether trading in an options
class may be stopped for more than two days.
Pursuant to the proposed rule change, the duration of a halt
declared by two Floor Officials pursuant to Rule 6.3 would not be
limited to a particular number of days. The proposed rule change
correspondingly would delete Rule 6.4, so that Board action no longer
would be required before trading in an options class could be stopped
for more than two consecutive business days. Instead, Floor Officials
would determine whether to halt trading based upon the
[[Page 44501]]
factors set forth in Rule 6.3, which are the same factors currently
considered by the Board in a suspension decision. This proposed
approach is consistent with the procedure for index options under Rule
24.7, where trading halts or suspensions do not require action by the
Board.
In addition, the proposed rule change would make clear that trading
may resume only upon a determination by two Floor Officials that such a
resumption is in the interests of a fair and orderly market. The
present form of Rule 6.3(b) allows trading to resume when two Floor
Officials determine either that the conditions that led to the halt no
longer are present or that a resumption of trading would serve the
interests of a fair and orderly market. The Exchange believes that
taken literally, this would enable trading to resume if the conditions
that led to the halt no longer are present, even if a resumption of
trading would be contrary to the interests of a fair and orderly
market, an interpretation that would conflict with the CBOE's practice
and would be contrary to the policies under the Act: Accordingly, the
Exchange believes that the proposed rule change would make clear that:
(1) Option trading may resume after a halt if, and only if, two Floor
Officials determine that such a resumption would be in the interests of
a fair and orderly market; and (2) the fact that the conditions leading
to the halt no longer are present is just one of the factors that Floor
Officials may consider in determining whether the interests of a fair
and orderly market would be served by a resumption of trading. The CBOE
notes that the Exchange has proposed similar changes to Rule 24.7(b),
which governs the resumption of trading after a trading halt in index
options.\3\
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\3\ See File No. SR-CBOE-97-36.
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Finally, because of the deletion of Rule 6.4, the Exchange believes
that it also is necessary to make conforming deletions of certain non-
substantive references to trading suspensions under Rule 6.4 that
appear in Rule 21.12 and Interpretation .02 of Rule 21.19 (concerning
government securities options) and in Rule 23.8 (concerning interest
rate option contracts).
The Exchange believes that the proposed rule change is consistent
with and furthers the objectives of Section 6(b)(5) of the Act \4\ in
that it is designed to perfect the mechanism of a free and open market
and to protect investors and the public interest by enabling Floor
Officials to evaluate and to consider market conditions and
circumstances and to halt trading for as long as necessary in the
interests of a fair and orderly market.
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\4\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE does not believe that the proposed rule 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
Within 35 days of the date of 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 such 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, 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. 20549. Copies of all such filings will also be
available for inspection and copying at the principal office of CBOE.
All submissions should refer to File No. SR-CBOE-97-35 and should be
submitted by September 11, 1997.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\5\
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\5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-22184 Filed 8-20-97; 8:45 am]
BILLING CODE 8010-01-M
