[Federal Register Volume 60, Number 170 (Friday, September 1, 1995)]
[Notices]
[Pages 45754-45756]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-21701]
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[[Page 45755]]
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36160; International Series Release No. 845; File No.
SR-CBOE-95-45]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change and Amendment No. 1 To Proposed Rule Change by the Chicago Board
Options Exchange, Inc. Relating to the Listing and Trading of Options
on the Mexico 30 Index
August 28, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on August
21, 1995, the Chicago Board Options Exchange, Inc. (``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 self-regulatory
organization. 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 provide for the listing and trading on the
Exchange of options on the Mexico 30 Index (``Mexico Index'' or
``Index''), a cash-settled broad-based index with European-style
exercise. The CBOE amended the proposal on August 25, 1995 in order to
provide more background information on the Mexican stock market and to
establish additional Index maintenance criteria.\1\
\1\ See Letter from Eileen Smith, CBOE, to Steve Youhn, SEC,
dated August 25, 1995.
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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 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
1. Purpose
The purpose of the proposed rule change is to permit the Exchange
to list and trade cash-settled, European-style stock index options on
the Mexico 30 Index.\2\ The Index is comprised of 30 representative
stocks of the Mexican Stock Exchange (``Bolsa'').\3\ CBOE believes that
options on the Index will provide investors with a low-cost means of
participating in the performance of the Mexican economy and a hedging
mechanism against the risk of investing in that economy. The CBOE
represents that the Index is deemed to be an index option under Rule
24.2 and a broad-based index under Rule 24.1(i)(1).
\2\ A European-style option may only be exercised during a
specified period before expiration.
\3\ The components of the Index are Alfa SA-A; Apasco SA; Grupo
Casa Autrey; Banacci-B; Grupo Carso-A1; Controla Com M-B; Cemex SA-
B; Cifra SA-C; Desc SA-B; Empresas Moderna-A; Fomento Econ M-B;
Grupo Embotelladoro Mexico; Grupo Financiero Bancomer-B; Grupo
Financiero Serfina-B; Grupo Gigante; Grupo Modelo-C; Grupo Mexico-B;
Grupo Tribasa-CPO; Hylsamex SA-BCP; Empresas ICA; Iusacell;
Kimberly-Clark M-A; Coca-Cola Femsa; Grupo Industrial Maseca-B;
Grupo Sidek-B; Tubos De Acero; Telefonos De Mexico-L; Tolmex SA-B2;
Grupo Telev-CPP; Vitro SA.
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Index Design. The Index was designed by and is maintained by the
CBOE and the Chicago Mercantile Exchange (``CME''). CBOE represents
that the 30 stocks comprising the Index were selected for their high
market capitalization and their high degree of liquidity, and further
believes that they are representative of the industrial composition of
the broader Mexican equity market. The Mexico Index is composed of 15
broad industry groups, including building materials, diversified
holding companies, and telecommunications.
The Index is weighted by the market capitalization of the component
stocks, however, at the time of a semi-annual review (occurring after
the close on expiration Fridays in December and June) the Index will be
adjusted, if necessary, to ensure that no single component shall have a
weight in the Index greater than 25%. For example, on June 16, 1995,
the most recent review date, Telefonos de Mexico (``TMX'') would have
had a weight of 30.41% of the Index. To reduce TMX's weight, the
Exchange reduced the number of outstanding TMX shares used in the
calculation of the Index from 8.0375 billion to 6.1303 billion.
The total capitalization of the Index as of July 31, 1995 was
$46.21 billion, which represents 49.35% of the overall capitalization
of the Mexican Bolsa. The median capitalization of the stocks in the
Index on July 31, 1995, was 4.507 billion Pesos ($737 million at the
exchange rate of 6.115 pesos per dollar prevailing on July 31, 1995).
The average market capitalization of these stocks was $1.54 billion on
the same date (using the same rate of exchange). The individual market
capitalization of these stocks ranged from $156 million (Grupo Sidek-B)
to $13.3 billion (Telmex) on July 31, 1995. The largest stock accounted
for 23.61% of the Index, while the smallest accounted for 0.36%. The
top five stocks in the Index by weight accounted for 55.02% of the
Index. CBOE represents that upon each semi-annual review of the Index,
the Exchange shall make any necessary modifications to ensure that the
top three weighted stocks in the Index by weight may not account for
more than 45% of the Index at the time of a semi-annual review.\4\ The
average daily volume in the component securities for the period from
February 1995 through July 1995, ranged from a low of approximately
9,270 shares to a high of 14,123,392 shares, with an average daily
trading volume for all components of the Index of approximately
1,479,390 shares per day.
\4\ See Amendment No. 1. As of July 31, 1995, the top three
stocks represented 43.6% of the weight of the Index.
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Calculation. The value of the Index is determined by multiplying
the price of each stock times the number of shares outstanding, adding
those sums and dividing by a divisor which gives the Index a value of
200 on its base date of January 3, 1995. This divisor is adjusted for
pertinent changes as described below in the section titled
``Maintenance.'' The Index had a closing value of 203.07 on July 31,
1995.
Maintenance. The Index will be maintained by the CBOE and CME. To
maintain continuity of the Index, the divisor of the Index will be
adjusted to reflect certain events relating to the component stocks.
These events include, but are not limited to, changes in the number of
shares outstanding, spin-offs, certain rights issuances, and mergers
and acquisitions. The composition of the Index will be reviewed
periodically and the Exchanges may make component changes at any time.
Index Option Trading. The Exchange proposes to base trading in
options on the Index on the full value of the Index as expressed in
U.S. Dollars. The Exchange also may provide for the listing of full-
value long-term index
[[Page 45756]]
option series (``LEAPS'') and reduced-value LEAPS on the
Index. For reduced-value LEAPS, the underlying value would be computed
at one-tenth of the value of the Index. The current and closing index
value of any such reduced-value LEAP will, after such initial
computation, be rounded to the nearest one-hundredth. The trading hours
for options on the Index will be from 8:30 a.m. Chicago time to 3:15
Chicago time. Bridge Information Systems (``Bridge'') will calculate
the value of the Index every fifteen seconds throughout the trading day
and disseminate the Index value through the Options Price Reporting
Authority (``OPRA'').\5\ Bridge obtains quotes and trade information on
a real-time basis directly through the Bolsa through an electronic
feed. Accordingly, the value of the Index will be based upon the prices
of the components as traded or quoted on the Bolsa.\6\ Finally, CBOE
represents that it has the necessary systems capacity to support new
series that would result from the introduction of Mexico 30 Index
options. CBOE has been informed that OPRA has the capacity to support
such new series.\7\
\5\ See Amendment No. 1.
\6\ Telephone conversation between Eileen Smith, CBOE, and Steve
Youhn, SEC, on August 25, 1995.
\7\ See Letter from Joe Corrigan, OPRA, to Eileen Smith, CBOE,
dated August 1, 1995.
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Exercise and Settlement. The trading hours of the Bolsa are the
same as those of the New York Stock Exchange, 8:30 a.m. through 3:00
p.m. Chicago time. The proposed options on the Index will expire on the
Saturday following the third Friday of the expiration month and trading
in the expiring contract month on CBOE will normally cease on Friday at
3:15 p.m. (Chicago time) unless a holiday occurs. The exercise
settlement value of Index options at expiration will be determined at
the close of the regular Friday trading sessions in Mexico. If a stock
does not trade during this interval or if it fails to open for trading,
the last available price of the stock will be used in the calculation
of the Index. When expirations are moved in accordance with Exchange
holidays, such as when the CBOE is closed on the Friday before
expiration, the last trading day for expiring options will be Thursday
and the exercise settlement value of Index options at expiration will
be determined at the close of the regular Thursday trading sessions in
Mexico even if the Mexican markets are open on Friday. If the Mexican
markets will be closed on the Friday before expiration but the CBOE
will not, the last trading day for expiring options will be Thursday.
Surveillance Agreements. The Exchange expects to apply its existing
index option surveillance procedures to Index options. In addition, the
Exchange is aware of a Memorandum of Understanding (``MOU'') between
the Commission and the Comision Nacional Bancaria y deValores. This MOU
will enable the Commission to obtain information concerning the trading
of the component stocks of the Mexico 30 Index. The Exchange also will
make every effort to enter into an effective surveillance agreement
with the Bolsa.
Position Limits. The Exchange is proposing to establish position
limits for Mexico 30 Index options equal to 50,000 contracts on the
same side of the market, with no more than 30,000 contracts in the
series with the nearest expiration date. According to the Exchange,
these limits are roughly equivalent, in dollar terms, to the limits
applicable to options on other indices. Ten reduced-value options will
equal one full-value contract for such purposes.
Exchange Rules Applicable. Except as modified herein, the Rules in
Chapter XXIV will be applicable to Mexico 30 Index options.
2. Statutory Basis
CBOE believes the proposed rule change is consistent with Section
6(b) of the Act in general and furthers the objectives of Section
6(b)(5) in particular in that it will permit trading in options based
on the Mexico 30 Index pursuant to rules designed to prevent fraudulent
and manipulative acts and practices and to promote just and equitable
principles of trade, and thereby will provide investors with the
ability to invest in options based on an additional index.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes the proposed rule change will impose no
burden on competition.
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. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the 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 the 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, NW., Washington, DC 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 at the
Commission's Public Reference Section, 450 Fifth Street, NW.
Washington, DC 20549. Copies of such filing will also be available for
inspection and copying at the principal office of the CBOE. All
submissions should refer to File No. SR-CBOE-95-45 and should be
submitted by September 22, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
\8\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-21701 Filed 8-31-95; 8:45 am]
BILLING CODE 8010-01-M
