[Federal Register Volume 59, Number 185 (Monday, September 26, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-23758]
[[Page Unknown]]
[Federal Register: September 26, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34688; International Series Release No. 716; File No.
SR-CBOE-94-31]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Chicago Board Options Exchange, Inc. Relating to
Substituting Component Securities of the CBOE Mexico Index.
September 20, 1994.
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 September 2, 1994, 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.
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\1\15 U.S.C. 78s(b)(1) (1988).
\2\17 CFR 240.19b-4 (1991).
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I. Self Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The CBOE seeks authority to replace one component security in the
CBOE Mexico Index (``Mexico Index'' or ``Index''), with a closed-end
country fund. 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 Exchange 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 Mexico Index, on which options are currently traded on the
Exchange, is composed of stocks and American Depositary Receipts
(``ADRs'') representing ten Mexican companies.3 The Index meets
the generic criteria for listing options set forth in CBOE Rule 24.2.
The Exchange is not proposing that the Commission grant the Exchange
the authority to replace a component security in the Index with the
Mexico Fund, a closed-end fund consisting of Mexican securities, if the
Exchange decides that such a substitution is necessary or desirable.
The CBOE will not replace any component security with the Mexico Fund
unless after such substitution the Index will continue to meet the
initial listing and maintenance criteria specified in CBOE Rule 24.2.
The purpose of such a substitution would be to make the Index more
attractive to investors and to facilitate hedging of the Index by
substituting a more liquid component.
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\3\The Mexico Index is a narrow-based, equal dollar-weighted
index. See Securities Exchange Act Release No. 34241 (June 22, 1994)
59 FR 33557 (June 29, 1994).
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The Exchange expects that the substitution of the Mexico Fund for a
component security in the Index could achieve these purposes for at
least two reasons. First, the CBOE believes, the Index will become more
representative of the Mexican economy because the Mexico Fund is
composed of numerous Mexican securities representative of diverse
sectors of the Mexican economy. Second, the Exchange believes, the
substitution will enhance liquidity of the components of the Index to
the extent that the Mexico Fund replaces a component security that
maintains a lower monthly trading volume. Based on average monthly
trading through August 31, 1994, the Exchange represents that the
Mexico Fund has historically experienced a greater monthly trading
volume than at least half of the component securities that currently
comprise the Index.
Although the Mexico Fund is not currently eligible for equity
options, it meets all criteria that component securities of the Index
are required to satisfy. First, the Mexico Fund had a market value of
$1,187,567,000 as of August 1, 1994, which is far in excess of the
initial listing and maintenance criterion requiring minimum market
capitalization of at least $75,000,000. Also, the Mexico Fund had
average monthly trading volume of 5.4 million shares for the six month
period through July 1994. The monthly trading volume did not drop below
2.8 million shares during that period.
The substitution of the Mexico Fund for a component security in the
Index would also be consistent with the initial listing and maintenance
criterion that no component security of the Index account for in excess
of 25% of the weight of the Index. Even though the Mexico Fund may
contain common stocks and ADRs that are also components of the Index,
because the Index is equal dollar-weighted, the Mexico Fund will
comprise 10% of the weight of the Index immediately following each
quarterly rebalancing of the Index. As a result, even if it were
possible for the Mexico Fund to consist entirely of another Index
component security, that component security could at most constitute
20% of the weight of the Index immediately following each quarterly
rebalancing of the Index, below the 25% specified in the initial
listing and maintenance criteria for the Index.
Finally, the Exchange will not substitute the Mexico Fund for a
component security of the Index unless securities representing at least
90% of the Index by weight and 80% of the Index by number of components
will continue to be eligible for the trading of equity options under
CBOE Rule 5.3, as required by the initial listing and maintenance
criteria for the Index. The Mexico Fund currently is not eligible for
the trading of equity options. Because one component of the Mexico
Fund, Grupo Financiero Serfin SA de CV (``Grupo Serfin'') also is not
options eligible, in order to remain in compliance with the listing
standards, the Exchange presently could substitute the Mexico Fund only
for Grupo Serfin. If in the future, however, Grupo Serfin or the Mexico
Fund become options eligible, the Exchange could substitute the Mexico
Fund for another component security and remain in compliance with the
maintenance standards for the Index.
Finally, the substitution of the Mexico Fund for a component
security of the Index would not impact the Index criterion limiting the
number of foreign securities or American Depositary Receipts that are
components of the Index because the Mexico Fund is listed on the New
York Stock Exchange, which is the primary market for the fund shares.
The Exchange believes that the proposed rule change is consistent
with Section 6 of the Act, in general, and furthers the objectives of
Section 6(b)(5) of the Act,\4\ in particular, in that it is designed to
prevent fraudulent and manipulative acts and practices and to promote
just and equitable principles of trade, foster cooperation and
coordination with persons facilitating transactions in securities, and
remove impediments to and perfect the mechanism of a free and open
market and protect investors and the public interest.
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\4\15 U.S.C. 78f(b)(5) (1988).
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(B) Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any inappropriate burden on competition.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
Written comments on the proposed rule change were neither solicited
nor received.
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 Exchange 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, 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 in the
Commission's Public Reference Section, 450 Fifth Street, NW.,
Washington, DC. 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-94-31 and should
be submitted by October 17, 1994.
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) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-23758 Filed 9-23-94; 8:45 am]
BILLING CODE 8010-01-M
