[Federal Register Volume 62, Number 187 (Friday, September 26, 1997)]
[Notices]
[Pages 50644-50645]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-25518]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39100; File No. SR-CBOE-97-41]
Self-Regulatory Organizations; Proposed Rule Change By Chicago
Board Options Exchange, Incorporated Relating to the Definition of Stop
Orders
September 19, 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 August
[[Page 50645]]
25, 1997, the Chicago Board Options Exchange, Incorporated (``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 persons.
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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 its Rule 6.53 (``Rule'') governing the
definition of stop orders to clarify that a stop order on the CBOE is
triggered when the option contract reaches a specified price ``on the
CBOE floor.'' 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 change is to amend the definition of a
stop order to clarify that the stop order becomes triggered when the
option contract reaches a specified price ``on the CBOE floor.''
Currently, paragraph (c)(iii) of Exchange Rule 6.53 defines a stop
order as a contingency order to buy or sell when the market for a
particular option contract reaches a specified price. The Rule does not
specify, but has always been interpreted to mean, that the contingency
to buy or sell is satisfied when the option contract is bid at or above
the stop price (in the case of a by order) or is offered at or below
the stop price (in the case of a sell order) ``on the floor of the
CBOE.'' The proposed amendment will make it clear, therefore, that a
stop order is not activated when the bid or offer (as appropriate)
reaches the stop limit on another exchange.
Unlike the equity markets, the option markets are not
electronically linked to each other. Thus, options traders have no way
of knowing whether a contract has reached a specified ``stop'' in
another market place, as would an equity securities trader.
Accordingly, there is no rule prohibiting trade-throughs in options
market places as there is in the equity market places.
The CBOE believes that the proposed rule change will clarify the
CBOE's responsibility in this regard, and will prevent any perception
that CBOE members have a duty to execute stop orders when the ``stop''
price has not been reached on the CBOE floor.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) that an exchange have rules that are
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to protect and
perfect the mechanism of a free and open market and a national market
system, and in general, to protect investors and the public interest.
By clarifying the definition of a ``stop order,'' the proposed rule
change will more accurately describe the obligations of CBOE members
with regard to stop orders executed on the Exchange. Therefore, the
Exchange believes that amending the rule is consistent with, and
furthers, the objectives of Section 6(b)(5) of the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The 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
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 adtermine 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 such filing will also be available
for inspection and copying at the principal office of the CBOE. All
submissions should refer to the file number SR-CBOE-97-41 and should be
submitted by October 17, 1997.
For the Commission by the Division of Market Regulation,
pursuant to the 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. 97-25518 Filed 9-25-97; 8:45 am]
BILLING CODE 8010-01-M
