[Federal Register Volume 59, Number 38 (Friday, February 25, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-4337]


[[Page Unknown]]

[Federal Register: February 25, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33636; File No. SR-CBOE-93-59]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Board Options Exchange, Inc. Relating to Narrow-
Based Index Options Listing Standards

February 17, 1994.
    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 December 
22, 1993, 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 CBOE.\1\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\The CBOE originally submitted a filing (SR-CBOE-92-39) 
covering the same subject matter of the present filing on December 
14, 1992. The CBOE has advised the Commission staff that it intends 
to withdraw SR-CBOE-92-39 upon Commission approval of the present 
filing. See letter from Michael L. Meyer, Schiff Hardin & Waite, to 
Michael A. Walinskas, Options Branch, Division of Market Regulation, 
SEC, dated February 11, 1994.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The CBOE proposes to establish generic listing standards for 
options on narrow-based (sector) indexes and to adopt a streamlined 
procedure for introducing trading in options that satisfy these listing 
standards. 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 placed 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 enable the CBOE to 
list classes of index options on narrow-based (sector) stock indices 
that satisfy specified listing standards pursuant to a filing submitted 
to the Commission for effectiveness upon filing under section 
19(b)(3)(A) of the Act. The proposed rule change includes both the 
listing standards that a narrow-based stock index must meet to qualify 
for such expedited effectiveness, as well as the procedures and 
conditions that will apply to such a filing. These listing standards, 
procedures and conditions were developed during the course of 
discussions among the Commission staff and representatives of the CBOE 
and other options exchanges.
    The initial listing standards that must be met to qualify a narrow-
based index option for filing under section 19(b)(3)(A) include that 
the options must be designated for A.M.-settlement, that the index must 
be capitalization-weighted, price-weighted, of equal-dollar weighted, 
and consist of ten or more component securities, and that the component 
securities must meet stated minimum market capitalization and trading 
volume criteria. In addition, the proposed rule includes ``weight'' 
limits for individual components securities and for the five highest-
weighted component securities in the subject index, and it requires 
that a high percentage of the component securities in the index must 
meet the issue-specific listing criteria set forth in CBOE Rule 5.3. 
Further, each component security must be a ``reported security'' under 
Rule 11Aa3-1 under the Act, and the non-U.S. component securities in a 
subject index that are not subject to comprehensive surveillance 
agreements may not exceed 20 percent of the index's weight. Finally, 
the current index value must be reported at least once every fifteen 
seconds during trading hours, any equal dollar-weighted index must be 
rebalanced at least once each calendar quarter, and any underlying 
index that is maintained by a broker-dealer must be subject to suitable 
``Chinese Wall'' arrangements.
    The proposed rule change also contains maintenance listing 
standards. These include most of the initial listing standards, 
somewhat reduced minimum trading volume criteria, and a percentage 
limitation respecting changes in the number of component securities in 
an index subsequent to initial listing. These maintenance standards 
would apply to each class of narrow-based index options listed pursuant 
to a section 19(b)(3)(A) filing, unless and until the class of option 
is subsequently approved pursuant to a filing made under section 
19(b)(2).
    The proposed rule change amends CBOE Rule 24.2, which provides that 
each new underlying index must be approved by the Commission. Practice 
under this rule to date has dictated use of filing and approval 
procedures pursuant to a subparagraph (2) of subsection 19(b) of the 
Act. Although that process would remain available to the CBOE under 
this proposed rule change, this rule change is designed to produce more 
expeditious trading of options on new indices that meet the listing 
standards.
    The Exchange believes that 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 is designed to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities and to protect investors and the public 
interest.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The CBOE 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

    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, 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 5U.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-93-59 and should be 
submitted by March 18, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\2\
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    \2\17 CF 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-4337 Filed 2-24-94; 8:45 am]
BILLING CODE 8010-01-M