[Federal Register Volume 59, Number 106 (Friday, June 3, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-13471]


[[Page Unknown]]

[Federal Register: June 3, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34127; File No. SR-CBOE-94-01]

 

Self-Regulatory Organizations; Order Approving Proposed Rule 
Change by the Chicago Board Options Exchange, Inc., Relating to the 
Submission of Options Transaction Data for Trade Recording and Price 
Reporting Purposes

May 27, 1994.
    On January 22, 1994, the Chicago Board Options Exchange, Inc. 
(``CBOE'' or ``Exchange'') submitted to the Securities and Exchange 
Commission (``SEC'' or ``Commission''), pursuant to section 19(b) of 
the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposal to amend CBOE Rule 6.51, ``Reporting 
Duties,'' Interpretation and Policy .01, to allow members to submit 
options transaction data to the Exchange for trade recording and price 
reporting purposes through an electronic data storage medium approved 
by the Exchange.\3\
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    \1\15 U.S.C. 78(b)(1) (1982).
    \2\17 CFR 240.19b-4 (1993).
    \3\On April 12, 1994, the CBOE submitted a letter clarifying 
that the proposal would allow buyers and sellers to submit 
transaction information through an electronic data storage medium 
acceptable to the Exchange and allow them to provide the information 
required for price reporting through an electronic data transmission 
link approved by the CBOE. See letter from Michael L. Meyer, Schiff 
Hardin & Waite, to Yvonne Fraticelli, Staff Attorney, Options 
Branch, Division of Market Regulation (``Division''), Commission, 
dated April 8, 1994.
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    The proposed rule change was published for comment in Securities 
Exchange Act Release No. 33730 (March 8, 1994), 59 FR 11814. No 
comments were received on the proposed rule change.
    Currently, CBOE Rule 6.51, Interpretation and Policy .01, requires 
both the buyer and the seller in a transaction to record on a card or 
ticket information concerning the transaction, including the buyer's or 
seller's assigned broker initial code and his clearing firm (if a 
market maker), the symbol of the underlying security, the type, 
expiration month and exercise price of the option contract, the 
transaction price, the number of contract units comprising the 
transaction, the time of the transaction, the name of the contra 
clearing firm member and the assigned broker initial code of the contra 
member. Under Interpretation and Policy .01, this information 
constitutes the ``transaction record.'' The CBOE proposes to amend 
Interpretation and Policy .01 to allow members to submit options 
transaction data to the Exchange for trade recording and price 
reporting purposes through an electronic data storage medium approved 
by the Exchange.
    Under current CBOE Rule 6.51, Interpretation and Policy .01, buyers 
and sellers must submit transaction data in paper form only, either on 
a trade ticket or transaction card. The CBOE believes that in today's 
market and operations technology environment, that limitation is unduly 
restrictive, and some CBOE members have requested the opportunity to 
submit transaction record data by means of electronic data 
transmission. Submission in that form would enable those members to 
enjoy the efficiency of reporting trades and prices to the CBOE through 
the same automated medium they use to report that information to their 
clearing firms. Accordingly, the CBOE seeks authority to approve 
particular electronic media in addition to paper that CBOE members may 
use for trade recording and price reporting purposes.
    In administering the proposed rule change, the CBOE states that the 
Exchange will from time to time identify particular electronic media 
and formats acceptable for use under Exchange Rule 6.51 based on 
members' needs, and will inform members about acceptable media and 
formats through appropriate circulars. The CBOE expects to identify as 
acceptable only those electronic media that involve secure and tested 
technology.
    The CBOE believes that the proposed rule change is consistent with 
section 6(b) of the Act, in general, and with Section 6(b)(5), in 
particular, in that it is designed to facilitate cooperation and 
coordination with persons engaged in the clearance and settlement of 
securities transactions, consistent with the protection of investors 
and the public interest.
    The Commission finds that the proposal is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange and, in particular, with 
the requirements of section 6(b)(5) and section 17A(a)(1)(A) of the 
Act.\4\ Specifically, the Commission believes that the CBOE's proposal 
will provide buyers and sellers on the CBOE with an efficient and 
accurate means of recording options transactions and submitting price 
reporting information to the CBOE with an efficient and accurate means 
of recording options transactions and submitting price reporting 
information to the CBOE while preserving the CBOE's ability to create 
necessary and reliable audit trail information. The Commission believes 
that the electronic submission of transaction data should help to 
ensure the accuracy of the CBOE's audit trails by reducing the 
possibility of human error.\5\ In turn, the audit trail information 
should help the CBOE to enforce compliance by its members with the 
federal securities laws and the CBOE's rules, thereby increasing the 
CBOE's ability to prevent fraudulent and manipulative acts and 
practices, promote just and equitable principles of trade and protect 
investors and the public interest, consistent with section 6(b)(5) of 
the Act. Moreover, the Commission finds that the proposal is consistent 
with section 17A(a)(1)(A) of the Act because it is designed to promote 
the prompt and accurate clearance and settlement of securities 
transactions.
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    \4\15 U.S.C 78f and 78q-1 (1982).
    \5\Telephone conversation between Barbara Casey, CBOE, and 
Yvonne Fraticelli, Staff Attorney, Options Branch, Division, 
Commission, on April 22, 1994.
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    In addition, the CBOE has represented that it will approve only 
those electronic media that involve secure and tested technology for 
submitting options transaction data under CBOE Rule 6.51. The 
Commission expects the CBOE to notify the Commission of any changes in 
the technology approved by the Exchange for submitting options 
transaction data.
    It is therefore ordered, pursuant to section 19(b)(2) of the Act\6\ 
that the proposed rule change (SR-CBOE-94-01) is approved.

    \6\15 U.S.C. 78s(b)(2) 1982).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-13471 Filed 6-2-94; 8:45am]
BILLING CODE 8010-01-M