[Federal Register Volume 59, Number 138 (Wednesday, July 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17664]


[[Page Unknown]]

[Federal Register: July 20, 1994]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34366; File No. SR-CBOE-94-21]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Board Options Exchange, Inc. Relating to Exercise 
Price Intervals on Interest Rate Options

July 13, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on June 30, 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 CBOE. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\15 U.S.C. 78s(b)(1) (1982).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to change CBOE Rule 23.5(a) to reduce 
from $2.50 to $1.00 the fixed interval between strike prices.
    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 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 purpose of the proposed rule change is to amend the Exchange's 
rules concerning interest rate option contracts to reduce from $2.50 to 
$1.00 the interval between exercise prices on such contracts.
    The Exchange believes that this change, which will establish a 
minimum spread of $100 ($1.00 times the multiplier of 100) between 
series, will improve the value and utility of interest rate options. In 
particular, the Exchange believes that this change should enable 
traders to construct hedges that correlate closely with interest rates 
and changes in interest rate measures underlying interest rate options. 
Under current CBOE Rule 23.5(d), the $2.50 minimum strike price 
interval is wider than the typical increments of change in interest 
rates, even during periods of high interest rate volatility. For 
example, during the most volatile week in recent months, the yield on 
the 30-year U.S. Treasury bond changed by less than 15 basis points (or 
$150), while strike price intervals were necessarily set at the minimum 
of $250 apart. The Exchange believes that that ``wide'' minimum 
interval made at- or near-the-money positions unavailable,which in turn 
limited the ability of traders to construct tight hedges or to use 
combination orders such as straddles effectively. The Exchange believes 
that reducing the strike price interval accordingly should improve the 
value and utility of interest rate options to CBOE members and their 
customers.
    The Exchange believes that the proposed rule change will enhance 
depth and liquidity in interest rate options. The Exchange believes 
this proposal is consistent with Section 6(b) of the Act in general, 
and Section 6(b)(5)\2\ in particular, by providing rules that perfect 
the mechanism of a free and open market, while protecting investors and 
the public interest.
---------------------------------------------------------------------------

    \2\15 U.S.C. 78f(b)(5) (1988).
---------------------------------------------------------------------------

(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 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, 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. Copies of such filing also will be available for 
inspection and copying at the principal office of the CBOE. All 
submissions should refer to File No. SR-CBOE-94-21 and should be 
submitted by August 10, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\3\
---------------------------------------------------------------------------

    \3\17 CFR 200.30-3(a)(12) (1993).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-17664 Filed 7-19-94; 8:45 am]
BILLING CODE 8010-01-M