[Federal Register Volume 59, Number 190 (Monday, October 3, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24301]


[[Page Unknown]]

[Federal Register: October 3, 1994]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34711; File No. SR-CBOE-94-30]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Board Options Exchange, Inc., Relating to Storage 
of Customer Account Records

September 23, 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 
September 7, 1994, the Chicago Board Options Exchange, Inc. (``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 self-
regulatory organization. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.

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

    Currently, paragraph (c) of CBOE Rule 9.8, ``Supervision of 
Accounts,'' provides that background and financial information of 
customers who have been approved for options transactions must be 
maintained at both the branch office servicing the customer's account 
and at the principal supervisory office with jurisdiction over the 
branch office. In addition, copies of options customer account 
statements over the most recent six months must be maintained at both 
the branch office supervising the accounts and at the principal 
supervisory office with jurisdiction over that branch. The CBOE 
proposes to amend CBOE Rule 9.8(c) and Interpretation and Policy .03 to 
enable members' supervisory offices to maintain certain customer 
account information at off-site locations as long as the records are 
readily accessible and promptly retrievable.
    The text of the proposal 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 self-regulatory organization 
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 self-regulatory organization 
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 CBOE states that the purpose of the proposal is to enable 
supervisory offices of CBOE members to store certain customer account 
records off-site. CBOE members that elect to do so must ensure that the 
records are easily accessible and promptly retrievable.
    Currently, under CBOE Rule 9.8, background and financial 
information about customers, as well as copies of customer account 
statements, must be maintained at the branch office serving the 
customer and at that branch's principal supervisory office. The 
substance of this rule appears uniformly in the rules of the other 
options exchanges and in the options account rules of the National 
Association of Securities Dealers, Inc. (``NASD''). According to the 
CBOE, on-site storage in major financial centers is expensive, and, in 
today's market environment, automated and secure facilities for data 
storage and retrieval make it unnecessary to require on-site storage. 
The CBOE states that, given those realities, the Options Self-
Regulatory Council (``OSRC'')\1\ has recommended that record retention 
requirements be relaxed and that the exchanges and the NASD amend their 
rules to permit supervisory offices to store customer records off-
premises as a matter of routine practice.\2\
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    \1\The OSRC, which was created pursuant to a plan submitted by 
the options exchanges under Rule 17d-2 (``17d-2 plan'') under the 
Act, includes representatives from each of the registered options 
exchanges and the NASD. The 17d-2 plan was developed by the 
exchanges and approved by the Commission to reduce regulatory 
duplication and to coordinate solutions to options-related sales 
practice issues common to firms which are members of two or more 
self-regulatory organizations.
    \2\In connection with the OSRC's recommendation, the designated 
options examining authorities, including the CBOE, have committed to 
periodic examinations of the document retention and supervisory 
practices of firms using off-site storage arrangements.
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    The CBOE concurs with the OSRC's recommendation and believes that 
its proposal will afford the CBOE's members the opportunity to 
discharge their supervisory responsibilities more efficiently and more 
cost-effectively. Accordingly, the CBOE's proposal amends paragraph (c) 
and Interpretation and Policy .03 of CBOE Rule 9.8 to enable CBOE 
members' supervisory offices to use off-premises storage for certain of 
the customer records specified in the rules, provided the records are 
easily accessible and promptly retrievable.\3\
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    \3\Interpretation and Policy .03 requires member to maintain, at 
the principal supervisory office with jurisdiction over the office 
servicing a customer's account, information to permit review of each 
customer's account to determine (1) the compatibility of options 
transactions with investment objectives and with the types of 
transactions for which the account was approved; (2) the size and 
frequency of options transactions; (3) commission activity in the 
account; (4) profit or loss in the account; (5) undue concentration 
in any options class or classes and (6) compliance with the 
provisions of Regulation T of the Federal Reserve Board.
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    The CBOE 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 prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, and to protect investors and the public 
interest.

(B) Self-Regulatory Organization's Statement of 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 after the 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 reason 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, 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 at the 
Commission's Public Reference Section, 450 Fifth Street, NW., 
Washington, D.C. Copies of such filing will also be available for 
inspection and copying at the principal office of the above-mentioned 
self-regulatory organization. All submissions should refer to the file 
number in the caption above and should be submitted by October 24, 
1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-24301 Filed 9-30-94; 8:45 am]
BILLING CODE 8016-01-M