[Federal Register Volume 59, Number 249 (Thursday, December 29, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-32093]
[[Page Unknown]]
[Federal Register: December 29, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35137; File No. SR-CBOE-94-40]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Chicago Board Options Exchange, Incorporated Relating to
Certain Settlement and Margin Deposit Time Frames
December 22, 1994.
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 November 7, 1994, the Chicago Board Options Exchange, Incorporated
(``CBOE'') 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 primarily 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. Sec. 78s(b)(1) (1988).
\2\17 CFR 240.19b-4 (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 reduce the settlement period for transactions
in certain securities and shorten certain time frames respecting
customer margin requirements. One approved, these changes would become
effective at the same time as Commission rule 15c6-1.\3\
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\3\On October 6, 1993, the Commission adopted Rule 15c6-1 which
establishes three business days after the trade date as the standard
settlement cycle for most securities transactions. Securities
Exchange Act Release No. 33023 (October 7, 1993), 58 FR 52891. The
rule becomes effective June 7, 1995. Securities Exchange Act Release
No. 34952 (November 9, 1994), 59 FR 59137.
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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 those CBOE
rules that reflect a five business day settlement period for
transactions in securities other than options, including stocks and
warrants, or that specify customer margin deposit time frames based on
a five business day settlement cycle. The CBOE represents that the
proposed changes conform CBOE's rules to Commission rule 15c6-1 under
the Act, which will establish a three business day settlement period
for transactions in most types of securities.\4\ These changes in
CBOE's rules will become effective concurrently with similar rule
changes of other national securities exchanges in accordance with Rule
15c6-1.\5\
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\4\Id.
\5\The CBOE represents that CBOE members will be notified by
circular in Spring 1995 of the settlement conversion schedule
established by the National Securities Clearing Corporation. Under
that schedule, June 2nd will be the last trading day with five
business day settlement. Monday, June 5th, and Tuesday, June 6th,
will be trading days with four business day settlement. All regular-
way trades executed on or after June 7th will settle three business
days following the trade date. As a result, there will be two double
settlement days--one on June 9th for trades executed on June 2nd and
5th and one on June 12th for trades executed on June 6th and 7th.
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The proposal will amend Chapter XXX (Stocks, Warrants and Other
Securities) and Chapter XXXI (Approval of Securities for Original
Listing) to reflect a three business day settlement cycle. The proposal
will amend Rules 30.12, 30.31, and 31.40 to change references from
``five business days'' to ``three business days'' as the settlement
time frame for regular way transactions. Rules 30.12 and 30.31 also
will be amended to provide that seller's option trades may not settle
in less than four business days rather than six business days. Rule
30.31 also will be amended to provide that bids and offers in rights to
subscribe shall be made only for next day settlement on the second and
third full business days, rather than the second, third, fourth, and
fifth business days, preceding the final day for subscription. Rule
30.34, covering the trading of warrants, will be amended to change all
references to five business days to three business days. In addition,
the CBOE also proposes to amend a related provision in CBOE Rule 12.3,
covering margin requirements, that is based on a five business day
settlement cycle to reflect a three business day cycle.
Rules 30.32, 31.22, and 31.42 require amendment to provisions
setting forth ex-rights or ex-dividend dates (i.e., the dates when
stocks trade without rights or dividends). All references to
transactions in stocks being ex-dividend or ex-rights on the fourth
business day preceding the record date will be changed to the second
business day preceding the record date. For transactions when the
record date occurs on a day other than a business day, the stock will
be traded ex-dividend or ex-rights on the third preceding business day
rather than on the fifth preceding business day.
Four rules dealing with customer margin requirements also will
require amendment. Rules 21.25, 23.13, 24.11, and 30.51 contain
requirements that depend on the seven day margin deposit time Frame
currently set forth in Regulation T.\6\ In view of Rule 15c6-1,
however, the Board of Governors of the Federal Reserve System has
reduced the time limit in Section 220.4(c) of Regulation T within which
a customer margin call must be satisfied. Under the amendment to
Regulation T, the new time limit is ``the number of business days in
the standard securities settlement cycle in the United States * * *
plus two business days.''\7\ Once Rule 15c6-1 of the Act becomes
effective, most customer margin calls will have to be met in five
business days. Accordingly, the margin deposit time frames set forth in
CBOE rules also are proposed to be reduced to five business days.
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\6\12 CFR 220.1-.19.
\7\See Federal Reserve System Release, Docket No. R-0840
(October 18, 1994), 59 FR 53565 (October 25, 1994).
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The CBOE believes that the proposed rule change is consistent with
section 6 of the Act in general and Section 6(b)(5) of the Act\8\ in
particular in that it is designed to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities by enabling the CBOE to enforce compliance by its members
with its Rules, the rules of the Commission, and the rules of the Board
of Governors of the Federal Reserve System.
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\8\15 U.S.C. Sec. 78f(B)(5) (1988).
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(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
Written comments on the proposed rule change were neither solicited
nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Within thirty-five 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 ninety 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 CBOE 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 will also be available for
inspection and copying at the principal office of the CBOE. All
submissions should refer to File No. SR-CBOE-94-40 and should be
submitted by January 19, 1995.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\17 CFR 200.30-3(a)(12)(1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-32093 Filed 12-28-94; 8:45 am]
BILLING CODE 8010-01-M