[Federal Register Volume 60, Number 26 (Wednesday, February 8, 1995)]
[Notices]
[Pages 7606-7607]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3034]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35307; File No. SR-CBOE-95-03]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Board Options 
Exchange, Inc. Relating to Restrictions on the Exercise on Index 
Options

January 31, 1995.
    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 January 
18, 1995, 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 Exchange. 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

    The Exchange proposes to amend its Rule 4.16 to limit the time 
period during which restrictions on the exercise of index options may 
be in effect, making Rule 4.16 consistent with CBOE Regulatory Circular 
RG91-11, dated January 14, 1991. Rule 4.16 would be amended to 
substitute the words ``business day'' for the words ``trading day,'' 
thereby making Rule 4.16 consistent with CBOE's stated policy as set 
forth in Regulatory Circular RG91-11. 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. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Section (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 revise Rule 4.16 to 
make it consistent with CBOE's stated policy regarding when 
restrictions on the exercise of index options may be in effect, as set 
forth in Regulatory Circular RG91-11. The Exchange represents that it 
promulgated the policies regarding exercise restrictions in Regulatory 
Circular RG91-11 to implement a coordinated approach to which all of 
the options exchanges had agreed. Regulatory Circular RG91-11 provides, 
in part, that, except during ``the last business day prior to 
expiration, the (American Stock Exchange, CBOE, New York Stock 
Exchange, Pacific Stock Exchange, and the Philadelphia Stock Exchange) 
intend to prohibit exercises of cash settled index options during any 
time when trading in such options are [[Page 7607]] delayed, halted or 
suspended.'' (Emphasis in original). The Exchange represents that by 
purporting to restrict exercises of these index options except on the 
last business day prior to expiration, RG91-11 conflicts with Rule 
4.16, which provides that exercise restrictions on index options are 
only allowed until ``the opening of business on the last trading day 
before the expiration date.'' (Emphasis added).
    The Exchange believes that this terminology creates a problem in 
the case of A.M.-settled index options. The ``last business day prior 
to expiration'' is, for both A.M.-settled and P.M.-settled index 
options, the Friday before expiration. For P.M.-settled options, that 
Friday is also the ``last trading day before the expiration date.'' 
Pursuant to CBOE Rule 24.9(a)(4), however, the ``last trading day'' 
before the expiration date of A.M.-settled index options is ``the 
business day preceding the last day of trading in the underlying 
securities prior to expiration''--i.e., Thursday before expiration. 
(Emphasis added). The present form of Rule 4.16 therefore would 
prohibit restrictions on the exercise of A.M.-settled index options on 
expiration Thursday, as well as expiration Friday, even when trading in 
such options ``had been delayed, halted or suspended.'' This, the 
Exchange believes, is contrary to the policy articulated in Regulatory 
Circular RG-11, which would only prohibit restrictions on exercise of 
any index option on expiration Friday.
    To eliminate this inconsistency, and to implement the policy of 
Regulatory Circular RG91-11 that index option exercise restrictions may 
be in effect until the opening of business on expiration Friday (i.e., 
the ``last business day'' before expiration), the proposed rule change 
would amend Rule 4.16 to substitute the words ``business day'' for the 
words ``trading day.''
    The CBOE represents 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)\1\ in particular in that it is designed to prevent 
fraudulent and manipulative acts and practices and to promote just and 
equitable principles of trade.

    \1\15 U.S.C. 78f(b)(5) (1988).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose and 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

    Because the foregoing rule change constitutes a stated policy, 
practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of the Exchange, it 
is has become effective pursuant to Section 19(b)(3)(A) of the Act and 
subparagraph (e)(1) of Rule 19b-4 thereunder. At any time within 60 
days of the filing of the proposed rule change, the Commission may 
summarily abrogate such rule change if it appears to the Commission 
that such action is necessary or appropriate in the public interest, 
for the protection of investors, or otherwise in furtherance of the 
purposes of the Act.

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. Sec. 552, will be available for inspection and copying at 
the Commission's Public Reference Section, 450 Fifth Street, N.W., 
Washington, D.C. 20549. 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-95-03 and should be 
submitted by March 1, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\2\

    \2\17 CFR 200.30-3(a)(12) (1994).
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[FR Doc. 95-3034 Filed 2-7-95; 8:45 am]
BILLING CODE 8010-01-M