[Federal Register Volume 60, Number 104 (Wednesday, May 31, 1995)]
[Notices]
[Pages 28432-28433]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13219]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35759; File No. SR-CBOE-95-22]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Board Options Exchange, Inc., Relating to 
Members' Compliance With Position and Exercise Limits for Non-CBOE 
Listed Options

May 24, 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 April 
20, 1995, 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

    The CBOE proposes to amend CBOE Rules 4.11, ``Position Limits,'' 
and 4.12, ``Exercise Limits,'' to require CBOE members who trade on-
CBOE listed option contracts and who are not members of the exchange 
where the options are traded to comply with the option position and 
exercise limits set by the exchange where the transactions are 
effected.\1\ In addition, the CBOE proposes to amend the text of CBOE 
Rule 4.12 to replace references to the Exchange's previous equity 
option position limits with references to the Exchange's current equity 
position limits, which were excluded inadvertently from the text of 
CBOE Rule 4.12 when the equity option position limits were increased in 
December 1993.\2\ Finally, the CBOE proposes to amend CBOE Rules 4.11 
and 4.12 to indicate that the Exchange's position and exercise limits 
are now established by the staff of the CBOE, rather than by the CBOE's 
Board of Directors (``Board'').

    \1\ Position limits impose a ceiling on the number of option 
contracts in each class on the same side of the market i.e., 
aggregating long calls and short puts or long puts and short calls) 
that can be held or written by an investor or group of investors 
acting in concern. Exercise limits prohibit an investor or group of 
investors acting in concert from exercising more than a specified 
number of puts or calls in a particular class within five 
consecutive business days.
    \2\ See Securities Exchange Act Release No. 33283 (December 3, 
1993), 58 FR 65204 (December 13, 1993) (order approving File No. SR-
CBOE-93-43) (``Position Limit Approval Order'').
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    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

    According to the CBOE, one purpose of the proposal is to eliminate 
a jurisdictional loophole whereby a CBOE member, who exceeds position 
or exercise limits on another options exchange in an option class not 
listed on the CBOE and who is not a member of the other exchange, falls 
outside of both the CBOE's and the other options 
[[Page 28433]] exchange's jurisdiction for position and exercise limit 
purposes. The CBOE notes that while CBOE Rules 4.11 and 4.12 prohibit 
excessive positions or exercises in CBOE listed option contracts, the 
CBOE's rules do not currently prohibit a CBOE member from exceed 
applicable limits set by another exchange for non-CBOE listed option 
contracts. If the CBOE member is not a member of the other exchange 
which lists the option contracts, then the other exchange cannot 
enforce its position and exercise requirements against the CBOE member 
either.
    The proposed amendments will extend CBOE Rules 4.11 and 4.12 to 
apply to option contracts dealt in on any exchange (rather than only to 
option contracts dealt in on the CBOE) by requiring a CBOE member who 
is effecting transactions in non-CBOE listed option contracts on 
another exchange, of which he or she is not a member, to comply with 
the position and exercise limits set by the exchange on which the 
transaction is effected. Thus, a CBOE members's customer transactions 
in non-Exchange listed options will be brought within the CBOE's 
jurisdiction for position and exercise limit purposes, if and when the 
other exchange on which the excessive transactions are effected does 
not have member jurisdiction over the CBOE member.
    According to the CBOE, other national securities exchange have 
noted a similar jurisdictional shortfall. The CBOE anticipates that 
other exchanges will propose similar options position and exercise 
limit rule changes so that jurisdiction will be expanded uniformly and 
coherently among the exchanges.
    In addition, the CBOE proposes to amend CBOE Rule 4.12 exercise 
limits to correlate to current CBOE position limits. Accordingly, the 
exercise limits will be increased to 4,500, 7,500, or 10,500 option 
contracts. Inadvertently, the CBOE's exercise limits were not increased 
when the equity option position limits were increased in December 
1993.\3\

    \3\ See Position Limit Approval Order, Supra note 2.
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    Finally, the CBOE proposes to amend CBOE Rules 4.11 and 4.12 to 
reflect that position and exercise limits are not fixed by the staff of 
the Exchange, rather than by the Board.\4\

    \4\ The Commission notes that any proposal to revise the 
Exchange's position and exercise limits must be filed with the 
Commission pursuant to Section 19(b)(2) under the Act.
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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 remove 
impediments to a free and open market and to protect investors and the 
public interest.

(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 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, 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 at 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 above-mentioned 
self-regulatory organization. All submissions should refer to the file 
number in the caption above and should be submitted by June 21, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\

    \5\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-13219 Filed 5-30-95; 8:45 am]
BILLING CODE 8010-01-M