[Federal Register Volume 60, Number 207 (Thursday, October 26, 1995)]
[Notices]
[Pages 54889-54893]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-26548]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36390; International Series Release No. 872; File No.
SR-CBOE-95-39]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Inc.; Order Approving a Proposed Rule Change and Notice of Filing and
Order Granting Accelerated Approval of Amendment No. 1 to a Proposed
Rule Change Relating to the Listing and Trading of Options and Long-
Term Options on the CBOE Germany 25 Index and Long-Term Options on a
Reduced-Value CBOE Germany 25 Index
October 18, 1995.
I. Introduction
On August 4, 1995, the Chicago Board Options Exchange, Inc.
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'' or ``SEC''), pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposal to list and trade on the Exchange cash-
settled, European-style \3\ stock index options on the Germany 25
Index. The Index is a capitalization-weighted index of 25 German blue-
chip equities listed on the Frankfurt Stock Exchange (``FSE''). The
proposed rule change was published for comment and appeared in the
Federal Register on August 28, 1995.\4\ The CBOE filed Amendment No. 1
to its proposal on October 13, 1995.\5\ No comments were received
regarding the CBOE's proposal.
\1\ 15 U.S.C. 78s(b)(1) (1988).
\2\ 17 CFR 240.19b-4 (1994).
\3\ European-style options may only be exercised during a
specified period before the options expire.
\4\ See Securities Exchange Act Release No. 36125 (August 18,
1995), 60 FR 44526.
\5\ Letter from Eileen Smith, Director, Product Development,
Research Department, CBOE, to Michael Walinskas, Branch Chief,
Office of Market Supervision, Division of Market Regulation,
Commission, dated October 13, 1995 (``Amendment No. 1''). In
Amendment No. 1, the CBOE provides information regarding the
industries represented in the Index, IBIS average daily trading
volume, and dissemination. Amendment No. 1 also states that if the
weight of any one industry group exceeds 50% of the total weight of
the Index, the Exchange will immediately notify Commission staff;
and that the CBOE will not remove a component of the Index between
annual reviews unless it becomes necessary (generally due to
bankruptcy, delisting, takeover, or merger. Id.
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II. Description of the Proposal
A. General
The purpose of the proposed rule change is to permit the Exchange
to list and trade cash-settled, European-style stock index options on
the Germany 25 Index. The Index is a capitalization-weighted index of
25 German blue-chip equities listed on the Frankfurt Stock Exchange
(``FSE''). The Exchange represents that options on the Index will
provide investors with a low-cost means of participating in the German
economy and hedging against the risk of investing in that economy.
B. Index Design
The 25 stocks that comprise the Germany 25 Index were selected by
the CBOE for their high market capitalization and high degree of
liquidity. According to the Exchange, the Index stocks are drawn from a
broad base of industries and are representative of the industrial
composition of the German equity market. Specifically, the Index
components are the top 25 German stocks by market capitalization
excluding: (1) Stocks with an average daily volume of less than 50,000
shares per day over the past six months; and (2) preferred stock of an
issuer if that issuer also has publicly-traded common stock. The Index
will be reviewed annually by that CBOE at the end of May each year and
any composition changes resulting from that review will be implemented
after the June expiration in that year.
The Germany 25 Index is weighted by the capitalization (market
value) of the component stocks. The capitalization of a particular
stock in the Index is calculated by multiplying the listed shares
(including common, preferred, and treasury shares) by the price of the
stock.\6\
\6\ The Commission notes that this varies from the method used
to calculate the values of domestic capitalization-weighted indexes,
such as the S&P 100 Index. For such domestic indexes, values are
determined based solely on the outstanding shares of common stock of
each component in the indexes.
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On June 30, 1995, the 25 stocks in the Index ranged in
capitalization from DM 3.656 billion (US$2.648 billion) \7\ to DM
51.642 billion (US$37.408 billion). The total capitalization of the
stocks in the index on that date was DM 399.101 billion (US$289.099
billion); the mean capitalization was DM 15.964 billion (US$11.564
billion) and the median capitalization was DM 11.144 billion (US$8.072
billion). The largest stock by capitalization (Allianz AG Holdings)
accounted for 12.94% of the total weighting of the Index, while the
smallest (Kaufhof) accounted for 0.92%. The top five stocks accounted
for 44.56% of the total weighting on that date.
\7\ The CBOE represents that the dollar values used herein are
based on a German mark/U.S. dollar exchange rate of 1.3805 marks per
U.S. dollar prevailing on June 30, 1995.
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For the period from January 1, 1995 through June 30, 1995, average
daily volume in individual Germany 25 Index component stocks ranged
from a low of approximately 87,629 shares to a high of 2.532 million
shares traded per day, with a mean daily trading volume for all the
stocks in the Index during that period of 523,501 shares traded per
day.
The Exchange represents that the Index is composed of ten (10)
broad industry groupings, including chemicals, automobile and insurance
companies, among others, which reflect the industry composition of the
German equity market.
C. Calculation
The CBOE states that the Germany 25 Index will reflect changes in
the capitalization of the component stocks relative to the
capitalization on a base date. The base date for the Index is June 30,
1995, at which time the Index was given a value of 200 by the CBOE. The
Index value of 200 was reached by multiplying the price of each stock
by the number of listed shares (including common, preferred, and
treasury),\8\ obtaining the sum of these values of all component
stocks, and then dividing by a divisor determined to give the Index a
value of 200. The CBOE states that it will calculate and disseminate
the Germany 25 Idex, based on the most recent closing prices of the
component stocks as reported by the FSE, each day prior to the opening
of trading in the United States.\9\ It is anticipated that at least
several information vendors will make this information available
throughout the CBOE trading day.
\8\ See supra note 6 and accompanying text.
\9\ Amendment No. 1, supra note 5.
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D. Maintenance
The Index will be maintained and calculated by to Exchange. To
maintain continuity of the Index, the Exchange
[[Page 54890]]
will adjust the Index to reflect certain events relating to the
component stocks. For example, the Exchange will adjust the Index
divisor to reflect cash dividends paid on the component securities.The
Exchange will make this adjustment because German companies usually pay
their dividends only once a year (generally in May or June). In not
adjusted, the annual dividend payment would result in a significant
drop in the Index value at the time when the dividends are paid. The
divisor will be adjusted immediately prior to each ex-dividend date so
that the Index level will not be affected by the dividend payment. A
similar adjustment will be made when a company issues new shares for
which the shareholders have preemptive rights, or when other intra-year
events such as mergers and spinoffs, occur.
Between annual reviews, CBOE will not remove a component of the
Index unless it becomes necessary as a result of significant and
fundamental changes to such Index component. Generally, such a change
would include bankruptcy, delisting from the FSE, takeover, or
merger.\10\ In that case, the next eligible component will be added,
i.e., the German security with the highest market capitalization not
then included in the Index that satisfies the criteria set forth above.
\10\ Amendment No. 1, supra note 5.
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E. Index Option Trading
In addition to regular Index options, the Exchange may provide for
the listing of long-term index option series (``LEAPS'') and reduced-
value LEAPS on the Index (``Index LEAPS''). For reduced-value Index
LEAPS, the underlying value will be computed at one-tenth of the Index
level. The current and closing index value of reduced-value Index LEAPS
will, after such initial computation, be rounded to the nearest one-
hundredth.
The trading hours for options on the Index will be from 8:00 a.m.
to 3:15 p.m., Chicago time. Currently, the trading hours of the
Exchange and the FSE do not overlap.\11\ The Exchange, therefore, will
calculate and disseminate the value of the Index based on the most
recent closing prices of the component stocks as reported by the FSE.
After the close of the FSE, however, trading continues in the 25 stocks
comprising the Index on the FSE's Integrated Stock Exchange Trading and
Information System (``IBIS'').\12\ The trading hours of IBIS and the
Exchange currently overlap for the two hour period between 8 a.m. and
10 a.m., Chicago time. During this two hour period, the Exchange will
continuously calculate and disseminate every 15 seconds an
``indicative'' Germany 25 Index level based on the most recent prices
of the component stocks as reported by IBIS.\13\ When Trading on IBIS
has concluded (10 a.m. Chicago time), the Exchange will disseminate the
last ``indicative'' Index level. To avoid any confusion, the
``indicative'' Index level will have a different ticker symbol from the
actual Index level.
\11\ The FSE's trading hours are from 10:30 a.m. to 1:30 p.m.,
Frankfurt time (3:30 a.m. to 6:30 a.m., Chicago time).
\12\ According to the Exchange, the Deutsche Borse AG, the
holding company for the FSE, states that IBIS is a screen-based
trading and information system that is available for trading from
8:30 a.m. to 5:00 p.m., Frankfurt time (1:30 a.m. to 10:00 a.m.,
Chicago time). The CBOE represents that IBIS, as part of the FSE, is
subject to the same rules and regulations as floor trading on the
FSE. According to the Exchange, IBIS began operating in April, 1991.
\13\ Amendment No. 1, supra note 5. The Exchange intends to
calculate the ``indicative'' Index with the same method of
calculation as described above for the actual Index.
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The option premium values will be quoted in U.S. dollars and
trading accounts will be denominated in U.S. dollars. For strike prices
under $200, the Exchange reserves the right to list series in 2\1/2\
point intervals.
F. Surveillance
The Exchange expects to apply its existing index options
surveillance procedures to Index options. In addition, the CBOE states
that the German legislature recently adopted new laws regarding insider
trading that also provide for the creation of an independent regulatory
authority.\14\ The Exchange understands that these developments will
facilitate the effective coordination between the Commission and the
appropriate German regulatory authority of option trading on the
Germany 25 Index because they will enhance the surveillance of trading
in the stocks comprising the Index. In addition, the Exchange will
continue to pursue its own independent agreement with the Deutsche
Borse AG (the holding company that owns the FSE) and/or the FSE.\15\
\14\ The Commission notes that this new regulatory body, the
Bundesaufsichtsamt fur den Wertpapierhandel, was established in
January 1995.
\15\ Telephone conversation between Eileen Smith, Director,
Product Development, Research Department, CBOE, and Brad Ritter,
Senior Counsel, Office of Market Supervision, Division, Commission,
on August 8, 1995.
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G. Exercise and Settlement
The proposed options on the Index will expire on the Saturday
following the third Friday of the expiration month. The Exchange
intends to list up to three near-term calendar months and three
additional months at three month intervals.\16\ Trading in the expiring
contract month will normally cease at 3:15 p.m. (Chicago time) on the
immediately preceding Thursday, unless a holiday occurs. The exercise
settlement value of the Index at option expiration will be calculated
by the Exchange on the day following the last day of trading in the
expiring contracts. The exercise settlement value of Index options at
expiration will be determined at the close of the regular Friday
trading sessions at the FSE in Germany, ordinarily at 1:30 p.m.,
Frankfurt time (6:30 a.m., Chicago time), i.e., values of component
stocks disseminated through IBIS will not be used in calculating the
settlement values for Index options or Index LEAPS.\17\ If an Index
stock does not open for trading at the FSE, the last available price on
the FSE of the stock will be used in the calculation of the value of
the Index. When expirations are moved in accordance with Exchange
holidays, such as when the CBOE is closed on the Friday before
expiration, the last trading day for expiring options will be Wednesday
and the exercise settlement value of Index options at expiration will
be determined at the close of the regular Thursday trading sessions at
the FSE in Germany even if the FSE is open on Friday. If the FSE will
be closed on the Friday before expiration but the CBOE will not, the
last trading day for expiring Index options and Index LEAPS will be
Wednesday.\18\
\16\ Telephone Conversation between Scott Lyden, Senior Research
Analyst, CBOE, and Francois Mazur, Attorney, Office of market
Supervision, Division of Market Regulation, Commission, on October
17, 1995 (``October 17 Telephone Conversation'').
\17\ Id.
\18\ In this circumstance, the CBOE will issue a notice to
members informing them that the last trading day for Index options
and Index LEAPS will be on Wednesday even though the CBOE will be
open on expiration Friday. Id.
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H. Position Limits
The Exchange proposes to establish position limits for options on
the Index of 50,000 contracts on either side of the market, with no
more than 30,000 contracts in the series with the nearest expiration
month. The Exchange represents that these limits are roughly
equivalent, in dollar terms, to the limits applicable to options on
other approved broad-based indexes. For purposes of determining whether
given position in full-value and reduced-value Index LEAPS comply with
applicable position and exercise limits, positions in full-value and
reduced-value Index LEAPS
[[Page 54891]]
will be aggregated with positions in the regular Index options. For
these purposes, ten reduced-value contracts will equal one full-value
contract.
I. Exchange Rules Applicable
Except as modified herein, the rules in Chapter XXIV of the CBOE's
rules applicable to other broad-based index options will be applicable
to Germany 25 Index options, including Index LEAPS for purposes of
trading rotations, halts and suspensions, and margin treatment.
The Exchange states that it has the necessary systems capacity to
support new series that would result from the introduction of Germany
25 Index options. The CBOE also states that it has been informed that
the Options Price Reporting Authority (``OPRA'') has the capacity to
support such new series.\19\
\19\ See Letter from Joe Corrigan, Executive Director, OPRA, to
Eileen Smith, Director, Product Development, Research Department,
CBOE, dated November 21, 1994 (``OPRA Letter'').
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III. Discussion
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange, and, in
particular, the requirements of Section 6(b)(5) of the Act.\20\ The
Commission finds that the trading of options on the Index will permit
investors to participate in the price movements of the 25 German equity
securities on which the Index is based. The Commission also believes
that the trading of options on the Index will allow investors holding
positions in some or all of the securities underlying the Index to
hedge the risks associated with their portfolios. Accordingly, the
Commission believes that Germany 25 Index options will provide
investors with an important trading and hedging mechanism that should
reflect accurately the overall movement of German equity securities. By
broadening the hedging and investment opportunities of investors, the
Commission believes that the trading of Index options will serve to
protect investors, promote the public interest, and contribute to the
maintenance of fair and orderly markets.\21\
\20\ 15 U.S.C. 78f(b)(5) (1988).
\21\ Pursuant to Section 6(b)(5) of the Act, the Commission must
predicate approval of any new option or warrant proposal upon a
finding that the introduction of such new derivative instrument is
in the public interest. Such a finding would be difficult for a
derivative instrument that served no hedging or other economic
function, because any benefits that might be derived by market
participants likely would be outweighed by the potential for
manipulation, diminished public confidence in the integrity of the
markets, and other valid regulatory concerns. In this regard, the
trading of listed options or warrants on the Index will provide
investors with a hedging vehicle that should reflect the overall
movement of the German equity market. The Commission also believes
that these options will provide investors with a means by which to
make investment decisions in the German equity market, allowing them
to establish positions or increase existing positions in German
stocks in a cost effective manner.
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The trading of Germany 25 Index options, however, raises several
issues, including issues related to index design, customer protection,
surveillance, and market impact. For the reasons discussed below, the
Commission believes that the CBOE has adequately addressed these
issues.
A. Index Design and Structure
The Commission finds that it is appropriate and consistent with the
Act to classify the Index as broad-based, and therefore to permit
Exchange rules applicable to the trading of broad-based index options
to apply to Index options.\22\ First, the Index consists of 25 actively
traded German securities. Second, the total capitalization of the
Index, as of June 30, 1995, was US$399.101 billion, with the market
values of the individual stocks in the Index ranging from a high of
US$37.408 billion to a low of US$2.648 billion, with a median value of
US$8.072 billion. Third, the Index reflects the various sectors of the
German equities market, and includes stocks of companies from a broad
range of industries, and no industry segment comprises more than 20% of
the Index's total value.\23\ Fourth, as of June 30, 1995, no single
stock comprised more than 12.94% of the Index's total value, and the
percentage weighting of the five largest issues in the Index accounted
for only 44.56% of the Index. Fifth, the Index selection and
maintenance criteria will serve to ensure that the Index continues to
reflect the 25 most highly capitalized German stocks. Accordingly, the
Commission believes it is appropriate to classify the Index as broad-
based.
\22\ In addition, the basic character of the reduced-value
Germany 25 Index, which is comprised of the same component
securities as the Germany 25 Index, and calculated by dividing the
Germany 25 Index by ten, is essentially identical to the Germany 25
Index.
\23\ See supra Section II.B. The Exchange has stated that if at
any time the weight of any one industry group exceeds 50% of the
total weight of the Index, it will notify Commission staff
immediately. Amendment No. 1, supra note 5.
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The Commission believes that the general broad diversification of
the Index component stocks, as well as their high capitalizations and
liquid markets, significantly minimize the potential for manipulation
of the Index. First, as discussed above, the Index represents a broad
cross-section of highly capitalized German stocks, with no single
industry group or stock dominating the Index. Second, the stocks that
comprise the Index are actively traded.\24\ Third, the Commission
believes that the Index selection and maintenance criteria will serve
to ensure that the Index continues to represent stocks with high
capitalizations and trading volumes. Fourth, the Exchange has proposed
position and exercise limits for the Index options that are consistent
with other broad-based index options. Accordingly, the Commission
believes it is unlikely that attempted manipulations of the prices of
the Index components would affect significantly the Index's value.
\24\ See supra Section II.B.
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In addition, because only one of the Index component stocks is
traded in the United States as a National Market System security,\25\
and the primary market for component stocks is closed throughout the
CBOE's trading day, the Commission believes it is reasonable and
appropriate for the Exchange to begin trading Index options at 8 a.m.
(Chicago Time).
\25\ Currently, Daimler-Benz AG is traded in the United States
as an American Depositary Receipt. October 17 Telephone
Conversation, supra note 16.
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B. Customer Protection
The Commission believes that a regulatory system designed to
protect public customers must be in place before the trading of
sophisticated financial instruments, such as Index options (including
full-value and reduced value Index LEAPS), can commence on a national
securities exchange. The Commission notes that the trading of
standardized exchange-traded options occurs in an environment that is
designed to ensure, among other things, that: (1) the special risks of
options are disclosed to public customers; (2) only investors capable
of evaluating and bearing the risk of options trading are engaged in
such trading; and (3) special compliance procedures are applicable to
options accounts. Accordingly, because the Index options and Index
LEAPS will be subject to the same regulatory regime as the other
standardized options traded on the CBOE, the Commission believes that
adequate safeguards are in place to ensure the protection of investors
in Index options and Index LEAPS.
C. Surveillance
As a general matter, the Commission believes that comprehensive
surveillance sharing agreements between the relevant foreign and
[[Page 54892]]
domestic exchanges are important where an index derivative product
comprised of foreign securities is to be traded in the United
States.\26\ In most cases, in the absence of such a comprehensive
surveillance sharing agreement, the Commission believes that it would
not be possible to conclude that a derivative product, such as a
Germany 25 Index option, was not readily susceptible to manipulation.
\26\ A comprehensive surveillance sharing agreement would allow
the parties to the agreement to obtain relevant surveillance
information, including, among other things, the identity of the
purchasers and sellers of securities underlying the derivative
product.
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With regard to the CBOE proposal, the Commission understands that
the CBOE has been attempting to secure such a surveillance sharing
agreement with the relevant German market.\27\ The Commission would
prefer that a comprehensive surveillance agreement be in place, and
believes that such agreements play a particularly important role in
ensuring the integrity of global securities markets. Even in the
absence of an agreement, however, the Commission does not believe that
the Exchange's proposal should continue to be detained pending the
conclusion of negotiations when an alternative with respect to
obtaining surveillance information exists for the Germany 25 Index
products. Specifically, the U.S. Department of State and the German
Foreign Office have exchanged Diplomatic Notes that provide a framework
for mutual assistance in investigatory and regulatory matters
(``Diplomatic Notes'').\28\ The Diplomatic Notes confirm that the
Commission is qualified to obtain assistance through the German
Ministry of Justice under German law. Based on the existence of the
Diplomatic Notes, the Commission believes that the German governmental
authorities are committed to assistance in addressing cross-border
fraud. In addition, the Commission could obtain from the German
Ministry of Justice (and vice versa) information similar to that which
would be available in the event that a comprehensive surveillance
sharing agreement were executed between the FSE and the CBOE with
respect to transactions in FSE-traded stocks related to Germany 25
Index options transactions on the CBOE.\29\ While this arrangement
would certainly be enhanced by the existence of comprehensive
surveillance sharing agreements, it is nonetheless consistent with
other instances where the Commission has explored alternatives to
direct exchange-to-exchange surveillance sharing agreements where the
relevant foreign exchange was unwilling or unable to enter into a
comprehensive surveillance sharing agreement.\30\
\27\ See Securities Exchange Act Release No. 36070 (August 9,
1995), 60 FR 42205.
\28\ See International Series Release No. 691, 1994 SEC LEXIS
2324 (July 22, 1994).
\29\ It is the Commission's expectation that this information
would include transaction, clearing, and customer information
necessary to conduct an investigation relating to trading of Index
options or components of the Index.
\30\ See, e.g., Letter to David R. Merrill, Deputy General
Counsel, CFTC, from Brandon Becker, Director, Division, Commission,
dated April 20, 1994 (Commission comment letter to the CFTC
regarding the offer by the Osaka Securities Exchange of futures
contracts based on the Nikkei 300 Index to U.S. persons), and letter
to Joanne T. Medero, General Counsel, CFTC, from William H. Heyman,
Director, Division, Commission, dated January 16, 1992 (Commission
comment letter to the CFTC regarding the offers by the Osaka Stock
Exchange and the Tokyo Stock Exchange of futures contracts based on
the Nikkei 225 and TOPIX Indexes to U.S. persons).
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In addition, the Commission notes that there are factors relating
to the computation of the Germany 25 Index that further support
reliance on arrangements other than direct exchange-to-exchange
surveillance agreements. Specifically, the size of the market for the
securities underlying the Germany 25 Index makes it less likely that
the proposed Index warrants are readily susceptible to
manipulation.\31\ For example, as of June 30, 1995, the market
capitalization of the securities in the Index ranged from a low of
approximately U.S. $2.648 billion to a high of approximately U.S.
$37.408 billion, and the average trading volume for individual Index
component securities during the period from January 1995 to June 1995
ranged from a low of 87,629 shares per day to a high of over 2.5
million shares per day.
\31\ In evaluating the manipulative potential of a proposed
index derivative product, as it relates to the securities that
comprise the index and the index product itself, the Commission has
considered several factors, including, among others, (1) the number
of securities contained in the index or group, (2) the
capitalizations of those securities, (3) the depth and liquidity of
the group or index, (4) the diversification of the group or index,
(5) the manner in which the index or group is weighted, and (6) the
ability to conduct surveillance on the product. See Securities
Exchange Act Release No. 31016 (August 11, 1992), 57 FR 37012
(August 17, 1992).
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The Commission continues to believe strongly that the existence of
comprehensive surveillance sharing agreements between the appropriate
German entity(ies) and the Exchange would be important measures to
deter and detect potential manipulations or other improper or illegal
trading involving Index options. Accordingly, the Commission urges the
Exchange and the appropriate German entity(ies) to seek formal
comprehensive surveillance sharing agreements as soon as practicable.
D. Market Impact
The Commission believes that the listing and trading of Germany 25
Index options on the CBOE will not adversely affect the underlying
securities markets.\32\ First, as described above, the Index is broad-
based and comprised of 25 stocks with no one stock or industry group
dominating the Index. Second, as noted above, the stocks contained in
the Index all have large capitalizations and are actively traded.
Third, existing CBOE stock index options rules and surveillance
procedures will apply to Germany 25 Index options. Fourth, the position
limits of 50,000 contracts on either side of the market, with no more
than 30,000 of such contracts in a series in the nearest month
expiration month, will serve to minimize potential manipulation and
market impact concerns. Fifth, the risk to investors of contra-party
non-performance will be minimized because the Index options will be
issued and guaranteed by The Options Clearing Corporation just like any
other standardized option traded in the United States.
\32\ The CBOE has stated that it has the necessary systems
capacity to support new series that would result from the
introduction of Germany 25 Index options. In addition, OPRA has
represented that additional traffic generated by options and LEAPS
on the Index is within OPRA's capacity. OPRA Letter, supra note 19.
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The Commission finds good cause for approving Amendment No. 1 prior
to the thirtieth day after the date of publication of notice of filing
thereof in the Federal Register. Specifically, Amendment No. 1 states
that the CBOE will notify Commission staff if the weight of one
industry group exceeds 50% of the total weight of the Index. Amendment
No. 1 also provides additional information regarding the composition,
calculation, and dissemination of the Index. Finally, Amendment No. 1
clarifies when an Index component may be removed between annual
reviews. The Commission believes that Amendment No. 1 serves to
strengthen and clarify the Exchange's original proposal, but does not
represent a material change that raises regulatory concerns not already
addressed by the original proposal. Accordingly, the Commission
believes it is consistent with Sections 6(b)(5) and 19(b)(2) of the Act
to approve Amendment No. 1 to the proposal on an accelerated basis.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
[[Page 54893]]
arguments concerning Amendment No. 1. 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. 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-95-39 and should
be submitted by November 16, 1995.
V. Conclusion
For the reasons discussed above, the Commission finds that the
proposal is consistent with the Act, and, in particular, Section 6 of
the Act.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\33\ that the proposed rule change (File No. SR-CBOE-95-39), as
amended, is approved.
\33\ 15 U.S.C. 78s(b)(2) (1988).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\34\
\34\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-26548 Filed 10-25-95; 8:45 am]
BILLING CODE 8010-01-M