[Federal Register Volume 61, Number 44 (Tuesday, March 5, 1996)]
[Notices]
[Pages 8699-8701]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5045]



-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36894; File No. SR-CBOE-96-06]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the Chicago 
Board Options Exchange, Inc., Relating to Arbitration Procedures

February 27, 1996.
    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 February 
7, 1996, 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 and II below, which Items have been prepared by the self-
regulatory organization. The Commission is approving this proposal on 
an accelerated basis.

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

    Currently, paragraph (c), ``Pre-Hearing Exchange,'' of CBOE Rule 
18.22, ``General Provisions Governing Pre-hearing Proceeding,'' 
provides that, at least ten calendar days prior to the first hearing 
date, all parties must serve on each other copies of documents in their 
possession that they intend to present at the hearing and identify 
witnesses they intend to present at the hearing. The CBOE proposes to 
amend Exchange Rule 18.22(c) to provide that at least 20 calendar days 
prior to the first hearing date: (1) the parties shall serve on each 
other copies of documents in their possession that they intend to 
present at the hearing; (2) the parties may provide each other and the 
Director of Arbitration with a list of documents that have already been 
produced pursuant to other provisions of CBOE Rule 18.22 in lieu of the 
actual documents; and (3) the parties shall serve on each other and on 
the Director of Arbitration a list identifying witnesses they intend to 
present at the hearing by name, address, and business affiliation. In 
addition, the CBOE proposes to amend CBOE Rule 18.22(g), ``Power to 
Direct Appearances and Production of Documents.'' to clarify that 
arbitrators may direct the appearance of any CBOE member without resort 
to the subpoena process.
    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 my 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 purpose of the proposal is to amend CBOE Rule 18.22(c) to 
conform the Exchange's rule to Section 20(c) of the Uniform Code of 
Arbitration (``Uniform Code''), as amended by the Securities Industry 
Conference on Arbitration (``SICA''). \1\ In addition, the CBOE 
proposes to amend CBOE 18.22(g) to clarify that arbitrators have power 
over members to direct appearance and produce documents without resort 
to the subpoena process. According to the CBOE, the proposed changes to 
CBOE Rule 18.22(c) have been adopted by the National Association of 
Securities Dealers (``NASD'') and the New York Stock Exchange 
(``NYSE''). \2\

    \1\ CBOE Rule 18.22(c) corresponds to SICA Uniform Code Section 
20(c) (as amended January 7, 1993, and October 21, 1994).
    \2\ See Securities Exchange Act Release Nos. 36222 (September 
13, 1995) 60 FR 48576 (September 19, 1995) (order approving File No. 
SR-NYSE-95-25); and 35525 (March 23, 1995), 60 FR 16219 (March 29, 
1995) (order approving File No. SR-NASD-95-05) (``Arbitration 
Approval Orders'').
---------------------------------------------------------------------------

    Currently, CBOE Rule 18.22(c) requires the parties, at least ten 
calendar days prior to the first scheduled hearing date, to serve each 
other with any documents in their possession and to identify witnesses 
they intend to present at the hearing. The proposed amendment to 
Exchange Rule 18.22(c) allows parties to provide a list of documents 
that have been produced 

[[Page 8700]]
previously to the other side, in lieu of producing the same documents 
again. The CBOE believes that the proposed change will provide for more 
efficient pre-hearing exchanges by not requiring the parties to again 
exchange those documents that have been produced previously. The 
proposal also requires that the witness list include the address and 
business affiliation of the witnesses identified. This will allow the 
parties to receive advance notice as to the background of witnesses and 
the location of nonparty witnesses. Finally, the proposed amendment to 
CBOE Rule 18.22(c) requires prehearing exhanges to occur 20 days in 
advance of the hearing, instead of ten days, as is presently required. 
The Exchange believes that this part of the proposal will serve to 
provide the parties with sufficient time to organize and present their 
cases in an efficient manner.
    In addition, the CBOE proposes to amend CBOE Rule 18.22(g). 
Currently, CBOE Rule 18.22(g) empowers arbitrators, without resorting 
to the subpoena process, to direct the appearance of employees of 
members and associated persons of members, and order those persons, as 
well as member organizations, to produce records in their control. The 
proposed change to paragraph (g) clarifies that arbitrators have the 
same power over members to direct appearances and produce documents 
without resort to the subpoena process.
    By conforming the rules of the Exchange to those of other self-
regulatory organizations (``SROs''), the CBOE believes that the 
proposed rule change is consistent with the 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 promote just and equitable principles of 
trade and to protect investors and the public interest by improving the 
administration of an impartial arbitration forum for the resolution of 
disputes between members, persons associated with members, and public 
investors.

(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. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    The CBOE has requested that the proposed rule change be given 
accelerated effectiveness pursuant to Section 19(b)(2) of the Act 
because the proposed amendments to CBOE Rule 18.22(c) have been 
proposed previously by other SROs and approved by the Commission.\3\ 
The Exchange believes good cause exists for approving the proposal on 
an accelerated basis in order to ensure and promote uniformity in the 
rules governing the administration of arbitration facilities offered by 
the SROs.

    \3\ See Arbitration Approval Orders, supra note 2.
---------------------------------------------------------------------------

    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 \4\ in that 
the proposal is designed to promote just and equitable principles of 
trade, to prevent unfair discrimination between customers, issuers, 
brokers, or dealers, and, in general, to protect investors and the 
public interest. The CBOE proposes to amend Exchange Rule 18.22(c) to 
allow parties to: (1) Provide a list of documents that have been 
produced previously to the other side, instead of providing the actual 
documents; (2) require the list identifying witnesses to include the 
address and business affiliation of the witnesses listed; and (3) 
require pre-hearing exchanges of documents and the list of documents 
previously produced to occur 20 days in advance of the hearing, instead 
of ten days, as is presently required. The Commission believes that the 
proposed amendments to CBOE Rule 18.22(c) should increase the 
efficiency of the arbitration process by eliminating duplicative 
prehearing documents exchanges. In addition, the Commission believes 
that the proposed amendments should: (1) Assist parties in the process 
of preparing and organizing their cases by providing them with advance 
notice regarding the background of witnesses and the location of 
nonparty witnesses; (2) reduce the number of instances of surprise; and 
(3) provide parties with a more reasonable time frame in which to 
address last minute discovery requests.

    \4\ 15 U.S.C. Sec. 78f(b)(5) (1982).
---------------------------------------------------------------------------

    The Commission finds that the proposed amendment to CBOE Rule 
18.22(g) is designed to protect investors and the public interest by 
clarifying the power of arbitrators to direct the appearance of CBOE 
members, as well as persons employed by or associated with CBOE 
members, without resort to the subpoena process.
    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice thereof in the Federal Register because the proposed amendments 
to Exchange Rule 18.22(c) are identical to rules adopted previously by 
other SROs.\5\ The Commission notes that the proposals by the NYSE and 
the NASD were published for comment in the Federal Register and that no 
comments were received concerning their proposals. The Commission does 
not believe that the CBOE's amendments to Exchange Rule 18.22(c) raise 
new regulatory issues. In addition, the Commission finds good cause for 
approving the CBOE's amendment to Exchange Rule 18.22(g) because the 
amendment clarifies the power of arbitrators to direct the appearance 
of Exchange members without resort to the subpoena process.

    \5\ See Arbitration Approval Orders, supra note 2.
---------------------------------------------------------------------------

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 March 26, 1996.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\6\ that the proposed rule change (File No. SR-CBOE-96-06), is 
approved.

    \6\ 15 U.S.C. Sec. 78s(b)(2) (1982).
    
[[Page 8701]]

---------------------------------------------------------------------------

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\

    \7\ 17 CFR 200.30-3(a)(12) (1995)
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-5045 Filed 3-4-96; 8:45 am]
BILLING CODE 8010-01-M