[Federal Register Volume 61, Number 55 (Wednesday, March 20, 1996)]
[Notices]
[Pages 11452-11453]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6636]



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

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36961; File No. SR-CBOE-96-13]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Board Options Exchange, Inc., Relating to the 
Exchange's Member Death Benefit Program

March 13, 1996.
    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 March 11, 1996, 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.
---------------------------------------------------------------------------

    \1\ 15 CFR U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to revise its Member Death Benefit Program to 
expand the coverage of the Program to include certain recently active 
members and to establish a defined benefit under the Program of 
$50,000. The text of the proposed rule change is available at the 
Office of the Secretary, the Exchange, 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 Exchange 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 Exchange's Member Death Benefit Program is set forth in CBOE 
Rule 3.24 and functions in the following manner. The Member Death 
Benefit Program covers any natural person who is a nominee of a member 
organization, a Chicago Board of Trade exerciser, a lessee of an 
Exchange membership, or an owner of an Exchange membership that is not 
being leased to a lessee. The Exchange refers to the foregoing 
individuals as ``active members.'' Each active member designates a 
beneficiary under the Program. Upon the death of an active member, the 
Exchange pays a member death benefit to that member's designated 
beneficiary. The amount of the benefit is equal to the number of active 
members at the time of the member's death multiplied by $25. Because 
this benefit is based on the number of active members, the amount of 
the benefit fluctuates as the number of active members fluctuates. As 
of December 31, 1995, there were 1,384 active members. Therefore, if a 
benefit were to have been paid on that date, it would have been equal 
to $34,600. After a member death benefit has been paid under the 
Program, the Exchange bills each active member $25 in order to recoup 
the cost of the benefit.
    The purpose of the proposed rule change is to revise the Member 
Death Benefit Program in two primary respects. First, the Exchange 
proposes to

[[Page 11453]]

expand the coverage of the Member Death Benefit Program to cover any 
individual who (i) was an active member within 90 days prior to the 
date of his or her death and (ii) was an active member during at least 
274 out of the 365 days preceding the date of his or her last 
termination from active member status. This expanded coverage would be 
in addition to the Program's current coverage of any individual who is 
an active member at the time of his or her death. Second, the Exchange 
proposes to establish a defined member death benefit under the Program 
of $50,000. This $50,000 benefit would replace the current member death 
benefit under the Program which is based on the number of active 
members at the time of a member's death. Accordingly, instead of being 
billed $25 by the Exchange after a member death benefit payout has 
occurred, under the proposed rule change each active member will be 
assessed an amount equal to $50,000 divided by the number of active 
members at the time of the assessment.
    The proposed rule change also makes two clarifications concerning 
the administration of the Member Death Benefit Program. First, the 
proposed rule change clarifies that in no event shall more than one 
member death benefit be paid by reason of the death of an individual 
who is eligible to receive the member death benefit. Second, the 
proposed rule change clarifies that the active members who will be 
assessed after a member death benefit has been paid by the Exchange 
will be those individuals who are active members at the time of the 
assessment. The actual date upon which such assessments will occur will 
be at the discretion of the Exchange. Finally, the proposed rule change 
makes certain editorial changes to Rule 3.24 that do not affect its 
substance.
    The purpose of the Member Death Benefit Program is to provide a 
death benefit to the designated beneficiaries of active members. The 
Exchange believes that the proposed rule change will further that 
purpose and provide for a fairer and more appropriate way to provide 
the member death benefit. For example, currently if an individual who 
has been an active member for three quarters of the previous year 
temporarily leaves his seat in order to take a short vacation, that 
individual would not be covered by the Member Death Benefit Program in 
the event that the individual were to pass away while on vacation. The 
same is true if the individual were to temporarily leave his seat 
because of an illness or accident and then were to pass away shortly 
thereafter. The proposed rule change is intended to cover these types 
of individuals under the Member Death Benefit Program because they have 
been active members for much of the year preceding the time of their 
death.
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act, in general, and furthers the objectives 
of Sections 6(b)(4) and 6(b)(5) of the Act in particular, in that it is 
designed to (i) provide for the equitable allocation of reasonable 
dues, fees, and other charges among Exchange members and (ii) remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system by serving to assist the Exchange in 
attracting and retaining active members through the enhancement of the 
financial security of their families in the event their death.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change will impose no 
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 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 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so findings or (ii) as to 
which the Amex 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 persons, 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 Amex. All 
submissions should refer to File No. SR-CBOE-96-13 and should be 
submitted by April 10, 1996.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\3\
---------------------------------------------------------------------------

    \3\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-6636 Filed 3-19-96; 8:45 am]
BILLING CODE 8010-01-M