[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Notices]
[Pages 29155-29156]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14402]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37264; File No. SR-CBOE-96-26]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by
the Chicago Board Options Exchange, Incorporated Relating to Continuous
Representation of Orders
May 31, 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 April
18, 1996, the Chicago Board Options Exchange, Incorporated (``CBOE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the CBOE.
On May 30,1996, the CBOE filed Amendment No. 1 to the proposal.\1\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ Amendment No. 1 corrects a technical error in Exhibit A of
the CBOE's filing, and is not substantive in nature. See Letter from
Timothy Thompson, Senior Attorney, CBOE, to James McHale, Attorney,
Office of Market Supervision, Division of Market Regulation,
Commission, dated May 16, 1996 (``Amendment No. 1'').
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The CBOE is hereby setting forth its interpretation of the meaning
of an existing Exchange rule which concerns the obligation of a floor
broker to continuously represent certain orders at the trading station
where the option class is traded. The text of the proposed rule change
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 CBOE 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 CBOE has prepared summaries, set forth in sections
(A), (B), and (C) below, of the most significant aspects of such
statements.
[[Page 29156]]
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 make a clarifying
amendment to Interpretation .04 of Rule 6.73, which requires a floor
broker to continuously represent certain orders in the trading crowd.
Paragraph (a) of Rule 6.73, Responsibilities of Floor Brokers,
states that a floor broker must use due diligence in handling an order
to execute the order at the best price or prices available to the
broker, in accordance with Exchange rules. In further clarifying a
broker's responsibility to use due diligence, Interpretation .04 of
Rule 6.73 states that a floor broker's use of due diligence includes
the immediate and continuous representation of ``market or marketable
orders'' at the trading station where the option class represented by
the order is traded. The use of the term ``marketable'' has lead to
some ambiguity in the interpretation of the Rule, however, because some
members have assumed that the term refers to marketable limit orders
which are limit orders where the specified price at which to sell is
below or at the current bid, or if to buy is at or above the current
offer. In fact, however, the interpretation should read, and has been
interpreted to mean, that a floor broker must immediately and
continuously represent market orders or limit orders where the
specified price to sell is at or below the current offer, or if to buy
is at or above the current bid. Because this interpretation will
require floor brokers to continuously and immediately represent some
orders that are neither market orders or marketable limit orders, i.e.
those orders whose limit price is between the bid and offer, the
Exchange thought it was appropriate to revise the interpretation to
clarify the intent of the term marketable. The proposed rule change
will ensure that floor brokers will represent an order in a trading
crowd when that order is likely to be executed soon, even if it is not
immediately executable.
By clarifying an existing rule of the Exchange in order to clear up
any possible ambiguity, the CBOE believes that the proposed rule change
is consistent with and furthers the objectives of Section 6(b)(5) of
the Act, in that it is designed to perfect the mechanisms of a free and
open market and to protect investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The exchange does not believe that the proposed rule change will
impose any inappropriate 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 with
respect to the meaning, administration, or enforcement of an existing
rule, it has become effective pursuant to Section 19(b)(3)(A) of the
Act and 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. 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 the File No. SR-CBOE-96-26 and should be
submitted by June 28, 1996.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 96-14402 Filed 6-6-96; 8:45 am]
BILLING CODE 8010-01-M