[Federal Register Volume 61, Number 145 (Friday, July 26, 1996)]
[Notices]
[Pages 39174-39176]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19033]


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[[Page 39175]]


SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37464; File No. SR-CBOE-96-50]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Board Options 
Exchange, Incorporated Relating to the Enforcement of OEX RAES 
Participation Requirements

July 22, 1996.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934, 15 U.S.C. 78s(b)(1), notice is hereby given that on July 17, 
1996, the Chicago Board Options Exchange, Incorporated (``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 CBOE. 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 establish an interim enforcement procedure for 
the Exchange's new log-on requirement for market-makers participating 
in the CBOE's Retail Automatic Execution System (``RAES'') for 
transactions in Standard & Poor's 100 Index (``OEX'') options.
    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, 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.

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 establish an interim 
enforcement mechanism for the Exchange's new log-on requirement for 
market-makers participating in RAES for transactions in OEX options. 
The new log-on requirement requires individual market-makers who are 
eligible to participate on OEX RAES to log onto OEX RAES any time they 
are present in the OEX trading crowd until the expiration occurring in 
that expiration month if they have logged onto OEX RAES at any earlier 
time in that expiration month.\1\ Previously, Rule 24.17(a) only 
required individual market-makers to log onto OEX RAES on the business 
day prior to expiration to the extent the market-maker was present in 
the OEX trading crowd on that day.\2\ The recent rule change also moved 
jurisdiction for the rule from the OEX Floor Procedure Committee to the 
OEX Market Performance Committee (``OEXMPC''). This change was made so 
that the OEXMPC could focus its efforts on the market performance 
issues of the OEX trading post, such as market-maker participation in 
RAES, thus allowing the OEX Floor Procedure Committee to focus on other 
issues.
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    \1\ See Securities Exchange Act Release No. 37313 (June 14, 
1996), 61 FR 32470 (June 24, 1996).
    \2\ The CBOE notes that market-makers participating on RAES in 
joint accounts or as nominees of a member organization were already 
required to be logged onto OEX RAES each time they were in the 
trading crowd before the recent rule change.
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    The change to require an individual market-maker to log onto OEX 
RAES each time the market-maker is in the trading crowd during an 
expiration month is intended to ensure continued adequate RAES 
participation by market-makers in every type of market situation. In 
addition, the OEXMPC plans to take other actions to secure continued 
market-maker participation in RAES including using the discretion 
currently permitted under the rule (i) to refer market-makers who 
repeatedly violate the log-on and/or log-off requirement for 
disciplinary action under Chapter XVII of Exchange rules and (ii) to 
suspend members from participation on RAES when the OEXMPC determines 
such action is necessary.
    In order to facilitate the individual market-makers in their 
compliance with the new requirement and in order to facilitate the 
efforts of the OEXMPC at implementing the new procedures, the OEXMPC is 
recommending to implement a few enforcement procedures for the recent 
rule change. First, all prior log-on and log-off failures through July 
19 of this year for all market-makers, including those participating in 
joint accounts and those participating as nominees of members 
organizations, will not be considered in determining the fee amount 
under paragraph (f)(i) of Rule 24.17. The Exchange believes this change 
is justified by the heightened emphasis that will be placed on 
compliance with the rule on a prospective basis. Second, for the first 
two lot-on or log-off failures of a particular market-maker in the 
August expiration month, i.e., the period from July 22 through August 
16, warning letters will be issued in lieu of assessing a fee. After 
August 16 or upon the third log-on or log-off failure, whichever comes 
first, fees will be assessed according to the schedule set forth in 
paragraph (f)(i) of Rule 24.17. A market-maker who has failed to log-on 
or to log-off three times in the August expiration period will be 
considered to have only one violation for the calendar year for the 
purpose of calculating the fee amount. Fee assessments may be appealed 
under Chapter XIX of the Exchange's rules.
    The Exchange represents to the Commission that it will submit a 
report to the Commission regarding the enforcement of the log-on and 
log-off requirements on OEX RAES during the August expiration month. 
The report will detail how many market-makers received one warning 
letter, how many received two warning letters, and how many received 
fees.
    By adopting enforcement procedures to facilitate market-makers in 
complying with new procedures and to facilitate the OEXMPC in enforcing 
the new OEX RAES procedures the Exchange believes that the proposed 
rule change is consistent with Section 6 of the Act in general and with 
Section 6(b)(5) in particular in that it is designed to promote just 
and equitable principles of trade, to foster cooperation with persons 
engaged in facilitating and clearing transactions in securities, and to 
protect investors and the public interest.

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

    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

    Because the foregoing rule change constitutes a stated 
interpretation 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

[[Page 39176]]

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. Copies of all such filing will also be available for 
inspection and copying at the principal office of CBOE. All submissions 
should refer to File No. SR-CBOE-96-50 and should be submitted by 
August 16, 1996.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\3\
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    \3\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-19033 Filed 7-25-96; 8:45 am]
BILLING CODE 8010-01-M