[Federal Register Volume 61, Number 199 (Friday, October 11, 1996)]
[Notices]
[Pages 53472-53473]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26171]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37787; File No. SR-CBOE-96-57]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Board Options Exchange, Inc., Relating to a Minor 
Rule Violation Plan Amendment To Create a Settlement Procedure for 
Position Limit Fines

October 4, 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 September 25, 1996, the Chicago Board Options Exchange, Inc. 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. Sec. 78s(b)(1) (1988).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The CBOE, pursuant to Rule 19b-4 of the Act, proposes to amend its 
minor rule violation plan to create an offer of settlement procedure 
for certain position limit violations.

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 may be examined at 
the places specified in Item IV below. The self-regulatory organization 
has

[[Page 53473]]

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

    Under the minor rule violation provisions of Exchange Rule 17.50, 
the CBOE currently processes position limit violations not exceeding 
$5,000 for any one trade date as summary fines. Exchange members whose 
fine for any one trade date does not exceed that threshold are 
summarily fined, including instances when consecutive trade dates 
violations occurred and significant fine amounts accumulated. If 
Exchange members wish to contest the summary fine(s), they are 
restricted to the contested fine procedures in the minor rule violation 
plan which permit either holding a hearing or presenting a written 
submission before the Business Conduct Committee (``Committee'').
    Based upon past experience with contested position limit summary 
fine matters, as well as an internal regulatory focus study, the 
Exchange proposes a new procedure so that members with significant 
position limit violations meeting certain criteria will be afforded an 
opportunity within the minor rule violation plan process to present one 
settlement offer before the Committee. Members with significant 
position limit summary fines do not presently have access to the 
settlement resolution process available to respondents under Exchange 
Rule 17.2 et seq. for regular disciplinary matters pending before the 
Committee, including making offers of settlement without admitting or 
denying the violations and personal appearances. Some members who 
proceeded to a contested fine hearing admitted that the violations 
occurred, and used the hearing forum solely to request that the fines 
be reduced or removed.
    The CBOE proposes to add language to Interpretation and Policy .01 
under Exchange Rule 17.50 to define what levels of position limit 
summary fines will trigger access to the new settlement procedure. In 
general, the CBOE will treat (a) position limit violations resulting in 
any one-day fine in excess of $2,500, or (b) position limit violations 
resulting in an aggregate fine in excess of $10,000 and involving five 
or more consecutive trade dates, as appropriate for an offer of 
settlement opportunity before the Committee.
    The CBOE proposes to make the new settlement procedure available 
only with respect to position limit summary fines until the CBOE can 
further review the effects on the minor rule violation plan process. In 
this regard, the CBOE notes that it has not experienced significant 
accumulations of fines by members for minor rule violations under 
Exchange Rule 17.50 other than position limit violations.
    By providing an interim step to allow for settlement of position 
limit summary fines, the proposed rule change is expected to increase 
the efficiency of the minor rule violation plan process by saving the 
time and expense of both members and Exchange staff in preparing for 
summary fine hearings. According to the CBOE, 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 refine and enhance the Exchange's 
minor rule violation plan as applied to position limit violations, 
thereby removing impediments to a free and open market and protecting 
investors and the public interest.

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

    The self-regulatory organization 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

    Within 35 days of the 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 finding, or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve the 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 person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. Sec. 552, will be available for inspection and copying at 
the Commission's Public Reference Section, 450 Fifth Street, N.W., 
Washington, D.C. 20549. Copies of such filing also will be available 
for inspection and copying at the principal office of the CBOE. All 
submissions should refer to File No. SR-CBOE-96-57 and should be 
submitted by November 1, 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. 96-26171 Filed 10-10-96; 8:45 am]
BILLING CODE 8010-01-M