[Federal Register Volume 61, Number 232 (Monday, December 2, 1996)]
[Notices]
[Pages 63886-63887]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30530]
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SECURITIES AND EXCHANGE COMMISSION
(Release No. 34-37968; File No. SR-CBOE-96-66)
November 20, 1996.
Self-Regulatory Organizations; Notice of Filing and Summary
Effectiveness of Proposed Rule Change by the Chicago Board Options
Exchange, Inc. Relating to Changing the Designated Reporting Authority
for the Exercise Settlement Values of Yield-Based Options on Treasury
Securities
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 November
5, 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 self-regulatory
organization. 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 proposed rule filing changes the designated reporting authority
for the exercise settlement values of yield-based options on Treasury
securities.
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 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
1. Purpose
The purpose of the proposed rule change is to change the designated
reporting authority for closing exercise settlement values of yield-
based options on Treasury securities (referred to herein as ``interest
rate options'') from the Federal Reserve Bank of New York (``FRBNY'')
to GovPX (``GovPX'') a leading independent provider of financial data.
On October 3, 1996, the FRBNY announced that it was discontinuing
dissemination of its Composite 3:30 p.m. Quotations for U.S. Government
Securities. FRBNY disseminated its last Composite Quotation on Tuesday,
October 15, 1996. In accordance with the designation of FRBNY as the
reporting authority for exercise settlement values of interest rate
options in Interpretation and Policy .01 under Rule 23.1, CBOE had
previously used FRBNY quotations to determine the exercise settlement
values of interest rate options on the yield of the most-recently
auctioned 90-day, five-year, ten-year and thirty-year government
securities (IRX, FVX, TNX, and TYX, respectively).
Since FRBNY is no longer disseminating these values, CBOE has
determined to designate GovPX as the replacement reporting authority,
and proposes to amend Interpretation and Policy 23.1.01 to reflect this
designation and to make a conforming amendment to Interpretation and
Policy 23.1.02. CBOE will use the 3:00 p.m. (Eastern time) yield
quotations disseminated by GovPX on the last trading day prior to the
expiration of interest rate options as the basis for the exercise
settlement values that it will report to OCC in accordance with CBOE
rules.
CBOE has been advised that yield quotations disseminated by GovPX
are based on quotations of bids and offers in the Treasury securities
market that GovPX obtains from five of the six inter-dealer brokers in
that market (Garban, Hilliard Farber, Liberty, RMJ, and Tullett). The
bids and offers from these five inter-dealer brokers represent the best
bids and offers for each Treasury security obtained from 38 primary
dealers.\1\ At 3:00 p.m. each day GovPX selects the best bid and best
offer for each Treasury security from those provided by the five inter-
dealer brokers. GovPX then disseminates that best bid and offer, and a
average, for each Treasury security. CBOE uses that average as its
exercise settlement value for expiring interest rate options.\2\ CBOE
understands that FRBNY itself is now using GovPX yield quotes for its
own internal purposes, instead of the Composite Quotes that it used to
obtain from a daily survey of dealers.
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\1\ Inter-dealer brokers are brokers' brokers. They broker
transactions between primary dealers in Treasury securities. In this
role they are well placed to observe market conditions.
\2\ Telephone conversation between Eileen Smith, CBOE, and Steve
Youhn, SEC, and Heather Seidel, SEC, on November 19, 1996.
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the Act
\3\ in general and furthers the objective of Section 6(b)(5) in
particular in that by providing a reliable source for determining the
exercise settlement values of interest rate options when the reporting
authority previously relied upon for this purpose has discontinued
reporting such values, it will facilitate exercise transactions in
these securities and will therefore protect investors and the public
interest.
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\3\ 15 U.S.C. 78f(b).
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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 either solicited or received with respect
to the proposed rule change.
[[Page 63887]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has been put into effect summarily under
Section 19(b)(3)(B) of the Act and publication of notice is being made,
pursuant to the requirement of Section 19(b)(3)(B) of the Act that
proposed rule changes put into effect summarily be filed thereafter in
accordance with the provisions of Section 19(b)(1).\4\ The rule change
was put into effect summarily pursuant to Section 19(b)(3)(B) of the
Act because such action was necessary for the protection of investors,
the maintenance of fair and orderly markets, or the safeguarding of
securities or funds.\5\ At any time within 60 days of the filing of
such 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.
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\4\ The Commission notes that the proposed rule change was
summarily approved on October 17, 1996. Telephone conversation
between Michael Meyer, outside counsel to CBOE, and Howard Kramer,
Senior Associate Director, SEC, on October 17, 1996.
\5\ The Commission notes that the change ensured that there was
a settlement value available for the yield-based options on Treasury
securities. See discussion supra.
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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 Room. Copies of such filing will also be
available for inspection and copying at the principal office of the
Exchange. All submissions should refer to File No. SR-CBOE-96-66 and
should be submitted by December 23, 1996.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-30530 Filed 11-29-96; 8:45 am]
BILLING CODE 8010-01-M