[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