[Federal Register Volume 62, Number 114 (Friday, June 13, 1997)]
[Notices]
[Pages 32394-32395]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-15466]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38725; File No. SR-CBOE-97-21]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Board Options Exchange, Incorporated Relating to 
Membership Application Submission Deadlines

June 6, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on May 15, 1997, 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.
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    \1\ 15 U.S.C. Sec. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The CBOE proposes to amend CBOE Rule 3.9 to give the Exchange's 
Membership Committee the authority to establish deadlines for the 
submission of each type of membership application, which in no event 
will exceed 90 days prior to the date that the application will be 
considered for approval.
    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 parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    CBOE Rule 3.9(a) currently requires every individual or 
organization applying to become an Exchange member and every individual 
applying to become a nominee of an Exchange member organization to file 
an application with the Exchange's Membership Department no later than 
the first business day of the month during which the application will 
be considered by the Exchange's Membership Committee. The Membership 
Committee generally meets once a month. The Membership Committee's 
present practice is to hold this meeting on the Thursday of the third 
week of the month. Depending on the particular month, the current 
membership application submission deadline can provide the Exchange 
with as few as 10 business days to process a membership application 
prior to the Membership Committee's consideration of the application at 
its monthly meeting.
    The Exchange has found that the current application submission 
deadline makes it extremely difficult for the Exchange to complete the 
processing of certain types of membership

[[Page 32395]]

applications in time for consideration by the Membership Committee at 
its monthly meeting. For example, the processing of membership 
applications submitted by new membership applicants involves a number 
of time-consuming components. Among other things, such an application 
cannot be acted upon until: (1) the Membership Department receives from 
an outside investigative service an investigate report concerning the 
applicant; (2) the applicant's name has been posted on the Exchange's 
Bulletin Board for 14 calendar days; (3) the Membership Department has 
reviewed the application materials and the contents of the investigate 
report; (4) a File Review Subcommittee of the Membership Committee has 
reviewed the application materials and the investigative report; and 
(5) the Membership Department has received from the applicant any 
clarifications or additional information requested from the applicant 
concerning the application materials or investigative report. 
Similarly, it is also time-consuming for the Exchange to process 
applications of member organizations requesting approval from the 
Membership Committee to transact business with the public pursuant to 
CBOE Rule 9.1 or to act as an order service firm pursuant to CBOE Rule 
6.77.
    On the other hand, the Exchange is typically able to process other 
types of membership applications more quickly. For example, the 
application of an existing member to change his or her membership 
status is less involved and does not involve an investigation by an 
outside investigative service. The same is true of an application of a 
former individual member who is reapplying for membership within 6 
months after his or her membership termination date.
    The purpose of the proposed rule change is to eliminate the current 
general membership application submission deadline, and instead, to 
provide in Rule 3.9(a) that the Membership Committee shall establish 
separate submission deadlines for each type of membership application. 
This will permit the Membership Committee to tailor a particular 
submission deadline to the type of membership application involved and 
to periodically shorten or lengthen the deadline, if appropriate, to 
correlate it with the amount of time that the Exchange is generally 
taking to process that type of application. The Membership Committee 
will disseminate these submission deadlines to the Exchange's 
membership in a regulatory circular that will be published in the 
Exchange's Regulatory Bulletin and will include the circular in the 
membership information packets that the Membership Department provides 
to prospective membership applicants. However, in no event will the 
Membership Committee be permitted to establish a submission deadline 
for any type of membership application which is in excess of 90 days 
prior to the date that such an application will be considered for 
approval. Additionally, the Membership Committee will not alter any 
membership application submission deadline without first giving at 
least 60 days prior notice in the form of a regulatory circular that a 
new deadline will be going into effect.
    Once the Membership Committee has established the submission 
deadline for a particular type of membership application, each such 
membership application will be required to be submitted to the 
Membership Department in accordance with the deadline in order to be 
eligible to be considered for approval.
    Finally, it should be noted that this rule change is not intended 
to limit the Membership Committee's ability to table its consideration 
of a membership application in accordance with Rule 3.9(c)(1) or Rule 
3.9(e) in order to obtain additional information concerning an 
applicant or pursuant to CBOE Rule 3.4(d) when an applicant is subject 
to an investigation being conducted by a self-regulatory organization 
or government agency involving the applicant's fitness for membership.
    The proposed rule change is consistent with Section 6(b) of the 
Act, in general, and furthers the objectives of Sections 6(b)(5) and 
6(b)(7) in particular, in that it is designed to protect investors and 
the public interest and to provide a fair procedure for the 
consideration of Exchange membership applications by ensuring that the 
Exchange has adequate time in which to review membership applications.

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

    The 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

    Within 35 days of the date of 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 CBOE consents, the Commission will:
    (A) By order approve such 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, NW, Washington, DC 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 in 
the Commission's Public Reference Room. Copies of such filing will also 
be available for inspection and copying at the principal office of the 
CBOE. All submissions should refer to File No. SR-CBOE-97-21 and should 
be submitted by July 7, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\2\
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    \2\ 17 CFR 200.30-3(a)(12)(1991).
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Jonathan G. Katz,
Secretary.
[FR Doc. 97-15466 Filed 6-12-97; 8:45 am]
BILLING CODE 8010-01-M