[Federal Register Volume 62, Number 242 (Wednesday, December 17, 1997)]
[Notices]
[Pages 66157-66158]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-32920]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39435; File No. SR-CBOE-97-55]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the Chicago 
Board Options Exchange, Inc., Relating to the Telephone Policy for the 
S&P 100 Index (``OEX'') Options Post

December 11, 1997.
    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 October 
9, 1997, the Chicago Board Options Exchange, Inc. (``CBOE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II 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 
and approving this proposal on an accelerated basis.

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The CBOE proposes to amend its current policy governing the use of 
member-owned or Exchange-owned telephones located at the post where 
Standard & Poor's 100 Index (``OEX'') options are traded to allow 
market makers to receive incoming telephone calls from locations 
outside the CBOE building on telephones at the OEX post.\1\
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    \1\ The Commission approved the Regulatory Circular (Regulatory 
Circular 96-73) containing the current OEX telephone policy on July 
26, 1996. See Securities Exchange Act Release No. 37487 (July 26, 
1996), 61 FR 40686 (August 5, 1996) (order approving File No. SR-
CBOE-96-14).
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    The text of the regulatory circular 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 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

    The purpose of the proposed rule change is to amend the Exchange's 
current regulatory circular (Regulatory Circular 96-73) governing the 
use of telephones at the OEX option trading post by eliminating the 
restriction against market makers receiving incoming calls at the OEX 
post from locations outside of the Exchange building. According to the 
CBOE, when the OEX Floor Procedure Committee (``Committee'') 
recommended that the Exchange adopt a policy prohibiting market makers 
from receiving incoming calls at the OEX post, the Committee was 
concerned that the receipt of telephone calls would interfere with the 
market makers' fulfillment of their duties to make markets and fill 
orders. However, the CBOE notes that all other trading posts on the 
CBOE's floor have successfully allowed market makers to receive 
incoming calls without any detrimental effects on the conduct of 
business at those locations. In fact, the Exchange has found that 
allowing market makers to receive incoming calls can allow them to stay 
in contact with outside parties who can provide information to the 
market makers that may assist them in performing their duties.
    The proposed change to allow market makers to receive incoming 
calls will make the OEX telephone policy consistent with the telephone 
policy at all other trading locations on the CBOE's floor in this 
respect. Under the proposal, the Exchange will allow market makers to 
have their own dedicated telephone or telephone line if space permits. 
The Exchange will retain the discretion to decide whether a market 
maker may have its own telephone or a dedicated line on an Exchange 
telephone depending on the space restrictions in the post.
    The Exchange also is amending the OEX telephone installation 
application and agreement to reflect the proposed change.
    The Exchange believes the proposed rule change will allow market 
makers to better perform their duties by giving them more open access 
to outside information. In addition, the proposed change will make the 
OEX telephone policy consistent with the policies elsewhere on the 
Exchange floor. For the foregoing reasons, the Exchange believes the 
rule proposal is consistent with and furthers the objectives of Section 
6(b)(5) of the Act, in that it is designed to perfect the mechanisms of 
a free and open market and to protect investors and the public interest 
by providing better access to the OEX post.

(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

    The CBOE has requested that the proposed rule change be given 
accelerated effectiveness pursuant to

[[Page 66158]]

Section 19(b)(2) of the Act. According to the CBOE, the proposed change 
is consistent with the use of telephones at other locations on the CBOE 
floor, including at the equity option telephone posts, where the use of 
telephones is governed by a policy approved by the Commission.\2\
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    \2\ The Commission approved the CBOE's proposal to incorporate 
its telephone policy for equity options into the rules of the 
Exchange in 1994. See Securities Exchange Act Release No. 33701 
(March 2, 1994), 59 FR 11336 (March 10, 1994) (order approving File 
No. SR-CBOE-93-24) (``Equity Option Approval Order'').
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    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange, and, in 
particular, the requirements of Section 6(b)(5) \3\ in that it is 
designed to promote just and equitable principles of trade, prevent 
fraudulent and manipulative acts and practices, and maintain fair and 
orderly markets.\4\ Specifically, the CBOE has represented that 
allowing OEX market makers to receive incoming calls from outside the 
CBOE building may allow OEX market makers to receive information that 
will assist OEX market makers in performing their duties. In addition, 
the proposal will make the OEX telephone policy regarding market 
makers' receipt of incoming calls consistent with the telephone 
policies at all other trading locations on the CBOE floor.
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    \3\ 15 U.S.C. 78f(b)(5)(1988).
    \4\ In approving this rule, the Commission notes that it has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(b)(5).
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    The Commission believes that it is reasonable for the Exchange to 
amend its telephone policy for OEX market makers to make the policy 
consistent with the procedures applicable to all other trading 
locations on the CBOE has indicated that market makers' receipt of 
incoming calls at other trading posts on the CBOE floor. In this 
regard, the Commission notes that the CBOE floor has produced no 
detrimental effect on the conduct of business at those trading posts. 
In addition, the CBOE states that the Exchange has not detected any 
improper trading activity resulting from its telephone policies.\5\ The 
Commission believes, as it found in approving the CBOE's telephone 
policy for equity options, that the Exchange's existing surveillance 
procedures will ensure that the CBOE is aware of any options 
transactions that raise manipulation concerns.\6\ Accordingly, the 
Commission believes that the CBOE's modification of its telephone 
policy for OEX market makers will not diminish the Exchange's ability 
to detect and deter manipulation.
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    \5\ Telephone conversation among Timothy Thompson, Senior 
Attorney, CBOE, Pat Cerny, Market Surveillance, CBOE, and Yvonne 
Fraticelli, Attorney, Office of Market Supervision, Division of 
Market Regulation, Commission, on November 18, 1997 (``November 18 
Conversation'').
    \6\ See Equity Option Approval Order, supra note 2.
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    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice of filing thereof in the Federal Register. Accelerated approval 
will allow the CBOE to implement a uniform policy regarding market 
makers' receipt of incoming calls at their trading posts. Accordingly, 
the Commission believes that granting accelerated approval to the 
proposal is appropriate and consistent with Section 6 of the Act.\7\
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    \7\ 15 U.S.C. 78f.
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
argument 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 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 Section, 450 Fifth Street, 
N.W., Washington, D.C. Copies of such filing will also be available for 
inspection and copying at the principal office of the above-mentioned 
self-regulatory organization. All submissions should refer to File No. 
SR-CBOE-97-55 and should be submitted by January 7, 1998.
    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (File No. SR-CBOE-97-55) is 
approved on an accelerated basis.

    \8\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-32920 Filed 12-16-97; 8:45 am]
BILLING CODE 8010-01-M