Federal Register, Volume 63 Issue 2 (Monday, January 5, 1998)

[Federal Register Volume 63, Number 2 (Monday, January 5, 1998)]
[Notices]
[Pages 276-280]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-45]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39489; File No. SR-CBOE-97-11]

Self-Regulatory Organizations; Chicago Board Options Exchange,
Inc.; Order Approving Proposed Rule Change and Notice of Filing and
Order Granting Accelerated Approval to Amendment Nos. 1, 2, 3, and 4 to
Proposed Rule Change To Increase OEX Position and Exercise Limits, To
Increase OEX Firm Facilitation Exemption, and To Increase OEX Index
Hedge Exemption

December 24, 1997.

I. Introduction

On February 26, 1997, the Chicago Board Options Exchange, Inc.
(``CBOE''or ``Exchange'') submitted to the Securities and Exchange
Commission (``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend Exchange Rule 24.4 to
increase the position and exercise limits for options on the Standard &
Poor's (``S&P'') 100 Stock Index (``OEX''), to increase the OEX firm
facilitation exemption, and to increase the OEX index hedge exemption.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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The proposed rule change appeared in the Federal Register on April
24, 1997.\3\ No comments were received on the proposal. On August 13,
1997, the CBOE submitted Amendment No. 1 to the proposed rule
change.\4\ Amendment No.

[[Page 277]]

2 was submitted by the CBOE on November 18, 1997.\5\ On November 25,
1997, the CBOE submitted Amendment No. 3 to the proposed rule
change.\6\ Amendment No. 4 was submitted by the CBOE on December 23,
1997.\7\ This order approves the CBOE's proposal. Also, Amendment Nos.
1, 2, 3, and 4 are approved on an accelerated basis.
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\3\ See Securities Exchange Act Release No. 38525 (April 18,
1997) 62 FR 20046.
\4\ See Letter from Timothy Thompson, Senior Attorney, CBOE, to
Sharon Lawson, Division of Market Regulation (``Division''),
Commission, dated August 7, 1997 (``Amendment No. 1''). In Amendment
No. 1, the CBOE proposes to: (1) clarify several aspects of the
proposal; (2) amend Interpretation .03 to Rule 24.4 to provide the
Exchange with greater flexibility in collecting hedging information
relating to OEX, S&P 500 Index Option (``SPX'') or any current or
future index products; and (3) delete Interpretation .04 to Rule
24.4 relating to additional margin requirements.
\5\ See Letter from Timothy Thompson, Senior Attorney, CBOE, to
Sharon Lawson, Division, Commission, dated November 14, 1997
(``Amendment No. 2''). In Amendment No. 2, the CBOE proposes to add
a new Interpretation .04 to Rule 24.4, which consists of a slightly
revised version of Interpretation .04 that the Exchange has proposed
to delete in Amendment No. 1. Amendment No. 2 also revises the OEX
reporting requirement procedures to reflect the requested increase
in the standard OEX position limit to 150,000 contracts. See File
Nos. SR-CBOE-97-11 and SR-CBOE-97-48.
\6\ See Letter from Patricia L. Cerny, Director, Department of
Market Regulation, CBOE, to Sharon Lawson, Division, Commission,
dated November 21, 1997 (``Amendment No. 3''). In Amendment No. 3,
the CBOE proposes to double the requested increases in OEX position
and exercise limits to 150,000 and 100,000 contracts, respectively,
to reflect the Commission's recent approval of the CBOE's request to
double the OEX position and exercise limits in connection with the
split of the underlying Index. See Securities Exchange Act Release
No. 39338 (November 19, 1997) (order approving File No. SR-CBOE-97-
48).
\7\ See Letter from Timothy H. Thompson, Senior Attorney, CBOE,
to Debbie Flynn, Division, Commission, dated December 17, 1997
(``Amendment No. 4''). In Amendment No. 4, the CBOE proposes to
amend Interpretation .03 to Rule 24.4 by increasing to 65,000
contracts the ``trigger'' for OEX reporting requirements to
correspond to the 65,000 trigger for margin requirements of
Interpretation .04 to Rule 24.4 proposed in Amendment No. 2. The
CBOE also proposes to add a sentence to Interpretation .03 to
clarify that the Exchange may specify other index options subject to
the reporting requirements set forth in Interpretation .03 to Rule
24.4.
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II. Description of the Proposal

The CBOE proposes a number of revisions to Exchange Rule 24.4, the
position limit rule for broad-based index options. Member firms have
expressed to the CBOE their need for relief from the current OEX
position and exercise limits, which, prior to the split of the
underlying Index,\8\ had not increased since 1987.\9\ At that time,
position limits were increased to 25,000 contracts with no more than
15,000 contracts in the near term series. As a result of the split of
the underlying Index, position and exercise limits were doubled to
50,000 and 30,000 contracts, respectively, to permit market
participants to maintain their existing level of investment in OEX
options.\10\ For the reasons discussed below, the Exchange is proposing
that the OEX position limits be raised to 150,000 contracts with no
more that 100,000 contracts in the near term series.\11\
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\8\ See supra note 6.
\9\ See Securities Exchange Act Release No. 24556 (June 5, 1987)
52 FR 22695 (June 15, 1987) (approval order increasing the position
limits on the OEX from 15,000 contracts to 25,000 contracts) (File
Nos. SR-CBOE-85-25 and SR-CBOE-87-26).
\10\ See supra note 6.
\11\ The Exchange's original filing requested increases in
position and exercise limits to 75,000 and 50,000 contracts,
respectively. In Amendment No. 3, the CBOE amended its earlier
proposal to reflect the Commission's recent approval of the CBOE's
request to double OEX exercise and position limits in connection
with the splitting of the Index underlying OEX options. See supra
note 6.
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Although OEX volume is less now than it was in 1987, according to
the CBOE, OEX still enjoys larger average daily trading volume than any
other index option and open interest has remained consistently
high.\12\ In addition, the Exchange believes that a significant reason
why volume has declined in OEX in the last couple of years is because
large customers and member firms have been unable to complete large
volume transactions in OEX due to position limit constraints.
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\12\ See Table 1.

Table 1.--Average Daily Volume During Expiration Week and Open Interest
on Expiration Friday
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Month/year OEX (Volume/open interest)
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September 1992............................ 377,554 contracts/1 million.
September 1993............................ 332,467 contracts/1 million.
September 1994............................ 423,589 contracts/1.3
million.
March 1995................................ 521,891 contracts/1.4
million.
December 1995............................. 301,118 contracts/1.23
million.
July 1996................................. 479,577 contracts/1.08
million.
December 1996............................. 314,949 contracts/1.2
million.
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Institutions often use index-related derivative products to hedge
the risks associated with holding diversified equity portfolios.
Because of position limit concerns, the Exchange believes that many of
these customers and firms use financially-equivalent index futures
products to the competitive disadvantage of the options exchanges. The
Exchange believes that restrictive position limits have hampered the
ability of customers to utilize these options to their potential. The
Exchange also believes the increase will afford the investing public,
as well as CBOE members and member firms, a greater opportunity and
more flexibility to use OEX options for their hedging needs.
At the same time, the CBOE does not believe that the higher limit
will increase any potential for market disruption. Even with the
increase, the at limit position as a percentage of the capitalization
of the OEX will remain small.\13\ In addition, the Exchange notes that
a number of equity options have a position limit of 25,000 contracts
but have significantly less average trading volume than the OEX.
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\13\ See Table 2.

Table 2.--Percentage of Capitalization Represented by an At Limit Position
----------------------------------------------------------------------------------------------------------------
At limit position
Position limit Market value (650 OEX Capitalization (as of as a percentage of
index level) July 1996) capitalization
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15,000 contracts.......................... $975,000,000 2.1 trillion................. 0.046
25,000 contracts.......................... 1,625,000,000 2.1 trillion................. 0.077
50,000 contracts.......................... 3,250,000,000 2.1 trillion................. 0.15
75,000 contracts.......................... 4,875,000,000 2.1 trillion................. 0.23
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[[Page 278]]

As a result of changing the base limit, the OEX firm facilitation
exemption amount will change as well.\14\ Currently, according to
Interpretation .06 of Exchange Rule 4.11, the firm facilitation
exemption for a broad-based index (other than SPX) is two times the
standard limit. Therefore, the OEX firm facilitation exemption will be
300,000 contracts if the OEX base limit proposal is approved.
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\14\ Under the firm facilitation exemption, a member firm may
apply to the CBOE to receive and maintain for its proprietary
account an exemption from the applicable standard position limit in
non-multiply-listed Exchange options for the purpose of
facilitating, pursuant to the provisions of Exchange Rule 6.74(b),
(a) orders for its own customer (one that will have the resulting
position carried with the firm) or (b) orders received from or on
behalf of a customer for execution only against the member firm's
proprietary account.
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The Exchange also proposes to increase the OEX index hedge
exemption from 150,000 contracts \15\ to 300,000 contracts. The index
hedge exemption is in addition to the standard limit and other
exemptions available under Exchange rules, interpretations, and
policies. The index hedge exemption is applicable to the unhedged value
of the qualified portfolio as determined by the calculation set forth
in Interpretation .01 of Exchange Rule 24.4. The Exchange believes
that, as with the increase in the base limit, the increase in the index
hedge exemption will make OEX a more valuable tool for investors to
hedge their portfolios.
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\15\ The index hedge exemption for OEX options were doubled from
75,000 contracts to 150,000 contracts in connection with the recent
reduction in value of the underlying Index. See supra note 6.
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III. Discussion

The Commission finds that the proposed rule change is consistent
with the requirements of Section 6(b) of the Act \16\ and the rules and
regulations thereunder applicable to a national securities
exchange.\17\ Specifically, because the increased OEX index option
standard limit and exemptions will enhance the depth and liquidity of
the market for both members and investors in general, the Commission
believes that this rule change is consistent with and furthers the
objectives of Section 6(b)(5) of the Act \18\ in that it would remove
impediments to and perfect the mechanism of a free and open market in a
manner consistent with the protection of investors and the public
interest.
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\16\ 15 U.S.C. 78f(b).
\17\ 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(f).
\18\ 15 U.S.C. 78f(b)(5).
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A. Increase OEX Position and Exercise Limits

Since the inception of standardized options trading, the options
exchanges have had rules imposing limits on the aggregate number of
options contracts that a member or customer could hold or exercise.
These rules are intended to prevent the establishment of options
positions that can be used or might create incentives to manipulate or
disrupt the underlying market so as to benefit the options position. In
particular, position and exercise limits are designed to minimize the
potential for mini-manipulations \19\ and for corners or squeezes of
the underlying market. In addition, such limits serve to reduce the
possibility for disruption of the options market itself, especially in
illiquid options classes.
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\19\ Mini-manipulation is an attempt to influence, over a
relatively small range, the price movement in a stock to benefit a
previously-established derivatives position.
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The Commission has been careful to balance two competing concerns
when considering an Exchange's position and exercise limits. First, the
Commission has recognized that the limits must be sufficiently low to
prevent investors from disrupting the underlying cash market. Second,
at the same time, the Commission has realized that limits must not be
established at levels that are so low as to discourage participation in
the options market by institutions and other investors with substantial
hedging needs or to prevent specialists and market-makers from
adequately meeting their obligations to maintain a fair and orderly
market.\20\
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\20\ See H.R. Rep. No. IFC-3, 96th Cong., 1st Sess. at 189-91
(Comm. Print 1978).
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The Commission believes that the proposed increase in OEX position
limits to 150,000 contracts will expand the depth and liquidity of the
OEX market without significantly increasing concerns regarding
intermarket manipulations or disruptions of the options or the
underlying securities. As previously noted by the Commission, markets
with active and deep trading interest, as well as with broad public
ownership, are more difficult to manipulate or disrupt than less active
and deep markets with smaller public floats. In this regard, the OEX is
a broad-based, capitalization-weighted index consisting of 100
actively-traded and liquid stocks.
Moreover, the CBOE has adopted important safeguards that will allow
it to monitor large unhedged positions (those in excess of 65,000
contracts) in order to identify instances of potential risk \21\ and to
assess additional margin or capital charges against the clearing firm,
if necessary.\22\ In this regard, the CBOE states that in the event of
a large unhedged, potentially risky position, the Exchange will notify
the clearing firm and assess the circumstances of the transactions,
along with the firm's view of the exposure of the account, whether the
account is approved and suitable for the strategies used, and whether
additional margin has been collected. The monitoring of unhedged or
underhedged accounts in excess of 65,000 contracts in this manner
should provide the CBOE with the information necessary to determine
whether additional margin or capital charges should be imposed in light
of the risks associated with a large underhedged OEX option position in
accordance with Interpretation .04 to Exchange Rule 24.4.
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\21\ Pursuant to Interpretation .03 to Exchange Rule 24.4, each
member or member organization, other than an Exchange market-maker,
that maintains a position in excess of 65,000 option contracts in
OEX on the same-side of the market on behalf of its own account or
for the account of a customer will report information as to whether
those positions are hedged and provide documentation as to how such
contracts are hedged, in the manner and form required by the
Exchange's Department of Market Regulation. See Amendment No. 4,
supra note 7.
The Commission notes that Amendment No. 4 also proposes to
clarify that the Exchange may specify other index options that my be
subject to the reporting requirements of Interpretation .03 to Rule
24.4, as well as the limit at which the reporting requirements may
be triggered. The proposed language refers to those index options
previously approved by the Commission for which no specific
reporting requirements have been established and required by the
Commission. See Telephone conversation between Timothy Thompson,
Senior Attorney, CBOE, and Deborah Flynn, Attorney, Division,
Commission, on December 23, 1997. The Commission notes that proposed
reporting requirements for any new or existing index options for
which the Exchange desires large position limits would be submitted
for Commission approval pursuant to the requirements of Rule 19(b).
\22\ Under Interpretation 0.04 to Exchange Rule 24.4, whenever
the Exchange determines that additional margin is warranted in light
of the risks associated with an under-hedged SPX option position in
excess of 45,000 contracts, or an under-hedged OEX option position
in excess of 65,000 contracts, the Exchange may consider imposing
additional margin upon the account maintaining such under-hedged
position, or the clearing firm carrying the account will be subject
to capital charges to the extent of any margin deficiency resulting
from the higher margin requirement. The Commission notes that
Amendment No. 1 proposed to delete Interpretation .04, which was
revised and reinstated in Amendment No. 2. See Amendment Nos. 1 and
2, supra notes 4-5.
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Accordingly, given the size and breadth of the OEX, along with the
new reporting requirement set forth in Interpretation .03 to Exchange
Rule 24.4 and the new margin and clearing firm requirements set forth
in Interpretation .04 to Exchange Rule 24.4, the Commission believes
that increasing the

[[Page 279]]

OEX position limits to 150,000 contracts should not increase any
manipulative concerns. Finally, the Exchange's surveillance program
will continue to be applicable to the trading of OEX options and should
detect and deter potential trading abuses arising from the increased
position and exercise limits.

B. Increase OEX Firm Facilitation Exemption

The Commission believes that the proposed increase of the OEX firm
facilitation exemption from 100,000 contracts to 300,000 contracts \23\
will accommmodate the needs of investors as well as market participants
without substantially increasing concerns regarding the potential for
manipulation and other trading abuses.\24\ The Commission also believes
that the proposed rule change will further enhance the potential depth
and liquidity of the options market as well as the underlying markets
by providing Exchange members greater flexibility in executing large
customer orders.
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\23\ Pursuant to the CBOE's rules, the firm facilitation
exemption for a broad-based index (other than SPX) is two times the
standard limit. See Interpretation .06(a) to Exchange Rule 4.11.
\24\ The Commission notes that the OEX firm facilitation
exemption is in addition to the standard limit and other exemptions
available under Exchange rules, interpretations, and policies.
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The CBOE's existing safeguards that apply to the current
facilitation exemption will continue to serve to minimize any potential
disruption or manipulation concerns. First, the facilitation firm must
receive approval from the Exchange's Exemption Committee prior to
executing facilitating trades.\25\ Second, a facilitation firm must,
within five business days after the execution of a facilitation
exemption order, hedge all exempt options positions that have not
previously been liquidated, and furnish to the Exchange's Department of
Market Regulation documentation reflecting the resulting hedging
positions.\26\ In meeting this requirement, the facilitation firm must
liquidate and establish its customer's and its own options and stock
positions or their equivalent in an orderly fashion, and not in a
manner calculated to cause unreasonable price fluctuations or
unwarranted price changes.\27\ In addition, a facilitation firm is not
permitted to use the facilitation exemption for the purpose of engaging
in index arbitrage.\28\ The Commission believes that these requirements
will help to ensure that the facilitation exemption will not have an
undue market impact on the OEX options or on any underlying stock
positions. Third, the facilitation firm is required to promptly provide
to the Exchange any information or documents requested concerning the
exempted options positions and the positions hedging them, as well as
to notify promptly the Exchange of any material change in the exempted
options position or the hedge.\29\ Fourth, neither the member's nor the
customer's order may be contingent on ``all or none'' or ``fill or
kill'' instructions, and the orders may not be executed until Exchange
Rule 6.74(b) (crossing order) procedures have been satisfied and crowd
members have been given a reasonable time to participate in the
trade.\30\ Fifth, the facilitation firm may not increase the exempted
option position once it is closed, unless approval from the CBOE is
again received pursuant to a reapplication.\31\ Lastly, violation of
any of these provisions, absent reasonable justification or excuse,
will result in the withdrawal of the facilitation exemption and may
form the basis for subsequent denial of an application for a
facilitation exemption.\32\
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\25\ See Interpretation .06(a) to Exchange Rule 4.11.
\26\ See Interpretation .06(d) to Exchange Rule 4.11.
\27\ See Interpretation .06(e)(1) to Exchange Rule 4.11.
\28\Id.
\29\ See Interpretations .06(b) and .06(e)(2) to Exchange Rule
4.11.
\30\ See Interpretations .06(c)(1) and .06(c)(2) to Exchange
Rule 4.11.
\31\ See Interpretation .06(e)(3) to Exchange Rule 4.11.
\32\ See Interpretation .06(f) to Exchange Rule 4.11.
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In summary, the Commission continues to believe that the safeguards
built into the facilitation exemptive process will serve to minimize
the potential for disruption and manipulation concerns, while at the
same time benefiting market participants by allowing member firms
greater flexibility to facilitate large customer orders. The Commission
also believes that the CBOE has adequate surveillance procedures to
surveil for compliance with the rule's requirements. Based on these
reasons, the Commission believes that it is appropriate to increase the
OEX firm facilitation exemption to 300,000 contracts.

C. Increase OEX Index Hedge Exemption

The Commission believes that the proposed increase of the OEX index
hedge exemption from 150,000 contracts to 300,000 contracts in
consistent with the Commission's approach to position and exercise
limits and adequately balances the benefits derived from increased
limits against concerns regarding the potential for market disruptions
and manipulations.\33\ Specifically, because any OEX options position
in excess of the outstanding OEX position limit must be fully hedged in
conformity with one of the enumerated hedge positions,\34\ market
disruption concerns are reduced. Moreover, to the extent that an OEX
options position is hedged with a qualified stock portfolio, it should
be more difficult to profit from any intermarket manipulation. The
Commission also notes that the rule will continue to require that the
underlying options positions cannot exceed the unhedged value of the
qualified portfolio. Accordingly, the Commission does not believe that
the proposed increase of the index hedge exemption for OEX options will
disrupt the options or equity markets or materially increase the
possibility of manipulation in the underlying securities or options.
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\33\ See Interpretation .01 to Exchange Rule 24.4.
\34\ See Interpretation .01(f) to Exchange Rule 24.4.
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The CBOE's existing safeguards that apply to the current OEX index
hedge exemption will continue to serve to minimize any potential
disruption or manipulation concerns. The Commission notes that these
safeguards and procedures will apply to the OEX index hedge exemption
as well as to all other broad-based index hedge exemptions permitted
under CBOE rules. First, the account in which exempted option positions
are held must receive prior Exchange approval for the hedge exemption
as well as specify the maximum number of contracts which may be
exempt.\35\ In addition, the hedge exemption account must promptly
provide to the CBOE any information requested concerning the qualified
portfolio, as well as promptly notify the Exchange of any material
change in the qualified portfolio which materially affects the unhedged
value of the qualified portfolio.\36\
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\35\ See Interpretation .01(a) to Exchange Rule 24.4.
\36\ See Interpretations .02(a) and .01(g)(3) to Exchange Rule
24.4.
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Second, positions included in a qualified portfolio which serve to
secure an index hedge exemption may not also be used to secure any
other position limit exemption granted by the Exchange, any other SRO,
or any futures contract market.\37\
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\37\ See Interpretation .02(b) to Exchange Rule 24.4.
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Third, any member or member organization that maintains a broad-
based index option position in such member's or member organization's
own account or in a customer account, and has reason to believe that
such position is in excess of the applicable limit, must promptly take
the action necessary to

[[Page 280]]

bring the position into compliance.\38\ Failure to abide by this
provision will be deemed to be a violation of Exchange Rules 4.11 and
24.4.\39\
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\38\ See Interpretation .02(c) to Exchange Rule 24.4.
\39\ Id.
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Lastly, violation of any of the provisions of Exchange Rule 24.4
and the interpretations and policies thereunder, absent reasonable
justification or excuse, will result in the withdrawal of the index
hedge exemption and may form the basis for subsequent denial of an
application for an index hedge exemption.\40\
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\40\ See Interpretation .02(d) to Exchange Rule 24.4. The hedge
exemption account also must: (i) liquidate and establish options,
stock positions or their equivalent, or other qualified portfolio
products in an orderly fashion; (ii) not initiate or liquidate
positions in a manner calculated to cause unreasonable price
fluctuations or unwarranted price changes; (iii) not initiate or
liquidate a stock position or its equivalent with an equivalent
index option position with a view toward taking advantage of any
differential in price between a group of securities and an overlying
stock index; and (iv) liquidate any options prior to, or
contemporaneously with, a decrease in the hedge value of the
qualified portfolio, which options would thereby be rendered
excessive. See Interpretations .01(g)(1) and .01(g)(2) to Exchange
Rule 24.4.
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Accordingly, the Commission continues to believe that the
safeguards built into the index hedge exemptive process will serve to
minimize the potential for disruption and manipulation, while at the
same time benefiting market participants. The Commission also believes
that the CBOE's surveillance procedures are sufficient to detect and
deter trading abuses arising from the increased position and exercise
limits associated with the increased index hedge exemption. Based on
these reasons, the Commission believes that it is appropriate to
increase OEX index hedge exemption to 300,000 contracts.\41\
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\41\ The Commission notes that the OEX index hedge exemption is
in addition to the standard limit and other exemptions available
under Exchange rules, interpretations, and policies.
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The Commission finds good cause for approving proposed Amendment
Nos. 1, 2, 3, and 4 prior to the thirtieth day after the date of
publication of notice of filing thereof in the Federal Register. The
Commission notes that Amendment No. 1 further clarifies the rationale
underlying the Exchange's filing seeking increases in the OEX position
and exercise limits. Amendment No. 1 also provides updated reporting
requirements submitted at the request of Commission staff. With the
exception of the proposed deletion of Interpretation .04 to Exchange
Rule 24.4, the Commission believes that Amendment No. 1 raises no new
regulatory issues. Regarding Interpretation. 04 to Exchange Rule 24.4,
the Commission notes that Amendment No. 2 restores this provision, in a
slightly revised form, to the CBOE's rules. As Amendment No. 2 merely
reinstates this provision and updates the CBOE's reporting requirements
to reflect the CBOE's request to double the OEX position and exercise
limits in connection with the ``split'' of the underlying Index, the
Commission believes that Amendment No. 2 raises no issues of regulatory
concern. The Commission notes that Amendment No. 3 simply modifies the
OEX position and exercise limits sought by the CBOE to reflect the
Commission's recent approval of the Exchange's ``split'' of the
underlying Index.\42\ The Commission further notes that by increasing
the ``trigger'' for reporting requirements from 45,000 contracts to
65,000 contracts, Amendment No. 4 merely provides consistency with the
reporting requirement procedures and the margin requirement trigger
level proposed in Amendment No. 2. Finally, the Commission notes that
no comments were received on the publication of the original proposal
and the increases being approved herein are equivalent on a dollar
basis to those originally proposed. Accordingly, the Commission
believes that there is good cause, consistent with Section 6(b)(5) of
the Act,\43\ to approve Amendment Nos. 1, 2, 3, and 4 to CBOE's
proposed rule change on an accelerated basis.
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\42\ See note 6, supra.
\43\ 15 U.S.C. 78f(b)(5).
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IV. Solicitation of Comments

Interested persons are invited to submit written data, views and
arguments concerning Amendment Nos. 1, 2, 3, and 4. 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 in the Commission's Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C. 20549. 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-97-11 and should
be submitted by January 26, 1998.

V. Conclusion

For the foregoing reasons, the Commission finds that the CBOE's
proposal, as amended, is consistent with the requirements of the Act
and the rules and regulations thereunder.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\44\ that the proposed rule change (SR-CBOE-97-11), including
Amendment Nos. 1, 2, 3, and 4, is approved.

\44\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\45\
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\45\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 98-45 Filed 1-2-98; 8:45 am]
BILLING CODE 8010-01-M