[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                          
------------------------------------------------------------------------
                Month/year                   OEX (Volume/open interest) 
------------------------------------------------------------------------
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  
----------------------------------------------------------------------------------------------------------------
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