[Federal Register Volume 63, Number 164 (Tuesday, August 25, 1998)]
[Notices]
[Pages 45275-45276]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-22704]



[[Page 45275]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40334; File No. SR-CBOE-98-34]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by Chicago Board Options 
Exchange, Incorporated to Amend Policy Regarding Exercise Procedures 
and Requirements for American-Style Cash-Settled Index Options

August 18, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on July 27, 1998, 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 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. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    CBOE proposes to set forth in an Exchange Regulatory Circular 
(``Exercise Procedures Circular'') its policies regarding exercise 
procedures and requirements for American-style cash-settled index 
options. The text of the Exercise Procedures 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, 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. CBOE 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 Exercise Procedures Circular, which supersedes a prior circular 
on the same subject, is intended to update and clarify the explanation 
of the operation of Exchange rules governing the procedures applicable 
to the exercise of American-style cash-settled index options. The 
Exchange is filing the Exercise Procedures Circular as a rule change in 
order to give it the status of a rule for enforcement purposes.
    Exchange Rule 11.1 sets forth the requirements for the exercise of 
outstanding option contracts. Exchange Rule 11.1.03 sets forth certain 
procedures that Exchange members must follow when exercising American-
style cash-settled index option contracts. The Exercise Procedures 
Circular reminds members of these procedures and also provides members 
with a more complete description of the steps they must follow when 
exercising such option contracts.
    For example, the Exercise Procedures Circular reminds members that 
the submission of an ``exercise advice'' to the Exchange does not 
initiate an exercise at the Options Clearing Corporation and that 
members must also submit an exercise instruction memorandum to their 
clearing firm. Also, the Exercise Procedures Circular reminds members 
that submission of an ``exercise advice'' or ``exercise advice 
cancellation'' after the 3:20 p.m. (CT) cut-off time set forth in 
Exchange Rule 11.1.03 will constitute a violation of Exchange Rule 
11.1. Further, members are reminded of the exercise procedures that the 
Exchange follows when there is a delayed opening, a trading halt, a 
modification in trading hours, or a closing rotation. These, among 
other provisions contained in the Exercise Procedures Circular, are 
intended to spell out more clearly what the requirements of Exchange 
Rule 11.1.03 are and how the provisions of Exchange Rule 11.1.03 are 
implemented by the Exchange.
2. Statutory Basis
    The Exchange believes the procedures set forth in the Exercise 
Procedures Circular are consistent with and further the objectives of 
Section 6(b)(5) of the Act \3\ in that they are designed to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, and processing information regarding the exercise 
of outstanding option contracts.
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    \3\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    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 proposed rule change will become effective upon filing pursuant 
to Section 19(b)(3)(A)(i) of the Act,\4\ and Rule 19b-4(e)(1) \5\ 
thereunder, in that it is designated by the Exchange as constituting a 
stated policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule. At any time within 
60 days of the filing of such 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.\6\
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    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(e)(1).
    \6\ In reviewing this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. 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 Room. Copies of such filing will also be 
available for inspection and copying at

[[Page 45276]]

the principal office of CBOE. All submissions should refer to the File 
No. SR-CBOE-98-34 and should be submitted by September 15, 1998.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.

Exhibit A

    Italicing indicates additions to, and [brackets] indicate 
deletions from, CBOE Rules currently in effect and as proposed to be 
amended.
* * * * *

CHAPTER XXIV

Index Options

* * * * *

Definitions

RULE 24.1

    (a)--(t) No change.
    * * *Interpretations and Policies:
    .01 The reporting authorities designated by the Exchange in 
respect of each index underlying an index option contract traded on 
the Exchange are as follows:

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                   Index                         Reporting  Authority   
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[Add the following to the current list]                                 
CBOE Telebras Index........................  CBOE.                      
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* * * * *

Terms of Index Option Contracts

RULE 24.9

    (a) General.
    (1) No change.
    (2) No change.
    (3) ``European-Style Exercise.'' The following European-style 
index options, some of which are A.M.-settled as provided in 
paragraph (a)(4), are approved for trading on the Exchange:

[Add the following to the current list.]

    CBOE Telebras Index.
    (4) No change.
    (5) No change.
    (b) Long-Term Index Options Series (``LEAPS'')
    (1) No change.
    (2) Reduced-Value LEAPS.
    (A) Reduced-value LEAPS on the following stock indices are 
approved for trading on the Exchange:

[Add the following to the current list.]

    CBOE Telebras Index.
    (B) No change.
    (c) No change.
    * * * Interpretations and Policies:
    .01 The procedures for adding and deleting strike prices for 
index options are provided in Rule 5.5 and Interpretations and 
Policies related thereto, as otherwise generally provided by Rule 
24.9, and include the following:
    (a) The interval between strike prices will be no less than 
$5.00; provided, that in the case of the following classes of index 
options, the interval between strike prices will be no less than 
$2.50:

[add the following to the list]

    CBOE Telebras Index for strike prices below $50

[FR Doc. 98-22704 Filed 8-24-98; 8:45 am]
BILLING CODE 8010-01-M