[Federal Register Volume 64, Number 20 (Monday, February 1, 1999)]
[Notices]
[Pages 4916-4920]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-2298]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40971; File No. SR-CBOE-98-11)


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change and Notice of Filing and Order Granting Accelerated Approval to 
Amendment No. 2 to the Proposed Rule Change by the Chicago Board 
Options Exchange, Inc. Relating to Adjustments in Market Maker Equity

January 25, 1999.

I. Introduction

    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ the 
Chicago Board Options Exchange, Inc. (``CBOE'' or ``Exchange'') filed 
with the Securities and Exchange

[[Page 4917]]

Commission (``SEC'' or ``Commission'') a proposal to amend CBOE Rule 
12.3, ``Margin Requirements'' by adopting Interpretation and Policy 
.06, which will allow a clearing broker to adjust the equity in the 
account of a market maker whose net liquidating equity is in deficit 
and permit the clearing broker to extend credit for opening 
transactions. Specifically, Interpretation and Policy .06 will allow a 
clearing broker to adjust the equity in the account of a market maker 
whose account is in deficit because the dissemination of the last sale 
price of a stock after the options close at 3:02 p.m.\3\ has resulted 
in a discrepancy between the last sale price of the stock and the 
closing quotes and last sale price of the overlying options series. 
Under these circumstances, Interpretation and Policy .06 will permit 
the clearing broker to recalculate the value of the options position in 
the market maker's account to reflect the movement in the price of the 
underlying stock.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ All time references are in Central Time.
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    On May 7, 1998, the CBOE filed Amendment No. 1 to the proposal.\4\ 
On August 18, 1998, the CBOE filed Amendment No. 2 to the proposal.\5\ 
In Amendment No. 2, the CBOE indicated that without the adjustment 
permitted under the proposal, Exchange Act Rule 15c3-1 would prohibit a 
clearing firm from extending credit to a market maker whose account is 
in deficit and would require the clearing firm to take steps to 
liquidate the positions in the market maker's account.\6\ In addition, 
the CBOE represented that the Exchange would ascertain at the end of 
the business day following the adjustment whether any market maker 
whose equity was adjusted pursuant to Interpretation and Policy .06 
continued to experience difficulty in maintaining positive equity in 
its account.\7\
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    \4\ See Letter from Timothy H. Thompson, Director, Regulatory 
Affairs, Legal Department, CBOE, to Yvonne Fraticelli, Division of 
Market Regulation (``Division''), Commission, dated May 6, 1998 
(``Amendment No. 1''). Amendment No. 1 made technical revisions to 
the proposal, deleted an incorrect reference to Regulation X of the 
Board of Governors of the Federal Reserve System, and explained the 
circumstances under which it might be necessary for a clearing 
broker to adjust a market maker's account equity.
    \5\ See Letter from Timothy H. Thompson, Director, Regulatory 
Affairs, Legal Department, CBOE, to Yvonne Fraticelli, Division, 
Commission, dated August 18, 1998 (``Amendment No. 2'').
    \6\ Subsequent to the filing of this proposal, the Division has 
granted the CBOE's request for a no-action position with regard to 
the application of SEC Rule 15c3-1(c)(2)(x)(D) under the 
circumstances described in the proposal. See Letter from Michael A. 
Macchiaroli, Associate Director, Division, Commission, to Richard 
Lewandowski, Vice President, Department of Financial and Sales 
Practice Compliance, Regulatory Division, CBOE, dated January 19, 
1999 (``January 19 Letter''). The CBOE's request for no-action 
relief and the Division's response are attached as Exhibit A.
    \7\ See Amendment No. 2, supra note 5.
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    Notice of the proposed rule change and Amendment No. 1 to the 
proposed rule change was published for comment in the Federal Register 
on May 28, 1998.\8\ The Commission received no comments regarding the 
proposal. This notice and order solicits comments on Amendment No. 2 to 
the proposal from interested persons and approves the proposed rule 
change, as amended.
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    \8\ See Securities Exchange Act Release No. 40015 (May 20, 
1998), 63 FR 29274.
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II. Description of the Proposal

    CBOE Rule 12.3(f)(3)(C)(3) prohibits a clearing firm from extending 
credit to a market maker for opening transactions when the market 
maker's account fails to maintain positive net liquidating equity.\9\ 
In addition, Exchange Act Rule 15c3-1(c)(2)(x)(D) prohibits a clearing 
broker from extending credit to a specialist whose market maker account 
is in deficit and would require the clearing broker to take steps to 
liquidate existing positions in the market maker account.\10\ The 
Commission has taken a no-action position with regard to the 
application of Exchange Act Rule 15c3-1(c)(2)(x)(D) under the 
circumstances described in the proposal.\11\
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    \9\ Specifically, CBOE Rule 12.3(f)(3)(C)(3) states that on any 
day when a market maker does not maintain positive net liquidating 
equity is his or her account(s), the carrying member must request 
additional equity at least equal to the deficit and may not extend 
further credit in the account(s) until the account(s) maintains a 
positive net liquidating equity. If the market maker fails to meet 
the call for additional equity, the carrying member should promptly 
take steps to liquidate the positions in the account(s).
    \10\ Specifically, Exchange Act Rule 15c3-1(c)(2)(x)(D) 
prohibits a broker or dealer guaranteeing, endorsing, or carrying 
listed options transactions in a specialist's market maker account 
from extending any further credit if at any time there is a 
liquidating deficit in the account. Among other things, the broker 
or dealer also must take steps to liquidate promptly existing 
positions in the account.
    \11\ See January 19 Letter, supra note 6.
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    The CBOE proposes to add Interpretation and Policy .06 to CBOE Rule 
12.3 to permit a clearing broker to adjust the equity in the account of 
a market maker whose net liquidating equity is in deficit and allow the 
clearing broker to extend credit for opening transactions. 
Specifically, Interpretation and Policy .06 will allow a clearing 
broker to adjust the equity in the account of a market maker whose 
account is in deficit because the dissemination of the last sale price 
of a stock after the options close at 3:02 p.m. has resulted in a 
discrepancy between the last sale price of the stock and the closing 
quotes and last sale price of the overlying options series. Under these 
circumstances, Interpretation and Policy .06 will permit the clearing 
broker to recalculate the value of the options position in the market 
maker's account to reflect the movement in the price of the underlying 
stock.
    According to the CBOE, the closing price for a stock may be 
disseminated after 3:02 p.m. when news announced near the close of 
trading results in heavy trading in the stock and a late trade tape. 
Under these circumstances, the last sale price for the stock may 
incorporate information that is not reflected in the closing price for 
the overlying options. As a result, the closing price of the underlying 
stock may be out of line with the closing quotes and last sale price of 
the overlying options series.\12\
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    \12\ In 1997, the CBOE and the other options exchanges changed 
the closing time for trading equity options and certain narrow-based 
index options from 3:10 p.m. to 3:02 p.m. See e.g., Securities 
Exchange Act Release No. 38543 (May 14, 1997), 62 FR 28082 (May 22, 
1997) (order approving File No. SR-CBOE-96-71). According to the 
CBOE, this pricing discrepancy rarely arose when the options markets 
closed at 3:10 p.m. because final stock prices generally were 
disseminated by the time the options markets closed, thereby 
allowing options market makers to adjust their quotes to reflect the 
last sale price of the underlying stock.
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    The discrepancy between the closing prices of the underlying stock 
and the overlying options series may result in deficit equity in the 
account of an options market maker.\13\ As noted above, CBOE Rule 
12.3(f)(3)(C)(3) requires a clearing broker to request additional 
equity on any business day when a market maker does not maintain 
positive net liquidating equity and prohibits a clearing broker from 
extending additional credit to a market maker when the market maker's 
account is in deficit. Interpretation and Policy .06 will permit a 
clearing broker to adjust the market maker's equity when the late 
dissemination of the closing price for a stock results in a discrepancy 
between the closing price of the stock and the closing quotes and last 
sale price of the overlying options.\14\ If the adjustment eliminates 
the deficit in the market maker's account, the clearing broker may 
extend credit to the market maker for opening transactions.
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    \13\ According to the CBOE, this deficit equity condition may 
occur even though the market maker is hedged in terms of market 
risk.
    \14\ To adjust the market maker's equity, the clearing broker 
will recalculate the value of the options position to reflect the 
price movement of the underlying stock. In recalculating the value 
of the options position, the clearing broker will use the same 
methodology as that used by the Options Clearing Corporation to 
reprice the options assuming different prices for the underlying 
securities. See January 19 Letter, supra note 6.

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[[Page 4918]]

    Interpretation and Policy .06 requires the clearing broker to 
document any adjustment to a market maker's equity and file it with the 
CBOE's Department of Financial and Sales Practice Compliance 
(``Department''). The clearing broker should file the adjustment with 
the Department before the next day's opening, but in any case before 
the clearing broker extends credit to the market maker for opening 
transactions. The Department must approve any adjustment before the 
clearing broker may finance opening trades. All information regarding 
the adjustments must be retained by the clearing broker and by the 
CBOE. In addition, the CBOE will ascertain at the end of the business 
day following the adjustment whether any market maker whose equity was 
adjusted pursuant to Interpretation and Policy .06 continues to 
experience difficulty in maintaining positive equity in his or her 
account.\15\ If a market maker fails to maintain positive equity in its 
account at the end of the business day following the adjustment, the 
requirements of Exchange Act Rule 15c3-1(c)(2)(x)(D) and CBOE Rule 
12.3(f)(3)(C)(3) will apply to the account.\16\ The CBOE estimates that 
the pricing discrepancy described in Interpretation and Policy .06 
occurs, on average, approximately once each quarter.\17\
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    \15\ See Amendment No. 2, supra note 5.
    \16\ Telephone conversation among Timothy H. Thompson, Director, 
Regulatory Affairs, Legal Department, CBOE, Richard Lewandowski, 
Vice President, Department of Financial and Sales Practice 
Compliance, Regulatory Division, CBOE, and Yvonne Fraticelli, 
Special Counsel, Division, Commission, on January 20, 1999 
(``January 20 Conversation'').
    \17\ See January 20 Conversation, supra note 16.
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III. Discussion

    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, with the requirements of section 6(b) of the Act.\18\ 
Specifically, the Commission finds that the proposal is consistent with 
the Section 6(b)(5) requirements that the rules of an exchange be 
designed to remove impediments to and perfect the mechanism of a free 
and open market and a national market system, and, in general, to 
protect investors and the public interest.\19\
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    \18\ 15 U.S.C. 78f(b).
    \19\ In approving the rule, the Commission has considered the 
proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
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    CBOE Rule 12.3(f)(3)(C)(3) requires a clearing broker carrying a 
market maker's account to call for additional equity on any business 
day on which the market maker's account fails to maintain positive net 
liquidating equity. In addition, that rule prohibits a clearing broker 
from extending additional credit to a market maker whose account does 
not maintain positive net liquidating equity and requires the clearing 
broker to take steps to liquidate the market maker's account if the 
market maker fails to satisfy the clearing broker's call for additional 
equity. Interpretation and Policy .06 will allow a clearing broker to 
adjust the equity in the account of a market maker whose account is in 
deficit because the last sale price of a stock is disseminated after 
the overlying options cease trading at 3:03 p.m., resulting in a 
discrepancy between the last sale price of a stock and the closing 
quotations and last sale price of the overlying options. The 
adjustments will permit the clearing broker to extend credit to the 
market maker for opening transactions.
    The Commission believes that it is appropriate for the CBOE to 
adopt Interpretation and Policy .06. In this regard, the Commission 
notes that Interpretation and Policy .06 will allow a clearing broker 
to adjust the equity of a market maker whose account is in deficit only 
in the limited circumstances described in Interpretation and Policy 
.06, i.e., when a market maker's account liquidates to a deficit 
because the last sale price of a stock is disseminated after the 
overlying options cease trading and the late dissemination of the 
closing stock price results in a discrepancy between the closing stock 
price and the closing quotations and last sale price of the overlying 
options. In such narrow instances, the adjusted equity should provide a 
more accurate picture of the market maker's financial condition than 
would be provided by using last sale numbers for the options in the 
market maker's account (at last with respect to those options). By 
allowing the clearing broker to extend credit for opening transactions 
under these limited circumstances, Interpretation and Policy .06 will 
permit the market maker to continue to operate with CBOE 
12.3(f)(3)(C)(3) otherwise would require the clearing broker to take 
steps to liquidate the positions in the market maker's account unless 
the market maker provided additional equity.
    The Commission notes that the proposal contains several safeguards 
that should help to ensure appropriate use of the extension of credit 
permitted under Interpretation and Policy .06. Specifically, 
Interpretation and Policy .06 requires a clearing broker to document 
and file with the CBOE any adjustment to a market maker's equity prior 
to the next day's opening, or at least before the firm may extend 
credit for opening transactions. Accordingly, the CBOE must approve the 
adjustment before a clearing broker may finance opening transactions. 
The clearing broker and the CBOE must retain all information regarding 
the adjustments. In additions, at the end of the business day following 
the adjustment, the CBOE will determine whether any market maker whose 
account was adjusted pursuant to Interpretation and Policy .06 
continues to experience difficulty in maintaining positive equity in 
its account.\20\ If the market maker fails to maintain positive equity 
in its account at the end of the business day following the adjustment, 
the requirements of Exchange Act Rule 15c3-1(c)(2)(x)(D) and CBOE Rule 
12.3(f)(3)(C)(3), which would prohibit the clearing broker from 
extending additional credit to the market maker and require the 
liquidation of positions in the market maker's account, will apply to 
the account.\21\ These procedures should help to ensure that CBOE 
market makers experiencing financial difficulties are monitored closely 
and are not permitted to continue to obtain credit from clearing firms 
if their financial difficulties appear to be chronic.
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    \20\ See Amendment No., supra note 5.
    \21\ See January 20 Conversation, supra note 16.
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    Finally, the Commission notes that the adjustment permitted under 
Interpretation and Policy .06 should occur infrequently. In this 
regard, the CBOE has estimated that the pricing discrepancy described 
in Interpretation and Policy .06 occurs, on average, approximately once 
each quarter.\22\ The Commission expects that should this issue arise 
more frequently than the average in two consecutive quarters that the 
CBOE will advise the Commission staff and consider whether the 
adjustment should be discontinued or limited.
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    \22\ See January 20 Conservation, supra note 16.
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    The Commission finds good cause for approving Amendment No. 2 to 
the proposed rule change prior to the thirtieth day after the date of 
publication of notice of filing of the amendment in the Federal 
Register. As discussed above, Amendment No. 2 clarifies the CBOE's 
reasons for adopting Interpretation and Policy .06 and indicates that 
the CBOE will determine at the end of the business day following an 
adjustment whether a market maker whose account equity was adjusted 
pursuant to Interpretation and Policy .06 continues to experience 
difficulties in maintaining positive

[[Page 4919]]

equity in its account. The Amendment does not raise new regulatory 
issues. Accordingly, the Commission believes it is consistent with 
sections 6(b)(5) and 19(b)(2) of the Act to approve Amendment No. 2 to 
the proposed rule change on an accelerated basis.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 2, including whether Amendment No. 2 
is consistent with the Act. 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. 
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-98-11 and should be 
submitted by February 20, 1999.

V. Conclusion

    It is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\23\ that the proposed rule change (File No. SR-CBOE-98-11), as 
amended, is approved.

    \23\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.

Exhibit A

January 19, 1999.
Mr. Richard Lewandowski,
Vice President,
Department of Financial and Sales Practice Compliance,
Regulatory Division,
The Chicago Board Options Exchange,
400 South LaSalle Street,
Chicago, Illinois 60605.

Re: Computation of Equity by Broker-Dealers Carrying Market-Maker 
Accounts of Listed Options Specialists

    Dear Mr. Lewandowski: This is in response to your letter dated 
January 11, 1999, in which you request that broker-dealers, in 
computing equity in specialist market-maker accounts for purposes of 
Rule 15c3-1 of the Securities Exchange Act of 1934 (``Exchange 
Act'') (17 CFR 240.15c3-1), be permitted to adjust the value of 
options positions to reflect substantial price movements of the 
underlying common stock when closing price information for the 
common stock is reported after closing quotations for the options 
series are established.
    Based on your letter and subsequent discussions with the staff 
of the Division of Market Regulation (``Division''), I understand 
the following facts to be pertinent to your request. A specialist in 
listed options on The Chicago Board Options Exchange (``CBOE'' or 
``Exchange'') maintains in a market-maker account, carried by a 
broker-dealer, positions in listed equity options and common stock 
underlying those options. In certain situations, last sale 
information for the common stock is reported after closing 
quotations and last sale information for the options series 
overlying the common stock are established.\1\ In these situations, 
the closing price of the common stock may not be reflected in the 
closing quotation information for the options series. Because of the 
discrepancy between the last sale price of the underlying common 
stock and the closing quotations of the options series, the net 
liquidating equity in the specialist's market-maker account may be 
valued at a liquidating deficit.
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    \1\ CBOE Rule 6.1 Interpretation .01 permits transactions in 
options on individual stocks to be effect on the Exchange until two 
minutes after the normal time set for the close of trading of the 
underlying stock on its primary exchange. See File No. SR-CBOE-96-71 
approved in Securities Exchange Act Release No. 34-38543 (May 14, 
1997), 62 FR 28082 (May 22, 1997). CBOE has discovered that when 
news of a stock underlying a CBOE option is disseminated near the 
close, heavy trading often results in dissemination of last sale 
information for the common stock well after the overlying options 
stop trading.
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    Pursuant to Rule 15c3-1(c)(2)(x)(D), a broker-dealer 
guaranteeing, endorsing, or carrying listed options transactions in 
a specialist market-maker account is prohibited from extending any 
further credit if at any time there is a liquidating deficit in the 
account. The broker-dealer is also required to take steps to 
liquidate promptly existing positions in the account and to transmit 
telegraphic facsimile notice of the deficit and its amount by the 
close of business of the following business day to its Designated 
Examining Authority and the Designated Examining Authority of the 
specialist, if different from its own. The broker-dealer, upon 
approval by the broker-dealer's Designated Examining Authority, is 
permitted to enter into hedging positions in the specialist's 
market-maker account
    Rule 15c3-1(c)(2)(x)(B)(2) provides the formula for computing 
equity in market-maker accounts for listed option specialists. 
Broker-dealers carrying accounts of listed options specialists must 
(i) mark all securities positions long or short in the account to 
their respective current market values; (ii) add (deduct in the case 
of a debit balance) the credit balance carried in such specialist's 
market-maker account; and (iii) add (deduct in the case of short 
positions) the market value of positions long in such account.
    Recalculation of the closing price would be done by the carrying 
broker-dealer using in the same methodology as that used by the 
Options Clearing Corporation to reprice options assuming different 
prices for the underlying securities. You believe that it is unduly 
harsh to use a closing price for the option which does not reflect 
the strong market movement of the underlying stop when there was a 
reporting delay in that price.
    Based upon the facts set forth above, the Division will not 
recommend enforcement action to the Securities and Exchange 
Commission (``Commission'') if, for the purpose of determining 
whether a net liquidating deficit exists in a specialist market-
maker account under Rule 15c3-(c)(2)(x)(D) a broker-dealer carrying 
market-maker accounts for listed options specialists adjusts the 
value of options positions in the specialist market-maker account, 
long or short, to reflect substantial price movement of the 
underlying common stock when the closing price of the common stock 
is reported after closing prices for the options series are 
established and a liquidating deficit results. Any broker-dealer 
adjusting equity in a specialist market-maker account must provide 
documentation to the Exchange for such adjustments before the 
opening of trading the next business day (or before the broker-
dealer may extend credit for opening transactions). In situations 
where the deficit is eliminated by the adjustment and the adjustment 
is approved by the Exchange's Department of Financial and Sales 
Practice Compliance, the specialist will be permitted to continue 
trading.
    You should be aware that this is a staff position with respect 
to enforcement only and does not purport to express any legal 
conclusions. This position is based solely on the foregoing 
description. Factual variations could warrant a different response, 
and any material change in the facts must be brought to the 
Division's attention. This position may be withdrawn or modified if 
the staff determines that such action is necessary for the 
protection of investors, in the public interest, or otherwise in 
furtherance of the purposes of the securities laws.
      Sincerely,
Michael A. Macchiaroli,
Associate Director.
January 11, 1999.
Mr. Michael Macchiaroli,
Associate Director, Division of Market Regulation, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, DC 20549.

Re: Adjustment of Closing Option Prices for Purposes of Calculating 
Equity in Accounts of Options Market-Makers

    Dear Mr. Macchiaroli: Often, a situation arises wherein, due to 
heavy volume just prior to the close of trading, last sale 
information for transactions in a common stock will continue to be 
reported past the time that trading in listed options on the common 
stock has ceased. When this occurs, the closing price established 
for the options is not adjusted to reflect the actual last sale 
price for the stock. The closing option prices are used to calculate 
equity in the accounts

[[Page 4920]]

of options market-makers. If the equity in a market-maker's account 
calculates to a deficit in this situation, adjusting the closing 
option prices to reflect the underlying stock's true last sale price 
and recalculating the equity can alleviate a deficit situation in 
many instances. This can allow the market-maker to continue trading 
whereas in the deficit situation, further market-making activity is 
prohibited.
    Market-makers on the Chicago Board Options Exchange are 
generally not self-clearing. They maintain market-maker accounts 
with other broker-dealer firms that specialize in clearing and 
carrying such accounts. If the equity in the account of an options 
market-maker calculates to a deficit, Rule 15c3-1(c)(2)(x)(D) of the 
Securities and Exchange Act of 1934 prohibits the clearing broker-
dealer from extending any further credit to the market-maker 
account. The clearing broker-dealer must promptly liquidate existing 
positions in the account. Although, the clearing broker-dealer may, 
upon approval of its Designated Examining Authority, itself effect 
or allow the market-maker to effect, opening hedging transactions in 
the options market-maker's account. The clearing broker-dealer is 
also required to send telegraphic or facsimile notice of a deficit 
and its amount to its Designated Examining Authority and the market-
maker's Designated Examining Authority, if different, by the close 
of business of the following business day.
    Equity in an options market-maker's account is calculated 
pursuant to a formula found in Rule 15c3-1(c)(2)(x)(B)(2) of the 
Securities and Exchange Act of 1934. In calculating equity in an 
options market-maker's account, all securities positions are marked 
to their current market value. Equity is equal to the market value 
of all long positions, less the market value of all short positions, 
plus the credit (or minus the debit) balance in the account.
    The Exchange requests that the Division of Market Regulation not 
recommend enforcement action to the Securities and Exchange 
Commission if broker-dealers clearing and carrying the accounts of 
options market-makers adjust the equity value of the market-maker's 
option positions to reflect a substantial move in the price of the 
underlying stock when the closing price of the stock is reported 
after closing quotations for the options are established and a 
liquidating deficit results. Any broker-dealer adjusting equity in a 
market-maker's account under these circumstances would be required 
to provide documentation to the Exchange's Department of Financial 
and Sales Practice Compliance for such adjustments before the 
opening of trading the next business day or before extending further 
credit to the market-maker for opening transactions. If the Exchange 
approves the adjustments and the adjustments eliminate the deficit, 
the market-maker will be permitted to continue trading.
    The Exchange greatly appreciates the attention you and your 
staff have given to this matter. Please feel free to contact me 
should you have any questions or require further information.
      Sincerely,
Richard Lewandowski.
cc:
    Mary Bender--CBOE
    Douglas Beck--CBOE
    Timothy Thompson--CBOE
[FR Doc. 99-2298 Filed 1-29-99; 8:45 am]
BILLING CODE 8010-01-M