[Federal Register Volume 64, Number 63 (Friday, April 2, 1999)]
[Notices]
[Pages 16017-16018]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-8145]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41214; File No. SR-CBOE-99-02]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change and Amendment No. 
1 by the Chicago Board Options Exchange, Inc. Relating to the 
Definition of Expiration Month for Purposes of Determining Log-On 
Obligations for the Retail Automatic Execution System

 March 25, 1999.
    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 January 14, 1999, the Chicago Board Options Exchange, Inc. (``CBOE'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change. The Exchange filed an 
amendment to its proposal on February 23, 1999.\3\ The proposed rule 
change, as amended, is described in Items I and II below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice and order to solicit comments on the proposed rule change and 
Amendment No. 1 from interested persons and to approve the proposal, as 
amended, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter from Stephanie C. Mullins, Attorney, CBOE, to 
Richard Strasser, Assistant Director, Division of Market Regulation, 
Commission, dated February 22, 1999 (``Amendment No. 1''). Amendment 
No. 1 redesignated the proposal pursuant to Section 19(b)(2) and 
requested accelerated approval of the proposed rule change. In 
addition, the amendment added language to CBOE Rule 24.17 defining 
expiration month for options on both the Standard & Poor's 100 Index 
and the Dow Jones Industrial Average.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to codify the definition of an expiration 
month for purposes of determining compliance with the Retail Automatic 
Execution System (``RAES'') log-on requirement for market-makers of 
options on the Standard & Poor's 100 Index (``OEX'') and the Dow Jones 
Industrial Average (``DJX''), as detailed in Exchange Rule 24.17. The 
text of the proposed rule change is available at the Office of the 
Secretary, CBOE and at the Commission.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange 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 III below. The Exchange 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 purpose of the proposed rule change is to codify the definition 
of an expiration month for purposes of determining compliance with the 
RAES log-on requirement for market-makers of OEX and DJX options, as 
detailed in Exchange Rule 24.17. Pursuant to Exchange Rule 
24.17(b)(iii), once a market-maker has logged on to RAES at any time 
during an expiration month, he or she must continue to do so each time 
he or she is present in the trading crowd until the next expiration. 
For this purpose, the Exchange is codifying the definition of an 
expiration month for OEX options as the period from the Monday 
immediately following an expiration Saturday through the Friday 
immediately preceding the next successive expiration Saturday.\4\
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    \4\ See Amendment No. 1.
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    When DJX RAES obligations were first established in October 1997, 
the Exchange applied the same RAES log-on obligations as those for OEX 
options.\5\ In consideration of the fact that expiring DJX options 
contracts cease trading at the close of business on the Thursday 
immediately preceding an expiration and that the new near-term series 
become the RAES eligible series on that Friday, however, the Exchange 
has determined that applying the same definition of an expiration month 
for options on both OEX and DJX is unworkable. Accordingly, the 
Exchange is codifying the definition of an expiration month for DJX 
RAES log-on obligation purposes as the period from the Friday 
immediately preceding an expiration Saturday through the

[[Page 16018]]

Thursday immediately preceding the next successive expiration Saturday.
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    \5\ See Securities Exchange Act Release No. 39202 (October 3, 
1997) 62 FR 53358 (October 14, 1997).
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2. Statutory Basis
    The Exchange believes the proposed rule change is consisting with 
Section 6(b) of the Act,\6\ in general, and furthers the objectives of 
Section 6(b)(5),\7\ in particular, in that it is designed to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
and processing information with respect to, and facilitating 
transactions in securities, and to protect investors and the public 
interest.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. 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-
0609. 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 be refer to File No. SR-CBOE-99-02 and 
should be submitted by April 23, 1999.

IV. Commission's Findings and Order Granting Accelerated Approval 
of the Proposed Rule Change

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations under the Act applicable to a national securities exchange 
and, in particular, with the requirements of Section 6(b) of the 
Act.\8\ Specifically, the Commission believes the proposal is 
consistent with the Section 6(b)(5)\9\ requirements that the rules of 
an exchange be designed to promote just and equitable principles of 
trade, to foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, to remove impediments to 
and perfect the mechanism of a free and open market and national market 
system and, in general, to protect investors and the public 
interest.\10\
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ In approving this rule change, 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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    RAES log-on obligations attempt to ensure continued adequate RAES 
participation by market-makers in every type of market situation, 
without the Exchange having to assign an inordinate number of RAES 
trades to any particular market-maker.\11\ The Commission notes that 
market-makers who violate the RAES log-on obligations are subject to 
disciplinary action by the Exchange, including fines and suspension 
from participation in RAES.\12\ Accordingly, the Commission believes it 
is appropriate for the Exchange to provide a precise and appropriate 
definition of an expiration month for both OEX and DJX options. Based 
on the differing expiration date for OEX and DJX options, the 
Commission believes it is reasonable to use different definitions for 
expiration month as it relates to RAES obligations.
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    \11\ See Securities Exchange Act Release No. 37313 (June 14, 
1996) 61 FR 32470 (June 21, 1996).
    \12\ See Securities Exchange Act Release No. 37464 (June 22, 
1996) 61 FR 39175 (July 26, 1996); Exchange Rules 24.17(f) and (g).
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    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice thereof in the Federal Register. As CBOE notes, the definition 
of an expiration month is used solely as an internal rule within the 
Exchange to determine whether members are meeting their RAES log-on 
requirements.\13\ Accelerated approval of the proposal will help 
facilitate the market-makers' compliance with their RAES log-on 
obligations and the Exchange's regulatory overview of its members 
without delay. The Commission approved a similar rule change by CBOE 
regarding options on Standard & Poor's 500 Stock Index.\14\ 
Accordingly, the Commission does not believe that the current filing 
raises any novel regulatory issues. For the foregoing reasons, the 
Commission believes it is consistent with Section 6(b)(5)\15\ and 
Section 19(b)(2)\16\ of the Act to grant accelerated approval to the 
proposed rule change.
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    \13\ See Amendment No. 1.
    \14\ See Securities Exchange Act Release No. 37349 (June 21, 
1996) 61 FR 33787 (June 28, 1996).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ 15 U.S.C. 78s(b)(2).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (SR-CBOE-99-02) is approved on an 
accelerated basis.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-8145 Filed 4-1-99; 8:45 am]
BILLING CODE 8010-01-M