[Federal Register Volume 64, Number 117 (Friday, June 18, 1999)]
[Notices]
[Pages 32906-32907]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15487]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41509; File No. SR-CBOE-99-06]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change by the Chicago Board Options Exchange, Inc. Increasing the 
Maximum Order Size on the Dow Jones High Yield Select 10 Index Eligible 
for Automatic Execution

June 10, 1999.

I. Introduction

    On February 10, 1999, the Chicago Board Options Exchange, Inc. 
(``CBOE'' or ``Exchange'') submitted to the Securities and Exchange 
Commission (``Commission'' or ``SEC''), 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 increase the maximum size of 
orders on the Dow Jones High Yield Select 10 Index eligible for 
automatic execution. Notice of the proposed rule change appeared in the 
Federal Register on May 10, 1999.\3\ The Commission received no 
comments on the proposal. This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 41357 (April 30, 
1999), 64 FR 25091.
---------------------------------------------------------------------------

II. Description of the Proposal

    The Exchange proposes to add an interpretation to CBOE Rule 6.8 
allowing the appropriate Floor Procedure Committee (``FPC'') to 
increase the maximum size of orders on the Dow Jones High Yield Select 
10 Index (``Index'') \4\ eligible for execution through the CBOE's 
Retail Automated Execution System (``RAES'') from 20 to 100 contracts.
---------------------------------------------------------------------------

    \4\ The Index is comprised of the ten highest yielding stocks 
from the Dow Jones Industrial Average. See Securities Exchange Act 
Release No. 39453 (December 6, 1997), 62 FR 67101 (December 23, 
1997).
---------------------------------------------------------------------------

    The Exchange believes that the proposal will enhance the depth and 
liquidity of the market for options on the Index.\5\ Additionally, the 
Exchange believes that the proposal will increase the number of timely 
and cost-effective executions, enhance information gathering through 
the audit trail, enhance fill reporting and price reporting, increase 
customer confidence, and increase the efficiency in handling non-RAES 
orders by reducing the number of transactions executed manually on the 
trading floor.
---------------------------------------------------------------------------

    \5\ The Exchange expects that increasing the order size limit to 
up to 100 contracts for Index options will enhance liquidity by 
accommodating through RAES larger institutional and public customer 
orders for Index options. Telephone conversation between Debora E. 
Barnes, Senior Attorney, CBOE, and John C. Roeser, Attorney, 
Division of Market Regulation, Commission, on March 16, 1999.
---------------------------------------------------------------------------

III. Discussion

    After careful review, 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.\6\ 
In particular, the Commission believes that the proposal is consistent 
with Section 6(b)(5),\7\ in that it is designed to promote just and

[[Page 32907]]

equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system. Specifically, the Commission finds 
that the proposal will facilitate transactions in securities and 
protect investors and the public interest. The Commission believes that 
increasing to up to 100 the maximum number of options contracts on the 
Index executable through RAES should enable the Exchange to more 
effectively and efficiently manage order flow in options on the Index 
consistent with its obligations under the Act. Further, the Commission 
believes that the RAES order size limit of 100 contracts for the Index 
should result in the efficient and timely execution of customer orders. 
The Commission notes that it has approved similar proposals by the 
Exchange increasing the number of option contracts eligible for 
automatic execution to a maximum of 100 contracts.\8\
---------------------------------------------------------------------------

    \6\ In approving this rule, the Commission has considered the 
proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ See Securities Exchange Act Release No. 38169 (January 14, 
1997), 62 FR 3547 (January 23, 1997) (order approving an increase to 
the maximum size of interest rate option orders eligible for 
automatic execution to up to 100 contracts); Securities Exchange Act 
Release No. 39202 (October 3, 1997), 62 FR 53358 (October 14, 1997) 
(order approving proposal to allow the Exchange discretion to set 
the eligible order size for RAES orders to up to 100 contracts for 
options on the Dow Jones Industrial Average).
---------------------------------------------------------------------------

    Based on representations from the CBOE, the Commission believes 
that increasing the size of orders on the Index eligible for execution 
through RAES will not expose the CBOE's options markets to risk of 
failure or operational breakdown. Specifically, the CBOE represents 
that the proposal will not impose any significant burden on the 
operation, security, integrity, or capacity of RAES.

IV. Conclusion

    For the foregoing reasons, the Commission believes that the 
proposed rule change is consistent with the Act and the rules and 
regulations thereunder applicable to a national securities exchange, 
and, in particular, with Section 6(b)(5).\9\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-CBOE-99-06) is approved.

    \10\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-15487 Filed 6-17-99; 8:45 am]
BILLING CODE 8010-01-M