[Federal Register Volume 64, Number 182 (Tuesday, September 21, 1999)]
[Notices]
[Pages 51160-51161]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-24497]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41863; File No. SR-CBOE-99-48]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Board Options 
Exchange, Inc. To Match Size Limits of the Automatic Execution System 
of the Philadelphia Stock Exchange, Inc.

September 10, 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 August 25, 1999, the Chicago Board Options Exchange, Inc. (``CBOE'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. 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

    The CBOE is proposing to increase the size limit of orders in 
certain classes of options contracts which are eligible for entry into 
the CBOE's Retail Automatic Execution System (``RAES'') to match the 
size limits of orders which will be eligible for entry into the 
automatic execution system of the Philadelphia Stock Exchange, Inc. 
(``Phlx'')

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 CBOE include 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. The 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
    As of the date of filing, CBOE Rule 6.8(e) generally limits the 
size of CBOE RAES orders to twenty or fewer contracts.\3\ 
Notwithstanding the provision, Interpretation and Policy .01 under that 
rule permits the appropriate FPC to increase the size in one or more 
classes of multiply listed equity options eligible for entry on RAES to 
the extent necessary to match the size of orders in the same options 
class eligible for entry into the automated execution system of any 
other options exchange. Interpretation and Policy .01 requires that the 
effectiveness of the increase in options size be conditioned on the 
CBOE making a filing with the Commission under Section 19(b)(3)(A) of 
the Act.\4\
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    \3\ On September 1, 1999, the Commission approved a CBOE 
proposal to increase generally the size limits of RAES orders from 
20 to 50 contracts. See Securities Exchange Act Release No. 41821.
    \4\ 15 U.S.C. 78s(b)(3)(A).
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    As of August 24, 1999, options on Bank America (BAC), Citigroup 
(C), Cendant (CD), Conoco (COC), Frontier (FRO), Georgia Pacific (GP), 
AT&T Liberty Media Group (LMG), Lucent (LU), and LHS Group (QLH) are 
dually listed on the CBOE and the Phlx. The current size limit eligible 
for automatic execution of Phlx orders is 30 contracts for BAC, and 25 
contracts for C, CD, COC, FRO, GP, LMG, LU, and QLH. These size limits 
could be increased by Phlz up to 50 contracts pursuant to Phlx Rule 
1080(c). The CBOE therefore anticipates that if it raises it RAES 
eligible limit to match the current size limits of the Phlx in BAC, C, 
CD, COC, FRO, GP, LMG, LU, and QLH, the Phlx in turn may potentially 
raise its own limits again.
    Therefore, pursuant to CBOE rule 6.8 and Interpretation and Policy 
.01, the CBOE proposes to increase the RAES eligible order size limit 
in BAC, C, CD, COC, FRO, GP, LMG, LU, and QLH to match the eligible 
order size on the automatic execution system of the Phlx, effective 
August 25, 1999. Currently, this will involve an increase to a 30 
contract size limit for BAC, and 25 contracts for C, CD, COC, FRO, GP, 
LMG, LU, and QLH. If the Phlx in response, increases its own size limit 
for automatic execution in response, the CBOE in turn will match such 
increases up to 50 contracts.\5\
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    \5\ In actuality, on August 25, 1999, the Phlx order size limits 
for the CBOE to match were 30 contracts for BAC and 25 contracts for 
C, CD, COC, FRO, GP, LMG, LU, and QLH. Telephone conversation among 
Chris Hill, Attorney, CBOE, and Kenneth Rosen, Attorney, and Melinda 
Diller, Law Clerk, Commission, on September 1, 1999.

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[[Page 51161]]

    The Exchange represents that RAES has the capacity to accommodate a 
RAES order limit size of up to 50 contracts in BAC, C, CD, COC, FRO, 
GP, LMG, LU, and QLH, both in terms of systems capacity as well as the 
market-making capacity of market-makers participating in RAES.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \6\ of the 
Act, in general, and furthers the objectives of Sections 6(b)(5) \7\ 
and 6(b)(8) \8\ of the Act in particular, in that it is designed to 
remove unnecessary burdens on competition, as well as remove 
impediments to, and perfect the mechanism of, a free and open market 
and a national market system, for the benefit of investors and the 
public interest.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 15 U.S.C. 78f(b)(8).
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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 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 neither solicited nor received written comments with 
respect to the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Because the foregoing rule change constitutes a stated policy, 
practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of the Exchange, it 
has become effective pursuant to Section 19(b)(3)(A) of the Act \9\ and 
subparagraph (f)(1) of the Rule 19b-4 thereunder.\10\ At any time 
within 60 days of the filing of the proposed 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.\11\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(1).
    \11\ In reviewing this proposal, the Commission has considered 
the proposal's 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-
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 also will be 
available for inspection and copying at the principal office of the 
CBOE. All submissions should refer to File No. SR-CBOE-99-48 and should 
be submitted by October 12, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-24497 Filed 9-20-99; 8:45 am]
BILLING CODE 8010-01-M