[Federal Register Volume 65, Number 39 (Monday, February 28, 2000)]
[Notices]
[Pages 10574-10575]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-4556]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42443; File No. SR-CBOE-99-27]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change by the Chicago Board Options Exchange, Inc. Relating to Customer 
Communications

February 18, 2000.

I. Introduction

    On June 18, 1999, the Chicago Board Options Exchange, Inc. 
(``CBOE'' or ``Exchange'') submitted to the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 \2\ 
thereunder, a proposed rule change. In its proposal, CBOE seeks to 
permit the use of non-standardized worksheets in customer 
communications. Notice of the proposal was published in the Federal 
Register on December 8, 1999.\3\ The Commission received no comment 
letters on the filing and this order approves the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 42186 (November 30, 
1999), 64 FR 68707.
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II. Description of the Proposal

    CBOE proposes to amend Exchange Rule 9.21 (``Communications to 
Customers''), which governs communications between Exchange members and 
their customers and other members of the public, to eliminate the 
requirement that standard forms of options worksheets be uniform within 
a member organization (i.e., for specific types of options and 
strategies). Following the recommendations of the Commission's Special 
Study of the Options Market,\4\ the options exchanges amended their 
rules to require uniform options worksheets. In 1991, the options 
exchanges further amended and clarified their rules by publishing the 
Guidelines for Options Communications (``Guidelines''),\5\ which 
explained the customer communications rules of the options exchanges 
and the interpretations of these rules. Among other things, the 
Guidelines helped clarify the options exchanges' rules about using 
options worksheets and stated, in part, that ``[s]tandard forms of 
worksheets must be uniform within a particular member organization. * * 
*'' CBOE now proposes to remove this requirement.
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    \4\ See Report of the Special Study of the Options Market, 
Chapter V, page 130 (December 22, 1978); Securities Exchange Act 
Release No. 15575 (Feb. 22, 1979) (Order implementing certain 
recommendations contained in the Commission's Special Study of the 
Options Market).
    \5\ See Securities Exchange Act Release No. 29682 (September 13, 
1991), 56 FR 47973 (September 23, 1991) (File Nos. SR-Amex-90-38; 
SR-CBOE-90-27; SR-NASD-91-02; SR-NYSE-90-51; and SR-PSE-90-41).
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    CBOE notes that the proposal will allow a member organization or 
its associated person to tailor worksheets to specific prospective or 
existing clients, to utilize worksheets that may be commercially 
available, or to use Exchange or other industry developed worksheets. 
Member organizations may still decide to require within their written 
supervisory procedures that options worksheets be standardized within 
their respective organizations. However, CBOE states that worksheets 
will continue to be subject to the content and approval requirements of 
material deemed sales literature, as required by existing Exchange Rule 
9.21.

[[Page 10575]]

III. Discussion

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act.\6\ In 
particular, the Commission finds the proposal is consistent with 
Section 6(b)(5) \7\ of the Act. Section 6(b)(5) requires, among other 
things, that the rules of an exchange be designed to promote just and 
equitable principles of trade and to protect investors and the public 
interest.
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    \6\ In addition, pursuant to Section 3(f) of the Act, 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).
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    The Commission believes that the proposal is consistent with the 
Act because it provides flexibility to CBOE member firms while still 
providing for investor protection. In particular, the proposal provides 
flexibility to CBOE members and their associated persons by allowing 
them to create options worksheets that match the investment objectives 
of their clients. At the same time, however, the proposal provides for 
investor protection by continuing the requirement that a registered 
options principal first approve the worksheet before its use.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-CBOE-99-27) is approved.

    \8\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-4556 Filed 2-25-00; 8:45 am]
BILLING CODE 8010-01-M