[Federal Register Volume 65, Number 241 (Thursday, December 14, 2000)]
[Notices]
[Pages 78230-78231]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-31799]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43677; File No. SR-CBOE-00-49]


Self-Regulatory Organizations; Notice of Filing by Chicago Board 
Options Exchange, Inc., Relating to RAES Eligibility Requirements for 
SPX Options

December 5, 2000.
    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 September 20, 2000, the Chicago Board Options Exchange, Incorporated 
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``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 C.F.R. 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Chicago Board Options Exchange, Inc. (``CBOE'' or the 
``Exchange'') proposes to amend Rule 24.16, which governs the 
eligibility requirements of Market-Makers to participate on the 
Exchange's Retail Automatic Execution System (``RAES'') in options on 
the Standard & Poor's 500 Index (``SPX'').
    The text of the proposed rule change is available at the CBOE and 
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 CBOE 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 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
    The purpose of the proposed rule change is to amend Rule 24.16, 
``RAES Eligibility in SPX,'' to: (1) eliminate the in-person and volume 
quotas from the eligibility requirements of Rule 24.16; and (2) 
eliminate the cap on the maximum number of Market-Makers that may 
participate in a RAES group. The proposed rule changes will make the 
RAES eligibility requirements of SPX Market-Makers the same as for 
other Market-Makers in non-index option classes and will enhance the 
depth and liquidity of the RAES markets in SPX.
    Currently, Rule 24.16(a)(iv) sets forth four eligibility 
requirements that a Market-Maker must meet before he or she can 
participate in RAES in SPX. One of these requirements is that the 
Market-Maker must execute at least fifty percent of his or her Market-
Maker contracts for the preceding calendar month in SPX. Another 
requirement is that the Market-Maker must execute at least seventy-five 
percent of his or her Market-Maker trades for the preceding calendar 
month in SPX in person. No comparable RAES eligibility requirements are 
imposed upon Market-Makers trading in non-index option classes. The 
Exchange proposes to eliminate the in-person and volume quotas from the 
eligibility requirements of Rule 24.16, so that the RAES eligibility 
requirements of SPX Market-Makers are the same as for other Market-
Makers.
    Recently, Market-Maker participation on RAES in index options has 
been low compared to historical levels. This problem has been 
aggravated by the fact that the in-person and volume requirements have 
forced the Exchange to delay new Market-Makers who wish to participate 
on RAES from logging onto RAES for at least 30 days. The proposed rule 
change would allow a new Market-Maker to log onto RAES so long as that 
Market-Maker: (1) Has signed the RAES Participation Agreement and 
completed the RAES instructional program (Rule 24.16(a); (2) has been 
approved under Exchange Rules as a Market-Maker with a letter of 
guarantee (Rule 24.16(a)(iv)(A)); and (3) maintains his or her 
principal business

[[Page 78231]]

on the CBOE as a Market-Maker (Rule 24.16(a)(iv)(B)).
    The Exchange also proposes to eliminate the cap on the maximum 
number of Market-Makers that may participate in a RAES group \3\ set 
forth in Rule 24.16(e). Currently, Rule 24.16(e) provides that a RAES 
group may not exceed the maximum number of RAES participants set by the 
appropriate Market Performance Committee from time to time, which in no 
event may be set higher than thirty-three and one-third percent of the 
average number of RAES participants for the prior quarter. The recent 
decline in RAES participation in index options has resulted in imposed 
reductions in the RAES group size due to the application of this size 
limit.
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    \3\ A RAES group is an account whereby members of a joint 
account may participate on the system at the same time and assign 
their RAES trades to a designated joint account or nominee acronym.
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    The proposed rule change would conform Rule 24.16 to the Exchange 
Rule governing RAES eligibility for equity options, Rule 8.16, which 
does not impose in-person and volume requirements on equity options 
Market-Makers. The Exchange believes that by making the SPX RAES 
eligibility rule consistent with the rule for equity Market-Makers, the 
proposed rule change will provide the SPX market with enhanced capital 
and market-making expertise while maintaining the overall quality of 
the market. By increasing the number of RAES participants in SPX, the 
Exchange believes the proposed rule change will further assure the 
availability of RAES during periods of market volatility.
2. Statutory Basis
    The proposed rule change is consistent with and furthers the 
objectives of Section 6(b)(5) of the Act \4\ in that it is designed to 
remove impediments to a free and open market and to protect investors 
and the public interest.
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    \4\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

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

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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, NW, Washington, DC 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 CBOE. 
All submissions should refer to File No. SR-CBOE-00-49 and should be 
submitted by January 4, 2001.
    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-31799 Filed 12-13-00; 8:45 am]
BILLING CODE 8010-01-M