[Federal Register Volume 66, Number 69 (Tuesday, April 10, 2001)]
[Notices]
[Pages 18676-18678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-8770]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44147; File No. SR-CBOE-01-11]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Board Options 
Exchange, Incorporated To Clarify Certain Provisions in Its Rules 
Relating to the Trading of Options on Securities That Represent an 
Interest in Registered Investment Companies

April 3, 2001.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on March 16, 2001, the Chicago Board Options Exchange, 
Incorporated (``CBOE'' or ``Exchange'') file 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. CBOE filed the proposal as a ``non-
controversial'' rule change under Rule 19b-4(f)(6) \3\ under the Act. 
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.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    CBOE hereby proposes to clarify certain provisions in its rules 
relating to the trading of options on securities that represent an 
interest in registered investment companies, including margin 
requirements and strike price intervals.

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

    In its filing with the Commission, 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. CBOE has prepared summaries, set forth in Sections A, B, 
and C below, of the most significant aspects of such statements.

[[Page 18677]]

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

1. Purpose
    On July 2, 1998, the Commission approved a CBOE rule change 
relating to the listing and trading of options on securities that 
represent an interest in listed, open-end, registered investment 
companies that hold securities comprising or based on broad-based 
indexes or portfolios of securities.\4\ On August 3, 2000, the 
Commission approved a CBOE rule change proposing to allow for the 
trading of options on securities that represent interests in registered 
investment companies based on narrow-based indexes or portfolios of 
securities.\5\ The Exchange is now proposing to clarify certain rules 
relating to the trading of these products (``Fund Shares'').\6\ More 
specifically, the Exchange is proposing to make clear in its rules (1) 
the margin requirements applicable to options on Fund Shares and (2) 
strike price intervals applicable to trading in certain Fund Shares.
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    \4\ See Securities Exchange Act Release No. 40166 (July 2, 1998) 
63 FR 37430 (July 10, 1998) (File No. SR-CBOE-97-03).
    \5\ See Securities Exchange Act Release No. 43114 (August 3, 
2000) 65 FR 49041 (August 10, 2000) (File No. SR-CBOE-00-31).
    \6\ There are several Fund Share structures that can be listed 
and traded on CBOE, including Index Portfolio Receipts and Index 
Portfolio Shares.
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    In SR-CBOE-97-03, the Commission approved margin requirements for 
options on Fund Shares at the same levels that apply to options 
generally under CBOE Rule 12.3, except that margin must be deposited 
and maintained equal to 100% of the current market value of the option 
plus 15% of the market value of equivalent units of the underlying 
security value.\7\ Because that filing only contemplated options on 
Fund Shares based on broad-based indexes, it had the effect of making 
these margin requirements comparable to margin requirements for broad-
based index options traded under CBOE Chapter 24. However, as a result 
of a CBOE rule filing making broad revisions to Rule 12.3 governing 
margin requirements that was filed after SR-CBOE-97-03 but approved 
before SR CBOL-97-03, \8\ the margin provisions adopted in SR-CBOE-97-
03 were mistakenly never incorporated into the text of CBOE Rule 12.3 
despite the fact that they were approved.
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    \7\ The margin requirement is subject to CBOE Rule 12.3(c)(5).
    \8\ See Securities Exchange Act Release No. 36709 (June 2, 
1997), 62 FR 31643 (June 10, 1997) (File No. SR-CBOE-97-17)
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    The Exchange now merely seeks to incorporate into CBOE Rule 12.3 
the omitted language previously approved in SR-CBOE-97-03. The Exchange 
also proposes to formalize margin requirements for options on Fund 
Shares based on narrow-based indexes or portfolios of securities. As 
with broad-based Fund Share options, these narrow-based Fund Share 
options would be comparable to their index option equivalent. 
Accordingly, the Exchange proposes to amend CBOE Rule 12.3 to provide 
that, for options on Fund Shares based on narrow-based indexes or 
portfolios of securities, minimum margin must be deposited and 
maintained equal to 100% of the current market value of the option plus 
20% of the market value of equivalent units of the underlying security 
value.\9\ The Exchange notes that these proposed changes are consistent 
with the American Stock Exchange's (``Amex'') margin requirements for 
Fund Shares set forth in Amex Rule 462.
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    \9\ The margin requirement is subject to CBOE Rule 12.3(c)(5).
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    The CBOE is also proposing to clarify in CBOE Rule 5.5 that the 
intervals for strike prices of series of options on Fund Shares based 
on the Nasdaq-100 Index shall be $1.00. The Exchange notes that the 
Amex, Philadelphia Stock Exchange, and International Securities 
Exchange trade such options with $1.00 strike intervals.\10\
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    \10\ See Securities Exchange Act Release No. 40157 (July 1, 
1998), 63 FR 37426 (July 10, 1998); Securities Exchange Act Release 
No. 44037 (March 2, 2001), 66 FR 14613 (March 13, 2001); and 
Securities Exchange Act Release No. 44055 (March 8, 2001), 66 FR 
15310 (March 16, 2001).
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2. Statutory Basis
    CBOE believes that the proposed rule change is consistent with the 
requirements of section 6(b)(5) Act.\11\ Section 6(b)(5) requires, 
among other things, that the rules of an exchange be designed to 
prevent fraudulent and manipulative acts and practices; to promote just 
and equitable principles of trade; to facilitate transactions in 
securities; to remove impediments to and perfect the mechanisms of a 
free and open market and a national market system; and, in general, to 
protect investors and the public interest.
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    \11\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE does not believe that the proposed rule change will impose a 
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

    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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed (or 
such shorter time as the Commission may designate) it has become 
effective pursuant to section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) \13\ thereunder. 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 the furtherance of the purposes of the 
Act.\14\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ Upon request from the CBOE, the Commission has waived the 
requirement that the Exchange provide written notice of its intent 
to file the proposed rule change at least five business days prior 
to the date of filing. 17 CFR 240.19b-4(f)(6)(iii).
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    CBOE has requested that the Commission waive the 30-day pre-
operative period because the CBOE believes that the proposed rule 
change does not significantly affect the protection of investors or the 
public interest or impose any significant burden on competition. The 
Commission agrees with the CBOE and believes that it is consistent with 
the protection of investors and the public interest that the proposed 
rule change become effective immediately. Accordingly, the commission 
finds good cause to waive the 30-day operative waiting period and to 
designate that the proposal become operative immediately.\15\
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    \15\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. See 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

[[Page 18678]]

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 the Exchange. All 
submissions should refer to File No. SR-CBOE-01-11 and should be 
submitted by May 1, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-8770 Filed 4-9-01; 8:45 am]
BILLING CODE 8010-01-M