[Federal Register Volume 66, Number 118 (Tuesday, June 19, 2001)]
[Notices]
[Pages 32970-32971]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-15399]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44401; File No. SR-CBOE-2001-23]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Board Options 
Exchange, Incorporated Relating to Brokers' Blanket Bonds

June 8, 2001.

    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that on May 14, 2001, 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 CBOE. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The CBOE proposes to revise CBOE Rule 9.22, ``Brokers' Blanket 
Bonds,'' to make its rule governing brokers' blanket bonds consistent 
with the rules of other self-regulatory organizations (``SROs'').
    The text of the proposed rule change is available at the Office of 
the Secretary, CBOE and at 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
    CBOE Rule 9.22 requires members approved to transact business with 
the public and every clearing member organization to carry brokers' 
blanket bonds covering officers and employees of the organization in 
such form and in such amounts as the Exchange may require. This rule 
imposes requirements on CBOE members that differ from those required of 
members of other SRO's.\3\ The purpose of the proposed rule change is 
to amend CBOE Rule 9.22 to make its requirements similar to those of 
other SROs. By harmonizing CBOE Rule 9.22 with the rules of other SROs, 
CBOE intends to simplify compliance with the requirements of CBOE rule 
9.22 for its members who are also members of other SROs.
---------------------------------------------------------------------------

    \3\ see NADS Rule 3020, Chicago Stock Exchange Rule 6, NYSE Rule 
319, American Stock Exchange Rule 330, Philadelphia Stock Exchange 
Rule 705, and Pacific Exchange rule 2.25(a).
---------------------------------------------------------------------------

    Specifically, CBOE proposes to amend CBOE Rule 9.22, Interpretation 
and Policy .01(a)(2), to require minimum

[[Page 32971]]

insurance coverage of not less than $25,000 for all insuring agreements 
required under Interpretation and Policy .01(a). Proposed 
Interpretation and Policy .01(a)(3) will specify that members maintain 
required coverage for Fidelity, On Premises, In Transit, Misplacement, 
and Forgery and Alternation insuring agreements of not less than 120% 
of its required net capital under Exchange Act Rule 15c3-1 \4\ up to 
$600,000. Minimum coverage for required net capital in excess of 
$600,000 shall be determined by reference to the following table:
---------------------------------------------------------------------------

    \4\ 17 CFR 240.15c3-1.

------------------------------------------------------------------------
    Net capital requirement under SEC rule 15c3-1      Minimum  coverage
------------------------------------------------------------------------
$600,000-1,000,000...................................           $750,000
1,000,001-2,000,000..................................          1,000,000
2,000,001-3,000,000..................................          1,500,000
3,000,001-4,000,000..................................          2,000,000
4,000,001-5,000,000..................................          3,000,000
6,000,001-12,000,000.................................          4,000,000
12,000,001-and above.................................          5,000,000
------------------------------------------------------------------------

    Proposed Interpretation and Policy .01(a)(4) will require members 
to maintain fraudulent trading coverage of not less than the greater of 
$25,000 or 50% of the coverage required in paragraph (a)(3), up to 
$500,000. Proposed Interpretation and Policy .01(a)(5) will require 
members to maintain securities forgery coverage of not less than the 
greater of $25,000 or 25% of the coverage required in paragraph (a)(3), 
up to $250,000.
    In addition, proposed Interpretation and Policy .01(b)(3) will 
clarify that members covered under the brokers' blanket bond of an 
affiliate must deduct from their net capital the amount of the 
deductible in excess of the maximum permissible amount described in 
Exchange Act Rule 15c3-1.
    Finally, the Exchange is making a number of non-substantive word 
changes to the rule to make its meaning more clear.
2. Statutory Basis
    The CBOE believes that the proposed rule change is consistent with 
Section 6(b) of the Exchange Act \5\ in general and furthers the 
objectives of Section 6(b)(5)\6\ in particular in that it is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and 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.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE 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 Exchange Act.

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

    The Exchange has 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

    The proposed rule change has been filed as a ``non-controversial'' 
rule change pursuant to Section 19(b)(3)(A) of the Exchange Act \7\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\8\ Because the foregoing 
rule change: (i) Does not significantly affect the protection of 
investors or the public interest; (ii) does not impose any significant 
burden on competition; and (iii) by its terms, does not become 
operative for 30 days after the date of the filing, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interest; and the Exchange has given the 
Commission written notice of its intent to file the proposed rule 
change at least five business days prior to the filing date of the 
proposed rule change, it has become effective pursuant to Section 
19(b)(3)(A) of the Exchange Act \9\ and Rule 19b-4(f)(6) 
thereunder.\10\
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    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 Exchange Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing. 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 Section. Copies of such filing will also 
be available for inspection and copying at the principal office of 
CBOE. All submissions should refer to file number SR-CBOE-2001-23 and 
should be submitted by July 10, 2001.

    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. 01-15399 Filed 6-18-01; 8:45 am]
BILLING CODE 8010-01-M