[Federal Register Volume 67, Number 54 (Wednesday, March 20, 2002)]
[Notices]
[Pages 13029-13030]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-6642]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45543; File No. SR-CBOE-2002-02]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Board Options Exchange, Inc. Relating to the 
Permanent Adoption of Decimal Pricing and the Establishment of Minimum 
Price Variations for Quoting in Equity Securities and Options

March 12, 2002.
    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 January

[[Page 13030]]

14, 2002, the Chicago Board Options Exchange, Inc. (``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.
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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 proposes to amend its rules to establish minimum price 
variations (``MPVs''). The text of the proposed rule change is 
available at the 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 Exchange 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 Exchange 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
    On September 25, 2001, the Commission issued an order requiring the 
securities exchanges and the NASD to submit their own respective rule 
filings to establish MPVs for quoting equity securities and options by 
January 14, 2002.\3\ The CBOE now proposes to formally adopt the MPVs 
currently in place on the Exchange.
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    \3\ See Securities Exchange Act Release No. 44846 (September 25, 
2001), 66 FR 49983 (October 1, 2001).
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    As part of the industry conversion to decimal pricing and pursuant 
to the Decimals Implementation Plan for the Equities and Options 
Markets submitted to the Commission on July 26, 2000 (the ``Plan''),\4\ 
the Exchange adopted the following MPV schedule for quoting: a five 
cent MPV for option issues quoted under $3 a contract; a ten cent MPV 
for option issues quoted at $3 a contract or greater; and a one cent 
MPV for the quoting of CBOE's equity products. The Plan, including the 
MPVs adopted under the Plan, remains in effect until the Commission 
approves rules submitted by each exchange and the NASD designating each 
market's MPVs. The Exchange seeks to designate the MPVs utilized under 
the Plan as its minimum increments.
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    \4\ See letter from Dennis L. Covelli, Vice President, New York 
Stock Exchange, Inc. to Annette Nazareth, Director, Division of 
Market Regulation, Commission, dated July 25, 2000.
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    The proposed rule change also provides that future changes to the 
Exchange's MPVs would be handled as they were handled before the 
conversion to decimal pricing, namely that the CBOE Board of Directors 
may determine to change the minimum increments and that the Exchange 
will designate any such change as a stated policy, practice, or 
interpretation with respect to the administration of the CBOE minimum 
increment rule for bids and offers (CBOE Rule 6.42) within the meaning 
of section 19(b)(3)(A) of the Exchange Act\5\ and will file a rule 
change for effectiveness upon filing with the Commission. Lastly, the 
Exchange also seeks to formally eliminate CBOE Rule 15.11 (Mandatory 
Year 2000 Testing) and CBOE Rule 15.22 (Mandatory Decimal Pricing 
Testing), both of which have expired.
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    \5\ 15 U.S.C. 78s(b)(3)(A).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act\6\ in general, and furthers the objectives 
of section 6(b)(5) of the Act\7\ in particular, in that it should 
promote just and equitable principles of trade, serve to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and protect investors and the public 
interest.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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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.

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 Exchange 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 the filing will also be 
available for inspection and copying at the principal offices of the 
Exchange. All submissions should refer to File No. SR-CBOE-2002-02 and 
should be submitted by April 10, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-6642 Filed 3-19-02; 8:45 am]
BILLING CODE 8010-01-P