[Federal Register Volume 67, Number 186 (Wednesday, September 25, 2002)]
[Notices]
[Pages 60266-60267]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-24294]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46507; File No. SR-CBOE-2002-54]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Board Options 
Exchange, Inc. Proposing To Allow the Listing of Options on Exchange 
Traded Funds at $1 Strike Price Intervals

September 17, 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 September 12, 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 
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 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CBOE proposes to list options at $1 strike price intervals on 
securities (``Units'') that represent interests in registered 
investment companies (or series thereof) organized as open-ended 
management investment companies, unit investment trusts, or similar 
entities that are principally traded on a national securities exchange 
or through the facilities of a national securities association, and 
that meet all criteria of Interpretation and Policy .06 to CBOE Rule 
5.3., commonly referred to as ``Exchange Traded Funds'' or ``ETFs.'' 
The text of the proposed rule change appears below. New text is in 
italics.

CBOE Rule 5.5: Series of Option Contracts Open for Trading

    (a)-(c) No Change.
* * * Interpretations and Policies
    .01-.07 No change.
    .08 Notwithstanding Interpretation and Policy .01 above, and except 
for options on Units covered under Interpretation and Policies .06 and 
.07 above, the interval between strike prices of series of options on 
Units, as defined under Interpretation and Policy .06 to Rule 5.3, will 
be $1 or greater where the strike price is $200 or less.

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
    CBOE proposes to amend CBOE Rule 5.5 by adding Interpretation and 
Policy .08, which would provide for $1 strike price intervals for 
options traded on ETFs. Additionally, the interval of strike prices for 
options on ETFs can be $1 only where the strike price is at $200 or 
less.
    CBOE contends that this proposed amendment is consistent with the 
strike price intervals established for options on ETFs on the American 
Stock Exchange LLC (``Amex''), the Philadelphia Stock Exchange, Inc. 
(``Phlx''), and the International Securities Exchange, Inc. 
(``ISE'').\3\ Furthermore, the CBOE currently trades options on certain 
ETFs at $1 strike price intervals.\4\ Specifically, that proposed rule 
change allowed for $1 strike price intervals for options on Nasdaq-100 
Index ETFs (``QQQ'') and was based on similar Amex rules relating to 
strike price intervals for options on ETFs.
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    \3\ See Securities Exchange Act Release Nos. 40157 (July 1, 
1998), 63 FR 37426 (Amex approval order); 44037 (March 2, 2001), 66 
FR 14613 (March 13, 2001) (ISE approval order); and 44055 (March 8, 
2001), 66 FR 15310 (March 16, 2001) (Phlx). Although the Phlx 
proposal granted $1 strike price intervals for trading on the 
general term ``ETFs,'' CBOE believes that it would be more accurate, 
under CBOE rules, to clarify the specific definition of an ETF by 
granting the $1 strike price intervals to those Units provided for 
under Interpretation and Policy .06 to CBOE Rule 5.3.
    \4\ See Securities Exchange Act Release No. 44147 (April 3, 
2001), 66 FR 18676 (April 10, 2001).
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    Lastly, CBOE affirms that it has the necessary systems capacity to 
support any additional series of options that may be added pursuant to 
the proposed rule change. Further, CBOE has been advised by Options 
Price Reporting Authority (``OPRA'') that is has the capacity to 
support any additional series of options that may be added pursuant to 
the proposed rule change.\5\
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    \5\ See letter from Joseph P. Corrigan, Executive Director, 
OPRA, to William Speth, Director of Research, CBOE, dated September 
11, 2002.
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(2) Statutory Basis
    The CBOE 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),\7\ in particular, in that it is designed to promote 
just and equitable principles of trade, to prevent fraudulent and 
manipulative acts and, in general, to 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 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

    The foregoing rule change has become effective pursuant to section 
19(b)(3)(A) of the Act \8\ and subparagraph (f)(6) of Rule 19b-4 \9\ 
thereunder because the Exchange has designated the proposed rule change 
as one that does not: (i) Significantly affect the protection of 
investors or the public interest; (ii) impose any significant burden on 
competition; (iii) become operative for 30 days from the date on which 
it was filed, or such shorter time as the Commission may designate; and 
the Exchange has given the Commission written notice of its intention 
to file the proposed rule change at least five business days prior to 
filing. At any time within 60 days of the filing of such proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission

[[Page 60267]]

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 Act.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
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    Under Rule 19b-4(f)(6)(iii) of the Act,\10\ the proposal does not 
become operative for 30 days after the date of its filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest and the Exchange is 
required to give the Commission written notice of its intention to file 
the proposed rule change at least five business days prior to filing. 
The Exchange has requested that the Commission waive the 30-day 
operative date and the five-day pre-filing notice requirement in order 
for it to implement the proposed rule change as quickly as possible. 
The CBOE contends that the proposed rule is substantially similar to 
comparable rules of the Amex, ISE, and Phlx. The Commission, consistent 
with the protection of investors and the public interest, has 
determined to waive the 30-day operative period as well as the five-day 
pre-filing notice requirement,\11\ and, therefore, the proposal is 
effective and operative upon filing with the Commission.
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    \10\ 17 CFR 240.19b-4(f)(6)(iii).
    \11\ For purposes only of waiving the five-day pre-filing notice 
requirement and the 30-day operative period for this proposal, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 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 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-2002-54 and 
should be submitted by October 16, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-24294 Filed 9-24-02; 8:45 am]
BILLING CODE 8010-01-P