regulatory organizations; proposed rule changes: Chicago Board Options Exchange, Inc.,
[Federal Register: July 30, 1999 (Volume 64, Number 146)]
[Notices]
[Page 41477-41478]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30jy99-159]
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41641; File No. SR-CBOE-99-31]
Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by the Chicago Board Options Exchange, Incorporated Relating to the Administration of DBOE Rule 8.95(f)
July 22, 1999.
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 June 23, 1999, the Chicago Board Options Exchange, Incorporated (``CBOE'' or ``Exchange'') filedwith the Securities and Exchange Commission (``Commission'') a proposed rule change. The Exchange submitted Amendment No. 1 to its proposed rule change on July 1, 1999.\3\ The proposed rule change, as amended, is 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.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, the Exchange made two technical corrections to its proposed rule language to conform the text of the rule language to its current rule and clarified that the Allocation Committee or Special Product Assignment Committee, as applicable, administers CBOE Rule 8.95(f). See Letter from Arthur B. Reinstein, Assistant General Counsel, CBOE, to Terri Evans, Attorney, Division of Market Regulation, Commission, dated June 30, 1999 (``Amendment No. 1'').
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Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to adopt an Interpretation and Policy pertaining to the administration of DBOE Rule 8.95(f). The text of the proposed rule change is as follows. New text is italicized.
Allocation of Securities and Location of Trading Crowds and DPMs
Rule 8.95 No Change.
* * * Interpretations and Policies:
.01-.02 No change.
.03 trading crowd may indicate that it no longer wishes to trade an option class opened for trading prior to May 1, 1987, for purposes of paragraph (f) of Rule 8.95 by means of a voting procedure as described in this Interpretation and Policy. Members of a trading crowd eligible to participate in the vote shall include those market-makers and floor brokers who have transacted at least 80% of their market-maker contracts (in the case of market-makers) or orders (in the case of floor brokers) in each of the three immediately preceding calendar months in option classes traded in the trading crowd, and who continue to be present in the trading crowd in the capacity of a market maker or floor broker at the time of the vote. Eligible market-makers and floor brokers shall each have one vote, and shall vote together as a single class. A trading crowd shall be deemed to have indicated that it no longer wishes to trade a designated option class if a majority of the trading crowd participates in the vote and if a majority of the total votes cast are in favor of the proposition. Any member of a trading crowd eligible to vote on whether the crowd wishes to trade an option class may request that such a vote be held by submitting a written request to that effect to the Secretary of the Exchange. The Exchange shall post a notice at the trading station of the time and date of any vote to be taken for purposes of Rule 8.95(f) at least 24 hours prior to the time of the vote. The Allocation Committee or Special Product Assignment Committee, as applicable shall determine all other administrative procedures pertaining to the vote.
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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 purposes 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.
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Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
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Purpose
CBOE Rule 8.95(f) permits a trading crowd to indicate that it no longer wishes to trade an option class opened for trading prior to May 1, 1987, in which event the Exchange's Allocation Committee or Special Product Assignment Committee, as applicable,\4\ may reallocate the class to another trading crowd or to a Designated Primary Market- Marker. The purpose of proposed Interpretation and Policy 8.95.03 is to adopt procedures for the administration of CBOE Rule 8.95(f) that specify how a trading crowd may manifest an indication that it no longer wishes to trade a class of options for purposes of that rule.
\4\ Id.
Two procedural aspects of the administration of CBOE Rule 8.95(f) are embodied in proposed Interpretation and Policy 8.95.03. The first is to define who constitutes a trading crowd for purposes of the rule, and the second is to adopt voting procedures to be used for purposes of determinations made under the rule. Proposed Interpretation and Policy 8.95.03 provides that members of a trading crowd for purposes of CBOE Rule 8.95(f) are those market-makers and floor brokers who have transacted at least 80% of their market-maker contracts (in the case of market-makers) or orders (in the case of floor brokers) in each of the three immediately preceding calendar months in option classes traded at that trading crowd's station, and who continue to be present in the trading crowd in the capacity of a market maker or floor broker at the time of the vote. These provisions are intended to ensure that determinations made under CBOE Rule 8.95(f) will be made by those members who are currently engaged as market-makers or floor brokers in the trading crowd, and who have concentrated their activity in the trading crowd over the last three months.
The proposed Interpretation and Policy also provides that a crowd will be deemed to have indicated that it no longer wishes to trade an option class only if (i) the question is put to a vote of the members of the trading crowd, (ii) a majority of the members of the trading crowd participate in the vote, and (iii) a majority of the votes cast are in favor of not wanting to continue to trade the class. At least 24 hours posted notice to the trading crowd of the time and date of the vote is required before a vote may take place. These voting procedures are substantially the same as those set forth in CBOE Rule 2.40(d) concerning recommendations of a market-maker surcharge under that rule, except that a specified quorum requirement and a longer (90-day) eligibility period for participation in the vote are provided under Interpretation and Policy 8.95.03 in light of the greater significance to a trading crowd of a determination not to continue to trade a class of options. In other respects, the Allocation Committee or Special Product Assignment Committee, as applicable, shall determine administrative procedures for conducting the vote.\5\
\5\ See Amendment No. 1, supra note 3.
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Statutory Basis
Proposed Interpretation and Policy 8.95.03 is consistent with and in furtherance of the objectives of Section 6(b)(5) of the Act\6\ in that it is designed to promote just and equitable principles of trade and to remove impediments to and perfect the mechanisms of a free and open market, because it will provide fair and orderly procedures for the administration of CBOE Rule 8.95(f).
\6\ 15 U.S.C. 78f(b(5).
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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 Act.
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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.
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Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
The foregoing rule change constitutes a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule of the Exchange, and therefore, has become effective pursuant to Section 19(b)(3)(A)(i) of the Act \7\ and paragraph (f)(1) of Rule 19b-4.\8\ 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 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.
\7\ 15 U.S.C. 78s(b)(3)(A)(i).
\8\ 17 CFR 240.19b-4(f)(1).
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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, N.W., Washington, D.C. 20549- 0609. Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filedwith 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 in Washington, D.C. 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-99-31 and should be submitted by August 20, 1999.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\9\
\9\ 17 CFR 200.30-3(a)(12)
Margaret H. McFarland, Deputy Secretary.
[FR Doc. 99-19490Filed7-29-99; 8:45 am]
BILLING CODE 8010-01-M
