Federal Register / Vol. 65, No. 103 / Friday, May 26, 2000 / Notices 34239

8CBOE Rule 6.8(a)(ii) states in part; ‘‘A trade

execute on RAES at an erroneous quote should be

treated as a trade reported at an erroneous price and

adjusted to reflect the accurate market after

receiving a Floor Official’s approval.’’

9According to the Exchange, either Exchange

staff or the traders in the crowd where the

particular options class is traded will know that the

conditions have been met just as soon as the

underlying market disseminates a corrected

opening price, which usually occurs within a few

minutes of the erroneous print’s dissemination. The

traders who trade the options have access to the

underlying market’s quotes and will receive a

message that the opening print has been corrected.

See Amendment No. 1, supra note 4.

10According to the Exchange, it does not have an

automated system to handle the adjusting of these

trades so it could require a significant amount of

staff time to determine exactly which trades may

need to be adjusted. Where there have been only

a very few affected trades, the Exchange represents

that its staff may be able to provide Floor Officials

with the necessary information to adjust the trades

within a few minutes. In an opening where a large

number of trades are affected, the Exchange believes

that it may take a number of hours to sift through

the various trades and determine how each should

be adjusted. As a result, the Exchange proposes to

provide prompt notice that the situation has

occurred and that trades may be adjusted. In this

way, any trader or customer that may be affected

by the adjustment can take any appropriate action

to adjust his or her position. Because the opening

print and its correction will be known as soon as

any notice is disseminated, traders and customers

should be able to determine the likelihood of their

trade being adjusted and what the adjustment is

likely to be. See Amendment No. 1, supra note 4.

11 In addition, pursuant to Section 3(f) of the Act,

the Commission has considered the proposed rule’s

impact on efficiency, competition, and capital

formation. 15 U.S.C. 78c(f).

12 15 U.S.C. 78f(b)(5).

13Concurrent approval of both Floor Officials is

necessary before a trade can be adjusted. See supra

note 7.

14 15 U.S.C. 78s(b)(2).

15 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

have with respect to RAES trades.8 The

Exchange believes this change will

prevent market makers from becoming

discouraged from participating on ROS

and will save time spent by Exchange

staff negotiating with participants on

trades that occur on erroneous prints. At

the same time, the Exchange believes

the rule change will give Floor Officials

the authority to determine which trades

should be adjusted so that a fair and

equitable result is achieved for all

market participants, including those

customers that might not have been

filled on the opening but otherwise

would have been filled had the class

opened at the correct price.

Under the proposed rule change, the

Exchange will notify its members as

soon as practicable after the correction

of an erroneous print on the

underlying.9 In addition, the Exchange

will indicate that this may result in the

adjustment of opening trades that were

either executed on ROS or should have

been executed on ROS. Further, all

adjustments will be made the day of the

erroneous print correction.10

III. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning Amendment No.

1, including whether the amendment 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 CBOE. All

submissions should refer to File No.

SR–CBOE–99–20 and should be

submitted by June 16, 2000.

IV. Discussion

After careful review, the Commission

finds that the proposed rule change is

consistent with the requirements of the

Act.11 In particular, the Commission

finds the proposal is consistent with

Section 6(b)(5) 12 of the Act. Section

6(b)(5) requires, among other things,

that the rules of an exchange be

designed to promote just and equitable

principles of trade and to protect

investors and the public interest.

The Commission believes that the

proposed rule change promotes just and

equitable principles of trade. In

particular, the proposal allows two

Floor Officials to adjust trades when

ROS opens a class based on an

erroneous opening print disseminated

by the underlying market.13 In addition,

the proposal would not only affect

market makers, but also customers

whose orders should or should not have

been executed at opening. The

Commission believes that procedures to

correct erroneous trades in a timely

manner are in the interest of all parties.

The Commission also believes the

proposal includes adequate Exchange

oversight and review procedures by

requiring the concurrent approval of

two Floor Officials before a trade can be

adjusted. In addition, CBOE amended

the proposal with Amendment No. 1 to

include certain other procedural

protections that limit the Exchange’s

and Floor Officials’ discretion in

adjusting trades. In particular,

Amendment No. 1 requires the

Exchange to notify its members as soon

as practicable about the possibility of a

trade adjustment, limits the adjustment

of trades to those that were or should

have been executed at the opening, and

requires that the Exchange make the

adjustments on the day when the

correction of the erroneous print

occurred. The Commission believes

these requirements should help protect

investors who execute trades at the

opening that are later adjusted.

The Commission finds good cause for

approving Amendment No. 1 prior to

the thirtieth day after the date of

publication of notice thereof in the

Federal Register. The Commission

believes that Amendment No. 1 strikes

a reasonable balance between the need

to correct erroneous trades and the need

for adequate Exchange oversight over

the process. Further, the Commission

did not receive any comments on the

original proposal, which did not contain

the protections that were incorporated

into the proposal through Amendment

No. 1.

V. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,14 that the

proposed rule change (SR–CBOE–99–

20), as amended, is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.15

Jonathan G. Katz,

Secretary.

[FR Doc. 00–13234 Filed 5–25–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42798; File No. SR–CBOE–

00–19]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Chicago Board Options Exchange,

Incorporated To Make Certain Changes

to Its Fee Schedule

May 18, 2000.

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 April 26,

2000, the Chicago Board Options

Exchange, Incorporated (‘‘CBOE’’ or

‘‘Exchange’’) filed with the Securities

and Exchange Commission

34240 Federal Register / Vol. 65, No. 103 / Friday, May 26, 2000 / Notices

3The Exchange recently has rescinded

transaction fees and trade match fees for public

customer equity options orders routed through the

Exchange’s electronic Order Routing System. See

File No. SR–CBOE–00–06.

4 17 U.S.C. 78f(b).

5 17 U.S.C. 78f(b)(4).

6 15 U.S.C. 78s(b)(3)(A)(ii).

7 17 CFR 240.19b–4(f)(2).

8 17 CFR 200.30–3(a)(12)

115 U.S.C. 78s(b)(1).

217 CFR 240.19b–4.

(‘‘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.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The CBOE proposes to rescind certain

customer equity options fees. The text of

the proposed rule change is available at

the CBOE and 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

purposed 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

The purpose of the proposed rule

change is to rescind certain customer

equity option fees. These fee changes

are being implemented by the Exchange

pursuant to CBOE Rule 2.22 and will be

in effect as of May 1, 2000.

Specifically, the CBOE proposes to

rescind transaction fees for manually

executed equity options orders for

public customers. The CBOE also

proposes to eliminate the trade match

fee for manually executed equity

options orders for public customers.3

Finally, the CBOE proposes to eliminate

the floor brokerage fee assessed to floor

brokers for execution of equity options

orders of public customers. The

Exchange believes this fee change

would generate significant savings for

its customers.

2. Statutory Basis

The CBOE believes that the proposed

rule change would be consistent with

the provisions of Section 6(b) of the

Act 4 in general and would further the

objectives of Section 6(b)(4) 5 in

particular, in that it is designed to

provide for the equitable allocation of

reasonable dues, fees, and other charges

among Exchange members.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The CBOE does not believe that the

proposed rule change would result in

any burden on competition.

Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

No written comments were solicted 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 rule change

establishes or changes a due, fee, or

other charge imposed by the Exchange,

it has become effective pursuant to

Section 19(B)(3)(A)(ii) of the Act 6 and

subparagraph (f)(2) of Rule 19b–4 7

thereunder. 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

purpose of the Act.

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 submission

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 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–00–19 and should be

submitted by June 16, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority. 8

Jonathan G. Katz,

Secretary.

[FR Doc. 00–13241 Filed 5–25–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42801; File No. SR–NASD–

00–08]

Self–Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the National Association of Securities

Dealers, Inc., Relating to Margin Rule

Amendments for Non-Equity Securities

and Exempt Accounts

May 19, 2000.

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 March 3,

2000, the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’), through its whollyowned subsidiary, NASD Regulation,

Inc. (‘‘NASD Regulation’’) filed with the

Securities and Exchange Commission

(‘‘SEC’’ or ‘‘Commission’’) the proposed

rule change as described in Items I, II,

and III below, which Items have been

prepared by NASD Regulation. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

NASD Regulation is proposing to

amend Rule 2520 to revise the margin

requirements relating to non-equity

securities and exempt accounts.

Proposed new language is in italics;

proposed deletions are in brackets.

* * * * *

2520. Margin Requirements

(a) Definitions

For purposes of this paragraph, the

following terms shall have the meanings

specified below:

(a)(1) through (a)(3) No change

(4) The term ‘‘designated account’’

means the account of: [a bank, trust

company, insurance company,