Federal Register / Vol. 62, No. 170 / Wednesday, September 3, 1997 / Notices 46527

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

2 In addition, the Commission notes that other

CBOE rules exist to help ensure a sufficient number

of Market-Makers will be available to make markets

in a particular trading crowd. For example, Rule

8.3(a) permits the CBOE Market Performance

Committee to make additional Market-Maker

appointments whenever this committee deems such

action to be in the interests of a fair and orderly

market. Therefore, if there were an insufficient

number of Market-Makers to respond to a call to a

particular trading crowd, the Market Performance

Committee could appoint additional Market-Makers

to the classes traded at the affected trading crowd,

which would make those additional Market-Makers

subject to the call to that trading crowd under Rule

7.5. Should the Exchange be unable to require a

sufficient number of Market-Makers to appear at an

affected trading crowd, the CBOE Allocation

Committee could move the location on the

Exchange’s trading floor where the affected option

classes are traded to a trading crowd that has an

adequate number of Market-Makers present or that

has a Designated Primary Market-Maker (‘‘DPM’’).

DPMs, in contrast to Market-Makers, are required to

be present at their trading posts throughout every

business day. See also Letter from Arthur B.

Reinstein, Senior Attorney, CBOE, to Michael

Walinskas, Senior Special Counsel, Division of

Market Regulation, SEC, dated August 20, 1997

(discussing the aforementioned safeguards).

SECURITIES AND EXCHANGE

COMMISSION

Sunshine Act Meeting

Notice is hereby given, pursuant to

the provisions of the Government in the

Sunshine Act, Pub. L. 94–409, that the

Securities and Exchange Commission

will hold the following meeting during

the week of September 1, 1997.

A closed meeting will be held on

Thursday, September 4, 1997 at 10:00

a.m.

Commissioners, Counsel to the

Commissioners, the Secretary to the

Commission, and recording secretaries

will attend the closed meeting. Certain

staff members who have an interest in

the matters may also be present.

The General Counsel of the

Commission, or his designee, has

certified that, in his opinion, one or

more of the exemptions set forth in 5

U.S.C. 552b(c) (4), (8), (9)(A) and (10)

and 17 CFR 200.402(a) (4), (8), (9)(i) and

(10), permit consideration of the

scheduled matters at the closed meeting.

Commissioner Johnson, as duty

officer, voted to consider the items

listed for the closed meeting in a closed

session.

The subject matter of the closed

meeting scheduled for Thursday,

September 4, 1997, at 10:00 a.m., will

be:

Institution and settlement of

injunctive actions.

Institution and settlement of

administrative proceedings of an

enforcement nature.

At times, changes in Commission

priorities require alterations in the

scheduling of meeting items. For further

information and to ascertain what, if

any, matters have been added, deleted

or postponed, please contact: The Office

of the Secretary at (202) 942–7070.

Dated: August 28, 1997.

Jonathan G. Katz,

Secretary.

[FR Doc. 97–23393 Filed 8–28–97; 4:08 p.m.]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–38972; File No. SR–CBOE–

97–34]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Chicago Board Options Exchange,

Incorporated Relating to Duties of

Market Makers

August 26, 1997.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

July 24, 1997 the Chicago Board Options

Exchange, Incorporated (‘‘CBOE’’ or

‘‘Exchange’’) filed with the Securities

and Exchange Commission (‘‘SEC’’) or

‘‘Commission’’) the proposed rule

change as described in Items I and II

below, which Items have been prepared

by the self-regulatory organization. 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 Exchange proposes to add an

interpretation to Rule 8.7 and to Rule

7.5 to clarify CBOE’s policy regarding

the enforcement of those rules

concerning the obligations of MarketMakers.

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

self-regulatory organization 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 self-regulatory organization 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 clarify the Exchange’s

policy regarding the enforcement of

Rule 8.7 and Rule 7.5 concerning the

obligations of Market-Makers. Rule

8.7(b) presently provides that, for each

class of option contracts for which a

Market-Maker holds an appointment

under Rule 8.3, the Market-Maker has a

continuous obligation to engage, to a

reasonable degree under the existing

circumstances, in dealings for his own

account when there exists, or it is

reasonably anticipated that there will

exist, a lack of price continuity, a

temporary disparity between the supply

of and demand for a particular option

contract, or a temporary distortion of the

price relationships between option

contracts of the same class. In short,

Rule 8.7(b) sets forth a Market-Maker’s

obligation to make markets in a class of

options in which he holds an

appointment.

Rule 7.5 presently provides a

mechanism by which Exchange Order

Book Officials may ‘‘call upon’’ MarketMakers to make bids (offers) in a

particular class of options that

contribute to meeting the standards set

forth in Rule 8.7. In particular, at the

request of a floor broker or on the Order

Book Official’s own initiative in the

interests of a fair, orderly and

competitive market, an Order Book

Official may call upon those MarketMakers who hold an appointment to the

particular options class or who that day

have effected a transaction for their

accounts in that class of options. The

Order Book Official is required to make

a record of Market-Makers ‘‘who fail to

respond’’ to this request.2

The Exchange has always interpreted

Rule 8.7(b) as applying to MarketMakers who are present on the

Exchange floor and as applying with
46528 Federal Register / Vol. 62, No. 170 / Wednesday, September 3, 1997 / Notices

3Although Rule 8.7 and Rule 7.5 do not require

Market-Makers to appear at the Exchange to

perform their market-making duties, the

Commission notes that other CBOE rules encourage

Market-Makers to undertake their market- making

functions. For example, Rule 8.60 provides that the

CBOE Market Performance Committee may take

remedial action against Market-Makers or trading

crowds that fail to satisfy minimum minimum

market performance standards. Accordingly, the

failure of a Market-Maker or trading crowd to

appear at the Exchange and to make markets in a

volatile market situation is a factor the CBOE

Market Performance Committee could consider in

evaluating the performance of a Market-Maker or

trading crowd and in determining whether to take

remedial action against a Market-Maker or trading

crowd pursuant to Rule 8.60. Letter from Arthur B.

Reinstein, Senior Attorney, CBOE, to Michael

Walinskas, Senior Special Counsel, Division of

Market Regulation, SEC, dated August 20, 1997.

4Spicer v. Chicago Board Options Exchange, Inc.,

No. 88C 2139, 1990 WL 172712 (N.D. Ill. Oct. 30,

1990) aff’d, 977 F.2d 255 (7th Cir. 1992).

5 15 U.S.C. § 78f(b)(5).

6 15 U.S.C. § 78s(b)(3)(A).

7 17 CFR 240.19b–4.

8 17 CFR 200.30–3(a)(12).

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

respect to the trading crowd in which

the Market-Maker is present at the time

in question. Similarly, the Exchange has

always interpreted Rule 7.5 as applying

to Market-Makers who are present on

the Exchange floor at the time of the

Order Book Official call. The Exchange

has not interpreted Rule 8.7 or Rule 7.5

as requiring Market-Makers to appear on

the Exchange floor to make markets on

any particular day or under any

particular market conditions.3 However,

when a Market-Maker is on the trading

floor and is present in a particular

trading crowd, the Exchange does

enforce the obligations set forth in Rule

8.7 with respect to the Market-Maker’s

activities in that trading crowd.

Similarly, whenever a Market-Maker is

on the trading floor, the Exchange

enforces the obligations set forth in Rule

7.5 as to that Market-Maker.

The Exchange’s present interpretation

is consistent with Rule 8.7(b)

paragraphs (i) through (iii), which make

clear that, at the station where a MarketMaker is present, a Market-Maker is

expected to perform certain activities in

the course of maintaining a fair and

orderly market. Similarly, the

Exchange’s present interpretation is

consistent with the text of Rule 7.5

which, by authorizing Order Book

Officials to ‘‘call upon’’ Market-Makers

and by requiring a record of those who

‘‘fail to respond,’’ implicitly recognizes

that this procedure will apply to

Market-Makers whose physical presence

on the floor will enable them to hear

and ‘‘respond’’ to such a ‘‘call.’’ The

proposed Interpretation .09 to Rule 8.7

and proposed Interpretation .04 to Rule

7.5 would clarify CBOE’s existing

interpretation and enforcement policy

regarding Rule 8.7(b) and Rule 7.5.

The Exchange believes such

clarification is necessary because it

knows of at least one instance where

Rule 8.7 obligations were

misinterpreted. In a class action lawsuit

filed against the Exchange, Spicer et al.

v. Chicago Board Options Exchange,

Inc. et al.,4 counsel for the class took the

position that Rule 8.7 imposed an

obligation on all Market-Makers to

appear on the Exchange’s trading floor

and to make markets under certain

market conditions. The Exchange

believes the proposed interpretation

will help avoid such misinterpretation

of either Rule 8.7(b) or Rule 7.5 in the

future.

2. Statutory Basis

The Exchange believes the proposed

rule change is consistent with and

furthers the objectives of Section 6(b)(5)

of the Act 5 in that the Exchange’s

clarification of its interpretation and

policy regarding Market-Maker

obligations under Rule 8.7 and Rule 7.5

is designed to perfect the mechanism of

a free and open market and to protect

investors and the public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange believes the proposed

rule change does not impose any burden

on competition that is 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

The Exchange has neither solicited

nor received written comments on the

proposed rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The foregoing rule change constitutes

an interpretation with respect to the

enforcement of an existing rule of the

self-regulatory organization. Therefore,

the proposed rule change has become

effective pursuant to Section 19(b)(3)(A)

of the Act 6 and subparagraph (e) of Rule

19b–4 thereunder.7 At any time within

sixty 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.

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, N.W.,

Washington, D.C. 20549. 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 at

the Commission’s Public Reference

Room, 450 Fifth Street, N.W.,

Washington, D.C. 20549. 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–97–

34 and should be submitted by

September 24, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–23340 Filed 9–2–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–38974; File No. SR–CBOE–

97–32]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Chicago Board Options Exchange, Inc.

Relating to the Operation and

Enforcement of Rules Relating to the

Transmission of Orders to Exchange

Electronic Order Systems Including

RAES

August 26, 1997.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

July 22, 1997, 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 self-regulatory

organization. The Commission is

publishing this notice to solicit