50970 Federal Register / Vol. 62, No. 188 / Monday, September 29, 1997 / Notices

26 15 U.S.C. 78s(b)(2).

27 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See Securities Exchange Act Release No. 38213

(January 28, 1997), 62 FR 5265 (February 4, 1997).

4 In Amendment No. 1, the Exchange provided a

new definition for ‘‘vertical spread interval’’ and

several technical non-substantive revisions to the

margin rules. See Letter from Tim Thompson,

Senior Attorney, CBOE, to John Ayanian, Special

Counsel, Office of Market Supervision (‘‘OMS’’),

Division of Market Regulation (‘‘Market

Regulation’’), Commission, dated March 18, 1997

(‘‘Amendment No. 1’’).

5 In Amendment No. 2, the Exchange amended its

spread rules for margin when the short index option

of a spread position is a Packaged Vertical Spread,

as described more fully herein. Amendment No. 2

also verified that CBOE will list and add series for

Packaged Vertical Spreads in accordance with Rule

24.9, Interpretation and Policy .01(c). Finally, in

Amendment No. 2, the Exchange indicated that

position limits for Packaged Vertical Spreads based

on the S&P 500 and 100 will be the same as existing

position limits for the respective index options and

will be aggregated with other option contracts on

the same index. See Letter from William M. Speth,

Sr. Research Analyst, Product Development,

Research Department, CBOE, to Howard L. Kramer,

Senior Associate Director, OMS, Market Regulation,

Commission, dated May 2, 1997 (‘‘Amendment No.

2’’).

6 In Amendment No. 3, the Exchange made

several non-substantive changes to the proposal. In

addition, added Rule 24.4(e) to reflect that position

limits for Packaged Vertical Spreads with

multipliers of 500 would have position limits equal

to 1/5th of the position limits for products with

multipliers of 100. The Exchange also clarified that

for Packaged Vertical Spreads with multipliers of

500, the spread rules for margin would only apply

when there are 5 contracts with a 100 multiplier

offsetting one contract with a 500 multiplier.

Finally, the Exchange also clarified its policy for

changing the multiplier and/or the vertical spread

intervals, as described more fully herein. See

vertical spread intervals, as described more fully

herein. See Letter from Eileen Smith, Director,

Product Development, Research Department, CBOE,

to John Ayanian, Special Counsel, OMS, Market

Regulation, Commission, dated June 4, 1997

(‘‘Amendment No. 3’’).

7A vertical spread is the combination of one long

and one short options position having the same

expiration. A call vertical spread will have a lower

strike price on the long options and a put spread

will have a higher strike price on the long option.

For example, a call vertical spread might consist of

one long December (expiration month) 700 (strike

price) call option and one short December 690 call

option.

8See Amendment No. 3, supra note 6.

9Only European-style Packaged Vertical Spreads

will be available to investors. A European-style

option is one that may be exercised only during a

limited period of time prior to expiration.

10An American-style option is one that may be

exercised at any time prior to expiration.

11See Amendment No. 3, supra note 6.

12Specifically, the ‘‘vertical spread interval’’

means a value specified by the Exchange which,

when added to the exercise price for call series or

subtracted from the exercise price for put series

defines the index level over which (for calls) and

under which (for puts) the value of the contract will

have its maximum value at expiration. See

Amendment No. 1, supra note 4.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,26 that the

proposed rule change (File No. SR–

CBOE–96–75), is amended, is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.27

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–25688 Filed 9–26–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39116; File No. SR–CBOE–

96–76]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change and

Notice of Filing and Order Granting

Accelerated Approval of Amendment

Nos. 1, 2, and 3 to the Proposed Rule

Change by the Chicago Board Options

Exchange, Incorporated Relating to the

Listing and Trading of Packaged

Vertical Spreads

September 22, 1997.

I. Introduction

On December 16, 1996, the Chicago

Board Options Exchange, Inc. (‘‘CBOE’’

or ‘‘Exchange’’) filed a proposed rule

change with the Securities and

Exchange Commission (‘‘SEC’’ or

‘‘Commission’’), pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘’Act’’) 1 and Rule 19b–4

thereunder,2 to list for trading Packaged

Vertical Spreads based upon the S&P

100 and the S&P 500 Indexes.

Notice of the proposal was published

for comment and appeared in the

Federal Register on February 4, 1997.3

The Exchange filed with the

commission Amendment Nos. 1,4 2,5

and 36 to the proposal on March 18,

May 2, and June 5 1997, respectively.

No comment letters were received on

the proposed rule change. This order

approves the Exchange’s proposal, as

amended.

II. Description of the Proposal

The Exchange proposes to list for

trading Packaged vertical Spreads based

upon the S&P 100 index and the S&P

500 index (‘‘Indexes’’). A Packaged

Vertical Spread is a packaged Europeanstyle option that replicates the behavior

and payout of a vertical spread 7

composed of standard index option

contracts. The Exchange proposes that

the Packaged Vertical Spreads may have

a multiplier of 100 (as with standard

index options overlying the S&P 100

and the S&P 500) or a multiplier of 500.

To date, the Exchange has not

determined whether Packaged Vertical

Spreads will initially have a multiplier

of 100 or 500. The Exchange, however,

does not intend to simultaneously open

series with both a 100 and a 500

multiplier. If the Exchange introduces

Packaged Vertical Spreads with a new

multiplier with a new tricker symbol, it

will only result in a brief period (1 or

2 months) of open series with both a 100

and a 500 multiplier. The Exchange

represents further that it will notify the

Commission so that it can be

determined what appropriate steps

should be taken prior to listing

Packaged Vertical Spreads with the

different multiplier.8

The Exchange believes Packaged

Vertical Spreads on the Indexes will

provide advantages to the investing

public that are not provided for by

standard index options. First, the

Exchange believes the Packaged Vertical

Spreads on the Indexes will offer

investors a relatively low risk security

which results because Packaged Vertical

Spreads, by their nature, have a

maximum gain and loss that can be

realized regardless of the movement in

the index level. These options are the

equivalent of standard vertical spreads

(i.e., the combination of one long and

one short options position with the

same expiration) traded as a single

security. Second, the ‘‘packaging’’ of a

strategy of two option positions into one

option product reduces transactionrelated expenses because the investor

will only have to enter into one

transaction. In the case of Packaged

Vertical Spreads with a multiplier of

500, the transaction-related expenses

would be substantially reduced from a

comparable trade involving standard

index options which currently have a

100 multiplier. Third, in the case of

Packaged Vertical Spreads overlying the

S&P 100, the investor will have the

opportunity to invest in an option

product that has European-style

exercise.9 Standard S&P 100 options

(‘‘OEX’’) have American-style

exercise.10 Accordingly, with Packaged

Vertical Spreads there is no early

exercise risk. The Exchange expects

Packaged Vertical Spreads on the

Indexes to be supported enthusiastically

by market-makers because vertical

spread trading is a familiar strategy to

professional traders and the Packaged

Vertical Spreads can be easily

incorporated into the overall risk profile

of the market-maker’s trading strategy in

standard index options.

The Exchange proposes to amend

Rule 24.1 to describe the new product 11

as well as the term ‘‘vertical spread

interval’’.12
Federal Register / Vol. 62, No. 188 / Monday, September 29, 1997 / Notices 50971

13See Amendment No. 3, supra note 6.

14See Amendment No. 3, supra note 6.

15The Exchange represents that it would not

allow margin offset, pursuant to Rule 24.11(c),

between spreads with different spread intervals. See

Amendment No. 3, supra note 6.

16See Amendment No. 2, supra note 5.

17See Memorandum from Joe Corrigan, OPRA, to

Eileen Smith, CBOE, dated November 21, 1996.

18 15 U.S.C. 78f(b)(5).

19 In approving this rule, the Commission notes

that it has considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

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

20Pursuant to Section 6(b)(5) of the Act, the

Commission must predicate approval of any new

option proposal upon a finding that the

introduction of such new derivative instrument that

served no hedging or other economic function,

because any benefits that might be derived by

market participants likely would be outweighed by

the potential for manipulation, diminished public

confidence in the integrity of the markets, and other

valid regulatory concerns. In this regard, the trading

of Packaged Vertical Spreads will provide investors

with another hedging vehicle that should reflect the

overall movement of the U.S.-listed stock market.

Position and Exercise Limits

The Exchange is proposing position

limits for Packaged Vertical Spreads

overlying the S&P 100 of 25,000

contracts. The Exchange is proposing

position limits for Packaged Vertical

Spreads overlying the S&P 500 of

100,000 contracts. For position limit

purposes, Packaged Vertical Spreads

will be aggregated with option contracts

on the same index. These position limits

are consistent with the position limits

that have been established for standard

index options on the S&P 100 and 500

indexes, respectively. The exercise

limits for Packaged Vertical Spreads

will be equal to the position limits set

forth above in accordance with the

terms of CBOE Rule 24.5.

To the extent that the Exchange lists

and a member holds Packaged Vertical

Spread positions with multipliers other

than 100 (e.e., 500), the contract will be

counted for position limit purposes as

the number of contracts times the

contract multiplier divided by 100. For

example, each Packaged Vertical Spread

based on the S&P 100 with a multiplier

of 500 would count as 5 Packaged

Vertical Spread contracts for the

purpose of determining compliance

with the position limits.13 In addition,

if a member holds Packaged Vertical

Spread positions with different

multipliers, that overlie the same index,

these positions would be aggregated in

determining compliance with the

position limits.

Margin

With respect to margin requirements,

risk exposure is limited in Packaged

Vertical Spreads, and therefore, the

maximum margin requirements should

not exceed the maximum exposure

amount which, for each Vertical Spread

option contract equals the vertical

spread interval times the index

multiplier. The proposed amendments

state that the maximum margin required

for a put or call Vertical Spread option

contract carried in a short position shall

not exceed this maximum exposure

amount. In addition, the amendment

provides that for each put or call

Vertical Spread option contract carried

in a short position in a cash account, the

customer must deposit cash equal to the

maximum exposure amount. The rules

will also provide that the required

margin for a spread when the exercise

price of the long call index option is

greater than the exercise price of the

short call index option where at least

one leg of the spread is a CAPS or

Vertical Spread would be the lesser of

(1) The difference in the aggregate

exercise prices or (2) the cap interval or

the vertical spread interval as

appropriate. For Packaged Vertical

Spreads with multipliers of 500, the

spread rules for margin would only

apply when there are 5 contracts with

a 100 multiplier offsetting a contract

with a 500 multiplier.14

Listing of Series

The Exchange expects to list contracts

having vertical spread intervals of

ranging from 10 to 50 points. The

Exchange does not intend to

simultaneously open series with more

than one vertical spread interval.

However, the CBOE may introduce a

new series with a new vertical spread

interval with a new ticker symbol

resulting in a brief period (1 or 2

months) of open series with two vertical

spread intervals.15

Initially, the Exchange intends to list

an at-the-money and various strikes

around the at-the-money in the first two

near-term months in accordance with

Rule 24.9, Interpretation and Policy

.01(c).16 New strikes will be added

when the underlying trades through the

highest or lowest strike available.

Settlement

The expiration date for Packaged

Vertical Spreads will be the Saturday

immediately following the third Friday

of the expiration month. Exercise will

result in the delivery of cash on the

business day following expiration. The

exercise settlement amount will be

equal to the difference between the OEX

or SPX settlement value, as appropriate,

and the strike price of the Packaged

Vertical Spread contract; or the amount

of the spread interval, whichever is less,

multiplied by the multiplier, i.e., either

$100 or $500. As noted above, Packaged

Vertical Spreads will have a Europeanstyle of exercise.

Miscellaneous

CBOE will use the same surveillance

methods it currently employs with

respect to their broad-based index

options.

CBOE has also been informed that the

Options Price Reporting Authority

recently added another outgoing high

speed line from OPRA processor and

thus, has the capacity to support the

new series associated the listing of

Packaged Vertical Spreads.17

By adopting rules that will provide for

the trading of index options that will

provide investors with certain

advantages over current products in the

way of reduced transaction costs and

risk reduction, CBOE believes the

proposed rule change is consistent with

and furthers the objectives of Section

6(b)(5) of the Act in that it is designed

to perfect the mechanisms of a free and

open market and to protect investors

and the public interest.

III. Commission Finding and

Conclusions

The Commission finds that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder

applicable to a national securities

exchange, and, in particular, the

requirements of Section 6(b)(5) of the

Act.18 Moreover, the Exchange’s

proposal to list and trade Package

Vertical Spreads on the S&P 100 and

S&P 500 indexes strikes a reasonable

balance between the Commission’s

mandates under Section 6(b)(5) to

remove impediments to and perfect the

mechanism of a free and open market

and a national market system, while

protecting investors and the public

interest.19 Specifically, the Commission

finds that the Packaged Vertical Spreads

are an innovative financial product that

will provide investors with additional

choices and flexibility in their use of

derivatives,20 In addition, Packaged

Vertical Spreads offer both holders and

writers of options a means to participate

in the options markets at a

predetermined maximum gain or loss.

Under the terms of Packaged Vertical

Spreads, the option writer’s (holder’s)

maximum loss (gain) is established at

the time of the investment by the

option’s vertical spread interval.

Accordingly, Packaged Vertical Spreads

permit investors to participate in the
50972 Federal Register / Vol. 62, No. 188 / Monday, September 29, 1997 / Notices

21The Commission notes that CBOE Rule 24.1, as

amended, defines Packaged Vertical Spreads.

Because the current Exchange proposed definition

is limited to Packaged Vertical Spreads on the S&P

500 and 100 Indexes, the Commission believes the

Exchange is required to submit a rule filing

pursuant to Section 19(b) of the Act in order to list

Packaged Vertical Spreads on another stock index

or individual security.

22The Exchange represents that it would not

allow margin offset, pursuant to Rule 24.11(c),

between spreads with different spread intervals. See

Amendment No. 3, supra note 6.

23See Amendment No. 3, supra note 6.

24 If the Exchange introduces Packaged Vertical

Spreads with a multiplier of 500, it will count each

Packaged Vertical Spreads as 5 Packaged Vertical

Spread contracts for the purpose of determining

compliance with the position limits.

25See Securities Exchange Act Release No. 29865

(October 28, 1991), 56 FR 56255 (November 1,

1991).

26For any long Packaged Butterfly Spread

position which is offset by a short option position

of any type, the minimum margin required on such

a position shall be the full purchase price on the

Packaged Butterfly Spread plus the margin required

in Rule 24.11(b) for the short position. See Rule

24.11(c)(1)(D). In addition, for any long Packaged

Vertical Spread position which is offset by short

position that is not a capped option or a Packaged

Vertical Spread, the minimum margin required on

such a position is the full purchase price of the long

Packaged Vertical Spread position plus the margin

required in Rule 24.11(b) for the short position. See

Rule 24.11(c)(1)(C).

27 In addition, the long contract must be paid in

full. The proceeds from the short option can be

used to pay for the long contract.

28The writer’s maximum exposure for this spread

position is determined as follows:

short loss¥long gain = maximum exposure

$5,000¥(700¥670) × 100

$5,000¥(30) × 100

$5,000¥$3,000 = ($2,000)

options market at a known cost. In

addition, the Commission believes that

Packaged Vertical Spreads, which

replicate the combination of two options

at different exercise prices, on the same

underlying interest and expiration,

likely will benefit investors by

providing them with a more efficient

and cost effective method of executing

spread transactions.

The Commission also finds that the

specific rules proposed by the CBOE to

accommodate Packaged Vertical

Spreads are consistent with the Act.21

Specifically, the Commission believes

that it is reasonable for the Exchange to

set a vertical spread interval range from

10 to 50 points. In response to the

Commission’s concerns that having

series of Packaged Vertical Spreads

simultaneously open with different

vertical spread intervals might be

confusing to investors, the Exchange

does not intend to simultaneously open

series with more than one vertical

spread interval. However, the CBOE

may introduce a new series with a new

vertical spread interval with a new

ticker symbol resulting in a brief period

(1 or 2 months) of open series with two

vertical spread intervals.22 The

Commission notes that the Exchange

may submit a ‘‘noncontroversial filing’’

pursuant to Section 19(b)(3)(A) of the

Act and Rule 19b–4(e)(6) thereunder if

it decided to change the present vertical

spread range (currently 10 to 50 points)

and the proposal does not raise any

other regulatory issues.

Similarly, the Commission believes it

is reasonable for the Exchange to list

Packaged Vertical Spreads with either a

100 or 500 multiplier. In response to the

Commission’s concerns that having

series of Packaged Vertical Spreads

simultaneously open with different

multipliers might be confusing to

investors, the Exchange does not intend

to simultaneously open series with two

different multipliers. However, the

CBOE may introduce a new series with

a new multiplier with a new ticker

symbol resulting in a brief period (1 or

2 months) of open series with two

multipliers. The Commission notes that

it will be notified by the Exchange to

determine what appropriate steps

should be taken prior to listing

Packaged Vertical Spreads with the

different multiplier.23

The Commission also notes that

Packaged Vertical Spreads on the S&P

500 and S&P 100 indexes will be subject

to the same position and exercise limit

requirements that currently apply to

S&P 500 and S&P 100 index options,

respectively. In particular, Packaged

Vertical Spreads on the S&P 500 will be

aggregated with all other S&P 500 index

options, subject to a 100,000 contract

limit under Rule 24.4(b). Packaged

Vertical Spreads on the S&P 100 index

will be aggregated with all other S&P

100 index options, subject to a 25,000

contract limit under Rule 24.4(b).24

The Commission believes that the

proposed margin treatment for Packaged

Vertical Spreads in cash and margin

accounts is consistent with the Act.

Specifically, the Commission believes

that, similar to short capped options

positions,25 it is reasonable to permit

short Packaged Vertical Spreads

positions in a cash account so long as

the maximum exposure (the vertical

spreads interval) is deposited. This

position is the equivalent of a

completely covered position, because

the maximum risk of loss is already on

deposit. In addition, the Commission

believes that the proposed margin

requirements for Packaged Vertical

Spreads in margin accounts is

reasonable because they are virtually

identical to the margin requirements for

traditional short stock index options

positions held in margin accounts,

except that a limit equal to the

maximum exposure to the option writer

is placed on the margin requirement. It

is reasonable to limit the margin in this

way because the margin would cover

100% of the writer’s exposure, thereby

requiring no additional margin calls.

The Commission also believes that the

proposed margin treatment for a spread

transaction where: (1) The short leg of

the spread is a Packaged Vertical

Spread; (2) the long leg of the spread is

a long call index option (not a Packaged

Butterfly Spread); 26 and (3) the exercise

price of the long call index option is

greater than the exercise price of the

short call Packaged Vertical Spread is

consistent with the Act. Specifically, it

is reasonable to limit the margin in this

case to the lesser of the difference in

aggregate exercise prices or the vertical

spread interval because the margin

would cover 100% of the writer’s

exposure, thereby requiring no

additional margin calls.27 For example,

a spread involving a long 670 S&P 500

index call option and a short 650

Packaged Vertical Spread on the S&P

500, with a vertical spread interval of

10, the margin deposit requirement

would be the lesser of: (1) The

difference in aggregate exercise prices

((670¥650) × 100 = $2,000)) and (2) the

vertical spread interval times the

multiplier (i.e., 10 × 100 = $1,000). The

margin requirement in this case would

be $1,000. The writer’s maximum

exposure is when the current index

level is 650, and is limited to $1,000.

For the same spread transaction

where the vertical spread interval is 50,

the margin deposit requirement would

be the lesser of: (1) The difference in

aggregate exercise prices ((670¥650) ×

100 = $2,000) and (2) the vertical spread

interval times the multiplier (i.e., 50 ×

100 = $5,000). The margin deposit

requirement in this case would be

$2,000. The writer’s maximum exposure

is when the current index level is 700,

and is limited to $2,000.28

In summary, the Commission believes

that the Packaged Vertical Spreads on

the S&P 500 and S&P 100 Indexes will

provide investors with additional

choices and flexibility in their use of

derivatives and offer both holders and

writers of options a means to participate

in the options markets at a

predetermined maximum gain or loss.

Further, the Commission notes that in

order to promote investor protection

and to ensure adequate disclosure in

connection with Packaged Vertical

Spreads, the rules pertaining to

standardized options and the

requirements of Exchange Act Rule 9b–

1 will apply to trading in Packaged
Federal Register / Vol. 62, No. 188 / Monday, September 29, 1997 / Notices 50973

29 In reviewing any disclosure materials

submitted, the Commission intends to assure that

the materials specifically describe the risks and

characteristics associated with trading Packaged

Spreads. The trading of Packaged Vertical Spreads

is expressly contingent upon the Commission’s

approval of such an ODD supplement.

30As described above, Packaged Vertical Spreads

on the S&P 500 and 100 indexes will be aggregated

with other options on the same index.

31 15 U.S.C. 78s(b)(2).

32 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See Letter from James F. Duffy, Executive Vice

President and General Counsel, Legal and

Regulatory Policy, American Stock Exchange

(‘‘Amex’’), to Jonathan G. Katz, Secretary,

Commission, dated June 20, 1996 (‘‘Amex letter’’).

4See Securities Exchange Act Release Nos. 37121

(April 17, 1996), 61 FR 17932 (April 23, 1996)

(notice of File No. SR–CHX–96–12) and 37589

(August 21, 1996), 61 FR 44370 (August 28, 1996)

approval order). In that rule filing, the Exchange

also stated its intent to trade CountryBasket

securities, pursuant to a request for unlisted trading

privileges. CountryBasket securities are Units

designed to track the performance of specific

foreign indices, more fully described in SR–CHX–

96–12 and SR–NYSE–95–23. Id. See also Securities

Exchange Act Release No. 36923 (March 5, 1996),

61 FR 10410 (March 13, 1996) (order approving File

No. SR–NYSE–95–23).

Vertical Spreads. The Commission

believes it is important to provide

investors with information regarding the

rights and characteristics of Packaged

Vertical Spreads. In this regard,

Packaged Vertical Spread investors will

receive a special supplement to the

Options Clearing Corporation’s (‘‘OCC’’)

Options Disclosure Document (‘‘ODD

Supplement’’) explaining in detail the

risks and characteristics of Packaged

Spreads.29

The Commission finds good cause for

approving Amendment Nos. 1, 2, and 3

prior to the thirtieth day after the date

of publication of notice of filing thereof

in the Federal Register. Specifically,

Amendment No. 1 to CBOE’s proposal

set forth a new definition for ‘‘vertical

spread interval’’ and several technical

non-substantive revisions to the margin

rules.

Amendment No. 2 to CBOE’s proposal

describes changes to its spread rules for

margin when the short index option of

a spread position is a Packaged Vertical

Spread, as described above; (2) verifies

that CBOE will list and add series for

Packaged Vertical Spreads in

accordance with Rule 24.9,

Interpretation and Policy .01(c); and (3)

sets position limits for Packaged

Vertical Spreads based on the S&P 500

and 100 to equal existing position limits

for the respective index options.30 The

Commission believes the Exchange’s

proposed reduction in position limits

from those originally proposed presents

no new regulatory issues and can be

approved on an accelerated basis.

Further, the originally proposed higher

position limits were subject to the full

21-day comment period without any

comments being received by the

Commission. Amendment No. 3 to

CBOE’s proposal also makes several

technical non-substantive changes. In

addition, the Exchange amended the

definition of Packaged Vertical Spread

to further clarify the structure of the

product.

The Commission believes that the

changes proposed in Amendment Nos.

1, 2, and 3, unless otherwise stated

above, merely clarify in the rule text

what was originally proposed by the

Exchange and will help to ensure that

investors understand the specifications

and trading characteristics of the

Packaged Vertical Spread contracts. In

addition, the Commission notes that the

original proposal was published for the

full 21-day comment period without any

comments being received by the

Commission.

Accordingly, the Commission finds

good cause, consistent with Sections

6(b)(5) and 19(b)(2) of the Act, to

approve Amendment Nos. 1, 2 and 3 to

the proposed rule change, on an

accelerated basis.

VI. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning Amendment Nos.

1, 2, and 3 to the proposed rule change.

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

Section, 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 SR–CBOE–96–76 and

should be submitted by October 20,

1997.

V. Conclusion

Based upon the aforementioned

factors, the Commission finds that the

proposed changes relating to the listing

and trading of Packaged Vertical

Spreads on the S&P 500 and 100 are

consistent with the requirements of

Section 6(b)(5) and the rules and

regulations thereunder. The initiation of

Packaged Vertical Spread trading,

however, is conditioned upon the

issuance of an order approving an ODD

Supplement, pursuant to Rule 9b–1 of

the Act.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,31 that the

proposed rule change (File No. SR–

CBOE–96–76), as amended, is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.32

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–25689 Filed 9–26–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39117; File No. SR–CHX–

96–14]

Self-Regulatory Organizations; Order

Granting Approval to Proposed Rule

Change by the Chicago Stock

Exchange, Inc., Relating to Trading of

Particular Investment Company Units

September 22, 1997.

I. Introduction

On April 23, 1996, the Chicago Stock

Exchange, Inc. (‘‘CHX’’ or ‘‘Exchange’’)

submitted to the Securities and

Exchange Commission (‘‘Commission’’),

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

Securities Exchange Act of 1934

(‘‘Act’’) 1 and Rule 19(b)–4 thereunder,2

a proposed rule change to amend Article

XXVIII of the CHX’s Rules to permit

them to trade certain units representing

an interest in a registered investment

company (‘‘Units’’) on CHX.

The proposed rule change, together

with the substance of the proposal, was

published for comment in Securities

Exchange Act Release No. 37228 (May

20, 1996) 61 FR 26940 (May 29, 1996).

One comment letter was received in

response to the proposal.3

II. Background and Description

In SR–CHX–96–12, the Exchange

requested and received approval of

proposed rule changes allowing the

listing and/or trading of Units.4 CHX is

proposing to apply its existing listing

standards for the trading of Units to the

trading of World Equity Benchmark

Securities (‘‘WEBS’’) pursuant to

unlisted trading privileges (‘‘UTP’’).

CHX is also proposing to amend Article