53358 Federal Register / Vol. 62, No. 198 / Tuesday, October 14, 1997 / Notices

4 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3The Exchange filed Amendment No. 1 to the

proposed rule change, the substance of which is

incorporated into this notice. See letter from

Timothy H. Thompson, Senior Attorney, CBOE, to

John Ayanian, Special Counsel, Market Regulation,

Commission, dated September 16, 1997

(‘‘Amendment No. 1’’).

4The Exchange’s OEX firm quote program was

approved by the Commission under Section 19(b)

of the Act in Securities Exchange Act Release No.

37388 (June 28, 1996), 61 FR 35821 (July 8, 1996).

thereunder. At any time within 60 days

of the filing of such proposed rule

change, the Commission may summarily

abrogate such rule change if its 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. Copies of the filing will also be

available for inspection and copying at

the principal office of the Exchange. All

submissions should refer to File No.

SR–BSE–97–05 and should be

submitted by November 4, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.4

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–27047 Filed 10–10–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39202; File No. SR–CBOE–

97–45]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the Chicago Board

Options Exchange, Inc., Relating to

Certain Rules Governing Market-Maker

Obligations With Respect to the

Trading of Options on the DJIA

October 3, 1997.

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 8, 1997,3 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 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 and is

granting accelerated approval to the

proposed rule change.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The CBOE proposes to amend certain

of its rules governing market-maker

obligations with respect to the trading of

options on the Dow Jones Industrial

Average (‘‘DJIA’’ or ‘‘Index’’). 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 III 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 Exchange is proposing to amend

certain Exchange rules governing

market-maker obligations with respect

to the trading of options on the DJIA

(trading symbol ‘‘DJX’’). Specifically,

the Exchange is proposing to make the

following changes with respect to

trading in options on the DJIA: (i)

Amending Rule 24.17 to apply the rules

governing the Retail Automatic

Execution System (‘‘RAES’’) eligibility

in options on the Standard & Poor’s 100

Stock Index (‘‘S&P 100’’) (‘‘OEX’’) to

options on the DJIA; (ii) amending Rule

24.17 to add an interpretation and

policy that the provisions of paragraph

(b)(v)(C) and (D) will not apply to DJX

market makers until December 1, 1997;

(iii) creating Rule 24.17A, RAES

Operations in Options on the DJIA,

which applies the RAES operations in

OEX to DJX and states that the Exchange

can determine the maximum order size

for RAES orders for options on the DJIA

up to 100 contracts, a higher level than

for OEX; (iv) amending paragraph (a)(2)

of Rule 8.51 (and related interpretations)

governing the minimum firm quote

requirement, for a market-maker trading

crowd; (v) applying the terms of the

previously approved OEX firm quote

program to the DJX trading crowd, and

amending the fine amount under the

Minor Rule Plan for violations of the

Firm Quote Rule; (vi) amending the fine

schedule for violations of the Firm

Quote Rule for OEX; and (vii) amending

Rule 8.16, RAES Eligibility in Equity

Options, to indicate that it does not

apply to DJIA options.4

The purpose for these proposed rule

changes is to enhance market-maker

obligations with respect to the trading of

options on the DJIA. The Exchange

expects these change to enhance the

depth and liquidity of the market for

options on the DJIA. The Exchange also

notes that because option contracts on

the DJIA will be based upon one-one

hundredth of the value of the DJIA,

these options contracts will overlie

approximately one-tenth of the value

that other broad-based index options

overlie, such as options on the Standard

& Poor’s 500 Stock Index (‘‘SPX’’) and

on OEX. This is so because the values

of the S&P 500 Index and the S&P 100

Index currently are approximately onetenth of the value of the DJIA, yet OEX

and SPX are based on the full value of

their respective underlying indexes.

Consequently, the Exchange believes an

increase in these market-maker

obligations is necessary to ensure an

appropriate level of market-maker

commitment.

Under the proposed rule change, the

rules applicable to RAES in OEX will

apply to RAES in DJX. The proposed

rule change revises Rule 24.17, RAES

Eligibility in OEX to refer to ‘‘Option

Class’’ instead of OEX. ‘‘Option Class’’

will mean either OEX or DJX, as

appropriate. Also, the Rule will be

revised to refer to the ‘‘appropriate

Committee’’ which will mean the OEX

Market Performance Committee’’ the
Federal Register / Vol. 62, No. 198 / Tuesday, October 14, 1997 / Notices 53359

5Rule 24.17(b)(v) (C) and (D) state that a market

maker in RAES who wants to participate in OEX

(and now DJX) must execute at lease seventy-five

percent of his market-maker contracts for the

preceding calendar month in OEX and execute at

least seventy-five percent of his market maker

trades for the preceding calendar month in OEX

(and now DJX) in person.

6See letter from Timothy H. Thompson, Senior

Attorney, CBOE, to John Ayanian, Special Counsel,

Market Regulation, Commission, dated September

24, 1997 (‘‘September letter’’). See Securities

Exchange Act Release Nos. 23490 (August 1, 1996),

51 FR 28788 (August 11, 1986) (firms on the Order

Routing System will automatically be on RAES for

purposes of routing small public customer market

or marketable limit orders into RAES; the system

will automatically attach a price to an order when

it receives the order, which price will be

determined from this displayed quote at the time

of the order’s entry; RAES orders that match

customer orders on the book will not be kicked out

but will be executed on RAES against normal

priority rules; participating market makers will be

assigned to the system as contraparties on a rotating

basis; Exchange rule shall not apply to the extent

they are inconsistent with the terms of the program;

RAES orders will count towards fulfillment of the

in-person requirement of Rule 8.7); and 38702 (May

30, 1997), 62 FR 31184 (June 6, 1997) (all or none,

immediate or cancel, fill or kill, and minimum

quantity contingency orders that are otherwise

RAES eligible may be executed on RAES).

7See supra note 6 and letter from Timothy H.

Thompson, Senior Attorney, CBOE, to Michael

Walinskas, Senior Special Counsel, Market

Regulation, Commission, dated October 2, 1997

(‘‘October letter’’). OEX and IBM options are the

only two classes where RAES orders are granted

priority over booked orders.

8See October letter supra note 7. The primary

purpose and benefit of this policy of ‘‘kicking out’’

RAES orders is to allow the ‘‘kicked out’’ RAES

order to interact with the booked order.

9The Commission notes that this does not take

into account the market moving through the booked

order before it is executed.

10The Exchange expects the number of DJX RAES

orders that would be ‘‘kicked out’’ under the normal

priority rules would be significant because of the

fact that DJX is designed to appeal to retail

customers who are more likely to send in small

RAES eligible orders, the larger RAES eligible order

size for DJX, and the greater percentage of DJX

series that will be eligible for RAES in DJX (all

series) than in OEX (only those series where the

offer is $10 or less are currently eligible).

case of OEX and ‘‘the Exchange

Committee to which the Exchange

delegates the market performance

function for options on the DJIA’’ in the

case of DJX. The proposed rule change

also adds Interpretation and Policy .02

to Rule 24.17 to state that the provisions

of paragraphs (b)(v) (C) and (D)

(formerly paragraphs (a)(v) (C) and (D))

shall not apply to DJX market makers

until December 1, 1997.5

The proposed rule change also adds a

new Rule 24.17A that sets forth the

RAES Operations for Options on the

DJIA, stating that RAES will operate the

same for DJX as for OEX, including that

the Exchange shall determine that series

will be eligible for RAES in DJX. Over

the years, the Commission has approved

OEX RAES operational policies to

Section 19(b) of the Act; however, these

policies have not been codified in the

Exchange rules. CBOE now proposes

that these policies also extend to DJX.6

For example, the proposed rule change

will apply DJX RAES the OEX RAES

that allows OEX RAES orders to trade

ahead of orders on the customer limit

order book in situations where the

displayed bid or offer is equal in price

to a customer order, reflected in the

limit order book. This is an exception to

the normal protection afforded customer

orders on the book, where RAES orders

entered when a booked order matches

the price of the disseminated bid (for a

RAES order to sell) or offer (for a RAES

order to buy) are ‘‘kicked out’’ of RAES

and generally executed manually on the

floor.7

The Exchange believes that it is

reasonable to apply this OEX RAES

policy to DJX, based upon the way in

which the Exchange expects the DJX

trading crowd to function, the amount

of protection it expects the ‘‘stranded’’

booked orders to receive on the floor,

and the operational difficulties

associated with ‘‘kicking out’’ RAES

orders for manual execution on the

floor.8

Specifically, CBOE has stated that it

expects this portion of the proposed rule

change to have only a nominal effect on

the execution of booked orders because,

based on information gathered from

talking to firms and investors, it believes

that DJX will attract a large order flow

and that large market-making firms will

have a presence in the trading crowd.

The Exchange believes that this

combination of active order flow and

liquid, well-capitalized traders will

result in the DJX trading floor operating

much like the trading floors in OEX and

IBM. The Exchange believes that in this

type of trading environment where there

is high liquidity, the likelihood that a

booked order will not be executed after

the execution of a RAES order at the

same price is small. In addition, the

CBOE notes that the likelihood of the

‘‘stranded’’ order not being executed is

diminished by the Exchange’s existing

priority rule, Rule 6.45, which ensures

that no transaction can take place on the

floor at a price equal to or better than

the price of the booked order until the

booked order has been filed.9 Finally,

CBOE states that the adverse effects to

customer orders that would result if

RAES orders were ‘‘kicked out’’ to be

executed on the trading floor, such as

delayed and missed executions,

outweigh the potential disadvantage

that might result to customer limit

orders on the book from the proposed

limited exception to the normal priority

rules.10

Proposed Rule 24.17A also states that

the Exchange will have the discretion to

set the eligible order size for RAES

orders up to one hundred (100)

contracts. The Exchange believes

expanding the eligible contract limit

size for RAES will provide the benefits

of: more timely and cost-effective

executions of customer options orders to

a greater number of orders than would

be the case if no changes were made;

enhanced audit trail; enhanced fill

reporting and price reporting; increased

customer confidence; and reduction of

transactions that have to be executed

manually on the trading floor, thereby

increasing the efficiency in the handling

of non-RAES orders. The Exchange also

notes that Rule 24.15(e) allows the

Exchange to set an eligible order size of

up to ninety-nine contracts for SPX

options. As noted, an SPX option covers

approximately ten times the value of an

option on the DJIA.

CBOE believes that this proposed rule

change will not impose any significant

burdens on the operation, security,

integrity, or capacity of RAES, but will

increase the efficiency of the Exchange

operations.

The Exchange also is proposing to

amend Rule 8.51 to allow the firm quote

requirement for options on the DJIA to

be set at a level of up to one hundred

(100) contracts. Under Rule 8.51, a

trading crowd is obligated to fill nonbroker-dealer customer orders for up to

the specified number of contracts at the

quotes that are displayed when the

order reaches the trading station at

which the option is traded. The reasons

specified above justifying the change in

the maximum RAES order size—the

relatively smaller dollar value of options

on one-one-hundredth of the DJIA as

compared to other broad-based index

options and the Exchange’s desire to

enhance the depth and liquidity of the

market for options on the DJIA—apply

equally to this proposed change in the

firm quote requirement. The exchange is

also proposing to amend Interpretations

.01 and .03 to Rule 8.51 to make these

interpretations consistent with the

change to paragraph (a) of Rule 8.51.

Finally, the Exchange is proposing to

apply the terms of the OEX firm quote

program to trading in DJX. Among the

significant terms of the firm quote

program are that: Floor Officials may

designate one or more market-makers to

take the contra side of a transaction if

market-makers do not voluntarily honor

the trading crowd’s obligation; marketmakers have the obligation to state the

size of their markets if those markets are

for less than the DJX firm quote limit;

market-maker and broker-dealer quotes

for less than the firm quote limit will
53360 Federal Register / Vol. 62, No. 198 / Tuesday, October 14, 1997 / Notices

11The largest possible firm quote limit will be

100 contracts, which is approximately equal in

value to 10 contracts in OEX. In addition, brokerdealer orders for less than the applicable firm quote

requirement will not be disseminated.

12The current fine schedule for violations of the

firm quote policy for OEX states that the fine for

third and subsequent violations is $3,000 to $5,000.

13See Securities Exchange Act Release Nos.

38169 (January 14, 1997), 62 FR 3547 (January 23,

1997) (order approving File No. SR–CBOE–96–72)

(increasing the maximum order size eligibility for

interest rate options); 36601 (December 18, 1995),

60 FR 66817 (December 26, 1995) (order approving

File No. SR–PHLX–95–39) (increasing the

maximum execution order size eligibility for public

customer orders for all equity and index options to

50 contracts); 33476 (January 13, 1994), 59 FR 3140

(January 20, 1994) (order approving File No. SR–

Amex–93–33) (increasing the size of Japan Index

options orders eligible for automatic execution to 99

contracts); and 25950 (July 28, 1988), 53 FR 29293

(August 3, 1988) (order approving File No. SR–

Amex–87–20) (increasing the number of

Institutional Index options eligible for automatic

execution to 100 contracts).

14 15 U.S.C. 78f(b)(5).

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

16 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).

17See supra note 6.

not be displayed; 11 and Floor Brokers

may choose one of two alternatives in

obtaining a fill under the Firm Quote

Rule, as described in the first circular

attached as Exhibit B to the submitted

filing.

The second Firm Quote Circular,

attached as Exhibit C to the submitted

filing, sets forth a schedule of fines that

may be imposed pursuant to the Minor

Rule Violation rule for violation of the

Firm Quote Rule. The Exchange believes

that both of these circulars are

essentially identical to the OEX firm

quote program circulars except that they

apply to trading in DJX and they

accordingly have a different firm quote

requirement. In addition, the Exchange

has decided to adopt a policy whereby

the fine for a third and fourth violation

of the firm quote policy in both DJX and

OEX would be $2,500, and for

subsequent violations there is a

mandatory referral to the Business

Conduct Committee (‘‘BCC’’).12 The

Exchange will reissue the OEX circular

with the revised fine schedule. The

Exchange notes that although the upper

fine limit is being reduced, the

Exchange will exercise its authority to

commence a disciplinary proceeding

pursuant to Exchange Rule 17.2 in

egregious situations and will refer the

case to the BCC for violations past the

fourth violation. Of course, in

disciplinary proceeding the violating

member could be subject to even greater

fines and other sanctions including

suspension.

The Exchange requests the

Commission to find good cause,

pursuant to Section 19(b)(2) of the Act,

for approving the proposed rule change

prior to the thirtieth day after

publication in the Federal Register. The

Exchange believes that accelerated

effectiveness of the proposed change is

appropriate because the Commission

has approved other proposals by options

exchanges allowing similar increases in

the number of option contracts eligible

for automatic execution 13 and has

approved an essentially identical firm

quote program for OEX. In addition, for

the same reasons, the Exchange believes

an increase in the firm quote

requirement is justified and that the

increase in the firm quote requirement

is a benefit to public customers without

any disadvantages to public customers.

Also, because options on the DJIA are

based on one-one hundredth of the

value of the Index, the value of the

Index underlying an option on the DJIA

is only approximately one-tenth or the

value of the indexes underlying certain

other broad based indexes which have

a RAES eligible order size of ten or more

and a firm quote requirement of ten.

Therefore, the Exchange believes no

unique or novel questions are raised by

this change.

2. Statutory Basis

By establishing market-maker

obligations with respect to trading

options on the DJIA, including a firm

quote requirement and a maximum size

for DJX orders eligible for execution

through RAES, the Exchange believes

that the proposed rule change will better

serve the needs of CBOE’s public

customers and the Exchange members

who make a market for such customers,

and is consistent with and furthers the

objectives of Section 6(b)(5) of the Act 14

in that it is designed to promote just and

equitable principles of trade, to remove

impediments to and perfect the

mechanism of a free and open market

and a national market system, and to

protect investors and the public interest.

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.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received from

Members, Participants or Others

No written comments were either

solicited or received.

III. 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. 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–97–45 and should be

submitted by November 3, 1997.

IV. Commission’s Findings and Order

Granting Accelerated Approval of

Proposed Rule Change

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. Specifically, the Commission

finds that the proposed rule change is

consistent with Section 6(b)(5) of the

Act 15 in that it is designed to promote

just and equitable principles of trade, to

remove impediments to and perfect the

mechanism of a free and open market

and a national market system, and to

protect investors and the public

interest.16

The Commission believes it is

reasonable for the Exchange to amend

Rule 24.17 to apply the OEX RAES

eligibility requirements to DJX, and to

apply the terms of the previously

approved firm quote program for OEX to

DJX because they are similar products

that are expected to trade in a similar

manner and it is necessary to have a

RAES rule and a firm quote program in

order to ensure efficient trading in DJX.

Also, the Commission believes it is

reasonable under the Act to exempt DJX

market makers from the requirements in

amended Rule 24.17(b)(v)(C) and (D) 17

until December 1, 1997 because when

options on the DJIA begin to trade on

October 6, 1997 there will be no

‘‘preceding month’’ against which to

measure a DJX market maker’s

performance.

The Commission also believes it is

reasonable for the Exchange to establish
Federal Register / Vol. 62, No. 198 / Tuesday, October 14, 1997 / Notices 53361

18The Commission requests that the CBOE

distribute a Notice to Members discussing all RAES

operations and policies that will apply to DJX. In

addition, the Commission expects CBOE, in the

near future, to codify RAES operations for OEX and

DJX in manner similar to that for SPX.

19The Commission notes that this reasoning

applies to an option contract based upon one-onehundredth of the DJIA and that the same reasoning

would not apply if the COE were to start trading

an options contract based upon one-tenth of the

DJIA. The Commission expects the CBOE to reset

the RAES eligible size and the firm quote limit

accordingly for an options contract based on onetenth of the DJIA.

20The current fine schedule for violations of the

firm quote program for OEX states that the fine for

third and subsequent violations is $3000 to $5000.

21The Commission believes it is reasonable under

the Act to amend Rule 8.16, RAES Eligibility in

Equity Options, to indicate that it does not apply

to DJIA options because DJX will now be covered

by the RAES eligibility rule for OEX.

22See supra note 4.

23See supra note 5.

24 15 U.S.C. 78s(b)(2).

25 17 CFR 200.30–3(a)(12).

Rule 24.17A, RAES Operations in DJX,

which will be the same for OEX except

for the maximum contract size eligible

for RAES. The maximum size for RAES

in DJX will be up to 100 contracts,

whereas the maximum size for OEX is

10 contracts. Similar to OEX, the

Exchange will have the authority to

choose which DJX series will be eligible

for RAES.18

As a general rule, the Commission

believes that customer limit orders in

the limit order book should receive

priority protection over other orders

when the quoted market touches the

limit order. Specifically, RAES orders

generally should not be executed by

market makers when customer limit

orders are also price eligible to interact

with the RAES orders. The Commission

believes that exceptions to this principle

are only appropriate in limited

circumstances where it is unlikely that

affected limit orders will receive an

inferior execution. The Commission has

previously approved CBOE rule changes

that afforded such an exception in two

highly liquid options classes, OEX

index options and IMB equity options.

After careful review, the Commission

has determined that it is appropriate to

allow DJX RAES orders to be

automatically executed notwithstanding

the possibility that customer limit

orders could be priced identically to the

prevailing disseminated best bid or

offer. The Commission notes that it is

basing this approval upon the fact that

the Exchange expects DJX to be a

heavily traded index product. As a

result, it is anticipated that most limit

orders will receive fair executions,

particularly since CBOE Rule 6.45

ensures that no transaction can take

place on the floor at a price equal to or

better than the price of the booked order

until the booked order has been filled.

The Commission expects the Exchange

to monitor the actual depth and

liquidity of the DJCX trading floor and

the treatment of customer orders on the

limit order book that are traded behind

RAES orders at the market.

The Commission also believes that

increasing the number of DJX contracts

eligible for RAES and to increase the

firm quote requirement for DJX is

consistent with the Act because options

on the DJIA are approximately one-tenth

the value of options on indexes

underlying other broad-based indexes.19

Therefore, increasing the RAES

eligibility and firm quote requirements

for DJX should enhance market maker

obligations and commitments in these

options, as well as help add depth and

liquidity to the market for DJX. In

addition, increasing the size of the

RAES eligibility for DJX will provide the

benefits of RAES execution to a larger

number of customer orders and reduce

the number of transactions to be

executed manually on the floor, which

could increase the efficiency of

executing non-RAES orders.

The Commission believes it is

consistent with the Act to amend the

Minor Rule Plan fine amount for

violations of the firm quote rule for both

OEX and DJX because the amended fine

schedule should still ensure adequate

and effective enforcement of the firm

quote program. The amended fine

amount for third and fourth violations

of the firm quote policy, which will be

$2500 20 is a reasonable amount in order

to help deter non-compliance with the

firm quote program, and there will now

be mandatory referral to the BCC for any

violations after the fourth violation. In

addition, the Commission notes that the

Exchange always has the authority to

commence a full disciplinary

proceeding under Exchange Rule 17.2

under its Minor Rule Plan program for

any violation of the firm quote program,

and that the CBOE stated that it will

exercise this authority in egregious

situations.21

The Commission finds good cause for

approving the proposed rule change

prior the thirtieth day after the date of

publication of notice of filing thereof in

the Federal Register. The Commission

believes that accelerated approval of the

proposal is appropriate because it

believes the proposed changes to the

various trading rule should become

effective prior to the day that the CBOE

begins to trade options on the DJIA, in

order to ensure that all rules applicable

to trading DJIA options are in place

prior to when such trading commences.

In addition, the Commission has

previously approved similar increases

in the number of options contracts

eligible for automatic execution on other

options exchanges 22 and has previously

approved the almost identical firm

quote program for OEX.23 Finally, the

Commission believes that the proposed

rule change does not raise any

significant regulatory issues.

It is therefore ordered, pursuant to

Section 19(b)(2) 24 that the proposed

rule change, as amended, is hereby

approved on an accelerated basis.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.25

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–27048 Filed 10–10–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39196; File No. SR–NASD–

97–60]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the National Association of Securities

Dealers, Inc., Relating to Trading Halts

October 3, 1997.

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

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on August 20, 1997,

the National Association of Securities

Dealers, Inc. (‘‘NASD’’) filed with the

Securities and Exchange Commission

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

rule change as described in Items I, II,

and III below, with Items have been

prepared by the Nasdaq Stock Market,

Inc. (‘‘Nasdaq’’). 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

Nasdaq is proposing to amend NASD

Rule 4120 and IM–4120–1 to expand

Nasdaq’s trading halt authority and to

clarify procedures for initiating certain

trading halts. Below is the text of the

proposed rule change. Proposed new

language is underlined; proposed

deletions are in brackets.

4120. Trading Halts

(a) Authority to Initiate Trading Halts

In circumstances in which [the

Association] Nasdaq deems it necessary

to protect investors and the public