Federal Register / Vol. 62, No. 187 / Friday, September 26, 1997 / Notices 50645

3 17 CFR 200.30–3(a)(12).

25, 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, II, and

III below, which Items have been

prepared by the CBOE. 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 amend its Rule

6.53 (‘‘Rule’’) governing the definition of

stop orders to clarify that a stop order

on the CBOE is triggered when the

option contract reaches a specified price

‘‘on the CBOE floor.’’ 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

CBOE 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 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 change

is to amend the definition of a stop

order to clarify that the stop order

becomes triggered when the option

contract reaches a specified price ‘‘on

the CBOE floor.’’

Currently, paragraph (c)(iii) of

Exchange Rule 6.53 defines a stop order

as a contingency order to buy or sell

when the market for a particular option

contract reaches a specified price. The

Rule does not specify, but has always

been interpreted to mean, that the

contingency to buy or sell is satisfied

when the option contract is bid at or

above the stop price (in the case of a by

order) or is offered at or below the stop

price (in the case of a sell order) ‘‘on the

floor of the CBOE.’’ The proposed

amendment will make it clear, therefore,

that a stop order is not activated when

the bid or offer (as appropriate) reaches

the stop limit on another exchange.

Unlike the equity markets, the option

markets are not electronically linked to

each other. Thus, options traders have

no way of knowing whether a contract

has reached a specified ‘‘stop’’ in

another market place, as would an

equity securities trader. Accordingly,

there is no rule prohibiting tradethroughs in options market places as

there is in the equity market places.

The CBOE believes that the proposed

rule change will clarify the CBOE’s

responsibility in this regard, and will

prevent any perception that CBOE

members have a duty to execute stop

orders when the ‘‘stop’’ price has not

been reached on the CBOE floor.

2. Statutory Basis

The basis under the Act for this

proposed rule change is the requirement

under Section 6(b)(5) that an exchange

have rules that are designed to prevent

fraudulent and manipulative acts and

practices, to promote just and equitable

principles of trade, to foster cooperation

and coordination with persons engaged

in regulating, clearing, settling,

processing information with respect to,

and facilitating transactions in

securities, to remove impediments to

protect and perfect the mechanism of a

free and open market and a national

market system, and in general, to protect

investors and the public interest. By

clarifying the definition of a ‘‘stop

order,’’ the proposed rule change will

more accurately describe the obligations

of CBOE members with regard to stop

orders executed on the Exchange.

Therefore, the Exchange believes that

amending the rule is consistent with,

and furthers, the objectives of Section

6(b)(5) of the Act.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The CBOE 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 solicited

or received with respect to the proposed

rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the date of

publication of this notice in the Federal

Register or within such longer period (i)

as the Commission may designate up to

90 days of such date if it finds such

longer period to be appropriate and

publishes its reasons for so finding or

(ii) as to which the self-regulatory

organization consents, the Commission

will:

(A) By order approve such proposed

rule change, or

(B) Institute proceedings to adtermine

whether the proposed rule change

should be disapproved.

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 in

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 the file number SR–

CBOE–97–41 and should be submitted

by October 17, 1997.

For the Commission by the Division of

Market Regulation, pursuant to the delegated

authority.3

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–25518 Filed 9–25–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39105; File No. SR–CSE–

97–07]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change by

the Cincinnati Stock Exchange, Inc.

Relating to Minor Rule Plan Violations

September 22, 1997.

On August 5, 1997, The Cincinnati

Stock Exchange, Incorporated (‘‘CSE’’ or

‘‘Exchange’’) filed with the Securities

and Exchange Commission

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

rule change pursuant to Section 19(b)(1)
50646 Federal Register / Vol. 62, No. 187 / Friday, September 26, 1997 / Notices

1 15 U.S.C. 78s(b)(1) (1994).

2 17 CFR 240.19b–4 (1997).

3The proposed rule change was originally

submitted on June 24, 1997. The CSE subsequently

submitted Amendment No. 1 which altered minor

technical language in Item II. Letter from Adam W.

Gurwitz, Vice President Legal and Secretary, CSE,

to Karl J. Varner, Esq., SEC, dated August 4, 1997.

This proposed rule change replaces SR–CSE–97–06,

which has been withdrawn. Letter from Adam W.

Gurwitz, Vice President Legal and Secretary, CSE,

to Katherine England, Assistant Director, SEC,

dated June 23, 1997.

4Securities Exchange Act Release No. 38922

(August 11, 1997), 62 FR 44024 (August 18, 1997).

5The Commission has considered the effect of the

proposed rule change on the promotion of

efficiency, competition and capital formation. 15

U.S.C. 78(c).

6 17 CFR 200.30–3(a)(12).

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

2The Commission has modified the text of the

summaries prepared by MBSCC.

of the Securities Exchange Act of 1934

(‘‘Act’’) 1 and Rule 19b–4 2 thereunder.3

Notice of the proposed rule change,

together with the substance of the

proposal, was published in the Federal

Register.4 No comment letters were

received. This order approves the

proposed rule change, as amended.

I. Background

Exchange Rule 8.14 provides the

Minor Rule Violation Program

(‘‘Program’’) as an alternative

disciplinary regime to violations of

Exchange Rules that the Exchange

determines are of a minor nature. The

Program provides the Exchange with the

ability, but not the obligation, to impose

a fine, not to exceed $2500, on any

member the Exchange determines has

violated a rule subject to the Program.

Section (e) of Exchange Rule 8.14

requires the Exchange from time to time

to prepare a list of minor rule violations.

Adding a particular rule violation to the

Program does not limit the Exchange’s

ability to treat violations of those rules

through more formal disciplinary

measures. The Program simply provides

the Exchange with greater flexibility in

addressing rule violations appropriately.

As part of its ongoing effort to

improve its regulatory program, the

Exchange has determined that certain

rule violations should be added to the

Program. The Program currently

includes the requirements of Exchange

Rules 4.1 and 4.2, concerning books and

records, to submit trade data to the

Exchange. The proposed rule change

will clarify that a member also must

provide financial and regulatory records

in accordance with Rule 4.2 and

Interpretations thereunder as well as

trade-related information. The proposed

rule change also will add Exchange Rule

11.9(c) to the Program. Exchange Rule

11.9(c) requires Designated Dealers, the

Exchange’s multiple, competing

specialists, to maintain continuous

quotations throughout the trading day.

II. Discussion

The Commission finds that the

proposed rule change is consistent with

Section 6(b) of the Act in general, and

furthers the objectives of Section 6(b)(7)

in particular because it provides a fair

procedure for the disciplining of

members and persons associated with

members in that the proposed rule

change will augment the Exchange’s

ability to police its market and will

increase the Exchange’s flexibility in

responding to minor rule violations.5

The Commission believes the proposed

rule change will enable the Exchange to

address appropriate minor rule

violations promptly and efficiently

through the minor rule procedures,

without the need to initiate formal

disciplinary proceedings.

Furthermore, the Commission

believes that proposed rule change is

consistent with Section 6(b)(5) in that it

is designed to promote just and

equitable principles of trade and to

remove impediments to and perfect the

mechanism of a free and open market

and a national market system, and, in

general, to protect investors and the

public interest because the proposed

rule change will help the Exchange

ensure compliance with its quotation

requirements and spread parameters,

which will enhance the value of

quotations made by the Exchange’s

multiple, competing specialists.

It is Therefore Ordered, pursuant to

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

proposed rule change, SR–CSE–97–07,

be, and hereby is, approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–25606 Filed 9–25–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39103; File No. SR–

MBSCC–97–5]

Self-Regulatory Organizations; MBS

Clearing Corporation; Notice of Filing

of a Proposed Rule Change Regarding

Participant Liability for Transactions

Submitted on Behalf of

Nonparticipants

September 22, 1997.

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

Securities Exchange Act of 1934 (the

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

August 1, 1997, MBS Clearing

Corporation (‘‘MBSCC’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change (File No. SR–MBSCC–97–5) as

described in Items I, II, and III below,

which items have been prepared

primarily by MBSCC. 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 proposed rule change will clarify

that participants will be liable as

principal for any contracts or other

transactions submitted to MBSCC on

behalf of entities that are not

participants (‘‘nonparticipants’’) and

that nonparticipants will not be deemed

to possess any rights or benefits of

participants.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

MBSCC 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. MBSCC has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of such statements.2

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

Currently, MBSCC’s rules state that

participants that process any contracts

or other transactions through MBSCC

for other participants are liable as

principal for such contracts or

transactions. However, it has always

been MBSCC’s intention that

participants be principally liable

whether they submit a contract or

transaction on behalf of other

participants or nonparticipants. Thus,

the proposed rule change will clarify

that participants will be liable as

principal for any contracts or other

transactions processed, compared,

settled, or carried out on behalf of

nonparticipants. In addition, the

proposed rule change states that such

nonparticipants will not be deemed to

possess any of the rights or benefits of

participants.