[Federal Register Volume 62, Number 220 (Friday, November 14, 1997)]
[Notices]
[Pages 61156-61157]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-29932]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39305; File No. SR-CBOE-97-57]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Board Options Exchange, Inc., Relating to 
Extension of the Permissible Maturity of FLEX Equity Options

November 6, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'' or ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on October 23, 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 comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. Sec. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The CBOE proposes to change its rules to permit a FLEX equity 
option to have a term of five years in certain circumstances.
    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 Exchange is proposing to allow FLEX equity options \3\ traded 
on the Exchange to have a maturity beyond three years and up to five 
years in certain circumstances. Currently, FLEX equity options, by 
operation of Rule 24A.4(a)(4)(i), are limited to a maturity of three 
years.
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    \3\ FLEX equity options are flexible exchange-traded options 
contracts which overlie equity securities. In addition, FLEX equity 
options provide investors with the ability to customize basic option 
features including size, expiration date, exercise style, and 
certain exercise prices.
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    When the Exchange filed for permission to list and trade FLEX 
equity options \4\ it determined to limit the maturity of these options 
to three years because, unlike FLEX Index options which were already 
being traded on the Exchange since February 1993 and which could have a 
maturity of up to five years, the Exchange was concerned that there 
would not be sufficient liquidity in many equity option classes to 
support series with a longer term to expiration. Since it has traded 
FLEX equity options, however, the Exchange has had numerous requests 
from broker-dealers to extend the maturity of FLEX equity options to 
five years. Among the reasons the broker-dealer firms have been 
interested in seeking an extension in the allowable maturity is that 
these longer expiration FLEX equity options might be used to hedge a 
firm's longer term issuances of structured products linked to returns 
of an individual stock. The Rule would permit the longer term FLEX 
equity options to be listed when requested by the submitting member if 
the FLEX Post Official determined that sufficient liquidity existed 
among Equity FLEX qualified participants. By allowing for the extension 
of the maturity of FLEX equity options to five years in situations 
where there is demand for a longer term expiration and where there is 
sufficient liquidity among Exchange qualified market-makers to support 
the request, the proposed rule change will better serve the needs of 
CBOE's customers and the Exchange members who make a market for such 
customers.
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    \4\ SR-CBOE-95-43 approved in Exchange Act Release No. 36841 
(February 14, 1996), 61 FR 6666 (February 21, 1996).
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2. Statutory Basis
    The Exchange represents that the proposed rule change is consistent 
with Section 6(b)(5) of the Act \5\ 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.
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    \5\ 15 U.S.C. Sec. 78f(b).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any inappropriate 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. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the 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 the proposed rule change, or
    (B) institute proceedings to determine 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

[[Page 61157]]

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-97-57 and 
should be submitted by December 5, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-29932 Filed 11-13-97; 8:45 am]
BILLING CODE 8010-01-M