[Federal Register Volume 62, Number 221 (Monday, November 17, 1997)]
[Notices]
[Pages 61419-61421]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-30054]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39308; File No. SR-CBOE-97-40]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Board Options Exchange, Incorporated Relating to 
the ``Terms and Conditions of an Order'' for Purposes of the Exchange's 
Rules on Solicited Trades and Crossed Trades

November 6, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

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(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on August 25, 1997, the Chicago Board Options Exchange, Inc. (``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 self-
regulatory organization. On October 31, 1997, the Exchange submitted 
Amendment No. 1 to the Proposal.\3\ 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. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Stephanie Mullins, Attorney, CBOE to David 
S. Sieradzki, Attorney, SEC dated October 31, 1997 (``Amendment No. 
1''). Amendment No. 1 changes the item to be defined from the word 
``terms'' to the phrase ``terms and conditions.'' In addition, 
Amendment No. 1 makes several non-substantive changes that clarify 
the proposal.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its rules governing solicited orders 
and ``crossing'' orders by adding to each rule an interpretation which 
will define and clarify the phrase ``terms and conditions'' as used in 
each rule. 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 define and clarify 
the meaning of the phrases ``terms and conditions'' of an order as used 
in Exchange Rules 6.9 and 6.74. Pursuant to Rule 6.9, Solicited 
Transactions, a member or member organization representing an order 
respecting an option traded on the Exchange (an ``original order''), 
including a spread, combination, or straddle order as defined in Rule 
6.53 and a stock-option order as defined in Rule 1.1(ii), may solicit a 
member or member organization or a non-member customer or broker-dealer 
(the ``solicited person'') to transact in-person or by order (a 
``solicited order'') with the original order.
    Pursuant to Rule 6.74(b), a floor broker may effect a cross of a 
customer order and a facilitation order subject to satisfaction of 
certain conditions including disclosure on an order ticket for the 
public customer order which is subject to facilitation, all of the 
terms of such order, including any contingency involving, and all 
related transactions in, either options or underlying or related 
securities. A facilitation order is defined in Rule 6.53(m) as an order 
which is only to be executed in whole or in part in a cross transaction 
with an order for a public customer of the member organization and 
which is clearly designated as a facilitation order.
    The rules relating to both facilitation ``solicited'' and 
``crossing'' transactions are designed to ensure that all market 
participants have an equal opportunity to participate in trades, 
fostering the objective of open outcry in a competitive market. The 
proposed rule amendment defines what is meant by the phrase ``terms and 
conditions'' as used in these two rules: the volume; the price; any 
contingencies; and any components related to the order. Components are 
related stock, options, futures or any other instruments or interests. 
A contingency order is a limit or market order to buy or sell that is 
contingent upon a condition being satisfied while the order is at the 
post. Contingent orders include: Market-if-touched orders; market-on-
close-orders; stop (stop-loss) orders; and stop-limit orders.
    The Exchange believes that the proposed Interpretations will enable 
those who solicit and those who wish to effect ``facilitation'' crosses 
to understand and abide by their disclosure obligations. In addition, 
the proposed change will aid in achieving uniformity with regard to 
trading crowd expectations, as well as to the type and amount of 
information disclosed on crossed and solicited orders.
2. Statutory Basis
    The Exchange represents that the proposed rule change is consistent 
with Section 6(b)(5) of the Act \4\ in that it is designed to prevent 
fraudulent and manipulative acts and practices and to perfect the 
mechanism of a free and open market.
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    \4\ 15 U.S.C. 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 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-97-40 and should 
be submitted by December 8, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 C.F.R. 200.30-3(a)(12).

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[[Page 61421]]

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-30054 Filed 11-14-97; 8:45 am]
BILLING CODE 8010-01-M