60738 Federal Register / Vol. 62, No. 218 / Wednesday, November 12, 1997 / Notices

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

2 17 CFR 240.19b–4.

3See Securities Exchange Act Release No. 38937

(August 14, 1997), 62 FR 44500.

4See Letter from Arthur B. Reinstein, Senior

Attorney, CBOE, to Michael Walinskas, Senior

Special Counsel, Division of Market Regulation,

SEC, dated October 14, 1997 (‘‘Amendment No. 1’’).

In Amendment No. 1, the CBOE revises the

proposes rule change to require under Rule 6.3 that

Floor Officials consult with a designated senior

exchange official prior to halting trading in a

security for more than two consecutive business

days. In addition, in Amendment No. 1, the

Exchange proposes to provide that any trading halt

under Rule 6.3 that lasts more than two consecutive

business days must be reviewed at the next

regularly scheduled meeting of the Exchange’s

Floor Officials Committee, which is authorized to

determine whether, in the interests of a fair and

orderly market, to terminate or modify any such

trading halt that is then still in effect.

5See Amendment No. 1, supra note 4.

6 Id. Amendment No. 1 provides that the Floor

Officials Committee will make a determination as

to whether to terminate or modify any trading halt

still in effect at the time of the Floor Officials

Committee’s next regularly scheduled meeting. It is

the understanding of Commission staff that the

Floor Officials Committee will review and discuss

all trading halts with durations exceeding two

consecutive business days regardless of whether

trading has since resumed in the particular security.

Telephone conservation on October 20, 1997

between Arthur B. Reinstein, Senior Attorney, the

CBOE and Deborah L. Flynn, Attorney, Division of

Market Regulation, SEC.

7 15 U.S.C. 78f.

8 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).

9 15 U.S.C. 78f(b)(5).

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39292; File No. SR–CBOE–

97–35]

Self-Regulatory Organizations;

Chicago Board Options Exchange,

Inc.; Order Granting Approval to

Proposed Rule Change and Notice of

Filing and Order Granting Accelerated

Approval of Amendment No. 1 Thereto

Relating to Trading Halts and

Suspensions

November 3, 1997.

I. Introduction

On July 25, 1997, the Chicago Board

Options Exchange, Inc. (‘‘CBOE’’ 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 19b–4

thereunder,2 a proposed rule change to

remove a requirement that a halt

declared by Floor Officials may

continue for only two consecutive days

and to delete a requirement that a

suspension must be declared by the

CBOE’s Board of Directors (‘‘Board’’).

The proposed rule change was

published for comment in the Federal

Register on August 21, 1997.3 No

comments were received on the

proposal. On October 21, 1997, the

CBOE submitted Amendment No. 1 to

the proposed rule change.4 This order

approves the proposed rule change and

approves Amendment No. 1 on an

accelerated basis.

II. Description of the Proposal

The purpose of the proposed rule

change is to amend Rule 6.3 to remove

the requirement that a halt declared by

Floor Officials may continue for only

two consecutive business days, to delete

Rule 6.4 relating to the suspension of

trading by the Exchange’s Board, and to

make certain conforming amendments

to Rules 21.12 and 23.8 and to

Interpretation of .02 of Rule 21.19.

Currently, pursuant to existing Rule

6.3, any two Floor Officials may halt

trading in any security in the interests

of a fair and orderly market for a period

not in excess of two consecutive

business days. Pursuant to existing Rule

6.4, the CBOE’s Board may suspend

trading in any security in the interests

of a fair and orderly market. The

Exchange believes that there is no

practical difference between a halt in

trading and a suspension in trading,

except for the present two-day limit for

a halt and the fact that a halt is declared

by two Floor Officials and a suspension

is declared by the Board. According to

the CBOE, the same factors considered

by its Board in deciding whether to

‘‘suspend’’ trading are considered by

Floor Officials in deciding whether to

‘‘halt’’ trading. Rules 6.3 and 6.4

require, however, that trading may be

stopped for more than two consecutive

business days only if the Board acts to

‘’suspend’’ trading.

The CBOE believes it is not necessary

to require the Board to decide whether

trading in an options class may be

stopped for more than two consecutive

business days. The Exchange believes

that the participation of senior exchange

officials is sufficient and that Board

participation is unnecessary. The

Exchange also believes that it is unduly

cumbersome and often, impractical, to

convene its Board on short notice just to

decide whether trading in an options

class may be stopped for more than two

consecutive business days.

Pursuant to the proposed rule change,

the duration of a halt declared by two

Floor Officials pursuant to Rule 6.3

would not be limited to a particular

number of days. Nonetheless, any halt

exceeding two consecutive business

days would require Floor Officials to

consult with a designated senior

Exchange official.5 Further, the proposal

would require a decision to extend a

trading halt beyond two consecutive

business days to be reviewed at the next

meeting of the Exchange’s Floor

Officials Committee.6 The proposed rule

change correspondingly would delete

Rule 6.4, so that Board action no longer

would be required before trading in an

options class could be stopped for more

than two consecutive business days.

This proposed approach is consistent

with the procedure for index options

under Rule 24.7, where trading halts or

suspensions are decided in consultation

with senior Exchange officials and do

not require action by the CBOE’s Board.

In addition, the proposed rule change

would make clear that trading may

resume only upon a determination by

two Floor Officials that such a

resumption is in the interests of a fair

and orderly market. Currently, Rule

6.3(b) allows trading to resume when

two Floor Officials determine either that

the conditions that led to the halt no

longer are present or that a resumption

of trading would serve the interests of

a fair and orderly market. The Exchange

believes that taken literally, the existing

language would enable trading to

resume if the conditions that led to the

halt no longer are present, even if a

resumption of trading would be contrary

to the interests of a fair and orderly

market, an interpretation that would

conflict with the CBOE’s practice and

would be contrary to the policies under

the Act.

Finally, the deletion of Rule 6.4

requires conforming deletions of certain

non-substantive references to trading

suspensions under Rule 6.4 that appear

in Rule 21.12 and Interpretation .02 of

Rule 21.19 (concerning government

securities options) and in Rule 23.8

(concerning interest-rate option

contracts).

III. Discussion

The Commission finds that the

proposed rule change is consistent with

the requirements of Section 6 of the

Act 7 and the rules and regulations

thereunder applicable to a national

securities exchange.8 The Commission

believes that the proposed rule change

is consistent with and furthers the

objectives of Section 6(b)(5) of the Act 9

in that it is designed to perfect the

mechanism of a free and open market

and to protect investors and the public

interest by allowing Floor Officials, in

consultation with senior Exchange

officials, to evaluate and to consider

market conditions and circumstances

and to halt trading for as long as
Federal Register / Vol. 62, No. 218 / Wednesday, November 12, 1997 / Notices 60739

10 15 U.S.C. 78f(b)(5).

11 15 U.S.C. 78s(b)(2).

12 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1)(1994). 2 15 U.S.C. 78aaa–78111(1994).

necessary in the interests of a fair and

orderly market.

Specifically, the Commission believes

that it is reasonable to declare a trading

halt in a particular security for a period

exceeding two consecutive business

days without requiring the specific

approval of a majority of the Exchange’s

Board. The Commission recognizes that

it may be impractical to convene the

Board each time a determination must

be made as to whether to extend a

trading halt in a particular security

beyond two consecutive business days.

The Commission notes that in

eliminating the Board’s participation in

the decisionmaking process, the

proposed rule change, as amended, does

not provide unbridled discretion to the

Exchange’s Floor Officials to declare a

trading halt of such duration. Instead,

the Commission notes that the proposal,

as amended, requires two procedures

which the Commission believes will

provide some assurances that a decision

to halt trading in a security for longer

than two consecutive business days will

receive proper consideration. First, the

Commission believes that the

involvement of a senior Exchange

official should ensure that the interests

of all market participants are carefully

considered in determining the propriety

of a trading halt. Second, the review of

each trading halt declared exceeding

two consecutive business days by the

Exchange’s Floor Officials Committee

should ensure that the CBOE’s

management structure remains apprised

of the manner in which the proposed

rules are applied. In the event that the

Exchange’s Floor Officials Committee

determines that the rules are not being

applied in an even-handed and fair

manner, the Commission expects the

Exchange to reevaluate the process and

propose changes, as necessary.

The Commission finds good cause for

approving proposed Amendment No. 1

prior to the thirtieth day after the date

of publication of notice of filing thereof

in the Federal Register. The

Commission notes that Amendment No.

1 further clarifies the process by which

a determination is made to halt trading

in a particular security for more than

two consecutive business days. The

Commission believes that requiring the

consultation of a senior Exchange

official and review by the Exchange’s

Floor Officials Committee clarifies the

discretion granted to Floor Officials

with respect to trading halts and raises

no new regulatory issues. Accordingly,

the Commission believes that it is

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

Act 10 to approve Amendment No. 1 to

CBOE’s proposed rule change on an

accelerated basis.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning Amendment No.

1. Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 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, NW.,

Washington, DC 20549. Copies of all

such filings will also be available for

inspection and copying at the principal

office of CBOE. All submissions should

refer to File No. SR–CBOE–97–35 and

should be submitted by December 3,

1997.

V. Conclusion

It Is Therefore Ordered, pursuant to

Section 19(b)(2) of the Act,11 that the

proposed rule change (SR–CBOE–97–

35), including Amendment No. 1, is

approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.12

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–29700 Filed 11–10–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39295; File No. SR–PCX–

97–38]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Pacific Exchange, Inc. Relating to

Charges and Recommended Fines for

Late SIPC Reports

November 4, 1997.

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

Securities Exchange Act of 1934

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

October 14, 1997, the Pacific Exchange,

Inc. (‘‘PCX’’ or ‘‘Exchange’’) filed with

the Securities and Exchange

Commission (‘‘Commission’’ or ‘‘SEC’’)

the proposed rule change as described

in Items, I II and III below, which Items

have been prepared by the PCX. 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 Exchange is proposing to modify

the late charges and recommended fines

applicable to members’ late filing of

forms and assessments with the

Exchange pursuant to the Securities

Investor Protection Act of 1970

(‘‘SIPA’’).2 The text of the proposed rule

change is below. Additions are

italicized; deletions are bracketed.

Text of the Proposed Rule Change

Financial Reports

¶3405

Rule 2.12(a)—(b)(1)—No change.

Rule 2.12(b)(2). Each member

organization for which the Exchange is

the designated collection agent must

[shall] file with the Exchange such

forms and assessments as are required

pursuant to the Securities Investor

Protection Act of 1970. Any member

organization that fails to file such form

or assessment in a timely manner will

[shall] be subject to a late filing charge

as follows:

Number of days late Amount of charge

1–30 ................................ [$200] $100

31–60 .............................. [400] 200

61–90 .............................. [800] 300

Provided however: (A) If a member

organization files its SIPC form and

assessment after its receipt of SIPC’s

final late notice, but files within five

business days after its receipt of SIPC’s

final late notice, such member

organization will [shall] be subject to a

fine pursuant to Rule 10.13; and (B) if

a member organization fails to file its

SIPC form and assessment within five

business days after its receipt of SIPC’s

final late notice, such member

organization will [shall] be subject to

formal disciplinary action pursuant to

Rule 10.3.

Commentary:

.01–.02—No change.

* * * * *