Federal Register / Vol. 62, No. 225 / Friday, November 21, 1997 / Notices 62383

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

2On October 6, 1997, the Exchange commenced

trading options on the following Dow Jones

indexes: the Dow Jones Industrial Index (‘‘DJX’’),

the Dow Jones Utilities Index (‘‘DUX’’), and the

Dow Jones Transportation Index (‘‘DTX’’).

3The Exchange filed its proposed rule change

with the Commission on October 3, 1997. However,

the proposed rule change indefinitely suspends the

Exchange’s Prospective Fee Reduction Program for

Market-Maker Transaction Fees, Floor Broker Fees,

and Member Dues, as of October 1, 1997. The

Commission notes that a proposed rule change

made pursuant to Section 19(b)(3)(A) of the Act,

such as SR–CBOE–97–53, is not effective until filed

with the Commission.

4 15 U.S.C. 78f(b).

5 15 U.S.C. 78f(b)(4).

6 15 U.S.C. 78s(b)(3)(A).

7 17 CFR 240.19b–4(e).

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39324; File No. SR–CBOE–

97–53]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Chicago Board Options Exchange,

Incorporated, Relating to Exchange

Fees

November 13, 1997.

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

Securities Exchange Act of 1934

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

October 3, 1997, the Chicago Board

Options Exchange, Incorporated

(‘‘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 Exchange. 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 seeks to establish

various fees and discounts relating to

options based on Dow Jones & Company

(‘‘Dow Jones’’) indexes, and the use of

the Exchange’s new cellular phone and

pager systems. The Exchange also seeks

to indefinitely suspend its Prospective

Fee Reduction Program for MarketMaker Transaction Fees, Floor Broker

Fees, and Member Dues.

The text of the proposed rule change

is available at the Office of the

Secretary, the Exchange 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

Exchange 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

Exchange 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 (i) To establish fees relating

to options based on Dow Jones indexes,

three of which began trading on October

6, 1997; 2 (ii) to indefinitely suspend,

effective October 1, 1997, the

Exchange’s Prospective Fee Reduction

Program for Market-Maker Transaction

Fees, Floor Broker Fees, and Member

Dues; 3 (iii) to establish user fees relating

to the Exchange’s new trading-floor

cellular phone system; and (iv) to

impose fees for the repair of abusive

damage to pagers. The Exchange is

implementing these fee changes

pursuant to Exchange Rule 2.22.

The Exchange proposes to establish a

transaction fee schedule for all options

based on Dow Jones indexes that is

identical to the current OEX transaction

fee schedule. The fees would be as

follows: (1) Forty cents per contract for

customer transactions that have a

premium greater than or equal to one

dollar; (2) twenty cents per contract for

customer transactions that have a

premium less than one dollar; (3) ten

cents per contract for member firm

proprietary transactions; and (4) six

cents per contract for market maker

transactions.

In addition, the Exchange proposes to

apply a Large Trade Discount Program

to Dow Jones indexes, through which

customer orders in excess of one

thousand contracts would receive a

discount. While the first one thousand

contracts of a customer order will be

assessed regular transaction fee rates, all

contracts in excess of one thousand

would receive a fifty percent discount.

It should be noted that the discount

program relating to Dow Jones products

will be separate and distinct from the

Large Trade Discount Program currently

applicable to all other Exchange

products. The Exchange proposes to cap

Retail Automated Execution System

(‘‘RAES’’) fees for Dow Jones indexes, so

that the fee of twenty five cents per

contract only applies to the first twenty

five contracts of any RAES order.

The Exchange also proposes, effective

October 1, 1997, to indefinitely suspend

its Prospective Fed Reduction Program

for Market-Maker Transaction Fees,

Floor Broker Fees, and Member Dues.

As a result of the large expenditure of

resources devoted to the

commencement of options trading in the

Dow Jones indexes, the Exchange finds

it necessary to indefinitely suspend its

Prospective Fee Reduction Program to

recoup working capital.

The Exchange further proposes to

establish fees for its new trading-floor

cellular phone system. A lease fee of

one hundred dollars per month is

proposed to be charged for each cellular

phone. Additionally, a lost, stolen, or

damaged phone fee will be assessed at

the current replacement or repair cost.

Finally, the Exchange proposes to

impose a fee for abusive damage to

pagers. The fee will be assessed at the

current repair cost.

2. Statutory Basis

The Exchange represents that the

proposed rule change is consistent with

Section 6(b) 4 of the Act, in general, and

furthers the objectives of Section

6(b)(4) 5 of the Act, in particular, in that

it is designed to provide for the

equitable allocation of reasonable dues,

fees, and other charges among Exchange

members.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe 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

The Exchange did not solicit or

receive written comments with respect

to the proposed rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The foregoing rule change establishes

or changes a due, fee, or other charge

imposed by the Exchange and, therefore,

has become effective pursuant to

Section 19(b)(3)(A) 6 of the Act and

subparagraph (e) of Rule 19b–4 7

thereunder. At any time within 60 days

of the filing of the proposed rule change,

the Commission may summarily
62384 Federal Register / Vol. 62, No. 225 / Friday, November 21, 1997 / Notices

8 17 CFR 200.30(a)(12).

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

2 17 CFR 240.19b–4.

3See Securities Exchange Act Release No. 39320

(October 10, 1997) 62 FR 54496.

4See Letter from Charles R. Haywood, Foley &

Lardner, to Debbie Flynn, Division of Market

Regulation, SEC, dated October 30, 1997

(‘‘Amendment No. 1’’). In Amendment No. 1, the

CHX requested that the rule filing by approved on

an accelerated basis due to the recent volatility in

the financial markets and the Exchange’s belief that

such volatility may continue.

5Standard and Poor’s 500 Stock Index is a service

mark of Standard and Poor’s Corporation.

6See Ch. II, Sec. 35(b) of the BSE’s rules.

7See Securities Exchange Act Release Nos. 26218

(October 26, 1988) 53 FR 44137 (November 1, 1988)

(order approving File No. SR–MSE–88–9); 27370

(October 23, 1989) 54 FR 43881 (October 27, 1989)

(order approving File No. SR–MSE–89–9); 28580

(October 25, 1990) 55 FR 45895 (October 31, 1990)

(order approving File No. SR–MSE–90–16); 29868

(October 28, 1991) 56 FR 56535 (November 5, 1991)

(order approving File No. SR–MSE–91–14); 33120

(October 29, 1993) 58 FR 59503 (November 9, 1993)

(order approving File No SR–CHX–93–22); 36414

(October 25, 1995) 60 FR 55630 (November 1, 1995)

(order approving File No. SR–CHX–95–23); 37459

(July 19, 1996) 61 FR 39172 (July 26, 1996) (order

approving File No. SR–CHX–96–20); and 38221

(January 31, 1997) 62 FR 5871 (February 7, 1997)

(order approving File No. SR–CHX–96–33).

8See CHX Art. IX, Rule 10A.

9 15 U.S.C. 78f.

10 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).

11 15 U.S.C. 78f(b)(5).

abrogate such rule change if it 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, 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 such

filing will also be available for

inspection and copying at the principal

office of the Exchange. All submissions

should refer to the File No. SR–CBOE–

97–53 and should be submitted by

December 12, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–30625 Filed 11–20–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39323; File No. SR–CHX–

97–24]

Self-Regulatory Organizations;

Chicago Stock Exchange, Inc; Order

Granting Accelerated Approval to

Proposed Rule Change and Notice of

Filing and Order Granting Accelerated

Approval of Amendment No. 1 Thereto

Relating to a Ban on the Entry of

Certain Stop Orders and Stop Limit

Orders

November 13, 1997.

I. Introduction

On September 22, 1997, the Chicago

Stock Exchange, Inc. (‘‘CHX’’ or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘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

adopt a new rule to prohibit the entry

of certain stop orders and stop limit

orders if the New York Stock Exchange

(‘‘NYSE’’) implements a stop order ban

pursuant to NYSE Rule 80A.

The proposed rule change was

published for comment in the Federal

Register on October 20, 1997.3 No

comments were received on the

proposal. On October 31, 1997, the CHX

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 Exchange proposes to add Article

IX, Rule 10B (Stop Order Ban Due to

Extraordinary Market Volatility) to

prohibit the entry of certain stop orders

and stop limit orders if the NYSE

implements a stop order ban pursuant to

NYSE Rule 80A. The NYSE’s Rule 80A

prohibits the entry of stop orders and

stop limit orders if the price of the

primary Standard and Poor’s 500 Stock

Price Index 5 futures contract traded on

the Chicago Mercantile Exchange

reaches a value 12 points below the

contract’s closing value on the previous

trading day. Likewise, the Boston Stock

Exchange (‘‘BSE’’) prohibits the entry of

stop and stop limit orders on the BSE

when the NYSE has a ban in place.6 The

Exchange’s new rule would exempt

from the ban stop orders and stop limit

orders of 2,099 shares or less for the

account of an individual investor

pursuant to instructions received

directly from the individual investor.

The Exchange has previously adopted

circuit breaker rules on a pilot basis 7

which parallel the circuit breaker rules

of the NYSE.8 Such rules are designed

to dampen market volatility by

providing a ‘‘time-out’’ to permit

investors and market professionals to

evaluate the state of the market.

However, unlike the NYSE, the

Exchange has not previously prohibited

the entry of stop and stop limit orders

during times of market stress.

III. Discussion

The Commission finds that the

proposed rule change is consistent with

the requirement of Section 6 of the Act 9

and the rules and regulations

thereunder applicable to a national

securities exchange.10 The Commission

believes that the proposed rule change

is consistent with and furthers the

objectives of Section 6(b)(5) of the Act 11

in that it is designed to perfect the

mechanism of a free and open market

and to protect investors and the public

interest. Specifically, the Commission

believes that the prohibition against

accepting stop orders and stop limit

orders, except for individual investor

orders of up to 2,099 shares, during

periods of market stress will facilitate

the maintenance of an orderly market

and reduce market volatility.

The Commission recognizes that

banning the entry of stop orders and

stop limit orders in a significant market

decline may help to reduce market

volatility related to increased selling

pressure in the security. The

Commission believes that banning the

entry of stop orders and stop limit

orders in dually-traded issues when

NYSE Rule 80A is in effect should

prevent the transfer of market volatility

from the NYSE to the CHX. The

Commission believes that the CHX

proposal represents a reasonable effort

to arrive at a coordinated means to

address potential strain on the market

that may develop should the CHX

become inundated with orders that have

been banned pursuant to NYSE Rule

80A.

The Commission notes that stop

orders and stop limit orders on the

specialist’s book at the time the ban is