[Federal Register Volume 62, Number 249 (Tuesday, December 30, 1997)]
[Notices]
[Pages 67926-67927]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-33830]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39467; File No. SR-CBOE-97-42]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change By the Chicago Board Options Exchange, Incorporated Relating to 
Proactive Disclosure of ``n'' Orders

December 19, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934, 15 U.S.C. 78s(b)(1), notice is hereby given that on August 25, 
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 CBOE. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.

1. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The CBOE proposes to amend Exchange Rule 7.5 (``Rule'') regarding 
disclosure obligations for ``n'' orders by adding Interpretation .04. 
An ``n'' order as defined in Rule 6.51 is an order for any account of a 
non-member market-maker or specialist relating to his assignment in a 
class of options listed for trading both at this Exchange and at the 
exchange of the market-maker or specialist. The text of the proposed 
rule change is available at the Office of the Secretary, CBOE, and 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 parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The purpose of the proposed rule change is to require a Floor 
Broker who holds a so-called ``n'' order to affirmatively disclose the 
status of the ``n'' order as such by public outcry at the post prior to 
representing the order in the trading crowd. An ``n'' order is defined 
in Rule 6.51 as an order for the account of a broker-dealer who is a 
non-member market-maker or specialist relating to his assignment in a 
class of options listed on CBOE and on another exchange. Disclosing the 
status of orders as ``n'' orders will make the trading crowd aware that 
the orders are broker-dealer orders and not public customer orders, so 
that they may be properly treated under CBOE Rules that give 
preferential treatment to non-broker-dealer public customer orders. For 
example, Rule 6.45 gives priority to non-broker-dealer public customer 
bids and offers in the customer limit order book over other bids and 
offers at the same price, and Rule 8.51 provides that a trading crowd's 
firm quote obligations apply to non-broker-dealer public customer 
orders only. Requiring the identification of ``n'' orders as broker-
dealer orders should reduce the likelihood that such orders will be 
inadvertently treated as public customer orders, thereby assuring that 
actual public customer orders will receive the priorities to which they 
are entitled under the Rules.
    By requiring the affirmative disclosure of a category of broker-
dealer orders that might otherwise by mistakenly identified as orders 
of public customers, the proposed rule change will safeguard the 
priorities granted under CBOE Rules to the orders of non-broker-dealer 
public customers, thereby serving to promote just and equitable 
principles of trade and to protect investors and the public interest in 
furtherance of the objectives of Section 6(b)(5) of the Securities 
Exchange Act of 1934.

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 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.,

[[Page 67927]]

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 he principal office of the CBOE. All submissions should refer to the 
file number in the caption above and should be submitted by January 20, 
1998.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\1\
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    \1\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-33830 Filed 12-29-97; 8:45 am]
BILLING CODE 8010-01-M