[Federal Register Volume 62, Number 34 (Thursday, February 20, 1997)]
[Notices]
[Pages 7812-7814]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4091]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38268; File No. SR-CBOE-97-02]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by Chicago Board Options Exchange, Incorporated, Relating to the 
Use of Proprietary Brokerage Order Routing Terminals on the Floor of 
the Exchange

February 11, 1997.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on January 21, 1997, the Chicago Board Options Exchange, Inc. (``CBOE'' 
or ``Exchange'')

[[Page 7813]]

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. 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 Exchange proposes to extend from the Standard & Poor's 500 
index (``SPX options'') to the trading crowd in options on the Standard 
& Poor's 100 index (``OEX options'') its existing policy adopted 
pursuant to Exchange Rule 6.23 whereby members are permitted to 
establish, maintain and use proprietary hand-held, brokerage order 
routing terminals and related systems (``Terminals'') in the trading 
crowd with the written approval of the Exchange upon submission of an 
``Application & Agreement for Brokerage/Order Routing Terminals in 
Trading Crowds'' (``Application Agreement''). At present, members may 
apply to use Terminals only in the trading crowd in SPX options. The 
Exchange proposes to make changes to the Application Agreement 
reflecting its use to apply for Terminals in the OEX crowd as well as 
the SPX crowd. 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 Basic 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 extend to floor 
brokers in the OEX trading crowd the Exchange's policy pursuant to 
which members have the right to use proprietary, wireless, hand-held 
terminals for the electronic routing of firm and customer orders 
directly to brokers in the crowd (``Terminals''). The Exchange's 
general policy concerning the use of Terminals in the SPX trading crowd 
was recently approved by the Commission.\3\ Pursuant to this policy, 
members may use Terminals in the SPX trading crowd only with the 
written approval of the Exchange after submission of the Exchange's 
Application Agreement.
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    \3\ See Securities Exchange Act Release No. 38054 (Dec. 16, 
1996), 61 FR 67365 (Dec. 20, 1996) (``Release No. 38054'').
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    In its filing originally proposing the adoption of a policy 
pertaining to the use of Terminals on the trading floor, the Exchange 
stated that it would initially limit the use of Terminals to the SPX 
options trading crowd. To date only one member firm has applied and 
been approved to use Terminals in that crowd. The Exchange now proposes 
to extend the availability of Terminals to one additional trading crowd 
on the floor, the OEX crowd, in response to a request from the same 
member firm that has been approved to use Terminals in the SPX crowd. 
The Exchange notes that the use of Terminals in the OEX crowd would be 
subject to exactly the same terms and conditions that apply in the SPX 
crowd, including the use of the same form of Application and Agreement 
that was recently approved.\4\
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    \4\ In particular, the applicant must agree that its terminal 
will be used to receive brokerage orders only, and that it will not 
be used to perform a market making function. id.
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    The Exchange originally proposed to limit Terminals to the SPX 
crowd for an initial evaluation period because the one firm proposing 
to use Terminals made its proposal with respect to SPX options only, 
and because the Exchange believed it should have some experience with 
its Terminals policy before extending the policy beyond the SPX Options 
trading crowd. Now that the same firm has expressed a desire to use 
Terminal in the OEX crowd as well as the SPX crowd, the Exchange 
believes that having Terminals in both crowds will provide a better 
evaluation of the Exchange's Terminals policy than if Terminals are 
limited to the SPX crowd only. Because OEX options represent a more 
retail-oriented product than the largely institutional SPX options, the 
Exchange believes that the availability of Terminals in both crowds 
will better enable the Exchange to evaluate how Terminals may be used 
for both retail and institutional orders, which in turn will be 
relevant to deciding when and under what conditions to propose an 
extension of the Terminal policy on a floor-wide basis.
2. Statutory Basis
    The proposed rule change is consistent with section 6(b) of the Act 
\5\ in general, and furthers the objectives of sections 6(b)(1) \6\ and 
6(b)(5) \7\ of the Act in particular, in that the proposal is designed 
to improve communications to and from the Exchange's OEX trading crowd 
in a manner that gives the Exchange necessary monitoring tools and that 
is designed to prevent fraudulent and manipulative acts and practices, 
promote just and equitable principles of trade, perfect the mechanisms 
of a free and open market, and protect investors and the public 
interest.
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    \5\ 15 U.S.C. 78f(b) .
    \6\ 15 U.S.C. 78f(b) (1).
    \7\ 15 U.S.C. 78f(b) (5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change will not impose 
any inappropriate burden on competition. To the contrary, the Exchange 
believes that the proposed rule change will promote competition among 
brokers by encouraging the development and use of new systems designed 
to facilitate the execution of customer orders, while at the same time 
preserving the benefits of the auction market for all customers.

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 with respect 
to the proposal.

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

[[Page 7814]]

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 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-97-02 and should be 
submitted by March 13, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-4091 Filed 2-19-97; 8:45 am]
BILLING CODE 8010-01-M