[Federal Register Volume 62, Number 37 (Tuesday, February 25, 1997)]
[Notices]
[Pages 8474-8475]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4605]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38311; International Series Release No. 1055; File No. 
SR-CBOE-96-77]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the Chicago 
Board Options Exchange, Incorporated Relating to the Policy of the CBOE 
Relating to Information Obtained Pursuant to the SEC's Memorandum of 
Understanding With the CONSOB

February 19, 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 December 17, 1996, the Chicago Board Options Exchange, Incorporated 
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change is 
described in Items I and II 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 and to grant 
accelerated approval of the proposed rule change.
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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 CBOE is submitting this rule filing to adopt an official policy 
concerning the circumstances and conditions under which the Exchange, 
in order to carry out its market surveillance and enforcement functions 
for derivative products containing Italian component securities, may 
obtain access to information regarding activity on the Italian 
securities markets obtained by the SEC pursuant to the Commission's 
Memorandum of Understanding (``MOU'') with the Commissione Nazionale 
per le Societa e la Borsa (``CONSOB''). The text of the proposed rule 
change is available at the Office of the Secretary, the 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 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 aspects of such statements.

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

    The CBOE does not have a surveillance sharing agreement with the 
Milan Exchange, which is an unincorporated association and is not able 
under Italian law to enter into such an arrangement. Therefore, the 
purpose of the proposed rule change is to enable the CBOE to carry out 
its market surveillance and enforcement functions for derivative 
products containing Italian component securities by seeking the 
necessary information about activity on the Italian securities markets 
from the SEC per the latter's MOU with the CONSOB. The Exchange's 
proposed policy details the circumstances and conditions under which 
the Exchange may obtain access to such information from the SEC. By 
adopting this policy, therefore, the Exchange believes it will be in a 
position to list derivative products containing Italian component 
securities because it will be able to have access to information on the 
underlying securities which it may need for enforcement or market 
surveillance purposes.
    The Exchange's proposed policy provides that the Exchange will 
advise the SEC of information it needs regarding activity on the 
Italian securities markets for market surveillance and enforcement 
purposes. The SEC, in turn, may request the CONSOB's assistance, 
pursuant to the MOU, in gaining access to such information. The 
Exchange will use such information it may receive from the SEC only for 
the purposes of conducting market surveillance and enforcement 
proceedings. The Exchange will limit distribution of such information 
to officers and directors of the Exchange and other employees directly 
responsible for conducting market surveillance and enforcement 
proceedings relating to the matter in connection with which the SEC 
provided the information to the CBOE. The Exchange also will undertake 
to maintain the confidentiality of the information and to take 
appropriate disciplinary action in the event it learns of a breach of 
such confidentiality, including referral to the SEC for any action the 
SEC deems necessary or appropriate.
    By adopting a policy that provides access to information on the 
underlying securities for market surveillance and enforcement purposes, 
the Exchange will be able to list options and other derivative products 
containing Italian component securities, provided that all other 
applicable product listing standards are met.\3\ Therefore, the 
Exchange believes that the proposed rule change could potentially 
provide investors with the opportunity to invest in such products and 
hedge their exposure to the Italian securities market. The Exchange 
also believes that the proposed rule change, therefore, is consistent 
with and furthers the objectives of Section 6(b)(5) of the Act, in that 
it is designed to perfect the mechanisms of a free and open market

[[Page 8475]]

and to protect investors and the public interest.\4\
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    \3\ This filing only addresses trading requirements relating to 
necessary surveillance sharing procedures.
    \4\ In approving the rule, the Commission has considered the 
proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    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. Commission's Findings and Order Granting Accelerated Approval 
of Proposed Rule Change

    The Exchange has requested that the proposed rule change be given 
accelerated effectiveness pursuant to Section 19(b)(2) of the Act. The 
Commission finds that the proposed rule change is consistent with the 
requirements of the Act, and the rules and regulations thereunder 
applicable to a national securities exchange, in that the proposal is 
consistent with Section 6(b) of the Act, in general and, Section 
6(b)(5),\5\ in particular, as it is designed to facilitate transactions 
in securities, to promote just and equitable principles of trade, and 
to protect investors and the public interest.
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    \5\ 15 U.S.C. 78f(b) and 78f(b)(5).
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    Specifically, the Commission believes that, since the CBOE does not 
and cannot have a surveillance sharing agreement with the Milan 
Exchange, the CBOE's adoption of the proposed policy will enable the 
Exchange to carry out its market surveillance and enforcement functions 
for derivative products containing Italian component securities by 
seeking the necessary information about activity on the Italian 
securities markets from the SEC per the latter's MOU with the CONSOB. 
The Commission believes that the Exchange's proposed policy adequately 
details the circumstances and conditions under which the Exchange may 
obtain access to such information from the SEC.
    The Commission believes that, under the Exchange's proposed policy, 
the Exchange will advise the SEC of information it needs regarding 
activity on the Italian securities markets for market surveillance and 
enforcement purposes. The Commission, in turn, may request the CONSOB's 
assistance, pursuant to the MOU, in gaining access to such information. 
The Commission notes that the Exchange will use such information it may 
receive from the SEC only for the purposes of conducting market 
surveillance and enforcement proceedings. The Commission also notes 
that the Exchange will limit distribution of such information to 
officers and directors of the Exchange and other employees directly 
responsible for conducting market surveillance and enforcement 
proceedings relating to the matter in connection with which the SEC 
provided the information to the CBOE. In view of the importance of 
maintaining the confidentiality of this information, the SEC believes 
that the officers and/or directors overseeing the exchange employees 
conducting the relevant market surveillance and enforcement proceedings 
would be responsible for ensuring the confidentiality of the 
information provided by the SEC pursuant to the MOU with the CONSOB and 
should take reasonable measures to ensure that the information does not 
become available to unauthorized persons. Thus, the Commission believes 
that the Exchange will undertake to maintain the confidentiality of 
such information and to take appropriate disciplinary action in the 
event it learns of a breach of such confidentiality, including referral 
to the SEC for any action the SEC deems necessary or appropriate.
    The Commission believes that the CBOE, by adopting a policy that 
provides access to information on the underlying securities for market 
surveillance and enforcement purposes, will be in a position to list 
options and other derivative products containing Italian component 
securities, provided that all other applicable product listing 
standards are met. Therefore, the Exchange's proposed rule change could 
potentially provide investors with the opportunity to invest in such 
products and hedge their exposure to the Italian securities market. 
Accordingly, the Commission believes that the proposed rule change is 
consistent with and furthers the objectives of Section 6(b)(5) of the 
Act, in that it is designed to perfect the mechanisms of a free and 
open market and to protect investors and the public interest.
    The Commission notes that a substantially identical proposal was 
published by the American Stock Exchange (``AMEX'') for the full 21 day 
comment period without any comments being received by the Commission. 
The Commission therefore believes that approving the CBOE policy on an 
accelerated basis will allow the Exchange to pursue trading in options 
and other derivative products containing Italian component securities 
without further delay. Accordingly, the Commission finds that, 
consistent with Section 6(b)(5) of the Act, good cause exists to 
approve CBOE's proposed rule change on an accelerated basis prior to 
the thirtieth day after the date of publication thereof in the Federal 
Register.

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 CBOE. 
All submissions should refer to File No. SR-CBOE-96-77 and should be 
submitted by March 18, 1997.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\6\ that the proposed rule change (SR-CBOE-96-77) is hereby 
approved on an accelerated basis.

    \6\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-4605 Filed 2-24-97; 8:45 am]
BILLING CODE 8010-01-M