Federal Register / Vol. 65, No. 206 / Tuesday, October 24, 2000 / Notices 63657

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

2 17 CFR 240.19b–4.

3Exercise limits will continue to correspond to

position limits, so that investors may exercise the

number of contracts set forth as the position limit,

during any five consecutive business day period.

4The Exchange recently listed and traded options

based on a value of 1⁄10 the current value of the

Nasdaq 100 Index and made related changes to

position and exercise limits for that option class.

See Securities Exchange Act Release No. 43000

(June 30, 2000), 65 FR 42409 (July 10, 2000).

entry system of the Federal Reserve, the

Depository Trust Company, or another

book entry system approved by the

Independent Trustees (each, an

‘‘approved book entry system’’) and, in

connection with the transfer, each

Fund’s subcustodian account with PNC

Bank’s Trust Department will be

designated through an approved book

entry system as the recipient of the

securities and the PNC Companies’

internal records and written

confirmation will indicate that the

collateral is being held on behalf of and

in the relevant Fund’s name for the

benefit of the applicable Series. Each

Fund thereby will acquire a security

interest in the collateral for the benefit

of the applicable Series. Any repurchase

agreements entered into by a Fund will

satisfy the requirements of proposed

rule 5b–3 under the Act, if and when

the rule is adopted and becomes

effective.

9. Before any transaction may be

conducted pursuant to the requested

exemption, the relevant Advisor must

obtain the information as it deems

necessary to determine that the price

test below has been satisfied. Before any

repurchase agreement is entered into

pursuant to the requested exemption,

the relevant Advisor must obtain and

document competitive quotations from

at least two other dealers with respect

to repurchase agreements comparable to

the type of repurchase agreement

involved (including size, which would

equal the Maximum Purchase Amount

for the particular Series in question,

maturity, and collateral), except that if

quotations are unavailable from two

dealers only one other competitive

quotation is required. In addition, the

repurchase transactions for which

quotations are sought must be

conventional overnight repurchase

agreements in which the funds would

be transferred by the relevant Fund on

behalf of the participating Series as of

the same day that the transaction is

entered into, and then returned by the

counterparty on the following business

day. Before entering into a transaction

pursuant to the requested exemption, a

determination will be required in each

instance, based upon the information

available to the relevant Advisor, that

the income to be earned from the

repurchase agreement to be entered into

with any PNC Company is at least equal

to that available from the repurchase

agreements with respect to which

quotes were obtained.

10. No less frequently than quarterly,

the Board of each Fund, including a

majority of the Independent Trustees,

on behalf of each Series of that Fund,

will review the Base Amounts that have

been established for the Series during

the preceding quarter to determine

whether the Base Amounts

appropriately reflected the amounts of

the Series’ net assets that would have

remained uninvested at the Fund’s

custodian in order to meet potential

redemptions from the sweep program if

the Base Amounts were not available.

To assist the Board in this review, the

Advisors will provide the Board with all

relevant information. The Board,

including a majority of the Independent

Trustees, will take such steps as it

deems necessary to assure that the Base

Amounts for each Series appropriately

reflect the amounts of the Series’ net

assets that would remain uninvested at

the Fund’s custodian in order to meet

potential redemptions from the sweep

program if the Base Amounts are not

available.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–27234 Filed 10–23–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43456; File No. SR–CBOE–

00–14]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Board Options Exchange,

Inc. Relating to an Increase in the

Position Limits for Nasdaq 100 Stock

Index Options

October 17, 2000.

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 April 10,

2000, the Chicago Board Options

Exchange, Inc. (‘‘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 CBOE proposes to amend

Exchange Rule 24.4—Position Limits for

Broad Based Index Options, to increase

the standard position and exercise

limits for the NASDAQ 100 Index

(‘‘NDX’’) option class, expand the index

hedge exemption, and eliminate the

near term position limit restriction. The

text of the proposed rule change is

available at the CBOE and at the

Commission’s Public Reference Room.

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

1. Purpose

The CBOE proposes to amend

Exchange Rule 24.4 by increasing the

broad based index option position limit

for the NDX, eliminating the restriction

on near term NDX option positions, and

increasing the NDX index hedge

exemption. Specifically, the Exchange

proposes to increase the overall position

limit from 25,000 contracts to 75,000

contracts—a tripling of the current

limit.3 The Exchange also proposes to

eliminate the 15,000 contract near term

limit. Lastly, the Exchange proposes to

raise the index hedge exemption from

75,000 option contracts, which is in

addition to the standard limit, to

150,000 option contracts.4

The CBOE believes that an increase in

position and exercise limits for NDX

options is appropriate for several

reasons. The current limit of 25,000

contracts, with no more than 15,000

contracts in the near term series, has

been in place since the inception of

trading in the NDX option class on

February 7, 1994. The CBOE notes that

the Commission recently approved rule

filings increasing position and exercise

limits for standardized equity option

63658 Federal Register / Vol. 65, No. 206 / Tuesday, October 24, 2000 / Notices

5See Securities Exchange Act Release No. 40875

(December 31, 1998), 64 FR 1842 (January 12, 1999)

(File Nos. SR–CBOE–98–25; Amex–98–22; PCX–98–

33; and Phlx–98–36) (increasing position limits for

standardized equity options to 13,500, 22,500,

31,500, 60,000, and 75,000).

6See Securities Exchange Act Release No. 40969

(January 22, 1999), 64 FR 4911 (February 1, 1999)

(File No. SR–CBOE–98–23); Securities Exchange

Act Release No. 41011 (February 1, 1999), 64 FR

6405 (February 9, 1999) (File No. SR–Amex–98–38).

7According to CBOE, OEX is the only American

style broad-based index option traded on the

Exchange. The Exchange stated that a front month

limitation was established for the OEX index option

when the Exchange initially sought to increase the

position limits for the option. Other broad-based

index options traded on the Exchange are European

style options, and therefore can only be exercised

on the expiration date. Telephone conversation

between Pat Cerny, Director, Department of Market

Regulation, CBOE, and Joseph Corcoran, Attorney,

Division of Market Regulation, Commission, on

October 12, 2000. 8 15 U.S.C. 78f(b)(5).

9 17 CFR 200.30–3(a)(12).

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

2A combination order is an order involving a

number of call option contracts and the same

number of put option contracts in the same

underlying security. See CBOE Rule 6.53(e).

contracts.5 The Commission also

approved the elimination of position

and exercise limits for certain broadbased index option contracts for a 2–

year pilot program.6 The highest equity

option position limit tier is now 75,000

contracts. As a comparison, market

capitalization for IBM, which has a base

position limit of 75,000 contracts, is

approximately $191 billion, while the

market capitalization for NDX with a

25,000/15,000 position limit is over $4.2

trillion. Additionally, the average daily

volume and open interest in NDX has

increased by approximately 150% since

October 1999 (see Exhibit B). Based on

these statistics and the recent position

limit relief granted for standardized

equity options, the CBOE believes it is

reasonable to allow for changes to the

position and exercise limits for NDX

index options.

With respect to the near term

limitation, the Exchange believes that

the rationale for imposing such a

limitation is not applicable to the NDX.

Historically, a front month limitation

was established for American style

broad-based index options as a measure

to lessen market volatility experienced

at the close of trading on expiration

when stock/index programs were

unwound.7 However, these conditions

are not relevant for the NDX. NDX is a

European style contract with a

settlement value based on a volume

weighting of opening stock prices as

reported within the first five (5) minutes

of trading. Additionally, it should be

noted that the CBOE’s surveillance

procedures during the week of

expiration include communication with

NASD Regulation to determine whether

there are any concerns regarding

potential manipulation in the securities,

which comprise the NASDAQ 100. Staff

believes that the front month limit for

NDX options is not necessary, and that

it only provides a further restriction to

the investing public, and, therefore,

should be eliminated. Eliminating the

front month position and exercise limits

for NDX index options may bring

additional depth an liquidity, in terms

of both volume and open interest, to the

NDX without significantly increasing

concern regarding intermarket

manipulations or disruptions of the

index options or the underlying

component securities.

2. Statutory Basis

The CBOE believes the proposed rule

change is consistent with and the

furthers the objectives of Section

6(b)(5) 8 of the Act in that it is designed

to remove impediments to a free and

open market and to protect investors

and the public interest.

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 and 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 selfregulatory 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,

including whether the proposed rule is

consistent with the Act. Persons making

written submissions should file six

copies thereof with the Secretary,

Securities and Exchange Commission,

450 Fifth Street, N.W., Washington, D.C.

20549–0609. 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

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the CBOE. All

submissions should refer to File No.

SR–CBOE–00–14 and should be

submitted by November 14, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–27238 Filed 10–23–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43452; File No. SR–CBOE–

00–40]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Board Options Exchange,

Inc. Relating to SPX Combination

Orders

October 17, 2000.

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

Securities Exchange Act of 1934

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

17, 2000, the Chicago Board Options

Exchange, Inc. (‘‘CBOE’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

Commission (‘‘SEC’’ or ‘‘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.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The CBOE proposes to adopt CBOE

Rule 24.20, ‘‘SPX Combination Orders,’’

to allow S&P 500 Index option (‘‘SPX’’)

traders to print and execute orders for

SPX options and orders for hedging

transactions in SPX combination orders

(‘‘combos’’) 2 outside of the prevailing