Federal Register / Vol. 65, No. 217 / Wednesday, November 8, 2000 / Notices 67023

10 In approving this rule, the Commission notes

that it has considered the proposed rule’s impact on

efficiency, competition, and capital formation. See

15 U.S.C. 78c(f).

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

12 15 U.S.C. 78f(6)(8).

13According to CBOE, responsibility for

accepting orders from a wide range of customers

will be borne by the member firms. Floor brokers

accepting orders in this manner would be required

to be qualified pursuant to Exchange Rule 91. As

is the case with brokers accepting orders of public

customers over OEX post telephones, any broker

speaking directly with a public customer is required

to be Series 7 qualified and registered with the

Exchange by a member organization approved to

conduct non-member customer business.

14 15 U.S.C. 78s(b)(2).

15 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

transactions in securities, to remove

impediments to and perfect the

mechanisms of a free and open market

and a national market system, and, in

general, to protect investors and the

public interest.10 Section 6(b)(5) also

requires that those rules not be designed

to permit unfair discrimination between

customers, issuers, brokers, or dealers.

Section 6(b)(8) of the Act requires that

the rules of an exchange not impose any

burden on competition not necessary or

appropriate in furtherance of the

purpose of the Act.

Under the current policy, the only

orders for equity options that may be

received at the post directly via

telephone lines from off-floor locations

are off-floor orders of CBOE market

makers. The proposed rule change

would expand this policy by permitting

the receipt of off-floor orders from any

source (i.e., members, broker-dealers,

non-broker-dealers, or public customers)

over outside telephone lines directly at

the equity trading posts during outgoing

telephone calls. The proposed rule

change would only allow for such

orders to be transmitted to the equity

posts pursuant to a telephone call

initiated at the post (an outgoing call),

while permitting CBOE market makers

to continue to transmit orders over the

telephone lines from off the floor

directly to the equity trading posts (via

incoming calls).

The Commission finds that the

proposed rule is consist with, and

furthers the objectives of, Section

6(b)(5) 11 of the Act in that it is designed

to improve communication to and from

the Exchange’s trading floor in a manner

that promotes just and equitable

principles of trade, prevents fraudulent

and manipulative acts and practices,

and maintains fair and orderly markets.

Specifically, the Commission notes that

the limits on telephone use proposed by

the CBOE are consistent with the goals

of the Act. In this regard, the

commission believes that it is

reasonable for CBOE to codify its

current policy permitting CBOE market

makers to send orders to the trading

floor via incoming calls (a benefit that

is not enjoyed by other types of

members and public customers). This

policy allows CBOE market makers to

transmit their orders more efficiently at

those times when they are required to be

off the floor. In the Commission’s view,

it is also reasonable for the Exchange to

now allow orders from any other source

to go directly to the post as long as those

orders are placed in outgoing calls only.

The Commission further believes that

the proposed rule change modifies the

Exchange’s communication system in a

way that provides for equitable access to

the Exchange floor among members,

broker-dealers, non-broker-dealers, and

public customers (both institutional and

retail) alike. Accordingly, the

Commission finds that the proposal is

consistent with the requirement of

Section 6(b)(8) 12 of the Act, which

requires that the proposed rule change

not impose any burden on competition

not necessary or appropriate in

furtherance of the Act’s purposes.

The Exchange has indicated that it

intends to police compliance with the

conditions applicable to the use of

telephones at the equity trading posts

(including the requirement that any

member or associated person receiving

orders over outside telephone lines be

properly qualified pursuant to CBOE

rules to do so) through complaints from

Exchange members at the post, as well

as observations of Floor Officials and

Exchange staff. The Exchange has

further indicated that CBOE’s Equity

Floor Procedure Committee will be

responsible for implementing this

policy in conformity with Exchange

Rules and provisions of the Act,

including approving access and the

phone technology, and will decide any

other issues relating to this policy.13

Finally, the CBOE Department of

Financial and Sales Practice

Compliance will be required to review

and approve all applications relating to

the policy to ensure that the applicant

is intending to transact business which

the applicant is authorized to transact.

The Commission believes that proper

surveillance is an essential component

of any policy telephone access to an

exchange’s trading floor. Especially

important in this case is ensuring that

the CBOE’s surveillance efforts prevent

individuals who are not properly

qualified to take public orders for

securities (i.e. non-Series 7 qualified

Exchange employees) from interacting

with the public. The Commission finds

that the safeguards proposed above by

the CBOE are consistent with the

prevention of fraudulent and

manipulative acts and practices, as

required under Section 6(b)(5).

IV. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,14 that the

proposed rule change (SR–CBOE–00–

04) is approved.

For the Commission, by the Division of

Market Regulations, pursuant to delegated

authority.15

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–28594 Filed 11–7–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43499; File No. SR–CBOE–

00–50]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by Chicago

Board Options Exchange, Inc. To

Extend the Pilot Period Relating to the

Processing of Live Ammo Orders Until

December 15, 2000

October 31, 2000.

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

Securities Exchange Act of 1934

(‘‘Act’’) 1 Rule 19b–4 2 thereunder,

notice is hereby given that on October

26, 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 extend until

December 15, 2000, the pilot program

that allows an Order Book Official

(‘‘OBO’’) or a Designated Primary

Market-Maker (‘‘DPM’’) to designate

certain booked orders to be

electronically executed (‘‘Live Ammo to

RAES’’). The text of the proposed rule

change is available at the Office of the

Secretary, CBOE and at the Commission.

67024 Federal Register / Vol. 65, No. 217 / Wednesday, November 8, 2000 / Notices

3Securities Exchange Act Release No. 42379, 65

FR 6665 (February 10, 2000). The Exchange rule

pertaining to the processing of Live Ammo orders

is Rule 7.4(g).

4 15 U.S.C. 78f.

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

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

7 17 CFR 240.19b–4(f)(6).

8As required under Rule 19b–4(f)(6)(iii), the

Exchange provided the Commission with written

notice of its intent to file the proposed rule change

at least five business days prior to the filing date.

9 17 CFR 240.19b–4(f)(6).

10 17 CFR 240.19b–4(f)(6)(iii).

11For purposes only of accelerating the operative

date of this proposal, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f).

12 17 CFR 200.30–3(a)(12).

II. Self-Regulatory Organization’s

Statement of the Purpose of and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

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

On February 2, 2000, the Commission

approved, on a pilot basis, a system

change that allows an OBO or a DPM to

reroute orders on the electronic book

screen that displays market orders and

limit orders and improve the market

(‘‘Live Ammo’’) to the Retail Automatic

Execution System (‘‘RAES’’) if the

orders are RAES-eligible.3 The pilot is

scheduled to expire on October 31,

2000.

The Exchange now proposes to extend

the pilot until December 15, 2000. The

Exchange is currently preparing a

proposed rule change, which will

propose to adopt the Live Ammo to

RAES processing system on a

permanent basis. Thus, the proposed

extension of the pilot will allow the

Live Ammo to RAES system to remain

in place while the Commission

considers the Exchange’s proposal to

permanently approve the system. The

Exchange also believes that extending

the pilot will continue to allow for the

faster execution of customer orders and

prevent a backlog of customer orders on

the Live Ammo screen.

2. Statutory Basis

The Exchange believes the proposed

rule change is consistent with Section

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

the objectives of Section 6(b)(5),5 in

particular, because it would foster

cooperation and coordination with

persons engaged in regulating, clearing,

settling, and processing information

with respect to, and facilitating

transactions in securities, and would

remove impediments to and perfect the

mechanism of a free and open market in

a manner consistent with the protection

of investors and the public interest.

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 not necessary or

appropriate in furtherance of purposes

of the Act.

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

Because the proposed rule change: (1)

Does not significantly affect the

protection of investors or the public

interest; (2) does not impose any

significant burden on competition; and

(3) does not become operative for 30

days from the date of filing, or such

shorter time as the Commission may

designate if consistent with the

protection of investors and the public

interest, the proposed rule change has

become effective pursuant to Section

19(b)(3)(A) of the Act 6 and Rule 19b–

4(f)(6) 7 thereunder.8

A proposed rule change filed under

Rule 19b–4(f)(6)9 normally does not

become operative prior to 30 days after

the date of filing. However, Rule 19b–

4(f)(6)(iii)10 permits the Commission to

designate a shorter time if such action

is consistent with the protection of

investors and the public interest. The

Exchange seeks to have the proposed

rule change become operative

immediately in order to allow the Pilot

to continue in effect on an

uninterrupted basis. The Commission,

consistent with the protection of

investors and the public interest, has

determined to make the proposed rule

change operative immediately through

December 15, 2000. The extension of the

Pilot will provide the Commission with

the time necessary to review and

evaluate the Exchange’s proposal to

permanently adopt the Live Ammo to

RAES system.

The Commission notes that unless the

pilot is extended, the Pilot will expire

on October 31, 2000, which the

Commission believes could result in

confusion regarding how orders on the

Live Ammo screen should be handled.

Therefore, the Commission believes that

it is in the public interest to extend the

Pilot.

Based on these reasons, the

Commission believes that it is

consistent with the protection of

investors and the public interest that the

proposed rule change become operative

immediately through December 15,

2000.11 At any time within 60 days of

the filing of the proposed rule change,

the Commission may summarily

abrogate such rule change if it appears

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,

including whether the proposed rule

change is consistent with the Act.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW,

Washington DC 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 CBOE. All

submissions should refer to File no. SR–

CBOE–00–50 and should be submitted

by November 29, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.12

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–28650 Filed 11–7–00; 8:45 am]

BILLING CODE 8010–01–M