10098 Federal Register / Vol. 62, No. 43 / Wednesday, March 5, 1997 / Notices

1Section 13 of the Act was amended by the

addition of Subsection (h) (15 U.S.C. § 78m(h)

(1990)) when Section 3 of the Market Reform Act

of 1990 (Pub. L. No. 101–432, 104 Stat. 963 (1990))

was enacted.

SECURITIES AND EXCHANGE

COMMISSION

Submission for OMB Review;

Comment Request

Extension.

Reproposed Rule 13h–1, SEC File No.

270–358, OMB Control No. 3235–0408.

Rule 19d–2, SEC File No. 270–204,

OMB Control No. 3235–0205.

Upon Written Request, Copies

Available From: Securities and

Exchange Commission, Office of Filings

and Information Services, Washington,

DC 20549.

Notice is hereby given that pursuant

to the Paperwork Reduction Act of 1995

(44 U.S.C. 3501 et seq.), the Securities

and Exchange Commission

(‘‘Commission’’) has submitted to the

Office of Management and Budget

requests for approval of extension on

previously approved collections of

information:

Reproposed Rule 13h–1 was proposed

pursuant to Section 13 of the Securities

Exchange Act of 1934 (the ‘‘Act’’).1 Rule

13h–1 will enable the Commission to

gather timely large trader information in

the form necessary for the

reconstruction of trading activity in

periods of market stress and for

surveillance, enforcement, and other

regulatory purposes. Without this

information, the Commission would not

be able to perform the reconstructions of

trading activity necessary for evaluating

periods of markets stress and other

regulatory purposes.

The staff estimates that there are 630

broker-dealers that will be subject to the

recordkeeping and reporting

requirements of the reproposed rule. In

addition, the staff estimates, based upon

analysis of previous requests for similar

information, that 750 investors will be

large traders subject to the identification

requirements of the reproposed rule.

Therefore, the Staff estimates that there

will be (630+750=1,380) 1,380

respondents under the reproposed rule.

Precise cost estimates are impossible

to calculate because the commentators

on the original proposal did not provide

specific details on costs. Nevertheless,

the staff estimates that annually the

1,380 respondents will require

approximately 11,444 hours to comply

with the reproposed rule. Further, the

staff estimates that, on average, each

response hour will cost approximately

$12.00, and therefore the total annual

cost of complying with the rule will be

approximately $137,328.

Rule 19d–2 under the Act prescribes

the form and content of applications of

the Commission by persons desiring

stays of final disciplinary sanctions and

summary action of self-regulatory

organizations (‘‘SROs’’) for which the

Commission is the appropriate

regulatory agency.

It is estimated that approximately 30

respondents will utilize this application

procedure annually, with a total burden

of 90 hours, based upon past

submissions. The staff estimates that the

average number of hours necessary to

comply with the requirements of Rule

19d–2 is 3 hours. The average cost per

hour is approximately $30. Therefore,

the total cost of compliance for the

respondents is $2,700.

General comments regarding the

estimated burden hours should be

directed to the Desk Officer for the

Securities and Exchange Commission at

the address below. Any comments

concerning the accuracy of the

estimated average burden hours for

compliance with Commission rules and

forms should be directed to Michael E.

Bartell, Associate Executive Director,

Office of Information Technology,

Securities and Exchange Commission,

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

20549 and Desk Officer for the

Securities and Exchange Commission,

Office of Information and Regulatory

Affairs, Office of Management and

Budget, Room 3208, New Executive

Office Building, Washington, D.C.

20503.

Dated: February 26, 1997.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–5372 Filed 3–4–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38342; File No. SR–CBOE–

97–03]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Board Options Exchange,

Inc. Relating to Options on Interests in

Listed, Open-End, Indexed Investment

Companies

February 26, 1997.

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

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on January 22, 1997,

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 selfregulatory organization. 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 the adoption of

rules to permit the trading of options on

interests in listed, open-end, investment

companies that hold a portfolio of

securities comprising or based on a

broad-based stock index.

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 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

The purpose of the proposed rule

change is to provide for the trading of

options on listed shares or units of

open-end, indexed, investment

companies. For purposes of this filing,

indexed investment companies are

those that hold a portfolio of securities

comprising or based on a designated

broad-based stock index such that the

investment company is designed to

provide investment results that

substantially correspond to the price

and yield performance of the designated

index. The kinds of shares or units

issued by open-end, investment

companies that are within the scope of

the proposed rule change include listed

shares issued by open-end, managed

investment companies or by series of

such funds, or listed interests in openend unit investment trusts (‘‘UITs’’) that

have as their assets either an indexed

portfolio of equity securities or shares of

an open-end investment company that

holds such a portfolio. (Shares or other

interests in investment companies are

herein referred to as ‘‘shares.’’). ‘‘Listed’’

shares are those that are principally

traded on a national securities exchange

or through the facilities of a national
Federal Register / Vol. 62, No. 43 / Wednesday, March 5, 1997 / Notices 10099

1For example, Creation Units for the series of

indexed open-end management investment

companies approved for listing on the American

Stock Exchange and known as ‘‘WEBs’’ represent

from 80,000 to 600,000 shares, which were valued

from $450,000 to $10,000,000, depending on the

series, at the time the Amex rules applicable to

WEBs were approved. See Securities Exchange Act

Release No. 36947 (March 8, 1996) (order approving

Amex Rules applicable to WEBs). Similarly, a

Creation Unit for listed UITs indexed to the S&P

500 Index represents 50,000 units, valued at

$3,750,000 at the current level of that Index.

2See, for example, the maintenance listing

standards contained in Amex Rules 1002(b) and

1002A(b), applicable to indexed UIT interests and

indexed mutual funds, respectively.

Notwithstanding the absence of maintenance

standards requiring a minimum number of shares

outstanding, as a practical matter there can never

be trading in a series of a listed investment

company in which there is less than one Creation

Unit outstanding, since listed open-end investment

companies may only be created and redeemed in

Creation Unit size, and if the last outstanding

Creation Unit should ever be redeemed, the series

(and options on that series) will cease to trade.

securities association and reported as a

‘‘national market security.’’

The open-end investment companies

that qualify as underlying securities for

options under this proposal

continuously offer to sell their shares or

interests at net asset value, although in

some cases the offering of such shares

may be made only in large block-size

units (sometimes referred to as

‘‘Creation Units’’) in exchange for an inkind deposit of the underlying indexed

portfolio of securities (or in the case of

UITs holding shares of an indexed fund,

an in-kind deposit of shares of the

indexed fund) and a specified amount of

cash to make the deposit equal the net

asset value of the fund shares being

purchased. Thus, it will always be

possible for a person to purchase blocksize units of shares of an underlying

fund or UIT at net asset value by means

of an in-kind deposit. The value of a

Creation Unit varies from fund to fund,

but it generally is of substantial size.1

Similarly, redemptions of shares of

underlying investment companies may

always be made at net asset value,

although, as for purchases, in some

cases redemptions may be made only in

block-size Creation Units, in which case

payment of redemption proceeds will be

made only in the form of an in-kind

distribution of the securities comprising

the underlying indexed portfolio or

shares of the underlying indexed fund.

Options on open-end investment

companies are proposed to be traded on

CBOE pursuant to the same rules and

procedures that apply generally to

trading in options on equity securities

or indexes of equity securities, except

that special listing criteria are proposed

to apply to this category of options, and

these options are proposed to be subject

to position and exercise limits on the

same basis as broad-based index

options.

The listing standards proposed for

options on open-end investment

companies are set forth in proposed

Interpretation and Policy. .06 under

CBOE Rule 5.3 and in Interpretation .10

under CBOE Rules 5.4. These standards,

which provide for the listing of

European-style options only, are

substantially the same as those that have

been applied to the initial and

continued listing of various open-end

investment companies on other

securities exchanges. There is also the

requirement, comparable to that which

applies to index options, that the

preponderant weight of a non-U.S.

index must be represented by stocks

traded on exchanges that have entered

into surveillance sharing agreements

with the Exchange. CBOE’s proposed

listing standards provide that there will

be no opening transactions in

investment company options and all

such options will trade on a liquidationonly basis if the underlying investment

companies should cease to trade on an

exchange or as national market

securities in the over-the-counter

market. Conforming the listing

standards for options on open-end

investment companies to those

applicable to the underlying investment

companies themselves assures that

options may be considered for listing on

CBOE on all open-end investment

companies that are themselves listed on

an exchange or on Nasdaq.

This in turn should be beneficial to

investors in listed investment

companies enabling them to adjust the

risks and rewards of their investments

to suit their individual needs. The

ability of these options should also add

to the depth and liquidity of the market

for the underlying investment

companies by permitting market makers

in that market to hedge the risks of their

market-making activities.

Exchange maintenance listing

standards for open-end investment

companies do not include criteria based

on either the number of shares or other

units outstanding or on their trading

volume.2 The CBOE believes the

absence of such criteria is justified on

the ground that since it should always

be possible to create additional shares or

other interests in open-end investment

companies at their net asset value by

making an in-kind deposit of the

securities that comprise the underlying

index or portfolio, there is no limit on

the available supply of such shares or

interests. This, in turn, in the CBOE’s

view, should make it highly unlikely

that the market for listed, open-end

investment company shares could be

capable of manipulation, since

whenever the market price for such

shares departs from net asset value,

there will be arbitrage opportunities

either to purchase or redeem shares at

net asset value that should bring prices

back in line.

For this same reason, there is not the

same need for option position and

exercise limits to protect the underlying

market against squeezes and other types

of manipulation as their may be for

options or securities that are not openended. Furthermore, in the absence of

any maintenance listing requirements in

the underlying market that call for a

minimum number of shares or units or

for minimum trading volume, position

and exercise limits are not meaningful

as a percentage of either of these

measures. Nevertheless, CBOE is

proposing to subject options on

indexed, open-end, listed investment

companies to the same position and

exercise limits that currently apply to

indexed European-exercise style options

generally. After some period of

experience with these limits, CBOE may

propose their relaxation or elimination,

but any such proposal would be subject

to being filed and approved under

section 19(b)2) of the Securities

Exchange Act of 1934.

Reflecting the indexed nature of the

underlying portfolios of the investment

companies on which options are

proposed to be traded, the Exchange

proposes to amend Interpretation and

Policy .01 under Exchange Rule 5.5 to

provide that the minimum strike price

intervals for these options will be $2.50

where the strike price is $200 or less,

and $5.00 where the strike price is over

$200. These are comparable to the strike

price intervals provided in

Interpretation and Policy .01 under

Exchange Rule 24.9, as applicable to

broad-based index options having strike

prices at about the level expected for

listed investment company options.

Margin requirements are proposed for

options on listed investment companies

at the same levels that apply to options

generally under Exchange Rule 12.3,

except that, reflecting the indexed

nature of underlying portfolios of these

investment companies, minimum

margin must be deposited and

maintained equal to 100% of the current

market value of the option plus 15%

(instead of 20%) of the market value of

equivalent units of the underlying

security value. In this respect, the

margin requirements proposed for

options on listed, indexed investment

companies are comparable to margin

requirements that currently apply to
10100 Federal Register / Vol. 62, No. 43 / Wednesday, March 5, 1997 / Notices

3See memorandum from Joseph Corrigan,

Executive Director, OPRA, to Eileen Smith, CBOE,

dated January 21, 1997. 4 17 CFR 200.30–3(a)(12).

1See Securities Exchange Act Release No. 36516

(November 27, 1995), 60 FR 62114 (December 4,

1995).

market index options under Exchange

Rule 24.11(b)(i).

CBOE believes it has the necessary

systems capacity to support the

additional series of options that would

result from the introduction of

investment company options, and it has

been advised that the Options Price

Reporting Authority (‘‘OPRA’’) also has

the capacity to support these additional

services.3

The proposed rule change is

consistent with Section 6(b) of the Act

in general and furthers the objectives of

Section 6(b)(5) in particular because, by

providing for the trading of options on

listed, indexed, open-end investment

companies within the framework of

CBOE’s regulated market place while

there is trading in the underlying

investment companies in other

exchange markets, the proposed rule

change is designed to prevent

fraudulent and manipulative acts and

practices, to promote just and equitable

principles of trade, to remove

impediments to and perfect the

mechanism of a free and open market

and a national market system, and to

protect investors and the public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange believes the proposed

rule change will impose no

inappropriate burden on competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received from

Members, Participants or Others

The Exchange has neither solicited

nor received written comments on the

proposed rule change.

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

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

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. 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–97–

03 and should be submitted by March

26, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.4

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–5371 Filed 3–4–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38332; File No. SR–CBOE–

97–07]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by Chicago

Board Options Exchange, Inc.,

Relating to Certain Multi-Market Orders

Involving Index Options

February 24, 1997.

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

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), and Rule

19b–4 thereunder, 17 CFR 240.19b–4,

notice is hereby given that on February

12, 1997, the Chicago Board Options

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

filed with the Securities and Exchange

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 Exchange proposes to amend

Rule 6.48 to specify that certain duties

of CBOE members in effecting options

transactions on the CBOE that are part

of certain stock-option orders on the

CBOE involving index options. 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 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 the

Statutory Basis for, the Proposed Rule

Change

(1) Purpose

In 1995, the Exchange filed a rule

change proposal with the Commission

that amended Rule 6.48 and set forth the

duties of CBOE members executing

options orders that constitute a

component of a ‘‘package’’ stock-options

order. The execution of this type of

order involves transactions in CBOE’s

options market and in another market (a

‘‘multi-market’’ order).1 Rule 6.48

specifies the sole basis on which an

options trade that is a component of a

multi-market order may be canceled by

the members that are parties thereto.

However, Rule 6.48 does not currently

provide for the cancellation of any

stock-option order that entails the

purchase of sale of index options.

Multi-market orders in index options

play an important role in allowing

traders to hedge their risks and thus, in

providing liquidity to customers in their

products. Sometimes, multi-market

orders involving index options might

consist of a spread between the CBOE

option product and another single

security traded in another market, e.g.,

S&P 500 index options (SPX) versus a

unit investment trust in the S&P 500. In

those instances where an order involves