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
Federal Register / Vol. 62, No. 43 / Wednesday, March 5, 1997 / Notices 10101

2The trust which underlies S&P 500 Depositary

Receipts (‘‘SPDRs’’) is made to replicate the

performance of the S&P 500 index; however, there

are a couple of reasons why the value of the SPDR

trust may deviate slightly from the S&P 500 value.

First, the trust underlying SPDRs is subject to slight

rounding errors because the trust must contain

whole shares while the S&P 500 index is not so

limited. Second, the trust underlying SPDRs is

required only to make adjustments to the

components monthly unless the value of the

component deviates by more than a certain

percentage from that component’s comparable

weight in the S&P 500 index.

3See CBOE Rule 1.1(ii).

4Telephone conversation between Tim

Thompson, Senior Attorney, CBOE, and John

Ayanian, Special Counsel, Office of Market

Supervision, Division of Market Regulation,

Commission, on February 21, 1997.

a CBOE index option and an equity

index-based security traded in another

market, where both are based upon the

same index,2 the Exchange believes it is

appropriate to deem such an order a

stock-option order, and thus eligible for

the order cancellation provision

contained in paragraph (b) of Rule 6.48.

Another common type of multi-market

order often involves the nearly

simultaneous trading of a CBOE option

and a basket of stocks in another market.

The CBOE does not believe that this

type of order should be deemed a stockoption order eligible for the cancellation

provisions contained in Rule 6.48

because a ‘‘basket’’ of stocks is not an

‘‘underlying or related security’’ as

required in the definition of stockoption order.3 To date, CBOE traders in

index options have relied on informal

trading protocols to ensure fairness and

equity in connection with the execution

and cancellation of multi-market orders.

Accordingly, the Exchange is

proposing to extend the order execution

and cancellation provisions contained

in Rule 6.48 to stock-option orders

involving an index option and a single

security equity index-based product

traded in another market, where both

are based upon the same index.4

Consequently, the Exchange is

proposing the deletion of paragraph

(b)(ii) of Rule 6.48 which exempts stockoption orders involving index options

from the two requirements set forth in

paragraph (b) of Rule 6.48. The first of

those requirements is that a member

announcing such an order to a trading

crowd must disclose all legs of the order

and must identify the specific markets

and prices at which the non-options

leg(s) are to be filed. Second, concurrent

with the execution of the option leg of

any multi-market order, the initiating

member and each member that is a

counterparty to the trade must take

steps to immediately execute the nonoptions leg(s) in the identified

market(s).

The Exchange believes, as with stockoption orders involving equity options,

that these provisions will clarify

members’ expectations about the

execution of each non-option

component of such orders.

Current Rule 6.48 provides that a

party to an options transaction that is

part of a stock-option order may have

the options transaction canceled only in

the event that market conditions in

another market prevents the execution

of one or more of the non-option legs of

the order.

The current proposal only addresses

multi-market orders involving an index

option and a single security equity

index-based product traded in another

market, where both are based upon the

same index (e.g., a stock-option order

involving SPDRs and SPX options).

Additionally, Rule 6.48 is not intended

to allow multi-market orders involving

index options and ‘‘baskets’’ of

securities to get the benefit of the order

cancellation provisions of the rule.

Stock-option orders are just one subset

of the types of multi-market orders that

are transacted by traders in the index

crowds. As mentioned above, some

multi-market orders involve a

transaction of an index option coupled

with a basket of stocks comprising the

index. An order for this type of

transaction does not meet the definition

of a stock-option order which is defined

under CBOE Rule 1.1(ii). The Exchange

is currently reviewing the protocols

used in the execution of these other

types of multi-market orders to

determine if further rule changes would

be beneficial in the handling of these

orders.

(2) Basis

The Exchange believes that 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 in that it is designed to

deal with the special circumstances of

multi-market orders involving index

options in a manner that promotes just

and equitable principles of trade, and

the protection of investors and the

public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The proposed rule change will impose

no 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

Because the foregoing 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; (3)

was provided to the Commission for its

review at least five days prior to the

filing date; and (4) does not become

operative for 30 days from February 12,

1997, the date on which it was filed, the

rule change has become effective

pursuant to Section 19(b)(3)(A) of the

Act and Rule 19b–4(e)(6) thereunder. In

particular, the Commission believes the

proposal qualifies as a

‘‘noncontroversial filing’’ in that the

proposed standards do not significantly

affect the protection of investors or the

public interest and do not impose any

significant burden on competition. 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 to the

Commission that such action is

necessary or appropriate in the public

interest, for the protection of investors,

or otherwise in the 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.

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 in

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
10102 Federal Register / Vol. 62, No. 43 / Wednesday, March 5, 1997 / Notices

5 17 CFR 200.30–3(a)(12).

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

2See Securities Exchange Act Release No. 35753

(May 22, 1995), 60 FR 28007.

3See Securities Exchange Act Release No. 36027

(July 27, 1995), 60 FR 39465.

4See Securities Exchange Act Release No. 37491

(July 29, 1996), 61 FR 48690.

5See Securities Exchange Act Release No. 38098

(December 30, 1996), 62 FR 1008. Commission note:

The CHX Form 19b–4 filing indicates incorrectly

that the pilot program was extended until March 31,

1997.

6See Securities Exchange Act Release No. 30058

(December 10, 1991), 56 FR 65765. 7 15 U.S.C. 78f(b)(5).

should refer to File No. SR–CBOE–97–

07 and should be submitted by March

26, 1997.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.5

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–5373 Filed 3–4–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38338; File No. SR–CHX–

97–02]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the Chicago Stock

Exchange, Incorporated Relating to

Enhanced SuperMAX

February 26, 1997.

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

Securities Exchange Act of 1934

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

January 30, 1997, the Chicago Stock

Exchange, Incorporated (‘‘CHX’’ or

‘‘Exchange’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’) the proposed rule

change as described in Items I and II

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 and to

grant accelerated approval to the

proposal.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange requests permanent

approval of its Enhanced SuperMAX

pilot program, as amended, located in

subsection (e) of Rule 37 of Article XX.

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

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 organizations 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 May 22, 1995, the Commission

approved a proposed rule change of the

CHX that allows specialists on the

Exchange, through the Exchange’s MAX

system, to provide order execution

guarantees that are more favorable than

those required under CHX Rule 37(a),

Article XX.2 That approval order

contemplated that the CHX would file

with the Commission specific

modifications to the parameters of MAX

that are required to implement various

options available under this new rule.

On July 27, 1995, the Commission

approved a proposed rule change of the

CHX that implemented two options

available under this new rule.3 These

two new options, Enhanced SuperMAX

and Timed Enhanced SuperMAX, we

approved on a pilot basis until July 31,

1996. The Commission extended the

pilot program until December 31, 1996

and requested that the CHX provide a

report to the Commission, by August 31,

1996,4 describing its experience with

the pilot program. On August 30, 1996,

the CHX submitted the report. Most

recently, the Commission extended the

pilot program until March 1, 1997.5 In

connection with the extension, the CHX

agreed to provide additional data to the

Commission regarding the pilot. On

January 31, 1997, the Exchange

submitted this data.

The purpose of the proposed rule

change is to request permanent approval

of the pilot program, as amended by this

filing. Specifically, the Exchange is

combining the two options currently

available under the pilot program into

one option, to be called Enhanced

SuperMAX. Enhanced SuperMAX was

merely a reactivation of the Exchange’s

Enhanced SuperMAX program, a

program originally approved by the

Commission on a pilot basis in 1991.6

The proposed Enhanced SuperMAX

program differs from the original pilot

program approved in 1991 in that it is

available starting at 8:45 a.m. instead of

9:00 a.m. This program also differs from

the Exchange’s SuperMAX program in

that under this program, certain orders

are ‘‘stopped’’ at the consolidated best

bid or offer and are executed with

reference to the next primary market

sale instead of the previous primary

market sale.

The Enhanced SuperMAX program, as

amended by this filing, also includes all

of the features of the pilot version of the

Timed Enhanced SuperMAX program.

Essentially, the new Enhanced

SuperMAX program will execute orders

in the same manner as the pilot

Enhanced SuperMAX program, except

that if there are no executions in the

primary market after the order has been

stopped for a designated time period,

the order is executed at the stopped

price at the end of such period. Such

period, known as a time out period, is

pre-selected by a specialist on a stockby-stock basis based on the size of the

order, may be changed by a specialist no

more frequently than once a month, and

may be no less than 30 seconds.

2. Statutory Basis

The proposed rule change is

consistent with Section 6(b)(5) of the

Act in that it is designed to promote just

and equitable principles of trade, to

remove impediments and to perfect the

mechanism of a free and open market

and a national market system, and, in

general, to protect investors and the

public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed rule change will impose a

burden on competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

No comments were solicited or

received.

III. Commission’s Findings and Order

Granting Accelerated Approval of

Proposed Rule Change

The Commission has carefully

reviewed the Exchange’s proposed rule

change and, for the reasons set forth

below, finds that the proposed rule

change, as amended by this filing, is

consistent with the requirements of the

Act and the rules and regulations

thereunder applicable to the Exchange,

and, in particular, with Section 6(b)(5)7

of the Act in that it is designed to

promote just and equitable principles of

trade, to remove impediments and to

perfect the mechanism of a free and