[Federal Register Volume 63, Number 83 (Thursday, April 30, 1998)]
[Notices]
[Pages 23819-23820]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-11449]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39908; File No. SR-CBOE-98-14]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Board Options 
Exchange, Inc. Relating to the Trading of Stocks, Warrants and Other 
Non-Option Securities

April 24, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on April 16, 1998, 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 self-regulatory organization. The 
Exchange has designated the proposed rule change as constituting a 
``non-controversial'' rule change under paragraph (e)(6) of Rule 19b-4 
under the Act \2\ which renders the proposal effective upon receipt of 
this filing by the Commission.\3\ The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4(e)(6).
    \3\ The Exchange has represented that the proposed rule change: 
(1) Will not significantly affect the protection of investors or the 
public interest; (ii) will not impose any significant burden on 
competition; and (iii) will not become operative for 30 days after 
the date of this filing, unless otherwise accelerated by the 
Commission. The Exchange also has provided at least five business 
days notice to the Commission of its intent to file this proposed 
rule change, as required by Rule 19b-4(e)(6) under the Act. Id.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The CBOE proposed to clarify certain of its rules governing the 
trading of stocks, warrants and other non-option securities.
    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 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 organization 
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 purpose of the proposed rule change is to amend certain of 
CBOE's rules applicable to securities traded on CBOE, other than 
options. The proposed revisions are to rules in Chapter XXX, which 
governs trading in ``Stocks, Warrants and Other [non-option] 
Securities.'' The Exchange also is proposing to add Interpretation and 
Policy .04 to Rule 8.80 in order to clarify the obligations of a 
Designated Primary Market-Maker (``DPM'') acting in respect of 
securities other than options. In conjunction with the implementation 
of certain upgrades and enhancements to the Exchange's computer system 
that will apply to the trading of securities other than options (the 
automated system for trading securities other than options as enhanced 
is referred to herein as the ``System''), the Exchange reviewed all of 
its Chapter XXX rules to make certain that the rules conformed with the 
features of the new System. Although the Exchange determined that no 
substantive changes to its rules were necessary as a result of this 
review, the Exchange did determine to make the following clarifications 
to its rules.

Odd Lot Orders

    The Exchange has proposed to adopt new Interpretation and Policy 
.04 under rule 8.80 in order to require DPMs to fill the odd lot 
portion of a mixed lot order (an order that includes an odd lot portion 
in addition to one or more round lots) in any security to which they 
are assigned at a price determined in accordance with Interpretation 
and Policy .05 under Rule 30.22. That Interpretation and Policy 
currently provides that the odd lot portion of a PRL (part of round 
lot) order is to be filled at the same price as the round lot portion, 
and is proposed to be amended to clarify that if the round lot portion 
of a PRL order fills at multiple prices, the odd lot portion is to be 
executed at a price equal to the first round lot execution. This change 
is descriptive of how the System will actually process the execution of 
odd lot portions of PRL orders.

Priority

    Rule 30.13(f), which provides for time priority for bids and offers 
made at the same price, is proposed to be amended to clarify that if a 
member makes certain changes to an order, that order will be considered 
made at the time of the change. The following changes will cause the 
time of entry of an order to be updated for time priority purposes: (1) 
Changing the price of the order, (2) increasing the size of the order; 
(3) increasing the length of time during which the order remains 
subject to execution; (4) removing or amending any other contingency 
applicable to the order; and (5) causing the order to shift between 
types of order books (e.g. from a round lot to an odd lot order).
2. Statutory Basis
    The Exchange represents that the proposed rule changes are 
consistent with Section 6(b) \4\ of the Act in general and further the 
objectives of Section 6(b)(5) \5\ in particular in that, by clarifying 
the obligations of DPMs in respect of odd lot portions of orders and 
clarifying the types of changes to orders that cause the time of the 
orders to be updated for purposes of time priority, they are designed 
to promote just and equitable principles of trade and to protect 
investors and the public interest.\6\
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ In approving these rules, 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

    The Exchange does not believe that the proposed rule change will 
impose any 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.

[[Page 23820]]

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    This proposed rule filing has been filed by the Exchange as a 
``non-controversial'' rule change pursuant to Section 19(b)(3)(A)(i) of 
the Act \7\ and subparagraph (e)(6) of Rule 19b-4 thereunder.\8\ 
Consequently, 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; 
and (3) does not become operative until May 17, 1998, more than 30 days 
from April 16, 1998, the date on which it was filed, and the Exchange 
provided the Commission with written notice of its intent to file the 
proposed rule change at least five days prior to the filing date, it 
has become effective pursuant to Section 19(b)(3)(A) of the Act and 
Rule 19b-4(e)(6 ) thereunder.
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    \7\ 15 U.S.C. 78s(b)(3)(A)(i).
    \8\ 17 CFR 240.19b-4(e)(6).
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    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 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, 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 also will be 
available for inspection and copying at the principal office of the 
CBOE. All submissions should refer to File No. SR-CBOE-98-14 and should 
be submitted by May 21, 1998.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-11449 Filed 4-29-98; 8:45 am]
BILLING CODE 8010-01-M