Federal Register / Vol. 63, No. 136 /Thursday, July 16, 1998 / Notices 38441

16 15 U.S.C. 78s(b)(2).

17 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See letter from Timothy H. Thompson, Director,

Regulatory Affairs, Legal Department, CBOE, to

Deborah Flynn, Attorney, Division of Market

Regulation, Commission, dated June 19, 1998

(‘‘Amendment No. 1’’). In Amendment No. 1, the

CBOE proposes to amend the proposed rule change

to add cross-references to new paragraph (b)(vi)

where the Rule only refers to paragraph (b)(v)

presently. The proposed change will make clear to

joint account participants, or the nominee of the

member organization, that the requirements of

paragraph (b)(v) need not be met in order to

participate in the joint account, or in the firm’s

Retail Automatic Execution System account, if the

requirements for paragraph (b)(vi) are met.

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 will also be

available for inspection and copying at

the principal office of the Exchange. All

submissions should refer to File No.

SR–Amex–97–39 and should be

submitted by August 6, 1998.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,16 that the

proposed rule change (SR–Amex–97–

39) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.17

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–18962 Filed 7–15–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40186; File No. SR–CBOE–

98–20]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Board Options Exchange,

Inc. and Amendment No. 1 Thereto

Relating to RAES Eligibility

Requirements for OEX and DJX

Options

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 May 18,

1998, 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. On

June 24, 1998, the CBOE filed an

amendment to the proposal.3 The

Commission is publishing this notice to

solicit comments on the proposed rule

change, as amended, from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The CBOE proposes to add a new subparagraph to CBOE Rule 24.17, RAES

Eligibility in OEX and DJX, that would

allow a Market-Maker to participate on

the Retail Automatic Execution System

(‘‘RAES’’) in both options on the

Standard & Poor’s 100 Index (‘‘OEX’’)

and options on the Dow Jones Industrial

Average (‘‘DJX’’) during the same

calendar month by meeting the

eligibility requirements for OEX alone,

DJX alone, or eligibility requirements

which consider the percentage of

transactions and contracts a MarketMaker transacted in OEX and DJX

combined. The text of the proposed rule

change is available at the Office of the

Secretary, the 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

Statutory Basis for, the Proposed Rule

Change

1. Purpose

Currently, CBOE Rule 24.17(b)(v) sets

forth four eligibility requirements that a

Market-Maker must meet before he can

participate in RAES in either OEX or

DJX. One of these requirements is that

the Market-Maker must execute at least

seventy-five percent of his MarketMaker contracts for the preceding

calendar month in the option class in

which the Market-Maker is participating

on RAES. Because of the high

percentage requirement, a Market-Maker

who qualifies to participate in RAES in

either OEX or DJX would not be able to

qualify to participate in RAES in the

other class. In fact, the Exchange

believes the seventy-five percent

requirement is so high that it serves as

a disincentive for a Market-Maker on

one side of the common structure in

which OEX and DJX are traded to move

into the other side of the structure to

trade the other option product for fear

that the Market-Maker will no longer

qualify for RAES in his primary trading

area.

The Exchange believes, however, that

a strength of the Market-Maker system is

the ability of Market-Makers to move

from one trading pit to another to

provide liquidity and capital when

market conditions warrant. Because the

traders in OEX or DJX stand right next

to each other in the same physical

trading structure, they are in the best

position to provide added liquidity and

capital to the products by moving from

one side of the trading structure to the

other. Consequently, the Exchange

determined to add new sub-paragraph

(b)(vi) to Rule 24.17 to allow a MarketMaker to qualify for RAES in both OEX

and DJX during the same calendar

month (1) by meeting the individual

requirements for OEX, (2) by meeting

the individual requirements for DJX, or

(3) by transacting seventy-five percent of

his contracts for the month in both OEX

and/or DJX combined and by transacting

seventy-five percent of his contracts in

OEX and DJX during the month in

person. A Market-Maker can participate

in RAES in both OEX and DJX during

the same calendar month as long as he

meets one of the sets of criteria above

and as long as the two products

continue to be traded at the same

physical trading location. It should be

noted that in the equity posts on the

floor, a Market-Maker may participate in

RAES in all classes traded at that post.

Although OEX and DJX are technically

traded at two separate trading posts, the

Market-Makers for each product are

separated by a movable railing within

the same physical structure. A MarketMaker must be present in the particular

trading crowd where the class is traded

while he is participating in RAES for

that class.

The Exchange proposes to implement

this rule change at the beginning of the

next calendar month after the rule

proposal is approved by the

Commission. Finally, the Exchange is

proposing to delete current

Interpretation .02 because it is no longer

relevant now that December 1, 1997 has

passed.

2. Statutory Basis

By eliminating a disincentive for

Market-Makers, in the physical structure

where OEX and DJX are traded, to move

between trading pits to provide added

liquidity and capital when market

conditions warrant, the Exchange

believes the proposed rule change is
38442 Federal Register / Vol. 63, No. 136 /Thursday, July 16, 1998 / Notices

4 15 U.S.C. 78f.

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

6 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1) (1994).

2 17 CFR 240.19b–4 (1997).

consistent with Section 6 of the Act,4 in

general, and with section 6(b)(5),5 in

particular, because it is designed to

promote just and equitable principles of

trade 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 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 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

change, as amended, 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 submissions, 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–98–20 and should be

submitted by August 6, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–18905 Filed 7–15–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40187; File No. SR–CHX–

98–13]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Stock Exchange, Inc.

Amending the Exchange’s Clearing the

Post Policy for Cabinet Securities

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 June 10,

1998, the Chicago Stock Exchange, Inc.

(‘‘CHX’’ 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 CHX. 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

interpretation and policy .02 of CHX

Rule 10 of Article XX and amend CHX

Rule 11 of Article XX relating to

clearing the post and to make

permanent the policy contained in

Article XX, Rule 11 regarding the ability

of oral bids and offers to clear the

cabinet post by phone. The text of the

proposed rule change is as follows:

Additions are italicized; deletions are

[bracketed].

ARTICLE XX

Rule 10. Manner of Bidding and

Offering.

No change in text.

* * * Interpretations and Policies

02. Clearing the Post.

Policy. All orders received by floor

brokers or originated by market makers

on the floor of the Exchange must

effectively clear the post before the

orders may be routed to another market,

either via the ITS System or through the

use of alternative means.

Floor brokers who receive an order on

the floor have a fiduciary responsibility

to seek a best price execution for such

order. This responsibility includes

clearing of the Exchange’s post prior to

routing an order to another market so

that other buying and selling interest at

the post can be checked for a potential

execution that may be as good as or

better than the execution available in

another market.

Market makers are required to provide

depth and liquidity to the Exchange

market, among other things. Exchange

Rules require that all market maker

transactions constitute a course of

dealings reasonably calculated to

contribute to the maintenance of a fair

and orderly market. In so doing, market

makers must adhere to traditional

agency/auction market principles on the

floor. Transactions by Exchange market

makers on other exchanges which fail to

clear the Exchange post do not

constitute such a course of dealings.

Notwithstanding the above, it is

understood that on occasion a customer

will insist on special handling for a

particular order that would preclude it

from clearing the post on the Exchange

floor. For example, a customer might

request that a specific order be given a

primary market execution. These

situations must be documented and

reported to the Exchange. Customer

directives for special handling of all

orders in a particular stock or all stocks,

however, will not be considered as

exceptions to clearing the post policy.

All executions resulting from bids and

offers reflected on Instinet terminals

resident on the Exchange floor

constitute ‘‘orders’’ which are

‘‘communicated’’ to the Exchange floor.

Therefore, all orders resulting from

interest reflected on Instinet terminals

on the Exchange floor must be handled

as any other order communicated to the

floor. All such orders must be presented

to the post during normal trading hours.

All trades between Instinet and

Exchange floor members are Exchange

trades and must be executed on the

Exchange.

Method of Clearing the Post. [Subject

to Article XX, Rule 11 relating to cabinet

securities,] [t]The Exchange’s clearing

the post policy requires the floor broker

or market maker to be physically

present on the Exchange floor and to be

present at the post. So long as the floor

broker or market maker is physically

present on the Exchange floor, a floor

broker’s or market maker’s bids and