[Federal Register Volume 60, Number 26 (Wednesday, February 8, 1995)]
[Notices]
[Pages 7599-7600]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3108]



-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35324; International Series Release No. 781 File No. 
SR-CBOE-95-12]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Board Options Exchange, Inc. Relating to Currency 
Warrants Based on the Value of the U.S. Dollar in Relation to the 
Mexican Peso

February 2, 1995.
    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 January 27, 1995, 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 Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.

    \1\15 U.S.C. 78s(b)(1) (1988).
    \2\17 CFR 240.19b-4 (1991).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The CBOE proposes to list and trade warrants based upon the value 
of the U.S. dollar in relation to the Mexican peso (``Mexican Peso 
Warrants''). 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 Exchange included statements 
concerning the purpose of the 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. [[Page 7600]] 

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The Exchange represents that it is permitted to list and trade 
currency warrants under CBOE Rule 31.5(E). The Exchange is now 
proposing to list and trade currency warrants based upon the value of 
the U.S. dollar in relation to the Mexican peso. The Exchange further 
represents that the listing and trading of Mexican Peso Warrants will 
comply in all respects with CBOE Rule 31.5(E), as discussed below.
Currency Warrant Trading
    Mexican Peso Warrants will be unsecured obligations of their 
issuers and will be cash-settled in U.S. dollars. Mexican Peso Warrants 
will be exercisable either throughout their life (i.e., American-style) 
or only immediately prior to their expiration date (i.e., European-
style). Upon exercise, the holder of a Mexican Peso Warrant structured 
as a ``put'' will receive payment in U.S. dollars to the extent that 
the value of the Mexican peso has declined in relation to the U.S. 
dollar below a pre-stated base level. Conversely, upon exercise, 
holders of a Mexican Peso Warrant structured as a ``call'' will receive 
payment in U.S. dollars to the extent that the value of the Mexican 
peso has increased in relation to the U.S. dollar above a pre-stated 
level. Mexican Peso Warrants that are ``out-of-the-money'' at the time 
of expiration will expire worthless.
Warrant Listing Standards and Customer Safeguards
    CBOE Rule 31.5(E) sets forth the criteria applicable to listing 
currency warrants. Any issue of Mexican Peso Warrants will conform to 
the listing guidelines under Rule 31.5(E) which provide that: (1) The 
issuer will have assets in excess of $100,000,000 and otherwise 
substantially exceed the size and earnings requirements in Rule 
31.5(A); (2) the term of the warrants shall be for a period ranging 
from one to five years from date of issuance; and (3) the minimum 
public distribution of such issues shall be one million warrants, 
together with a minimum of 400 public holders, and have an aggregate 
market value of at least $4 million.
    On September 28, 1994, the Exchange submitted for Commission 
approval, proposed rules governing customer protection and margin 
requirements for stock index warrants, currency index warrants, and 
currency warrants.\3\ If the Commission approves these proposed rules, 
the Exchange represents that the listing and trading of the proposed 
Mexican Peso Warrants will be subject to these rules.

    \3\See Securities Exchange Act Release No. 35178 (December 29, 
1994), 60 FR 2409 (January 9, 1994) (notice of File No. SR-CBOE-94-
34).
---------------------------------------------------------------------------

    The CBOE will also require that Mexican Peso Warrants be sold only 
to customers whose accounts have been approved for options trading 
pursuant to Exchange Rule 9.7. The Exchange also notes that the 
suitability standards of Exchange Rule 9.9 shall apply to 
recommendations in Mexican Peso Warrants. Further, the Exchange 
represents that the standards of Rule 9.10(a), regarding discretionary 
orders, will be applied to Mexican Peso Warrants. Additionally, the 
Exchange will require that customer positions in Mexican Peso Warrants 
be subject to the margin requirements applicable to foreign currency 
options.
    Prior to the commencement of trading of Mexican Peso Warrants, the 
Exchange will distribute a circular to its membership calling attention 
to certain compliance responsibilities when handling transactions in 
Index warrants. The Exchange will submit a draft of the circular to the 
Commission staff for approval prior to distribution to members.
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Act, in general, and furthers the objectives of 
Section 6(b)(5) of the Act,\4\ in particular, in that it is designed to 
facilitate transactions in securities and to remove impediments to and 
perfect the mechanism of a free and open market by providing investors 
with a low-cost means of participating in the performance of the 
Mexican economy or hedging against the risk of investing in that 
economy.

    \4\15 U.S.C. 78f(b)(5) (1988).
---------------------------------------------------------------------------

(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

    Written comments on the proposed rule change were neither solicited 
nor received.

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 Exchange 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. 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. 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-95-12 and should be 
submitted by March 1, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\

    \5\17 CFR 200.30-3(a)(12) (1994).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-3108 Filed 2-7-95; 8:45 am]
BILLING CODE 8010-01-M