7606 Federal Register / Vol. 60, No. 26 / Wednesday, February 8, 1995 / Notices

49See supra Section III.A.

50See Securities Exchange Act Release No. 30944

(July 21, 1992), 57 FR 33376 (July 28, 1992).

51See supra Section III.A.

52 15 U.S.C 78s(b)(2) (1988).

53The Commission notes that prior to listing

Index options or Index LEAPS, the CBOE will be

required to review the then most recent semiannual

reports filed with the Commission by each of the

closed-end funds represented in the Index to ensure

that the closed-end fund securities comprising the

Index, as well as the holdings of each of the closedend funds represented in the Index, satisfy, at the

time of listing, the listing criteria discussed above.

54 17 CFR 200.30–3(a)(12) (1994).

the Exchange’s listing standards for

standardized options trading; and (2) no

individual security held by one or more

of the mutual funds represented in the

Index and no individual country

represented by those holdings will

dominate the Index.49 Third, because

the securities issued by each of the

closed-end funds comprising the Index

must be ‘‘reported securities’’ as defined

in Rule 11Aa3–1 of the Act, the

securities issued by these closed-end

funds generally will be actively-traded,

highly-capitalized securities. Fourth, the

10,500 contract position and exercise

limits applicable to Index options and

Index LEAPS will serve to minimize

potential manipulation and market

impact concerns.

Lastly, the Commission believes that

settling expiring Asian Markets Index

options, including full-value and

reduced-value Index LEAPS, based on

the opening prices of the closed-end

fund securities comprising the Index is

consistent with the Act. As noted in

other contexts, valuing options for

exercise settlement on expiration based

on opening prices rather than closing

prices may help reduce adverse effects

on markets for the closed-end fund

securities underlying options on the

Index.50

The Commission finds good cause for

approving Amendment No. 2 prior to

the thirtieth day after the date of

publication of notice of filing thereof in

the Federal Register. Specifically,

Amendment No. 2 provides objective

maintenance criteria which, for the

reasons stated above, should minimize

the potential for manipulation of the

Index and the closed-end mutual fund

securities comprising the Index.

Further, as discussed above, the

Commission believes that these

maintenance criteria significantly

strengthen the customer protection and

surveillance aspects of the proposal, as

originally proposed.51 Moreover, the

Commission believes that reducing the

number of component funds in the

Index by one is not a material change

that raises regulatory concerns not

already addressed by the proposal.

Accordingly, the Commission believes it

is consistent with Sections 6(b)(5) and

19(b)(2) of the Act to approve

Amendment No. 2 to the proposed rule

change on an accelerated basis.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning Amendment No.

2. 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. Copies of such filing

will also be available for inspection and

copying at the principal office of the

above-mentioned self-regulatory

organization. All submissions should

refer to the File Number SR–CBOE–94–

20 and should be submitted by March

1, 1995.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,52 that the

proposed rule change (SR–CBOE–94–

20), as amended, is approved.53

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.54

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–3035 Filed 2–7–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35307; File No. SR–CBOE–

95–03]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Chicago Board Options Exchange, Inc.

Relating to Restrictions on the

Exercise on Index Options

January 31, 1995.

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 18, 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.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange proposes to amend its

Rule 4.16 to limit the time period during

which restrictions on the exercise of

index options may be in effect, making

Rule 4.16 consistent with CBOE

Regulatory Circular RG91–11, dated

January 14, 1991. Rule 4.16 would be

amended to substitute the words

‘‘business day’’ for the words ‘‘trading

day,’’ thereby making Rule 4.16

consistent with CBOE’s stated policy as

set forth in Regulatory Circular RG91–

11. 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. The text of these

statements may be examined at the

places specified in Item IV below. The

Exchange has prepared summaries, set

forth in Section (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 revise Rule 4.16 to make it

consistent with CBOE’s stated policy

regarding when restrictions on the

exercise of index options may be in

effect, as set forth in Regulatory Circular

RG91–11. The Exchange represents that

it promulgated the policies regarding

exercise restrictions in Regulatory

Circular RG91–11 to implement a

coordinated approach to which all of

the options exchanges had agreed.

Regulatory Circular RG91–11 provides,

in part, that, except during ‘‘the last

business day prior to expiration, the

(American Stock Exchange, CBOE, New

York Stock Exchange, Pacific Stock

Exchange, and the Philadelphia Stock

Exchange) intend to prohibit exercises

of cash settled index options during any

time when trading in such options are
Federal Register / Vol. 60, No. 26 / Wednesday, February 8, 1995 / Notices 7607

1 15 U.S.C. 78f(b)(5) (1988). 2 17 CFR 200.30–3(a)(12) (1994).

1 15 U.S.C. 78s(b)(1) (1988).

2 17 CFR 24.19b–4 (1992).

3 In Amendment No. 1, the Exchange proposed to

treat the Asian Markets Index as a narrow-based

index for purposes of margin, position limits, and

exercise limits. Pursuant to CBOE Rule 24.4A, the

position limits for the Index will initially be set at

10,500 contracts. See Letter from Eileen Smith,

Director, Product Development, Research

Department, CBOE, to Brad Ritter, Senior Counsel,

Office of Market Supervision (‘‘OMS’’), Division of

Market Regulation (‘‘Division’’), Commission, dated

August 18, 1994.

4See Securities Exchange Act Release No. 34552

(August 19, 1994), 59 FR 44203 (August 26, 1994).

5 In Amendment No. 2, the Exchange proposed:

(1) to reduce the number of components in the

Index from 25 to 23; and (2) several amendments,

as discussed more fully herein, regarding the

maintenance criteria for the Index. See Letter from

Joseph Levin, Vice President, Research Department,

CBOE, to Brad Ritter, Senior Counsel, OMS,

Division, Commission, dated January 26, 1995

(‘‘Amendment No. 2’’).

delayed, halted or suspended.’’

(Emphasis in original). The Exchange

represents that by purporting to restrict

exercises of these index options except

on the last business day prior to

expiration, RG91–11 conflicts with Rule

4.16, which provides that exercise

restrictions on index options are only

allowed until ‘‘the opening of business

on the last trading day before the

expiration date.’’ (Emphasis added).

The Exchange believes that this

terminology creates a problem in the

case of A.M.-settled index options. The

‘‘last business day prior to expiration’’

is, for both A.M.-settled and P.M.-settled

index options, the Friday before

expiration. For P.M.-settled options, that

Friday is also the ‘‘last trading day

before the expiration date.’’ Pursuant to

CBOE Rule 24.9(a)(4), however, the ‘‘last

trading day’’ before the expiration date

of A.M.-settled index options is ‘‘the

business day preceding the last day of

trading in the underlying securities

prior to expiration’’—i.e., Thursday

before expiration. (Emphasis added).

The present form of Rule 4.16 therefore

would prohibit restrictions on the

exercise of A.M.-settled index options

on expiration Thursday, as well as

expiration Friday, even when trading in

such options ‘‘had been delayed, halted

or suspended.’’ This, the Exchange

believes, is contrary to the policy

articulated in Regulatory Circular RG–

11, which would only prohibit

restrictions on exercise of any index

option on expiration Friday.

To eliminate this inconsistency, and

to implement the policy of Regulatory

Circular RG91–11 that index option

exercise restrictions may be in effect

until the opening of business on

expiration Friday (i.e., the ‘‘last business

day’’ before expiration), the proposed

rule change would amend Rule 4.16 to

substitute the words ‘‘business day’’ for

the words ‘‘trading day.’’

The CBOE represents 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) 1 in particular in that it is

designed to prevent fraudulent and

manipulative acts and practices and to

promote just and equitable principles of

trade.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed rule change will impose

and 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 rule change

constitutes a stated policy, practice, or

interpretation with respect to the

meaning, administration, or

enforcement of an existing rule of the

Exchange, it is has become effective

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

Act and subparagraph (e)(1) of Rule

19b–4 thereunder. 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.

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–95–03

and should be submitted by March 1,

1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.2

[FR Doc. 95–3034 Filed 2–7–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35303; International Series

Release No. 778; File No. SR–CBOE–94–

19]

Self-Regulatory Organizations; Order

Approving a Proposed Rule Change

and Notice of Filing and Order

Granting Accelerated Approval of

Amendment No. 2 to the Proposed

Rule Change by the Chicago Board

Options Exchange, Inc., Relating to the

Listing of Options and Long-Term

Options on the CBOE Emerging

Markets Index and Long-Term Options

on a Reduced-Value CBOE Emerging

Markets Index

January 31, 1995.

I. Introduction

On June 30, 1994, the Chicago Board

Options Exchange, Inc. (‘‘CBOE’’ or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission

(‘‘Commission’’), pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’) 1 and Rule 19b–4

thereunder,2 a proposed rule change to

provide for the listing and trading of

index options on the CBOE Emerging

Markets Index (‘‘Emerging Markets

Index’’ or ‘‘Index’’). The Exchange filed

Amendment No. 1 to the proposed rule

change on August 18, 1994.3 Notice of

the proposal, as amended, appeared in

the Federal Register on August 26,

1994.4 The Exchange subsequently filed

Amendment No. 2 to the proposed rule

change on January 26, 1995.5 No

comment letters were received on the

proposed rule change. This order

approves the Exchange’s proposal, as

amended.

II. Description of Proposal

A. General

The CBOE proposes to list for trading

options on the Emerging Markets Index,

a new securities index developed by the