[Federal Register Volume 60, Number 235 (Thursday, December 7, 1995)]
[Notices]
[Pages 62913-62914]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-29779]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36534; File No. SR-CBOE-95-65]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Board Options Exchange, Inc. Relating to Joint 
Account Participant Trading in Equity Options

November 30, 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 October 
20, 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 self-regulatory 
organization. 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 revise its policy regarding joint account 
participation in equity 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, 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

    The purpose of this rule change is to revise that provision of the 
Exchange's policy governing joint account participant trading in equity 
options that currently prohibits the simultaneous representation in a 
trading crowd by more than one member of a joint account.\1\ Under the 
proposed regulatory circular, a joint account may be simultaneously 
represented in a trading crowd but only by participants trading in-
person. All other provisions of the current regulatory circular would 
remain unchanged, including a prohibition against orders being entered 
in the crowd via a floor broker when a joint account participant is 
trading in the crowd in-person. This change in policy is also reflected 
in a deletion of one sentence and the addition of another from 
paragraph (a)(ii) of Rule 8.16, RAES Eligibility in Equity Options.

    \1\This policy is set forth in Regulatory Circular RG 93-50, 
which is a reissuance of RG 91-68, submitted for immediate 
effectiveness as File No. SR-CBOE-91-48, noticed in Securities 
Exchange Act Release No. 30334 (February 4, 1992), 57 FR 4900 
(February 10, 1992).
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    There are two reasons why the Exchange has determined to propose 
this change, which has been recommended by the Exchange's Equity Floor 
Procedure Committee. First, the change will make the policy governing 
joint account trading in equity options more consistent with the 
current policy governing index option trading, where multiple 
representation of orders for the same joint account is permitted by 
participants in the joint account trading in-person at the trading 
post, or by floor brokers representing the orders at the post.\2\ The 
policy proposed for equity options is more restrictive, in that it 
would only permit joint representation by participants trading in-
person, and would not permit multiple representation of orders for the 
same joint account if one or more of the orders is represented by a 
floor broker. The policy for index options reflects that, as a 
practical matter, floor broker representation is often required in 
index option trading crowds, where special trading practices and 
procedures have been adopted to deal with the special needs of these 
very large crowds. Since a trader from another crowd may be unfamiliar 
with these practices, he may need to use the services of a floor broker 
who is regularly present at the index crowd and who understands its 
trading practices. Smaller equity option trading posts do not present 
the same practical need for the services of floor brokers, which is why 
the proposed policy permitting joint account representation at equity 
option posts is limited to in-person representation of orders by 
market-makers.

    \2\See Regulatory Circular RG 95-64, which is a reissuance of 
Regulatory Circular RG 91-57, approved in Securities Exchange Act 
Release No. 31174 (September 10, 1992), 57 FR 42789 (September 16, 
1992).

[[Page 62914]]

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    A second reason why the Exchange has chosen to institute this 
policy is to ensure that member organizations that choose to employ a 
joint account for their Exchange trading, rather than using individual 
market-maker accounts, are not disadvantaged in participating in trades 
vis-a-vis those member organizations that do employ individual market-
maker accounts. Some member organizations choose to have their various 
market-makers trade in a joint account so that the member 
organization's positions can be more easily monitored and managed. 
Under the current equity policy regarding joint accounts, however, 
these member organizations would only be able to be represented by one 
joint account participant in a trading crowd at one time. On the other 
hand, the member organization using the individual market-maker 
accounts would be able to be represented by each market-maker's 
individual account. The proposed change would eliminate the 
disadvantage currently suffered by member organizations using joint 
account structures.
    In addition to the regulatory circular, one sentence will be 
deleted and another added from Rule 8.16(a)(ii). This rule currently 
prohibits more than one joint account participant from using the joint 
account for trading on RAES in a particular option class unless the 
Exchange's Market Performance Committee (``MPC'') provides an 
exemption. However, because any joint account participant trading in-
person would be entitled to participate on the same side of a trade 
with his fellow joint account participants in the same trading crowd as 
a result of the proposed regulatory circular, the Exchange believes it 
is appropriate to no longer require an exemption from the MPC to have 
more than one participant use the joint account for trading on RAES. In 
any event, to participate on RAES, a member must be present in the 
trading crowd.
    The Exchange represents that by eliminating a distinction that 
currently exists between member organizations that manage their 
positions differently, the proposed rule change furthers the objectives 
of Section 6(b) of the Act in general and Section 6(b)(5) in particular 
by providing rules that perfect the mechanisms of a free and open 
market and that 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, DC. 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-95-65 and should be 
submitted by December 28, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\3\

    \3\17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-29779 Filed 12-6-95; 8:45 am]
BILLING CODE 8010-01-M