2406 Federal Register / Vol. 60, No. 5 / Monday, January 9, 1995 / Notices

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

2 17 CFR 240.19b–4 (1991).

3The Commission initially approved the BSE’s

SPEP pilot program in Securities Exchange Act

Release No. 22993 (March 10, 1986), 51 FR 8298

(March 14, 1986) (File No. SR–BSE–84–04). The

Commission subsequently extended the pilot

program in Securities Exchange Act Release Nos.

26162 (October 6, 1988), 53 FR 40301 (October 14,

1988) (File No. SR–BSE–87–06); 27656 (January 30,

1990), 55 FR 4296 (February 7, 1990) (File No. SR–

BSE–90–01); 28919 (February 26, 1991), 56 FR 9990

(March 8, 1991) (File No. SR–BSE–91–01); and

30401 (February 24, 1992), 57 FR 7413 (March 2,

1992) (File No. SR–BSE–92–01). The BSE was

permitted to incorporate objective measures of

specialist performance into its pilot program in

Securities Exchange Act Release No. 31890

(February 19, 1993), 58 FR 11647 (February 26,

1993) (File No. SR–BSE–92–04) (‘‘February 1993

Approval Order’’), at which point the initial pilot

program ceased to exist as a separate program.

Commission approval of the BSE’s current SPEP

pilot program expires on December 31, 1994. See

Securities Exchange Act Release No. 33341

(December 15, 1993), 58 FR 67875 (December 22,

1993) (File No. SR–BSE–93–16) (‘‘December 1993

Approval Order’’).

petition must satisfy the specificity

requirements described above.

Not later than 15 days prior to the first

prehearing conference scheduled in the

proceeding, a petitioner shall file a

supplement to the petition to intervene

which must include a list of the

contentions which are sought to be

litigated in the matter. Each contention

must consist of a specific statement of

the issue of law or fact to be raised or

controverted. In addition, the petitioner

shall provide a brief explanation of the

bases of the contention and a concise

statement of the alleged facts or expert

opinion which support the contention

and on which the petitioner intends to

rely in proving the contention at the

hearing.

The petitioner must also provide

references to those specific sources and

documents of which the petitioner is

aware and on which the petitioner

intends to rely to establish those facts or

expert opinion. Petitioner must provide

sufficient information to show that a

genuine dispute exists with the

applicant on a material issue of law or

fact. Contentions shall be limited to

matters within the scope of the

amendment under consideration. The

contention must be one which, if

proven, would entitle the petitioner to

relief. A petitioner who fails to file such

a supplement which satisfies these

requirements with respect to at least one

contention will not be permitted to

participate as a party.

Those permitted to intervene become

parties to the proceeding, subject to any

limitations in the order granting leave to

intervene, and have the opportunity to

participate fully in the conduct of the

hearing, including the opportunity to

present evidence and cross-examine

witnesses.

If the amendment is issued before the

expiration of the 30-day hearing period,

the Commission will make a final

determination on the issue of no

significant hazards consideration. If a

hearing is requested, the final

determination will serve to decide when

the hearing is held.

If the final determination is that the

amendment request involves no

significant hazards consideration, the

Commission may issue the amendment

and make it immediately effective,

notwithstanding the request for a

hearing. Any hearing held would take

place after issuance of the amendment.

If the final determination is that the

amendment request involves a

significant hazards consideration, any

hearing held would take place before

the issuance of any amendment.

A request for a hearing or a petition

for leave to intervene must be filed with

the Secretary of the Commission, U.S.

Nuclear Regulatory Commission,

Washington, DC 20555, Attention:

Docketing and Services Branch, or may

be delivered to the Commission’s Public

Document Room, the Gelman Building,

2120 L Street, NW., Washington, DC, by

the above date. Where petitions are filed

during the last 10 days of the notice

period, it is requested that the petitioner

promptly so inform the Commission by

a toll-free telephone call to Western

Union at 1–(800) 248–5100 (in Missouri

1–(800) 342–6700). The Western Union

operator should be given Datagram

Identification Number N1023 and the

following message addressed to Mr.

Frederick J. Hebdon: petitioner’s name

and telephone number, date petition

was mailed, plant name, and

publication date and page number of

this Federal Register notice. A copy of

the petition should also be sent to the

Office of the General Counsel, U.S.

Nuclear Regulatory Commission,

Washington, DC 20555, and to General

Council, Tennessee Valley Authority,

ET 11H, 400 West Summit Hill Drive,

Knoxville, Tennessee 37902, attorney

for the licensee.

Nontimely filings of petitions for

leave to intervene, amended petitions,

supplemental petitions and/or requests

for hearing will not be entertained

absent a determination by the

Commission, the presiding officer or the

presiding Atomic Safety and Licensing

Board that the petition and/or request

should be granted based upon a

balancing of the factors specified in 10

CFR 2.714(a)(1)(i)–(v) and 2.714(d).

For further details with respect to this

action, see the application for

amendment dated January 3, 1995,

which is available for public inspection

at the Commission’s Public Document

Room, the Gelman Building, 2120 L

Street, NW., Washington, DC, and at the

local public document room, located at

the Chattanooga-Hamilton County

Library, 1101 Broad Street, Chattanooga,

Tennessee 37402.

Dated at Rockville, Maryland, this 4th day

of January 1995.

For the Nuclear Regulatory Commission.

David E. LaBarge,

Sr. Project Manager, Project Directorate II–

4, Division of Reactor Projects—I/II, Office

of Nuclear Reactor Regulation.

[FR Doc. 95–535 Filed 1–6–95; 8:45 am]

BILLING CODE 7590–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–35187; File No. SR–BSE–

94–12]

Self-Regulatory Organizations; Boston

Stock Exchange, Inc.; Order Approving

Proposed Rule Change and

Amendment No. 1 to Proposed Rule

Change Relating to its Specialist

Performance Evaluation Program

December 30, 1994.

I. Introduction

On October 3, 1994, the Boston Stock

Exchange, Inc. (‘‘BSE’’ or ‘‘Exchange’’)

submitted to the Securities and

Exchange Commission (‘‘SEC’’ or

‘‘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

extend its Specialist Performance

Evaluation Program (‘‘SPEP’’ or

‘‘Evaluation Program’’), which currently

incorporates objective measures of

specialist performance, for an additional

twelve-month period.3 On October 6,

1994, the Exchange submitted

Amendment No. 1 to the proposed rule

change in order to correct certain

typographical errors.

The proposed rule change, together

with Amendment No. 1, was published

for comment in Securities Exchange Act

Release No. 34819 (October 11, 1994),

59 FR 52327 (October 17, 1994). No

comments were received on the

proposal. This order approves proposed

rule change, including Amendment No.

1.

II. Description of the Proposal

The Exchange proposes to extend its

Specialist Performance Evaluation
Federal Register / Vol. 60, No. 5 / Monday, January 9, 1995 / Notices 2407

4See February 1993 Approval Order, supra, note

3. In addition to the substantive changes discussed

below, SPEP was moved to Ch. XV, ¶ 2156 of the

BSE Rules.

5BEACON is the BSE’s automated order-routing

and execution system. Of all incoming BEACON

orders, SPEP collects data for regular buy and sell

market and marketable limit orders only. Thus

BEACON orders with qualifiers (e.g., buy minus or

sell plus, market-on-close, stop, stop limit, all or

none, etc.) and crosses are excluded from analysis.

6 Data collection starts when the stock opens on

the primary market. Blocks of time are excluded in

the event of trading halts, BEACON system failure,

etc.

7The same exclusions apply for Holding Orders

Without Action as for Turnaround Time. See supra,

note 6.

8A specialist is deficient in any individual

objective measure or the overall program if he

scores below certain minimum performance levels,

as set forth below. Thus for his performance to be

deemed adequate, a specialist must receive the

following scores:

Overall Evaluation—at or above weighted score of

5.80

Turnaround Time—below 21.0 seconds (8 points)

Holding Orders Without Action—below 21% (7

points)

Trading Between the Quote—at or above 26% (5

points)

Executions Greater than BBO—at or above 76%

(6 points)

Questionnaire—at or above weighted score of 50

(4 points)

9 In the event a specialist receives a deficient

score on the questionnaire alone, the Exchange staff

reviews the deficient questionnaire to determine if

there is sufficient reason to warrant informing the

Performance Improvement Action Committee of

potential performance problems.

10Alternate specialists provide added liquidity to

the market, by promising to trade up to a certain

amount of shares, on the request of the primary

specialist. A specialist must apply for the privilege

of being an alternate.

11The possible performance improvement actions

are described in the BSE Rules under SPEP’s

Supplemental Material. This Supplemental Material

is intended to provide specialists with adequate

notice of the consequences of poor performance. It

does not articulate any new substantive standards.

12 In the event a specialist ranked in the bottom

ten percent does not fall below the threshold for the

overall program score, the Exchange staff reviews

the performance of the specialist to determine if

there is sufficient reason to warrant informing the

Performance Improvement Action Committee of

potential performance problems.

13See supra, text accompanying notes 10–11.

14Rule 11b–1, 17 CFR 240.11b–1 (1991); Ch. XV,

¶ 2155.01 of the BSE Rules.

15For a description of the Commission’s rationale

for approving the incorporation of objective

measures of performance into the BSE’s SPEP on a

pilot basis, see February 1993 Approval Order,

supra, note 3. The discussion in the aforementioned

order is incorporated by reference into this order.

Program to incorporate objective

measures of specialist performance.4

The current pilot program uses the

BEACON system 5 to assess how well a

specialist handles market and

marketable limit orders routed to him

for execution. For each specialist, a

record of all action taken on relevant

BEACON orders is accumulated in a

special file, from which the four

calculations described below are run.

First, Turnaround Time measures the

average number of seconds from the

receipt of a guaranteed market or

marketable limit order (i.e., for 1299

shares or less) in BEACON until it is

executed (in whole or in part), stopped

or cancelled.6 Time continues to

accumulate if the specialist just moves

an order from the auto-ex screen to the

manual one, until that order is executed

(in whole or in part), stopped or

cancelled.

Second, Holding Orders Without

Action measures the number of market

and marketable limit orders which are

neither executed, stopped nor cancelled

within twenty-five seconds. This

measure differs from Turnaround Time

in that orders of all sizes (including

those already counted toward

Turnaround Time) are analyzed.7

Third, Trading Between the Quote

measures the number of market and

marketable limit orders that are

executed between the best consolidated

bid and offer where the spread is greater

than 1/8th.

Fourth, Executions in Size Greater

than Best Bid and Offer (‘‘BBO’’)

measures the number of market and

marketable limit orders which exceed,

and are executed in a size larger than,

BBO size.

For each of the above measures,

including the revised questionnaire, the

specialist receives a raw score. A ten

point grading scale is then applied to

ranges of raw scores. In computing the

overall program score, the measures are

assigned the following weights:

Turnaround Time, 15%; Holding Orders

Without Action, 15%; Trading Between

the Quote, 25%; Executions in Size

Greater than BBO, 25%; Questionnaire,

20%.

At the same time as it incorporated

the objective measures described above,

the Exchange also revised the

conditions for performance review. For

each measure, the Evaluation Program

states at what score specialist

performance is deemed to be adequate.8

A specialist who is deficient in the same

one objective measure, for two out of

three consecutive review periods, is

required to appear before the

Performance Improvement Action

Committee.9 The purpose of this

meeting is to discuss, informally,

possible methods of improving the

specialist’s performance.

If the specialist does not improve in

the next review period, he is referred to

the Market Performance Committee. The

Market Performance Committee is

directed to take such actions as it deems

necessary and appropriate to address

the deficient score. These actions

include suspending a specialist’s

trading account, suspending his

alternate specialist account privilege,10

or reallocating his specialty stocks.11

Finally, the BSE also incorporated

modified relative rankings into its

Evaluation Program. Exchange staff

reviews the performance of any

specialists whose scores place them in

the bottom ten percent of all BSE

units.12 In addition, a specialist who is

deficient on the overall program score,

for two out of three consecutive review

periods, is required to appear before the

Market Performance Committee, with

the same possible consequences as

above.13

The BSE has requested a twelvemonth extension of the current pilot

program to enable the Exchange to

evaluate further the appropriateness of

the measures and their respective

weights, as well as the effectiveness of

the overall evaluation program. The BSE

believes that the proposed rule change

will promote just and equitable

principles of trade and aid in the

perfection of a free and open market and

a national market system. The Exchange

states that the SPEP results weigh

heavily in stock allocation decisions

and, as a result, specialists are

encouraged to improve their market

quality and administrative duties.

III. Discussion

The Commission believes that

specialists play a crucial role in

providing stability, liquidity and

continuity to the trading of stocks.

Among the obligations imposed upon

specialists by the Exchange, and by the

Act and the rules thereunder, is the

maintenance of fair and orderly markets

in their designated securities.14 To

ensure that specialists fulfill these

obligations, it is important that the

Exchange conduct effective oversight of

their performance. The BSE’s Specialist

Performance Evaluation Program is

critical to this oversight.

In its order approving the

incorporation of objective measures of

performance,15 the Commission asked

the Exchange to monitor the

effectiveness of the amended Evaluation

Program. Specifically, the Commission

requested information about the number

of specialists who fell below acceptable

levels of performance for each objective

measure, the questionnaire and the

overall program; and about the specific

measures in which each such specialist

was deficient. The Commission also

requested information about the number

of specialists who, as a result of each
2408 Federal Register / Vol. 60, No. 5 / Monday, January 9, 1995 / Notices

16See supra, notes 8–13 and accompanying text.

17For example, the BSE could develop additional

measures of market depth, such as how often the

specialist’s quote exceeds 500 shares or how often

the BSE quote, in size, is larger than the BBO

(excluding quotes for 100 shares). Another possible

objective criteria could measure quote performance

(i.e., how often the BSE specialist’s quote, in price,

is alone at or tied with the BBO).

18 In this regard, because of the substantial

overlap between Turnaround Time and Holding

Orders Without Action, the Commission

recommends that the BSE consider either having

only one measure in this category (i.e., timeliness

of execution) or reducing the weights of the existing

measures, which together account for the current

Evaluation Program.

19For each objective measure, the Commission

also requests that the BSE provide the mean and

median scores.

20 15 U.S.C. 78f(b)(5) (1988).

21 15 U.S.C. 78k(b) (1988).

22 17 CFR 240.11b–1 (1991).

condition for review,16 were referred to

the Performance Improvement Action

Committee and/or the Market

Performance Committee; and about the

type of action taken with respect to each

such deficient specialist.

In September 1993, and October 1994,

the BSE submitted to the Commission

monitoring reports regarding its

amended Evaluation Program. The

reports describe the BSE’s experience

with the pilot program during 1993 and

the first two review periods of 1994. In

terms of the overall scope of the

Evaluation Program, the Commission

continues to believe that objective

measures, together with a floor broker

questionnaire, should generate

sufficiently detailed information to

enable the Exchange to make accurate

assessments of specialist performance.

Based on results from several review

periods, the BSE appears to have

implemented its BEACON criteria and

generated data to assess, in a

quantitative way, how well specialists

carry out certain aspects (i.e., timeliness

of execution, price improvement and

market depth) of their responsibilities as

specialists.

The Commission also has reviewed

the BSE’s experience with its minimum

adequate performance thresholds. Based

on the number of specialists who

surpassed acceptable levels of

performance for each measure (and on

an informal comparison of the floorwide average to the minimum

threshold), it appears that these

standards have been helpful in

identifying some specialists with

potential performance problems, as well

as providing an incentive for improved

market making performance.

Finally, based on the information

provided in the BSE’s monitoring

reports, the Commission finds that the

Exchange applied its conditions for

review fairly and consistently. The

Commission continues to believe that,

taking the Evaluation Program as a

whole, most potential performance

problems should be brought to the

attention of the appropriate committee.

In terms of the BSE’s response to the

deficiencies it identified, the

Commission notes that the monitoring

reports only cover a limited time period;

accordingly, it is too soon for the

Commission to reach any definitive

conclusion about the effectiveness of the

performance improvement actions.

Nevertheless, the BSE should examine

its Evaluation Program to ensure that

adequate corrective actions are taken

with respect to each deficient specialist.

In conclusion, the Commission

believes that the BSE has taken a good

first step toward developing a more

effective Specialist Performance

Evaluation Program. Accordingly, the

Commission believes that it is

appropriate to extend the current pilot

program for an additional twelve-month

period, expiring December 31, 1995.

This twelve-month period will allow the

Exchange to respond to the

Commission’s concerns about the

Evaluation Program, as set forth below.

First, the Commission suggests that the

BSE consider incorporating additional

objective criteria, so that the Exchange

can conduct and even more thorough

analysis of specialist performance.17 At

the same time, the BSE should assess

whether each measure, as well as the

questionnaire, is assigned an

appropriate weight.18 Moreover, the

Commission strongly encourages the

Exchange to conduct an ongoing

examination of its minimum adequate

performance thresholds, in order to

ensure that they continue to be set at

appropriate levels. The Commission

also continues to believe that relative

performance rankings that subject the

bottom ten percent of all specialists

units to review by an Exchange

committee are an important part of an

effective Evaluation Program. Finally,

the BSE should closely monitor the

conditions for review and should take

steps to ensure that all specialists whose

performance is deficient and/or diverges

widely from the best units will be

subject to meaningful review. In the

Commission’s opinion, a meaningful

review process would ensure that

adequate corrective actions are taken

with respect to each deficient specialist.

The Commission would have difficulty

granting permanent approval to an

Evaluation Program that did not include

a satisfactory response to the concerns

described above.

The Commission therefore requests

that the BSE submit a report to the

Commission, by June 1, 1995, describing

its experience with the pilot. At a

minimum, this report should contain

data, for the last review period of 1994

and the first review period of 1995, on

(1) the number of specialists who fell

below acceptable levels of performance

for each objective measure,19 the

questionnaire and the overall program,

and the specific measures in which each

such specialist was deficient; (2) the

number of specialists who, as a result of

the objective measures, appeared before

the Performance Improvement Action

Committee for informal counseling; (3)

the number of such specialists then

referred to the Market Performance

Committee and the type of action taken;

(4) the number of specialists who, as a

result of the overall program, appeared

before the Market Performance

Committee and the type of action taken;

(5) the number of specialists who, as a

result of the questionnaire or falling in

the bottom ten percent, were referred by

the Exchange staff to the Performance

Improvement Action Committee and the

type of action taken (this should include

the number of specialists then referred

to the Market Performance Committee

and the type of action taken by that

Committee); and (6) a list of stocks

reallocated due to substandard

performance and the particular unit

involved. Any requests to modify this

pilot, to extend its effectiveness or to

seek permanent approval for the

Evaluation Program should be

submitted to the Commission by July 31,

1995, as a proposed rule change

pursuant to Section 19(b) of the Act.

IV. Conclusion

For the reasons discussed above, the

Commission finds that the proposed

rule change is consistent with the

requirements of Sections 6 and 11 of the

Act and the rules and regulations

thereunder applicable to a national

securities exchange. In particular, the

Commission believes the proposal is

consistent with the Section 6(b)(5)20

requirement that the rules of the

Exchange be designed to promote just

and equitable principles of trade, to

remove impediments to and perfect the

mechanism of a free and open market

and a national market system, and, in

general, to protect investors and the

public interest.

Further, the Commission finds that

the proposal is consistent with Section

11(b) of the Act,21 and Rule 11b–1

thereunder,22 which allow securities

exchanges to promulgate rules relating

to specialists in order to maintain fair

and orderly markets and to remove
Federal Register / Vol. 60, No. 5 / Monday, January 9, 1995 / Notices 2409

23 15 U.S.C. 78s(b)(2) (1988).

24 17 CFR 200.30–3(a)(12) (1991).

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

2 17 CFR 240.19b–4 (1991).

3Currency warrants, as used in this filing, may

refer to warrants on individual currencies (or cross

currencies) or to warrants on a specific currency

index group (‘‘currency index warrants.’’)

4Securities Exchange Act Release No. 28556, 55

FR 43233 (Oct. 26, 1990).

5Although the Exchange has conformed its

proposed rule to those of other exchanges by

including these provisions giving special margin

treatment to covered writing positions, the

Exchange strongly believes that such provisions

should not be approved for any exchange unless the

Commission concurrently approves the same

margin treatment for covered writing of stock index

call options and stock index put options.

impediments to and perfect the

mechanism of a national market system.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,23 that the

proposed rule change (SR–BSE–94–12)

is approved on a pilot basis until

December 31, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.24

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–387 Filed 1–6–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35178; File No. SR–CBOE

94–34]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change and

Amendment No. 1 to Proposed Rule

Change by the Chicago Board Options

Exchange, Inc. Relating to the

Establishment of Uniform Listing and

Trading Guidelines for Stock Index and

Currency Warrants

December 29, 1994.

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

September 29, 1994, 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 CBOE proposes to adopt rules

governing stock index and currency

warrants.3 On December 21, 1994, the

CBOE amended certain surveillance

related matters addressed in the filing.

(See footnote 6 infra.)

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

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

On October 19, 1990, the Commission

approved SR–CBOE–90–08 authorizing

the Exchange to list and trade stock,

warrants and other securities.4 This

filing proposes rules governing

customer protection and margin

requirements for stock index warrants,

currency index warrants and currency

warrants and position limits for stock

index warrants. This filing incorporates

the results of numerous

communications with the Commission

staff and other exchanges, including

comments contained in a letter from

Sharon Lawson to Joanne Moffic-Silver

dated January 28, 1993 (‘‘Lawson

letter’’). This filing also makes certain

changes in the listing criteria for stock

index and currency warrants and makes

clear that certain rules applicable to

currency warrants would apply equally

to currency index warrants.

Position Limits. The Exchange is

proposing position limits for stock

index warrants that, in general, are

approximately 75%, in terms of

underlying dollar value, of the current

position limits for index options.

Existing Exchange Rule 4.13, Reports

Related to Position Limits, and Rule

4.14, Liquidation of Positions, are made

applicable to transactions in stock index

warrants.

Customer Protection. Modifications

are proposed to Exchange Rule 30.50,

Doing Business With the Public, to

incorporate references to proposed new

Rule 30.52. In addition, Interpretation

.02 is being deleted as unnecessary in

that, subject to certain ‘‘grandfather’’

provisions identified below, rules

applicable to domestic index warrants

will apply equally to warrants on

foreign indexes.

Proposed new Rule 30.52, Special

Requirements for Stock Index Warrants,

Currency Index Warrants and Currency

Warrants, sets out various customer

protection rules applicable to stock

index, currency index and currency

warrants. In addition to the rules

actually set forth therein, Rule 30.52

makes the following existing options

customer protection rules applicable to

stock index, currency and currency

index warrants.

Rule 9.2 Registration of Options

Principals

Rule 9.6 Registration of Branch Offices

Rule 9.7 Account Approval

Requirements

Rule 9.8 Supervision Requirements

Rule 9.9 Suitability Requirements

Rule 9.10 Discretionary Account

Requirements

Rule 9.21 Requirements for Customer

Communications

Rule 9.23 Record-keeping

Requirements for Customer

Complaints

Margin. The Exchange’s proposed

margin requirements for customers

having positions in index warrants,

currency index warrants and currency

warrants are included in proposed new

Rule 30.52. In general, the proposed

margin requirements for long and short

positions in stock index warrants and

currency index warrants are the same as

margin requirements for positions in

stock index options and the margin

requirements for long and short

positions in currency warrants are the

same as those for currency options.

CBOE believes that such requirements

are more appropriate than applying

stock margin treatment to such

warrants.

CBOE’s proposed margin rule also

follow the proposals of the other

exchanges in providing spread margin

offsets between offsetting warrants and

between warrants and listed options on

the same underlying interest and

providing special margin treatment for

‘‘covered writing positions’’ (i.e.,

‘‘short’’ stock index warrant positions

covered by positions in all the stocks

comprising the index).5 Nevertheless,

CBOE believes that a broker-dealer

carrying such positions must bear in

mind that special characteristics of

warrants—such as pricing differences,

the necessity of borrowing to make