3012 Federal Register / Vol. 60, No. 8 / Thursday, January 12, 1995 / Notices

35See supra note 5.

36See Pilot Report, supra note 10.

37See supra note 5.

38See supra note 34 and accompanying text.

39See supra note 16.

40See Amendment No. 1, supra note 3.

41 15 U.S.C. 78s(b)(2) (1988).

42 17 CFR 200.30–3(a)(12) (1993).

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

interruption. For the reasons discussed

above and in prior orders concerning

the Pilot Program,35 the Commission

believes that reducing the number of asof-adds submitted to the Exchange may

benefit investors by reducing the

Exchange’s processing costs, making the

CBOE more efficient in terms of the time

involved in trade processing, and

reducing risk exposure to investors and

Exchange member firms. Additionally,

the Exchange has represented that no

problems have arisen and no formal

complaints have been received by the

Exchange concerning the Pilot Program

since its implementation.36

Accordingly, the Commission believes it

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

19(b)(2) of the Act to approve, on an

accelerated basis, that portion of the

proposed rule change requesting

permanent approval of the Pilot

Program.

For the reasons discussed above, the

Commission also believes that it is

appropriate to accelerate approval of the

proposal to impose caps on the monthly

as-of-add fees assessed against members.

The Commission believes that this

portion of the proposal addresses a

significant concern that the Commission

previously raised regarding the Pilot

Program by ensuring that members are

not assessed fees that are inordinately

high, or punitive.37 The Commission

continues to believe that it is

inappropriate for the CBOE to promote

and enforce compliance with Exchange

rules solely through the assessment of

fees. Further, this proposal is a

limitation on the existing Pilot Program,

which has no upper limit on the

monthly fee that can be assessed. As a

result, because the Commission has not

received comment on the existing Pilot

Program, the Commission believes it is

appropriate to approve this aspect of the

proposal on an accelerated basis.

With regard to proposed paragraph (d)

to Rule 2.26, the Commission believes

that this amendment will promote

uniformity between Rule 2.26 and

existing Rule 2.30. The logic for waiving

application of Rule 2.30 in the existence

of unusual circumstances also applies to

Rule 2.26, i.e., if circumstances prevent

a significant number of members from

processing trade information, it

generally may be inappropriate to assess

fees against those members for violating

Rules 2.26 and 2.30. Accordingly, the

Commission believes it is appropriate to

approve this portion of the proposal on

an accelerated basis in order to promote

uniformity between the Exchange’s

rules and thus minimize potential

confusion, and to avoid inconsistent

results where for the same set of

‘‘unusual circumstances,’’ the Exchange

is able to waive application of Rule 2.30

but not Rule 2.26.38

At this time the Commission is not

approving that portion of the proposed

rule change that would incorporate the

Pilot Program into the Minor Rule Plan.

Although the Commission believes that

this portion of the proposal addresses

suggestions previously noted by the

Commission concerning the Pilot

Program, the Commission believes that

prior to approval, Exchange members

should be given adequate notice of, and

an opportunity to comment on,

proposals that could subject them to

disciplinary sanctions. As a result, the

Commission expects the Exchange to

distribute to its members notice of the

rule change as approved herein and

notice of the proposal to incorporate the

Pilot Program into the Minor Rule

Plan.39 Moreover, the Exchange’s

request for accelerated approval of the

proposal was for the sole purpose of

avoiding procedural and accounting

problems that would result from a lapse

in the Pilot Program.40 The Commission

believes this concern has been

adequately addressed by accelerating

permanent approval of the Pilot

Program

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning the foregoing

proposed rule change and Amendment

No. 1 thereto. 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–94–50 and should be

submitted by January 31, 1995.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act 41 that the

following portions of the proposed rule

change (SR–CBOE–94–50), are

approved: (1) The amendments to CBOE

Rule 2.26 placing a ceiling on the

monthly as-of-add fees that can be

assessed against individual members

and clearing members, and allowing the

Exchange to suspend the rule in exigent

circumstances; and (2) permanent

approval of the Pilot Program.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.42

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–483 Filed 1–11–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35192; File No. SR–CBOE–

94–44]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Board Options Exchange,

Inc., Relating to Market Maker

Appointments

January 4, 1995.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

November 14, 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 amend CBOE

Rule 8.3(c) concerning the number of

trading stations at which a single market

maker’s appointed classes of options are

traded.

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

self-regulatory organization included

statements concerning the purpose of

and basis for the proposed rule change
Federal Register / Vol. 60, No. 8 / Thursday, January 12, 1995 / Notices 3013

2Although the CBOE has stated its desire to rely

on section 19(b)(3)(A) of the Act if it should seek

to change the limit, the Commission has requested

that the CBOE provide it with additional

information to justify the appropriateness of such

reliance.

3See Securities Exchange Act Release No. 34947

(November 7, 1994), 59 FR 59262 (File No. SR–

CBOE–94–38), proposing to amend CBOE Rule

15.10(c)(2)(ii)(B). 4 17 CFR 200.30–3)(a)(12) (1993).

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 self-regulatory organization 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 the proposed rule

change is to revise CBOE Rule 8.3(c) to

give the Market Performance Committee

(‘‘MPC’’) authority to designate the

maximum number of trading stations at

which a single market marker’s

appointed classes of options are traded,

and to add Interpretation and Policy .02

to CBOE Rule 8.3 to state that the MPC

has designated such maximum number

as ten trading stations. CBOE Rule 8.3

currently sets a five station upper limit

on the maximum number of trading

stations that may be covered by a single

market maker’s appointment.

In light of the recent and anticipated

increases in both the number of options

classes traded on the Exchange and the

number of trading stations on the floor,

the Exchange has determined that it

needs greater flexibility to increase this

limit from time to time in order to be

able to respond promptly to any need

for greater market maker participation

that may result from such expansion. By

granting authority to fix this number to

the MPC, which already has the

authority to grant exceptions to the

current five-station limit on a case-by

case basis, the Exchange believes it will

have achieved the flexibility it needs.

When and if the MPC changes the limit

from ten stations as it is here proposing,

the new limit will be reflected in a

revision to Interpretation and Policy .02

under the Rule filed under Section

19(b)(3)(A)(i) of the Act as a stated

policy, practice, or interpretation with

respect to the meaning, administration,

or enforcement of Rule 8.3.2

The CBOE believes that the proposed

increase in the current limit under Rule

8.3(c) from five to ten stations reflects

that, in light of the expansion of the

number of options classes traded in

CBOE’s marketplace and in the number

of stations at which options are traded,

a five-station limit is unduly restrictive

and places CBOE’s market makers at a

competitive disadvantage in relation to

options market makers on other

exchanges. Currently, the five-station

maximum limits an individual market

maker’s affirmative market making

obligations to, at most, slightly more

than 9% of the trading stations on the

floor, or less than 25% of all CBOE

classes. To assure adequate market

maker coverage of all classes traded on

the CBOE, enlargement of the current

five station limit to ten stations is

needed.

In addition, CBOE believes that the

importance of maintaining

comparability among exchanges

regarding the percentage of the classes

traded in which a market maker may

hold an appointment is not limited to

general reasons of competitive fairness

and equality. Comparability is also

important because under the new short

sale rule applicable to stocks traded in

the Nasdaq market, the exception to the

short sale rule for options market

makers only applies to stocks

underlying options in which the market

maker holds an appointment. So long as

CBOE market makers limited to holding

appointments in less than 25% of the

classes traded on the Exchange, CBOE’s

market makers will be at a competitive

disadvantage in respect of their ability

to hedge their options positions

pursuant to the market maker

exemption from the NASD short sale

rule. CBOE recently filed a proposed

rule change that would amend its Rule

15.10 by eliminating the provision that

restricts the market maker exemption to

Nasdaq National Market securities

underlying options traded at no more

than three stations. Instead, the market

maker exemption would be available for

all options classes to which a market

maker holds an appointment.3

The proposed amendment is intended

to enhance the ability of the Exchange

to provide fair and orderly markets in

options and to provide for competitive

equality among exchanges, and

therefore the Exchange believes that its

proposal is consistent with the

promotion of just and equitable

principles of trade and the protection of

investors and the public interest as

required by Section 6(b)(5) of the Act.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

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

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 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.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

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

above-mentioned self-regulatory

organization. All submissions should

refer to File No. SR–CBOE–94–44 and

should be submitted by February 2,

1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.4

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–717 Filed 1–11–95; 8:45 am]

BILLING CODE 8010–01–M