24986 Federal Register / Vol. 61, No. 97 / Friday, May 17, 1996 / Notices

31 15 U.S.C. 78s(b)(2) (1988).

32 17 CFR § 200.30–3(a)(12) (1994).

trading purposes. If reclassified as

narrow-based, Amendment No. 3

establishes procedures for reducing

position limits which, the Commission

notes, are consistent with existing

procedures for reducing narrow-based

index option position limits.

Accordingly, the Commission believes

there is good cause, consistent with

Sections 6(b)(5) and 19(b)(2) of the Act,

to approve the Amendments on an

accelerated basis.

III. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning the Amendments.

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

above-mentioned self-regulatory

organization. All submissions should

refer to the file number in the caption

above and should be submitted by June

7, 1996.

It therefore is ordered, pursuant to

Section 19(b)(2) of the Act,31 that the

proposed rule change (SR–CBOE–96–

09) is approved, as amended.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.32

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–12385 Filed 5–16–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37201; File No. SR–CBOE–

96–24]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Board Options Exchange,

Inc. Relating to as of Add Submissions

May 10, 1996.

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 April 15, 1996, 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 terminate its

fee program for members who, for more

than a prescribed percentage of

transactions, submit trade information

pursuant to CBOE Rule 6.51 after the

date on which the trade is executed.

(These post-trade date submissions are

commonly referred to as ‘‘as of adds.’’)

In conjunction with the foregoing, the

Exchange also proposes to revise the

structure of its as of add summary fine

program. 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

CBOE Rule 6.51 requires, among other

things, that (i) a participant in each

transaction to be designated by the

Exchange shall immediately report the

transaction to the Exchange and (ii) each

business day, each Clearing Member

shall file with the Exchange trade

information covering each Exchange

transaction made by it or on its behalf

during the business day.

On October 1, 1993, the Exchange

instituted an as of add fee program to

collect fees from members who, for

more than a prescribed percentage of

transactions, submit trade information

pursuant to Rule 6.51 after the date on

which the trade is executed. This

program is set forth in CBOE Rule 2.26

and currently functions in the following

manner. Each individual member is

assessed a $10.00 fee for each as of add

submitted by the member during a given

month that is in excess of 2.4% of the

member’s trade submissions during that

month. Similarly, each Clearing Member

is assessed a $3.00 fee for each as of add

submitted by the Clearing Member

during a given month that is in excess

of 1.2% of the Clearing Member’s trade

submissions during that month. In

addition, the total fee under the program

that may be assessed against a member

in a given month are capped at $500 for

individual members and at $1,000 for

Clearing Members.

The reason the Exchange

implemented the as of add fee program

was to allocate the costs borne by the

Exchange in processing as of add

submissions to those members most

responsible for generating those costs

and thereby to encourage the

submission of information with respect

to a trade on the date the trade is

executed by creating an economic

incentive to submit the information on

that day. During the first year of the

program, the percentage of as of add

submissions declined by 10% even

though the Exchange experienced a 37%

increase in trading volume. Based on

past experience, the Exchange estimates

that had the program not been in effect

during that time period, the percentage

of as of add submissions would have

doubled. Since November, 1994,

however, the percentage of as of add

submissions has remained relatively

constant. Therefore, although the

program has clearly been effective in

reducing the percentage of as of add

submissions, it no longer appears to be

causing a reduction in the rate of those

submissions.

Accordingly, the Exchange is

proposing to terminate the as of add fee

program and to seek further reductions

in the percentage of as of add

submissions by revising the structure of

the Exchange’s as of add summary fine

program.

The Exchange instituted its as of add

summary fine program on February 1,

1995. The program is a part of the

Exchange’s minor rule violation plan

and is set forth in CBOE Rule
Federal Register / Vol. 61, No. 97 / Friday, May 17, 1996 / Notices 24987

17.50(g)(7). Under the program, any

individual member whose monthly

percentage of as of add submissions

exceeds 7.2% for two consecutive

months or any Clearing Member whose

monthly percentage of as of add

submissions exceeds 3.6% for two

consecutive months is subject to a fine

of $250 for the first offense, $500 for the

second offense, and $1,000 for each

subsequent offense occurring during any

12 month period.

The Exchange is proposing to revise

the structure of the as of add summary

fine program in four primary respects in

order to encourage further changes in as

of add behavior, and to the extent the

Exchange collects fines under the

program, to help the Exchange defray

the additional costs it incurs in

processing as of add submissions.

First, the Exchange is proposing to

replace the current as of add summary

fine schedule for individual members.

The proposed fine schedule would be

stricter in two respects: (i) action against

an individual member under the fine

schedule would be triggered when the

member exceeds the maximum

allowable as of add submission

percentage in a given month instead of

when the member exceeds that

percentage in two consecutive months

as is the case under the current fine

schedule and (ii) the maximum

allowable as of add submission

percentage under the fine schedule

would be reduced from its current level

of 7.2% to 5%. Specifically, the current

find schedule for individual members

would be replaced with the following

fine schedule. Any individual member

whose percentage of as of add

submissions in any month exceeds 5%

would receive a letter of information for

the first offense, a letter of caution for

the second offense, a $500 fine for the

third offense, a $1,000 fine for the fourth

offense, and would be referred to the

Exchange’s Business Conduct

Committee for each subsequent offense

occurring during any 12 month period.

In addition, as is currently the case, the

Exchange would retain the discretion to

initiate a formal disciplinary proceeding

against an individual member pursuant

to Chapter XVII of the Exchange’s rules

in the event the Exchange determines

that any violations of Rule 6.51 are not

minor in nature.

Second, the current as of add

summary fine schedule for Clearing

Members would be deleted and going

forward as of add summary fines would

only be assessed against individual

members. The Exchange believes that

such a fine structure is appropriate

because individual members have

primary control over the timing of trade

submissions, and in the Exchange’s

experience, most as of adds are caused

by delays and errors of individual

members. Moreover, Clearing Members

generally have a greater economic

incentive than individual members to

reduce as of adds because Clearing

Members incur personnel and systems

costs due to the extra work necessary to

process as of adds whereas individual

members do not incur such costs.

Therefore, the Exchange believes that

the most effective manner in which to

achieve a reduction in the percentage of

as of adds is to direct the as of add

summary fine program toward

individual members. Of course,

notwithstanding the foregoing, the

Exchange would still have the ability to

initiate a formal disciplinary proceeding

against a Clearing Member for violations

of Rule 6.51.

Third, the Exchange is proposing to

implement a verification procedure

under Rule 17.50 pursuant to which any

member who receives an as of add

summary fine would be able to request

verification of that fine by the Exchange.

Under this procedure, the Exchange

would attempt to serve any member

who incurs an as of add summary fine

with a disciplinary notice on or before

the 10th day of the month immediately

following the month in which the fine

is incurred. The member would then

have until the 25th day of the month in

which the disciplinary notice is served

to request verification. After the

Exchange’s verification process is

completed, it would notify the member

in writing of the Exchange’s

determination, and if the member so

desired, the member could appeal the

fine within 30 days after the date of

such notice in accordance with the

appeal procedures under Rule 17.50(d).

In addition, any member who incurs an

as of add summary fine and does not

request verification would be able to

appeal the fine under Rule 17.50(d)

within 30 days after the Exchange’s

service of the disciplinary notice

informing the member of the fine. The

above-described verification procedures

would function in the same general

manner as the verification procedures

that are currently in place under Rule

17.50 for fines imposed for failure to

submit accurate trade information and

for failure to submit trade information to

the price reporter, and these procedures

would serve to replace the current as of

add verification procedures under Rule

2.26(c) which would be eliminated

under the proposed rule change along

with the remainder of Rule 2.26.

Finally, the current procedures set

forth in Rule 2.26(d) which permit the

Exchange to suspend the as of add fee

program would also be eliminated along

with the remainder of Rule 2.26, and

instead, would be restated in Rule 17.50

and made applicable to the as of add

summary fine program. As is currently

the case with respect to the as of add fee

program, these procedures would

permit the Exchange’s Clearing

Procedures Committee, with the

approval of the President of the

Exchange, or his designee, to suspend

the as of add summary fine program for

periods no greater than 7 calendar days,

plus extensions, when unusual

circumstances affect the ability of a

significant number of members to

submit trade information on a timely

basis.

The Exchange proposes to implement

the proposed rule change within 45

days after its approval by the

commission. The purpose of this time

interval is to give the Exchange the

opportunity to inform members of the

approval of the proposed rule change in

the Exchange’s Regulatory Bulletin

before the rule change is put into effect.

The Exchange will publish the effective

date of the rule change in the

Exchange’s Regulatory Bulletin and will

notify the Commission of the effective

date by letter.

The Exchange 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)

in particular, in that the Exchange

believes the proposed rule change will

serve to reduce the percentage of as of

add submissions thereby benefiting both

members and investors by increasing

the efficiency with which Exchange

transactions are processed and by

reducing the risk exposure to members

and investors that results from the

existence of unresolved trades.

Accordingly, the Exchange believes that

the proposed rule change serves to

promote just and equitable principles of

trade, to remove impediments to and to

perfect the mechanism of a free and

open market and a national market

system, and in general, to 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.
24988 Federal Register / Vol. 61, No. 97 / Friday, May 17, 1996 / Notices

1 17 CFR 200.30–3(a) (12).

1See Letter from David Rusoff, Attorney, Foley &

Lardner, to Ivette Lopez, Assistant Director,

Division of Market Regulation, SEC, dated May 9,

1996 (‘‘Amendment No. 1’’). Amendment No. 1

added amendments to Article IX, Rule 10(b); Article

XX, Rule 1; and Article XXI, Rule 1 to the proposed

rule change. Amendment No. 1 also added two

paragraphs to the end of Section II.A.1 of the

original filing in order to describe the amendments

to the proposed rule change contained in

Amendment No. 1, and corrected the text of Exhibit

A to the original filing. For a more detailed

description of Amendment No. 1, see text

accompanying notes 6–8.

2Trading in the Chicago Basket, currently

conducted on the Floor of the Exchange from 8:30

a.m. to 3:15 p.m., central time, will be unaffected

by the proposed rule change.

3The CHX represents that ITS will be available

for both inbound and outbound trades during the

PPS to the extent that other market centers (e.g., the

Pacific Stock Exchange, Incorporated and the

Philadelphia Stock Exchange, Inc.) are open for

trading. The CHX also represents the PPS will be

surveilled in the same manner and using the same

techniques as those used to surveil the Primary

Trading Session. To facilitate the surveillance of the

PPS, CHX’s surveillance staff will remain on-site

during the PPS and for any necessary additional

time period after the close of the PPS. See Letter

from David T. Rusoff, Attorney, Foley & Lardner, to

Ivette Lopez, Assistant Director, Division of Market

Regulation, SEC, dated May 9, 1996 (‘‘ITS/

Surveillance Letter’’).

4The Exchange will require order tickets of PPSeligible orders to include an ‘‘E’’ designator, which

will indicate that the order is eligible for execution

during the PPS. See ITS/Surveillance Letter, supra

note 3.

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, 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–96–

24 and should be submitted by June 7,

1996.

For the Commission, by the division of

Market Regulation, pursuant to delegated

authority.1

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–12388 Filed 5–16–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37204; File No. SR–CHX–

96–13]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Stock Exchange,

Incorporated, Relating to the

Modification of the Hours of the

Exchange’s Primary Trading Session

and the Establishment of a PostPrimary Trading Session

May 13, 1996.

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 April 9, 1996, the

Chicago Stock Exchange, Incorporated

(‘‘CHX’’ 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. On May 10, 1996, the

Exchange submitted to the Commission

Amendment No. 1 to the proposed rule

change.1 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

Rule 10(b) of Article IX, Rule 1 of

Article XX, several interpretations and

policies under Rule 37 of Article XX,

and Rule 1 of Article XXI in order to

modify the Exchange’s trading hours for

each traded security to track the trading

hours of the security’s primary market

and to add a new Post-Primary Trading

Session.

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

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

1. Purpose

Currently, the Exchange’s Primary

Trading Session runs from 8:30 a.m. to

3 p.m., central time, Monday through

Friday. One purpose of the proposed

rule change is to amend Article XX,

Rule 10(b) to conform the Exchange’s

Primary Trading Session hours for each

traded security to the trading hours

during which the security is traded on

its primary market. If a security’s

primary market is the CHS, the trading

hours will be from 8:30 a.m. to 3:30

p.m., central time.2

The proposed rule change would also

add a Post-Primary Trading Session

(‘‘PPS’’) on the trading floor.3 The PPS

for orders and securities designated as

eligible for the PPS would be for onehalf hour after the close of the regular

trading session on the security’s primary

market. Securities in which the CHX is

the primary market will not be eligible

for the PPS.

Only orders designated as eligible for

the PPS would be eligible for execution

during the PPS.4 Market, limit and

contingent order types currently

acceptable would be accepted for PPS if

so designated. In this regard, GTX

orders would only be accepted if

specifically designated as PPS-eligible.

The Exchange’s MAX System will not

be available as an automated execution

system or as an automated routing

system during the PPS. As a result,

order sending firms must contact a floor