32868 Federal Register / Vol. 61, No. 123 / Tuesday, June 25, 1996 / Notices

1See Securities Exchange Act Release No. 36996

(March 20, 1996), 61 FR 13907.

2Exceptions to this policy which have been

approved by a Floor Procedure Committee are

contained in Exchange Regulatory Circular RG95–

64, which concerns the trading activities of joint

account participants in the Standard & Poor’s

(‘‘S&P’’) 100 (‘‘OEX’’) and S&P 500 (‘‘SPX’’) index

option classes. See also Securities Exchange Act

Release No. 36977 (March 15, 1996) (order

approving File No. SR–CBOE–95–65) (approving

regulatory circular which provides that a joint

account trading in equity options may be

represented simultaneously in a trading crowd by

participants trading in person) (‘‘Joint Account

Circular’’).

Exchange believed that the Company’s

had fallen below certain of the

Exchange’s continued listing guidelines.

The Company’s responded to the letter

with two detailed submissions to the

Exchange dated May 9, 1996 and May

30, 1996. These submissions addressed

the concerns raised by the Exchange in

the letter as well as the concern raised

at meetings held between officials of the

Company and the Exchange on April 16,

1996 and May 14, 1996.

On June 4, 1996, the Company

received as a letter from the Exchange

stating that the Exchange had made a

determination to delist the Company’s

Security.

The Company has informed the

Exchange that it is the position of the

Company that throughout the process

initiated by the Exchange on March 27,

1996, the Company has fully cooperated

with the Exchange staff and has

provided to the staff extensive

submissions which the Company

believes make clear that the Company

has complied with the Exchange’s

continued listing guidelines. The

Company and the Exchange, however,

have been unable to resolve their

difference on this issue. The Company

has informed the Exchange, therefore,

that it is the Company’s position that in

view of the impasse between the

Exchange and the Company, and in

view of the large expenditures of money

and management time that would be

required before a final resolution of the

matters at issue could be obtained, it is

in the best interests of both the

Company and its shareholders that

matters be settled by the removal of the

Company’s Security from listing on the

Exchange.

The Company has been informed by

the Exchange that it is also the position

of the Exchange that it would be in the

best interests of the Exchange and the

investing public to settle matters with

the Company as provided in this

application.

Accordingly, the Exchange and the

Company have agreed to settle matters

between them by the Company making

this application to remove its Security

from listing on the Exchange. In

accordance therewith, the Company and

the Exchange have agreed that,

coincident with the approval of this

application by the Commission, the

Exchange will withdraw its letter of

June 4, 1996.

For purposes of Section 1011 of the

Exchange’s Listed Company Guide, the

Exchange and the Company have agreed

that the Exchange staff and the

Company management have not been

able to agree concerning the application

of certain continued listing guidelines to

the Company, and that it is unlikely that

they will be able to reach agreement on

this matter.

Any interested person may, on or

before July 11, 1996, submit by letter to

the Secretary of the Securities and

Exchange Commission, 450 Fifth Street,

N.W., Washington, D.C. 20549, facts

bearing upon whether the application

has been made in accordance with the

rules of the exchanges and what terms,

if any, should be imposed by the

Commission for the protection of

investors. The Commission, based on

the information submitted to it, will

issue an order granting the application

after the date mentioned above, unless

the Commission determines to order a

hearing on the matter.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 96–16059 Filed 6–24–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37316; File No. SR–CBOE–

96–10]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change by

the Chicago Board Options Exchange,

Inc., Relating to Multiple

Representation

June 17, 1996.

I. Introduction

On March 6, 1996, the Chicago Board

Options Exchange, Inc. (‘‘CBOE’’ or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’) a proposed rule change

to amend CBOE Rule 6.55, ‘‘Multiple

Orders Prohibited,’’ to provide that,

except in accordance with procedures

established by the appropriate Floor

Procedure Committee, or with such

Floor Procedure Committee’s

permission in individual cases, no

market maker shall enter or be present

in a trading crowd while a floor broker

present in the trading crowd is holding

an order on behalf of the market maker’s

individual account or an order initiated

by the market maker for an account in

which the market maker has an interest.

Notice of the proposal was published

for comment and appeared in the

Federal Register on March 28, 1996.1

No comments were received on the

proposed rule change.

II. Description of the Proposal

Currently, CBOE Rule 6.55 provides

that no CBOE member, for any account

in which he has an interest or on behalf

of a customer, shall maintain with more

than one broker orders for the purchase

or sale of the same option contract or

other security, or the same combination

of option contracts or other securities,

with the knowledge that such orders are

for the account of the same principal.

According to the Exchange, the purpose

of CBOE Rule 6.55 is to prevent a person

from being disproportionately

represented in a trading crowd.

In furtherance of this purpose, the

Exchange also has had a long-standing

policy of prohibiting market makers

from entering or being present in a

trading crowd while a floor broker

present in the trading crowd is holding

an order on behalf of the market maker’s

individual account or an order initiated

by the market maker for an account in

which the market maker has an interest,

except in accordance with procedures

established by the appropriate Floor

Procedure Committee or with such

Floor Procedure Committee’s

permission in individual cases.2 This

policy prevents a market maker from

avoiding CBOE Rule 6.55 by placing an

order with a floor broker for a particular

option contract or other security and

also representing himself or herself in

the trading crowd for such option

contract or other security. The purpose

of the proposal is to specifically

delineate this policy in the Exchange’s

rules by including it in a new paragraph

(b) to CBOE Rule 6.55.

In addition, the CBOE proposes to add

Interpretation and Policy .01 to CBOE

Rule 6.55 to specify three alternative

procedures that govern how a market

maker may permissibly enter a trading

crowd in which a floor broker is present

who holds an order on behalf of the

market maker’s individual account or an

order initiated by the market maker for

an account in which the market maker

has an interest.

Under the first alternative, the market

maker must make the floor broker aware

of the market maker’s intention to enter

the trading crowd and the floor broker
Federal Register / Vol. 61, No. 123 / Tuesday, June 25, 1996 / Notices 32869

3The CBOE has represented that this provision is

intended to provide the Exchange with the

flexibility to address special situations that may

arise infrequently. One such situation would exist

where there is exceptionally high activity in a small

trading crowd. In this case, the CBOE may grant

permission to market makers to enter the trading

crowd for a limited time. Telephone conversation

between Mike Meyer, Schiff Hardin & Waite, and

Yvonne Fraticelli, Attorney, Office of Market

Supervision, Division of Market Regulation,

Commission, on May 13, 1996.

4 15 U.S.C. 78f(b)(5) (1988 & Supp. V 1993).

5See File No. SR–CBOE–80–11 (proposal to adopt

CBOE Rule 6.55).

6 In addition, the proposal is consistent with the

provisions of the Joint Account Circular, which was

approved recently by the Commission. See note 2,

supra. Specifically, the Joint Account Circular

notes, among other things, that members may not

enter orders in a particular crowd with floor brokers

for their individual or joint account whenever they

are trading in person in that crowd.

7The procedures provided in Interpretation and

Policy .01 for cancelling an order are as follows: (1)

The market maker makes the floor broker aware of

the market maker’s intention to enter the trading

crowd and the floor broker time stamps the order

ticket for the order and writes the notation ‘‘Cancel’’

or ‘‘CXL’’ next to the time stamp; (2) the market

maker cancels his order by giving the floor broker

a written cancellation of the order which is timestamped by the market maker immediately prior to

its transmission to the floor broker; or (3) the market

maker cancels his order by taking the order ticket

for the order back from the floor broker, provided

that the market maker allows the floor broker to

retain a copy of the order ticket (which the floor

broker must time-stamp at the time of cancellation

and retain for the floor broker’s records).

Interpretation and Policy .01 also provides

procedures that allow the market maker to re-enter

the order with the floor broker upon the market

maker’s exit from the trading crowd.

8The Commission expects that the CBOE will

grant such exceptions only in limited and truly

extraordinary circumstances. See note 3, supra.

9See note 2, supra. The Commission notes that

the establishment of such procedures would require

a rule filing with the Commission pursuant to

Section 19(b)(2) under the Act.

must time-stamp the order ticket for the

market maker order and write the

notation ‘‘Cancel’’ or ‘‘CXL’’ next to the

time stamp. If the market maker wishes

to re-enter the order via the floor broker

upon the market maker’s exit from the

trading crowd, the floor broker must at

that time again time stamp the order

ticket and write the notation ‘‘Reentry’’

or ‘‘RNTRY’’ next to such subsequent

time stamp.

Under the second alternative, the

market maker must cancel the market

maker order by giving the floor broker

a written cancellation of the order

which is time-stamped by the market

maker immediately prior to its

transmission to the floor broker. If the

market maker wishes to re-enter the

order upon his exit from the trading

crowd, a new order ticket must be used

by the representing floor broker.

Under the third alternative, the

market maker must cancel the market

maker order by taking the order ticket

for the order back from the floor broker,

provided that the market maker allows

the floor broker to retain a copy of the

order ticket (which the floor broker

must time-stamp at the time of

cancellation and retain for the floor

broker’s records). If the market maker

wishes to re-enter the order upon his

exit form the trading crowd, a new order

ticket must be used.

The CBOE states that the proposed

amendment to CBOE Rule 6.55 also

codifies past practice by providing that

the appropriate Floor Procedure

Committee may adopt other procedures

which, if followed, would permit a

market maker to be exempt from the

requirements of paragraph (b) of CBOE

Rule 6.55, or may grant permission for

a market maker to enter a trading crowd

in a particular instance notwithstanding

the requirements of that paragraph.3

Proposed Interpretation and Policy .02

advises members to consult CBOE

regulatory circulars concerning joint

accounts in connection with procedures

governing the simultaneous presence in

a trading crowd of participants in and

orders for the same joint account.

Finally, the proposal changes the title

of CBOE Rule 6.55 from ‘‘Multiple

Orders Prohibited’’ to ‘‘Multiple

Representation Prohibited’’ in order to

more accurately reflect the scope of the

amended rule.

III. Discussion

The Commission finds that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder

applicable to a national securities

exchange, and, in particular, the

requirements of Section 6(b)(5) 4 in that

it is designed to remove impediments to

and perfect the mechanism of a free and

open securities market and to facilitate

transactions in securities, while

protecting investors and the public

interest.

Currently, CBOE Rule 6.55 prohibits

members from placing identical orders

for the account of the same principal

with several floor brokers. According to

the Exchange, CBOE Rule 6.55 is

designed to prevent a person from being

represented disproportionately in a

trading crowd. An account using

multiple orders would be represented

disproportionately because, when an

execution is divided among competing

brokers, an account using multiple

orders would receive a larger share of

the execution that an account using a

single order.5

The proposal, which codifies an

existing CBOE policy, is designed to

prevent a market maker from avoiding

CBOE Rule 6.55 by placing an order

with a floor broker for a particular

option contract or other security and

also representing himself or herself in

the trading crowd for that option

contract or security. By prohibiting a

market maker from entering or being

present in a trading crowd while a floor

broker in the trading crowd holds an

order on behalf of the market maker’s

individual account or an order initiated

by the market maker for an account in

which the market maker has an interest,

the proposal furthers the objectives of

CBOE Rule 6.55 and prevents a person

from being represented

disproportionately in a trading crowd.6

The Commission believes that it is

appropriate for the CBOE to adopt

Interpretation and Policy .01, which

includes procedures that will allow a

market maker to cancel his order with

a floor broker and enter a trading crowd

in which a floor broker is present who

was holding an order on behalf of the

market maker’s individual account or an

order initiated by the market maker for

an account in which the market maker

has an interest.7 The Commission

believes that the procedures proposed in

Interpretation and Policy .01 are

consistent with the purpose of CBOE

Rule 6.55 in that they allow a market

maker to enter the trading crowd after

cancelling his order with the floor

broker, thereby ensuring that the market

maker is not represented

disproportionately in the trading crowd.

In addition, Interpretation and Policy

.01 should help the CBOE to maintain

a fair and orderly market by clearly

specifying procedures that will allow

market maker to enter a trading crowd

in which a floor broker holds an order

on behalf of the market maker, and

providing procedures that will allow the

market maker to re-enter the order with

the floor broker upon the market

maker’s exit from the trading crowd.

The Commission notes that CBOE

Rule 6.55(b) allows the appropriate

Floor Procedure Committee to create

exceptions to CBOE Rule 6.55(b) by

establishing procedures or granting

permission to a market maker in

individual cases. The Commission

believes that this provision is

appropriate and consistent with the Act

because it will add flexibility to CBOE

Rule 6.55(b) by allowing the CBOE to

create an exception to the rule under

extraordinary circumstances 8 or to

develop special trading procedures,

such as those established in RG95–64.9

Finally, the Commission believes that

it is reasonable for the CBOE to amend

the title of CBOE Rule 6.55 to clarify the

scope of the rule, and to adopt

Interpretation and Policy .02, which
32870 Federal Register / Vol. 61, No. 123 / Tuesday, June 25, 1996 / Notices

10 15 U.S.C. 78s(b)(2) (1988).

11 17 CFR 200.30–3(a)(12) (1995).

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

advises members to consult Exchange

regulatory circulars for procedures

governing the simultaneous presence in

a trading crowd of participants in and

orders for the same joint account.

IV. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,10 that the

proposed rule change (SR–CBOE–96–

10) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–16067 Filed 6–24–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37327; File No. SR–CHX–

96–15]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Stock Exchange,

Incorporated Relating To Assignment

and Reassignment of NASDAQ/NMS

Issues

June 19, 1996.

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

Securities Exchange Act of 1934

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

May 16, 1996, the Chicago Stock

Exchange, Inc. (‘‘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 selfregulatory 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 amend

interpretation and policy .01 of Rule 1

of Article XXX relating to assignments

and reassignments of Nasdaq National

Market (‘‘NM’’) securities. Below is the

text of the proposed rule change.

Proposed new language is italicized:

CHICAGO STOCK EXCHANGE RULES

ARTICLE XXX

Specialists

Registration and Appointment

Rule 1.

* * * Interpretations and Policies

.01 Committee on Specialist Assignment

& Evaluation.

Assignment Function

I. Events Leading to Assignment Proceedings

Pursuant to Article XXX, Rules 1 and 8, the

Committee may, when circumstances require,

assign or reassign a security. Seven

circumstances may lead to the need for

assignment or reassignment of a security.

They are:

1. New listing or obtaining unlisted trading

privilege;

2. Specialist request;

3. Corporation request;

4. Split-up and/or merger of specialist

units;

5. Fundamental change of specialist unit;

6. Unsatisfactory performance action; or

7. Disciplinary action.

The following guidelines have been

adopted by the Committee for its use in the

assignment or reassignment of stocks among

specialists and co-specialists. These

guidelines set forth the general policy of the

Committee concerning the posting and

allocation of stocks. They are not, however,

rigid rules to be strictly followed regardless

of unique circumstances. These guidelines

form only the starting point of the

Committee’s deliberations; they will be

applied in light of the facts in each

individual case.

1. New Listing—Unlisted Trading Privilege.

(a) Initial listing of a security or obtaining

unlisted trading privileges from the S.E.C. for

a security will lead automatically to an

assignment proceeding..

(b) Nasdaq/NM Securities—Subsequent

Exchange Listing..

(i) Initial 100 stocks in Nasdaq/NM Pilot.

In the event that one of the initial 100

Nasdaq/NM Securities currently assigned to

a specialist unit under the Exchange’s

Nasdaq/NM Pilot Program becomes a Dual

Trading System issue, the Committee will

utilize the following guidelines in

determining whether the security should be

posted and re-assignment proceedings

should be initiated or whether the specialist

unit should be allowed to continue as the

specialist unit for the security:.

(A) If the specialist unit has designated the

security as a security that the specialist unit

desires to continue to trade as a Dual

Trading System Issue (‘‘Non-Reassignment

Issue’’), the Committee, under normal

circumstances, will not post the security or

initiate re-assignment proceedings. Each

specialist unit may designate five (5) issues

as Non-Reassignment Issues under this

paragraph (A), which designation may be

changed no more than once a year. In the

event that a Non-Reassignment Issue

becomes a Dual Trading System issue, the

total number of stocks that the specialist unit

can designate as a Non-Reassignment Issue

will be decremented. For example, if 2 NonReassignment Issues become Dual Trading

System Issues, the specialist will only be able

to designate a total of three (3) issues as NonReassignment Issues going forward..

(B) If the specialist unit has not designated

the issues as a Non-Reassignment Issue, the

specialist unit can nonetheless designate its

interest to continue to trade the issue as a

Dual Trading System Issue. Such designation

can only be made for one out of every three

Nasdaq/NM issues that the specialist unit

trades that becomes a Dual Trading System

Issue. If such designation is made by the

specialist, the Committee, under normal

circumstances, will not post the issue or

initiate re-assignment proceedings. If no such

designation is made by the specialist, the

Committee will post the issue and initiate reassignment proceedings. In such event, the

specialist unit trading the issue will not be

eligible to apply for the security in such

proceedings. The specialist unit cannot

accumulate the number of stocks for

designation. If the specialist unit does not

make such designation for any of three

consecutive issues that become Dual Trading

System issues, he or she cannot carry forward

the unused designation.

(ii) All other Nasdaq/NM Stocks. In the

event that a Nasdaq/NM Security (other than

a security described in (i) above) currently

assigned to a specialist unit becomes a Dual

Trading System issue within one year of the

date that the specialist unit began trading the

security, the security will be posted and the

Committee will initiate a re-assignment

proceeding for such security. In the event

that such security becomes a Dual Trading

System issue more than one year after the

date the specialist unit began trading the

security, the Committee will utilize the

following guidelines in determining whether

the security should be posted and reassignment proceedings commenced or

whether the specialist unit should be allowed

to continue as the specialist without posting

the security:

(A) If the specialist unit has designated the

security as a Non-Reassignment Issue, the

Committee, under normal circumstances, will

not post the security or initiate re-assignment

proceedings. Each specialist unit may

designate 20% of the Nasdaq/NM securities

(not including the securities described in (i)

above) assigned to such specialist unit as

Non-Reassignment Issues under this

paragraph (A), which designations may be

changed no more than once a year.

(B) If the specialist has not designated the

issue as a Non-Reassignment Issue, the

specialist may nonetheless designate its

interest to continue to trade the issue as a

Dual Trading System issue, and the

procedures set forth in (i)(B) above shall

apply to such issue.

(iii) Nothing contained in this paragraph

1(b) shall be construed to limit or modify the

authority of the Committee pursuant to the

other provisions of this Rule.

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