Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Chicago Board Options Exchange, Inc., Relating to the Listing and Trading of Generic Narrow- Based Index Options Under Rule 19b-4(e)

[Federal Register Volume 64, Number 92 (Thursday, May 13, 1999)]
[Notices]
[Pages 25936-25937]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-12067]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41374; File No. SR-CBOE-99-16]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Chicago Board Options 
Exchange, Inc., Relating to the Listing and Trading of Generic Narrow-
Based Index Options Under Rule 19b-4(e)

May 5, 1999.
    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 April 15, 1999, 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 Exchange. The 
filing was amended on April 28, 1999.\3\ The proposed rule change has 
been filed by the CBOE as a ``non-controversial'' rule change under 
Rule 19b-4(f)(6) \4\ under the Act. The Commission is publishing this 
notice to solicit comments on the proposed rule change, as amended, 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Timothy H. Thompson, Director, Regulatory 
Affairs, CBOE, to Michael Walinskas, Deputy Associate Director, 
Division of Market Regulation, Commission, dated April 20, 1999.
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    CBOE is proposing to amend Rule 24.2, Designation of the Index, to 
provide for the listing and trading of narrow-based stock index options 
pursuant to new Rule 19b-4(e) under the Act.\5\ The text of the 
proposed rule change follows. Proposed new language is in italics; 
proposed deletions are in brackets:
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    \5\ 17 CFR 240.19b-4(e).
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* * * * *

CHAPTER XXIV

Index Options
* * * * *
Designation of the Index
    Rule 24.2 (a) The component securities of an index underlying an 
index option contract need not meet the requirements of Rule 5.3. 
Except as set forth in subparagraph (b) below, [T]the listing of a 
class of index options on a new underlying index will be treated by the 
Exchange as a proposed rule change subject to filing with and approval 
by the Securities and Exchange Commission (``Commission'') under 
Section 19(b) of the Exchange Act.

(b) [A rule change proposing the listing of a class of index options on 
a new underlying narrow-based index may be designated by the Exchange 
as constituting a stated policy, practice or interpretation with 
respect to the administration of this Rule 24.2 within the meaning of 
subparagraph (3)(A) of subsection 19(b) of the Exchange Act, thereby 
qualifying the rule change for effectiveness upon filing with the 
Commission, if the Exchange prefiles with the Commission a draft copy 
of the rule change not less than one week before it is filed, and if 
the Exchange proposes to commence trading in the subject class of index 
options not earlier than 30 days after the date of filing, and] 
Notwithstanding paragraph (a) above, the Exchange may trade options on 
narrow-based index options pursuant to Rule 19b-4(e) of the Securities 
Exchange Act of 1934, if each of the following conditions is satisfied:
    (1)-(12) No change.
    (c) No change.
* * * * *

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 Exchange 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
    The CBOE is proposing to amend Rule 24.2, Designation of the Index, 
to provide for the listing and trading of narrow-based stock index 
options pursuant to new Rule 19b-4(e) under the Act. Certainly, CBOE 
Rule 24.2 permits the Exchange to list and trade options on narrow-
based indexes thirty days after a filing describing the index option is 
made under Section 19(b)(3)(A) of the Act, provided that the index 
meets the generic listing criteria set forth in Rule 24.2(b). The 
recent Commission release adopting new Rule 19b-4(e) (``New Products 
Release''),\6\ however, no longer requires a Section 19(b)(3)(A) filing 
and subsequent waiting period so long as the exchange relying on the 
new Rule has generic listing criteria approved by the Commission and 
meets certain other requirements.
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    \6\ See Amendment to Rule Filing Requirements for Self-
Regulatory Organizations Regarding New Derivative Securities 
Products, Securities Exchange Act Release No. 40761 (December 8, 
1998), 63 FR 70952 (December 22, 1998).
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    The New Products Release indicated that products meeting the 
listing criteria approved by the Commission in its 1994 Generic Narrow-
Based Index Options approval order \7\ (as set forth in CBOE Rule 24.2) 
qualified for filing under new Rule 19b-4(e), so long as an exchange 
eliminated the Section 19(b)(3)(A) rule filing requirement from its 
existing rules.\8\ The Exchange is, therefore, proposing to eliminate 
the Section 19(b)(3)(A) rule filing requirement in Rule 24.2 and 
instead incorporate the provisions of new Rule 19b-4(e). The Exchange 
represents that it will use new Rule 19b-4(e) in accordance with the

[[Page 25937]]

terms and conditions set forth in the order approving that rule.
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    \7\ See, Securities Exchange Act Release No. 34157 (June 3, 
1994), 59 FR 30062 (June 10, 1994).
    \8\ See, New Products Release at note 89.
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2. Statutory Basis
    The Exchange believes that this proposed rule change is consistent 
with and furthers the objectives of Section 6(b)(5) of the Act \9\ in 
that it would remove impediments to and perfect the mechanism of a free 
and open market in a manner consistent with the protection of investors 
and the public interest.
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    \9\ 15 U.S.C. 78f(b)(5).
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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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    The foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) thereunder 
\11\ because the proposed rule change (1) does not significantly affect 
the protection of investors or the public interest; (2) does not impose 
any significant burden on competition; (3) by its terms, does not 
become operative for 30 days from the date of filing, or such shorter 
time that the Commission may designate if consistent with the 
protection of investors and the public interest; and (4) CBOE provided 
the Commission with written notice of its intent to file the proposed 
rule change at least five days prior to the filing date. At any time 
within 60 days of the filing of such proposed rule change, the 
Commission may summarily abrogate such rule change if it appears to the 
Commission that such action is necessary or appropriate in the public 
interest, for the protection of investors, or otherwise in furtherance 
of the purposes of the Act.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In reviewing this proposal, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
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    The Exchange has requested that the rule change be accelerated to 
become operative immediately to ensure that the Exchange not be 
disadvantaged in the listing of new index option products vis-a-vis the 
American Stock Exchange (``Amex''). Amex filed a similar rule change 
with the Commission that became operative as of March 11, 1999. 
Additionally, the Exchange notes that the public has had ample notice 
of the Commission's New Products Release, which describes the kind of 
rule change effected by the Exchange in the instant proposal. The 
Commission finds that accelerating the operative date of the rule 
change as proposed furthers the aims of the New Products Release and is 
consistent with the protection of investors and the public interest, 
and thus designated the date hereof as the operative date.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent wit the Act. 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-
0609. 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 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Room. 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-99-16, and 
should be submitted by June 3, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-12067 Filed 5-12-99; 8:45 am]
BILLING CODE 8010-01-M