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Notice

Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Chicago Board Options Exchange, Incorporated To Amend Its Rules To Allow for $0.50 Strike Price Intervals for Options Based on Certain Index Portfolio Shares

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Start Preamble February 15, 2001.

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 January 31, 2001, the Chicago Board Options Exchange, Incorporated (“Exchange” or “CBOE”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the CBOE. 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 its rules to allow for $0.50 strike price intervals for options based on certain Index Portfolio Shares (“IPSs”).

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

The Exchange is proposing to establish $0.50 strike price intervals for options based on certain IPSs. More specifically, the Exchange intends to list options on the iShares S&P 100 Index Fund (ticker symbol “OEF”), an IPS which currently trades on the Exchange. OEF is an exchange-traded fund that represents ownership in an open-end management company established to hold a portfolio of stocks replicating the S&P Index (“Index” or “S&P 100”). It holds substantially all of the securities of the Index in approximately the same proportions as reflected in the Index.

The Exchange will list options on OEF pursuant to the criteria set forth in Interpretations and Policies .06 under CBOE Rule 5.3.[3] However, the Exchange believes that it is appropriate to amend CBOE Rule 5.5, by adding Interpretations and Policies .06, to provide that options on OEF be set to $0.50 or greater strike price intervals. These 1/2 point increments would correspond favorably to the 5-point increments in certain broad-based index options traded on the Exchange, such as the S&P 100 (“OEX”) and S&P 500 (“SPX”), because the size of the OEF-based contract will be approximately one-tenth of the size of the option contracts on the OEX. Accordingly, the Exchange believes that to effectively compliment existing CBOE products and to help ensure efficient trading of OEF options, adopting $0.50 strike price intervals for OEF options is necessary.

The Exchange recognizes that adding series of options for trading under the proposed rule change may result in a slight increase in message traffic; however, the Exchange represents that it has the necessary systems capacity to support any additional series of options that may be added under the proposed rule.

2. Statutory Basis

The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act [4] in general, and furthers the objectives of Section 6(b)(5) of the Act [5] in particular, in that it will permit trading in options based on OEF pursuant to strike intervals designed to promote just and equitable principles of trade, and thereby will provide investors with the ability to invest in options based on an additional CBOE product.

B. Self-Regulatory Organization's Statement on Burden on Competition

The CBOE does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others

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

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

Because the foregoing 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; and (3) does not become operative for 30 days from the date of filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) [6] of the Act and Rule 19b-4(f)(6) [7] thereunder.[8]

A proposed rule change filed under Rule 19b-4(f)(6) may not become operative prior to 30 days after the date of filing. However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange seeks to have the proposed rule change become operative on January 31, 2001, to allow Start Printed Page 11342it to implement these $0.50 strike price intervals immediately.

The Commission believes that it is consistent with the protection of investors and the public interest that the proposed rule change become operative immediately as of January 31, 2001.[9] At any time within 60 days of the filing of the 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.

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 with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 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 5 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-01-02 and should be submitted by March 16, 2001.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[10]

Start Signature

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  CBOE Rule 5.3 describes the criteria for underlying securities. Specifically, Interpretations and Policies .06 under CBOE Rule 5.3 indicates which securities are deemed appropriate for options trading.

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8.  Under Rule 19b-4(f)(6)(iii), the Exchange must given written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing the rule change, or such shorter time as designated by the Commission. As required, the Exchange has provided the Commission with written notice of its intent to file the proposed rule change.

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9.  For purposes only of accelerating the operative date of 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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[FR Doc. 01-4498 Filed 2-22-01; 8:45 am]

BILLING CODE 8010-01-M