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Notice

Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by Chicago Board Options Exchange, Incorporated Relating to Exercise Prices for FLEX Equity Options

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Start Preamble August 16, 2001.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),[1] and Rule 19b-4 there under,[2] notice is hereby given that on August 14, 2001, Chicago Board Options Exchange, Incorporated (“CBOE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission” or “SEC”) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Exchange filed the proposal pursuant to Section 19(b)(3)(A) of the Act,[3] and Rule 19b-4(f)(6)[4] thereunder, which renders the proposal effective upon filing with the Commission.[5] The Commissiion 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 Proposal

The Exchange proposes to amend CBOE Rule 24A.4 to provide that exercise prices for Flexible Exchange options (“FLEX Options”) on specified equity securities (“FLEX Equity Options”) may be stated in fractional or decimal form. The text of the proposed rule change is below. Additions are in italics.

CHAPTER XXIVA

Flexible Exchange Options

Rule 24A.4 Terms of FLEX Options

(a)-(b) Unchanged.

(c)

(1) Unchanged.

(2) Exercise prices and premiums may be stated in dollar amount or percentage of the price of the underlying security, rounded to the nearest minimum tick or, in the case of exercise prices, to the nearest $.10 or one-eighth of a dollar;

(3)-(4) Unchanged.

Interpretations and Policies:

.01 Unchanged.

* * * * *

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 its proposal and discussed any comments it received regarding the proposal. The text of these statements may be examined at the places specified in Item IV below. 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 purpose of the proposed rule change is to amend Rule 24A.4, Terms of FLEX Options, to provide that exercise prices for FLEX Equity Options may be stated in fractional or decimal form. Specifically, the Exchange proposes to amend paragraph (c)(2) of Rule 24A.4 to state that exercise prices for FLEX Equity Options may be rounded to the nearest $.10, as well as to the nearest one-eighth of a dollar. The proposed rule change would enable market participation to state both exercise prices and premiums for FLEX Equity Options in decimal form, thereby facilitating transactions in FLEX Equity Options.[6]

2. Statutory Basis

CBOE believes the proposed rule change is consistent with the provisions of Section 6(b) of the Act,[7] in general, and Section 6(b)(5)[8] in particular, in that it is designed to facilitate transactions in securities, to protect investors and the public interest, and to remove impediments to and perfect the mechanism of a free and open market.

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

CBOE does not believe that the proposed rule change will impose a burden on competition that is 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 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 does not:

(i) Significantly affect the protection of investors or the public interest;

(ii) Impose any significant burden on competition; and

(iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act [9] and Rule 19b-4(f)(6) thereunder.[10] 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.

The Exchange has requested that the Commission accelerate the operative date. The Commission finds good cause to designate the proposal to become operative upon filing with the Commission because such designation is consistent with the protection of investors and the public interest. Acceleration of the operative date will allow CBOE to better compete with the over-the-counter market and those options exchanges that have already adopted rules to permit offering FLEX Equity Options strike prices in $.10 increments. For these reasons, the Commission finds good cause to designate that the proposal is both effective and operative upon filing with the Commission.[11]

Start Printed Page 44191

IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposal 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 CBOE. All submissions should refer to file number SR-CBOE-2001-45 and should be submitted by September 12, 2001.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[12]

Jonathan G. Katz,

Secretary.

End Signature End Preamble

Footnotes

5.  The Exchange provided the Commission with written notice of its intent to file the proposal on August 6, 2001, pursuant to Rule 19b-4(f)(6). 17 CFR 204.19b-4(f)(6). See August 3, 2001 letter from Jamie Galvan, Attorney, CBOE to Nancy Sanow, Division of Market Regulation, SEC.

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6.  The proposed rule change is based upon the rules of other securities exchanges, specifically AMEX Rule 903G(c), PCX Rule 8.102(f) and PHLX Rule 1079(a).

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11.  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. 01-21162 Filed 8-21-01; 8:45 am]

BILLING CODE 8010-01-M