[Federal Register Volume 61, Number 15 (Tuesday, January 23, 1996)]
[Notices]
[Pages 1802-1803]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-791]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36709; File No. SR-CBOE-95-72]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Chicago Board Options
Exchange, Incorporated Relating to the Effective Date of the Standing
Assurance Provision Relating to the Requirement To Make Prior
Arrangements or Obtain Other Assurances Before Short Selling
January 11, 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 January
2, 1996, the 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 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 hereby gives notice that it proposes to change the
effective date of a certain aspect of a rule change, interpretation .04
to Rule 30.20, previously approved by the Commission.\1\ The previously
approved rule change relates to the requirement to make prior
arrangements to borrow stock or to obtain other assurances that
delivery can be made on settlement date before a member or person
associated with a member may sell short. Specifically, the CBOE
proposes to delay, until March 30, 1996, the effectiveness of that
portion of Interpretation .04 to Rule 30.20 that prohibits CBOE members
from using blanket assurances that securities are available for
borrowing to satisfy their affirmative determination requirements.
\1\ See Securities Exchange Act Release No. 36245 (Nov. 27,
1995), 60 FR 62273 (Dec. 5, 1995).
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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
The purpose of this rule proposal is to delay the effectiveness of
a certain aspect of a rule change previously approved by the Commission
relating to the requirement to make prior arrangements to borrow stock,
warrants, or other securities that trade subject to Chapter 30 of the
Exchange's rules, or to otherwise ensure availability of the subject
securities before engaging in
[[Page 1803]]
short sales. Specifically, the CBOE proposes to delay, until March 30,
1996, the effectiveness of that portion of the rule change that
prohibits CBOE members from using blanket or standing assurances that
securities are available for borrowing to satisfy their affirmative
determination requirements.
The previously approved rule requires members to annotate, on the
trade ticket or some other record maintained for that purpose by the
member firm, the following information:
1. if a customer assures delivery, the present location of the
securities in question, whether they are in good deliverable form
and the customer's ability to deliver them to the member within
three (3) business days; or
2. if the member locates the stock, the member must annotate the
identity of the individual and firm contacted who offered assurance
that the shares would be delivered or were available for borrowing
by settlement date and the number of shares needed to cover the
short sale.
The rule also provides that the manner by which a member or person
associated with a member annotates compliance with this ``affirmative
determination'' requirement (e.g., marking the order ticket, etc.) is
left for each individual member to decide. In addition, the rule
clarifies that an affirmative determination and annotation of that
affirmative determination must be made for each and every transaction
since a ``blanket'' or standing assurance that securities are available
for borrowing is not acceptable to satisfy the affirmative
determination requirement (``standing assurance provision''). Thus, a
firm that relies on a fax sheet or other standing assurance as to stock
availability must annotate such reliance for each short sale
transaction. By requiring firms to annotate each and every affirmative
determination, the rule makes clear the CBOE's policy that firms cannot
rely on daily fax sheets of ``borrowable stocks'' to satisfy their
affirmative determination requirements under the Interpretation .04 to
Rule 30.20.
As the rule change was filed for immediate effectiveness as a non-
controversial rule change, the rule became operative thirty days after
the rule change was filed with the Commission.\2\ This rule is based
upon a similar rule that has been adopted by the National Association
of Securities Dealers (``NASD''). The NASD has decided to delay the
effectiveness of the standing assurance provision until February 20,
1996 because of the feedback from a broad spectrum of NASD members and
because the NASD believes the standing assurance provision may have
created an unnecessarily burdensome regulatory requirement on NASD
members. As a result, the NASD is in the process of evaluating comments
raised by market participants concerning the provision to determine
what further action should be taken. The CBOE plans to consult with the
NASD regarding their review of this provision and anticipates that it
will decide whether it should take action regarding the standing
assurance provision by March 30, 1996.
\2\ It should be noted at this time the CBOE does not trade any
product that would be subject to this rule, although, by its terms,
the rule applies to transactions by CBOE members on another national
securities exchange or in the over-the-counter market.
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By delaying the effectiveness of the standing assurance provision
until March 30, 1996, this rule proposal will give members an
opportunity to take the necessary actions to comply with the rule. In
addition, the delay will allow the CBOE to consult with the NASD to
determine whether to retain this provision or modify it, thereby
assuring that the CBOE rules are crafted to achieve their regulatory
purpose in a manner that is the least burdensome for its membership.
Therefore, CBOE, represents that the proposed rule change is consistent
with Section 6 of the Act, in general, and furthers the objectives of
Section 6(b)(4) of the Act in particular, in that it is designated by
the Exchange as constituting a stated policy with respect to the
enforcement of an existing rule.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any inappropriate 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
Because the foregoing rule change constitutes a stated policy,
practice or interpretation with respect to the enforcement of an
existing CBOE rule, it has become effective pursuant to Section
19(b)(3)(A) of the Act and subparagraph (e) of Rule 19b-4 thereunder.
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 purpose of the Act.
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 there of 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. 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 the File No. SR-CBOE-95-72 and should be
submitted by February 13, 1996.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\3\
\3\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-791 Filed 1-22-96; 8:45 am]
BILLING CODE 8010-01-M