February 25, 1998
Volume 26, Number 8
Exchange
Bulletin
The Constitution and Rules of the Chicago Board Options Exchange, Incorporated ("Exchange"), in certain specific instances, require the
Exchange to provide notice to the Exchange membership. To satisfy this requirement, a complimentary copy of the Exchange Bulletin,
including the bi-monthly Regulatory Bulletin, is provided to all individual members and nominees of member organizations on a weekly
basis.
Additional subscriptions may be obtained by submitting your name, firm, address and telephone number to: Chicago Board Options Exchange, Attention: Marketing Department, 400 South LaSalle, Chicago, Illinois 60605. The cost of an annual subscription (July 1 through
June 30) is $100.00, ($50.00 after January 1) payable in advance. Non-members are welcome to subscribe.
REGULATORY CIRCULARS
Regulatory Circular RG98-26
Date:
February 20, 1998
To:
Members and Member Organizations
From:
Membership Department
Re:
Option Trading Permit Lease Pool Procedures
In connection with the transfer of the New York Stock Exchange (NYSE) option program to the CBOE, the Exchange created and issued seventy-five
Option Trading Permits. The Permit gives the holder limited member status by entitling the holder to only the following trading rights and privileges:
1.
To be admitted to the trading area on the second floor for the purpose of engaging in the activity of a Market Maker, DPM and/or Floor Broker
in the option classes that are located in that area, which classes are the former NYSE option classes that are not also traded on the CBOE
main trading floor, and any classes which are subsequently allocated to the second floor trading area and;
2.
To trade by order as principal those classes of equity options that were traded on both the CBOE and the NYSE immediately prior to the
relocation of the NYSE option program to the CBOE and;
3.
To trade by order as principal all classes of options traded on the CBOE in addition to those described in paragraphs 1 and 2 above, provided
that the Permit holder’s total contract volume in such classes of options during any calendar quarter may not exceed twenty percent (20%) of
the sum of such Permit holder’s total in person contract volume as principal effected pursuant to paragraph 1 above and the Permit holder’s
contract volume pursuant to paragraph 2 above and;
4.
To be admitted to the main CBOE trading floor for the purpose of responding to the call of a Board Broker or Order Book Official pursuant to
Rule 7.5 in respect of any class of options in which a transaction has been effected for the Permit holders account on the day of the call.
The Exchange deposited into a “lease pool” those Option Trading Permits not issued to NYSE option members, plus any Option Trading Permits which,
following their issuance to NYSE option members, were surrendered by those members. There are currently twenty-eight Permits in the lease pool.
These Permits were allocated to lessees pursuant to a competitive bidding process. All current Option Trading Permit leases expire April 30, 1998.
Operation of the Lease Pool
Permits in the lease pool will be re-allocated through a competitive bidding process which operates as follows:
1.
The Exchange will accept from members and non-members who have qualified for membership sealed bids equal to the monthly rent that the
bidder is willing to pay for a month-to-month lease from May 1, 1998 through October 31, 1998. All bids must be submitted in writing to the
Membership Department and will be accepted until at 4:00 p.m. Friday, March 13, 1998.
2.
Upon the close of the bidding period, Permits in the pool will be awarded to the highest bidders in a number equal to the total number of
Permits in the pool at that time. In the event that there is more than one bid at the cut-off level, the bid received first in time will have priority.
3.
The monthly rent to be paid by a lessee will be the dollar value of the bid submitted by that lessee. Lease payments will be collected by the
Exchange at the beginning of the month.
4.
Following the auction, bids for Permit leases will continue to be accepted. The high bid will be posted without the identity of the bidder
attached.
Page 2
February 25, 1998
Volume 26, Number 8
The Chicago Board Options Exchange Bulletin
5.
Should any lessee desire to give up his Permit prior to the next auction, the Membership Department will post the availability of the Permit for
one full trading day. The Permit will then be transferred to the bidder with the highest bid at 4:30 p.m. on that trading day.
6.
A lessee who gives up his Permit prior to the end of the month will be reimbursed in the amount of the new lessee’s prorated lease payment
for the balance of that month.
7.
All Permits in the lease pool will be re-auctioned in the manner described in #1 and #2 above every six months. No priority will be given to
current lessees.
8.
Bidding restrictions:
a.
Bids may be submitted by individuals or organizations on behalf of identified individuals.
b.
The person proposed to occupy a Permit must be a member or qualified to become a member at the time the bid is placed.
c.
A non-refundable fee of $500 will be required at the time a bid is submitted.
d.
No minimum bid price will be set. Minimum bid increments will be $50.
e.
No lease of a Permit in the lease pool will become effective until there has been deposited with the Membership Department of the
Exchange a Letter of Guarantee from a Clearing Member in the amount equal to the last sale price of a Permit, except that until
such a sale takes place, the amount shall be $50,000.
Questions concerning the terms of the Permits or the operation of the Permit lease pool may be directed to Edward L. Provost at 312-786-7717.
Questions concerning the steps necessary to obtain “qualified” status for the purposes of submitting a bid for a Permit lease may be directed to the
Department of Membership at 312-786-7460.
MEMBERSHIP INFORMATION FOR February 12, 1998 THROUGH February 18, 1998
Members are required to report any address or telephone number changes to the Membership Department at (312) 786-7449 pursuant to
Exchange Rule 3.6(b). For Seat Market Quotes, call (312) 786-7456.
SEAT MARKET QUOTES as of February 20, 1998
SEAT MARKET QUOTES as of January 31, 1997
Bid:
$715,000.00
Bid:
$715,000.00
Offer:
$745,000.00
Offer:
$750,000.00
Last Sale:
$720,000.00 on January 29, 1998
Last Sale: $735,000.00 on February 19, 1998
OPTION TRADING PERMIT- LEASE POOL as of February 20, 1998
Highest Bid:
$2,750.00
Highest Monthly Rate:
$4,700.00
OTP's Available:
None
Lowest Monthly Rate:
$2,800.00
Last Lease:
$2,800.00 1/9/98
Membership Sales and Transfers
This notice is given pursuant to Rules 3.15 and 3.16 which permit certain types of claims to be filed with the Membership Department
within 20 days from the date of this Exchange Bulletin.
From
To
Price/Transfer
Date
William F. O'Connor
B.E. Partners
$735,000
02/20/98
February 25, 1998
Volume 26, Number 8
The Chicago Board Options Exchange Bulletin
Effective Date
MEMBERSHIP APPLICATIONS RECEIVED
This notice is given pursuant to Exchange Rule 3.9. Please send
any comments to the Membership Committee in care of the
Membership Department.
Lessor:
Lessee:
Rate:
Individual Member Applicants
Paul Liang, Lessor
175 East Delaware #9003
Chicago, IL 60611
Page 3
Larkspur Securities, Inc.
Arbitrade, L.L.C.
Steven B. Price, NOMINEE
1/18%
02/17/98
Term:
Month to Month
Date Posted
02/13/98
Lessor:
Lessee:
Rate:
Christopher P. Ennis, Lessee
2701 Oak Avenue
Northbrook, IL 60062
02/13/98
M. Barbara O’Brien, Nominee
Zahr Trading
543 Grove
Glencoe, IL 60022
02/13/98
Michael De Filippis, Nominee
TJC Limited Options Partnership
1246 Fordham Drive
Glendale Heights, IL 60139
02/13/98
Mark P. Corman, Nominee
Sallerson-Troob L.L.C.
815 McKenzie Station Drive
Lisle, IL 60532
02/18/98
Samuel I. Sallerson, Nominee
Sallerson-Troob L.L.C.
442 W. Wellington - #8E
Chicago, IL 60657
02/18/98
Andrew S. Troob, Nominee
Sallerson-Troob L.L.C.
725 Green Leaf
Glencoe, IL 60022
Lessor:
Lessee:
Rate:
David J. Epstein
Apollo Partners, L.P.
William H. Ray, NOMINEE
1/18%
02/18/98
Term:
B E Partners
Rathunas Trading L.L.C.
Andrew H. Carolan, NOMINEE
1 1/8%
Term:
Month to Month
02/20/98
Month to Month
Terminated Leases
Termination Date
Lessor:
02/13/98
Lessee:
Merrill Lynch Professional Clearing
Corp.
Hull Trading Company, L.L.C.
Lessor:
Lessee:
O & R Options Co. 02/17/98
Robert C. Sheehan And Associates, Inc.
Daniel D. Mulvihill Jr. (MLV), NOMINEE
Lessor:
Lessee:
Larkspur Securities, Inc.
Lakota Trading, Inc.
Stephen E. Nowak (SSN), NOMINEE
02/17/98
Lessor:
Lessee:
David J. Epstein
Mercury Trading, Inc.
William H. Ray (WWR), NOMINEE
02/18/98
02/18/98
Lessor:
Lessee:
William F. O’Connor
Rathunas Trading, L.L.C.
Andrew H. Carolan (AHC), NOMINEE
02/20/98
Member Organization Applicants
Date Posted
MEMBERSHIP OTP LEASES
PBL Partners L.L.C., Lessor
175 E. Delaware - #9003
Chicago, IL 60611
Paul Liang - Managing Member
Tom Yan - Member
Howard Walkes - Member
Bruce Stevens - Member
02/17/98
This notice is given pursuant to Exchange Rules 3.15 and 3.16 which
permit certain types of claims to be filed with the Membership Department within 20 days from the date of this Exchange Bulletin.
New OTP Leases
Effective Date
Lessor:
Lessee:
02/17/98
Rate:
Lease Pool
LETCO Trading L.P.
Ruth Eichler, NOMINEE
$3000
Term:
Month to Month
MEMBERSHIP LEASES
This notice is given pursuant to Exchange Rules 3.15 and 3.16 which
permit certain types of claims to be filed with the Membership Department within 20 days from the date of this Exchange Bulletin.
Individual Members
New Leases
Effective Date
Lessor:
02/13/98
Lessee:
Rate:
Lessor:
Lessee:
Rate:
Merrill Lynch Professional Clearing
Corp.
Hull Liquidity Fund, L.P.
Alexander Magid, NOMINEE
1 1/8%
Term:
O & R Options Co.
Cedar Creek Trading, LLC
Matthew J. Benson, NOMINEE
1 1/8%
Term:
MEMBERSHIP TERMINATIONS
One Week
02/17/98
Month to Month
Termination Date
CBT Exercisers:
Thomas G. Gorman (TUG)
144 Old Green Bay Road
Hubbard Woods, IL 60093
02/12/98
Nominee(s)/Inactive Nominee(s):
Jerry B. Ware (TXS)
Lakota Trading, Inc.
Lakota Trading Inc
401 S. LaSalle, Ste #200
Chicago, IL 60605
02/17/98
Page 4
February 25, 1998
Volume 26, Number 8
Termination Date
02/17/98
Edmund P. Mahoney (EPM)
Mokena Partnership
528 Cumnor Ct.
Deerfield, IL 60015
Mark P. Corman (MEC)
G-Bar Limited Partnership
815 McKenzie Station Drive
Lisle, IL 60532
02/18/98
Ronald A. Myers (CPT)
Raymond James & Associates, Inc.
400 S. Lasalle - CBOE Box 558
Chicago, IL 60605
02/18/98
Registered For a Member Organization:
Nicholas J. Notorangelo (NTR) (CBT)
Zahr Trading
1239 W. Melrose
Chicago, IL 60657
02/13/98
EFFECTIVE MEMBERSHIPS
The Chicago Board Options Exchange Bulletin
New Accounts
Acronym
Effective Date
Steven B. Price
QPZ
02/17/98
Steven B. Price
QUN
02/17/98
Peter J. Klink
QPB
02/13/98
Gary S. Booras
QPB
02/13/98
Stephen M. Farber
QFN
02/18/98
Kurt J. Steib
QFN
02/18/98
Terminated Participants
Acronym
Effective Date
David A. Kincade
QCA
02/17/98
David A. Kincade
QCD
02/17/98
Mark P. Corman
QRR
02/18/98
Mark P. Corman
QZZ
02/18/98
Mark P. Corman
QEE
02/18/98
Kenneth H. Odom
QMT
02/18/98
Vito H. Favia
QMT
02/18/98
Lloyd W. Montgomery
QST
02/18/98
Daniel G. Brennan
QST
02/18/98
Daniel A. Baldwin
QST
02/18/98
Michael W. Wallace
QST
02/18/98
James J. Humes Jr.
QST
02/18/98
This notice is given pursuant to Exchange Rule 3.11.
Individual Members
Effective Date
Nominee(s)/Inactive Nominee(s):
Terminated Accounts
Matthew J. Benson (TUB)
02/17/98
Cedar Creek Trading L.L.C
1224 Cleveland Avenue
LaGrange, IL 60526
Type of Business to be Conducted: Market Maker, Floor Broker
Steven B. Price (PRI)
Arbitrade, L.L.C.
440 S. LaSalle, Suite 700
Chicago, IL 60605
Type of Business to be Conducted: Market Maker
02/17/98
Registered For a Member Organiztaion:
CHANGES IN MEMBERSHIP STATUS
Nicholas J. Notorangelo (NTR) (CBT)
02/12/98
Zahr Trading
1239 W. Melrose
Chicago, IL 60657
Type of Business to be Conducted: Market Maker, Floor Broker
Member Organizations
Cedar Creek Trading L.L.C
02/17/98
135 E. 57th St - 11th Flr
New York, Ny 10022
Membership Function: Lessee
Type of Business to be Conducted: associated with a Market Maker,
Floor Broker
Individual Member Applicants
Effective Date
Stephen E. Nowak
02/17/98
From:
Nominee For Lakota Trading, Inc.;
Floor Broker, Market Maker
To:
CBT Exerciser, Registered For Lakota Trading, Inc.;
Floor Broker, Market Maker
Ruth Eichler
02/17/98
From:
CBT Exerciser Registered For LETCO Trading L.P.;
Market Maker
To:
Nominee For LETCO Trading L.P.; Market Maker
David Kincade
02/17/98
From:
Nominee For Cohen, Duffy, McGowan & Co. (Chicago),
LLC.; Floor Broker, Market Maker
To:
Nominee For GPZ Trading L.L.C.; Market Maker
JOINT ACCOUNTS
This notice is given pursuant to Exchange Rule 8.9.
New Participants
Acronym
Effective Date
Michael W. Wallace
QBD
02/17/98
Michael W. Wallace
QLL
02/17/98
Timothy J. Mahoney
02/17/98
From:
Lessor To Mokena Partnership
To:
Lessor To Mokena Partnership/Nominee For Mokena
Partnership; Floor Broker, Market Maker
February 25, 1998
Volume 26, Number 8
The Chicago Board Options Exchange Bulletin
Effective Date
Effective Date
William H. Ray
From:
Nominee for Mercury Trading Inc;
Market Maker, Floor Broker
To:
Nominee for Apollo Partners, L.P.;
Market Maker, Floor Broker
02/18/98
Page 5
Jon A. Najarian
02/18/98
From:
CBT Exerciser Registered for Apollo Partners L.P;
Market Maker/ Lessor to Mercury Trading Inc.
To:
Nominee for Mercury Trading, Inc.;
Market Maker, Floor Broker/ Lessor to Mercury
Trading Inc.
Position Limits
For all equity options classes except those listed below, the standard position and exercise limits pursuant to Exchange Rule 4.11 and
4.12 will be applicable. For a complete list of all applicable lists, check 2nd floor data information bins or contact the Department of
Market Surveillance.
Class
BAQ/BAW
HBI/WNU
IR/IRU
NLQ
PIR/PZW
QST/QZT
RAQ/WYH
WYH/RAQ
BKS
CA/CWA
CVZ/PMZ
HHX/HRC
HRC/HHX
IBC
IMG
KZQ/KZY
PWJ/PWZ
QOE/QZE
OWN/ZIT
ROK/ROX
SCI
SFY/SYF
SFV
SUB/SUV
TEO
USI/IRZ
AGE
BQF
CDN
CWQ
DLP/DLU
FTZ/IGL
HMA/HMZ
HRS
IGL/FTZ
LM/LYM
MZY/OFQ/OFZ
NOI
OFQ/QFZ/MZY
QVY
RKQ
RWQ/RZW
SEI
VFC
VX/VPQ
WPI
XRQ
YPQ/VX
AKS
CKR/CKY
DSZ/WAC
FXH/QVS
GMH/GUZ
HQR/HZR
OCN
WAI/WZA
KHQ/KHW
NT
QVS/FXH
UQD
BQR/FLT
CQM/NWY
ECL
ENZ/ENX
EQD/EZD
MEA
MOQ/MOZ
NWY/CQM
Limit
10,500 contracts
7,500 contracts
1,575,000 shares
50,000 contracts
1,125,000 shares
1,125,000 shares
3,445,000 shares
3,445,000 shares
15,000 contracts
3,750,000 shares
2,584,000 shares
3,382,000 shares
3,382,000 shares
9,000 contracts
459,000 shares
2,000,000 shares
1,575,000 shares
463,500 shares
1,125,000 shares
10,500 contracts
21,000 contracts
750,000 shares
9,000 contracts
1,125,000 shares
15,000 contracts
1,125,000 shares
1,125,000 shares
21,000 contracts
50,000 contracts
50,000 contracts
997,500 shares
15,000 contracts
1,575,000 shares
15,000 contracts
15,000 contracts
598,500 shares
3,603,000 shares
9,000 contracts
3,603,000 shares
15,000 contracts
21,000 contracts
937,500 shares
9,000 contracts
15,000 contracts
2,500,000 shares
21,000 contracts
9,000 contracts
2,500,000 shares
9,000 contracts
825,000 shares
990,000 shares
900,000 shares
10,500 contracts
7,500 contracts
9,000 contracts
7,500 contracts
1,575,000 shares
21,000 contracts
900,000 shares
15,000 contracts
2,927,500 shares
3,320,000 shares
15,000 contracts
472,500 shares
937,500 shares
15,000 contracts
937,500 shares
3,320,000 shares
Date
3/21/98
3/21/98
3/21/98
3/21/98
3/21/98
3/21/98
3/21/98
3/21/98
4/18/98
4/18/98
4/18/98
4/18/98
4/18/98
4/18/98
4/18/98
4/18/98
4/18/98
4/18/98
4/18/98
4/18/98
4/18/98
4/18/98
4/18/98
4/18/98
4/18/98
4/18/98
5/16/98
5/16/98
5/16/98
5/16/98
5/16/98
5/16/98
5/16/98
5/16/98
5/16/98
5/16/98
5/16/98
5/16/98
5/16/98
5/16/98
5/16/98
5/16/98
5/16/98
5/16/98
5/16/98
5/16/98
5/16/98
5/16/98
6/20/98
6/20/98
6/20/98
6/20/98
6/20/98
6/20/98
6/20/98
6/20/98
6/20/98
6/20/98
6/20/98
6/20/98
7/18/98
7/18/98
7/18/98
7/18/98
7/18/98
7/18/98
7/18/98
7/18/98
Class
ORG/ORY
PQO
QIG/TWZ
QRT
QTP/ZTP
TCB
TWZ/QIG
VXQ
YQC
IOM
KOZ/PPZ/PRH
PRH/PPZ/KOZ
QRI/RIU
QDA/QXA
XSQ/XYQ
WH/WHZ
BJS
DKB
HQR/HZR
AAL/VHW
BA/WBO/VBO
CD/VUC/LUL/VFS/
LFS
CIQ/WCI/VHR
CTC/WDT/VDT/
CUC/WZC/VXD
HAL/VHW
KRB/LXK/KRW/VUK/
VKX/VZK
MER/VME/LME
MMM/WMU/VMU/
VMV
VFS/LFZ/CD/
VUC/LUL
VUZ/THQ/VTH/
LTH
AIG/VAF/LAJ/
VXE/LVJ
ARC/VFR/LFR
BAC/VBA/LBA
CYQ/VYC/LCY/CYZ
VYV/LYL
DD/VDD/LDD
EMC/VUE/LUE
GM/LGM/GMX/
VGN/LGZ
GPS/VGS/LGS
GZP/VWS/LVP
HWP/VVX
IBM/VIB/LIB
LUV/VUV/LOV/
LYU/VUY/LVW
MTC/VM/LCT/MZM
VZV/LYC
ORQ/VOR/LRO/OWQ
VZR/LRZ/WOU
PEP/VP/LPP/PVP/
VPR/LDV
SCH/VYS/LWS
SYH/VZY/LWZ
SLB/VWY/LYS
SLM/VRM/LOS/SLZ/
VZL/LYM
TXN/VXT/LTN
VSZ/WZY/VVX/HWP
WMB/VBB/LMB
MOB/VML/LML
Limit
Date
750,000 shares
50,000 contracts
50,000 contracts
21,000 contracts
4,500 contracts
9,000 contracts
1,695,000 shares
50,000 contracts
9,000 contracts
50,000 contracts
15,000 contracts
15,000 contracts
1,125,000 shares
675,000 shares
3,750,000 shares
10,500 contracts
21,000 contracts
9,000 contracts
7,500 contracts
50,000 contracts
50,000 contracts
9,750,000 shares
7/18/98
7/18/98
7/18/98
7/18/98
7/18/98
7/18/98
7/18/98
7/18/98
7/18/98
8/22/98
8/22/98
8/22/98
8/22/98
9/19/98
9/19/98
9/19/98
10/17/98
11/17/98
12/20/98
1/23/99
1/23/99
1/23/99
42,000 contracts
4,462,500 ADSs
1/23/99
1/23/99
50,000 contracts
4,500,000 shares
1/23/99
1/23/99
50,000 contracts
25,000 contracts
1/23/99
1/23/99
9,750,000 shares
1/23/99
6,875,000 shares
1/23/99
3,750,000 shares
1/22/2000
40,000 contracts
50,000 contracts
3,750,000 shares
1/22/2000
1/22/2000
1/22/2000
50,000 contracts
50,000 contracts
25,000 contracts
1/22/2000
1/22/2000
1/22/2000
3,750,000 shares
1/22/2000
32,500 contracts
50,000 contracts
3,000,000 shares
1/22/2000
1/22/2000
1/22/2000
25,000 contracts
1/22/2000
3,750,000 shares
25,000 contracts
1/22/2000
1/22/2000
2,000,000 shares
1/22/2000
50,000 contracts
2,625,000 shares
1/22/2000
1/22/2000
50,000 contracts
32,500 contracts
21,000 contracts
50,000 contracts
1/22/2000
1/22/2000
1/22/2000
2/19/2000
Page 6
February 25, 1998
Volume 26, Number 8
The Chicago Board Options Exchange Bulletin
Research Circulars
The following Research Circulars were distributed between February 13, 1998 and February 19, 1998. If you wish to read the entire document, and
have access to a fax machine, please call the CBOE FaxLine at 1-800-OPTIONS, choose option “4” and then option “1”. Please have your fax number
and the corresponding FaxLine document number ready. The FaxLine number is listed adjacent to each circular. To receive a list of all available
documents, use the FaxLine number 000. You may also access the Research Circulars on our Web Site at http://www.cboe.com Questions regarding
any of the information that is discussed in any Research Circular may be directed to the CBOE Investor Services Department at 1-800-OPTIONS.
CBOE Research Circular #RS98-72
FaxLine Document No. 863
February 13, 1998
The Quick & Reilly Group, Inc. (“BQR/adj. BVR”): Determination of Cash-in-Lieu Amount
CBOE Research Circular #RS98-73
FaxLine Document No. 900
February 13, 1998
New Listing: ASE Test Limited (“ASTSF/QDQ”)
CBOE Research Circular #RS98-74
FaxLine Document No. 864
February 13, 1998
HSN, Inc. (“HSNI/QTH”) Name and Underlying Stock Symbol Change to: USA Networks, Inc. (“USAI”)
Effective Date: February 17, 1998
CBOE Research Circular #RS98-75
FaxLine Document No. 865
February 13, 1998
Coast Savings Financial, Inc. (“CSA”) COMPLETED Distribution of Contingent Rights and Merger with H.F. Ahmanson & Company
CBOE Research Circular #RS98-76
FaxLine Document No. 866
February 17, 1998
PerSeptive BioSystems, Inc. (“PBIO/adj. OPZ”): Determination of Cash-in-Lieu Amount
CBOE Research Circular #RS98-77
FaxLine Document No. 867
February 17, 1998
St. Jude Medical, Inc. (“STJ”) Partial Self-Tender Offer
CBOE Research Circular #RS98-78
FaxLine Document No. 868
February 18, 1998
Bergen Brunswig Corporation (“BBC”) Proposed Merger with Cardinal Health, Inc. (“CAH”)
CBOE Research Circular #RS98-80
FaxLine Document No. 869
February 19, 1998
Whitman Corporation (“WH/adj. WZH”): Determination of Cash-in-Lieu Amount
CBOE Research Circular #RS98-81
FaxLine Document No. 870
February 19, 1998
The Energy Group plc ADS (“TEG”) Tender Offer by Goldman Sachs International on Behalf of PacifiCorp Acquisitions
CBOE Research Circular #RS98-82
FaxLine Document No. 871
February 19, 1998
CompuServe Corporation (“CSRV/adj. SVW”): Determination of Cash-in-Lieu Amount
Regulatory
Bulletin
February 25, 1998
Volume RB9, Number 4
The Constitution and Rules of the Chicago Board Options Exchange, in certain specific
instances, require the Exchange to provide notice to the membership. The Regulatory
Bulletin will be mailed to all members twice a month and is intended to satisfy this
requirement.
Regulatory
Circulars
Regulatory Circular RG98-19
Date:
February 6, 1998
To:
Members and Member Organizations
From:
The Department of Financial and Sales Practice Compliance
Subject:
Market-Maker Margin Requirements
The purpose of this circular is to respond to inquiries regarding appropriate methods for
meeting Regulation T margin calls for non market-maker positions. Option positions that
are not deemed market-maker positions or stock and option positions that do not qualify
as permitted offset positions according to Exchange Rule 12.3(f) are subject to customer
margin requirements. A Regulation T margin call is to be issued when an account executes trades that require a margin deposit. The call will be issued for the deficiency
between the market-maker’s account equity and the margin requirement. Regulation T
Section 220.4 requires the “deposit of cash, margin securities or any combination thereof”
within a specified time frame (currently 5 business days) in order to satisfy a margin call.
Margin calls that are not met by an appropriate deposit will be deemed liquidations.
Market appreciation is not an acceptable method of meeting a Regulation T call. If a call
is issued and the account equity appreciates due to market movement to a level that
would cover or reduce the required margin deposit the market-maker is still obligated to
deposit the cash or securities equal to the original call. Liquidating another non marketmaker position after a Regulation T margin call has been issued is not an acceptable
method of meeting the call.
If you have any questions regarding this memorandum, please contact Jim Adams at
(312) 786–7718 or Rich Lewandowski at (312) 786–7183.
(Reg. Circular 95-12 revised)
Regulatory Circulars
continued
Regulatory Circular RG98-20
Date:
February 12, 1998
To:
Members and Member Organizations
Attention:
Chief Executive Officers/Managing Partners/
Compliance Officers/Senior Registered Options Principals
From:
Capital Markets Division
Subject:
American Express Credit Corporation
* % Cash Exchangeable Notes, Due 2/ * /03
(Linked to the Price of the Common Shares of
American Express Company)
The aforementioned Notes are the subject of a Preliminary Prospectus Supplement and
will commence trading at a date to be announced (Trading Symbol: AXC.R, CUSIP Number 025818CJ2).
GENERAL DESCRIPTION:
As more fully explained in the Preliminary Prospectus Supplement, the Notes constitute
Debt Securities of the American Express Credit Corporation (hereinafter the “Issuer”) and
will be issued in minimum denominations of $1,000.
Interest at the rate of * % per annum, will be paid semi-annually on February *
August * of each year, beginning August * , 1998.
and
The Notes are exchangeable solely for cash or payable solely in cash at maturity. Noteholders
do not have any right to receive any common shares or other securities. The price of the
common shares of American Express Company serves solely as a benchmark to determine the amount payable on any Note upon exchange at the option of the Holder and
under certain circumstances, at the option of the Issuer.
PAYMENT AT MATURITY:
At maturity, the Issuer will pay $1,000 per Note (or in the event of maturity prior to February
* , 2003 for any reason, the Accreted Value**). Accrued and unpaid interest to maturity
will be payable by the Issuer on all Notes outstanding at maturity, other than any Note with
respect to which a valid Notice of Exchange has been delivered by the Holder.
_______________________
The purpose of this circular is to provide basic information to Members and Member Organizations regarding the subject securities and to advise of certain compliance responsibilities when handling transactions in these securities. This is not a sales document and is
not intended to be distributed to customers.
* To be announced.
** Accreted Value equals the issue price plus accrued original issue discount, calculated
on a semi-annual bond equivalent basis.
EXCHANGE RIGHT OF NOTEHOLDERS:
On any Exchange Date (see below), Noteholders will have the right, (subject to a prior call
by the Issuer for cash at the Call Price as summarized below under “Issuer Exchange
Right” and upon delivery of an Official Notice of Exchange prior to 11:00 a.m. New York City
time on such date) to exchange each $1,000 principal amount of Notes for an amount in
cash equal to the Exchange Amount.
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Februar
y 25, 1998, Volume RB9, Number 4
February
Regulatory Circulars
continued
Regulatory Circular RG98-20 continued
As more fully explained in the Prospectus Supplement, the Exchange Amount will equal the
product of * shares of stock of American Express Company and the Closing Price of the
stock on (1) in the case of an exchange by the Holder, the applicable Exchange Date, or (2)
in the case of an exchange by the Issuer, the Call Date. No accrued and unpaid interest will
be payable on Notes exchanged by the Holder or called by the Issuer.
ISSUER EXCHANGE RIGHT:
On or after February * , 2000, the Issuer may call the Notes, in whole but not in part, for
Mandatory Exchange into cash in an amount equal to the Exchange Amount, provided that
if Parity (see below) on the Trading Date immediately preceding the Notice Date is less than
the Call Price for the related Call Date, the Issuer will instead pay an amount equal to the Call
Price on such Call Date, which may not be less than 30 nor more than 60 days from the
Notice Date.
If called for Mandatory Exchange, Holders must exercise their right to receive the Exchange
Amount, or payment will be made at the Call Price, on the Call Date fixed by the Issuer.
EXCHANGE DATE:
Any Trading Day, from and including March * , 1998, through and including the Trading Day
prior to the earliest of (1) maturity (2) the Call Date and (3) the Issuer Notice Date, in the event
of a call for cash at the Call Price as described under “Issuer Exchange Right.”
EXCHANGE RATIO:
* shares of American Express Company per Note, subject to adjustment for certain
corporate events.
PARITY:
With respect to any Trading Date, an amount equal to the Exchange Ratio times the closing
price of American Express Company common shares on such Trading Date.
CERTAIN RISK FACTORS:
• The trading price of the Notes may vary considerably prior to maturity, due to, among other
things, fluctuations in the market price of the Common Shares of American Express Company and other events that are difficult to predict and beyond the Issuer’s control.
• The yield to maturity of the Notes is less than would be payable on a non-exchangeable
debt security if the Issuer were to issue such a security at the same time it issues the
Notes.
• The terms of the Notes differ from those of ordinary securities in that the Notes are exchangeable for cash at the option of the holder and, under certain circumstances, at the
option of the Issuer, for an amount that is not fixed in advance, but rather based on the
price of the Common Shares of American Express Company.
• The opportunity for appreciation afforded by an investment in the Notes is less than the
opportunity afforded by an investment in the Common Shares. In addition, Holders of the
Notes will not participate in any such equity appreciation, unless the Notes are exchanged
and at the time of such exchange Parity equals or exceeds the Call Price.
• The market value of the Notes is expected to depend primarily on the extent of the appreciation of the Common Shares of American Express Company above the Market Price of the
stock on February * , 1998.
Februar
y 25, 1998, Volume RB9, Number 4
February
RB3
Regulatory Circulars
continued
Regulatory Circular RG98-20 continued
• The Exchange Ratio or, in certain circumstances, the determination of the Exchange
Amount, is subject to adjustment for certain events arising from, among others, stock
splits and combinations, stock dividends, extraordinary cash dividends and other actions
that may impact on the capital structure of American Express Company.
OTHER IMPORTANT INFORMATION:
• Investors should consider the tax consequences of investing in the Notes. See the
Prospectus Supplement for a discussion of the tax considerations, including the implica
tions of Original Issue Discount.
• The Notes are not subject to any sinking fund.
• As more fully discussed in the Prospectus Supplement, tax changes which could negatively impact on the Issuer would allow for the Notes to be called for redemption.
• Ownership of the Notes will be maintained in book entry form with DTC. Notes sold
outside the U.S. will be deposited with Euroclear and Cedel.
The foregoing information has been excerpted from the Preliminary Prospectus Supplement, and the Exchange assumes no responsibility for the accuracy or completeness of
such information. Members and associated persons of member organizations are advised
to read both the Prospectus and the Prospectus Supplement.
REGULATORY CONSIDERATIONS:
MARGIN AND CAPITAL REQUIREMENTS
For margin and capital purposes, AXCR.O3 is a debt security. A long position will have an
initial and maintenance margin requirement equal to 50% and 25% of market value, respectively.
AXCR.03 does not qualify as an options hedge under the Securities and Exchange
Commission’s Rule 15c3-1 (the “Net Capital Rule”) or the Exchange’s margin rules. Therefore, members should be aware that making markets in or trading AXCR.O3, or any structured product that does not qualify as an options hedge, will subject the member to the
provisions of the Net Capital Rule. Members should refer to Regulatory Circular RG 97-40
for further information regarding capital requirements and structured products.
For capital purposes, AXCR.O3 positions will be subject to a haircut equal to 15% of
market value. There are no haircut offsets for related derivative securities.
SALES PRACTICES
The Notes are considered debt securities and subject to the provisions of Rule 30.50. A
customer’s account is not required to be options approved. Members and associated
persons of member organizations should take such steps as may be reasonably necessary to assure that prospective Note purchasers reach an investment decision only after
carefully considering the suitability of the Notes in light of their particular financial circumstances and objectives.
* * * * *
Questions regarding customer suitability of these securities should be directed to Larry
Bresnahan (312) 786-7713 and margin questions should be directed to Jim Adams (312)
786-7718. General product questions should be directed to Nick Parcharidis of the Capital
Markets Division (212) 803-1411.
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y 25, 1998, Volume RB9, Number 4
February
Regulatory Circulars
continued
Regulatory Circular RG98-21
Date:
February 12, 1998
To:
All Exchange Members and Member Personnel
From:
Floor Officials Committee
Re:
Trading Floor Dress Code on Casual Days
The following Dress Code shall be applicable on the trading floor on CBOE Casual Days.
All Exchange members and Exchange member personnel must maintain a neat and well
groomed appearance and adhere to the following guidelines:
Appropriate:
-
Sport trousers or casual slacks
Blue jeans in good condition or jean skirts
Shirts with collars
Casual blouses
Casual shoes or clean sneakers
Sweaters in good condition
Neckties shall not be required
Inappropriate:
-
T-shirts or tank tops
Shirts without collars
Sweatshirts
Athletic Sweaters
Shorts
Any clothing that is tattered or has holes
Clothing that has offensive phrases or pictures
Athletic wear or service fatigues
Clothing which draws excessive attention to the wearer (e.g., revealing blouses,
halter tops, or half-shirts)
Bare feet or sandals
The regular Trading Floor Dress Code which is set forth in Regulatory Circular RG97-56 shall
remain in effect on Casual Days to the extent that it has not been modified by this circular.
This includes, but is not limited to, the requirement that all Exchange members and Exchange member personnel wear a jacket provided by a member firm organization or wear a
suitcoat or sportcoat. In addition, the Casual Day Dress Code shall be supplemented by
common sense and good taste.
The Casual Day Dress Code must be complied with at the point of entry to the trading floor.
Violators of the Casual Day Dress Code may be fined in accordance with CBOE Rules 6.20
and 17.50(g)(6).
Casual Days shall be designated by the Office of the Chairman. As of the present time, the
following days have been designated as Casual Days by the Office of the Chairman: every
Friday, each Thursday before any three-day weekend that begins on a Friday, the day of the
CBOE Great America Outing, the day of the CBOE Members’ Golf Outing, and CBOE
Family Day.
Februar
y 25, 1998, Volume RB9, Number 4
February
RB5
Regulatory Circulars
continued
Regulatory Circular RG98-21 continued
Your cooperation is appreciated. Any questions regarding the Casual Day Dress Code
may be directed to a Floor Official.
(Regulatory Circulars RG95-63, RG95-92, RG95-108, RG96-48, RG97-55, 97-110 Revised)
Regulatory Circular RG98-01
To:
All Exchange Members
From:
Department of Financial and Sales Practice Compliance
Date:
January 2, 1998
Subject:
FOCUS REPORT (Form X-17A-5)
1997 Year-End Filing
Due March 2, 1998
Under SEC Rule 17a-10(a)(1) every registered broker-dealer is required to file FOCUS
Report X-17A-5 IIA and Schedule I for the calendar year ended December 31, 1997.
Enclosed you will find a FOCUS Report Part IIA and Schedule I. EVERY EXCHANGE
MEMBER AND MEMBER ORGANIZATION registered with the SEC as a broker-dealer
and whose designated examining authority is the CBOE, must file FOCUS Report Part IIA
and Schedule I thereto for calendar year 1997 no later than March 2, 1998, with the
Exchange’s Department of Financial and Sales Practice Compliance on the 7th floor.
The CBOE will compile the data and forward a computer tape containing the data for all
members to the Securities and Exchange Commission.
In an effort to increase the confidentiality of FOCUS information and reduce processing time and errors in the preparation of FOCUS filings, the CBOE has entered
into an agreement with the Chicago Board of Trade (“CBOT”) and the Chicago
Mercantile Exchange (“CME”) to utilize WinJammer, an electronic FOCUS filing
system. This year, CBOE members will have the option of using WinJammer, which
provides for the direct electronic submission of FOCUS reports to the CBOE. This
program eliminates the need for a paper copy filing. WinJammer is a personal
computer program which requires the installation of WinJammer software and a
Personal Identification Number diskette (“PIN” disk). The software and PIN disk
will be provided by the CBOE upon a member’s completion of the WinJammer
Software License Agreement and PIN Agreement. If you have any questions regarding WinJammer, and/or would like to request the WinJammer software and
PIN disk, please contact the Department of Financial and Sales Practice Compliance at (312) 786-7942.
Computer system requirements for operating WinJammer are discussed later in
this memorandum.
A number of clearing firms have indicated that they would be providing assistance
to their Members for year-end FOCUS completion and/or electronic FOCUS filing.
For information regarding the services offered, please contact your respective
clearing firm.
A twenty-five dollar ($25) filing fee was approved by the Board of Directors on June 5, 1991
(Regulatory Circular RG91-39). The fee was initiated to partially recover FOCUS processing costs and should be attached to form X-17A-5 (checks only, please). If the FOCUS is
filed electronically, your account at your clearing firm will be charged $25 no later than
March 2, 1998. It is anticipated that a higher filing fee of $100 may be applied in 1999 for
RB6
Februar
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February
Regulatory Circulars
continued
Regulatory Circular RG98-01 continued
year-end 1998 Focus filings submitted in paper form. Electronic filers would continue to be
charged $25.
It should be noted that every member and member organization registered with the SEC as
a broker/dealer for which the Exchange has regulatory responsibility must file a FOCUS
Report Form X-17A-5 Part IIA and Schedule I. Therefore, if you are a nominee and a
registered broker/dealer, you must submit a separate FOCUS Report Form X-17A-5
Part IIA and Schedule I for your personal broker-dealer activity. Your member
organization must also submit these reports for the firm’s activities.
ATTENTION: CBT Exercisers and Lessors
Even if you did not execute any trades on the CBOE during calendar year 1997, if you have
a broker/dealer registration with the SEC you are still required to file the FOCUS Report
Form X-17A-5 Part IIA and Schedule I.
*************
In filling out FOCUS Form X-17A-5 and Schedule I, it is very important that the following
points be observed:
1.
Your filing must be accurate. You may wish to consult your accountant for
assistance in satisfying your filing obligations.
2.
All entries should pertain to your business as a broker/dealer. You need
not list assets, liabilities or revenue derived outside your broker/dealer activity.
3.
Line 12 (Total Assets) on page one (1) must equal line 25 (Total Liabilities
and Ownership Equity) on page two (2).
4.
The form must be signed (unless filing electronically) and must contain
your broker/dealer number (SEC file number).
5.
Please be aware that it is your ultimate responsibility to file the FOCUS
Report. Although your clearing firm may provide assistance with regard to
completing the FOCUS Report, it is your responsibility to make sure your
FOCUS Report is filed with the Department of Financial and Sales Practice
Compliance on or before March 2, 1998.
*************
In accordance with CBOE Rule 17.50, any member who fails to file Form X-17A-5 and
Schedule I for calendar year 1997 by March 2, 1998 shall be subject to the following fines:
DAYS LATE
1-30
31-60
61-90
AMOUNT
$200
$400
$800
Repeated failure to file FOCUS Report Form X-17A-5 and Schedule I in a timely manner will
be referred to the Exchange’s Business Conduct Committee as will a failure to file more than
ninety (90) days late.
Februar
y 25, 1998, Volume RB9, Number 4
February
RB7
Regulatory Circulars
continued
Regulatory Circular RG98-01 continued
If you are unsure as to whether you are required to file or have any questions, please
contact the Department of Financial and Sales Practice Compliance on the 7th floor at
(312) 786-7942.
*************
ATTENTION: WinJammer System Requirements
In order to run WinJammer you must be using Windows 3.1, Windows NT, Windows 95,
OS/2, or Windows for Workgroups.
WinJammer will operate on a 386 computer with 4 MB of RAM , but it is highly recommended that you use at least a 486 computer with 16 MB of RAM. Additionally, if the
computer you’re using has only 4 MB of RAM it is suggested that you shut down all other
applications to improve performance. Modem rate should be 2400 baud or higher. Specific
instructions are listed on page 3 of the Quick Start Guide which is provided with the
WinJammer software .
In order to obtain a copy of the WinJammer software along with the Quick Start Guide,
please contact the Department of Financial and Sales Practice Compliance on the 7th floor
at (312) 786-7942. For technical questions related to WinJammer’s installation and
use, please contact CBOE Focus Help-Line at 312 786-7035.
(RG97-07 Reissued)
Rule Changes,
Interpretations
and Policies
APPROVED RULE CHANGE(S)
The Securities and Exchange Commission (“SEC”) has approved the following change(s)
to Exchange Rules pursuant to Section 19(b) of the Securities Exchange Act of 1934, as
amended (“the Act”). Copies are available from the Legal Department.
The effective date of the rule change is the date of approval unless otherwise noted.
SR-CBOE-97-66 — Definition of Foreign Broker-Dealer
On January 30, 1998, the SEC granted accelerated approval to Rule Change File No. SRCBOE-97-66, which amends Rules 7.4(a) and 8.51(a) and adopts new Rule 1.1(xx) to
provide that a foreign broker-dealer is considered a broker-dealer for certain purposes under
Exchange Rules. (Securities Exchange Act Release No. 39604, 63 FR 6247 (February 6,
1998)) Any questions regarding the amendments may be directed to Tim Thompson,
Legal Department, at 312-786-7070. The full text of the amendments is set forth below.
New language is italicized.
Rule 1.1
Definitions
(a)-(ww) No Change.
(xx) Foreign Broker-dealer. The term “foreign broker-dealer” means any person or
entity that is registered, authorized or licensed by a foreign governmental agency
or foreign regulatory organization (or is required to be so registered, authorized or
licensed) to perform the function of a broker or dealer in securities, or both. For
the purposes of this definition, the terms “broker” and “dealer” have the same
meaning as provided in Section 3(a)(4) and 3(a)(5) of the Exchange Act, except
that a “broker” or “dealer” may be a bank.
***
RB8
Februar
y 25, 1998, Volume RB9, Number 4
February
Rule Changes,
Interpretations and
Policies continued
SR-CBOE-97-66 continued
Rule 7.4
Obligations for Orders
(a) Acceptance. A Board Broker or Order Book Official shall ordinarily be expected
to accept orders for all option contracts of the class or classes to which his appointment extends. A Board Broker or Order Book Official shall not accept orders from
any source other than a member. For the purposes of this rule, an order shall be
deemed to be from a member if the order is placed with a Board Broker or Order
Book Official by a person associated with a member or through the telecommunications system of a member firm. The Floor Procedure Committee may specify the
manner in which orders are routed to the Board Broker or Order Book Official for
entry into the book. No member shall place or permit to be placed, an order with a
Board Broker or Order Book Official for an account in which such member, any other
member, any non-member joint venture participant, or an non-member broker-dealer
has an interest. For the purposes of this Rule, the term “broker-dealer” includes
foreign broker-dealers as defined in Rule 1.1(xx).
(b)-(f) No Change.
***
Rule 8.51 Trading Crowd Firm Disseminated Market Quotes
(a) The classes and series which shall be subject to the requirements of this rule will
be determined at the discretion of the Market Performance Committee (“MPC”).
(1) Only non-broker dealer customer orders shall be entitled to an execution pursuant to the provisions of this paragraph (a). For the purposes of this Rule, the term
broker-dealer includes foreign broker-dealers as defined in Rule 1.1(xx).
(2) - (4) No Change.
(b) No Change.
PROPOSED RULE CHANGE(S)
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934, as amended (“the
Act”), and Rule 19b-4 thereunder, the Exchange has filed the following proposed rule change(s)
with the Securities and Exchange Commission (“SEC”). A copy of the rule change filing(s)
is available from the Legal Department. Members may submit written comments to the
Legal Department.
The effective date of a proposed rule change will be the date of approval by the SEC, unless
otherwise noted.
SR-CBOE-97- 68 – Continuing Education of Registered Persons
On December 29, 1997, the Exchange filed SR-CBOE-97-68, which proposes to amend
Rule 9.3A, Continuing Education of Registered Persons, in support of recent recommendations of The Securities Industry/Regulatory Council on Continuing Education. Among other
things, the amendments strengthen the continuing education requirements for Registered
Representatives and implement in 1998 a new program designed for managers and supervisors.
Februar
y 25, 1998, Volume RB9, Number 4
February
RB9
Rule Changes,
Interpretations and
Policies continued
SR-CBOE-97- 68 continued
Any questions regarding the proposed rule change may be directed to Tim Thompson,
Legal Department, at 312-786-7070. A copy of the filing is available from the Legal Department.
SR-CBOE-98-02 – Term Limit for Chairman of Executive Committee
On January 13, 1998, the Exchange filed Rule Change File No. SR-CBOE-98-02, which
proposes to amend Section 8.1(a) of the Exchange’s Constitution to limit the number of
terms that may be served by the Chairman of the Executive Committee, who also serves as
the Vice Chairman of the Exchange. The Constitutional amendment was recommended
by the Board of Directors on September 10, 1997 and was approved by a majority vote of
the membership on December 8, 1997.
The proposed amendment provides that the same person may be elected to the office of
Vice Chairman for up to three consecutive one year terms. For purposes of this limit, a
combination of at least six months of a one-year term plus the next two one-year terms is
considered to be three consecutive one-year terms. A person becomes eligible to serve as
Vice Chairman again, once that person has been out of that office for a period of six months
or more.
Any questions regarding the proposed constitutional amendment may be directed to
Stephanie Mullins, Legal Department, at 312-786-7433. The full text of the proposed amendment is set forth below. Proposed new language is underlined.
Constitution, Article VIII, Officers
Section 8.1 Designation; Number; Election
(a) The officers of the Exchange shall be a Chairman of the Board, a Chairman of
the Executive Committee, a President, one or more Vice-Presidents (the number
thereof to be determined by the Board of Directors), a Secretary, a Treasurer, and
such other officers as the Board may determine. The Chairman of the Board shall
be elected by the affirmative vote of at least two-thirds of the Directors then in office
exclusive of the Chairman and the President, who shall not vote. Such affirmative
vote may also prescribe his duties not inconsistent with the Constitution or Rules
and may prescribe a tenure of office.
The Chairman of the Executive Committee shall be a director who owns or directly
controls his own membership and shall be elected by a plurality of members voting
at a meeting of the membership held each year on the third business day in
January and shall serve until his successor is duly chosen and qualified or until his
earlier death or his resignation or removal. Once a director has held the office of
the Chairman of the Executive Committee for six months or more of a one-year
term and for the next two succeeding one-year terms, the director shall thereafter
be ineligible to again hold the office until a period of not less than six months has
elapsed during which the director has not held that office.
Candidates for the office must notify the Secretary of the Exchange in writing no
later than the third Monday of December. In the event there is only one candidate,
no election need be held and the Board of Directors shall declare the office filled by
the sole announced candidate. The remaining officers of the Exchange shall be
appointed by the Chairman of the Board, subject to the approval of the Board, at
the first regular meeting of the Directors after each annual election meeting, and
shall serve until his successor is duly chosen and qualified or until his earlier death
or his resignation or removal.
(b)
RB10
No Change
Februar
y 25, 1998, Volume RB9, Number 4
February
Rule Changes,
Interpretations and
Policies continued
SR-CBOE-98-03 – Allocation of Securities
On January 21, 1998, the Exchange filed Rule Change File No. SR-CBOE-98-02, which
proposes to adopt new Rule 8.95 to codify the Exchange’s process for allocating securities
to market-maker trading crowds and designated primary market-makers. The proposed rule
change also makes conforming changes to Rule 8.80.
Any questions regarding the proposed rule change may be directed to Arthur Reinstein,
Legal Department, at 312-786-7570. The full text of the proposed amendments to Rule 8.80
and proposed new Rule 8.95 is set forth below. Proposed new language is underlined;
proposed deletions are [bracketed].
Rule 8.80. Modified Trading System
(a) Deleted [insert date of effectiveness of this rule filing]. (See Rule 8.95.) [At the
discretion of the Exchange, the Modified Trading System (“MTS”) will be employed
in any one or more option classes opened for trading on the Exchange after May 1,
1987. Option classes opened for trading prior to May 1, 1987, or replacements
thereof, will not become a part of MTS except to the extent authorized by a membership vote. MTS also may be used, at the discretion of the Exchange, in any one
or more of the securities traded subject to the rules in Chapter XXX.]
(b) The Modified Trading System (“MTS”) [MTS] Designated Primary Market-Makers shall be selected and removed as follows:
(b)(1) through (b)(6) No change.
(b)(7) Deleted [insert date of effectiveness of this rule filing]. (See Rule
8.95.) [The MTS Committee also has the authority to discontinue use of
the DPM in a particular option class upon any one or more of the following
conditions:
(i) If average daily contract and transaction volume over the previous quarter exceeds levels previously established, pursuant to
subpart (b)(3) above, by the Committee warranting discontinuance
of the DPM in that class (or classes).
(ii) If it is otherwise determined, considering all the facts and circumstances, that the trading environment in a particular option
class would be better accommodated by introduction of the market-maker system without a DPM.]
(b)(8) through (b)(10) No change.
(c) through (d) No change.
*****
Rule 8.95.
Allocation of Securities and
Location of Trading Crowds and DPMs
(a)
The Allocation Committee shall be responsible for determining for each
equity option class traded on the Exchange (i) whether the option class should be
allocated to a trading crowd or to a DPM and (ii) which trading crowd or DPM should
be allocated the option class. The Allocation Committee shall also be responsible
for determining the location on the Exchange’s trading floor of each trading crowd,
each DPM, and each security traded on the Exchange. The Special Product Assignment Committee shall be responsible for determining for each security traded
Februar
y 25, 1998, Volume RB9, Number 4
February
RB11
Rule Changes,
Interpretations and
Policies continued
SR-CBOE-98-03 continued
on the Exchange other than an equity option (i) whether the security should be
allocated to a trading crowd or to a DPM and (ii) which trading crowd or DPM
should be allocated the security.
(b) The Allocation Committee and the Special Product Assignment Committee
may consider any information which the respective Committee believes will be of
assistance to it in making determinations pursuant to paragraph (a) of this Rule.
Factors to be considered in making such determinations may include, but are not
limited to, any one or more of the following: performance, volume, capacity, market performance commitments, operational factors, efficiency, competitiveness,
environment in which the security will be traded, expressed preferences of issuers, and recommendations of other Exchange committees.
(c) During the first six months following the allocation of a security to a trading
crowd or DPM, the Committee that made the allocation may remove the allocation, and reallocate the applicable security pursuant to paragraph (a) of this Rule,
if the trading crowd or DPM fails to adhere to any market performance commitments made by the trading crowd or DPM in connection with receiving the allocation. Any determination made by the Allocation Committee or the Special Product Assignment Committee pursuant to paragraph (a) of this Rule may also be
changed by the respective Committee at any time if the Committee concludes
that a change is in the best interest of the Exchange based on operational factors
or efficiency.
(d) Prior to taking any action pursuant to paragraph (c) of this Rule, except when
expeditious action is required, the Allocation Committee or Special Product Assignment Committee, as applicable, shall notify the trading crowd or DPM involved
of the reasons the Committee is considering taking action pursuant to paragraph
(c) and the kind of action that is under consideration, and shall either convene one
or more informal meetings of the Committee (or a panel thereof) with the trading
crowd or DPM to discuss the matter, or shall provide the trading crowd or DPM
with the opportunity to submit a written statement to the Committee. Ordinarily,
neither counsel for the Committee nor counsel for the trading crowd or DPM shall
be invited to any such informal meetings, and no verbatim record of the meetings
shall be kept.
(e) The allocation of a security to a trading crowd or DPM and the location of a
trading crowd or DPM on the Exchange’s trading floor does not convey ownership
rights in such allocation or location or in the order flow associated with such
allocation or location.
(f) No option classes opened for trading prior to May 1, 1987 shall be allocated to
a DPM except to the extent authorized by a membership vote. Notwithstanding
the foregoing, pursuant to a membership vote taken in November, 1989, if a trading
crowd indicates that it no longer wishes to trade an option class opened for trading
prior to May 1, 1987, the option class may be reallocated to another trading crowd
or to a DPM giving priority to trading crowd applications over DPM applications,
provided that the Allocation Committee or Special Product Assignment Committee, as applicable, determines that the trading crowd’s commitment to market
quality is competitive and that operational considerations are satisfied.
(g) In allocating and reallocating securities to trading crowds and DPMs, the Allocation Committee and Special Product Assignment Committee shall act in accordance with any limitation or restriction on the allocation of securities that is established pursuant to another Exchange Rule.
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Februar
y 25, 1998, Volume RB9, Number 4
February
Rule Changes,
Interpretations and
Policies continued
SR-CBOE-98-03 continued
. . . Interpretations and Policies:
.01 Subject to Rule 8.80(b)(6), it shall be the responsibility of the Allocation Committee and the Special Product Assignment Committee pursuant to paragraph (a)
of this Rule to reallocate a security in the event that the security is removed pursuant to another Exchange Rule from the trading crowd or DPM to which the security
has been allocated or in the event that for some other reason the trading crowd or
DPM to which the security has been allocated no longer retains such allocation.
.02 It shall be the responsibility of the Allocation Committee pursuant to paragraph
(a) of this Rule to relocate a trading crowd or DPM in the event that the trading crowd
or DPM is required to be relocated pursuant to another Exchange Rule.
Februar
y 25, 1998, Volume RB9, Number 4
February
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