cboe exchange and regulatory bulletin · page 2 september 24, 1999 volume 27, number 39 the chicago...

Exchange Bulletin

The Constitution and Rules of the Chicago Board Options Exchange, Incorporated ("Exchange"), in certain specific instances, req uire theExchange to provide notice to the Exchange membership. To satisfy this requirement, a complimentary copy of the Exchange Bulletin ,including the Regulatory Bulletin , is delivered to all effective members on a weekly basis.

Additional subscriptions may be obtained by submitting your name, firm, mailing address, e-mail address and telephone number to : ChicagoBoard Options Exchange, Attention: Investor Services Department, 400 South LaSalle, Chicago, Illinois 60605. The cost of an ann ual sub-scription (July 1 through June 30) is $200 ($100 after January 1) for hard copy delivery or $100 ($50 after January 1) for e-ma il delivery, payablein advance. Non-members are welcome to subscribe.

It’s easy to stay informed about issues at CBOE! CBOE Members can now receive informational and news notices via e-mail or fax .To sign up, simply e-mail your name and desired e-mail address or fax number to: [email protected] or contact Doug Luzzi at 312-786-7105.

September 24, 1999 V olume 27, Number 39

Members are required to report any address or telephone number changes to the Membership Department at (312) 786-7449 pursuant toExchange Rule 3.6(b). For Seat Market Quotes, call (312) 786-7456.

SEAT MARKET QUOTES AS OF SEPTEMBER 17, 1999

CLASS BID OFFER LAST SALE AMOUNT LAST SALE DATE

CBOE/FULL $565,000.00 $675,000.00 $575,000.00 September 16, 1999

CBOE/OTP $75,000.00 $100,000.00 $110,000.00 July 15, 1999

CBOT/FULL $541,000.00 $600,000.00 $550,000.00 September 16, 1999

OPTION TRADING PERMIT- LEASE POOL AS OF SEPTEMBER 17, 1999

Highest Bid: No Bid Highest Monthly Rate: $3,500.00

OTP's Available: None Lowest Monthly Rate: $50.00

Last Lease: $50.00 on September 15, 1999

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 Depar tmentwithin 20 days from the date of this Exchange Bulletin.

From To Price/Transfer Date

Alan J. Gottlieb M. Jamil Akhtar $565,000 09/13/99

CIT Leasing, L.P. Larkspur Securities, Inc. $550,000 09/15/99

September 24, 1999 Volume 27, Number 39 The Chicago Board Options Exchange Bulletin

MEMBERSHIP INFORMATION FOR SEPTEMBER 9, 1999 THROUGH SEPTEMBER 15, 1999

INFORMATION CIRCULAR

Information Circular IC99-89

DATE: August 27, 1999

TO: Membership

FROM: Nominating Committee

SUBJECT: Selection of Nominees for the Board of Directors, Nominating and MTS Appointment Committees

Once again it is time for the Nominating Committee to select nominees for the Board of Directors and the Nominating and MTS Appointment Commit-tees. On August 3, 1999 the membership approved changes to CBOE’s governance structure. In the 1999 Annual Election1 , we will begin implement-ing the changes as approved. Available terms on the Board include 1 "floor” director, 1 “at large” director, 1 “lessor” director, all three positions have 3year terms. 2 “off floor” directors (executive officers of member organizations which primarily conduct a non-member public customer business)positions are available with 3 year terms and 1 “off floor” director position with a 1 year term is available. In addition, the Exchange will be electing 6public directors, with 1, 2 and 3 year terms. The Nominating Committee will also be selecting nominees for 7 expiring terms on the NominatingCommittee and 5 expiring terms on the MTS Committee.

Individuals who are interested in being considered by the Nominating Committee must complete and submit a Candidate Information andStatement of Business Affiliation Form and a brief resume by September 30, 1999, and contact Debora Barnes at (312) 786-7416 to arrange fora personal interview before the Committee. Candidate Information and Statement of Business Affiliation Forms are available at the 4th and7th floor reception desks. Interviews will be scheduled on certain weekdays in September and early October, 1999, in the Execu tive Confer-ence Room, 7th floor. The Nominating Committee will select nominees only from those members who submit their names for nomination. Individualsgenerally nominate themselves and are not nominated by others. The names of individuals who have placed themselves into nomination will be postedon the Exchange’s Bulletin Boards.

During the personal interviews, candidates are questioned about a broad range of relevant issues in an attempt to ascertain what type of experience orexpertise the candidate would bring to the Board or the Nominating and MTS Committees. Previous CBOE Committee experience and the regulatoryhistory of candidates is also reviewed. After these interviews, the Committee selects the nominees that it believes will most adequately fill the upcomingvacancies on the Board, Nominating and MTS Committees. The slate for the Board, Nominating and MTS Appointments Committees will be posted onOctober 19th after which members may petition to run against the slated candidates. Petitions must be submitted to Joanne Moffic-Silver, Secretary ofthe Exchange, by 5 p.m. (CT) by November 1, 1999, and petitioners’ names will also be posted on Exchange Bulletin Boards.

On Friday, November 19, 1999, the membership will be asked to elect candidates to fill the vacancies on the Board of Directors, the NominatingCommittee and the MTS Appointments Committee. The membership makes the final decision in ensuring that CBOE has the best leadership in theindustry.

Persons currently serving on the Nominating Committee are: David Snyder, Chairman; James Kackley, Tony McCormick, Bill McGowan, David Miller,Benjamin Nitka, Brian Novak, Don Phillips, Ilene Resnick, Howard Ring, Ethan Schwartz and Richard Thomas. If you have any questions regarding thenominating process, please call Debora Barnes at (312) 786-7416.

1 Pending SEC approval of SR-CBOE-99-43.

Date PostedMEMBERSHIP APPLICATIONS RECEIVEDThis notice is given persuant to Exchange Rule 3.9. Please send anycomments to the Membership Committee in care of the MembershipDepartment.

Individual Member Applicants Date Posted

William R. Bergey, Nominee 09/09/99Botta Trading-Lacerta DPM LLC9 OxfordClarendon Hills, IL 60514

Bruce I. Andrews, Nominee 09/09/99Commercial Crush Inc886 Oakwood Ave.Lake Forest, IL 60045

William P. Lynn, Nominee 09/09/99Bear, Stearns Securities Corp.1908 N. ClevelandChicago, IL 60614

Clifford N. Sulak, Nominee 09/10/99Arbitrade, L.L.C.21118 N. Woodland Ave.Barrington, IL 60010

Francis J. Navickas, Nominee 09/10/99Susquehanna Investment Group655 W. Irving Park #2213Chicago, IL 60613

Frederick A. Gahl, Nominee 09/10/99Roger W. Geary Inc.269 East Vine Ave.Lake Forest, IL 60045

James T. Anstrand, Nominee 09/13/99Larocque Trading Group L.L.C.1604 Auburn Ave.Naperville, IL 60565

John J. Colletti, Nominee 09/15/99Samuelson Trading Corporation741 E. BauerNaperville, IL 60563


Date Posted

David P. Erickson, Nominee 09/15/99Samuelson/Smith420 E. Park St.Arlington Heights, IL 60005

Ronald C. Dawczak, Nominee 09/15/99Samuelson/Smith6743 W. 105th St.Chicago Ridge, IL 60415

Gary S. Bell, Lessee 09/15/993027 Ashbury Dr.Naperville, IL 60564

Cynthia P. Francque, CBT Registered For 09/15/99Anteros Capital Markets L.L.C.30 S. Wacker Dr. – Rm. 1502Chicago, IL 60606

Scott A. Snyder, Nominee 09/15/99Boyle & Snyder, L.L.C.350 Meadowbrook DriveNorthfield, IL 60093

Member Organization Applicants Date Posted

Schwartz Trading Group LLC 09/09/99Robert P. Baids, CBT Registered ForNicole L. Caltoum, CBT Registered ForKathryn M. McBride, CBT Registered ForKenneth D. Mueller, NomineeKenneth H. Schwartz, NomineeAndrew F. Wolff, CBT Registered For440 S. LaSalle – Ste. 2500Chicago, IL 60605 LaRocque Trading Group LLC – Member Ethan Schwartz – Member

Botta Trading-Scorpious DPM, L.L.C. 09/09/99Ann L. Bartosz, NomineeMichael J. Edwards, Nominee440 S. LaSalle – Ste. 3100Chicago, IL 60605 Botta Trading LLC – Managing Member Ann Bartosz – Managing Member Michael J. Edwards – Managing Member

Hiland Capital I, L.L.C. 09/15/99Jeffrey A. Cesarone, CBT Registered ForTerrence W. Herlihy, NomineeRobert Maine, NomineeRobert M. Murphy, NomineeJohn A. Witten, NomineeScott W. Witten, Nominee401 S. LaSalle – Ste. 1700Chicago, IL 60605 Robert M. Murphy – Managing Member Jeffrey Cesarone – Managing Member Scott Witten – Managing Member O’Connor & Company LLC – Member Edmund J. O’Connor – Managing Member

**Correction to Bulletin dated 09/17/99**ZH Partners, JV 09/07/99Denise M. Fantetti, NomineeDiane M. Fantetti, NomineeMichael B. Hoban, NomineeEdmund Zarek, Nominee440 S. LaSalle – Ste. 2500Chicago, IL 60605 GPZ Trading LLC – Partner Edmund Zarek – Partner Michael Hoban - Partner

MEMBERSHIP LEASESThis notice is given pursuant to Exchange Rules 3.15 and 3.16 whichpermit certain types of claims to be filed with the Membership De-partment within 20 days from the date of this Exchange Bulletin.

New Leases Effective Date

Lessor: Robert B. Gianone 09/09/99Lessee: Big Blue Trading, J. V.

Richard I. Haave II, NOMINEERate: 1 5/8% Term: Monthly

Lessor: M. Jamil Akhtar 09/14/99Lessee: Option Capital Group, LLC

Randy R. Dalby, NOMINEERate: 1 5/8% Term: Monthly

Lessor: Cutler Group, L.P. 09/14/99Lessee: KFT DPM, LLC

Joseph J. Fahrenbach, NOMINEERate: 1 3/4% Term: 09/14/99 thru

09/30/99

Lessor: Hrl Enterprises, Ltd. 09/14/99Lessee: S.H. Brandt Investments Co.

Thomas W. Pruter, NOMINEERate: 1 5/8% Term: Monthly

Lessor: Wolverine Trading L.P. 09/15/99Lessee: Option Resource Group, Llc

David M. Wheaton, NOMINEERate: 1 5/8% Term: Daily

Lessor: Merrill Lynch Professional Clearing 09/15/99Corp.

Lessee: Qsa, L.L.C.Gerard G. Sullivan, NOMINEE

Rate: 1 5/8% Term: Monthly

Lessor: Larkspur Securities, Inc. 09/15/99Lessee: Futrex Trading L.L.C.

David H. Klaiber, NOMINEERate: 1 7/8% Term: Monthly

Terminated Leases Termination Date

Lessor: Robert B. Gianone 09/09/99Lessee: Barry & Gianone Securities L.L.P.

Richard I. Haave II (HRV), NOMINEE

Lessor: Alan J. Gottlieb 09/13/99Lessee: Larocque Trading Group L.L.C.

James D. Alvarez (JDA), NOMINEE

Date Posted


Termination DateLessor: HRL Enterprises, Ltd. 09/14/99Lessee: LLL Investments, Inc.

H. Richard Loya (HRL), NOMINEE

Lessor: CIT Leasing, L.P. 09/15/99Lessee: Futrex Trading L.L.C.

David H. Klaiber (DVK), NOMINEE

Lessor: Merrill Lynch Professional Clearing 09/15/99 Corp.

Lessee: Martin E. Rauba (MRT)

OPTION TRADING PERMIT LEASES

New OTP LeasesThis notice is given pursuant to Exchange Rules 3.15 and 3.27 whichpermit certain types of claims to be filed with the Membership De-partment within 20 days from the date of this Exchange Bulletin.

Lessor: Spear, Leeds & Kellogg 09/10/99Lessee: Frank S. SerrinoRate: $2,000.00 Term: Daily

Terminated OTP LeasesThis notice is given pursuant to Exchange Rules 3.15 and 3.27 whichpermit certain types of claims to be filed with the Membership De-partment within 20 days from the date of this Exchange Bulletin.

Lessor: Spear, Leeds & Kellogg 09/09/99Lessee: Victor R. Meskin (VRM)

Lessor: Spear, Leeds & Kellogg 09/13/99Lessee: Frank S. Serrino (FRK)

LEASE POOL OPTION TRADING PERMIT LEASES

New OTP Leases Effective Date

Lessor: Chicago Board Options Exchange 09/08/99Lessee: Spear, Leeds & Kellogg

Rex L. Hufnagel, NOMINEERate: $50.00 Term: 10/31/99

Lessor: Chicago Board Options Exchange 09/09/99Lessee: Spear, Leeds & Kellogg

Michael J. Smollen, NOMINEERate: $50.00 Term: 10/31/99

Lessor: Chicago Board Options Exchange 09/15/99Lessee: Cornerstone Partners

Michael W. Mayer, NOMINEERate: $50.00 Term: 10/31/99

Lessor: Chicago Board Options Exchange 09/15/99Lessee: Sondra C. RabinRate: $50.00 Term: 10/31/99

Terminated OTP Leases Termination Date

This notice is given pursuant to Exchange Rules 3.15 and 3.27 whichpermit certain types of claims to be filed with the Membership De-partment within 20 days from the date of this Exchange Bulletin.

Lessor: Chicago Board Options Exchange 09/09/99Lessee: BIT Enterprises Inc.

Effective Date

Termination Date

Termination DateLessor: Chicago Board Options Exchange 09/15/99Lessee: Spear, Leeds & Kellogg

Lessor: Chicago Board Options Exchange 09/15/99Lessee: Cornerstone Partners

Michael W. Mayer(MKE), NOMINEE

MEMBERSHIP TERMINATIONS

Individual Members Termination Date

Lessee(s):

Frank S. Serrino (FRK) 09/13/99141 W. Jackson Blvd., Suite 1910AGlencoe, IL 60022

Martin E. Rauba (MRT) 09/15/99230 S. LaSalle - Ste. 688Chicago, IL 60604

Lessor(s):

Alan J. Gottlieb 09/13/997400 E. Cypresshead DrPampano Beach, FL 33067

Nominee(s) / Inactive Nominee(s):

Patrick Raymond Brozynski (BRZ) 09/10/99D.M. Fantetti, Inc.440 S. LaSalle, Ste. 2800Chicago, IL 60605

Patrick M. Seguin (SGZ) 09/13/99Lakeshore Securities, L.P.230 S. LaSalle Ste. 688Chicago, IL 60604

Gavin B. Rowe (ROE) 09/14/99Cornerstone Partners440 S. LaSalle, Ste. 2500Chicago, IL 60605

Nicole P. Marcoux (NCK) 09/14/99LLL Investments, Inc.230 S. LaSalle - Ste. 688Chicago, IL 60604

Andrew J. Blackburn (MRX) 09/14/99Cutler Group, L.P.220 Bush Street, Ste. 845San Francisco, CA 94104

H. Richard Loya (HRL) 09/14/99LLL Investments, Inc.400 S. LaSalleChicago, IL 60605

Steven P. Glazer (GLZ) 09/15/99Cornerstone Partners440 S. LaSalle St., Suite 2500Chicago, IL 60605

Member Organizations

LLL Investments, Inc. 09/14/99Attn: Leo L. Libfeld131 Francisco TerraceOak Park, IL 60302


Effective DateEFFECTIVE MEMBERSHIPSThis notice is given pursuant to Exchange Rule 3.11.

Individual Members Effective Date

CBT Registered For:

Andrew F. Wolff (WLF) 09/13/99Premo Trading, Ltd440 S. LaSalle, Ste. 2500Chicago, IL 60605Type of Business to be Conducted: Floor Broker Market Maker

Lessee(s):

Frank S. Serrino (FRK) 09/10/99141 W. Jackson Blvd., Suite 1910AGlencoe, IL 60022Type of Business to be Conducted: Market Maker

Sondra C. Rabin (SCR) 09/15/991300 N. Lake Shore Drive, #18-BChicago,IL 60610Type of Business to be Conducted: Market Maker

Nominee(s) / Inactive Nominee(s):

Steven P. Glazer (GLZ) 09/14/99Cornerstone Partners440 S. LaSalle St., Suite 2500Chicago, IL 60605Type of Business to be Conducted: Market Maker

Member Organizations

** Correction to Bulletin Dated 09/10/99**

Boyle & Snyder LLC 08-31-99440 S. LaSalle – Ste. 3012Chicago, IL 60605

JOINT ACCOUNTSThis notice is given pursuant to Exchange Rule 8.9.

New Participants Acronym Effective Date

Richard I. Haave II QBB 09/09/99

Alan I. Zahtz QTB 09/10/99

Marc R. Rutkowski QTS 09/13/99

Andrew F. Wolff QTZ 09/13/99

Wendy A. Fawcett QKD 09/13/99

Kathryn L. McBride QTZ 09/15/99

New Accounts

Thomas W. Pruter QSG 09/09/99

Michael J. Sobol QSG 09/09/99

Douglas R. Walker QSG 09/09/99

Patrick Raymond Brozynski QSG 09/09/99

Ethan H. Schwartz QTZ 09/10/99

Nicole L. Caltoum QTZ 09/10/99

Kenneth D. Mueller QTZ 09/10/99

Michael B. Hoban QHZ 09/13/99

Wendy A. Fawcett QHZ 09/13/99

Bradley G. Griffith QOD 09/14/99

Thomas M. O’Donnell QOD 09/14/99

Gary L. Bowers QOD 09/14/99

Kevin M. Luthringshausen QME 09/15/99

Michael B. Frazin QME 09/15/99

Scott I. Bauer QME 09/15/99

Kelly C. Luthringshausen QME 09/15/99

Phillip E. Teuscher QME 09/15/99

Frank P. Tenerelli QME 09/15/99

Gary B. Patzik QME 09/15/99

Michael J. Edwards QME 09/15/99

John R. Haffner QME 09/15/99

Corey D. Zimmerman QME 09/15/99

Kevin M. Luthringshausen QLX 09/15/99

Michael B. Frazin QLX 09/15/99

Scott I. Bauer QLX 09/15/99

Kelly C. Luthringshausen QLX 09/15/99

Phillip E. Teuscher QLX 09/15/99

Frank P. Tenerelli QLX 09/15/99

Gary B. Patzik QLX 09/15/99

Michael J. Edwards QLX 09/15/99

John R. Haffner QLX 09/15/99

William P. Lynn QLX 09/15/99

Steven I. Malitz QLX 09/15/99

Corey D. Zimmerman QLX 09/15/99

Terminated Participants Acronym Termination Date

Patrick Raymond Brozynski QSG 09/10/99

Edmund J. Zarek QGC 09/13/99

Edmund J. Zarek QSD 09/13/99

Edmund J. Zarek QSJ 09/13/99


Termination Date

John S. Stafford Jr. QKD 09/13/99

Martin E. Rauba QAU 09/15/99

CHANGES IN MEMBERSHIP STATUS

Individual Member Applicants Effective Date

Richard I. Haave II 09/09/99From: Nominee For Barry & Gianone Securities L.L.P.;

Floor Broker, Market MakerTo: Nominee For Big Blue Trading, J.V.; Floor Broker,

Market Maker

Victor Meskin 09/09/99From: Lessee from Spear Leeds & Kellogg; Market Maker,

Floor Broker/ Lessor To Arbitrade L.L.C.To: Lessor To Arbitrade L.L.C.

James D. Alvarez 09/14/99From: Nominee For Larocque Trading Group L.L.C.;

Market MakerTo: CBT Exerciser Registered For Larocque Trading

Group L.L.C.; Floor Broker, Market Maker

William R. Halloran 09/14/99From: Lessor To TFM Investment Group; CBT Exerciser

Registered For PJH Options Inc.; Market Maker,Floor Broker

To: Lessor To TFM Investment Group/ Nominee ForPJH Options Inc.; Market Maker, Floor Broker

Thomas W. Pruter 09/14/99From: CBT Exerciser Registered For S. H. Brandt

Investment Co.; Market MakerTo: Nominee For S. H. Brandt Investment Co.;

Market Maker

Kenneth D. Mueller09/15/99From: Nominee For M.O.E. Options Inc.; Floor BrokerTo: Nominee For M.O.E. Options Inc.; Market Maker,

Floor Broker/Independent Market Maker

Kathryn McBride 09/15/99From: Nominee For M.O.E. Options Inc.; Floor BrokerTo: CBT Exerciser Registered For M.O.E. Options Inc.;

Market Maker Floor Broker/Independent MarketMaker

Member Organization Applicants Effective Date

From: Lessee For; Market Maker 09/13/99To: Lessee For; Market Maker, Floor Broker

Cutler Group, L.P. 09/14/99From: Lessee From; Market MakerTo: Lessor To KFT DPM, LLC Lessee From;

Market Maker

Wolverine Trading L.P. 09/15/99From: Owner; Lessee From; CBT Registered For;

Market Maker, Floor BrokerTo: Lessor To Option Resource Group, LLC Owner

Lessee From; CBT Registered For; Market Maker,Floor Broker

Effective DateM.O.E. Options Inc. 09/15/99From: Owner; Lessee From; Market Maker, Floor BrokerTo: Owner; Lessee From; CBT Registered For; Market

Maker, Floor Broker

MEMBER ADDRESS CHANGES

Individual Members Effective Date

Bruce I. Andrews 09/09/99440 S. LaSalle, Suite 1596Chicago, IL 60605

William P. Kollada Jr. 09/09/99440 S. LaSalle, Ste. 700Chicago, IL 60605

Lincoln W. Brewer 09/09/99440 S. LaSalle-Ste 700Chicago, IL 60605

Andrew J. Ianiro 09/09/99345 Leclaire Ave.Wilmette, IL 60091

William P. Lynn 09/09/99440 S. LaSalle-Ste. 1021Chicago, IL 60605

Benjamin W. Phillips 09/10/99440 S. LaSalle St.. Suite 2601Chicago, IL 60605

Steven J. Wolan 09/10/99440 S. LaSalle St., Suite 2601Chicago, IL 60605

Alexis E. Santiago 09/10/99440 S. LaSalle St., Suite 2601Chicago, IL 60605

Paul D. Zavodnyik 09/10/99440 S. LaSalle St., Suite 2601Chicago, IL 60605

Thomas A. Simmons 09/10/99440 S. LaSalle St., Suite 2601Chicago, IL 60605

Ryan R. Paulsen 09/10/99440 S. LaSalle St., Suite 2601Chicago, IL 60605

Spencer E. Young 09/10/99440 S. LaSalle St., Suite 2601Chicago, IL 60605

Michael T. Tyson 09/10/99440 S. LaSalle St., Suite 2601Chicago, IL 60605

Christ L. Sirigas 09/10/99440 S. LaSalle St., Suite 2601Chicago, IL 60605

Darren B. Washington 09/10/99440 S. LaSalle St., Suite 2601Chicago, IL 60605


POSITION LIMITS

For all equity options classes except those listed below, the standard position and exercise limits pursuant to Exchange Rule 4 .11 and 4.12will be applicable. For a complete list of all applicable limits, check 2nd floor data information bins or contact the Departme nt of MarketRegulation. If you wish to receive regular updates of the position limit list, please contact Candice Nickrand at (312) 786-77 30 of theDepartment of Market Regulation.

Effective DateEffective Date

Class Limit DateAA 150,000 contracts 10/16/99AOL/AOO/AOE/ZAN/ZOL 275,000 contracts 10/16/99 ZFK/ZKS/NWY CQV/CZV 9,000,000 shares 10/16/99BZT/LBG/USB/ZBU 88,500 contracts 10/16/99DWQ 45,000 contracts 10/16/99FQW/FWW 3,375,000 shares 10/16/99ISU 63,000 contracts 10/16/99JNQ 63,000 contracts 10/16/99KMG 91,500 contracts 10/16/99MGG/PVR 45,000 contracts 10/16/99NQA 94,500 contracts 10/16/99NWQ/QUK 150,000 contracts 10/16/99NWY/AOL/AOO/AOE/ZAN/ 275,000 contracts 10/16/99 ZOL/ZFK/ZKSPVR/MGG 45,000 contracts 10/16/99QEB/PXW 1,417,500 shares 10/16/99QKW 63,000 contracts 10/16/99QTD/QWE/TDU 150,000 contracts 10/16/99QTN/TNW 150,000 contracts 10/16/99QUK/NWY 150,000 contracts 10/16/99QXB 225,000 contracts 10/16/99SQX 150,000 contracts 10/16/99TBH/BHZ 75,000 contracts 10/16/99USB/LBG/ZBU/BZT 88,500 contracts 10/16/99VCI/YVC 3,375,000 shares 10/16/99AAS 45,000 contracts 11/20/99AHQ/AHU/ZHO/ZHA/ 30,600,000 shares 11/20/99 WHO/XKB/XWBAQU 63,000 contracts 11/20/99AUP/TYC/ZPA 150,000 contracts 11/20/99

BOV/QFN/ZFB/WOF 20,775,000 shares 11/20/99FQ 54,000 contracts 11/20/99FQF/IZP 54,000 contracts 11/20/99GZA/WLA 135,000 contracts 11/20/99HGU/LOW/ZOY 106,500 contracts 11/20/99IZP/FQF 54,000 contracts 11/20/99LOW/ZOY/HGU 106,500 contracts 11/20/99QDQ 27,000 contracts 11/20/99QFN 120,000 contracts 11/20/99QFN/ZFB/WOF/BOV 20,775,000 shares 11/20/99QLF 120,000 contracts 11/20/99QRN/RNO/RNW 150,000 contracts 11/20/99RQZ/RFZ 126,000 contracts 11/20/99SEI/SBM 13,500 contracts 11/20/99TYC/ZPA/AUP 150,000 contracts 11/20/99XKB/XWB/AHQ/AHU/ 30,600,000 shares 11/20/99 ZHO/ZHA/WHOBBC/XXU 135,000 contracts 12/18/99COF 180,000 contracts 12/18/99COU/KOV 7,500,000 shares 12/18/99COX/TXH 106,500 contracts 12/18/99IP/ZNP/UCY 12,162,000 shares 12/18/99MEL 150,000 contracts 12/18/99PWQ 150,000 contracts 12/18/99QVR/YVR 120,000 contracts 12/18/99SKM/SKW 31,500 contracts 12/18/99SSV/UTX/ZXU 181,500 contracts 12/18/99TXH/COX 106,500 contracts 12/18/99UCY/IP/ZNP 12,162,000 shares 12/18/99UTX/ZXU/SSV 181,500 contracts 12/18/99XXU/BBC 135,000 contracts 12/18/99

Class Limit Date

Kenneth P. Trch 09/10/99440 S. LaSalle St., Suite 2601Chicago, IL 60605

S. Sye Unell 09/10/99451 Lakeside TerraceGlencoe, IL 60022

James D. Alvarez 09/14/99440 S. LaSalle, Suite 700Chicago, IL 60605

Thomas W. Pruter 09/14/99401 S. LaSalle, Ste 1700Chicago, IL 60605

Clifford N. Sulak 09/14/99440 S. LaSalleChicago, IL 60605

Jeffrey A. Cesarone 09/14/99401 S. LaSalle, Suite 1700Chicago, IL 60605

Terrence W. Herlihy 09/14/99401 S. LaSalle, Suite 1700Chicago, IL 60605

Robert F. Maine III 09/14/99401 S. LaSalle, Suite 1700Chicago, IL 60605

Robert M. Murphy 09/14/99401 S. LaSalle, Suite 1600Chicago, IL 60605

John A. Witten 09/14/99401 S. LaSalle, Suite 1700Chicago, IL 60605

Scott W. Witten 09/14/99401 S. LaSalle, Suite 1700Chicago, IL 60605

Kathryn McBride 09/15/99440 S. LaSalle, Ste. 2500Chicago, IL 60605

Kevin Berninger 09/15/99299 N. Dunton #208Arlington Heights, IL 60004

Member Organizations Effective Date

Kula Corporation 09/09/99858 W Armitage-PMB 277Chicago, IL 60614

Member Name Change

Individual Members Effective DateFrom: Bruce I. Andrews 09/09/99To: Bruce I. Andrews

From: James T. Anstrand 09/13/99To: James T. Anstrand

From: Jai Sherma 09/13/99To: Jai Sharma

From: Prafirio Santana 09/13/99To: Porfirio Santana


BAC/ZNB/LBZ/ZZC 8,150,000 shares 1/22/00BSW/BYV/OGZ/YHQ/YHU/ 300,000 contracts 1/22/00 YHV/YMM/ZYH/YZY/YHZ/ ZGH/ZYO/ZYM/WYHCD/VFS/LFZ/VUC/LUL 8,500,000 shares 1/22/00CDN/TYB 10,357,500 shares 1/22/00CNC/UNG/VJS/LLG 7,500,000 shares 1/22/00CPB/VLL/LLL/ 75,000 contracts 1/22/00 VXL/ULLCYQ/LYL/LYZ/ZYZ/ 18,213,000 shares 1/22/00 WCY/ZCYDCX/LZY 7,500,000 shares 1/22/00DT/DTT 22,500 contracts 1/22/00DVN/PZU 54,000 contracts 1/22/00EL 63,000 contracts 1/22/00ELN 150,000 contracts 1/22/00F/VFO/LFO/VFV/LFV 75,000 contracts 1/22/00GQI 150,000 contracts 1/22/00GTQ 150,000 contracts 1/22/00GZQ/EGW 75,000 contracts 1/22/00GZY/CYQ/LYL/LYZ/ZYZ/ 18,213,000 shares 1/22/00 WCY/ZCYIBI/IUI 6,300,000 shares 1/22/00IPG 63,000 contracts 1/22/00LDQ/ZQM/LYI 7,500,000 shares 1/22/00LLG/CNC 7,500,000 shares 1/22/00LMG 150,000 contracts 1/22/00LTD/VLD/TDU/ 75,000 contracts 1/22/00 VUD/LDXLUV/ZUV/LVW/LVO/ 20,250,000 shares 1/22/00 ZVO/XUV/ZVA/WUVLYI/LDQ/ZQM 7,500,000 shares 1/22/00LZY/DCX 7,500,000 shares 1/22/00LRO/LRZ/ZOR 15,000,000 shares 1/22/00MQD/MQG 150,000 contracts 1/22/00MTC/VM/LYC 75,000 contracts 1/22/00MXT 63,000 contracts 1/22/00OGR/OGZ 150,000 contracts 1/22/00OGZ/YHQ/YHU/YHV/ 300,000 contracts 1/22/00 YMM/ZYH/YZY/YHZ/ZGH/ ZYO/ZYM/WYH/BZW/BYVPEP/VP/LDV 75,000 contracts 1/22/00PUC 27,000 contracts 1/22/00PZU/DVN 54,000 contracts 1/22/00QKW/QKZ 150,000 contracts 1/22/00QXF 63,000 contracts 1/22/00QMD 63,000 contracts 1/22/00QWL/QWW 150,000 contracts 1/22/00SFX/SFJ 4,725,000 shares 1/22/00SLM/VRM/VZL/LYM 7,500,000 shares 1/22/00SNW/SBC/LFE/ZFE 7,500,000 shares 1/22/00STM 63,000 contracts 1/22/00TAN 120,000 contracts 1/22/00TSM/TVM 9,225,000 shares 1/22/00TYB/CDN 10,357,000 shares 1/22/00YHQ/YHU/YHV/YMM/ 300,000 contracts 1/22/00 ZYH/YZY/YHZ/ZGH/ZYO/ ZYM/WYH/OGZ/BZW/BYVDSS/QNU 150,000 contracts 2/19/00HDD/QNU 106,500 contracts 2/19/00HQB/HVB 3,465,000 shares 2/19/00INQ/NQ/ZNL/WNL 225,000 contracts 2/19/00MIQ 45,000 contracts 2/19/00QLL 63,000 contracts 2/19/00QNU/DSS 150,000 contracts 2/19/00QNU/HDD 106,500 contracts 2/19/00RLQ 150,000 contracts 2/19/00TQN/TVN 3,375,000 shares 2/19/00TRB 63,000 contracts 2/19/00UER 63,000 contracts 2/19/00UFS 45,000 contracts 2/19/00UNC 45,000 contracts 2/19/00VUQ 150,000 contracts 2/19/00CQR 45,000 cotracts 3/18/00EQN 150,000 contracts 3/18/00GD/GZC 63,000 contracts 3/18/00GZC/GD 63,000 contracts 3/18/00JQM/JZM 3,375,000 shares 3/18/00LQT 63,000 contracts 3/18/00QED/EXF 150,000 contracts 3/18/00QHS/UAB 63,000 contracts 3/18/00QVL 45,000 contracts 3/18/00QWS 63,000 contracts 3/18/00UQD/UNQ 150,000 contracts 3/18/00XQL 60,000 contracts 3/18/00

QFG 63,000 contracts 4/22/00CNW/YIT 54,000 contracts 4/22/00QNF 63,000 contracts 4/22/00UML 27,000 contracts 4/22/00YIT/CNW 54,000 contracts 4/22/00AIG/LVJ/YGA/ 7,500,000 shares 1/20/01 LZJ/ZAF/ZFAAMQ 150,000 contracts 1/20/01ANF/ZFQ 120,000 contracts 1/20/01AX/ZOU/BPA 150,000 contracts 1/20/01AYV/ZYE/VOD 150,000 contracts 1/22/01BAY/LBN/ZBN/BZY/LZW/ 7,500,000 shares 1/20/01 ZZN/NT/ZOOBBY/ZBY 150,000 contracts 1/20/01BMY/ZBM 150,000 contracts 1/20/01BPA/AX/ZOU 150,000 contracts 1/20/01C/LTY/LVZ/LXW/ZRV/ 15,000,000 shares 1/20/01 ZUZ/CIW/ZZV/ZVI/ ZCY/WCY/WIVCOL/ZYS/CZL/ZVS 75,000 contracts 1/20/01CWQ/ZWC 300,000 contracts 1/20/01DAL/ZDA 40,000 contracts 1/20/01DLQ/DLY/ZN/ZDE/WDQ 200,000 contracts 1/20/01EMC/EMB/ZUE 150,000 contracts 1/20/01FDX/ZFX 150,000 contracts 1/20/01GDT 150,000 contracts 1/20/01GM/LGZ/GU/ZWV 75,000 contracts 1/20/01GPS/LYP/ZGS/ 11,250,000 shares 1/20/01 LXB/ZVG/GPV/ZKGGZZ/MDT/ZVY 150,000 contracts 1/20/01IBM/IBZ/WIB/ZVB 150,000 contracts 1/20/01INQ 150,000 contracts 1/20/01KRB/LZK/ZK/LKW 7,500,000 shares 1/20/01LTQ/ZZT 150,000 contracts 1/20/01LTY/LRV/LTY/LVZ/LXW/ 15,000,000 shares 1/20/01 ZRV/ZUZ/C/CRW/ZZVLU/ULU/WEU/YZA/ 27,375,000 shares 1/20/01 ZDV/ZEULYY/YZD/CPQ 14,850,000 shares 1/20/01MAT/TZC/ZVC 16,500,000 shares 1/20/01MCD/ZMC 150,000 contracts 1/20/01MDQ 150,000 contracts 1/20/01MRK/ZMK/WMR 150,000 contracts 1/20/01NGH/RU/ZRJ/ZRY 75,000 contracts 1/20/01NOK/NAY/ZOK/ZAK 150,000 contracts 1/20/01NT/LZW/WNT/ZOO/ZZN 15,000,000 shares 1/20/01NT/ZOO/BAY/LBN/ 7,500,000 shares 1/20/01 ZBN/BZY/LZW/ZZNOIL/LOI/ZOI 60,000 contracts 1/20/01PQO/ZPQ/POY/ZQW 75,000 contracts 1/20/01PVN/LNX/ZLA/LXC/ZKU 7,500,000 shares 1/20/01QAQ/AAW/ZLU/LXW/ZYL 150,000 contracts 1/20/01QGC/QGW/ZCK/QCB/ 300,000 contracts 1/20/01 QCD/ZBORQ/LRZ/ORV/ZOR/ZWM 11,250,000 shares 1/20/01RCQ/LGJ/ZGJ 63,000 contracts 1/20/01SCH/LWE/LWZ/ 15,000,000 shares 1/20/01 ZWS/ZWZSLR/ZSR 120,000 contracts 1/20/01T/ZT/TZ/ZYT 11,250,000 shares 1/20/01TZC/ZVC/MAT 16,500,000 shares 1/20/01UTX/LUD/ZXU 150,000 contracts 1/20/01VMB/ZVM 150,000 contracts 1/20/01VOD/AY/ZYE 150,000 contracts 1/20/01WFC 130,000 contracts 1/20/01WMT/LWT/ZWT 150,000 contracts 1/20/01XLQ/ZXJ 150,000 contracts 1/20/01XRX/ZXR 150,000 contracts 1/20/01YZA/LU/ULU/WEU/ 27,375,000 shares 1/20/01 ZDV/ZEUZQN/QZN/YZZ/YQN/ 450,000 contracts 1/20/01 ZWE/ZCR/ZCM/WXW/ YMA/ZQQAIG/LVJ/LZJ/WAP/ZAF/ZFA/ 9,375,000 shares 1/19/02 AYG/WAJ/ZPWBGQ/WGN/ZGB 150,000 contracts 1/19/02CL/WTP/ZGO 150,000 contracts 1/19/02ENE/ZOZ/WUM 150,000 contracts 1/19/02GP 120,000 contracts 1/19/02GTW/ZWB/WGB 150,000 contracts 1/19/02LTD/LDX/KLX/WKX/ZOF 75,000 contracts 1/19/02TOM/ZSO/WSV 63,000 contracts 1/19/02TXN/TNZ/ZTN/WTN/ 150,000 contracts 1/19/02 ZZI/WGZ

Class Limit DateClass Limit Date


POSITION LIMIT CIRCULARSPosition Limit Circular PL99-107

DATE: September 13, 1999

TO: Members and Member Organizations

FROM: Department of Market Regulation

RE: Equity Option Position and Exercise Limits

As a result of a review of trading statistics, the following classes now qualify for a higher position and exercise limit:

Option Class Stock Symbol New TierFST FST 22,500

IQJ IDTC 75,000

For additional information, please contact Melissa Becker at (312) 786-7362 in the Department of Market Regulation.

Position Limit Circular PL99-108

DATE: September 15, 1999

TO: Members and Member Organizations

FROM: Department of Market Regulation

RE: Equity Option Position and Exercise Limits

As a result of a review of trading statistics, the following class now qualifies for a higher position and exercise limit:

Option Class Stock Symbol New TierBBI BBI 31,500

For additional information, please contact Melissa Becker at (312) 786-7362 in the Department of Market Regulation.

RESEARCH CIRCULARS

The following Research Circulars were distributed between September 10, 1999 and September 15, 1999 . If you wish to read the entire document, andhave 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 numberand the corresponding FaxLine document number ready. The FaxLine number is listed adjacent to each circular. To receive a list of all availabledocuments, use the FaxLine number 000. You may also access the Research Circulars on our Web Site at http://www.cboe.com Questions regardingany 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 #RS99-623 FaxLine Document #954September 10, 1999Wyman-Gordon Company (“WYG”): Tender Offer FURTHER EXTENDED by WGC Acquisition Corp.

CBOE Research Circular #RS99-624 FaxLine Document #955September 10, 1999Elf Aquitaine SA (“ELF”) FURTHER EXTENDED Exchange Offer by Total Fina S.A.

CBOE Research Circular #RS99-625 FaxLine Document #956September 10, 1999Galileo Technology Ltd. (“GALT/QFG”) 2-for-1 Stock SplitEx-Distribution Date: September 20, 1999

CBOE Research Circular #RS99-626 FaxLine Document #900September 13, 1999New Listings: Network Access Solutions (NASC/UNW)

Wit Capital Group, Inc. (WITC/IUC)High Speed Access (HSAC/HSU)

CBOE Research Circular #RS99-627 FaxLine Document #957September 14, 1999Orion Capital Corporation (“OC”): Tender Offer FURTHER EXTENDED by NTG Acquisition Corp.


CBOE Research Circular #RS99-628 FaxLine Document #958September 14, 1999Enron Oil & Gas Company (“EOG”) Name Change to: EOG Resources, Inc.Effective Date: September 15, 1999

CBOE Research Circular #RS99-629 FaxLine Document #900September 14, 1999New Listings: DrKoop.com, Inc KOOP/DKU

CBOE Research Circular #RS99-631 FaxLine Document #900September 15, 1999New Listings: Motorola, Inc. Active Date - Sep 16, 1999

Motorola, Inc. Leaps 2001 Active Date - Sep 16, 1999Motorola, Inc. Leaps 2002 Active Date - Sep 16, 1999

RegulatoryBulletin

September 24, 1999 V olume RB10, Number 38

The Constitution and Rules of the Chicago Board Options Exchange, Incorporated (“Ex-change”), in certain specific instances, require the Exchange to provide notice to themembership. The weekly Regulatory Bulletin is delivered to all effective members tosatisfy this requirement.

RegulatoryCirculars

Regulatory Circular RG99-178

Date: September 10, 1999

To: Designated Primary Market Makers (DPMs)

From: Regulatory Services Division

Re: Displaying the True Size and Prices of Bids and Offers in the Book

The Regulatory Services Division would like to remind all Designated Primary MarketMakers (DPMs) and those approved to act on behalf of DPMs that Exchange Rule 8.80(c)(8)obligates DPMs to display bids and offers in the Book pursuant to Exchange Rule 7.7.

DPMs are reminded that Exchange Rule 7.7 requires a DPM to continuously display in avisible manner the highest bid and lowest offer, along with the number of contracts bid forat the highest bid and offered at the lowest offer in the Book in each appointed optionclass. It is inappropriate for a DPM or its staff, in the course of fulfilling their obligations,to suppress the true size and/or price of a book bid or offer.

The suppression of Book size or price could constitute violations of Exchange Rule 7.7 aswell as rules concerning due diligence and just and equitable principles of trade.

Questions regarding the obligations of DPMs should be directed to Ann Grady at (312)786-7733, Douglas Beck at (312) 786-7959 or Daniel Hustad at (312) 786-7715.



To: CBOE Members and Member Firms

From: Equity Floor Procedure Committee

Re: RAES NBBO 1 Tick Step-Up

Effective Friday, September 10, 1999, the Equity Floor Procedure Committee hasapproved changing the RAES Step-Up procedures to the National Best Bid-Offer(NBBO) to 1 tick for all RAES multiply listed classes. Book Priority will be maintainedby routing the RAES-touching-Book orders to PAR.

RB2 September 24, 1999, Volume RB10, Number 39

Regulatory Circularscontinued

Regulatory Circular RG99-179 continued

This temporary change is in response to unintended pricing anomalies created byinstituting RAES 2 Tick Step-Up last week. Once RAES is enabled to detect priceinversion orders and route them to PAR, RAES Step-Up will be reset for 2 Tick NBBOStep-Up. The date for the RAES change will be announced at a future time.

For RAES questions regarding these functional changes, please contact Tim Watkins at(312) 786-7172, Anthony Montesano at (312) 786-7365, or the Help Desk at (312) 786-7100.



To: Members and Member Organizations

From: Equity Floor Procedure Committee

Re: Implementation of Variable RAES

At its meeting on Thursday, September 2, the Equity Floor Procedure Committee approvedthe implementation of Variable RAES for all equity option classes and all narrow-basedindex option classes. Variable RAES permits a market-maker to specify the maximumnumber of contracts that he is willing to trade on any turn on the RAES wheel.1 The EquityFloor Procedure Committee has the authority, however, to specify the minimum number ofcontracts which a market-maker must be willing to designate as his maximum on VariableRAES. For now, the Equity Floor Procedure Committee has determined to establish theminimum as one contract, meaning that a market-maker may specify on Variable RAESany number of contracts between one and the RAES contract limit for that option class.

If any member wishes to provide comment to the Equity Floor Procedure Committee aboutthe decision to implement Variable RAES or about the decision to establish the minimumcontract limit at one contract, please provide your written comments to Timothy Thompson,Legal Department (ext. 7070) or to Karen Calvin, Division of Market Regulation (ext. 7759)by next Tuesday, September 21. The Equity Floor Procedure Committee will consider anycomments received at its meeting on Wednesday, September 22.

1 Depending on the number of contracts in a RAES order and the number of market-makers logged onto theRAES wheel at any one time, a market-maker may receive more than one turn on the RAES wheel for aparticular order.


Date: 15 September 1999

To: Members and Member Organizations

From: Office of the Secretary

Re: Gratuities Policy – Rule 4.4

This circular addresses the Exchange’s policy regarding the permissibility of membersand member organizations giving gratuities to employees of the Exchange and employ-ees of financial concerns (“Gratuities Policy”). The Gratuities Policy restates limitationson gifts that are reflected in Exchange Rule 4.4 (“Rule”) and the Exchange’s EmployeeConflict of Interest Policy.

September 24, 1999, Volume RB10, Number 39 RB3

Regulatory Circular RG99-181 continuedRegulatory Circularscontinued

Gifts and Gratuities to CBOE Employees

Recently, the Exchange amended its Gratuities Policy with respect to CBOE employees. Inpertinent part, the policy with respect to employees provides:

• CBOE employees may not accept any gift or gifts (including a gratuity, loan or otherthing) valued in excess of $50 (in the aggregate) during any calendar year from the samemember or person associated with a member or any person or entity with whom theemployee is directly and/or substantially involved in conducting business on behalf ofCBOE.

• If an employee receives gifts from more than one person associated with the samemember or member firm, these gifts are considered to be from the same member andare aggregated for the purposes of this Policy.

• Legal Division and Regulatory Services Division employees may not accept any gift thathas more than a nominal value (such as a coffee mug) from the same member or anyperson or entity with whom the employee is directly and/or substantially involved inconducting business on behalf of CBOE.

There are no exceptions to these restrictions, without obtaining prior written consent fromthe Division Head in charge of the employee’s division or, for Division Heads, from the Presi-dent.

Gratuities or Compensation to Employees of Financial Concerns.

Where gratuities or compensation from a member to an employee of a financial concern(including another member or a non-member broker, dealer, bank or institution) exceeds$100 in any given calendar year, the donor must obtain the prior consent of the recipient’semployer and of the Exchange.

Procedure to Request Gift Approval

No member should make a gift in excess of the limits indicated above, without first obtainingExchange approval. Requests for Exchange approval may be made on the attached form.Additional copies of the form may be obtained from the Exchange’s Office of the Secretary.

To obtain approval for a gift to an Exchange employee that exceeds the limits indicatedabove, the request should be submitted to the employee’s Division Head. (Upon granting ordenying the request, Division Heads will submit the information to the Office of the Secre-tary.) To obtain approval for a gift to an employee of a financial concern (including anothermember), the request should be submitted to the Office of the Secretary.

Questions regarding the Gratuities Policy may be directed to Nancy Nielsen at (312) 786-7466.

RG98-128 Revised


Regulatory Circular RG99-181 continuedRegulatory Circularscontinued

Form to Request Prior Approval of Gratuities and CompensationUnder Exchange Rule 4.4

This form may be used to request prior approval of the Exchange for gratuities or com-pensation to an:

• employee of the Exchange in an amount greater than $50 in any calendaryear, or• employee of a financial concern in an amount greater than $100 in anycalendar year.

1. Name of Recipient ____________________________________

2. Recipient’s Employer __________________________________

3. Recipient’s Position/Title _______________________________

4. Nature of gratuity or compensation _______________________

5. Dollar value of gratuity or compensation __________________________________

6. Total dollar value and nature of other gratuities or compensation to recipient duringcalendar year ________________________________________________________

7. Reason for gratuity or compensation ______________________________________

8. Person Giving the Gratuity or Compensation

Name of Member: (Print) Firm, if any

Signature : Date:

9. Consent of Employer: Granted Denied(for employees of CBOE obtain consent from the employee’s Division Head)

Name: (print) _______________________________ Firm

Signature : ______________________________________________ Date:

10. Consent of Exchange: Granted Denied(for gifts to employees of financial concerns)

Signature : ______________________________________________ Date:


APPROVED RULE CHANGE(S)

The Securities and Exchange Commission (“SEC”) has approved the following change(s) toExchange Rules pursuant to Section 19(b) of the Securities Exchange Act of 1934, asamended (“the Act”). Copies are available from the Legal Division.

The effective date of the rule change is the date of approval unless otherwise noted.

SR-CBOE-97-67 — Margin Rules

On July 27, 1999, the SEC approved Rule Change File No. SR-CBOE-97-67, which substan-tively amends the Exchange rules concerning margin requirements. (Securities ExchangeAct Release No. 41658, 64 FR 42736 (August 5, 1999)) The rule changes became effectiveAugust 23, 1999. Members are referred to Regulatory Circular RG99-160 (printed in theAugust 20, 1999 Regulatory Bulletin) for a description of the amendments.

Any questions regarding the margin rules may be directed to Jim Adams at 312-786-7718 orRich Lewandowski at 312-786-7183, in the Department of Financial and Sale Practice Com-pliance. The text of the amendments is set forth below. New language is italicized.

Rule12.2 Time Margin Must Be Obtained

The amount of initial margin, or payment in respect of cash account transactions,required by this Rule shall be obtained as promptly as possible and in any eventwithin one payment period as defined in Section 220.2 of Regulation T of the Boardof Governors of the Federal Reserve System. The amount of maintenance marginrequired by this Rule shall be obtained as promptly as possible and in any eventwithin 15 days.

Rule 12.3 Margin Requirements

(a) No change

(1) No change

(2) The term “current market value” is as defined in Section 220.3 of Regu-lation T of the Board of Governors of the Federal Reserve System. At anyother time, in the case of options, stock index warrants, currency indexwarrants and currency warrants, it shall mean the closing price of that se-ries of options or warrants on the Exchange on any day with respect towhich a determination of current market value is made. In the case of othersecurities, it shall mean the preceding business day’s closing price asshown by any regularly published reporting or quotation service. If there isno closing price on the option or on another security, a member organiza-tion may use a reasonable estimate of the current market value of thesecurity as of the close of business on the preceding business day.

(3) The term “escrow agreement”, when used in connection with non cashsettled call or put options carried short, means any agreement issued in aform acceptable to the Exchange under which a bank holding the underly-ing security (in the case of a call option) or required cash, cash equivalentsor a combination thereof (in the case of a put option), is obligated to deliverto the creditor (in the case of a call option) or accept from the creditor (inthe case of a put option) the underlying security against payment of theexercise price in the event the call or put is assigned an exercise notice.

The term “escrow agreement”, when used in connection with cash settledcall or put options, stock index warrants, currency index warrants or cur-

Rule Changes,Interpretationsand Policies


Rule Changes,Interpretations andPolicies continued

SR-CBOE-97-67 continued

rency warrants carried short, means any agreement issued in a form ac-ceptable to the Exchange under which a bank holding cash, cash equiva-lents, one or more qualified equity securities or a combination thereof inthe case of a call option or warrant; or cash, cash equivalents or a com-bination thereof in the case of a put option or warrant; is obligated (in thecase of an option) to pay the creditor the exercise settlement amount inthe event an option is assigned an exercise notice or (in the case of awarrant) the funds sufficient to purchase a warrant sold short in the eventof a buy-in.

(4) No change

(5) The term “butterfly spread” means an aggregation of positions in threeseries of either put or call options all having the same underlying compo-nent or index and time of expiration, and based on the same aggregatecurrent underlying value, where the interval between the exercise price ofeach series is equal, which positions are structured as either A) a “longbutterfly spread” in which two short options in the same series are offsetby one long option with a higher exercise price and one long option with alower exercise price or B) a “short butterfly spread” in which two longoptions in the same series offset one short option with a higher exerciseprice and one short option with a lower exercise price.

(6) The term “box spread“ means an aggregation of positions in a longcall option and short put option with the same exercise price (“buy side”)coupled with a long put option and short call option with the same exer-cise price (“sell side”) all of which have the same underlying componentor index and time of expiration, and are based on the same aggregatecurrent underlying value, and are structured as either: A) a “long boxspread” in which the sell side exercise price exceeds the buy side exer-cise price or B) a “short box spread” in which the buy side exercise priceexceeds the sell side exercise price.

(7) The term “underlying stock basket” means a group of securities whichincludes each of the component securities of the applicable index andwhich meets the following conditions (i) the quantity of each stock in thebasket is proportional to its representation in the index, (ii) the total mar-ket value of the basket is equal to the underlying index value of the indexoptions or warrants to be covered, (iii) the securities in the basket cannotbe used to cover more than the number of index options or warrantsrepresented by that value and (iv) the securities in the basket shall beunavailable to support any other option or warrant transaction in the ac-count.

(8) The term “cash equivalent” is as defined in Section 220.2 of Regula-tion T of the Board of Governors of the Federal Reserve System.

(9) The term “listed” for purposes of this Chapter 12 means a securitytraded on a registered national securities exchange or automated facilityof a registered national securities association.

(10) The term “OTC margin bond” for purposes of this Chapter 12 means(1) any debt securities not traded on a national securities exchange thatmeet all of the following requirements (a) at the time of the original issue,a principal amount of not less than $25,000,000 of the issue was out-standing; (b) the issue was registered under Section 5 of the SecuritiesAct of 1933 and the issuer either files periodic reports pursuant to the Act


or is an insurance company under Section 12(g)(2)(G) of the Act; or (c) atthe time of the extension of credit the creditor has a reasonable basis forbelieving that the issuer is not in default on interest or principal payments;or (2) any private pass-through securities (not guaranteed by a U.S. gov-ernment agency) that meet all of the following requirements: (a) an aggre-gate principal amount of not less than $25,000,000 was issued pursuant toa registration statement filed with the Commission; and (b) current reportsrelating to the issue have been filed with the Commission; and (c) at thetime of the credit extension, the creditor has a reasonable basis for believ-ing that mortgage interest, principal payments and other distributions arebeing passed through as required and that the servicing agent is meetingits material obligations under the terms of the offering.

(b) No change

(c) No change

(1)No change(2) Non-Convertible Debt Securities. On any long position in a non-convertible debtsecurity that is listed or that qualifies as an “OTC margin bond”, the margin to bemaintained shall be 20% of the current market value or 7% of the principal amount,whichever amount is greater.

(3) Security Offset. Listed and OTC.

(A) – (B)No change

(4) Initial and Maintenance Margin Requirements on Long Options, Stock Index War-rants, Currency Index Warrants and Currency Warrants. Options and warrants carried“long” in a customer’s account shall be margined as follows:

(A) Listed or OTC Options Expiring in 9 Months or Less. In the case of any put orcall option, stock index warrant, currency index warrant or currency warrant whichexpires in 9 months or less, initial margin must be deposited and maintained equalto at least 100% of the current market value of the option or warrant.

(B) Listed Options and Warrants With An Expiration Exceeding 9 Months. In thecase of a listed put or call option on a stock or stock index, and a stock indexwarrant, expiring in more than 9 months, margin must be deposited and maintainedequal to at least 75% of the current market value of the option or warrant.

(C) OTC Options and Warrants With An Expiration Exceeding 9 Months. In thecase of an OTC put or call option on a stock or stock index, and a stock indexwarrant, expiring in more than 9 months, margin must be deposited and maintainedequal to at least 75% of the option or warrant’s in-the-money amount plus 100% ofthe amount, if any, by which the current market value of the option or warrant exceeds its in-the-money amount provided also that the option or warrant:

(1) is guaranteed by the carrying broker-dealer,

(2) has an American style exercise provision and

(5) Initial and Maintenance Margin Requirements on Short Options, Stock Index War-rants, Currency Index Warrants and Currency Warrants.

(A) Listed. General Rule. The initial and maintenance margin required on any listedput, call, stock index warrant, currency index warrant or currency warrant carried

SR-CBOE-97-67 continuedRule Changes,Interpretations andPolicies continued


“short” in a customer’s account shall be 100% of the current market value of theoption or warrant plus the percentage of the current “underlying component value” (asdescribed in column IV of the table below) specified in column II of the table belowreduced by any “out-of-the-money” amount as defined in this subparagraph (c)(5)(A)below.

Notwithstanding the margin required above, the minimum margin for each such call optionor call warrant shall not be less than 100% of the current market value of the option orwarrant plus the percentage of the current market value of the underlying component speci-fied in column III of the table below, and for each such put option or put warrant, shall notbe less than 100% of the current market value of the option or warrant plus the percentageof the option or warrant’s aggregate exercise price amount specified in column III of thetable below.

I.Type of Option II.Initial and/or III. Minimum Margin IV. UnderlyingMaintenance Required Component ValueMargin Required

1. Stock 20% 10% The equivalent number ofshares at current marketprices.

2. Narrow based 20% 10% The product of the currentindex as defined index group value and thein Rule 24.1 applicable index multiplier.

3. Broad-based 15%1 10%2 The product of the currentindex (including index group value and theCapped-style options applicable index multiplier.(CAPS & QCAPS)Packaged VerticalSpreads and PackagedButterfly Spreads) asdefined in Rule 24.1

4. Interest Rate 10% 5% The product of the indexContracts value and the applicable

index multiplier.

5. U.S. Treasury .35% ½% The underlying principalbills – 95 days or amount.less to maturity

6. U.S. Treasury notes 3% ½% The underlying principalamount.

1In any event, the maximum margin required on a capped style index option (CAPS and Q-CAPS), Packaged Vertical Spreadand Packaged Butterfly Spread as defined in Rule 24.1 need not exceed the aggregate cap interval, vertical spread intervaland butterfly spread interval, respectively. Cap interval, vertical spread interval and butterfly spread interval shall have themeanings defined in Rule 24.1.2 In respect of a capped-style index option, Packaged Vertical Spread and Packaged Butterfly Spread as defined in Rule 24.1which is out-of-the-money, the minimum margin required is as follows: CALLS - the lesser of a) 100% of the current market valueof the option plus 10% of the underlying index value or b) the aggregate cap, vertical spread or butterfly spread interval,respectively, PUTS - the lesser of a) 100% of the current market value of the option plus 10% of the aggregate put exerciseprice or b) the aggregate cap, vertical spread or butterfly spread interval, respectively. Cap interval, vertical spread intervaland butterfly spread interval shall have the meanings defined in Rule 24.1.

3 The term “spot price” in respect of a currency warrant on a particular business day means the noon buying rate in U.S.dollars on such day in New York City for cable transfers of the particular underlying currency as certified for customspurposes by the Federal Reserve Bank of New York.




7. U.S. Treasury bonds 3.5% ½% The underlying principalamount.

8. Foreign Currency The product of units perOptions and Warrants foreign currency contract

and the closing spot price.3

Australian Dollar 4% ¾%British Pound 4% ¾%Canadian Dollar 4% ¾%German Mark 4% ¾%European Currency Unit 4% ¾%French Franc 4% ¾%Japanese Yen 4% ¾%Swiss Franc 4% ¾%

9. Currency Index 3% A percentage of The product of the indexWarrants the aggregate value and the applicable

exercise price as index multiplier.specified by theExchange andapproved by the SEC

10. Stock Index 15% 10% The product of the indexWarrants (broad-based) value and the applicable in

dex multiplier.

11. Stock Index 20% 10% The product of the indexWarrants (narrow-based) value and the applicable in

dex multiplier.

For purposes of this subparagraph (c)(5)(A), “out-of-the-money” amounts aredetermined as follows:

Option or Warrant Issue Call PutStock Options Any excess of the aggregate Any excess of the current

exercise price of the option market value of theover the current market value equivalent number ofof the equivalent number of shares of the underlyingshares of the underlying security over the aggregatesecurity. exercise price of the

option.

U.S. Treasury Options Any excess of the aggregate Any excess of the currentexercise price of the option market value of theover the current market value underlying principalof the underlying principal amount over the aggregateamount. exercise price of the

option.

Index stock options, Any excess of the aggregate Any excess of the productcurrency index warrants exercise price of the option or of the current index valueand stock index warrants warrant over the product of the and the applicable multi-

current index value and the plier over the aggregateapplicable multiplier. exercise price of the option

or warrant.



Option or Warrant Issue Call PutForeign currency options Any excess of the aggregate Any excess of the productand warrants exercise price of the option or of units per foreign

warrant over the product of currency contract and theunits per foreign currency closing spot prices overcontract and the closing the aggregate price of thespot prices. option or warrant.

Interest rate options Any excess of the aggregate Any excess of theexercise price of the option product of the currentover the product of the current interest rate measureinterest rate measure value value and the applicableand the applicable multiplier. multiplier over theaggregate exercise price of the option.

(B) OTC Options. General Rule. The initial and maintenance margin required on any put,call, stock index warrant, currency index warrant, or currency warrant that is not listed andcarried “short” in a customer’s account shall be any in-the-money amount plus the percent-age of the current “underlying component value” (as described in column IV of the tablebelow) specified in column II of the table below reduced by any “out-of-the-money” amount(as defined in subparagraph (c)(5)(A) above).

Notwithstanding the margin required above, the minimum margin for each such call optionor call warrant shall not be less than the percentage of the current value of the underlyingcomponent specified in column III of the table below, and for each such put option or putwarrant, shall not be less than the percentage of the option’s or the warrant’s aggregateexercise price amount specified in column III of the table below.

I.Type of Option II.Initial and/or III. Minimum Margin IV. UnderlyingMaintenance Required Aggregate ValueMargin Required

1. Stock and 30% 10% The equivalent number ofConvertible shares times currentCorporate Debt. market price per share for

stocks or the underlyingprincipal amount for convertible corporate debtsecurities.

2. Narrow-based index 30% 10% The product of the currentindex value and the applicable index multiplier.

3. Broad-based index 20% 10% The product of the currentindex value and the applicable index multiplier.

4. U.S. Government or 5% 3% The underlying principalU.S. Government Agency amount.debt securities other thanthose exempted byRule 3a12-7 under theSecurities ExchangeAct of 19341


1 Option contracts under category (4) must be for a principal amount of not less than $500,000. If the principal amount is lessthan $500,000, category (6) will apply.


I.Type of Option II.Initial and/or III. Minimum Margin IV. UnderlyingMaintenance Required Aggregate ValueMargin Required

5. Corporate debt 15% 5% The underlying principal se-curities registered on amount.a national securitiesexchange andmarginable OTCcorporate debtsecurities as definedin paragraph 12.3(a)2

6.All other OTC 45% 20% The current value of theoptions not underlying principal amount.covered above

2 Option transactions on all other OTC margin bonds as defined in paragraph 12.3(a) are not eligible for the margin requirementscontained in this provision. Margin requirements for such securities are to be computed pursuant to category (6).

For the purpose of this subparagraph (c)(5)(B), “in-the-money amounts” are determined asfollows:

Option Issue Call PutStock Options Any excess of the Any excess of the aggregate exercise

current market value price of the option over the currentof the equivalent market value of the equivalent num-number of shares ber of shares of the underlying secuof the underlying rity.security over theaggregate exerciseprice of the option.

Index options Any excess of the Any excess of the aggregate exerciseproduct of the current price of the option over the product ofindex value and the the current index value and the appliapplicable multiplier cable multiplier.over the aggregateexercise price of theoption.

U.S. Government Any excess of the Any excess of the aggregate exercisemortgaged related current value of the price of the option over the currentor corporate debt underlying principal value of the underlying principalsecurities options amount over the amount.

aggregate exerciseprice of the option.

(C) Related Securities Positions - Listed or OTC Options. Unless otherwise specified,margin must be deposited and maintained in the following amounts for each of the followingtypes of positions.

(1)

(A) Short Call Covered by a Convertible Security. No margin is required for a calloption written on an equity security when the account holds a “long” position in anysecurity, other than a warrant, which can be immediately exchanged or convertedwithout restriction (including the payment of money) into an equal or greater quan-




tity of the security underlying the option provided (1) such net long position isadequately margined in accordance with this Rule and (2) the right to exchange orconvert the net “long” position does not expire on or before the short call.

(B) Short Listed Call Covered by a Warrant. No margin is required for a call optionwritten on an equity security when the account holds a net “long” position in awarrant which can be immediately exercised without restriction to purchase anequal or greater quantity of the security underlying the option provided that thewarrant does not expire before the short call, and provided that the amount (if any)by which the exercise price of the warrant exceeds the exercise price of the shortcall is held in or deposited to the account. A warrant used in lieu of the requiredmargin under this provision shall contribute no equity to the account.

(2) Covered Calls/Covered Puts. No margin need be required in respect of anoption contract stock index warrant, currency index warrant or currency warrantcarried in a short position which is covered by a long position in equivalent units ofthe underlying security in the case of a call, or a short position in equivalent unitsof the underlying security in the case of a put, provided, however, in computingmargin on such position in the underlying security, the current market value to beused shall not be greater than the exercise price in the case of a call. In the caseof a put, in computing margin on the underlying position, margin shall be theamount required by subparagraph (b)(2) of this Rule, plus the amount, if any, bywhich the exercise price of the put exceeds the current market value of theunderlying. In respect of an option contract or warrant on a market index carriedshort, an underlying stock basket, subject to the same requirements for comput-ing margin, may serve as cover.

No margin is required in respect of a call option contract on a Standard and Poor’s500 (S&P 500) market index carried in a short position where there is carried for thesame account a long position in the underlying open-end index mutual fund (whichshall be specifically designated by the Exchange) having an aggregate marketvalue at least equal to the underlying value of the S&P 500 contracts to be covered.

(3) Exceptions. The following paragraphs set forth the minimum amount of mar-gin which must be maintained in margin accounts of customers having positionsin components underlying options, stock index warrants, currency index warrantsor currency warrant when such components are held in conjunction with certainpositions in the overlying option or warrant. In respect of an option or warrant ona market index, an underlying stock basket is an eligible underlying component.The option or warrant must be listed or guaranteed by the carrying broker dealer.In the case of a call option or warrant carried in a short position, a related longposition in the underlying component shall be valued at no more than the calloption / warrant exercise price for margin equity purposes.

(A) Long Option Offset. When a component underlying an option or warrant iscarried long (short) in an account in which there is also carried a long put (call)option or warrant specifying equivalent units of the underlying component, theminimum amount of margin which must be maintained on the underlying compo-nent is 10% of the option / warrant exercise price plus the out-of-the-money amountnot to exceed the minimum maintenance required pursuant to paragraph (b) ofthis Rule.

(B) Conversion. When a call option or warrant carried in a short position is cov-ered by a long position in equivalent units of the underlying component and thereis also carried a long put option or warrant specifying equivalent units of the sameunderlying component and having the same exercise price and expiration date asthe short call option or warrant, the minimum amount of margin which must bemaintained for the underlying component shall be 10% of the exercise price.




(C) Reverse Conversion. When a put option or warrant carried in a short position iscovered by a short position in equivalent units of the underlying component andthere is also carried a long call option or warrant specifying equivalent units of thesame underlying component and having the same exercise price and expirationdate as the short put option or warrant, the minimum amount of margin which mustbe maintained for the underlying component shall be 10% of the exercise priceplus the amount by which the exercise price of the put exceeds the current marketvalue of the underlying, if any.

(D) Collar. When a call option or warrant carried in a short position is covered by along position in equivalent units of the underlying component and there is alsocarried a long put option or warrant specifying equivalent units of the same under-lying component and having a lower exercise price than, and same expiration dateas, the short call option / warrant, the minimum amount of margin which must bemaintained for the underlying component shall be the lesser of 10% of the exerciseprice of the put plus the put out-of-the-money amount or 25% of the call exerciseprice.

(4) Spreads. Long Position Does Not Expire Before Short Position. This subpara-graph applies to accounts carrying positions where long call options or call war-rants (or long put options or put warrants), except for capped style options, offsetpositions in short call options or call warrants (or short put options or put warrants)for the same underlying component or index, provided the offsetting long positiondoes not expire before the short position and the long position is paid in full. A longwarrant may offset a short option contract and a long option contract may offset ashort warrant provided they have the same underlying component or index andequivalent aggregate current underlying value. In the event the long position is notlisted, it must be guaranteed by the carrying broker dealer; otherwise the shortposition must be margined separately pursuant to subparagraph (c)(5)(A) or (B),whichever is applicable.

(A) When the exercise price of the long call position (or short put position ) is lessthan or equal to the exercise price of the offsetting short call position (or long putposition ), no margin is required.

(B) When the exercise price of the long call position (or short put position ) isgreater than the exercise price of the offsetting short call position (or long putposition ) the amount of margin required is the lesser of (1) the margin requiredpursuant to subparagraph (c)(5)(A) or B above whichever is applicable or (2) thedifference in aggregate exercise prices.

(C) Capped-Style Index Option (CAPS & Q-CAPS), Packaged Vertical Spread andPackaged Butterfly Spread As Defined In Rule 24.1.

(1) The requirements set forth in subparagraphs (4)(A) and (4)(B) above apply tospreads composed of either CAPS, Q-CAPS, Packaged Vertical Spread or Pack-aged Butterfly Spread options provided the long and short option each have thesame cap, vertical spread or butterfly spread interval (as applicable); except that,in respect of spreads subject to subparagraph (4)(B), the amount of margin re-quired for a spread in CAPS, Q-CAPS or Packaged Vertical Spread options neednot exceed the lesser of 1) the difference in aggregate exercise prices or 2) thecap, vertical spread or butterfly spread interval (as applicable). Cap interval, verti-cal spread interval and butterfly spread interval shall have the meanings defined inRule 24.1.




(2) In respect of a short CAPS, Q-CAPS or Packaged Vertical Spread optionoffset by a long option that is not also a CAPS, Q-CAPS or Packaged VerticalSpread option, the amount of margin required is as set forth in subparagraph(4)(A) or (4)(B) above; except that, in respect of spreads subject to subparagraph(4)(B), the amount of margin required need not exceed the lesser of 1) the differ-ence in aggregate exercise prices or 2) the cap, vertical spread or butterfly spreadinterval (as applicable).

(3) In respect of a long CAPS, Q-CAPS or Packaged Vertical Spread optionwhich offsets a short option that is not also a CAPS, Q-CAPS or PackagedVertical Spread option, each position must be margined separately in accor-dance with the applicable requirements of this Rule 12.3.

(4) In respect of any Packaged Butterfly Spread Option offset by, or which off-sets, any option position that is not also a Packaged Butterfly Spread option,each position must be margined separately in accordance with the applicablerequirements of this Rule 12.3.

(5) Straddle/Combination.

(A) Listed Options. When a call option contract is carried in a short position, andthere is carried for the same customer a short put option contract specifying thesame underlying component or index and its aggregate current underlying value,the amount of margin required shall be the margin on the put or the call, whicheveris greater, as required pursuant to subparagraph (c)(5)(A) above plus the currentmarket value of the other option.

(B) OTC Options. When a call option contract is carried in a short position andthere is carried for the same customer a short put option contract specifying thesame underlying component or index and its aggregate value, the amount ofmargin required shall be the margin on the put or call, whichever is greater, asrequired pursuant to subparagraph (c)(5)(B) above, plus any unrealized loss (i.e.,the “in-the-money amount”) on the other option provided that both the put and callare guaranteed by the carrying broker-dealer. In the event either the put or call isnot guaranteed by the carrying broker-dealer, but is listed, the same requirementapplies. If either or both the put or call are not guaranteed by the carrying brokerdealer or listed, then the put and call must be margined separately pursuant tosubparagraph (c)(5)(A) or (B) above, whichever is applicable, except that theminimum margin shall not apply to the option with the lower requirement.

(C) Straddles and combinations involving stock index warrants, currency indexwarrants and currency warrants are subject to the same requirement set forth insubparagraphs (A) or (B) above, whichever is applicable. Options may be pairedwith warrants provided they have the same underlying component or index andequivalent aggregate current underlying value.

(6) Butterfly Spread. This subparagraph (c)(6)(C)(6) applies to a butterfly spreadas defined in subparagraph (a)(5) of this Rule where all option positions are listedor guaranteed by the carrying broker-dealer.

(1) In respect of a long butterfly spread as defined in subparagraph (a)(5) of thisRule, the net debit must be paid in full.

(2) In respect of a short butterfly spread as defined in subparagraph (a)(5) of thisRule, margin must be deposited and maintained equal to at least the amount ofthe aggregate difference between the two lowest exercise prices with respect toshort butterfly spreads comprised of calls options or the aggregate difference




between the two highest exercise prices with respect to short butterfly spreadscomprised of put options. The net proceeds from the sale of short option compo-nents may be applied to the requirement.

(7) Box Spread. This subparagraph (c)(6)(B)(7) applies to box spreads as definedin subparagraph (a)(6) of this Rule where all option positions are listed or guaran-teed by the carrying broker-dealer.

(1) In respect of a long box spread as defined in subparagraph (a)(6) of this Rule,the net debit must be paid in full.

(2) In respect of a short box spread as defined in subparagraph (a)(6) of this Rule,margin must be deposited and maintained equal to at least the amount of theaggregate difference between the exercise prices. The net proceeds from the saleof short option components may be applied to the requirement.

(8) Long Box Spread in European Style Options. In respect of a long box spread asdefined in subparagraph (a)(6) of this Rule, in which all component options have aEuropean style exercise provision and are listed or guaranteed by the carryingbroker-dealer; margin must be deposited equal to at least 50% of the aggregatedifference in the exercise prices. The net proceeds from the sale of short optioncomponents may be applied to the requirement. For margin purposes, the longbox spread may be valued at an amount not to exceed 100% of the aggregatedifference in the exercise prices.

(d) Customer Cash Account – Short Options, Stock Index Warrants, CurrencyIndex Warrants and Currency Warrants.

(1) Equity Options.

(A) Calls. A call option contract carried in a short position is deemed a coveredposition, and eligible for the cash account, provided any one of the following offsets isapplicable:

(1) an equal or greater quantity of the underlying security specified by the optioncontract is held in or purchased for the account on the same day the call is writtenprovided the option premium is held in the account until full cash payment for theunderlying security is received,

(2) a security immediately convertible without the payment of money into an equal orgreater quantity of the underlying security specified by the option contract, is held inor purchased for the account on the same day the call is written, provided that:

(i) the option premium is held in the account until full cash payment for the convertiblesecurity is received, and

(ii) the ability to convert does not expire before the expiration of the short call, or

(3) in lieu of the underlying security, an escrow agreement is either held in theaccount at the time the call is written or is received into the account promptlythereafter.

The escrow agreement must certify that the bank holds for the account of thecustomer as security for the agreement, the underlying security (or a securityimmediately convertible into the underlying security without the payment of money)




and that the bank will promptly deliver to the member organization the underlyingsecurity in the event the account is assigned an exercise notice.

(B) Puts. A put option contract carried in a short position is deemed a coveredposition, and eligible for the cash account, provided any one of the following offsetsis either held in the account at the time the put is written or is received into theaccount promptly thereafter:

(1) cash or cash equivalents in an amount not less than the aggregate exerciseprice, or

(2) an escrow agreement.

The escrow agreement must certify that (1) the bank holds for the account of thecustomer as security for the agreement cash, cash equivalents or a combinationthereof having an aggregate market value at the time the option is written of notless than 100% of the aggregate exercise price amount and (2) that the bank willpromptly pay the member organization the aggregate exercise price in the eventthe account is assigned an exercise notice.

(2) Index Options.

(A) Calls. A call option contract on a market index carried in a short position isdeemed a covered position, and eligible for the cash account provided any one ofthe following offsets is applicable:

(1) an underlying stock basket as defined in Rule 12.1 is held in or purchased forthe account on the same day the call is written provided the option premium is heldin the account until full cash payment for the stock basket is received, or

(2) an escrow agreement is either held in the account at the time the call is writtenor received into the account promptly thereafter.

The escrow agreement must certify that the bank holds for the account of thecustomer as security for the agreement 1) cash, 2) cash equivalents, 3) one ormore qualified equity securities, or 4) a combination thereof having an aggregatemarket value at the time the option is written of not less than 100% of the aggregatecurrent index value and that the bank will promptly pay the member organization theexercise settlement amount in the event the account is assigned an exercise no-tice.

(B) Puts. A put option contract on a market index carried in a short position isdeemed a covered position and eligible for the cash account provided any one ofthe following is either held in the account at the time the put is written or receivedinto the account promptly thereafter:

(1) cash or cash equivalents in an amount not less than the aggregate exerciseprice or


The escrow agreement must certify that the bank holds for the account of thecustomer as security for the agreement 1) cash, 2) cash equivalents or 3) a combi-nation thereof having an aggregate market value at the time the option is written ofnot less than 100% of the aggregate exercise price amount and that the bank will




promptly pay the member organization the exercise settlement amount in the eventthe account is assigned an exercise notice.

(C) No margin is required in respect of a call option contract on a Standard and Poor’s500 (S&P 500) market index carried in a short position where there is carried for thesame account a long position in the underlying open-end index mutual fund (whichshall be specifically designated by the Exchange) having an aggregate market valueat least equal to the underlying value of the S&P 500 contracts to be covered.

(3) Capped-Style Index Option (CAPS & Q-CAPS), Packaged Vertical Spread orPackaged Butterfly Spread As Defined in Rule 24.1. A CAPS, Q-CAPS or Pack-aged Vertical Spread put or call option contract, or Packaged Butterfly Spread optioncontract, carried in a short position is deemed a covered position and eligible for thecash account provided any one of the following is either held in the account at thetime the CAPS, Q-CAPS, Packaged Vertical Spread or Packaged Butterfly Spreadoption contract is written or received into the account promptly thereafter:

(A) cash or cash equivalents of not less than the amount of the aggregate cap,vertical spread or butterfly spread interval (as applicable) as defined in Rule 24.1 or

(B) an escrow agreement.

The escrow agreement must certify that the bank holds for the account of the cus-tomer as security for the agreement 1) cash, 2) cash equivalents or 3) a combinationthereof having an aggregate market value at the time the positions are established ofnot less than the aggregate cap interval, vertical spread interval or butterfly spreadinterval (as applicable) and that the bank will promptly pay the member organizationsuch amount in the event the account is assigned an exercise notice. Cap interval,vertical spread interval and butterfly spread interval shall have the meanings de-fined in Rule 24.1.

(4) Stock Index Warrants and Currency Index Warrants.

(A) Calls. A call warrant on a market index carried in a short position is deemed acovered position and eligible for the cash account provided an escrow agreement iseither held in the account at the time the call warrant is sold or received into theaccount promptly thereafter.

The escrow agreement must certify that the bank holds for the account of the cus-tomer as security for the agreement 1) cash, 2) cash equivalents, 3) one or morequalified equity securities, or 4) a combination thereof having an aggregate marketvalue at the time the warrant is sold of not less than 100% of the aggregate currentindex value; and that the bank will promptly pay the member organization fundssufficient to purchase the warrant sold short in the event of a buy-in.

(B) Puts. A put warrant on a market index carried in a short position is deemed acovered position and eligible for the cash account provided any one of the followingoffsets is either held in the account at the time the put warrant is sold or received intothe account promptly thereafter:

(1) cash or cash equivalents in an amount not less than the aggregate exercise priceor





The escrow agreement must certify that the bank holds for the account of thecustomer as security for the agreement 1) cash 2) cash equivalents or 3) a combi-nation thereof having an aggregate market value at the time the warrant is sold ofnot less than 100% of the aggregate exercise price, and that the bank will promptlypay the member organization funds sufficient to purchase the warrant sold short inthe event of a buy-in.

(e) Customer Cash Account - Spreads. A European style cash-settled indexoption, stock index warrant or currency index warrant carried in a short position isdeemed a covered position, and eligible for the cash account, provided a longposition in a European style cash-settled index option, stock index warrant orcurrency warrant having the same underlying component or index that is based onthe same aggregate current underlying value, is held in or purchased for theaccount on the same day provided:

(1) (A) the long position and the short position expire concurrently,

(B) the long position is paid in full and

(C) either there is held in the account at the time the positions are established orreceived into the account promptly thereafter:

(1) cash or cash equivalents of not less than any amount by which the aggregateexercise price of the long call or call warrant (short put or put warrant) exceeds theaggregate exercise price of the short call or call warrant (long put or put warrant),to which requirement the net proceeds from the sale of the short position may beapplied, or


The escrow agreement must certify that the bank holds for the account of thecustomer as security for the agreement 1) cash, 2) cash equivalents or 3) a combi-nation thereof having an aggregate market value at the time the positions are es-tablished of not less than any amount by which the aggregate exercise price of along call or call warrant (short put or put warrant) exceeds the aggregate exerciseprice of a short call or call warrant (long put or put warrant) and that the bank willpromptly pay the member organization such amount in the event the account isassigned an exercise notice or that the bank will promptly pay the member organi-zation funds sufficient to purchase a warrant sold short in the event of a buy-in.

(D) A long warrant may offset a short option contract and a long option contractmay offset a short warrant provided they have the same underlying component orindex and equivalent aggregate current underlying value. In the event the longposition is not listed, it must be guaranteed by the carrying broker dealer; other-wise the short position is not eligible for the cash account and must be marginedseparately pursuant to subparagraph (c)(5)(A) or (B), whichever is applicable.

(2) Butterfly Spreads. Put or call options carried in a short position are deemedcovered positions and eligible for the cash account provided the account con-tains long positions of the same type which in conjunction with the short optionsconstitute a butterfly spread as defined in subparagraph (a)(5) of this Rule andprovided:

(A) all component options are European style,




(B) all component options are cash settled,

(C) the long options are held in, or purchased for the account on the same day,

(D) in respect of a long butterfly spread as defined in subparagraph (a)(5) of thisRule, the net debit is paid in full,

(E) in respect of a short butterfly spread as defined in subparagraph (a)(5) of thisRule, either there is held in the account at the time the positions are established orreceived into the account promptly thereafter:

(1) cash or cash equivalents of not less than the amount of the aggregate differ-ence between the two lowest exercise prices with respect to short butterfly spreadscomprised of call options or the aggregate difference between the two highestexercise prices with respect to short butterfly spreads comprised of put options, towhich requirement the net proceeds from the sale of short option components maybe applied, or


The escrow agreement must certify that the bank holds for the account of the cus-tomer as security for the agreement 1) cash, 2) cash equivalents or 3) a combinationthereof having an aggregate market value at the time the positions are established ofnot less than the amount of the aggregate difference between the two lowest exer-cise prices with respect to short butterfly spreads comprised of call options or theaggregate difference between the two highest exercise prices with respect to shortbutterfly spreads comprised of put options and that the bank will promptly pay themember organization such amount in the event the account is assigned an exercisenotice on the call (put) with the lowest (highest) exercise price.

(F) all component options are listed or guaranteed by the carrying broker-dealer.

(3) Box Spreads. Put and call options carried in a short position are deemedcovered positions and eligible for the cash account provided the account containslong positions which in conjunction with the short options constitute a box spreadas defined in subparagraph (a)(6) of this Rule provided:

(A) all component options are European style,

(B) all component options are cash settled,

(C) the long options are held in, or purchased for the account on the same day,

(D) in respect of a long box spread as defined in subparagraph (a)(6) of this Rule,the net debit is paid in full,

(E) in respect of a short box spread as defined in subparagraph (a)(6) of this Rule,either there is held in the account at the time the positions are established orreceived into the account promptly thereafter:

(1) cash or cash equivalents of not less than the amount of the aggregate differ-ence between the exercise prices, to which requirement the net proceeds from thesale of short option components may be applied, or





The escrow agreement must certify that the bank holds for the account of thecustomer as security for the agreement 1) cash, 2) cash equivalents or 3) a combi-nation thereof having an aggregate market value at the time the positions are es-tablished of not less than the amount of the aggregate difference between theexercise prices and that the bank will promptly pay the member organization suchamount in the event the account is assigned an exercise notice on either shortoption.

(F) all component options are listed or guaranteed by the carrying broker-dealer.

(f) – (h) No change

Interpretations and Policies:

.01 [Reserved]

.02 – .06 No change

.07 The term “aggregate current index value” means the current index value timesthe index multiplier; the term “aggregate exercise price” means the exercise pricetimes the index multiplier; and the term “exercise settlement amount” means thedifference between the aggregate exercise price and the aggregate current indexvalue (as such terms are defined in Article XVII of the By-Laws of The OptionsClearing Corporation).

.08 For purposes of Rule 12.3 the bank or trust company issuing escrow agree-ments must be approved by The Options Clearing Corporation if the escrow agree-ments to be forwarded to the Corporation for the purpose of meeting marginrequirements.

.09 A security is qualified if: (a) Exchange securities: it is a listed equity security(with the exception of warrants, rights and options) or (b) OTC securities: it is anequity security (with the exception of warrants, rights and options) listed on thecurrent list of Marginable Over–the–Counter Stocks published by the Board ofGovernors of the Federal Reserve System.

.10 When one or more securities are substituted for securities held by the bankor trust company the substitution should not impair the value of the collateral heldby the bank at the time the substitution is made.

.11 An index option escrow receipt is no longer deemed to be an acceptabledeposit in lieu of the margin required to be maintained by the broker–dealer uponnotification that the collateral value is below 50% of the current aggregate indexvalue. If the collateral is not promptly supplemented to a level in excess of 55% ofthe current aggregate index value, the broker–dealer must take steps to promptlyliquidate the short index call(s) covered by the receipt.

.12 The margin requirements set forth in this Rule are applicable only to stockindex warrants, currency index warrants and currency warrants listed on or afterAugust 29, 1995.

.13 The margin treatment for spread positions involving stock index warrants,currency index warrants and currency warrants is subject to a one-year pilot pro-gram scheduled to begin on August 29, 1995.




.14 When due to a merger or acquisition a security underlying an option ceases totrade and the registered clearing agency or party which issues the option has an-nounced that all outstanding call options will settle for cash equal to any amount bywhich a fixed settlement price exceeds the exercise price and all outstanding putoptions will settle for cash equal to any amount by which the exercise price exceedsa fixed settlement price, no margin is required on such an option carried short if it isout-of-the-money. If such an option carried short is in-the-money, margin must bemaintained equal to 100% of the aggregate in-the-money amount.

Rule 12.5. Determination of Value for Margin Purposes

Positions in active securities dealt in on a recognized exchange (including optioncontracts) shall, for margin purposes, be valued at current market value prices;provided that, whether or not dealt in on an exchange, only those options contractson a stock or stock index, or a stock index warrant, having an expiration that ex-ceeds 9 months and which are listed or guaranteed by the carrying broker-dealer,may be deemed to have market value for the purposes of Rule 12.3(c). Positions inother securities shall be valued conservatively in the light of current market pricesand the amount of anticipated realization upon a liquidation of the entire position.Substantial additional margin must be required in all cases where the securitiescarried are subject to unusually rapid or violent changes in value, or where theamount carried is such that they cannot be liquidated promptly.

Rule 23.13 Reserved

Rule 24.11 Reserved

Rule 30.53 Reserved



cboe exchange and regulatory bulletin · page 2 september 24, 1999 volume 27, number 39 the chicago...

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