Federal Register / Vol. 65, No. 106 / Thursday, June 1, 2000 / Notices 35147

1 17 CFR 240.11Aa3–2.

2OPRA is a National Market System Plan

approved by the Commission pursuant to Section

11A of the Act and Rule 11Aa3–2 thereunder. See

Securities Exchange Act Release No. 17638 (Mar.

18, 1981). The OPRA Plan provides for the

collection and dissemination of last sale and

quotation information on options that are traded on

the member exchanges. The five exchanges which

agreed to the OPRA Plan are the American Stock

Exchange (‘‘Amex’’); the Chicago Board Options

Exchange (‘‘CBOE’’); the New York Stock Exchange

(‘‘NYSE’’); the Pacific Exchange (‘‘PCX’’); and the

Philadelphia Stock Exchange (‘‘Phlx’’).

3See Securities Exchange Act Release No. 42002

(October 13, 1999), 64 FR 56543.

4See letters from Gerald D. Putnam, Chief

Executive Officer, Archipelago, L.L.C., to Jonathan

G. Katz, Secretary, Commission, dated November

10, 1999 (‘‘Archipelago Letter’’); the United States

Department of Justice, to the Commission, dated

November 10, 1999 (‘‘Justice Letter’’); and Michael

J. Simon, Senior Vice President, General Counsel,

and Secretary, International Securities Exchange, to

Jonathan G. Katz, Secretary, Commission, dated

November 17, 1999 (‘‘ISE Letter’’).

5See letters to Deborah L. Flynn, Division of

Market Regulation, Commission, from Joseph

Corrigan, Executive Director, OPRA, dated

December 31, 1999 (‘‘Amendment No. 1’’) and April

26, 2000 (‘‘Amendment No. 2’’). See also letter to

John Roeser, Division of Market Regulation,

Commission, from Joseph Corrigan, Executive

Director, OPRA, dated May 17, 2000 (‘‘Amendment

No. 3’’). In Amendment No. 1, OPRA responded to

the issues raised by commenters, but proposed no

changes to its original filing. In Amendment No. 2,

OPRA proposed to revise the list of factors to be

considered in the determination of a participation

fee and to implement the proposed fee structure on

a temporary basis to expire at the end of calendar

year 2000. In Amendment No. 3, as described

below, OPRA proposes to modify its initial filing to

incorporate into the OPRA Plan the concept of a

participation fee, with the specific standards

applicable to the determination of the amount of a

participation fee to be added by a future OPRA Plan

amendment, subject to Commission approval.

OPRA also proposes to make conforming changes

to its Application Agreement.

6See Archipelago Letter, Justice Letter, and ISE

Letter, supra note 4.

of the outstanding voting securities of

the other person; (b) any person 5% or

more of whose outstanding voting

securities are directly or indirectly

owned, controlled or held with power to

vote by the other person; and (c) any

person directly or indirectly controlling,

controlled by, or under common control

with the other person.

2. Rule 17a–8 under the Act exempts

from the prohibitions of section 17(a)

mergers, consolidations, or purchases or

sales of substantially all of the assets of

registered investment companies that

are affiliated persons solely by reason of

having a common investment adviser,

common directors/trustees, and/or

common officers, provided that certain

conditions set forth in the rule are

satisfied.

3. Applicants state that the National

City Group holds of record more than

5% (and in some cases more than 25%)

of the outstanding voting securities of

certain of the Funds. Because of this

ownership, applicants state that the

Funds may be deemed affiliated persons

for reasons other than those set forth in

rule 17a–8 and therefore unable to rely

on the rule. Applicants request an order

pursuant to section 17(b) of the Act

exempting them from section 17(a) to

the extent necessary to consummate the

Reorganization.

4. Section 17(b) of the Act provides

that the SEC may exempt a transaction

from the provisions of section 17(a) if

the evidence establishes that the terms

of the proposed transaction, including

the consideration to be paid, are

reasonable and fair and do not involve

overreaching on the part of any person

concerned, and that the proposed

transaction is consistent with the policy

of each registered investment company

concerned and with the general

purposes of the Act.

5. Applicants submit that the terms of

the Reorganization satisfy the standards

set forth in section 17(b). Applicants

note that the Boards, including a

majority of the Disinterested Trustees,

found that participation in the

Reorganization is in the best interests of

each Fund and that the interests of the

existing shareholders of each Fund will

not be diluted as a result of the

Reorganization. Applicants also note

that the Reorganization will be based on

the Funds’ relative net asset values.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–13615 Filed 5–31–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42817; File No. SR–OPRA–

99–01]

Options Price Reporting Authority;

Notice of Filing and Order Granting

Accelerated Effectiveness of

Amendment to OPRA Plan Adopting a

Participation Fee Payable by Each New

Party to the Plan

May 24, 2000.

On August 16, 1999, pursuant to Rule

11Aa3–2 under the Securities Exchange

Act of 1934 (‘‘Act’’),1 the Options Price

Reporting Authority (‘‘OPRA’’) 2

submitted to the Securities and

Exchange Commission (‘‘Commission’’)

an amendment to the Plan for Reporting

of Consolidated Options Last Sale

Reports and Quotation Information

(‘‘OPRA Plan’’). The proposed

amendment would add provisions

applicable to a participation fee payable

by each new party to the OPRA Plan

and codifies procedures applicable to

the admission of new parties to the

OPRA Plan. Notice of the proposed

OPRA Plan amendment was published

in the Federal Register on October 20,

1999.3 The Commission received three

comment letters on the proposed OPRA

Plan amendment.4 On January 3, 2000,

April 28, 2000, and May 18, 2000,

OPRA submitted Amendments Nos. 1,

2, and 3, respectively.5 The Commission

is publishing this notice and order to

grant accelerated approval to the

proposed OPRA Plan amendment, as

revised by Amendment No. 3, and to

solicit comments from interested

persons on Amendment No. 3.

I. Background

Currently, the OPRA Plan provides

that any national securities exchange or

registered securities association whose

rules governing the trading of

standardized options have been

approved by the Commission may

become a party to the OPRA Plan,

provided it agrees to conform to the

terms and conditions of the OPRA Plan.

However, the OPRA Plan does not

provide procedures for the application

process or for a participation fee to be

paid by an exchange at the time it

becomes a party to the OPRA Plan.

In response to the application recently

received from the International

Securities Exchange (‘‘ISE’’) to become a

party to the OPRA Plan and in

anticipation of the receipt of additional

applications from other new options

exchanges, OPRA’s initial filing

proposed to incorporate into the OPRA

Plan certain application forms and

procedures to be used to apply to

become a party to the OPRA Plan and

to obtain interim access to the OPRA

system and to the OPRA Processor for

planning and testing purposes. The

initial filing also proposed to add to the

OPRA Plan provisions for a one-time

participation fee payable by each new

party to the OPRA Plan.

The Commission received three

comment letters on the proposed OPRA

Plan amendment.6 None of the

commenters oppose the proposed

establishment of an OPRA participation

fee. However, the commenters raise

concerns regarding the factors OPRA

proposed to consider in determining the

amount of the participation fee,

asserting that the proposed OPRA Plan

amendment could create a barrier to

entry into the options industry that

could harm competition. In response to

35148 Federal Register / Vol. 65, No. 106 / Thursday, June 1, 2000 / Notices

7See Amendment No. 3, supra note 5.

8See Amendment No. 3, supra note 5.

9 15 U.S.C. 78k–1(b)(5).

10 In approving this proposed OPRA Plan

amendment, the Commission has considered its

impact on efficiency, competition, and capital

formation. 15 U.S.C. 78c(f) 11 17 CFR 240.11A3–2.

12 15 U.S.C. 78k–1.

13 17 CFR 240.11Aa3–2.

the commenters, OPRA proposes to

modify the proposal.7

II. Description and Purpose of

Amendment No. 3 to the Plan

Amendment

The purpose of Amendment No. 3 to

the proposed OPRA Plan amendment, as

described above, is to further modify

that part of the proposed OPRA Plan

amendment concerning the

participation fee, and to make

conforming changes to the Application

Agreement filed as part of the original

filing. Because the OPRA Plan

participants and the Commission have

not yet reached agreement on the

precise standards to be applied in

determining the amount of the

participation fee, OPRA proposes, in

Amendment No. 3 to the OPRA Plan

amendment, to eliminate the proposed

factors to be considered in determining

the participation fee and the

requirement that the fee be paid as a

condition to becoming a party to the

OPRA Plan.8 Instead, Amendment No. 3

would incorporate into the OPRA Plan

only the concept of a participation fee,

with the specific standards applicable to

the determination of the amount of the

fee to be added by a future OPRA Plan

amendment that would be subject to a

separate filing and Commission

approval. Although any new party to the

OPRA Plan would be subject to the new

participation fee, the fee would not be

payable until after the applicable

standards have been approved by the

Commission and a specific fee based on

those standards has been agreed upon

by OPRA and the new participant.

A new exchange would not have a

vote on the adoption of the specific

standards applicable to the

determination of the fee to be paid by

that party or on the determination of the

amount of the fee based on those

standards, although it may participate

with the other parties in the discussion

of the specific standards to be adopted.

As was provided in the proposed OPRA

Plan amendment as originally filed, in

the event OPRA and the new participant

do not agree on the amount of the

participation fee, the amount of the fee

will be subject to review by the

Commission pursuant to Section

11A(b)(5) of the Act.9

III. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning Amendment No.

3 to the proposed OPRA Plan

amendment, including whether it is

consistent with the Act. Persons making

written submissions should file six

copies thereof with the Secretary,

Securities and Exchange Commission,

450 Fifth Street, NW, Washington, DC

20549–0609. Copies of the submission,

all subsequent amendments, and all

written statements with respect to

Amendment No. 3 to the proposed

OPRA Plan amendment that are filed

with the Commission, and all written

communications relating to the

Amendment No. 3 to the proposed

OPRA Plan amendment between the

Commission and any person, other than

those withheld from the public in

accordance with the provisions of 5

U.S.C. 552, will be available for

inspection and copying in the

Commission’s Public Reference Room.

Copies of the filing also will be available

at the principal offices of OPRA. All

submissions should refer to file number

SR–OPRA–99–01 and should be

submitted by June 22, 2000.

IV. Commission’s Findings and Order

Granting Accelerated Approval of

Amendment No. 3 to the Proposed

OPRA Plan Amendment

After careful review, the Commission

finds that the proposed OPRA Plan

amendment as revised by Amendment

No. 3, is consistent with the

requirements of the Act and the rules

and regulations thereunder.10

Specifically, the Commission believes

that Amendment No. 3 to the proposed

OPRA Plan amendment is consistent

with Rule 11Aa3–2 11 in that it will

contribute to the maintenance of fair

and orderly markets and remove

impediments to and perfect the

mechanisms of a national market

system. The Commission notes that any

new party to the OPRA Plan would be

subject to a participation fee. The fee,

however, would not be payable until

after specific standards for determining

the fee have been approved by the

Commission and a specific fee based on

those standards has been agreed upon

by OPRA and the new participant.

The Commission believes that is

reasonable for the OPRA Plan to provide

for an initial participation fee to be paid

by new parties to the OPRA Plan. Until

specific standards can be agreed upon

by the OPRA participants and approved

by the Commission, however, the

Commission believes it is appropriate

for new exchanges to be admitted as

parties to the OPRA Plan without

requiring such new parties to pay a

participation fee immediately.

In addition, Amendment No. 3 to the

OPRA Plan amendment would allow

new parties to the OPRA Plan to

participate in discussions regarding the

specific standards on which the

participation fee is to be based, but

would prohibit new parties from voting

on the adoption of such standards. The

Commission believes that because

specific standards would be the subject

of a separate filing and published by the

Commission for notice and comment,

new parties would have a voice, if not

a vote, regarding the propriety of such

standards. Further, the Commission

notes that such standards will

ultimately be subject to Commission

approval, which will ensure further

review of this issue.

The Commission finds good cause to

accelerate the approval of Amendment

No. 3 to the proposed OPRA Plan

amendment prior to the thirtieth day

after the date of publication in the

Federal Register. The Commission notes

that Amendment No. 3 to the proposed

OPRA Plan amendment is responsive to

concerns expressed by commenters and

Commission staff regarding the

propriety of the proposed factors to be

considered in the determination of a

participation fee. In addition, approving

Amendment No. 3 to the proposed

OPRA Plan amendment on an

accelerated basis will permit the OPRA

Plan to provide for a fee as ISE becomes

a party to the OPRA Plan. The

Commission believes that approving the

amended proposal on an accelerated

basis will provide the OPRA Plan

participants additional time to develop

appropriate standards upon which a

participation fee should be based,

without unnecessarily delaying ISE’s

bid to become a party to the OPRA Plan.

The Commission finds, therefore, that

granting accelerated approval of

Amendment No. 3 to the proposed

OPRA Plan amendment is consistent

with Section 11A of the Act.12

V. Conclusion

It is therefore ordered, pursuant to

Rule 11Aa3–2 of the Act,13 that the

proposed OPRA Plan amendment, as

amended by Amendment No. 3, (SR–

OPRA–99–01) is approved on an

accelerated basis.

Federal Register / Vol. 65, No. 106 / Thursday, June 1, 2000 / Notices 35149

14 17 CFR 200.30–3(a)(29).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3See Securities Exchange Act Release No. 29682

(September 13, 1991), 56 FR 47973 (September 23,

1991) (File Nos. SR–Amex–90–38; SR–CBOE–90–

27; SR–NASD–91–02; SR–NYSE–90–51; and SR–

PSE–90–41). 4 15 U.S.C. 78f(b)(5).

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–13616 Filed 5–31–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42821; File No. SR–CBOE–

00–18]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Board Options Exchange,

Inc. To Interpret Rules Relating to

Customer Communications

May 24, 2000.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on April 20,

2000, the Chicago Board Options

Exchange, Inc. (‘‘CBOE’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I, II, and III below, which Items

have been prepared by the Exchange.

The Commission is publishing this

notice to solicit comments on the

proposed rule change from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The CBOE proposes to issue a

Regulatory Circular to its membership

setting forth a clarifying interpretation

to Exchange Rule 9.21, Communications

to Customers, which governs

communications from member firms to

customers or members of the public.

The text of the proposed rule change is

available at the CBOE and at the

Commission.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

CBOE included statements concerning

the purpose of and basis for the

proposed rule change and discussed any

comments it received on the proposed

rule change. The text of these statements

may be examined at the places specified

in Item IV below. The CBOE has

prepared summaries, set forth in

Sections A, B, and C below, of the most

significant aspects of such statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

Exchange Rule 9.21, Communications

to Customers, governs communications

between Exchange members and their

customers and other members of the

public. The Exchange, along with the

other options exchanges, has published

Guidelines for Options Communications

(‘‘Guidelines’’) 3 to explain the customer

communications rules of the options

exchanges and the interpretations of

these rules. The Exchange proposes to

issue a Regulatory Circular to formally

install a clarifying interpretation that

has long been applied by the Exchange.

This interpretation deals with the

requirement to discuss tax

considerations when engaging in certain

option strategies. Although the

Exchange believes this interpretation to

be consistent with and fairly implied by

Rule 9.21 and the Guidelines, the

Exchange believes that clarification in a

Regulatory Circular would be beneficial

to its members.

Although Rule 9.21 is silent regarding

tax considerations in customer

communications, the Guidelines and the

Exchange’s internal checklist

(‘‘Checklist’’), which CBOE’s

Department of Financial and Sales

Practice Compliance uses in reviewing

communication materials, do require

that tax considerations be discussed in

communications in certain

circumstances. The Guidelines state,

‘‘depending upon the technical or

specific nature of such communication,

any one or more of the following points

should be addressed.’’ The Guidelines

go on to list various considerations,

including the following statement about

taxes, ‘‘[s]ince options transactions may

involve complex tax considerations, it

would misleading to omit the mention

of such strategies from any

communication that discusses or

recommends options strategies.’’ In

response to comments and

recommendations made by the

Commission’s Office of Compliance

Inspections and Examinations, the

Exchange in February 1994 added

language to its Checklist reflecting the

Exchange’s long-standing practice in

reviewing communications for tax

considerations. That practice was, and

is, to require a discussion of tax

considerations if the communication is

educational material or sales literature

that is strategy specific and complex.

The Exchange believes that more

clarification could be provided to its

members regarding this topic and has,

therefore, decided to issue an

interpretation in a Regulatory Circular

clarifying which communications

require a mention about tax

considerations. The language in the

interpretation mimics the language

contained in the Exchange’s Checklist.

The proposed interpretation states that

an advisory concerning taxes is required

for educational material and sales

literature involving specific, detailed

and complex option strategies. In

addition, the proposed interpretation

states an advisory regarding taxes is not

necessary where the communication is

of a general, noncomplex nature or

involves common basic options

strategies (e.g., purchasing, covered

writing or cash secured put writing). An

example of an appropriate advisory

concerning taxes, where one is needed,

would be, ‘‘[b]ecause of the importance

of tax considerations to all option

transactions, the investor considering

options should consult with his/her tax

advisor as to how taxes affect the

outcome of contemplated options

transactions.’’

Again, although the proposed

interpretation merely restates the

Exchange’s long-standing policy in

reviewing customer communications for

the inclusion of discussions of tax

considerations, the Exchange believes

that this policy also makes sense from

a practical standpoint. The Exchange

believes that in common, basic option

strategies the tax consequences are

straightforward. Therefore, the

Exchange believes that the inclusion of

a tax advisory in all communications

might serve to lessen the impact of the

advisory in those cases where the

advisory serves a useful purpose.

The Exchange believes that formal

clarification of this interpretation of

Rule 9.21 is warranted; however, the

Exchange also believes that its longstanding interpretation is appropriate

and supported by the language of the

Guidelines.

2. Statutory Basis

The CBOE believes the proposed

Regulatory Circular interpretation of

Exchange Rule 9.21 is consistent with

and further the objectives of Section

6(b)(5) 4 of the Act in that it is designed

to remove impediments to a free and