Federal Register / Vol. 62, No. 171 / Thursday, September 4, 1997 / Notices 46785

allocations in the Eliminated Portfolio

determine that another investment is

more appropriate due to the change in

portfolio expenses, such Contract

owners can transfer their Contract value

to any of the remaining thirteen

investment divisions.

Applicants Legal Analysis And

Conditions

1. Section 26(b) of the 1940 Act

provides that it shall be unlawful for

any depositor or trustee of a registered

unit investment trust holding the

security of a single issuer to substitute

another security for such security unless

the Commission shall have approved

such substitution; and the Commission

shall issue an order approving such

substitution if the evidence establishes

that it is consistent with the protection

of investors and the purposes fairly

intended by the policies and provisions

of the 1940 Act. Section 26(b) protects

the expectation of investors that the unit

investment trust will accumulate shares

of a particular issuer and is intended to

insure that unnecessary or burdensome

sales loads, additional reinvestment

costs or other charges will not be

incurred due to unapproved

substitutions of securities.

2. Applicants request an order

pursuant to section 26(b) of the 1940

Act approving the Substitution.

Applicants represent that the purposes,

terms, and conditions of the

Substitution are consistent with section

26(b). Applicants believe the

Substitution will benefit the

participants by eliminating a portfolio

with below average historical returns

which, due to its small size, is difficult

to manage in compliance with

applicable diversification requirements.

Applicants represent that the

Eliminated Portfolio, when compared to

funds with similar objectives, has been

performing below average and Maxim

Series Fund, Inc. plans to cease offering

the Eliminated Portfolio. Its one, five

and since inception returns of 19.77%,

12.56%, and 10.15% respectively, have

been below average compared to similar

funds. GWL&A proposes to provide

Contract owners with an investment in

the Substituted Portfolio which has

similar investment objectives to the

Eliminated Portfolio. The Substitution

will effectively remove a poorly

performing portfolio from the Separate

Account while the similarity in

investment objectives provides a means

for Contract owners to continue their

current investment goals and risk

expectations.

3. Applicants represent that the

Substitution will be effected at net asset

value in conformity with sections 22(c)

and 22(g) of the 1940 Act and Rule 22c–

1 thereunder. The Substitution may be

effected primarily for cash, but also may

involve partial redemptions in-kind of

securities (‘‘Related Transactions’’). The

use of in-kind redemptions in

conformity with section 22(g) of the

1940 Act would alleviate the impact of

the brokerage fees and expenses upon

GWL&A or the investment adviser or

sub-adviser of the Substituted

Portfolios, as these entities will bear all

expenses related to the Substitution.

The Related Transactions will be

effected to the extent consistent with the

investment objectives and any

applicable diversification requirements.

4. Either GWL&A or the investment

adviser of the Substituted Portfolio will

assume the transfer and custodial

expenses and legal and accounting fees

incurred with respect to the

Substitution. Participants will not incur

any fees or charges as a result of the

transfer of account values from any

portfolio. Applicants represent that

there will be no increase in the Contract

or Separate Account fees and charges

after the Substitution. Applicants

further represent that the Substitution is

designed to avoid any adverse federal

tax impact to the Contract owners or

participants.

5. Section 17(a)(1) of the 1940 Act

prohibits any affiliated person or an

affiliate of an affiliated person, of a

registered investment company, from

selling any security or other property to

such registered investment company.

Section 17(a)(2) of the 1940 Act

prohibits any affiliated person as

described above from purchasing any

security or other property from such

registered investment company.

6. Section 17(b) of the 1940 Act

authorizes the Commission to issue an

order exempting a proposed transaction

from section 17(a) if: (a) The terms of

the proposed transaction are fair and

reasonable and do not involve

overreaching on the part of any person

concerned; (b) the proposed transaction

is consistent with the policy of each

registered investment company

concerned; and (c) the proposed

transaction is consistent with the

general purposes of the 1940 Act.

7. Applicants request an order

pursuant to section 17(b) of the 1940

Act exempting the Related Transactions

from the provisions of sections 17(a) of

the 1940 Act.

8. Applicants represent that the terms

of the Substitution are reasonable and

fair and do not involve overreaching on

the part of any person concerned. The

Substitution will be effected at the net

asset value of the securities involved

and the interests of Contract owners will

not be diluted. In-kind redemptions will

alleviate some of the expenses involved

with the Substitution and only will be

used to the extent they are consistent

with the investment objectives and

applicable diversification requirements

of the affected portfolios. All in-kind

redemptions will be conducted in a

manner conforming with the conditions

of Rule 17a–7 under the 1940 Act.

9. Applicants represent that the

Substitution and Related Transactions

are consistent with the policies of each

investment company involved and the

general purposes of the 1940 Act, and

comply with the requirements of section

17(b).

Conclusion

Applicants assert that, for the reasons

summarized above, the requested order

approving the Substitution and Related

Transactions should be granted.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–23390 Filed 9–3–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–38986; File No. SR–Amex–

97–28]

Self-Regulatory Organizations, Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by American Stock

Exchange, Inc. Relating to the

Extension of the Exchange’s Pilot

Program for Specialists in Portfolio

Depositary Receipts and Index Fund

Shares To Participate in the AfterHours Trading Facility

August 27, 1997.

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

Securities Exchange Act of 1934, 15

U.S.C. 78s(b)(1), notice is hereby given

that on August 6, 1997, the American

Stock Exchange, Inc. (‘‘Amex’’ or

‘‘Exchange’’) filed with the Securities

and Exchange Commission the proposed

rule change as described in Items I, II,

and III below, which items have been

prepared by the self-regulatory

organization. The Commission is

publishing this notice to solicit

comments on the proposed rule change

from interested persons and to grant

accelerated approval to the proposed

rule change.
46786 Federal Register / Vol. 62, No. 171 / Thursday, September 4, 1997 / Notices

1The Exchange currently lists two Portfolio

Depositary Receipts, viz., Standard and Poor’s

Depositary Receipts on the S&P 500 and MidCap

Indexes (‘‘SPDRs’’). The Exchange currently lists 17

Index Fund Shares which are commonly referred to

as WEBSsm. WEBS are shares issued by an open-end

management investment company that seek to

provide investment results that correspond

generally to the price and yield performance of a

specified foreign or domestic equity market index.

The Exchange currently lists WEBS based on the

following Morgan Stanley Capital International

(‘‘MSCI’’) indices: MSCI Australia Index; MSCI

Austria Index; MSCI Belgium Index; MSCI Canada

Index; MSCI France Index; MSCI Germany Index;

MSCI Hong Kong Index; MSCI Italy Index; MSCI

Japan Index; MSCI Malaysia Index; MSCI Mexico

Index; MSCI Netherlands Index; NSCI Singapore

(Free) Index; MSCI Spain Index; MSCI Sweden

Index; MSCI Switzerland Index; and MSCI United

Kingdom Index (See SR–AMEX–95–43).

2According to the Exchange, there was very

limited trading volume in the AHT for SPDRs,

investment trust securities and Index Fund Shares

during August 1, 1996 to May 30, 1997. The

Exchange, nevertheless, is optimistic that there

could be increased after hours trading activity in

these securities given their increasing popularity.

3 In approving this rule, the Commission notes

that it has considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f).

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The text of the proposed rule change

is available at the Office of the

Secretary, the Amex 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

self-regulatory organization 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 III below.

The self-regulatory organizations 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 the

Statutory Basis for, the Proposed Rule

Change

(1) Purpose

The Exchange seeks to continue the

pilot program permitting specialists in

Portfolio Depositary Receipts (‘‘PDRs’’),

investments trust securities and Index

Fund Shares 1 to participate in the afterhours trading (‘‘AHT’’) facility to

‘‘clean-up’’ order imbalances and to

effect closing price coupled orders.2

The Exchange believes that extension

of the Exchange’s pilot program to

permit specialists in PDRs, investment

trust securities and Index Fund Shares

to participate in the AHT facility in

order to ‘‘clean-up’’ order imbalances

and effect closing price coupled orders

would benefit investors by providing

additional liquidity to the listed cash

market for derivative securities based

upon well known market indexes. The

market price of these securities is based

upon transactions largely effected in

markets other than the Amex. (In the

case of Index Fund Shares, the market

price of these securities is based

exclusively on transactions occurring

outside the Amex.) The specialist in the

Amex listed derivatives has no unique

access to market sensitive information

regarding the market for the underlying

securities or closing index values. The

Exchange, therefore, believes that

specialist participation in the AHT

facility in PDRs, investment trust

securities and Index Fund Shares in the

manner previously approved by the

Commission does not raise any market

integrity issues. In addition, should a

customer not care for an execution at

the closing price, the rules of the

Exchange’s AHT facility permit

cancellation of an order up to the close

of the AHT session at 5 p.m. (Order in

the AHT facility are not executed until

the 5 p.m. close of the After-Hours

session.) A customer, therefore, has

approximately 40 minutes to determine

if an execution at the closing price suits

its needs, and may cancel its order if it

believes that the closing price does not

suit its objectives.

(2) Statutory Basis

The proposed rule change is

consistent with Section 6(b) of the Act

in general and furthers the objectives of

Section 6(b) in particular in that it is

designed to prevent fraudulent

manipulative acts and practices,

promote just and equitable principles of

trade, remove impediments to and

perfect the mechanism of a free and

open market and a national market

system, and, in general, protect

investors and the public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

Amex does not believe the proposed

extension of the pilot program will

impose any burden on competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

No written comments were solicited

or received with respect to the proposed

rule change.

III. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning the foregoing.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of the

submission, all subsequent

amendments, all written statements

with respect to the proposed rule

change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of 5 U.S.C. 552, will be

available for inspection and copying in

the Commission’s Public Reference

Room, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the PCX. All submissions

should refer to File No. SR–Amex–97–

28 and should be submitted by

September 25, 1997.

IV. Commission’s Findings and Order

Granting Accelerated Approval of

Proposed Rule Change

The Commission has carefully

reviewed PCX’s proposed rule change

and believes, for the reasons set forth

below, the proposal is consistent with

the requirements of the Act and the

rules and regulations thereunder

applicable to a national securities

exchange, and in particular, the

requirements of Sections 6(b)(5) in that

it is designed to prevent fraudulent,

manipulative acts and practices and to

promote just and equitable principles of

trade, and to remove impediments to

and protect the mechanism of a free and

open market and to protect investors

and the public interest.3

Under the pilot program, specialists

in PDRs, investment trust securities, and

Index Fund Shares may participate in

the AHT facility to clean up order

imbalances by entering an order for

their own account. The pilot program

also allows specialists in PDRs,

investment trust securities, and Index

Fund Shares to participate in a coupled

closing price order as long as the other

side of the order is not for an account

in which a member or member

organization has a direct or indirect

interest. Moreover, the pilot program

eliminates the mitigation of limit orders

for PDRs, investment trust securities

and Index Fund Shares from the

specialists’ limit order book to the AHT
Federal Register / Vol. 62, No. 171 / Thursday, September 4, 1997 / Notices 46787

4 15 U.S.C. 78f and 78s(b)(2).

5 15 U.S.C. 78s(b)(2).

6 17 CFR 200.30–3(a)(12).

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

2Quotations and quotation sizes in reported

securities may be entered into the Consolidated

Quotations Service (CQS) through The Nasdaq

Stock Market only by an Association member

registered with it as a CQS market maker. See

NASD rule 6320.

facility to prevent the potential for

manipulation or misuse of specialists’

information regarding which limit

orders are eligible for execution in the

AHT facility.

In the original approval order, the

Commission observed that the pilot

program should assist specialists in

their obligation to minimize temporary

disparity between supply and demand.

Moreover, the Commission agreed with

the Exchange that the pilot program

should benefit investors by providing

additional liquidity to the listed cash

market for derivative securities based

upon well-known market indexes. The

Commission also noted that the

proposed rule change struck a

reasonable balance between the

Exchange’s need to accommodate the

needs of investors by providing

additional liquidity to the listed cash

market for derivative securities based on

market indexes, and the need to prevent

the potential for manipulation or

misuses of information.

The Commission initially approved

the pilot program for one year. The pilot

program has been extended several

times to allow the Exchange and the

Commission to evaluate further whether

there were additional issues that needed

to be addressed. At the Commission’s

request, the Exchange submitted a

report with this rule filing describing

the Exchange’s experience with the pilot

program. According to the report, there

was very limited trading volume in the

AHT for SPDRs, investment trust

securities and Index Fund Shares during

August 1, 1996 to May 30, 1997. Given

the experience Amex has gained

through extended operation and

renewal of the pilot program, the

Commission expects the Amex to

determine, at least two months prior to

expiration of the current pilot, whether

to seek permanent approval of, or

discontinue, the pilot. Should the

Exchange decide to seek permanent

approval of the pilot program, it should

submit another report to the

Commission by May 1, 1998, describing

its experiences with the pilot program.

The Commission believes that there is

good cause for approving the proposed

rule change prior to the thirtieth day

after the date of publication of notice

thereof in the Federal Register. This

will permit the pilot program to

continue on an uninterrupted basis for

another year, until August 29, 1998. The

Exchange proposes to continue using

the identical procedures contained in

the pilot program as originally

approved. In addition, the rule change

that implemented the pilot program was

published in the Federal Register for

the full comment period and no

comments were received. Accordingly,

the Commission believes that it is

consistent with Sections 6 and 19(b) of

the Act 4 to accelerate approval of the

proposal rule change.

It is therefore, ordered, pursuant to

Section 19(b)(2) of the Act,5 that the

proposed rule change (SR–Amex–97–

28) is hereby approved on an

accelerated basis.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–23392 Filed 9–3–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–38985; File No. SR–NASD–

97–53]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

National Association of Securities

Dealers, Inc. Relating to Trading in

Exchange-Listed Securities in the

Third Market

August 27, 1997.

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

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

July 28, 1997, the National Association

of Securities Dealers, Inc. (‘‘NASD’’),

through its wholly-owned subsidiary,

The Nasdaq Stock Market, Inc.

(‘‘Nasdaq’’), filed with the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’) the proposed rule

change as described in Items I, II, and

III below, which Items have been

prepared by Nasdaq. 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 NASD is proposing to amend

several rules governing the trading in

exchange-listed securities in the overthe-counter market. Specifically, the

NASD is proposing to amend rules of

the NASD to: (1) Codify permissible

uses of computer-generated quote

systems with respect to exchange-listed

securities; (2) eliminate the excess

spread rule for market makers in

exchange-listed securities; (3) reduce

the minimum quotation size applicable

to market makers in exchange-listed

securities to one unit of trading (i.e., 100

shares), regardless of whether the CQS

market maker 2 is displaying a

customer’s limit order or quoting for its

own proprietary account; (4) extend

exemptive provisions of the NASD’s

limit order protection rule applicable to

Nasdaq-listed securities (the ‘‘Manning

Rule’’) to exchange-listed securities; and

(5) reduce from 1000 to 100 the number

of shares that the Computer Assisted

Execution System (‘‘CAES’’) will

execute automatically. Below is the text

of the proposed rule change. Proposed

new language is underlined; proposed

deletions are in brackets.

6330. Obligations of CQS Market Makers

(a) No Change.

(b) [CQS market makers shall be

required to input a minimum quotation

size of 200 or 500 shares in each

reported security (as established and

published from time to time by the

Association) depending on trading

characteristics of the security; provided

that a CQS market maker may input a

quotation size less than such minimum

quotation size to display a limit order in

compliance with SEC Rule 11Ac1–4. A

limit order displayed in a] A CQS

market maker’s quotation [pursuant to

SEC Rule 11Ac1–4] must be for at least

one normal unit of trading [or a multiple

thereof].

[(c) Excess Spreads.

A market maker shall not enter

quotations in CQS securities that exceed

the parameters for maximum allowable

spreads as approved by the

Association’s Board of Governors and

that may be published from time to time

by the Association. The maximum

allowable spreads for CQS securities

shall be 125 percent of the average of

the three (3) narrowest market maker

spreads in each security, which average

spread calculations shall include

quotations from national securities

exchanges (if the number of CQS market

makers in a security plus the number of

national securities exchanges trading

that security is less than three (3), the

maximum allowable spread will be 125

percent of the average spread);

provided, however, that the maximum

allowable spread shall never be less

than 1⁄4 of a point.]

(d) redesignated as paragraph (c)

(d) Computer-Generated Quotations.

(1) General Prohibition—Except as

provided below, this rule prohibits the