Federal Register / Vol. 62, No. 178 / Monday, September 15, 1997 / Notices 48331

11 17 CFR 200.19b–4.

12 15 U.S.C. § 78s(b)(2).

13 17 CFR 200.30–3(a)(12).

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

2The Commission has modified the text of the

summaries prepared by DTC.

3Letter from Robert L.D. Colby, Deputy Director,

Division of Market Regulation, Commission, to Paul

Saltzman, Senior Vice President and General

Counsel, PSA The Bond Market Association,

(January 17, 1997); letter from Richard L. Gregg,

Commissioner, Bureau of the Public Debt,

Department of the Treasury, to Michael A.

Macchiaroli, Associate Director, Division of Market

Regulation, Commission (January 17, 1997).

4PSA The Bond Market Association Trading

Practice Guidelines for Inflation Indexed Securities

(December 18, 1996).

5 15 U.S.C. 78q–1.

6 15 U.S.C. 78s(b)(3)(A)(iii).

number of specialists or co-specialists

who register in additional securities.

The report should also include data on

(1) the rate of deregistration at the

specialist’s request, and (2) the number

of specialists applying to register in

securities that do not have a specialist

already assigned, and compare that data

for the pilot year to the prior year. In

addition, the Commission requests that

the CHX submit by July 8, 1998, any

proposed rule change pursuant to Rule

19b–4 under the Act 11 to further extend

or seek permanent approval of the pilot

program.

IV. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,12 that the

proposed rule change (SR–CHX–97–15)

is approved on a one year pilot basis

through September 8, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.13

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–24305 Filed 9–12–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39031; File No. SR–DTC–

97–07]

Self-Regulatory Organizations; The

Depository Trust Company; Notice of

Filing and Immediate Effectiveness of

Proposed Rule Change Relating to

Disclosure Requirements for

Transactions Involving Inflation

Indexed Securities Through the

Institutional Delivery System

September 8, 1997.

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

Securities Exchange Act of 1934

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

May 19, 1997, The Depository Trust

Company (‘‘DTC’’) 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 primarily by DTC. The

Commission is publishing this notice to

solicit comments from interested

persons on the proposed rule change.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The purpose of the proposed rule

change is to amend Section M of DTC’s

participant operating procedures in

accordance with certain disclosure

requirements for transactions involving

inflation indexed securities processed

through DTC’s Institutional Delivery

(‘‘ID’’) system.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

DTC 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. DTC has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of such statements.2

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

PSA The Bond Market Trade

Association (‘‘PSA’’) on behalf of its

members and all other registered

brokers and dealers, received no-action

and interpretive relief from the

Commission and the Treasury

(collectively ‘‘interpretive relief’’) 3

regarding the application of certain

regulations to inflation indexed

securities issued by the U.S. Treasury

Department (‘‘Treasury’’). The purpose

of the proposed rule change is to enable

broker-dealers that use DTC’s ID system

for generating confirmations for their

customer transactions to comply with

the disclosure requirements set forth in

the interpretive relief.

The interpretative relief requires

broker-dealers to disclose in

confirmations for inflation indexed

securities that yield to maturity may

vary due to inflation adjustments or

provide disclosure to similar effect. A

broker-dealer using the ID system can

enter data in the security type field

identifying the security as an inflation

indexed security by using a designated

acronym (i.e., ‘‘ITS’’). Under the

proposed rule change, DTC will add

procedures to its ID system to provide

that when the designated acronym

identifying an inflation indexed security

appears in the security type field of the

ID confirmation, the required disclosure

will be deemed to be a part of the ID

confirmation for that transaction.

The interpretative relief also requires

confirmations involving inflation

indexed securities for when-issued

transactions and for transactions in the

Treasury’s Separate Trading of

Registered Interest and Principal of

Securities (‘‘STRIPS’’) program to

disclose the real yield (i.e., nominal

yield not adjusted for inflation) for the

securities.4 Under the proposed rule

change, a broker-dealer using the ID

system to send confirmations for such

transactions will be able to disclose the

real yield by entering that figure either

in the yield field or in the special

instructions field of trade data

submitted to the ID system.

DTC believes the proposed rule

change is consistent with the

requirements of Section 17A of the Act 5

and the rules and regulations

thereunder because the proposed rule

change will assure the safeguarding of

securities and funds which are in the

custody or control of DTC by facilitating

the confirmation of transactions in

inflation indexed securities through the

use of DTC’s ID system.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

DTC perceives no impact on

competition by reason of the proposed

rule change.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

The proposed rule change was

developed through discussions with

PSA acting on behalf of its members and

with several participants. Written

comments from DTC participants or

others have not been solicited or

received on the proposed rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The foregoing rule change has become

effective pursuant to Section

19(b)(3)(A)(iii) 6 of the Act and pursuant
48332 Federal Register / Vol. 62, No. 178 / Monday, September 15, 1997 / Notices

7 17 CFR 240.19b–4(e)(4).

8Securities Exchange Act Release No. 38950

(August 19, 1997), 62 FR 44997.

9 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3Securities Exchange Act Release No. 38808 (July

1, 1997), 62 FR 37111 (July 10, 1997).

4See letter from Michele R. Weisbaum, Vice

President and Associate General Counsel, Phlx to

David Sieradzki, Attorney, SEC, dated August 6,

1997 (‘‘Amendment No. 1’’). In Amendment No. 1,

the Phlx proposed to amend Option Floor

Procedure Advice B–7, Time Priority of Bids/Offers

in Foreign Currency Options, to delete text

describing the enhanced specialist split for 3D

options.

5 3D FCOs are cash-settled, European-style, cash/

spot FCO contracts on the German mark that trade

in one-week and two-week expirations. See

Securities Exchange Act Release No. 33732 (Mar. 8,

1994), 59 FR 12023 (Mar. 15, 1994).

6See Securities Exchange Act Release No. 35177

(Dec. 29, 1994), 60 FR 2419 (Jan 9, 1995) (‘‘Original

Split Approval Order’’).

7See letter from Michele R. Weisbaum, Vice

President and Associate General Counsel, Phlx to

David Sieradzki, Attorney, SEC, dated June 30, 1997

(‘‘Phlx Letter’’).

8Telephone conversation between Michele R.

Weisbaum, Vice President and Associate General

Counsel, Phlx, James T. McHale, Special Counsel,

SEC and David Sieradzki, Attorney, SEC (June 19,

1997). Rule 1014(h) provides that ‘‘[t]his enhanced

split will not apply where a customer bid/offer for

under 100 contracts has time priority.’’

9The Exchange represents that it is in the process

of considering new and different types of parity

splits that, if adopted, would be applicable to all

products traded by specialists on the foreign

currency option floor or at least to a broader range

of specialist traded products. See Phlx Letter, supra

note 7.

10 15 U.S.C. 78f(b).

11 15 U.S.C. 78f(b)(5).

to Rule 19b–4(e)(4) 7 promulgated

thereunder because the proposal effects

a change in an existing service of a

registered clearing agency that does not

adversely affect the safeguarding of

securities or funds in the custody or

control of DTC or for which it is

responsible and does not significantly

affect the respective rights or obligations

of DTC or persons using the service. At

any time within sixty days of the filing

of such rule change, the Commission

may summarily abrogate such rule

change if it appears to the Commission

that such action is necessary or

appropriate in the public interest, for

the protection of investors, or otherwise

in furtherance of the purposes of the

Act.

On August 25, 1997, notice of filing

of File No. SR–DTC–97–07 was

incorrectly published in the Federal

Register as a proposed rule change filed

pursuant to Section 19(b)(2).8 This

notice of the proposed rule change

supersedes that release and correctly

publishes notice of filing of File No. SR–

DTC–97–07 as a proposed rule change

filed pursuant to Section 19(b)(3)(A).

The proposed rule change became

immediately effective upon filing with

the Commission on May 19, 1997.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing.

Persons making written submissions

should file six copies 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

Section, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of such

filing also will be available for

inspection and copying at the principal

office of DTC. All submissions should

refer to File No. SR–DTC–97–07 and

should be submitted by October 6, 1997.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–24303 Filed 9–11–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39030; File No. SR–PHLX–

97–25]

Self-Regulatory Organizations;

Philadelphia Stock Exchange, Inc.;

Order Granting Approval to Proposed

Rule Change and Notice of Filing and

Order Granting Accelerated Approval

of Amendment No. 1 Thereto, Relating

to Elimination of the Enhanced Parity

Split for the Specialist in the 3D

German Mark Foreign Currency

Options

September 8, 1997.

I. Introduction

On May 29, 1997, the Philadelphia

Stock Exchange, Inc. (‘‘Phlx’’ or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’), pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’) 1 and Rule 19b–4

thereunder,2 a proposed rule change to

eliminate from Exchange Rule 1014(h)

(‘‘Rule’’) the enhanced parity split for

the specialist in the dollar denominated

delivery German Mark (‘‘3D’’) foreign

currency options (‘‘FCOs’’).

The proposed rule change was

published for comment in the Federal

Register on July 10, 1997.3 No

comments were received on the

proposal. On August 6, 1997, the Phlx

submitted Amendment No. 1 to the

proposed rule change.4 This order

approves the proposal as amended.

II. Description of the Proposal

In January, 1995, the Exchange

amended the Rule to adopt an enhanced

split for its specialist in 3D FCOs 5 in

order to encourage the specialist to

make deeper markets to attract order

flow.6 The Rule provides that the

Foreign Currency Option Committee

(‘‘the Committee’’) would conduct a

review of the entitlement to the

enhanced parity split at the end of the

first year and then every 6 months

thereafter. Pursuant to the most recent

review, the Committee determined to

eliminate the enhanced split which was

only applicable to this one product

traded on the Foreign Currency Option

Floor of the Exchange. The specialist in

the product has not objected to the

elimination of the enhanced split. In

fact, the specialist firm trading this

product has indicated that enhanced

split is not particularly useful to the

firm and that the firm does not generally

take advantage of it.7 In addition, the

Exchange has represented that the order

size in this product is generally not

large enough to trigger the enhanced

split.8 Although the Exchange is

proposing to eliminate the enhancement

at this time, it represents it is continuing

to study the potential use of enhanced

splits for the Foreign Currency Option

Floor on a broader basis.9 By

eliminating the current enhanced split,

parity and priority will be determined

in accordance with Exchange Rule 119

and the remainder of section (h) to Rule

1014.

III. Discussion

The Commission finds that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder

applicable to a national securities

exchange, and, in particular, with the

requirements of Section 6(b).10

Specifically, the Commission believes

the proposal is consistent with the

Section 6(b)(5) 11 requirements that the