50422 Federal Register / Vol. 62, No. 186 / Thursday, September 25, 1997 / Notices

8 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See Letter from Michael D. Pierson, Senior

Attorney, Regulatory Policy, PCX to James T.

McHale, Special Counsel, Division of Market

Regulation (‘‘Division’’), SEC, dated July 29, 1997

(‘‘Amendment No. 1’’). Amendment No. 1, among

other issues, addressed maintenance standards and

revised the Exchange’s limitation of liability rule,

PCX Rule 7.13.

4See Securities Exchange Act Release No. 38884

(July 29, 1997), 62 FR 42150 (August 5, 1997).

5See Letter from Michael D. Pierson, Senior

Attorney, Regulatory Policy, PCX to Marianne H.

Duffy, Special Counsel, Division, SEC, dated

September 17, 1997 (‘‘Amendment No. 2’’).

Amendment No. 2 proposed an additional

maintenance standard regarding options eligibility

of the Index components.

6The 50 stocks comprising the Index are: BMC

Software Inc. (BMCS), Parametric Technology Corp.

(PMTC), Diamond Offshore Drilling, Inc. (DO),

Ascend Communications Inc. (ASND), Cabletron

Systems (CS), Altera Corp. (ALTR), Ciena Corp.

(CIEN), Linear Technology Inc. (LLTC), Paychex

Inc. (PAYX), Compuware Corp. (CPWR), XILINX

Inc. (XLNX), Maxim Integrated Products (MXIM),

Health Management Assoc. (HMA), McAfee

Associates Inc. (MCAF), Sterling Commerce Inc.

(SE), Iomega Corp. (IOM), Robert Half Intl. Inc.

(RHI), ATMEL Corp. (ATML), Bed Bath & Beyond

Inc. (BBBY), American Power Conversion (APCC),

Planet Hollywood Intl. Inc. (PHII), Synopsys Inc.

(SNPS), Reading and Bates Corp. (RB), Viking Office

Prods. Inc. (VKNG), Micron Electronics Inc. (MUEI),

Cambridge Technology Partners (CAPT), Blyth

Industries Inc. (BTH), Jabil Circuit Inc. (JBIL),

Novellus Systems Inc. (NVLS), Dollar Tree Stores

Inc. (DLTR), Jones Medical Inds. Inc. (JMED),

Pairgain Technologies Inc. (PAIR), Rexall Sundown

Inc. (RXSD), CDW Computer Centers Inc. (CDWC),

Titanium Metals Corp. (TIMT), Remedy Corp.

(RMDY), Aspect Telecommunications (ASPT), Delta

& Pine Land Co. (DLP), Telco Communications Grp.

Inc. (TCGX), APAC Teleservices Inc. (APAC),

Learning Tree Intl. Inc. (LTRE), Visio Corp. (VSIO),

Catalina Marketing Corp. (POS), Nautica Enterprises

Inc. (NAUT), Boston Technology Inc. (BSN), ETEC

Systems Inc. (ETEC), Mentor Corp. (MNTR), Gentex

Corp. (GNTX), Veritas Software Co. (VRTS), and Bio

Technology General Corp. (BTGS).

7The term I/B/E/S refers to the Institutional

Broker’s Estimate System, a source of analysts’

earnings expectation data that is obtained from over

7,000 analysts working for approximately 750

research organizations.

8 In the future, should the Index include non-U.S.

registered securities, such securities will not in the

aggregate comprise more than 10% of the Index

weight and will not represent more than 3 Index

components. Prior to reaching these limits, PCX

will notify the Commission to determine if a new

filing under Rule 19b–4 is required.

9The industry groupings and their Index weight

are as follows: apparel (0.76%); auto parts (0.63%);

biotechnology (0.56%); catalog/specialty

distribution (2.55%); computer communications

(5.66%); computer local area networks (4.52%);

computer software (20.45%); contract drilling

(6.29%); discount stores (1.14%); diversified

commercial services (8.37%); electronic data

processing peripherals (2.55%); electronic data

processing services (4.06%); electrical products

(1.82%); electronic data processing (1.53%);

electronic production equipment (3.18%); farming/

seeds/milling (0.86%); hospital/nursing

management (2.88%); medical specialties (0.64%);

other metals/minerals (0.91%); other

pharmaceuticals (2.15%); other speciality stores

(1.89%); other telephone/communications (0.84%);

packaged goods/cosmetics (1.35%); restaurants

(1.79%); semiconductors (16.99%); and

telecommunications equipment (5.63%). The

industry groupings are based upon the

classifications used by FactSet Research Systems,

Inc., an electronic market data provider of

information that is available by subscription in the

securities industry.

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, N.W.,

Washington, D.C. 20549. Copies of such

filings will also be available for

inspection and copying at the principal

office of OCC. All submissions should

refer to the file number SR–OCC–97–06

and should be submitted by October 16,

1997.

It Is Therefore Ordered, pursuant to

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

proposed rule change (File No. SR–

OCC–97–06) be and hereby is approved

on an accelerated basis.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–25446 Filed 9–24–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39087; File No. SR–PCX–

97–29]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change and

Amendment No. 1 Thereto and Notice

of Filing and Order Granting

Accelerated Approval of Amendment

No. 2 Thereto by the Pacific Exchange,

Inc. Relating to the Listing and Trading

of Options on the Morgan Stanley

Emerging Growth Index

September 17, 1997.

I. Introduction

On July 8, 1997, the Pacific Exchange,

Inc. (‘‘PCX’’ 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 list and trade

options on the Morgan Stanley

Emerging Growth Index (‘‘Index’’). On

July 29, 1997, the Exchange submitted

an amendment to the proposal.3 Notice

of the proposed rule change and

Amendment No. 1 appeared in the

Federal Register on August 5, 1997.4 No

comment letters were received

concerning the proposed rule change.

On September 17, 1997, the Exchange

submitted Amendment No. 2.5 This

order approves the PCX’s proposal, as

amended.

II. Description of the Proposal

The purpose of the proposed rule

change is to permit the Exchange to list

and trade European-style, cash-settled

options on the Index, a market

capitalization-weighted, broad-based

index developed by Morgan Stanley &

Co. Incorporated (‘‘Morgan Stanley’’)

comprised of the common stocks of 50

domestic emerging growth securities

representing 26 different industry

groups.

A. Design of the Index

The Index is comprised of 50

representative stocks 6 traded on the

New York Stock Exchange, Incorporated

(‘‘NYSE’’), the American Stock

Exchange, Incorporated (‘‘Amex’’) and

through the facilities of the National

Association of Securities Dealers,

Incorporated (‘‘NASD’’) automated

quotation system and are reported

national market system securities.

The Index was designed by Morgan

Stanley to reflect the emerging growth

equity market. The component

securities were selected for their market

capitalization, price per share, longterm

debt as a percentage of total capital,

mean estimated longterm (three year)

earnings per share growth rate, net sales

and return on average total equity.

Specifically, stocks were selected based

on whether they are ‘‘emerging’’ stocks

(in general, having current sales figures

of between $25 million and $2 billion

annually) and ‘‘growth’’ stocks (in

general, having a high mean I/B/E/S 7

anticipated earnings growth rate). A

primary consideration in determining

‘‘growth’’ is whether a stock’s expected

growth rate is significantly higher than

that of other stocks. In addition,

currently all of the issues are traded in

the United States and there are no

foreign issues or American Depositary

Receipts (‘‘ADRs’’) included in the

Index.8

The Exchange represents that the

Index currently is representative of the

domestic emerging growth stock market

as a whole, and therefore, believes it is

a broad-based index. In support of this,

the PCX notes that the Index is

comprised of companies in 26 different

industry groups, which range from

apparel (.76%) to auto parts (.63%) to

restaurants (1.79%).9 Although
Federal Register / Vol. 62, No. 186 / Thursday, September 25, 1997 / Notices 50423

10Routine corporate actions, such as stock splits

and stock dividends that require simple changes in

the common shares outstanding and the stock

prices of the companies in the Index will be

handled by PCX through a contract with Bridge

Data. Non-routine corporate actions and other

material changes such as share issuances that

change the market value of the Index and require

an Index divisor adjustment are performed by

Morgan Stanley. In addition, Morgan Stanley will

select all of the stocks that are added to the Index

at the time of the semi-annual rebalancing and

quarterly review.

11See PCX Rule 6.72.

12For example, on June 18, 1997, a position of

37,500 contracts would have a dollar value of

$1,168,800,000 (37,500 times the Index value of

311.68 times the Index multiplier of 100). For a

comparison of position limits on similar indices,

see Securities Exchange Act Release No. 32554

(June 29, 1993) 58 FR 36492 (July 7, 1993) (order

approving increase in position and exercise limits

on the Wilshire Small Cap Index to 37,500 contracts

on the same side of the market with no more than

22,500 of such contracts in the series with the

nearest expiration date) and Securities Exchange

Act Release No. 36504 (November 22, 1995) 60 FR

61275 (November 29, 1995) (order approving

increase in position and exercise limits on the PSE

Technology Index to 37,500 contracts on the same

side of the market with no more than 22,500 on

such contracts in the series with the nearest

expiration date).

13 In addition, the Options Price Reporting

Authority (‘‘OPRA’’) has represented that it has the

necessary systems capacity to support those new

series of index options that would result from the

introduction of Index options and long-term Index

options. See letter from Joe Corrigan, Executive

Director, OPRA, to Kim Koppien, Vice PresidentOperations, Options Division, PCX, dated August

18, 1997.

technology issues comprise 61% of the

market capitalization of the Index, these

companies are included in nine

different industries ranging from

computer software to semiconductors to

computer services.

The Index is weighted by the market

capitalization of the component stocks.

As of June 18, 1997, the total market

capitalization of the Index was $112.7

billion, and the average market

capitalization of the component stocks

was $2.3 billion. The individual market

capitalization of the stocks ranged from

$629 million (Bio Technology General

Corp.) to $5.9 billion (BMC Software,

Inc.) on the same date. The largest

component stock accounted for 5.20%

of the Index, while the smallest

accounted for 0.56%. The top five

stocks in the Index by weight accounted

for 24.05% of the Index. The average

daily trading volume in the component

securities for the period from December

18, 1996 through June 18, 1997, ranged

from a low of 94,688 shares to a high of

6,291,777 shares, with an average daily

trading volume for all the component

stocks of approximately 926,131 shares

per day.

B. Maintenance of the Index

The Index will be maintained by PCX

in conjunction with Morgan Stanley.

Index maintenance includes monitoring

Index criteria and completing the

adjustments for company additions and

deletions, share changes, stock splits,

stock dividends and stock price

adjustments due to events such as

company restructurings or spin-offs, as

well as a semi-annual rebalancing and

quarterly review.10 In order to ensure

that the Index continues to represent the

overall character of the emerging growth

equity market, any changes made to the

Index, including those made at the time

of semi-annual rebalancing and

quarterly review, will be in compliance

with the following initial inclusion and

maintenance criteria: (a) the number of

component stocks in the Index will be

no less than 42 and no greater than 58;

(b) the top weighted component stock

will not account for more than 25% of

the weight of the Index; (c) the top five

weighted component stocks will not

account for more than 50% of the

weight of the Index; (d) no component

stock will have a market capitalization

of below $75 million; (e) no component

issue will have an average trading

volume of less than 20,000 shares per

day; (f) no component issue will have an

average trading value of less than

$100,000 per day; (g) no component will

have a price per share of less than $3;

(h) at least 80% of the issues comprising

the Index and at least 90% of the Index

weight will meet the initial listing

requirements for options trading

pursuant to PCX Rule 3.6; and (i) the

minimum market capitalization for all

of the issues included in the Index,

collectively, will be $60 billion.

In the event that the Index does not

comply with any of these criteria at the

time of semi-annual rebalancing and

quarterly review, the Exchange either

will: (i) make adjustments to the

composition of the Index to place it in

compliance with such criteria; or (ii)

notify Commission staff to determine

the appropriate regulatory response,

which could include, but is not limited

to, the removal of securities from the

Index, prohibiting opening transactions,

or discontinuing the listing of new

series of Index options.

C. Calculation and Dissemination of

Index Value

The value of the Index is determined

by multiplying the price of each stock

by the number of shares outstanding,

adding those sums and dividing by a

divisor which resulted in an Index value

of 300.00 on its base date of February 7,

1997. The Index value will be calculated

by Bridge Data Corporation and will be

disseminated at 15-second intervals

during regular PCX trading hours to

market information vendors via the

Consolidated Tape Authority. Notice of

component changes will be

disseminated to vendors and Member

Firms via facsimile and over the

Options News Network.

D. Trading of the Index Options

The Exchange proposes to base

trading in options on the Index on the

full value of the Index as expressed in

U.S. dollars. The Exchange also may

provide for the listing of long-term

index option series (‘‘LEAPS’’) and for

FLEX options on the Index. The

Exchange will list expiration months for

Index options and Index LEAPS in

accordance with PCX Rule 7.8. Strike

prices will be set to bracket the Index in

5 point increments. The minimum tick

size for series trading below $3 will be

1⁄16th and the minimum tick size for all

other series will be 1⁄8th.11

E. Position Limits

The Exchange is proposing to

establish position limits for Index

options equal to 37,500 contracts on the

same side of the market, with no more

than 22,500 contracts in the series with

the nearest expiration date. These limits

are roughly equivalent, in dollar terms,

to the limits applicable to options on

other indices.12 Furthermore, the hedge

exemption rule applicable to broadbased index options, Commentary .02 to

PCX Rule 7.6, will apply to Index

options. With regard to FLEX Index

options, the Exchange is proposing to

establish position limits of 200,000

contracts on the same side of the market

pursuant to PCX Rule 8.107(a). The PCX

also represents that it has the necessary

systems capacity to support new series

that would result from the introduction

of the Index options.13

F. Exercise and Settlement

The proposed options on the Index

will expire on the Saturday following

the third Friday of the expiration month

and trading in the expiring contract

month on the PCX will normally cease

at 1:15 p.m. (Pacific Time) on the

business day preceding the last day of

trading in the component securities of

the Index (ordinarily the Thursday

before expiration Saturday, unless there

is an intervening holiday). The exercise

settlement value of Index options at

expiration will be determined from

opening prices established at the open

of the regular Friday trading sessions at

the appropriate exchange or market

system. If a stock does not trade during
50424 Federal Register / Vol. 62, No. 186 / Thursday, September 25, 1997 / Notices

14 If a stock does not trade during the opening of

the regular Friday trading session at the appropriate

exchange or market system, or if it fails to open for

trading, then pursuant to PCX Rule 7.8(e), the last

reported sale price of stock will be used in the

calculation of the Index, unless the exercise

settlement amount is fixed in accordance with the

Rules and By-Laws of The Options Clearing

Corporation.

15 ISG was formed on July 14, 1983 to, among

other things, coordinate more effectively

surveillance and investigative information sharing

arrangements in the stock and options markets. See

Intermarket Surveillance Group Agreement, July 14,

1983. The most recent amendment to the ISG

Agreement, which incorporates the original

agreement and all amendments made thereafter,

was signed by ISG members on January 29, 1990.

See Second Amendment to the Intermarket

Surveillance Group Agreement, January 29, 1990.

The members of the ISG are: the Amex; the Boston

Stock Exchange, Inc.; the Chicago Board Options

Exchange, Inc. (‘‘CBOE’’); the Chicago Stock

Exchange, Inc.; the NASD; the NYSE; the PCX; and

the Philadelphia Stock Exchange, Inc. Because of

potential opportunities for trading abuses involving

stock index futures, stock options, and the

underlying stock, and the need for greater sharing

of surveillance information for these potential

intermarket trading abuses, the major stock index

futures exchanges (e.g., the Chicago Mercantile

Exchange and the Chicago Board of Trade) joined

the ISG as affiliate members in 1990.

16See Amendment No. 1, supra note 3. The

Commission notes that the text of new Rule 7.13 is

substantially similar to the limitation of liability

provisions of other SROs. See CBOE Rule 24.14.

17 15 U.S.C. 78f(b)(5).

18Pursuant to Section 6(b)(5) of the Act, the

Commission must predicate approval of any new

securities product upon a finding that the

introduction of such product is in the public

interest. Such a finding would be difficult with

respect to a product that served no hedging or other

economic function, because any benefits that might

be derived by market participants likely would be

outweighed by the potential for manipulation,

diminished public confidence in the integrity of the

markets, and other valid regulatory concerns. In this

regard, the trading of listed options on the Index

will provide investors with a hedging vehicle that

should reflect the overall movement of the stocks

representing companies in the emerging growth

sector in the U.S. stock markets.

19 15 U.S.C. 78c(f).

20Although technology issues comprise 61% of

the market capitalization of the Index, these

companies are included in nine different industries

ranging from computer software to semiconductors

to computer services. in addition, the Commission

previously has approved the listing and trading of

options on a broad-based index designed to

measure the performance of high capitalization

technology stocks. See e.g., Securities Exchange Act

Release No. 37693 (September 17, 1996) 61 FR

50362 (September 25, 1996) (order approving the

listing and trading of options on the Goldman Sachs

Technology Composite Index).

21See Letter from Carol Shahmoon, Counsel,

Morgan Stanley, to Sharon Lawson, Senior Special

Counsel, Division of Market Regulations,

Commission, dated August 7, 1997.

this interval or if it fails to open for

trading, the last available price of the

stock will be used in the calculation of

the Index.14 When the last trading day

is moved in accordance with Exchange

holidays (such as when the PCX is

closed on the Friday before expiration),

the last trading day for expiring options

will be Wednesday and the exercise

settlement value of Index options at

expiration will be determined at the

open of the regular Thursday trading

sessions.

G. Surveillance

The Exchange will apply its existing

index option surveillance procedures to

Index options. These procedures

include complete access to trading

activity in the underlying securities.

Further, the Intermarket Surveillance

Group (‘‘ISG’’) Agreement, dated July

14, 1983, as amended on January 29,

1990, will be applicable to the trading

of options on the Index.15

H. Other Exchange Matters

Finally, the Exchange proposes to

amend PCX Rule 7.13 regarding

limitation of liability in order to be

consistent with the limitation of liability

rules of other self-regulatory

organizations (‘‘SROs’’).16

III. Commission Findings and

Conclusions

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, the

requirements of Section 6(b)(5).17

Further, the trading of options on the

Index will allow investors holding

positions in some or all of the securities

underlying the Index to hedge the risk

associated with their portfolios.

Specifically, the Commission finds that

the listing and trading of options on the

Index, including LEAPS and FLEX

Index options, will serve to promote the

public interest and help to remove

impediments to a free and open

securities market by providing investors

with a means to hedge exposure to

market risk associated with the

emerging growth equity market 18 and

promote efficiency, competition, and

capital formation.19

Nevertheless, the trading of options

on the Index raises several concerns

related to the design and maintenance of

the Index, customer protection,

surveillance and market impact. The

Commission believes, however, for the

reasons discussed below, that the PCX

has adequately addressed these

concerns.

A. Design and Maintenance of the Index

The Commission finds that it is

appropriate and consistent with the Act

for the PCX to designate the Index as

broad-based for purposes of index

options trading. First, the Index is

composed of 50 companies from 26

industry groups including: computer

software; semiconductors; consumer

goods; energy; capital equipment; basic

materials; agriculture/food and financial

services.20 Second, no particular stock

or group of stocks dominates the Index.

Specifically, as of June 18, 1997, the

largest stock accounted for 5.20% of the

Index weight, while the smallest

accounted for 0.56%. The top five

stocks in the Index by weight accounted

for 24.05%. Accordingly, the

Commission believes that it is

appropriate for the PCX to apply its

rules governing broad-based index

options to trading in the proposed Index

options. The Commission notes that

with respect to the maintenance of the

Index, Morgan Stanley has implemented

several safeguards in connection with

the listing and trading of the Index

options that will serve to ensure that the

Index components are highly

capitalized, diversified and activelytraded. In this regard, Morgan Stanley

will maintain the Index so that: (a) the

number of component stocks in the

Index will be no less than 42 and no

greater than 58; (b) the top weighted

component stock will not account for

more than 25% of the weight of the

Index; (c) the top five weighted

component stocks will not account for

more than 50% of the weight of the

Index; (d) no component stock will have

a market capitalization of below $75

million; (e) no component issue will

have an average trading volume of less

than 20,000 shares per day; (f) no

component issue will have an average

trading value of less than $100,000 per

day; (g) no component will have a price

per share of less than $3; (h) at least

80% of the issues comprising the Index

and 90% of the Index weight will meet

the initial listing requirements for

options trading pursuant to PCX Rule

3.6; and (i) the minimum market

capitalization for all of the issues

included in the Index, collectively, will

be $60 billion.

In addition, the Commission notes

that Morgan Stanley has adopted

appropriate procedures to be followed

by those responsible for maintaining the

Index in order to help to prevent and to

deter the misuse of any informational

advantages with respect to changes in

the composition of the Index.21 Such

procedures include, for example,

informational barriers.

B. Customer Protection

The Commission believes that a

regulatory system designed to protect

public customers must be in place

before the trading of sophisticated

financial instruments, such as Index
Federal Register / Vol. 62, No. 186 / Thursday, September 25, 1997 / Notices 50425

22The Commission believes that a CSSA should

provide the parties thereto with the ability to obtain

information necessary to detect and deter market

manipulation and other trading abuses.

Consequently, the Commission generally requires

that a CSSA require that the parties to the

agreement provide each other, upon request,

information about market trading activity, clearing

activity, and the identity of the ultimate purchasers

and sellers of securities. See Securities Exchange

Act Release No. 31529 (November 27, 1992).

23As noted above, presently there are no stocks

of foreign issuers in the Index.

24See supra note 14.

25The Commission notes that both the Exchange

and OPRA have represented that they have the

necessary systems capacity to support those new

series of index options that would result from the

introduction of options on the Index. See supra

note 13 and accompanying text.

26See e.g., CBOE Rule 24.14, supra note 15. In

order to conform its limitation of liability

provisions to those of other SROs, the PSE will not

rely on this rule to limit its liability for intentional

misconduct or for any violation of the federal

securities laws.

27See e.g., Securities Exchange Act Release No.

34125 (May 27, 1994) 59 FR 29307 (June 6, 1994).

28 15 U.S.C. 78s(b)(2).

29 17 CFR 200.30–3(a)(12).

options, can commence on a national

securities exchange. The Commission

notes that the trading of standardized

exchange-traded options occurs in an

environment that is designed to ensure,

among other things, that (1) the special

risks of options are disclosed to public

customers; (2) only investors capable of

evaluating and bearing the risks of

options trading are engaged in such

trading; and (3) special compliance

procedures are applicable to options

accounts. Accordingly, because the

Index options will be subject to the

same regulatory regime as the other

standardized options currently traded

on the PCX, the Commission believes

that adequate safeguards are in place to

ensure the protection of investors in

Index options. In addition, the PCX

plans to distribute a circular to its

membership calling attention to specific

risks associated with options on the

Index.

C. Surveillance

In evaluating new derivative

instruments, the Commission,

consistent with the protection of

investors, considers the degree to which

the derivative instrument is susceptible

to manipulation. The ability to obtain

information necessary to detect and

deter market manipulation and other

trading abuses is a critical factor in the

Commission’s evaluation. It is for this

reason that the Commission requires

that there be a comprehensive

surveillance sharing agreement

(‘‘CSSA’’) in place between an exchange

listing or trading a derivative product

and the exchanges trading the stocks

underlying the derivative contract that

specifically enables officials to surveil

trading in the derivative product and its

underlying stocks.22 Such agreements

provide a necessary deterrent to

manipulation because they facilitate the

availability of information needed to

fully investigate a potential

manipulation if it were to occur. For

foreign stock index derivative products,

these agreements are especially

important to facilitate the collection of

necessary regulatory, surveillance and

other information from foreign

jurisdictions.23

In order to address the above noted

concerns, the Exchange will apply its

existing index option surveillance

procedures to Index options. In

addition, as previously discussed, the

markets on which all component stocks

trade are members of the ISG which

provides for the exchange of all

necessary surveillance information.24

D. Market Impact

The Commission believes that the

listing and trading of Index options on

the PCX should not adversely impact

the securities markets in the United

States.25 First, the existing index option

surveillance procedures of the PCX will

apply to options based on the Index.

Second, the Commission notes that the

Index is broadbased and diversified and

includes highly capitalized securities

that are actively traded. Third, the

position limit of 37,500 contracts on the

same side of the market, provided no

more than 22,500 of such contracts are

in series in the nearest expiration

month, will serve to minimize potential

manipulation and market impact

concerns. Fourth, the risk to investors of

contra-party non-performance will be

minimized because Index and regular

and long-term options will be issued

and guaranteed by the Options Clearing

Corporation just like any other

standardized option traded into the

United States. Accordingly, the

Commission does not believe that the

introduction of Index options on the

PCX will have a significant effect on the

underlying securities markets.

E. Other Exchange Matters

The Commission finds that the

proposed limitation of liability language

will provide the PCX with protection

that is substantively similar to

protection already afforded other

SROs.26 The Commission believes that

by amending the Exchange’s limitation

of liability rule, entities will not be

discouraged from creating new products

or calculating and disseminating

settlement values.27 Therefore,

derivative products, that provide

hedging or other economic functions,

should remain available to investors.

For the reasons described above, the

Commission finds good cause to

approve Amendment No. 2 prior to the

thirtieth day after the date of

publication of notice of filing thereof in

the Federal Register. Specifically,

Amendment No. 2 provides, 90% of the

Index weight will meet the initial listing

requirements for options trading

pursuant to PCX Rule 3.6.

Accordingly, the Commission believes

that it is consistent with Sections 6(b)(5)

and 19(b)(2) 28 of the Act, to find that

good cause exists to approve

Amendment No. 2 on an accelerated

basis.

IV. Solicitation of Comments and

Conclusion

Interested persons are invited to

submit written data, views and

arguments concerning Amendments No.

2. Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 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 in Washington, D.C. Copies of

such filing will also be available for

inspection and copying at the principal

office of the PCX. All submissions

should refer to the File No. SR–PCX–

97–29 and should be submitted by

October 16, 1997.

For the foregoing reasons, the

Commission finds that the PCX’s

proposal to list and trade options based

on the Morgan Stanley Emerging

Growth Index is consistent with the

requirements of the Act and the rules

and regulations thereunder.

It Is Therefore Ordered, pursuant to

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

proposed rule change (SR–PCX–97–29),

as amended, is approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.29
50426 Federal Register / Vol. 62, No. 186 / Thursday, September 25, 1997 / Notices

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–25376 Filed 9–24–97; 8:45 am]

BILLING CODE 8010–01–M

OFFICE OF THE UNITED STATES

TRADE REPRESENTATIVE

Generalized System of Preferences

(GSP); Schedule of Hearings and

Deadlines for Submitting Comments

on One Additional Petition for the GSP

1997 Product Review

AGENCY: Office of the United States

Trade Representative (USTR).

ACTION: Notice.

SUMMARY: This is to notify that one

product has been added to the 1997 GSP

Product Review and to set forth the

timetable for hearings, and for providing

public comments on a petition to waive

the GSP competitive need limit on

imports of sugar from Brazil.

FOR FURTHER INFORMATION CONTACT: GSP

Subcommittee, Office of the United

States Trade Representative, 600 17th

Street, NW, Room 518, Washington, DC

20508 (Tel. 202/395–6971). Public

versions of all documents relating to

this review may be seen by appointment

in the USTR public Reading Room

between 9:30–12 a.m. and 1–4 p.m. (Tel.

202/395–6186).

SUPPLEMENTARY INFORMATION: The GSP

program is authorized pursuant to Title

V of the Trade Act of 1974, as amended

(‘‘the Trade Act’’) (19 U.S.C. 2461 et

seq.). The GSP program grants duty-free

treatment to designated eligible articles

that are imported from designated

beneficiary developing countries. In a

Federal Register notice dated August

13, 1997 (62 FR 43408), USTR

announced the acceptance of product

petitions for review and in a subsequent

notice dated September 4, 1997 (62 FR

46792) USTR announced deadlines for

hearings and submissions related to

them.

I. Subject of reviews

USTR has accepted one petition for a

waiver of the competitive need limit for

the following article in addition to those

petitions described in part C of the

Annex to the Federal Register notice

dated August 13, 1997 (62 FR 43408).

PETITION FOR WAIVER OF COMPETITIVE NEED LIMIT FOR A PRODUCT ON THE LIST OF ELIGIBLE PRODUCTS FOR THE

GENERALIZED SYSTEM OF PREFERENCES

Case No. HTS subheading Article Petitioner

97–26 ........ 1701.11.10 (Brazil) ................... Cane or beet sugar and chemically pure sucrose, in solid

form: Raw sugar not containing added flavoring or coloring

matter Cane sugar: Described in additional U.S. note 5 to

this chapter and entered pursuant to its provisions.

Sindicato da Industria do

Azucar e do alcool do

Estado de Pernambuco,

Brazil.

II. Opportunities For Public Comment

And Inspection Of Comments And

Notice Of Public Hearings

The GSP Subcommittee of the Trade

Policy Staff Committee (TPSC) invites

comments in support of, or in

opposition to, any petition which is the

subject of this notice. Submissions

should comply with 15 CFR Part 2007,

including sections 2007.0, and 2007.1.

Instructions and dates for submitting

statements, schedule of public hearings

and requests to make statements at the

public hearings should, with one

exception, conform to the instructions

in the Federal Register notice of

September 4, 1997 (62 FR 46792). The

one exception to these Federal Register

instructions, and the final date of

submitting statements on the product

that is the subject of this notice and for

requesting permission to make a

statement on this product at the public

hearing is not September 30, 1997, but

has been set at 5:00 p.m. on October 10,

1997.

Frederick L. Montgomery,

Chairman, Trade Policy Staff Committee.

[FR Doc. 97–25370 Filed 9–24–97; 8:45 am]

BILLING CODE 3190–01–M

DEPARTMENT OF TRANSPORTATION

Office of the Secretary

Reports, Forms and Recordkeeping

Requirements; Agency Information

Collection Activity Under Office of

Management and Budget Review

AGENCY: Office of the Secretary, (DOT).

ACTION: Notice.

SUMMARY: The Department of

Transportation, as part of its continuing

effort to reduce paperwork and

respondent burden, invites the general

public, grantee organizations, and State,

local and other Federal agencies to

comment on proposed and/or

continuing information collections, as

required by the Paperwork Reduction

Act of 1995 944, U.S.C. 3506(c)(2)(A).

The Act requires Federal agencies to

publish notice in the Federal Register

concerning each proposed collection of

information, including each proposed

extension of an existing collection, and

to allow 60 days for public comment in

response to the notice. The Department

is currently seeking comments

concerning collection requirements for

grants to State and local governments,

and for grants to institutions of higher

learning, hospitals, and other nonprofit

institutions.

DATES: Written comments should be

received on or before November 24,

1997 to be assured of consideration.

ADDRESSES: Submit written comments

to Mr. Ladd Hakes, U.S. Department of

Transportation (M–62), 400 Seventh

Street SW., Washington, DC 20590.

Written comments may be faxed to (202)

366–7510. Identify comments regarding

collection requirements for grants to

State and local governments by the

OMB Control Number 2105–0520.

Identify comments regarding

requirements for grants to institutions of

higher learning, hospitals, and other

nonprofit institutions by the OMB

Control Number 2105–0531.

FOR FURTHER INFORMATION CONTACT: Mr.

Ladd Hakes, (202) 366–4268; refer to the

control numbers above.

ADDITIONAL SUPPLEMENTARY INFORMATION:

Title: Uniform Administrative

Requirements for Grants and

Cooperative Agreements to State and

Local Governments.

Forms: SF 269, SF 270, SF 271, SF

272, and SF 424.

OMB Control Number: 2105–0520.

Affected Public: State and local

governments receiving Federal financial

assistance from the Department of

Transportation (DOT).

Abstract: Requirements for Federal

administration of financial assistance to

State and Local governments is