Federal Register / Vol. 62, No. 209 / Wednesday, October 29, 1997 / Notices 56221

4 15 U.S.C. 78s(b)(3)(A).

5 17 CFR 240.19b–4(e)(6).

6 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b-4.

3The Commission previously approved the

trading of standardized cash-settled, Europeanstyle

stock index options on the Taiwan Index on

December 23, 1996. See Securities Exchange Act

Release No. 38081, 62 FR 138 (January 2, 1997)

(order approving File No. SR–PSE–96–40). The

Taiwan Index is a broad-based index, comprised of

113 representative stocks traded on the Taiwan

Stock Exchange.

4See Securities Exchange Act Release No. 38920

(August 11, 1997), 62 FR 44027.

5See Securities Act Release No. 34364 (July 13,

1994), 59 FR 36813 (July 19, 1994) (order approving

File No. SR–PSE–93–13) (‘‘Wilshire/PSE

Technology Order’’).

6The Commission has previously designated

FLEX Index Options as standardized options for the

purposes of the options disclosure framework

established under Rule 9b-1 of the Act. See

Securities Exchange Act Release No. 31910

(February 23, 1993), 58 FR 12056 (March 2, 1993).

In addition, the Commission has approved the

listing by the PCX of FLEX Index Options on the

Wilshire Small Cap and PSE Technology Indexes.

See Wilshire/PSE Technology Order, supra note 5.

7These rules currently allow the Exchange to

trade FLEX Index Options on the Wilshire Small

Cap Index and the PSE Technology Index. The PCX

has proposed to set position and exercise limits for

FLEX options on the Index at 200,000 contracts, as

set forth in PCX Rule 8.107. This is the same FLEX

position and exercise limits established for the

Wilshire Small Cap and PSE Technology Indexes.

8See supra note 3.

9An American-style option is one that may be

exercised at any time on or before the expiration

date.

10A European-style option is one that may be

exercised only during a limited period of time prior

to expiration of the option.

11A capped-style index option is one that is

automatically exercised prior to expiration when

the cap index value is less than or equal to the

index value for calls or when the cap index value

is greater than or equal to the index value for puts.

manipulative acts and practices, to

promote just and equitable principles of

trade, to remove impediments to, and

perfect the mechanism of a free and

open market and a national market

system, and, in general, to protect

investors and the public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed rule change 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. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Because the foregoing rule change: (1)

Does not significantly affect the

protection of investors or the public

interest; (2) does not impose any

significant burden on competition; (3)

does not become operative for 30 days

from the date of its filing; and (4) the

Exchange provided the Commission

with notice of its intent to file the

proposed rule change at least five days

prior to the filing date, the proposed

rule change has become effective

pursuant to Section 19(b)(3)(A) 4 of the

Act and Rule 19b–4(e)(6) 5 thereunder.

At any time within 60 days of the filing

of such proposed rule change, the

Commission may summarily abrogate

such rule change if it appears to

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.

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, 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 U.S.C. 552, will be

available for inspection and copying in

the Commission’s Public Reference

Room. Copies of such filings will also be

available for inspection and copying at

the principal office of the NYSE. All

submissions should refer to the File No.

SR–NYSE–97–29 and should be

submitted by November 19, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–28570 Filed 10–28–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34– 39265; File No. SR–PCX–

97–22]

Self-Regulatory Organizations; Pacific

Exchange, Inc.; Order Granting

Approval to Proposed Rule Change

Relating to the Trading of FLEX Index

Options and LEAPS on the Dow Jones

& Co. Taiwan Index

October 22, 1997

I. Introduction

On June 9, 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 amend its rules

to allow the trading of Flexible

Exchange Options (‘‘FLEX Options’’)

and long-term index option series

(‘‘LEAPS’’) on the Dow Jones & Co.

Taiwan Index (‘‘Taiwan Index’’ or

‘‘Index’’).3

The proposed rule change was

published for comment in the Federal

Register on August 18, 1997.4 No

comments were received on the

proposal. This order approves the

proposal.

II. Description of the Proposal

The Commission previously approved

the Exchange’s proposal to allow trading

in FLEX Options on the Wilshire Small

Cap and PSE Technology Indexes.5

FLEX Options give investors the ability,

within specified limits, to designate

certain of the terms of the options. In

recent years, an over-the-counter

(‘‘OTC’’) market in customized options

has developed which permits

participants to designate the basis terms

of the options, including size, term to

expiration, exercise style, exercise price,

and exercise settlement value, in order

to meet their individual investment

needs. Participants in the OTC market

are typically institutional investors, who

buy and sell options in large-size

transactions through a relatively small

number of securities dealers. To

compete with this growing OTC market

in customized options, the PCX permits

FLEX index options trading with the

Options Clearing Corporation (‘‘OCC’’)

as issuer and guarantor.6

The PCX now proposed to amend its

Rules 8.100 and 8.1027 to permit the

trading of FLEX Options based on the

same Dow Jones & Co. Taiwan Index

previously approved for standardized

non-Flex options trading.8 The PCX’s

proposal will allow FLEX Option

market participants to designate the

following contract terms for FLEX

Options on the Taiwan Index: (1)

exercise price; (2) exercise style (i.e.,

American,9 European,10 or capped 11);
56222 Federal Register / Vol. 62, No. 209 / Wednesday, October 29, 1997 / Notices

12The expiration date of a FLEX Option may not

fall on a day that is on, or within two business days,

of the expiration date of a non-FLEX option.

13See supra note 5.

14The Exchange is not proposing to trade

reduced-value LEAPS on the Dow Taiwan Index.

15Telephone conversation on October 8, 1997

between Michael Pierson, Senior Attorney, PCX,

and Deborah Flynn, Attorney, Division of Market

Regulation, Commission.

16 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).

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.

19The Commission believes that the proposal to

trade FLEX Options on the Taiwan Index should

also encourage fair competition by allowing the

Exchange to compete with the growing OTC market

in customized index options to address the

demands of sophisticated portfolio managers and

other institutional investors who are increasingly

relying on the OTC market to satisfy their hedging

needs.

20See supra note 11.

21 Id.

22 15 U.S.C. 78s(b)(2).

23 17 CFR 200.30–3(a)(12).

(3) Expiration date;12 (4) option type

(put, call, or spread); and (5) form of

settlement (A.M., P.M. or average).

These terms are identical to the terms

that can be designated for the previously

approved PCX FLEX Index Options.13

The Exchange also proposes to list

and trade full-value LEAPS, pursuant to

PCX Rule 6.4(d), on the Index.14 LEAPS

on the Index will allow the PCX to list

options series with expirations of up to

three years from the date of issuance.

For LEAPS, the underlying value would

be computed by using the same levels

as proposed for the Index options.15

III. Discussion

After careful review, 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.16 Specifically, the

Commission believes the proposal is

consistent with the requirements of

Section 6(b)(5) of the Act 17 because

trading of FLEX Options and LEAPS on

the Taiwan Index will serve to protect

investors, promote the public interest,

and help to remove impediments to a

free and open securities market. The

Commission also believes that the

trading of FLEX Options and LEAPS on

the Index will provide investors with

more flexibility in hedging the risks

associated with holding some or all of

the securities underlying the Index.18 By

broadening the hedging and investment

opportunities of investors, the

Commission believes that the trading of

FLEX Options and LEAPS on the Index

will serve to protect investors, promote

the public interest, and contribute to the

maintenance of fair and orderly markets.

In particular, as noted above, FLEX

Options on the Index will allow

investors to customize certain terms,

including size, term to expiration,

exercise style, exercise price, and

exercise settlement value.19 LEAPS

should also benefit investors by

allowing them to hedge positions on the

Index on a longer term basis through

investment in one options series, rather

than having to roll shorter term

expirations into new series to remain

hedged on a longer basis.

The Commission notes that the

Taiwan Index was thoroughly reviewed

recently in connection with the

Exchange’s proposal to list and trade

standardized, non-FLEX options based

on the Index.20 At that time, the

Commission found that the Exchange

had adequately addressed the

Commission’s concerns arising from

issues relating to the design and

structure of the Index, customer

protection and surveillance. The

Commission’s findings relied on several

factors, including the large

capitalizations, substantial trading

volume, wide diversity of the

component stocks in the Taiwan Index

and the size of the market underlying

the Index.21

The Commission believes that it is

reasonable for the Exchange to allow

trading in FLEX Options and LEAPS

based on this Index given that, to the

Commission’s knowledge, there have

been no significant, adverse changes to

the Index to date that would change the

Commission’s initial findings approving

the trading of options on the Index. For

the foregoing reasons, the Commission

finds that the PCX’s proposal to trade

FLEX Options and LEAPS based on the

Taiwan index is consistent with the

requirements of the Act and the rules

and regulations thereunder.

IV. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,22 that the

proposed rule change (SR–PCX–97–22)

is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.23

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–28568 Filed 10–28–97; 8:45 am]

BILLING CODE 8010–01–M

SMALL BUSINESS ADMINISTRATION

Reporting and Recordkeeping

Requirements Under OMB Review

ACTION: Notice of Reporting

Requirements Submitted for Review.

SUMMARY: Under the provisions of the

Paperwork Reduction Act (44 U.S.C.

Chapter 35), agencies are required to

submit proposed reporting and

recordkeeping requirements to OMB for

review and approval, and to publish a

notice in the Federal Register notifying

the public that the agency has made

such a submission.

DATES: Comments should be submitted

on or before November 28, 1997. If you

intend to comment but cannot prepare

comments promptly, please advise the

OMB Reviewer and the Agency

Clearance Officer before the deadline.

COPIES: Request for clearance (OMB 83–

1), supporting statement, and other

documents submitted to OMB for

review may be obtained from the

Agency Clearance Officer. Submit

comments to the Agency Clearance

Officer and the OMB Reviewer.

FOR FURTHER INFORMATION CONTACT:

Agency Clearance Officer: Jacqueline

White, Small Business Administration

409 3RD Street, S.W., 5th Floor,

Washington, D.C. 20416, Telephone:

(202) 205–6629.

OMB Reviewer: Victoria Wassmer,

Office of Information and Regulatory,

Affairs Office of Management and

Budget, New Executive Office Building,

Washington, D.C. 20503.

Title: Procurement Automated Source

System (PASS).

Form No’s: SBA Forms 1062 and

1395.

Frequency: On Occasion.

Description of Respondents: Small

Business Interested in Federal

Procurement Opportunities.

Annual Responses: 242,000.

Annual Burden: 47,333.

Jacqueline White,

Chief, Administrative Information Branch.

[FR Doc. 97–28677 Filed 10–28–97; 8:45 am]

BILLING CODE 8025–01–P