61158 Federal Register / Vol. 62, No. 220 / Friday, November 14, 1997 / Notices

3 17 CFR 300.30(a)(12).

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

his other security holdings and as to his

financial situation and needs.

Specifically, prior to the execution of

a transaction recommended to a

customer, other than transactions with

customers where investments are

limited to money market mutual funds,

a member would be required to make

reasonable efforts to obtain information

concerning the customer’s financial

status, the customer’s tax status, the

customer’s investment objectives, and

such other information used or

considered to be reasonable by such

member or registered representative in

making recommendations to the

customer.

The rule change would contain a nonexclusive list of practices that the

Exchange deems to violate a member’s

duty to recommend to a customer only

securities suitable for that customer.

These would be: (1) Recommending

speculative low-priced securities to

customers without knowledge of or an

attempt to obtain information

concerning the customers’ other

securities holdings, their financial

situation and other necessary data; (2)

excessive activity in a customer’s

account, often referred to as ‘‘churning’’

or ‘‘overtrading’’; (3) trading in mutual

fund shares, particularly on a short-term

basis; (4) fraudulent activity (including

establishing fictitious accounts in order

to execute transactions which otherwise

would be prohibited, executing

transactions in discretionary accounts in

excess of or without actual authority

from customers, causing the execution

of transactions which are unauthorized

by customers or the sending of

confirmations in order to cause

customers to accept transactions not

actually agreed upon, and unauthorized

use or borrowing of customers’ funds

and securities); and (5) recommending

the purchase of securities or the

continuing purchase of securities in

amounts that are inconsistent with the

reasonable expectation that the

customer has the financial ability to

meet such a commitment.

In addition, with regard to derivative

financial products, the rule change

would require that members made every

effort to familiarize themselves with

each customer’s financial situation,

trading experience, and ability to meet

the risks involved with such products

and to make every effort to make

customers aware of the pertinent

information regarding new financial

products.

2. Statutory Basis

The purposed rule change is

consistent with Section 6(b)(5) of the

Act in that it is designed to promote just

and equitable principles of trade, to

foster cooperation and coordination

with persons regulating securities

transactions, 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

The Exchange has neither solicited

nor received written comments on the

proposed rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the date of

publication of this notice in the Federal

Register or within such longer period (i)

as the Commission may designate up to

90 days of such date if it finds such

longer period to be appropriate and

publishes its reasons for so finding or

(ii) as to which the self-regulatory

organization consents, the Commission

will:

A. by order approve such proposed

rule change, or

B. institute proceedings to determine

whether the proposed rule change

should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning the foregoing.

Persons making written submission

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of the

submissions, 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 at

the Commission’s Public Reference

Room, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the CHX. All submissions

should refer to File No. SR–CHX–97–21

and should be submitted by December

5, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.3

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–29987 Filed 11–13–97; 8:45 am]

BILLING CODE 8070–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39309; File No. SR–GSCC–

97–06]

Self-Regulatory Organizations;

Government Securities Clearing

Corporation; Notice of Filing and Order

Granting Accelerated Approval of a

Proposed Rule Change Regarding

Funds-Only Settlement Payment

Procedures

November 7, 1997.

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

Securities Exchange Act of 1934

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

July 16, 1997, the Government

Securities Clearing Corporation

(‘‘GSCC’’) filed with the Securities and

Exchange Commission (‘‘Commission’’)

and on September 19, 1997 and on

November 4, 1997, amended the

proposed rule change as described in

Items I and II below, which items have

been prepared primarily by GSCC. The

Commission is publishing this notice to

solicit comments from interested

persons and to grant accelerated

approval of the proposal.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The proposed rule change will amend

GSCC’s rules to provide netting

members with the option of making

funds-only settlement payments to

GSCC by authorizing banks to accept

payment directions directly from GSCC.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

GSCC 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. GSCC has prepared

summaries, set forth in sections (A), (B),
Federal Register / Vol. 62, No. 220 / Friday, November 14, 1997 / Notices 61159

2The Commission has modified the text of the

summaries prepared by GSCC.

3 GSCC submitted a draft form of the agreement

as Exhibit A to its filing, which is available for

review and copying at the Commission’s Public

Reference Room and through GSCC.

4All times cited herein are New York time.

5Securities Exchange Act Release No. 33237

(November 22, 1993), 58 FR 63414 [File No. SR–

GSCC–91–04].

6 15 U.S.C. 78q–1(b)(3)(F). 7 15 U.S.C. 78q–1(b)(3)(F).

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

The main purpose of the proposed

rule change is to amend GSCC’s rules

concerning netting members’ funds-only

settlement payments to GSCC. Under

the proposed rule change, netting

members will have the option of

satisfying their funds-only settlement

obligations with GSCC by way of an

automatic debit (‘‘auto debit’’)

arrangement. GSCC has informed the

Commission that other clearing

agencies, such as The Options Clearing

Corporation, use such agreements to

facilitate their funds-only settlement

process.

Under GSCC’s current rules, a netting

member with an obligation to pay a

funds-only settlement amount to GSCC

on a particular business day instructs a

depository institution acceptable to

GSCC, currently The Bank of New York,

to make such payment to GSCC on its

behalf. These payment procedures

oblige GSCC each day to monitor

continuously its account at the

depository institution to determine

whether every netting member with a

funds-only settlement obligation to

GSCC has made its payment in a timely

manner.

The proposed auto debit arrangement

will supplement the current approach to

payment processing. Under the

proposed rule change, netting members

will have the option to satisfy fundsonly settlement obligations pursuant to

payment instructions given directly by

GSCC to their banks. Each netting

member choosing this option will enter

into an agreement with GSCC and a

bank acceptable to both the member and

GSCC.3 The bank will be required to

meet the financial, operational

capability, and other requirements set

forth in GSCC’s rules for eligibility to

issue letters of credit on behalf of

members for clearing fund purposes.

GSCC believes that because the bank

will maintain accounts on behalf of both

the member and GSCC, it will be able

to make and to collect funds-only

settlement payments efficiently by

posting debit and credit entries to the

applicable accounts on its own books.

Pursuant to the auto debit agreement,

the bank generally will make payment

to GSCC’s account by 9:00 a.m.4 on

behalf of netting members owing funds

to GSCC. If the bank does not intend to

make any payments on behalf of

members, it will so inform GSCC by

8:00 a.m. Therefore, GSCC effectively

will be guaranteed payment by 8:00 a.m.

unless it receives a notice of dishonor

from the bank. GSCC believes that the

use of the auto debit arrangement will

promote the timely receipt of funds

payments by GSCC and will reduce the

operational duties GSCC encounters in

monitoring its current funds-only

settlement payment process.

In connection with the auto debit

arrangement, GSCC has proposed

changes to certain of its other

procedures. First, GSCC will begin

requiring all netting members to make

funds-only settlement payments to

GSCC by 9:00 a.m. and will enforce this

deadline with the assistance of its new

fine schedule described in File No. SR–

GSCC–97–04 as of January 2, 1998. In

December of this year, the earlier

opening of the cash FedWire at 12:30

a.m. is scheduled to take effect. GSCC

previously received authorization from

the Commission to require netting

members to make funds-only settlement

payments to GSCC by 9:00 a.m.5

However, because of its concern that

members would not be able to meet this

deadline on a consistent basis, GSCC

has kept the deadline at 10:00 a.m.

Second, the proposed rule change will

eliminate the extra hour for the payment

to GSCC of funds-only settlement

amounts currently in effect for netting

members whose offices are located

outside of the New York City time zone.

GSCC believes that this extra hour is no

longer necessary because of members’

increased ability to make efficient and

timely payments due to the earlier

opening of the cash FedWire and the

availability of the auto debit

arrangement.

Finally, under the proposed rule

change, GSCC will move the deadline

for it to pay a netting member any

funds-only settlement payment it owes

from 11:00 a.m. to 10:00 a.m. GSCC

believes that it is equitable for netting

members also to benefit from the

availability of the earlier opening of the

cash FedWire and the efficiencies of the

auto debit arrangement.

GSCC believes that the proposed rule

change is consistent with the

requirements of Section 17A(b)(3)(F) of

the Act 6 because it will increase

settlement efficiency and reduce

payment related risks to GSCC.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

GSCC does not believe that the

proposed rule change will have any

impact or impose any burden on

competition.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

Written comments relating to the

proposed rule change have not yet been

solicited or received. Members will be

notified of the rule change filing and

comments will be solicited by an

important notice. GSCC will notify the

Commission of any written comments

received by GSCC.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Section 17A(b)(3)(F) of the Act 7

requires that the rules of a clearing

agency be designed to assure the

safeguarding of securities and funds in

its custody or control or for which it is

responsible. The Commission believes

that the proposed rule change is

consistent with this obligation because

the auto debit arrangement will allow

GSCC to increase its control over the

payment of funds-only settlement

payments. As a result, the amount of

time and energy GSCC currently spends

monitoring netting members’ payments

of their funds-only settlement

obligations should be reduced and the

risk of nonpayment or late payment of

such obligations should be reduced.

The Commission finds good cause for

approving the proposed rule change

prior to the thirtieth day after the

publication of notice of filing.

Approving prior to the thirtieth day

after publication of notice will allow

GSCC to immediately begin

implementing the auto debit

arrangement which should result in

increased efficiency in the clearance

and settlement process for GSCC’s

netting members that use the

arrangement. The Commission also

notes that use of the auto debit

arrangement will not be mandated by

GSCC.

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
61160 Federal Register / Vol. 62, No. 220 / Friday, November 14, 1997 / Notices

8 15 U.S.C. 78s(b)(2).

9 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3ASAP Memberships are governed by PCX Rule

1.14.

4See Exchange Act Release No. 37913 (November

1, 1996) 61 FR 57936 (November 8, 1996) (PCX–96–

33). In that filing, the Exchange had changed its fee

from $4,000 a year to the current schedule as

described in the text.

5A PCX seat was sold for $380,000 recently;

about the same time last year, a seat was sold for

$145,000. Telephone conversation between Michael

D. Pierson, Senior Attorney, PCX, and Vicky

Berberi-Doumar, Special Counsel, Division of

Market Regulation, Commission, on November 4,

1997.

6 15 U.S.C. 78f(b)(4).

7 15 U.S.C. 78s(b)(3)(A).

8 17 CFR 240.19b–4(e).

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

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing also will be available for

inspection and copying at the principal

office of GSCC. All submissions should

refer to File No. SR–GSCC–97–06 and

should be submitted by December 5,

1997.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,8 that the

proposed rule change (File No. SR–

GSCC–97–06) be and hereby is

approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–29930 Filed 11–13–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39311; File No. SR–PCX–

97–40]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Pacific Exchange, Inc. Relating to a

Fee Change for ASAP Members

November 7, 1997.

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 October

30, 1997, the Pacific Exchange, Inc.

(‘‘PCX’’ or ‘‘Exchange’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) 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.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange is proposing to modify

its Schedule of Rates for Exchange

Services by changing its annual fee for

Automatic System Access Privilege

(‘‘ASAP’’) Members.3 The text of the

proposed rule is available at the Office

of the Secretary, the PCX, 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 IV below.

The self-regulatory organization 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

Under the Exchange’s current

Schedule of Rates, an ASAP Member is

required to pay the Exchange an annual

fee equal to 20% of the average price of

Exchange membership sales in the three

months immediately preceding the

Member’s activation or renewal of

membership.4 The minimum ASAP fee

is $4,000 (and it is non-refundable).

The Exchange is now proposing to

modify this fee, making it $4,000 per

year (non-refundable).

The Exchange is reducing its fee for

ASAP memberships in order to make its

rates applicable to electronic trading

more competitive. The proposal is also

intended to reduce the significant

increase in fees for ASAP memberships

that has accompanied the recent rise in

Exchange seat prices.5

2. Statutory Basis

The proposal is consistent with

Section 6(b) of the Act, in general, and

Section 6(b)(4),6 in particular, in that it

is designed to provide for the equitable

allocation of reasonable dues, fees and

other charges among its members.

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 that is not

necessary or appropriate in furtherance

of the purposes of the Act.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Written comments on the proposed

rule change were neither solicited nor

received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Because the foregoing rule change

establishes or changes a due, fee, or

other charge imposed by the Exchange,

it has become effective pursuant to

Section 19(b)(3)(A) 7 of the Act and Rule

19b–4(e) under the Act.8 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 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.

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 5 U.S.C. 552, will be