63404 Federal Register / Vol. 62, No. 229 / Friday, November 28, 1997 / Notices

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

2See Securities Exchange Act Release No. 39337

(November 19, 1997) granting immediate

effectiveness to SR–CHX–97–30.

3Securities Exchange Act Release No. 33806

(March 23, 1994) 59 FR 15248 (Notice of Filing and

Immediate Effectiveness of File No. SR–CHX–94–

03); Securities Exchange Act Release No. 17766

(May 8, 1981) 46 FR 25745 (Order approving SR–

MSE–81–3 and SR–MSE–81–5); and Securities

Exchange Act Release No. 28638 (November 30,

1990) 55 FR 49731 (Order approving SR–MSE–

90–7).

is appropriate in the public interest

because allowing Bank Austria to utilize

a REIT to hold its real estate related

assets in the United States will, under

the IRC, allow the head office of Bank

Austria to treat the earnings on those

assets as not being effectively connected

with a United States trade or business

and to be taxed on those earnings on a

pass-through basis, which will render

Bank Austria’s United States operations

more efficient and less costly. In

addition, applicants note that specific

provisions of New York state tax law

also provide more beneficial tax

treatment to REITs than to certain other

kinds of entities, including banks.

Applicants believe that the combined

effect of the treatment of REITs under

the IRC and New York state tax law will

lower their cost of doing business in the

United States and encourage Bank

Austria to continue investing in the

United States, and perhaps expand its

investment activities. Applicants state

that the tax-treatment which Bank

Austria seeks for its investments in the

United States is generally available to

REITs and no public interest is served

by requiring Bank Austria to hold

certain of its assets in its New York

Branch rather than in a separate

subsidiary.

6. Applicants submit that exempting

Mortgage Corp. from the Act is

consistent with the protection of

investors. Applicants claim that the

proposed use of Mortgage Corp. to

restructure the manner in which Bank

Austria holds its United States real

estate related assets will not subject

investors to any of the abuses addressed

by the Act. Applicants state that all of

Mortgage Corp.’s common stock will be

owned by Bank Austria and that

Preferred Shares will be given to a

limited number of employees as a bonus

in order to enable Mortgage Corp. to rely

on the REIT provisions of the IRC. It is

anticipated that there will be fewer than

100 holders of Preferred Shares who are

residents of the United States.

7. Applicants submit that granting

Mortgage Corp. the requested exemption

is consistent with the policies and

provisions of the Act. Applicants note

that although the Act deals with

companies which invest and reinvest in

securities, it contains exemptions for

some entities which would otherwise

come within its purview, in particular

entities that are wholly-owned

subsidiaries of companies that are

themselves exempt from the Act and

through which exempt companies

conduct their activities and entities that

invest in real estate.

Applicants’ Conditions

Applicants agree that any order of the

Commission granting the requested

relief will be subject to the following

conditions:

1. Mortgage Corp. will operate as a

REIT and its investments will be limited

to those permitted for a REIT under the

IRC.

2. Mortgage Corp. will issue no

securities other than shares of common

stock to be held by Bank Austria,

Preferred Shares to be given at no cost

from time to time to employees of Bank

Austria solely when necessary or

advisable for maintaining a number of

shareholders sufficient to rely on the

REIT provisions of the IRC, commercial

paper to finance or refinance any of its

investments, and a credit agreement

with Bank Austria in the approximate

amount of $50,000,000. No participants

in or syndication of the credit agreement

will be made.

3. No employee will own more than

one Preferred Share. Bank Austria will

offer to buy at their appraised value

Preferred Shares from its employees

under the circumstances described in

the application. Mortgage Corp. also

will not permit there to be more than

109 holders of Preferred Shares at any

time.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary

[FR Doc. 97–31152 Filed 11–26–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39341; File No. SR–CHX–

97–28]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Stock Exchange,

Incorporated Amending the

Exchange’s Clearing the Post Policy

for Cabinet Securities

November 21, 1997.

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

Securities Exchange Act of 1934

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

October 23, 1997, the Chicago Stock

Exchange, Incorporated (‘‘CHX’’ or the

‘‘Exchange’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’) the proposed rule

change as described in Items I, II, 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 proposes, for a sixmonth pilot period, to amend

interpretation and policy .02 of Rule 10

of Article XX and amend Rule 11 of

Article XX relating to clearing the post

for cabinet securities. The text of the

proposed rule change is available at the

Office of the Secretary, the CHX, 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 period 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

The purpose of the proposed rule

change is to amend the Exchange’s

existing clearing the post policy for

cabinet securities for a six-month pilot

period. The clearing the post policy is

contained in interpretation and policy

.02 of CHX Article XX, Rule 10.2 The

Exchange’s clearing the post policies

were previously contained in several

Notices to Members which had been

approved by the Commission.3 These

Notices to Members, and their

corresponding Approval Orders, explain

the Exchange’s clearing the post

requirements.

In general, the clearing the post policy

requires a floor broker or market maker

to clear the post by his or her physical

presence at the post. The purpose of this
Federal Register / Vol. 62, No. 229 / Friday, November 28, 1997 / Notices 63405

4 15 U.S.C. 78f(b)(5).

5 17 CFR 200.30–3(a)(12).

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

2Securities Exchange Act Release No. 39066

(September 12, 1997), 62 FR 49280.

3 Interdealer broker netting members already have

a $5 million cap per loss event on their liability for

loss allocation.

4 15 U.S.C. 78q–1(b)(3)(F).

5 15 U.S.C. 78q–1(b)(3)(D).

proposed rule change is to permit a floor

broker or market maker to clear the post

in cabinet securities by phone. The bids

and offers made to clear the post by

phone will be audibly announced at the

cabinet post through a speaker system

maintained by the Exchange. This new

policy will be effective for a six-month

pilot period to permit the Exchange to

determine the effectiveness of the new

policy before implementing it on a

permanent basis.

2. Statutory Basis

The proposed rule change is

consistent with Section 6(b)(5) 4 of the

Act in that it is designed to prevent

fraudulent and manipulative acts and

practices and to perfect the mechanism

of a free and open market.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed rule change will impose

any inappropriate 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 either

solicited or received.

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 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

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. Copies of such filing will also be

available for inspection and copying at

the principal office of the Exchange. All

submissions should refer to File No.

SR–CHX–97–28 and should be

submitted by December 19, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.5

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–31240 Filed 11–26–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39340; File No. SR–GSCC–

97–05]

Self-Regulatory Organizations;

Government Securities Clearing

Corporation; Order Approving a

Proposed Rule Change to Modify the

Loss Allocation Process

November 21, 1997.

On July 8, 1997, the Government

Securities Clearing Corporation

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

Exchange Commission (‘‘Commission’’)

a proposed rule change (File No. SR–

GSCC–97–05) pursuant to Section

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

of 1934 (‘‘Act’’).1 On July 23, 1997,

GSCC filed with the Commission an

amendment to the proposed rule

change. Notice of the proposal was

published in the Federal Register on

September 19, 1997.2 No comment

letters were received. For the reasons

discussed below, the Commission is

approving the proposed rule change.

I. Description

Generally, if a GSCC member were to

default, after liquidating the defaulting

member’s positions and applying its

collateral deposited with GSCC, GSCC

would allocate any loss that it did not

absorb from its own capital among

members pro rata based on the extent of

their recent activity with the defaulting

member. In order to determine which

members will be subject to loss

allocation, GSCC would look at trading

authority that was entered into GSCC’s

netting system during as many days as

is necessary to reach a level of activity

that is equal to or greater than five times

the dollar value of the liquidated

positions.

Pursuant to this proposed rule

change, GSCC is limiting the amount to

which any netting member that is not an

interdealer broker is liable for loss

allocation arising from blind brokered

activity.3 The new cap per loss event is

equal to the lesser of $5 million or five

percent of the total loss amount arising

from blind brokered activity that is

allocated to members that are not

interdealer brokers as a group. To the

extent that this cap is applicable, any

amounts not collected from individual

netting members will be reallocated to

the entire netting membership pro rata

based on each member’s average daily

clearing fund deposit requirement over

the twelve month period prior to the

insolvency.

GSCC states that the $5 million cap is

intended to provide to all members the

same level of protection that interdealer

broker members currently have for blind

brokered activity. The 5% limit is

intended to ensure that no single

member will be liable for an amount of

loss for blind brokered activity that is

significantly greater than the amount of

loss allocated to other dealer members.

II. Discussion

Section 17A(b)(3)(F) 4 of the Act

provides that the rules of a clearing

agency must be designed to assure the

safeguarding of securities and funds in

the custody or control of the clearing

agency or for which it is responsible,

and Section 17A(b)(3)(D) 5 of the Act

provides that the rules of a clearing

agency must provide for equitable

allocation of charges among its

participants. Prior to the rule change,

nonbroker members could be assessed

for the entire loss resulting from blind

brokered transactions even though they

did not have any control or knowledge

of their counterparty. Because in

brokered transactions, dealers cannot

select their counterparty, these members

may not be able to limit their losses

resulting from the counterparty’s

default. The rule change limits the

member’s liability but still provides the

member with an incentive to minimize

the risk of loss. Therefore, the

Commission believes that the rule