7288 Federal Register / Vol. 62, No. 32 / Tuesday, February 18, 1997 / Notices

4PSE Rule 11.7 provides due process protections

for persons who have been aggrieved by Exchange

action. It gives such persons an opportunity to be

heard and to have the complained of action

reviewed by the Exchange.

5See Exchange Act Release No. 38054 (December

16, 1996), 61 FR 67365 (December 20, 1996). 6 17 CFR 200.30–3(a)(12).

1 15 U.S.C. § 78s(b)(1).

2Securities Exchange Act Release No. 37914

(Nov. 1, 1996), 61 FR 57940 (Nov. 8, 1996).

3See Letter from Karen M. O’Brien, General

Counsel, North American Securities Administrators

Association, Inc. (‘‘NASAA’’), to Karl Varner,

Division of Market Regulation, SEC, dated January

27, 1997, which indicated that OCC cleared options

qualify for designation as Tier I securities under the

NASAA Memorandum of Understanding (‘‘MOU’’)

between NASAA and the Phlx. But see infra note

5.

4NASAA is an association of securities

administrators from each of the 50 states, the

District of Columbia, Puerto Rico and ten Canadian

provinces.

5NASAA plans to have its board ratify this

amendment to the Phlx MOU at its February 21,

1997, board meeting. According to NASAA, because

the Phlx MOU is a membership document, it cannot

be revised until the members vote on this

amendment during the April 1997, membership

meeting. Telephone conversation between Karen

O’Brien, General Counsel, NASAA, and Karl

Varner, Attorney, Division of Market Regulation,

SEC, on February 7, 1997.

6See Securities Exchange Act Release No. 34235

(June 17, 1994), 59 FR 32736 (June 24, 1994).

failed to cure the same within seven

calendar days following the giving of

notice (or such shorter period of time as

the Exchange may deem appropriate if

it determines the circumstances have

created a situation requiring a shortened

cure period). It states that Members

must immediately stop using their

Terminals and must remove such

Terminals from the floor of the

Exchange upon the termination of

approval pursuant to this paragraph,

and that nothing in this paragraph shall

be construed as a waiver of or limitation

upon whatever right Members may

otherwise have to seek appropriate relief

pursuant to PSE Rule 11 in the event the

Exchange terminates approval of a

Member’s Terminal pursuant to this

paragraph.4

Pilot Program

Finally, Paragraph 8 of the proposed

policy states that the Pilot Program

expires six months after its

implementation, but may be renewed

upon an Exchange filing with the

Securities and Exchange Commission

pursuant to the Securities Exchange Act

of 1934.

The Exchange notes that, except in

certain minor respects, the proposed

Policy is consistent with an approved

rule change of the Chicago Board

Options Exchange (‘‘CBOE’’) relating to

the use of proprietary brokerage order

routing terminals on the CBOE floor.5

Basis

The Exchange believes that proposal

is consistent with Section 6(b) of the

Act, in general, and Section 6(b)(5) of

the Act, in particular, in that it is

designed to facilitate transactions in

securities; to foster cooperation and

coordination with persons engaged in

regulating, clearing, settling, and

processing with respect to transactions

in securities; to promote just and

equitable principles of trade; and 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 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

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

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, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principle

office of the PSE. All submissions

should refer to File No. SR–PSE–97–02

and should be submitted by March 11,

1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–3915 Filed 2–14–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–38269; File No. SR–Phlx–

96–41]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

Relating to Designating Options as

Tier I Securities

February 11, 1997.

On October 11, 1996, the Philadelphia

Stock Exchange, Inc. (‘‘Phlx’’ or

‘‘Exchange’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) the proposed

rule change, pursuant to Section

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

of 1934 (‘‘Act’’),1 to include equity

options, index options and other option

like products issued, cleared and

guaranteed by the Options Clearing

Corporation (‘‘OCC’’) as Tier I securities

under Exchange Rule 803. Notice of the

proposed rule change, together with the

substance of the proposal, was

published in the Federal Register.2 One

comment letter was received on the

proposal.3 The Commission is

approving the proposed rule change

contingent upon NASAA’s4 amendment

of the Phlx MOU to permit OCC issued

options to be designated as Tier I

securities.5

I. Background

In 1994, the Exchange adopted a two

tier listing criteria program for equity

and debt securities.6 The Exchange

originally adopted its Tier I listing

standards based on standards

established in a MOU between the

NASAA and the Phlx. The Phlx MOU is

modeled after the MOU between the
Federal Register / Vol. 62, No. 32 / Tuesday, February 18, 1997 / Notices 7289

7See Securities Act Release No. 6810 (Dec. 16,

1988), 53 FR 52550 (Dec. 28, 1988).

8See supra note 6 n. 12.

9See Rules Phlx 803 through 805 for equity and

debt security listing standards; Phlx Rules 1009 and

1009A for listing applicable to options on equities

and indexes respectively.

10See supra note 9.

11See supra notes 3 and 5. As discussed above,

NASAA plans to revise the Phlx MOU. The

Commission notes that this approval order is

contingent on the NASAA’s formal amendment of

the Phlx MOU to permit OCC issued options to be

designated as Tier I securities.

12The Commission notes that Phlx’s proposed

rule is almost identical to the Pacific Stock

Exchange’s (‘‘PSE’’) current rule designating PSE

listed options as PSE Tier I securities for blue sky

purposes.

13See Supra note 3.

14See supra notes 5 and 11.

15 Id.

16See supra note 3.

17 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3Letter from Michele R. Weisbaum, Vice

President and Associate General Counsel, Phlx, to

Continued

National Association of Securities

Dealers (‘‘NASD’’) and NASAA,7 which

is entitled ‘‘A Model Uniform

Marketplace Exemption.’’

In the order approving the Exchange’s

Tier I listing standards, the Commission

noted that the Exchange was adopting

the MOU standards in an effort to

provide issuers whose securities were

designated as Tier I a greater

opportunity to obtain blue sky

exemptions.8 With the adoption of the

MOU, the Exchange has received blue

sky exemptions for its listed securities

designated as Tier I from a number of

states. When the Exchange adopted its

two tiered listing standards, however,

the Exchange did not include equity and

index options as Tier I securities, and

the Phlx MOU with NASAA did not

designate such options as Tier I

securities. The Exchange has explained

that exclusion of options as Tier I

securities was merely an oversight

rather than an intentional exclusion

because the Exchange’s equity and debt

security listing standards are provided

in a separate rule from its option listing

standards.9

The OCC, which is considered the

issuer of all Phlx listed options, has the

responsibility of registering these

options. OCC has indicated to the

Exchange that it must register Phlx

listed options in numerous states in

which the OCC would not otherwise be

required to register if the options were

able to take advantage of the blue sky

exemptions accorded to the Phlx’s Tier

I securities. Thus, the Exchange

proposes to include its equity options,

index options and any other OCC

issued, cleared and guaranteed products

as Tier I securities for blue sky

purposes. Under the proposal, options

would still have to meet existing

eligibility listing standards set forth in

Phlx rules specifically for options.10

Further, the Phlx and NASAA have

agreed that OCC issued options may

qualify for designation as Tier I

securities and are in the process of

amending the Phlx MOU to reflect this

change.11

Discussion

The proposed rule change is

consistent with Section 6 of the Act in

general, and in particular, with Section

6(b)(5), in that it is designed to promote

just and equitable principles of trade,

prevent fraudulent and manipulative

acts and practices, to foster cooperation

and coordination with persons engaged

in regulating, clearing, settling,

processing information with respect to,

and facilitating transactions in

securities, to remove impediments to

and perfect the mechanism of a free and

open market and a national market

system, as well as to protect investors

and the public interest.

The proposed rule change should

facilitate transactions in securities and

remove impediments to a free and open

market by eliminating the need for OCC

to register Phlx listed options in those

states that currently grant a blue sky

exemption to Phlx’s Tier I securities.

This rule change should help to

eliminate some of the costs associated

with listing options as well as making

the process of listing options easier and

quicker.

As discussed above, under the rule

being approved herein, OCC cleared

options will be designated as Tier I

securities for blue sky purposes only.

Accordingly, the rule change does not

affect or change in any way the

standards that must be met to initially,

or continue to, list equity and index

options or such other OCC issued

options permitted under Phlx rules. In

approving the Phlx’s proposal, the

Commission recognizes that the listing

criteria set forth in Phlx Rules 803

through 805 for Tier I securities are for

equity-type securities as opposed to

options issued by the OCC.

Nevertheless, because it is clear under

Phlx’s rule that listed options will still

have to meet options listing criteria and

that the Tier I designation for options is

merely to eliminate the need to register

such securities under certain state blue

sky laws, we believe the change is

appropriate and consistent with the

Act.12

Finally, as noted above, in

conjunction with this proposal, NASAA

and Phlx have agreed that OCC issued

options may be designated as Tier I

securities for blue sky purposes,13 and

NASAA has represented to the

Commission that the Phlx MOU will be

amended as soon as practical to reflect

this agreement.14 Accordingly, this rule

change will not become operative until

NASAA amends the Phlx MOU to

permit OCC issued options to be

designated as Tier I securities.15 This

amendment would ensure that the MOU

is consistent with Phlx rules designating

OCC cleared options as Tier I securities,

and that those states that grant Phlx a

blue sky exemption based on the MOU

will recognize such exemption for Phlx

listed options. In addition, in its letter

to the Commission, NASAA states that

this approach is similar to the structure

adopted in the MOU between the PSE

and NASAA.16

It is therefore ordered, pursuant to

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

proposed rule change SR–Phlx–96–41

be, and hereby is, approved contingent

upon NASAA’s amendment of the Phlx

MOU to permit OCC issued options to

be designated as Tier I securities.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.17

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–3916 Filed 2–14–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38265; File No. SR–Phlx–

96–23]

Self-Regulatory Organizations; Order

Approving and Notice of Filing and

Order Granting Accelerated Approval

of Amendment No. 1 to Proposed Rule

Change by the Philadelphia Stock

Exchange, Inc. Relating to Options

Specialist Evaluations.

February 11, 1997.

On July 1, 1996, 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

modify its procedures for evaluating

options specialists units. Notice of the

proposal was published for comment

and appeared in the Federal Register on

September 12, 1996. The exchange

subsequently filed Amendment No. 1 to

the proposed rule change on December

2, 1996.3 No comment letters were