Federal Register / Vol. 65, No. 25 / Monday, February 7, 2000 / Notices 5919

1Section 2(a)(9) of the Act defines ‘‘control’’ as

the power to exercise a controlling influence over

the management or policies of a company. That

section creates a presumption that an owner of

more than 25% of the outstanding voting securities

of a company controls the company.

2 If the requested order is granted, Vodafone

AirTouch’s counsel have advised Vodafone

AirTouch that it is not an investment company

under section 3(a) of the Act.

3See Tonopah Mining Company of Nevada, 26

S.E.C. 426, 427 (1947).

1 17 CFR 240.11Aa3–2.

2OPRA is a National Market System Plan

approved by the Commission pursuant to Section

11A of the Act and Rule 11Aa3–2 thereunder. See

Securities Exchange Act Release No. 17638 (Mar.

18, 1981).

The Plan provides for the collection and

dissemination of last sale and quotation information

on options that are traded on the member

exchanges. The five exchanges that agreed to the

OPRA Plan are the American Stock Exchange

(‘‘AMEX’’); the Chicago Board Options Exchange

(‘‘CBOE’’); the New York Stock Exchange (‘‘NYSE’’);

the Pacific Exchange (‘‘PCX’’); and the Philadelphia

Stock Exchange (‘‘PHLX’’).

will hold a 45% general partner interest

in Wireless and Bell Atlantic will hold

the remaining 55% general partner

interest. The Transaction is expected to

be consummated in early March 2000.

AirTouch states that, following the

Transaction, on an unconsolidated

basis, approximately 62% of its total

assets will consist of securities of

operating companies that AirTouch

controls (within the meaning of section

2(a)(9) of the Act), including Wireless,

approximately 17% will consist of

securities of wholly- and majorityowned subsidiaries, approximately 19%

will consist of other securities, and

approximately 2% will consist of assets

other than securities.1

Applicant’s Legal Analysis

1. Under section 3(a)(1)(C) of the Act,

an issuer is an investment company if

it is engaged or proposes to engage in

the business of investing, reinvesting,

owning, holding, or trading in

securities, and owns or proposes to

acquire investment securities having a

value exceeding 40% of the value of the

issuer’s total assets (exclusive of

Government securities and cash items)

on an unconsolidated basis. Section

3(a)(2) of the Act defines ‘‘investment

securities’’ to include all securities

except Government securities, securities

issued by employees’ securities

companies, and securities issued by

majority-owned subsidiaries of the

owner which are not investment

companies and which are not excepted

from the definition of investment

company by section 3(c)(1) or section

3(c)(7) of the Act.

2. AirTouch states that as a result of

the Transaction, it may meet the

definition of an investment company

under section 3(a)(1)(C) of the Act

because Wireless will not be a whollyor majority-owned subsidiary and,

therefore, AirTouch’s ‘‘investment

securities,’’ as defined in section 3(a)(2)

of the Act, may represent approximately

81% of its total assets on an

unconsolidated basis.

3. Section 3(b)(2) of the Act provides

that, notwithstanding section 3(a)(1)(C)

of the Act, the SEC may issue an order

declaring an issuer to be primarily

engaged in a business or businesses

other than that of investing, reinvesting,

owning, holding, or trading in securities

either directly, through majority-owned

subsidiaries, or controlled companies

conducting similar types of businesses.

AirTouch requests an order under

section 3(b)(2) declaring that it is

primarily engaged through its whollyand majority-owned subsidiaries and

controlled companies in a business

other than that of investing, reinvesting,

owning, holding, or trading in

securities.2

4. In determining whether a company

is primarily engaged in a noninvestment company business under

section 3(b)(2), the SEC considers: (a)

The applicant’s historical development;

(b) its public representations of policy;

(c) the activities of its officers and

directors; (d) the nature of its present

assets; and (e) the sources of its present

income.3

(a) Historical Development. AirTouch

states that it has been an operating

company since 1984, developing mobile

telecommunications networks and

providing telecommunications services

in the U.S. and, beginning in 1989,

overseas.

(b) Public Representations of Policy.

AirTouch states that it has never held,

and does not now hold, itself out as an

investment company. AirTouch asserts

that, in its annual reports, shareholder

communications, prospectuses, SEC

filings, and on its Internet web site, it

consistently has held itself out to the

public as an operator of mobile

telecommunications networks and

provider of telecommunications

services.

(c) Activities of Officers and Directors.

AirTouch states that its officers and

directors are actively engaged in the

management of its wholly- and majorityowned subsidiaries and controlled

companies through which AirTouch

conducts its telecommunications

business. AirTouch states that it has

approximately 14,000 full-time

employees, only two of whom spend

any time on investment activities.

(d) Nature of Assets. AirTouch states

that, as of September 30, 1999, its assets

other than securities, together with

securities of wholly- and majorityowned subsidiaries, represented

approximately 65%, securities and

controlled companies represented

approximately 16%, and other securities

represented approximately 19% of its

total assets on an unconsolidated basis.

AirTouch further states that, following

the consummation of the Transaction,

on a pro forma basis, its assets other

than securities, together with securities

of wholly- and majority-owned

subsidiaries, will represent

approximately 19%, securities of

controlled companies, including

Wireless, will represent approximately

62%, and other securities will represent

approximately 19% of its total assets on

a unconsolidated basis.

(e) Sources of Income. AirTouch

states that for the twelve months ended

March 31, 1999, it had net income of

$844 million, of which 40.1% was

attributable to its wholly- and majorityowned subsidiaries, 45.3% was

attributable to controlled companies,and

14.6% was attributable to investments.

AirTouch states that post-Transaction,

on a pro forma basis, for the twelve

months ended March 31, 1999, its net

income was $925 million, of which

86.7% was attributable to controlled

companies, including Wireless, and

13.3% was attributable to investments.

5. AirTouch thus states that it meets

the factors that the SEC considers in

determining whether an issuer is

primarily engaged in a business other

than that of investing, reinvesting,

owning, holding, or trading in

securities.

For the SEC, by the Division of Investment

Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–2605 Filed 2–4–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42362; File No. SR–OPRA–

00–02]

Options Price Reporting Authority;

Notice of Filing and Order Granting

Accelerated Effectiveness of

Amendment to OPRA Plan Adopting a

Temporary Capacity Allocation Plan

January 28, 2000.

Pursuant to Rule 11Aa3–2 under the

Securities Exchange Act of 1934

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

January 28, 2000, the Options Price

Reporting Authority (‘‘OPRA’’) 2

submitted to the Securities and

5920 Federal Register / Vol. 65, No. 25 / Monday, February 7, 2000 / Notices

3OPRA has determined to treat this proposed

capacity allocation as an amendment to its national

market system plan and, accordingly, to file the

proposed capacity allocation for Commission

review and approval pursuant to paragraph (b) of

Rule 11Aa3–2. Any determination made by OPRA

to continue the effectiveness of the proposed

capacity allocations or any revised capacity

allocations beyond March 4, 2000 will be the

subject of a separate filing under the same Rule.

4See Exchange Act Release No. 41843 (September

8, 1999) in which the Commission issued an order

authorizing the options exchanges, OPRA, OPRA’s

processor and other parties to act jointly in

planning, developing and discussing approaches

and strategies with respect to options quote message

traffic and related matters (‘‘September 1999

Order’’).

5See Exchange Act Release No. 42328 (January

11, 2000), 65 FR 2988 (January 19, 2000) (File No.

SR–OPRA–00–01).

6Any such continued allocation of OPRA

capacity that might be approved by OPRA would

be the subject of a separate filing under Rule

11Aa3–2. 17 CFR 240.11Aa3–2. See note 3, supra.

7 15 U.S.C. 78k–1(a)(1)(C)(ii).

8 17 CFR 240.11Aa3–2(c)(4).

Exchange Commission (‘‘SEC’’ or

‘‘Commission’’) an amendment to the

Plan for Reporting of Consolidated

Options Last Sale Reports and

Quotation Information (‘‘Plan’’). The

amendment proposes to allocate the

message handling capacity of OPRA’s

processor among the participant

exchanges for a temporary period

ending March 4, 2000, to minimize the

likelihood that during this period the

total number of messages generated by

the participants will exceed the

processor’s (i.e., Securities Industry

Automation Corporation) aggregate

message handling capacity.3 The

Commission is publishing this notice

and order to solicit comments from

interested persons on the proposed Plan

amendment, and to grant accelerated

approval to the proposed Plan

amendment through March 4, 2000.

I. Description and Purpose of the

Amendment

As discussed above, OPRA proposes

to allocate the message handling

capacity of its processor among the

participant exchanges for a temporary

period ending March 4, 2000, to

minimize the likelihood that during this

period the total number of messages

generated by the participants will

exceed the processor’s aggregate

message handling capacity. During this

period, the processor’s aggregate

message-handling capacity, which is

estimated by the processor to be 3,110

messages per second, will be allocated

among the participants by automatically

limiting the number of messages that

each participant may input to the

processor as follows:

American Stock Exchange: 910

messages per second

Chicago Board Options Exchange: 1,210

messages per second

Pacific Exchange: 545 messages per

second

Philadelphia Stock Exchange: 445

messages per second

OPRA proposes to allocate the

message handling capacity of its

processor in response to significant

increases in the number of options

quotations that have recently been

experienced by all of the participant

exchanges as a result of the greater

number of options series being traded

on the exchanges and the heightened

volatility in the underlying securities.

Although the aggregate amount of

options market information messages is

generally still within the capacity of the

OPRA processor, the aggregate options

message traffic is now so close to

reaching the processor’s maximum

message-handling capacity that some

short-term solution to the problem is

necessary to avoid risking unacceptable

delays and queuing in the dissemination

of real-time options market information.

Although some long-term solutions have

been proposed in the course of the

Options Capacity Planning and Quote

Mitigation Program that has been taking

place over the past several months,

these may not be in place soon enough

to deal with the current expansion of

message traffic.4 For this reason, during

the month of January 2000, OPRA’s

participant exchanges agreed upon a

capacity allocation based upon an

assumed maximum processor capacity

of 3,000 messages per second.5 OPRA’s

processor now estimates that the

capacity allocation may prudently be

adjusted upwards to reflect an assumed

maximum processor capacity of 3,110

messages per second. Accordingly,

OPRA’s participant exchanges, in the

presence of Commission staff pursuant

to the September 1999 Order, have

agreed to the allocation that is proposed

in this filing to be effective during

February 2000. Because this allocation

is based upon an assumed maximum

processor capacity of 3,110 messages

per second, which the processor advises

is a realistic number, it should serve the

intended purpose of avoiding delays

and queues in OPRA’s real-time stream

of market information.

To retain sufficient flexibility to deal

with changed circumstances within and

among the options markets, including

the planned commencement of options

trading by the International Securities

Exchange, the proposed allocations will

remain in effect only until March 4,

2000, unless OPRA decides that the

proposed allocation or some revised

allocation should be continued beyond

that date.6

II. Implementation of the Plan

Amendment

OPRA believes the temporary

implementation of the proposed

capacity allocation program is essential

to avoid delays and queues in the

dissemination of options market

information, which in turn is necessary

to achieve the objective of Section

11A(a)(1)(C)(iii),7 including to assure

the availability to brokers, dealers and

investors of information with respect to

quotations for and transactions in

securities. Accordingly, OPRA requests

the Commission to permit the proposed

allocation program to be put into effect

summarily upon publication of notice of

this filing, on a temporary basis,

pursuant to paragraph (c)(4) of Rule

11Aa3–2,8 based on a finding by the

Commission that such action is

necessary or appropriate in the public

interest, for the protection of investors

or the maintenance of fair and orderly

markets, to remove impediments to, and

perfect the mechanisms of, a national

market system, or is otherwise in

furtherance of the purposes of the Act.

III. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposed Plan

amendment is consistent with the Act.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549–0609. Copies of

the submission, all subsequent

amendments, and all written statements

with respect to the proposed Plan

amendment that are filed with the

Commission, and all written

communications relating to the

proposed Plan amendment between the

commission and any person, other than

those 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.

Copies of the filing also will be available

at the principal offices of OPRA. All

submissions should refer to file number

SR–OPRA–00–2 and should be

submitted by February 28, 2000.

IV. Commission’s Findings and Order

Granting Accelerated Approval of

Proposed Plan Amendment

After careful review, the Commission

finds that the proposed Plan

amendment is consistent with the

requirements of the Act and the rules

Federal Register / Vol. 65, No. 25 / Monday, February 7, 2000 / Notices 5921

9 In approving this proposed Plan amendment,

the Commission has considered the proposal’s

impact on efficiency, competition,and capital

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

10 15 U.S.C. 78k–1.

11 17 CFR 240.11Aa3–02.

11 17 CFR 200.30–3(a)(29).

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

2 17 CFR 240.19b–4.

3The Commission approved this Interpretation in

1996. See Release No. 34–37726 (September 25,

1996), 61 FR 51474 (October 2, 1996).

and regulations thereunder.9

Specifically, the Commission believes

that the proposed amendment, which

allocates the limited capacity of the

OPRA system among the options

markets, is consistent with Rule 11Aa3–

2 in that it will contribute to the

maintenance of fair and orderly markets

and remove impediments to and perfect

the mechanisms of a national market

system. The Commission notes that the

aggregate message traffic generated by

the options exchanges is rapidly

approaching the outside limit of OPRA’s

systems capacity. OPRA’s processor has

informed the Commission that current

plans to enhance OPRA’s systems are

not expected to be completed before the

end of the second quarter of this year,

at the earliest. Consequently, the

Commission is concerned that, absent

an agreed-to program to allocate systems

capacity among the options markets that

is put in place immediately, systems

queuing of options quotes may be the

norm, to the detriment of all investors

and other participants in the options

markets. The Commission believes that

the agreed-upon allocation proposal is a

reasonable means for addressing

potential strains on capacity that may

occur between now and March 4, 2000.

The Commission finds good cause to

accelerate the proposed Plan

amendment prior to the thirtieth day

after the date of publication in the

Federal Register. The Commission notes

that the proposed Plan amendment is

intended to allocate OPRA system

capacity for a short period of time to

mitigate potential disruption to the

orderly dissemination of options market

information caused by the inability of

the OPRA system to handle the

anticipated quote message traffic. The

commission believes that approving the

proposed capacity allocation will

provide the options exchanges and

OPRA with an immediate, short-term

solution to a pressing problem, while

giving the Commission and the options

markets additional time to evaluate and

possibly, implement, other quote

mitigation strategies. In addition, the

limited time frame of the applicability

of the capacity allocation program

should provide the Commission and the

options exchanges with greater

flexibility to modify the program, as

necessary, to ensure the fairness of the

allocation process to all of the options

markets going forward. The Commission

finds, therefore, that granting

accelerated approval of the proposed

Plan amendment is appropriate and

consistent with Section 11A of the

Act.10

V. Conclusion

It is therefore ordered, pursuant to

Rule 11Aa3–2 of the Act,11 that the

proposed Plan amendment (SR–OPRA–

00–02) is approved on an accelerated

basis through March 4, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.12

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–2607 Filed 2–4–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42371; File No. SR–CBOE–

99–63]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the Chicago Board

Options Exchange, Inc. Relating to

Exercise Price Intervals for FLEX

Equity Options

January 31, 2000.

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 December 10, 1999,

the Chicago Board Options Exchange,

Inc. (‘‘CBOE’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’) the proposed rule

change as described in Items I and II

below, which Items have been prepared

by the Exchange. The Commission is

publishing this notice and order to

solicit comments on the proposed rule

change from interested persons and to

approve the proposal on an accelerated

basis.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

CBOE proposes to delete

Interpretation .01 of CBOE Rule

24A.4(c)(2) 3 which limits exercise price

intervals and exercise prices for FLEX

Equity call options to those that apply

to Non-FLEX Equity call options. The

text of the proposed rule change is

available at the Office of the Secretary,

CBOE 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

CBOE 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 III below. The CBOE 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 delete Interpretation .01

under CBOE Rule 24A.4(c)(2). This

interpretation limits the exercise price

intervals and exercise prices available

for FLEX Equity call options to those

intervals and prices that are available

for Non-FLEX Equity call options

pursuant to Interpretation and Policy

.01 under CBOE Rule 5.5. This policy

was intended to eliminate uncertainty

concerning what constitutes a

‘‘qualified’’ covered call for certain

purposes under the Internal Revenue

Code pending clarification of this tax

issue.

Currently, under Section 1092(c)(4)(B)

of the Internal Revenue Code, certain

covered short positions in call options

qualify for advantageous tax treatment if

the options are not in the money by

more than a specified amount at the

time they are written. One measure used

to determine whether a call option is

qualified is whether its exercise or

‘‘strike’’ price is no lower than the

‘‘lowest qualified benchmark price,’’

which is generally the highest strike

price available for trading that is less

than the current price of the underlying

stock. Since the exercise prices of FLEX

Equity Options are not subject to the

same intervals that apply to Non-FLEX

Equity Options, this has raised the

question whether the existence of a

series of FLEX Equity Options with a

strike price of, for example, 58 when the

price of the underlying stock is 59

would disqualify a Non-FLEX call

option with a strike price of 55, which

would otherwise be the highest strike

price available that is less than the price

of the stock.