6682 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Notices

19See Exchange Act Release Nos. 41011

(February 1, 1999), 64 FR 6405 (February 9, 1999)

(order approving File No. SR–Amex–98–38,

eliminating position and exercise limits on a two

year pilot basis for Institutional Index Options and

Major Market Index Options and FLEX options on

those index options); 40969 (January 22, 1999), 64

FR 4911 (February 2, 1999) (order approving File

No. SR–CBOE–98–23, eliminating position and

exercise limits on two year pilot basis for the S&P

500 Index, the S&P 100 Index, and the Dow Jones

Industrial Average Index, and FLEX options on

those indexes).

20See Amendment No. 1. This includes

references in Phlx Rules 1079(d)(1), 1000A(b)(11),

(c); 1047A(a)(i), (d), (f)(iv); and 1101A Commentary

.01.

21 15 U.S.C. 78s(b)(2).

22 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 8s(b)(1).

2 17 CFR 240.19b–4.

3 In Amendment No. 1, the Exchange requested

that the Commission approve the existing 4% addon margin for all non-customized cross-rate foreign

currency options until February 4, 2000, prior to the

thirtieth day after the publication of the notice

thereof in the Federal Register; provided statistical

data to substantiate the proposed rule change; and

made substantive changes to the proposed rule text.

See Letter from Nandita Yagnik, Counsel, Phlx, to

Hong-anh Tran, Attorney, Division of Market

Regulation (‘‘Division’’), Commission, dated

October 25, 1999 (‘‘amendment No. 1’’). 4Securities Exchange Act Release No. 42093

(November 3, 1999), 64 FR 61682 (November 12,

1999) (File No. SR–Phlx–99–30). 5 In Amendment No. 2, the Exchange made

technical changes to the proposed rule text.

Specifically, the Exchange proposes to modify the

introductory portion of Commentary .16 to Phlx

Rule 722 to clarify that the Commentary .16

methodology applies to non-customized Cross-Rate

FCOs, but not to customized Cross-Rate FCOs. The

Exchange also proposes replacing the word

‘‘currency’’ with the term ‘‘currency pair’’

throughout Paragraph (c) of Commentary .16, and

adding the word ‘‘the’’ before the word ‘‘base

currency’’ in Paragraph (a) of the same commentary.

See Letter from Nadita Yagnik, Counsel, Phlx, to

Hong-anh Tran, Attorney, Division of Market

Regulation (‘‘Division’’), Commission, dated

January 18, 2000 (‘‘Amendment No. 2’’).

6See Securities Exchange Act Release No. 29919

(November 7, 1991), 56 FR 58109 (November 15,

1991) (‘‘1991 Order‘‘). Although the Exchange

received approval for the British pound/Japanese

yen Cross-rate FCO, the Exchange has not listed

such a contract.

the CBOE and Amex.19 Although Phlx’s

VLE, TPX and XOC options are not

identical to CBOE’s or Amex’s, the

Commission believes that, given its

approval of these proposed rule

changes, the Phlx’s proposed increase in

position and exercise limits to three

times their current level is appropriate.

Finally, the Commission believes it

appropriate for the Exchange to

eliminate language contained in Phlx

Rule 1001A and 1101A, concerning the

Big Cap Index (‘‘MKT’’) since MKT is no

longer traded on the Exchange. The

Commission also believes it is

appropriate for the Exchange to delete

all references to options on the Super

Cap Index, as these options were

delisted from the Exchange on

September 29, 1999.20

The Commission finds good cause to

approve Amendment No. 1 to the

proposed rule change prior to the 30th

day after the date of publication of

notice of filing thereof in the Federal

Register. Amendment No. 1 provides for

a reporting requirement for member

firms that should aid the Exchange in

monitoring accounts with large

positions in VLE, TPX, and XOC.

Amendment No. 1 also makes certain

minor technical changes. Accordingly,

the Commission finds that, consistent

with Sections 6(b) and 19(b)(2) of the

Act, there is good cause to approve

Amendment No. 1 to the proposed rule

changes on an accelerated basis.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning Amendment No.

1, including whether the amendments

are consistent with the Exchange 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, 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, located at the above address.

Copies of such filing will also be

available for inspection and copying at

the principal office of the self-regulatory

organization. All submissions should

refer to File No. SR–Phlx–98–55 and

should be submitted by March 2, 2000.

V. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,21 that the

proposed rule change (SR–Phlx–98–55)

be approved, as amended.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.22

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–3088 Filed 2–9–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42388; International Series

Release No. 1213; File No. SR–Phlx–99–30]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change and

Notice of Filing and Order Granting

Accelerated Approval to Amendment

No. 2 to the Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

Respecting Non-Customized CrossRate Foreign Currency Option Margin

Levels

February 4, 2000.

I. Introduction

On August 5, 1999, the Philadelphia

Stock Exchange, Inc. (‘‘Phlx’’ or

‘‘Exchange’’) filed with 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 method of calculating initial

and maintenance customer margin

requirements for non-customized crossrate foreign currency options (‘‘CrossRate FCOs’’). The Exchange amended

the proposal on October 26, 1999.3

The Commission published notice of

the proposed rule change in the Federal

Register on November 12, 1999.4 The

Exchange filed a second amendment to

the proposal on January 19, 2000.5 The

Commission received no comments on

the proposal. This order approves the

proposed rule change, as amended.

II. Description of the Proposal

The Exchange proposes to determine

the add-on margin levels for all noncustomized Cross-Rate FCOs using the

methodology outlined in Commentary

.16 to Phlx Rule 722, in lieu of the fixed

four percent rate that the Exchange

currently uses.

In 1991, the Commission approved

the Exchange’s proposal to list and trade

three non-customized Cross-Rate

FCOs—German mark/Japanese yen,

British pound/German mark and British

pound/Japanese yen options.6 The

Commission’s 1991 order approved a

four percent add-on margin level for the

non-customized Cross-Rate FCOs for a

one-year period only, because these

products were new products and the

Commission was concerned that the

volatility in the underlying currencies

could change significantly. Accordingly,

the Commission stated that the

Exchange should further analyze the

add-on margin adequacy, and, within

nine months, submit the analysis along

with a proposed rule change to retain

the margin level or establish a new

level.

Based on the 1991 Order, the

Exchange’s customer margin

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Notices 6683

7For foreign currency put options, ‘‘out-of-themoney-amounts’’ equal the aggregate exercise price

of the option minus the product of units per foreign

currency contract and the closing spot price. See

Phlx Rule 722(d).

For foreign currency call options, ‘‘out-of-themoney-amounts’’ equal the product of units per

foreign currency contract and the closing spot price

minus the aggregate exercise price of the option.

See id.

8The minimum add-on margin on any call

carried ‘‘short’’ in a customer’s account is equal to

3⁄4% of the current market value of the underlying

FCO contract; the minimum add-on margin on any

such put option contract is equal to 3⁄4% of the

option’s aggregate exercise price amount. See id.

9See Securities Exchange Act Release No. 41365

(May 4, 1999), 64 FR 25946 (May 13, 1999) SR–

Phlx–99–12) (‘‘1999 Order’’).

10The underlying currency is the currency in

which a foreign currency option settles. The base

currency is the currency in which premiums are

quoted and paid.

requirements for short positions for noncustomized Cross-Rate FCOs equaled

the add-on margin of four percent of the

current market value of the foreign

currency underlying the FCO contract,

plus 100 percent of the market value of

the FCO contract, reduced by any ‘‘outof-the-money amounts’’ 7 but in no

event be less than 100 percent of the

market value of the FCO contract plus

a ‘‘minimum add-on margin amount’’ 8

The Exchange represented that this addon margin level was sufficient to cover

each non-customized cross-rate

product’s historical price volatility over

seven-day intervals (for the July 30,

1990 to July 30, 1991 time period) with

a confidence level of at least 96 percent.

Due to an oversight, the Exchange did

not file the required analysis of the

adequacy of the add-on margin nor the

proposed rule change within nine

months of the 1991 Order. Following

this discovery, the Exchange in 1999

filed a proposed rule change to

temporarily codify the four percent addon margin level while it considered a

method of determining add-on margin,

on a permanent basis, for all noncustomized Cross-Rate FCOs.9 The

Commission’s order approving that

proposed rule change permitted the

Exchange to apply a four percent addon margin level for all non-customized

Cross-Rate FCOs for a six-month period

until November 4, 1999.

On August 5, 1999, the Exchange filed

the current proposed rule change to

determine the add-on margin levels for

non-customized Cross-Rate FCOs using

the methodology outlined in

Commentary .16 to Phlx Rule 722, in

lieu of the four percent rate that the

Exchange currently uses.

The Exchange currently uses the

Commentary .16 methodology to

calculate the add-on margin for

standardized FCOs (where the base

currency is denominated in U.S.

dollars). The Commentary .16

methodology bases the add-on margin

percentage for a foreign currency option

on the volatility of the foreign currency

underlying the option (the ‘‘underlying

currency’’) relative to the ‘‘trading

currency.’’ 10 To implement this change,

the Exchange proposes to amend the

text of Commentary .16, and the chart in

Rule 722, to clarify that the Exchange

will set the add-on margin for CrossRate FCOs based on all five-day price

movements of the base currency vis-a`-

vis the underlying currency for the

contract.

In particular, the Exchange proposes

to review five day price movements of

the base currency relative to the

underlying currency over the most

recent three year period and would set

the add-on margin level at a level

sufficient to cover those price changes at

least 97.5 percent of the time. If

subsequent quarterly reviews show that

the existing add-on margin level for any

non-customized cross-rate FCO

currency pair provides a confidence

level below 97 percent, the Exchange

would increase the add-on margin

requirement for that currency pair to a

level that would have covered those

price movements at a 98 percent

confidence level. If a subsequent

quarterly review shows a confidence

level between 97 percent and 97.5

percent, the add-on margin level would

remain the same but would be subject

to monthly follow-up reviews until the

confidence level exceeds 97.5 percent

for two consecutive months (then the

Exchange would put it back on the

quarterly review cycle). If a monthly

follow-up review showed that the

confidence level dropped below 97

percent, the Exchange would increase

the add-on margin level to a 98 percent

confidence level. Generally, if any

review shows that the confidence level

exceeds 98.5 percent, the Exchange

would reduce the add-on margin level

to a 98 percent confidence level. But to

account for the possibility of

unexpectedly large price movements, if

any review show that a Cross-Rate FCO

currency paid had a five-day price

movement, either positive or negative,

greater than two times the existing addon margin level, the Exchange would set

the add-on margin requirement for that

currency pair to a 99 percent confidence

level (‘‘Extreme Outlier Test’’). In

addition to the routine reviews

described above, the Exchange would

continue to have authority to impose a

higher margin level at any time, if

market conditions so warrant.

The Exchange filed an amendment to

the proposed rule change on October 26,

1999. The amendment requested that

the Commission grant accelerated

approval to the amendment so that the

Exchange could continue to apply the

four percent add-on margin for all

Cross-Rate FCO products until February

4, 2000. This would provide additional

time for the Commission to consider the

proposed rule change, while ensuring

that trading of these products would

continue following November 4, 1999,

when the existing four percent add-on

margin would have expired.

Based on the data supplied by the

Exchange on October 26, 1999 for the

three-year period of July 16, 1996

through July 15, 1999, the Commentary

.16 methodology would produce add-on

margins for British pound/Deutsche

mark and Deutsche mark/Japanese yen

non-customized Cross-Rates (which are

currently listed on the Exchange) of 3.5

percent and 4 percent, respectively,

covering 99 percent and 97.5 percent

confidence level, respectively. The

British pound/Deutsche mark FCO

contract would have been margined at a

99 percent confidence level because the

extreme outlier test would have applied.

The British pound/Japanese yen CrossRate contract, which is currently not

listed on the Exchange, would have an

add-on margin of 5 percent, covering

97.5 percent confidence level.

III. Discussion

Upon 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.11 The Commission

finds that the proposed rule change is

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

Act, which requires, inter alia, that the

rules of an exchange promote just and

equitable principles of trade and

facilitate transactions in securities.12 In

particular, the proposed rule change

will make the required margin on noncustomized Cross-Rate FCOs better

reflect existing economic circumstances

and therefore will better correlate the

margin requirement with the risk

associated with holding a short position

in a non-customized Cross-Rate FCO.

The Exchange proposes to set the addon margin based on the five-day price

movements (excluding weekends) of the

underlying currency relative to the base

currency over the most recent three-year

period, by setting the add-on margin

percentage at a level that would cover

those price movements at a specified

confidence level, typically 97.5 percent.

6684 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Notices

11 In approving this rule, the Commission has

considered the proposal’s impact on efficiency,

competition, and capital formation. 15 U.S.C. 78c(f). 12 15 U.S.C. 78f(b)(5). 13See Phlx Rule 722(i)(8).

14 15 U.S.C. 78s(b)(2). 15 17 CFR 200.30–3(a)(12).

The Commission finds that the use of

the Commentary .16 methodology to set

add-on margins for non-customized

Cross-Rate FCOs, in lieu of the fixed

four percent requirement the Exchange

currently uses, potentially provides a

more economically meaningful margin.

The currencies involved in the noncustomized Cross-Rate FCOs that the

Exchange is authorized to list and

trade—the British pound, Deutsche

mark, and Japanese yen—are all

relatively stable currencies and it is

reasonable to assume that those

currencies’ future volatility will be

linked to their past volatility. Also, the

Exchange has the authority to apply a

higher add-on margin than required by

the Commentary .16 methodology, when

appropriate.13 Use of the Commentary

.16 methodology further would promote

efficiency because the Exchange will not

have to file a proposed rule change with

the Commission each time Commentary

.16 methodology changes the add-on

margin levels. The Commission finds good cause for

approving Amendment No. 2 to the

proposed rule change prior to the

thirtieth day after the date of

publication of notice of filing thereof in

the Federal Register. In Amendment

No. 2, the Exchange made two general

technical changes to Commentary .16 to

Phlx Rule 722, by clarifying that

Commentary .16 was applicable to noncustomized Cross-Rate FCOs but not to

customized Cross-Rate FCSs, and by

clarifying that paragraph (c) of

Commentary .16 focuses on currency

pairs, i.e., movements of currencies visa

`

-vis each other. The amendment did

not raise any new regulatory issues.

Accordingly, the Commission believes

that there is good cause to approve

Amendment No. 2 to the proposal on an

accelerated basis.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning Amendment No.

2, including whether the 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, NW, Washington, DC

20549–0609. 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 Room. Copies

of the filing will also be available for

inspection and copying at the principal

office of the Exchange. All submissions

should refer to File No. SR–Phlx–99–30

and should be submitted by March 2,

2000.

V. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,14 that the

proposed rule change (SR–Phlx–99–30)

is approved, as amended.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.15

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–3089 Filed 2–9–00; 8:45 am]

BILLING CODE 8010–01–M

SMALL BUSINESS ADMINISTRATION

[Declaration of Disaster #3232, Amdt. 2]

State of Kentucky

In accordance with a notice received

from the Federal Emergency

Management Agency dated January 24,

2000, the above-numbered Declaration

is hereby amended to include Hancock

and Henderson Counties in the State of

Kentucky as a disaster area due to

damages caused by tornadoes, severe

storms, torrential rains, and flash

flooding that occurred on January 3–4,

2000.

In addition, applications for economic

injury loans from small businesses

located in the contiguous County of

Breckinridge, Kentucky, and Perry,

Posey, and Vanderburgh Counties in

Indiana may be filed until the specified

date at the previously designated

location. Any counties contiguous to the

above-named primary counties and not

listed herein have been previously

declared.

All other information remains the

same, i.e., the deadline for filing

applications for physical damage is

March 10, 2000 and for economic injury

the deadline is October 10, 2000.

(Catalog of Federal Domestic Assistance

Program Nos. 59002 and 59008)

Dated: February 2, 2000.

Bernard Kulik,

Associate Administrator for Disaster

Assistance.

[FR Doc. 00–3075 Filed 2–9–00; 8:45 am]

BILLING CODE 8025–01–P

SOCIAL SECURITY ADMINISTRATION

Agency Information Collection

Activities: Proposed Request and

Comment Request

In compliance with Public Law 104–

13, the Paperwork Reduction Act of

1995, SSA is providing notice of its

information collections that require

submission to the Office of Management

and Budget (OMB). SSA is soliciting

comments on the accuracy of the

agency’s burden estimate; the need for

the information; its practical utility;

ways to enhance its quality, utility and

clarity; and on ways to minimize burden

on respondents, including the use of

automated collection techniques or

other forms of information technology.

I. The information collections listed

below will be submitted to OMB within

60 days from the date of this notice.

Therefore, comments and

recommendations regarding the

information collections would be most

useful if received by the Agency within

60 days from the date of this

publication. Comments should be

directed to the SSA Reports Clearance

Officer at the address listed at the end

of this publication. You can obtain a

copy of the collection instruments by

calling the SSA Reports Clearance

Officer on (410) 965–4145, or by writing

to him at the address listed at the end

of this publication.

1. Claimant’s Medications—0960–

0289. The Social Security

Administration (SSA) uses Form HA–

4632 to request that applicants for

disability benefits provide information

to facilitate processing their title II, OldAge, Survivors and Disability Insurance

(OASDI) and Title XVI, Supplemental

Security Income (SSI) claims. The form

elicits from the claimants an updated

list of medications used by the

claimants. It enables the Administrative

Law Judge hearing the case to fully

inquire into medical treatment the

claimant is receiving and the effect of

medications on the claimant’s medical

impairments. The respondents are

applicants for OASDI and SSI benefits.

Number of Respondents: 171,939.

Frequency of Response: 1.

Average Burden Per Response: 15

minutes.

Estimated Annual Burden: 42,985

hours.

2. Statement of Employer—0960–

0030. The information collected on

Form SSA–7011 is needed by SSA to

substantiate allegations of wages paid to

workers when those wages do not

appear in SSA’s records of earnings and

the worker does not have proof that

payment was made. This information is