Federal Register / Vol. 62, No. 53 / Wednesday, March 19, 1997 / Notices 13201

2Section 2(a)(9) defines ‘‘control’’ as the power to

exercise a controlling influence over the

management or policies of a company. The section

creates a presumption that owners of 25% or more

of a company’s voting securities control such

company.

3Rule 17a–7 permits certain purchase and sale

transactions between an investment company and

certain of its affiliated persons provided that certain

conditions are met, including that the transaction

be effected at the current market price of the

security.

1The Commission notes that the majority of other

ITS Participants (the American Stock Exchange,

Boston Stock Exchange, Chicago Stock Exchange,

Cincinnati Stock Exchange, National Association of

Securities Dealers, New York Stock Exchange,

Pacific Stock Exchange) have filed essentially the

same proposals to amend each of their rules

concerning the Pre-Opening Application. See

Securities Exchange Act Release No. 38285

(February 13, 1997), 62 FR 8065 (February 21,

1997).

rate of overnight dollar LIBOR plus

0.5%.

5. Applicants propose that the Global

Fund sell the Investec Shares to the

Trust. The purchase price to be paid by

the Trust will be the July Price plus

carrying costs relating to such

investment. These carrying costs will

consist of (a) reimbursement of the

carrying costs actually paid by the

Global Fund to Investec in

consideration of the deferral of the

Global Fund’s purchase of the Investec

Shares and (b) reimbursement of the

Global Fund of its cost of funds (the

overnight LIBOR plus 0.5%) from the

Initial Purchase Settlement Date through

the date on which the Trust purchases

the Investec Shares (the ‘‘Trust Purchase

Date’’).

Applicants’ Legal Analysis

1. Section 17(a) of the Act provides,

in pertinent part, that it is unlawful for

any affiliated person of a registered

investment company, or any affiliated

person of such an affiliated person,

acting as principal, knowingly to sell or

purchase securities to or from such

registered company.

2. Section 2(a)(3) of the Act defines

the term ‘‘affiliated person’’ of another

person to include, in pertinent part (a)

any person directly or indirectly

owning, controlling, or holding with

power to vote 5% or more of the

outstanding voting securities of such

other person, (b) any person directly or

indirectly controlling, controlled by, or

under common control with such other

person or (c) if such other person is an

investment company, any investment

adviser thereof.

3. The Trust and the Global Fund are

both subject to control, as defined in

section 2(a)(9) of the Act,2 by Old

Mutual. Also, the Trust and the Global

Fund share a common investment

adviser. Thus, the Trust and the Global

Fund are ‘‘affiliated persons’’ within the

meaning of section 2(a)(3). As a result,

sales of securities on a principal basis

by the Global Fund to the Trust are

prohibited by section 17(a) of the Act.

4. Section 17(b) of the Act provides

that the SEC may exempt a transaction

from the prohibitions of section 17(a) if

evidence establishes that the terms of

the proposed transaction, including the

consideration to be paid, are reasonable

and fair and do not involve

overreaching on the part of any person

concerned, and that the proposed

transaction is consistent with the policy

of the registered investment company

concerned and with the general

purposes of the Act.

5. Applicants believe that the

requested relief meets the standards set

forth in section 17(b). Applicants

believe that the proposed transaction is

consistent with the objective and

policies of the Trust and that the

proposed transaction is consistent with

the general purposes of the Act. In

addition, the terms of the transaction

were presented to the board of trustees

of the Trust and at a meeting on

February 14, 1997, the board of trustees

of the Trust, including a majority of the

independent trustees, approved the

purchase of the Investec Shares. In

evaluating the terms of the transaction,

the trustees of the Trust considered the

fact that the proposed purchase price to

be paid by the Trust will include

reimbursement of Global Fund for its

payment of Investec’s carrying costs and

for its own carrying costs.

6. Applicants state that the proposal

does not involve dumping. Further,

applicants state that the transaction is

consistent with the requirements of rule

17a–7,3 except that the purchase price

will be below market price and the

Trust and the Global Fund are not

affiliated persons solely by reason of

having a common investment adviser or

investment advisers which are affiliated

persons of each other, common

directors, and/or common officers.

7. Applicants state that if the Trust

were not able to purchase the Investec

Shares from the Global Fund on the

basis proposed, it would be

disadvantaged relative to other

portfolios and funds managed by Old

Mutual and its affiliates because, unlike

those other portfolios and funds that

have been allocated shares of the

placing, the Trust would, in order to

increase its investment in Investec, have

to purchase shares on the open market

without the benefit of the discount

negotiated by Old Mutual. Applicants

state that the Trust is not obligated to

purchase the Investec Shares if the

market price of the shares falls below

the proposed purchase price. Thus, the

Global Fund bears the investment risk of

holding the Investec Shares. Applicants

state that the Global Fund has in effect

granted an option to the Trust and the

Trust has not paid, and is not required

to pay, any fee to the Global Fund or

any other party for this option.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–6837 Filed 3–18–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38393; File No. SR–CBOE–

97–12]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Board Options Exchange,

Inc. To Amend the Exchange’s Rule

Concerning the Pre-Opening

Application of the Intermarket Trading

System

March 12, 1997.

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

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on February 26, 1997,

the Chicago Board Options Exchange,

Inc. (‘‘CBOE’’ or ‘‘Exchange’’) filed with

the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I, II and III below, which Items

have been prepared by the selfregulatory 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 CBOE proposes to amend CBOE

Rule 30.72, Pre-Opening Application

Rule, with respect to the Pre-Opening

Application in the Intermarket Trading

System (‘‘ITS’’). The proposed

amendment is to enhance the operation

of the Pre-Opening Application by

effectively including circuit breakers as

a trading halt situation that will trigger

the Pre-Opening Application.1

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
13202 Federal Register / Vol. 62, No. 53 / Wednesday, March 19, 1997 / Notices

4 15 U.S.C. 78f(b)(5). 5 15 U.S.C. 78k–1(a)(1)(D).

on the proposed rule change. The text

of these statement 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 enhance the operation of

CBOE Rule 30.72, the ITS Pre-Opening

Application. The CBOE’s Pre-Opening

Application rule contains basic

definitions pertaining to ITS, prescribes

the sorts of transactions that may be

effected through ITS and the pricing of

commitments to trade, and specifies the

procedures pertaining to the PreOpening Application, whereby an

Exchange Designated Primary MarketMaker (‘‘Exchange DPM’’) who wishes

to open a market in an ITS stock may

obtain any pre-opening interest in that

stock by other market-makers registered

in that stock in other Participant

markets.

CBOE’s current Pre-Opening

Application prescribes that if an

Exchange DPM anticipates that the

opening transaction on the Exchange

will be at a price that represents a

change from the security’s previous

day’s consolidated closing price of more

than the ‘‘applicable price change,’’ the

Exchange DPM shall notify other

Participant markets by sending a preopening notification through the ITS.

The ‘‘applicable price changes’’ are:

Consolidated closing price 2

Applicable price

change (more

than)

Network A:3

Under $15 ...................... 1⁄8 point.

$15 or over ..................... 1⁄4 point.

Network B:

Under $5 ........................ 1⁄8 point.

$5 or over ....................... 1⁄4 point.

2 If the previous day’s closing price of an eligible listed security exceeded $100 and the

security does not underlie an individual stock

option contract listed and currently trading on

an exchange, the ‘‘applicable price change’’ is

one point. 3 Network A is comprised of New York Stock

Exchange securities; Network B is comprised

of American Stock Exchange securities.

Thereafter, the Exchange DPM shall not

open the market in the security until not

less than three minutes after the

transmission of the pre-opening

notification. Once an Exchange DPM

has issued a pre-opening notification,

other Participant markets may transmit

‘‘pre-opening responses’’ to the

Exchange DPM through the ITS that

contain ‘‘obligations to trade.’’ The

Exchange DPM is then obligated to

combine these obligations with orders it

already holds in the security, and, on

the basis of this aggregated information,

decide upon the opening transaction in

the security.

The Pre-Opening Application also

applies whenever an ‘‘indication of

interest’’ is sent to the Consoldiated

Tape Association (‘‘CTA’’) Plan

Processor prior to the opening of trading

in the relevant security or prior to the

reopening of trading in the relevant

security following the declaration of a

trading halt for certain defined reasons,

even if the anticipated opening or reopening price is not greater than the

‘‘applicable price change.’’ The current

Pre-Opening Application provides that

the Pre-Opening Application Rule

applies when an indication of interest is

disseminated following five defined

trading halt situations; reopenings

following order imbalance, order influx,

equipment, communications or

technical problems, news pending and

news dissemination, and for a delayed

opening.

The purpose of the proposed

amendment is to amend the CBOE’s PreOpening Application rule to provide

that the Pre-Opening Application would

be triggered whenever any ‘‘indication

of interest’’ (i.e., an anticipated opening

price range) is sent to the Consolidated

Tape System prior to the opening or

reopening of trading in the relevant

security. Under the proposed change,

the Pre-Opening Application would also

be triggered when indications of interest

are disseminated in situations other

than those five defined trading halts,

including the resumption of trading

following the activation of market-wide

circuit breakers. In particular, the

proposed amendment would delete the

definition of ‘‘Trading Halt,’’ which is

limited to the five defined trading halt

situations mentioned above, and replace

all references to ‘‘Trading Halt’’ with

‘‘halt or suspension in trading.’’ As a

result, one standard procedure would

then goven all trading halt situations

and would include suspensions of

trading pursuant to circuit breakers.

2. Statutory Basis

The proposed rule change is

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

Act 4 in that it is designed to promote

just and equitable principles of trade, to

remove impediments to and to perfect

the mechanism of a free and open

market and a national market system,

and, in general, to protect investors and

the public interest. The proposed rule

change is also consistent with Section

11A(a)(1)(D) 5 of the Act which provides

that the linking of all markets for

qualified securities through

communications and data processing

facilities will foster efficiency, enhance

competition, increase the information

available to brokers, dealers, and

investors, facilitate the offsetting of

investors’ orders, and contribute to the

best execution of such orders.

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 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 the 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, NW.,

Washington, DC 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 at
Federal Register / Vol. 62, No. 53 / Wednesday, March 19, 1997 / Notices 13203

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

2 17 CFR 240.19b–4.

3Securities Exchange Act Release No. 34345 (July

11, 1994), 59 FR 36245 (July 15, 1994) (approval for

index options on the Phone Index). 4 15 U.S.C. 78f(b)(5).

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–CBOE–97–12 and should be

submitted by April 9, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–6892 Filed 3–18–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38383; File No. SR–Phlx–

97–12]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

Relating to the Maintenance Criteria for

the PHLX Phone Index

March 11, 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 March 5,

1997, the Philadelphia Stock Exchange

Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with

the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I, II and III below, which Items

have been prepared by the Exchange.

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 Phlx, pursuant to Rule 19b–4 of

the Act, proposes to amend the

maintenance standards applicable to the

PHLX Phone Index (‘‘Index’’) to allow

the number of stocks in the index to

decline to six stocks without having to

delist the index.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and the

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

Phlx 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 Phlx 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 Index is a capitalization weighted

index composed of eight widely held

U.S. companies created as a result of the

divestiture of American Telephone and

Telegraph Co. (‘‘AT&T’’) in 1983. The

Index includes seven regional telephone

companies spun off from AT&T and

AT&T itself.3 Currently, the Index

would not meet the maintenance

standards if less than 90% of the

component stocks in the Index, by

weight, are eligible for Exchange options

trading or if the number of stocks in the

index ever decreases to less than eight

or increases to more than ten. In such

case, the Exchange is required to wind

down the Index by restricting trading to

closing only transactions and not

opening any new series of options on

the Index unless a new Rule 19b–4

filing is submitted to the Commission

and approved.

The Exchange is proposing, herein, to

amend the maintenance standards to

allow the number of component stocks

in the index to decrease to six without

having to wind down the Index. Thus,

if the number of stocks in the index

decreases to less than six or increases to

more than ten, the Exchange would

restrict trading to closing only

transactions and not open any new

series of options on the Index until it

seeks and gains approval for such a

revised index. The 90% Exchange

options eligibility maintenance standard

will still apply.

The Exchange expects that in the near

future, two separate mergers involving

four of the components may occur.

NYNEX and Bell Atlantic are proposing

a merger with Bell Atlantic as the

survivor and SBC Communications is

proposing to merge with Pacific Telesis

with SBC Communications as the

survivor. If these two mergers are

consummated, the Index would only

have six component issues which would

still pass the new proposed

maintenance criteria.

2. Basis

The Phlx believes that the proposed

rule change is consistent with Section 6

of the Act in general and furthers the

objective of Section 6(b)(5) in

particular 4, in that it is designed to

promote just and equitable principles of

trade, to prevent fraudulent and

manipulative acts and practices, and 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.

B. Self-Regulatory Organization’s

Statement on the Burden on

Competition

The PHLX 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 solicited

or received with respect to 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 the

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

agency consents, the Commission will:

(A) By order approve the 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 at

the Commission’s Public Reference

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such