Federal Register / Vol. 62, No. 57 / Tuesday, March 25, 1997 / Notices 14177

3See Securities Exchange Act Release No. 35091

(Dec. 12, 1994), 59 FR 65558 (Dec. 20, 1994).

4 In the filing submitted by the Exchange to adopt

this fee, the Exchange noted that many of these

firms are located in other geographic regions, thus

requiring increased staff time and travel expenses

to conduct examinations. It was further noted, that

many of these firms trade products not available on

the PHLX, thus requiring additional time and

money to train and prepare the examiners who

conduct the exams. Securities Exchange Act Release

No. 35091 (Dec. 12, 1994), 59 FR 65558 (Dec. 20,

1994).

5Currently 13 firms are subject to the

examination fee out of approximately 140 firms for

which the Exchange is the DEA. Seven of the 13

firms made colorable arguments that they were not

subject to the examination fee under the previous

interpretation and the Exchange took note of their

argument. Therefore, during the time prior to filing

this proposed rule change, those firms were not

charged the examination fee. Accordingly, this is a

new fee to that class of firms that are now subject

to the fee by reason of the 25% revenue test. Letter

from Michele R. Weisbaum, Vice President and

General Counsel, PHLX to Karl Varner, Office of

Market Supervision, Division of Market Regulation,

SEC, dated March 13, 1997; Letter from Michele R.

Weisbaum, Vice President and General Counsel,

PHLX to Karl Varner, Office of Market Supervision,

Division of Market Regulation, SEC, dated March

17, 1997.

6 15 U.S.C. § 78s(b)(3)(A).

7 17 CFR 240.19b–4(e).

8 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

The purpose of the proposed rule

change is to amend the second

exemption to the Exchange’s $1,000 per

month examination fee.3 This fee was

initially adopted to recoup the costs of

examining firms, for which the

Exchange is the Designated Examining

Authority (‘‘DEA’’), which contribute

little if any revenue to the Exchange to

offset the expense of conducting such

examinations.4 Because this fee was

intended to pertain to a specific group

of members and participants, a number

of exemptions were carved out for firms

which do generate enough revenue to

the Exchange to offset examining costs

or which are inactive. One of the

exemptions, organizations operating

from the PHLX trading floor, has proved

to be too vague. The Exchange has

found that a number of member or

participant organizations which operate

primarily or exclusively from off the

floor, have entered into arrangements

whereby they argue that they meet this

exemption.5 Specifically, a floorbroker

or Registered Options Trader from

another firm which does conduct

business on the floor becomes dually

affiliated with the off-floor member or

participant organization and may or

may not ever do any business for that

firm on the floor. These firms have

argued that this dual affiliation would

qualify them as an organization

operating from the PHLX trading floor

since they now have an affiliated person

on the trading floor. Under this

arrangement, these off-floor firms may

still not generate revenue to offset the

costs of examining them. The Exchange

believes, however, that the description

of the fee’s exemption for firms

operating from the trading floor may

have been unintentionally vague enough

to permit this interpretation and thus

determined to add an objective

measurement.

Under this new test, any organization

which can demonstrate that it has

derived at least 25% of its revenues in

a calendar quarter from floor trading

activity, will be deemed to have covered

the cost of examining the firm and will

then be exempt from the $1,000 per

month fee.

The proposed rule change is

consistent with Section 6 of the Act in

general, and in particular, with Section

6(b)(4), in that it provides for the

equitable allocation of reasonable dues,

fees and other charges among its

members and other persons using its

facilities in that it clarifies which firms

are deemed to have paid their share of

the cost of an examination by setting an

objective income test.

B. Self-Regulatory Organization’s

Statement on 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 either

solicited or received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The foregoing rule change has become

effective on February 28, 1997, pursuant

to Section 19(b)(3)(A) of the Act 6 and

subparagraph (e)(2) of Rule 19b–4

thereunder,7 because it establishes or

changes a due, fee, or other charge. At

any time within 60 days of the filing of

such proposed rule change, the

Commission may summarily abrogate

such rule change if it appears to the

Commission that such action is

necessary or appropriate in the public

interest, for the protection of investors,

or otherwise in furtherance of the

purposes of the Act.

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 in

the Commission’s Public Reference

Room. Copies of such filing will also be

available for inspection and copying at

the principal office at the PHLX. All

submissions should refer to File No.

SR–PHLX–97–10 and should be

submitted by April 15, 1997.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.8

Jonathan G. Katz,

Secretary.

[FR Doc. 97–7391 Filed 3–24–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38415; File No. SR–Phlx–

97–05]

Self-Regulatory Organizations; Order

Approving a Proposed Rule Change

and Notice of Filing and Order

Granting Accelerated Approval to

Amendment No. 1 Thereto by the

Philadelphia Stock Exchange, Inc.

Relating to Reducing the Value of the

Super Cap Index

March 18, 1997.

On January 9, 1997, the Philadelphia

Stock Exchange, Inc. (‘‘Phlx’’ or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’), pursuant to Section

19(b) of the Securities Exchange Act of

1934 (‘‘Act’’),1 and Rule 19b–4

thereunder,2 a proposed rule change to

reduce the value of its Super Cap Index

(‘‘Index’’) option (‘‘HFX’’) to one-half its

present value by doubling the divisor

used in calculating the Index. The Index

is comprised of the top five optionseligible common stocks of U.S.

companies traded on the New York

Stock Exchange (’’NYSE’’), as measured

by capitalization. The other contract
14178 Federal Register / Vol. 62, No. 57 / Tuesday, March 25, 1997 / Notices

3See Securities Exchange Act Release No. 38247

(February 5, 1997), 62 FR 6596 (February 12, 1997).

4 In Amendment No. 1, the Exchange provides

that the position and exercise limits for HFX

options will remain at 5,500 contracts, as opposed

to being doubled as originally proposed, upon the

effective date of the two-for-one split of the Index.

The Phlx states that because the Super Cap Index

currently maintains low open interest in the nonexpiring series, non of which involves customer

accounts, the Phlx does not believe a doubling of

the position and exercise limits is warranted. See

letter from Theresa McCloskey, Vice President,

Regulatory Services, Phlx, to Sharon Lawson,

Senior Special Counsel, Office of Market

Supervision (‘‘OMS’’), Division of Market

Regulation (‘’Divsion’’), Commission, dated March

17, 1997 (‘‘Amendment No. 1’’).

5See Securities Exchange Act Release No. 36369

(October 13, 1995), 60 FR 54272 (October 20, 1995).

6See letter from Theresa A. McCloskey, Vice

President, Regulatory Services, Phlx, to James T.

McHale, Attorney, OMS, Division, Commission,

dated January 31, 1997 (‘‘Phlx letter’’).

7See Securities Exchange Act Release No. 37536

(August 7, 1996) (SR-Phlx-96–17). The Options

Clearing Corporation was not able to accept certain

strike prices resulting from a three-for-one split,

because dividing certain strike prices by three

resulted in a strike price with too many decimal

places. This operational limitation does not arise in

a two-for-one split.

8See Amendment No. 1, Supra note 4.

9Specifically, because the Index value would be

less than 500, the applicable strike price interval

would be $5 in the near term months (the first four

consecutive months series) and $25 in the far term.

See Rule 1101A(a).

10See note 13, infra.

11With the Index at 540, a February 540 call on

January 29, 1997 was priced at approximately 211⁄4,

multiplied by 100=$2,125. See Phlx letter, supra

note 6.

12 15 U.S.C. 78f(b)(5).

13The Phlx will be issuing a circular to its

membership, within one week of the effective date

of the change, which will advise members of the

reduction in value of the HFX and specific strike

prices for the adjusted HFX options. Telephone

Conversation between Edith Hallahan, Special

Counsel, Regulatory Services, Phlx, and James T.

McHale, Attorney, OMS, Division, Commission, on

March 17, 1997.

specifications for the HFX will remain

unchanged.

Notice of the proposal was published

for comment and appeared in the

Federal Register on February 12, 1997.3

No comment letters were received on

the proposal. On March 18, 1997, the

Phlx filed Amendment No. 1 to the

proposed rule change.4 This order

approves the Phlx’s proposal, as

amended.

I. Description of the Proposal

The Exchange began trading the HFX

in November, 1995.5 The Index was

created with a value of 350 on its base

date of May 31, 1995 which rose to 540

on January 29, 1997. Thus, the value of

the Index has increased 54% since

inception.6 Consequently, the premium

for HFX options also has risen. In May,

1996, the Exchange filed a proposed

rule change to reduce the value of the

Index to one-third of its then present

value; although this proposal was

approved by the Commission,

operational limitations prevented its

implementation.7 Thus, the Index has

never been split.

As a result, the Exchange proposes to

conduct a ‘‘two-for-one split’’ of the

Index, such that the value would be

reduced to one-half of its present value.

In order to account for the split, the

number of HFX contracts will be

doubled, such that for each HFX

contract currently held, the holder

would receive two contracts at the

reduced value, with a strike price onehalf of the original strike price. For

instance, the holder of a HFX 540 call

will receive two HFX 270 calls. The

position and exercise limits applicable

to the HFX will remain at 5,500

contracts,8 and the trading symbol will

remain HFX.

In conjunction with the split, the

Exchange will list strike prices

surrounding the new, lower index

value, pursuant to Phlx Rule 1101A.9

The Exchange will announce the

effective date of the split by way of an

Exchange memorandum to the

membership, which will include notice

of the strike price changes.10

The Phlx states that the purpose of the

proposal is to attract additional liquidity

to the product in those series that public

customers are most interested in

trading. For example, a near-term, atthe-money call option series currently

trades at approximately $2,125 per

contract.11 The Exchange believes that

certain investors and traders currently

may be impeded from trading at such

levels. With the Index split, that same

option series (once adjusted), with all

else remaining equal, could trade at

approximately $1,062 per contract. The

Phlx believes that a reduced premium

value should encourage additional

investor interest.

In support of its proposal, the

Exchange notes that Super Cap Index

options provide an important

opportunity for investors to hedge and

speculate upon the market risk

associated with the underlying stocks.

By reducing the value of the Index, the

Phlx believes such investors will be able

to utilize this trading vehicle, while

extending a smaller outlay of capital.

The Exchange believes that this, in turn,

should attract additional investors and

create a more active and liquid trading

environment.

II. Discussion

The Commission finds that proposed

rule change is consistent with the

requirements of the Act and the rules

and regulations thereunder applicable to

a national securities exchange, and, in

particular, the requirements of Section

6(b)(5) of the Act.12 Specifically, the

Commission believes that reducing the

value of the Index will serve to promote

the public interest and help remove

impediments to a free and open

securities market, by providing a

broader range of investors with a means

of hedging exposure to market risk

associated with securities representing

the most highly capitalized companies

traded on the NYSE. Further, the

Commission notes that reducing the

value of HFX options should help

attract additional investors, thus

creating a more active and liquid trading

market. The Commission notes that the

Phlx will be providing market

participants with adequate prior notice

of the Index level change in order to

avoid investor confusion.13

The Commission believes that

doubling the Index’s divisor will not

have an adverse market impact or make

trading in HFX options susceptible to

manipulation. After the split, the Index

will continue to be comprised of the

same stocks with the same weightings,

will be calculated in the same manner

(except for the change in divisor) and

will have the same position and exercise

limits. Finally, the Phlx’s surveillance

procedures also will remain the same.

The Commission finds good cause for

approving Amendment No. 1 to the

proposed rule change prior to the

thirtieth day after the date of

publication of notice thereof in the

Federal Register. Amendment No. 1

provides that the position and exercise

limits for HFX options will remain at

5,500 contracts, as opposed to being

doubled as originally proposed, upon

the effective date of the two-for-on split

of the Index. The Phlx states that

because the Super Cap Index currently

maintains low open interest in the nonexpiring series, none of which involves

customer accounts, the Phlx does not

believe a doubling of the position and

exercise limits is warranted. The

Commission finds that Amendment No.

1 strengthens the proposal by

maintaining position and exercise limits

at their current levels, which should

continue to reduce the likelihood of

manipulation. Moreover, the

Commission notes that all of the market

participants holding existing positions

in HFX options will continue to hold

positions well within the 5,500 contract

limit once the Index is split and their

positions are doubled. Accordingly,

there is no market need to double

position limits, as Phlx originally

proposed, to provide investors a period

of time in which to reduce their double
Federal Register / Vol. 62, No. 57 / Tuesday, March 25, 1997 / Notices 14179

14 15 U.S.C. 78s(b)(2).

15 17 CFR 200.30–3(a)(12).

positions to the lower limit levels. The

Commission also notes that no

comments were received on the original

Phlx proposal, which was subject to the

full 21-day comment period. Therefore,

the Commission believes that it is

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

Act to approve Amendment No. 1 to the

proposed rule change on an accelerated

basis.

Interested persons are invited to

submit written data, views and

arguments concerning Amendment No.

1 to the proposed rule change. 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

Section, 450 Fifth Street, N.W.,

Washington, D.C. Copies of such filing

will also be available for inspection and

copying at the principal office of the

Phlx. All submissions should refer to

File No. SR–Phlx–97–05 and should be

submitted by April 15, 1997.

For the foregoing reasons, the

Commission finds that the Phlx’s

proposal, as amended, is consistent with

the requirements of the Act and the

rules and regulations thereunder.

It is therefore ordered, pursuant to

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

amended proposed rule change (SR–

Phlx–97–05) is approved.

For the Commission, by the Division of

Market Regulations, pursuant to delegated

authority.15

Jonathan G. Katz,

Secretary.

[FR Doc. 97–7394 Filed 3–24–97; 8:45 am]

BILLING CODE 8010–01–M

SMALL BUSINESS ADMINISTRATION

State of Arkansas; Declaration of

Disaster #2932; Amendment #1

In accordance with notices from the

Federal Emergency Management

Agency, dated March 11 and March 13,

1997, the above-numbered Declaration

is hereby amended to include the

Counties of Conway, Craighead,

Independence, Jefferson, Lawrence,

Pope, and Woodruff in the State of

Arkansas as a disaster area due to

damages caused by severe storms and

tornadoes beginning on March 1 and

continuing through March 4, 1997.

In addition, applications for economic

injury loans from small businesses

located in the contiguous counties of

Cleveland, Izard, Johnson, Lincoln,

Logan, Monroe, Newton, Searcy, Sharp,

Stone, Van Buren, and Yell in Arkansas

may be filed until the specified date at

the previously designated location. Any

counties contiguous to the above-named

counties and not listed herein have been

previously declared.

All other information remains the

same, i.e., the termination date for filing

applications for physical damage is May

1, 1997, and for loans for economic

injury the deadline is December 2, 1997.

(Catalog of Federal Domestic Assistance

Program Nos. 59002 and 59008.)

Dated: March 17, 1997.

Bernard Kulik,

Associate Administrator for Disaster

Assistance.

[FR Doc. 97–7511 Filed 3–24–97; 8:45 am]

BILLING CODE 8025–01–P

Commonwealth of Kentucky;

Declaration of Disaster #2933;

Amendment #1

In accordance with a notice from the

Federal Emergency Management

Agency, dated March 12, 1997, the

above-numbered Declaration is hereby

amended to include the Counties of

Anderson, Butler, Crittenden, Fayette,

Floyd, Jessamine, Larue, Lawrence,

Livingston, Mercer, McCracken,

Montgomery, Morgan, Pike, Robertson,

Rowan, Union, Webster, and Woodford

in the Commonwealth of Kentucky a

disaster area due to damages caused by

severe storms, tornadoes, and flooding

beginning on March 1, 1997 and

continuing.

In addition, applications for economic

injury loans from small businesses

located in the following contiguous

counties may be filed until the specified

date at the previously designated

location: Ballard, Carlisle, Edmonson,

Garrard, Graves, Green, Johnson, Logan,

Knott, Letcher, Madison, Magoffin,

Marshall, Martin, Taylor, and Warren in

the Commonwealth of Kentucky;

Hardin, Massac, Pope, and Pulaski in

the State of Illinois; Buchanon,

Dickenson, and Wise in the

Commonwealth of Virginia; and

McDowell in the State of West Virginia.

Any counties contiguous to the abovenamed primary counties and not listed

herein have been covered under a

separate declaration for the same

occurrence.

The numbers assigned to this disaster

for economic injury are 943900 for

Illinois; 944000 for Virginia; and 944100

for West Virginia.

(Catalog of Federal Domestic Assistance

Program Nos. 59002 and 59008.)

Dated: March 17, 1997.

Bernard Kulik,

Associate Administrator for Disaster

Assistance.

[FR Doc. 97–7512 Filed 3–24–97; 8:45 am]

BILLING CODE 8025–01–P

Federated States of Micronesia;

Declaration of Disaster #2939

The Island of Yap in the Federated

States of Micronesia constitutes a

disaster area as a result of damages

caused by Typhoon Fern which

occurred beginning December 24 and

continuing through December 27, 1996.

Applications for loans for physical

damage as a result of this disaster may

be filed until the close of business on

May 19, 1997 and for economic injury

until the close of business on December

19, 1997 at the address listed below or

other locally announced locations: U.S.

Small Business Administration, Disaster

Area 4 Office, 1825 Bell Street, Suite

208, Sacramento, CA 95825.

The interest rates are:

Percent

For Physical Damage:

Homeowners With Credit

Available Elsewhere ......... 8.000

Homeowners Without Credit

Available Elsewhere ......... 4.000

Businesses With Credit

Available Elsewhere ......... 8.000

Businesses and Non-Profit

Organizations Without

Credit Available Elsewhere ............................... 4.000

Others (Including Non-Profit

Organizations) With Credit

Available Elsewhere ......... 7.250

For Economic Injury:

Businesses and Small Agricultural Cooperatives

Without Credit Available

Elsewhere ........................ 4.000

The number assigned to this disaster

for physical damage is 293906 and for

economic injury the number is 944200.

(Catalog of Federal Domestic Assistance

Program Nos. 59002 and 59008).