14174 Federal Register / Vol. 62, No. 57 / Tuesday, March 25, 1997 / Notices

4 15 U.S.C. § 78f(b).

5 15 U.S.C. § 78f(b)(5).

6The Commission waived the five-day prefiling

requirement, because the Commission had the

opportunity to review the proposal when it was

filed as SR–CSE–97–04, pursuant to Section

19(b)(2) of the Act. The previous proposal was

withdrawn on March 6, 1997 and refiled pursuant

to Section 19(b)(3)(A) of the Act.

7Although the proposal was originally filed with

the Commission on March 6, 1997, the Commission

notes that any substantive amendment to a

proposed rule change filed under Rule 19b–4(e)(6)

causes the 30-day delayed implementation period

to be restarted from the date of the filing of the

amendment. See Securities Exchange Act Release

No. 35123 (Dec. 20, 1994), 59 FR 66692 (Dec. 28,

1994).

8 15 U.S.C. § 78s(b)(3).

9 17 CFR 240.19b–4(e)(6).

10The 60 day abrogation period commences from

March 14, 1997, the date of the submission of the

substantive amendment.

11 17 CFR 200.30–3(a)(12).

Pursuant to Regulatory Circular #95–

04, members are currently required to

submit certain data pertaining to agency

orders and proprietary trades. The

Exchange recognizes, however, that the

types of data it requires will likely

change as CSE’s regulatory program

evolves. The proposed rule change will

therefore impose a general regulatory

data submission requirement that will

refer members to the current Regulatory

Circular delineating order, market, and

transaction submission requirements. In

this way, the Exchange will retain the

flexibility necessary for effective

regulatory surveillance and enforcement

efforts.

(2) Basis

The Exchange believes that the

proposed rule change is consistent with

Section 6(b) of the Act 4 in general and

furthers the objectives of Section

6(b)(5) 5 in particular in that it is

designed to promote just and equitable

principles of trade, and to remove

impediments to and perfect the

mechanism of a free and open market

and a national market system.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The CSE 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

Because the foregoing proposed rule

change: (1) Does not significantly affect

the protection of investors or the public

interest; (2) does not impose any

significant burden on competition; (3)

was provided to the Commission for its

review at least five days prior to the

filing date; 6 and (4) does not become

operative for 30 days from March 14,

1997,7 the rule change has become

effective pursuant to Section 19(b)(3)(A)

of the Act 8 and Rule 19b–4(e)(6) 9

thereunder. In particular, the

Commission believes the proposal

qualifies as a ‘‘noncontroversial filing’’

in that the proposed standards do not

significantly affect the protection of

investors or the public interest and do

not impose any significant burden on

competition. At any time within 60 days

of the filing of the proposed rule

change,10 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 the

furtherance of the purposed 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

Section, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the CSE. All submissions

should refer to File No. SR–CSE–97–05

and should be submitted by April 15,

1997.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.11

Jonathan G. Katz,

Secretary.

[FR Doc. 97–7392 Filed 3–24–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38411; File No. SR–NYSE–

97–01]

Self-Regulatory Organization; Notice of

Filing of Proposed Rule Change by

New York Stock Exchange, Inc.

Relating to Amendments to Rule 431

(‘‘Margin Requirements’’)

March 17, 1997.

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

Securities Exchange Act of 1934, 15

U.S.C. 78s(b)(1), notice is hereby given

that on January 9, 1997 the New York

Stock Exchange, Inc. (‘‘Exchange’’) filed

with the Securities and Exchange

Commission (‘‘SEC’’ or ‘‘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 parties.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange has filed amendments

to Rule 431 (‘‘Margin Requirements’’).

The change consists of amendments

regarding permitted market maker and

specialist offset positions being

eliminated from Regulation T of the

Federal Reserve Board (‘‘FRB’’) and to

acknowledge specific provisions of Rule

15c3–1 of the Securities Exchange Act

of 1934 (‘‘the Net Capital Rule’’). The

proposed rule change also incorporates

in Rule 431 cash account transactions

permitted by the FRB and SEC, as well

as incorporating several definitions.

Proposed new language is italicized;

proposed deletions are in brackets.

Proposed Amendment of Rule 431

Margin Requirements

Rule 431. (a) through (f)(2)(I)

unchanged.

(J) Registered specialists, market

makers or traders.—Notwithstanding

the other provisions of this sub-section

(f)(2), a member organization may clear

and carry the listed option transactions

of one or more registered specialists,

registered market makers or registered

traders in options (which registered

traders are deemed specialists for all

purposes under the Securities Exchange

Act of 1934 pursuant to the rules of a

national exchange) (hereinafter referred

to as ‘‘specialist(s)’’, upon a ‘‘Good

Faith’’ margin basis satisfactory to the

concerned parties, provided [that all

real and potential risks in accounts

carried under such arrangements are at

all times adequately covered by the

margin maintained in the account or in

the absence thereof, by the carrying
Federal Register / Vol. 62, No. 57 / Tuesday, March 25, 1997 / Notices 14175

member organization’s excess Net

Capital under Rule 325.] the ‘‘Good

Faith’’ margin requirement is not less

than the Net Capital haircut deduction

of the member organization carrying the

transaction pursuant to Rule 325. In lieu

of collecting the ‘‘Good Faith’’ margin

requirement, a carrying member

organization may elect to deduct in

computing its Net Capital the amount of

any deficiency between the equity

maintained in the account and the

‘‘Good Faith’’ margin required.

For purposes of this paragraph

(f)(2)(J), a permitted offset position

means, in the case of an option in which

a specialist makes a market, a position

in the underlying asset or other related

assets, and in the case of other

securities in which a specialist makes a

market, a position in options overlying

the securities in which a specialist

makes a market. Accordingly, a

specialist in options may establish, on a

share-for-share basis, a long or short

position in the securities underlying the

options in which the specialist makes a

market, and a specialist in securities

other than options may purchase or

write options overlying the securities in

which the specialist makes a market, if

the account holds the following

permitted offset positions:

(i) A short option position which is

‘‘in or at the money’’ and is not offset

by a long or short option position for an

equal or greater number of shares of the

same underlying security which is ‘‘in

the money’’;

(ii) A long option position which is

‘‘in or at the money’’ and is not offset

by a long or short option position for an

equal or greater number of shares of the

same underlying security which is ‘‘in

the money’’;

(iii) A short option position against

which an exercise notice was tendered;

(iv) A long option position which was

exercised;

(v) A net long position in a security

(other than an option) in which a

specialist makes a market;

(vi) A net short position in a security

(other than an option) in which the

specialist makes a market; or

(vii) A specified portfolio type as

referred to in SEC Rule 15c3–1—

Appendix A.

For purposes of this paragraph

(f)(2)(J), the term ‘‘in or at the money’’

means the current market price of the

underlying security is not more than two

standard exercise intervals below (with

respect to a call option) or above (with

respect to a put option) the exercise

price of the option; the term ‘‘in the

money’’ means the current market price

of the underlying asset or index is not

below (with respect to a call option) or

above (with respect to a put option) the

exercise price of the option; and, the

term ‘‘overlying option’’ means a put

option purchased or a call option

written against a long position in an

underlying asset; or a call option

purchased or a put option written

against a short position in an underlying

asset.

Securities, including options, in such

accounts shall be valued conservatively

in the light of current market prices and

the amount which might be realized

upon liquidation. Substantial additional

margin must be required or excess Net

Capital maintained in all cases where

the securities carried: (i) are subject to

unusually rapid or violent changes in

value including volatility in the

expiration months of options, (ii) do not

have an active market, or (iii) in one or

more or all accounts, including

proprietary accounts combined, are

such that they cannot be liquidated

promptly or represent undue

concentration of risk in view of the

carrying organization’s Net Capital and

its overall exposure to material loss.

(K) unchanged.

(L) Exclusive designation.—A

customer may designate at the time an

option order is entered which security

position held in the account is to serve

in lieu of the required margin, if such

service is offered by the member

organization; or the customer may have

a standing agreement with the member

organization as to the method to be used

for determining on any given day which

security position will be used in lieu of

the margin to support an option

transaction. Any security held in the

account which serves in lieu of the

required margin for a short put or short

call shall be unavailable to support any

other option transaction in the account.

(M) Cash account transactions.—A

member organization may make option

transactions in a customer’s cash

account, providing:

(i) The transaction is permissible

under Section 220.8 of Regulation T of

the Board of Governors of the Federal

Reserve System; or

(ii) The transaction is a debit put

spread in listed broad-based index

options with European-style exercise

comprised of a long put(s) coupled with

a short put(s) overlying the same broadbased index with an equivalent

underlying aggregate index value and

the short put(s) and long put(s) expire

simultaneously, and the strike price of

the long put(s) exceed the strike price of

the short put(s).

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

on the proposed rule change. The text

of these statements may be examined at

the places specified in item IV below.

The Exchange 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

Regulation T of the FRB currently

prescribes option margin requirements.

In April 1996, the FRB amended

Regulation T to effectively delegate

margin requirements for options

transactions for both customers and

market makers/specialists, shifting

responsibility for establishing margin

requirements for such transactions to

the self-regulatory organizations. This

amendment to Regulation T will become

effective June 1, 1997.

Accordingly, the proposed

amendments incorporate the current

FRB requirements into Exchange Rule

431 so that they may remain in effect

after June 1, 1997. The proposed

amendments also incorporate certain

treatments of positions recognized

under the Net Capital Rule.

Specifically, the proposed

amendments to Rule 431 adopt

provisions regarding permitted market

maker and specialist offset positions

from Regulation T and the Net Capital

Rule. These offset positions would be

subject to the same ‘‘good faith’’ margin

treatment as currently accorded under

Regulation T and would require the

clearing/carrying firm to comply with

the applicable haircut requirements of

the Net Capital Rule for any cash margin

deficiency (e.g., the difference between

the margin required under Rule 431 and

the amount received from the specialist/

market maker). The proposal also

incorporates the current Regulation T

definitions of the terms ‘‘in or at the

money,’’ ‘‘in the money’’ and ‘‘overlying

options.’’ The parameters for permitted

offsets within the ‘‘in or at the money’’

definition have been expanded from one

to two ‘‘standard exercise intervals.’’

Section (f)(2)(J) of the rule has been

revised in order to clarify the existing
14176 Federal Register / Vol. 62, No. 57 / Tuesday, March 25, 1997 / Notices

1Letter dated March 15, 1994 from Brandon

Becker, Director, Division of Market Regulation

addressed to Ms. Mary L. Bender (CBOE) and Mr.

Timothy Hinkas (OCC).

1 15 U.S.C. § 78s(b)(1) (1988).

2 17 CFR 240.19b–4 (1991).

definition of ‘‘good faith’’ margin

requirements.

A new provision has been added

(Section (f)(2)(L)) to incorporate the

provisions currently contained in

Regulation T regarding ‘‘exclusive

designation’’ that allow a customer to

designate which security position in an

account is to be utilized to cover the

required margin at the time an option

order is entered; provided the member

organization offers such a service.

Further, Section (f)(2)(M) has been

added to incorporate those cash account

transactions currently permitted under

Regulation T and the debit put spread

currently allowed pursuant to the

Commission’s no-action letter on

‘‘theoretical pricing.’’1

(2) Statutory Basis

The proposed rule change is

consistent with the requirements of

Section (6)(b)(5) of the Securities

Exchange Act of 1934 (the ‘‘Act‘‘) which

provides that the rules of the Exchange

be designed to promote just and

equitable principles of trade and to

protect the investing public. The

proposed rule change is also consistent

with the rules and regulations of the

Board of Governors of the Federal

Reserve System for the purpose of

preventing the excessive use of credit

for the purchase or carrying of

securities, pursuant to Section 7(a) of

the Act.

(B) Self-Regulatory Organization’s

Statement of Burden on Competition

The Exchange believes that the

proposed rule change will not 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

Comments 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 reason 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 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

submissions, 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. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the above-mentioned selfregulatory organization. All submissions

should refer to the File No. SR–NYSE–

97–01 and should be submitted by April

15, 1997.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority

Jonathan G. Katz,

Secretary.

[FR Doc. 97–7393 Filed 3–24–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38416; File No. SR–PHLX–

97–10]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Philadelphia Stock Exchange, Inc.

Relating to a Clarification of the

Exemptions From the Exchange

Examination Fee

March 18, 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 February

28, 1997, the Philadelphia Stock

Exchange, Inc. (‘‘PHLX’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’)

the proposed rule change as described

in Items I, II, and III below, which Items

have been prepared by the PHLX. 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 one of the

exemptions to its existing examination

fee in order to clarify to which firms the

fee is applicable. The text of the

amendment to the fee schedule language

is as follows (new text is italicized):

* * * * *

Examination Fee—$1,000 monthly

This fee is applicable to member/

participant organizations for which the

PHLX is the DEA. The following

organizations are exempt: (1) inactive

organizations; (2) organizations

operating from the PHLX trading floor

which have demonstrated that at least

25% of their income as reflected on the

most recently submitted FOCUS Report

was derived from floor activities; (3)

organizations for any month where they

incur transaction or clearing fees

charged directly by the Exchange or by

its registered clearing subsidiary,

provided that the fees exceed the

examination fee for that month; and (4)

organizations affiliated with an

organization exempt from this fee due to

the second or third category. Affiliation

includes an organization that is a

wholly owned subsidiary of, or

controlled by or under common control

with, an ‘‘exempt’’ member or

participant organization. An inactive

organization is one which has no

securities transaction revenue, as

determined by semi-annual FOCUS

reports, as long as the organization

continues to have no such revenue each

month.

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

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.