Federal Register / Vol. 62, No. 61 / Monday, March 31, 1997 / Notices 15213

1 15 U.S.C. § 78s(b)(1) (1988).

2 17 CFR 240.10a–1 (1993).

3The text of the proposed rule change is available

for review in the Office of the Secretary, at CBOE

and in the Public Reference Room of the

Commission.

4The Index is maintained and published by

Standard & Poor’s, Inc. and is intended to provide

a performance benchmark for the U.S. equity

markets. The Index is a capitalization weighted

measure of the aggregate market value of 500

common stocks. The Index includes 105 individual

groups and 11 economic sectors.

5The International Finance Corporation is an

international organization that was established in

1956 to further economic growth in its developing

member countries by promoting private sector

development. The Corporation, together with

private investors, assists in financing the

establishment, improvement and expansion of

private sector enterprises by making investments

where sufficient private capital is not otherwise

available on reasonable terms. The Corporation’s

share capital is provided by its member countries.

It raises most of the funds for its investment

activities through the issuance of notes, bonds and

other debt securities in the international capital

markets.

1996 Act, among other things, amended

section 3(c)(1) of the Investment Company

Act (the existing exclusion from Investment

Company Act regulation used by privately

offered investment companies) and added

section 3(c)(7) to create a new exclusion from

regulation under the Investment Company

Act for privately offered investment

companies that consist solely of ‘‘qualified

purchasers’’ owning or investing on a

discretionary basis a specified amount of

‘‘investments.’’ The new rules would: (i)

define the term ‘‘investments’’ for purposes

of the qualified purchaser definition; (ii)

define the term ‘‘beneficial owner’’ for

purposes of the provisions that permit an

existing privately offered investment

company to convert into a qualified

purchaser pool or to be treated as a qualified

purchaser; (iii) address certain interpretative

issues under section 3(c)(7); (iv) address

certain interpretative issues under section

3(c)(1) resulting from changes made by the

1996 Act; (v) address investments in

privately offered investment companies by

‘‘knowledgeable employees’’; and (vi)

address certain transfers of securities issued

by privately offered investment companies.

The subject matter of the closed

meeting scheduled for Thursday, April

3, 1997, following the 10:00 a.m. open

meeting, will be:

Institution and settlement of injunctive

actions.

Institution and settlement of

administrative proceedings of an

enforcement nature.

Opinions.

At times, changes in Commission

priorities require alterations in the

scheduling of meeting items. For further

information and to ascertain what, if

any, matters have been added, deleted

or postponed, please contact: The Office

of the Secretary at (202) 942–7070.

Dated: March 26, 1997.

Jonathan G. Katz,

Secretary.

[FR Doc. 97–8226 Filed 3–27–97; 3:08 pm]

BILLING CODE 8010–01–M

[Release No. 34–38431; file No. SR–CBOE–

97–13]

Self Regulatory Organizations;

Chicago Board Options Exchange,

Inc.; Notice of Filing and Order

Granting Accelerated Approval of

Proposed Rule Change Relating to

Short Sales of S&P 500 Index Bear

Market Warrants

March 21, 1997.

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

Securities Exchange Act of 1934

(11Act’’),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 primarily by CBOE. The

Commission is publishing this notice

and order to solicit comments on the

proposed rule change from interested

persons and to grant accelerated

approval of the proposed rule change.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

CBOE is proposing to amend Rule

30.20 relating to short sales, to reflect an

exemption granted by the Commission

pursuant to Exchange Act Rule 10a–1 2

for S&P 500 Index Bear Market Warrants

(‘‘Warrants’’).3

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

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 IV below. 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

CBOE is proposing to amend Rule

30.20 regarding short sales, to reflect an

exemption granted by the Commission

pursuant to Exchange Act Rule 10a-1 for

S&P 500 Index Bear Market Warrants.

Description of S&P 500 Warrants

The CBOE is currently trading S&P

500 Index 4 Bear Market Warrants with

3-month Reset, expiring November 20,

1997, issued by the International

Finance Corporation (‘‘IFC’’ or

‘‘Corporation’’).5 The Warrants

constitute direct, unconditional, general

and unsecured obligations of the

Corporation. There were 1,250,000

warrants originally offered, and the

trading symbol is OPT.WS. The

Warrants trade on the New York Stock

Exchange (‘‘NYSE’’) and CBOE. The

Warrants are quoted and traded like

other equity securities, generally in

round lots of one hundred. Odd lots

(less than 100 Warrants) also may be

traded.

The Warrants are exercisable

immediately upon purchase, subject to

postponement for certain extraordinary

events and subject to maximum or

minimum exercise amounts, and may be

exercised at any time until 3:00 p.m.,

New York City time, on the fourth Index

Calculation Day immediately preceding

November 20, 1997 (‘‘Expiration Date’’)

or any earlier Delisting Date. The

Warrants will expire on the Expiration

Date.

No fewer than 500 Warrants may be

exercised by or on behalf of a Warrant

holder at any one time, except in the

case of automatic exercise of the

Warrants or exercise upon cancellation

of the Warrants. All exercises of

Warrants (other than on automatic

exercise or upon cancellation) are

subject, at the Corporation’s option, to

the limitation that on any exercise date,

not more than 1,000,000 Warrants in

total may be exercised and not more

than 250,000 Warrants on behalf of any

person or entity may be exercised.

The holder of the Warrants will be

entitled to receive the product, if

positive of U.S. $50 multiplied by (i) the

amount, if any, by which the Index

Strike Price for the applicable Valuation

Date exceeds the Index Spot Price,

divided by (ii) the Index Strike price, as

described in the following formula:
15214 Federal Register / Vol. 62, No. 61 / Monday, March 31, 1997 / Notices

6 17 CFR 240.3b–3.

7 17 CFR 240.10a–1.

8 17 CFR 240.11Aa3–1(a)(4).

9See Letter from Timothy Thompson, Senior

Attorney, CBOE, to Blair Corkran, Senior Special

Counsel, Division of Market Regulation,

Commission, dated February 27, 1997.

10See Letter from Nancy J. Sanow, Assistant

Director, Division of Market Regulation,

Commission, to Timothy Thompson, Senior

Attorney, CBOE, dated March 21, 1997.

11The Exchange believes that the situation

presented is very analogous to the case of

SuperShares, which were interests in a unit

investment trust which had the objective of

providing investment results corresponding to the

price and yield performance of stocks in the

Standard & Poor’s 500 Composite Stock Index. The

Commission approved an interpretation exempting

SuperShares from paragraph (b) of Rule 30.20. See

Securities Exchange Act Release No. 33015 (October

5, 1993), 58 FR 53006 (October 13, 1993). 12 15 U.S.C. § 78s(b)(2).

U.S. $50 (Index Strike Price Index Spot Price)

Index Strike Price

× −

The Index Strike price is 743.95, which

is the closing level of the Index on the

date of the Prospectus, and the Index

Spot Price will be determined upon

exercise. If the closing level of the Index

on February 20, 1997 (‘‘Reset Date

Closing Level’’) is above 743.95, then

the Index Strike Price with respect to

the Warrants will be increased to the

Reset Date Closing Value on the Reset

Date.

The ‘‘Valuation Date’’ for a Warrant

will be the first Index Calculation Day

immediately succeeding the applicable

Exercise Date, subject to postponement

upon the occurrence of certain

extraordinary events or exercise

limitation events, as described in the

prospectus.

Exemption From Rule 30.20

Exchange Act Rule 3b–3 6 defines the

term ‘‘short sale,’’ and Exchange Act

Rule 10a–1 7 governs short sales

generally. Paragraph (a) of Rule 10a–1

covers transactions in any security

registered on a national securities

exchange, if trades in such security are

reported in the consolidated transaction

reporting systems, and prohibits short

sales with respect to these securities

unless such sales occur on a ‘‘plus tick’’

(i.e., at a price above the price at which

the immediately preceding sale was

effected), or a ‘‘zero-plus tick’’ (i.e., at

the last sale price if it was higher than

the last different price). The CBOE has

adopted a similar provision applicable

to certain CBOE securities than is set

forth in paragraph (b) of Rule 30.20.

Exchange Act Rule 10a–1 and CBOE

Rule 30.20 are designed to prevent the

market price of a stock (or other

reported security, as that term is defined

in paragraph (a)(4) of Rule 11Aa3–1

under the Exchange Act) 8 from being

manipulated downward by unrestricted

short selling.

CBOE Rule 30.20(b) sets forth that

securities exempted from the

requirements of Exchange Act Rule 10a–

1 will likewise be exempt from the

parallel provisions of 30.20(b) which

applies to the trading of stock, warrants,

unit investment trust interests, and

other securities subject to Chapter XXX

of the rules of the Exchange. By letter

dated March 21, 1997, in response to a

request previously submitted by CBOE,9

the Commission exempted short sales of

S&P 500 Index Bear Market Warrants

from the requirements of Rule 10a–1,

subject to the condition that any such

transactions must not be made for the

purpose of creating actual or apparent

active trading in, or raising or otherwise

affecting the price of the Warrants or

any related security.10 In order to give

effect to the exemption, it is necessary

that short sales of Warrants also be

exempt from CBOE Rule 30.20(b),

subject to the same condition. CBOE

proposes to add an interpretation to

Exchange Rule 30.20 (1) describing the

exemption for Warrants from Rule 10a–

1 contained in the no-action letter; and

(2) stating that so long as that exemption

remains in force, short sales of Warrants

would be exempt from the tick

requirements of paragraph (b) of CBOE

Rule 30.20.

The CBOE believes that secondary

market transactions in S&P 500 Index

Bear Market Warrants (‘‘Warrants’’) can

appropriately be exempted from

paragraph (b) of Rule 30.20.11 The CBOE

can not conceive of circumstances in

which a person would sell the Warrants

in an effort to affect the price of a single

component stock or security. First, the

prices of the Warrants are not

dependent upon the price of any one

stock. Rather, the prices are based upon

the relationship of the value of the S&P

500 Index to the Valuation Data Amount

as defined in the prospectus. The CBOE

therefore does not believe that a person

seeking to manipulate the market price

of any one of the stocks that make up

the S&P 500 Index would seek to sell

the Warrants as a means of

accomplishing that result.

Second, CBOE believes that any

temporary disparities in relative market

values between the Warrants and the

underlying Index would tend to be

corrected immediately by arbitrage

activity. The arbitrage opportunity is

created as a result of the ability of the

Warrants to be exercised according to

the formula described above. Under

these circumstances, it seems unlikely

that short sales of the Warrants could be

used to depress the price of the

underlying securities.

Moreover, the short sale rule does not

apply to analogous derivative products

such as index options and futures

contracts. Because the Warrants will be

used to offset or hedge positions in the

related futures or options contracts,

application of the short sale rule to the

Warrants when it is not applicable to

futures or options contracts would

increase risks to investors seeking to

engage in trading activities which might

involve short sales of the Warrants and

detract from the ability of market

participants to insure fair valuation of

the Warrants.

The Exchange believes that the

proposed rule change is consistent with

and furthers the objectives of Section

6(b)(5) of the Act, in that it is designed

to perfect the mechanisms of a free and

open market and to protect investors

and the public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

CBOE does not believe that the

proposed rule change will impose any

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 relating to the

proposed rule change have been

solicited or received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

CBOE requests that the Commission

find good cause pursuant to Section

19(b)(2) of the Act 12 for approving the

proposed rule change prior to the 30th

day after publication in the Federal

Register.

IV. Commission’s Findings and Order

Granting Accelerated Approval of

Proposed Rule Change

The Commission finds that CBOE’s

proposal to amend Rule 30.20 to reflect

the exemption granted by the

Commission pursuant to Exchange Act

Rule 10a–1 for S&P 500 Index Bear

Market Warrants is consistent with the
Federal Register / Vol. 62, No. 61 / Monday, March 31, 1997 / Notices 15215

13 15 U.S.C. § 78f(b)(5) (1988).

14 15 U.S.C. § 78s(b)(2) (1988).

15 17 CFR 200.30–3(a)(12) (1996).

Act and the rules and regulations

promulgated thereunder. Specifically,

the Commission finds that the proposed

rule change is consistent with Section

6(b)(5) 13 which requires that the CBOE’s

rules be designed, among other things,

to promote just and equitable principles

of trade. The Commission believes that

by adding interpretive language to

CBOE Rule 30.20, CBOE effectively

clarifies the exemption of S&P 500

Index Bear Market Warrants from the

requirements of Exchange Act Rule 10a–

1 regarding short sales and the

exemption from application of Rule

30.20(b). The Commission believes that

the interpretation to Rule 30.20

appropriately reflects the exemption

and conditions thereto as set forth in the

No-Action Letter issued by the

Commission, and that the proposed rule

change does not raise any regulatory

concerns because, as noted above, the

Commission has previously exempted

such short sales. The Commission notes

that the Warrants will be exempt from

the requirements of CBOE Rule 30.20(b)

so long as the Commission’s exemption

remains in effect.

The Commission finds good cause for

approving the proposed rule change

prior to the thirtieth day after the date

of publication of notice of filing in the

Federal Register because the proposal

accurately codifies the position

previously taken by the Commission in

the Warrant No-Action Letter.

Accordingly, the Commission believes it

is consistent with Sections 6(b)(5) and

19(b)(2) of the Act to approve the

proposed rule change on an accelerated

basis.

V. 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 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 CBOE. All submissions should

refer to File No. SR–CBOE–97–13 and

should be submitted by April 21, 1997.

Conclusion

For the reasons discussed above, the

Commission finds that the proposed

rule change is consistent with the Act,

and in particular with Section 6 of the

Act.

It is therefore ordered, pursuant to

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

proposed rule change (SR–CBOE–97–

13) is hereby approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.15

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–8074 Filed 3–28–97; 8:45 am]

BILLING CODE 8010–01–M

DEPARTMENT OF TRANSPORTATION

Notice of Applications for Certificates

of Public Convenience and Necessity

and Foreign Air Carrier Permits Filed

Under Subpart Q During the Week

Ending March 21, 1997

The following Applications for

Certificates of Public Convenience and

Necessity and Foreign Air Carrier

Permits were filed under Subpart Q of

the Department of Transportation’s

Procedural Regulations (See 14 CFR

302.1701 et seq.). The due date for

Answers, Conforming Applications, or

Motions to modify Scope are set forth

below for each application. Following

the Answer period DOT may process the

application by expedited procedures.

Such procedures may consist of the

adoption of a show-cause, a tentative

order, or in appropriate cases a final

order without further proceedings.

Docket Number: OST–97–2253.

Date Filed: March 21, 1997.

Due Date for Answers, Conforming

Applications, or Motion to Modify

Scope: April 18, 1997.

Description

Application of Thai Airways

International Public Company Limited,

pursuant to 49 U.S.C. Section 41302,

and Subpart Q of the Regulations,

applies for an amendment of its foreign

air carrier permit to engage in the

scheduled foreign air transportation of

persons, property and mail in a manner

described in the Agreement and the

MOU as follows, with any omissions or

inconsistencies to be resolved in favor

of encompassing the maximum

authority permitted under the

Agreement and MOU;

A. With respect to scheduled

combination foreign air transportation

in both directions between points on the

following routes:

(i) From Thailand via intermediate

points to 8 points in the United States

plus an additional 10 points in the

United States for code share services

only and beyond to Canada, Mexico,

and a total of three additional points in

Central and South America. All points

in the United States and the three

unnamed beyond points are to be

selected by Thailand, and may be

changed by Thailand upon 60 days’

prior notice to the United States.

(ii) From Thailand via intermediate

points across the Pacific to Hawaii,

Guam, the Commonwealth of the

Northern Mariana Islands and American

Samoa and beyond.

B. With respect to scheduled all-cargo

foreign air transportation in both

directions between points on the

following route:

(i) From Thailand via intermediate

points to a point or points in the United

States and beyond.

Docket Number: OST–97–2255.

Date Filed: March 21, 1997.

Due Date for Answers, Conforming

Applications, or Motion to Modify

Scope: April 18, 1997.

Description

Application of Custom Air Transport,

Inc., pursuant to 49 U.S.C. Section

41102 and Subpart Q of the Regulations,

applies for the issuance of a certificate

of public convenience and necessity so

as to authorize CAT to operate charter

passenger services in interstate air

transportation.

Docket Number: OST–97–2256.

Date Filed: March 21, 1997.

Due Date for Answers, Conforming

Applications, or Motion to Modify

Scope: April 18, 1997.

Description

Application of Custom Air Transport,

Inc., pursuant to 49 U.S.C. Section

41102, and Subpart Q of the

Regulations, applies for the issuance of

a certificate of public convenience and

necessity so as to authorize CAT to

operate charter passenger services in

foreign air transportation.

Docket Number: OST–97–2257.

Date Filed: March 21, 1997.

Due Date for Answers, Conforming

Applications, or Motion to Modify

Scope: April 18, 1997.