26660 Federal Register / Vol. 63, No. 92 /Wednesday, May 13, 1998 / Notices

5 15 U.S.C. 78f.

6 15 U.S.C. 78f(b)(5).

7 17 CFR 200.30–3(a)(12) (1994).

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

2 In Amendment No. 1, the Exchange made

technical corrections to the proposed rule change

and clarified the purpose of the proposal. See Letter

from James E. Buck, Senior Vice President and

Secretary, NYSE, to Michael Walinskas, Deputy

Associate Director, Division of Market Supervision,

dated April 29, 1998 (‘‘Amendment No. 1’’).

narrow-based standards regarding

margin requirements provided for under

Exchange Rules 30.53 and 12.3 will

apply. The applicable generic narrowbased position and exercise limits will

be determined pursuant to Exchange

Rule 30.35.

2. Basis

The Exchange believes that the

proposed rule change is consistent with

Section 6(b) of the Act 5 in general, and

furthers the objectives of Section

6(b)(5) 6 in particular, in that it will

permit trading in warrants based on the

Index pursuant to Exchange rules

designed to prevent fraudulent and

manipulative acts and practices, to

promote just and equitable principles of

trade, to remove impediments to and

perfect the mechanism of a free and

open market and a national market

system, and to protect investors and the

public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The 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 were solicited

or received with respect to the proposed

rule change.

III. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning the foregoing,

including whether the proposed rule

change, and Amendment No. 1 thereto,

is consistent with the 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. 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 number SR–CBOE–98–17

and should be submitted by June 3,

1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–12708 Filed 5–12–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39973; File No. SR–NYSE–

98–12]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change and

Amendment No. 1 Thereto by the New

York Stock Exchange, Inc. Relating To

Changes in Bond Listing Procedures

and Practices

May 7, 1998.

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

Securities Exchange Act of 1934

(‘‘Act’’), 1 notice is hereby given that on

April 15, 1998, the New York Stock

Exchange, Inc. (‘‘NYSE’’ 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 NYSE. On

April 30, 1998, the NYSE submitted to

the Commission Amendment No. 1 to

the proposed rule change.2 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 Exchange proposes to amend its

Listed Company Manual to make certain

changes regarding the listing

requirements for debt securities and

other debt security practices.

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

NYSE 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 NYSE 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 Exchange proposes to make

certain changes to its rules, standards

and procedures relating to debt

securities. The changes are designed to

facilitate the process for listing debt

securities on the Exchange and to

update certain rules and policies to

conform to todays practices.

(a) Interest Payments. Paragraph

204.18 (Interest Payments) of the Listed

Company Manual requires an issuer or

its paying agent to notify the Exchange

whenever it makes an interest payment.

The obligation can be satisfied through

the use of confirmation cards where that

is appropriate. It also requires the issuer

to notify the press and the Exchange

whenever it does not meet its interest

obligations. The Exchange proposes to

delete the obligation to inform the

Exchange of interest payments, whether

by confirmation cards or otherwise.

Instead, the Exchange feels that

reliance upon an issuer’s obligation to

report its failure to meet a payment

obligation adequately protects the

holders of debt securities. The Exchange

is also proposing to add to the end of

Paragraph 204.18 a cross-reference to

202.00, which reminds issuers that they

are required to disclose material

information (including the inability to

meet payment obligations).

The Exchange believes that the

issuer’s obligation to report immediately

to the press and the Exchange a failure

to meet an interest payment or any

unusual circumstance or condition

relating to its ability to meet an interest

payment makes the practice of mailing

and collecting interest payment

confirmation cards an administrative

burden that is not necessary to the

proper monitoring and surveillance of

debt securities.

(b) Multiple Facsimile Signatures.

Paragraph 501.06 (Bond Signatures)

requires bonds to be executed, either

manually or by facsimile machine, by

two of the issuer’s officers. Whether the

issuer uses one facsimile signature (and

one manual signature) or two facsimile

signatures, the Exchange currently

requires the issuer to submit an opinion
Federal Register / Vol. 63, No. 92 /Wednesday, May 13, 1998 / Notices 26661

of counsel that states that the use of

each facsimile signature (a) is

specifically authorized by (or at least is

not inconsistent with) the issuer’s

charter or by-laws and the issue’s

indenture, and (b) is valid and effective

under the laws of the state of the

issuer’s incorporation. In the case of the

use of a single facsimile signature, the

opinion of counsel must also state that

the actual facsimile signature to be used

has been duly adopted. In the case of

the use of two facsimile signatures, the

issuer is required to submit to the

Exchange the board resolution adopting

the actual signatures to be used.

The Exchange believes that it remains

appropriate to subject an issuer’s use of

facsimile signatures to each of those

requirements. However, the Exchange

believes that it is not necessary to

require the issuer to provide opinions of

counsel and board resolutions to the

Exchange in connection with those

requirements.

The Exchange therefore proposes to

continue to require issuers to authorize

the use of facsimile signatures, to adopt

the specific facsimile signatures to be

used, to comply with charter, by-law

and indenture provisions and to comply

with state laws, but to discontinue the

practice of requiring issuers to submit

opinions of counsel and board

resolutions in respect of those

requirements. The Exchange believes

that improvements in facsimile

technology, increased acceptance of

facsimile signatures in the business

world and the streamlining of the listing

process will justify the proposed

updating of rules regulating the use of

facsimile signatures.

(c) Discharge of Obligation upon

Default of Funds. Paragraph 602.01

(Requirements for a Depository for

Funds) and Subparagraph (D) of

paragraph 703.06 each require, in part,

that a debt security’s indenture may not

discharge the issuer’s payment

obligation if the funds representing

payment are deposited with the trustee,

depository or paying agent more than

ten days before the date on which the

funds become available to bond holders.

The prohibition addresses the practice

of depositing securities with the trustee

in advance of a payment obligation as a

way of satisfying a restrictive covenant

where the indenture does not provide

for prepayment.

The Exchange adopted those

provisions to protect bondholders prior

to the enactment of the Trust Indenture

Act and the widespread use of early call

provisions. However, the practice of

advance security deposits is no longer

in use. That plus (a) the protections

afforded to bondholders by the Trust

Indenture Act and (b) the fact that an

issuer’s defeasance does not normally

discharge the issuer’s payment

obligation to the bondholder as set forth

in the debt instrument have led the

Exchange to believe that it is

appropriate to remove the prohibition

from the Listed Company Manual.

(d) Clearance of Terms. Subparagraph

(B) (Clearance of Terms) of Paragraph

703.06 currently asks an issuer to

submit the indenture and registration

terms to the Exchange prior to applying

to list the bond and to receive the

Exchange’s clearance of the terms of

those documents before the company is

permitted to use a ‘‘listing intention

statement’’ in the offering prospectus.

The Exchange no longer believes that

early submission and prior clearance are

necessary to the listing process and

proposes to eliminate both

requirements.

Today, in determining whether a

bond qualifies for listing on the

Exchange, the Exchange determines

whether (a) the issuer’s equity security

is listed on the Exchange (in which case,

the issue’s debt securities qualify for

listing) or (b) if the issuer does not list

its equity security on the Exchange, a

nationally recognized security rating

organization has rated the debt issue no

lower than a Standard & Poors’ ‘‘B’’

rating or its equivalent. As a result, the

Exchange no longer needs to pre-clear

the issuer’s financial statements and the

like in determining whether the debt

security qualifies for an Exchange

listing. The one item that has required

the Exchange to continue to review

indenture terms has been the

prohibition against defeasance

discussed in paragraph (iii) above.

However, by eliminating that

requirement, the Exchange eliminates

the last justification of its need to preclear indenture and registration terms.

Of course, if an issuer is uncertain as to

whether it will qualify for listing, it is

welcome to contact the Exchange to

discuss the issue’s eligibility prior to

engaging in the process of completing a

listing application.

The Exchange also proposes to make

some non-substantive changes to

Subparagraph (B) that clarifies the

remaining portions of that

Subparagraph.

(e) Delivery of Prospectus, Mortgage

and/or Indenture. Subparagraph (F)

(Debt Securities Listing Application

Supporting Documents) of Paragraph

703.06 currently requires the issuer to

provide with its listing application four

copies of a security’s prospectus if the

debt security has been issued for 12

months or less and to provide one copy

of the prospectus if the debt security has

been issued for more than 12 months. It

also requires the issuer to provide one

final copy of an issuer’s mortgage or

indenture.

The Exchange proposes to change

those document delivery requirements if

the issuer makes the document publicly

available by means of a disclosure

service (such as Disclosure, Inc.) that

the Exchange finds satisfactory. If the

document is available in that manner,

the Exchange would no longer require

the issuer to submit the final copy (in

the case of a mortgage or indenture) and

would require the issuer to submit only

one copy of the prospectus, even if the

debt security has been issued for 12

months or less.

The Exchange feels that modern

technologies grant the Exchange ready

and dependable access to documents

and thereby reduce the need to require

issuers to provide documents

themselves.

(f) Opinion of Counsel. Subparagraph

(G) (Opinion of Counsel) of Paragraph

703.06 currently requires the issuer to

provide the Exchange with an opinion

of counsel that verifies such things as

the validity of the debt securities and

the authorization for the issuance.

While the Exchange continues to believe

that the opinion plays an important role

in the listing process, the Exchange

believes that its physical possession of

the opinion is not necessary in most

cases. Specifically, the Exchange

believes that an issuer’s affirmation of

the existence of the opinion of counsel

will suffice for issues that a registered

broker-dealer purchases from the issuer

with a view toward resale, whether

through an underwritten public offering

or otherwise. (The Exchange would

continue to require the submission of

the opinion of counsel for Rule 144A

offerings.) The Exchange proposes to

amend Subparagraph (G) accordingly.

Substituting the affirmation for a copy

of the opinion facilitates the listing

process for issuers because it forestalls

any need of the issuer to procure

counsel’s consent to share the opinion

with the Exchange.

In addition, the Exchange believes

that it is appropriate to eliminate certain

of the items that it requires for inclusion

in the opinion of counsel. Specifically,

the Exchange believes that it is no

longer necessary to require the opinion

(a) to set forth the date, nature and

status of orders or proceedings of

regulatory authorities relating to the

issuance of securities that are the

subject of a listing application, (b) to

state that the Board has authorized the

issuing and listing of the securities, and

(c) to disclose an affiliation of the

counsel to the issuer.
26662 Federal Register / Vol. 63, No. 92 /Wednesday, May 13, 1998 / Notices

3As for the elimination of the requirement to

disclose counsel’s affiliation to the issuer, in

Amendment No. 1, the NYSE stressed that in most

cases issuers no longer would have to furnish the

opinion of counsel. The Exchange notes that if it

needed to request, review, and/or rely on an

opinion, the NYSE could then inquire about the

opinion’s source and any relevant affiliations. See

Amendment No. 1.

4 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See Letter from Michael D. Pierson, Senior

Attorney, Regulatory Policy PCX to David

Sieradzki, Attorney, Division of Market Regulation

(‘‘Division’’), SEC dated March 27, 1998

(‘‘Amendment No. 2’’).

4Securities Exchange Act Release No. 39532 (Jan.

9, 1998), 63 FR 2711 (Jan. 16, 1998).

5The MFI is an electronic order delivery and

reporting system that allows member firms to route

orders for execution by the automatic execution

feature of POETS as well as to route limit orders

to the Options Public Limit Order Book. Orders that

do not reach those two destinations are defaulted

to a member firm booth. MFI also provides member

firms with instant confirmation of transactions to

their systems. Member firms may access POETS by

establishing an MFI mainframe-to-mainframe

connection.

6Orders entered via MFI are delivered to one of

three destinations: (a) To Auto-Ex, where they are

automatically executed at the disseminated bid or

offering price; (b) to Auto-Book, which maintains

non-marketable limit orders based on limit price

and time of receipt; or (c) to a Member Firm’s

default destination—a particular firm booth or

remote entry site—if the order fails to meet the

eligibility criteria necessary for either Auto-Ex or

Auto-Book or if the Member Firm requests such

default for its orders. See generally Exchange Act

Release No. 27633 (Jan. 18, 1990), 55 FR 2466 (Jan.

24 1990) (‘‘POETS Approval Order’’).

The Exchange has rarely used or

relied upon the opinion’s description of

regulatory proceedings. Its deletion

would sacrifice little, while serving to

simplify the opinion. In addition, the

Exchange believes that the listingapplication signature of an authorized

officer of the issuer provides sufficient

assurance of the board’s authorization of

the issue and of listing the issue on the

Exchange.3

2. Statutory Basis

The basis under the Act for the

proposed rule change is the requirement

under Section 6(b)(5) that an exchange

have rules that are designed to prevent

fraudulent and manipulative acts and

practices, to promote just and equitable

principles of trade, to remove

impediments to and perfect the

mechanism of a free and open market

and national market system, and, in

general, to protect investors and the

public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The proposed rule change does 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

The Exchange has not solicited, and

does not intend to solicit, comments on

the proposed rule change. The Exchange

has not received any unsolicited written

comments from members or other

interested parties.

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 pro and publishes its

reasons 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

should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposed rule

change is consistent with the 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. 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 of the NYSE. All

submissions should refer to the File No.

SR–NYSE–98–12 and should be

submitted by June 3, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.4

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–12706 Filed 5–12–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39970; File No. SR–PCX–

97–28]

Self-Regulatory Organizations; Pacific

Exchange, Inc.; Order Granting

Approval to Proposed Rule Change

and Notice of Filing and Order

Granting Accelerated Approval to

Amendment No. 2 to the Proposed

Rule Change Relating to ExchangeSponsored Hand-Held Terminals for

Options Floor Brokers

May 7, 1998.

I. Introduction

On July 3, 1997, and December 12,

1997, respectively, the Pacific Exchange,

Inc. (‘‘PCX’’ or ‘‘Exchange’’) submitted

to 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 and Amendment

No. 1 thereto to adopt rules to allow the

use of Exchange-Sponsored Floor Broker

Hand-Held Terminals (‘‘ExchangeSponsored Terminals’’) on the floor of

the Exchange. The Exchange also

proposed an interpretation to Rule 6.67

which would not require members’

orders entered through ExchangeSponsored Terminals to be in writing.

Finally, the Exchange proposed Rule

6.88(b) to prohibit the use of a floor

broker hand-held terminal for market

making. On March 30, 1998, the

Exchange filed Amendment No. 2 to the

proposed rule change with the

Commission.3 In Amendment No. 2, the

Exchange amends Rule 6.67,

Commentary .02 to indicate that orders

sent through proprietary Terminals

would also be deemed to be written

orders for the purposes of Rule 6.67.

The proposed rule change, and

Amendment No. 1 thereto were

published for comment in the Federal

Register on January 16, 1998.4 No

comments were received on the

proposal. This order approves the

proposal as amended, including

Amendment No. 2 on an accelerated

basis.

II. Description of the Proposal

A. General Description

The Exchange’s Member Firm

Interface (‘‘MFI’’) 5 currently permits

Exchange Member Firms to use an

electronic link with the Exchange to

send their option orders directly to the

Exchange for delivery to POETS (Pacific

Option Exchange Trading System).6

Under the proposal, member firms