28432 Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 / Notices

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

2 17 CFR 240.19b–4 (1991).

3The Exchange had initially submitted the filing

prior to April 16, 1998, but that submission did not

include a signature page. By letter dated April 14,

1998, the Exchange filed Amendment No. 1 to the

filing, which contained signatures for the filing. See

Letter from Michael D. Pierson, Senior Attorney,

Regulatory Policy, PCX, to Marie D’Aguanno Ito,

Special Counsel, Division of Market Regulation,

Commission, dated April 14, 1998.

4On May 1, 1998, PCX submitted Amendment

No. 2 to the filing, seeking to withdraw the portion

of the filing that proposed removing the limit on the

number of option issues that may be included in the

LMM program. The PCX represented in the

Amendment that such proposal would be submitted

in a separate filing. See Letter from Michael D.

Pierson, Senior Attorney, Regulatory Policy, to

Marie D’Aguanno Ito, Special Counsel, Division of

Market Regulation, Commission, dated April 30,

1998.

5See Exchange Act Release No. 37810 (October

11, 1996), 61 FR 54481 (October 18, 1997)

(approving File No. SR–PSE–96–09).

6See Exchange Act Release No. 39106 (September

22, 1997), 62 FR 31172 (September 30, 1997).

7See Exchange Act Release No. 37874 (October

28, 1996), 61 FR 56597 (November 1, 1996)

(approving SR–PSE–96–38, establishing a staffing

charge for LMMs who participate in the pilot

program); see also File No. SR–PCX–98–03

(proposal to modify the LMM Book Pilot staffing

charge).

made for that year. The net long-term

capital gains in excess of the periodic

distributions permitted by rule 19b–1

then must either be added to one of the

permitted capital gains distributions

resulting in the total distributions for

the year in excess of the amount

required to be paid, added to a

permitted distribution of long-term

capital gains on the common stock, or

retained by applicant (with applicant

paying taxes on those amounts).

Accordingly, applicant states that the

requested relief would permit it to

operate the Distribution Policy with

respect to the preferred stock without

these unintended adverse consequences.

3. Applicant asserts that its requested

relief does not give rise to the concerns

underlying section 19(b) of the Act and

rule 19b–1. One of these concerns was

that stockholders might not be able to

distinguish between frequent

distributions of capital gains and

dividends from investment income.

Applicant states that in the case of

preferred stock there is little chance for

investor confusion since all an investor

expects to receive is the specified

distribution for any particular dividend

period, and no more. Moreover, in

accordance with rule 19a–1 under the

Act, a separate statement showing the

sources of the distribution will

accompany each periodic dividend,

with a statement provided near the end

of the last dividend period in a year

indicating the sources (i.e., net

investment income and short-term

capital gains, net long-term capital gains

and return of capital) of each

distribution that was made during the

year. In addition, applicant notes that

the amount and sources of distributions

received during the year will be

included on applicant’s IRS Form 1099–

DIV report sent to stockholders who

received distributions during the year.

This information will also be included

in applicant’s annual report to

stockholders.

4. Applicant submits that another

concern underlying section 19(b) and

rule 19b–1, was that frequent capital

gains distributions could facilitate

improper fund distribution practices,

including the practice of urging an

investor to purchase shares on the basis

of an upcoming dividend (‘‘selling the

dividend’’), where the dividend results

in an immediate corresponding

reduction in net asset value and is in

effect a return of the investor’s capital.

Applicant believes that this concern

does not apply to preferred stock which

entitles a holder to a specified periodic

dividend and no more and, like a debt

security, is initially sold at a price based

on its liquidation preference plus an

amount equal to any accumulated

dividends. Applicant also states that

this concern does not arise with regard

to closed-end investment companies

which do not continuously distribute

their shares.

5. Section 6(c) of the Act provides that

the SEC may exempt any person,

security, or transaction from any

provision of the Act, or from any rule

thereunder, if such exemption is

necessary or appropriate in the public

interest and consistent with the

protection of investors and the purposes

fairly intended by the policy and

provisions of the Act. For the reasons

stated above, applicant believes that the

requested exemption from section 19(b)

of the Act and rule 19b–1, meets the

standards set forth in section 6(c) of the

Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 98–13646 Filed 5–21–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39995; File No. SR–PCX–

98–17]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Pacific Exchange, Inc. Relating to

Expansion of the LMM Book Pilot

Program

May 15, 1998.

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 April 16,

1998, the Pacific Exchange, Inc. (‘‘PCX’’

or ‘‘Exchange’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) the proposed

rule change as described in Items I, II

and III below, which Items have been

prepared by the self-regulatory

organization.3 The Commission is

published 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 PCX is proposing to remove the

current cap on the number of LMMs

who may participate in the program.4

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 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

Purpose

On October 11, 1997, the Commission

approved an Exchange proposal to

adopt a one-year pilot program under

which a limited number of LMMs

would be able to assume operational

responsibility for the options public

limit order book (‘‘Book’’) in certain

option issues.5 On September 22, 1997,

the Commission approved an Exchange

proposal to extend the program for one

year, so that it is currently set to expire

on October 12, 1998.6

Under the pilot program, approved

LMMs manage the Book function, take

responsibility for trading disputes and

errors, set rates for Book execution, and

pay the Exchange a fee for systems and

services.7 Currently, both multiplylisted and non-multiply-listed option
Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 / Notices 28433

8See Exchange Act Release No. 38273 (February

12, 1997), 62 FR 7489 (February 19, 1997)

(approving File No. SR–PSE–96–45); see also

Exchange Act Release No. 39667 (February 13,

1998), 63 FR 9895 (February 26, 1998) (order

approving proposal to allow non-multiply-listed

option issues to be traded under the program).

9See Exchange Act Release No. 38462 (April 1,

1997), 62 FR 16886 (April 8, 1997).

10 15 U.S.c. 78f(b).

11 15 U.S.C. 78f(b)(5). 12 17 CFR 200.30–3(a)(12).

issues are eligible to be traded under the

pilot program.8 Initially, the program

was limited by allowing no more than

three LMMs to participate in the

program and no more than 40 option

symbols to be used. But on April 1,

1997, the Commission approved an

Exchange proposal to expand the

program so that up to nine LMMs may

participate and up to 150 option

symbols may be used.9

The Exchange is now proposing to

expand the LMM Book Pilot Program to

eliminate the cap on the number of

LMMs that may participate in the

program. The Exchange notes that the

program has been in operation for

approximately eighteen months and no

significant problems have occurred. The

program has been viable and effective,

and has resulted in significant cost

savings to customers in Book execution

charges. The Exchange believes that it

has adequate systems and operation

capacity to expand the scope of the

program beyond its current limits.

The Exchange believes that the

proposed change will make the

Exchange LMM Program more

competitive because it will provide

LMMs with the same flexibility

currently held by options specialists at

other exchanges, and DPMs at the

Chicago Board Options Exchange.

Basis

The Exchange believes the proposed

rule change is consistent with Section

6(b) 10 of the Act, in general, and

furthers the objectives of Section

6(b)(5),11 in particular, in that it is

designed to facilitate transactions in

securities, to promote just and equitable

principles of trade, and to protect

investors and the public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed rule change will 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

Written comments on the proposed

rule change 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 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, 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 PCX. All submissions

should refer to File No. SR–PCX–98–17

and should be submitted by June 12,

1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.12

Jonathan G. Katz,

Secretary.

[FR Doc. 98–13727 Filed 5–21–98; 8:45 am]

BILLING CODE 8010–01–M

SMALL BUSINESS ADMINISTRATION

[Declaration of Disaster #3076]

State of Alabama; Amendment #2

In accordance with a notice from the

Federal Emergency Management Agency

dated April 29, 1998, the abovenumbered Declaration is hereby

amended to include Walker County in

the State of Alabama as a disaster area

due to damages caused by severe storms

and tornadoes beginning on April 8,

1998 and continuing through April 20,

1998.

In addition, applications for economic

injury loans from small businesses

located in the contiguous county of

Marion, Alabama may be filed until the

specified date at the previously

designated location. Any counties

contiguous to the above-name primary

county and not listed herein have been

previously declared.

All other information remains the

same, i.e., the deadline for filing

applications for physical damage is June

8, 1998 and for economic injury the

termination date is January 11, 1999.

(Catalog of Federal Domestic Assistance

Program Nos. 59002 and 59008)

Dated: May 8, 1998.

Bernard Kulik,

Associate Administrator for Disaster

Assistance.

[FR Doc. 98–13743 Filed 5–21–98; 8:45 am]

BILLING CODE 8025–01–P

SMALL BUSINESS ADMINISTRATION

[Declaration of Disaster #3069]

State of Georgia; Amendment #7

In accordance with notices from the

Federal Emergency Management Agency

(FEMA) dated May 1, 8, and 11, 1998

and a notification from FEMA dated

May 12, 1998, the above-numbered

Declaration is hereby amended to

include Columbia, Floyd, Lincoln,

Peach, ockdale, Towns, and Union

Counties in the State of Georgia as a

disaster area due to damages caused by

severe storms and flooding. This

declaration is further amended to

establish the incident period for this

disaster as beginning on February 14,

1998 and continuing through May 11,

1998, and to extend the deadline for

filing applications for physical damages

resulting from this disaster to May 22,

1998.

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