Federal Register / Vol. 63, No. 114 / Monday, June 15, 1998 / Notices 32691

2 15 U.S.C. 78o–3.

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

2Amendment No. 1 clarified the text of the

proposed rule change. See letter from Michael D.

Pierson, Senior Attorney, to Heidi Pilpel, Special

Counsel, Division of Market Regulations, SEC (June

4, 1998).

reports. The proposed rule change

would clarify that these types of

independently-prepared research

reports would not have to be filed with

the Department. The Department

intends to interpret the term

‘‘independent’’ in (G)(i) of the proposed

rule change in a manner similar to the

use of that term in NASD Rule IM–

2210–3 regarding rankings.

Under the proposed rule change,

these research reports would continue

to be subject to the Department’s spotcheck procedures. Moreover, the

proposed rule change would impose

certain conditions designed to ensure

that the opinions in the research reports

are objective, that the presentation is

balanced, and that investors have access

to regular updates of the reports. In

particular, the proposed rule change

would impose several requirements

derived from an analogous SEC rule,

Rule 139, which provides a safe harbor

from the definition of ‘‘offer for sale’’

and ‘‘offer to sell’’ in the Securities Act

of 1933.

Thus, under the proposed rule

change, a published article that analyzes

only a few funds or that is not regularly

updated in the normal course of

business would have to be filed with the

Department if it is to be distributed or

made generally available to customers

or the public. Moreover, while a

member could distribute an

independently-prepared research report

concerning a particular fund without

filing the report with the Department, if

the member alters the report in any

material way, then the member would

have to file it with the Department if it

is to be distributed or made generally

available to customers or the public.

NASD Regulation believes that the

proposed rule change would not raise

significant investor protection concerns.

In its filing and review program, the

Department rarely has found significant

issues with the types of research reports

that would be expected by the proposed

rule change. Moreover, to ensure that

investors are adequately protected, the

proposed rule change would except

these types of research reports only from

the filing requirements, and not the

content requirements of applicable

NASD rules. Under the proposed rule

change, these research reports would

continue to be subject to the content

requirements of Rule 2210 as well as

Conduct Rule 2110 (requiring that a

member ‘‘observe high standards of

commercial honor and just and

equitable principles of trade’’); Rule

2120 (prohibiting use of manipulative,

deceptive or other fraudulent devices);

and IM–2310–2 (requiring fair dealing

with customers, including an avoidance

of fraud violations). In addition,

Conduct Rule 2210 would continue to

require that these research reports be

approved prior to use by a registered

principal of the member.

The proposed rule change would

apply to independently-prepared

research reports that are contained in

software or that are electronically

communicated, as well as those on

paper.

(b) Statutory Basis

NASD Regulation believes that the

proposed rule change is consistent with

the provisions of Section 15A(b)(6) 2 of

the Act, which require that the

Association adopt and amend its rules

to promote just and equitable principles

of trade, and generally provide for the

protection of investors and the public

interest in that the proposed rule change

allows the dissemination of certain

research reports, subject to the content

requirements of the NASD Conduct

Rules.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

NASD Regulation does not believe

that the proposed rule change will result

in any burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act, as amended.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Written 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 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, 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 of the NASD. All

submissions should refer to the file

number in the caption above and should

be submitted by July 6, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority, 17 CFR 200.30–3(a)(12).

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–15781 Filed 6–12–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40070; File No. SR–PCX–

98–19]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Pacific Exchange, Inc. Relating to

Capital Requirements and Guaranteed

Participation of Lead Market Makers

June 4, 1998.

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

Securities Exchange Act of 1934

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

April 16, 1998, the Pacific Exchange,

Inc. (‘‘PCX’’ or ‘‘Exchange’’) filed with

the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change, and amended

such proposed rule change on June 4,

1998,2 as described in Items I, II, and III

below, which Items have been prepared

by the Exchange. The Commission is

publishing this notice to solicit

comments on the proposed rule change

from interested persons.
32692 Federal Register / Vol. 63, No. 114 / Monday, June 15, 1998 / Notices

3Cf. CBOE Rule 8.80, Interp. and Policy .02. The

Commission notes that PCX rules governing LMMs,

including PCX Rule 6.82, apply strictly to options

trading.

4See PCX Rule 5.3(a).

5As with the current rule, the proposed rule

would not apply to issues traded by an LMM in

connection with the Exchange’s LMM Book Pilot

Program, as provided in PCX Rule 6.82(h). The

current capital requirement for LMMs trading such

issues is a cash or liquid asset position of at least

$500,000 plus $25,000 for each issue over 5 issues

for which they perform the function of an Order

Book Official. See PCX Rule 6.82, Comm. 04. LMMs

who are participating in the LMM Book Pilot

Program are also required to maintain ‘‘minimum

net capital’’ as provided in SEC Rule 15c3–1. Id.

6Cf. CBOE Rule 8.80, Interp. and Policy .02.

7Thus, for example, if trading volume in an issue

reached an average of 2,000 contracts per day in the

first month, 4,000 per day in the second month, and

4,000 per day in the third month, the condition

would have been met under the proposed

formulation, but not under the current formulation.

8 15 U.S.C. 78f(b).

9 15 U.S.C. 79f(b)(5).

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

PCX is proposing to modify its capital

requirements for Lead Market Makers

(‘‘LMMs’’) on the Exchange and to

clarify the procedures applicable to

LMMs’ guaranteed participation. The

text of the proposed rule change is

attached as Exhibit A.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

PCX 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. PCX 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

a. LMM Capital. PCX Rule 6.82(c)(11)

currently provides that each LMM on

the Exchange must maintain a cash or

liquid asset position in the amount of

$100,000 or in an amount sufficient to

assume a position of twenty trading

units of the security underlying the

option the LMM has been allocated,

whichever amount is greater.3 The term

‘‘trading unit’’ means, in the case of

stocks, 100 shares.4 Therefore, LMMs

are currently required to maintain a

cash or liquid asset position in the

amount of $100,000 or in an amount

sufficient to assume a position of 2000

shares of stock in each option issue

allocated to the LMM.

The Exchange is proposing to

eliminate the current LMM capital

requirement and to replace it with

another one providing that each LMM

must maintain a cash or liquid asset

position of at least $350,000, plus

$25,000 for each issue over eight issues

that have been allocated to the LMM.5

Under the proposal, PCX Rule

6.82(c)(11) will continue to provide that

in the event that two or more LMMs are

associated with each other and deal for

the same LMM account, the LMM

capital requirement will apply to such

LMMs collectively, rather than to each

LMM individually.6

The Exchange believes that the

current LMM capital requirement,

which generally fluctuates as the price

of the underlying stock fluctuates, is

unduly complicated and difficult to

calculate, both for the Exchange and for

individual LMMs. In that regard, the

Exchange notes that the Commission’s

net capital rule also establishes fixed

dollar amounts applicable to brokerdealers. In addition, the Exchange

believes that all of its LMMs should

have cash or liquid asset positions of at

least $350,000 and the current

minimum amount of $100,000 is

insufficient.

b. Guaranteed Participation. PCX

Rule 6.82(d)(2) currently provides that

LMMs are guaranteed 50% participation

in transactions occurring on their

disseminated bids or offers in their

allocated issues. But the LMM’s

guaranteed participation may be

reduced from 50% to 40% in a

multiply-traded issue, and may be

reduced from 50% to 25% in a nonmultiply traded issue, if trading in the

issues reaches certain levels (and other

events occur). The applicable trading

volume requirement, for both multiplytraded and non-multiply traded issues,

is an average daily trading volume of

3,000 contracts at the Exchange for three

consecutive months. The Exchange

believes that the current formulation of

this provision is ambiguous and

therefore is proposing to clarify it by

replacing the words ‘‘for three

consecutive months’’ with the words

‘‘during any three-calendar-month

period (measured on a ‘rolling’ threecalendar-month basis).’’ 7

The Exchange is also proposing to

adopt Rule 6.82(d)(2)(C) to specify the

circumstances under which an LMM

may return to receiving a guaranteed

50% participation after having had it

reduced to 40% or to 25%. Specifically,

the proposal states that ‘‘[i]f the Options

Allocation Committee has reduced an

LMM’s guaranteed participation in an

issue pursuant to subsections (A) or (B)

. . . and average daily trading volume

in an issue falls below 3,000 contracts

at the Exchange during any threecalendar-month period (measured on a

‘rolling’ three-calendar-month basis),

the Options Allocation Committee will

evaluate the LMM’s performance in that

issue and, based on that evaluation, may

raise the LMM’s guaranteed

participation in that issue from 40% to

50% (in a multiply-traded issue) or from

25% to 50% (in a non-multiply traded

issue).’’ The purpose of this proposal is

to codify the Exchange’s existing policy

on when an LMM’s guaranteed

participation may return to 50%.

2. Statutory Basis

The Exchange believes that the

proposed rule change is consistent with

the provisions of Section 6(b) 8 of the

Act, in general, and furthers the

objectives of Section 6(b)(5),9 in

particular, in that it is designed 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 result in

any burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act, as amended.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

The Exchange has neither solicited

nor received comments on the proposed

rule change.

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 Exchange 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
Federal Register / Vol. 63, No. 114 / Monday, June 15, 1998 / Notices 32693

10 17 CFR 200.30–3(a)(12).

1New text is italicized, deleted test is bracketed.

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, NW,

Washington, DC 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 persons, 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

filings will also be available for

inspection and copying at the principal

office of the PCX. All submissions

should refer to File No. SR–PCX–98–19

and should be submitted by July 6,

1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

Exhibit A

Test of the Proposed Rule Change 1

LEAD MARKET MAKERS

¶ 5181 Lead Market Makers

Rule 6.82(a)–(b)—No change.

(c) Obligations of Lead Market Makers

Each LMM must [shall] meet the following

obligations:

(1)–(10)—No change.

(11) Maintain a cash or liquid asset

position [in the amount] of at least $350,000,

plus $25,000 for each issue over 8 issues that

have been allocated to the LMM. [$100,000

or in an amount sufficient to assume a

position of twenty (20) trading units of the

security underlying the option the LMM has

been allocated, whichever amount is greater.]

In the event that two or more LMMs are

associated with each other and deal for the

same LMM account, this requirement will

[shall] apply to such LMMs collectively,

rather than to each LMM individually;

(12)–(13)—No change.

(d) Rights of Lead Market Makers:

(1)—No change.

(2) Guaranteed Participation—No change.

(A) Multiply-traded Issues. If the average

daily trading volume in a multiply-traded

issue reaches 3,000 contracts at the Exchange

during any three-calendar-month period

(measured on a rolling three-calendar-month

basis), [for three consecutive months] and if:

(i) in the case of an issue traded by two

options exchanges, the Exchange’s monthly

share of the total multi-exchange customer

trading volume in an issue drops from above

70% to below 70%; or

(ii) in the case of an issue traded by three

or more options exchanges, the Exchange’s

monthly share of the total multi-exchange

customer trading volume in the issue drops

from above 45% to below 45%; the Options

Allocation Committee will [shall] evaluate

the LMM’s performance in that issue and,

based on that evaluation, may reduce the

LMM’s guaranteed participation in that issue

from 50% to 40%.

(B) Non-multiply-traded Issues. If the

average daily trading volume in a nonmultiply-traded issue reaches 3,000 contracts

at the Exchange during any three-calendarmonth period (measured on a ‘‘rolling’’ threecalendar-month basis) [for three consecutive

months,] the Options Allocation Committee

will [shall] evaluate the LMM’s performance

in that issue and, based on that evaluation,

may reduce the LMM’s guaranteed

participation in that issue from 50% to 25%.

(C) Return to Previous Levels of

Guaranteed Participation. If the Options

Allocation Committee has reduced an LMM’s

guaranteed participation in an issue

pursuant to subsections (A) or (B) above, and

average daily trading volume in the issue

falls below 3,000 contracts at the Exchange

during any three-calendar-month period

(measured on a ‘‘rolling’’ three calendar

month basis), the Options Allocation

Committee will evaluate the LMM’s

performance in that issue and, based on that

evaluation, may raise the LMM’s guaranteed

participation in that issue from 40% to 50%

(in a multiply-traded issue) or from 25% to

50% (in a non-multiply-traded issue).

(e)–(g)—No change.

Commentary: .01–.04—No change.

[FR Doc. 98–15824 Filed 6–12–98; 8:45 am]

BILLING CODE 8010–01–M

DEPARTMENT OF TRANSPORTATION

Aviation Proceedings, Agreements

Filed During the Week Ending June 5,

1998

The following Agreements were filed

with the Department of Transportation

under the provisions of 49 U.S.C.

Sections 412 and 414. Answers may be

filed within 21 days of date of filing.

Docket Number: OST–98–3898.

Date Filed: June 2, 1998.

Parties: Members of the International

Air Transport Association.

Subject: PTC31 S/CIRC PAC 0047

dated May 29, 1998 Expedited South

Pacific Resos 002L (r1) & 015v (r2)

Tables—PTC31 S/CIRC Fares 0016

dated May 29, 1998 Intended effective

date: expedited July 1, 1998.

Docket Number: OST–98–3929.

Date Filed: June 5, 1998.

Parties: Members of the International

Air Transport Association.

Subject: PTC31 Telex Mail Vote 938,

Las Vegas-Japan fares r1–10,

Correction—Telex TE651, Voting

Result—Telex TE654, Intended effective

date: July 1, 1998.

Docket Number: OST–98–3930.

Date Filed: June 5, 1998.

Parties: Members of the International

Air Transport Association.

Subject: CSC/Reso/001 Dated April 1,

1998, Book of adopted Resos/RPs r1–9,

Minutes—CSC/Minutes/002 dated May

12, 1998, Intended effective date:

October 1, 1998.

Dorothy W. Walker,

Federal Register Liaison.

[FR Doc. 98–15847 Filed 6–12–98; 8:45 am]

BILLING CODE 4910–62–P

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 June 5, 1998

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 order, a

tentative order, or in appropriate cases

a final order without further

proceedings.

Docket Number: OST–98–3895.

Date Filed: June 1, 1998.

Due Date for Answers, Conforming

Applications, or Motions to Modify

Scope: June 29, 1998.

Description: Application of Reliant

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

Section 41102 and Subpart Q of the

Regulations, applies for a certificate of

public convenience and necessity

authorizing Reliant to conduct interstate

charter air transportation of property

and mail between points in the United

States beginning on or about September

1, 1998.

Docket Number: OST–98–3896.

Date Filed: June 1, 1998.

Due Date for Answers, Conforming

Applications, or Motions to Modify

Scope June 29, 1998.

Description: Application of Reliant

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

Section 41102 and Subpart Q of the