Federal Register / Vol. 63, No. 15 / Friday, January 23, 1998 / Notices 3611

76 17 CFR 240.9b–1 See supra note 9.

77 15 U.S.C. 78s(b)(2).

78 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1).

2The enhanced parity split for the specialist in

3D German Mark options was first approved on

December 29, 1994. See Securities Exchange Act

Release No. 35177 (Dec. 29, 1994), 60 FR 2419 (Jan.

9, 1995). 3D German Mark options are cash-settled,

European-style, cash/spot foreign currency option

contracts on the German Mark that trade in oneweek and two-week expirations.

3The enhanced parity split was eliminated as of

September 8, 1997. See Securities Exchange Act

Release No. 39030 (Sept. 8, 1997), 62 FR 48332

(Sept. 15, 1997). The sole specialist firm trading 3D

German Mark options indicated that the enhanced

parity split was not particularly useful and that it

did not generally take advantage of it. Furthermore,

the Exchange represented that the order size in 3D

German Mark options generally was not large

enough to trigger the application of the enhanced

parity split (i.e., such orders represented less than

100 contracts).

4The Exchange recently amended its enhanced

parity split pilot program for equity and index

option specialists to expand its application. As a

result of the amendment, all index options and all

newly listed equity options receive the enhanced

parity split. However, only 50% of those equity

options not considered ‘‘newly listed’’ are eligible

to receive the enhanced parity split. In addition,

specialists are now permitted to revise the list of

eligible equity options on a quarterly basis, rather

than an annual basis. See Securities Exchange Act

Release No. 39401 (Dec. 4, 1997), 62 FR 65300 (Dec.

11, 1997).

5 It should be noted that because FCOs on the

Italian Lira and the Spanish Peseta are traded as

customized options, there are no specialists

assigned to those products. For simplicity and

clarity, all further references to FCOs shall not

include these two products.

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 at

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 Exchange. All submissions

should refer to SR–Phlx–96–38 and

should be submitted by February 13,

1998.

V. Conclusion

For the reasons discussed above; the

Commission finds that the proposal is

consistent with the Act and Sections 6

and 11A of the Act, in particular. In

addition, the Commission has

previously concluded pursuant to Rule

9b–1 under the Act, that FLEX options,

including FLEX equity options and

FLEX index options, and FLEX index

options traded and settled in certain

designated foreign currencies, are

standardized options for purposes of the

options disclosure framework

established under Rule 9b–1 of the

Act.76 Apart from the flexibility with

respect to strike prices, expiration dates,

exercise styles, and settlement (for FLEX

index options), all of the other terms of

FLEX options are standardized pursuant

to OCC and Phlx rules.

Standardized terms include matters

such as exercise procedures, contract

adjustments, time of issuance, effect of

closing transactions, restrictions on

exercise under OCC rules, margin

requirements, and other matters

pertaining to the rights and obligations

of holders and writers.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,77 that the

proposal (File No. SR–Phlx–96–38), as

amended, including Amendment Nos. 2,

4 and 5 on an accelerated basis, is

approved. In addition, the portion of the

proposal eliminating FLEX equity

options position and exercise limits is

approved on a pilot basis until January

14, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.78

Jonathan G. Katz,

Secretary.

[FR Doc. 98–1552 Filed 1–22–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39552; File No. SR–Phlx–

97–55]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

Establishing an Enhanced Parity Split

Pilot Program for Specialists in

Foreign Currency Options Effective

Until December 31, 1998

January 14, 1998.

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

Securities Exchange Act of 1934

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

December 1, 1997, the Philadelphia

Stock Exchange, Inc. (‘‘Phlx’’ 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 Exchange. 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 seeks to revise

Exchange Rule 1014(h) to establish an

enhanced parity split pilot program

(‘‘Pilot Program’’) for its foreign

currency option (‘‘FCO’’) specialists

effective until December 31, 1998.

The text of the proposed rule change

is available at the Office of the

Secretary, the Exchange, and at the

Commission.

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

Exchange 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

The Exchange previously provided

and enhanced parity split to the

specialist dealing in dollar denominated

delivery German Mark (‘‘3D German

Mark’’) options.2 The enhanced parity

split gave the specialist 50% of the first

500 contracts of any trade in 3D German

Mark options. The Exchange eliminated

the enhanced parity split earlier this

year because the specialist in 3D

German Mark options and other traders

of the product found it to be of little

benefit.3 At the time the enhanced

parity split was eliminated, the

Exchange informed the Commission that

it would continue to study the potential

use of an enhanced parity split for all

FCO specialists on a broader basis. This

proposed rule change sets forth the

Exchange’s plan for the expanded use of

the enhanced parity split in FCOs.

The Exchange seeks to implement an

enhanced parity split procedure similar

to the one currently applied to

transactions in equity and index options

at the Exchange.4 Under the Pilot

Program, however, the application of

the proposed FCO enhanced parity split

would be more widespread, and the

enhanced parity split would be

available to all FCO specialists assigned

to FCO products.5 The Pilot Program

would be in effect until December 31,

1998.

The enhanced parity split would

apply to the first 500 contracts in a FCO

transaction in a FCO transaction. When

the enhanced parity split is applied, the
3612 Federal Register / Vol. 63, No. 15 / Friday, January 23, 1998 / Notices

6Exchange Rule 1014(h), ‘‘Options on Foreign

Currencies,’’ Section (i), states that ‘‘all bids/offers

of customer accounts for under 100 contracts have

time priority over all other bids/offers’’ on the FCO

floor. In that instance, the FCO specialist cannot be

on parity with such customer so the enhanced

parity split will not apply. However, because

Exchange Rule 1014(h)(i) does not confer time

priority on customer orders for 100 or more

contracts, FCO specialists may avail themselves of

the enhanced parity split when interacting with

customer orders involving 100 or more FCO

contracts.

7Telephone conversation between Michele R.

Weisbaum, Vice President and Associate General

Counsel, Exchange, and Michael L. Loftus,

Attorney, Division of Market Regulations,

Commission (December 15, 1997).

8 15 U.S.C. 78f.

9 15 U.S.C. 78f(b)(5). 10 17 CFR 200.30–3(a)(12).

FCO specialist will be counted as two

crowd participants when determining

the allocation of the FCO contracts

among the trading crowd participants

on parity, except in the following

circumstances: (i) when there is one

other trading crowd participant on

parity, the FCO specialist will receive

60% of the FCO contracts making up the

order; or (ii) when there are two other

trading crowd participants on parity, the

FCO specialist will receive 40% of the

FCO contracts making up the order.

Because a customer bid/offer for

under 100 FCO contracts is deemed to

have time priority over all other bids/

offers, such an order will not be subject

to the enhanced parity split.6 This

provision will help ensure that small

customer orders are not disadvantaged

by the application of the enhanced

parity split. If a FCO transaction

involves more than 500 contracts, those

contracts exceeding the 500 contract

threshold will be allocated on a pro rata

basis among the crowd participants on

parity.

It should be noted that the application

of this enhanced parity split will be

mandatory. Therefore, with respect to

any FCO transaction that implicates the

enhanced parity split, the FCO

specialist will be required to accept the

preferential allocation and may not

decline the enhancement.7

2. Statutory Basis

The Exchange believes that the

proposed rule change is consistent with

Section 6 of the Act,8 in general, and

with Section 6(b)(5),9 in particular, in

that it is designed to promote just and

equitable principles of trade; to prevent

fraudulent and manipulative acts and

practices; to foster cooperation and

coordination with persons engaged in

regulating, clearing, settling, processing

information with respect to, and

facilitating transactions in securities; 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.

The Exchange further believes that the

proposed rule change balances the

competing interests of specialists and

market makers while assisting

specialists in making tight and liquid

markets and protecting customer

interests.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange 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

The Exchange did not solicit or

receive written comments with respect

to the proposed 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

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

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

filing will also be available for

inspection and copying at the principal

office of the Exchange. All submissions

should refer to File No. SR–Phlx–97–55

and should be submitted by February

13, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Jonathan G. Katz,

Secretary.

[FR Doc. 98–1553 Filed 1–22–98; 8:45 am]

BILLING CODE 8010–01–M

SMALL BUSINESS ADMINISTRATION

[Declaration of Disaster #3047]

State of California

Orange County and the contiguous

Counties of Los Angeles, Riverside, San

Bernardino, and San Diego in the State

of California constitute a disaster area as

a result of damages caused by flooding

and mudslides which occurred on

December 6, 1997. Applications for

loans for physical damages may be filed

until the close of business on March 13,

1998 and for economic injury until the

close of business on October 12, 1998 at

the address listed below or other locally

announced locations: Small Business

Administration, Disaster Area 4 Office,

P.O. Box 13795, Sacramento, CA 95853–

4795.

The interest rates are:

Percent

For physical damage:

Homeowners with credit available elsewhere ........................ 7.625

Homeowners without credit available elsewhere ........................ 3.812

Businesses with credit available

elsewhere ................................ 8.000

Businesses and non-profit organizations without credit available elsewhere ........................ 4.000

Others (including non-profit organizations) with credit available

elsewhere ................................ 7.125

For economic injury:

Businesses and small agricultural

cooperatives without credit

available elsewhere ................. 4.000

The number assigned to this disaster

for physical damage is 304706 and for

economic injury the number is 971400.

(Catalog of Federal Domestic Assistance

Program Nos. 59002 and 59008)

Dated: January 12, 1998.

Aida Alvarez,

Administrator.

[FR Doc. 98–1614 Filed 1–22–98; 8:45 am]

BILLING CODE 8025–01–P