Federal Register / Vol. 63, No. 128 / Monday, July 6, 1998 / Notices 36467

12 Id.

13 In approving this rule change, the Commission

has considered the proposed rule’s impact on

efficiency, competition, and capital formation. The

proposed rule change will provide the Commission

with additional time to review the public comments

before determining whether to expand the Actual

Size Rule to all Nasdaq stocks on a permanent basis.

Since the Commission believes that the data

discussed above indicates that the pilot has not

harmed the Nasdaq market thus far, the net effect

of approving the proposed rule change will be

positive. 15 U.S.C. 78c(f).

14 15 U.S.C. 78s(b)(2).

15 17 CFR 200.30–3(a)(12).

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

2Securities Exchange Act Release No. 38706

(June 2, 1997), 62 FR 31468.

3Securities Exchange Act Release No. 38308

(February 19, 1997), 62 FR 8467 [File No. SR–

Amex–96–44]. The Chicago Board Options

Exchange has filed a proposed rule change to trade

similar products. Securities Exchange Act Release

No. 38342 (February 26, 1997), 62 FR 10098 [File

No. SR–CBOE–97–03].

4The SPDR trust was established to accumulate

and hold a portfolio of common stocks that is

intended to track the price performance and

dividend yield of a particular S&P index.

retail investors continued to have

substantial and reasonable access to

dealer capital via both SOES and marker

maker proprietary automatic execution

systems.

• There was no evidence of any

material difference in market quality of

pilot stocks and peer non-pilot stocks

during the market stress on October 27

and 28, 1997.

To provide the Commission with

sufficient time to review the public

comments before determining whether

to expand the Actual Size Rule to all

Nasdaq stocks on a permanent basis, the

NASD proposes to extend the current

150-stock pilot through July 31, 1998.

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 Exchange

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 File No.

SR–NASD–97–26 and should be

submitted by July 27, 1998.

V. Commission’s Findings and Order

Granting Accelerated Approval of

Amendment No. 5 to the Proposed Rule

Change

The Commission approved the Actual

Size Rule on a pilot basis so that its

effects could be assessed. In doing so,

the Commission stated that it believed

that a reduction in the quotation size

requirement could reduce the risks that

market makers must take, produce

accurate and informative quotations,

and encourage market makers to

maintain competitive prices even in the

changing market conditions resulting

from the Order Handling Rules.

As discussed above, the NASD has

produced an extensive economic

analysis of the pilot. The data appears

to suggest that the pilot has not resulted

in harm to the Nasdaq market. Indeed,

as discussed above, the Actual Size Rule

appears to be an appropriate adjustment

of market making obligations in light of

the changing market dynamics resulting

from the Order Handling Rules.

Nevertheless, the pilot report is lengthy

and the Commission has received

hundreds of comment letters on both

the report and the NASD’s proposal to

adopt permanently the Actual Size

Rule.12 Extending the pilot through July

31, 1998, should provide the

Commission with sufficient time to

review the public comments before

determining whether to expand the

Actual Size Rule to all Nasdaq stocks on

a permanent basis.

For the reasons discussed above, the

Commission finds that the NASD’s

proposal is consistent with the

Exchange Act and the rules and

regulations thereunder applicable to a

national securities association and has

determined to approve the extension of

the pilot through July 31, 1998. The

Commission finds good cause for

approving the proposed rule change

prior to the thirtieth day after the date

of publication of notice of the filing in

the Federal Register to permit the

NASD to continue the pilot on an

uninterrupted basis for an additional

month.

Accordingly, the Commission believes

that the proposed rule change (SR–

NASD–97–26) is consistent with

Sections 15A(b)(6) and (b)(9) of the

Exchange Act 13 and

It is therefore ordered, pursuant to

Section 19(b)(2) of the Exchange Act,14

that the proposed rule change, SR–

NASD–97–26, be and hereby is

approved through July 31, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.15

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–17784 Filed 7–2–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40132; File No. SR–OCC–

97–02]

Self-Regulatory Organizations; the

Options Clearing Corporation; Order

Granting Approval of a Proposed Rule

Change Regarding the Issuance,

Clearance, and Settlement of Options

on Unit Investment Trust Interests and

Investment Company Shares That Hold

Portfolios or Baskets of Common

Stock

June 25, 1998.

On February 21, 1997, The Options

Clearing Corporation (‘‘OCC’’) filed with

the Securities and Exchange

Commission (‘‘Commission’’) a

proposed rule change (File No. SR–

OCC–97–02) pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’).1 On February 21, 1997,

May 14, 1997, and June 11, 1998, OCC

amended the proposed rule change.

Notice of the proposal was published in

the Federal Register on June 9, 1997.2

No comment letters were received. For

the reasons discussed below, the

Commission is approving the proposed

rule change.

I. Description

The rule change amends OCC’s

existing by-laws and rules to

accommodate the issuance, clearance,

and settlement of options on exchange

listed securities representing units of

beneficial interests in open-end unit

investment trusts (‘‘trust units’’) and in

open-end management investment

companies (‘‘fund shares’’) that hold

securities based on an index or a

portfolio of common stocks, such as

shares that have been proposed for

trading by the American Stock Exchange

(‘‘Amex’’).3 The Amex currently trades

trust units know as Portfolio Depository

Receipts (‘‘SPDRs’’) based on the

Standard & Poor’s (‘‘S&P’’) 500 index

and on the S&P MidCap 400 index.

SPDRs are trust units that represent

beneficial ownership in the SPDR trust 4
36468 Federal Register / Vol. 63, No. 128 / Monday, July 6, 1998 / Notices

5The initial series offered by this investment

company are: the Australia Index Series; the Austria

Index Series; the Belgium Index Series; the Canada

Index Series; the France Index Series; the Germany

Index Series; the Hong Kong Index Series; the Italy

Index Series; the Japan Index Series; the Malaysia

Index Series; the Mexico (Free) Index Series; the

Netherlands Index Series; the Singapore (Free)

Index Series; the Spain Index Series; the Sweden

Index Series; the Switzerland Index Series; and the

United Kingdom Index Series.

6Supra note 3.

7A holder of a single European-style call option

contract will have the right on and only on the

expiration date, expiring at the expiration time on

such date, to purchase from OCC at the aggregate

exercise price the number of units of the underlying

security represented by such option contract.

8A holder of a single European-style put option

contract will have the right on and only on the

expiration date, expiring at the expiration time on

such date, to sell to OCC at the aggregate exercise

price the number of units of the underlying security

represented by such option contract.

9Section 11 sets forth the general rules pertaining

to adjustments on stock option contracts. OCC has

deleted Section .08 from the Interpretations and

Policies and moved these provisions to new Rule

807.

10 15 U.S.C. 78q–1(b)(3)(F). 11 17 CFR 200.30–3(a)(12).

and trade similarly to shares of common

stock.

The Amex also trades fund shares

known as World Equity Benchmark

Shares (‘‘WEBS’’) which are issued by

an open-end management investment

company consisting of seventeen

separate series based on seventeen

foreign equity market indexes.5 The

investment objective of each series is to

provide results that correspond to the

aggregate price and yield performance of

publicly traded securities in a particular

market as represented by a particular

foreign equity index.

The Amex has proposed trading

options on exchange-traded trust units

and fund shares pursuant to the same

rules and procedures that are generally

applicable to trading in options on

equity securities with only minor

differences that affect their clearance

and settlement.6 These differences are

that options on trust units and fund

shares would be listed as European-style

options only and that each option

contract would cover 1000 trust units or

fund shares as the unit of trading.

The general rights of a holder of a

single call equity option contract are set

forth in Article VI, Section 9(a) of OCC’s

by-laws, and the general rights of a

holder of a single put equity option

contract are set forth in Article VI,

Section 9(b) of OCC’s by-laws. Because

options on trust units or fund shares are

deemed equity option contracts under

OCC’s rules, OCC is amending Section

9(a) and (b) of Article VI to set forth the

general rights of a holder of a single

European-style equity call option 7 and

a single European-style equity put

option,8 respectively. Furthermore, OCC

is amending Interpretations and Policy

.01 to Section 9, which provides that

subsections (a) and (b) of Section 9

apply only to stock option contracts to

clarify that the term ‘‘stock option

contracts’’ will include option contracts

on publicly traded interests in trust

units, fund shares, or shares in entities

similar to investment companies that

hold portfolios or baskets of common

stock.

OCC is adding Interpretation and

Policy .01 to Article VI, Section 10 of

the by-laws to reflect that, for series of

options in which the underlying

security is trust units or fund shares, the

unit of trading is the amount of the

underlying security deliverable upon

the exercise of the option as specified by

the exchange on which the option is

traded unless otherwise specified by

OCC in accordance with its by-laws and

rules.

In addition, OCC is adding Rule 807

to its rules. The rule contains essentially

the same provisions as those found in

Interpretations and Policy .08 to Article

VI, Section 11 of the by-laws.9 Rule 807

sets forth the general provision that

when a flexibly structured option

contract with a European-style

expiration has been adjusted to require

upon exercise the delivery of a fixed

amount of cash, the expiration date with

respect to the option will be accelerated

to fall on or shortly after the date on

which the conversion of the underlying

security to a right to receive cash occurs.

The ability to accelerate an expiration

date following an adjustment calling for

a fixed amount of cash was added

specifically to accommodate Europeanstyle, flexibly-structured equity options.

Without the ability to accelerate, the

option position would have to be

maintained until it could be exercised at

its regular expiration. For the same

reason, OCC is making this applicable to

all European-style stock option

contracts. In connection with the

addition of Rule 807, OCC is amending

the term ‘‘expiration date’’ as defined in

Article I, Section 1 of OCC’s by-laws, to

provide that the expiration date of a

stock option contract is subject to the

acceleration provisions of the new rule.

II. Discussion

Section 17A(b)(3)(F) of the Act 10

requires that the rules of a clearing

agency be designed to assure the

safeguarding of securities and funds in

its custody or control or for which it is

responsible. The Commission believes

the rule change is consistent with OCC’s

obligation under the Act because OCC

will clear and settle options on trust

units and fund shares by using existing

OCC systems, rules, and procedures.

Thus, OCC should be able to implement

the clearance and settlement of options

on trust units and fund shares in a safe

manner consistent with its statutory

obligation due to the similarity of

options on trust units and fund shares

to option products currently cleared and

settled by OCC.

III. Conclusion

On the basis of the foregoing, the

Commission finds that the proposed

rule change is consistent with the

requirements of the Act and in

particular Section 17A of the Act and

the rules and regulations thereunder.

It is therefore ordered, pursuant to

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

proposed rule change (File No. SR–

OCC–97–02) be and hereby is approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–17717 Filed 7–2–98; 8:45 am]

BILLING CODE 8010–01–M

SMALL BUSINESS ADMINISTRATION

[License No. 04/04–0273]

Capital Across America, L.P.; Notice of

Issuance of a Small Business

Investment Company License

On April 21, 1998, an application was

filed by Capital Across America, L.P.,

414 Union Street, Suite 2025, Nashville,

Tennessee 37219, with the Small

Business Administration (SBA)

pursuant to Section 107.300 of the

Regulations governing small business

investment companies (13 CFR 107.300

(1997)) for a license to operate as a small

business investment company.

Notice is hereby given that, pursuant

to Section 301(c) of the Small Business

Investment Act of 1958, as amended,

after having considered the application

and all other pertinent information, SBA

issued License No. 04/04–0273 on June

17, 1998, to Capital Across America,

L.P. to operate as a small business

investment company.

(Catalog of Federal Domestic Assistance

Program No. 59.011, Small Business

Investment Companies)

Dated: June 17, 1998.

Don A. Christensen,

Associate Administrator for Investment.

[FR Doc. 98–17714 Filed 7–2–98; 8:45 am]

BILLING CODE 8025–01–P