39916 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 / Notices

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

2 17 CFR 240.19b–4.

3 In Amendment No. 1, the AMEX: 1) requests an

extension of the current pilot program for a period

of up to six-months from July 17, 1998; 2) sets forth

the allocation of the additional option issues among

the Exchanges; and 3) represents that the AMEX has

sufficient capacity to support the proposed

expansion of the program. See Letter from Scott G.

Van Hatten, Legal Counsel, AMEX, to Richard

Strasser, Assistant Director, Division of Market

Regulation (‘‘Division’’), SEC, dated July 10, 1998

(‘‘AMEX Amendment No. 1’’).

4 In Amendment No. 1, the CBOE requests an

extension of the 21⁄2 Point Strike Price Pilot

Program until January 15, 1999, or until the

Commission approves the CBOE’s proposal to make

the program permanent, whichever occurs first. In

addition, the CBOE amended its filing to request

that the Commission expand the program and

approve it permanently. See Letter from Timothy H.

Thompson, Director—Regulatory Affairs, CBOE, to

Deborah Flynn, Attorney, Division, SEC, dated July

14, 1998 (‘‘CBOE Amendment No. 1’’).

5 In Amendment No. 1, the PCX proposes to add

an additional 100 issues to the 21⁄2 Point Strike

Price Pilot Program and sets forth the allocation of

the additional issues among the Exchanges. In

addition, the PCX represents that it has not suffered

capacity problems in the past and has sufficient

capacity to handle an expansion of the program. See

Letter from Robert P. Pacileo, Staff Attorney, PCX,

to Deborah L. Flynn, Attorney, Division, SEC, dated

July 2, 1998 (‘‘PCX Amendment No. 1’’).

6 In Amendment No. 2, the PCX requests an

extension of the 21⁄2 Point Strike Price Pilot

Program until January 15, 1999, or until the

Commission approves the PCX’s proposal to make

the program permanent, whichever occurs first. See

Letter from Robert P. Pacileo, Staff Attorney, PCX,

to Deborah L. Flynn, Attorney, Division, SEC, dated

July 8, 1998 (‘‘PCX Amendment No. 2’’).

7 In Amendment No. 1, the PHLX clarifies that the

allocation of the proposed 100 new options classes

is to be made in accordance with an agreement to

be reached by the Exchanges. See Letter from Linda

S. Christie, Counsel, PHLX, to Michael Walinsakas,

Deputy Associate Director, Division, SEC, dated

July 1, 1998 (‘‘PHLX Amendment No. 1’’).

8 In Amendment No. 2, the PHLX requests an

extension of the 21⁄2 Point Strike Price Pilot

Program for six-months or until the Commission

approves the PHLX’s proposal to make the program

permanent. See Letter from Linda S. Christie,

Counsel, PHLX, to Michael Walinsakas, Deputy

Associate Director, Division, SEC, dated July 7,

1998 (‘‘PHLX Amendment No. 2’’).

An open meeting will be held on

Wednesday, July 29, 1998, at 11:00 a.m.

A closed meeting will be held on

Friday, July 31, 1998, at 10:00 a.m.

Commissioners, Counsel to the

Commissioners, the Secretary to the

Commission, and recording secretaries

will attend the closed meeting. Certain

staff members who have an interest in

the matters may also be present.

The General Counsel of the

Commission, or his designee, has

certified that, in his opinion, one or

more of the exemptions set forth in 5

U.S.C. 552b(c) (4), (8), (9)(A) and (10)

and 17 CFR 200.402(a) (4), (8), (9)(i) and

(10), permit consideration of the

scheduled matters at the closed meeting.

Commissioner Hunt, as duty officer,

voted to consider the items listed for the

closed meeting in a closed session.

The subject matter of the open

meeting scheduled for Wednesday, July

29, 1998, at 11:00 a.m., will be:

Consideration of whether to issue an

interpretive release setting forth the

Commission’s views on how public

companies, investment companies,

investment advisers, and municipal

securities issuers should meet their

disclosure obligations regarding the

Year 2000 issue and its consequences.

For further information, contact Mauri

Osheroff at (202) 942–2840.

The subject matter of the closed

meeting scheduled for Friday, July 31,

1998, at 10:00 a.m., will be:

Institution of injunctive actions.

Institution of administrative

proceedings of an enforcement nature.

Formal order of investigation.

At times, changes in Commission

priorities require alterations in the

scheduling of meeting items. For further

information and to ascertain what, if

any, matters have been added, deleted

or postponed, please contact:

The Office of the Secretary at (202)

942–7070.

Dated: July 21, 1998.

Jonathan G. Katz,

Secretary.

[FR Doc. 98–19974 Filed 7–22–98; 12:28 pm]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

(Release No. 34–40226; File Nos. SR–

AMEX–98–21; SR–CBOE–98–29; SR–PCX–

98–31; and SR–PHLX–98–26)

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Changes

and Amendments by the American

Stock Exchange, Inc., the Chicago

Board Options Exchange, Inc., the

Pacific Exchange, Inc. and the

Philadelphia Stock Exchange, Inc.

Relating to Expansion and Permanent

Approval of the 21⁄2 Point Strike Price

Program and Order Granting

Accelerated Approval of Proposal to

Extend the Current Pilot Program

July 17, 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 June 17,

1998, the American Stock Exchange,

Inc. (‘‘AMEX’’); on June 30, 1998, the

Chicago Board Options Exchange, Inc.

(‘‘CBOE’’); on June 19, 1998, the Pacific

Exchange, Inc. (‘‘PCX’’); and on July 1,

1998, the Philadelphia Stock Exchange,

Inc. (‘‘PHLX’’) (referred to individually

as ‘‘Exchange’’ and collectively as

‘‘Exchanges’’) filed with the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’) the proposed rule

changes as described in Items I and II

below, which Items have been prepared

by the Exchanges. The AMEX submitted

to the Commission Amendment No. 1 to

its proposed rule change on July 13,

1998.3 The CBOE submitted to the

Commission Amendment No. 1 to its

proposal on July 15, 1998.4 The PCX

submitted to the Commission

Amendment No. 1 to its proposed rule

change on July 7, 1998,5 and

Amendment No. 2 to its proposal on

July 10, 1998.6 The PHLX submitted to

the Commission Amendment No. 1 to

its proposed rule change on July 2,

1998,7 and Amendment No. 2 to its

proposal on July 8, 1998.8 The

Commission is publishing this notice to

solicit comments on the proposed rule

changes from interested persons. As

discussed below, the Commission also

is granting accelerated approval to the

portion of the proposal relating to the

extension of the 21⁄2 Point Strike Price

Pilot Program until January 15, 1999.

I. Self-Regulatory Organizations’

Statement of the Terms of Substance of

the Proposed Rule Changes

The Exchanges propose to extend the

21⁄2 Point Strike Price Pilot Program for

six-months ending on January 15, 1999,

or until the Commission approves the

program permanently, whichever occurs

first. In addition, the Exchange propose

the expand the 21⁄2 Point Strike Price

Pilot Program by adding 20 allowable

classes to the program each quarter for

the 5 calendar quarters immediately

following the Commission’s grant of

permanent approval of the pilot

program. The additional options classes

will be allocated among the Exchanges

according to an agreement to be entered

into by the Exchanges. The text of the

proposed rule changes is available at the

Office of the Secretary, the Exchanges,

and at the Commission.
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 / Notices 39917

9See Securities Exchange Act Release No. 35993

(July 19, 1995) 60 FR 38073 (July 25, 1995) (order

approving File Nos. SR–PHLX–95–08; SR–AMEX–

95–12; SR–PSE–95–07; SR–CBOE–95–19; and SR–

NYSE–95–12).

10See Securities Exchange Act Release No. 37441

(July 15, 1996) 61 FR 38234 (July 23, 1996) (order

approving File Nos. SR–AMEX–96–24; SR–CBOE–

96–41; SR–NYSE–96–19; SR–PSE–96–18; AND SR–

PHLX–96–22).

11See Securities Exchange Act Release No. 38856

(July 21, 1997) 62 FR 40391 (July 28, 1997) (order

approving File Nos. SR–AMEX–97–24; SR–CBOE–

97–31; SR–PCX–97–30; and SR–PHLX–97–33)

(‘‘21⁄2 Point Strike Price Extension Order’’).

12 Id.

13The original allotment of option issues for each

Exchange was: CBOE (28), AMEX (22), PHLX (18),

PSE (18), and NYSE (14).

14See Securities Exchange Act Release Nos. 38541

(April 23, 1997) 62 FR 23516 (April 30, 1997) (File

No. SR–CBOE–97–14) (order approving the

issuance of trading permits in connection with the

purchase of the NYSE’s options business) and

38542 (April 23, 1997) 62 FR 23521 (April 30, 1997)

(File No. SR–NYSE–97–05) (order approving the

transfer of the NYSE’s options business to the

CBOE).

15See 21⁄2 Point Strike Price Extension Order,

supra note 11.

16The actual allotment of options issues for each

Exchange as of July 1997 is: CBOE (31), AMEX (25),

PHLX (23), and PCX (21).

17See 21⁄2 point Strike Price Extension Order,

supra note 11.

18 In the 21⁄2 Point Strike Price Extension Order,

supra note 11, the Commission required that each

Exchange submit a report in conjunction with any

proposal to extend, expand or make permanent the

pilot program.

19The Exchanges have agreed to notify the

Commission of the specific allocation of the

additional options classes among the Exchanges

prior to the actual allocation. Telephone

conversation between Richard Strasser, Assistant

Director, Division, SEC; Michael D. Pierson, Senior

Attorney, PCX; Claire P. McGrath, Managing

Director and Special Counsel, AMEX; Jonathan

Kallman, Acting General Counsel, PHLX; and

Timothy H. Thompson, Director-Regulatory Affairs,

CBOE, on July 6, 1998.

20See PCX Amendment No. 1, AMEX

Amendment No. 1, and File Nos. SR–CBOE–98–29

and SR–PHLX–98–26 (collectively ‘‘Exchange

Capacity Representations’’).

21See Memorandum from Timothy H. Thompson,

Senior Attorney, CBOE, to Joseph P. Corrigan,

Executive Director, OPRA, dated June 12, 1998, and

Letter from Joseph P. Corrigan, Executive Director,

OPRA, to Timothy H. Thompson, DirectorRegulatory Affairs, CBOE, dated June 12, 1998

(‘‘OPRA Capacity Statement’’).

22 15 U.S.C. 78f.

23 15 U.S.C. 78f(b)(5).

II. Self-Regulatory Organizations’

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Changes

In their filings with the Commission,

the Exchanges included statements

concerning the purpose of, and basis for,

the proposed rule changes. The text of

these statements may be examined at

the places specified in Item IV below.

The Exchanges have prepared

summaries, set forth in sections A, B,

and C below, of the most significant

aspects of such statements.

A. Self-Regulatory Organizations’

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Changes

1. Purpose

The Commission previously approved

a pilot program proposed by the

Exchanges and the New York Stock

Exchange (‘‘NYSE’’) to list selected

options trading at a strike price greater

than $25 but less than $50 at 21⁄2 point

intervals (i.e., 271⁄2, 321⁄2, 371⁄2, 421⁄2

and 471⁄2). 9 Since its original adoption

in 1995, the pilot program has been

extended twice, once in July of 1996 10

and again in July of 1997.11 Currently,

the program expires July 17, 1998.12

Pursuant to the original pilot program,

the Exchanges, including the NYSE,

were permitted to use 21⁄2 point strike

price intervals for a joint total of up to

100 option issues. Each of the

Exchanges received an allocation of 10

options plus a percentage of the

remaining 50 options equal to each

Exchange’s pro rata share of the total

number of equity options listed by the

Exchanges.13 The allocation was

subsequently changed to account for the

sale of NYSE’s option business to

CBOE.14 At the time of the sale of

NYSE’s option business, the NYSE had

11 option classes in the 21⁄2 Point Strike

Price Pilot Program.15

Currently, each Exchange is allocated

a whole number of classes based on the

sum of the following: 1) one quarter of

the first 50 issues; and 2) a percentage

of the remaining 50 classes determined

by each Exchange’s pro rata share of the

total number of equity option listings as

of July 1, 1997. 16 In addition, the

options originally selected by the NYSE,

which have not been subsequently

decertified or delisted, continue to be

eligible for the pilot program, but are

not counted against any Exchange’s

allotment.17 However, these classes may

not be replaced by another selection in

the event a class becomes ineligible or

is decertified.

As has been the case since the

inception of the 21⁄2 Point Strike Price

Pilot Program, when more than one

Exchange selects a multiply-traded

option for its allotment, the Options

Clearing Corporation (‘‘OCC’’) will

determine which will be deemed to

have selected the option according to

the procedures agreed upon by the

Exchanges. The Exchanges have agreed

that an Exchange (‘‘Selecting

Exchange’’) intending to list 21⁄2 point

strikes on an option will inform OCC of

its selection by submitting a notice

(‘‘Selection Notice’’) to OCC between

8:30 a.m. and 12:00 Noon (Central

Time). If more than one Exchange

submits a Selection Notice to the OCC

for the same multiply-traded option,

then the Exchange that first submits a

Selection Notice to the OCC will be

deemed to be the Selecting Exchange for

that option. Such option will count

toward the allotment of the Selecting

Exchange, but not toward the allotment

of any other Exchange submitting a

Selection Notice under the terms of the

pilot program.

In addition, each of the Exchanges has

submitted a report to the Commission

that includes data and written analysis

regarding the operation of the pilot

program during the previous year, as

required in the 21⁄2 Strike Price

Extension Order.18 The Exchanges

generally believe that the pilot program

has provided customers greater

opportunities and flexibility to tailor

their options positions, while enhancing

the depth and liquidity of the markets

in the selected options classes.

Generally, the Exchanges believe that

permanent approval of the pilot

program is now appropriate given the

length of time the program has been in

place and its past success.

In addition, the Exchanges are

requesting an expansion of the pilot

program from 100 to 200 eligible

classes. Generally, to provide for the

orderly introduction of the new classes

and insure that the Exchanges’ systems

capacity remains sufficient throughout

the expansion, the Exchanges propose to

add only 20 classes each calendar

quarter for the 5 quarters following the

Commission’s grant of permanent

approval of the program. The additional

options classes shall be allocated among

the Exchanges in accordance with an

agreement to be entered into by the

Exchanges.19 The Exchanges 20 and the

Options Price Reporting Authority

(‘‘OPRA’’) 21 represent that sufficient

computer processing capacity is

available to accommodate the expansion

of the 21⁄2 Point Strike Price Pilot

Program on a permanent basis. The

Exchanges propose to extend the current

pilot program for an additional sixmonths to allow the Commission to

consider the Exchanges’ request seeking

expansion and permanent approval of

the 21⁄2 Point Strike Price Pilot Program.

2. Statutory Basis

The Exchanges believe the proposed

rule change is consistent with Section

6(b) of the Act 22 in general and furthers

the objectives of Section 6(b)(5) 23 in

particular in that the joint proposal is

designed to prevent fraudulent and

manipulative acts and practices, to
39918 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 / Notices

24 15 U.S.C. 78s(b)(2).

25 In granting partial approval of the proposal, the

Commission has considered the proposal’s impact

on efficiency, competition, and capital formation.

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

26 15 U.S.C. 78f(b)(5).

27 15 U.S.C. 78f(b)(5) and 78s(b)(2).

28 15 U.S.C. 78s(b)(2).

29 17 CFR 200.30–3(a)(12).

promote just and equitable principles of

trade, and is not designed to permit

unfair discrimination between

customers, issuers, brokers or dealers.

B. Self-Regulatory Organizations’

Statement on Burden on Competition

The Exchanges believe that the

proposed rule changes will impose no

burden on competition.

C. Self-Regulatory Organizations’

Statement on Comments on the

Proposed Rule Changes Received From

Members, Participants or Others

No written comments were solicited

or received with respect to the proposed

rule changes.

III. Date of Effectiveness of the

Proposed Rule Changes and Timing for

Commission Action

Within 35 days of the 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.

The Exchanges have also requested

that the Commission find good cause,

pursuant to Section 19(b)(2) of the

Act,24 for approving the extension of the

21⁄2 Point Strike Price Pilot Program for

a six-month period ending on January

15, 1999, or until the Commission

approves the request to expand the

program and approve it permanently,

whichever occurs first, on an

accelerated basis prior to the thirtieth

day after publication in the Federal

Register.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning the foregoing,

including whether the proposed rule

changes, as amended, are 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 submissions, all

subsequent amendments, all written

statements with respect to the proposed

rule changes that are filed with the

Commission and all written

communications relating to the

proposed rule changes 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 at

the Commission’s Public Reference

Room, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filings will also be available for

inspection and copying at the principal

offices of the Exchanges. All

submissions should refer to File Nos.

SR–AMEX–98–21, SR–CBOE–98–29,

SR–PCX–98–31, and SR–PHLX–98–26

and should be submitted by August 14,

1998.

V. Commission Findings and Order

Granting Partial Accelerated Approval

of the Proposed Rule Changes

The Commission finds that the

proposed rule changes, as amended,

relating to the extension of the 21⁄2 Point

Strike Price Pilot Program for sixmonths or until the Commission

approves the Exchanges’ proposal to

make the program permanent,

whichever occurs first, is consistent

with the Act and the rules and

regulations thereunder applicable to a

national securities exchange,25 and, in

particular, Section 6(b)(5) of the Act.26

Specifically, the Commission believes

that the proposed six-month extension

of the pilot program providing for the

listing of 21⁄2 point strike price intervals

in selected equity options will continue

to provide investors with more

flexibility in the trading of equity

options with a strike price greater than

$25 but less than $50, while allowing

the Commission adequate time to

consider the Exchanges’ proposal

seeking expansion and permanent

approval of the program.

The Commission finds good cause for

granting the Exchanges’ request for a

six-month extension of the 21⁄2 Point

Strike Price Pilot Program prior to the

thirtieth day after the date of

publication of notice of filing thereof in

the Federal Register. As mentioned

above, the Exchanges submitted

separate reports to the Commission that

include data and written analysis

regarding the operation of the pilot

program as required in the 21⁄2 Strike

Price Extension Order. The Commission

notes that the Exchanges have not

reported any significant problems with

the pilot program since its inception

and that the Exchanges will continue to

monitor the pilot program to ensure that

no problems arise. In particular, the

Exchanges will continue to monitor the

impact of the program on their systems

capacity. The Commission believes

extending the pilot program on an

accelerated basis will provide the

investing public with the added

flexibility provided by 21⁄2 point strike

prices on an uninterrupted basis.

Finally, although the pilot has been in

place since 1995, the Commission has

received no adverse comments

concerning the operation of the pilot

program. Therefore, the Commission

believes good cause exists to approve

the extension of the pilot program until

January 15, 1999, or until the

Commission approves the Exchanges’

proposal seeking to expand the program

and to have it approved permanently,

on an accelerated basis. Accordingly,

the Commission believes that granting

accelerated approval of the requested

extension is appropriate and consistent

with Sections 6(b)(5) and 19(b)(2) of the

Act.27

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,28 that the

extension of the 21⁄2 Point Strike Price

Pilot Program proposed by the

Exchanges (File Nos. SR–AMEX–98–21,

SR–CBOE–98–29, SR–PCX–98–31, and

SR–PHLX–98–26), as amended, is

approved until January 15, 1999, or

until the Commission approves the

proposal seeking to expand the program

and have it approved permanently,

whichever occurs first, on an

accelerated basis.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.29

Jonathan G. Katz,

Secretary.

[FR Doc. 98–19751 Filed 7–23–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40219; File No. SR–DTC–

98–02]

Self-Regulatory Organizations; The

Depository Trust Company; Order

Granting Approval of a Proposed Rule

Change to Implement the HUB Mailbox

Service

July 16, 1998.

On February 10, 1998, The Depository

Trust Company (‘‘DTC’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) a proposed rule change

(File No. SR–DTC–98–02) pursuant to