Federal Register / Vol. 63, No. 140 /Wednesday, July 22, 1998 / Notices 39319

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

2 17 CFR 240.19b–4.

6(a)(ii) above in lieu of utilizing the PCX

Application Module.

(iv) Notwithstanding subsection

8(h)(iii) above, during the first 24

calendar months following

implementation of the PCX Application,

the PCX retains the right to notify the

Operating Committee in writing, on or

prior to the Restriction Date, that it will

undertake, or cause to be undertaken,

system adjustments to the operation of

the PCX Application in an effort to

ensure future compliance with the PCX

Application Ceiling. In the event of such

notification, the PCX shall have, at a

minimum, nine calendar months from

the date of such notice (or such longer

period as may be approved by all

members of the Operating Committee

upon showing of reasonable cause), to

implement its proposed system

adjustments (the ‘‘Implementation

Period’’). During the Implementation

Period, the Restrictions shall not apply.

During the next 12 calendar months

following the end of the Implementation

Period, if the Percentage of PCX

Application ITS Volume exceeds the

PCX Application Ceiling for any Rolling

Calendar Quarter, the Restrictions shall

apply on the first business day of the

second month following the end of such

Rolling Calendar Quarter (the

‘‘Subsequent Restriction Date’’). In that

event, the Restrictions will end on the

first business day of the third month

following the Subsequent Restriction

Date.

For example, assume that the

Percentage of PCX Application ITS

Volume exceeds the PCX Application

Ceiling for the Rolling Calendar

Quarters ending in January, February

and March of Year 1 (which fall within

the first 24 calendar months of the

operation of the PCX Application). As in

the above example, the Restriction Date

would be the first business day of May

of that year, which is the first business

day of the second month following

March. The Restrictions would apply as

of that date, unless the PCX notified the

Operating Committee, on or prior to the

first business day in May, that it

planned to effect system adjustments in

an attempt to ensure future compliance

with the PCX Application Ceiling.

Assuming that the PCX provides such

notification on the Restriction Date, the

Restrictions would not apply during the

Implementation Period, which would

last for at least nine months from the

Restriction Date (that is, assuming the

minimum duration, the nine calendar

months of May through January of Year

2). Following the end of the

Implementation Period, assume that the

Percentage of PCX Application ITS

Volume exceeded the PCX Application

Ceiling for the next Rolling Calendar

(the quarter beginning in February and

ending April of Year 2). In that event,

the Subsequent Restriction Date would

be the first business day of June of Year

2, which is the first business day of the

second month following April. The

Restrictions would apply beginning on

that day and would continue through

the end of August of Year 2 (ceasing as

of the first business day of September of

Year 2, which is the first business day

of the third month following June).

(v) Notwithstanding subsections 8(h)

(iii) and (iv) above, if for any Rolling

Calendar Quarter the Percentage of PCX

Application ITS Volume exceeds 30

percent, the Restrictions shall apply as

of the first business day of the second

month following the end of such rolling

Calendar Quarter. In that event, the

Restrictions shall apply for three

calendar months.

(vi) Each month the PCX shall furnish

the Operating Committee with a report

showing the number of shares for each

of the components of the PCX

Application Formula for the previous

month, as well as the data necessary to

determine if the shares in those calls

that produce ‘‘trade-through’’

commitments (as such commitments are

described more fully in Section

6(a)(ii)(B) in Scenario 3) originating

from the PCX Application Module are or

are not included in the ‘‘X variable’’ of

the PCX Application Formula. Any one

or more Participants may cause a

certified public accountant to audit any

one or more of such reports. The

requesting Participant(s) shall pay for

all such audits.

* * * * *

Dated: July 15, 1998.

By the Commission.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–19435 Filed 7–21–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40202; File No. SR–CHX–

98–15]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Stock Exchange, Inc.

Relating to Specialists’ Payment of

Listing Fees

July 14, 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 16,

1998, the Chicago Stock Exchange,

Incorporated (‘‘CHX’’ 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 CHX. 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 proposes to add Article

XXX, Rule 20A in order to establish that

Specialists, Co-Specialists and Relief

Specialists may not pay listing fees for

any issuing corporation for which they

act in such capacity. The text of the

proposed rule change is available at the

Office of the Secretary, the CHX, 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

CHX 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 CHX 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 proposes to adopt new

Rule 20A to Article XXX to establish

that Specialists, Co-Specialists and

Relief Specialists may not pay listing

fees, including initial and maintenance

fees, for any issuing corporation for

which they act in such capacity.

The purpose of the proposed rule

change is to avoid situations in which

either an actual or apparent conflict of

interest may arise. A Specialist has an

obligation to maintain a free and open

market in an issue. In order to maintain

the integrity of the market, Specialists

must remain independent of issuers.

The Exchange has already established

rules that seek to ensure that

independence. For example, Article

XXX, Rule 23 prohibits Specialists from

engaging in any business transactions

with the issuer of exclusive issues. Also,

Interpretation .01 to Article XXXVIII,
39320 Federal Register / Vol. 63, No. 140 /Wednesday, July 22, 1998 / Notices

3 15 U.S.C. 78f.

4 15 U.S.C. 78f(b)(5).

5 17 CFR 200.30–3(a)(12).

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

2Securities Exchange Act Release No. 39860

(April 14, 1998), 63 FR 19774.

3 GSCC is required to pay FOS obligations to

members by 10:00 a.m. eastern time (‘‘ET’’).

Members must satisfy clearing fund deficiencies by

the later of two hours after the receipt of GSCC’s

call or 10:00 a.m. ET. However, if the notification

is not made earlier then two hours before the close

of the cash FedWire, members may satisfy the calls

on the next business day.

4 GSCC does not plan to exercise the offset right

unless it has a significant FOS obligation to a

member (i.e., $5 million or more), and the member

has a significant clearing fund deficiency (i.e., $5

million or more).

5 GSCC plans to set the preestablished time at

fifteen minutes before GSCC’s deadline to make it

own FOS payments to members.

6Pursuant to GSCC’s existing rules, a member has

the right to substitute eligible collateral for any cash

that GSCC applies to its clearing fund deposit as a

result of an offset.

7 15 U.S.C. 78q–1(b)(3)(F).

Rule 23 contains a section on the

relationship between company officials

and Specialists designed to ensure that

the relationship is appropriate.

Consistent with that goal, the Exchange

seeks to impose a broad restriction that

Specialists cannot pay listing fees for

any issuer, whether the issue is

exclusive or not. The Exchange believes

that the proposed rule change will help

ensure that there are no incentives on

the part of issuers of Specialists that

may jeopardize or call into question the

independence of the market.

2. Statutory Basis

The Exchange believes that the

proposed rule change is consistent with

Section 6 of the Act,3 in general, and

furthers the objectives of Section 6(b)(5)

of the Act,4 in particular, in that it is

designed to perfect the mechanisms of

a free and open market and a national

market system, 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.

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 written 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 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

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 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, NW,

Washington, DC 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the CHX. All submissions

should refer to File No. SR–CHX–98–15

and should be submitted by August 12,

1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.5

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–19441 Filed 7–21–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40207; File No. SR–GSCC–

98–01]

Self-Regulatory Organizations;

Government Securities Clearing

Corporation; Order Approving a

Proposed Rule Change Relating to

Funds-Only Settlement Payment

Procedures

July 15, 1998.

On February 17, 1998, the

Government Securities Clearing

Corporation (‘‘GSCC’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) a proposed rule change

(File No. SR–GSCC–98–01) pursuant to

Section 19(b)(1) of the Securities

Exchange Act of 1934 (‘‘Act’’).1 Notice

of proposal was published in the

Federal Register on April 21, 1998.2 No

comment letters were received. For the

reasons discussed below, the

Commission is approving the proposed

rule change.

I. Description

Two important elements of GSCC’s

risk management process are the daily

calculation and collection of clearing

fund deposit deficiency amounts and of

mark to the market margin. At times,

GSCC is obligated to pay a member a

FOS amount on a day on which that

member also has a clearing fund

deficiency call. Pursuant to its current

rules, GSCC is required to make the FOS

payment to such a member prior to the

time the member must make its clearing

fund deficiency payment to GSCC.3 The

proposed rule change permits GSCC to

retain FOS payments it owes to a

member and to apply such amounts to

any clearing fund deposit obligation the

member owes to GSCC.4

Under the proposed rule change,

GSCC is entitled to retain the lesser of

the FOS amount or the amount of the

clearing fund call (or the entire FOS

amount if the difference between the

amounts is zero) and apply it to the

member’s clearing fund deposit

requirement. If a member pays all or a

portion of its clearing fund deficiency in

any type of eligible collateral by a

preestablished time before GSCC’s

deadline to make its own FOS payments

to members,5 GSCC is only entitled to

retain the portion of its FOS obligation

to the member in an amount equal to the

member’s remaining clearing fund

deficiency.6

II. Discussion

Section 17A(b)(3)(F) of the Act 7

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

that the proposed rule change is

consistent with this obligation because

it will allow GSCC to increase its

control over FOS payments it owes to

members that have a significant clearing

fund deposit obligation. This should