41306 Federal Register / Vol. 63, No. 148 / Monday, August 3, 1998 / Notices

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

2 17 CFR 240.19b–4.

3Amendment No. 1 corrected an error in the

original filing regarding the trade match fee

reduction for a threshold volume of 925,000

contracts and above, and made other clarifying

changes. See letter from Stephanie C. Mullins,

Attorney, CBOE to S. Kevin An, Special Counsel,

Division of Market Regulation, Commission (July

14, 1998).

to permit the Portfolios to purchase and

redeem shares of the Underlying

Portfolios.

10. Applicants believe that the terms

of the proposed transactions will be

reasonable and fair and will not involve

overreaching because shares of

Underlying Portfolios will be sold and

redeemed at their net asset values.

Applicants also state that the

investment by the Portfolios in the

Underlying Portfolios will be effected in

accordance with the investment

restrictions of the Portfolios and will be

consistent with the policies as set forth

in the registration statement of the

Portfolios.

Applicants’ Conditions

Applicants agree that the order

granting the requested relief shall be

subject to the following conditions:

1. Each Portfolio and each Underlying

Portfolio will be part of the same ‘‘group

of investment companies,’’ as defined in

section 12(d)(G)(ii) of the Act.

2. No Underlying Portfolio or Other

Portfolio will acquire securities of any

other investment company in excess of

the limits contained in section

12(d)(1)(A) of the Act, except to the

extent that such Underlying Portfolio or

Other Portfolio (a) receives securities of

another investment company as a

dividend or as a result of a plan of

reorganization of a company (other than

a plan devised for the purpose of

evading section 12(d)(1) of the Act); or

(b) acquires (or is deemed to have

acquired) securities of another

investment company pursuant to

exemptive relief from the Commission

permitting such Underlying Portfolio or

Other Portfolio to (i) acquire securities

of one or more affiliated investment

companies for short-term cash

management purposes; or (ii) engage in

interfund borrowing and lending

transactions.

3. Any sales charges, distributionrelated fees, and service fees relating to

the shares of the Portfolios, when

aggregated with any sales charges,

distribution-related fees, and service

fees paid by the Portfolios relating to its

acquisition, holding, or disposition of

shares of the Underlying Portfolios and

Other Portfolios, will not exceed the

limits set froth in rule 2830 of the NASD

Conduct Rules.

4. Before approving any advisory

contract under section 15 of the Act, the

board of trustees of a Portfolio,

including a majority of the trustees who

are not ‘‘interested persons,’’ as defined

in section 2(a)(19) of the Act, will find

that the advisory fees charged under the

contract are based on services provided

that are in addition to, rather than

duplicative of, services provided under

any Underlying Portfolio or Other

Portfolio advisory contract. This

finding, and the basis upon which the

finding was made, will be recorded fully

in the minute books of the Portfolio.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–20560 Filed 7–31–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40264; File No. SR–CBOE–

98–31]

Self-Regulatory Organization; Notice of

Filing and Immediate Effectiveness of

Proposed Rule Change by the Chicago

Board Options Exchange, Inc. Relating

to Exchange Fees.

July 24, 1998.

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

Securities Exchange Act of 1934

(‘‘Act’’) 1 and Rule 19b–4 2 thereunder

notice is hereby given that on June 30,

1998, the Chicago Board Options

Exchange, Inc. (‘‘CBOE’’ 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 CBOE. On

July 15, 1998, the Exchange filed a letter

amendment to the proposed rule change

(‘‘Amendment No. 1’’).3 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 is proposing to amend

and add certain fees, as well as renew

and amend (i) its Prospective Fee

Reduction Program; and (ii) its

Customer ‘‘Large’’ Trade Discount

Program. The text of the proposed rule

change is available at the Office of the

Secretary, CBOE 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

CBOE included statements concerning

the purpose of and basis for the

proposed rule change and discussed any

comments its received on the proposed

rule change. The text of these statements

may be examined at the places specified

in Item IV below. The CBOE 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

The purpose of this proposed rule

change its to make certain fee changes

and additions, and to renew and amend

(i) the Exchange’s Prospective Fee

Reduction Program; and (ii) its

Customer ‘‘Large’’ Trade Discount

Program. The foregoing fee changes are

being implemented by the Exchange

pursuant to CBOE Rule 2.22 and will

take effect on July 1, 1998.

The Exchange is amending the

following fees: (1) Trade Match Fee will

be increased to $.05 from $.04 per

contract side; (2) Trade Match Report

Fees will be changed to $.0025 per

contract side for all matched and

unmatched information. Previously the

fee was $.0008 for paper reports per

contract side, per copy, for matched and

unmatched information; $.0003 for data

transmission per contract side, per pass;

and $.0003 for unmatched report

transmission per contract, per pass; (3)

CBOE Market-Maker Handheld

Terminals Fee will be increased to $.08

per record from $.05 per record; (4)

DPM Regulatory Fee will be changed to

$.40 per $1,000 of gross revenue from a

flat fee of $150 per quarter; (5) Dow

Jones Booth Fee will be changed to a flat

$300 per month, which previously was

$300 per month for OCC firms and $625

per month for Non-OCC firms (the fee

also formerly included a variable fee for

insufficient fee credits for both OCC and

Non-OCC firms). The Exchange is

proposing to add the following fees: (1)

Technology Fee of $200 per month; and

(2) Book Manual Entry Fee of $1 per

order.

The Exchange’s Fee Reduction

Program for Market-Maker Transaction

Fees, Floor Broker Fees, and Member

Dues currently provides that if at the

end of any quarter of the Exchange’s

fiscal year, the Exchange’s average

contract volume per day on a fiscal year-
Federal Register / Vol. 63, No. 148 / Monday, August 3, 1998 / Notices 41307

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

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

6 15 U.S.C. 78s(b)(3)(A)(ii).

7 17 CFR 240.19b–4(e)(2).

8 In receiving this proposal, the Commission

considered its impact on efficiency, competition

and capital formation. 15 U.S.C. 78c(f).

to-date basis exceeds one of certain

predetermined volume thresholds, the

Exchange’s market-maker transaction

fees, floor broker fees, and member dues

will be reduced in the following fiscal

quarter in accordance with a fee

reduction schedule. The program is

scheduled to terminate on June 30, 1998

at the end of the Exchange’s 1998 fiscal

year. The program is proposed to be

amended to replace the market-maker

transaction fee and floor broker fee

reduction with a trade match fee

reduction, and to continue the program

during the Exchange’s 1999 fiscal year,

terminating June 30, 1999. The program

also is proposed to be amended to

increase the volume thresholds at which

the discount commences.

The Exchange has decided to amend

the name of the program and the fees

associated with it because market-maker

transaction fees and floor broker fees are

not being increased, and the Exchange

feels that it is not in the best interest of

the financial welfare of the Exchange to

give any further discount on those fees.

However, the Exchange is increasing

trade match fees, and the Exchange feels

that to compensate for that increase,

during high volume quarters, the trade

match fee will be discounted.

Additionally, the trade match fee

discount is an across-the-board

discount, applying fairly to both marketmakers and floor brokers.

Specifically, the threshold volume at

which the $.005 trade match fee

reduction applies will be 800,000

contracts. Currently, a $.005 fee

reduction only applies to floor broker

fees when the volume threshold is

between 725,000 and 775,000 contracts.

The threshold volume at which the $.01

trade match fee reduction applies will

be 825,000 contracts. Currently the $.01

fee reduction only applies to marketmaker transaction fees when the

threshold volume is between 700,000

and 775,000 contracts. Also, there will

be a $.015 trade match fee reduction for

a threshold volume of 925,000 contracts

and above. Currently, there is no $.015

fee reduction in the program.

Finally, the member dues fee

reduction, which currently ranges from

25% to 75% for volumes ranging from

675,000 to 775,000 contracts, as

amended will range from 25% to 100%

for volumes ranging from 800,000 to

900,000. The 25% discount will

commence at 800,000 contracts, the

50% discount will commence at

850,000 contract, the 75% discount will

commence at 875,000 contract, and the

100% discount will commence at

900,000 contract.

The Exchange’s Customer ‘‘Large’’

Trade Discount Program currently

provides for discounts on the

transaction fees that CBOE members pay

with respect to public customer orders

for 500 or more contracts. Specifically,

for any month the Exchange’s average

contract volume per day exceeds one of

certain predetermined volume

thresholds, the transaction fees that are

assessed by the Exchange in that month

with respect to public customer orders

for 500 or more contracts are subject to

a discount in accordance with a

discount schedule. The program is

scheduled to terminate on June 30, 1998

at the end of the Exchange’s 1998 fiscal

year. The program is proposed to be

amended to provide that the program

will continue in effect during the

Exchange’s 1999 fiscal year and will

terminate on June 30, 1999. In addition

to renewing the current fee discount

percentages under the program, the

program is also proposed to be amended

to increase by 50,000 contracts all the

threshold levels to which the discount

rates apply, increasing the minimum

threshold level from 600,000 to 650,000,

contracts at which the 30% discount

rate applies. Additionally, the Exchange

proposes to discontinue its Dow Jones

Large Trade Discount Program as of June

30, 1998. Dow Jones customer orders

will now be included in the CBOE’s

Customer Large Trade Discount

Program. In all other respect the

program remains unchanged.

The proposed amendments are the

product of the Exchange’s annual

budget review. The amendments are

structured to fairly allocate the costs of

operating the Exchange in the event that

the Exchange experiences higher

volume. In addition, although the

proposed rule change provides that the

Exchange’s Fee Reduction Program for

Trade Match Fees and Member Dues,

and the Exchange’s Customer ‘‘Large’’

Trade Discount Program will terminate

at the end of the Exchange’s 1999 fiscal

year, the Exchange intends to evaluate

these programs prior to the beginning of

the 2000 fiscal year and may renew

these programs in the same or modified

form for the 2000 fiscal year.

The proposed rule change is

consistent with Section 6(b) of the Act,4

in general, and furthers the objectives of

Section 6(b)(4) 5 of the Act in particular,

in that it is designed to provide for the

equitable allocation of reasonable dues,

fees, and other charges among CBOE

members.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The CBOE 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 CBOE 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

Because the foregoing rule change

establishes or changes a due, fee, or

other charge imposed by the Exchange,

it has become effective pursuant to

Section 19(b)(3)(A)(ii) of the Act 6 and

subparagraph (e)(2) of Rule 19b–4

thereunder.7 At any time within 60 days

of the filing of the proposed rule change,

the Commission may summarily

abrogate such rule change if it appears

to the Commission that such action is

necessary or appropriate in the public

interest, for the protection of investors,

or otherwise in furtherance of the

purposes of the Act.8

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 at

the Commission’s Public Reference

Room. Copies of such filing also will be

available for inspection and copying at

the principal office of the CBOE. All

submission should refer to File No. SR–

CBOE–98–31 and should be submitted

by August 24, 1998.
41308 Federal Register / Vol. 63, No. 148 / Monday, August 3, 1998 / Notices

9 17 CFR 200.30–3(a)(12).

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

2See Letter from Agnes M. Gautier, Vice

President, Market Surveillance, NYSE to David

Sieradzki, Attorney, Division of Market Regulation,

Commission dated July 13, 1998 (‘‘Amendment No.

1’’). In Amendment No. 1, the Exchange requests

accelerated approval for the proposal to allow the

Exchange’s procedures for limit-at-the-close orders

to continue on an uninterrupted basis. As noted

below, the Exchange’s pilot program expires on July

31, 1998. See infra note 9 and accompanying text.

3See Securities Exchange Act Release No. 33706

(March 3, 1994), 59 FR 11093 (March 9, 1994)

(‘‘LOC Pilot Program Approval Order’’).

4See Securities Exchange Act Release No. 35854

(June 16, 1995), 60 FR 32723 (June 23, 1995) (order

approving SR–NYSE–95–09).

5A MOC order is a market order to be executed

in its entirety at the closing price on the Exchange.

See NYSE Rule 13.

6The term ‘‘expiration days’’ refers to both (1) the

trading day, usually the third Friday of the month,

when some stock index options, stock index futures

and options on stock index futures expire or settle

concurrently (‘‘Expiration Fridays’’) and (2) the

trading day on which end of calendar quarter index

options expire (‘‘QIX Expiration Days’’).

7See LOC Pilot Program Approval Order, supra

note 3.

8See Securities Exchange Act Release No. 37969

(November 20, 1996), 61 FR 60735 (November 29,

1996) (order approving SR–NYSE–96–21).

9See Securities Exchange Act Release No. 40094

(June 15, 1998), 63 FR 33975 (June 22, 1998) (order

approving SR–NYSE–97–36).

10For a more complete description of the changes

to the MOC/LOC program, see Securities Exchange

Act Release No. 40094 (June 15, 1998), 63 FR 33975

(June 22, 1998) (order approving SR–NYSE–97–36).

11See Securities Exchange Act Release No. 38865

(July 23, 1997), 62 FR 40881 (July 30, 1998), (order

approving SR–NYSE–97–19).

For the Commission, by the Division

of Market Regulation, pursuant to

delegated authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–20558 Filed 7–31–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40262; File No. SR–NYSE–

98–15]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval to Proposed

Rule Change and Amendment No. 1 to

the Proposed Rule Change by the New

York Stock Exchange, Inc. Seeking

Permanent Approval of the Exchange’s

Pilot Program Concerning Entry of

LOC Orders

July 24, 1998.

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

Securities Exchange Act of 1934

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

May 21, 1998, the New York Stock

Exchange, Inc. (‘‘NYSE’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’)

the proposed rule change as described

in Items I and II below, which Items

have been prepared by the NYSE. On

July 16, 1998, the Exchange submitted

Amendment No. 1 to the proposed rule

change to the Commission.2 The

Commission is publishing this notice to

solicit comments on the proposed rule

change and Amendment No. 1 to the

proposed rule change from interested

persons and to grant accelerated

approval to the proposed rule change, as

amended.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The proposed rule change seeks

permanent approval of the procedures

for handling limit-at-the-close (‘‘LOC’’)

orders. The text of the proposed rule

change is available at the Office of the

Secretary, NYSE 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

NYSE 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 III below. The NYSE 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 proposed rule change seeks to

make permanent the Exchange’s pilot

program for entry of LOC orders, which

was first approved by the Commission

on March 3, 1994.3 A LOC order is one

that is entered for execution at the

closing price, provided that the closing

price is at or within the limit specified.

NYSE Rule 13 provides, in part, that

‘‘the term ‘at the close order’ shall also

include a limit order that is entered for

execution at the closing price, on the

Exchange, of the stock named in the

order pursuant to such procedures as

the Exchange may from time to time

establish.’’ The LOC order type has been

available, on a pilot basis, for all NYSElisted stocks since July 1995.4 Under the

original pilot, LOC orders could be

entered only to offset published

imbalances of market-on-close (‘‘MOC’’)

order 5 and had to be entered by 3:55

p.m. on both expiration and nonexpiration days.6 In addition, on

expiration days, LOC orders could not

be canceled after 3:40 p.m., except for

legitimate errors. On non-expiration

days, LOC orders could not be canceled

after 3:55 p.m., except for legitimate

errors.7

In May 1997, the Exchange

implemented an amended policy

regarding LOC orders to permit their

entry at any time during the trading day

up to 3:40 p.m. on expiration days, and

3:50 p.m. on non-expiration days.8

Thereafter, as with MOC orders, LOC

orders could not be canceled (except for

legitimate errors), and could be entered

only to offset published imbalances.

LOC orders are subject to the same

restrictions regarding order entry and

cancellation as are MOC orders, as well

as to the additional limitation that LOC

orders yield priority to conventional

limit orders at the same price.

In June 1998, the Exchange further

amended its policy regarding MOC and

LOC orders.9 Under the amended

procedures, the deadline for entry of all

MOC and LOC orders was set at 3:40

p.m. on all trading days. Thereafter,

MOC and LOC orders cannot be

canceled (except for legitimate errors),

and can only be entered to offset a

published imbalance. In addition, the

Exchange made several changes to its

rules regarding the publication of order

imbalances. First, the Exchange now

requires publication of all MOC/LOC

imbalances of 50,000 shares or more in

all stocks on any trading day as soon as

practicable after 3:40 p.m. Second, the

Exchange includes marketable LOC

orders as well as MOC orders in the

imbalance publication. Third, the

Exchange is now allowing publication

of MOC/LOC imbalances of any size

between 3:00 p.m. and 3:40 p.m. with

Floor Official approval. Finally, an

additional imbalance publication will

be made at 3:50 p.m. for stock that has

an imbalance published at 3:40 p.m.10

These procedures are part of the current

pilot for LOC orders which expires July

31, 1998.11

The Commission has commented on

the appropriateness of LOC orders in

previous releases. For example, in its

release approving the original proposal

for the creation of LOC orders, the

Commission noted that LOC orders

could help curb excess price volatility at

the close ‘‘without diminishing any

benefit to investors from trading

strategies which rely on MOC orders to