41882 Federal Register / Vol. 63, No. 150 /Wednesday, August 5, 1998 / Notices

10 17 CFR 200.30–3(a)(12).

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

2The margin required for U.S. government

obligations under NYSE Rule 431(e)(2)(A) varies

according to the length of time to maturity.

3The text of proposed NYSE Rule 431(e)(2)(G)(i)

indicates that the required margin for exempt

account transactions involving highly rated foreign

sovereign debt will be .5% of current market value.

However, in the portion of the filing describing the

proposed rule change, the NYSE indicates that the

proposed margin level for exempt account

transactions involving highly rated foreign

sovereign debt will be .05% of current market

value. The NYSE clarified that the proposed margin

requirement for these securities is .5% of current

market value. Telephone conversation between

Donald van Weezel, Managing Director, Regulatory

Affairs, NYSE, and Yvonne Fraticelli, Attorney,

Division of Market Regulation, Commission, on

May 20, 1998.

4The NYSE’s proposal defines ‘‘highly rated

foreign sovereign debt securities’’ as debt securities

(including major foreign sovereign debt securities)

issued or guaranteed by the government of a foreign

country, its provinces, states or cities, or a

supranational entity, if at the time of the extension

of credit [regarding] (sic) the issue, the issuer or

guarantor, or any other outstanding obligation of the

issuer or guarantor ranked junior to or on a parity

with the issue or the guarantee is assigned a rating

(implicitly or explicitly) in one of the top two rating

categories by at least one nationally recognized

statistical rating organization. See proposed NYSE

Rule 431(a)(9).

5NYSE Rule 431(e)(2)(A) establishes the

following margin requirements for U.S. government

debt: (1) 1% of the current market value for

obligations with less than one year to maturity; (2)

2% of the current market value for obligations with

one year but less than three years to maturity; (3)

3% of the current market value for obligations with

three years but less than five years to maturity; (4)

4% of the current market value for obligations with

five years but less ten years to maturity; (5) 5% of

the current market value for obligations with ten

years but less than 20 years to maturity; and (6) 6%

of the current market value for obligations with 20

years or more to maturity.

6The proposal defines investment grade debt

securities as any debt securities (including those

issued by the government of a foreign country, its

provinces, states or cities, or a supranational entity),

if at the time of the extension of credit [regarding]

(sic) the issue, the issuer or guarantor, or any other

outstanding obligation of the issuer or guarantor

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 CSE. All

submissions should refer to File No.

SR–CSE–98–01 and should be

submitted by August 26, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–20871 Filed 8–4–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[(Release No. 34–40278; File No. SR–NYSE–

98–14)]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the New York Stock Exchange, Inc.

Relating to Margin Requirements

July 29, 1998.

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

Securities Exchange Act of 1934

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

April 28, 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, II, and III below, which Items

have been prepared by the NYSE. 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 NYSE proposes to amend NYSE

Rule 431, ‘‘Margin Requirements,’’ to

revise the margin requirements for nonequity securities and to expand the

types of non-equity securities eligible

for exempt account treatment.

Specifically, the NYSE proposes to

revise NYSE Rule 431 to: (1) provide

that the margin requirement for highly

rated foreign sovereign debt securities

will be the amounts specified currently

in NYSE Rule 431(e)(2)(A) for U.S. debt

securities,2 (2) reduce the margin for

exempted securities other than U.S. debt

securities from 15% to 7% of the

current market value (NYSE Rule

431(e)(2)(B)); and (3) reduce the margin

for investment grade debt securities

from 20% to 10% of the current market

value (NYSE Rule 431(e)(2)(C)(i)). The

margin for all other listed non-equity

securities, and for all other marginable

non-equity securities, will remain at

20% of the current market value or 7%

of the principal amount, whichever is

greater. In addition, the NYSE proposes

several changes with regard to exempt

accounts. Specifically, the NYSE

proposes to: (1) modify the definition of

‘‘exempt account;’’ (2) require no margin

for exempt account transactions

involving mortgage-related securities

and major foreign sovereign debt

securities (NYSE Rule 431(e)(2)(F)); and

(3) require margin equal to 0.5% of

current market value for exempt account

transactions involving highly rated

foreign debt securities and margin equal

to 3% of current market value for

exempt account transactions involving

all other investment grade debt

securities (proposed NYSE Rule

431(e)(2)(G)).3 The NYSE also proposes

to adopt NYSE Rule 431(e)(2)(H), which

will limit the amount of uncollected

marked to market losses which may be

deducted from a member organization’s

net capital.

Copies of the proposed rule change

are available at the 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 IV below. The NYSE has

prepared summaries, set forth in

Sections A, B, the 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 NYSE proposes to amend NYSE

Rule 431 to revise the margin

requirements for non-equity securities

and to expand the types of non-equity

securities eligible for exempt account

treatment. According to the NYSE,

Regulation T of the Board of Governors

of the Federal Reserve System (‘‘FRB’’),

which establishes initial margin

requirements, currently provides that

transactions in non-equity securities are

subject to ‘‘good faith’’ requirements

when done in a margin account and

have no FRB margin requirements when

done in a ‘‘good faith’’ account.

Therefore, the maintenance margin

requirements of NYSE Rule 431 are

particularly important because they

provide ongoing safety and soundness

levels for positions maintained in

customers’ accounts.

The NYSE proposes to revise NYSE

Rule 431 to: (1) provide that the margin

for highly rated foreign sovereign debt

securities 4 will equal the margin

required for U.S. debt secuties under

NYSE Rule 431(e)(2)(A); 5 (2) reduce the

margin for exempted securities other

than U.S. debt securities from 15% to

7% of the current market value (NYSE

Rule 431(e)(2)(B)); and (3) reduce the

margin for investment grade debt

securities 6 from 20% to 10% of the
Federal Register / Vol. 63, No. 150 /Wednesday, August 5, 1998 / Notices 41883

ranked junior to or on a parity with the issue or the

guarantee is assigned a rating (implicitly or

explicity) in one of the top four rating categories by

at least one nationally recognized statistical rating

organization.

7The proposal defines listed non-equity securities

to mean any non-equity securities that: (1) are listed

on a national securities exchange; or (2) have

unlisted trading privileges on a national securities

exchange. See proposed NYSE Rule 431(a)(15).

8The proposal defines other marginable nonequity secuities as (1) any debt securities not traded

on a national securities exchange that meet all of

the following requirements: (a) at the time of the

original issue, a principal amount of not less than

$25,000,000 of the issue was outstanding; (b) the

issue was registered under Section 5 of the

Securities Act of 1933 and the issuer either files

periodic reports pursuant to the Act or is an

insurance company under Section 12(g)(2)(G) of the

Act; and (c) at the time of the extension of credit,

the creditor has a reasonable basis for believing that

the issuer is not in default on interest or principal

payments; or (2) any private pass-through securities

(not guaranteed by a U.S. government agency) that

meet all of the following requirements: (a) an

aggregate principal amount of not less than

$25,000,000 was issued pursuant to a registration

statement filed with the Commission under Section

5 of the Securities Act of 1933; (b) current reports

relating to the issue have been filed with the

Commission; and (c) at the time of the credit

extension, the creditor has a reasonable basis for

believing that mortgage interest, principal

payments, and other distributions are being passed

through as required and that the servicing agent is

meeting its material obligations under the terms of

the offering. See proposed NYSE Rule 431(a)(16).

9See SEC Rule 15c3–1.

10Specifically, the NYSE proposes to revise the

current definition of ‘‘designated account’’ in NYSE

Rule 431(a)(3) to indicate that a designated account

means the account of: (1) a bank, as defined in

Section 3(a)(6) of the Act; (2) a savings association,

as defined in Section 3(b) of the Federal Deposit

Insurance Act, the deposits of which are insured by

the Federal Deposit Insurance Corporation; (3) an

insurance company, as defined in Section 2(a)(17)

of the Investment Company Act of 1940; (4) an

investment company registered with the SEC under

the Investment Company Act of 1940; (5) a state or

a political subdivision thereof; or (6) a pension or

profit sharing plan subject to ERISA or of an agency

of the United States or of a state or a political

subdivision thereof. NYSE Rule 431(a)(3) currently

defines ‘‘designated account’’ as the account of a

bank, trust company, insurance company,

investment trust, state or political subdivision

thereof, charitable or nonprofit educational

institution regulated under the laws of the United

States or any state, or pension or profit sharing plan

subject to ERISA or of an agency of the United

States or of a state or a political subdivision thereof.

11The proposal defines ‘‘major foreign sovereign

debt securities’’ a any debt securities issued or

guaranteed by the government of a foreign country

or a supranational entity, if, at the time of the

extension of credit [regarding] (sic) the issuer or

guarantor, or any other outstanding obligation of the

issuer or guarantor ranked junior to or on a parity

with the issue or the guarantee is assigned a rating

(implicitly or explicitly) in one of the top four

rating categories by at least one nationally

recognized statistical rating organization. See

proposed NYSE Rule 431(a)(11).

current market value (NYSE Rule

431(e)(2)(C)(i)). The margin for all other

listed non-equity securities,7 and for all

other marginable non-equity securities 8

will remain at 20% of the current

market value or 7% of the principal

amount, whichever is greater (NYSE

Rule 431(e)(2)(C)(ii).

The NYSE states that the proposed

amendments to NYSE Rule 431 will

provide for margin requirements on

non-equity securities commensurate

with the risks associated with positions

in such securities held by customers.

According to the NYSE, the proposed

margin percentages for retail customers

for investment grade debt securities and

municipal securities will be comparable

to the highest haircut percentages

provided in the SEC’s net capital rule 9

for proprietary positions in similar

securities.

The NYSE notes that NYSE Rule 431

currently contains margin requirements

specifically addressing transactions

with exempt accounts involving exempt

securities and mortgage-related

securities. These requirements are lower

than those applicable to transactions in

such securities with accounts other than

exempt accounts. In NYSE Rule

431(a)(13), the NYSE proposes to define

‘‘exempt account’’ to mean a member

organization, non-member brokerdealer, ‘‘designated account,’’ or any

person having a net worth of at least $40

million. The proposal increases the

financial threshold for a customer to be

considered an exempt account from $16

to $40 million. The NYSE also proposes

to revise its definition of designated

account.10

In proposed NYSE Rule 431(e)(2)(G),

‘‘Transactions with Exempt Accounts

Involving Highly Rated Foreign

Sovereign Debt Securities and

Investment Grade Debt Securities,’’ the

NYSE proposes to provide lower margin

requirements for exempt account

transactions in highly rated foreign

sovereign debt, investment grade foreign

sovereign debt, and other investment

grade non-equity securities. According

to the NYSE, the proposed margin

requirements recognize both the quality

of the securities and the

creditworthiness of the customer and,

accordingly, are intended to maintain

reasonable safety and soundness

standards. For transactions in these

types of securities by exempt accounts,

member organizations will be required

to either take net capital charges or to

collect margin equal to marked to

market losses and any percentage

requirements under the rule. The

percentage requirements will be:

3% of current market value for all

investment grade corporate debt and

for foreign sovereign debt in the lower

two investment grade categories; and

.5% of current market value for foreign

sovereign debt in the second highest

investment grade category (i.e., highly

rated foreign sovereign debt

securities).

Under revised NYSE Rule

431(e)(2)(F), ‘‘Transactions with Exempt

Accounts Involving Certain ‘Good Faith’

Securities,’’ the highest grade foreign

sovereign debt security (i.e., major

foreign sovereign debt securities) 11 and

mortgage-related securities will be

accorded the same treatment as U.S.

Government securities in that no margin

will be required and marked to the

market losses need not be collected,

subject to the limits in proposed NYSE

Rule 431(e)(2)(H), ‘‘Limits on Net

Capital Deductions for Exempt

Accounts.’’ Currently, investment grade

foreign sovereign debt is treated the

same as marginable corporate debt,

which requires 20% margin.

Proposed NYSE Rule 431(e)(2)(H) will

impose limitations on the amount of any

uncollected marked to market losses

which are being deducted from a

member organizations’ net capital under

proposed NYSE Rule 431(e)(2)(F) and

431(e)(2)(G). The limits will be

established at 5% of Tentative Net

Capital (Net Capital before deductions

on securities) for each exempt account,

and 25% of Tentative Net Capital for all

exempt accounts combined. When

marked to market losses exceeding these

limits continue to exist on the fifth

business day after they were incurred,

the member organization must provide

the Exchange with written notification

and may not enter into any new

transactions that would result in an

increase in the amount of the excess.

Finally, the NYSE’s proposal contains

a new definition section, which, among

other things, specifically defines the

following types of non-equity securities:

‘‘highly rated foreign sovereign debt

securities’’ (proposed NYSE Rule

431(a)(9));

‘‘investment grade debt securities’’

(proposed NYSE Rule 431(a)(10));

‘‘major foreign sovereign debt

securities’’ (proposed NYSE Rule

431(a)(11));

‘‘listed non-equity securities’’ (proposed

NYSE Rule 431(a)(15)); and

‘‘other marginable non-equity

securities’’ (proposed NYSE Rule

431(a)(16)).

The defined terms categorize certain

types of non-equity securities for

purposes of prescribing the applicable

margin requirements.

(2) Statutory Basis

The NYSE believes that the proposed

rule change is consistent with the

requirements of Section 6(b)(5) of the

Act, which provides that the rules of the
41884 Federal Register / Vol. 63, No. 150 /Wednesday, August 5, 1998 / Notices

12 17 CFR 200.30–(a)(12).

Exchange must be designed to promote

just and equitable principles of trade

and to protect the investing public. The

NYSE believes that the proposed rule

change is also consistent with the rules

and regulations of the FRB for the

purpose of preventing the excessive use

of credit for the purchase or carrying of

securities, pursuant to Section 7(a) of

the Act.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange believes that the

proposed rule change will not impose

any burden on competition that is not

necessary or appropriate in furthermore

of the purposes of the Act.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

No written comments were solicited

or received.

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 by order approve such proposed

rule change, or 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

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 NYSE. All

submission should refer to file number

SR–NYSE–98–14 and should be

submitted by August 26, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.12

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–20870 Filed 8–4–98 8:45am]

BILLING CODE 8010–01–M

SMALL BUSINESS ADMINISTRATION

Reporting and Recordkeeping

Requirements Under OMB Review

AGENCY: Small Business Administration.

ACTION: Notice of reporting requirements

submitted for OMB review.

SUMMARY: Under the provisions of the

Paperwork Reduction Act (44 U.S.C.

Chapter 35), agencies are required to

submit proposed reporting and

recordkeeping requirements to OMB for

review and approval, and to publish a

notice in the Federal Register notifying

the public that the agency has made

such a submission.

DATES: Submit comments on or before

September 4, 1998. If you intend to

comment but cannot prepare comments

promptly, please advise the OMB

Reviewer and the Agency Clearance

Officer before the deadline.

COPIES: Request for clearance (OMB 83–

1), supporting statement, and other

documents submitted to OMB for

review may be obtained from the

Agency Clearance Officer.

ADDRESSES: Address all comments

concerning this notice to: Agency

Clearance Officer, Jacqueline White,

Small Business Administration, 409 3rd

Street, S.W., 5th Floor, Washington,

D.C. 20416; and OMB Reviewer,

Victoria Wassmer, Office of Information

and Regulatory Affairs, Office of

Management and Budget, New

Executive Office Building, Washington,

D.C. 20503.

FOR FURTHER INFORMATION CONTACT:

Jacqueline White, Agency Clearance

Officer, (202) 205–6629.

SUPPLEMENTARY INFORMATION:

Title: Disclosure Statement.

Form No.: 856.

Frequency: Biannually.

Description of Respondents: Small

Business Investment Companies.

Annual Responses: 200.

Annual Burden: 200.

Title: Application for Pool of

Guaranteed Interest Certificates.

Form No: 1454.

Frequency: On Occasion.

Description of Respondents: SBA

Loan Pool Assemblers.

Annual Responses: 450.

Annual Burden: 1350.

Dated: July 29, 1998.

Jacqueline White,

Chief, Administrative Information Branch.

[FR Doc. 98–20861 Filed 8–4–98; 8:45 am]

BILLING CODE 8025–01–P

SMALL BUSINESS ADMINISTRATION

[Declaration of Disaster #3107]

State of New Hampshire

As a result of the President’s major

disaster declaration on July 2, 1998 for

emergency assistance only, and an

amendment thereto on July 14, 1998

adding Individual Assistance, I find that

Belknap, Carroll, Grafton, Merrimack,

and Rockingham Counties in the State

of New Hampshire constitute a disaster

area due to damages caused by severe

storms and flooding beginning on June

12, 1998, and continuing. Applications

for loans for physical damages as a

result of this disaster may be filed until

the close of business on September 12,

1998, and for loans for economic injury

until the close of business on April 14,

1999 at the address listed below or other

locally announced locations:

U.S. Small Business Administration, Disaster

Area 1 Office, 360 Rainbow Blvd., South,

3rd Floor, Niagara Falls, NY 14303.

In addition, applications for economic

injury loans from small businesses

located in the following contiguous

counties may be filed until the specified

date at the above location: Coos,

Hillsborough, Strafford, and Sullivan

Counties in New Hampshire, and

Oxford and York Counties in Maine.

Any counties contiguous to the abovenamed primary counties and not listed

herein have been previously declared

under a separate declaration for the

same occurrence.

The interest rates are:

Percent

Physical Damage:

Homeowners With Credit

Available Elsewhere .......... 7.000

Homeowners Without Credit

Available Elsewhere .......... 3.500

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