41880 Federal Register / Vol. 63, No. 150 /Wednesday, August 5, 1998 / Notices

1See Tonopah Mining Company of Nevada, 26

S.E.C. 426, 427 (1947).

a wholly-owned subsidiary, owns a 46%

interest; TV Show Brasil S.A. (‘‘TVSB’’),

in which applicant, through a whollyowned subsidiary, owns a 45% interest;

VTR Hipercable S.A. (‘‘Hipercable’’), in

which applicant, through a whollyowned subsidiary, owns a 34% interest;

and six operating subsidiaries of

Megapo Comunicaciones de Mexico,

S.A. de C.V., in each of which applicant,

through a wholly-owned subsidiary,

owns a 49% interest. Applicant has

exercised an option to obtain the

remaining 55% interest in TVSB and

consummation of the transaction is

pending regulatory approval. Applicant

also will have an option to purchase

new Hipercable shares to increase its

ownership to 50%.

4. Applicant states that it is a holding

company that conducts its multichannel television and related

communications operations through

wholly-owned and majority-owned

subsidiaries and Controlled Companies.

Applicant further states that, while it

always intends to purchase a majority

voting interest when acquiring an equity

interest in a new television or

telecommunications system, it is not

always possible or feasible because

many Latin American countries prohibit

United States owners such as applicant

from acquiring a direct majority interest

in cable, telecommunication or

programming companies.

5. Applicant states that it does not

seek passive investments. To ensure that

applicant has active participation in the

management of the companies in which

it does not own a majority voting

interest, applicant enters into

shareholder or other voting agreements

and often requires amendments to the

governing documents of the company.

Applicant states that these agreements

and amendments establish applicant’s

right to appoint a specified number of

directors to the company’s board of

directors and require supermajority

approval of shareholders or the board

for most significant decisions affecting

the company. Applicant asserts that

under these provisions applicant

controls the direction and development

of the company and has veto power over

most major decisions. In addition, under

management or technical assistance

agreements with the company,

applicant’s personnel typically manage

the design, construction and operation

of the company’s operating system and

are responsible for the selection and

training of key personnel of the

company. Applicant assets that it has

these arrangements in place with

respect to each of the Controlled

Companies.

Applicant’s Legal Analysis

1. Under section 3(a)(1)(C) of the Act,

an issuer is an investment company if

it ‘‘is engaged or proposes to engage in

the business of investing, reinvesting,

owning, holding, or trading in

securities, and owns or proposes to

acquire investment securities having a

value exceeding 40 per cent of the value

of an issuer’s total assets (exclusive of

Government securities and cash items)

on an unconsolidated basis.’’ Section

3(a)(2) defines ‘‘investment securities’’

to include all securities except, in part,

securities issued by majority-owned

subsidiaries of the owner which are not

investment companies.

2. Applicant states that it currently

meets the definition of investment

company under section 3(a)(1)(C) of the

Act because approximately 81% of its

total assets are interests in the

Controlled Companies that are

‘‘investment securities’’ within the

meaning of section 3(a)(2).

3. Section 3(b)(2) provides that,

notwithstanding section 3(a)(1)(C) of the

Act, the SEC may issue an order

declaring an issuer to be primarily

engaged in a business or businesses

other than that of investing, reinvesting,

owning, holding, or trading in securities

either directly, through majority-owned

subsidiaries, or controlled companies

conducting similar types of businesses.

Applicant requests an order under

section 3(b)(2) declaring that it is

primarily engaged, through majorityowned subsidiaries and Controlled

Companies, in a business other than that

of investing, reinvesting, owning,

holding, or trading in securities.

4. To determine whether applicant is

primarily engaged in a non-investment

company business under section 3(b)(2),

the SEC considers the following factors:

(a) applicant’s historical development;

(b) its public representations or policy;

(c) the activities of its officers and

directors; (d) the nature of its present

assets; and (e) the sources of its present

income.1

(a) Historical Development. Applicant

states that it was formed to consolidate

UIHI’s Latin American cable and

telecommunications businesses under

one corporation. Since its incorporation,

applicant has been engaged in the

television and telecommunications

business in Latin American through its

wholly-owned and majority-owned

subsidiaries and Controlled Companies.

(b) Public Representations of Policy.

Applicant states that it has never held

itself out as an investment company.

Applicant asserts that it consistently has

held itself out as being in the business

of acquiring, developing, owning and

operating cable and telecommunications

businesses outside the United States.

(c) Activities of Officers and Directors.

Applicant states that its officers spend

the majority of their time operating

applicant’s subsidiaries, including

constructing distribution networks,

hiring staff, planning and implementing

budgets, and designing, acquiring,

operating, and monitoring subscriber

management and information systems.

Of applicant’s officers, only the Chief

Financial Officer spends any time

(approximately 10%) overseeing the

management of applicant’s funds and

temporarily investing those funds

pending their use in applicant’s

business.

(d) Nature of Assets. As of May 31,

1998, applicant has total assets of

apprxoimately $259,232,000, 10.2% of

which were attributable to its majorityowned subsidiaries, 81% of which were

attributable to its Controlled Companies,

and 8.7% of which were attributable to

its other assets (such as capitalized

development costs, cash, short-term

investments and accounts receivables).

(e) Sources of Income. For the twelve

month period ending May 31, 1998,

applicant experienced net losses that

were attributable 27% to majorityowned subsidiaries, 17% to Controlled

Companies, and 56% to applicant’s

operating expenses (in the form of

interest payments on bridge financing to

fund acquisitions of wholly-owned and

majority-owned operating subsidiaries,

and overhead costs).

5. Applicant thus asserts that it meets

the requirements for an order under

section 3(b)(2) of the Act.

For the SEC, by the Division of

Investment Management, under

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–20872 Filed 8–4–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40274; File No. SR–CSE–

98–01]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change and

Amendment No. 1 Thereto by the

Cincinnati Stock Exchange, Inc. To

Amend Existing and to Institute New

Trading Fees

July 29, 1998.

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

Securities Exchange Act of 1934
Federal Register / Vol. 63, No. 150 /Wednesday, August 5, 1998 / Notices 41881

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

2 17 CFR 240.19b–4.

3Amendment No. 1 corrected typographical

errors in the filing. Letter from Adam W. Gurwitz,

Vice President Legal, CSE to Kelly McCormick,

Attorney, Division of Market Regulation.

Commission, dated July 14, 1998.

4 15 U.S.C. 78f.

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

6 15 U.S.C. 78f(b)(4).

7 15 U.S.C. 78s(b)(3)(A).

8 17 CFR 240.19b–4(e)(2).

9 In reviewing this proposal, the Commission has

considered its impact on efficiency, competition,

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

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

notice is hereby given that on July 2,

1998, the Cincinnati Stock Exchange,

Inc. (‘‘CSE’’ 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 Exchange.

On July 15, 1998, the Exchange

submitted to the Commission

Amendment No. 1 to the proposed rule

change.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 proposes to amend CSE

Rule 11.10, which contains the

Exchange’s schedule of fees, to more

equitably distribute technology

enhancement costs amoung its

members. The text of the proposed rule

change is available at the Office of the

Secretary, CSE 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

CSE 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 CSE 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 is revising its fee

structure, delineated in CSE Rule 11.10,

to more equitably distribute technology

costs among members. The CSE has

incurred significant expense in

enhancing its computer systems,

including a migration to the TCP/IP

protocol. The Exchange believes that

these enhancements will improve the

CSE’s electronic trading environment

and provide members with improved

services. The new fee structure will

partially offset these expenses and is

intended to apportion the enhancement

costs fairly.

Specifically, the proposed rule change

will increase the Designated Dealer

Book fee from $15.00 to $25.00 per

issue. This is a per issue fee paid by

specialists to make markets on the CSE.

By increasing the fee, the Exchange

intends partially to offset increased

technology costs by charging specialists

who enjoy the benefits of this new

technology on an issue by issue basis.

To create an incentive for Designated

Dealer to increase the number of issues

traded on the Exchange, however, this

fee will be lowered to $5.00 per issue

where a Designated Dealer is the sole

specialist. Moreover, the fee will

decrease as a Designated Dealers

increases the number of issues it trades

on the Exchange.

The proposed rule change will also

alter the Exchange’s port fee. In light of

the Exchange’s migration to the TCP/IP

protocol, the proposed rule change will

define the term ‘‘Port’’ as a TCP/IP

address for purposes of the CSE’s port

charge. This charge will change from

$100.00 to $200.00 per month to

partially offset the software and

hardware expenses incurred by the

Exchange in the conversion.

In addition, the CSE will add a new

‘‘technology fee’’ of $300.000 per month

applicable to all members. As the

nation’s only entirely electronic

exchange, the CSE devotes significant

resources to improving and enhancing

its computerized environment. This fee

will help offset expenses incurred by

the Exchange in implementing new and

improved technology, including

migration to the TCP/IP protocol.

Finally, the proposed rule change will

increase the Exchange’s transaction fee

caps, that is, the level above which a

member’s transactions are no longer

charged, for both agency and

preferenced transactions, from

1,750,001 shares per day to 2,000,001

shares per day and will eliminate the

$3.75 cap on non-preferenced

Designated Dealer activity. Like other

fee changes, additional revenue from

these charges will partially offset the

CSE’s technology expenses.

2. Basis

The proposed rule change is

consistent with section 6(b) of the Act 4

in general, and furthers the objectives of

section 6(b)(5) 5 in particular in that it is

designated to promote just and equitable

principles of trade and to remove

impediments to and perfect the

mechanism of a free and open market

and a national market system, and in

general, to protect investors and the

public interest. It is also consistent with

section 6(b)(4) 6 in that it is designed to

provide for the equitable allocation of

reasonable dues, fees, and other charges

among Exchange members by

apportioning technology costs more

fairly.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The CSE does not believe that the

proposed rule change will impose any

inappropriate burden on competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received from

Members, Participants, or Others

No written comments were either

solicited or received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The proposed rule change has become

effective on filing, pursuant to section

19(b)(3)(A) of the Act 7 and Rule 19b–

4(e)(2) 8 thereunder because it revises

member fees. 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.9

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
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