25752 Federal Register / Vol. 60, No. 92 / Friday, May 12, 1995 / Notices

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

2 17 CFR 240.19b–4.

3See Letter from Michael Schwartz, Chairman,

COOP, to Jonathan G. Katz, Secretary, Commission,

dated April 5, 1995.

4The Exchanges amended the original proposals

to extend the pilot program, from six to twelve

months. See Letters from Michael Pierson, Senior

Attorney, PSE, dated March 24, 1995 (‘‘PSE

Amendment No. 1’’), and Timothy Thompson,

represents a material change in the

supply or demand for that security. For

example, if the market in XYZ security

is 20 bid to 201⁄4 offered, 1,000 shares

bid and 1,000 shares offered, and the

specialist receives an order to sell

10,000 shares at 201⁄4, the specialist

would be expected to change the size of

the offer to 11,000 shares as soon as he

or she becomes aware of the order. If the

quotation already reflects significant

supply (demand), and the specialist

receives an order that is relatively de

minimis in relation to such supply

(demand), the specialist may take a

reasonable period of time, which should

not generally exceed two minutes,

before updating the quotation, so as to

avoid constant revisions of quotations

that do not reflect material changes in

supply and demand. For example, if the

market in XYZ security is 20 bid to 201⁄4

offered, 5,000 shares bid and 50,000

shares offered, and the specialist

receives an order to sell 200 shares at

201⁄4, the specialist would be permitted

to wait a reasonable period of time

before changing the size of the offer to

50,200 shares.

Under exceptional circumstances, the

specialist would not necessarily display

the full quotation size. For example, as

noted in Information Memo 94–32,

when a member proposes to effect a

block transaction at a significant

premium or discount from the

prevailing market and the specialist is

aware of interest on the contra side, it

may be more appropriate for the

specialist and Floor Official(s) to gap the

quotation in a security for a brief period,

generally not exceeding five minutes,

with a view toward contacting and/or

attracting contra market interest. In such

case, the bid or asked price should

touch the prior sale price and reflect

size of 100 shares by 100 shares. The

same principles would also apply to a

situation where there is a sudden influx

of market orders on one side of the

market which would be likely to result

in a significant price change.

2. Statutory Basis

The basis under the Act for the

proposed rule change is the requirement

under Section 6(b)(5) that an Exchange

have rules that are designed to promote

just and equitable principles of trade, to

remove impediments to, and perfect the

mechanism of a free and open market

and, in general, to protect investors and

the public interest. The policy with

respect to displaying full size of orders

received by specialists enhances the

purposes of the Act by assuring that

accurate and complete information with

respect to the current market on the

Exchange for any stock is available to

market participants.

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 that is not

necessary or appropriate in furtherance

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 either

solicited or received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the publication of

this notice in the Federal Register or

within such other 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 the 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.

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

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

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the NYSE. All submissions

should refer to File No. SR–NYSE–95–

17 and should be submitted by June 2,

1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–11774 Filed 5–11–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35680; File Nos. SR–Phlx–

95–08, SR–Amex–95–12, SR–PSE–95–07,

SR–CBOE–95–19, SR–NYSE–95–12]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Changes by

the Philadelphia Stock Exchange, Inc.,

the American Stock Exchange, the

Pacific Stock Exchange, Incorporated,

the Chicago Board Options Exchange,

Incorporated, and the New York Stock

Exchange, to Adopt a 21⁄2 Point Strike

Price Pilot Program

May 5, 1995.

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 February

6, March 8, March 15, and March 22,

1995, respectively, the Philadelphia

Stock Exchange, Inc. (‘‘Phlx’’), the

American Stock Exchange (‘‘Amex’’),

the Pacific Stock Exchange,

Incorporated (‘‘PSE’’), the Chicago

Board Options Exchange, Incorporated

(‘‘CBOE’’), and the New York Stock

Exchange (‘‘NYSE’’) (collectively the

‘‘Exchanges’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’) the proposed rule

changes as described in Items I, II, and

III below, which Items have been

prepared by the Exchanges.

Additionally, the Committee on Options

Proposals (‘‘COOP’’) filed a letter with

the Commission endorsing the

Exchanges’ proposed rule changes.3 The

Commission is publishing this notice to

solicit comments on the proposed rule

changes from interested persons.

I. Self-Regulatory Organizations’

Statement of the Terms of Substance of

the Proposed Rule Changes

The Exchanges propose to establish a

pilot program, whereby the Exchanges

may select a certain number of their

listed options for inclusion in a twelve

month pilot program for the listing of

strike prices at 21⁄2 point intervals.4
Federal Register / Vol. 60, No. 92 / Friday, May 12, 1995 / Notices 25753

Attorney, CBOE, dated March 27, 1995 (‘‘CBOE

Amendment No. 1’’), to John Ayanian, Attorney,

Office of Market Supervision (‘‘OMS’’), Division of

Market Regulation (‘‘Market Regulations’’),

Commission, and Letters from Gerald O’Connell,

First Vice President, Phlx, dated March 29, 1995

(‘‘Phlx Amendment No. 2’’), Clarie McGrath,

Special Counsel, Amex, dated April 3, 1995 (‘‘Amex

Amendment No. 1’’), and Daniel Parker Odell,

Assistant Secretary, NYSE, dated March 29, 1995

(‘‘NYSE Amendment No. 1’’), to Michael Welinskas,

Branch Chief, OMS, Market Regulation,

Commission.

5The Phlx also proposes to codify the existing

procedure for determining strike price intervals by

stating that such intervals generally shall be $2.50

or greater where the strike price is $25 or less, $5.00

or greater where the strike price is greater than $25

but less than $200, and $10 or greater where the

strike price is $200 or more. See File No. SR–Phlx–

95–08.

The Phlx submitted Amendment No. 1 on March

10, 1995 to add the phrase ‘‘or greater’’ to the last

clause of the text of the above rule change to be

consistent with CBOE Rule 5.5, Interpretation .01,

in that strike price intervals may be $10 ‘‘or greater’’

where the strike price is $200 or more. See Letter

from Gerald O’Connell, First Vice President, Phlx,

to Michael Walinskas, Branch Chief, OMS, Market

Regulation, Commission, dated March 10, 1995.

(‘‘Phlx Amendment No. 1’’).

6The NYSE submitted Amendment No. 1 on

April 3, 1995 to amend, among other things, the text

of proposed Supplementary Material .30(f) and

.30(f)(i) to NYSE Rule 703 to list 21⁄2 strike prices

for 14 options, instead of 11 options as originally

stated. See NYSE Amendment No. 1, supra note 3.

7See Securities Exchange Act Release No. 21985

(April 25, 1985), 50 FR 18595 (Approving File Nos.

SR–Phlx–85–9 and SR–PSE–85–9, amending both

exchanges’ policies regarding strike price intervals

to conform to those of the other options exchanges);

see also Securities Exchange Act Release No. 21929

(April 10, 1985), 50 FR 15258 (April 17, 1985) (File

Nos. SR–CBOE–85–1 and SR–Amex–85–6).

8Proposed NYSE Rule 703, Supplementary

Material .30(f) states that select options may be

listed at 21⁄2 point strike price intervals ‘‘if the strike

price for that series is greater than $25.00, but is less

than or equal to $50.00.’’ While the NYSE has

proposed slightly different language to make the

proposed rule consistent with other NYSE rules, the

proposal allows for the listing of 21⁄2 point strike

prices at 271⁄2, 321⁄2, 371⁄2, 421⁄2 and 471⁄2 in

accordance with the terms of the pilot program.

Telephone conversation between Gary Katz,

Managing Director, Options and Index Products,

NYSE, and John Ayanian, Attorney, OMS, Market

Regulation, Commission, on May 2, 1995.

9The applicable strike price codes will be Y 271⁄2;

Z 321⁄2; U 371⁄2; V 421⁄2; and W 471⁄2.

10The actual allotment of option issues for each

exchange is as follows: CBOE (28), Amex (22), Phlx

(18), PSE (18), and NYSE (14).

11The NYSE states that it does not propose to

require the listing of 21⁄2 point strikes for all

expiration months in selected option classes.

Telephone conversation between Gary Katz,

Managing Director, Options and Index Products,

NYSE, and John Ayanian, Attorney, OMS, Market

Regulation, Commission, on May 4, 1995.

12The maximum number of allotted new strikes

created as a result of this pilot program for each

exchange is as follows: CBOE (1,120); Amex (880);

Phlx (720); PSE (720); and NYSE (560). These

figures do not include the new strikes created from

multiply-traded options simultaneously selected by

more than one exchange in accordance with the

terms of the pilot program.

13The Amex notes in its proposal that certain low

volatility stocks of highly capitalized companies

usually trade in fairly narrow price ranges. Amex

further notes that options on such stocks generally

have limited trading activity since in-the-money

options sell for little more than intrinsic value and

out-of-the-money options yield little premium

income to attract uncovered or covered writers. (See

File No. SR–Amex–95–12).

The NYSE notes in its proposal that it anticipates

selecting its allotment from among those options

that overlie less volatile stocks. The NYSE believes

that the market for options that overlie low

volatility stocks will benefit from the pilot program

because options series with strike prices that are

closer to the price of the underlying stock will be

available. Consequently, expanded options

strategies will be available to investors. (See File

No. SR–NYSE–95–12).

Specifically, the CBOE proposes to

adopt new Interpretation and Policy .07

to CBOE Rule 5.5, ‘‘Option Contracts

Open for Trading.’’ Similarly, the Phlx

proposes to amend Phlx Rule 1012,

‘‘Series of Options Open for Trading,’’

by adopting a new Commentary .05.5

The PSE proposes to amend PSE Rule

6.4, ‘‘Series of Options Open for

Trading,’’ by adopting a new

Commentary .03. The NYSE proposes to

amend NYSE Rule 703, ‘‘Series of

Options for Trading,’’ by amending

Supplementary Material .30(d)(ii) and

adopting a new Supplementary Material

0.30(f).6 The Amex proposes to list 21⁄2

point strike prices pursuant to the pilot

program in accordance with Amex Rule

903(a)(ii), ‘‘Series of Options Open for

Trading.’’ Equity options with strike

prices between $25 and $50 would be

eligible for the pilot program. The text

of the proposed rule changes for each

exchange is available at the Office of the

Secretary, the Exchanges, and at the

Commission.

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

The Exchanges have, as a result of a

cooperative effort, submitted a joint

proposal regarding the listing of 21⁄2

point strike prices for selected equity

options on a pilot basis. The pilot

program would operate for a twelvemonth period following implementation

by the Exchanges. Currently, the

Exchanges list strike prices for equity

options at 5 point intervals, where the

underlying stock is trading between $25

and $200.7

The Exchanges propose to list select

options trading at a strike price greater

than $25 but less than $50 8 (i.e., 271⁄2,

321⁄2, 371⁄2, 421⁄2 and 471⁄2 9 at 21⁄2 point

intervals. Pursuant to the pilot program,

the Exchanges would be permitted to

use such 21⁄2 point strike price intervals

for a joint total of up to 100 option

issues. Each of the exchanges may select

10 options plus a percentage of the

remaining 50 options equal to that

exchange’s pro rata share of the total

number of equity options listed by the

Exchanges.10

In addition, certain other conditions

would apply to the pilot program.

Listing 21⁄2 point strike prices in

selected options generally would be

required for all expiration months on all

participating exchanges, but not for

long-term options (LEAPS).11 If an

exchange chooses a multiply-traded

option for its allotment, any other

exchange trading that option would also

be allowed to list 21⁄2 point strike prices

without having such listing count

toward the other exchange’s allotted

amount. The Exchanges have agreed

that in the event more than one

exchange simultaneously selects the

same multiply-traded option, the

Options Clearing Corporation (‘‘OCC’’)

would determine which exchange

would be deemed to have selected the

option. Such option would not count

toward the other exchange’s allotment.

In implementing the proposal, the

Exchanges note that the pilot program

effectively adds five additional strike

prices to each of the applicable clauses

of equity options, thereby creating a

significant number of new strikes,

including both puts and calls for all four

listed expiration months.12 The

Exchanges believe that limiting the pilot

program to 100 selected equity options

is a reasonable alternative to adding 21⁄2

point strike price intervals for all equity

options trading at a strike price greater

than $25 but less than $50. Further, the

Exchanges believe that the allocated

number of options limits the number of

new strike prices while providing

important investment opportunities for

selected options.13

Further, the Exchanges believe that

the addition of 21⁄2 point strike price

intervals will stimulate customer

interest by creating greater trading

opportunity and flexibility. The

Exchanges believe that 21⁄2 point strikes

will provide customers the ability to

more closely tailor investment strategies

to the precise movement of the

underlying security. The Exchanges also
25754 Federal Register / Vol. 60, No. 92 / Friday, May 12, 1995 / Notices

14 17 CFR 200.30–3(a)(12).

1Section 3(c)(1) excludes from the definition of

‘‘investment company’’ any issuer whose

outstanding securities are beneficially owned by not

more than 100 persons and which is not making,

and does not propose to make, a public offering of

its securities.

believe that an increase in customer

interest will, in turn, enhance the depth

and liquidity of the markets in the

affected equity options.

The Exchanges believe that the

proposed rule changes are consistent

with Section 6 of the Act, in general,

and further the objectives of Section

6(b)(5), in particular, in that they are

designed to promote just and equitable

principles of trade as well as to protect

investors and the public interest.

(B) Self-Regulatory Organizations’

Statement on Burden on Competition

The Exchanges do not believe that the

proposed rule changes will impose any

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 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 changes, or

(B) Institute proceedings to determine

whether the proposed rule changes

should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning the foregoing.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, D.C. 20549. Copies of the

submission, 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

Section, 450 Fifth Street, NW.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the Exchanges. All submissions

should refer to File Nos. SR–Phlx–95–

08, SR–Amex–95–12, SR–PSE–95–07,

SR–CBOE–95–19, and SR–NYSE–95–12

and should be submitted by June 2,

1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Margaret H. McFarland,

Deputy Secretary.

[Investment Company Act Rel. No. 21045;

811–8170]

America’s Utility Tax-Free Income

Fund, Inc.; Notice of Application

May 5, 1995.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of Application for

Deregistration Under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANT: America’s Utility Tax-Free

Income Fund, Inc.

RELEVANT ACT SECTION: Section 8(f).

SUMMARY OF APPLICATION: Applicant

seeks an order declaring that it has

ceased to be an investment company.

FILING DATES: The application was filed

on February 21, 1995 and amended on

April 27, 1995.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicant with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

May 31, 1995, and should be

accompanied by proof of service on

applicant, in the form of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the writer’s interest, the reason for the

request, and the issues contested.

Persons who wish to be notified of a

hearing may request such notification

by writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, N.W., Washington, D.C. 20549.

Applicant, 901 East Byrd Street,

Richmond, Virginia 23219.

FOR FURTHER INFORMATION CONTACT:

Marc Duffy, Senior Attorney, at (202)

942–0565, or C. David Messman, Branch

Chief, at (202) 942–0564 (Division of

Investment Management, Office of

Investment Company Regulation).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee from the SEC’s

Public Reference Branch.

Applicant’s Representations

1. Applicant is an open-end

diversified management investment

company organized under the laws of

the State of Maryland. On November 29,

1993, applicant registered under section

8(b) of the Act and filed a registration

statement under the Securities Act of

1933 (the ‘‘1933 Act’’). The 1933 Act

registration statement was never

declared effective, and was withdrawn

on October 6, 1994.

2. Applicant has never made, nor does

it intend to make, a public offering of its

securities. Applicant, however, sold

250,000 shares of its common stock for

$5 million to Dominion Resources, Inc.

(‘‘DRI’’) on January 26, 1994, and an

additional 15,883 shares of common

stock to DRI for $316,670 on February

1, 1994. DRI is the sole shareholder of

applicant.

3. At the time of filing this

application, the assets of applicant

consisted of portfolio securities of the

types that applicant is permitted to

invest in pursuant to its investment

objective and fundamental investment

policies. On March 31, 1995, the assets

had a value of $5,211,589. After

receiving the order sought by this

application, DRI intends to effect a

merger of applicant with and into DRI

or one of its consolidated subsidiaries.

As a result, DRI would continue to own

the assets of applicant without DRI

having to recognize at this time a loss

on its investment in applicant’s

common stock.

4. Applicant believes that after

receiving the order sought by this

application it could rely on the

exception from the definition of

‘‘investment company’’ in section

3(c)(1) of the Act because applicant has

never made a public offering of its

securities and has never had more than

one securityholder.1

5. At the time of filing this

application, applicant had no debts or

other liabilities outstanding, nor was

applicant a party to any litigation or

administrative proceeding.

6. Applicant is not now engaged, nor

does it intend to engage, in any business

activities other than those necessary for

the winding-up of its affairs by means