24942 Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Notices

2See BIS Central Bank Survey of Foreign

Exchange Market Activity in April 1992 (March

1993).

3 Id.

4The Commission notes that the margin level

review currently applicable to customized FCOs on

the Exchange’s existing approved foreign currencies

will also apply to customized FCOs involving the

Spanish peseta. See Exchange Act Release No.

34925, Supra note 1.

5 Id.

6 Id.

7Based on an exchange rate of 126.6 Spanish

pesetas/U.S. dollars on April 5, 1995, as published

in the Wall Street Journal, this would correspond

to an opening position for a Spanish peseta

customized FCO transaction (i.e., 200 contracts)

valued at approximately $7,900,000.

8Pursuant to Exchange Rule 1069(j)(1), quote

spread parameters for customized strike FCOs on

approved foreign currencies are twice those

provided in Rule 1014(c). Because the Phlx does not

list regular FCOs on the Spanish peseta (and will

not be able to list regular FCOs on the peseta

pursuant to this proposal), no quote spread

parameters for the peseta are specified in Rule

1014(c).

9Specifically, the Exchange is proposing a

minimum fractional change of $0. (0000) 01 for

Spanish peseta customized FCO’s. Telephone

conversation between Michele Weisbaum,

Associate General Counsel, Phlx, and Brad Ritter,

Senior Counsel, Office of Market Supervision,

Division of Market Regulation, Commission, on

May 4, 1995. The Commission notes that the

Exchange may be required to submit a rule filing

pursuant to Section 19(b) of the Act prior to altering

this minimum fractional change level.

10 17 CFR 200.30–3(a)(12) (1994).

1 15 U.S.C. 78s(b)(1) (1988).

bank trading.2 Moreover, over 91% of

the activity in the Spanish peseta is

against either the U.S. dollar (64%) or

the German mark (27%).3 The Spanish

peseta is not pegged to a rate of

exchange vis a vis the U.S. dollar.

Further, the United States has

substantial trade relations with Spain.

The Exchange represents that the

initial and maintenance customer

margin levels for the Spanish peseta

will initially be set at 4%, which would

cover 96.54% of all seven day price

movements over the last two years.4

Pursuant to Rule 1069(a)(1)(B), users

would be able to trade customized

FCO’s between the Spanish peseta and

any other approved foreign currency.

Currency pairs between the Spanish

peseta and the Australian dollar and

between the Spanish peseta and the

Canadian dollar have exhibited a

correlation of less than .25 over the

preceding two year period and will be

placed in Tier II under Exchange Rule

722, thereby requiring 6% margin.5 All

other currency pairs involving the

peseta would be placed in Tier I (4%

margin required) because their

correlations have exceeded .25.6

The contract size for the Spanish

peseta would be 5,000,000 pesetas.7 The

premiums will be quoted in

thousandths of a cent per unit for U.S.

dollar/Spanish peseta contracts and the

minimum premium would be $0. (0000)

01 per unit which equals $5.00.

Exchange Rule 1069(j)(1)(A) will be

added to provide that, because the

Exchange does to have continuously

quoted FCOs on the Spanish peseta,

there will be no quote spread

parameters applicable to customized

FCOs on the Spanish peseta.8

Consistent with the Phlx’s other

approved foreign currencies, Exchange

Rule 1033 will be amended to specify

the bid and offer rules for customized

FCOs based on the Spanish peseta.

Similarly, Rule 1034 will be amended to

provide that the Exchange will

determine the minimum fractional

change applicable to Spanish peseta

customized FCOs.9

The Exchange believes that the

foregoing rule change proposal is

consistent with Section 6 of the Act, in

general, and with Section 6(b)(5), in

particular, in that it is designed to

promote just and equitable principles of

trade, foster cooperation and

coordination with persons engaged in

regulating, clearing, settling, and

processing information, and facilitate

transactions in securities, remove

impediments to and perfect the

mechanism of a free and open market

and a national market system, as well as

to protect investors and the public

interest by offering investors the ability

to trade options on a major international

currency in an auction market

environment with all of the attendant

protections as an alternative to trading

it in the over-the-counter market.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

The Phlx 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 solicited

or received with respect to 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.

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

Section, 450 Fifth Street NW.,

Washington, DC. Copies of such filing

will also be available for inspection and

copying at the principal office of the

Phlx. All submissions should refer to

File No. SR–Phlx–95–21 and should be

submitted by May 31, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–11508 Filed 5–9–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35672; File No. SR–NYSE–

95–16]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the New York Stock Exchange, Inc.,

Relating to the Options Market Maker

Exemption From the NASD Short Sale

Bid Test for Certain Merger and

Acquisition Securities

May 4, 1995.

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

Securities Exchange Act of 1934

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

April 21, 1995, the New York Stock

Exchange, Inc. (‘‘NYSE’’ 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 NYSE. The

Commission is publishing this notice to
Federal Register / Vol. 60, No. 90 / Wednesday, May 10, 1995 / Notices 24943

2Hereinafter referred to as Nasdaq National

Market (‘‘NM’’) securities. 3 17 CFR 200.30–3(a)(12) (1994).

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 its Rule

759A (Reporting Requirements

Applicable to Short Sales in NASDAQ

NMS Securities 2). Rule 759A prohibits

an Exchange options specialist or

Competitive Options Trader (‘‘COT’’)

from relying on the options market

making exemption from the short sale

bid test of the Rules of Fair Practice of

the NASD unless the transaction is an

‘‘exempt hedge transaction.’’ The

proposed rule change would expand the

definition of ‘‘exempt hedge

transaction’’ to include certain short

sales of a company that is involved in

a publicly-announced merger or

acquisition (‘‘M&A’’).

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

self-regulatory organization 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 self-regulatory organization 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

NYSE Rule 759A prohibits each

exchange options specialist and COT

from relying on the options market

maker exemption of the NASD Rules of

Fair Practice to effect short sales in

Nasdaq NM securities at or below the

best bid when the displayed bid is

below the preceding best bid in, unless

the short sale is an ‘‘exempt hedge

transaction.’’ The proposal would

expand the definition of ‘‘exempt hedge

transaction’’ to include certain short

sales in the stock of a company that is

a party (or a prospective party) to an

M&A with the issuer of a Nasdaq NM

security that underlies an Exchangelisted option. Specifically, with respect

to an Exchange options specialist, the

exemption would apply to short sales of

a company that is a party to an M&A

with a company whose Nasdaq NM

security underlies a specialty stock

option; with respect to a COT, the

exemption would apply to short sales of

a company that is a party to an M&A

with a company whose Nasdaq NM

security underlies an Exchange-listed

stock option.

For the exemption to apply, the

options specialist or COT must initiate

the short sale in order to effect a bona

fide hedge of an existing or prospective

position in an Exchange-listed stock

option. A ‘‘prospective position’’ refers

to a position that might be created as the

result of specialist or COT has initiated

prior to the hedge transaction.

The proposed rule change seeks to

address the bona fide hedging needs of

an options specialist or COT where a

company enters into an M&A with a

company whose Nasdaq NM security

underlies an Exchange-listed option.

Under those circumstances, the options

specialist or COT may have no feasible

alternative to hedge an options position

on the Nasdaq NM security, given the

risk arbitrage relationship that is likely

to exist between the stock underlying

the option and the stock of the other

company involved in the merger or

acquisition.

The Exchange believes that the

proposed rule change is consistent with

Section 6(b) under that Act in general,

and furthers the objectives of section

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

designed to promote just and equitable

principles of trade and to protect

investors and the public interest. The

proposal seems to enhance the ability of

options specialists and COTs to perform

their market-making functions, thereby

contributing to the depth and liquidity

of the options market.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

The NYSE believes that the proposed

rule change will not impose any burden

on competition.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Written comments on the proposed

rule change were neither solicited nor

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:

(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.

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

Section, 450 Fifth Street, NW.,

Washington, DC. Copies of such filing

will also be available for inspection and

copying at the principal office of the

above-mentioned self-regulatory

organization. All submissions should

refer to File No. SR–NYSE–95–16 and

should be submitted by May 31, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.3

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–11509 Filed 5–9–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35671; File No. SR–PHLX–

94–61]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change and

Notice of Filing and Order Granting

Accelerated Approval of Amendment

No. 1 to the Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.,

Relating to Floor Procedure Advice F–

8, Failure to Comply With an Exchange

Inquiry

May 4, 1995.

On November 21, 1994, the

Philadelphia Stock Exchange, Inc.

(‘‘PHLX’’ or ‘‘Exchange’’) filed with the

Securities and Exchange Commission