3888 Federal Register / Vol. 60, No. 12 / Thursday, January 19, 1995 / Notices

security involved in an M&A to qualify as an

exempt hedge transaction pursuant to the current

proposal, the M&A must be publicly announced.

See letter from Michael D. Pierson, Senior Attorney,

Market Regulation, PSE, to Francois Nazur,

Attorney, Division, Commission (‘‘PSE Amendment

No. 1’’). The Commission notes that the Amex

proposal, as originally proposed requires the M&A

to be publicly announced.

5See Securities Exchange Act Release Nos. 34971

(November 14, 1994), 59 FR 60027 (Amex); 34972

(November 14, 1994), 59 FR 60028 (CBOE); and

34970 (November 14, 1994), 59 FR 60029 (PSE).

6Securities Exchange Act Release No. 34632

(September 2, 1994), 59 FR 46999 (approving

proposals by the Amex, CBOE, New York Stock

Exchange, Inc., PSE, and Philadelphia Stock

Exchange, Inc.).

7The NASD bid test rule prohibits broker-dealers

from effecting short sales, for themselves or their

customers, at or below the ‘‘bid’’ when the current

‘‘inside’’ or best bid is below the previous inside

bid. NASD Rules of Fair Practice (‘‘NASD Rules’’),

Art. III, Section 48. See Securities Exchange Act.

Release No. 34277 (June 6, 1994), 59 FR 34885

(amending the NASD Rules to add the short sale

rule).

8For purposes of this order, a ‘‘market Maker’’ is

a Market Maker as referred to in the CBOE and PSE

Rules, and a Specialist or Registered Options Trader

as referred to in the Amex Rules.

9An ‘‘exempt hedge transaction’’ is a short sale

in an NM security effected to hedge, and which in

fact serves to hedge, an existing offsetting options

positions or an offsetting contemporaraneous with

the short sale. See Amex Rule 957(d)(2)(b)(ii), CBOE

Rule 15.10(c)(2)(iii)(A), and Rule 4.19(c)(2)(B)(9).

10See Securities Exchange Act Release No. 34277,

supra note 6. The Commission approved the

NASD’s short sale rule on an eighteen month

temporary basis, effective September 6, 1994,

through March 5, 1996. Id.

11See Securities Exchange Act Release No. 34277,

supra note 7. The NASD short sale rule states that

once an M&A has been two affected securities may

immediately reguister as a qualified market maker

in the other M&A security. See NASD Rules, Article

III, 48(1)(3)(iii). Consequently, such a market maker

may relay on the market maker exemption for short

sales of the other M&A security.

12Proposed Rule 957(d)(2)(b)(iv); Proposed CBOE

Rule 15.10(a)(2)(ii)(D); and Proposed PSE Rule

4.19(c)(2)(B)(iv). A ‘‘designated NM security’’ is an

NM security which the market maker has

designated as qualifying for the bid test exemption.

See e.q., CBOE Rule 15.10(c)(2)(B).

13 15 U.S.C. 78f(b)(5) (1988).

14Securities Exchange Act Release No. 34277,

supra note 7.

15See supra note 9.

16 15 U.S.C. 78s(b)(2) (1982).

17Amex Rule 957, CBOE Rule 15.10, and PSE

Rule 4.19.

18 17 CFR 200.30–3(a)(12) (1993).

Amex, CBOE, and PSE proposals were

each published for comment in the

Federal Register on November 21,

1994.5 No comments were received on

the proposed rule changes. This order

approves the Exchanges’ proposals, as

amended.

II. Description of Proposals

The Commission recently approved

proposals submitted by the options

exchange concerning a market maker

exemption 6 to the NASD bid test rule 7

applicable to short sales to NM

securities traded through Nasdaq. The

purposes of the market maker

exemption is to allow options market

makers 8 to hedge their options

positions by buying or selling (including

selling short) shares of underlying stock

or underlying component stocks

contained in stock indexes; such short

sales are referred to as ‘‘exempt hedge

transactions.’’ 9 The Exchange’

proposals were approved on a

temporary basis to remain in effect

concurrently with the NASD’s bid test

rule pilot program.10

Currently, the NASDA provides an

exemption from the short sale bid test

for risk arbitragers (and other NASD

members) who take positions in the

stocks involved in M&G transactions.11

Consequently, the Exchange desire to

amend their respective rules to extend

the market maker exemption from the

bid test rule to certain short sales of the

stock of a company that is involved in

a publicly announced M&A with a

company whose stock is a designated

Nasdaq/NM security.12

III. Discussion

The Commission believes that the

Exchanges’ proposed rule changes are

consistent with the requirements of the

Act and the rules and regulations

thereunder applicable to national

securities exchanges. In particular, the

Commission believes the Exchanges’

proposals are consistent with the

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

Act 13 in that they are designed to

remove impediments to, and perfect the

mechanism of, a free and open market,

and to protect investors and the public

interest.

The Commission approved the

NASD’s short sale rule proposal on June

29, 1994,14 and in so doing stated that

the short sale rule, together with the

market maker exemption, is a

reasonable approach to regulating short

sales of Nasdaq/NM securities. The

Commission believes that the

Exchanges’ proposals are consistent

with the NASD’s bid test rule and

address the limitations established by

the NASD concerning the applicability

of the market maker exemption.

Specifically, the Exchanges’ proposals

are designed to extend the market maker

exemption to the stock of a company

that is involved in a publicly announced

M&A with a company whose stock is

designated Nasdaq/NM security. The

Commission believes that when a

designated Nasdaq/NM security

becomes involved in an M&A, options

market makers may need to hedge

positions in options overlying such a

designated Nasdaq/NM security by

buying or selling the securities of the

other company involved in the M&A,

whether or not the other company’s

stock has listed overlying options.

Indeed, where there are no options on

the other company’s stock, buying or

selling that company’s stock at times

may be the only feasible way for a

market maker to hedge positions in

options on the designated Nasdaq/NM

security, given the risk arbitrage

relationship that is likely to exist

between the two stocks. Therefore, the

Commission believes that by allowing

market makers to sell short, for hedging

purposes, shares of a company that is

involved in an M&A with a company

whose stock is a designated Nasdaq/NM

security, and to designate such sales as

bid test exempt, the Exchanges’

proposals will enhance the ability of

their market makers perform their

market making functions, thereby

contributing to the liquidity of the

market for options, as well as to the

liquidity of the market for the stocks of

both companies.

The Commission notes that the

proposed extension of the market maker

exemption from the short sale rule is

limited to publicly announced M&As.

Moreover, market makers may avail

themselves of the M&A extension to the

exemption only when the short sales are

made to hedge existing or prospective

positions in options on a security of

another company involved in the M&A,

the options positions are or will be in

a class of options for which the market

maker is registered and are or will be an

‘‘exempt hedge transaction’’ as defined

in the Exchanges’ rules.15

IV Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,16 that the

Amex, CBOE, and PSE proposed rule

changes (SR–Amex–94–42, SR–CBOE–

94–27, and SR–PSE–94–23,

respectively), as amended, are approved

on a temporary basis, to remain in effect

so long as their respective rules

regarding the market maker

exemption 17 to the NASD’s bid test rule

remain in effect.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.18

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–1281 Filed 1–18–95; 8:45 am]

BILLING CODE 8010–01–M1
Federal Register / Vol. 60, No. 12 / Thursday, January 19, 1995 / Notices 3889

[Release No. 34–35220; File No. SR–CBOE/

94–48]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Board Options Exchange,

Inc.; Relating to the Placement of

CBOE Memberships in Trust

January 11, 1995.

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

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on December 1, 1994,

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 selfregulatory organization. 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 CBOE proposes to adopt a new

Rule 3.25 that would enable an

individual CBOE member to place his

membership in trust for estate planning

purposes, subject to certain conditions

and requirements.

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

self-regulatory organization included

statements concerning the purpose of an

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

The purpose of the proposed rule

change is to include in CBOE’s

membership rules a new Rule 3.25 that

would enable any individual member to

place his membership in trust, subject to

various conditions and requirements set

forth in the rule. Rule 3.25 is designed

to make the membership transfer

process simple for members and for the

Exchange and is structured to correlate

the substance and mechanics of the new

rule with CBOE’s existing rules,

including, for example, CBOE’s rules

respecting sales and leases of

memberships and transfers of

memberships to family members.

The Exchange believes that the

proposed rule change will provide

members with useful, but appropriately

controlled, estate planning flexibility.

For example, the proposal will permit a

member who has placed his

membership in trust to provide for the

appointment of a successor trustee in

the event of the member’s disability.

The successor trustee would then hold

the membership for the benefit of the

member during the disability period,

provided the membership is leased

during that period in accordance with

CBOE’s membership lease rules.

Specifically, the proposed rule change

would provide that an individual

member in good standing may, during

his lifetime, transfer his membership to

a trust for which he is the sole trustee

and sole present beneficiary. Under

paragraph (c) of proposed Rule 3.25 a

member who has placed his

membership in trust (‘‘Trust Member’’)

may transfer his membership, in

accordance with the provisions of Rule

3.14(c)(1), to an eligible family member

who is approved for Exchange

membership, or, in accordance with

Rule 3.14(c)(3), to a member

organization. Any such transfer must

conform to the collateral deposit

requirements of the final sentence in

Rule 3.14(c). In addition, the proposed

rule change provides that a Trust

Member may transfer his membership

from the trust to himself to be held

directly.

Paragraph (b) of the proposed rule

change would authorized a Trust

Member to provide in his trust

agreement for the appointment of a

successor trustee in the event the Trust

Member dies, is declared legally

incompetent, or becomes disabled. A

successor trustee could be so appointed

for one of two purposes only—either to

effect a transfer of the membership after

the member’s death in accordance with

the Exchange’s membership transfer

rules, or, to retain the membership in

trust for the benefit of an incompetent

or disable Trust Member, provided the

membership is leased in accordance

with Exchange Rule 3.16(b) (‘‘Leased

Memberships’’).

Any transfer of a membership into

trust would be subject to Exchange

review. Under paragraph (d) of

proposed Rule 3.25, a member seeking

to effect such a transfer must furnish the

Exchange with a copy of the trust

agreement together with an attorney’s

certification that the agreement

conforms to the requirements of the new

rule. The Exchange may disapprove a

transfer by written notice to the member

if the Exchange finds that the trust

agreement does not so conform. In

addition, the new rule specifies that,

notwithstanding a transfer into trust, the

membership must remain subject to all

Exchange rules, and the Trust Member

must remain personally responsible for

all obligations and liabilities associated

with use of the membership.

The Exchange believes that the

proposed rule change is consistent with

Section 6 of the Act and with Section

6(b)(1) of the Act in particular in that it

is designed to enable the Exchange to

enforce members’ compliance with

Exchange rules and to protect investors

and the public interest.

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.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

Comments were neither solicited nor

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 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
3890 Federal Register / Vol. 60, No. 12 / Thursday, January 19, 1995 / Notices

1 17 CFR 200.3(a)(12) (1993).

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

2 17 CFR 240.19b–4.

3Securities Exchange Act Release No. 35054

(December 6, 1994).

4 59 FR 64225 (December 13, 1994).

5The rule change will result in higher fees,

however, for some Level 1 subscribers who do not

currently pay for receipt of last sale data.

6 15 U.S.C. 78o–3(b)(5).

7 17 CFR 200.30–3(a)(12).

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, DC 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the CBOE. All submissions

should refer to the file number in the

caption above and should be submitted

by February 9, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.1

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–1282 Filed 1–18–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35217; File No. SR–NASD–

94–70]

Self-Regulatory Organizations;

National Association of Securities

Dealers, Inc.; Order Approving

Proposed Rule Change Relating to

Consolidation of the Level 1 and Last

Sale Information Services and

Subscriber Fees

January 11, 1995.

On December 1, 1994, the National

Association of Securities Dealers, Inc.

(‘‘NASD’’ or ‘‘Association’’) filed with

the Securities and Exchange

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

a proposed rule change pursuant to

Section 19(b)(1) of the Securities

Exchange Act of 1934 (‘‘Act’’) 1 and Rule

19b–4 thereunder.2 The rule change will

effectuate a consolidation of the Nasdaq

Level 1 and Last Sale Information

services and of the corresponding

subscriber charges. The rule change

modifies Sections A (1) and (5) of Part

VIII of Schedule D to the NASD ByLaws.

Notice of the proposed rule change,

together with its terms of substance was

provided by issuance of a Commission

release 3 and by publication in the

Federal Register.4 No comments were

received in response to the notice. This

order approves the proposed rule

change.

This rule change establishes a single

service offering comprised of the

existing Nasdaq Level 1 (‘‘Level 1’’)

quotation and last sale (‘‘last sale’’)

information services. The monthly

charge to be levied for the consolidated

service will be $19/terminal, the sum of

the monthly charges previously assessed

for receipt of the last sale and Level 1

services on an authorized terminal

device.5 The combined service will be

distributed by commercial vendors of

market data for which their subscribers

will pay a single monthly charge.

The Commission has determined to

approve the NASD’s proposal. The

Commission finds that the rule change

is consistent with the requirements of

the Act and the rules and regulations

thereunder applicable to the NASD,

including the requirements of Section

15A(b)(5) of the Act.6 Section 15A(b)(5)

requires, in part, that the rules of a

national securities association provide

for the equitable allocation of reasonable

dues, fees and other charges among

members, issuers and other persons

using any facility or system that the

Association operates or controls. While

the consolidation will result in a fee

increase for a small portion of

subscribers, the additional cost will be

partially offset by administrative savings

for large subscribers and vendors.

Moreover, the rule will effect a

simplification in the fee structure

applicable to receipt of two major data

services.

It is therefore ordered, pursuant to

section 19(b)(2) of the Act, that the

proposed rule change SR–NASD–94–70

be, and hereby is, approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–1229 Filed 1–18–95; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–20832; 812–9208]

Brandes International Fund, et al.;

Notice of Application

January 12, 1995.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

exemption under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANTS: Brandes International Fund

(the ‘‘Company’’), Brandes Investment

Partners, Inc. (the ‘‘Adviser’’), and First

Fund Distributors, Inc. (the

‘‘Distributor’’).

RELEVANT ACT SECTIONS: Order requested

under section 6(c) of the Act to grant an

exemption from sections 2(a)(32),

2(a)(35), 18(f), 18(g), 18(i), 22(c), and

22(d) of the Act, and rule 22c–1

thereunder.

SUMMARY OF APPLICATION: Applicants

request an order to permit the Funds to

issue multiple classes of shares

representing interests in the same

portfolio of securities and assess and,

under certain circumstances waive, a

contingent deferred sales charge

(‘‘CDSC’’) upon the redemption of

certain shares.

FILING DATES: The application was filed

on October 7, 1994 and amended on

December 14, 1994. Applicants agree to

file an additional amendment, the

substance of which is incorporated

herein, during the notice period.

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 applicants with a

copy of the request, personally or by

mail. Hearing requests should be

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

February 6, 1995, and should be

accompanied by proof of service on the

applicants, 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 notification by

writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street NW., Washington, DC 20549.

Applicants: Brandes International Fund,

Brandes Investment Partners, Inc.,

12750 High Bluff Drive, Suite 420, San

Diego, California 92130; First Fund

Distributors, Inc., 4455 E. Camelback

Rd., Suite 261E, Phoenix, AZ 85018.

FOR FURTHER INFORMATION CONTACT:

Sarah A. Buescher, Staff Attorney, at

(202) 942–0573, or Robert A. Robertson,

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.

Applicants’ Representations

1. The Company is a registered openend management investment company

organized as a Delaware business trust.

The Company currently has one series.

It does not propose to offer or sell shares

until the issuance of the order requested