28636 Federal Register / Vol. 60, No. 105 / Thursday, June 1, 1995 / Notices

[FR Doc. 95–13317 Filed 5–31–95; 8:45 am]

BILLING CODE 6325–01–C
Federal Register / Vol. 60, No. 105 / Thursday, June 1, 1995 / Notices 28637

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

2The modifications are set forth in the

procedures attached as Exhibit 2 to File No. SR–

DTC–95–10. The procedures are an addition to

Section M of the ID System of DTC’s Participant

Operating Procedures. The file is available for

review in the Commission’s Public Reference Room

and at the principal office of DTC.

3The Commission has modified the text of the

summaries prepared by DTC.

4Securities Exchange Act Release No. 33466

(January 12, 1994), 59 FR 3139 [File No. SR–DTC–

93–07] (order approving proposed rule change

relating to the enhanced ID system) (‘‘Enhanced ID

Filing’’).

5Securities Exchange Act Release No. 34199

(June 10, 1994), 59 FR 31660 [File No. SR–DTC–94–

04] (order granting accelerated approval of a

proposed rule change to implement the interactive

capabilities and the electronic mail features of the

enhanced ID system).

6Securities Exchange Act Release No. 34779

(October 3, 1994), 59 FR 34779 [File No. SR–DTC–

94–13] (order granting accelerated approval on a

temporary basis through May 31, 1995, of the prime

broker option in the ID system).

7 15 U.S.C. 78q–1(b)(3) (A) and (F) (1988).

8Supra note 3.

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–35758; File No. SR–DTC–

95–10]

Self-Regulatory Organizations; The

Depository Trust Company; Notice of

Proposed Rule Change Seeking To

Implement the Advice of Confirm

Correction/Cancellation Feature and

To Modify the Authorization/Exception

Processing Feature of the Institutional

Delivery System

May 24, 1995.

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

Securities Exchange Act of 1934,1 notice

is hereby given that on April 27, 1995,

The Depository Trust Company (‘‘DTC’’)

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 primarily by DTC.

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 proposed rule change involves

the Advice of Confirm Correction/

Cancellation feature and a modification

of Authorization/Exception processing

in the Institutional Delivery (‘‘ID’’)

system of DTC.2

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

DTC 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. DTC has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of such statements.3

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In a previous filing with the

Commission, DTC described several

enhancements to the ID system that it

planned to implement, including the

Advice of Confirm Correction/

Cancellation feature and the

modification of Authorization/

Exception processing.4 These are the

subject of this proposed rule change.

The Advice of Confirm Correction/

Cancellation feature is one of three

electronic mail features described in the

Enhanced ID Filing. The other two

electronic mail features are the Notice of

Order Execution and Institution

Instructions, which were the subjects of

another DTC filing.5 The Advice of

Confirm Correction/Cancellation feature

will enable an institution or its agent

which has received a confirmation

through the ID system to notify the

broker-dealer of the reason(s) why the

institution disagrees with the

confirmation. This communication from

the institution, which is sometimes

called a ‘‘DK’’ (i.e., don’t know) of the

trade, will enable the broker-dealer to

take steps to resolve the discrepancy

between its records of the trade and the

institution’s records. The Advice of

Confirm Correction/Cancellation was

described in another DTC filing as a

feature which will enable a prime

broker to DK a trade when it receives an

ID confirmation from an executing

broker.6

The Enhanced ID Filing also

described a planned modification of

Authorization/Exception processing to

extend the period during which

delivering parties are allowed to

authorize settlement of trades or to

except trades from settlement. Prior to

the modification, only ID trades which

settled on the third day following the

trade date (‘‘T+3’’) or later could be

authorized or excepted from settlement

through an instruction submitted in

Authorization/Exception processing on

settlement date minus one (‘‘S–1’’). The

modification allows authorization or

exception of trades settling on T+1 and

later through an instruction submitted

on any of the twenty-three business

days from S–1 through S+21.

DTC believes the proposed rule

change is consistent with the

requirements of Section 17A(b)(3) (A)

and (F) 7 of the Act since the proposed

rule change will promote efficiencies in

the clearance and settlement of

transactions in securities. The proposed

rule change will be implemented

consistently with the safeguarding of

securities and funds in DTC’s custody or

control or for which it is responsible

since the proposed rule change will be

implemented as enhancements to DTC’s

existing ID system.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

DTC perceives no impact on

competition by reason of the proposed

rule change.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

The proposed rule change has been

developed through widespread

consultations with securities industry

members, as described in the Enhanced

ID Filing.8 Written comments from DTC

participants or others have not been

solicited or received on the proposed

rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within thirty-five 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

ninety 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,
28638 Federal Register / Vol. 60, No. 105 / Thursday, June 1, 1995 / Notices

9 17 CFR 200.30–3(a)(12) (1994).

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

2 17 CFR 240.19b–4 (1994).

3 In Amendment No. 1, the Exchange proposed to:

(1) amend the procedure for the symbols that will

be used for the proposed longer term 3D Options,

(2) change the name of these options in Phlx’s rules

from ‘‘cash/spot’’ to ‘‘3D’’ foreign currency options

(‘‘FCOs’’); and (3) specify the strike price intervals

applicable to the longer-term 3D Options. See Letter

from Michele Weisbaum, Associate General

Counsel, Phlx, to Brad Ritter, Senior Counsel, Office

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

Regulation (‘‘Division’’), Commission, dated

February 24, 1995. Amendment No. 1 also clarified

the proposal to allow spread margin between the 3D

Options and the regular Deutsche mark FCO. This

proposal, however, was later withdrawn in

Amendment No. 2. See Amendment No. 2, supra

note 5.

4See Securities Exchange Act Release No. 35520

(March 21, 1995), 60 FR 15807.

5 In Amendment No. 2, the Exchange withdrew

its request for spread margin treatment between the

Exchange’s German mark FCOs and the 3D Options.

Additionally, the Exchange notified the

Commission that it is terminating its agreement

with one of the two outside vendors that it had

contracted with to calculate the settlement value of

the 3D Options. See Letter from Michele Weisbaum,

Associate General Counsel, Phlx, to Brad Ritter,

Senior Counsel, OMS, Division, Commission, dated

May 8, 1995 (‘‘Amendment No. 2’’).

6See Securities Exchange Act Release No. 33732

(March 8, 1994), 59 FR 12023 (March 15, 1994) (‘‘3D

Approval Order’’).

7A European-style option may only be exercised

during a specified time period immediately prior to

expiration of the option.

8The Exchange is also amending Phlx Rules

1000, 1012, 1014, 1057, and 1069 to change

references from ‘‘cash/spot’’ FCOs to ‘‘3D’’ FCOs, as

these options are more commonly referred to. The

Exchange is also making some non-substantive

changes to Rule 1012 for ease of reading.

9 15 U.S.C. 78f(b)(5) (1988).

10Pursuant to Section 6(b)(5) of the Act, the

Commission must predicate approval of any new

option proposal upon a finding that the

introduction of such new derivative instrument is

in the public interest. Such a finding would be

difficult for a derivative instrument that served no

hedging or other economic function because any

benefits that might be derived by market

participants likely would be outweighed by the

potential for manipulation, diminished public

confidence in the integrity of the markets, and other

valid regulatory concerns.

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, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of DTC. All submissions should

refer to File No. SR–DTC–95–10 and

should be submitted within June 22,

1995.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–13327 Filed 5–31–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35756; File No. SR–Phlx–

95–02]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change and

Amendment No. 1 to the Proposed

Rule Change, and Notice of Filing and

Order Granting Accelerated Approval

of Amendment No. 2 to the Proposed

Rule Change by the Philadelphia Stock

Exchange, Inc., Relating to Additional

Expirations for Cash/Spot German

Mark Foreign Currency Options (‘‘3D

Options’’)

May 24, 1995.

On January 25, 1995, the Philadelphia

Stock Exchange, Inc. (‘‘Phlx’’ or

‘‘Exchange’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’), pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’),1 and Rule 19b–4

thereunder,2 a proposed rule change to

list series of cash/spot German mark

foreign currency options (‘‘3D Options’’)

having up to 12 months to expiration.

On February 24, 1995, the Exchange

filed Amendment No. 1 to the proposed

rule change.3 Notice of the proposed

rule change and Amendment No. 1

thereto appeared in the Federal Register

on March 27, 1995.4 No comment letters

were received on the proposed rule

change, as amended. The Exchange

subsequently filed Amendment No. 2 to

the proposal on May 9, 1995.5 This

order approves the Exchange’s proposal,

as amended.

On March 8, 1994, the Commission

approved the listing and trading of 3D

Options.6 3D Options are issued by The

Options Clearing Corporation and are

European-style.7 These FCOs currently

have one-week and two-week

expirations and were originally

designed to provide a hedging vehicle

for: sophisticated retail customers,

portfolio managers, and multi-national

corporations which need to hedge their

short term foreign currency exposure;

and to banks which need to hedge the

risks associated with trading in the

forward and cash markets.

The Exchange represents that the

users of 3D Options have particularly

liked the U.S. dollar settlement feature

and have indicated to the Exchange that

they would like to be able to use an

exchange-traded U.S. dollar settled FCO

to hedge longer-term currency risks. As

a result, in addition to the current oneweek and two-week expiration series of

3D Options, the Phlx proposes to list

series of 3D Options on the March, June,

September, and December cycle and the

two near-term months. Phlx Rules

1012(a)(ii) (B) and (C) are being

amended to reflect these additional

series of options.

The expiration date for these longerterm 3D Options will be the Monday

preceding the third Wednesday of each

month. The Exchange will not list 3D

Options with month-end expirations or

series with more than 12 months to

expiration.8

Currently, 3D Options are listed with

the symbol XDA, XDB, XDC, XDD, or

XDE depending on whether they will

expire on the first, second, third, fourth,

or fifth Monday of the month,

respectively. Because the proposed

longer-term 3D Options will expire on

the Monday before the third Wednesday

of each month, they will always expire

on either the second or third Monday of

the month. Accordingly, the longer-term

3D Options will be listed with the

symbol XDB or XDC and will carry that

symbol until expiration.

3D Options are currently listed in

one-half point strike price intervals. The

longer-term 3D Options listed for the

three near term months will also be

listed in one-half point strike price

intervals. The 3D Options listed with

six, nine, of twelve months to expiration

will have one point strike price

intervals.

The Commission finds that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder

applicable to a national securities

exchange, and, in particular, the

requirements of Section 6(b)(5) 9 in that

the proposal is designed to promote just

and equitable principles of trade, to

prevent fraudulent and manipulative

acts and practices, and to protect

investors and the public interest.

Specifically, the Commission believes

that the proposal is designed to provide

investors an additional means of

hedging foreign currency portfolios and

cash flows with longer-term market risk,

thereby facilitating transactions in

FCOs. The Commission believes that by

allowing the Phlx to list these options

with up to 12 months to expiration,

investors will be provided with greater

flexibility to tailor FCO positions to

satisfy their investment objectives.10 In