62522 Federal Register / Vol. 60, No. 234 / Wednesday, December 6, 1995 / Notices

4See Securities Exchange Act Release Nos. 19264

(Nov. 22, 1982) and 26152 (Oct. 3, 1988).

5See Amendment No. 1.

6The position limit tiers have been established at

levels that represent 75% of the levels recently

approved by the SEC in connection with a Phlx

proposal to increase position limits for narrowbased index options. See Securities Exchange Act

Release No. 36194 (Sept. 6, 1995). Accordingly, the

Exchange proposes that position limits for narrowbased index warrants be set at roughly 75% of the

6,000, 9,000 and 12,000 position limit levels.

7See Amendment No. 1. The Commission notes

that although the recently approved regulatory

framework for broad-based index warrants

establishes uniform settlement provisions for all

exchanges, the Phlx in this filing proposes to amend

Section 803(e)(3) to clarify its rule language.

8See Amendment No. 1.

9 In order to expedite SEC review of a particular

warrant issuance, the Exchange may file for

approval of the index underlying the proposed

warrants pursuant to the procedures and criteria set

forth in Rule 1009A. These criteria establish

streamlined procedures for listing options on stock

industry groups (i.e., narrow-based). Accordingly,

the Exchange proposes that the same criteria apply

to subsequent proposals to establish narrow-based

indexes which underlie proposed warrant

issuances. 10 17 CFR 200.30–3(a)(12) (1994).

The Commission approved the trading

of options on narrow-based indexes in

1982 and it approved the trading of

stock index warrants in 1988.4 Because

the Commission has experience

regulating warrants, the Phlx does not

believe that the listing of warrants on

narrow-based stock indexes will present

any novel regulatory issues and,

therefore, should be permitted on the

same basis as warrants overlying broadbased indexes.

To conform the trading of warrants on

narrow-based indexes to the rules

applicable to options on narrow-based

indexes, the Exchange proposes that the

same margin requirements applicable to

short sales of narrow-based index

options apply to warrants overlying the

same index. In addition, the Exchange

proposes to apply a position limit

structure similar to that which is

applicable to narrow-based index

options. Accordingly, the Exchange

proposes to establish position limits for

narrow-based index warrants at three

separate, fixed-tier amounts (4,500,000,

6,750,000, and 9,000,000), the

applicable level being determined by

the level of index component

concentration.5 These levels are

equivalent to 75% of the position limits

currently applicable to narrow-based

index options. Because broad-based

index warrant position limit levels were

established at approximately 75% of the

corresponding levels for broad-based

index options, the Exchange believes it

is appropriate to establish narrow-based

index warrant position limits at the

corresponding level applicable to

narrow-based index options.6

Also consistent with the existing

regulatory framework for broad-based

warrants, the issuer may elect to use

closing prices for the securities

underlying the index to determine

settlement values at all times other than

the day on which the final settlement

valued is to be determined (‘‘valuation

date’’), as well as during the two

business days preceding valuation

date.7 Finally, the Exchange represents

that it will not list a warrant on an index

consisting of fewer than nine stocks

unless the SEC separately approves such

index for warrant trading. In addition,

the Phlx will impose a maintenance

standard that requires an index to have

at least nine stocks at all times, unless

separately approved by the SEC.8

In all other respects, the Exchange

represents that the rules applicable to

the trading of broad-based and narrowbased index options are the same.

Accordingly, it proposes that all other

rules applicable to broad-based index

warrants apply equally to warrants on

narrow-based indexes. Finally, the

Exchange represents that it will surveil

trading in narrow-based index warrants

in a similar manner to the surveillance

of trading in broad-based index

warrants.

Upon approval of this filing, the

Exchange proposes that additional

Commission review of a specific

narrow-based warrant issuance will be

required only for warrants overlying

narrow-based indexes that have not

previously been approved by the SEC

for option or warrant trading. Thus,

upon approval of this filing, the

Exchange proposes it be permitted to

list a warrant on any narrow-based

index that the SEC has already approved

for option trading.9

2. Statutory Basis

The Exchange believes the proposed

rule change is consistent with Section

6(b) of the Act in general and furthers

the objectives of Section 6(b)(5) in

particular in that it is designed to

prevent fraudulent and manipulative

acts and practices and to promote just

and equitable principles of trade, and is

not designed to permit unfair

discrimination between customers,

issuers, brokers and dealers.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange believes the proposed

rule change will reduce or eliminate a

burden on competition by allowing the

listing of warrants on narrow-based

indexes in the same manner as options

on narrow-based indexes.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

The Exchange has neither solicited

nor received written comments on the

proposed rule change.

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 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 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

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 Phlx. All submissions

should refer to File No. SR–Phlx–95–76

and should be submitted by December

27, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–29687 Filed 12–5–95; 8:45 am]

BILLING CODE 8010–01–M
Federal Register / Vol. 60, No. 234 / Wednesday, December 6, 1995 / Notices 62523

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

2 17 CFR 240.19b–4.

3See Securities Exchange Act Release No. 36020

(July 24, 1995), 60 FR 39029 (July 31, 1995) (order

approving CBOE Interpretation and Policy 5.3.05).

4See Letter from Michael L. Meyer, Attorney,

Schiff Hardin & Waite, to Sharon M. Lawson,

Assistant Director, Office of Market Supervision

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

Regulation’’), Commission, dated June 13, 1995

(‘‘File SR–CBOE–95–11 Letter’’).

[Release No. 34–36528; File No. SR–CBOE–

95–58]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

Chicago Board Options Exchange,

Incorporated Relating to Listing

Standards for Options on Equity

Securities Issued in a Reorganization

Transaction Pursuant to a Public

Offering or a Rights Distribution

November 29, 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 October

19, 1995, the Chicago Board Options

Exchange, Incorporated (‘‘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 CBOE. 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 Chicago Board Options Exchange,

Inc. (‘‘CBOE or the Exchange’’) proposes

to amend its listing standards in respect

of options on equity securities issued in

a spin-off, reorganization,

recapitalization, restructuring or similar

transaction where the issuance is made

pursuant to a public offering or a rights

distribution.

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,

CBOE 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 CBOE 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 amend the special listing

standards set forth in Interpretation and

Policy .05 under Exchange Rule 5.3 that

apply to options on equity securities

issued in certain spin-offs,

reorganizations, recapitalizations,

restructurings or similar transactions

(referred to herein as ‘‘restructuring

transactions’’) so as to also include

securities issued pursuant to a public

offering or a rights distribution that is

part of a restructuring transaction.

Interpretation and Policy .05 under

Exchange Rule 5.3 is intended to

facilitate the listing of options on equity

securities issued in restructuring

transactions (referred to as ‘‘Restructure

Securities’’) by permitting the Exchange

to base its determination as to the

satisfaction of certain of the listing

standards set forth in Exchange Rule 5.3

and Interpretation and Policy .01

thereunder by reference to specified

characteristics of the ‘‘Original

Security’’ in respect of which the

Restructure Security was issued or

distributed or of the trading market of

the Original Security, or by reference to

the number of shares of the Restructure

Security issued and outstanding or to

the listing standards of the exchange on

which the Restructure Security is listed.

Interpretation and Policy 5.3.05 permits

the Exchange to certify a Restructure

Security as options eligible sooner than

if it had to wait until it could base its

certification on characteristics of the

Restructure Security itself, but only in

circumstances where the factors relied

upon make it reasonable to conclude

that the Restructure Security will in fact

satisfy applicable listing criteria.

As recently approved by the

Commission, CBOE Interpretation and

Policy 5.3.05 does not extend to

restructuring transactions involving the

issuance of a Restructure Security in a

public offering or a rights distribution.3

Although these kinds of restructuring

transactions were included in

Interpretation and Policy 5.3.05 as

initially filed, CBOE subsequently

amended that filing to eliminate them in

order to permit the Commission to

approve that filing without having to

address the special questions raised by

public offerings and rights distributions.

At that time it was anticipated that

CBOE would file a separate rule change

proposing the extension of

Interpretation and Policy 5.3.05 to

restructuring transactions that involve

public offerings and rights

distributions.4

The question raised by the proposed

extension of Interpretation and Policy

5.3.05 to reorganization transactions

involving public offerings or rights

distributions reflect that when a

Restructure Security is issued in a

public offering or pursuant to a rights

distribution, it cannot automatically be

assumed that the shareholder

population of the Restructure Security

and the Original Security will be the

same. Instead, the holders of a

Restructure Security issued in a public

offering will be those persons who

subscribed for and purchased the

security in the offering, and the holders

of a Restructure Security issued in a

rights distribution will be those persons

who elected to exercise their rights.

Even in the case of a distribution of

nontransferable rights to shareholders of

the Original Security, not all such

shareholders may choose to exercise

their rights. As a result, it cannot be

assumed that the Restructure Security

will necessarily satisfy listing criteria

pertaining to minimum number of

holders, minimum public float and

trading volume simply because the

Original Security satisfied these criteria.

On the other hand, the Exchange

believes that the same reasons for

wanting to make an options market

available without delay to holders of

securities issued in reorganizations that

do not involve public offerings or rights

distributions apply with equal force to

securities issued in reorganizations that

do involve public offerings or rights

distributions, so long as there can be

reasonable assurance that the securities

satisfy applicable options listing

standards. That is, holders of an

Original Security who utilize options to

manage the risks of their stock positions

may well find themselves to be holders

of both the Original Security and the

Restructure Security following a

reorganization because they chose to

purchase the Restructure Security in a

public offering or to exercise rights in

order to maintain the same investment

position they had prior to the

reorganization. Such holders may want

to continue to use options to manage the

risks of their combined stock position

after the reorganization, but they can do

so only if options on the Restructure

Security are available. The Exchange
62524 Federal Register / Vol. 60, No. 234 / Wednesday, December 6, 1995 / Notices

5 17 CFR 200.30–3(a)(12).

believes that it is important to avoid any

undue delay in the introduction of

options trading in such a Restructure

Security in circumstances where there is

sound reason to believe that the

Restructure Security does in fact satisfy

options listing standards.

Accordingly, CBOE proposes to add

new paragraph (d) to Interpretation and

Policy .05 under Exchange Rule 5.3, to

address situations where a Restructure

Security is issued pursuant to a public

offering or rights distribution. Pursuant

to the proposed rule change, the

Exchange may certify the Restructure

Security as satisfying minimum

shareholder and minimum public float

requirements on the basis provided for

in approved Interpretation and Policy

.05(c), only after at least five days of

‘‘regular way’’ trading. Moreover, after

due diligence, the Exchange must have

no reason to believe that the Restructure

Security does not satisfy these

requirements. Additionally, in order to

base certification on Interpretation and

Policy 5.3.05, the closing prices of the

Restructure Security on each of the five

or more trading days prior to the

selection date must be at least $7.50.

Finally, as is required for all underlying

securities selected for options trading,

trading volume in the Restructure

Security must be at least 2,400,000

shares during a period of twelve months

or less up to the time the security is so

selected.

The effect of the proposed rule change

is that a Restructure Security issued

pursuant to a public offering or a rights

distribution that is part of a

reorganization will be eligible for

options trading only if it satisfies all of

the existing standards applicable to the

selection of underlying securities

generally, except that (A) the Exchange

may assume the satisfaction of the

minimum public ownership

requirement of 7,000,000 shares and the

minimum 2,000 shareholders

requirement if (i) either the percentage

of value tests of subparagraph (a)(1) of

Interpretation and Policy 5.3.05 are met

or the aggregate market value

represented by the Restructure Security

is at least $500,000,000, and if (ii) the

Restructure Security is listed on an

exchange or an automatic quotation

system having equivalent listing

requirements or at least 40,000,000

shares of the Restructure Security are

issued and outstanding, and if (iii) after

the Restructure Security has traded

‘‘regular way’’ for at least five trading

days and after having conducted due

diligence in the matter, the Exchange

has no reason to believe that these

requirements are not met, and (B)

subject to the same percentage of value

or aggregate market value requirements,

the Restructure Security may be deemed

to satisfy the minimum market price per

share requirement if it has a closing

market price per share of at least $7.50

during each of the five or more trading

days preceding the date of selection,

instead of having to satisfy this

requirement over a majority of days over

a period of three months. (In the event

the Restructure Security has a closing

price that is less than $7.50 on any of

the trading days preceding its selection,

it will have to satisfy this requirement

on a majority of trading days over a

period of three months before it can be

certified as eligible for options trading.)

For any Restructure Security issued in

a public offering or a rights distribution

that does satisfy these requirements, the

effect of the proposed rule change will

be to permit its certification for options

trading to take place as early as on the

sixth day after trading in the stock

commences, instead of having to wait

for three months of trading.

The Exchange believes that the

proposed rule change is consistent with

Section 6(b) of the Securities Exchange

Act of 1934 in general, and furthers the

objectives of Section 6(b)(5) in

particular, by removing impediments to

a free and open market in options

covering securities issued in public

offerings or pursuant to rights

distributions as part of restructuring

transactions and other similar corporate

reorganizations.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

CBOE does not believe that the

proposed rule change will impose on

any 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 submission

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 20549. Copies of such

filing with also be available for

inspection and copying at the principal

office of CBOE. All submissions should

refer to the File No. SR–CBOE–95–58

and should be submitted by December

27, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.5

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–29688 Filed 12–6–95; 8:45 am]

BILLING CODE 8010–01–M

SMALL BUSINESS ADMINISTRATION

[License No. 01/71–0364]

Geneva Middle Market Investors, L.P.;

Issuance of a Small Business

Investment Company License

On Tuesday, August 29, 1995, a

notice was published in the Federal

Register (Vol. 60, No. 167, FR 44929)

stating that an application had been

filed by Geneva Middle Market

Investors, L.P., at 70 Walnut Street,

Wellesley, Massachusetts 02181, with

the Small Business Administration

(SBA) pursuant to § 107.102 of the

regulations governing small business

investment companies (13 CFR 107.102

(1995)) for a license to operate as a small

business investment company.

Interested parties were given until

close of business Wednesday,

September 13, 1995 to submit their