Federal Register / Vol. 60, No. 234 / Wednesday, December 6, 1995 / Notices 62521

furtherance of the Act, id. § 78o–3(b) (9), and to

produce fair and informative quotations, to prevent

fictitious or misleading quotations, and to promote

orderly procedures for collecting, distributing and

publishing quotations. Id. § 78o–3(b) (11). In

addition, the Commission believes that the rule

change will further the goals of Section 11A in that

it will promote efficient and effective market

operations and economically efficient execution of

investor orders in the best market and assure fair

competition between the exchange markets and the

OTC market and among brokers and dealers. Id.

§ 78k–1(a) (1) (C).

7Securities Exchange Act Release No. 34277

(June 29, 1994), 59 FR 34885 (July 7, 1994). 8 17 CFR 200.30–3(a) (12).

1Letter from Michele R. Weisbaum, Associate

General Counsel, Phlx, to Michael Walinskas, SEC,

dated November 22, 1995.

2See Securities Exchange Act Release No. 36167

(Aug. 29, 1995).

3The Exchange notes that a substantially similar

regulatory scheme generally applies to broad-based

index options and warrants.

As discussed below, the Commission

believes that delayed implementation of

the PMM standards until February 1,

1996 and limited extension of the short

sales rule until August 3, 1996 (rather

than June 3, 1996) is consistent with the

Act and the rules and regulations

promulgated thereunder.7

Maintaining the current operation of

the short sale rule until the NASD has

completed and tested the systems

necessary to provide market participants

adequate notice of a market maker’s

PMM status will avoid confusion in the

marketplace and assure consistency in

the application of NASD rules.

Moreover, extension of the short sale

rule until August 3, 1996 will maintain

the effectiveness of the PMM standards

for six months, as envisioned by the

Commission’s Original Approval Order.

As noted in the Original Approval

Order, this will provide the Commission

and the NASD the opportunity to study

the effects of the rule and its exemptions

and to determine whether these are

practicable and necessary on an ongoing

basis, or whether other alternatives

would be more appropriate.

In the Original Approval Order, the

Commission stated that experience with

the NASD’s short sale rule may

demonstrate that some or all of the

elements of the rule require

reconsideration. The Commission notes

that this is the NASD’s second proposal

to extend the operation of the short sale

rule due to technical problems

associated with the implementation of

the PMM designation. The Commission

is concerned about the delay in

implementing the PMM designation

which inhibits the ability to assess the

effects of the short sale rule with the

designation in place and, thus, expects

that no further delays will be necessary.

V. 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

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to the file

number SR–NASD–95–58 and should be

submitted by December 27, 1995.

VI. Conclusion

For the reasons stated above, the

Commission believes the rule change is

consistent with the Act and, therefore,

has determined to approve it.

It is therefore ordered, pursuant to

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

change SR–NASD–95–58 be, and hereby

is, approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–29686 Filed 12–5–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–36524; File No. SR–Phlx–

95–76]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change and

Amendment No. 1 to Proposed Rule

Change by the Philadelphia Stock

Exchange, Inc. Relating to Uniform

Listing and Trading Guidelines for

Narrow-based Stock Index Warrants

November 29, 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 October 27, 1995,

the Philadelphia Stock Exchange, Inc.

(‘‘Phlx’’ 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 self-regulatory organization. On

November 22, 1995, the Phlx submitted

Amendment No. 1 (‘‘Amendment No.

1’’) to the proposal to establish a

maintenance requirement with respect

to the minimum number of securities

that must comprise an index underlying

a warrant issuance, to clarify issues

relating to settlement values for both

narrow-based and broad-based index

warrants, and to amend certain position

limit levels applicable to narrow-based

index warrants.1 The Commission is

publishing this notice to solicit

comments on the proposed rule change

and Amendment No. 1 from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule change

The Phlx proposes to amend

Exchange Rules 722, 803, 1000A, and

1001A to establish uniform listing and

trading guidelines applicable to narrowbased stock index warrants. The text of

the proposed rule change and

Amendment No. 1 thereto is available at

the Office of the Secretary, Phlx and at

the Commission.

II. Self-Regulatory Organization’s

Statement of the Purpose of and

Statutory Basis for, the Proproposed

Rule Change

In its filing with the Commission, the

Phlx 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 Phlx 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

1. Purpose

In view of the recent approval of the

regulatory framework for stock index

warrants on broad-based stock indexes, 2

the Exchange now proposes to establish

uniform listing and trading guidelines

for warrants based on narrow-based

indexes. To accommodate the trading of

warrants on narrow-based indexes, the

Exchange proposes to modify the

recently approved regulatory framework

for broad-based index warrants. 3 Thus,

the Exchange proposes to conform the

rules applicable to warrants on narrowbased indexes to those applicable to

options on narrow-based indexes.
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