Federal Register / Vol. 60, No. 25 / Tuesday, February 7, 1995 / Notices 7251

5 15 U.S.C. 79q–1 (1988).

6 15 U.S.C. 78q–1(b)(3)(G) (1988).

7Section 17A(b)(3)(H) of the Act requires, among

other things, that the rules of a clearing agency

provide a fair procedure with respect to the

disciplining of participants.

8See PTC Rules, Article VI, Rules 3 and 7.

9 15 U.S.C. 78s(b)(2) (1988).

10 17 CFR 200.30–3(a)(12).

Pursuant to Rule 3 of Article VI of

PTC’s rules, the proposed rule change

establishes a daily penalty fee for a

participant’s failure to fund a shortfall

in its mandatory deposit to the

participants fund by the required date.

The daily penalty fee is the greater of (i)

$200 or (ii) an amount calculated at an

annual rate equal to the daily average

Fed Funds rate plus 250 basis points

(2.5%) on the outstanding balance of the

shortfall in the mandatory deposit to the

participants fund.

II. Discussion

The Commission believes that the

proposed rule change is consistent with

Section 17A of the Act5 and in

particular with Section 17A(b)(3)(G) of

the Act.6 Section 17A(b)(3)(G) requires,

among other things, that the rules of a

clearing agency provide that its

participants be appropriately

disciplined for violation of any

provision of the clearing agency’s rules

by fine or any other fitting sanction. The

Commission believes that PTC’s

proposal to establish a daily penalty fee

applicable to a participant’s failure to

fund on a timely basis a shortfall in its

mandatory deposit to the participants

fund is consistent with this obligation.

Because PTC maintains the

participants fund to secret the

obligations of participants and limited

purpose participants to PTC, and other

participants, late funding of a deficiency

in a participant’s mandatory deposit to

the participants fund increases the risk

of loss of PTC and its participants. In

addition, late funding of a deficiency in

a participant’s mandatory deposit to the

participants fund reduces an additional

source of cash collateral which is

available to PTC to meet temporary

financing needs such as the payment of

principal and interest. For these

reasons, the Commission believes it is

important that participants make timely

funding of shortfalls and that the

proposed penalty fee will encourage

such funding.

In the event that a participant is

assessed a penalty, PTC’s rules,

consistent with Section 17A(b)(3)(H),7

provide participants with an

opportunity to appeal the assessment of

the penalty and to explain any

mitigating circumstances. The penalty

will not become effective until the

period for filing an appeal has lapsed

and will be automatically stayed during

the pendency of any appeal. The Board

of Directors also may reduce or remit a

fine imposed by the President or a Vice

President regardless of whether an

appeal is made.8 The Commission

believes that PTC’s appeal process will

provide participants with a fair

opportunity to be heard.

PTC has requested that the

Commission find good cause for

approving the proposed rule change

prior to the thirthieth day after the date

of publication of notice of filing. In

order to assure that PTC can implement

the penalty fee beginning February 1,

1995, it is necessary that PTC receive

the appropriate approval in advance of

that date. The Commission, therefore,

finds sufficient cause to accelerate

approval of this proposal.

III. Conclusion

On the basis of the foregoing, the

Commission finds that the proposed

rule change is consistent with the Act,

in particular with Section 17A of the

Act, and with the rules and regulations

thereunder.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,9 that the

proposed rule change (File No. SR–

PTC–94–07) be and hereby is approved

on an accelerated basis.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–2904 Filed 2–6–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35308; File No. SR–PHLX–

94–69]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

Relating to a One Year Pilot Program

for the Trading, Comparison, Clearing,

Settling, Listing, and Delisting of

Municipal Securities

January 31, 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 20, 1994,

the Philadelphia Stock Exchange, Inc.

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

Securities and Exchange Commission

(‘‘SEC’’ or Commission’’) the proposed

rule change as described in Items I, II,

and III below, which Items have been

prepared by the self-regulatory

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 PHLX proposes to amend its rules

to establish a one year pilot program

allowing the Exchange to list and trade

municipal securities. Specifically, the

PHLX proposes to (1) amend PHLX

Rules 132, ‘‘Dealings Outside the

Exchange in Securities Dealt in on the

Exchange,’’ 501, ‘‘Specialist

Appointment,’’ 803, ‘‘Criteria for

Listing—Tier I,’’ and 810, ‘‘Suspension

and Delisting Policies Based on

Exchange Findings;’’ and (2) add PHLX

Rule 309, ‘‘Municipal Securities,’’ to

provide requirements for trading,

comparison, settlement, clearing and

listing and delisting of municipal

securities.

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

Exchange 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

The purpose of the proposed rule

change is to amend PHLX Rules 132,

501, 803 and 810 and to add PHLX Rule

309 to initiate a one year pilot program

for trading, comparison, clearance,

settlement and listing and delisting of

municipal securities. Under proposed

PHLX Rule 803(c)(5), a municipal issuer

may list municipal securities having an

aggregate market value and principal

amount of at least twenty million

dollars ($20,000,000) provided there are

at least one hundred (100) public

beneficial holders and the issue is rated

as investment grade by at least one

nationally recognized rating service.

Proposed PHLX Rule 810(d) requires

the delisting of the debt securities of a

non-listed issuer when the issue no

longer has at least a market value or

principal amount outstanding of at least

half a million dollars ($500,000), fails to

be held by at least fifty (50) public
7252 Federal Register / Vol. 60, No. 25 / Tuesday, February 7, 1995 / Notices

1Although the PHLX believes that proposed

PHLX Rule 810(d) will apply primarily to

municipal securities, it may also apply to the debt

of issuers whose equities are not listed on the

Exchange. Telephone conversation between Murray

L. Ross, Secretary, PHLX, and Yvonne Fraticelli,

Staff Attorney, Options Branch, Division of Market

Regulation, Commission, on January 20, 1995.

2 In this regard, the Exchange intends to require

specialist units applying for appointment and

registration in municipal securities to be in

compliance with the Municipal Securities

Rulemaking Board (‘‘MSRB’’) G–3 regulations

regarding municipal securities principals and

representatives. The National Association of

Securities Dealers (‘‘NASD’’) has authority to

enforce MSRB rules for listed municipal securities.

The PHLX enforcement in this regard will not

preempt or limit in any manner the NASD’s

authority to act in this area. 3 17 CFR 200.30–3(a)(12) (1994).

1On November 30, 1994, the PHLX amended its

proposal to clarify that the proposed two-day period

for compliance with Exchange Examinations

Department requests would apply, for example, to

requests for books and records, rather than to

requests for financial information, which are

governed by PHLX Rule 703(e). See Letter from

Edith Hallahan, Special Counsel, PHLX, to Michael

Walinskas, Branch Chief, Office of Market

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

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

November 30, 1994 (‘‘November 30 Letter’’). On

January 31, 1995, the PHLX amended its proposal

to delete references to foreign currency option

(‘‘FCO’’) participants and participant organizations

in Floor Procedure Advice (‘‘Advice’’) F–8, ‘‘Failure

to Comply with an Exchange Inquiry.’’ See Letter

from Edith Hallahan, Special Counsel, Regulatory

Services, PHLX, to Michael Walinskas, Branch

Chief, OMS, Division, Commission, dated January

30, 1995 (‘‘January 30 Letter’’). However, Advice F–

8 continues to apply to FCO participants and

participant organizations. Specifically, the PHLX

notes in its January 30 Letter that PHLX Rule 13,

‘‘Foreign Currency Options Participant’’ provides

that FCO participants are subject to the provisions

of the Exchange’s rules that are applicable to a

member of the Exchange and each reference to a

member of the Exchange in the PHLX’s rules is

deemed to pertain also to FCO participants.

2Under the Advice F–8’s fine schedule, as

amended, the Exchange will impose a fine of $200

for the first occurrence, $1,000 for the second

occurrence, $2,500 for the third occurrence, and a

beneficial owners of record or is no

longer investment grade rated by at least

one nationally recognized rating

service.1

The Exchange proposes to assign any

municipal security it lists to a

specialist 2 and to trade municipal

securities in accordance with all PHLX

regulations otherwise applicable to the

trading of securities on the equities

trading floor of the Exchange, except

that pursuant to proposed PHLX Rule

132(d)(17) municipal securities shall be

exempt from the provisions of the

Exchange’s off-board trading rule. Under

proposed PHLX Rule 309, municipal

securities will be compared, settled and

cleared in accordance with the

applicable regulations of the MSRB. The

PHLX believes that Exchange listing of

municipal securities will allow public

investors to have an alternative to the

over-the-counter market to trade

municipal debt securities.

The PHLX states that the proposed

rule change is based on Section 6(b)(5)

of the Act in that it is designed to

further promote the mechanism of a free

and open market and to protect

investors and the public interest.

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 either

solicited or 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 PHLX 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, N.W.,

Washington, D.C. 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, N.W.,

Washington, D.C. Copies of such filing

also will be available for inspection and

copying at the principal office of the

PHLX. All submissions should refer to

File No. SR–PHLX–94–69 and should be

submitted by February 28, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.3

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–2969 Filed 2–6–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35305; File No. SR–PHLX–

94–61]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.,

Relating to Floor Procedure Advice F–

8, Failure To Comply With an

Exchange Inquiry

January 31, 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 November 21,

1994, the Philadelphia Stock Exchange,

Inc. (‘‘PHLX’’ or ‘‘Exchange’’) filed with

the Securities and Exchange

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

the proposed rule change as described

in Items I, II and III below, which Items

have been prepared by the selfregulatory organization.1 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

Currently, Advice F–8 requires

Exchange members to comply promptly

with any request for information made

by the Exchange’s Market Surveillance

Department in connection with any

investigation within the Exchange’s

disciplinary jurisdiction. The Exchange

proposes to amend Advice F–8 to

require members to comply with

Exchange requests for information in

connection with any regulatory inquiry,

investigation, or examination relating to

the Exchange’s disciplinary jurisdiction

or regulatory obligations. The PHLX also

proposes to amend the Advice to require

that information requested by the

Exchange’s Examinations Department be

received within two business days from

the date of the original request in order

to satisfy the prompt compliance

requirement of Advice F–8. Finally, the

PHLX proposes to amend Advice F–8 to

reduce the fine for a first violation of the

Advice from $500 to $200, and to

provide that each additional request for

information not furnished within the

allotted time period may be considered

as a separate occurrence for purposes of

the Advice’s fine schedule.2 The text of