Federal Register / Vol. 60, No. 247 / Tuesday, December 26, 1995 / Notices 66817

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

2 17 CFR 240.19b–4 (1994).

3See Securities Exchange Act Release No. 36248

(September 19, 1995), 60 FR 49653.

4On December 13, 1995, the PHLX submitted a

letter indicating that the Exchange’s Automated

Options Market (‘‘AUTOM’’) system and AUTO-X

have sufficient capacity to accommodate the

proposed rule change. Specifically, the PHLX states

that its equity and index option trading floor

currently trades approximately 75,000 contracts per

day; a small percentage of those orders are filled

through AUTO-X. According to the PHLX, AUTOM

currently is approximately 30% utilized during

peak market activity and can easily support any

additional volume associated with the proposal. See

Letter from William H. Morgan, Vice President,

Trading Systems, PHLX, to Michael Walinskas,

Branch Chief, Office of Market Supervision,

Commission, dated December 12, 1995 (‘‘December

12 Letter’’).

5See Securities Exchange Act Release No. 32906

(September 15, 1993), 58 FR 49345 (September 22,

Continued

affected by the irreconcilable material

conflict.

5. The determination by the Board of

the existence of an irreconcilable

material conflict and its implications

shall be made known promptly in

writing to all Participants.

6. Participating Insurance Companies

will provide pass-through voting

privileges to all Variable Contract

owners so long as the Commission

continues to interpret the 1940 Act as

requiring pass-through voting privileges

for variable contract owners.

Accordingly, Participating Insurance

Companies will vote shares of a

Portfolio held in their Separate

Accounts in a manner consistent with

timely voting instructions received from

Variable Contract owners. Each

Participating Insurance Company also

will vote share of a Portfolio held in its

Separate Accounts for which no timely

voting instructions from Variable

Contract owners are received, as well as

shares it owns, in the same proportion

as those shares for which voting

instructions are received. Participating

Insurance Companies shall be

responsible for assuring that each of

their Separate Accounts participating in

a Portfolio calculates voting privileges

in a manner consistent with other

Participating Insurance Companies. The

obligation to calculate voting privileges

in a manner consistent with all other

Separate Accounts investing in a

Portfolio shall be a contractual

obligation of all Participating Insurance

Companies under their participation

agreements.

7. The Trust will notify all

Participants that prospectus disclosure

regarding potential risks of mixed and

shared funding may be appropriate. The

Trust shall disclose in its Prospectus

that: (a) its shares may be offered to

insurance company Separate Accounts

that fund Variable Contracts of

Participating Insurance Companies that

may or may not be affiliated with one

another, and to Qualified Plans; (b)

because of differences of tax treatment

or other considerations, the interests of

various Variable Contract owners and

Qualified Plan participants might at

some time be in conflict; and (c) the

Board will monitor for any material

conflicts and determine what action, if

any, should be taken.

8. All reports received by the Board

regarding potential or existing conflicts,

and all action of the Board with respect

to determining the existence of a

conflict, notifying Participants of a

conflict, and determining any proposed

action adequately remedies a conflict,

will be properly recorded in the minutes

or other appropriate records, and such

minutes or other records shall be made

available to the Commission upon

request.

9. If and to the extent Rule 6e–2 or

Rule 6e–3(T) are amended, or Rule 6e–

3 is adopted, to provided exemptive

relief from any provision of the 1940

Act or the rules thereunder with respect

to mixed and shared funding on terms

and conditions materially different from

any exemptions granted in the order

requested, then the Portfolios and/or the

Participants, as appropriate, shall take

such steps as may be necessary to

comply with Rule 6e–2 and Rule 6e–

3(T), as amended, and Rule 6e–3, as

adopted, to the extend such rules are

applicable.

10. The Trust will comply with all

provisions of the 1940 Act requiring

voting by shareholders (which, for these

purposes, shall be the persons having a

voting interest in the shares of the

Trust), and, in particular, the Trust will

provide for meetings as required by

applicable State law or the Act,

including Section 16(c) of the 1940 Act

(although the Trust is not one of the

trusts described in that section) as well

as with Section 16(a) and, if and when

applicable, Section 16(b). Further, each

Portfolio will act in accordance with the

Commission’s interpretation of the

requirements of Section 16(a) with

respect to periodic elections of directors

and with whatever rules the

Commission may adopt with respect

thereto.

11. The Participants shall, at least

annually, submit to the Board such

reports, materials or data as the Board

may reasonably request so that the

Board may fully carry out the

obligations imposed upon it by these

stated conditions, and said reports,

materials, and data shall be submitted

more frequently if deemed appropriate

by the Board. The obligations of the

Participants to provide these reports,

materials, and data upon reasonable

request of the Board shall be a

contractual obligation of all Participants

under their participation agreements.

12. If a Qualified Plan becomes an

owner of ten percent or more of the

assets of a Portfolio, such Qualified Plan

will execute a fund participation

agreement with the Trust on the behalf

of such Portfolio. A Qualified Plan shall

execute an application containing an

acknowledgement of this condition

upon such Qualified Plan’s initial

purchase of the shares of any Portfolio.

Conclusion

For the reasons stated above,

Applicants assert that the requested

exemptions, in accordance with the

standards of Section 6(c), are

appropriate in the public interest and

consistent with the protection of

investors and the purposes fairly

intended by the policy and provisions of

the 1940 Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–31238 Filed 12–22–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–36601; File No. SR–PHLX–

95–39]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.,

Relating to Increasing the Maximum

Size of Options Orders Eligible for

Automatic Execution

December 18, 1995.

On August 21, 1995, the Philadelphia

Stock Exchange, Inc. (‘‘PHLX’’ or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘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

increase the maximum automatic

execution (‘‘AUTO-X’’) order size

eligibility for public customer market

and marketable limit orders for all

equity and index options from 25

contracts to 50 contracts.

Notice of the proposed rule change

was published for comment in the

Federal Register on September 26,

1995.3 No comments were received on

the proposal.4

Generally, public customer market

and marketable limit orders for up to 25

option contracts are eligible for

execution through the AUTO-X feature

of AUTOM.5 The PHLX proposes to
66818 Federal Register / Vol. 60, No. 247 / Tuesday, December 26, 1995 / Notices

1993) (order approving File No. SR–PHLX–92–38).

For USTOP 100 Index (‘‘TPX’’) options, public

customer market and marketable limit orders for up

to 50 contracts are eligible for AUTO-X. See

Securities Exchange Act Release No. 35781 (May

30, 1995), 60 FR 30131 (June 7, 1995) (File No. SR–

PHLX–95–29). Orders for up to 500 contracts are

eligible for AUTOM. See Securities Exchange Act

Release No. 35782 (May 30, 1995), 60 FR 30136

(June 7, 1995) (order approving File No. SR–PHLX–

95–30).

6See PHLX Rule 1033(a), ‘‘Size of Bid/Offer and

10-up Guarantee.’’

7See Securities Exchange Act Release No. 36582

(December 13, 1995) (order approving File No. SR–

PHLX–95–78). See also Securities Exchange Act

Release Nos. 25540 (March 31, 1988), 53 FR 11390

(April 6, 1988) (order approving AUTOM on a pilot

basis); 25868 (June 30, 1988), 53 FR 25563 (order

approving File No. SR–PHLX–88–22, extending

pilot through December 31, 1988); 26354 (December

13, 1988), 53 FR 51185 (order approving File No.

SR–PHLX–88–33, extending pilot program through

June 30, 1989); 26522 (February 3, 1989), 54 FR

6465 (order approving File No. SR–PHLX–89–1,

extending pilot through December 31, 1989): 27599

(January 9, 1990) 55 FR 1751 (order approving File

No. SR–PHLX–89–03, extending pilot through June

30, 1990); 28625 (July 26, 1990), 55 FR 31274 (order

approving File No. SR–PHLX–90–16, extending

pilot through December 31, 1990); 28978 (March 15,

1991), 56 FR 12050 (order approving File No. SR–

PHLX–90–34), extending pilot through December

31, 1991);29837 (October 18, 1991), 56 FR 36496

(order approving File No. SR–PHLX–90–03,

extending pilot through December 31, 1993); and

33405 (December 30, 1993), 59 FR 790 (order

approving File No. SR–PHLX–90–57, extending

pilot through December 31, 1994); 35183 (December

30, 1994), 60 FR 2420 (January 9, 1995) (order

approving File No. SR–PHLX–90–41, extending

pilot through December 31, 1995); 29662

(September 9, 1991), 56 FR 46816 (order approving

File No. SR–PHLX–91–31, permitting AUTO-X

orders up to 20 contracts in Duracell options only);

29837 (October 18, 1991), 56 FR 55146 (October 24,

1991) (order approving File No. SR–PHLX–93–33,

increasing AUTO-X for equity options to 20

contracts); 33405 (December 30, 1993), 59 FR 790

(order approving File No. SR–PHLX–93–57,

extending pilot through December 31, 1994); 34920

(October 31, 1994), 59 FR 55510 (November 7, 1994)

(File No. SR–PHLX–94–40, codifying use of

AUTOM for index options); 35601 (April 13, 1995),

60 FR 19616 (File No. SR–PHLX–95–18, codifying

the use of AUTOM for certain order types); 36429

(October 27, 1995), 60 FR 55874 (November 3, 1995)

(File No. SR–PHLX–95–35, allowing broker-dealer

USTOP 100 Index option orders to be routed

through AUTOM); and 36467 (November 8, 1995),

60 FR 57615 (November 16, 1995) (order approving

File No. SR–PHLX–95–33, limiting AUTO-X for

National Over-the-Counter Index Options to series

where the bid is $10 or less).

8See Securities Exchange Act Release No. 27599

(January 9, 1990), 55 FR 1751 (January 18, 1990)

(order approving File No. SR–PHLX–89–03). In

1991, the Commission approved a PHLX proposal

to extend AUTO–X to all equity options. See

Securities Exchange Act Release No. 28978 (March

15, 1991), 56 FR 12050 (March 21, 1991) (order

approving File No. SR–PHLX–90–34).

9See, e.g., Securities Exchange Act Release No.

29837, supra note 7.

10But see note 14 and accompanying text

regarding the provision of meaningful opportunity

for price improvement.

11Under Advice F–10, when a fast market is in

effect, displayed options quotes are not firm and the

10-up guarantee is not applicable, although

specialists and trading crowds are required to use

best efforts to update quotes and fill incoming

orders in accordance with the 10-up rule.

12The Wheel is an automated mechanism for

assigning specialists and ROTs, on a rotating basis,

as contra-side participants for AUTO–X orders.

Specialists must participate on the Wheel and ROTs

may participate on the Wheel in assigned issues. On

the Wheel, the specialist receives the first

assignment of trades for the day in each respective

option. Thereafter, the Wheel assigns trades to

ROTs in an order standardized for that day on a

random basis. Each 10 lot or order (whichever is

smaller) constitutes an assignment. See Securities

Exchange Act Release No. 35033 (November 30,

1994), 59 FR 63152 (December 7, 1994) (order

approving File No. SR–PHLX–94–32).

increase the maximum AUTO-X order

size eligibility for public customer

market and marketable limit orders for

all equity and index options from 25

contracts to 50 contracts. Under the

proposal, 50 contracts represents the

maximum size of a permissible AUTOX order, which a determined by the

specialist in that option. Consistent with

the PHLX’s 10-up rule,6 the minimum

size of the Exchange’s AUTO-X

guarantee is 10 contracts.

AUTOM, which has operated on a

pilot basis since 1988 and was most

recently extended through December 31,

1996,7 is the PHLX’s electronic order

routing, delivery, execution and

reporting system for equity and index

options. AUTOM is an online system

that allows electronics delivery of

options orders from member firms

directly to the appropriate specialist on

the Exchange’s trading floor.

In 1990, AUTO–X was approved as

part of the AUTOM pilot program.8

AUTO–X orders are executed

automatically at the disseminated

quotation price on the Exchange and

reported to the originating firm. Orders

that are not eligible for AUTO–X are

handled manually by the specialist.

The PHLX believes that the proposal

should improve the AUTOM system by

offering the benefits of AUTO–X,

including prompt and efficient

automatic executions at the displayed

price, to additional customer orders.

The Exchange states that the proposed

AUTO–X increase from a maximum of

25 to 50 contracts is in line with prior

changes. For example, the PHLX notes

that the Commission previously has

approved other PHLX proposals to

increase the maximum AUTO–X

contract size limit.9

Further, the Exchange believes that it

is appropriate to permit automatic

executions of option orders up to 50

contracts for several reasons. First, the

PHLX states that AUTO–X orders,

although immediately reported with the

best bid/offer as the execution price,

may be subject to price improvement by

the specialist, if a better bid/offer is

available. For example, a superior

Registered Options Trader (‘‘ROT’’) bid/

offer established immediately prior to

the receipt of an AUTO–X order may

not be disseminated in time to be

matched with the AUTO–X order

electronically but the superior bid/offer

may be matched with the AUTO–X

order through manual intervention by

the specialist.10

Second, the PHLX notes that

Exchange rules and policies contain

safeguards designed to protect

customers, as well as ROTs and

specialists, in the event quotations are

not up-to-date, not disseminating, or

otherwise malfunctioning. For example,

in extraordinary (fast) market

conditions, quotations are disseminated

with an ‘‘F’’ once the 10-up guarantee

on screen markets is suspended

pursuant to Option Floor Procedure

Advice (‘‘Advice’’) F–10, ‘‘Extraordinary

Market Conditions (Fast Markets).’’ 4 In

addition, Advice A–13, ‘‘Auto

Execution Engagement/Disengagement

Responsibility,’’ allows a specialist to

disengage AUTO–X in extraordinary

circumstances, upon approval by two

floor officials. The PHLX believes that

these provisions serve to protect the

integrity of AUTO–X by preventing

inaccurate executions.

Third, the Exchange notes that

specialists have the flexibility to

establish the AUTO–X guarantee size for

each option up to the maximum

permissible size. In addition, the

Exchange’s ‘‘Wheel’’ for electronically

assigning AUTO–X participation

(although not yet operational) is

voluntary for ROTs and will provide

executions in 10-lot increments.12 Thus,

the PHLX believes that increasing the

maximum AUTO–X order size up to 50

contracts does not raise financial

viability concerns because ROTs can

choose whether to participate on the

Wheel and because the Wheel assigns

orders in 10-lot increments. With

respect to the financial integrity of

PHLX specialists and ROTs, the

Exchange notes that it monitors

compliance with PHLX Rules 703,

‘‘Financial Responsibility and

Reporting,’’ and 722, ‘‘Margin

Accounts,’’ on a regular basis.

The PHLX believes that the proposal

is consistent with Section 6(b) of the

Act, in general, and, in particular, with

Section 6(b)(5), in that it is designed to

promote just and equitable principles of

trade and to prevent fraudulent and

manipulative acts and practices, as well

as to protect investors and the public

interests, by extending the benefits of

AUTO–X to a larger number of customer

orders.

The Commission finds that the

proposed rule change is consistent with
Federal Register / Vol. 60, No. 247 / Tuesday, December 26, 1995 / Notices 66819

13 15 U.S.C. 78f and 78k–1 (1988).

14As noted above, the PHLX’s rules will not

require a specialist to guarantee AUTO–X orders to

a depth of 50 contracts. Instead, the proposal will

allow specialists to establish an AUTO–X guarantee

for each option up to the permissible size of 50

contracts, with a minimum guarantee of 10

contracts required.

15CF. Securities Exchange Act Release Nos.

36310 (September 29, 1995), 60 FR 52792 (October

10, 1995) (rule proposals and amendments to

improve the handling and execution of customer

orders); and 33894 (April 11, 1994), 59 FR 18429

(April 18, 1994) (order approving File No. SR–

Amex-93–32, noting that limiting the automatic

execution of orders for Hong Kong Index options to

50 contracts or less will ensure that larger orders

are exposed to the floor for potential price

improvement).

16See December 12, Letter, Supra note 4.

17 15 U.S.C. 78s(b)(2) (1982).

18 17 CFR 200.30–3(a)(12) (1994).

the requirements of the Act and the

rules and regulations thereunder

applicable to a national securities

exchange and, in particular, the

requirements of Sections 6 and 11A.13

The Commission notes that the

development and implementation to

date of the AUTOM system has

provided for more efficient handling

and reporting of orders in PHLX equity

and index options through the use of

new data processing and

communications techniques, thereby

improving order processing and

turnaround time. The Commission does

not object at this time to extending the

benefits available through the use of an

automated system to larger-size

customer options orders of up to 50

contracts.

Public customers may benefit from

the proposal because public customer

orders for up to 50 option contracts may

be executed automatically and

guaranteed by the specialist at the

displayed market quote. In addition,

public customers will have the benefit

or receiving immediate executions and

nearly instantaneous confirmations for

orders of up to 50 contracts.14 The

increase in the AUTO–X feature for all

equity and index options may also

increase the depth and liquidity of the

market for the options where the

specialist chooses to fill orders to a

depth of up to 50 contracts. The

Commission notes, however, that

AUTO–X currently, and as proposed,

does not require an opportunity for

price improvement on a systematic

basis. The Commission expects the

PHLX to examine the feasibility of

modifying AUTO–X to provide a

mechanism for price improvement on a

systematic basis.15

The Commission also believes, based

on representations by the Exchange,16

that expanding the order eligibility size

of AUTO–X for all equity and index

options to 50 contracts will not expose

the PHLX’s options markets or equity

markets to risk of failure or operational

break-down. In particular, the Exchange

represents that only a small percentage

of total daily trades on the PHLX are

filled through AUTO–X; in addition, the

Exchange notes that, currently, AUTOM

is approximately 30% utilized during

peak market activity. The Exchange

represents that AUTOM can easily

support any volume associated with the

proposal. In addition, since the AUTOM

system is completely independent from

the PHLX’s Automated Communication

and Execution (‘‘PACE’’) system for

routing and executing stock orders,

neither AUTOM nor PACE should

impact the other during periods of high

volume.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act, 17 that the

proposed rule change (SR–PHLX–95–

39) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.18

[FR Doc. 95–31219 Filed 12–22–95; 8:45 am]

BILLING CODE 8010–01–M

DEPARTMENT OF TRANSPORTATION

Aviation Proceedings; Agreements

Filed During the Week Ending 12/15/95

The following Agreements were filed

with the Department of Transportation

under the provisions of 49 U.S.C 412

and 414. Answers may be filed within

21 days of date of filing.

Docket Number: OST–95–936.

Date filed: December 15, 1995.

Parties: Members of the International

Air Transport Association.

Subject: TC2 Reso/P 1873 dated

December 1, 1995, Middle East-Africa

Resolutions r-1—r19, Intended effective

date: April 1, 1996, Necessary

Government Action Date: no later than

February 20, 1996.

Docket Number: OST–95–937.

Date filed: December 15, 1995.

Parties: Members of the International

Air Transport Association.

Subject: TC23 Reso/P 0724 dated

December 1, 1995, Africa-TC3 Resos,

Intended effective date: April 1, 1996,

Necessary Government Action Date: no

later than February 15, 1996.

Docket Number: OST–95–938.

Date filed: December 15, 1995.

Parties: Members of the International

Air Transport Association.

Subject: TC12 Telex Mail Vote 765,

Mexico-Germany and Mid AtlanticGermany fares, r-1— 074aa r-2—074w,

Intended effective date: January 20,

1996.

Paulette V. Twine,

Chief Documentary Services Division.

[FR Doc. 95–31249 Filed 12–22–95; 8:45 am]

BILLING CODE 4910–62–P

Notice of Applications for Certificates

of Public Convenience and Necessity

and Foreign Air Carrier Permits Filed

Under Subpart Q During the Week

Ending December 15, 1995

The following Applications for

Certificates of Public Convenience and

Necessity and Foreign Air Carrier

Permits were filed under Subpart Q of

the Department of Transportation’s

Procedural Regulations (See 14 CFR

302.1701 et. seq.). The due date for

Answers, Conforming Applications, or

Motions to modify Scope are set forth

below for each application. Following

the Answer period DOT may process the

application by expedited procedures.

Such procedures may consist of the

adoption of a show-cause order, a

tentative order, or in appropriate cases

a final order without further

proceedings.

Docket Number: OST–95–922.

Date filed: December 11, 1995.

Due Date for Answers, Conforming

Applications, or Motion to Modify

Scope: January 8, 1996.

Description: Application of Rio Air

Express, S.A. dba Skyjet Brazil, requests

Amendment of its Foreign Air Carrier

Permit to transport belly-cargo and mail

in combination with its charter

passenger service between Brazil and

the United States.

Docket Number: OST–95–923.

Date filed: December 11, 1995.

Due Date for Answers, Conforming

Applications, or Motion to Modify

Scope: January 8, 1996.

Description: Application of Virgin

Atlantic Airways Limited, pursuant to

U.S.C. Section 40109 and Subpart Q of

the Regulations, requests amendment of

its Foreign Air Carrier Permit, to

authorize the following air

transportation, in addition to scheduled

combination air transportation of

passengers, cargo, and mail between

London, England (Heathrow) and San

Francisco, California, for which Virgin

Atlantic initially sought an amendment

to its foreign air carrier permit on

January 11, 1994:

(1) scheduled combination air

transportation of passengers, cargo, and

mail between London, England

(Heathrow) and Washington, DC

(Dulles); and

(2) scheduled combination air

transportation of passengers, cargo, and