Federal Register / Vol. 60, No. 4 / Friday, January 6, 1995 / Notices 2167

1See Decision of the Comptroller General of the

United States, File No. B–239769.2 (July 24, 1992).

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

2 17 CFR 240.19b–4 (1991).

3See Securities Exchange Act Release No. 33369

(December 22, 1993), 58 FR 69431 (File No. SR–

NYSE–93–30).

4The following are not included in any grouping

of eligible stocks: foreign stocks, preferred stocks,

Continued

under the Act to register an indefinite

amount of shares under the Securities

Act of 1933.

2. An investment company that has

filed a declaration under rule 24f–2

must file annual notices with the SEC

and pay share registration fees for shares

sold in the previous fiscal year. If the

rule 24f–2 notice is filed within two

months after the close of the investment

company’s fiscal year, the amount of the

registration fee is based on net sales

(new sales minus redemptions) in the

year in question. If the rule 24f–2 notice

is not filed within two months, the

registration fee is based on gross sales

(with no credit for redemptions). At the

latest, the rule 24f–2 notice along with

the appropriate registration fee must be

filed within six months after the end of

an investment company’s fiscal year.

A.T. Ohio’s fiscal year ends August 30,

and the Fund’s fiscal year ends August

31.

3. A.T. Ohio transferred all of its

assets to the Ohio Municipal Money

Market Portfolio (the ‘‘Portfolio’’) of the

Fund on August 30, 1994. The Portfolio

was established to continue the

operations of A.T. Ohio as a series

portfolio of the Fund. Applicants assert

that there was uncertainty as to how the

applicants’ fees should be calculated

because of the reorganization. Thus, the

amounts of the registration fees were

unsettled until after the New York banks

were closed October 28, 1994, and

applicants’ administrator had to obtain

a certified check in the amount of the

Fund’s net fee payment on October 31,

1994, the last day of the two month

filing deadline.

4. A.T. Ohio and the Fund submitted

their rule 24f–2 notices for the fiscal

year ending August 30 and 31, 1994,

respectively, to a same day courier

service on October 31, 1994. Because

A.T. Ohio had net redemptions during

the fiscal year, no registration fee was

due with the 24f–2 notice. The Fund,

however, had net sales during the fiscal

year. That notice, therefore, was

accompanied by $109,700.69, the fee

payable to register the shares sold by the

Fund in excess of redemptions. The

filing arrived at the SEC’s filing desk

after 5:30 p.m. on October 31, 1994. As

a result, the filing was made on

November 1, 1994, but was rejected as

having been filed too late to be eligible

for a registration fee based on net sales.

Thus, absent relief, applicants owe

registration fees based on gross sales.

For A.T. Ohio’s fiscal year ending

August 30, 1994, this would amount to

an additional $429,084.50 and for the

Fund’s fiscal year ending August 31,

1994 this would amount to an

additional $1,997.07.

Applicants’ Legal Analysis

1. Section 6(c) permits the SEC to

exempt any person, security, or

transaction from any provisions of the

Act if and to the extent the exemption

is necessary or appropriate in the public

interest and consistent with the

protection of investors and the purposes

fairly intended by the policy and

provisions of the Act. In addition, the

SEC must find that an investment

company was not at fault to grant an

exemption from the two month filing

deadline of rule 24f–2.1

2. A.T. Ohio and the Fund believe

that they made a good faith effort to file

the rule 24f–2 notices on a timely basis

by same-day courier. Applicants state

that the delay in receipt of their filings

was caused by a series of delays

precipitated by the same-day courier

service.

3. Applicants believe that the

requested relief meets the section 6(c)

standards. Thus, applicants request an

exemption under section 6(c) from rule

24f–2 to permit them to pay registration

fees based on net sales.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–294 Filed 1–5–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35175; File No. SR–NYSE–

94–49]

Self-Regulatory Organizations; New

York Stock Exchange, Inc.; Notice of

Filing and Order Granting Accelerated

Approval of a Proposed Rule Change

Relating to a Six-Month Extension of

the Pilot for the Capital Utilization

Measure of Specialist Performance

December 29, 1994.

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 December

22, 1994, the New York Stock Exchange,

Inc. (‘‘NYSE’’ 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. 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 consists of

extending for six months the pilot to use

a measure of specialist performance

which focuses on a specialist unit’s use

of its own capital in relation to the total

dollar volume of trading activity in the

unit’s stocks. This capital utilization

measure (described in detail below)

would be used by the Allocation

Committee (‘‘Committee’’) in allocating

newly-listed stocks.

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

NYSE 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 and is set forth in

Sections A, B and C below.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

In recognition of the importance of

dealer participation, particularly in

volatile markets when such

participation is viewed as providing

‘‘value added’’ in maintaining fair and

orderly markets, the Exchange has

developed a measure of specialist

performance dealing with utilization of

capital for market-making. This measure

of performance focuses on a specialist

unit’s use of its own capital in relation

to the total dollar value of trading

activity in the unit’s stocks.

On December 22, 1993, the

Commission approved, on a pilot basis

ending December 31, 1994, the

Exchange’s proposed rule change to

adopt capital utilization as an additional

measure of specialist performance.3 The

Exchange is now seeking to extend that

pilot for an additional six months,

through June 30, 1995.

Under the pilot, a capital utilization

percentage is derived for each eligible

stock 4 and the specialist unit overall by
2168 Federal Register / Vol. 60, No. 4 / Friday, January 6, 1995 / Notices

warrants, when-issued stocks, IPOs (for the first 60

days), closed-end funds, stocks selling for $5 and

under, stocks with less than 2,000 shares average

daily trading volume, and stocks that have been

delisted for more than six months.

5 ‘‘S&P 500 Stock Price Index’’ is a service mark

of Standard and Poor’s Corporation.

The base period calculation includes the total

average daily dollar value for the trading days

within the twelve month period excluding those

days during which there was a change of 1% or

more in the S&P 500 Price Index. The volatile

period calculation includes the total average daily

dollar value for the trading days within the twelve

month period during which there was a change of

1% or more in the S&P 500 Price Index.

6The base period calculation include the total

average daily dollar value for the days within the

twelve month trading period that were not among

the 10% most volatile. The volatile period

calculation includes the average daily dollar value

for the days within the twelve month period that

were the 10% most volatile.

7The specialist capital utilization measure is not

being added as a basis for initiating a Performance

Improvement Action under NYSE Rule 103A.

During the pilot period, the Market Performance

Committee will receive quarterly reports on the

initiative, with a view toward their recommending

such enhancements or modifications as may seem

appropriate based on actual experience with this

measure. Any modifications or enhancements

would be filed with the Commission, and would be

implemented only with the Commission’s approval.

dividing the average daily dollar value

of the unit’s stabilizing purchases and

sales by the average daily total dollar

value of shares traded in the unit’s

stocks. This percentage is calculated

both for stabilizing trades only and

stabilizing plus reliquefying trades. (A

reliquefying transaction is one in which

the specialist reduces a position in a

specialty stock by selling part of a long

position on a zero-minus tick, or

purchasing to cover part of a short

position on a zero-plus tick.) These

percentages are provided for base

periods (ie., non-volatile periods) and

volatile periods (days when there is a

change of one percent or more in the

S&P 500 Stock Price Index),5 and each

stock’s ten percent most volatile days,6

so that performance of a unit relative to

other units can be compared as to

volatile and non-volatile market

conditions.

The capital utilization measure

separates stocks into three broad

groupings including:

• Stocks included in the top 200

stocks in the S&P 500 Stock Price Index

and other stocks that are at least as

active (based on average daily dollar

value of shares traded).

• The remainder of the S&P 500 and

any stocks among the 500 most active

on the Exchange.

• All other stocks.

Specialist units are placed

alphabetically into three tiers based on

their base day and volatile day capital

utilization percentages for each of the

three groupings of stocks. Within each

grouping, a Floor-wide mean capital

utilization percentage is calculated. A

unit will be in Tier 1 if its capital

utilization percentage is more than 1.1

standard deviations above the mean. (A

standard deviation is a statistical

measure of the distance from the mean.)

A unit will be in Tier 2 if its capital

utilization percentage is within 1.1

standard deviations above or below the

mean. A unit will be in Tier 3 if its

capital utilization percentage is more

than 1.1 standard deviations below the

mean.

During the past year, the Allocation

Committee has received specialist

capital utilization information on a

‘‘rolling’’ 12-month basis. The

Allocation Committee has been given

information as to a unit’s tier in each

stock grouping, with the tier data being

included with other objective data, such

as DOT turnaround performance,

stabilization rates and TTV percentages.

The specialist units themselves have

been given, on a monthly basis for the

prior 12 months, their actual capital

utilization percentages for each stock.7

The Exchange implemented this new

measure of specialist performance as a

one-year pilot which is due to expire on

December 31, 1994. In its July 25, 1994,

report on the Allocation and Capital

Utilization pilots, the Exchange

reviewed the Committee’s use of the

capital utilization measure in allocation

decisions. The measure appears to be a

useful addition to the other measures of

specialist performance referred to by the

Committee. It is proposed that the pilot

measure of specialist capital utilization

be extended for an additional six

months, through June 30, 1995, to be

used by the Allocation Committee as

described above.

2. Statutory Basis

The basis under the Act for the

proposed rule change is the requirement

under Section 6(b)(5) that an Exchange

have rules that are designed to promote

just and equitable principles of trade, to

remove impediments to, and perfect the

mechanism of a free and open market

and, in general, to protect investors and

the public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed rule change will impose

any burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act.

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. 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 other 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.

Copies of such filing will also be

available for inspection and copying at

the principal office of the NYSE. All

submissions should refer to File No.

SR–NYSE–94–49, and should be

submitted by January 27, 1995.

IV. Commission’s Findings and Order

Granting Approval of Proposed Rule

Change

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, with the

requirements of Sections 6 and 11 of the

Act. Section 6(v)(5) requires that the

rules of an exchange be designed to

promote just and equitable principles of

trade, to prevent fraudulent and

manipulative acts, and, in general, to

protect investors and the public interest.

Section 11(b) of the Act and Rule 11b–

1 thereunder allow exchanges to

promulgate rules relating to specialists

in order to maintain fair and orderly

markets. For the reasons set forth below,

the Commission continues to believe

that the consideration of specialist

capital utilization by the Allocation

Committee should enhance the

Exchange’s allocation process and

encourage improved specialist

performance, consistent with the

protection of investors and the public

interest.
Federal Register / Vol. 60, No. 4 / Friday, January 6, 1995 / Notices 2169

8See, e.g., Rule 11b–1, 17 CFR 240.11b–1 (1994);

NYSE Rule 104.

9See, e.g., Commission’s order approving

revisions to the NYSE’s Allocation Policy and

Procedures, Securities Exchange Act Release No.

34906 (October 27, 1994), 59 FR 55142.

10See note 3, supra.

11The Commission notes that this request for

information is not exclusive an that the NYSE

should add any additional data and analysis to the

report in order to assess the effectiveness of the

capital utilization measure.

12This information should include which stocks

were reallocated due to performance, and the

specialist units involved in each reallocation.

13 15 U.S.C. 78s(b)(2) (1988).

14 17 CFR § 200.30–3(a)(12) (1991).

Specialists play a crucial role in

providing stability, liquidity and

continuity to the trading of securities.

Among the obligations imposed upon

specialists by the Exchange, and by the

Act and rules thereunder, is the

maintenance of fair and orderly markets

in designated securities.8 To ensure that

specialists fulfill these obligations, it is

important that the Exchange develop

objective measures of specialist

performance and prescribe stock

allocation procedures and policies that

encourage specialists to strive for

optimal performance. The Commission

supports the NYSE’s effort to develop an

objective measure of specialist capital

utilization to encourage improved

specialist performance and market

quality.

The Commission believes that

extending the pilot period for the

specialist capital utilization tier ratings

is appropriate because that standard

should provide the NYSE Allocation

Committee with an objective measure of

specialist performance that will refine

the Exchange’s allocation process and

thereby encourage improved specialist

performance. The NYSE’s Allocation

Policy emphasizes that the most

significant allocation criterion is

specialist performance.9 In the

Commission’s view, performance based

stock allocations not only help to ensure

that stocks are allocated to specialists

who will make the best markets, but

will provide an incentive for specialists

to improve their performance or

maintain superior performance.

For these reasons and for the other

reasons discussed in Release No.

33369,10 the Commission has

determined to extend the pilot period

for this measure through June 30, 1995.

The Commission believes that extending

the pilot period is appropriate because

it will provide the Exchange and the

Commission with an opportunity to

further study the effects of the use of the

measure on the NYSE’s allocation

process. During the pilot period, the

Commission continues to expect the

NYSE to monitor carefully the effects of

the revised Allocation Policy and report

its findings to the Commission.

Specifically, the Commission request

the NYSE report the capital utilization

data as presented to the Allocation

Committee in three tiers 11 and any

action taken by the Allocation

Committee.12 The Commission also

requests that the NYSE submit its

monitoring report, as well as any

requests for extension or permanent

approval of the use of the capital

utilization measure, by May 1, 1995.

The Commission finds good cause

pursuant to Section 19(b)(2) of the Act

for approving the proposed rule change

prior to the thirtieth day after

publication of the proposed rule change

in the Federal Register. Accelerated

approval will enable the Exchange to

continue to make use of the capital

utilization measure of specialist

performance on an uninterrupted basis

and will ensure continuity and

consistency in the stock allocation

deliberation process.

V. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,13 that the

proposed rule change (File No. SR–

NYSE–94–49) be approved through June

30, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–370 Filed 1–5–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35169; File No. SR–NASD–

94–71]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

National Association of Securities

Dealers, Inc. Relating to the

Application of ‘‘Do Not Reduce’’ and

‘‘Do Not Increase’’ Instructions With

Respect to the Repricing of Open

Orders

December 28, 1994.

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 7, 1994,

the National Association of Securities

Dealers, Inc. (‘‘NASD’’ or ‘‘Association’’)

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 NASD. 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 NASD is proposing to amend

Article III, Section 46 of the Rules of

Fair Practice. Below is the text of the

proposed rule change. Proposed new

language is italicized and proposed

deletions are bracketed.

Adjustment of Open Orders

Sec. 46.

* * * * *

(e) The provisions of this rule shall

not apply to: (1) orders governed by the

rules of a registered national securities

exchange; (2) orders marked ‘‘do not

reduce’’ where the dividend is payable

in cash; (3) orders marked ‘‘do not

increase[;]’’ where the dividend is

payable in stock, provided that the price

of such orders shall be adjusted as

required by this rule; (4) open stop

orders to buy; (5) open sell orders; or (6)

orders for the purchase or sale of

securities where the issuer of the

securities has not reported a dividend,

payment or distribution pursuant to

Securities and Exchange Commission

Rule 10b–17.

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

NASD 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 NASD has

prepared summaries, set forth in Section

(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

Article III, Section 46 of the Rules of

Fair Practice, which became effective

September 15, 1994, requires a member

holding an open order, prior to

executing or permitting the order to be

executed, to adjust the price and size of

the order in proportion to the dividend

or other distribution, on the day that the

security is quoted ex. Since the rule

became effective, the NASD has

discovered an inconsistency in the

definition of the terms ‘‘Do Not Reduce’’

(DNR) and ‘‘Do Not Increase’’ (DNI)

between the NASD’s Section 46 and