Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Notices 8433

transactions in securities, and to protect

investors and the public.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The proposed rule change will

remove or lessen existing burdens on

competition in that it will enhance the

liquidity of and provide for greater price

competition in Amex securities trading

under $10.

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 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 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 Amex. All submissions

should refer to File No. SR–Amex–95–

02 and should be submitted by March

7, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–3568 Filed 2–13–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35345; File No. SR–CBOE–

94–54]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Board Options Exchange

Relating to Firm Quote

Responsibilities

February 8, 1995.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934, 15

U.S.C. 78(b)(1), notice is hereby given

that on January 4, 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 Exchange proposes to expand the

applicability of the firm quote rule to

include two-part orders in equity

options, in which the component series

are on opposite sides of the market and

in a one-to-one ratio. 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, 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

Exchange has prepared summaries, set

forth in sections (A), (B), and (C) below,

of the most significant parts 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 expand the applicability of

Rule 8.51 to certain two part equity

orders and thus, to attempt to ensure the

ability of public customers to execute

defined risk strategies, such as spreads

and straddles, at the disseminated

market quotes.

CBOE Rule 8.51 places the

responsibility on the trading crowd to

ensure that non-broker-dealer customer

orders are sold or bought, up to ten

contracts, at the quoted offer or bid,

respectively. This ‘‘firm quote’’ or ‘‘tenup’’ requirement is meant to provide

confidence that the displayed quotes

may be relied upon by the investing

public and to ensure that public

customer orders will be executed at

those quotes.

From its inception the rule was

intended to apply to, and has been

interpreted to apply only to, single part

orders, i.e., either a buy order or a sell

order for a particular option series. The

Exchange has determined, however, that

public customers would be served better

if the interpretation were expanded to

included a requirement to provide a tenup market in two-part equity option

orders in which the components of the

order are on opposite sides of the

market and in a one-to-one ration to

each other. The expansion in the

interpretation of this rule would make it

possible for public customers to execute

both sides of a defined risk strategy,

such as a spread or a straddle, at the

disseminated prices. This rule change,

then, should help the Exchange compete

more effectively for public customer

order flow and trading activity.

The Exchange does not believe this

rule change would be burdensome to

market-makers because, under the

current interpretation, the marketmakers would be required to satisfy the

ten-up requirement as to each leg of a

spread or straddle if each was placed as

a separate order. This rule change

would merely ensure that these two

components may be done at the same

time, as one order, and at the same

prevailing market quotes. The Exchange

believes, however, that it is

inappropriate, under any circumstances,

to extend the firm-quote treatment to

multi-part orders with all parts on the

same side of the market as this would

effectively impose the burden on

options market-makers of making

markets in the underlying security. For

example, a position in a long call and

a short put is economically equivalent

to being long the underlying stock; and

thus, requiring a trading crowd to

provide firm quote treatment to an order

for this position would essentially be

requiring the option market-makers to

act as market-makers in the underlying

security.
8434 Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Notices

1 17 CFR 200.30–3(a)(12) (1994).

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

2Letter from Piku Thakkar, Assistant Counsel,

DTC, to Peter R. Geraghty, Division of Market

Regulation, Commission (January 24, 1995).

3Same-day funds, which are also known as ‘‘Fed

funds’’, are immediately available for redelivery on

the day of receipt.

4 During 1993, a total of 392,000 new issues were

made eligible for DTC’s services. This was 99.94%

of all new issues submitted to DTC’s Underwriting

Department for eligibility determinations. These

figures include equity, corporate debt, municipal

debt, and U.S. Government and Agency securities.

In the unusual circumstance where the processing

characteristics of a new issue that is being

structured would not meet DTC’s operational

arrangements, if contacted early enough in the

planning process DTC staff often is able to assist in

suggesting restructuring alternatives that would

permit the issue to be made depository eligible.

5 DTC’s operational arrangements memorandum

was published in June 1987 and was updated in

both June 1988 and February 1992. For a complete

description of the operational arrangements

memorandum, refer to Securities Exchange Act

Release No. 24818 (August 19, 1987), 52 FR 31833

[File No. SR–DTC–87–10] (order approving the

implementation of DTC’s operational arrangements

for the eligibility of security issues), and Securities

Exchange Act Release No. 30625 (April 30, 1992),

57 FR 18534 [File No SR–DTC–92–06] (order

approving modifications to DTC’s operational

arrangements).

Under Rule 8.51, the firm quote size

minimum will not apply whenever a

‘‘fast market’’ is declared under rule 6.6,

and may be suspended for any class or

series on a case by case basis as

determined by the Market Performance

Committee.

CBOE believes the proposed rule

change will contribute to a market that

will instill an increasing customer

confidence and ability to transact

business in an increasingly efficient

manner. CBOE believes the proposed

rule change is consistent with Section

6(b) of the Securities Exchange Act of

1934 (the ‘‘Exchange Act’’) in general

and furthers the objectives of Section

6(b)(5) in particular by providing rules

that perfect the mechanisms of a free

and open market and that protect

investors and the public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

CBOE 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 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 submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

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. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of CBOE. All submissions should

refer to the file number in the caption

above and should be submitted by

March 7, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to the delegated

authority.1

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–3618 Filed 2–13–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35342; File No. SR–DTC–

94–19]

Self-Regulatory Organizations; The

Depository Trust Company; Notice of

Filing of Proposed Rule Change

Regarding Implementation of New

Guidelines Regarding Principal and

Income Payments in a Same-Day

Funds Environment

February 8, 1995.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

December 5, 1994, The Depository Trust

Company (‘‘DTC’’) 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 primarily by DTC. On January

24, 1995, DTC amended the proposed

rule change to include a statement that

the proposed rule change did not

impose any burden on competition not

necessary or appropriate in furtherance

of the purposes of the Act.2 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

modifications to the existing operational

arrangements necessary for a securities

issue to become eligible for DTC’s

services. Specifically, the rule change

calls for changes to the processing of

principal and income distributions in a

same-day funds environment.3

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

DTC 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. DTC 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

DTC’s operational arrangements are

designed to maximize the number of

issues that can be made depository

eligible while ensuring orderly

processing and timely payments to

participants. DTC’s experience

demonstrates that when issuers,

underwriters, and their counsel are

aware of DTC’s requirements those

requirements can be met almost without

exception.4 The purpose of the

proposed rule change is to incorporate

in DTC’s operational arrangements

memorandum principles for the

processing of principal and income

payments in same-day funds.5 Towards

this end, the operational arrangements

memorandum will incorporate the

relevant provisions of the ‘‘Standards