2410 Federal Register / Vol. 60, No. 5 / Monday, January 9, 1995 / Notices

6Telephone conversation between James R.

McDaniel, Schiff Hardin & Waite, and Stephen M.

Youhn, SEC, on December 21, 1994 (‘‘Amendment

No. 1’’). The Exchange proposes that the ‘‘20% test’’

be applied in the same manner as that contained in

Securities Exchange Act Release No. 34157 (June 3,

1994), 59 FR 30062 (June 10, 1994) (Commission

approval order allowing the expedited trading

approval of certain narrow-based index options).

7Telephone conversation between James R.

McDaniel, Schiff Hardin & Waite, and Stephen M.

Youhn, SEC, on December 22, 1994.

8 17 CFR 200.30–3(a)(12) (1993).

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

delivery on short sales, and the issuer

credit risk associated with long

warrants—may cause these margin

requirements to be insufficient to fully

cover the risk of such positions in

certain circumstances, and brokerdealers must therefore be prepared to

call for additional margin when

appropriate. CBOE further believes that

each exchange listing stock index,

currency index or currency warrants

should draw the attention of its member

firms to this issue in connection with

the adoption of these margin rules.

In accordance with the Lawson letter,

the proposed rules would be applicable

only to warrants issued after the

effective date of this filing. Warrants

issued prior to that date would remain

subject to rules then in effect.

Applicability of Other Exchange

Rules. Appendix A to Chapter XXX,

which is a cross-reference table to other

rules of the Exchange that are applicable

to securities otherwise covered in

Chapter XXX, is being updated to reflect

the applicability of certain options rules

(i.e., customer protection rules

including, but not limited to, options

account approval, suitability, etc.,) to

stock index warrants, currency index

warrants and currency warrants.

Listing Criteria. The listing criteria for

stock index warrants and currency

warrants are being amended to reflect

the comments contained in the Lawson

letter and to make clear that they apply

to currency index warrants. In

particular, issuers would be required to

have a minimum tangible net worth in

excess of $150 million. In addition, the

aggregate original issue price of all of a

particular issuer’s warrant offerings

(combined with offerings by its

affiliates) that are listed on a national

securities exchange or that are National

Market securities traded through

NASDAQ would not be permitted to

exceed 25 percent of the issuer’s net

worth. Finally, opening prices for all

U.S. traded securities will be used to

determine an index’s settlement value

where 25 percent or more of the value

of the index is represented by securities

whose primary trading market is in the

U.S.

Trading Halts or Suspensions.

Proposed new Rule 30.36 makes the

provisions in Rule 24.7 concerning

trading halts or suspensions in stock

index options applicable to stock index

warrants.

Specific Warrant Issues. It is the

Exchange’s understanding that, upon

approval of the foregoing amendments,

no rule filing pursuant to Section 19(b)

of the Act will be required in order for

the Exchange to list specific issues of

warrants on a board-based index that is

the underlying index for warrants or

standardized options that have

previously been listed or approved for

listing by the Commission on a national

securities exchange or national

securities association.

Initial and maintenance listing

standards for stock index warrants will

require that no more than 20% of the

securities in the underlying index, by

weight, may be comprised of foreign

securities that are not subject to

comprehensive surveillance sharing

agreements between the CBOE and the

primary exchange on which the foreign

security (including a foreign security

underlying an ADR) is traded.6 Prior to

trading stock index or currency

warrants, the Exchange will distribute a

circular to its membership providing

guidance regarding member firm

compliance responsibilities (including

suitability recommendations) when

handling transactions in index or

currency warrants.7

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 impose no burden on

competition.

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 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, 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 at

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 the CBOE. All submissions

should refer to File No. SR–CBOE–94–

34 and should be submitted by January

30, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–427 Filed 1–6–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35186; File No. SR–DTC–

94–16]

Self-Regulatory Organizations; The

Depository Trust Company; Notice of

Filing of a Proposed Rule Change

Clarifying the Depository Trust

Company’s Policy on Depository-toDepository Services and Fees

December 30, 1994.

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

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on
Federal Register / Vol. 60, No. 5 / Monday, January 9, 1995 / Notices 2411

2This policy statement does not apply to ‘‘linked

services,’’ which the Commission has described as

arrangements where one depository (the ‘‘servicing

depository’’) performs for another depository (the

‘‘using depository’’( the core tasks necessary to

deliver the services to the using depository’s

participants. The Commission has cited as

examples of linked services DTC’s processing of ID

confirmations and affirmations and DTC’s fourthparty delivery service. The Commission has

expressed the view that a servicing depository

should be permitted to charge a using depository

the same fee it charges its participants for the same

or a similar service. See Securities Exchange Act

Release No. 23083 (March 31, 1986) at 15–23.

3See letter from Richard B. Nesson, Executive

Vice President and General Counsel, DTC, to Jerry

W. Carpenter, Assistant Director, Division of Market

Regulation, Commission (November 11, 1994).

4Letter from William F. Jaenike, Chairman of the

Board and Chief Executive Officer, DTC, to Robert

J. McGrail, Executive Vice President and Chief

Operating Officer, MSTC (November 17, 1994).

5Securities Exchange Act Release No. 20461

(December 7, 1983) at footnote 34.

6 15 U.S.C. 78q–1(b)(3) (1988).

7 DTC states that the Commission has indicated

that where one depository is entitled to charge

another (e.g., for linked services), it expects that any

offer of volume discounts to participants generally

would also be made available to the other

depository. Securities Exchange Act Release No.

23803 (March 31, 1986) at page 21.

November 29, 1994, The Depository

Trust Company (‘‘DTC’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change (File No. SR–DTC–94–16) as

described in Items I, II, and III below,

which Items have been prepared

primarily by DTC. 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

DTC proposes to clarify its policy

regarding depository-to-depository

services and fees by filing the following

statement:

DTC shall make available to any other

securities depository that is registered as a

clearing agency under Section 17A of the

Securities Exchange Act of 1934 (a

‘‘depository’’) any service that DTC makes

available to its Participants generally,

provided that such depository makes its

services available to DTC on the same basis.

DTC shall charge such depository for the

services rendered by DTC and shall pay such

depository for services rendered to DTC only

such fees as DTC and the depository

negotiate, but if DTC and such depository do

not have an agreement on fees, DTC shall (i)

render book-entry delivery services to such

depository without charge if and so long as

such depository shall render book-entry

delivery services to DTC on the same basis

and (ii) charge its published fees for services

relating to the physical handling of

certificates rendered by DTC to such

depository and pay such depository its

published fees for custody-related services

rendered by such depository to DTC.2

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 that 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

The purpose of the proposed rule

change is to state DTC’s policy

respecting depository-to-depository

services and fees. DTC states that this

policy statement reflects the practices

that have been followed by DTC and the

other depositories since the beginning of

interdepository processing and is

consistent with the Commission’s

expressed views concerning these

matters.

From the very beginning of

interdepository processing, in the mid1970s and through the present, DTC and

the other depositories have charged and

paid each other for services rendered

only such fees that have been

negotiated. For example, in 1975,

Pacific Securities Depository Trust

Company (‘‘PSDTC’’) declared that it

would not pay or levy charges on the

other depositories. In September 1976,

DTC was informed of the unilateral

determination by the Midwest

Securities Trust Company (‘‘MSTC’’)

Board that as a matter of principle

MSTC would discontinue paying DTC

for services other than for physical

withdrawals of certificates. In 1977,

DTC, PSDTC, and MSTC formally

agreed to provide most services to each

other without charge (‘‘no charge

agreement’’).

At the present time, DTC has an

informal agreement with the

Philadelphia Depository Trust Company

covering custody-related services. Each

depository charges the other its

published fees for these services. In June

1992, DTC and MSTC entered into an

agreement that provided for depositoryto-depository charges for certain

services. This agreement was terminated

by DTC on June 1, 1994, effective

August 1, 1994, in accordance with the

procedure set forth in the agreement for

termination by either party upon sixty

days notice.3 DTC has advised MSTC

that if a new agreement is not reached

between DTC and MSTC, after

November 30, 1994, DTC will continue

to provide services to MSTC but in the

manner and on the terms described in

the policy statement,4 which is the

subject of the proposed rule change.

DTC states that the Commission has

been aware of and has commented in its

releases on the practice followed by FTC

and other depositories of paying each

other only such fees as are negotiated

rather than all fees charged to

participants generally. DTC states that

the Commission in its releases has never

expressed the view that one depository,

by virtue of executing a participant

agreement with another depository in

order to establish the legal framework

for an interface relationship, thereby

becomes subject to all of that other

depository’s published participant fees.

DTC states that the Commission has

expressed that belief that:

[R]egistered securities depositories are not

similar to ordinary participants. Registered

securities depositories are subject to special

regulation that no other participants face

including a specific statutory charge to

cooperate with other registered securities

depositories. Thus, the Commission believes

that a ‘‘no-charge’’ policy with respect to

interface account activity does not result in

an inequitable allocation of fees.5

DTC believes that the proposed rule

change is consistent with Section

17A(b)(3) 6 of the Act. DTC believes that

implementation of the subject policy

will help assure that depository

interface services are available to

participants of any depository thereby

promoting the goal of one-account

settlement. DTC also states that the

policy will enable DTC to avoid paying

another depository inappropriately high

fees that might effect its inefficient

operation and to avoid paying another

depository higher per-unit fees than

such depository charges its participants

generally.7 DTC believes that managing

the fees paid to other depositories,

which currently account for

approximately 60% of DTC’s total cost

of providing interface services to its

participants, will help reduce the fees

that DTC must charge its participants to

recover those costs.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

DTC believes that by promoting the

goal of one-account settlement and by

enabling DTC to control the interface

costs that are paid by its participants,

the proposed rule change would help
2412 Federal Register / Vol. 60, No. 5 / Monday, January 9, 1995 / Notices

8 17 CFR 200.30–3(a)(12) (1994).

1See Securities Exchange Act Release No. 34955

(November 9, 1994), 59 FR 59810.

2The Pilot Program is the first phase of a system

in which the Board ultimately intends to make

available transaction information which is both

comprehensive and contemporaneous. In other

phases, information for institutional and retail

customer transactions will be added to the system.

In a recent letter to the Commission, the Board

outlined the four-phase plan, of which the present

fee filing applies to phase one. See letter from

Robert Drysdale, Chairman, MSRB, to Arthur Levitt,

Chairman, SEC, dated November 3, 1994. The Board

will submit to the Commission a proposed rule

change prior to the implementation of each planned

phase.

promote competition among depository

users.

(C) Self-Regulatory Organization’s

Statement on Comments on that

Proposed Rule Change Received From

Members, Participants, or Others

DTC has not sought or received

comments on the proposed rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within thirty-five 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 ninety 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 DTC 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, 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, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of DTC. All submissions should

refer to the file number SR–DTC–94–16

and should be submitted by January 30,

1995.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–381 Filed 1–6–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35181; File No. SR–MSRB–

94–18]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Municipal Securities Rulemaking

Board Relating to Fees for

Subscription to the Transaction

Reporting Pilot Program

December 30, 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 16, 1994,

the Municipal Securities Rulemaking

Board, Inc. (‘‘MSRB’’ or ‘‘Board’’) 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 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 MSRB is filing herewith a

proposed rule change to establish a fee

for an annual subscription to a Service

(the ‘‘Service’’) which will provide daily

reports of transaction data from the

Board’s Transaction Reporting Pilot

Program (‘‘the Pilot Program’’). The

Board will charge a fee for the Service

equal to a yearly rate of $15,000. The

proposed fee is structured to defray the

Board’s cost of disseminating the

transaction data and to defray, in part,

the cost of collecting and compiling

inter-dealer transaction data that will be

used in the Pilot Program both for the

Service and for a comprehensive

surveillance database. The Board does

not expect or intend to make a profit

from the Service, and will review the fee

annually to determine whether

adjustments are necessary.

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

self-regulatory organization 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

1. Purpose

Background and Description of the

Pilot Program. On November 9, 1994,

the Commission approved the Board’s

plan for the Pilot Program for collecting

inter-dealer transaction data and the

production and sale of daily transaction

reports containing certain summarized

data about the inter-dealer transactions.1

Operation of the Pilot Program is

planned to commence with reporting of

inter-dealer trades on or after January 2,

1995.2 As part of the Pilot Program, the

Board also will make information on all

inter-dealer trades in municipal

securities available to the Commission

and other regulatory agencies in a

‘‘surveillance database’’ to assist in

inspection and enforcement of Board

rules. This data on specific transactions,

which will include the identity of

dealers, will not be publicly available

and will not be included in the Service.

The Pilot Program will collect interdealer transaction data by using data

submitted to the automated comparison

system for inter-dealer municipal

securities transactions. The transaction

reports will provide aggregate data

about market volume on the previous

business day and will provide summary

price and volume data about those

issues that were traded at or above a

threshold number of times on that day.

For each of these issues, the report will

provide high, low and average prices of

the transactions in the issue, along with

the total par value traded and the

number of trades in the issue. The

average prices (but not the high and low

prices) will be calculated based upon

those trades in a ‘‘band’’ of $100,000 to

$1 million par value. The prices and par

values of individual transactions will

not be included in the transaction

reports, but will be available to the

enforcement agencies in the

surveillance database.

As part of the Service, the Board will

provide the transaction reports to the