Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Notices 7805

1Letter from William Floyd-Jones, Jr., Assistant

General Counsel, Amex, to Michael Walinskas,

Derivative Products Regulation, SEC, dated Dec. 23,

1994. The Amex originally proposed listing

BOUNDs with 60 month expirations and extending

the maximum duration of LEAPs from 39 months

to 60 months.

use safety margins based on an alternate

methodology consistent with the

proposed ASME Code Case N–514

guidelines. The ASME Code Case N–514

allows determination of the setpoint for

LTOP events such that the maximum

pressure in the vessel would not exceed

110% of the P/T limits of the existing

ASME Appendix G. This results in a

safety factor of 1.8 on the principal

membrane stresses. All other factors,

including assumed flaw size and

fracture toughness, remain the same.

Although this methodology would

reduce the safety factor on the principal

membrane stresses, use of the proposed

criteria will provide adequate margins

of safety to the reactor vessel during

LTOP transients.

The change will not increase the

probability or consequences of

accidents, no changes are being made in

the types of any effluents that may be

released offsite, and there is no

significant increase in the allowable

individual or cumulative occupation

radiation exposure.

Accordingly, the Commission

concludes that this proposed action

would result in no significant

radiological environmental impact.

With regard to potential nonradiological impacts, the proposed

change involves use of more realistic

safety margins for determining the

PORV setpoint during LTOP events. It

does not affect non-radiological plant

effluents and has no other

environmental impact. Therefore, the

Commission concludes that there are no

significant non-radiological

environmental impacts associated with

the proposed action.

Alternative to the Proposed Action

Since the Commission has concluded

there is no measurable environmental

impact associated with the proposed

action, any alternatives with equal or

greater environmental impact need to be

evaluated.

As an alternative to the proposed

action, the staff considered denial of the

proposed action. Denial of the

application would result in no change

in current environmental impacts. The

environmental impacts of the proposed

action and the alternative action are

equivalent.

Alternative Use of Resources

This action did not involve the use of

any resources not previously considered

in the Final Environmental Statements

related to operation of the Salem

Nuclear Generating Station, dated April

1973.

Agencies and Persons Consulted

The NRC staff consulted with the state

of Pennsylvania regarding the

environmental impact of the proposed

action. The state official had no

comments.

Finding of No Significant Impact

The Commission has determined not

to prepare an environmental impact

statement for the proposed exemption.

Based upon the foregoing

environmental assessment, the

Commission concludes that the

proposed action will not have a

significant effect on the quality of the

human environment.

For further details with respect to this

action, see the request for exemption

dated December 22, 1994, which is

available for public inspection at the

Commission’s Public Document Room,

2120 L Street, NW., Washington, DC and

at the local public document room

located at the Salem Free Public Library,

112 West Broadway, Salem, New Jersey

08079.

Dated at Rockville, Maryland, this 7th day

of February 1995.

For The Nuclear Regulatory Commission.

Chester Poslusny,

Acting Director, Project Directorate I–2,

Division of Reactor Projects—I/II, Office of

Nuclear Reactor Regulation.

[FR Doc. 95–3366 Filed 2–8–95; 8:45 am]

BILLING CODE 7590–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–35327; File No. SR–AMEX–

94–56]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change and

Amendment No. 1 to Proposed Rule

Change by the American Stock

Exchange, Inc., Relating to Buy-Write

Options Unitary Derivatives

(‘‘BOUNDs’’)

February 3, 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 12, 1994,

the American Stock Exchange, Inc.

(‘‘Amex’’ 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 Amex, pursuant to Rule 19b–4

under the Act, proposes to amend its

rules to permit trading in Buy-Write

Options Unitary Derivatives

(‘‘BOUNDs’’). As described in more

detail below, BOUNDs are long term

options which the Amex believes have

the same economic characteristics as a

covered call writing strategy. On

December 23, 1994, the Exchange

submitted Amendment No. 1

(‘‘Amendment No. 1’’) to the filing to

provide that BOUNDs will be listed

with a maximum expiration date

corresponding to the longest prescribed

long term equity options (‘‘LEAPs’’)

then available for trading, which is

currently 39 months.1

The text of the proposed rule change

and Amendment No. 1 are available at

the Office of the Secretary, Amex 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

self-regulatory organization included

statements concerning the purpose of,

and statutory 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

In 1986, the Exchange began listing 26

unit investment trusts, each of which

held shares of a single ‘‘blue-chip’’

equity security. Investors were offered

an opportunity to separate their

ownership interests in these trusts into

two distinct trading components

representing different economic

characteristics of the individual stocks

held in the trusts. These separate

trading components were known as

PRIMEs and SCOREs.
7806 Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Notices

2See Amendment No. 1.

PRIMEs were the enhanced income/

limited capital gain component. The

holder of a PRIME retained the

dividends on the stock held by the trust

and participated in the underlying

stock’s appreciation up to a fixed dollar

amount. SCOREs were the capital

appreciation component. The holder of

a SCORE had the right to all capital

appreciation above a fixed dollar

amount, but did not receive the

dividends on the underlying stock.

PRIMEs and SCOREs were extremely

popular with investors, but the trusts

from which they derived have now

reached their five-year termination

dates. Certain Internal Revenue Service

regulations, moreover, effectively

preclude the creation of new PRIMEs

and SCOREs through the original trust

mechanism.

The Exchange, for some time, has

sought a replacement for the expired

PRIMEs and SCOREs. During this

process, the Exchange and other options

exchanges began to list and trade

LEAPs. Like SCOREs, LEAPs enable

investors to receive the benefits of a

stock’s price appreciation above a fixed

dollar amount over a long period of

time. Currently, however, there is no

generally available replacement for

PRIMEs.

The Exchange, accordingly, proposes

to list BOUNDs as a replacement for

PRIMEs. The Options Clearing

Corporation (‘‘OCC’’) will be the issuer

of all BOUNDs traded on the Exchange.

As with all OCC issued options,

BOUNDs will be created when an

opening buy and an opening sell order

are executed. The execution of such

orders will increase the open interest in

BOUNDs. Except as described herein,

BOUNDs will be subject to the rules

governing standardized options.

The Exchange anticipates listing

BOUNDs with respect to those

underlying securities that have listed

LEAPs. The criteria for stocks

underlying BOUNDs will be the same as

the criteria for stocks underlying LEAPs.

It is anticipated that the sum of the

market prices of a LEAP and a BOUND

on the same underlying stock with the

same expiration and exercise price will

closely approximate the market price for

the underlying stock. If the combined

price of the LEAP and BOUND diverge

from that of the underlying common

stock, there will be an arbitrage

opportunity which, when executed,

should bring the price relationships

back into line.

BOUNDs will have the same strike

prices and expiration dates as their

respective LEAPs except that the

Exchange will list only a strike price

that is at or very close to the price of the

underlying stock at the time of listing,

or that is below the price of the stock

at that time. For example, at the time of

initial listing, the strike prices for a

BOUND with the underlying stock

trading at $50 per share, would be set

at $40 and $50. The Exchange would

not list a BOUND with a strike price of

$60 in this example.

The Exchange anticipates that it will

list new complementary LEAPs and

BOUNDs on the same underlying

securities annually, or at more frequent

intervals, depending on market demand.

The Exchange has the current authority

to list LEAPs with up to 39 months until

expiration and, therefore, seeks to

introduce BOUNDs with up to the same

39 month duration.2

Like PRIMEs, BOUNDs will offer

essentially the same economic

characteristics as covered calls with the

added benefits that BOUNDs can be

traded in a single transaction and are

not subject to early exercise. BOUND

holders will profit from appreciation in

the underlying stock’s price up to the

strike price and will receive payments

equivalent to any cash dividends

declared on the underlying stock. On

the ex-dividend date for the underlying

stock, OCC will debit all accounts with

short positions in BOUNDs and credit

all accounts with long positions in

BOUNDs with an amount equal to the

cash dividend on the underlying stock.

Like regular options, BOUNDs will

trade in standardized contract units of

100 shares of underlying stock per

BOUND so that at expiration, BOUND

holders will receive 100 shares of the

underlying stock for each BOUND

contract held if, on the last day of

trading, the underlying stock closes at or

below the strike price. However, if at

expiration the underlying stock closes

above the strike price, the BOUND

contract holder will receive a payment

equal to 100 times the BOUND’s strike

price for each BOUND contract held.

BOUND writers will be required to

deliver either 100 shares of the

underlying stock for each BOUND

contract or the strike price multiplied by

100 at expiration, depending on the

price of the underlying stock at that

time. This settlement design is similar

to the economic result that accrues to an

investor who has purchased a covered

call (i.e., long stock, short call) and held

that position to the expiration of the call

option.

For example, if the XYZ BOUND has

a strike price of $50 and XYZ stock

closes at $50 or less at expiration, the

holder of the XYZ BOUND contract will

receive 100 shares of XYZ stock. This is

the same result as if the call option in

a buy—write position had expired out of

the money; i.e., the option would expire

worthless and the writer would retain

the underlying stock. If XYZ closes

above $50 per share, then the holder of

an XYZ BOUND will receive $5,000 in

cash (100 times the $50 strike price).

This mimics the economic result to the

covered call writer when the call

expires in the money, i.e., the writer

would receive an amount equal to 100

shares times the strike price and would

forfeit any appreciation above that price

(because the stock would be delivered to

satisfy the settlement obligations created

upon the exercise of the call option).

The settlement mechanism for the

BOUNDs will operate in conjunction

with that of LEAP calls. For example, if

at expiration the underlying stock closes

at or below the strike price, the LEAP

call will expire worthless, and the

holder of a BOUND contract will receive

100 shares of stock from the short

BOUND. If on the other hand, the LEAP

call is in the money at expiration, the

holder of the LEAP call is entitled to

100 shares of stock from a short LEAP

upon payment of the strike price, and

the holder of a BOUND contract is

entitled to the cash equivalent of the

strike price times 100 from the short

BOUND. An investor long both a LEAP

and a BOUND, where XYZ closes above

the $50 strike price at expiration, would

be entitled to receive $5,000 in cash

from the short BOUND and, upon

exercise of the LEAP, would be

obligated to pay $5,000 to receive 100

shares of XYZ stock.

An investor long the underlying stock,

and who writes both a LEAP and a

BOUND, will be obligated to deliver the

stock to the long LEAP call if the

underlying stock closes above the strike

price, and will receive in return

payment of the strike price times 100,

which amount will then be delivered to

the long BOUND. Accordingly, the

Exchange believes a covered writer’s

position is effectively closed upon the

delivery of the underlying stock. If a

writer of both instruments has deposited

cash or securities other than the

underlying stock as margin for a short

LEAP call and BOUND, then the writer

delivers 100 shares of stock (purchased

on the open market) to the long LEAP

call upon payment of the strike price

times 100. The writer of the BOUND

then delivers the cash value of 100

times the strike price to the holder of

the long BOUND.

It should be noted that LEAPs are

American-style options whereas
Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Notices 7807

3A European-style option may only be exercised

during a limited period of time before the option

expires. An American-style option may be exercised

at any time prior to its expiration.

BOUNDs are European-style.3 The

Exchange believes that it would be

inappropriate for the BOUND holder to

have an American-style exercise right

since the BOUND will tend to trade at

a discount to the stock and strike price.

Sales Practices. BOUNDs will be

subject to the Exchange’s sales practice

and suitability rules applicable to

standardized options.

Adjustments. BOUNDs will be subject

to adjustments for corporate and other

actions in accordance with the rules of

OCC.

Position Limits. BOUNDs will be

subject to the position limits for equity

options set forth in Exchange Rule 904.

In addition, BOUNDs will be aggregated

with other equity options on the same

underlying stock for purposes of

calculating position limits. According to

the Exchange, since a BOUND to the

holder is a bullish position (i.e., the

equivalent of a short put position where

the strike price has been prepaid), the

Exchange proposes that long BOUNDs

be aggregated with long call and short

put positions in the related equity

options. Similarly, since the Exchange

believes the BOUND, from the

perspective of the seller, is a ‘‘bearish’’

position (i.e., it is the equivalent of a

long put position where the strike price

has been prepaid), it proposes to

aggregate short BOUNDs with short call

and long put positions in the related

equity options.

Customer Margin. The Exchange

proposes to apply options margin

treatment to BOUNDs as follows:

1. Long BOUND Positions: full

payment required at the time of

purchase. As described more fully

below, however, there will be a credit

for long BOUNDs in BOUND spread

positions.

2. Short BOUND Positions: the

BOUND seller receives full value of the

BOUND at the time of the initial sale

and receives no further payment when

the contract is settled either by payment

of the strike price or delivery of the

underlying stock. Short BOUND

positions, therefore, will be margined in

an amount equal to the current market

price of the BOUND plus an amount

equal to an ‘‘add-on’’ used to margin

short call options times the market

value of the BOUND. Since the

maximum obligation of the seller of a

BOUND cannot exceed the strike price,

however, the amount of margin will

never exceed the strike value. For

example:

A. Assume a stock rice of $50, an

exercise price of $50, a margin add-on

percent of 20% and the BOUND trading

at $40. In this case, the short seller

would have to pay $48 to margin the

position, i.e., $40 BOUND price plus

20% of $40.

B. Assume a stock price of $40, an

exercise price of $50, a margin add-on

percent of 20% and the BOUND trading

at $35. In this case, the margin would

be $42, i.e., $35 BOUND price plus 20%

of $35.

3. Covered Positions: Short BOUND

positions offset by the equivalent

number of shares of the underlying

stock will not require any additional

margin since the seller’s obligation to

the buyer will, in all cases, be covered

by the position in the underlying stock.

Further, since the sum of the prices of

a LEAP and a BOUND will be

approximately equal to the price of the

underlying stock, a long stock position

is cover for both a short BOUND and a

short LEAP position.

4. Spread Positions. (i) Same

Expiration—Different Strike Prices:

There will be no margin requirement for

BOUND positions which are long the

higher strike price and short the lower

strike price since the long BOUND more

than covers the obligation of the short

side of the position. For positions short

the higher strike price and long the

lower strike, a customer will be required

to post the difference between the strike

prices.

(ii) Different Expiration—Same Strike

Price: No margin will be required for

positions long the nearest expiration

and short the longer expiration since the

value of the long BOUND will cover the

obligation on the short leg of the

position. Positions that are short the

near expiration and long the distant

expiration will require full margin on

the short position less 80% of the

market value of the long position.

(iii) Different Expiration—Different

Strike Prices: There will be no margin

required for positions that are long the

near expiration and short the distant

expiration when the strike price on the

near expiration is higher than the strike

on the distant expiration. For positions

which are long the near expiration and

short the distant expiration where the

strike price on the near expiration is

lower than the strike on the distant

contract, the margin will be the

difference in the strike between the near

term and distant strikes. For positions

which are short the near expiration and

long the distant expiration, full margin

will be required on the short position

less 80% of the market value of the long

position.

(2) Basis

The Exchange believes that 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, to promote just and

equitable principles of trade, to foster

cooperation and coordination with

persons engaged in facilitating

transactions in securities, and to remove

impediments to and perfect the

mechanism of a free and open market

and the national market system.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Amex believes that 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

No written comments were either

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, 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
7808 Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Notices

4 17 CFR 200.30–3(a)(12) (1994).

available for inspection and copying in

the Commission’s Public Reference

Section, 450 Fifth Street NW.,

Washington, D.C. Copies of such filing

will also be available for inspection and

copying at the principal office of the

above-mentioned self-regulatory

organization. All submissions should

refer to the file number in the caption

above and should be submitted by

March 2, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.4

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–3280 Filed 2–8–95; 8:45 am]

BILLING CODE 8010–01–M

[Investment Company Act Release No.

20880; 811–7304]

Brookhollow Trust; Application for

Deregistration

February 3, 1995.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

deregistration under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANT: Brookhollow Trust.

RELEVANT ACT SECTION: Section 8(f).

SUMMARY OF APPLICATION: Applicant

seeks an order declaring that it has

ceased to be an investment company.

FILING DATES: The application on Form

N–8F was filed on October 28, 1994,

and amended on January 13, 1995, and

January 27, 1995.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicant with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

February 28, 1995, and should be

accompanied by proof of service on

applicant, in the form of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the writer’s interest, the reason for the

request, and the issues contested.

Persons who wish to be notified of a

hearing may request notification by

writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 5th

Street NW., Washington, D.C. 20549.

Applicant, 6 St. James Avenue, Boston,

Massachusetts 02116.

FOR FURTHER INFORMATION CONTACT:

James J. Dwyer, Staff Attorney, at (202)

942–0581, or C. David Messman, Branch

Chief, at (202) 942–0564 (Office of

Investment Company Regulation,

Division of Investment Management).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee at the SEC’s

Public Reference Branch.

Applicant’s Representations

1. Applicant is a Massachusetts

business trust and a diversified openend management investment company.

On October 19, 1992, applicant filed a

notification of registration on Form N–

8A to register as an investment company

under section 8(a) of the Act. On

November 20, 1992, applicant filed a

registration statement on Form N–1A

under section 8(b) of the Act and under

the Securities Act of 1933 to register an

indefinite number of shares.

2. Applicant’s registration statement

was declared effective on May 7, 1993.

The registration statement initially

pertained only to applicant’s

Brookhollow Treasury Money Market

Fund series. No public offering or sales

of securities of such series were made.

3. An amendment to applicant’s

registration statement pertaining to the

Brookhollow Short Duration U.S.

Government Fund (‘‘Short Duration

Fund’’) series was declared effective on

March 3, 1993. The public offering of

the shares of such series commenced on

April 2, 1993. No sales of such shares

were completed.

4. On October 1, 1993, pursuant to an

action by unanimous written consent,

applicant’s board of trustees adopted

resolutions appoving applicant’s

liquidation. On October 29, 1993,

applicant had outstanding 10,168.813

shares of beneficial interest of Short

Duration Fund, with a net asset value of

$9.93 per share and an aggregate net

asset value of $100,977.79, which

amount applicant distributed on that

date to its sole securityholder of record

(the seed capital investor).

5. Legal, accounting, printing,

mailing, deregistration, termination, and

other expenses incurred in connection

with applicant’s liquidation, totalling

approximately $17,412, were paid by

Signature Financial Group, Inc.

(‘‘Signature’’). EBC Distributors, Inc.,

applicant’s principal underwriter, is a

wholly-owned subsidiary of Signature.

6. At the time of the application,

applicant had no securityholders, assets,

or liabilities. Applicant is not a party to

any litigation or administrative

proceeding. Applicant is not presently

engaged in, nor does it propose to

engage in, any business activities other

than those necessary for the winding up

of its affairs.

7. Applicant intends to make all

legally required filings with the

Massachusetts Secretary of State to

terminate applicant.

For the SEC, by the Division of Investment

Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–3281 Filed 2–8–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 35–26228]

Filings Under the Public Utility Holding

Company Act of 1935, as Amended

(‘‘Act’’)

February 3, 1995.

Notice is hereby given that the

following filing(s) has/have been made

with the Commission pursuant to

provisions of the Act and rules

promulgated thereunder. All interested

persons are referred to the application(s)

and/or declaration(s) for complete

statements of the proposed

transaction(s) summarized below. The

application(s) and/or declaration(s) and

any amendments thereto is/are available

for public inspection through the

Commission’s Office of Public

Reference.

Interested persons wishing to

comment or request a hearing on the

application(s) and/or declaration(s)

should submit their views in writing by

February 27, 1995, to the Secretary,

Securities and Exchange Commission,

Washington, DC 20549, and serve a

copy on the relevant applicant(s) and/or

declarant(s) at the address(es) specified

below. Proof of service (by affidavit or,

in case of an attorney at law, by

certificate) should be filed with the

request. Any request for hearing shall

identify specifically the issues of fact or

law that are disputed. A person who so

requests will be notified of any hearing,

if ordered, and will receive a copy of

any notice or order issued in the matter.

After said date, the application(s) and/

or declaration(s), as filed or as amended,

may be granted and/or permitted to

become effective.

The Columbia Gas System, Inc., et al.

The Columbia Gas System, Inc.

(‘‘Columbia’’), a registered holding

company, and its nonutility subsidiary

company, Columbia LNG Corporation

(‘‘Columbia LNG’’), both of 20

Montchanin Road, Wilmington,

Delaware 19807, have filed a posteffective amendment to their

application-declaration previously filed

under sections 6(a), 7, 9(a), 10, 12(b) and