65074 Federal Register / Vol. 60, No. 242 / Monday, December 18, 1995 / Notices

3We acknowledge that changes made to a

station’s ADI under 47 CFR 76.55(e) or 76.59 will

undoubtably be for reasons related to the must-carry

rules; however, it is only changes made to a

station’s ADI under these two rules that matter for

copyright purposes.

1 15 U.S.C. § 78s(b)(1) (1988).

2CBOE amended its proposal to correct a

typographical error in the filing. Letter from

Michael L. Meyer, Schiff, Hardin & Waite, to Mark

Steffensen, Division of Market Regulation

(‘‘Division’’), Commission (October 26, 1995).

1996, 1997 and 1998 accounting years,

cable operators should use the list

adopted by the Commission for the 1996

must-carry/retransmission consent

election, and, for subsequent years, the

list adopted by the Commission for each

must-carry/retransmission consent

election period. If the Commission

should make modifications to television

markets in accordance with §§ 76.55(e)

and/or 76.59, or should generate a

television market list for the must-carry/

retransmission consent election other

than at three-year intervals, those

modifications should be applied to their

corresponding compulsory license

accounting periods in determining the

local service area of a broadcast station.

B. Local/Distant Status

In the December 30, 1994, adjustment

of our regulations to account for the

statutory changes made by the Home

Viewer Act, we described the Act’s

amendment to the local service area

definition in 17 U.S.C. 111(f) as

‘‘includ[ing] the area in which the

station is entitled to insist upon carriage

of its signal by a cable system (i.e. its

must-carry zone), in accordance with

the rules of the Federal

Communications Commission in effect

on September 18, 1993, and any

subsequent modification of those rules.’’

59 FR 67635 (December 30, 1994). We

believe we need to clarify this statement

as it relates to cable systems that serve

communities in more than one county

assigned to different ADIs.

Cable carriage by one system across

one or more ADIs does not appear to be

an uncommon occurrence. Each county

in the United States is allocated to a

market based on which home-market

stations receive a preponderance of total

viewing. Because many larger cable

systems typically serve several counties,

a ‘‘straddle’’ situation can occur where

a cable system carries a broadcast signal

assigned to one market in communities

within counties assigned to other

markets. This situation is further

complicated when such carriage is

pursuant to the FCC’s new must-carry

rules. How should cable systems

straddling different markets report

carriage of broadcast signals in those

markets for compulsory license

purposes?

The Home Viewer Act amendment to

the 17 U.S.C. 111(f) local service area

definition makes it clear that a broadcast

station’s television market is its ADI.

The Home Viewer Act defines

‘‘television market’’ by reference to

§ 76.55(e) of the FCC’s rules, which

provides that a broadcast station’s

television market is ‘‘its Area of

Dominant Influence (ADI) as

determined by Arbitron and published

in its Television ADI Market Guide

* * *’’ 47 CFR 76.55(e)(1). A broadcast

station’s ADI is also the area in which

it is entitled to assert mandatory

carriage rights on cable systems located

in that ADI. See Broadcast Signal

Carriage Issues, 8 FCC Rcd 2965, 2976–

2977 (1993). Thus, the Office

acknowledged in its December 30, 1994,

Federal Register notice the

correspondence between a broadcast

station’s must-carry area and its ADI;

however, it did not describe what

application, if any, this would have to

cable systems straddling more than one

ADI.

After reviewing the provisions of the

Cable Television Consumer Protection

and Competition Act of 1992 (‘‘1992

Cable Act’’), Public Law No. 102–385,

and the FCC’s implementing rules, it is

apparent that there are circumstances,

e.g., the ‘‘straddle’’ situation, where the

must-carry zone of a broadcast station

exceeds its ADI. The FCC stated in its

Report & Order implementing the 1992

Cable Act’s must-carry requirements

that in circumstances where a cable

system serves a community or

communities in more than one county

and those counties are assigned to

different ADIs, ‘‘all broadcast stations in

both ADIs will be considered ‘local’ for

must-carry purposes.’’ 8 FCC Rcd at

2976.

We do not believe that the application

of the must-carry rules adopted

pursuant to the 1992 Cable Act have any

direct bearing in determining the size of

the local service area of a broadcast

station for copyright purposes. The

copyright local service area is a

broadcast station’s television market as

defined in 47 CFR 76.55(e), which

means that it is the station’s ADI, plus

any modifications made to the ADI by

the Commission under § 76.55 or § 76.59

of its rules.3 The Office should not have

stated in the December 30, 1994,

Federal Register notice that the local

service area was equal to the station’s

must-carry zone, since such zone can, in

certain circumstances, be considered to

extend beyond a station’s ADI. Thus, in

the ‘‘straddle’’ situation, a cable system

may only report carriage of a broadcast

station as local under 17 U.S.C. 111 in

those communities assigned to the

station’s ADI, even though the system

may have must-carry obligations to

deliver the signal to communities

located in other ADIs.

We believe that this interpretation is

consistent with Congress’ intent in

amending the local service area

definition. The legislative history to the

Home Viewer Act does not indicate any

intention to equate the copyright local

service area with the must-carry

obligation, and to do so would do

violence to 17 U.S.C. 111(d)(1)(B) by

substantially reducing the occurrence of

partially local/partially distant signals.

Furthermore, Congress expressly

recognized in the 1992 Cable Act that

broadcast stations could be considered

distant signals for copyright purposes in

communities where they enjoyed mustcarry rights. 1992 Cable Act, section

614(h)(1)(b)(ii). Nothing in the Home

Viewer Act indicates an intention to

change this result.

Dated: December 4, 1995.

Marybeth Peters,

Register of Copyrights.

Approved by:

James H. Billington,

The Librarian of Congress.

[FR Doc. 95–30458 Filed 12–15–95; 8:45 am]

BILLING CODE 1410–31–P

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–36568; Filed No. SR–

CBOE–95–62]

Self-Regulatory Organizations;

Chicago Board Options Exchange,

Incorporated; Notice of Filing of

Proposed Rule Change Regarding

Book-Entry Settlement of Securities

Transactions and Depository Eligibility

Requirements

December 8, 1995.

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

Securities Exchange Act of 1934

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

October 19, 1995, the Chicago Board

Options Exchange, Incorporated

(‘‘CBOE’’) filed with the Securities and

Exchange Commission (‘‘Commission’’)

the proposed rule change described in

Items I, II, and III below, which items

have been prepared primarily by CBOE.

On October 26, 1995, CBOE filed an

amendment to the proposed rule

change.2 The Commission is publishing

this notice to solicit comments on the
Federal Register / Vol. 60, No. 242 / Monday, December 18, 1995 / Notices 65075

3The Commission has modified the text of the

summaries provided by CBOE.

4The rules in Chapter XXX govern the listing and

trading of debt and equity securities, warrants, UIT

interests, and such other securities as may be

determined by CBOE’s Board of Directors. Chapter

XXX does not apply to the trading of option

contracts.

5The Group of Thirty is an independent,

nonpartisan, nonprofit organization established in

1978. In its March 1989 report, the Group of Thirty

made nine recommendations for harmonizing

clearance and settlement practices worldwide. The

U.S. Working Committee, comprised of

representatives from brokerage firms, banks, other

financial intermediaries, and major industry

organizations was formed to study the existing U.S.

clearance and settlement system and to recommend

reforms consistent with the Group of Thirty

recommendations. After reviewing the nine Group

of Thirty recommendations, the U.S. Working

Committee concluded that at that time the U.S.

substantially complied with all but two of those

recommendations, T+3 settlement and same-day

funds settlement. In order to achieve T+3

settlement, the U.S. Working Committee

recommended requiring book-entry settlement

between financial intermediaries and between

financial intermediaries and their institutional

clients and depository eligibility for all new

issuances. U.S. Working Committee, Implementing

the Group of Thirty Recommendations in the

United States (November 1990). The U.S. Working

Committee’s recommendations were supported

strongly by the report of the Bachmann Task Force.

Bachmann Task Force on Clearance and Settlement

Reform in U.S. Securities Markets, Report

Submitted to the Chairman of the Securities and

Exchange Commission (May 1992).

6Securities Exchange Act Release No. 32455

(June 11, 1993), 58 FR 33679 (order approving

proposed rule change of the American Stock

Exchange (‘‘Amex’’), Boston Stock Exchange

(‘‘BSE’’), Midwest Stock Exchange (now the Chicago

Stock Exchange) (‘‘CHX’’), New York Stock

Exchange (‘‘NYSE’’), Pacific Stock Exchange

(‘‘PSE’’), Philadelphia Stock Exchange (‘‘PHLX’’),

and NASD regarding the book-entry settlement of

securities transactions).

7Because retail customers do not settle their

trades on a DVP/RVP basis, the rule will not alter

their current method of settlement.

8Under proposed Rule 30.136(d), depository

eligible securities means securities that (i) are part

of an issue (as identified by a single CUSIP number)

of securities that is eligible for deposit at a

securities depository and (ii) with respect to a

particular transaction are eligible for book-entry

transfer at the depository at the time of settlement

of the transaction.

9Securities Exchange Act Release No. 35798

(June 1, 1995), 60 FR 30909 (order approving

proposed rule change of Amex, BSE, CHX, NYSE,

PSE, PHLX, and NASD regarding uniform

depository eligibility rules).

proposed rule change from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

CBOE proposes to adopt new Rules

30.136 and 30.137 in order to conform

its rules to those of other self-regulatory

organizations regarding book-entry

settlement of transactions in depository

eligible securities and regarding the

establishment of depository eligibility

requirements for issuers that apply to

list securities on CBOE.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

change

In its filing with the Commission,

CBOE 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. CBOE has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of such statements.3

The purpose of the proposed rule

change is to encourage book-entry

settlement of securities transactions by

adding two new rules to Chapter XXX

of the CBOE rules.4 Both of the

proposed new rules are substantially the

same as rules previously adopted by six

other national securities exchanges and

the National Association of Securities

Dealers (‘‘NASD’’) in response to

recommendations of the Group of

Thirty, U.S. Working Committee (‘‘U.S.

Working Committee’’), Clearance and

Settlement Project (‘‘Project’’), regarding

book-entry settlement of securities

transactions.5 In connection with the

Project, several years ago the U.S.

Working Committee recommended that

settlements and other movements of

corporate and municipal securities for

transactions among financial

intermediaries (brokers, dealers, and

banks) and between financial

intermediaries and their institutional

clients be effected only by book-entry

movements within a depository.

Thereafter, six national securities

exchanges and the NASD adopted

uniform rules in conformity with the

U.S. Working Committee’s

recommendation.6

Because CBOE did not then provide a

market in depository-eligible securities,

it did not adopt the uniform rule. It now

is proposing the adoption of Rule

30.136, which would implement such a

book-entry settlement requirement for

securities listed on CBOE. The addition

of Rule 30.136 will conform the rules of

CBOE to those of other U.S. selfregulatory organizations, which rules

are designed to ensure that the vast

majority of securities transactions

effected in the U.S. markets will be

settled by book-entry.

Subject to certain exceptions set forth

in the text of the rule and described

below, Rule 30.136 will require the use

of the facilities of a registered securities

depository for the book-entry settlement

of all transactions in depository eligible

securities between a member firm and a

financial intermediary or a member of a

national securities exchange or a

registered securities association. The

rule also will apply to transactions in

depository eligible securities between

member firms and their clients if

settlement is to be effected on a

delivery-versus-payment (‘‘DVP’’) or

receipt-versus-payment (‘‘RVP’’) basis.

As is the case under comparable rules

adopted by other self-regulatory

organizations, Rule 30.136 will not

apply to or affect the manner in which

member firms settle transactions with

traditional retail customers,7 the

settlement of transactions in securities

that are not depository eligible,8 or

transactions in which settlement occurs

outside the U.S. Rule 30.136 also will

not apply to transactions where the

securities to be delivered in settlement

of a transaction are not on deposit at a

securities depository and (1) the

transaction is for same-day settlement

and the deliverer cannot by reasonable

efforts deposit the securities prior to a

depository’s cut-off time for same-day

crediting of deposited securities or (2)

the deliverer cannot by reasonable

efforts deposit the securities prior to a

cut-off date time established for that

issue of securities by the depository.

The latter exception is intended to

address corporate reorganizations and

other extraordinary activities.

The second rule being proposed by

CBOE, Rule 30.137, also reflects a

response to a directive from the Group

of Thirty to address the need to raise

clearing and settlement standards. The

rule is substantially identical to a

uniform depository eligibility rule that

was developed through the coordinated

effort of six national securities

exchanges and the NASD and that has

been incorporated into the rules of those

self-regulatory organizations.9

Rule 30.137 will require that before a

domestic issuer’s issue of securities is

listed that the issuer represent to CBOE

that the CUSIP number identifying the

issue has been included in the file of

eligible issues maintained by a

registered securities depository. This

requirement will not apply to a security

if the terms of such security cannot be

reasonably modified to meet the criteria

for depository eligibility at all registered

securities depositories. In addition, the

rule will not apply to American

Depository Receipts for securities of a

foreign issuer.

Rule 30.137 also sets forth additional

requirements that must be met before a

security will be deemed to be

‘‘depository eligible’’ within the

meaning of the rule. The rule specifies

different requirements for depository
65076 Federal Register / Vol. 60, No. 242 / Monday, December 18, 1995 / Notices

10 17 CFR 200.30–3(a)(12) (1994).

1CCOS is a wholly-owned subsidiary of the Board

of Trade Clearing Corporation (‘‘BOTCC’’) which

provides clearing services for futures and

commodities transactions executed on the Board of

Trade of the City of Chicago (‘‘CBOT’’).

2 15 U.S.C. § 78q–1 (1988).

3 17 CFR 240.17Ab2–1 (1994).

4Securities Exchange Act Release No. 32481 (June

16, 1993), 58 FR 34105 [File No. 600–27] (notice of

filing of application for exemption from registration

as a clearing agency) (‘‘CCOS Release’’).

5A complete list of comment letters for File No.

600–27 is available for review in the Commission’s

Public Reference Room.

6Letter from Dennis Dutterer, Executive Vice

President and General Counsel, BOTCC, to Jonathan

Katz, Secretary, Commission (October 6, 1993).

Letter from Fred Grede, Vice President, Board of

Trade of the City of Chicago (‘‘CBOT’’), to Brandon

Becker, Director, Division of Market Regulation

(‘‘Division’’), Commission (October 6, 1993).

7 15 U.S.C. § 78o-5 (1988).

8 15 U.S.C. § 78o-5(e)(1) (1988).

9Securities Exchange Act Release No. 33911

(April 15, 1994) 59 FR 19263 [File No. 600–27]

(notice of filing of amendment to application for

exemption from registration as a clearing agency).

10Supra note 5.

eligibility depending upon whether a

new issue is distributed by an

underwriting syndicate before or after

the date a securities depository system

is available for monitoring repurchases

of the distributed shares by syndicate

members (i.e., a ‘‘flipping tracking

system’’).

Currently, a flipping tracking system

is being developed that will include a

securities depository service that (i) can

be activated upon the request of the

managing underwriter for a period of

time that the managing underwriter

specifies, (ii) in certain circumstances

will require the delivering participant to

provide to the depository information

sufficient to identify the seller of such

shares as a precondition to the

processing of book-entry delivery

instructions for distributed shares, and

(iii) will report to the managing

underwriter the identify of any other

syndicate member or selling group

member whose customer(s) sold

distributed shares (but will not report to

the managing underwriter the identity

of such customer[s]) and in certain

circumstances will report to such

syndicate member or selling group

member the identity of such

customer(s). Prior to the availability of

a flipping tracking system, the managing

underwriter may delay the date a

security is deemed ‘‘depository eligible’’

for up to three months after trading has

commenced in the security. After the

availability of a flipping tracking

system, a new issue must be depository

eligible before commencement of

trading on CBOE.

The proposed rule change is

consistent with Section 6(b)(5) of the

Act in that by reducing the number of

transactions in depository eligible

securities for which settlement is

effected by the delivery of physical

securities, by requiring that transactions

between member firms and transactions

between member firms and clients that

settle on a DVP or RVP basis generally

occur in a book-entry environment, and

by requiring securities listed in CBOE be

depository eligible, the efficiency of the

U.S. clearance and settlement system

will be enhanced and the potential for

systemic risk will be reduced.

Furthermore, the proposal is designed to

foster cooperation and coordination

with persons engaged in regulatory,

clearing, settling, and facilitating

transactions in securities and to remove

impediments to and perfect the

mechanism of a free and open market

and a national market system.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

The CBOE does not believe that the

proposed rule change will impose any

burden on competition.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received from

Members, Participants, or Others

Written comments on the proposed

rule change were neither solicited nor

received.

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 CBOE 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

Section, 450 Fifth Street, NW.,

Washington, DC. Copies of such filing

will also be available for inspection and

copying at the principal office of CBOE.

All submissions should refer to File No.

SR–CBOE–95–62 and should be

submitted by January 8, 1996.

For the Commission, by the Division

of Market Regulation, pursuant to

delegated authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–30661 Filed 12–15–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–36573; File No. 600–27]

Self-Regulatory Organizations;

Clearing Corporation for Options and

Securities; Order Approving

Application for Exemption From

Registration as a Clearing Agency

December 12, 1995.

On December 14, 1992, the Clearing

Corporation for Options and Securities

(‘‘CCOS’’) 1 filed with the Securities and

Exchange Commission (‘‘Commission’’)

an application for exemption from

registration as a clearing agency

pursuant to Section 17A of the

Securities Exchange Act of 1934

(‘‘Act’’) 2 and rule 17Ab2–1 thereunder.3

Notice of CCOS’s application was

published in the Federal Register on

June 23, 1993.4 Fourteen comment

letters were received in response to the

notice of filing of the CCOS

application.5 On October 7, 1993, CCOS

filed an amendment to its application 6

setting forth its intention to register

Chicago Board Brokerage, Inc. (‘‘CBB’’)

as a U.S. government securities broker

pursuant to Section 15C of the Act 7 and

to proceed with CBB’s membership with

the National Association of Securities

Dealers (‘‘NASD’’) as required by that

section.8 Notice of the amendment was

published in the Federal Register on

April 22, 1994, to solicit comments.9

One hundred eleven comment letters

were received in response to the notice

of filing of the amendment.10 This Order

grants CCOS’s application for