12802 Federal Register / Vol. 60, No. 45 / Wednesday, March 8, 1995 / Notices

3 15 U.S.C. 78s(b)(3)(A)(ii) (1988).

4 17 CFR 240.19b–4(e)(2) (1994).

5 17 CFR 200.30–3(a)912) (1994).

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

2 17 CFR 240.19b–4 (1992).

3See Securities Exchange Act Release No. 35141

(December 22, 1994), 59 FR 67744 (December 30,

1994).

4See Letter from Gerald O’Connell, First Vice

President, Market Regulation and Trading

Operations, Phlx, to Michael Walinskas, Branch

Chief, Office of Market Supervision (‘‘OMS’’),

Division of Market Regulation (‘‘Division’’),

Commission, dated December 14, 1994.

5 In Amendment No. 2, the Phlx withdrew

Amendment No. 1, inserted the effective date of the

Two-for-One Split (as defined herein) into new Rule

1014(g)(ii), corrected an erroneous cross-reference

in new Rule 1014(g)(ii), and clarified that the

proposed exceptions to the Two-for-One Split are

mutually exclusive. See Letter from Gerald

O’Connell, First Vice President, Market Regulation

and Trading Operations, Phlx, to Michael

Walinskas, Branch Chief, OMS, Division,

Commission, dated February 9, 1995.

6See Securities Exchange Act Release No. 34109

(May 25, 1994), 59 FR 28570 (June 2, 1994)

(‘‘Exchange Act Release No. 34109’’). The New Unit

Split was subsequently expanded to include index

option specialists. See Securities Exchange Act

Release No. 35028 (November 30, 1994), 59 FR

63151 (December 7, 1994) (‘‘Exchange Act Release

No. 35028’’).

7The Two-for-One Split only applies to orders for

more than five contracts. Additionally, it applies to

all option classes listed after August 26, 1994, and

to 50% of each specialist unit’s issues listed prior

to that date. Specifically, each specialist unit’s

issues are divided into quartiles based on the most

recent quarterly contract volume; the specialist unit

may choose one-half of the issues in each quartile,

as long as the total number of issues does not

exceed 50% of the unit’s issues. See Securities

Exchange Act Release No. 34606 (August 26, 1994),

59 FR 45741 (September 2, 1994) (‘‘Exchange Act

Release No. 34606’’) As with the New Unit Split,

this provision was subsequently expanded to

include index option specialists. See Exchange Act

Release No. 35028, supra note 6.

8See Phlx Rule 1014(g) (Two-for-One Split) and

Commentary .17 thereto (New Unit Split).

9A controlled account is defined as ‘‘any account

controlled by or under common control with a

member broker-dealer.’’ See Phlx Rule 1014(g).

Customer accounts are all accounts other than

controlled accounts and specialist accounts. For

purposes of Rule 1014(g), discretionary accounts are

considered customer accounts. Telephone

conversation between Edith Hallahan, Special

Counsel, Phlx, and Brad Ritter, Senior Counsel,

OMS, Division, Commission, on February 28, 1995.

The Phlx represents that the rule will continue to

prohibit the application of any such enhancement

in instances that would lessen the pro rata

participation of customer orders on parity.

impact on or impose a 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 have been

solicited or received. PTC will notify the

Commission of any written comments

received by PTC.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The foregoing rule change has become

effective pursuant to Section

19(b)(3)(A)(ii) 3 of the Act and pursuant

to Rule 19b–4(e)(2) 4 promulgated

thereunder because the proposal effects

a change in a dues, fee, or other charge

imposed by PTC. At any time within

sixty days of the filing of such rule

change, the Commission may summarily

abrogate such rule change if it appears

to the Commission that such action is

necessary or appropriate in the public

interest, for the protection of investors,

or otherwise in furtherance of the

purposes of the Act.

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 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of PTC. All submissions should

refer to File No. SR–PTC–95–01 and

should be submitted by March 29, 1995.

For the Commission by the Division of

Market Regulations, pursuant to delegated

authority.5

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–5577 Filed 3–7–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35429; File No. SR–Phlx–

94–59]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change and

Notice of Filing and Order Granting

Accelerated Approval of Amendment

No. 2 to the Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

Relating to Enhanced Specialist

Participation in Parity Options Trades

March 1, 1995.

On November 18, 1994, the

Philadelphia Stock Exchange, Inc.

(‘‘Phlx’’ or ‘‘Exchange’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’), pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’),1 and Rule 19b–4

thereunder,2 a proposed rule change: (1)

clarifying when a specialist is entitled to

receive an enhanced participation on

parity equity and index options trades;

and (2) altering the size of the enhanced

specialist participation presently

available pursuant to Phlx Rule 1014(g).

Notice of the proposed rule change

appeared in the Federal Register on

December 30, 1994.3 No comment

letters were received on the proposed

rule change. The Exchange filed

Amendment No. 1 to the proposal on

December 20, 1994,4 and Amendment

No. 2 on February 9, 1995.5 This order

approves the Exchange’s proposal, as

amended.

On May 25, 1994, the Commission

approved an enhanced specialist

participation for ‘‘new equity option

specialist units trading newly listed

options classes where the specialist is

on parity with two or more registered

options traders (‘‘ROTs’’) (‘‘New Unit

Split’’).6 On August 26, 1994, the

Commission approved, on a one-year

pilot basis, an enhanced specialist

participation whereby an equity option

specialist on parity with one or more

ROTs is counted as two crowd

participants (‘‘Two-for-One Split’’).7

When either the New Unit Split or the

Two-for-One Split apply, no customer

order on parity is restricted to a smaller

participation than any other crowd

participant, including the specialist.8

At this time, the Exchange proposes to

amend both Rule 1014(g) and

Commentary .17 thereto to specify that

the enhanced splits apply where equity

and index option specialists are on

parity with controlled accounts, not just

with ROTs. The term ‘‘controlled

account’’ includes accounts controlled

by or under common control with a

member broker-dealer.9

In addition to defining the

circumstances under which the Twofor-One Split and the New Unit Split

will be applied, the current proposal

also serves to replace, in certain

situations, the Two-for-One Split with a

percentage distribution. Those

situations are where there are orders for

more than five contracts and where only

one or two controlled accounts are on

parity with the specialist for such

orders. In those cases: where there is

one controlled account on parity with
Federal Register / Vol. 60, No. 45 / Wednesday, March 8, 1995 / Notices 12803

10 15 U.S.C. 78f(b)(5) (1988).

11See Exchange Act Release Nos. 34109, supra

note 6, and 34606 supra note 7.

12 Id.

13See Exchange Act Release No. 34606, supra

note 7.

14 15 U.S.C. 78s(b)(2) (1988).

15 17 CFR 200.30–3(a)(12) (1994).

the specialist, the specialist will receive

60% of the contracts and the controlled

account will receive 40% of the

contracts; and where there are two

controlled accounts on parity, the

specialist will receive 40% of the

contracts and each controlled account

will receive 30% of the contracts. In

qualified situations where there are

three or more controlled accounts on

parity with the specialist, the existing

Two-for-One Split will continue to

apply whereby the specialist will be

counted as two crowd participants.

The Exchange believes that in

transactions where there are less than

three controlled accounts on parity with

the specialist, the current Two-for-One

split becomes overly burdensome on

those controlled accounts. For example,

applying the Two-for-One Split to a 100

contract buy order in a trading crowd

consisting of one ROT and the

specialist, will result in the specialist

selling 66 contracts and the ROT selling

34 contracts. Pursuant to the proposed

amendment, in the above example the

specialist’s share will be reduced to 60

contracts and the ROT’s share will

increase to 40 contracts. As another

example, where there are two ROTs on

parity with a specialist, the present

Two-for-One Split will entitle the

specialist to sell 50 contracts and each

ROT to sell 25 contracts. The proposal

will reduce the specialist’s share to 40

contracts and increase each ROT’s share

to 30 contracts. These results, the

Exchange believes, demonstrate that

while the specialist will continue to

receive an enhanced split, the split will

be reduced in small crowds where the

impact on ROTs is more pronounced.

Finally, the Exchange also proposes to

codify the Two-for-One and New Unit

Split provisions, as amended herein,

into new Options Floor Procedure

Advice B–6 for ease of reference on the

trading floor. Similarly, to improve the

organization of Rule 1014, the Phlx also

proposes to reorganize Phlx Rule 1014

by numbering the Two-for-One Split

provisions as Rule 1014(g)(ii) and by

moving the New Unit Split provisions

from Commentary .17 to Rule

1014(g)(iii).

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, the

requirements of Section 6(b)(5)10 in that

the proposal is designed to promote just

and equitable principles of trade, to

prevent fraudulent and manipulative

acts and practices, and to protect

investors and the public interest.

Specifically, as the Commission stated

in approving the New Unit Split and the

Two-for-One Split, enhanced specialist

participation for equity and index

option parity trades may serve to aid the

Exchange in attracting and retaining

well capitalized specialist units to the

Exchange without unreasonably

restraining competition or harming

investors.11

Further, the Commission believes that

it is appropriate to amend the Two-forOne and New Unit Splits to state that

the enhanced participations apply when

an equity or index option specialist is

on parity with controlled accounts and

not just with ROT orders. The

Commission’s main concern in

originally approving the enhanced

specialist participations was ensuring

that customer orders were not

disadvantaged by the application of the

enhanced splits.12 Because the

definition of controlled account

excludes customer accounts, the

protection afforded to customer orders

is not in anyway diminished by this

proposal.

Finally, the only other substantive

amendment in the current proposal is to

alter the Two-for-One Split in situations

where the specialist is on parity with

less than three controlled accounts.

Because the effect of this amendment is

merely to reduce the benefit given to

specialists on parity trades and,

accordingly, to minimize the impact of

the Two-for-One Split on controlled

accounts, the Commission believes that

the proposal does not raise any new

issues that were not adequately

addressed when the Two-for-One Split

was originally approved.13

The Commission believes that the

remaining proposed amendments are

non-substantive and, therefore, do not

raise any material regulatory issues.

Specifically, the proposal to reorganize

the structure of Rule 1014 and to

incorporate the New Unit and Two-forOne Splits, as amended, into a new

Options Floor Procedure Advice, may

reduce potential confusion by providing

easier to use references to the enhanced

participation provisions.

The Commission finds good cause for

approving Amendment No. 2 to the

proposed rule change prior to the

thirtieth day after the date of

publication of notice of filing thereof in

the Federal Register. Specifically,

Amendment No. 2 merely clarifies the

manner in which the Two-for-One Split

will be applied and corrects an

erroneous cross-reference, neither of

which raise any new regulatory issues

that were not addressed in the original

proposal. Accordingly, the Commission

believes it is consistent with Section

6(b)(5) of the Act to approve

Amendment No. 2 to the Phlx’s

proposal on an accelerated basis.

Interested persons are invited to

submit written data, views and

arguments concerning Amendment No.

2. 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 the

Phlx. All submissions should refer to

the File No. SR–Phlx–94–59 and should

be submitted by March 29, 1995.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,14 that the

proposed rule change (SR–Phlx–94–59),

as amended is hereby approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.15

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–5580 Filed 3–7–95; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–20931; 812–8630]

Dean Witter Reynolds Inc., et al.,

Notice of Application

March 1, 1995.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of Application for

Exemption Under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANTS: Dean Witter Reynolds Inc.

(the ‘‘Sponsor’’); and Dean Witter Select

Municipal Trust, Dean Witter Select