Federal Register / Vol. 60, No. 56 / Thursday, March 23, 1995 / Notices 15315

5Applicants represent that, during the Notice

Period, the application will be amended to reflect

this representation.

1 15 U.S.C. § 78s(b) (1988).

2Securities Exchange Act Release No. 35193

(January 4, 1995), 60 FR 3015.

3Letter from P. Howard Edelstein, President,

Electronic Settlements Group, Thomson Trading

Services, Inc., to Jonathan G. Katz, Secretary,

Commission (February 1, 1995).

4 17 CFR 240.15c6–1 (1994).

5Securities Exchange Act Release Nos. 33023

(October 6, 1993), 58 FR 52891 (order adopting Rule

15c6–1 and 34952 (November 9, 1994), 59 FR 59137

(changing effective date from June 1, 1995, to June

7, 1995).

6The transition from five day settlement to three

day settlement will occur over a four day period.

Friday, June 2, will be the last trading day with five

business day settlement. Monday, June 5, and

Tuesday, June 6, will be trading days with four

business day with three business day settlement. As

a result, trades from June 2 and June 5 will settle

on Friday, June 9. Trades from June 6 and June 7

will settle on Monday, June 12.

not receive any benefit or additional

protections thereby.5

Applicants submit that the requested

relief is appropriate in the public

interest, because it would promote

competitiveness in the variable annuity

contract market by eliminating the need

for Applicants to file redundant

exemptive applications, thereby

reducing their administrative expenses

and maximizing the efficient use of their

resources. The delay and expense

involved in having repeatedly to seek

exemptive relief would reduce

Applicants’ ability effectively to take

advantage of business opportunities as

they arise.

Applicants further submit that the

requested relief is consistent with the

purposes of the 1940 Act and the

protection of investors for the same

reasons.

Applicants thus believe that the

requested exemption is appropriate in

the public interest and consistent with

the protection of investors and the

purposes fairly intended by the policy

and provisions of the 1940 Act.

4. Applicants represent that the

1.25% per annum mortality and

expense risk charge is within the range

of industry practice for comparable

annuity contracts. This representation is

based upon an analysis of publicly

available information about similar

industry products, taking into

consideration such factors as, among

others, the current charge levels and

benefits provided, the existence of

expense charge guarantees and

guaranteed annuity rates. Jackson

National will maintain at its principal

offices, available to the Commission, a

memorandum setting forth in detail the

products analyzed in the course of, and

the methodology and results of,

Applicants’ comparative review.

5. Jackson National has concluded

that there is a reasonable likelihood that

the Separate Accounts’ proposed

distribution financing arrangements will

benefit the Separate Accounts and their

investors. Jackson National represents

that it will maintain and make available

to the Commission upon request a

memorandum setting forth the basis of

such conclusion.

6. The Separate Accounts will be

invested only in management

investment companies that undertake,

in the event the company should adopt

a plan for financing distribution

expenses pursuant to rule 12b–1 under

the 1940 Act, to have such plan

formulated and approved by the

company’s board members, the majority

of whom are not ‘‘interested persons’’ of

the management investment company

within the meaning of Section 2(a)(19)

of the 1940 Act.

Conclusion

For the reasons set forth above,

Applicants represent that the

exemptions requested are necessary and

appropriate in the public interest and

consistent with the protection of

investors and the purposes fairly

intended by the policy and provisions of

the 1940 Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–7139 Filed 3–22–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35502; File No. SR–PSE–

94–27]

Self-Regulatory Organizations; The

Pacific Stock Exchange Incorporated;

Order Approving Proposed Rule

Change Relating to Implementation of

a Three-Day Settlement Standard

March 16, 1995.

On December 19, 1994, The Pacific

Stock Exchange Incorporated (‘‘PSE’’)

filed a proposed rule change (File No.

SR–PSE–94–27) with the Securities and

Exchange Commission (‘‘Commission’’)

pursuant to Section 19(b) of the

Securities Exchange Act of 1934

(‘‘Act’’).1 Notice of the proposal was

published in the Federal Register on

January 12, 1995 to solicit comments

from interested persons.2 The

Commission received one written

comment.3 As discussed below, this

order approves the proposed rule

change.

I. Description

In October 1993, the Commission

adopted Rule 15c6–1 under the Act 4

which establishes three business days

after the trade date (‘‘T+3’’), instead of

five business days (‘‘T+5’’), as the

standard settlement cycle for most

securities transactions. The rule will

become effective June 7, 1995.5 Several

of the PSE’s rules are interrelated with

the standard settlement time frame. The

purpose of the proposed rule change is

to amend PSE’s rules to be consistent

with a T+3 settlement standard for

securities transactions.

Under PSE Rule 5.7, transactions in

stocks traded ‘‘regular’’ will be ‘‘exdividend’’ or ‘‘ex-rights,’’ as the case

may be, on the second business day

preceding the record date fixed by the

company or the date of the closing of

transfer books, except when PSE’s board

of directors rules otherwise. Rule 5.7

also provides that should such record

date or such closing of transfer books

occur upon a day other than a business

day, this rule applies for the third

preceding business day.

Under Rule 5.9(a)(2), transactions in

securities admitted to dealings on an

‘‘issued’’ basis settling ‘‘regular way’’

will be for delivery on the third

business day following the day of the

contract. Rule 5.9(a)(3) provides that

transactions on a ‘‘seller’s option’’ basis

will be made for delivery at the option

of the seller within the time specified in

the option, which time may not be less

than four business days following the

date of the contract. Rule 5.9(a)(4)

provides that transactions in rights and

warrants may be made on a ‘‘next day’’

basis only during the three business

days preceding the final day for trading

therein.

Rule 9.12(a)(4) requires that no

member organization may grant delivery

versus payment (‘‘DVP’’) or receipt

versus payment (‘‘RVP’’) privileges to a

customer without obtaining an

agreement from the customer to provide

instructions to its agent no later than the

second day after the trade date for RVP

trades or no later than the first business

day after trade date for DVP trades.

PSE has requested that the proposed

rule change become effective on the

same date as Rule 15c6–1. Rule 15c6–

1 will become effective on June 7,

1995.6

II. Written Comment

The Commission received one

comment letter from Thomson Trading

Services, Inc. (‘‘Thomson’’) suggesting

that additional regulatory changes may

be necessary to implement T+3
15316 Federal Register / Vol. 60, No. 56 / Thursday, March 23, 1995 / Notices

7Supra note 3.

8 15 U.S.C. § 78f (1988).

9The Commission release adopting Rule 15c6–1

stated that ‘‘the value of securities positions can

change suddenly causing a market participant to

default on unsettled positions. Because the markets

are interwoven through common members, default

at one clearing corporation or by a major market

participant or end-user could trigger additional

failures resulting in risk to the national clearance

and settlement system.’’ Securities Exchange Act

Release No. 33023 (October 6, 1993), 58 FR 52891.

10Securities Exchange Act Release No. 35332

(February 3, 1995), 60 FR 8102 (notice of proposed

rule filing).

11 15 U.S.C. § 78f (1988).

12 15 U.S.C. § 78s(b)(2) (1988)

13 17 CFR 200.30(a) (12) (1994).

1 15 U.S.C. 78s(b)(1) (1982).

2Amendment No. 1 provides additional

information regarding the Index components, and

states that the Exchange will file with the

Commission pursuant to Section 19(b)(1) of the Act

should the number of component securities in the

Index exceed 116. See letter from Claire P. McGrath,

Managing Director and Special Counsel, Derivatives

Securities, to Michael Walinskas, Branch Chief,

Division of Market Regulation, Commission, dated

March 9, 1995 (‘‘Amendment No. 1’’).

3All components of the Index will be REITs as

that term is defined in Sections 856 through 860 of

the Internal Revenue Code, 26 U.S.C. §§ 856–60

(1988 & Supp. 1993). Id. A REIT is a financial

vehicle that allows investors to pool funds for

participation in real estate ownership or financing.

REITs are subject to special tax treatment and are

exempt from corporate level tax if they meet certain

qualifications. These qualifications include, but are

not limited to, the distribution of 95% of taxable

income; that five or fewer individuals cannot own

more than 50% of the shares; that over 10% of total

assets cannot be sold in one year; and that at least

75% of taxable income be derived from real estate

in the form of, for example, rents, mortgages, or

gains from the sale of real estate. See letter from

Claire P. McGrath, Managing Director and Special

Counsel, Derivatives Securities, Amex, to Michael

Walinskas, Branch Chief, Division of Market

Regulation, Commission, dated March 6, 1995.

settlement.7 Thomas believes that the

PSE should amend Rule 9.12(a)(5)

which requires the use of the facilities

of a registered securities depository for

confirmation and acknowledgement of

all transaction in depository-eligible

securities.

III. Discussion

The Commission believes the

proposal is consistent with the

requirements of Section 6 of the Act.8

Specifically, Section 6(b)(5) states that

the rules of the exchange must be

designed to foster cooperation and

coordination with persons engaged in

regulating, clearing, settling, and

processing information. The PSE rules

and other self-regulatory organizations’

rules currently establish the standard

time frame for settlement of securities

transactions. On June 7, 1995, the new

settlement cycle of T+3 will be

established as mandated by the

Commission’s Rule 15cb–1. As a result,

the PSE’s current rule providing for a

T+5 settlement cycle will be

inconsistent with the Commission rule.

This proposal will amend the PSE’s

rules to harmonize them with the

Commission’s Rule 15cb–1 and a T+3

settlement cycle.

In addition, the Commission believes

that the proposed rule change is

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

Act in that it protects investors and the

public interest by reducing risks to

clearing corporations, their members,

and public investors which are inherent

in settling securities transactions. The

reduction of the time period for

settlement of most securities

transactions will correspondingly

decrease the number of unsettled trades

in the clearance and settlement system

at any given time. Thus, fewer unsettled

trades will be subject to credit and

market risk, and there will be less time

between trade execution and settlement

for the value of those trades to

deteriorate.9

While Thomson’s letter supports the

PSE’s efforts to shorten the settlement

cycle for securities transactions,

Thomson believes that the PSE should

amend Rule 9.12(a)(5), which requires

the use of the facilities of a registered

securities depository for the

confirmation and acknowledgement of

all transactions in depository-eligible

securities where payment for securities

purchased or delivery of securities sold

is to be made by or to an agent of the

customer. The Commission believes that

the issue raised by the Thomson letter

need not be resolved prior to the

approval of the proposed rule change.

Discussions regarding Thomson’s

concerns are underway among the

Commission, Thomson, and DTC. DTC

has submitted a rule filing that will

establish a linkage between DTC and

vendors such as Thomson.10 The

Commission intends to consider

whether self-regulatory organization

rules should continue to preclude use of

private vendor systems for

confirmation/affirmation services in

DVP/RVP trades. However, if the PSE’s

proposed rule change being approved by

this order is not approved prior to the

June 7, 1995, effective date of Rule

15c6–1, the PSE rules will conflict with

the Commission’s Rule 15c6–1.

The Thomson letter suggests that

approval of the proposed rule change

without amendments to Rule 9.12(a)(5)

raises competitive concerns. Under the

Act, the Commission’s responsibility is

to balance the perceived anticompetitive

effects of a regulatory policy or decision

against the purpose of the Act that

would be advanced by the policy or

decisions and the costs associated

therewith. The Commission notes that

any anticompetitive effects pointed to

by Thomson are not caused by the

proposed rule change being approved by

this order but rather by an existing PSE

rule. The Commission is reviewing

Thomson’s claim but does not believe

that approval of this proposal will itself

create any burdens on competition.

Moreover, as discussed above, the rule

advances fundamental purposes under

the Act, namely the efficient clearance

and settlement of securities.

IV. Conclusion

For the reasons stated above, the

Commission finds that PSE’s proposal is

consistent with Section 6 of the Act.11

It is Therefore Ordered, pursuant to

Section 19(b)(2) of the Act,12 that the

proposed rule change (File No. SR–PSE–

94–27) be and hereby is approved and

will become effective on June 7, 1995.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.13

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–7138 Filed 3–22–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35511; File No. SR–Amex–

95–06]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the American Stock Exchange, Inc.,

Relating to Options on the Morgan

Stanley REIT Index.

March 17, 1995.

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

Securities Exchange Act of 1934

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

February 16, 1995, the American Stock

Exchange, Inc. (‘‘Amex’’ 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 Amex. The

Exchange filed Amendment No. 1 to the

proposed rule change on March 9,

1995.2 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 Amex proposes to trade options

on the Morgan Stanley REIT Index

(‘‘REIT Index’’), a new index developed

by Morgan Stanley & Co. Incorporated

(‘‘Morgan Stanley’’) comprised of real

estate investment trusts (‘‘REITs’’)3

which are traded on the Amex, the New