Federal Register / Vol. 60, No. 59 / Tuesday, March 28, 1995 / Notices 15947

1Position limits impose a ceiling on the aggregate

number of options contracts on the same side of the

market that can be held or written by an investor

or group of investors acting in concert.

2See Securities Exchange Act Release No. 25738

(May 24, 1988), 53 FR 20201 (June 2, 1988).

3See Securities Exchange Act Release Nos. 25738

(May 24, 1988), 53 FR 20201 (June 2, 1988) (order

approving CBOE’s equity option hedge exemption

pilot programs); 25739 (May 24, 1988), 53 FR 20204

(June 2, 1988) (approving CBOE’s stock index

option hedge exemption pilot program); 27786

(March 8, 1990), 55 FR 9523 (March 14, 1990)

(order approving NYSE’s equity option and stock

index option hedge exemption pilot programs);

25811 (June 20, 1988), 53 FR 23821 (June 24, 1988)

(order approving PSE’s equity option hedge

exemption pilot program); and 32900 (September

14, 1993), 58 FR 49077 (September 21, 1993) (order

approving PSE’s stock index option hedge

exemption pilot program).

4See Securities Exchange Act Release Nos. 24986

(November 18, 1994), 59 FR 60856 (November 28,

1994) (order approving File Nos. SR–Amex–94–49,

SR–CBOE–94–41, SR–PSE–94–33, and SR–PHLX–

94–53); and 35194 (January 5, 1995), 60 FR 2800

(January 11, 1995) (order approving File Nos. SR–

NYSE–94–47).

5Under the pilot, the Exchanges must determine

on a case-by-case basis whether an instrument that

is being used as the basis for an underlying hedged

position is readily and immediately convertible into

a security that is convertible at a future date, but

which is not presently convertible, is not a

‘‘convertible’’ security for purposes of the equity

option position limit hedge exemption until the

date it becomes convertible. In addition, if the

convertible security used to hedge an options

position is called for redemption by the issuer, the

security would have to be converted into the

underlying security immediately or the

corresponding options position reduced

accordingly. See, e.g., Securities Exchange Act

Release No. 32904 (September 14, 1993), 58 FR

49339 (September 2, 1993) (order approving File

No. SR–CBOE–91–43).

6Exercise limits prohibits the exercise by an

investor or group of investors acting in concert of

more than the number of options contracts specified

in the position limit rule within five consecutive

business days.

Securities Exchange Commission at the

address below. Any comments

concerning the accuracy of the

estimated average burden hours for

compliance with Commission rules and

forms should be directed to David T.

Copehafer, Acting Director, Securities

and Exchange Commission, 450 Fifth

Street, N.W., Washington, D.C. 20549

and Clearance Officer for the Securities/

Exchange Commission, Project Nos.

3235–0074; 3235–0065; 3235–0072;

33235–0073; 3235–0067; 3235–0423;

3235–0418; 3235–0258; 3235–0257; and

3235–0256, Office of Management and

Budget, Room 3208, New Executive

Office Building, Washington, D.C.

20503.

Dated: March 21, 1995.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–7532 Filed 3–27–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35523; File Nos. SR–Amex–

95–13; SR–CBOE–95–13, SR–NYSE–9504,

SR–PSE–95–05, and SR–PHLX–95–10]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Changes by

the American Stock Exchange, Inc., the

Chicago Board Options Exchange,

Inc., the New York Stock Exchange,

Inc., the Pacific Stock Exchange, Inc.,

and the Philadelphia Stock Exchange,

Inc., Relating to Permanent Approval

of the Hedge Exemption Pilot

Programs

March 22, 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 February 1, 1995,

the Chicago Board Options Exchange,

Inc. (‘‘CBOE’’); on February 3, 1995, the

Philadelphia Stock Exchange, Inc.

(‘‘PHLX’’); on February 21, 1995, the

Pacific Stock Exchange, Inc. (‘‘PSE’’); on

February 28, 1995, the New York Stock

Exchange, Inc. (‘‘NYSE’’); and on March

14, 1995, the American Stock Exchange,

Inc. (‘‘Amex’’) (each individually

referred to as an ‘‘Exchange’’ and two or

more collectively referred to as

‘‘Exchanges’’) filed with the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’) the proposed rule

changes 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 changes

from interested persons.

I. Self-Regulatory Organizations’

Statement of the Terms of Substance of

the Proposed Rule Changes

The proposed rule changes filed by

the Amex and PHLX request permanent

approval of the Exchanges’ pilot

program for exemptions from equity

option position limits for certain hedged

positions.1

The proposals filed by the CBOE,

NYSE, and the PSE request permanent

approval of the Exchanges’ pilot

programs for position limit exemptions

for certain hedged equity option

positions and certain stock index option

positions.

The text of the proposals are available

at the Office of the Secretary of the

respective Exchanges and at the

Commission.

II. Self-Regulatory Organizations’

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Changes

In its filing with the Commission, the

self-regulatory organizations included

statements concerning the purpose of

and basis for the proposed rule changes

and discussed any comments it received

on the proposed rule changes. The text

of these statements may be examined at

the places specified in Item IV below.

The self-regulatory organizations have

prepared summaries, set forth in

sections (A), (B), and (C) below, of the

most significant aspects of such

statements.

(A) Self-Regulatory Organizations’

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Changes

The Commission has previously

approved pilot programs proposed by

the Amex and the PHLX providing

exemptions from positions limits for

certain fully hedged equity option

positions.2 In addition, the Commission

has previously approved pilot programs

proposed by the CBOE, the NYSE and

the PSE providing exemptions from

position limits for certain fully hedged

equity option positions and/or stock

index option positions.3 The Exchanges’

pilot programs were most recently

extended through May 17, 1995.4

Each of the pilot programs allow the

underlying hedged positions to include

securities that are readily convertible

into common stock.5 Under all of the

pilot programs, exercise limits continue

to correspond to position limits, so that

investors are allowed to exercise, during

five consecutive business days, the

number of option contracts set forth as

the position limit, as well as those

contracts purchased pursuant to the

pilot program.6

The Exchanges believe that the

proposed rule changes are consistent

with Section 6(b) of the Act, in general,

and further the objectives of Section

6(b)(5), in particular, in that they are

designed to protect investors and the

public interest and to remove

impediments and perfect the

mechanism of a free and open market.

(B) Self-Regulatory Organizations’

Statement on Burden on Competition

The Exchanges do not believe that the

proposed rule changes will impose any

burden on competition.

(C) Self-Regulatory Organizations’

Statements on Comments on the

Proposed Rule Changes Received From

Members, Participants or Others

Written comments on the proposed

rule changes were neither solicited nor

received.
15948 Federal Register / Vol. 60, No. 59 / Tuesday, March 28, 1995 / Notices

7 17 CFR 200.30–3(a)(12) (1994). 1 15 U.S.C. 78s(b)(1) (1988).

2The other such condition is that the solicited

order can no longer reasonably be considered

imminent in view of the passage of time since the

solicitation.

III. Date of Effectiveness of the

Proposed Rule Changes 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 reason for so finding or (ii)

as to which the self-regulatory

organizations consent, the Commission

will:

(a) By order approve such proposed

rule changes, or

(b) Institute proceedings to determine

whether the proposed rule changes

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

changes that are filed with the

Commission, and all written

communications relating to the

proposed rule changes 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, NW.,

Washington, D.C.

Copies of such filing will also be

available for inspection and copying at

the principal office of the abovementioned self-regulatory organizations.

All submissions should refer to the file

number in the caption above and should

be submitted by April 18, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–7576 Filed 3–27–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35519; File No. SR–CBOE–

95–07]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Board Options Exchange,

Inc., Relating to Solicited Transactions

March 21, 1995.

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

Securities Exchange Act of 1934

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

February 14, 1995, the Chicago Board

Options Exchange, Inc. (‘‘CBOE’’ 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 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 CBOE proposes to modify

paragraph (e) of Rule 6.9 concerning

solicited transactions so as to eliminate

the requirement that the terms of the

matching order be disclosed to the

trading crowd.

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 test 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

Paragraph (e) of Rule 6.9 restricts the

ability of a member to trade options,

securities underlying such options, and

related instruments while in possession

of knowledge of all the material terms

of an ‘‘original order’’ and a solicited

matching order unless either of two

conditions is met. One of the conditions

is that all the terms of both the original

order and the matching order be

disclosed to the trading crowd.2

The Exchange now proposes to amend

paragraph (e) to eliminate the

requirement that the terms of the

matching order be disclosed to the

trading crowd. Thus, a member will be

able to trade options, the securities

underlying such options, and any

related instruments once the terms of

the original order have been disclosed.

Under the Exchange’s proposal, when

there has been advance solicitation of

the other side of an original order, a

member (or associated person) with

knowledge of the original order and a

matching responsive order may not buy

or sell the option or the underlying

security until the terms of the original

order are disclosed to the trading crowd;

once those terms are disclosed,

however, the member may trade even if

the terms of the matching order are not

disclosed. As explained below, this

modification would place solicited

parties on an equal footing with

Exchange members who have

knowledge of the terms of the original

order only, and would conform the

trading restriction in paragraph (e) to

the various priority provisions of Rule

6.9 and Interpretation .02 thereunder,

which generally require disclosure only

of the terms of an original order, not the

terms of a matching solicited order.

The Exchange believes that this

amendment is appropriate to achieve

the primary purpose of Rule 6.9, which

is to facilitate and regulate solicitation

without imposing undue restrictions on

trading, particularly anticipatory hedge

transactions. As currently structured,

the trading restrictions in paragraph (e)

impose a special and substantial burden

on any solicited party who was

indicated, in response to a solicitation,

an intention to place a matching

responsive order. Under the present

rule, such a solicited party may not

trade based on knowledge of the

impending solicited transaction, even if

the original order has been fully

disclosed to the crowd, until the

solicited order is also disclosed.

In contrast to this treatment of

solicited parties, paragraph (e) does not

restrict trading by other CBOE members

who know the terms of the disclosed

order but who, if solicited, have not

indicated an intention to trade at the

original order’s limit and who are

otherwise unaware of any specific

matching solicited order. Such parties

may trade under the current rule even