16896 Federal Register / Vol. 60, No. 63 / Monday, April 3, 1995 / Notices

7At the February 1995 meeting of the ITS

Operating Committee, the ITS participants

approved enhancements to ITS to permit trading in

sixteenths for Amex-listed securities priced under

$10.

8 15 U.S.C. 78f(b) and 78k–1 (1988).

9The rule change is consistent with the

recommendation of the Division of Market

Regulation (the ‘‘Division’’) in its Market 2000

Study, in which the Division noted that the 1⁄8

minimum variation can cause artificially wide

spreads and hinder prices inside the prevailing

quote. See Division of Market Regulation, SEC,

Market 2000: An Examination of Current Equity

Market Developments (January 1994), at 18.

10See Amex Order, supra note 4.

11See Securities Exchange Act Release No. 35338

(February 7, 1995), 60 FR 8432 (February 14, 1995)

(File No. SR–Amex–95–02).

12 15 U.S.C. 78s(b)(2) (1988).

13 17 CFR 200.30–3(a)(12) (1994).

consultations will be held between ITS

participants to explain to each of them

the necessity of making system changes

to accommodate the trading through ITS

of CBOE instruments priced under $10.7

2. Statutory Basis

The Exchange believes the proposed

rule change is consistent with Section

6(b) of the Act in general and with

Section 6(b)(5) in particular in that it is

designed to promote just and equitable

principles of trade, to foster cooperation

with persons engaged in facilitating and

clearing transactions in securities, and

to protect investors and public interest.

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 Purpose

of Rule Change Received From

Members, Participants or Others

No written comments were either

solicited or received.

III. 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

available for inspection and copying at

the Commission’s Public Reference

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the CBOE. All submissions

should refer to File No. SR-CBOE–95–18

and should be submitted by [insert date

21 days from date of publication].

IV. Commission’s Findings and Order

Granting Accelerated Approval of

Proposed Rule Change

The Commission finds that the

proposed rule change to increase from

$1 to $10 the price level below which

equity securities may be traded in

sixteenths, and at or above which equity

securities may be traded in eighths, is

consistent with the requirements of the

Act and the rules and regulations

thereunder applicable to a national

securities exchange, and, in particular,

with the requirements of Sections 6(b)

and 11A.8 The Commission believes the

proposal is consistent with the Section

6(b)(5) requirements that the rules of an

exchange be designed to promote just

and equitable principles of trade, to

prevent fraudulent and manipulative

acts, and, in general, to protect investors

and the public interest. Additionally,

the Commission believes that the

proposal is consistent with Section 11A,

which requires the Commission to

facilitate the establishment of a national

market system. Pursuant to Section 11A,

a national market system should assure,

among other things, fair competition

between the exchanges, economically

efficient execution of securities

transactions and the practicability of

brokers executing investors’ orders in

the best market.

Although the CBOE currently does

not trade any securities that would be

affected by the proposal, the rule change

to allow trading in sixteenths for

securities priced under $10 will make

the CBOE’s Rule consistent with the

recently approved Amex Rule, and will

allow the Exchange to trade any future

equity listings in sixteenths.

The Commission generally believes

that market quality should be enhanced

by applying a minimum fractional

change of 1⁄16, rather than 1⁄8, to

securities selling below $10. The

Commission believes that decreasing

such trading variations should help to

produce more accurate pricing of such

securities and can result in tighter

quotations. In addition, if the quoted

markets are improved by the reduced

minimum tick fluctuations, the change

could result in added benefits to the

market such as increased liquidity in

stocks priced below $10.9 The

Commission believes that decreasing

such trading variations should help to

produce more accurate pricing of such

securities and can result in tighter

quotations.

In addition, the Commission believes

that the proposal could lead to

increased competition between the

exchanges pursuant to Section 11A of

the Act. As noted above, ITS

participants now have the capability to

trade securities priced below $10 in

sixteenths.10 Should the CBOE begin

trading equity securities, customers

should be able to receive a better, more

competitive price in securities priced

below $10 if they are quoted in

sixteenths.

The Commission finds good cause for

approving the proposed rule change

prior the thirtieth day after the date of

publication of notice of filing thereof in

the Federal Register. The Commission

believes that accelerated approval of the

proposal is appropriate in order to allow

the CBOE to permit equities priced

below $10 to be traded in sixteenths.

Further, the Amex proposal to allow

trading in sixteenths for Amex-listed

securities priced below $10 was noticed

previously in the Federal Register for

the full statutory period and the

Commission did not receive any

comments on it.11

It Is Therefore Ordered, pursuant to

Section 19(b)(2) 12 that the proposed

rule change is hereby approved on an

accelerated basis.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.13

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–8090 Filed 3–31–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35544; File No. SR–MSRB–

95–02]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Municipal Securities Rulemaking

Board Relating to Interpretation of

Rule G–37 on Political Contributions

and Prohibitions on Municipal

Securities Business

March 28, 1995.

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

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), and Rule

19b–4 thereunder, notice is hereby
Federal Register / Vol. 60, No. 63 / Monday, April 3, 1995 / Notices 16897

1The Board plans to publish the interpretations

in the April 1995 MSRB Reports (Vol. 15, no. 1).

2Securities Exchange Act Release No. 33868

(April 7, 1994), 59 FR 17621 (April 13, 1994). The

rule applies to contributions made on and after

April 25, 1994

3See Securities Exchange Act Release No. 34161

(June 6, 1994), 59 FR 30379 (June 14, 1994),

Securities Exchange Act Release No. 34603 (Aug.

25, 1994); 59 FR 45049 (Aug. 31, 1994); and

Securities Exchange Act Release No. 35128 (Dec.

20, 1994); 59 FR 66989 (Dec. 28, 1994). See also

MSRB Reports Vol. 14, No. 3 at 11–16 (June 1994);

Vol. 14, No. 4 at 31–32 (August 1994); and Vol. 14,

No. 5 at 8 (December 1994)

4File Nos. SR–MSRB–94–6, SR–MSRB–94–15

and SR–MSRB–94–16.

given that on March 23, 1995, the

Municipal Securities Rulemaking Board

(‘‘Board’’ or ‘‘MSRB’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) a proposed

rule change as described in Items I, II,

and III below, which Items have been

prepared by the Board. The purpose of

the proposed rule change is to provide

interpretative guidance concerning rule

G–37 on political contributions and

prohibitions on municipal securities

business. The Board has designated this

proposal as constituting a stated policy,

practice, or interpretation with respect

to the meaning, administration, or

enforcement of an existing rule of the

Board under section 19(b)(3)(A) of the

Act, which renders the proposal

effective upon receipt of this filing by

the Commission. 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 Board is filing the proposed rule

change to provide interpretative

guidance concerning rule G–37 on

political contributions and prohibitions

on municipal securities business.1

Proposed new language is in italics.

Rule G–37 Questions and Answers

* * * * *

1. Definition of Municipal Finance

Professional: Solicitation of Municipal

Securities Business (Rule G–37(g)(iv)(B))

Q. Any associated person who solicits

municipal securities business is deemed a

municipal finance professional under rule G–

37. The Board previously noted that

‘‘solicitation’’ may encompass a number of

activities, including, for example, making

presentations of public finance and/or

municipal securities marketing capabilities

to issuer officials, and engaging in other

activities calculated to appeal to issuer

officials for municipal securities business, or

which effectively do so (MSRB Reports, Vol.

14, No. 5 (Dec. 1994) at 8). If an associated

person of a dealer attends a presentation by

dealer personnel of public finance

capabilities, would this also constitute

‘‘solicitation’’ under rule G–37?

A: Yes. If an associated person of a dealer

attends such a presentation, then he or she

is assumed to have solicited municipal

securities business and therefore is deemed

a municipal finance professional under rule

G–37. Accordingly, any contributions given to

issuer officials by that person within the last

two years could subject the dealer to the

rule’s two-year prohibition on business with

such issuers. For additional guidance in this

area, please refer to O&A number 4 in the

June 1994 issue of MSRB Reports (Vol. 14,

No. 3), CCH Manual paragraph 3681; and

Q&A numbers 1, 2 and 3 in the December

1994 issue of MSRB Reports (Vol. 14, No. 5),

CCH Manual paragraph 3681.

2. Definition of Municipal Finance

Professional: Supervisors (Rule G–

37(g)(iv)(C))

Q: A sales representative at a branch office

solicits municipal securities business for the

dealer. Such activity results in that person

becoming a ‘‘municipal finance professional’’

under rule G–37(g)(iv)(B). Would that

person’s branch manager also be considered

a municipal finance professional?

A: Yes. Rule G–37(g)(iv)(C) provides that

the definition of municipal finance

professional includes, among others, any

associated person who is both a (i) municipal

securities principal or a municipal securities

sales principal and (ii) a supervisor of any

associated person who solicits municipal

securities business (or who is primarily

engaged in municipal securities

representative activities). If a sales person is

soliciting municipal securities business, then

the supervisor of that person (i.e., the branch

manager) also is included within the

definition of municipal finance professional.

Prior to the most recent revision to this

portion of the definition of municipal finance

professional (which was approved on March

6, 1995 in Securities Exchange Act Release

No. 34–35446), the definition included any

‘‘direct supervisor’’ of any associated person

who solicited municipal securities business

(or who was primarily engaged in municipal

securities representative activities). Under

both definitions, branch managers are

included within the definition of municipal

finance professional in the circumstances

described above. For additional information

in this area, please refer to MSRB Reports,

Vol. 14, No. 4 (August 1994) at 28–29, CCH

Manual paragraph 3681.

* * * * *

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

Board 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. The Board 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

On April 7, 1994, the Commission

approved Board rule G–37, concerning

political contributions and prohibitions

on municipal securities business.2 Since

that time, the Board has received

numerous inquiries concerning the

application of the rule. In order to assist

the municipal securities industry and,

in particular, brokers, dealers and

municipal securities dealers in

understanding and complying with the

provisions of the rule, the Board

published three prior notices of

interpretation which set forth, in

question-and-answer format, general

guidance on rule G–37.3 In prior filings

with the Commission, the Board stated

that it will continue to monitor the

application of rule G–37, and, from time

to time, will publish additional notices

of interpretations, as necessary.4 In light

of questions recently received from

market participants concerning certain

provisions of the rule, the Board has

determined that it is necessary to

provide further guidance to the

municipal industry. Accordingly, the

Board is publishing this fourth set of

questions and answers which focuses on

those provisions of the rule relating to:

(1) solicitation of municipal securities

business; and (2) the definition of

municipal finance professional. As

previously stated, the Board will

continue to monitor the application of

rule G–37, and, from time to time will

publish additional notices of

interpretations, as necessary.

The Board believes that the proposed

rule change is consistent with Section

15B(b)(2)(C) of the Act, which provides

that the Board’s rules shall be 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 regulating, clearing,

settling, processing information with

respect to, and facilitating transactions

in municipal securities, to remove

impediments to and perfect the

mechanism of a free and open market in

municipal securities, and, in general, to

protect investors and the public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

Because the proposed rule change

would apply equally to all brokers,

dealers and municipal securities

dealers, the Board does not believe that
16898 Federal Register / Vol. 60, No. 63 / Monday, April 3, 1995 / Notices

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

2 17 CFR 240.19b–4 (1994).

3On March 15, 1995, the PHLX amended its

proposal to clarify the delisting standards for

municipal securities. See Letter from Murray L.

Ross, Secretary, PHLX, to Sharon Lawson, Assistant

Director, Division of Market Regulation,

Commission, dated March 14, 1995 (‘‘Amendment

No. 1’’). Specifically, Amendment No. 1 indicates

that PHLX Rule 810(b)(4)(d), as amended, will

apply solely to municipal securities.

4The PHLX intends to require specialist units

applying for appointment and registration in

municipal securities to be in compliance with the

Municipal Securities Rulemaking Board (‘‘MSRB’’)

Rule G–3 regulations regarding municipal securities

principals and representatives. The National

Association of Securities Dealers (‘‘NASD’’) has

authority to enforce MSRB rules for listed

municipal securities. The PHLX enforcement in this

regard will not preempt or limit in any manner the

NASD’s authority to act in this area.

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

the proposed rule change will impose

any burden on competition not

necessary or appropriate in furtherance

of the purposes of the Act.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Written comments were neither

solicited nor received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The foregoing rule change has become

effective upon filing pursuant to Section

19(b)(3)(A)(i) of the Act and

subparagraph (e) of Rule 19b–4

thereunder because the rule change

constitutes a stated policy, practice, or

interpretation with respect to the

meaning, administration, or

enforcement of an existing rule of the

Board.

At any time within 60 days of the

filing of a rule change pursuant to

Section 19(b)(3)(A) of the Act, the

Commission may summarily abrogate

the 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

Room. Copies of the filing will also be

available for inspection and copying at

the principal office of the Board. All

submissions should refer to File No.

SR–MSRB–95–02 and should be

submitted by April 24, 1995.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority, 17 CFR 200.30–3(a)(12).

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–8088 Filed 3–31–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35542; File No. SR–PHLX–

94–69]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change and

Notice of Filing and Order Granting

Accelerated Approval to Amendment

No. 1 to the Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.,

Relating to a One Year Pilot Program

for the Trading, Comparison, Clearing,

Settling, Listing, and Delisting of

Municipal Securities

March 28, 1995.

On December 20, 1994, the

Philadelphia Stock Exchange, Inc.

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

Securities and Exchange Commission

(‘‘SEC’’ or ‘‘Commission’’), pursuant to

section 19(b)(1) of the Securities

Exchange Act of 1934 (‘‘Act’’),1 and

Rule 19b–4 thereunder,2 a proposal to

establish a one year pilot program

allowing the Exchange to list and trade

municipal securities.

Notice of the proposal appeared in the

Federal Register in Securities Exchange

Act Release No. 35308 (January 31,

1995), 60 FR 7251 (February 7, 1995).

No comments were received on the

proposed rule change.3

The PHLX proposes to initiate a one

year pilot program for the trading,

comparison, clearance, settlement,

listing and delisting of municipal

securities. Specifically, the PHLX

proposes to (1) Amend PHLX Rules 132,

‘‘Dealing Outside the Exchange in

Securities Dealt in on the Exchange,’’

501, ‘‘Specialist Appointment,’’ 803,

‘‘Criteria for Listing—Tier I,’’ and 810,

‘‘Suspension and Delisting Policies

Based on Exchange Findings;’’ and (2)

add PHLX Rule 309, ‘‘Municipal

Securities,’’ to provide requirements for

trading, comparison, settlement,

clearing and listing and delisting of

municipal securities.

To be eligible for listing on the

Exchange, proposed PHLX Rule

803(c)(5) provides that a municipal debt

security must: (1) Have an aggregate

market value and principal amount

outstanding of at least $20,000,000; (2)

have at least 100 public beneficial

holders of record; and (3) be rated as

investment grade by at least one

nationally recognized rating service.

Proposed PHLX Rule 810(b)(4)(d)

allows the Exchange to delist a

municipal debt security when the issue

is (1) Not rated as investment grade by

at least one nationally recognized rating

service; (2) does not have at least a

market value or principal amount

outstanding of $500,000; or (3) is not

held by at least 50 public beneficial

holders of record.

The Exchange proposes to assign any

municipal security it lists to a

specialist 4 and to trade municipal

securities in accordance with all PHLX

regulations otherwise applicable to the

trading of securities on the equities

trading floor of the Exchange, except

that pursuant to proposed PHLX Rule

132(d)(17) municipal securities shall be

exempt from the provisions of the

Exchange’s off-board trading rule. Under

proposed PHLX Rule 309, municipal

securities will be compared, settled and

cleared in accordance with the

applicable regulations of the MSRB.

The PHLX believes that the proposed

rule change is consistent with the

requirements of section 6(b)(5) under

the Act in that it is designed to promote

the mechanism of a free and open

market and to protect investors and the

public interest.

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),5 in that

it is designed to promote just and

equitable principles of trade, to protect

investors and the public interest, and to

foster cooperation and coordination

with persons engaged in regulating,

clearing, settling and processing

information with respect to, and

facilitating transactions in, securities.

With regard to the listing standards

for municipal securities proposed by the

PHLX, the Commission notes that listing