Federal Register / Vol. 60, No. 63 / Monday, April 3, 1995 / Notices 16899

6See note 4, supra.

7See Securities Exchange Act Release Nos. 33721

(March 7, 1994), 59 FR 11636 (order approving File

No. SR–PSE–94–05) (establishes municipal bond

trading pilot program through July 5, 1994); 34317

(July 5, 1994), 59 FR 35546 (July 12, 1994) (order

approving File No. SR–PSE–94–21) (extends

municipal bond trading pilot program through

November 2, 1994); 34911 (October 27, 1994), 59 FR

55303 (November 4, 1994) (order approving File No.

SR–PSE–94–32) (extends municipal bond trading

pilot program through November 2, 1995).

8 15 U.S.C. 78s(b)(2) (1988).

9 17 CFR 200.30–3(a)(12) (1994).

standards serve as a means for a selfregulatory organization to screen issuers

and to provide listed status only to

issuers with sufficient investor base and

trading interest to maintain fair and

orderly markets. Once a security has

been approved for initial listing,

maintenance criteria allow an exchange

to monitor the status and trading

characteristics of that issue to ensure

that it continues to meet the exchange’s

standards for market depth and

liquidity.

The Commission believes that the

municipal securities listing and

delisting criteria proposed by the PHLX

are designed to protect investors and

ensure the maintenance of fair and

orderly markets in such listed securities.

The PHLX’s proposal provides that only

municipal bond issuers that satisfy the

criteria established in PHLX Rule

803(c)(5) will be considered for listing

on the Exchange. Specifically, under

PHLX Rule 803(c)(5) 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.

The Commission believes that these

criteria, along with any other

information relevant to determine

whether the issue is appropriate for

exchange trading, should help to ensure

that only municipal issuers capable of

meeting their financial obligation and

whose bond issues can support a liquid

trading market will be listed on the

Exchange. The criteria will also alert

municipal issuers seeking listing on the

PHLX of the Exchange’s specific listing

standards.

The Commission notes that 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 Commission believes that the

delisting standards should allow the

Exchange to identify issuers that may

have insufficient resources to meet their

financial obligations or whose debt

securities may lack sufficient trading

depth and liquidity for a fair and

orderly market.

Under the proposal, municipal

securities will trade in accordance with

all PHLX regulations otherwise

applicable to the trading of securities on

the equities trading floor of the

Exchange, except that municipal

securities will be exempt from the

provisions of the PHLX’s off-board

trading rule. Because municipal

securities will trade under the PHLX’s

existing regulatory regime for equities,

which includes specialist obligations

and margin requirements, the

Commission believes that adequate

safeguards are in place to ensure the

protection of investors in municipal

securities.

Further, the Commission notes that

the regulatory scheme in place for

municipal securities will continue to

apply to PHLX-listed municipal

securities,6 with the additional coverage

of the PHLX surveillance program to the

trading of listed municipal securities.

The Commission believes that this

regulatory framework will provide

sufficient oversight of municipal

securities trading on the Exchange.

The PHLX intends to require

specialist units applying for

appointment and registration in

municipal securities to be in

compliance with MSRB Rule G–3

regarding municipal securities

principals and representatives. The

Commission notes that this requirement

is consistent with the rules of the MSRB

and, in addition, that it is important that

any specialist selected by the PHLX for

a listed municipal security be familiar

with the characteristics of municipal

securities.

Finally, the Commission notes that

the PHLX’s proposal to list and trade

municipal securities is virtually

identical to a proposal submitted by the

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

which was approved by the

Commission.7 Therefore, the

Commission finds that the proposed

rules are equally acceptable for the

PHLX.

The Commission finds good cause for

approving Amendment No. 1 to the

proposed rule change prior to the

thirtieth day after the date of

publication of notice of filing thereof in

the Federal Register because

Amendment No. 1 clarifies the proposal

by indicating that the delisting

standards for municipal securities apply

solely to municipal securities and not to

the debt of other non-listed issuers.

Because Amendment No. 1 clarifies the

Exchange’s proposal and raises no new

regulatory issues, the Commission

believes it is consistent with sections

6(b)(5) and 19(b)(2) of the Act to

approve Amendment No. 1 on an

accelerated basis.

Interested persons are invited to

submit written data, views and

arguments concerning Amendment No.

1 to the proposed rule change. 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 changes 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, NW.,

Washington, DC. Copies of such filing

will also be available for inspection and

copying at the principal office of the

above-mentioned self-regulatory

organization. All submissions should

refer to the file number in the caption

above and should be submitted by April

24, 1995.

It Is Therefore Ordered, pursuant to

section 19(b)(2) of the Act,8 that the

proposed rule change (SR–PHLX–94–

69) relating to the pilot program for

listing and trading municipal securities

is approved until March 28, 1996.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–8092 Filed 3–31–95; 8:45 am]

BILLING CODE 8010–01–M

[Investment Company Act Rel. No. 20969;

International Series Release No. 798/812–

9354]

The Chase Manhattan Bank, N.A.;

Notice of Application

March 28, 1995.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

exemption under the Investment

Company Act of 1940 (‘‘Act’’).

APPLICANT: The Chase Manhattan Bank,

N.A., (‘‘Chase’’).
16900 Federal Register / Vol. 60, No. 63 / Monday, April 3, 1995 / Notices

1Russian clearing and custody procedures differ

substantially from the procedures generally

employed elsewhere. Other than the exemption

requested from section 17(f) to permit Chase-Russia

to qualify as an ‘‘eligible foreign custodian’’ under

rule 17f–5, applicant is not requesting (and any

order would not grant) an exemption from section

17(f) or rule 17f–5 for any aspect of the custody or

clearing procedures employed in Russia. Moreover,

applicant acknowledges that any order will not

constitute a determination by the Commission that

the Russian clearing and custody procedures

comply with section 17(f) or the rules thereunder.

2Applicant notes that there are special risks

associated with investing in securities in the

Russian market including, among others, risks

relating to the settlement of trades and the

registration of securities in an environment

characterized by multiple, unaffiliated registrar

RELEVANT ACT SECTIONS: Exemptions

requested under section 6(c) from the

provisions of section 17(f) of the Act.

SUMMARY OF APPLICATION: Chase seeks an

order to enable it to maintain foreign

securities and other assets of United

States registered investment companies

for which it serves as custodian or

subcustodian in the custody of Chase

Manhattan Bank International (‘‘ChaseRussia’’).

FILING DATE: The application was filed

on December 9, 1994, and amended on

March 14, 1995.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicant with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

April 24, 1995, and should be

accompanied by proof of service on

applicant, in the form of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the writer’s interest, the reason for the

request, and the issues contested.

Persons who wish to be notified of a

hearing may request such notification

by writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, NW., Washington, DC 20549.

Applicant, c/o Daniel L. Goelzer, Esq.,

Baker & McKenzie, 815 Connecticut

Avenue, NW., Washington, DC 20006.

FOR FURTHER INFORMATION CONTACT:

Courtney S. Thornton, Senior Attorney,

at (202) 942–0583, or Barry D. Miller,

Senior Special Counsel, at (202) 942–

0564 (Division of Investment

Management, Office of Investment

Company Regulation).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee from the SEC’s

Public Reference Branch.

Applicant’s Representations and Legal

Analysis

1. Chase requests expemptive relief

for itself, any management investment

company registered under the Act, other

than an investment company registered

under section 7(d) of the Act (a ‘‘U.S.

Investment Company’’) and any

custodian for a U.S. Investment

Company from section 17(f) of the Act

to the extent necessary to permit ChaseRussia to qualify as an ‘‘Eligible Foreign

Custodian’’ under rule 17f–5. The

requested exemption would permit

Chase, a U.S. Investment Company, and

any custodian for a U.S. Investment

Company to maintain foreign securities,

cash, and cash equivalents (collectively,

‘‘Assets’’) in the custody of ChaseRussia, a wholly-owned, indirect

subsidiary of Chase located in Russia.1

For purposes of the application, the

term ‘‘foreign securities’’ includes (a)

securities issued and sold primarily

outside the United States by a foreign

government, a national of any foreign

country, or a corporation of other

organization incorporated or organized

under the laws of any foreign country,

and (b) securities issued or guaranteed

by the Government of the United States,

or by any state or any political

subdivision thereof, or by any agency

thereof, or by any entity organized

under the laws of the United States, or

of any state thereof which have been

issued and sold primarily outside the

United States.

2. Section 17(f) of the Act requires

every registered management

investment company to place and

maintain its securities and similar

investments in the custody of certain

enumerated entities. Rule 17f–5 under

the Act expands the group of entities

located outside the United States that

are permitted to serve as custodians for

the Assets of registered management

investment companies. Rule 17f–5

defines the term ‘‘Eligible Foreign

Custodian’’ to include a majority-owned

direct or indirect subsidiary of qualified

U.S. bank or bank-holding company that

is incorporated or organized under the

laws of county other than the United

States and that has shareholders’ equity

in excess of $100,000,000 (U.S. $

equivalent or U.S. $). as of the close of

its most recently completed fiscal year.

The rule defines the term ‘‘Qualified

U.S. Bank’’ to include a banking

institution organized under the laws of

the United States that has an aggregate

capital, surplus, and undivided profit of

not less than $550,000.

3. Chase is a national banking

association and is regulated as such by

the Comptroller of the Currency under

the National Bank Act. At December 31,

1993, Chase has shareholders’ equity in

excess of $6.4 billion. Thus, Chase is a

‘‘Qualified U.S. Bank’’ as defined in rule

17f–5, since it is a banking institution

organized under the laws of the United

States, and has aggregate capital,

surplus, and undivided profit

substantially in excess of the $500,000

minimum required by the rule.

4. Chase is a subsidiary of The Chase

Manhattan Corporation, a Delaware

corporation that is one of the leading

financial services providers in the

world. Through its Global Securities

Service division (‘‘GSS’’), Chase

provides custody and related services to

global institutional investors, including

U.S. mutual funds. GSS currently has

over $1.3 trillion in assets under

custody worldwide.

5. Chase-Russia, a wholly-owned

indirect subsidiary of Chase, was

incorporated in Russia on October 26,

1993, under General License No. 2629.

Chase-Russia is authorized to engage in

the business of commercial banking in

Russia, and is supervised by the Central

Bank of the Russian Federation. ChaseRussia offers customers a wide range of

retail and wholesale banking services; it

also operates a custody department to

support local and foreign investors.

6. Chase-Russia will satisfy the

requirements of rule 17f–5 insofar as it

is an indirect, wholly-owned subsidiary

of Chase, and is incorporated and

organized under the laws of Russia.

Chase-Russia will not, however, meet

the $100 million minimum

shareholders’ equity requirement of rule

17f–5. Accordingly, Chase-Russia will

not qualify as an Eligible Foreign

Custodian under the rule and, absent

exemptive relief, could not serve as

custodian for the Assets of U.S.

Investment Companies.

7. Where custody services are

required in Russia, Chase will hold the

Assets of U.S. Investment Companies as

custodian or subcustodian, and will

deposit, or cause or permit the deposit

of, the Assets with Chase-Russia in

accordance with the arrngements

described below. Before permitting

Chase-Russia to act as a custodian for

the Assets of a U.S. Investment

Company, Chase will ensure that ChaseRussia is capable and well-qualified to

provide custody and subcustody

services to Chase, U.S. Investment

Companies, and custodians for U.S.

Investment Companies. Under the

proposed foreign custody arrangements,

the protection afforded the Assets of

U.S. Investment Companies held by

Chase-Russia will not be diminished

from the protection afforded by rule

17f–5.2
Federal Register / Vol. 60, No. 63 / Monday, April 3, 1995 / Notices 16901

companies and non-authoritative paper share

extract certificates. These risks, like other risks

associated with foreign investment, would remain

with the U.S. Investment Companies. Chase will be

liable only to the same extent as if it had held the

assets itself in Russia (i.e., by opening a branch in

Moscow). However, Chase’s liability with respect to

assets held in custody in Russia will not be reduced

by Chase’s causing such assets to be held in a

subsidiary rather than directly by Chase. Chase’s

contracts with its customers will reflect this

liability.

1For purposes of such calculations, a message

includes any message that a participant

disseminates over the Consolidated Tape System,

including, but not limited to, prices relating to

Eligible Securities or concurrent use securities,

administrative messages, index messages,

corrections, cancellations, and error messages.

2For example, a month’s relative message usage

for CTA network a would be calculated as follows:

Where:

‘‘A’’ represents the number of messages that CTA

Network A participants disseminate over the CTA

network A pursuant to the CTA plan during that

month; and

‘‘B’’ represents the number of messages that CTA

Network B participants disseminate over the CTA

Network B pursuant to the CTA plan during the

month.

To determine a month’s relative message usage

for CQ Network A, substitute ‘‘CQ’’ where ‘‘CTA’’

appears in this footnote.

Applicant’s Conditions

Chase agrees that any order of the SEC

granting the requested relief may be

conditioned upon the following:

1. The foreign custody arrangements

proposed herein regarding Chase-Russia

will satisfy the requirments of rule 17f–

5 in all respects other than ChaseRussia’s level of shareholders’ equity.

2. Chase will deposit Assets with

Chase-Russia only in accordance with

the custody agreement and the

subcustody agreement described below.

The custody and subcustody agreements

will remain in effect at all times during

which Chase-Russia fails to satisfy the

requirements of rule 17f–5.

a. The custody agreement will be

between Chase and the U.S. Investment

Company (or its custodian). In that

agreement, Chase will undertake to

provide custody or subcustody services,

and the U.S. Investment Company (or its

custodian) will authorize Chase to

delegate to Chase-Russia such of Chase’

duties and obligations as will be

necessary to permit Chase-Russia to

hold in custody in Russia the Assets of

U.S. Investment Companies. The

custody agreement will further provide

that the delegation by Chase to ChaseRussia will not relieve Chase of any

responsibility to the U.S. Investment

Company or its custodian for any loss

due to such delegation, and that Chase

will be liable for any loss or claim

arising out of or in connection with the

performance by Chase-Russia of the

custody services to the same extent as

if Chase had itself provided the custody

services under the custody agreement.

b. A subcustody agreement will be

executed between Chase and ChaseRussia. Pursuant to this agreement,

Chase will delegate to Chase-Russia

such of Chase’s duties and obligations

as would be necessary to permit ChaseRussia to hold Assets in custody in

Russia. The subcustody agreement will

provide that (i) Chase-Russia is acting as

a foreign custodian for Assets that

belong to a U.S. Investment Company

pursuant to the terms of an exemptive

order issued by the SEC, and (ii) the

U.S. Investment Company or its

custodian (as the case may be) that has

entered into a custody agreement will be

entitled to enforce the terms of the

subcustody agreement, and can seek

relief directly against Chase-Russia. The

subcustody agreement will provide that

it will be governed by New York law.

3. Chase currently satisfies and will

continue to satisfy the Qualified U.S.

Bank requirement set forth in rule 17f–

5(c)(3).

For the SEC, by the Division of Investment

Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–8027 Filed 3–31–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35543; File No. S7–27–93]

Consolidated Tape Association; Notice

of Filing of Seventeenth Substantive

Amendment to the Restated

Consolidated Tape Association Plan

and Twenty-First Substantive

Amendment to the Consolidated

Quotation Plan

March 28, 1995.

Pursuant to Rule 11Aa3–2 of the

Securities Exchange Act of 1934

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

March 9, 1995, the Consolidated Tape

Association (‘‘CTA’’) and Consolidated

Quotation (‘‘CQ’’) Plan Participants filed

with the Securities and Exchange

Commission (‘‘Commission’’ or ‘‘SEC’’)

amendments to the Restated CTA Plan

and CQ Plan. The Commission is

publishing this notice to solicit

comments from interested persons on

the amendments.

I. Description and Purpose of the

Amendments

The amendments seek to change a

procedure for allocating high speed line

access fee revenues between ‘‘Network

A’’ and ‘‘Network B’’ under each plan.

The participants propose to apply

‘‘relative message usage percentages’’ to

the allocation of high speed line

revenues between networks

retroactively, beginning with the period

commencing January 1, 1994.

The amendments would also

eliminate the requirements that the

participants set the high speed line

access fee at a level designed to recover

the costs of making the high speed line

available, and set indirect high speed

line access fees at a level that equals

one-half of the direct access fees. The

actual fees, however, would not be

changed at this time.

A. Allocation of High Speed Line

Revenue

Currently, under each plan, the

participants impose on subscribers,

vendors, computer input users and

others one combined high speed line

access fee for access to both Network A

and Network B market data. Under the

proposed amendments, the participants

wish to change the current methods set

forth in the plans for allocating each

plan’s high speed line access revenues

between the two networks. The

participants feel that a more appropriate

and equitable way to achieve that

allocation would be to apply a measure

that reflects each network’s relative

usage of the plans’ systems.

To that end, the participants have

selected each network’s ‘‘relative

message usage percentage’’. These

percentages, in the participants’ view,

reflect a network’s relative portion of

the total number of messages 1 that the

participants disseminate over the high

speed line for a given period. Under the

proposed amendments, a ‘‘relative

message usage percentage’’ would equal

the number of a network’s messages

reported over the high speed line

divided by the sum of the numbers of

both networks’ messages that both

networks report over the high speed

line.2 The participants have proposed to

retroactively apply the ‘‘relative

message usage percentage’’ to the

allocation of high speed line revenues

between networks commencing January

1, 1994.

CTA Network A Relative Message

A

A+B,

If the instant amendments are

approved, the participants will direct

the Processor to calculate the allocation

percentages on a monthly basis. Under

the proposed amendments, the New

York Stock Exchange (‘‘NYSE’’) shall

distribute to the Network B