Federal Register / Vol. 60, No. 78 / Monday, April 24, 1995 / Notices 20131

5 15 U.S.C. 78s(b)(2) (1988).

6 17 CFR 200.30–3(a)(12) (1994).

1 15 U.S.C. 78q–1, 78s(a) (1988).

2Letter from Charles A. Moran, President, GSCC,

to Brandon Becker, Director, Division of Market

Regulation, Commission (February 3, 1995)

(‘‘Registration Letter’’).

3 17 CFR 240.17Ab2–1 (1994).

4Securities Exchange Act Release No. 25740 (May

24, 1988), 53 FR 19639.

5Securities Exchange Act Release Nos. 29067

(April 11, 1991), 56 FR 15652 and 32385 (June 3,

1993), 58 FR 32405.

6The Commission determined that GSCC’s rules

did not enumerate the statutory categories of

membership as required by Section 17A(b)(3)(B)

and the financial standards for applicants and

members as contemplated by Section 17A(b)(4)(B)

of the Act. 15 U.S.C. 78q–1(b)(3)(B), 78q–1(b)(4)(B)

(1988). In addition, the Commission determined

that while the composition of GSCC’s Board of

Directors reasonably reflected GSCC’s anticipated

initial membership, it would be appropriate to

reevaluate whether GSCC’s process for selecting its

Board of Directors complied with the fair

representation requirements in Section 17A(b)(3)(C)

of the Act before granting full registration as a

clearing agency. 15 U.S.C. 78q–1(b)(3)(C) (1988).

7See Registration Letter, note 2 supra.

8Securities Exchange Act Release Nos. 34935

(November 3, 1994), 59 FR 56100 (order approving

establishment of new categories of netting system

membership for futures commission merchants) and

32722 (August 5, 1993), 58 FR 42993 (order

approving establishment of new categories of

netting system membership for dealer and

interdealer brokers, issuers of government

securities, insurance companies, registered clearing

agencies, and registered insurance companies).

9See Registration Letter, note 2 supra.

10 15 U.S.C. 78s(a)(1) (1988).

delete reference in Rule 5(d)(viii) (Overthe-Counter Execution of Equity

Securities Transactions) to Rules 560

and 570 because these rules have been

rescinded. Because Rules 560 and 570

no longer exist, the Commission agrees

that these references should be deleted.

The Exchange is also proposing to

delete the signature requirement in Rule

181 (Cancellations Must Be Written) to

reflect its current practice. The

Exchange believes that the signature

requirement is no longer necessary on

the Trading Floor because of the use of

printed tickets, which include the name

and clearing number of the broker or

brokerage firm. The Commission agrees

that this change to remove the signature

requirement is appropriate in light of

technological developments in the

market.

The Exchange is also proposing to

amend Rules 183 (Specialist

Registration Fee) and 184 (Specialist

Clerks) to eliminate references to out-ofdate charges and schedule of payments.

The Commission agrees that the rules

should be revised to delete references to

the outdated fees and payment

schedules. Rather than make repeated

amendments in the Rules whenever the

fees are changed, the Exchange proposes

to use general language in these rules to

refer to the fees that are imposed by the

Exchange each year. The Exchange is

also amending Rule 783 (d) (Normal

Buy-Ins) to delete the reference to a

member’s entitlement to a Floor

brokerag commission because such

commissions are now negotiated. The

Commission believes that these changes

will help to remove impediments to and

perfect the mechanism of a free and

open market in accordance with Section

6(b)(5) of the Act.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,5 that the

proposed rule change (SR–Amex–95–

10) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

[FR Doc. 95–10044 Filed 4–21–95; 8:45 am]

BILLING CODE 8010–01–M

[Release 34–35618; File No. 600–23]

Self-Regulatory Organizations;

Government Securities Clearing

Corporation; Notice of Filing of an

Amended Application for Full Clearing

Agency Registration and a Request for

Extension of Temporary Registration

as a Clearing Agency

April 17, 1995.

Notice is hereby given that on

February 3, 1995, the Government

Securities Clearing Corporation

(‘‘GSCC’’) filed with the Securities and

Exchange Commission (‘‘Commission’’)

an application, pursuant to Sections

17A and 19(a) of the Securities

Exchange Act of 1934 (‘‘Act’’),1

requesting that the Commission grant

GSCC full registration as a clearing

agency or, in the alternative, extend

GSCC’s temporary registration as a

clearing agency until such time as the

Commission is able to grant GSCC

permanent registration.2 On March 13,

1995, GSCC filed with the Commission

an amended CA–1. The Commission is

publishing this notice to solicit

comments from interested persons on

the request for extension of registration.

On May 24, 1988, the Commission

approved, pursuant to Sections 17A and

19(a) of the Act and Rule 17Ab2–1(c)

thereunder,3 the application of GSCC for

registration as a clearing agency on a

temporary basis for a period of three

years.4 The Commission subsequently

extended GSCC’s registration until May

31, 1995.5

GSCC provides clearance and

settlement services for its members’

transactions in government securities.

GSCC offers its members services for

next-day settling trades, forward settling

trades, auction takedown activity, the

multilateral netting of trades, the

novation of netted trades, and daily

marking-to-the-market. In connection

with GSCC’s clearance and settlement

services, GSCC provides a centralized

loss allocation procedure and maintains

margin to offset netting and settlement

risks.

At the time of GSCC’s initial

registration, the Commission granted

GSCC exemptions from compliance

with the participation standards in

Sections 17A(b)(3)(B) and 17A(b)(4)(B)

and the fair representation requirements

in Section 17A(b)(3)(C) of the Act.6

GSCC has requested that the

Commission remove GSCC’s exemption

from the participation standards in

Section 17A(b)(3)(B) and 17A(b)(4)(B) of

the Act.7 The Commission recently has

approved two proposed rule changes

that increase the categories of those

eligible for membership in GSCC’s

netting system.8 In addition, GSCC has

asserted that its current selection

process for its board of directors, which

permits any GSCC member to nominate

candidates for election to the Board and

to vote for candidates so nominated,

assures fair representation.9 GSCC

further states that it recognizes future

membership growth may require GSCC

to adjust the selection process to ensure

fair member representation on the

Board. The Commission is reviewing

GSCC’s request to remove the

exemptions.

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing

application by May 15, 1995. Such

written data, views, and arguments will

be considered by the Commission in

granting registration or instituting

proceedings to determine whether

registration should be denied in

accordance with Section 19(a)(1) of the

Act.10 Persons making written

submissions should file six copies

thereof with the Secretary, Securities

and Exchange Commission, 450 Fifth

Street, NW., Washington, DC 20549.

Reference should be made to File No.

600–23. Copies of the amended

application for registration and all

written comments will be available for

inspection at the Commission’s Public
20132 Federal Register / Vol. 60, No. 78 / Monday, April 24, 1995 / Notices

11 17 CFR 200.30–3(a)(16)(1994).

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

2 17 CFR 240.19b–4 (1994).

3See Securities Exchange Act Release No. 35278

(January 25, 1995), 60 FR 6324.

4The proposal would permit five-year LEAPS on

both broad-based and narrow-based indexes on

which LEAPS have been approved for trading on

the CBOE.

5See CBOE Rule 24.9(b).

6 15 U.S.C. 78f(b)(5) (1988 & Supp. V 1993).

7The Commission also finds that extending the

maximum term for Index LEAPS from three to five

years does not alter the Commission’s designation

of index LEAPS as standardized options pursuant

to Rule 9b–1(a)(4) of the Act.

8See Securities Exchange Act Release No. 24853

(August 27, 1987), 52 FR 33486 (September 3,

1987).

9 Id.

10 Id.

11The Commission’s findings are predicated on

the somewhat limited length of five-year index

LEAPS. Any subsequent proposal to list index

LEAPS with expirations beyond five years could

alter the nature of the product and would raise new

regulatory concerns, including, among other things,

the appropriate margin treatment, disclosure, and

trading rules for the product.

12See CBOE Rule 24.9(b)(1).

13See CBOE Rule 8.7(a).

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

15 17 CFR 200.30–3(a)(12) (1994).

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

2 17 CFR 240.19b–4 (1994).

3See letter from David Rusoff, Foley & Lardner,

to Jennifer Choi, SEC, dated February 27, 1995. The

original filing incorrectly referenced Rule 3 of

Article IV of the Exchange Rules as the rule to be

Reference Room, 450 Fifth Street, NW.,

Washington, DC 20549.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–9986 Filed 4–21–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35617; File No. SR–CBOE–

95–02]

Self-Regulatory Organizations; Order

Approving a Proposed Rule Change by

the Chicago Board Options Exchange,

Inc., Relating to the Listing of LongTerm Index Options Series (‘‘LEAPS’’)

With a Duration of up to Sixty Months

Until Expiration

April 17, 1995.

On January 19, 1995, the Chicago

Board Options Exchange, Inc. (‘‘CBOE’’

or ‘‘Exchange’’), pursuant to Section

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

of 1934 (‘‘Act’’)1 and Rule 19b–4

thereunder,2 filed with the Securities

and Exchange Commission

(‘‘Commission’’) a proposed rule change

to permit the listing of long-term index

options series (‘‘LEAPS’’) with a

duration of up to sixty months (five

years) until expiration. Notice of the

proposal appeared in the Federal

Register on February 1, 1995.3 No

comment letters were received on the

proposed rule change. This order

approves the CBOE proposal.

The purpose of the proposed rule

change is to permit the Exchange to list

index LEAPS with a duration of up to

sixty months (five years).4 Presently, the

Exchange has authority pursuant to

CBOE Rule 24.9(b) to list index LEAPS

that expire from twelve to thirty-six

months from the time they are listed.

The Exchange represents that there has

been increasing member firm and

customer interest in longer term

instruments. The Exchange, therefore, is

proposing to amend Exchange Rule 24.9

to permit the listing of index options

with up to sixty months until

expiration. In addition, the Exchange

proposes to amend Rule 24.9 to allow

for up to ten expiration months for

index LEAPS, as opposed to the six

months currently allowed. The proposal

does not change any other rule

regarding the listing and trading of

index LEAPS.5

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).6

Specifically, the Commission believes

the proposal is designed to provide

investors with additional means of

hedging equity portfolios from longterm market risk with an exchangetraded security (i.e., a standardized

option), thereby facilitating transactions

in options and contributing to the

protection of investors and the

maintenance of fair and orderly

markets.7

Currently, institutional customers use

index options to hedge the risks

associated with holding diversified

equity portfolios. The Commission

continues to believe, as originally stated

in its approval of the listing of index

LEAPS by the Exchange, that allowing

investors to lock in their hedges with

longer-term index LEAPS will permit

institutions to protect better their

portfolios from adverse market moves.8

Further, the Commission believes that

index LEAPS with up to five years until

expiration will allow this protection at

a known and limited cost.9 Moreover,

the proposal will provide institutions

with an additional securities product

with which to hedge their portfolios as

an alternative to hedging with futures

positions or off-exchange customized

index options.10 Accordingly, the

Commission believes that the proposed

rule change will better serve the longterm hedging needs of institutional

investors.11

Finally, although as with index

LEAPS presently trading on the

Exchange, specific strike price interval,

bid/ask differential, and price

continuity rules will not apply until the

proposed longer-term index LEAPS

have less than 12 months until

expiration,12 the Commission notes that

CBOE’s general rule obligating market

makers to maintain fair and orderly

markets will continue to apply to the

proposed longer-term index LEAPS.13

The Commission believes that the

requirements of CBOE Rule 8.7(a) are

broad enough, even in the absence of

strike price interval, bid/ask differential,

and continuity requirements, to provide

the Exchange with the authority to make

a finding of inadequate market maker

performance should market makers

enter into transactions or make bids or

offers (or fail to do so) in the proposed

longer-term index LEAPS that are

inconsistent with the maintenance of a

fair and orderly market.

It is therefore ordered, pursuant to

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

proposed rule change (File No. SR–

CBOE–95–02) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.15

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–9978 Filed 4–21–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35614; File No. SR–CHX–

95–05]

Self-Regulatory Organizations;

Chicago Stock Exchange,

Incorporated; Order Granting Approval

to Proposed Rule Change Relating to

the Authority of the Committee on

Floor Procedure

April 17, 1995.

On February 10, 1995, the Chicago

Stock Exchange, Incorporated (‘‘CHX’’

or ‘‘Exchange’’) submitted to 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 proposed rule

change to amend CHX Rule 3 of Article

XII to provide the Committee on Floor

Procedure with the same authority over

persons associated with a member as it

currently has over members. On March

1, 1995, the Exchange submitted to the

Commission Amendment No. 1 to the

proposed rule change.3