Federal Register / Vol. 60, No. 74 / Tuesday, April 18, 1995 / Notices 19423

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

2 17 CFR 240.19b–4 (1992).

3See Securities Exchange Act Release No. 35326

(February 3, 1995), 60 FR 8104 (February 20, 1995).

4 In Amendment No. 1, the Phlx proposes to reset

the starting value for the Index at 405.36 as of the

opening on January 3, 1995, as opposed to 370 on

December 14, 1994, as originally proposed. See

Letter from Michele Weisbaum, Associate General

Counsel, Phlx, to Brad Ritter, Senior Counsel, Office

of Market Supervision (‘‘OMS’’), Division of Market

Regulation (‘‘Division’’), Commission, dated March

7, 1995 (‘‘Amendment No. 1’’).

5 In Amendment No. 2, as discussed herein, the

Phlx proposes to list long-term options on the

Index. See Letter from Michele Weisbaum,

Associate General Counsel, Phlx, to Brad Ritter,

Senior Counsel, OMS, Division, Commission, dated

March 17, 1995 (‘‘Amendment No. 2’’).

6See 17 CFR 240.11Aa3–1. A ‘‘reported security’’

is defined in paragraph (a)(4) of this rule as ‘‘any

listed equity security or NASDAQ security for

which transaction reports are required to be made

on a real-time basis pursuant to an effective

transaction reporting plan.’’ A ‘‘transaction

reporting plan’’ is defined in paragraph (a)(2) of this

rule as ‘‘any plan for collecting, processing, making

available or disseminating transaction reports with

respect to transactions in reported securities filed

with the Commission pursuant to, and meeting the

requirements of, this section.’’

7See Amendment No. 2, supra note 5.

8See infra Section II.D, entitled ‘‘Calculation of

the Index,’’ for a description of this calculation

method.

9See Amendment No. 1, supra note 4.

10The Phlx’s options listing standards, which are

uniform among the options exchanges, provide that

a security underlying an option must, among other

Continued

Advisers Act of 1940 by obtaining a

blanket consent from a client to enter

into agency cross transactions, provided

certain disclosure is made to the client.

Approximately 214 respondents utilize

the rule annually, necessitating about

122 responses each year, for a total of

26,108 responses. Each response

requires about .5 hours, for a total of

13,054 hours.

Rules 8b–1 through 8b–32 provide

standard instructions to guide persons

when filing registration statements

under the Investment Company Act of

1940. Rules 8b–1 through 8b–32 impose

burdens only in the context of the

preparation of the various registration

forms. Accordingly, no separate burden

estimate is being submitted for Rules

8b–1 through 8b–32 and burden

estimates are, or will be, made for each

of the registration statement forms.

Direct general comments to the OMB

Clearance Officer for the Securities and

Exchange Commission at the address

below. Direct any comments concerning

the accuracy of the estimated average

burden hours for compliance with

Commission rules and forms to David T.

Copenhafer, Acting Director, Office of

Information Technology, Securities and

Exchange Commission, 450 Fifth Street,

N.W., Washington, DC 20549, and SEC

Clearance Officer, Office of Management

and Budget, Paperwork Reduction

Project 3235–0232 (Form 1–E); 3235–

0243 (Rule 206(3)–2); 3235–0176 (Rules

8b–1 through 8b–32), Room 3208, New

Executive Office Building, Washington,

DC 20543.

Dated: April 3, 1995.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–9527 Filed 4–17–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35591; File No. SR–Phlx–

95–07]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.,

and Notice of Filing and Order

Granting Accelerated Approval of

Amendment Nos. 1 and 2 to the

Proposed Rule Change Relating to the

Listing and Trading of Options and

Long-Term Options on the Phlx USTOP

100 Index

April 11, 1995.

I. Introduction

On January 30, 1995, the Philadelphia

Stock Exchange, Inc. (‘‘Phlx’’ or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission

(‘‘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

provide for the listing and trading of

index options on the Phlx USTOP 100

Index (‘‘USTOP 100 Index’’ or ‘‘Index’’).

Notice of the proposal appeared in the

Federal Register on February 20, 1995.3

The Exchange filed Amendment No. 1

to the proposed rule change on March

7, 1995,4 and Amendment No. 2 on

March 17, 1995.5 This order approves

the Exchange’s proposal, as amended.

II. Description of Proposal

A. Composition of the Index

The Phlx proposes to list for trading

options on the Phlx USTOP 100 Index,

a new broad-based stock index to be

calculated and maintained by the Phlx.

The Index will be composed of 100 of

the most highly capitalized, widely-held

U.S. common stocks representing a

variety of industries, including, but not

limited to, technology, manufacturing,

and the service industries. Ninety-four

of the components in the Index are

listed on the New York Stock Exchange

(‘‘NYSE’’) and six are Nasdaq National

Market securities. All component stocks

are ‘‘reported securities,’’ as that term is

defined in Rule 11Aa3–1 of the Act.6

The Phlx also proposes to list long-term

Index options on the full-value Index

(‘‘Index LEAPS’’).7 Index LEAPS will

trade independent of and in addition to

regular USTOP 100 Index options

traded on the Exchange; however, as

discussed below, position and exercise

limits of Index LEAPS and regular Index

options will be aggregated. The Phlx

will use a capitalization-weighted

methodology to calculate the value of

the Index.8

As of the close of trading on March 6,

1995, the Index was valued at 427.98.9

As of January 23, 1995, the market

capitalizations of the individual

securities in the Index ranged from a

high of $86.12 billion to a low of $7.61

billion, with the mean being $20.66

billion. The market capitalization of all

the securities in the Index was

approximately $2.07 trillion. The total

number of shares outstanding on that

date for the stocks in the Index ranged

from a high of 557.2 million shares to

a low of 15.7 million shares. In addition,

the average daily trading volume in the

U.S. of the stocks in the Index for the

six-month period from July 1, 1994,

through December 31, 1994, ranged

from a high of 3.06 million shares per

day to a low of 207,795 shares per day.

Finally, as of January 23, 1995, no one

component accounted for more than

4.17% of the Index’s total value and the

percentage weighting of the five largest

issues in the Index accounted for

17.28% of the Index’s value. The

percentage weighting of the lowest

weighted component on that date was

0.37% of the Index and the percentage

weighting of the five smallest issues in

the Index accounted for 1.99% of the

Index’s value.

B. Maintenance

The Index will be maintained by the

Phlx. The Phlx will make special

adjustments to the securities comprising

the Index to reflect such events as stock

splits or reverse splits, spinoffs, stock

dividends, reorganizations,

recapitalizations, and similar events,

upon their occurrence. In accordance

with Phlx Rule 1009A, if any change in

the nature of any stock in the Index

occurs as a result of delisting, merger,

acquisition or otherwise, the Exchange

will take appropriate steps to delete that

stock from the Index and replace it with

another stock which the Exchange

believes would be compatible with the

intended market character of the Index.

In making replacement determinations,

the Exchange will also take into account

the capitalization, liquidity, and

volatility of a particular stock.

The Exchange represents that all of

the stocks comprising the Index

currently are options eligible 10 and
19424 Federal Register / Vol. 60, No. 74 / Tuesday, April 18, 1995 / Notices

things, meet the following requirements: (1) the

public float must be at least 7,000,000 shares; (2)

there must be a minimum of 2,000 stockholders; (3)

trading volume in the U.S. must have been at least

2.4 million over the preceding twelve months; and

(4) the U.S. market price must have been at least

$7.50 for a majority of the business days during the

preceding three calendar months. See Phlx Rule

1009, Commentary .01.

11See Amendment No. 1, supra note 4.

12The formula for calculating the value of the

Index is the same as that previously approved by

the Commission for calculating the value of the

Phlx Big Cap Index. See Securities Exchange Act

Release No. 33973 (April 28, 1994), 59 FR 23245

(May 5, 1994). Telephone conversation between

Michele Weisbaum, Associate General Counsel,

Phlx, and Brad Ritter, Senior Counsel, OMS,

Division, Commission, on February 2, 1995.

13Telephone conversation between Michele

Weisbaum, Associate General Counsel, Phlx, and

Brad Ritter, Senior Counsel, OMS, Division,

Commission, on March 16, 1995.

14A European-style option can be exercised only

during a specified period before the option expires.

15The limitations applicable to the listing of 25.0

point strike price intervals will be the same as those

applicable to the listing of 25.0 point strike price

intervals on far-term index option series listed on

the Exchange’s Big Cap Index. See Securities

Exchange Act Release No. 34233 (June 17, 1994), 59

FR 32731 (June 24, 1994) (‘‘Exchange Act Release

No. 34233’’).

16Exchange Rule 1101A, Commentary .02, which

already permits 25.0 point intervals in far-term

series for the Exchange’s other broad-based indexes

will be amended to include this treatment for the

USTOP 100 Index.

17See Amendment No. 2 supra note 5. The

Exchange has also submitted a proposal to increase

the maximum term to maturity for index LEAPS

from 36 months to 60 months for all of its options

approved indexes. See Securities Exchange Act

Release No. 35376 (February 14, 1995), 60 FR 9880

(February 22, 1995).

18See Phlx Rule 1001A(a)(i).

19See Phlx Rule 1002A.

20See Amendment No. 2, supra note 5.

have standardized options listed on

them. If at any time, less than 90% of

the components in the Index, by weight,

are options eligible, the Exchange will

submit a Rule 19b–4 filing for

Commission approval before opening

any new series of options on the Index

for trading. Further, the Exchange will

submit a Rule 19b–4 filing for

Commission approval prior to opening

any new series of options on the Index

if the number of stocks in the Index ever

increases to more than 120 or decreases

to less than 80.

C. Applicability of Phlx Rules Regarding

Index Options

Except as modified by this order, Phlx

Rules 1000A through 1103A, in

particular, and Phlx Rules 1000 through

1070, in general, will be applicable to

USTOP 100 Index options and Index

LEAPS.

D. Calculation of the Index

The value of the USTOP 100 Index

will be calculated using a capitalizationweighted methodology. The

representation of each security in the

Index will be proportional to the

security’s last sale price multiplied by

the total number of shares outstanding,

in relation to the total market value of

all of the securities in the Index. The

initial value of the Index was set to

equal 405.36 index and reflects changes

in the prices of the Index component

securities relative to the Index’s base

date of January 3, 1995.11 The formula

for calculating the value of the Index is

as follows:12

Current Index Value equals

(MV1)+(MV2)+···(MV100) divided by

Divisor and multiplied by 100

Where:

MV=Price x Shares outstanding for each

component of the Index

Divisor=Number calculated to achieve a

base value of 405.36 for the Index

as of the opening of trading on

January 3, 1995.

The Index divisor will be adjusted for

changes in the capitalization of any of

the component securities resulting from

mergers, acquisitions, delistings,

substitutions, and other like corporate

events. The formula for adjusting the

divisor is as follows:

Divisor equals to Total Capitalization (as

a result of adjustments) divided by

Old Index Value

The Index value will be updated

dynamically at least once every 15

seconds during the trading day. The

Phlx has retained Bridge Data, Inc. to

compute the value of the Index.

Pursuant to Phlx Rule 1100A, updated

Index values will be disseminated and

displayed by means of primary market

prints reported by the Consolidated

Tape Association and over the facilities

of the Options Price Reporting

Authority (‘‘OPRA’’). The Index value

will also be available on broker/dealer

interrogation devices to subscribers of

the option information.

The Index value for purposes of

settling outstanding regular Index

options and Index LEAPS contracts

upon expiration will be calculated

based upon the regular way opening

sale prices for each of the Index’s

component securities in their primary

market on the last trading day prior to

expiration. In the case of securities

traded on and through Nasdaq, the first

reported sale price will be used. Once

all the component stocks have opened,

the value of the Index will be

determined and that value will be used

as the final settlement value for expiring

Index options and Index LEAPS

contracts. If any of the component

stocks do not open for trading on the

last trading day before expiration, then

the prior trading day’s (i.e., normally

Thursday’s) last sale price will be used

in the Index calculation. In this regard,

before deciding to use Thursday’s

closing value of a component security

for purposes of determining the

settlement value of the Index, the Phlx

will wait until the end of the day on the

last trading day before expiration.13

E. Contract Specifications

The proposed options on the Index

will be cash-settled, European-style

options.14 Standard options trading

hours (9:30 a.m. to 4:10 p.m. Eastern

Standard time) will apply to the

contracts. The Index multiplier will be

100. Strike prices will be set at 5.0 point

intervals except exercise prices in the

far-term series (i.e., nine months to

expiration) shall be set in 25.0 point

intervals unless demonstrated customer

interest exists at 5.0 point intervals.15

Additional exercise prices will be added

in accordance with Phlx Rule 1101A(a).

Demonstrated customer interest will

include institutional (firm), corporate or

customer interest expressed directly to

the Exchange or through the customer’s

floor brokerage unit but not interest

expressed by a registered option trader

(‘‘ROT’’) with respect to trading for the

ROT’s own account.16

In addition, pursuant to Phlx rule

1012(a), there may-be-up to six

expiration months outstanding at any

given time. Specifically, there may be

up to three expiration months from the

March, June, September, and December

cycle plus up to three additional nearterm months so that the two nearest

term months will always be available.

The Exchange also intends to list

several Index LEAPS series that expire

from 12 to 36 months from the date of

issuance pursuant to Phlx Rule

1101A(b)(iii).17

F. Position and Exercise Limits, Margin

Requirements, and Trading Halts

Position limits for the Index will be

set at 25,000 contracts on the same side

of the market, provided that no more

than 15,000 of such contracts are in

series in the nearest term expiration

month.18 Exercise limits will be set at

the same level as position limits.19

Positions in Index LEAPS will be

aggregated with positions in regular

Index options on a one-for-one basis for

purposes of position and exercise

limits.20 Exchange rules applicable to

options on the Index will be identical to

the rules applicable to other broadbased index options for purposes of
Federal Register / Vol. 60, No. 74 / Tuesday, April 18, 1995 / Notices 19425

21See Phlx Rule 1047A.

22See Phlx Rules 722 and 1000A.

23The Intermarket Surveillance Group (‘‘ISG’’)

was formed on July 14, 1983 to, among other things,

coordinate more effectively surveillance and

investigative information sharing arrangements in

the stock and options markets. See Intermarket

Surveillance Group Agreement, July 14, 1983. The

most recent amendment to the ISG Agreement,

which incorporates the original agreement and all

amendments made thereafter, was signed by ISG

members on January 29, 1990. See Second

Amendment to the Intermarket Surveillance Group

Agreement, January 29, 1990. The members of the

ISG are: the American Stock Exchange, Inc.

(‘‘Amex’’); the Boston Stock Exchange, Inc.; the

Chicago Board Options Exchange, Inc.; the Chicago

Stock Exchange, Inc.; the National Association of

Securities Dealers, Inc. (‘‘NASD’’); the NYSE; the

Pacific Stock Exchange, Inc.; and the Phlx. Because

of potential opportunities for trading abuses

involving stock index futures, stock options, and

the underlying stock and the need for greater

sharing of surveillance information for these

potential intermarket trading abuses, the major

stock index futures exchanges (e.g., the Chicago

Mercantile Exchange and the Chicago Board of

Trade) joined the ISG as affiliate members in 1990.

24 15 U.S.C. 78f(b)(5) (1988 & Supp. V 1993).

25Pursuant to Section 6(b)(5) of the Act, the

Commission must predicate approval of any new

option proposal upon a finding that the

introduction of such new derivative instrument is

in the public interest. Such a finding would be

difficult for a derivative instrument that served no

hedging or other economic function, because any

benefits that might be derived by market

participants likely would be outweighed by the

potential for manipulation, diminished public

confidence in the integrity of the markets, and other

valid regulatory concerns. In this regard, the trading

of listed Index options and Index LEAPS will

provide investors with a hedging vehicle that

should reflect the overall movement of the 100

component stocks.

trading rotations, halts, and

suspensions,21 and margin treatment.22

G. Surveillance

Surveillance procedures currently

used to monitor trading in each of the

Exchange’s other index options will also

be used to monitor trading in Index

options and Index LEAPS. These

procedures include complete access to

trading activity in the underlying

securities. Further, the Intermarket

Surveillance Group Agreement, dated

July 14, 1983, as amended on January

29, 1990, will be applicable to the

trading of options on the Index.23

III. Findings and Conclusions

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).24 In

particular, the Commission finds that

the Index is broad-based, the proposed

Index options and Index LEAPS are

designed to reduce the potential for

manipulation, and the proposal to list

and trade options on the USTOP 100

Index is consistent with the Exchange’s

obligation to promote investor

protection.

The Commission finds that the

trading of options on the Index will

permit investors to participate in the

price movements of the 100 securities

on which the Index is based. Further,

trading of options on the Index will

allow investors holding positions in

some or all of the securities underlying

the Index to hedge the risks associated

with their portfolios. Accordingly, the

Commission believes the USTOP 100

Index options and Index LEAPS will

provide investors with an important

trading and hedging mechanism that

should reflect accurately the overall

movement of 100 of the largest and most

widely-held U.S. common stocks. By

broadening the hedging and investment

opportunities of investors, the

Commission believes that the trading of

Index options will serve to protect

investors, promote the public interest,

and contribute to the maintenance of

fair and orderly markets.25

The trading of Index options and

Index LEAPS on the USTOP 100 Index,

however, raises several concerns,

namely issues related to index design,

customer protection, surveillance, and

market impact. The Commission

believes, however, for the reasons

discussed below, that the Phlx

adequately has addressed these

concerns.

A. Index Design and Structure

The Commission finds that the

USTOP 100 Index is a broad-based

index, and thus it is appropriate to

permit Exchange rules applicable to the

trading of broad-based index options to

apply to the Index options and Index

LEAPS. Specifically, the Commission

believes the Index is broad-based

because it contains 100 actively-traded

stocks representing over 35 industry

groups, and thus reflects a substantial

segment of the U.S. equities market.

The Commission also finds that the

large capitalizations, liquid markets,

and relative weightings of the Index’s

component securities significantly

minimize the potential for manipulation

of the Index. First, the Index repesents

and consists of the common stock

values of 100 actively traded U.S.

companies. Second, the overwhelming

majority of the components that

comprise the Index are actively traded,

with an average daily trading volume for

the period from July 1, 1994 through

December 31, 1994, ranging from a high

of 3.06 million shares per day to a low

of 207,795 shares per day. Third, the

market capitalizations of the securities

in the Index are extremely large, raning

from a high of $86.12 billion to a low

of $7.61 billion as of January 23, 1995,

with the mean being $20.67 billion.

Fourth, no one particular security or
19426 Federal Register / Vol. 60, No. 74 / Tuesday, April 18, 1995 / Notices

26Moreover, the Commission notes that if the

Phlx increases the number of component securities

to more than 120 or decreases that number to less

than 80, the Phlx will be required to seek

Commission approval pursuant to Section 19(b)(2)

of the Act before listing new strike price or

expiration month series of USTOP 100 Index

options or Index LEAPS.

27The Commission also believes that the portion

of the Exchange’s proposal allowing 25.0 point

strike price intervals for far-term option series

strikes a reasonable balance between the Exchange’s

interest in limiting the number of outstanding strike

prices in inactive far-term series and its interest in

accommodating the needs of investors. In addition,

the Commission believes that the provision

allowing the Exchange to list additional far-term

series at 5.0 point intervals in response to genuine

customer requests should provide the Exchange

with the flexibility to meet the needs of investors

and, in turn, should allow investors to establish

options positions that are tailored to meet their

investment objectives. The Commission expects the

Exchange to monitor the listing of additional strikes

in order to ensure that new strikes are added only

in response to genuine customer requests. See

Exchange Act Release No. 34233, supra note 15 and

Exchange Rule 1101A, Commentary .02.

28Securities Exchange Act Release No. 31243

(September 28, 1992), 57 FR 45849 (October 5,

1992).

29See supra note 23.

30 In addition, the Phlx has represented that the

Phlx and the OPRA have the necessary systems

capacity to support those new series of options that

would result from the introduction of Index options

and Index LEAPS. See Letter from Michele

Weisbaum, Associate General Counsel, Phlx, to

Brad Ritter, Senior Counsel, OMS, Division,

Commission, dated February 2, 1995; and

Memorandum from Joe Corrigan, Executive

Director, OPRA, to Jamie Farmer, New Product

Development, Phlx, dated January 31, 1995.

31See supra note 6.

32See Securities Exchange Act Release No. 30944

(July 21, 1992), 57 FR 33376 (July 28, 1992).

group of securities dominates the Index.

Specifically, as of January 23, 1995, no

one stock accounted for more than

4.17% of the Index’s total value and the

percentage weighting of the five largest

issues in the Index accounted for only

17.28% of the Index’s value. Fifth, all of

the components in the Index have

standardized options trading on them

and the Phlx will maintain the Index so

that at least 90% of the securities in the

Index, by weight, are eligible for

standardized options trading. This

proposed maintenance requirement will

ensure that the Index is substantially

comprised of options eligible

securities.26 Sixth, the Index is

comprised of stocks representing a

diverse group of industries. Finally, the

Commission believes that, as discussed

below, existing mechanisms to monitor

trading activity in the component

securities will help deter as well as

detect illegal trading activity involving

the Index options and Index LEAPS.

B. Customer Protection

The Commission believes that a

regulatory system designed to protect

public customers must be in place

before the trading of sophisticated

financial instruments, such as USTOP

100 Index options and Index LEAPS,

can commence on a national securities

exchange. The Commission notes that

the trading of standardized exchangetraded options occurs in an

environment that is designed to ensure,

among other things, that: (1) The special

risks of options are disclosed to public

customers; (2) only investors capable of

evaluating and bearing the risks of

options trading are engaged in such

trading; and (3) special compliance

procedures are applicable to options

accounts. Accordingly, because the

Index options and Index LEAPS will be

subject to the same regulatory regime as

the other standardized options currently

traded on the Phlx, the Commission

believes that adequate safeguards are in

place to ensure the protection of

investors in USTOP 100 Index options

and LEAPS.27

C. Surveillance

The Commission believes that a

surveillance sharing agreement between

an exchange proposing to list a security

index derivative product and the

exchange(s) trading the securities

underlying the derivative product is an

important measure for surveillance of

the derivative and underlying securities

markets. Such agreements ensure the

availability of information necessary to

detect and deter potential

manipulations and other trading abuses,

thereby making the security index

product less readily susceptible to

manipulation.28 In this regard, the Phlx,

NYSE, Amex, and NASD are all

members of the ISG, which provides for

the exchange of all necessary

surveillance information.29

D. Market Impact

The Commission believes that the

listing and trading of USTOP 100 Index

options and Index LEAPS on the Phlx

will not adversely impact the

underlying securities markets.30 First, as

described above, the Index is broadbased and composed of 100 stocks with

no one stock dominating the Index.

Second, because (i) at least 90% of the

numerical value of the Index must be

accounted for by securities that meet the

Exchange’s options listing standards, (ii)

each of the component securities must

be traded on either the NYSE or the

Amex, or traded through Nasdaq as

National Market securities, and (iii) the

component securities must be subject to

last sale reporting pursuant to Rule

11Aa3–1 of the Act,31 the component

securities generally will be activelytraded, highly-capitalized securities.

Third, the 25,000 contract position and

exercise limits, along with the 15,000

contract telescoping requirement, will

serve to minimize potential

manipulation and market impact

concerns. Fourth, the risk to investors of

contra-party performance will be

minimized because the Index options

will be issued and guaranteed by The

Options Clearing Corporation just like

any other standardized option traded in

the United States. Fifth, existing Phlx

stock index options rules and

surveillance procedures will apply to

options on the USTOP 100 Index.

Lastly, the Commission believes that

settling expiring USTOP 100 Index

options and Index LEAPS based on the

opening prices of component securities

is consistent with the Act. As noted in

other contexts, valuing options for

exercise settlement on expiration based

on opening prices rather than closing

prices may help reduce adverse effects

on markets for securities underlying

options on the Index.32

The Commission finds good cause for

approving Amendment Nos. 1 and 2 to

the proposed rule change prior to the

thirtieth day after the date of

publication of notice of filing thereof in

the Federal Register. Specifically,

Amendment No. 1 merely changes the

initial value of the Index. Because this

amendment is being made prior to

commencement of trading of Index

options and Index LEAPS, the

Commission believes that this change

will not create any potential for investor

confusion and therefore does not raise

any new regulatory concerns.

Amendment No. 2 allows the Phlx to

list Index LEAPS in addition to regular

Index options. Because the proposed

Index LEAPS will be subject to the same

rules governing Index options and

because positions in Index LEAPS will

be aggregated with those in Index

options for purposes of position and

exercise limits, the Commission believes

that Amendment No. 2 does not raise

any regulatory concerns not already

addressed by the Exchange, as discussed

above.

Accordingly, the Commission believes

it is consistent with section 6(b)(5) of

the Act to approve Amendment Nos. 1

and 2 to the Phlx’s proposal on an

accelerated basis.

Interested persons are invited to

submit written data, views and

arguments concerning Amendment Nos.

1 and 2. 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
Federal Register / Vol. 60, No. 74 / Tuesday, April 18, 1995 / Notices 19427

33 15 U.S.C. 78s(b) (2) (1988).

34 17 CFR 200.30–3 (a) (12) (1994).

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

Section, 450 Fifth Street, N.W.,

Washington, D.C. Copies of such filing

will also be available for inspection and

copying at the principle office of the

Phlx. All submissions should refer to

the File No. SR–Phlx–95–07 and should

be submitted by May 9, 1995.

It Is Therefore Ordered, pursuant to

section 19(b)(2) of the Act,33 that the

proposed rule change (SR–Phlx–95–07),

as amended, is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.34

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–9458 Filed 4–17–95; 8:45 am]

BILLING CODE 8010-011-M

[Release No. 34–35597; File No. SR–NYSE–

95–11]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the New York Stock Exchange, Inc.

Relating to Adoption of Rule 440A

(‘‘Telephone Solicitation—

Recordkeeping’’) and an Interpretation

with Respect to Proposed Rule 440A

April 12, 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 March 22, 1995,

the New York Stock Exchange, Inc.

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

Securities and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) 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 NYSE is herewith filing a

proposed rule change to adopt new Rule

440A (‘‘Telephone Solicitation—

Recordkeeping’’) and to add an

interpretation with respect to the

meaning and administration of

proposed Rule 440A.

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 text

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

1. Purpose

The purpose of the proposed rule

change is to:

(1) Adopt a rule requiring members

and member organizations that engage

in telephone solicitations to maintain a

centralized list of persons who do not

wish to receive telephone solicitations;

and

(2) Set forth an interpretation

concerning the meaning and

administration of proposed Rule 440A

with respect to compliance with Federal

Communications Commission (‘‘FCC’’)

and SEC rules relating to telemarketing

practices. It is intended that the

interpretation will be published as an

Interpretation Memorandum for

inclusion in the Exchange Interpretation

Handbook.

In 1994, an industry Task Force,

comprised of representatives from the

Exchange, and other industry regulatory

and self-regulatory organizations, was

formed to review broker-dealer

telemarketing practices and compliance

with the Telephone Consumer

Protection Act of 1991 (‘‘TCPA’’) and

the FCC rules and regulations

implementing that law. The TCPA and

FCC rules address telemarketing

practices and the rights of telephone

customers. One of those requirements is

that businesses (which includes brokerdealers) that make telephone

solicitations to residential telephone

subscribers must institute written

policies and have procedures in place

for maintaining ‘‘do-not-call’’ lists.

The industry Task Force is

considering several initiatives relating

to broker-dealers that engage in

telephone solicitation or ‘‘cold-calling’’

activities. One such initiative is

proposed Rule 440A which requires

members and member organizations to

make and maintain a centralized list of

persons who have informed the member

or member organization that they do not

want to receive telephone solicitations.

It is anticipated that such a rule will

also be adopted by other self-regulatory

organization participants of the Task

Force.

The proposed interpretation to Rule

440A reminds members and member

organizations that they are subject to

compliance with the requirements of the

relevant rules of the FCC and SEC

relating to telemarketing practices and

the rights of telephone consumers.

2. Statutory Basis

The proposed rule change is

consistent with the requirements of

Section 6(b)(5) of the Act, which

requires that the rules of the Exchange

be designed to prevent fraudulent and

manipulative acts and practices, to

promote just and equitable principles of

trade, and, in general, to protect

investors and the public interest, in that

it addresses the practices of Exchange

members and member organizations

who make telemarketing calls and the

protection of customers who have

indicated a desire not to receive such

calls.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed rule change will impose

any burden on competition that is 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

The Exchange has neither solicited

nor received written comments on the

proposed rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the publication of

this notice in the Federal Register or

within such other 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 reasons for so finding or (ii) as to

which the self-regulatory organization

consents, the Commission will:

(A) By order approve the proposed

rule change, or

(B) Institute proceedings to determine

whether the proposed rule change

should be disapproved.