19616 Federal Register / Vol. 60, No. 75 / Wednesday, April 19, 1995 / Notices

1Applicant’s board of directors determined that

the Plan was in the best interests of applicant and

that the interests of applicant’s existing

shareholders would not be diluted as a result of

effecting the transactions.

1See Securities Exchange Act Release No. 35183

(December 30, 1994), 60 FR 2420 (January 9, 1995)

(order approving File No. SR–PHLX–94–41). See

also Securities Exchange Act Release Nos. 25540

(March 31, 1988), 53 FR 11390 (order approving

AUTOM on a pilot basis); 25868 (June 30, 1988),

53 FR 25563 (order approving File No. SR–PHLX–

88–22, extending pilot through December 31, 1988);

26354 (December 13, 1988), 53 FR 51185 (order

approving File No. SR–PHLX–88–33, extending

pilot program through June 30, 1989); 26522

(February 3, 1989), 54 FR 6465 (order approving

File No. SR–PHLX–89–1, extending pilot through

Applicant’s Representations

1. Applicant is an open-end

diversified management investment

company that was organized as a

corporation under the laws of the State

of Washington. On November 26, 1933,

applicant filed a registration statement

to register its shares under the Securities

Act of 1933. The registration statement

was declared effective on November 26,

1933, and the initial public offering

commenced on that date. On November

12, 1940, applicant registered under the

Act as an investment company.

2. On May 6, 1993, applicant’s board

of directors approved an agreement and

plan of reorganization (the ‘‘Plan’’)

between applicant and SAFECO

Common Stock Trust, a registered openend management investment company

organized under the laws of Delaware

(the ‘‘Acquiring Fund’’).1

3. By moving its assets from a

Washington corporation to a Delaware

trust, applicant expects its shareholders

to benefit from the adoption of new

methods of operations and employment

of new technologies that are expected to

reduce costs. For example, Washington

corporations are required to hold annual

meetings, whereas Delaware trusts have

no such requirement. Further, Delaware

trusts generally have greater flexibility

than Washington corporations to

respond to future contingencies,

allowing such trusts to operate under

the most advanced and cost efficient

form of organization. For example,

Delaware law authorizes electronic or

telephonic communications between a

Delaware trust and its shareholders. In

addition, as one of several series of the

Acquiring Fund, applicant’s

shareholders should enjoy certain

expense savings through economies of

scale that would not be available to a

stand-alone entity.

4. On May 7, 1993, applicant filed

proxy materials with the SEC and

afterwards distributed such proxy

materials to its shareholders.

Applicant’s shareholders approved the

reorganization at a regular meeting of

shareholders on August 5, 1993, that

was reconvened at a special meeting of

shareholders on September 22, 1993.

5. Pursuant to the Plan, on September

30, 1993, applicant transferred all of its

assets to the Acquiring Fund in

exchange for shares of the Acquiring

Fund. Immediately thereafter, applicant

distributed pro rata to its shareholders

the shares it received from the

Acquiring Fund in the reorganization.

On September 30, 1993, applicant had

11,872,883.263 shares outstanding,

having an aggregate net asset value of

$148,894,185.84 and a per share net

asset value of $12.54.

6. Expenses incurred in connection

with the reorganization, consisting of

legal fees, accounting fees, and printing

and mailing costs for the proxy

solicitation, were approximately

$22,710 and were paid by applicant.

7. There are no securityholders to

whom distributions in complete

liquidation of their interests have not

been made. Applicant has no debts or

other liabilities that remain outstanding.

Applicant is not a party to any litigation

or administrative proceeding.

8. Applicant filed articles of

dissolution with the State of

Washington on October 1, 1993.

9. Applicant is not now engaged, nor

does it propose to engage, in any

business activities other than those

necessary for the winding up of its

affairs.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret M. McFarland,

Deputy Secretary.

[FR Doc. 95–9673 Filed 4–18–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35601; File No. SR–PHLX–

95–18]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Philadelphia Stock Exchange, Inc.,

Relating to the Automated Options

Market System and AUTO–X Eligibility

of Certain Orders

April 13, 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 April 4, 1995, the

Philadelphia Stock Exchange, Inc.

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

Securities Exchange Commission

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

rule change as described in Items I, II

and III below, which Items have been

prepared by the self-regulatory

organization. The Commission is

publishing this notice to solicit

comments on the proposed rule change

from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The PHLX proposes to codify its

practice of accepting stop, stop-limit,

all-or-none, or better, simple cancel,

simple cancel to reduce size (cancel

leaves), cancel to change price, cancel

with replacement order, market-onclose, opening-only-market, and

possible duplicate orders for delivery

through the PHLX’s Automated Options

Market (‘‘AUTOM’’) system. In addition,

the PHLX proposes to codify its practice

of accepting orders designated as ‘‘day’’

orders, which are executable on the day

they are entered or not at all, and goodtill-cancelled (‘‘GTC’’) orders for

delivery through AUTOM and execution

through AUTO–X, the automatic

execution feature of AUTOM. Currently,

day orders and GTC orders are accepted

on the PHLX’s trading floor as both

manually entered orders on floor tickets

and through AUTOM.

The text of the proposed rule change

is available at the Office of the

Secretary, PHLX, and at the

Commission.

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

The purpose of the proposal is to

codify (1) the acceptance of certain

order types and designators for

electronic execution through AUTOM;

and (2) the designation of certain types

of orders that are executed through

AUTO–X. AUTOM, which has operated

on a pilot basis since 1988 and was most

recently extended through December 31,

1995,1 is the PHLX’s electronic order
Federal Register / Vol. 60, No. 75 / Wednesday, April 19, 1995 / Notices 19617

December 31, 1989); 27599 (January 9, 1990), 55 FR

1751 (order approving File No. SR–PHLX–89–03,

extending pilot through June 30, 1990); 28625 (July

26, 1990), 55 FR 31274 (order approving File No.

SR–PHLX–90–16, extending pilot through

December 31, 1990); 28978 (March 15, 1991), 56 FR

12050 (order approving File No. SR–PHLX–90–34,

extending pilot through December 31, 1991); 29662

(September 9, 1991), 56 FR 46816 (order approving

File No. SR–PHLX–91–31, permitting AUTO–X

orders up to 20 contracts in Duracell options only);

29782 (October 3, 1991), 56 FR 55146 (order

approving File No. SR–PHLX–91–33, permitting

AUTO–X for all strike prices and expiration

months); 29837 (October 18, 1991), 56 FR 36496

(order approving File No. SR–PHLX–90–03,

extending pilot through December 31, 1993); 32906

(September 15, 1993), 58 FR 15168 (order approving

File No. SR–PHLX–92–38, permitting AUTO–X

orders up to 25 contracts in all options); and 33405

(December 30, 1993), 59 FR 790 (order approving

File No. SR–PHLX–93–57, extending pilot through

December 31, 1994).

2The Commission recently approved a PHLX

proposal to codify the use of AUTOM and AUTO–

X for index options. See Securities Exchange Act

Release No. 34920 (October 31, 1994), 59 FR 5510

(November 7, 1994) (order approving File No. SR–

PHLX–94–40).

3See Securities Exchange Act Release Nos. 27599

(making day limit orders eligible for delivery

through AUTOM) and 28978 (making GTC and

cabinet orders eligible from AUTOM), supra note 1.

4A ‘‘stop’’ order is a contingency order to buy or

sell when the market for a particular option contract

reaches a specified price. A stop order to buy

becomes a market order when the option contract

trades at or above the stop price. A stop order to

sell becomes a market order when the option

contract trades at or below the stop price. See PHLX

Rule 1066(c)(2), ‘‘Stop (stop-loss) Order.’’

5A stop-limit order is a contingency order to buy

or sell at a limited price when the market for a

particular option contract reaches a specified price.

A stop-limit order to buy becomes a limit order

when the option contract trades at or above the stop

price. A stop-limit order to sell becomes a limit

order when the option contract trades at or below

the stop price. See PHLX Rule 1066(c)(1), ‘‘StopLimit Order.’’

6An ‘‘all-or-none order’’ is a market or limit order

to be executed in its entirety or not at all. See PHLX

Rule 1066(c)(4), ‘‘All or None Order.’’

7A ‘‘market-on-close’’ order is a market or limit

order to be executed as close as possible to the

closing bell, or during the closing rotation and

should be near to or at the closing price for the

particular series. See PHLX Rule 1066(c)(6),

‘‘Market-on-Close Order.’’

8An ‘‘opening-only-market’’ order is a market

order which is to be executed in whole or in part

during the opening rotation or not at all. See PHLX

Rule 1066(c)(5).

9 ‘‘Cancel-replacement’’ is an order which

requires the immediate cancellation of a previous

order prior to the replacement of a new order. See

PHLX Rule 1066(c)(7), ‘‘Cancel-Replacement

Order.’’

10The designation ‘‘or better’’ indicates that the

originator of the order is aware that the market is

currently better than the limit price of the order;

this order is not filled at a price outside of the ‘‘or

better’’ price. The ‘‘or better’’ designation is used to

verify the validity of the order and confirms that the

order was entered on the correct side.

11 ‘‘Possible duplicate’’ is a status which indicates

that before an AUTOM order is executed manually

by the specialist, the specialist should confirm that

the order has not yet been executed.

12 Various types of cancellation conditions and

procedures are defined in Option Floor Procedure

Advise A–6, ‘‘Responsibility to Cancel Orders on

the Book’’ as well as PHLX Rule 1066, ‘‘Certain

Types of Orders Defined.’’ The designation ‘‘simple

cancel’’ indicates that an order is to be cancelled,

while ‘‘cancel leaves’’ indicates that the size of a

previous order is being reduced and ‘‘cancel to

change price’’ cancels the price of a previous order.

13Under Advice A–2, a specialist may not accept

option orders consisting of two or more option

series (e.g., spread, straddle, and combination

orders).

routing, delivery, execution and

reporting system for equity and index

options. AUTOM is an on-line system

that allows electronic delivery of

options orders from member firms

directly to the appropriate specialist on

the Exchange’s trading floor.

Orders for up to 100 options contracts

are eligible for AUTOM and public

customer orders for up to 25 contracts

are eligible for AUTO–X, the automatic

execution feature of AUTOM.2 AUTO–

X orders are executed automatically at

the disseminated quotation price on the

Exchange and reported to the

originating firm. Orders that are not

eligible for AUTO–X are handled

manually by the specialist.

At the inception of the AUTOM pilot

program, only customer market orders

were AUTOM-eligible. Thereafter, the

Commission approved proposals

permitting delivery of marketable limit,

GTC, and cabinet orders

(accommodation transactions) through

AUTOM.3

Exchange By-Law Article X,

‘‘Standing Committees,’’ Section 10–18,

‘‘Options Committee,’’ grants authority

over all connections and

communications on the options floor,

including AUTOM, to the Options

Committee. Pursuant to this authority,

the Options Committee decided in 1991

to accept certain additional order types

for AUTOM and AUTO–X in the

interest of maintaining fair and orderly

markets.

The PHLX proposes to incorporate the

following order types into the AUTOM

pilot program: stop,4 stop-limit,5 all-ornone,6 market-on-close,7 opening-onlymarket,8 and cancel-replacement

orders.9 In addition, the PHLX proposes

to codify the following order conditions

into the AUTO pilot program: or

better,10 possible duplicate orders,11

and several types of cancellation

conditions—simple cancel, simple

cancel to reduce size (cancel leaves) and

cancel to change price.12 Currently,

these orders are accepted and these

designations are utilized for both

manual and AUTOM-delivered orders.

With respect to automatic executions,

market and marketable limit orders

currently are eligible for AUTO–X. The

PHLX proposes to codify its practice of

designating AUTO–X orders with the

conditions ‘‘day’’ or ‘‘GTC.’’ Market or

marketable limit orders, like all AUTOM

orders, are necessarily ‘‘day’’ orders

expiring at the end of the trading day or

GTC orders that are good until

cancelled. Thus the PHLX explains that

the proposal to codify the use of ‘‘day’’

and ‘‘GTC’’ designators for AUTO–X

merely reveals the life span of AUTO–

X orders, without adding new order

types.

The Exchange believes that these

order types are appropriate for AUTOM

and AUTO–X because they are

commonly utilized in the securities

industry and have been accepted

through AUTOM since 1991 without

significant problems reported by

AUTOM users. In addition, the PHLX

believes that incorporating such orders

into AUTOM extends the benefits of

these systems to additional order types.

The PHLX states that all of the

additional order types and designators

are currently accepted on the Exchange

as manual orders, and are thus defined

in PHLX Rule 1066, ‘‘Certain Types of

Orders Defined.’’ The PHLX specialist

can accept these orders for placement

on the limit order book. According to

the PHLX, permitting these orders to be

routed by AUTOM directly to the

specialist does not affect the handling of

the orders by the specialist. For

example, an AUTOM order can be

placed on the book. None of these

orders are discretionary orders, which

may not be placed on the book under

Floor Procedure Advice (‘‘Advice’’) A–

2, ‘‘Types of Orders to be Accepted onto

the Specialist’s Book.’’ 13 Thus,

according to the PHLX, the effect of the

proposal is to permit orders that can

now be held by a specialist to be routed

electronically through AUTOM, as

opposed to be being routed manually

through trading floor representatives.

The Exchange notes that the material

terms of these orders are relayed to the

specialist by AUTOM and displayed on

the order ticket, which is printed at the

specialist post. This information is the

same as if the order were manually

delivered. A computer screen displays

the following information respecting

incoming AUTOM orders to the trading

crowd: numeric designation, buy or sell,

call or put, volume, symbol, month,

strike, price, and time received.

Accordingly, the PHLX believes that

the proposal is consistent with Section

6(b) of the Act, in general, and, in

particular, with Section 6(b)(5), in that

it is designed to promote just and

equitable principles of trade and to

protect investors and the public interest

by codifying certain order types and

condition designations into the AUTOM
19618 Federal Register / Vol. 60, No. 75 / Wednesday, April 19, 1995 / Notices

14 17 CFR 200.30–3(a)(12) (1994).

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

2 17 CFR 240.19b–4.

3The Exchange stated that non-corporate or

partnership entities would have to be structured in

such a format that would qualify as a broker or

dealer registered with the SEC pursuant to the Act,

since this is a prerequisite to becoming an Exchange

member organization. Telephone conversation

between Michael D. Pierson, Senior Attorney, PSE,

and Elisa Metzger, Senior Counsel, SEC, on March

3, 1995.

4 15 U.S.C. 78f(b).

5 15 U.S.C. 78f(b)(2).

6 15 U.S.C. 78f(c).

pilot program. Specifically, the

Exchange believes that the additional

order types benefit from the advantages

of AUTOM, including efficient and

prompt order delivery and execution.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

The PHLX does not believe that the

proposed rule change will impose any

inappropriate burden on competition.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

No written comments were either

solicited or received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Because the foregoing rule change: (1)

Does not significantly affect the

protection of investors or the public

interest; (2) does not impose any

significant burden on competition; and

(3) does not become operative for 30

days after April 4, 1995, it has become

effective pursuant to Section 19(b)(3)(A)

of the Act and Rule 19b–4(e)(6)

thereunder. In particular, the

Commission believes that the proposal

does not significantly affect the

protection of investors or the public

interest and does not impose any

significant burden on competition. At

any time within 60 days of the filing of

such proposed rule change, the

Commission may summarily abrogate

such 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 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 May

10, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–9668 Filed 4–18–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35600; File No. SR–PSE–

95–06]

Self-Regulatory Organizations; Pacific

Stock Exchange, Inc.; Order Granting

Approval to Proposed Rule Change

Relating to New Organizational

Structures

April 13, 1995.

On February 21, 1995, the Pacific

Stock Exchange, Inc. (‘‘PSE’’ 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 Articles V and VIII of its

Constitution to allow for the admission

of entities with new organizational

structures as member organizations.

The proposed rule change was

published for comment in Securities

Exchange Act Release No. 35443 (March

6, 1995), 60 FR 13196 (March 10, 1995).

No comments were received on the

proposal. This order approves the

proposed rule change.

I. Proposal

The PSE Constitution currently allows

members of the Exchange to confer the

privileges of their memberships on a

firm which may be either a partnership

or a corporation. The Exchange is

proposing to amend Article VIII, Section

1(a) of its Constitution to provide that

the Exchange may, in its discretion, and

on such terms as the Exchange may

prescribe, approve as a member firm,

entities that have characteristics

essentially similar to corporations,

partnerships, or both.3 In addition, the

Exchange is proposing to amend Article

V, Sections 4, 5, and 7 of the PSE

Constitution (definitions of ‘‘member

firm,’’ ‘‘member organization,’’ and

‘‘associated person’’) to be consistent

with the proposed change to Article

VIII, Section 1(a). The Exchange is

proposing to add the phrase ‘‘or other

organization’’ to the definitions of

‘‘member firm’’ and ‘‘member

organization’’ and to add the phrases

‘‘member of a Limited Liability

Company’’ and ‘‘trustee of a business

trust’’ to the definition of ‘‘associated

person.’’ These amendments would

permit the Exchange to approve

business trusts, limited liability

companies and other organizational

structures as member organizations so

long as the characteristics of the entity

in question are essentially similar to

those of corporations or partnerships.

The Exchange believes that the rule

change is consistent with Section 6(b) of

the Exchange Act, in general, and

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

designed to promote just and equitable

principles of trade and to protect

investors and the public interest.

II. Discussion

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, with the

requirements of Sections 6(b).4

Specifically, the Commission believes

the amendment is consistent with the

Section 6(b)(2) 5 of the Act, which

requires the rules of an exchange,

subject to the provisions of Section 6(c)

of the Act,6 to ensure that any registered

broker or dealer or natural person

associated with a registered broker or

dealer may become a member of the

exchange and any person may become

associated with a member thereof.

The PSE Constitution currently allows

members of the Exchange to confer the

privileges of their membership on a firm

which may be either a partnership or a

corporation. The amendments would

enable entities with new organizational

structures similar to corporations and

partnerships to become Exchange

members and be included in the

Exchange’s definition of a member

organization. As in the case of a

partnership or corporation applying for