Federal Register / Vol. 60, No. 78 / Monday, April 24, 1995 / Notices 20135

4 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 Securities Exchange Act Release No. 35376

(February 14, 1995), 60 FR 9880.

4 In Amendment No. 1, the Phlx proposed to: (1)

Amend Rule 1101A to specify that ten additional

expiration months may be added for the proposed

longer-term index LEAPS, as opposed to the six

additional months currently allowed for LEAPS;

and (2) provide that the proposal will apply to all

indexes, both broad-based and narrow-based,

previously approved for the trading of standardized

index options on the Exchange. See Letter from

Edith Hallahan, Special Counsel, Phlx, to Michael

Walinskas, Branch Chief, Office of Market

Supervision, Division of Market Regulation,

Commission, dated February 23, 1995.

5The 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. Id.

6 Id.

7See Phlx Rule 1101A(b)(iii) and Securities

Exchange Act Release No. 28910 (February 22,

1991), 56 FR 9032 (March 4, 1991) (‘‘Exchange Act

Release No. 28910’’).

8 15 U.S.C. 78f(b)(5) (1988 & Supp. V 1993).

9The 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.

10See Exchange Act Release No. 28910, supra

note 7.

11 Id.

12 Id.

13The 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.

14See Exchange Act Release No. 28910, supra

note 7.

15See Phlx Rules 1014, 1020, and 1000A(a).

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 principal office of the

Phlx. All submissions should refer to

File No. SR–Phlx–95–05 and should be

submitted by May 15, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.4

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–9977 Filed 4–21–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35616; File No. SR–Phlx–

95–11]

Self-Regulatory Organizations; Order

Approving a Proposed Rule Change

and Notice of Filing and Order

Granting Accelerated Approval of

Amendment No. 1 to the Proposed

Rule Change by the Philadelphia Stock

Exchange, Inc. Relating to the Listing

of Long-Term Index Options Series

(‘‘LEAPS’’) With a Duration of up to

Sixty Months Until Expiration

April 17, 1995.

On February 8, 1995, the Philadelphia

Stock Exchange, Inc. (‘‘Phlx’’ 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 22, 1995.3 No

comment letters were received on the

proposed rule change. The Exchange

filed Amendment No. 1 to the proposal

on February 23, 1995.4 This order

approves the Phlx proposal, as

amended.

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).5 Presently, the

Exchange has authority pursuant to Phlx

Rule 1101A(b)(iii) 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

1101A to permit the listing of index

options with up to sixty months until

expiration. In addition, the Exchange

proposes to amend Rule 1101A(b)(iii) to

allow for up to ten expiration months

for index LEAPS, as opposed to the six

months currently allowed.6 The

proposal does not change any other rule

regarding the listing and trading of

index LEAPS.7

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).8

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.9

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.10

Further, the Commission believes that

index LEAPS with up to five years until

expiration will allow this protection at

a known and limited cost.11 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.12 Accordingly, the

Commission believes that the proposed

rule change will better serve the longterm hedging needs of institutional

investors.13

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,14 the Commission notes that

Phlx’s general rule obligating market

makers to maintain fair and orderly

markets will continue to apply to the

proposed longer-term index LEAPS.15

The Commission believes that the

requirements of Phlx Rules 1014 and

1020 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 longerterm index LEAPS that are inconsistent

with the maintenance of a fair and

orderly market.

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. Specifically,

Amendment No. 1 provides that the

Exchange may list up to ten additional

expiration months when listing the

proposed longer-term index LEAPS. The

Commission believes this is consistent

with the original approval of index

LEAPS which allowed for up to six

additional expiration months for LEAPS

expiring 36 months from the date of
20136 Federal Register / Vol. 60, No. 78 / Monday, April 24, 1995 / Notices

16See Exchange Act Release No. 28910, supra

note 7.

17 15 U.S.C. 78s(b)(2) (1988). 18 17 CFR 200.30–3(a)(12) (1994).

1Section 17(a) of the Act generally prohibits sales

or purchases of securities between registered

investment companies and any affiliated person of

that company. Rule 17a–8 provides an exemption

from section 17(a) for certain reorganizations among

registered investment companies that may be

affiliated persons, or affiliated persons of an

affiliated person, solely by reason of having a

common investment adviser, common directors,

and/or common officers. Applicant and the

Acquiring Fund were ‘‘affiliated persons’’ as

defined in the Act solely by reason of having a

common investment adviser.

2 Dividing the number of outstanding shares by

the total net assets does not yield a precise figure

of $1.00 per share. This results from both the effect

on the total net assets of realized gains and losses

resulting from the sale of portfolio securities prior

to their stated maturity and the effect of penny

rounding.

listing 16 and, therefore, does not raise

any new regulatory issues.

Moreover, Amendment No. 1 provides

that the Exchange may list longer-term

LEAPS on all indexes currently

approved for the trading of standardized

options, regardless of whether the index

was previously approved for the trading

of LEAPS. For those indexes approved

for trading LEAPS, the Commission

believes that Amendment No. 1 clarifies

the application of the proposal and

minimizes the potential for investor

confusion. With regard to those indexes

not previously approved for trading

LEAPS, the Commission believes that

allowing index LEAPS on these indexes,

including the proposed longer-term

LEAPS, does not raise any new

regulatory issues. Specifically, each of

these indexes has previously been

approved by the Commission for the

listing of standardized index options,

and LEAPS on these indexes will be

subject to the limitations discussed

above.

Accordingly, the Commission believes

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

the Act to approve Amendment No. 1 to

the Phlx’s proposal on an accelerated

basis.

Interested persons are invited to

submit written data, views and

arguments concerning Amendment No.

1. Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of the

submission, all subsequent

amendments, all written statements

with respect to the proposed rule

change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of 5 U.S.C. 552, will be

available for inspection and copying in

the Commission’s Public Reference

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

Phlx. All submissions should refer to

the File No. SR–Phlx–95–11 and should

be submitted by May 15, 1995.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,17 that the

proposed rule change (File No. SR–

Phlx–95–11) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.18

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–9979 Filed 4–21–95; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–21013; 811–4403]

Smith Barney California Municipal

Money Market Fund; Notice of

Application

April 17, 1995.

AGENCY: Securities and Exchange

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

ACTION: Notice of application for

deregistration under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANT: Smith Barney California

Municipal Money Market Fund.

RELEVANT ACT SECTION: Section 8(f).

SUMMARY OF APPLICATION: Applicant

seeks an order declaring that it has

ceased to be an investment company.

FILING DATE: The application was filed

on February 22, 1995 and amended on

April 5, 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

May 15, 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 may request notification of a

hearing by writing to the SEC’s

Secretary.

ADDRESSES: Secretary, SEC, 450 5th

Street, N.W., Washington, D.C. 20549.

Applicant, 388 Greenwich Street, New

York, New York 10013.

FOR FURTHER INFORMATION CONTACT:

Elaine M. Boggs, Staff Attorney, at (202)

942–0572, or C. David Messman, Branch

Chief, 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 at the SEC’s

Public Reference Branch.

Applicant’s Representations

1. Applicant is an open-end

management investment company that

was organized as a business trust under

the laws of Massachusetts. On

September 4, 1985, applicant registered

under the Act as an investment

company, and filed a registration

statement to register its shares under the

Securities Act of 1933. The registration

statement was declared effective on

November 20, 1985, and the initial

public offering commenced shortly

thereafter.

2. On April 27, 1994 and May 25,

1994, applicant’s board of trustees

approved an agreement and plan of

reorganization (the ‘‘Plan’’) between

applicant and Smith Barney Muni

Funds—California Money Market

Portfolio (the ‘‘Acquiring Fund’’)—a

registered open-end management

investment company. In addition, the

board of trustees made the findings

required by rule 17a–8 under the Act.1

3. On August 2, 1994, applicant

mailed proxy materials to its

shareholders. On November 11, 1994,

applicant’s shareholders approved the

reorganization.

4. Pursuant to the Plan, on November

18, 1994, applicant transferred all of its

assets to the Acquiring Fund in

exchange for shares of the Acquiring

Fund and the assumption by the

Acquiring Fund of certain liabilities of

applicant. Immediately thereafter,

applicant liquidated and distributed pro

rata to its shareholders the shares it

received from the Acquiring Fund in the

reorganization. On November 18, 1994,

applicant had 831,064,778 shares

outstanding, having an aggregate net

asset value of $830,713,099 and a per

share net asset value of $1.00.2

5. Expenses incurred in connection

with the reorganization, consisting of

accounting, printing, administrative,

and legal expenses, totaled $91,857. One

half of the expenses were borne by the

Fund’s sponsor, Smith Barney Inc., and