24520 Federal Register / Vol. 61, No. 95 / Wednesday, May 15, 1996 / Notices

2Approximately 40% of applicant’s cash

management activities are conducted through

outside managers on a fully discretionary basis.

3The methods used in the valuation of

applicant’s assets were in accordance with section

2(a)(41) under the Act.

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

2 17 CFR 240.19b–4 (1994).

3On May 2, 1996, the Amex filed Amendment

No. 1 to the proposed rule change to include within

the rule text the requirement that if the Exchange

grants a facilitation exemption on the basis of oral

representations, the member organization must file

the appropriate forms and documentation

substantiating the basis for the exemption within

either two business days or a period of time to be

designated by the Exchange (‘‘Amendment No. 1’’).

See Letter from Claire P. McGrath, Managing

Director and Special Counsel, Derivative Securities,

Amex, to Michael Walinskas, Branch Chief,

Derivatives Regulation, Division of Market

Regulation, Commission, dated May 2, 1996.

4The Commission notes that a facilitation trade

is defined as a transaction that involves crossing an

order of a member firm’s public customer with an

order for the member firm’s proprietary account.

on the whole, spends substantially all of

its time actively involved in the natural

resources business of the Group. Of

applicant’s twenty-two directors, only

one director, who serves as applicant’s

Finance Director, spends any

meaningful amount of his time

(approximately 5%) monitoring the

Group’s securities holdings and cash

management activities, and that time is

spent mostly on administrative and

supervisory matters. Applicant’s five

executive directors have been with the

Group for a significant amount of time

and have substantial experience in

applicant’s natural resources operations.

Of applicant’s thirteen principal

officers, only the Treasurer spends any

time (approximately 60%) on cash

management.2 Applicant is represented

by its directors and officers on many of

the boards of directors of its subsidiaries

and its controlled company. In many of

those companies, applicant’s directors

and officers play a leading role in

management’s strategic decision making

or in other essential operational

functions.

d. Nature of Assets. As of December

31, 1995, applicant had total assets of

$5,162 million.3 For purpose of analysis

under section 3(b)(2), 63% of

applicant’s total assets were operating

assets attributed to its majority-owned

subsidiaries (including wholly-owned

subsidiaries), its controlled company,

Engelhard, and applicant’s interests in

its joint ventures.

e. Sources of Income. As of December

31, 1995, applicant derived

approximately 66% of its income from

its operating businesses and

approximately 34% from its investment

activities. With respect to income

earned by the Group’s operations,

applicant’s majority-owned subsidiaries

(including wholly-owned subsidiaries)

accounted for approximately 26% of its

income, Engelhard accounted for

approximately 12% of its income, and

its joint venture interests accounted for

approximately 28% of its income.

6. In the alternative to exemptive

relief under section 3(b)(2), applicant

requests an order under section 6(c)

exempting applicant from all provisions

of the Act and the rules and regulations

thereunder. Section 6(c) authorizes the

Commission to issue a conditional or

unconditional exemption from any

provision of the Act or rule thereunder

if the exemption is ‘‘necessary or

appropriate in the public interest’’ and

is ‘‘consistent with the protection of

investors and the purposes fairly

intended by the policy and provisions of

[the Act].’’ Applicant states that it was

structured for valid economic and legal

reasons and not with the Act in mind.

Consequently, applicant believed that it

would be inappropriate and detrimental

to applicant and its shareholders to be

treated as an investment company and

made subject to the Act. Furthermore,

applicant believes that it is not the type

of company and does not engaged in the

activities the Act was designed to

regulate. Accordingly, applicant submits

that the requested exemption is

necessary and appropriate in the public

interest, is consistent with the

protection of investors, and is consistent

with the purposes of the Act.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–12128 Filed 5–14–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37179; File No. SR–Amex–

96–11]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change and

Amendment No. 1 to Proposed Rule

Change by the American Stock

Exchange, Inc., To Establish a Firm

Facilitation Exemption

May 8, 1996.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’)1 and Rule 19b–4 thereunder,2

notice is hereby given that on April 9,

1996, the American Stock Exchange,

Inc. (‘‘Amex’’ or ‘‘Exchange’’) filed with

the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I, II, and III below, which Items

have been prepared by the selfregulatory organization. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.3

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Amex proposes to amend

Exchange Rules 904, 905, 904C, and

906G to provide for an exemption from

standardized equity and index and

Flexible Exchange option position and

exercise limits for member firms seeking

to facilitate customer orders.

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

Amex 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 Amex 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 Amex is proposing to establish a

firm facilitation exemption 4 for all nonmultiply-listed Exchange option classes.

This exemption would be available to

the Exchange’s standardized equity and

index and Flexible Exchange option

classes. In addition, the firm facilitation

exemption will be twice the standard

limit.

Under the proposal, the procedures

set forth in Exchange Rule 950(d)

Commentary .02 for crossing a customer

order with a firm facilitation order must

be followed. In this regard, before a

customer order can be crossed with a

firm facilitation order, the trading crowd

must be given a reasonable opportunity

to participate. Moreover, only after it

has been determined that the trading

crowd will not fill the order, may the

firm’s customer order be crossed with

the firm’s facilitation order.

The Amex notes that the firm

facilitation exemption will be in

addition to and separate from the

standard limit, as well as other

exemptions available under the

Exchange’s position limit rules. For

example, if a firm desires to facilitate

customer orders in the XYZ option
Federal Register / Vol. 61, No. 95 / Wednesday, May 15, 1996 / Notices 24521

5 17 CFR 200.30–3(a)(12) (1994).

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

class, which is assumed not to be

multiply-listed and also assumed to

have a 25,000 contract standard position

limit, the firm may qualify for a firm

facilitation exemption of up to twice the

standard limit (50,000 contracts), as

well as an equity hedge exemption of up

to twice the standard limit (50,000

contracts), in addition to the 25,000

contract standard limit. If both

exemptions are allowed, the facilitation

firm may hold or control a combined

position of up to 125,000 XYZ contracts

on the same-side of the market.

Initially, the Exchange intends to

provide the facilitation exemption to

member firms only for positions in

equity options that are solely listed on

the Exchange and not for multiply-listed

equity options. The reason for this

temporary limitation is to allow the

options exchanges, working through the

Intermarket Surveillance Group (‘‘ISG’’),

to develop uniform procedures to assure

that all market participants at each

exchange are given an opportunity to

participate in an order before a member

firm is given an exemption from the

position limit rules.

Under the proposal, member firms

must receive approval from the

Exchange prior to executing the

facilitating order which would result in

the firm exceeding position limits.

Although permission may be obtained

based on oral representations, the

facilitation firm is required to furnish to

the Exchange, within two business days

or such other time period designated by

the Exchange, forms and documentation

substantiating the basis for the

exemption. Further, to remain qualified

for the exemption, the member firm

must, within five business days after the

execution of the exempted order, hedge

all exempt option positions that have

not previously been liquidated, and

furnish to the Exchange documentation

reflecting the resulting hedging position.

In meeting this requirement, the

facilitation firm must liquidate and

establish its customer’s and its own

option and stock positions or their

equivalent in an orderly fashion, and

not in a manner calculated to cause

unreasonable price fluctuations or

unwarranted price changes. In addition,

a facilitation firm is not permitted to use

the facilitation exemption for the

purpose of engaging in index arbitrage.

Moreover, the facilitation firm is

required to promptly provide to the

Exchange any information or documents

requested concerning the exempted

option positions and the positions

hedging them, as well as to promptly

notify the Exchange of any material

change in the exempted option

positions or the hedge.

2. Statutory Basis

The Exchange believes that the

proposed rule change is consistent with

Section 6(b) of the Act in general and

furthers the objectives of Section 6(b)(5)

in particular in that it is designed to

prevent fraudulent and manipulative

acts and practices, to promote just and

equitable principles of trade, and is not

designed to permit unfair

discrimination between customers,

issuers, brokers, and dealers.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe 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

The Exchange has neither solicited

nor received written comments with

respect to the proposed rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Because the foregoing proposed rule

change: (1) does not significantly affect

the protection of investors or the public

interest; (2) does not impose any

significant burden on competition; (3)

was provided to the Commission for its

review at least five business days prior

to the filing date; and (4) does not

become operative for 30 days from April

9, 1996, the date on which it was filed,

the proposed rule change 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

qualifies as a ‘‘noncontroversial filing’’

in that the proposed amendments do not

significantly affect the protection of

investors or the public interest and do

not impose any significant burden on

competiton. At any time within 60 days

of the filing of the proposed rule change,

the Commission may summarily

abrogate such rule change if it appears

to the Commission that such action is

necessary or appropriate for 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 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the Amex. All submissions

should refer to File No SR–Amex–96–11

and should be submitted by June 5,

1996.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.5

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–12174 Filed 5–14–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37186; File No. SR–PSE–

96–12]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Pacific Stock Exchange, Inc.

Relating to Financial Arrangements of

Market Makers

May 9, 1996.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

April 5, 1996, the Pacific Stock

Exchange Incorporated (‘‘PSE’’ or

‘‘Exchange’’) filed with the Securities

and Exchange Commission

(‘‘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 PSE proposes to amend its rules

on the trading restrictions that apply to

Options Floor Members with ‘‘financial

arrangements’’ as defined in PSE Rule

6.40.