29158 Federal Register / Vol. 61, No. 111 / Friday, June 7, 1996 / Notices

17See Securities Exchange Act Release No. 35188

(January 3, 1995), 60 FR 2422 (January 9, 1995) (SR–

Phlx–94–46) (order approving establishment of Phlx

PPS from 4:00 to 4:15 (ET)); Securities Exchange

Act Release No. 29631 (August 30, 1991), 56 FR

46025 (September 9, 1991) (SR–PSE–91–21) (order

approving extension of PSE post-1 p.m. session

from 1:30 to 1:50 p.m. (PT)).

18The Commission notes that the CHX has

represented that trading during the PPS will be

surveilled in the same manner and using the same

techniques as those used to surveil the Primary

Trading Session. See ITS/Surveillance Letter, supra

note 7.

19The Commission notes the CHX’s

representation that it will distribute a Notice to

Members setting forth the procedures to be followed

to make orders eligible for the PPS. See supra note

10.

20See ITS/Surveillance Letter, supra note 7.

21The Commission notes that the proposal to

establish the Phlx’s PPS was noticed previously in

the Federal Register for the full statutory period

and the Commission did not receive any comments

on it. See supra note 17.

22 15 U.S.C. 78s(b)(2).

23 17 CFR 200.30–3(a)(12).

definition that the existing one in that

it can readily accommodate future

changes in the trading hours of the other

national securities exchanges, without,

at present, affecting a substantive

change to the existing hours of trading

in these securities on the Exchange.

The Commission also believes that the

initiation of the PPS does not raise any

new regulatory concerns. Currently,

auction market trading after 4:00 p.m.

(ET) occurs on the Phlx until 4:15 p.m.

(ET) and the PSE until 4:50 p.m. (ET).17

The CHX’s PPS will operate in a

substantially similar manner and enable

the CHX to compete with both the Phlx

and PSE for after-hours volume.

Specifically, the CHX PPS will continue

to provide full transparency by

disseminating quotes through the

Consolidated Quotation System and

reporting trades to the consolidated

tape. In addition, although the

Exchange’s MAX System will be

unavailable for automated order routing

or executions during the PPS, there will

continue to be complete access to the

CHX and the usual auction market

trading rules of the Exchange will

continue to apply.18 Moreover, in order

to preserve the execution quality of

market, limit, contingent (including

GTX) orders placed on the CHX

specialists’ books during the Primary

Trading Session, such orders will not

automatically migrate to the PPS, but

rather will do so only if the order is so

designated (i.e., with an ‘‘E’’ indicator

on the ticket) and entered with the

specialist after 3:00 p.m. (CT).19

Furthermore, the Commission

believes that the CHX’s proposal to

cancel the PPS for a particular day as a

result of any trading halt during the

Primary Trading Session pursuant to

Article XX, Rule 10A that is still in

effect at the close of the Primary Trading

Session removes from its consideration

any regulatory concerns that may have

existed if this provision was not present.

The Commission notes, however, that

the only other national securities

exchanges that will be operating an

auction market after 4:00 p.m. (ET) will

be the Phlx and PSE. In this regard, the

CHX has represented to the Commission

that the ITS will be available between

the three exchanges during their post4:00 p.m. (ET) auction market

sessions.20 Thus, ITS commitments will

be able to be routed back and forth, just

as during the regular hours of auction

trading on the primary markets.

Although the NYSE is operating its

Off-Hours Trading facility and the Amex

is operating its After-Hours Trading

facility during this time period, these

sessions are limited to accepting single

stock orders priced at either the NYSE

or Amex closing price, respectively, or

effecting portfolio trades. Because the

PPS trading session will not overlap the

5:00 p.m. (ET) executions in Crossing

Session I of the NYSE’s Off-Hours

Trading facility or the Amex’s AfterHours Trading Facility, the proposal

being approved today does not raise

market structure issues regarding the

interaction between the PPS and these

two after-hours trading facilities.

Accordingly, the Commission does

not believe that an extension of auction

market trading on the CHX until 4:30

p.m. (ET) will have an adverse effect on

the maintenance of fair and orderly

markets or disadvantage public

customers.

The Commission finds good cause for

approving the proposed rule change

prior the thirtieth day after the date of

publication of notice of filing thereof in

the Federal Register. The Commission

believes that accelerated approval of the

proposal to modify the definition of the

Exchange’s Primary Trading Session is

appropriate because the CHX’s proposal

does not alter, at present, the existing

hours of the Primary Trading Session.

Moreover, the Commission will retain

the ability to consider the effects of any

future change in the hours of the CHX’s

Primary Trading Session brought about

by the modification of another

exchange’s trading hours through its

review under Section 19(b) of the Act of

any proposed rule that would

precipitate such a change.

The Commission believes that

accelerated approval of the proposal to

establish a PPS is appropriate because

the CHX’s proposal is substantively the

same as the PPS currently operated by

the Phlx, with the exception that the

CHX’s PPS remains open for an

additional fifteen minutes.21 In this

regard, the Commission does not believe

that this difference is a significant one,

as the same market situation that

currently exists between 4:00 to 4:15

(ET) when only the Phlx and PSE are

conducting auction market trading will

prevail between 4:15 to 4:30 p.m. (ET)

when only the CHX and PSE will be

conducting such trading.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning Amendment No.

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, Amendment Nos. 1 and 2,

and 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, N.W.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the Exchange. All submissions

should refer to File No. SR–CHX–96–13

and should be submitted by June 28,

1996.

V. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act 22 that the

proposed rule change is hereby

approved on an accelerated basis.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.23

Jonathan G. Katz,

Secretary.

[FR Doc. 96–14400 Filed 6–6–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37256; File No. SR–DTC–

96–08]

Self-Regulatory Organizations; The

Depository Trust Company; Notice of

Filing of a Proposed Rule Change To

Establish a Custody Service For

Certain Non-depository Eligible

Securities

May 30, 1996.

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

Securities Exchange Act of 1934
Federal Register / Vol. 61, No. 111 / Friday, June 7, 1996 / Notices 29159

1 15 U.S.C. § 78s(b)(1) (1988).

2The Commission has modified the text of the

summaries prepared by DTC.

3A description of DTC’s proposed Custody

Services is set forth in Exhibit B to the filing ‘‘DTC

Custody Service,’’ which is available for review at

the Commission’s Public Reference Room.

4All necessary documents (e.g., stock powers or

endorsements) to effect a legal transfer from

customer or firm name to DTC’s nominee name

must be deposited with DTC prior to or

contemporaneously with a participant’s instruction

to transfer the position from a participant’s custody

free account to the participant’s general free

account. Custody Issues eligible for transfer from a

participant’s custody free account to its general free

account are those Custody Issues for which (i) all

necessary documents of transfer are on deposit at

DTC, (ii) there are no pending restrictions on

transferability, and (iii) the issue is otherwise DTC

eligible.

5 17 CFR 240.15c3–3(b) (1995).

6 17 CFR 240.15c3–3(c) (1995).

7 DTC will require its participants to notify DTC

of redemptions and reorganizations involving

Custody Issues where DTC has not already

announced such an activity.

8The Reorg Deposit Service enables DTC

participants to deposit at DTC certificates for up to

two years after the reorganization activity and to

have DTC collect the proceeds on their behalf. For

a complete description of DTC’s Reorg Deposit

Service, refer to Securities Exchange Act Release

No. 34189 (June 9, 1994), 59 FR 30818 [SR–DTC–

94–06] (notice of filing and immediate effectiveness

of proposed rule change).

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

April 2, 1996, The Depository Trust

Company (‘‘DTC’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change (File No. SR–DTC–96–08) as

described in Items I, II, and III below,

which items have been prepared

primarily by DTC. 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

DTC is filing the proposed rule

change to establish procedures for its

Custody that will enable DTC

participants that hold certain nondepository eligible securities to deposit

those securities with DTC for

safekeeping and other limited

depository services.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

DTC 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. DTC has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of such statements.2

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

The purpose of the proposed rule

change is to establish a method by

which the securities industry may

centralize the safe-keeping of certificates

which are not currently deposited at

DTC because either the DTC participant

desires that the certificate be held in

customer or firm name or the issue is

not eligible for full depository services

(e.g., securities with certain transfer

restrictions). The Custody Service will

permit DTC participants to deposit such

securities at DTC for safe-keeping and

other limited depository services.3

Certificates deposited through the

Custody Service will be held by DTC in

customer or firm name and will not be

transferred into DTC’s nominee name.

Therefore, a security issue deposited

through the Custody Service (‘‘Custody

Issue’’) will not be eligible for DTC’s

book-entry services unless a depositing

participant directs DTC to transfer the

position originally credited to the

participant’s custody free account to the

participant’s general free account.4

DTC believes that the Custody Service

will provide brokers and dealers with

appropriate control over Custody Issues

for purposes of Rule 15c3–3(b) 5 under

the Act. In accordance with the

requirements for the satisfactory control

of securities set forth in Rule 15c3–

3(c)(5),6 DTC believes (i) it is a ‘‘bank’’

within the meaning of Section 3(a)(6) of

the Act because it is a member bank of

the Federal Reserve System, (ii) the

delivery of Custody Issues to brokers

and dealers will not require the

payment of money or value, and (iii) the

Custody Issues in DTC’s custody or

control will not be subject to any right,

charge, security interest, lien, or claim

of any kind in favor of DTC or any

person claiming through DTC.

The proposed Custody Service will be

implemented in three phases. As each

phase is introduced, additional services

will be offered to DTC participants.

During the first phase, DTC will accept

deposits, process withdrawals, and

transfer eligible Custody Issues into a

participant’s general free account. DTC

also will respond to inquiries regarding

custody deposits and offer automated

and physical activity reports to

participants.

The second phase of the Custody

Service will add redemption and

reorganization services. When a custody

position becomes the subject of a

reorganization or redemption, DTC

generally will report the event to its

participants using existing services.7 In

addition, DTC participants will be able

to utilize DTC’s Reorg Deposit Service 8

to present eligible Custody Issues for

mandatory reorganizations, full and

partial calls, maturities, name changes,

reverse splits, mergers, and other similar

activities. Participants will be able to

submit negotiable and transferable

Custody Issues for voluntary

reorganizations through existing,

modified services. DTC also will collect

and distribute the proceeds derived

from the presentment of custody

deposits.

In the third phase of the Custody

Service, DTC will implement the

capability to collect and distribute

dividend and interest payments for

Custody Issues registered in customer or

firm name. Although DTC is seeking

approval for each phase of the Custody

Service, it intends only to implement

Phase I at this time, with the other

phases to follow in accordance with the

experience and needs of DTC

participants.

DTC believes the proposed rule

change will reduce the costs,

inefficiencies, and risks associated with

the physical safe-keeping of securities

which are not current depository

eligible at DTC because its participants

will be able to reduce the inventories of

securities in their physical vault and in

turn should reduce their processing,

labor, and insurance expenses. DTC

believes the proposed rule change is

consistent with the requirements of the

Act and the rules and regulations

thereunder applicable to DTC in that it

promotes efficiencies in the prompt and

accurate clearance and settlement of

securities transactions. Moreover, DTC

believes the proposed service

establishes uniform procedures for

clearance and settlement which will

reduce unnecessary costs and increase

the protection of investors and persons

facilitating transactions by and acting on

behalf of investors. DTC also believes

the proposed rule change supports

industry efforts to immobilize securities

certificates and maximize efficiencies in

securities processing.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

DTC does not believe that the

proposed rule change will impose any

burden on competition not necessary or

appropriate in furtherance of the

purposes of the Act, in the public

interest, and for the protection of

investors.
29160 Federal Register / Vol. 61, No. 111 / Friday, June 7, 1996 / Notices

9 17 CFR 200.30–3(a)(12) (1995).

1 15 U.S.C. § 78s(b)(1) (1988).

2Letter from Jean M. Cawley, OCC, to Jerry W.

Carpenter, Assistant Director, Division of Market

Regulation, Commission (March 20, 1996).

3The Commission has modified the text of the

statements prepared by OCC.

4For a complete description of the batch ERD

system and the transition to the on-line ERD

system, refer to Securities Exchange Act Release No.

31595 (December 11, 1992), 57 FR 61139 [SR–OCC–

92–30] (order approving on an accelerated basis a

proposed rule change relating to the conversion of

OCC’s current batch ERD system to an on-line

system).

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

DTC has not solicited comments from

its participants on the proposed rule

change. A number of DTC participants

have requested that DTC develop a

custody service and informally have

committed to using such a service.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within thirty-five days of the date of

publication of this notice in the Federal

Register or within such longer period (i)

as the Commission may designate up to

ninety 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 DTC consents, the

Commission will:

(A) by order approve such proposed

rule change or

(B) institute proceedings to determine

whether the proposed rule change

should be disapproved.

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, N.W.,

Washington, D.C. 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

Room, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of DTC. All submissions should

refer to the file number SR–DTC–96–08

and should be submitted by June 28,

1996.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.9

Jonathan G. Katz,

Secretary.

[FR Doc. 96–14357 Filed 6–6–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37258; File No. SR–OCC–

95–17]

Self-Regulatory Organizations; The

Options Clearing Corporation; Notice

of Filing of a Proposed Rule Change

Modifying the Escrow Deposit Program

May 30, 1996.

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

Securities Exchange Act of 1934

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

November 2, 1995, The Options

Clearing Corporation (‘‘OCC’’) 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 primarily by OCC.

OCC amended the proposed rule change

on March 22, 1996.2 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 purpose of the proposed rule

change is to amend OCC’s escrow

deposit program to permit escrow

deposits for stock put contracts and

stock index put contracts and to make

other conforming changes to OCC’s

rules.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

OCC 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. OCC has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of such statements.3

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

OCC proposes to modify its escrow

deposit program to (i) permit escrow

deposits for stock put options and stock

index put options; (ii) delete provisions

regarding OCC’s batch system for

processing escrow receipts; (iii) change

provisions regarding the timing of the

release of escrow deposits; and (iv)

delete provisions for bulk deposits for

call options and deposits of Treasury

bills for put options. In addition, OCC

proposes to modify other OCC rules to

conform to this rule change.

Pursuant to OCC rules, clearing

members may deposit with an OCC

approved custodian shares of stock

which may be in the form of escrow

deposits, underlying certain options in

lieu of margin. Escrow deposits are

specific deposits of assets held by OCC

at an approved custodian for the

account of a specific customer.

Presently, OCC’s rules restrict escrow

deposits to short positions in stock calls

and stock index calls. For stock call

options, the underlying security may be

deposited in escrow with an OCCapproved custodian and for stock index

call options, any combination of cash,

short-term government securities, or

marginable equity securities may be

deposited in escrow with an OCCapproved custodian.

Permitting escrow deposits with

respect to stock put contracts and stock

index put contracts had been deferred

until sufficient interest existed and an

acceptable system could be developed

to process escrow deposits for put

options. OCC recently received requests

to expand its escrow program to include

such deposits for stock and stock index

puts. Those requests prompted OCC to

review its escrow program and its

processing systems that support the

escrow program. As a result thereof,

OCC determined to make several

enhancements and modifications to its

escrow program as described below.

First, OCC proposes to expand its

escrow program to permit escrow

deposits for stock put contracts and

stock index put contracts and process

those deposits through its on-line

Escrow Receipt Depository (‘‘ERD’’)

system.4 To accomplish the proposed

expansion of its escrow program, certain

changes to OCC Rules 610 and 1801 are

necessary. In general, the changes will

accommodate the Deposit of any

combination of cash and short-term

government securities for put contracts,

will provide for the valuation and

substitution of deposited assets and, in

the event of the value of the property

declines below a specified amount, will

permit OCC to disregard the escrow