2858 Federal Register / Vol. 61, No. 19 / Monday, January 29, 1996 / Notices

1 15 U.S.C. § 78s(b)(1) (1988).

2 17 CFR § 240.19b-4 (1995).

3Position limits impose a ceiling on the number

of option contracts which an investor or group of

investors acting in concert may hold or write in

each class of options on the same side of the market

(i.e., aggregating long calls and short puts or long

puts and short calls).

4Exercise limits prohibit an investor or group of

investors acting in concert from exercising more

than a specified number of puts or calls in a

particular class within five consecutive business

days.

5See note 7, infra, and accompanying text.

6On April 5, 1995, the PHLX submitted a revised

version of the text of the proposed rule change,

which amends the text to indicate that the proposed

position and exercise limit for FCOs is 200,000

contracts. See Letter from Edith Hallahan, Special

Counsel, Regulatory Services, to Michael

Walinskas, Branch Chief, Office of Market

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

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

5, 1995 (‘‘Amendment No. 1’’). On April 26, 1995,

the PHLX amended PHLX Rule 1001, Commentary

.05(c), to (1) replace references to the current FCO

position limits with references to the proposed FCO

position limit; (2) designate current paragraph (c) as

paragraph (b), in order to reflect the deletion of

current paragraph (b); and (3) provide that the

position and exercise limit for customized and noncustomized contracts on the German mark/Japanese

yen cross-rate and the British pound/German mark

cross-rate options, as well as for cross-rate options

traded pursuant to PHLX Rule 1069, ‘‘Customized

Foreign Currency Options,’’ is 200,000 contracts.

See Letter from Edith Hallahan, Special Counsel,

Regulatory Services, PHLX, to Michael Walinskas,

Branch Chief, OMS, Division, Commission, dated

April 26, 1995 (‘‘Amendment No. 2’’).

7The PHLX amended its proposal to provide that

options on the Italian lira and the Spanish peseta

will continue to be subject to their current position

and exercise limits of 100,000 contracts. The

Exchange also indicated that, under the proposal,

the aggregation principles provided in PHLX Rule

1001 will continue to apply. See Letter from Gerald

D. O’Connell, First Vice President, Market

Regulation and Trading Operations, PHLX, to

Michael Walinskas, Branch Chief, OMS, Division,

Commission, dated December 20, 1995

(‘‘Amendment No. 3’’).

8See Securities Exchange Act Release No. 35688

(May 8, 1995), 60 FR 26062.

9As noted above, the position and exercise limits

for options on the Italian lira and the Spanish

peseta will continue to be 100,000 contracts. See

Amendment No. 3, supra note 7.

10See Securities Exchange Act Release no. 19313

(October 14, 1982), 47 FR 46946 (October 21, 1982)

(order approving File No. SR–PHLX–81–4).

11See Securities Exchange Act Release Nos.

21676 (January 18, 1985), 50 FR 3859 (January 28,

1985) (order approving File No. SR–PHLX–84–18

(increasing position limits from 10,000 to 25,000

contracts); 22479 (September 27, 1985), 50 FR

41276 (October 9, 1985) (order approving File No.

SR–PHLX–85–22) (increasing position limits to

50,000 contracts); 23710 (October 15, 1986), 51 FR

37691 (October 23, 1986) (order approving File No.

SR–PHLX–86–24) (increasing position limits to

100,000 contracts); and 34712 (September 23, 1994),

59 FR 50307 (October 3, 1994) (order approving File

No. SR–PHLX–93–13) (adopting position limit of

150,000 contracts for FCOs with annual trading

volume of at least 3,500,000 contracts).

12See Securities Exchange Act Release No. 34712,

supra note 10.

13Position accountability standards require

traders who own or control positions in excess of

established limits to provide to the exchange, upon

request, information regarding the nature of the

position and the trading strategy employed.

14See Letter from Jean A. Webb, Secretary,

Commodity Futures trading Commission (‘‘CFTC’’),

to Todd E. Petzel, Senior Vice President, Research,

and Chief Economist, CME, dated January 2, 1992.

See also Speculative Position Limits—Exemption

from CFTC Rule 1.61; CME Proposed Amendments

to Rules 3902.D, 5001.E, 3010.F, 3012.F, 3013.F,

3015.F, 4604, and Deletion of Rules 3902.F, 5001.G,

3010.H., 3012.H, 3013.H, and 3015.H.

15See Securities Exchange Act Release No. 34925

(November 1, 1994), 59 FR 55720 (November 8,

1994) (order approving File No. SR–PHLX–94–18).

16See e.g., Securities Exchange Act Release Nos.

30672 (May 6, 1992), 57 FR 20546 (May 13, 1992)

(order approving File No. SR–PHLX–91–30)

(aggregating long-term FCOs); 30945 (July 21, 1992),

57 FR 33381 (July 28, 1992) (order approving File

No. SR–PHLX–92–13) (aggregating month-end

FCOs); 33732 (March 8, 1994), 59 FR 12023 (March

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 Exchange. All submissions

should refer to File No. SR–NYSE–95–

45 and should be submitted by February

20, 1996.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–1472 Filed 1–26–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–36746; International Series

Release No. 919; File No. SR–PHLX–95–13]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change and

Notice of Filing and Order Granting

Accelerated Approval of Amendment

No. 3 to the Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.,

Relating to Modifications of the

Position and Exercise Limits for

Foreign Currency Options

January 19, 1996.

On March 10, 1995, as subsequently

amended below, the Philadelphia Stock

Exchange, Inc. (‘‘PHLX’’ 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 PHLX Rules 1001, ‘‘Position

Limits,’’ 3 and 1002, ‘‘Exercise Limits,’’ 4

to increase the position and exercise

limits for all foreign currency options

(‘‘FCOs’’), except for options on the

Italian lira and the Spanish peseta, to

200,000 contracts.5 The PHLX

subsequently filed Amendment Nos. 1,

2,6 and 3 7 to the proposed rule change

on April 5, 1995, May 2, 1995, and

December 20, 1995, respectively.

Notice of the proposed rule change

and Amendment Nos. 1 and 2 appeared

in the Federal Register on May 16,

1995.8 No comments were received on

the proposal.

Currently, PHLX Rules 1001 and 1002

establish the following position and

exercise limits for FCOs: (i) 150,000

contracts for FCOs which meet an

annual trading volume of at least

3,500,000 contracts; and (ii) 100,000

contracts for all other FCOs traded on

the PHLX. The PHLX proposes to

amend Exchange Rules 1001 and 1002

to increase the position and exercise

limits for all FCOs, except for options

on the Italian lira and the Spanish

peseta,9 to 200,000 contracts.

PHLX FCO position and exercise

limits were set initially at 10,000

contracts in 1982, when FCOs first

began trading on the Exchange.10 Since

that time, the position and exercise

limits have been raised four times.11 In

1993, the Exchange filed a proposal to

adopt a two-tiered approach to FCO

position and exercise limits, which was

approved by the Commission in

September 1994.12 According to the

PHLX, many of the factors cited at that

time continue to indicate that FCO

position and exercise limits warrant an

increase to 200,000 contracts. For

example, the Chicago Mercantile

Exchange (‘‘CME’’) substituted ‘‘position

accountability standards’’ 13 for position

limits for futures and futures options on

certain foreign currencies.14 As a result,

the PHLX believes that the Exchange is

placed at a serious competitive

disadvantage.

In addition, the Exchange has

commenced trading customized FCOs,15

in which positions are aggregated with

other FCO positions in the underlying

currency; however, customized option

trading volume is not included in the

volume calculation to determine the

applicable position limit under the

current two-tiered system. In addition to

customized options, there are also other

FCO products that are aggregated for

position and exercise limit purposes,

including long-term, month-end, cash/

spot, and American- and European-style

FCOs.16 According to the PHLX, FCO
Federal Register / Vol. 61, No. 19 / Monday, January 29, 1996 / Notices 2859

15, 1994) (order approving File No. SR–PHLX–93–

10) (aggregating cash/spot FCOs); and 24859

(August 27, 1987), 52 FR 33493 (September 3, 1987)

(order approving File No. SR–PHLX–87–24)

(aggregating European-style contracts).

17See Bank for International Settlements (‘‘BIS’’)

Central Bank Survey of Foreign Exchange Market

Activity in 1989.

18See BIS Central Bank Survey of Foreign

Exchange Market Activity in April 1992 (March

1993).

19According to the PHLX, 200,000 contracts

would represent less than 2% of the daily

international currency transaction volume in the

Deutsche mark; 22% of the daily international

currency transaction volume in the Australian

dollar; 5% of the daily international currency

transaction volume in the British pound; 16% of the

daily international currency transaction volume in

the Canadian dollar; 19% of the daily international

currency transaction volume in the French franc;

8% of the daily international currency transaction

volume in the Swiss franc; and 4% of the daily

international currency transaction volume in the

Japanese yen. See Letter from Gerald D. O’Connell,

First Vice President, Market Regulation and Trading

Operations, PHLX, to Yvonne Fraticelli, Attorney,

Office of Market Supervision, Division of Market

Regulation, Commission, dated May 18, 1995.

20 In 1985, the first increase from 10,000 contracts

to 25,000 contracts represented a 150% change

while the second increase from 25,000 to 50,000

contracts represented a 100% increase; similarly,

the 1986 change to 100,000 contracts represented a

100% change. The proposed changes, from 150,000

to 200,000 contracts, and from 100,000 to 200,000

contracts, represent changes of 33% and 100%,

respectively.

21 15 U.S.C. § 78f(b)(5) (1988 & Supp. V 1993).

22See Securities Exchange Act Release Nos.

22479 and 34712, supra note 10.

23See Securities Exchange Act Release No. 31627

(December 21, 1992), 57 FR 62399 (December 30,

1992) (order approving File No. SR–Amex–92–36).

participants have continued to

accumulate positions near existing

limits. If large traders continue to be

restricted by the current position and

exercise limit levels, the PHLX believes

that trading interest could migrate to the

over-the-counter (‘‘OTC’’) market,

hampering PHLX liquidity. The

Exchange believes that a higher position

and exercise limit may enable such

traders to consider, or return to, an

exchange marketplace for their FCO

trading, thereby increasing the liquidity

of the PHLX’s FCO markets. The PHLX

believes that increases are particularly

appropriate because the FCO market

attracts a large number of institutional

and corporate investors with substantial

hedging needs. According to the

Exchange, these investors utilize the

PHLX marketplace by participating in

block size transactions in FCOs to hedge

exposure to fluctuations in exchange

rates.

Since the most recent increase in

position and exercise limits, the

Exchange has continued to examine

FCO position and exercise limits in light

of the underlying currency market. The

PHLX estimates that the size of the

worldwide currency market has grown

exponentially. For example, in 1989,

total gross global foreign exchange

turnover was estimated to be $932

billion per day and net global turnover

was estimated to be $640 billion per

day.17 In 1992, total gross global foreign

exchange turnover was estimated to be

$1.354 billion per day, which represents

a 35% increase since 1989. Further,

global ‘‘net-net’’ exchange market

turnover was estimated at $880 billion;

this takes into account local and crossborder double counting and estimated

gaps in reporting.18

Further, the PHLX believes that, as a

percentage of total global currency

turnover, the impact of a PHLX FCO

position, even at 200,000 contracts, is

minimal.19

The Exchange also believes that the

proposed increase is reasonable in light

of prior position and exercise limit

increases. The 1992 increase represents

a 50% increase in the two affected

options. Previously, the Commission

approved increases of 150%, 100%, and

100%.20 Accordingly, the PHLX

believes that the current proposal to

raise by 100% the position and exercise

limits for all FCOs, except options on

the Italian lira and the Spanish peseta,

is in line with prior changes, and

specifically does not create a higher

increase than any prior one.

Because of the large size of the

underlying market in foreign currencies,

the PHLX does not believe that

manipulative concerns would be

enhanced if the limits for FCOs were

increased. In this regard, the Exchange

notes that its surveillance procedures

are designed to detect violations of these

limits. In addition, the PHLX notes that

the proposal will eliminate the

fluctuations in limits inherent in a

volume-based approach.

For these reasons, and in light of these

market changes, the Exchange believes

that the proposed rule change is

consistent with Section 6 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 as

well as to protect investors and the

public interest. The PHLX believes that

the proposal will increase the depth and

liquidity of the FCO market which, in

turn, should result in position and

exercise limit levels that serve the

purposes of protecting investors and the

public interest as well as preventing

unfair acts and practices, such as

manipulation.

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).21

Specifically, the Commission believes

that the proposal to increase the

position and exercise limits for all

FCOs, except for options on the Italian

lira and the Spanish peseta, should help

to accommodate the needs of investors

and market participants while helping

to increase the depth and liquidity of

the PHLX’s FCO market. The proposal

should also simplify the PHLX’s rules

by establishing limits that will not

change periodically based on trading

volume in the FCO as exists under the

PHLX’s current rules.

The Commission believes, as it has

stated in the past, that although position

and exercise limits for FCOs must be

sufficient to protect the options and

related markets from disruptions by

manipulation, the limits must not be

established at levels that are so low as

to discourage participation in the

options market by institutions and other

investors with substantial hedging

needs or to prevent market makers from

adequately meeting their obligations to

maintain a fair and orderly market.22 In

its proposal, the PHLX states that the

FCO market attracts a large number of

corporate and institutional investors

who have substantial needs and who

execute block-sized transactions in

FCOs. In addition, the PHLX believes

that trading could migrate to the OTC

market if traders continue to be

restricted by the PHLX’s current FCO

position and exercise limits. In light of

the size of the FCO market and the

needs of FCO investors and market

makers, the Commission believes that

the PHLX’s proposal is a reasonable

effort to accommodate the needs of

market participants and to help the

Exchange remain competitive with the

OTC market for FCOs.

At the same time, the Commission

does not believe that the proposal

significantly increases concerns

regarding intermarket manipulations or

disruptions of the markets for FCOs or

the underlying currencies. The

Commission notes that the interbank

foreign currency spot market is an

extremely large, diverse market

comprise of banks and other financial

institutions worldwide.23 That market is

supplemented by equally deep and

liquid markets for standardized options

and futures on foreign currencies and

options on those futures. An active OTC

market also exists in FCOs.

Moreover, the absence of discernible

manipulative problems under the

current FCO position and exercise limits

leads the Commission to conclude that
2860 Federal Register / Vol. 61, No. 19 / Monday, January 29, 1996 / Notices

24See Securities Exchange Act Release No. 33288

(December 3, 1993), 58 FR 65221 (December 13,

1993) (order approving File No. SR–PHLX–93–07).

25The Commission continues to believe that

proposals to increase position and exercise limits

must be justified and evaluated separately. After

reviewing the proposed exercise limits, the

Commission has concluded that the exercise limit

increase does not raise manipulation problems or

increase concerns over market disruption in the

underlying currencies.

26 15 U.S.C. § 78s(b)(2) (1982).

27 17 CFR 200.30–3(a)(12) (1995).

1This date is derived from the SEC’s

computerized data retrieval system.

the proposed increase is warranted. The

Commission recognizes, as it has stated

in the past, that there are no ideal limits

in the sense that options positions of

any given size can be stated

conclusively to be free of any

manipulative concerns.24 The PHLX

and the Commission, however, have

relied largely on the absence of

discernible manipulation or disruption

problems under the current limit as an

indicator that additional increase can be

safely considered. The Commission

believes for these reasons that the

proposed liberalization of existing FCO

position and exercise limits is

appropriate.25

In addition, the Commission believes

that the PHLX’s surveillance programs

will be adequate to detect and deter

position and exercise limit violations by

market participants as well as detect

and deter attempted manipulative

activity and other trading abuses.

The Commission finds good cause for

approving Amendment No. 3 to the

proposed rule change prior to the

thirtieth day after the date of

publication of the notice thereof in the

Federal Register. Specifically,

Amendment No. 3 clarifies the

Exchange’s proposal by indicating that

the proposed rule change does not alter

the aggregation principles contained in

PHLX Rule 1001. In addition,

Amendment No. 3 provides that the

position and exercise limits for options

on the Italian lira and the Spanish

peseta will continue to be 100,000

contracts. This clarification was

necessary because at the time the

proposal was originally submitted the

PHLX did not have approval to trade

those FCOs. In addition, the

Commission believes that the 100,000

contract limit for options on the Italian

lira and the Spanish peseta should

remain unchanged at this time because

the PHLX trades only customized

options on those currencies and the

market for those currencies may not be

as deep and liquid as the market for

other FCOs traded by the PHLX. Based

on the above, the Commission finds

good cause to accelerate approval of

Amendment No. 3.

Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning Amendment No.

3. 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 at

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

above-mentioned self-regulatory

organization. All submissions should

refer to the file number in the caption

above and should be submitted by

February 8, 1996.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,26 that the

proposed rule change (SR–PHLX–95–

13), as amended, is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.27

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–1471 Filed 1–26–96; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–21693; File No. 811–2155]

Select Capital Growth Fund, Inc.

January 22, 1996.

AGENCY: U.S. Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for an

order under the Investment Company

Act of 1940 (the ‘‘1940 Act’’).

APPLICANT: Select Capital Growth Fund,

Inc. (‘‘Select Capital’’).

RELEVANT 1940 ACT SECTION: Order

requested under Section 8(f) of the 1940

Act.

SUMMARY OF APPLICATION: Application

seeks an order declaring that it has

ceased to be an investment company.

FILING DATE: The application was filed

on September 19, 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 Secretary of

the SEC 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

February 16, 1996, 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 who wish to be notified of a

hearing may request notification by

writing to the Secretary of the SEC.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, NW., Washington, DC 20549;

Applicant, 20 Washington Avenue

South, Minneapolis, Minnesota 55401.

FOR FURTHER INFORMATION CONTACT:

Joseph G. Mari, Senior Special Counsel,

or Patrice M. Pitts, Special Counsel,

Division of Investment Management

(Office of Insurance Products), at (202)

942–0670.

SUPPLEMENTARY INFORMATION: Following

is a summary of the application. The

complete application is available for a

fee from the Pubic Reference Branch of

the SEC.

Applicant’s Representations

1. Select Capital is organized as a

Minnesota corporation, and is registered

under the 1940 Act as an open-end

diversified management investment

company. On December 28, 1970,1

Applicant filed a registration statement

under Section 8(b) of the 1940 Act, and

a registration statement on Form S–5

under the Securities Act of 1933

registering an unlimited number of

shares of common stock, having no

designated par value (File No. 2–39128).

The Form S–5 registration statement

became effective on August 13, 1971,

and the initial public offering

commenced on August 16, 1971.

2. Applicant’s only security holders

were Northwestern National Life

Insurance Company (‘‘NWNL’’) and subaccounts of NWNL Select Variable

Account and Select*Life Variable

Account (the ‘‘Variable Accounts’’).

3. On November 1, 1994, Applicant’s

board of directors unanimously (i)

approved the substitution of shares of

the Growth Portfolio of the Variable

Insurance Products Fund (the ‘‘Fidelity

Growth Portfolio’’) for shares of

Applicant held by the Variable