Federal Register / Vol. 61, No. 118 / Tuesday, June 18, 1996 / Notices 30931

1 15 U.S.C. 78S(B)(1) (1988).

2The Commission has modified the text of the

statements DTC submitted.

3For a complete discussion of MCC’s and

Midwest Securities Trust Company’s (‘‘MSTC’’)

withdrawal from the clearing and depository

business, refer to Securities Exchange Act Release

No. 36684 (January 5, 1996), 61 FR 1195 [File Nos.

SR–CHX–95–27, SR–DTC–95–22, SR–MCC–95–04,

SR–MSTC–95–10, SR–NSCC–95–15] (order

approving MCC’s and MSTC’s withdrawal from the

clearance and settlement, securities depository, and

branch receive businesses).

4A more detailed description of these services is

set forth in Section II of DTC’s Drop Service

Agreement which describes the terms under which

DTC’s service will be provided. The Drop Service

Agreement is attached as Exhibit 2 to DTC’s

proposed rule change and is available through DTC

or through the Commission’s Public Reference

Room. All transfer agents are required to execute

the Drop Service Agreement in order to use DTC’s

Drop Service.

By the Commission.

Margaret P. Crenshaw,

Secretary.

June 10, 1996—Filing of Appeal letter

June 12, 1996—Commission Notice and

Order of Filing of Appeal

July 5, 1996—Last day of filing of petitions

to intervene [see 39 C.F.R. § 3001.111(b)]

July 15, 1996—Petitioner’s Participant

Statement or Initial Brief [see 39 C.F.R.

§ 3001.115 (a) and (b)]

August 5, 1996—Postal Service’s Answering

Brief [see 39 C.F.R. § 3001.115(c)]

August 20, 1996—Petitioner’s Reply Brief

should Petitioner choose to file one [see 39

C.F.R. § 3001.115(d)]

August 27, 1996—Deadline for motions by

any party requesting oral argument. The

Commission will schedule oral argument

only when it is a necessary addition to the

written filings [see 39 C.F.R. § 3001.116]

October 8, 1996—Expiration of the

Commission’s 120-day decisional schedule

[see 39 U.S.C. § 404(b)(5)]

[FR Doc. 96–15385 Filed 6–17–96; 8:45 am]

BILLING CODE 7710–FW–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34– 37303; File No. SR–DTC–

96–09]

Self-Regulatory Organizations; The

Depository Trust Company; Notice of

Filing of a Proposed Rule Change

Relating to the Establishment of

Procedures to Establish a Drop

Window Service.

June 11, 1996

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

Securities Exchange Act of 1934

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

April 25, 1996, The Depository Trust

Company (‘‘DTC’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change (File No. SR–DTC–96–09) 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 a proposed rule change

that establishes procedures for a transfer

agent drop service (‘‘Drop Service’’).

The Drop Service will provide transfer

agents located outside of New York City

with a central location within the

Borough of Manhattan to receive and

deliver securities.

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 that 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

DTC proposes to offer a Drop Service

in order to provide transfer agents

located outside of New York City with

a central location within Manhattan for

the receipt of securities from banks,

broker-dealers, depositories, and

shareholders. DTC’s Drop Service will

enable transfer agents to comply with

New York Stock Exchange Rule 496 and

American Stock Exchange Rule 891.

These rules require a transfer agent

seeking qualification as a transfer agent

for securities listed on the respective

exchanges to maintain an office

acceptable to the exchange and the

issuer located south of Chambers Street

in the Borough of Manhattan, City of

New York to receive and deliver

securities.

In the past, some transfer agents

located outside of New York City

complied with these rules by using a

drop service offered by the New York

office of the Midwest Clearing

Corporation (‘‘MCC’’). However, in 1996

MCC withdrew from the clearing

business and no longer offers a drop

service.3 DTC proposes to offer the DTC

Drop Service to replace the drop facility

offered by MCC and to ensure

continuity of service to transfer agents.

In connection with the Drop Service,

DTC will provide ancillary services to

transfer agents such as the inspection of

securities, maintenance of records

regarding the receipt and delivery of

securities, facilitation of rush transfers,

cancellation of certificates, and advice

regarding legal and regular transfer

requirements.4

DTC believes the proposed rule

change is consistent with the

requirements of Section 17A of the Act

because it promotes efficiencies in the

prompt and accurate clearance and

settlement of securities transactions,

specifically the transfer of record

ownership. DTC estimates that 80% of

securities delivered to transfer agents

through a drop service originate as DTC

deposits, withdrawals by transfer, and

denomination changes. By establishing

a central drop facility at DTC,

certificates will be sent directly to a

transfer agent from DTC, rather than

from DTC to a separate drop location in

Manhattan and ultimately to the transfer

agent. Therefore, DTC’s Drop Service

will promote efficiencies in the transfer

of record ownership. DTC’s Drop

Service also will reduce the expenses

associated with the transfer of record

ownership by centralizing the recording

and filming of securities received by

transfer agents. Moreover, DTC believes

the Drop Service will foster cooperation

and coordination between DTC and

other entities engaged in the clearance

and settlement of securities

transactions.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

DTC perceives no impact on

competition by reason of the proposed

rule change.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received from

Members, Participants or Others

DTC has not solicited or received

comment on the proposed rule change.

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:
30932 Federal Register / Vol. 61, No. 118 / Tuesday, June 18, 1996 / Notices

5 17 CFR 200.30–3(a)(12) (1995).

1An example of this would be an FCO which has

a custom strike price or is quoted as an inverse

option.

2Although custom-dated FCOs currently cease

trading at 9:00 a.m., the Phlx, as discussed below,

proposes to amend this time such that all

customized FCOs cease trading at 8:00 a.m.

3This transitional process will be similar to the

one used when the Exchange changed the

expiration from the Saturday preceding the third

(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–96–09

should be submitted by July 9, 1996.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.5

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–15349 Filed 6–17–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37287; File No. SR-Phlx–

96–13]

Self-Regulatory Organizations;

Philadelphia Stock Exchange, Inc.;

Notice of Filing of Proposed Rule

Change Relating to Trading Hours and

Expiration Times for Customized

Foreign Currency Options

June 7, 1996.

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 May 7, 1996, the

Philadelphia Stock Exchange, Inc.

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

Securities and Exchange Commission

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

rule change as described in Items I, II,

and III below, which Items have been

prepared by the Phlx. 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 amend certain

Exchange rules to: (1) adjust the time

that all customized FCOs cease trading

on expiration day from 9:00 a.m. and

2:30 p.m. until 8:00 a.m.; (2) adopt a

uniform expiration time for all

customized FCOs of 10:15 a.m. (instead

of 11:59 p.m.) (all time references are to

eastern standard time); and (3) make all

customized FCOs subject to pro-rata

assignment.

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

Phlx 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. Phlx 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 Exchange has different expiration

times and procedures and trading hours

for both regular and customized FCOs.

Regular non-customized FCOs cease

trading at 2:30 p.m., expire at 11:59 p.m.

on their expiration date, and are subject

to a random assignment process.

Customized FCOs which expire on any

trading day except a regular mid-month

or end-of-month expiration are referred

to as ‘‘custom dated FCOs.’’ Custom

dated FCOs currently cease trading at

9:00 a.m., expire at 10:15 a.m. on their

expiration date, and are subject to a prorata assignment process.

The third type of FCO (which is the

subject of this rule filing) is the

customized FCO which does not have a

custom date (i.e., the option expires on

a mid-month or end-of-month

expiration date).1 These option

contracts are treated the same as regular

expiring FCOs, i.e., they cease trading at

2:30 p.m., expire at 11:59 p.m., and are

subject to random assignment. The

Exchange proposes to change this

scheme to correspond with custom

dated FCOs. Accordingly, Phlx proposes

to alter the expiration times for

customized FCOs with mid-month or

end-of-month expirations so that they

cease trading at 8:00 a.m.,2 expire at

10:15 a.m. on their expiration date, and

are subject to pro-rata assignment. As a

result, all customized FCOs will have

the same expiration process regardless

of when they expire.

According to Phlx, customized FCOs

are mainly traded by institutional

customers who often by the options as

a hedge against over-the-counter

contracts. Because the over-the-counter

options typically expire at 10:00 a.m.,

these customers cannot effectively

hedge their risk with customized FCOs

unless they know their assignment

exposure at the same time. Thus,

custom dated options have been a very

useful trading vehicle for the

institutional market due to their 10:15

a.m. expiration (with pro-rata exercise

notification at 10:00 a.m.). Customized

FCOs with mid-month or end-of-month

expirations, however, have not been as

useful for offsetting purposes since

customers do not know their assignment

exposure until the following day. The

Exchange therefore believes that by

having all customized FCOs expire at

10:15 a.m., it will add liquidity to the

market and encourage institutions to

take advantage of all types of exchange

traded FCOs. Furthermore, the Phlx

believes that by revising the expiration

times on the mid-month and end-ofmonth expiration days, it will increase

the volume for customized FCOs and

thereby reduce the amount of

paperwork at expiration.

The Exchange proposes to implement

this change as of the August 1996 midmonth expiration. Currently, open

interest exists in customized FCO

contracts expiring on September 13,

1996 (mid-month expiration), December

13 1996 (mid-month expiration) and

March 27, 1997 (end-of-month

expiration). If this open interest still

exists at the time that this rule change

is approved, the Exchange will exempt

these expirations from the new

procedure (i.e., they will continue to

cease trading at 2:30 p.m., expire at

11:59 p.m., and be subject to random

assignment). This exemption will be

noted in Phlx Rule 1000(b)(21)(iv),

which defines the term Expiration Date

and will be publicized in numerous

memoranda to the membership.3