Federal Register / Vol. 61, No. 126 / Friday, June 28, 1996 / Notices 33789

4Amendment No. 1 effects a technical change to

the proposal by replacing the term ‘‘regulatory

circular’’ with the term ‘‘proposed rule change’’ in

three different places in the filing; the last sentence

of Item 1, the first line of Item 9, and the last

sentence of Section I of Exhibit 1. Letter from

Timothy Thompson, CBOE, to Michael Walinskas,

Special Counsel, Office of Market Supervision,

Division of Market Regulation, Commission, dated

March 21, 1996 (‘‘Amendment No. 1’’). 5 15 U.S.C. § 78f(b)(5) (1988).

6See Amendment No. 1, supra note 4.

7 15 U.S.C. § 78s(b)(2) (1988).

8 17 CFR 200.30–3(a)(12).

submitted Amendment No. 1 to its

proposal.4 This order approves the

proposal.

II. Description of the Proposal

The purpose of the proposed rule

change is to amend one of the four Rule

24.16 requirements SPX market makers

must meet to qualify for participation in

RAES. RAES is the Exchange’s

automatic execution system for small

(generally fewer than 10 contracts)

public customer market or marketable

limit orders. When RAES receives an

order, the system automatically will

attach to the order its execution price,

determined by the prevailing market

quote at the time of the order’s entry

into the system. A buy order will pay

the offer; a sell order will sell at the bid.

An eligible SPX market maker who is

signed onto the system at the time the

order is received will be designated to

trade with the public customer order at

the assigned price.

Rule 24.16(a)(iv), RAES Eligibility in

SPX, currently states that for a market

maker to qualify to participate in SPX

RAES that market maker must: (A) be

approved under Exchange rules as a

market maker with a letter of guarantee,

(B) maintain his principal business on

the CBOE as a market maker, (C) execute

at least seventy-five percent of his

market maker contracts for the

preceding month in SPX options (‘‘75%

SPX requirement’’), and (D) execute at

least seventy-five percent of his market

maker trades for the preceding month in

SPX options in person. These

requirements generally seek to ensure

that those market makers who are

satisfying the public customer orders at

the prevailing bid or offer are the same

market makers who have made a

commitment to make markets on a

regular basis at the SPX post.

According to the Exchange, however,

a number of market makers who

regularly make markets in SPX

nevertheless fail to execute seventy-five

percent of their market maker contracts

for the preceding month in SPX options.

In many cases, these market makers fail

to meet the 75% SPX requirement

because they execute a large percentage

of contracts in S&P 100 (‘‘OEX’’) options

on the floor of the Exchange to hedge

their SPX positions. Because SPX and

OEX options are legitimate hedge

vehicles for each other, the Exchange

does not believe a market maker who

makes markets regularly in SPX options,

but who employs these hedge strategies,

should be prevented from contributing

to the Exchange’s efforts to execute

small public customer RAES orders.

Consequently, the Exchange proposes

that the 75% SPX requirement be

reduced to a 50% requirement.

III. Discussion

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),5 in that

it is designed to promote just and

equitable principles of trade, prevent

fraudulent and manipulative acts and

practices, and maintain fair and orderly

markets.

In its filing, the Exchange states that

the proposed change should increase

the number of market makers available

to execute public customer RAES

orders, while ensuring that the orders

are filled by market makers who are best

equipped to handle these orders. Hence,

the 50% requirement would ensure that

a market maker assigned a RAES trade

would have transacted at least as many

market maker contracts in SPX options

as that market maker had transacted in

all other products on the CBOE floor

combined. Moreover, the Exchange

notes that the requirement of its Rule

24.16(b) that any market maker who has

logged onto RAES at any time during an

expiration month must continue to do

so each time he is present in the trading

crowd until the next expiration will

continue to apply. The Exchange

believes that this should ensure that a

larger number of market makers

generally will be available to participate

on RAES on any particular day.

The Commission believes that the

presence of an adequate number of

market makers protects investors and

contributes to the maintenance of a fair

and orderly market. The Commission

believes that the proposal furthers this

goal by helping the Exchange to

maintain the continued availability of

RAES for SPX options, thereby

contributing to the effective and

efficient execution of public investor

orders at the best available prices. The

Commission agrees with the CBOE that

lowering the 75% SPX requirement to

one of 50% will ensure that the affected

market makers will continue to be those

best equipped to handle RAES orders in

SPX options given that at least half of

their CBOE transactions will continue to

be in SPX options.

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 thereof in the

Federal Register. Amendment No. 1

merely serves to effect technical changes

to the Exchange’s proposal and does not

materially affect the proposal.6

Accordingly, the Commission believes

there is good cause, consistent with

Sections 6(b)(5) and 19(b)(2) of the Act,

to approve Amendment No. 1 to the

proposal on an accelerated basis.

IV. Solicitation of Comments

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, 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

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 CBOE. All submissions

should refer to File No. SR–CBOE–96–

19 and should be submitted by July 19,

1996.

V. Conclusion

For the reasons discussed above, the

Commission finds that the proposal is

consistent with the Act, and, in

particular, Section 6 of the Act.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,7 that the

proposed rule change (File No. SR–

CBOE–96–19) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–16521 Filed 6–27–96; 8:45 am]

BILLING CODE 8010–01–M
33790 Federal Register / Vol. 61, No. 126 / Friday, June 28, 1996 / Notices

1 17 CFR 240.19b–4.

2An American-style option, pursuant to Phlx

Rule 1000(b)(34), means an option contract that

may be exercised at any time from the opening of

the position until its expiration.

3The Exchange notes that certain wrap-around

symbols are utilized respecting the Index, such that

XOC and XOV will not be the only symbols in use.

A wrap-around situation occurs when the strike

price codes A–T indicating the strike price of an

option (from 5 to 100) have been used and

additional strike prices require listing the option

with a different root symbol. For example, XOX and

XOW are currently used for wrap-around situations

respecting the Index.

4See Securities Exchange Act Release No. 22044

(May 17, 1985), 50 FR 21532 (May 24, 1985) (File

Nos. SR–Phlx–84–28 and SR–Phlx–85–110. 5 15 U.S.C. 78f(b)(5).

[Release No. 34–37355; File No. SR–Phlx–

96–18]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

to Trade a European-style National

Over-the-Counter Index Option

June 24, 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 28, 1996, the

Philadelphia Stock Exchange, Inc.

(‘‘Phlx’’ 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 Phlx, pursuant to Rule 19b–4

under the Act,1 proposes to change the

exercise style of the National Over-theCounter Index (‘‘Index’’) option,

currently trading with the symbol XOC,

from American-style 2 to European-style.

A European-style option, pursuant to

Phlx Rule 1000(b)(35), means an option

contract that can be exercised only on

the day it expires. The new Europeanstyle option will trade with the current

symbol XOC. The Exchange also will

convert the existing American-style

XOC options to the symbol XOV.3

American-style options will continue to

trade until expiration or until no open

interest remains, at which time the

series will be delisted. No new

American-style series will be opened

after the European-style index option

begins trading.

In order to effectuate this change, an

amendment to Floor Procedure Advice

G–1, Exercise Requirements, is required.

Advice G–1 governs the exercise of

index options, requiring that a

memorandum to exercise any Americanstyle index option must be received or

prepared by the Phlx member

organization no later than 4:30 p.m.

Because the Index is presently an

American-style index option, this

Advice must be amended to delete

reference to the Index. The

corresponding Exchange rule, Rule

1042(a), will also apply, but does not

require an amendment.

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

self-regulatory organization 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 self-regulatory organization 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 Phlx began trading the Index in

1985.4 The Index is a capitalizationweighted market (broad-based) index

composed of the 100 largest capitalized

stocks trading over-the-counter. The

Index has traded on the Phlx for over

ten years, generally garnering steady

volume and open interest. At this time,

the Exchange seeks to improve upon the

success of the Index by changing one

contract specification, relating to the

ability to exercise the Index option.

The purpose of this proposal is to

allow the Exchange to offer a Europeanstyle option based on the Index. The

Exchange has received requests to

change the expiration style, indicating

that many investors prefer to trade

index options that cannot be exercised

except on the day they expire.

European-style index options have

certain advantages, including the

elimination of the risk of early exercise.

For instance, investors holding spread

positions would not have to be

concerned that one leg of a short

position can be exercised prior to

expiration. In general, sellers will

benefit from the European exercise

feature, because absent concern about

early exercise, they can engage in longrange planning and strategies.

However, the Exchange has proposed

to continue trading the American-style

option until the listed series expire or

no longer have open interest. Thus, the

contract terms of existing Americanstyle XOC options will not suddenly be

changed, keeping intact their ability to

exercise early. The Exchange also

proposes to provide adequate notice of

the new European-style option by way

of memoranda to the Exchange

membership. Except during the winddown period explained above, the

Exchange does not intend to continue

trading American-style options side-byside with European-style options on the

Index. In order to prevent a proliferation

of strike prices respecting a similar

product, it has determined instead to

trade only the European-style option.

In order to preserve the investment

community’s familiarity with the

symbol XOC, the Exchange proposes to

retain the use of this symbol for the new

European-style options on the Index and

convert the existing American-style

options on the Index from the symbol

XOC to XOV. The Exchange intends to

effectuate this conversion as soon as is

practicable in order to allow a period of

time for Index traders and investors to

become accustomed to the new symbol.

Upon approval of the proposed rule

change, the Exchange will list

European-style options on the Index

utilizing the symbol XOC.

2. Statutory Basis

The proposed rule change is

consistent with Section 6 of the Act,5

and, in particular, with Section 6(b)(5)

of the Act, in that it is designed to

promote just and equitable principals of

trade and facilitate transactions in

securities, while protecting investors

and the public interest, by providing a

European-style index option on the

Index, which will permit exercise only

on the day it expires. Specifically, the

Exchange believes that the benefits of

the European-style exercise feature

combined with the interest in the Index

during the past ten years of trading on

the Exchange should foster a deep and

liquid market for the Index option, thus

facilitating transactions. At the same

time, the Exchange believes that Index

investors should not be disadvantaged

by the proposal, because the Exchange

will provide adequate notice and an

orderly procedure, as American-style

options are phased out and the new

European-style options are introduced.
Federal Register / Vol. 61, No. 126 / Friday, June 28, 1996 / Notices 33791

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Phlx does not believe that 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

No written comments were either

solicited or received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the publication of

this notice in the Federal Register or

within such longer period (i) as the

Commission may designate up to 90

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 the self-regulatory organization

consents, the Commission will:

(A) by order approve the 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, 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, 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–Phlx–96–18

and should be submitted by July 19,

1996.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland

Deputy Secretary.

[FR Doc. 96–16575 Filed 6–27–96; 8:45 am]

BILLING CODE 8010–01–M

SOCIAL SECURITY ADMINISTRATION

Privacy Act of 1974; Report of Revised

Routine Use

AGENCY: Social Security Administration

(SSA).

ACTION: Revised Routine Use.

SUMMARY: In accordance with the

Privacy Act (5 U.S.C. 552a(e)(4) and

(11)), we are issuing public notice of our

intent to revise a routine use applicable

to the Master Files of Social Security

Number (SSN) Holders and SSN

Applications, SSA/OSR, 09–60–0058.

The title of this system previously

referred to ‘‘HHS’’ (an acronym for

Department of Health and Human

Services). We have deleted this

reference as SSA is now independent of

the HHS. (For convenience, we will

refer to this system of records as the

Enumeration System.) The proposed

revision will allow SSA to disclose

SSNs to Federal, State and local entities

for use in income-maintenance and

health-maintenance programs, such as

general assistance, food stamps and

Medicaid, where such use is authorized

by Federal statute.

We invite public comment on this

publication.

DATE: We filed a report of an altered

system of records—revised routine use

with the Chairman, Committee on

Government Reform and Oversight of

the House of Representatives; the

Chairman, Committee on Governmental

Affairs of the Senate; and the

Administrator, Office of Information

and Regulatory Affairs, Office of

Management and Budget on June 18,

1996. The routine use will become

effective as proposed, without further

notice August 7, 1996, unless we receive

comments on or before that date that

result in a contrary determination.

ADDRESSES: Interested individuals may

comment on this publication by writing

to the SSA Privacy Officer, Social

Security Administration, Room 3–A–6

Operations Building, 6401 Security

Boulevard, Baltimore, Maryland 21235.

Comments may be faxed to (410) 966–

0869. All comments received will be

available for public inspection at that

address.

FOR FURTHER INFORMATION CONTACT: Mr.

Ron Martorana, Social Insurance

Specialist, Office of Disclosure Policy,

Social Security Administration, 3–D–1

Operations Building, 6401 Security

Boulevard, Baltimore, Maryland 21235,

telephone 410–965–1745.

SUPPLEMENTARY INFORMATION:

A. Discussion of Proposed Routine Use

In the mid 70’s, SSA published a

routine use in the Federal Register

allowing the Agency to disclose SSNs to

State welfare offices for use in

determining individuals’ eligibility for

benefits under the Aid to Families with

Dependent Children (AFDC) program.

At that time, section 402(a)(25) of the

Social Security Act (the Act) required

individuals applying for AFDC to

provide their SSN to State welfare

agencies; the SSN, thus, was a condition

of eligibility.

Section 402(a)(25) of the Act has since

been amended to provide that AFDC

applicants furnish this information as

required by section 1137 of the Act.

Under section 1137, individuals

applying to States for, not only AFDC,

but also Medicaid, unemployment

compensation under section 3304 of the

Internal Revenue Code of 1986, the food

stamp program under the Food Stamp

Act of 1977 and any State program

under a plan approved under title I, X,

XIV, or XVI of the Act, must furnish

their SSN as a condition of eligibility. In

addition, section 205(c)(2)(C) of the Act

provides that State agencies may require

applicants for general assistance

programs to furnish their SSN for

identification purposes. We therefore

are proposing to revise the current

routine use allowing disclosure of SSNs

to States for AFDC purposes, to include

disclosure of SSNs to Federal, State and

local entities for use in administering

other income-maintenance and healthmaintenance programs, such as those

listed above, where such use of the SSN

is authorized by Federal law. (SSA

already validates SSNs for these

agencies.) Routine use number two in

the Enumeration System is revised to

read:

SSA will disclose SSNs to Federal,

State and local entities for the purpose

of administering income-maintenance

and health-maintenance programs,

where such use of the SSN is authorized

by Federal statute.

This revision will allow SSA to

disclose SSNs on a consistent basis for

all Federal, State and locally

administered income-maintenance and

health-maintenance programs when a

Federal law authorizes the use of the

SSN in such programs.

A notice of the Enumeration System,

to which the routine use will apply, was

last published in the Federal Register at

60 FR 52948, October 11, 1995.