Federal Register / Vol. 61, No. 131 / Monday, July 8, 1996 / Notices 35821

1 Violations of Rule 8.51 are deemed to be

violations of Rule 6.20(b) pursuant to paragraph

(vii) of Interpretation and Policy .04 under Rule

6.20. Rule 6.20(b) requires that fines imposed

thereunder must be agreed upon by at least two

Floor Officials.

6. The expenses borne by applicant

pursuant to the reorganization totalled

$46,775. These expenses included the

cost of printing and mailing proxies and

proxy statements, a portion of the cost

of the tax opinion, with the remainder

paid by OGEGF, as well as legal,

accounting, and transfer agency

expenses. Applicant’s share of the

expenses was paid from its cash reserve.

7. As of the date of the filing of the

application, applicant has no assets, and

no outstanding debts or liabilities.

Applicant has no shareholders and is

not a party to any litigation or

administrative proceeding. Applicant is

not presently engaged in, nor does it

propose to engage in, any business

activities other than those necessary for

the winding-up of its affairs.

8. Applicant filed a termination of

trust with Massachusetts authorities on

June 26, 1995.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 96–17252 Filed 7–5–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37388; File No. SR–CBOE–

96–31]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Chicago Board Options Exchange,

Incorporated Relating to Operation and

Enforcement of the Firm Quote Rule in

the OEX Trading Crowd

June 28, 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 15, 1996, the

Chicago Board Options Exchange,

Incorporated (‘‘CBOE’’ 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 CBOE. 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 CBOE proposes to issue two

regulatory circulars pertaining to the

administration and enforcement of the

firm quote rule in the trading crowd

where options on the Standard and

Poor’s 100 Index (‘‘OEX options’’) are

traded. The text of the regulatory

circulars and the proposed rule change

are available at the Office of the

Secretary, CBOE and at the Commission.

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

CBOE 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 CBOE 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 purpose of the proposed rule

change is, first, to consolidate and

clarify in a single regulatory circular

(referred to as ‘‘Regulatory Circular 96–

xx’’) the Exchange’s policies concerning

the administration and enforcement of

the firm quote rule (CBOE Rule 8.51) in

the OEX trading crowd, and, second, to

set forth in a separate regulatory circular

(referred to as ‘‘Regulatory Circular 96–

yy’’) the specific fines that may be

imposed under the Exchange’s summary

fine procedure for violations of the

requirements of the firm quote program

in the OEX crowd, as contemplated in

CBOE Rule 17.50(g)(6).

Proposed Regulatory Circular 96–xx

consolidates without substantial change

various requirements applicable to

market makers and floor brokers in the

OEX trading crowd under CBOE Rule

8.51 (the firm quote rule). These

requirements have previously been set

forth in a number of different regulatory

circulars, two of which (RG 90–09 and

RG 96–25) are currently effective. The

proposed regulatory circular would take

the place of both of these circulars in

order to provide in one place a clear and

comprehensive statement of how firm

quote requirements apply in the OEX

crowd.

In addition to restating what is set

forth in existing circulars, the proposed

circular would amend those circulars to

clarify certain aspects of the obligations

of market makers and floor brokers

under the firm quote rule, and how

those obligations are enforced.

Specifically, with respect to market

makers, proposed Regulatory Circular

96–xx sets forth a mechanism for the

enforcement of Rule 8.51 in the OEX

trading crowd by providing that if the

OEX trading crowd fails to honor a

posted quotation in accordance with the

firm quote rule, two Floor Officials may

designate one or more market makers in

the crowd to take the contra side of the

order that is entitled to execution. The

proposed circular makes it clear that

any failure to comply with the Floor

Officials’ designation is a violation of

Rule 8.51, which may subject the

violator to summary fine under Rule

17.50 as well as to formal disciplinary

proceedings.1 The circular points out

that the fine permitted to be imposed by

Floor Officials for such violations can be

as high as $5,000, which is the

maximum fine authorized under the

summary fine rule. It is the Exchange’s

expectation that the in terrorem effect of

a substantial fine will cause market

makers to comply with Floor Officials’

designations, and the fines themselves

will rarely if ever have to be imposed.

Proposed Regulatory Circular 96–xx

also clarifies the meaning of the due

diligence obligation imposed on floor

brokers under Rule 6.73(a), as that

obligation applies in the OEX trading

crowd in light of the operation of the

firm quote rule. The circular describes

two alternative ways in which public

customer orders eligible for execution

under the firm quote rule may be

represented: The floor broker may either

ask for a market and then immediately

fill the order for up to the ten contract

limit entitled to execution under the

firm quote rule at the better of the

posted market or the market given in

response to his request, or the floor

broker may bid or offer on behalf of his

customer at a price between the posted

bid and offer in an attempt to obtain an

execution at a better price than the

posted market. Under the second

alternative, the floor broker must then

immediately fill the public customer

order for up to ten contracts at his

announced bid or offer if the crowd is

willing to trade at that price, or if not,

he must immediately fill the order at the

originally posted market.

In all other respects, proposed

Regulatory Circular 96–xx is

substantially the same as the existing

circulars that it will replace.

Proposed Regulatory Circular 96–yy is

being issued pursuant to CBOE’s

summary fine rule (Rule 17.50), which

authorizes the summary imposition of

fines for certain specified ‘‘minor rule

violations’’ in lieu of formal disciplinary

proceedings. Paragraph (g)(6) of Rule

17.50 covers the imposition of summary
35822 Federal Register / Vol. 61, No. 131 / Monday, July 8, 1996 / Notices

2See supra note 1. 3 17 CFR 200.30–3(a)(12).

1On June 14, 1996, the NASD filed Amendment

No. 1 with the Commission. Amendment No. 1

addresses the relationship of the proposed rule

change to industry initiatives concerning

compensation practices, expands the scope of the

proposed rule change to govern all sales targets,

whether or not previously specified and replaces

the term ‘‘variable contract securities’’ with the

term ‘‘variable contract.’’ See Letter from John M.

Ramsay, Deputy General Counsel, NASD to

Katherine A. England, Assistant Director, Division

of Market Regulation, SEC (June 14, 1996).

2NASD Manual, Rules of the Association,

Conduct Rules (CCH), Rules 2820, 2830.

fines for violation of trading conduct

and decorum policies established under

CBOE Rule 6.20, and states that the

specific dollar amount that may be

imposed as fines thereunder will be

distributed to the membership

periodically. The Exchange has

previously issued Regulatory Circular

95–37, which sets forth fines for most of

the trading conduct and decorum

policies established under Rule 6.20,

but does not include fines for violation

of the firm quote requirements of Rule

8.51, which are deemed to be violations

of Rule 6.20(b).2 Proposed Regulatory

Circular 96–yy cures this omission for

violations of the firm quote rule in the

OEX crowd by setting forth the specific

dollar amounts that may be imposed as

summary fines for such violations. As

noted above, the fines that may be

imposed for refusal to take the other

side of an OEX trade entitled to

execution under the firm quote rule

when directed to do so by Floor

Officials range from $1,000 to $5,000,

which places them at the high end of

the scale under Rule 17.50. This is

intended to remove any economic

incentive for a market maker to refuse

to obey the directions of Floor Officials

to comply with firm quote requirements.

The Exchange believes that by

clarifying the obligations of market

makers and floor brokers in the OEX

crowd under the firm quote rule and by

specifying the fines that may be

imposed for failure to honor these

obligations, the proposed regulatory

circulars will serve to promote just and

equitable principles of trade and to

protect investors and the public interest,

in furtherance of the objectives of

section 6(b)(5) of the Act.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange 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 solicited

or received with respect to the proposed

rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Because the foregoing rule change

constitutes a stated policy with respect

to the meaning, administration, or

enforcement of an existing rule, it has

become effective pursuant to Section

19(b)(3)(A) of the Act and Rule 19b–4

thereunder. At any time within 60 days

of the filing of the proposed rule change,

the Commission may summarily

abrogate such rule if it appears to the

Commission that such action is

necessary or appropriate in 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, 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 the File No. SR–CBOE–

96–31 and should be submitted by July

29, 1996.

For Commission, by the Division of Market

Regulation, pursuant to delegated authority.3

Jonathan G. Katz,

Secretary.

[FR Doc. 96–17251 Filed 7–5–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37374; File No. SR-NASD–

95–61]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

National Association of Securities

Dealers, Inc. Relating to the Regulation

of Cash and Non-Cash Compensation

in Connection With the Sale of

Investment Company Securities and

Variable Contracts

June 26, 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 December 22,

1995,1 the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’) filed with the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’) the proposed rule

change as described in Items I, II, and

III below, which Items have been

prepared by the NASD. 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 NASD proposes to amend NASD

Rules 2820 and 2830 (formerly Article

III, Sections 29 and 26 of the Rules of

Fair Practice) to revise existing rules

applicable to the sale of investment

company securities and establish new

rules applicable to the sale of variable

contracts.2 Below is the text of the

proposed rule change. Proposed new

language is italicized; proposed

deletions are in brackets.

Rules of the Association

Conduct Rules

* * * * *

Variable Contracts of an Insurance

Company

Rule 2820.

* * * * *

Definitions

(b)

* * *

(3) The terms ‘‘affiliated member’’,

‘‘cash compensation’’, ‘‘non-cash

compensation’’ and ‘‘offeror’’ as used in

paragraph (h) shall have the following

meanings:

‘‘Affiliated Member’’ shall mean a

member which, directly or indirectly,

controls, is controlled by, or is under

common control with a non-member

company.

‘‘Cash compensation’’ shall mean any

discount, concession, fee, service fee,

commission, loan or override received

in connection with the sale and

distribution of variable contracts. ‘‘Noncash compensation’’ shall mean any

form of compensation received in