Federal Register / Vol. 61, No. 129 / Wednesday, July 3, 1996 / Notices 34911

1 15 U.S.C. 78s(b)(1) (1988).

2File No. SR–CBOE–95–44 approved in Exchange

Act Release No. 36135 (August 22, 1995), 60 FR

44921.

[FR Doc. 96–17033 Filed 7–2–96; 8:45 am]

BILLING CODE 3110–01–C

OFFICE OF PERSONNEL

MANAGEMENT

Federal Salary Council

AGENCY: Office of Personnel

Management.

ACTION: Notice of meeting.

SUMMARY: According to the provisions of

section 10 of the Federal Advisory

Committee Act (P.L. 92–463), notice is

hereby given that the forty-ninth

meeting of the Federal Salary Council

will be held at the time and place

shown below. At the meeting the

Council will continue discussing issues

relating to locality-based comparability

payments authorized by the Federal

Employees Pay Comparability Act of

1990 (FEPCA). The meeting is open to

the public.

DATES: July 25, 1996, at 10:00 a.m.

ADDRESSES: Office of Personnel

Management, 1900 E Street NW., Room

7B09, Washington, DC.

FOR FURTHER INFORMATION CONTACT:

Ruth O’Donnell, Chief, Salary Systems

Division, Office of Personnel

Management, 1900 E Street NW., Room

6H31, Washington, DC 20415–0001.

Telephone number: (202) 606–2838.

For the President’s Pay Agent:

Lorraine A. Green,

Deputy Director.

[FR Doc. 96–16943 Filed 7–2–96; 8:45 am]

BILLING CODE 6325–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–37364; File No. SR–CBOE–

96–36]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Board Options Exchange,

Inc. Relating to the Interruption of

RAES Due to Unusual Market Activity

June 25, 1996.

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

Securities Exchange Act of 1934

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

June 12, 1996, the Chicago Board

Options Exchange, Incorporated

(‘‘CBOE’’ 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 CBOE proposes to amend CBOE

Rule 6.6, Unusual Market Conditions, to

give the Order Book Official (‘‘OBO’’) or

the Post Director authority to turn off

the Exchange’s Retail Automatic

Execution System (‘‘RAES’’) for a class

or classes of options and for a short

period of time when, in the judgement

of that OBO or Post Director, there is

unusual market activity in such options

or their underlying 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, 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

The purpose of the proposed rule

change is to add a new paragraph (e) to

CBOE Rule 6.6 that will authorize

OBOs, and, in the case of options traded

at Designated Primary Market-Maker

(‘‘DPM’’) stations, Post Directors

temporarily to deactivate RAES in

specified classes of options traded at the

posts where such persons are stationed

when in their judgement such action is

warranted by an influx of orders or

other unusual market conditions in such

options or their underlying securities

and the OBO or Post Director

determines that such action is

appropriate in the interests of

maintaining a fair and orderly market.

Whenever such action is taken, notice

thereof shall immediately be given to

two Floor Officials who may continue

the deactivation of RAES for more than

five minutes or take such actions as they

deem necessary pursuant to their

authority under Rule 6.6.

This rule change is being proposed to

permit a more immediate response to

events, such as significant news

announcements, that can cause

temporary order imbalances and

otherwise disrupt the market for stocks

that underlie options traded on CBOE.

In these situations stock prices may

move sharply, and Exchange marketmakers may not have time to adjust

their options quotes in the numerous

series of options that overlie these

stocks. This may result in published

options quotes that do not reflect

current stock prices. Because orders sent

to RAES are executed automatically at

published quotations, customers may

receive executions at unrealistic prices,

some at a price more favorable than fair

market prices and some less favorable

than fair market prices.

Exchange Rule 6.6 currently

authorizes two Floor Officials to

respond to this situation by declaring

the market in particular classes of

options to be ‘‘fast,’’ and then turning

off RAES (and taking other action) until

there has been time for prices to be

adjusted. Because of the speed with

which computerized order routing

systems can direct orders to RAES, and

because RAES itself provides for

instantaneous automatic executions,

there can be a significant number of

executions at stale prices during the

several minutes that it might take for

two Floor Officials to declare a fast

market. By authorizing OBOs and Post

Directors to turn off RAES for up to five

minutes, the response time to such a

situation will be considerably

shortened, and the number of

executions at stale prices should be

reduced accordingly. In this respect, the

proposed rule change is not unlike the

recently approved rule change that

authorized Post Directors or OBOs to

suspend trading in specified classes of

options for up to five minutes when

there is a trading halt or suspension of

trading in the underlying security in the

primary market.2 There, as is proposed

here, authority is given to the OBO or

Post Director to deal quickly and on an

interim basis with a situation where

immediate response is called for,

pending further consideration of the

matter by two Floor Officials.

It is anticipated that in most instances

where RAES is deactivated by an OBO

or Post Director, the period of time

when RAES is unavailable should be

very brief, lasting less than five minutes.

Even then, orders will continue to be

delivered to the trading crowd via the

Exchange’s electronic order routing

system (‘‘ORS’’) and the trading crowd

will remain obligated to fill customer
34912 Federal Register / Vol. 61, No. 129 / Wednesday, July 3, 1996 / Notices

3The firm quote rule, which obligates the trading

crowd to fill public orders for up to 10 contracts

at published quotes, remains in effect unless

suspended by two Floor Officials acting under Rule

6.6(b) in the event of a fast market. The proposed

rule change would not authorize an OBO or DPM

to declare a fast market or suspend the firm quote

rule.

4 17 CFR 200.30–3(a) (12).

1 15 U.S.C. 78s(b)(1) (1988).

2Securities Exchange Act Release No. 36933

(March 6, 1996), 61 FR 10045.

3Historically, this component has represented

about ten percent of the total clearing fund

requirement.

4Prior to the implementation of GSCC’s netting

service for repos, GSCC’s rules required

computation of the average of a member’s absolute

funds amounts over the prior twenty business days.

Securities Exchange Act Release No. 36491

(November 17, 1995), 60 FR 61577 (order approving

proposed rule change).

5This change has been made to both paragraphs

(b) and (d) of Rule 4, Section 2 of GSCC’s rules.

Paragraph (b) applies to bank netting members,

Category 1 dealer netting members, Category 1

futures commission merchant netting members,

Category 2 inter-dealer broker netting members,

government securities issuer netting members,

insurance company netting members, and registered

investment company netting members. Paragraph

(d) applies to Category 2 dealer netting members

and Category 2 futures commission merchant

netting members.

orders in accordance with Exchange

rules, including the firm quote rule.3

Members will be notified of any

deactivation of RAES in particular

classes of options by an OBO or a Post

Director pursuant to proposed Rule

6.6(e) by means of a message that is

printed at each trading post on the floor

and is transmitted to terminals

throughout the floor over the Exchange’s

TextNet system.

The Exchange believes that the

proposed rule change is consistent with

and furthers the objectives of Section

6(b)(5) of the Act in that, by permitting

the Exchange to act expeditiously to

prevent automatic executions of options

transactions at stale prices in the event

of significant news announcements or

other potentially disruptive situations, it

is designed to promote just and

equitable principles of trade, to remove

impediments to and perfect the

mechanism of a free and open market

and a national market system, and to

protect investors and the public interest.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed change will impose any

burden on competition.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Written comments on the proposed

rule change were neither solicited nor

received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 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

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 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

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 File No. SR–CBOE–96–36 and

should be submitted by July 24, 1996.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.4

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–16921 Filed 7–2–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37368; File No. SR–GSCC–

96–01]

Self-Regulatory Organizations;

Government Securities Clearing

Corporation; Order Approving a

Proposed Rule Change Relating to the

Enhancement of Risk Management

Processes

June 25, 1996.

On January 5, 1996, the Government

Securities Clearing Corporation

(‘‘GSCC’’) filed with the Securities and

Exchange Commission (‘‘Commission’’)

the proposed rule change (File No. SR–

GSCC–96–01) pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’).1 Notice of the proposal

was published in the Federal Register

on March 13, 1995.2 No comment letters

were received. For the reasons

discussed below, the Commission is

granting approval of the proposed rule

change.

I. Description

As part of GSCC’s continuous process

of reviewing its risk management

mechanism, GSCC has made various

enhancements and revisions to that

mechanism. The design of the risk

management process for GSCC’s newly

implemented netting service for

repurchase agreements (‘‘repos’’) and

recommendations made by Commission

staff during their inspection of GSCC

last year provided the impetus for

certain of the enhancements and

revisions. Each of the changes to GSCC’s

risk management process is described in

detail below.

A. Change in the Clearing Fund

Formula

1. Funds Adjustment Component

There are three components to a

netting member’s clearing fund deposit

requirement: (1) the funds adjustment

component, (2) the receive/deliver

settlement component, and (3) the repo

volatility component. The sum of the

three components is a member’s total

clearing fund deposit requirement. The

first component of the clearing fund, the

funds adjustment component, addresses

the potential risk that a member might

not pay a funds-only settlement amount

due to GSCC.3

Prior to this amendment, the funds

adjustment component was 125% of the

average of a member’s ten largest fundsonly settlement amounts measured on

an absolute basis during the most recent

seventy-five business days.4 Under the

proposed rule change, the funds

adjustment component is now 100% of

the average of the member’s twenty

largest funds-only settlement amounts

during the most recent seventy-five

business days.5 However, GSCC retains

the right to reinstitute at its discretion