Exchange Act of 1934 ("Act"), 15 U.S.C. 78s(b)(1), notice is hereby given that on November 23, 1988, the Pacific Stock Exchange Incorporated ("PSE" or "Exchange") filed with the Securities and Exchange Commission the proposed rule change as described in Items I, II and III below, which Items have been prepared by PSE. 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 proposed rule change will amend PSE Rule VII so as to further illustrate the authority of the PSE Examinations Department to require compliance from those relevant PSE members who are within the scope of the PSE's power as the Designated Examining Authority. Specifically, the proposed rule change will give the PSE the authority to examine the financial responsibility and/or operational conditions of any member or member organization. The proposed rule gives the Exchange the authority to require a member or member organization to furnish requested information in the course of such examinations including, if the PSE deems it necessary, books and records as well as sworn or unsworn testimony. 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. 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. the members under its authority are complying with the various PSE and SEC financial rules and regulations. In order to more adequately fulfill this regulatory function, the Exchange proposes to amend PSE Rule VII so as to provide the Examinations Department with more specifically defined authority in order to inspect the books and records of the members over which it is responsible. The proposed rule amendments are consistent with Sections 6(b) and 6(c) of the Act, in general, and Section 6(b)(5) and 6(c)(3)(A) in particular, in that they will help to maintain those standards of compliance which act to help insure the protection of investors and the public interest. (B) Self-Regulatory Organization's Statement on Burden on Competition The proposed rule changes imposes no burden on competition. (C) Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received from Members, Participants or Others Comments on the proposed rule change were neither requested 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 selfregulatory organization consents, the Commission will: (A) by order approved such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change 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 persons, 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 PSE. All submissions should refer to File No. SR-PSE-88-26 and should be submitted by [insert date 21 days from date of publication]. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. Jonathan G. Katz Secretary SECURITIES EXCHANGE ACT OF 1934 Self-Regulatory Organizations; Clearing On October 14, 1988, the Clearing Corporation for Options and Securities (“CCOS”) filed with the Commission an application for temporary registration as a clearing agency under Section 17A of the Securities Exchange Act of 1934 ("Act") and Rule 17Ab2-1. On November 22, 1988, the Commission published in the Federal Register notice of the CCOS filing and invited interested persons to submit, on or before December 23, 1988, written data, views and arguments ("comments") concerning the application and the Commission's specific requests for comments on a variety of issues.1 One potential commentator requested an extension of the time period for submitting comments.2 CCOS responded to that request and generally opposed the requested extension.3 The Commission has determined to extend the time for submission of comments to January 31, 1989. Persons desiring to make written submissions should file six copies thereof with the Secretary of the Commission, 450 Fifth Street, N. W., Wash ington, D.C. 20549. Reference should be made to File No. 600-26. Copies of the application and of all written comments will be available for inspection at the Commission's Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. Jonathan G. Katz Secretary SECURITIES EXCHANGE ACT OF 1934 Pursuant to § 19(b)(1) of the Securities Exchange Act of 1934, 15 U.S.C. 78s(b)(1), notice is hereby given that on December 20, 1988, December 12, 1988, December 15, 1988, and November 28, 1988, respectively, the American Stock Exchange, Inc. (“Amex"), the Chicago Board Options Exchange, Inc. ("CBOE"), the Pacific Stock Exchange, Inc. (“PSE”), and the Philadelphia Stock Exchange, Inc. ("PHLX") filed with the Securities and Exchange Commission ("Commission") the proposed rule changes as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organizations ("SROs"). I. Self-Regulatory Organizations' Statement of the Terms of Substance of the Proposed Rule Change The SROs propose to extend the current margin requirements for short equity and index options positions through March 20, 1989. The SROs' current margin requirements were approved in Securities Exchange Act Release No. 25701 (May 17, 1988), 53 FR 20706, for a six-month period. 'See Securities Exchange Act Release No. 26286 (November 16, 1988), 53 FR 47597. 2 See letter from Burton R. Rissman, Schiff, Hardin & Waite to Jonathan G. Katz, Secretary, Commission, dated December 3, 1988. 3 See letter from Alan B. Cohen, Cleary, Gottlieb, Steen & Hamilton, to Jonathan Kallman, Assistant Director, Division of Market Regulation, dated December 20, 1988. II. Self-Regulatory Organizations' Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In their filings with the Commission, the SROS included statements concerning the purpose of and basis for the proposed rule changes. The text of these statements may be examined at the places specified in Item IV below. The SROs have prepared summaries, set forth in Sections (A), (B), and (C) below, of the most significant aspects of such statements. A. Self-Regulatory Organizations' Statements of the Purpose of, and Statutory Basis for, the Proposed Rule Changes On May 17, 1988, the Commission approved proposals by the SROS to amend their rules to increase the customer margin requirements for short positions in equity and index options. The proposals, which were approved for a six-month period, provided for margin requirements for broad-based index options of 100% of the options premium plus 15% of the underlying aggregate index value, less any out-of-the-money amount, with a minimum requirement of the option premium plus 10% of the underlying aggregate index value. The proposals provided for margin requirements for equity options and narrow-based index options of 100% of the options premium plus 20% of the underlying product value, less any out-ofthe-money amount, with a minimum requirement of the option premium plus 10% of the underlying product value. The SROs note that analysis of underlying instrument percentage price changes indicates that both equity and index options may be overmargined. The SROs propose to extend the current margin requirements until March 20, 1989, however, to permit implementation of a routine margin monitoring program expected to be instituted by the options SROS in the first quarter of 1989, and to gain more time to review the initial pilot experience. (B) Self-Regulatory Organizations' Statement on Burden on Competition The SROs do not believe that the proposed rule change will impose a burden on competition. (C) Self-Regulatory Organizations' Statement on Comments on the Proposed Rule Change Received from Members, Participants, or Others Comments were neither solicited nor received; however, the CBOE stated that discussions with staff of numerous member organizations reflected support for the continuation of current margin levels. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The SROs have requested accelerated effectiveness of the proposals pursuant to § 19(b)(2) of the Act to permit the uninterrupted effectiveness of the current margin levels. The Commission finds good cause for approving the proposed rule changes prior to the thirtieth day after the date of publication of the proposals in the Federal Register. The SROs' proposals extend current margin requirements that were noticed for the full thirtyday period and were approved by the Commission in Securities Exchange Act Release 25701 (May 17, 1988), 53 FR 20706. In light of the absence of any comments on the SROs' original proposal, the Commission believes that a good cause finding is warranted. In addition, the proposals merely extend the margin levels that have been in place for six months, and prevent the margins from reverting back to levels that may be inconsistent with the routine margin monitoring program that is being developed. The Commission finds that the proposed rule changes are 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 § 6(b)(5), 2 which provides, in pertinent part, that the rules of the exchanges must be designed to protect investors and the public interest. Extending the current margin requirements until a routine margin monitoring program is implemented should assure both firms and investors reasonable financial protection even if market volatility increases during this period. Moreover, the SROs have provided data to indicate that the current margin levels are adequate for prudential purposes. 'Securities Exchange Act Release No. 25701, 53 FR 20706. 215 U.S.C. § 78f(b)(5) (1982). Interested persons are invited to submit written IT IS THEREFORE ORDERED, pursuant to rule changes are approved for a period ending on For the Commission, by the Division of Market Jonathan G. Katz SECURITIES EXCHANGE ACT OF 1934 Self-Regulatory Organizations; American Stock Pursuant to Section 19(b)(1) of the Securities 315 U.S.C. § 78s(b)(2) (1982). 417 C.F.R. §200.30-3(a)(12) (1988). 'These changes are being made to the Amex's trading halt licit comments on the proposed rule change from I. Self-Regulatory Organization's Statement of [Brackets] indicate deletions; italics indicate ad- The effectiveness of this proposed rule change is Chicago Board of Trade, Chicago Mercantile Exchange, Kansas City Board of Trade and New York Futures Exchange. This rule change shall be effective for a one-year Rules of General Applicability Rule 950. (a) The following Floor Rules shall apply to Ex- Stock Index Options Trading Rotations, Halts and Suspensions proposal as approved in Securities Exchange Act Release (b) Trading on the Exchange in options on a stock index group shall be halted or suspended whenever trading has been halted or suspended in the primary market(s) for any combination of underlying stocks accounting for such minimum percentage of the current index group value as the Exchange may establish from time to time pursuant to this Rule, or whenever [the Exchange otherwise] two floor governors and a senior executive officer of the Exchange deem[s] such actions appropriate in the interest of a fair and orderly market or to protect investors. Among the factors that the Exchange may consider in exercising its discretion to halt or suspend trading in options on a stock index group are that: (1) the current calculation of the numerical index value derived from the current market prices of the underlying stocks in such stock index group is not available; (2) trading is one or more of the underlying stocks comprising such stock index group has been halted in the primary market(s) under circumstances which indicate that such stock or stocks will likely re-open at a price or prices significantly different than the price or prices at which such stock or stocks last traded prior to the trading halt; (3) trading has been halted or suspended in the primary market(s) for any combination of underlying stocks accounting for 20% or more of the current index group value; or (4) other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. Trading in any class or series of stock index options that has been the subject of a halt or suspension by the Exchange may be resumed upon a determination by the Exchange that (i) the conditions which led to the halt or suspension are no longer present; (ii) underlying securities constituting 50% or more of the stock index value are not subject to halt or suspension in the primary market for the trading of such underlying securities; and (iii) two floor governors in consultation with a senior executive officer of the Exchange conclude in their best judgment [and] that the interests of a fair and orderly market are [best] served by a resumption of trading. (c) No change. Commentary .01-.06 No change. .07 The Exchange shall halt trading in a class of broad-based stock index options no later than ten minutes after the Exchange has determined that [trading of futures on the same stock index (or on a stock index which the Exchange has determined to be closely related)] the primary Standard and Poor's 500 Index futures contract [Standard & Poor's 500] Index points [or 250 Dow has reached a price limit due to a decline of 30 Jones Industrial Average points] from the closing value of the previous trading day, if during such period the Exchange has determined that there is no indication that active trading above such point is about to commence. Trading may resume in such class of index options if active trading has resumed in the futures contract for two minutes, so long as the Exchange has determined that (a) underlying securities constituting [80%] 50% or more of the index value are not subject to halt or suspension in the primary market for the trading of such underlying securities[.]; and (b) two floor governors in consultation with a senior executive officer of the Exchange conclude in their best judgment that the interests of a fair and orderly market are served by a resumption in trading. (b) Not applicable. (c) Not applicable. The text of the proposed rule change is available at the Office of the Secretary, Amex 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 Amex 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 Amex 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 the Statutory Basis for, the Proposed Rule Change (1) Purpose In conjunction with the other major Exchanges, the Amex filed a proposal (SR-AMEX 88-24) to implement trading halts during significant market |