[Federal Register Volume 59, Number 65 (Tuesday, April 5, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-8082]


[[Page Unknown]]

[Federal Register: April 5, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33825; File No. SR-DGOC-93-03]

 

Self-Regulatory Organizations; Delta Government Options Corp.; 
Notice of Filing of Proposed Rule Change Relating to the Time for 
Exercises of Options and for the Assignments of Exercise Notices

March 25, 1994.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on December 27, 1993, Delta 
Government Options Corp. (``DGOC'') filed with the Securities and 
Exchange Commission (``Commission'') and on February 14, 1994, amended 
the proposed rule change as described in Items I, II, and III below, 
which Items have been prepared, in part, by DGOC. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change will modify: (1) The time for the 
exercises of options by DGOC participants maintaining long positions; 
(2) the procedure DGOC uses to assign exercise notices to participants 
maintaining short positions; and (3) the time by which exercise notices 
will be assigned.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, DGOC 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. DGOC 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 proposal will amend Section 1001 (Exercise Procedures) of 
DGOC's Procedures to change the time by which a participant must tender 
to DGOC's clearing bank an option exercise notice. The cutoff time will 
be changed from 5:00 p.m. to 4:00 p.m. or such earlier time as may be 
announced by the Public Securities Association as the recommended 
closing time for trading in the government securities markets on the 
business day the participant wishes to exercise an option contract.
    The proposal also will amend DGOC's Procedures Section 1002 
(Assignment of Exercise Notices) which describes the manner in which 
exercise notices are assigned to participants. Currently when less than 
all exercisable options in a class of options (i.e., all puts and calls 
covering the same issue of Treasury Securities) are exercised, exercise 
notices are assigned randomly to participants that maintain short 
positions in that class of options. Under the proposal, exercise 
notices will be assigned to each participant maintaining a short 
position in the same class of options on a pro rata basis. The pro rata 
allocation will be determined by a formula whereby the total number of 
exercise notices received for a class of options will be multiplied by 
the ratio of the number of exercisable options in that class subject to 
exercise that a participant maintains to all exercisable options in the 
class.
    Finally, the proposal will change the time by which exercise 
notices will be assigned under DGOC's Procedures Section 1002. 
Currently, exercise notices are assigned at or before 8 a.m. on the 
business day following acceptance of an exercise notice by DGOC's 
clearing bank. Under the proposal, assignments will take place at or 
before 5 p.m on the same business day that the clearing bank accepts an 
exercise notice.
    The proposal will permit participants with short positions to 
receive more timely notice of their assignments of exercises and will 
allow them to manage more precisely their financial exposure following 
assignments by permitting them to engage in other trading on that 
business day. The proposal also will provide a method whereby DGOC will 
allocate exercise notices in a fairer manner. The new cutoff time for 
submission of exercise notices, the pro rata assignment of exercise 
notices, and the earlier notice of assignments are consistent with the 
policies and practices of the over-the-counter market.
    DGOC states in its filing that upon publication of this notice DGOC 
will inquire of all its participants that maintain long positions with 
DGOC whether they perceive any special burden associated with the one 
hour reduction in the time available for exercise. DGOC states that if 
any participant should wish to maintain the 5 p.m. exercise notice 
tendering time on any outstanding option, DGOC will defer 
implementation of the proposed rule change until one day following the 
expiration of all such outstanding options subject to the 5 p.m. time. 
DGOC further states in the filing that once the formal inquiry of 
participants has been completed, participants should expect to receive 
notice from DGOC that all options issued by DGOC and expiring after a 
certain date will be subject to the changes made in this proposal. From 
its informal polling of participants, DGOC estimates that 
implementation of the 4 p.m. cutoff time shall occur during the first 
quarter of 1994.
    DGOC believes that the proposed rule change is consistent with the 
Act and particularly with section 17A of the Act in that it will 
facilitate the prompt and accurate clearance and settlement of 
securities transactions.\2\
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    \2\15 U.S.C. 78q-1 (1987)
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B. Self-Regulatory Organization's Statement on Burden on Competition

    DGOC does not believe that the proposed rule change will impose a 
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 received.

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 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 in the 
Commission's Public Reference Section, 450 Fifth Street, NW., 
Washington, DC 20549. Copies of such filing also will be available for 
inspection and copying at the principal office of DGOC. All submissions 
should refer to the file number SR-DGOC-93-3 and should be submitted by 
April 26, 1994.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\3\
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    \3\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-8082 Filed 4-4-94; 8:45 am]
BILLING CODE 8010-01-M