Federal Register / Vol. 69, No. 27 / Tuesday, February 10, 2004 / Notices 6353

4See PCX Constitution Section 2(a).

5 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. 15 U.S.C. 78c(f).

6 15 U.S.C. 78f(b)(3).

7 15 U.S.C. 78f(b)(5).

8 15 U.S.C. 78s(b)(2).

9 17 CFR 200.30–3(a)(12).

Composition of the MTS Committee 

CBOE is amending Rule 8.82 to 

modify the composition of the MTS 

Committee. Under the proposed rule 

change, the nine elected members of the 

MTS Committee will include: three 

persons whose primary business is as a 

Market-Maker, three persons whose 

primary business is as a Market-Maker 

or as a Designated Primary Market 

Maker (‘‘DPM’’) Designee, and three 

persons whose primary business is as a 

Floor Broker, at least two of whom 

represent public customer business in 

the course of their activities as a Floor 

Broker. The proposal removes a 

provision requiring that no more than 

two members of the MTS Committee be 

associated with a DPM. The Vice 

Chairman of the Exchange and the 

Chairman of the Market Performance 

Committee will continue to serve on the 

MTS Committee. 

The amendments to CBOE Rule 8.82 

also provide that one of the nine elected 

positions on the MTS Committee may 

instead be filled by a lessor whose 

primary business is not as a MarketMaker, DPM Designee, or Floor Broker, 

and whose primary residence is located 

within 80 miles of the Exchange’s 

trading floor. In addition, the 

amendments to Rule 8.82 provide that 

the sole judge of whether a candidate 

satisfies the applicable qualifications for 

election to the MTS Committee in a 

designated category shall be the 

Nominating Committee, in the case of 

candidates nominated by the 

Nominating Committee, or the 

Executive Committee, in the case of 

candidates nominated by petition, and 

the decision of the respective committee 

shall be final. The proposal further 

amends CBOE Rule 8.82 to provide that: 

(i) no elected member of the MTS 

Committee may be affiliated with any 

other elected member of the MTS 

Committee; (ii) the term of office of 

elected MTS Committee members will 

commence at the time of the first regular 

Board meeting of the calendar year; (iii) 

the Board of Directors is the sole judge 

of whether or not an MTS Committee 

member no longer qualifies to serve on 

the Committee; (iv) the Board may 

remove MTS Committee members for 

cause; and (v) the Vice Chairman, with 

the approval of the Board, may fill 

vacancies on the MTS Committee until 

the first regular Board meeting of the 

calendar year following the next annual 

election. The MTS Committee monitors 

and implements the Exchange’s DPM 

program. 

Terms of Office for Committee Members 

The proposed rule change also 

amends CBOE Rule 2.1 to provide that 

the term of office for committee 

members appointed pursuant to that 

Rule will continue until the first regular 

Board meeting of the next calendar year 

and until their successors are appointed 

or until death, resignation or removal. In 

addition, amended Rule 2.1 provides 

that any action taken by majority of the 

committee members voting, as opposed 

to present, at a meeting shall be the act 

of the committee. 

Other Business Activities of the 

President of the Exchange 

The Exchange also is amending CBOE 

Constitution Section 8.6 to allow the 

Board of Directors to exempt the 

President from the prohibition against 

engaging in any business other than as 

President of the Exchange, in the same 

manner that the Board may exempt the 

Chairman of the Board pursuant to 

Constitution Section 8.2. The 

Commission notes that the Pacific 

Exchange, Inc. (‘‘PCX’’) has a similar 

provision in its Constitution.4 In 

addition, the Commission notes that 

under CBOE Rule 8.1(d), the President 

cannot be affiliated with a CBOE 

member.

In addition to the changes described 

above, the Exchange is adopting changes 

to several provisions of its Constitution 

and rules that are intended to update 

those provisions to reflect current 

practice. Those changes are described in 

the Notice of Proposed Rule Change. 

III. Discussion 

After careful review, the Commission 

finds that the proposed rule change, as 

amended, is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.5 In 

particular, the Commission finds that 

the proposal is consistent with the 

requirements of Sections 6(b)(3) 6 and 

6(b)(5) 7 of the Act. Section 6(b)(3) 

requires, among other things, that the 

CBOE’s rules assure a fair representation 

of its members in the administration of 

its affairs. Section 6(b)(5) requires, 

among other things, that CBOE’s rules 

be designed to promote just and 

equitable principles of trade, to prevent 

fraudulent and manipulative acts and 

practices, and, in general, protect 

investors and the public interest.

The Commission believes that the 

proposed rule change should clarify 

CBOE’s Constitution with respect to the 

terms of office of its Directors and 

committee members, as well as the 

composition of its Nominating 

Committee and thereby should increase 

the efficiency of CBOE’s governance. In 

addition, the Commission believes that 

the amendments to the composition of 

CBOE’s MTS Committee are consistent 

with its obligation to ensure its 

members are fairly represented in the 

administration of its affairs, and should 

permit CBOE to include representatives 

of diversified broker-dealers on the 

Committee without permitting the 

Committee to become dominated by any 

one type of member constituency. 

Further, the Commission believes that 

the proposed rule change should update 

CBOE’s election and voting procedures, 

as well as the methods by which CBOE 

may provide notice to its members. 

IV. Conclusion 

For the foregoing reasons, the 

Commission finds that the proposed 

rule change, as amended, is consistent 

with the requirements of the Act and 

rules and regulations thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,8 that the 

proposed rule change, as amended, (SRCBOE–2003–55) is approved.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.9

Margaret H. McFarland, 

Deputy Secretary.

[FR Doc. 04–2824 Filed 2–9–04; 8:45 am] 

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–49188; File No. SR–CHX–

2003–17] 

Self-Regulatory Organizations; Order 

Approving Proposed Rule Change and 

Amendment No. 1 Thereto by the 

Chicago Stock Exchange, Incorporated 

Relating to Automatic Quotations 

February 4, 2004. 

On June 16, 2003, the Chicago Stock 

Exchange, Incorporated (‘‘CHX’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

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

6354 Federal Register / Vol. 69, No. 27 / Tuesday, February 10, 2004 / Notices 

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

2 17 CFR 240.19b–4.

3See letter from Kathleen M. Boege, Associate 

General Counsel, CHX, to Nancy J. Sanow, Assistant 

Director, Division of Market Regulation, 

Commission, dated November 25, 2003 

(‘‘Amendment No. 1’’). In Amendment No. 1, the 

Exchange expanded its discussion regarding the 

consequences of the proposed rule change, and also 

clarified that the proposed rule change was filed 

pursuant to Section 19(b)(2) of the Act. 15 U.S.C. 

78s(b)(2).

4See Securities Exchange Act Release No. 48982 

(December 23, 2003), 68 FR 75674.

5 In approving this proposed rule change, the 

Commission notes that it has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. 15 U.S.C. 78c(f).

6 15 U.S.C. 78f(b)(5).

7 15 U.S.C. 78s(b)(2).

8 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See letter from Mary Yeager, Assistant Secretary, 

NYSE, to Nancy J. Sanow, Assistant Director, 

Division of Market Regulation (‘‘Division’’), 

Commission, dated March 10, 2003 (‘‘Amendment 

No. 1’’).

4See letter from Darla C. Stuckey, Corporate 

Secretary, NYSE to Nancy J. Sanow, Assistant 

Director, Division, Commission, dated May 20, 2003 

(‘‘Amendment No. 2’’).

5See Securities Exchange Act Release No. 47961 

(June 2, 2003), 68 FR 34453.

6See letter from Mary Yeager, Assistant Secretary, 

NYSE, to Nancy J. Sanow, Assistant Director, 

Division, Commission, dated June 10, 2003 

(‘‘Amendment No. 3’’). In Amendment No. 3, the 

Exchange added the phrase ‘‘or rejected’’ to a 

sentence within NYSE Rule 91.10 to clarify that 

transactions that are not rejected are deemed to be 

accepted for the purposes of NYSE Rule 91.10. This 

sentence now reads that ‘‘[t]ransactions which are 

not then confirmed or rejected in accordance with 

the procedures above are deemed to have been 

accepted.’’ This is a technical amendment and is 

not subject to notice and comment.

7See letter from Darla C. Stuckey, Corporate 

Secretary, NYSE, to Nancy J. Sanow, Assistant 

Director, Division, Commission, dated January 29, 

2004 (‘‘Amendment No. 4’’). In Amendment No. 4, 

the Exchange provided the Commission with 

examples of different scenarios for confirming 

principal transactions under NYSE Rule 91.10. This 

is a technical amendment and is not subject to 

notice and comment.

8See In the Matter of New York Stock Exchange, 

Inc., 70 S.E.C. Docket 106, Securities Exchange Act 

Release No. 41574 (June 29, 1999), Administrative 

Proceeding File No. 3–9925.

of 1934 (‘‘Act’’),1 and Rule 19b–4 

thereunder,2 a proposed rule change 

that would delete an interpretation of 

CHX Article XX, Rule 7 that prohibits 

specialists from disseminating 

automatically-generated quotations that 

are more than $.10 away from the 

Intermarket Trading System best bid or 

offer. On November 26, 2003, CHX filed 

Amendment No. 1 to the proposed rule 

change.3 The Federal Register

published the proposed rule change, as 

amended, for comment on December 31, 

2003.4 The Commission received no 

comments on the proposal.

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.5 In particular, the 

Commission believes that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,6 which requires, 

among other things, that an exchange’s 

rules be designed to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. The CHX has 

represented that, following the 

securities industry’s transition to 

decimal pricing, the consolidated 

quotations in the national securities 

markets flicker significantly throughout 

the trading day. Consequently, the 

quotations generated by CHX’s autoquote functionality flicker significantly 

during the trading day, resulting in 

significant, costly quotation traffic. 

Given that the Consolidated Quotation 

Association is now charging 

participants based on their capacity 

requirements, CHX wants to eliminate 

any unnecessary use of capacity. The 

Commission notes that, since automatic 

executions are required to be executed 

at the national best bid or offer in effect 

at the time the order is received or 

better, the proposed change should not 

have any negative effect on execution 

prices.

It is therefore ordered, pursuant to 

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

proposed rule change, as amended, (SR–

CHX–2003–17) be, and it hereby is, 

approved.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.8

Margaret H. McFarland, 

Deputy Secretary.

[FR Doc. 04–2807 Filed 2–9–04; 8:45 am] 

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–49183; File No. SR–NYSE–

2002–32] 

Self-Regulatory Organizations; New 

York Stock Exchange, Inc.; Order 

Approving Proposed Rule Change and 

Amendment Nos. 1, 2, 3, and 4 To 

Incorporate Interpretive Material to 

Several NYSE Rules 

February 4, 2004. 

I. Introduction 

On August 12, 2002, the New York 

Stock Exchange (‘‘NYSE’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to section 

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

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

incorporate interpretive material to 

several existing NYSE Rules. On March 

11, 2003, the Exchange filed 

Amendment No. 1 to the proposed rule 

change.3 On May 21, 2003, the 

Exchange filed Amendment No. 2 to the 

proposed rule change.4

On June 9, 2003, the proposed rule 

change, as amended by Amendment 

Nos. 1 and 2, was published for 

comment in the Federal Register.5 The 

Commission received no comments on 

the proposed rule change, as amended. 

On June 11, 2003, the NYSE filed 

Amendment No. 3 to the proposed rule 

change.6 On January 29, 2004, the NYSE 

filed Amendment No. 4 to the proposed 

rule change.7 This order approves the 

proposed rule change, as amended.

II. Description of the Proposed Rule 

Change 

The NYSE filed the proposed rule 

change to codify long-standing 

interpretive material to several NYSE 

rules and to respond to 

recommendations made by an 

independent consultant retained by the 

NYSE.8

A. NYSE Rule 72 

NYSE Rule 72 delineates the basic 

rule governing the priority and 

precedence of bids and offers at the 

same price on the Exchange. NYSE Rule 

72(b) provides that certain types of 

agency cross transactions at a given 

price receive priority over pre-existing 

bids or offers at that price. The 

Exchange proposes to add a sentence to 

NYSE Rule 72(b) to clarify that a broker 

whose cross is broken up because 

another member has provided price 

improvement must follow the crossing 

procedures of NYSE Rule 76 before 

completing the balance of the cross.

The Exchange is also proposing to add 

an example to NYSE Rule 72(b) to 

illustrate its interpretation that a sale 

‘‘clears the floor,’’ meaning all bids and 

offers not satisfied in a given transaction 

are deemed to be simultaneously reentered and on parity with each other. 

B. NYSE Rule 75

The Exchange is proposing to codify 

formally in NYSE Rule 75 its longstanding practice that Floor disputes 

involving $10,000 or more, or 

questioned trades, can be referred for 

resolution to a panel of three Floor 

Governors, Senior Floor Officials, or