30464 Federal Register / Vol. 65, No. 92 / Thursday, May 11, 2000 / Notices

12 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b-4.

3Securities Exchange Act Release No. 34–42501

(March 7, 2000), 65 FR 13801.

4See Securities Exchange Act Release No. 42487

(March 2, 2000), 65 FR 13801 (March 9, 2000).

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,

including whether the proposed rule

change is consistent with the Act.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549–0609. 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

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to the File No.

SR–NASD–99–26 and should be

submitted by June 1, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.12

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–11807 Filed 5–10–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42757; File No. SR–NYSE–

99–44]

Self-Regulatory Organizations; New

York Stock Exchange, Inc; Order

Approving Proposed Rule Change

Relating to NYSE Rule 103A

May 4, 2000.

I. Introduction

On November 3, 1999, the New York

Stock Exchange, Inc (‘‘NYSE’’ or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission ‘‘SEC’’ or

‘‘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

relating to NYSE Rule 103A. The

proposed rule change was published for

comment in the Federal Register on

March 14, 2000.3 The Commission did

not receive any comment letters with

respect to the proposal. This order

approves the Exchange’s proposal.

II. Description of the Proposal

1. Purpose

The Exchange proposed to amend

Rule 103A (Special Stock Reallocation)

to codify the Market Performance

Committee’s (‘‘MPC’’) authority with

respect to allocation freezes, stock

assignments and reassignments,

specialist unit organizational changes,

and Floor member qualification and

continuing education requirements.

a. Allocation Freezes

Currently, Rule 103A provides the

MPC the authority to establish and

administer measures of specialist

performance, conduct performance

improvement actions when a specialist

unit does not meet the performance

standards in Rule 103A, and reallocate

stocks if a unit does not achieve its

specified goals when subject to a

performance improvement action. The

Exchange represented that these

standards help to establish and maintain

acceptable levels of specialist

performance, thereby enhancing the

competitiveness of the Exchange’s

specialist system. The purpose of a

performance improvement action is to

provide assistance and guidance to

specialist units to enable them to

enhance their performance. When a

performance improvement action is

initiated, a specialist unit is required to

submit a performance improvement

plan addressing how it intends to

improve performance to the MPC. Based

on the MPC’s review of the performance

improvement plan, the MPC has the

authority to preclude a specialist unit,

that is subject to a performance

improvement action, from applying to

be allocated any newly-listing company

(an ‘‘allocation freeze’’) if the MPC

believes such action is appropriate.

The Exchange proposed to amend

Rule 103A to allow the MPC to exercise

its discretion in imposing allocation

freezes. In certain instances, the

Committee will determine that a unit’s

performance is not as strong as other

units’ performance, although the unit’s

performance fully meets the Rule 103A

performance standards. For example,

this may occur when a specialist unit’s

scores on the quarterly Specialist

Performance Evaluation Questionnaire

are above Rule 103A perfomace

standards, however, the unit may have

lower scores than other units over a

period of several quarters, resulting in

persistent lower rankings in the bottom

quartile. In these instances, the

Exchange believes the MPC should be

able to use its professional judgment to

provide incentives to specialist units to

encourage them to enhance their

performance. Therefore, the Exchange

proposes to add to Rule 103A authority

for the Committee to initiate an

allocation freeze for a unit, without

initiating a formal performance

improvement action. The Commission

expects the NYSE’s MPC to exercise its

discretion consistent with the purpose

of the Act.

b. Receipt of New Listings During an

Allocation Freeze

Under the Exchange’s Allocation

Policy and Procedures (the ‘‘Allocation

Policy’’) the are circumstances when a

newly-listing company may choose its

specialist unit. For example, a newlylisting company that is related to an

already listed company many choose to

stay with the current specialist for the

listed company or choose to go through

the Allocation Committee.4 The newlylisting company may choose to stay

with the current specialist for the

related listed company even if such unit

it is under an allocation freeze imposed

by the MPC as long as the unit is not

subject to a performance improvement

action.

Similarly, under the Allocation

Policy, the newly-listing company may

choose its specialist from among a group

of specialist units chosen by the

Allocation Committee. The Allocation

Committee has the ability to exclude or

include the current specialist for the

related company in such a group. If the

specialist unit was under an allocation

freeze imposed by the MPC, it would

not be precluded from being placed in

the group or chosen by the newly-listing

company as long as the allocation freeze

was not the result of a performance

improvement action.

c. Floor Member Qualification and

Continuing Education

The Exchange also proposes to amend

Rule 103A to make mandatory (i)

participation by proposed Floor

members in an Exchange-sponsored

Federal Register / Vol. 65, No. 92 / Thursday, May 11, 2000 / Notices 30465

5 15 U.S.C. 78f.

6 In approving this rule, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

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

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

8See 17 CFR 240.11b–1; NYSE Rule 104.

9See Securities Exchange Act Release No. 41574,

70 S.E.C. Docket 106 (June 29, 1999).

10See id at 9.

11 15 U.S.C. 78s(b)(2).

12 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See Letters from Michael D. Pierson, Director,

Regulatory Policy, PCX, to Michael A. Walinskas,

Associate Director, Division of Market Regulation

(‘‘Division’’), SEC, dated June 24, 1999

(‘‘Amendment No. 1’’) from Michael D. Pierson to

Jennifer Colihan, Attorney, Division, SEC, dated

January 7, 2000 (‘‘Amendment No. 2’’); from

Michael D. Pierson to Kelly Riley, Attorney,

Division, SEC, dated January 14, 2000

(‘‘Amendment No. 3’’).

4See Exchange Act Release No. 42384 (February

3, 2000), 65 FR 6675.

5See Letter from Robert Pacileo, Senior Attorney,

Regulatory Policy, PCX, to Nancy J. Sanow, Senior

Special Counsel, Division, SEC, dated April 20,

Continued

education program before such

individuals would be permitted to act as

members on the Floor; and (ii)

participation by all Floor members in an

Exchange-sponsored educational

program, conducted semi-annually, and

at such other times as may be

appropriate in connection with any

particular matter or matters. Rule 103A

would also make it mandatory for Floor

members to participate in any testing

programs the Exchange may introduce

from time to time in connection with

the mandatory education program.

d. Stock Assignments and

Reassignments and Organizational

Changes of Specialist Units

The Exchange proposes to amend rule

103A to codify the Committee’s

authority with respect to approving

stock assignments and reassignments,

assignments in special stock situations,

and organizational changes to specialist

units. Such situations typically involve

(i) changes in a specialist unit’s

organizational structure effecting

control of the specialist unit, such as

split-ups and mergers; (ii) withdrawal of

individual specialists from one

specialist unit, where the specialists

propose to register with another unit

and transfer certain securities to such

other unit; and (iii) assignments of

newly-listed securities to a specialist

unit already registered in a security with

a trading relationship to the newlylisted securities (e.g., a corporate

restructuring of a listed company; stocks

involved in mergers of listed companies;

and immediate relisting of a listed

company that delisted for technical

reasons). In all of these situations, the

MPC will review the proposal, and

approve the matter if the Committee

believes that market quality in the

securities subject to the proposal will

not be eroded.

III. Discussion

The Commission finds that the

proposed rule change, as amended, is

consistent with the requirements of

Section 6 of the Act 5 and the rules and

regulations thereunder applicable to a

national security exchange.6 In

particular, the Commission finds the

proposed rule change is consistent with

Section 6(b)(5) of the Act 7 which

requires, among other things, that the

rules of an exchange be designed to

prevent fraudulent and manipulative

acts and practices, to remote

impediments to and perfect the

mechanism of a free and open market,

and to protect investors and the public

interest.

Specialists play a crucial role in

providing stability, continuity, and

liquidity to the trading of securities.

Specialists are obligated by the NYSE

and the Act and rules thereunder, 8 to

maintain fair and orderly markets in

designated securities. The Commission

supports effective NYSE oversight of the

specialist’s activities and performance,

including comparing a specialist’s score

on the quarterly Specialist Evaluation

Questionnaire with other specialist’s

scores in an effort to provide an

incentive to increase specialist

performance. The Commission believes

that giving the MPC the discretion to

impose an allocation freeze should

provide the Exchange with the means to

identify and correct poor specialist

performance and to ascertain whether

specialists are maintaining fair and

orderly markets in their assigned

securities.

Furthermore, the proposed floor

member qualification and continuing

education requirements are a result of

NYSE’s undertakings.9 The NYSE

pledged to design and implement a

mandatory, regular education program

for Floor members that would address

Floor members’ obligations and

prohibitions under the federal securities

laws and NYSE rules.10 The

Commission believes that NYSE’s

proposal to require Floor members to

participate in an education program

prior to being permitted to act as

members is appropriate and consistent

with this undertaking. Also, the semiannual, or more frequent as the NYSE

deems appropriate, educational

programs for all Floor members satisfies

the NYSE’s undertaking to provide

regular, mandatory education programs.

The Exchange also proposed mandatory

testing programs that should ensure that

Floor members are aware of Floor

members’ obligations and prohibitions

under the federal securities laws and

NYSE rules.

As a result, because the proposed

amendment of NYSE Rule 103A

promotes increased specialist

performance and creates mandatory and

regular training for all floor members,

the Commission believes that NYSE’s

proposed amendment to Rule 103A is

consistent with the provisions of the Act

discussed above.

IV. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,11 that the

proposed rule change (SR–NYSE–99–

42), including amendments Nos. 1 and

2, is approved.

By the Commission, for the Division of

Market Regulation, pursuant to delegated

authority.12

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–11803 Filed 5–10–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42756; File No. SR–PCX–

99–10]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change and

Notice of Filing and Order Granting

Accelerated Approval to Amendment

Nos. 4 and 5 to the Proposed Rule

Change by the Pacific Exchange, Inc.

Amending Its Disciplinary Procedures

May 4, 2000.

I. Introduction

On April 2, 1999, the Pacific

Exchange, Inc. (‘‘PCX’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’ or ‘‘SEC’’)

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 amend its

disciplinary procedures. On June 25,

1999, January 18, 2000, and January 19,

2000, respectively, the PCX filed

Amendment Nos. 1, 2 and 3 to the

proposed rule change.3 The proposed

rule change including Amendments

Nos. 1, 2 and 3 were published for

comment in the Federal Register on

February 10, 2000.4 On April 21, 2000,

the PCX filed Amendment No. 4 to the

proposal. 5 On April 28, 2000, the PCX