33380 Federal Register / Vol. 65, No. 100 / Tuesday, May 23, 2000 / Notices

a meeting on May 25, 2000, at 10:30

a.m. at the office of the Chief Actuary of

the U.S. Railroad Retirement Board, 844

North Rush Street, Chicago, Illinois, on

the conduct of the 21st Actuarial

Valuation of the Railroad Retirement

System. The agenda for this meeting

will include a discussion of the results

and presentation of the 21st Actuarial

Valuation. The text and tables which

constitute the Valuation will have been

prepared in draft form for review by the

Committee. It is expected that this will

be the last meeting of the Committee

before publication of the Valuation.

The meeting will be open to the

public. Persons wishing to submit

written statements or make oral

presentations should address their

communications or notices to the RRB

Actuarial Advisory Committee, c/o

Chief Actuary, U.S. Railroad Retirement

Board, 844 North Rush Street, Chicago,

Illinois 60611–2092.

Dated: May 11, 2000.

Beatrice Ezerski,

Secretary to the Board.

[FR Doc. 00–12866 Filed 5–22–00; 8:45 am]

BILLING CODE 7905–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–24456; File No. 812–12092]

Northbrook Life Insurance Company,

et al.

May 16, 2000.

AGENCY: Securities and exchange

Commission (‘‘Commission’’)

ACTION: Notice of application for an

order pursuant to Section 11(a) of the

Investment Company Act of 1940 (the

‘‘Act’’) approving the terms of an offer

of a Longevity Reward Rider to owners

of certain variable annuity contracts (the

‘‘Contracts’’).

Applicants: Northbrook Life

Insurance Company (‘‘Northbrook’’),

Northbrook Life Insurance Company

Variable Annuity Accout II (‘‘Account

II’’), and Dean Witter Reynolds Inc.

(‘‘Dean Witter’’).

Summary of Application: Applicants

seek an order approving the terms of a

proposed offer to certain owners of the

Contracts of a rider that (a) upon death

of a Contract’s owner, gives any

surviving spouse theoption of

continuing the Contract with a value

equal to the death benefit then payable,

(b) reduces or waives certain charges,

and (c) imposes a new withdrawal

charge on purchase payments made

before or after the rider’s issue date (the

‘‘Rider Date’’).

Filing Date: The application was filed

on May 15, 2000.

Hearing or Notification of Hearing: An

order granting the application will be

issued unless the Commission orders a

hearing. Interested persons may request

a hearing by writing to the Secretary of

the Commission and serving Applicants

with a copy of the request, personally or

by mail. Hearing requests must be

received by the Commission by 5:30

p.m. on June 7, 2000, and should be

accompanied by proof of service on

Applicants in the form of an affidvit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the requester’s interest, the reason for

the request, and the issues contested.

Persons who wish to be notified of a

hearing may request notification by

writing to the Secretary of the

Commission.

ADDRESSES: Secretary, Securities and

Exchange Commission, 450 Fifth Street,

N.W., Washington, DC. 20549–0609.

Applicants, Bruce A. Teichner, Esq.,

Associate Counsel, Allstate Life

Insurance Company, 3100 Sanders

Road, Northbrook, Illinois 60062.

FOR FURTHER INFORMATION CONTACT: Ann

L. Vlcek, Senior Counsel, Michael D.

Pappas, Senior Counsel, or William J.

Kotapish, Assistant Director, Office of

Insurance Products, Division of

Investment Management, at (202) 942–

0670.

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application is

available for a fee from the Public

Reference Branch of the Commission,

450 Fifth Street, N.W., Washington, DC.

20549–0102, (202) 942–8090.

Applicant’s Representations

1. Northbrook is a wholly-owned

subsidiary of Allstate Life Insurance

company (‘‘Allstate Life’’). Allstate Life

is an indirect subsidiary of The Allstate

Corporation, a publicly-traded

insurance holding company. Northbrook

is Account II’s depositor within the

meaning of the Act.

2. Dean Witter is a wholly-owned

subsidiary of Morgan Stanley Dean

Witter & Co., a publicly-traded financial

services company. Dean Witter is the

principal underwriter of Account II.

Dean Witter is registered as a brokerdealer under the Securities Exchange

Act of 1934 (File No. 9–14172).

3. Account II is registered under the

Act as a unit investment trust (File No.

811–6116). Account II funds the Morgan

Stanley Dean Witter Variable Annuity II

Contracts (defined above as the

‘‘Contracts’’) that Northbrook and Dean

Witter have offered and sold for a

number of years.

4. The Contracts, which are registered

under the Securities Act of 1933 (File

No. 033–35412), are deferred annuity

contracts under which Contract owners

may make one or more purchase

payments over a period of time (called

the ‘‘accumulation phase’’). During the

accumulation phase, the Contract

owner’s purchase payments, after

deduction of certain charges, earn (at

the owner’s election) a ‘‘variable’’ return

based on the investment performance of

one or more of Account II’s subaccounts

and/or a fixed rate of return that

Northbrook declares from time to time.

5. At the end of the accumulation

phase, the Contract owner elects

whether to receive a ‘‘lump sum’’

payment of the Contract’s accumulated

value, or to receive that value under one

of several payment options that

Northbrook offers. Payment options are

available on a variable and/or fixed

basis. The Contracts incorporate many

other features, including several ‘‘death

benefit’’ options, partial withdrawal

rights, full surrender rights, transfer

privileges, and other optional rider

benefits.

6. The Contracts currently impose a

withdrawal charge of up to 6% of any

amount by which purchase payments

withdrawn in any year exceed 15% of

the cumulative purchase payments that

had been made as of the beginning of

that year (the ‘‘annual free withdrawal

amount’’). The withdrawal charge

associated with each purchase payment

declines 1% each year until it is 0%

beginning in the seventh year after the

payment was made. Unused portions of

the annual free withdrawal amount do

not carry over to future years.

7. The Contracts also impose an

annual Contract maintenance charge of

$30, a $25 charge applicable to certain

transfers in excess of twelve during a

one-year period (which is currently

being waived), a daily administrative

charge at an annual rate of 0.10% of the

Contract’s value in Account II, a

mortality and expense risk charge at an

annual rate of 1.25% of the Contract’s

value in Account II (or higher if certain

optional rider benefits are selected), and

a charge corresponding to any

applicable state premium taxes.

8. Northbrook now proposes to offer

a Longevity Reward Rider (the ‘‘LRR’’)

to owners of certain outstanding

Contracts. The LRR provides additional

Contract benefits. The benefits under

the LRR include: (a) An option whereby

a deceased owner’s surviving spouse

may continue the Contract using the

then-current death benefit value as the

new Contract value, if higher, rather

Federal Register / Vol. 65, No. 100 / Tuesday, May 23, 2000 / Notices 33381

than the current Contract value; (b) a

reduced mortality and expense risk

charge (i.e., at an annual rate that is

.07% less than the rate that otherwise

would apply); (c) a permanent waiver of

the $30 annual Contract maintenance

charge if the Contract’s value exceeds

$40,000 at any time; and (d) a reduction

in the withdrawal charge that will apply

to the withdrawal of any purchase

payments that are made after the LRR is

added to the Contract.

9. Contract owners who elect the LRR

will have a new three year withdrawal

charge schedule that will apply to

withdrawals made after the Rider Date.

The new schedule would apply to any

amount of such a subsequent

withdrawal of purchase payments that

exceeds the 15% annual free

withdrawal amount, regardless of

whether such withdrawn purchase

payments were made before or after the

Rider Date.

10. The withdrawal charge under the

new withdrawal charge schedule will

begin at 3% and decline by 1% per year

over three years to 0% by the end of the

third year. For purchase payments made

prior to the rider Date, the three year

period runs from the Rider Date. For any

purchase payment made subsequent to

the Rider Date, the three year period

runs from the date of that payment.

11. The same exceptions to imposing

the LRR withdrawal charge will apply

as apply to the Contract’s basic

withdrawal charge. Specifically, no LRR

withdrawal charge will be imposed at

the time a payment option commences,

upon the death of a Contract owner or

annuitant, upon amounts withdrawn to

satisfy any applicable minimum

distribution requirements under the

Internal Revenue Code, or upon

amounts withdrawn that are within the

15% annual free withdrawal amount.

These are the same exceptions as would

apply to the Contracts without the LRR.

12. The LRR will be offered only to

Contract owners who have maintained

their existing purchase payments in

their Contracts for at least six years.

Accordingly, no amount of withdrawal

charge will remain on any purchase

payments made prior to the Rider Date.

13. Contract owners will not be

permitted to elect for the LRR to apply

to part of a Contract and not to the rest.

Any election of the LRR must apply to

the whole Contract.

14. Applicants state that the principal

purpose of offering the LRR is to reward

the eligible Contract owners for their

persistency. In addition, the LRR allows

Northbrook to maintain the Contract on

a competitive footing with other newer

variable annuity contracts in the

marketplace that offer the same or

similar benefits.

15. After an initial notification of the

offer in the Contract prospectus or other

communication to Contract owners by

Dean Witter’s registered representatives,

the LRR will be offered by providing

eligible owners who express an interest

in learning the details of the offer, in

addition to such prospectus, a separate

document explaining the offer (‘‘the

Officer Document’’).

16. The Offering Document will

advise such Contract owners that the

offer is specifically designed for those

Contract owners who intend to continue

to hold their Contracts as long-term

investment vehicles. The Offering

Document will state that the offer is not

intended for all Contract owners, and

that it is especially not appropriate for

any Contract owner who anticipates

surrendering all or a significant part of

his or her Contract within the next three

years. In this regard, the Offering

Document will encourage Contract

owners to carefully evaluate their

personal financial situation when

deciding whether to accept or reject the

offer of the LRR. In addition, the

Offering Document will explain how an

owner of a Contract contemplating

acceptance of the LRR may avoid the

LRR withdrawal charge if no more than

the annual 15% free withdrawal amount

is withdrawn in any one year and any

subsequent purchase payments are

maintained until expiration of the

applicable LRR withdrawal charge

period. In this regard, the Offering

Document will state in clear plain

English that, if a significant amount of

the Contract’s value is surrendered or

withdrawn during the three years

following the Rider Date: (a) the LRR’s

benefits may be more than offset by the

LRR withdrawal charge; and (b) a

Contract owner may be worse off than

if he or she had rejected the offer.

17. To accept the LRR, an owner must

complete an internal election form. This

election form will include the

disclosure set forth in Condition No. 1

under ‘‘Applicant’ Conditions’’ below.

18. The compensation to registered

representatives who offer the LRR to

Contract owners is expected to take the

form of annual ‘‘trail’’ commissions

equal to approximately 0.70% of the

Contract’s average value. On the sale of

a new Contract, the registered

representative would currently earn a

commission equal to approximately 5%

of purchase payments made, plus

annual trail commission of

approximately .10%.

19. The Contracts provide a basic

death benefit equal to the highest of (a)

the Contract’s accumulated value; (b)

the cumulative amount of all purchase

payments made to date (with

approximate adjustment for any partial

withdrawals that have been made); and

(c) the Contract’s accumulated value on

the most recent death benefit

anniversary, which are every sixth

anniversary of a Contract’s issuance

beginning with the sixth, with

appropriate adjustment for subsequent

purchase payments and partial

withdrawals. The Applicants assert that

this basic death benefit can be of quite

significant value to a Contract Owner

and that it can reasonably be expected

that, in many cases where an owner has

died, the death benefit will exceed the

Contract’s then accumulated value. The

Applicants maintain, therefore, that the

LRR could have considerable value for

a surviving spouse who wishes to

continue the Contract.

20. The .07% reduction in the

mortality and expense risk charge and,

in cases involving more than $40,000 of

Contract value, the waiver of the $30

annual charge that otherwise would

apply are further benefits that the LRR

would provide. These benefits are

guaranteed and cannot be reduced or

withdrawn. In particular, if the Contract

value ever exceeds $40,000 at any time

following the Rider Date, the $30 charge

will be waived for the remaining

duration of the Contract, even if its

value subsequently falls below $40,000.

21. Finally, additional purchase

payments made after the LRR is added

to a Contract will be subject only to the

3%/3-year withdrawal charge schedule

provided for in that rider, rather than

the Contract’s regular 6%/6-year

withdrawal charge schedule that would

have applied to those same purchase

payments if the LRR had not been added

to the Contract. Applicants assert that

this is a substantial benefit to any

Contract owner, including a surviving

spouse, who may have an interest in

making further purchase payments.

Applicants’ Legal Analysis

1. Section 11(a) of the Act makes it

unlawful for any registered open-end

company, or any principal underwriter

for such a company, to make or cause

to be made an offer to the holder of a

security of such company, or of any

other open-end investment company, to

exchange that security for a security in

the same or another such company on

any basis other than the relative net

asset values of the respective securities,

unless the terms of the offer have first

been submitted to and approved by the

Commission.

2. section 11(c) of the Act, in

pertinent part, requires, in effect, that

any offer of exchange of the securities of

33382 Federal Register / Vol. 65, No. 100 / Tuesday, May 23, 2000 / Notices

a registered unit investment trust for the

securities of any other investment

company be approved by the

Commission regardless of the basis of

the exchange.

3. Standing alone, Section 11(a) by its

terms applies only to exchanges of

securities issued by ‘‘open-end’’

investment companies, which, under

Section 5(a)(1) of the Act, includes only

management-type investment

companies. Account II itself, as noted

above, is a unit investment trust-type

(rather than a management-type) of

investment company under Section 4(2)

of the Act. It would appear, therefore,

that Section 11 could require

Commission approval for Applicants’

offer of the LRR only if that falls within

the ambit of Section 11(c).

4. Applicants do not conceded that

their offer of the LRR to existing

Contract owners necessarily constitutes

an offer of securities of a registered unit

investment trust in exchange for

securities of any other investment

company within the purview of Section

11(c). Nor do Applicants concede that,

for purposes of Section 11, a Contract

with the LRR is a different security than

a contract without the LRR.

Nevertheless, Applicants request an

exemption pursuant to Section 11(a) of

the Act to the extent deemed necessary

to permit the offer of the LRR as

described herein.

5. Applicants have considered

whether they could rely on Rule 11a-2

under the Act. Applicants believe and

represent that the only provision in Rule

11a-2 that could prevent such reliance

would be the so-called ‘‘tacking’’

requirement in Rule 11a-2(d)(1).

Applicants state that since the LRR

withdrawal charge continues for only

three years, and since the most recent

purchase payment made by Contract

owners who are eligible for the LRR was

made at least six years prior to the Rider

Date, the tracking requirement

effectively would prohibit the

imposition of any portion of the LRR’s

withdrawal charge with respect to

purchase payments made prior to the

Rider Date. For that reason, Applicants

have concluded that Rule 11a-2 is

unavailable to them.

6. Congress enacted Section 11 to

prevent ‘‘switching,’’ i.e., the practice of

inducing security holders of one

investment company to exchange their

securities for those of a different

investment company solely for the

purpose of exacting additional selling

charges. Applicants assert that the LRR

would not involve ‘‘switching.’’

Applicants maintain, to the contrary,

that the purpose of the LRR is to enable

Contract owners to enhance their

Contracts through the rider without

having to buy a new variable annuity

contract. Applicants represent that

because the LRR provides clear benefits,

as described above, the LRR’s sole

purpose is not to exact additional

selling charges (or any other type of

charge).

7. Applicants state that the LRR

would not result in any duplicative

charges. Applicants represent that the

limited withdrawal charge provided

under the LRR is reasonable in relation

to the benefits that the rider provides

and the costs that Applicants will incur

in providing those benefits. Those costs

will include costs of developing and

administering the LRR, the direct dollar

costs of the charges that will be waived

or reduced and the benefits that will be

paid under the LRR, and the costs of

distributing the LRR to Contract owners

and educating them about it.

8. Applicants represent that any

possible withdrawal charge under the

LRR is modest in amount. Applicants

state that, if the Contract owner makes

no withdrawals during the three years

after the Rider Date, there is no

possibility that any withdrawal charge

will ever be deducted that exceeds what

would have been deducted absent the

LRR. Applicants also state that even if

purchase payments are withdrawn

during that three year period, the LRR

withdrawal charge will apply only if

more than the 15% annual free

withdrawal amount is withdrawn in any

year.

9. The LRR will be offered only to

Contract owners who already have

demonstrated an inclination to maintain

their Contracts for substantial periods of

time. Applicants believe that the income

taxes that are generally payable when

earnings are withdrawn from a Contract,

as well as the tax penalties that may

apply if those withdrawals are made

prior to the owner’s reaching age 591⁄2,

serve as additional motivations that

cause most owners to hold their

Contracts for a substantial number of

years (and often until retirement).

10. Applicants state that any

withdrawal charge will be waived for

withdrawals of any amounts necessary

to meet any federal tax law minimum

distribution requirements applicable to

a Contract.

11. Under all these circumstances,

Applicants believe that, as a practical

matter, few owners that add the LRR to

their Contracts will ever actually pay

any additional withdrawal charges as a

result; and to the extent that the LRR

succeeds in its purpose of maintaining

the Contracts on a competitive footing

in the marketplace, withdrawals should

be even further reduced.

12. Applicants state that except for

the withdrawal charge as described

above, the LRR will not result in any

increase in or imposition of any charge.

Accordingly, Applicants assert that

except for the potential imposition of

the LRR withdrawal charge on certain

withdrawals that occur within three

years after the Rider Date, every aspect

of a Contract will be at least as favorable

after the LRR is added as it was before.

Applicants maintain that adding the

LRR to a Contract will have no adverse

tax consequences to a Contract’s owner.

13. In light of these considerations,

Applicants do not believe there is any

public policy or purpose under Section

11 (or otherwise) that would preclude

offering the LRR on the terms and

subject to the conditions stated herein.

Applicants’ Conditions

Applicants consent to the following

conditions:

1. The Offering Document will

contain concise, plain English

statements that: (a) the LRR is suitable

only for Contract owners who expect to

hold their Contracts as long term

investments; and (b) if a significant

amount of the Contract’s value is

surrendered or withdrawn during the

first three years after the Rider Date, the

LRR’s benefits may be more than offset

by that charge, and a Contract owner

may be worse off than if he or she had

rejected the LRR.

2. The Offering Document will

disclose in concise plain English the

only aspect in which adding the LRR

rider could disadvantage a Contract

owner (i.e., through the possible

imposition of the LRR withdrawal

charge).

3. A Contract owner choosing to add

the LRR will complete and sign the

election form, which will prominently

restate in concise, plain English the

statements required in Condition No. 1,

and will return it to Northbrook. If the

election form is more than two pages

long, Northbrook will use a separate

document to obtain the Contract

owner’s acknowledgment of the

statements referred to in Condition No.

1 above.

4. Applicants will maintain and make

available the following separately

identifiable records, for the time periods

specified below, for review by the

Commission upon request: (a)

Northbrook will maintain records

showing the level of LRR purchases and

how it relates to the total number of

Contract owners eligible to acquire the

LRR (at least quarterly as a percentage

of the number eligible); (b)(i)

Northbrook will maintain copies of any

form of Offering Document, prospectus

Federal Register / Vol. 65, No. 100 / Tuesday, May 23, 2000 / Notices 33383

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

2 17 CFR 240.19b–4.

3See May 12, 2000 letter from Kathleen M. Boege,

Associate General Counsel, CHX, to Nancy J.

Sanow, Assistant Director, Division of Market

Regulation, SEC (‘‘Amendment No. 1’’).

Amendment No. 1 states that the subject E-Session

credit will be available through October 1, 2000.

4 15 U.S.C. 78s(b)(3)(A)(ii).

5On October 13, 1999, the Commission approved,

on a pilot basis, the CHX’s proposed rule change

that allowed the CHX to implement an extended

hours trading session. See Securities Exchange Act

Release No. 42004 (October 13, 1999), 64 FR 56548

(October 20, 1999) (SR–CHX–99–16). The E-Session

is currently approved to continue through October

1, 2000. See Securities Exchange Act Release No.

42463 (February 28, 2000), 65 FR 11817 (March 6,

2000) (SR–CHX–00–02).

disclosure, election form,

acknowledgment form, or offering letter,

regarding the offering of the LRR,

including the dates(s) used, and (ii)

Dean Witter will maintain copies of any

other written materials or scripts for

presentations used by registered

representatives regarding the LRR,

including the dates used; (c) records

showing information about each LRR

purchase that occurs, including (i) the

following information to be maintained

by Northbrook: The name of the

Contract owner; the Contract number;

the election form (and separate

acknowledgment form, if any, used to

obtain the Contract owner’s

acknowledgment of the statements

required in Condition No. 1 above),

including the date such election or

acknowledgment form was signed; the

date of birth, address and telephone

number of the Contract owner; the issue

date of the LRR; the amount of the

Contract’s value on that date; and

persistency information relating to the

Contract (date of any subsequent

withdrawals and withdrawal charges

paid); and (ii) the following information

to be maintained by Dean Witter: The

name of the Contract owner, the

Contract number, the registered

representative’s name, CRD number,

firm affiliation, branch office address

and telephone number; the name of the

registered representative’s broker-dealer;

and the amount of commissions paid to

the registered representative that relates

to the LRR; and (d) each of Northbrook

and Dean Witter will maintain logs

showing any Contract owner complaints

received by it about the LRR, state

insurance department inquiries to it

about the LRR, or litigation, arbitration

or other proceedings to which it is a

party regarding the LRR.

5. Applicants will include the

following information on the logs

referred to in Condition No. 4(d) above:

date of complaint or commencement of

proceeding; name and address of the

person making the complaint or

commencing the proceeding; nature of

the complaint or proceeding; and

persons named or involved in the

complaint or proceeding.

6. Applicants will retain (i) the

records specified in Condition Nos. 4(a)

and (d) above for six years from creation

of the record; (ii) the records specified

in Condition No. 4(b) above for six years

after the date of last use; and (iii) the

records specified in Condition No. 4(c)

for five years from the Rider Date. The

records referred to in these conditions

will be prepared and retained, for the

periods specified herein, by Northbrook

and Dean Witter. Nevertheless, upon

request of the Commission or its staff,

Northbrook and Dean Witter shall

coordinate the prompt assembly of such

records for review at a single easily

accessible location.

Conclusion

For the reasons discussed above,

Applicants submit that the LRR offer is

necessary or appropriate in the public

interest and consistent with the

protection of investors and the purposes

fairly intended by the policies and

provisions of the Act. Applicants submit

that the requested order should

therefore be granted.

For the Commission, by the Division

of Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–12865 Filed 5–22–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42784; File No. SR–CHX–

00–12]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change and

Amendment No. 1 by the Chicago

Stock Exchange, Incorporated Relating

to Fees for the E-Session

May 15, 2000.

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

Securities Exchange Act of 1934

(‘‘Act’’) 1 and Rule 19b—4 thereunder,2

notice is hereby given that on May 1,

2000, the Chicago Stock Exchange,

Incorporated (‘‘CHX’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

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

the proposed rule change as described

in Items I, II, and III below, which Items

have been prepared by the Exchange.

On May 15, 2000, the Exchange

amended the proposal. 3 The Exchange

has designated this proposal as one

establishing or changing a due, fee, or

other charge imposed by the CHX under

Section 19(b)(3)(A)(ii) of the Act,4

which renders the proposal effective

upon filing with the Commission. 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 Exchange proposes to amend its

membership dues and fees schedule (the

‘‘Schedule’’) to provide Exchange

specialists and floor brokers with a

credit of $.25 per trade executed during

the Exchange’s extended hours trading

session (‘‘E-Session’’) 5 through October

1,200. The text of the proposed rule

change is below. Additions are in

italics. Deletions are in brackets.

MEMBERSHIP DUES AND FEES

* * * * *

M. Credits

1. Specialist Credits

Total monthly fees owned by a

specialist to the Exchange will be

reduced (but to no less than zero) by the

application of the following

[transaction] credits:

a. No change.

b. No change.

c. E-Session Credits. A credit of $.25

per trade executed during the E-Session.

This credit shall be available through

October 1, 2000.

2. Floor Broker Credits.

a. No change.

b. No change.

c. E-Session Credits. Total monthly

fees owned by a floor broker to the

Exchange will also be reduced (but to no

less than zero) by the application of an

E-Session Credit. ‘‘E-Session Credit’’

means a credit of $.25 per trade

executed during the E-Session. This

credit shall be available through October

1, 2000.

* * * * *

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

Exchange 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

Exchange has prepared summaries, set

forth in Sections A, B, and C below, of