34520 Federal Register / Vol. 65, No. 104 / Tuesday, May 30, 2000 / Notices

23 15 U.S.C. 78o–3(b)(6).

24 15 U.S.C. 78o–3(b)(11).

25 In approving this rule proposal, the

Commission notes that it has also considered the

proposed rule’s impact on efficiency, competition,

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

26 15 U.S.C. 78s(b)(2)

27 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3 17 CFR 240.19b–4(f)(6).

4 17 CFR 240.19b–4

5See Securities Exchange Act Release No. 40058

(June 2, 1998), 63 FR 31543 (June 9, 1998).

Nasdaq this authority will help prevent

fraudulent practices and protect

investors in accordance with Section

15A(b)(6) of the Act.23 Moreover, this

authority will help ensure that Nasdaq

disseminates fair and accurate quotes,

and that the dissemination of quotes is

done in an orderly manner pursuant to

the requirements of Section 15A(b)(11)

of the Act.24

The Commission believes the

proposed rule will benefit investors

because it will grant Nasdaq the

authority to halt trading and quotations

in OTCBB securities when the OTCBB

security is a derivative or component of

a security listed on a domestic

exchange, foreign exchange or Nasdaq

and the domestic exchange, foreign

exchange or Nasdaq imposes a trading

halt in the underlying listed security.

This will help assure accurate pricing of

OTCBB derivatives and components, as

the price of these securities is derived

from the price of the underlying

security. Market makers will be unable

to quote or trade an OTCBB derivative

or component when no accurate pricing

information on the underlying security

is available.

In addition, without this rule in place,

the purpose of a trade halt in the

underlying security could be frustrated.

For example, if Nasdaq imposed a trade

halt on a Nasdaq security in order to

allow for dissemination of material

news regarding the issuer, but quoting

and trading of a derivative of that

security continued on the OTCBB, the

goal of the original halt would not be

fully accomplished. Rather, before the

material news could be fully absorbed

by the public, trading based on

incomplete or inaccurate information

would take place. The NASD’s new rule

will prevent this.

Finally, the proposed rule will

authorize Nasdaq to halt trading in an

OTCBB security when there is a failure

to timely provide the NASD with

information mandated by Rule 10b–17

under the Act, which if not timely

disseminated could have an impact on

the pricing and trading of OTCBB

issues. Thus, the Commission finds that

the proposed rule is designed to protect

investors and to produce fair and

informative quotations, prevent

fictitious or misleading quotations and

to promote orderly procedures for

collecting, distributing, and publishing

quotations.

IV. Conclusion

For the foregoing reasons, the

Commission finds that the proposed

rule change is consistent with the

Exchange Act and the rules and

regulations thereunder applicable to the

NASD and, in particular, Sections

15A(b)(6) and 15(b)(11).25

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act 26 that the

proposed rule change (SR–NASD–99–

33) be, and hereby is, approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.27

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–13417 Filed 5–26–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42805; File No. SR–PHLX–

00–10]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Philadelphia Stock Exchange, Inc. To

Reduce the Value of the Over-theCounter Prime Index (‘‘OTX’’)

May 22, 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 March 31,

2000, the Philadelphia Stock Exchange,

(‘‘Phlx’’ 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. The

proposed rule change has been filed by

the Phlx as a ‘‘non-controversial’’ rule

change under Rule 19b–4(f)(6) 3 of the

Act. 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 Phlx, pursuant to Rule 19b–4 of

the Act,4 proposes to reduce the value

of its Over-The-Counter prime Index

(‘‘Index’’) option (‘‘OTX’’) to one-fourth

its present value by quadrupling the

base market divisor used to calculate the

Index. In addition, the position and

exercise limits applicable to OTX will

be quadrupled until the last expiration

then trading. The Index is a price

weighted, A.M. settled index composed

of fifteen stocks which are considered to

be the ‘‘most active’’ stocks traded on

the Nasdaq market.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

Phlx 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. Phlx 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

1. Purpose

The purpose of this proposed rule

change, as discussed more fully below,

is to attract additional liquidity to OTX.

a. Background. The Exchange began

trading OTX in 1998.5 As of March 21,

2000, the index value was 714 and the

near-month in-the-money call premium

was $57.75 per contract. The Exchange

proposes to conduct a ‘‘four-for-one

split’’of the Index, such that the value

would be reduced to one-quarter of the

current value. The number of OTX

contracts will be quadrupled, such that

for each OTX contract currently held,

the holder would receive four contracts

at the reduced value with a strike price

one quarter of the original strike price.

For instance, the holder of an OTX 800

call will receive four OTX 200 calls. In

addition to the strike price being

reduced by one-quarter, the position

and exercise limits applicable to OTX

will be quadrupled, from 25,000

contracts to 100,000 contracts until the

last expiration then trading. The result

would be an index value of 178.50 and

a near-month at-the-money call

premium of $14.44. This procedure is

similar to the one employed respecting

equity options where the underlying

security is subject to a four-for-one stock

split. The trading symbol will remain as

OTX.

In conjunction with the split, the

Exchange will list strike prices

surrounding the new, lower index

Federal Register / Vol. 65, No. 104 / Tuesday, May 30, 2000 / Notices 34521

6 15 U.S.C. 78f.

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

8 15 U.S.C. 78s(b)(3)(A).

9 17 CFR 240.19b–4(f)(6).

10The Exchange provided the Commission with

the five business day notice required by Rule 19b–

4(f)(6) of the Act on March 3, 2000.

11 15 U.S.C. 78s(b)(3)(A).

12 17 CFR 240.19b–4(f)(6).

13 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

value, pursuant to Phlx Rule 1101A.

The Exchange will announce the

effective date by way of an Exchange

memorandum to the membership, also

serving as notice of the strike price and

position exercise limit changes.

b. Purpose. As stated above, the

purpose of the proposal is to attract

additional liquidity to OTX. A four-forone split, thus reducing the value of the

Index, should have a positive effect on

overall transaction volumes by making

the option premiums more attractive for

retail investors. A reduced value should

thus encourage additional investor

interest. By reducing the value of the

Index, investors will be able to utilize

this trading vehicle while extending a

smaller outlay of capital. This should

attract additional investors, and, in turn,

create a more active and liquid trading

environment.

2. Statutory Basis

For these reasons, Phlx believes that

the proposed rule change is consistent

with Section 6 of the Act 6 in general,

and in particular, with Section 6(b)(5),7

in that it is designed to promote just and

equitable principles of trade, as well as

to protect investors and the public

interest, by establishing a lower index

value, which should, in turn, facilitate

trading in OTX options. The Exchange

believes that reducing the value of the

Index should not raise manipulation

concerns and should not cause adverse

market impact, because the Exchange

will continue to employ its surveillance

procedures and has proposed an orderly

procedure to achieve the index split,

including adequate prior notice to

market participants.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed rule change will impose

any burden on competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Written comments were neither

solicited nor received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The proposed rule change has been

filed by the Exchange as a ‘‘noncontroversial’’ rule change pursuant to

Section 19(b)(3)(A) of the Act 8 and Rule

19b–4(f)(6) thereunder.9 Because the

foregoing proposed rule change: (1)

Does not significantly affect the

protection of investors or the public

interest, (2) does not impose any

significant burden on competition, and

(3) by its terms does not become

operative for 30 days after the date of

this filing, or such shorter time as the

Commission may designate,10 it has

become effective pursuant to Section

19(b)(3)(A) 11 of the Act and Rule 19b–

4(f)(6) 12 thereunder. The Exchange has

requested that the Commission

accelerate the operative date of the rule

change to permit the Exchange to

implement it immediately. The

Commission has determined, consistent

with the protection of investors and the

public interest, to make the proposed

rule change operative upon filing,

pursuant to Section 19(b)(3)(A) of the

Act and Rule 19b–4(f)(6)(iii). Under

Rule 19b–4(f)(6)(iii), a proposed ‘‘noncontroversial’’ rule change does not

become operative for 30 days after the

date of filing, unless the Commission

designates a shorter time. The

Commission believes that it is

consistent with the protection of

investors and the public interest to

make the proposed rule change

operative upon filing because reducing

the value of the Index should enable

more investors to participate in the

market, thereby promoting liquidity in

the marketplace. At any time within 60

days of the filing of the proposed rule

change, the Commission may summarily

abrogate such rule change if it appears

to the Commission that such action is

necessary or appropriate in the public

interest, for the protection of investors,

or otherwise in furtherance of the

purposes of the Act.

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, NW,

Washington, DC 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 at

the Commission’s Public Reference

Room. Copies of such filing also will be

available for inspection and copying at

the principal office of the Phlx. All

submissions should refer to File No.

SR–PHLX–00–10 and should be

submitted by June 20, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.13

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–13415 Filed 5–26–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42800; File No. SR–Phlx–

00–28]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

To Divide Its Allocation, Evaluation

and Securities Committee Into Two

Separate Committees: the Equity

Allocation, Evaluation and Securities

Committee and the Option Allocation,

Evaluation and Securities Committee

May 19, 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 March 28,

2000, the Philadelphia Stock Exchange,

Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with

the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I, II, and III below, which Items

have been prepared by the Exchange.

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

Exchange By-Law, Article X, Section

10–7 and Exchange Rule 500, each

concerning its Allocation, Evaluation

and Securities Committee (‘‘AESC’’), to

divide the AESC into two separate

committees: the Equity Allocation,

Evaluation and Securities Committee

and the Option Allocation, Evaluation