34240 Federal Register / Vol. 65, No. 103 / Friday, May 26, 2000 / Notices

3The Exchange recently has rescinded

transaction fees and trade match fees for public

customer equity options orders routed through the

Exchange’s electronic Order Routing System. See

File No. SR–CBOE–00–06.

4 17 U.S.C. 78f(b).

5 17 U.S.C. 78f(b)(4).

6 15 U.S.C. 78s(b)(3)(A)(ii).

7 17 CFR 240.19b–4(f)(2).

8 17 CFR 200.30–3(a)(12)

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

217 CFR 240.19b–4.

(‘‘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 CBOE proposes to rescind certain

customer equity options fees. The text of

the proposed rule change is available at

the CBOE and the Commission.

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

CBOE included statements concerning

the purpose of and basis for the

purposed 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 CBOE 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 the proposed rule

change is to rescind certain customer

equity option fees. These fee changes

are being implemented by the Exchange

pursuant to CBOE Rule 2.22 and will be

in effect as of May 1, 2000.

Specifically, the CBOE proposes to

rescind transaction fees for manually

executed equity options orders for

public customers. The CBOE also

proposes to eliminate the trade match

fee for manually executed equity

options orders for public customers.3

Finally, the CBOE proposes to eliminate

the floor brokerage fee assessed to floor

brokers for execution of equity options

orders of public customers. The

Exchange believes this fee change

would generate significant savings for

its customers.

2. Statutory Basis

The CBOE believes that the proposed

rule change would be consistent with

the provisions of Section 6(b) of the

Act 4 in general and would further the

objectives of Section 6(b)(4) 5 in

particular, in that it is designed to

provide for the equitable allocation of

reasonable dues, fees, and other charges

among Exchange members.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The CBOE does not believe that the

proposed rule change would result in

any burden on competition.

Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

No written comments were solicted or

received with respect to the proposed

rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Because the foregoing rule change

establishes or changes a due, fee, or

other charge imposed by the Exchange,

it has become effective pursuant to

Section 19(B)(3)(A)(ii) of the Act 6 and

subparagraph (f)(2) of Rule 19b–4 7

thereunder. At any time within 60 days

of the filing of such 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

purpose 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 submission

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 Exchange. All

submissions should refer to File No.

SR–CBOE–00–19 and should be

submitted by June 16, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority. 8

Jonathan G. Katz,

Secretary.

[FR Doc. 00–13241 Filed 5–25–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42801; File No. SR–NASD–

00–08]

Self–Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the National Association of Securities

Dealers, Inc., Relating to Margin Rule

Amendments for Non-Equity Securities

and Exempt Accounts

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 3,

2000, the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’), through its whollyowned subsidiary, NASD Regulation,

Inc. (‘‘NASD Regulation’’) filed with the

Securities and Exchange Commission

(‘‘SEC’’ or ‘‘Commission’’) the proposed

rule change as described in Items I, II,

and III below, which Items have been

prepared by NASD Regulation. 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

NASD Regulation is proposing to

amend Rule 2520 to revise the margin

requirements relating to non-equity

securities and exempt accounts.

Proposed new language is in italics;

proposed deletions are in brackets.

* * * * *

2520. Margin Requirements

(a) Definitions

For purposes of this paragraph, the

following terms shall have the meanings

specified below:

(a)(1) through (a)(3) No change

(4) The term ‘‘designated account’’

means the account of: [a bank, trust

company, insurance company,

Federal Register / Vol. 65, No. 103 / Friday, May 26, 2000 / Notices 34241

investment trust, state or political

subdivision thereof, charitable or

nonprofit educational institution

regulated under the laws of the United

States or any state, or pension or profit

sharing plan subject to ERISA or of any

agency of the United States or of a state

or a political subdivision thereof.]

(A) a bank (as defined in Section

3(a)(6) of the Act),

(B) a savings association (as defined

in Section 3(b) of the Federal Deposit

Insurance Act), the deposits of which

are insured by the Federal Deposit

Insurance Corporation,

(C) an insurance company (as defined

in Section 2(a)(17) of the Investment

Company Act of 1940),

(D) an investment company registered

with the Securities and Exchange

Commission (SEC) under the Investment

Company Act,

(E) a state or political subdivision

thereof, or

(F) a pension or profit sharing plan

subject to Employee Retirement Income

Security Act (ERISA) or of an agency of

the United States or of a state or a

political subdivision thereof.

(a)(5) through (a)(8) No Change

(9) The term ‘‘highly rated foreign

sovereign debt securities’’ means any

debt securities (including major foreign

sovereign debt securities) issued or

guaranteed by the government of a

foreign country, its provinces, state or

cities, or a supranational entity, if at the

time of the extension of credit the issue,

the issuer or guarantor, or any other

outstanding obligation of the issuer or

guarantor ranked junior to or on a

parity with the issue or the guarantee is

assigned a rating (implicitly or

explicitly) in one of the top two rating

categories by at least one nationally

ranked statistical rating organization.

(10) The term ‘‘investment grade debt

securities’’ means any debt securities

(including those issued by the

government of a foreign country, its

provinces, states or cities, or a

supranational entity), if at the time of

the extension of credit the issue, the

issuer or guarantor, or any other

outstanding obligation of the issuer or

guarantor ranked junior to or on a

parity with the issue or the guarantee is

assigned a rating (implicitly or

explicitly) in one of the top four rating

categories by at least one nationally

recognized statistical rating

organization.

(11) The term ‘‘major foreign

sovereign debt’’ means any debt

securities issued or guaranteed by the

government of a foreign country or a

supranational entity, if at the time of the

extension of credit the issue, the issuer

or guarantor, or any other outstanding

obligation of the issuer or guarantor

ranked junior to or on a parity with the

issue or the guarantee is assigned a

rating (implicitly or explicitly) in the top

rating category by at least one nationally

recognized statistical rating

organization.

(12) The term ‘‘mortgage related

securities’’ means securities falling

within the definition in Section 3(a)(41)

of the Act.

(13) The term ‘‘exempt account’’

means a member, non-member broker/

dealer registered as a broker or dealer

under the Act, ‘‘designated account,’’ or

any person having a net worth of at least

forty-five million dollars and financial

assets of at least forty-million dollars.

(14) The term ‘‘non-equity securities’’

means any securities other than equity

securities as defined in Section 3(a)(11)

of the Act.

(15) The term ‘‘listed non-equity

securities’’ means any non-equity

securities that: (A) are listed on a

national securities exchange; or (B) have

unlisted trading privileges on a national

securities exchange.

(16) The term ‘‘other marginable nonequity securities’’ means:

(A) Any debt securities not traded on

a national securities exchange meeting

all of the following requirements:

(i) At the time of the original issue, a

principal amount of not less than

$25,000,000 of the issue was

outstanding;

(ii) The issue was registered under

Section 5 of the Securities Act of 1933

and the issuer either files periodic

reports pursuant to Section 13(a) or

15(d) of the Act or is an insurance

company which meets all of the

conditions specified in Section

12(g)(2)(G) of the Act; and

(iii) At the time of the extensions of

credit, the creditor has a reasonable

basis for believing that the issuer is not

in default on interest or principal

payments; or

(B) Any private pass-through

securities (not guaranteed by any agency

of the U.S. government) meeting all of

the following requirements:

(i) An aggregate principal amount of

not less than $25,000,000 (which may be

issued in series) was issued pursuant to

a registration statement filed with the

SEC under Section 5 of the Securities

Act of 1933;

(ii) Current reports relating to the

issue have been filed with the SEC; and

(iii) At the time of the credit

extension, the creditor has a reasonable

basis for believing that mortgage

interest, principal payments and other

distributions are being passed through

as required and that the servicing agent

is meeting its material obligations under

the terms of the offering.

(b)(1) through (e)(1) No change

(e)(2) Exempted Securities,

[Marginable Corporate Debt Securities]

Non-equity Securities and Baskets

(A) Obligations of the United States and

Highly Rated Foreign Sovereign Debt

Securities

On net ‘‘long’’ or net ‘‘short’’ positions

in obligations (including zero coupon

bonds, i.e., bonds with coupons

detached or non-interest bearing bonds)

issued or guaranteed as to principal or

interest by the United States

Government or [issued or guaranteed]

by corporations in which the United

States has a direct or indirect interest as

shall be designated for exemption by the

Secretary of the Treasury, or in

obligations that are highly rated foreign

sovereign debt securities, the margin to

be maintained shall be the percentage of

the current market value of such

obligations as specified in the

applicable category below:

(i) Less than one year to maturity—1

percent

(ii) One year but less than three years to

maturity—2 percent

(iii) Three years but less than five years

to maturity—3 percent

(iv) Five years but less than ten years to

maturity—4 percent

(v) Ten years but less than twenty years

to maturity—5 percent[, or]

(vi) Twenty years or more to maturity—

6 percent

Notwithstanding the above, on zero

coupon bonds with five years or more

to maturity the margin to be maintained

shall not be less than 3 percent of the

principal amount of the obligation.

When such obligations other than

United States Treasury bills are due to

mature in thirty calendar days or less,

a member, at its discretion, may permit

the customer to substitute another such

obligation for the maturing obligation

and use the margin held on the

maturing obligation to reduce the

margin required on the new obligation,

provided the customer has given the

member irrevocable instructions to

redeem the maturing obligation.

(B) All Other Exempted Securities

On any positions in exempted

securities other than obligations of the

United States, the margin to be

maintained shall be [15]7 percent of the

current market value [or 7 percent of the

principal amount of such obligation,

whichever amount is greater].

34242 Federal Register / Vol. 65, No. 103 / Friday, May 26, 2000 / Notices

3 12 CFR 220. The Board of Governors of the

Federal Reseve System (‘‘FRB’’) issued Regulation

T pursuant to Section 7(c) of the Act.

4The term ‘‘good faith’’ in this context generally

means that such transactions are subject to the

requirements of the applicable self-reguatory

organizaiton and that such requirements shall be

applicable for initial and maintenance margin

purposes.

5 In 1998, amendments to Regulation T

established ‘‘good faith’’ accounts, which can be

used for transactions in non-equity securities in lieu

of a margin or cash account. See Board of Governors

of the Federal Reserve Docket Nos. R–0923, and R–

0944 (January 8, 1998), 63 FR 2706 (January 16,

1998).

(C) [Non-Convertible Corporate Debt]

Non-Equity Securities

On any positions in [non-convertible

corporate debt] non-equity securities,

[which are listed or traded on a

registered national securities exchange

or qualify as an ‘‘OTC margin bond,’’ as

defined in Section 220.2(t) of Regulation

T of the Board of Governors of the

Federal Reserve System], the margin to

be maintained (except where a lesser

requirement is imposed by other

provisions of this Rule) shall be]:

(i) 10 percent of the current market

value in the case of investment grade

debt securities; and

(ii) 20 percent of the current market

value or 7 percent of the principal

amount, whichever amount is greater, in

the case of all other listed non-equity

securities, and all other marginable nonequity securities as defined in

paragraph (a)(16) of this Rule [except on

mortgage related securities as defined in

Section 3(a)(41) of the Act the margin to

be maintained for an exempt account

shall be 5 percent of the current market

value. For purposes of this

subparagraph, an exempt account shall

be defined as a member, non-member

broker/dealer, ‘‘designated account’’ or

any person having net tangible assets of

at least sixteen million dollars.]

(D) and (E) No Change

(F) [Cash] Transactions With

[Customers] Exempt Accounts Involving

Certain ‘‘Good Faith’’ Securities

[When a customer purchases an

issued exempted security from or

through a member in a cash account,

full payment shall be made promptly. If,

however, delivery or payment therefor

is not made promptly after the trade

date, a deposit shall be required as if it

were a margin transaction, unless it is

a transaction with a ‘‘designated

account.’’]

On any position resulting from a

transaction [in issued] involving

exempted securities, mortgage related

securities, or major foreign soveriegn

debt securities [made for a member, or

a non-member broker/dealer, or] made

for or with [a ‘‘designated’’] an ‘‘exempt

account,’’ no margin need be required

and any marked to the market loss on

such position need not be [marked to

the market] collected. However, [where

such position is not marked to the

market, an amount equal to the loss at

the market in such position] the amount

of any uncollected marked to the market

loss shall be [charged against] deducted

in computing the member’s net capital

as provided in SEC Rule 15c3–1, subject

to the limits provided in paragraph

(e)(2)(H) below.

(G) Transactions With Exempt

Accounts Involving Highly Rated

Foreign Sovereign Debt Securities and

Investment Grade Debt Securities

On any position resulting from a

transaction made for or with an

‘‘exempt account’’ (other than a position

subject to paragraph (e)(2)(F), the

margin to be maintained on highly rated

foreign sovereign debt and investment

grade debt securities shall be, in lieu of

any greater requirements imposed under

this Rule, (i) 0.5 percent of current

market value in the case of highly rated

foreign sovereign debt securities, and (ii)

3 percent of current market value in the

case of all other investment grade debt

securities. The member need not collect

any such margin, provided the amount

equal to the margin required shall be

deducted in computing the member’s

net capital as provided in SEC Rule

15c3–1, subject to the limits provided in

paragraph (e)(2)(H) below.

(H) Limits on Net Capital Deductions

for Exempt Accounts

(i) Member organizations shall

maintain a written risk analysis

methodology for assessing the amount

of credit extended to exempt accounts

pursuant to paragraphs (e)(2)(F) and

(e)(2)(G) which shall be made available

to the Association upon request.

(ii) In the event that the deductions of

securities positions from net capital

deductions taken by a member as a

result of marked to the market losses

incurred under paragraphs (e)(2)(F) and

(e)(2)(G) (exclusive of the percentage

requirements established thereunder)

exceed:

a. on any one account or group of

commonly controlled accounts, 5

percent of the member’s tentative net

capital, or

b. on all accounts combined, 25

percent of the member’s tentative net

capital,

and, such excess exists on the fifth

business day after it was incurred, the

member shall give prompt written

notice to the Association and shall not

enter into any new transaction(s) subject

to the provisions of paragraphs (e)(2)(F)

or (e)(2)(G) that would result in an

increase in the amount of such excess

under, as applicable, subparagraph a. or

b. above.

* * * * *

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

NASD Regulation 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.

NASD Regulation 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

NASD Regulation is proposing

amendments to Rule 2520 to revise the

margin requirements for certain nonequity securities and to expand the

types of non-equity securities eligible

for exempt account treatment.

Currently, Regulation T3 of the FRB,

which establishes initial margin

reqirements, provides that transactions

in non-equity securities are subject to

‘‘good faith’’ requirements 4 when

effected in a margin account. Securities

that are transacted in a ‘‘good faith’’

account are not subject to Regulation T

margin requirements, 5 but are subject to

the margin required by the creditor in

‘‘good faith’’ or the percentage set by the

regulatory authority where the trade

occurs, whichever is greater. As a result,

the margin requirements of NASD Rule

2520 apply to non-equity positions

maintained in customers’ accounts and

are important in providing ongoing

safety and soundness levels. In this

regard, NASD Regulation believes that

the proposed rule change provides for

margin requirements for non-equity

securities that are commensurate with

the risks associated with positions in

such securities held by customers.

In addition, NASD Regulation is

proposing several changes with regard

to exempt accounts. Specifically, the

proposed rule change will modify the

definition of ‘‘exempt account,’’

including increasing the financial

threshold for a customer to be

considered an exempt account, and will

revise margin requirements for exempt

account transactions involving

mortgage-related securities, major

Federal Register / Vol. 65, No. 103 / Friday, May 26, 2000 / Notices 34243

6The margin required for U.S. government

obligations under NASD Rule 2520 varies according

to the length of time to maturity.

7NASD Rule 2520(a)(6) provides that exempted

securities have the meaning provided in Section

3(a)(12) of the Act.

8See SEC Rule 15c3–1.

9NASD Regulation proposes to revise the

definition of ‘‘designated account.’’ Specifically, the

proposal defines ‘‘designated account’’ to mean the

account of: (1) a bank, as defined in Section 3(a)(6)

of the Act; (2) a savings association, as defined in

Section 3(b) of the Federal Deposit Insurance Act,

the deposits of which are insured by the Federal

Deposit Insurance Corporation; (3) an insurance

company, as defined in Section 2(a)(17) of the

Investment Company Act of 1940; (4) an investment

company registered with the SEC under the

Investment Company Act of 1940; (5) a state or a

political subdivision thereof; or (6) a pension or

profit sharing plan subject to ERISA or of an agency

of the United States or of a state or a political

subdivision thereof. 10 15 U.S.C. 78o–3(b)(6).

foreign sovereign debt securities, highly

rated foreign debt securities and other

investment grade debt securities.

Non-Equity Securities NASD

Regulation believes that the proposed

rule change will provide for margin

requirements on non-equity securities

that are commensurate with the risks

associated with positions in such

securities held by customers. Under the

proposed rule change, the margin

requirements for highly rated foreign

sovereign debt securities will be the

amounts specified in NASD Rule 2520

for U.S. debt securities.6 In addtition,

the posposed rule change will reduce

the margin requirement for exempted

securities 7 other than U.S. debt

securities from 15 percent to 7 percent

of the current market value, and reduce

the margin requirement for investment

grade debt securities, including

investment grade debt securities issued

by the government of a foreign country,

from 20 percent to 10 percent of the

current market value. The margin

requirement for all other marginable

non-equity securities will remain at the

greater of 20 percent of the current

market value or 7 percent of the

principal amount. The proposed rule

change will result in margin

requirements for investment grade debt

securities and exempted securities other

than U.S. debt securities that are

comparable to the highest haircut

percentages under the SEC’s net capital

rule 8 for proprietary positions in similar

securities.

Exempt Accounts. Currently, NASD

Rule 2520 contains margin requirements

specifically addressing transactions by

exempt accounts in exempted securities

and mortgage-related securities. These

requirements are lower than those

applicable to transactions in such

securities effected in accounts other

than exempt accounts. The proposed

rule change will define ‘‘exempt

account’’ as a member organization,

non-member broker/dealer registered as

a broker or dealer pursuant to the Act

or ‘‘designated account,’’ 9 and will

increase the financial threshold for a

person to be considered an exempt

account to require a net worth of at least

$45 million and financial assets of $40

million.

The proposed rule change also will

provide lower margin requirements for

exempt account transactions in highly

rated foreign sovereign debt, investment

grade foreign sovereign debt, and other

investment grade non-equity securities.

According to NASD Regulation, the

proposed rule change recognizes both

the quality of the securities as well as

the creditworthiness of the customer

and, as such, is intended to maintain

reasonable safety and soundness

standards. For transactions in these

types of securities by exempt accounts,

members will be required either to

collect margin equal to the marked to

market losses and any percentage

requirements under the rule or to take

a net capital charge, subject to the limits

provided in proposed NASD Rule

2520(e)(2)(H). Under the proposed rule

change, the percentage requirements

will be 3 percent of current market

value for all investment grade corporate

debt and for foreign sovereign debt in

the lower two investment grade

categories and 0.5 percent of current

market value for foreign sovereign debt

in the second highest investment grade

category (i.e., highly rated foreign

sovereign debt securities). These terms

are also defined in the proposed rule

change.

For major foreign sovereign debt

securities and mortgage-related

securities in exempt accounts, the

proposed rule change provides the same

margin treatment for these securities as

U.S. Government securities in exempt

accounts, in that no margin will be

required and marked to the market

losses need not be collected, subject to

the limits proposed in NASD Rule

2520(e)(2)(H).

Proposed NASD Rule 2520(e)(2)(H)

will also limit the amount of any

uncollected marked to market losses

which are being deducted from a

member’s net capital to 5 percent for

each exempt account and 25 percent for

all exempt accounts combined. When

marked to market losses exceeding these

limits continue to exist on the fifth

business day after they were incurred,

the member will be required to provide

the Association with written

notification and will be prohibited from

entering into any new transactions that

would increase the amount of the

excess.

Other Provisions. The proposed rule

change will provide new definitional

provisions, which, among other things,

will define the following types of nonequity securities: highly rated foreign

sovereign debt securities; investment

grade debt securities; major foreign

sovereign debt securities; listed nonequity securities; and other marginable

non-equity securities. The defined terms

categorize certain types of non-equity

securities for purposes of prescribing

the applicable margin requirements. In

addition, the proposed rule change will

require that, as good business practice

and for safety and soundness

considerations, members maintain

written procedures for assessing credit

extended to exempt accounts.

2. Statutory Basis

NASD Regulation believes that the

proposed rule change is consistent with

the provisions of section 15A(b)(6) 10 of

the Act which requires, among other

things, that the Association’s rules must

be designed to prevent fraudulent and

manipulative acts and practices, to

promote just and equitable principles of

trade and, in general, to protect

investors and the public interest. NASD

Regulation believes that the proposed

rule change will promote the safety and

soundness of member firms and is

consistent with the rules and

regulations of the FRB for the purpose

of preventing the excess use of credit for

the purchase or carrying of securities.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

NASD Regulation does not believe

that the proposed rule change will result

in any burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act.

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

Within 35 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

90 days of such date if it finds such

longer period to be appropriate and

publishes its reasons for so finding or

34244 Federal Register / Vol. 65, No. 103 / Friday, May 26, 2000 / Notices

11 17 CFR 200.30–3(a)(12).

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

217 CFR 240.19b–4.

3The current proposal replaces File No. SR–Phlx–

00–36, which the Phlx has withdrawn. See Letter

from John Kenney, Jr., Counsel, Phlx, to Nancy

Sanow, Assistant Director, Division of Market

Regulation, Commission, dated May 5, 2000. In file

No. SR–Phlx–00–36, the Phlx proposed to establish

a monthly transaction fee of $0.20 per $1000 of

value traded for equity specialists’ trades transacted

through the Philadelphia Stock Exchange

Automated Communication and Execution

(‘‘PACE’’) System. According to the Phlx, the

Exchange inadvertently filed File No. SR–Phlx–00–

36 with the Commission. Telephone conversation

between John Kenney, Jr., Counsel, Phlx, and

Michael Gaw, Attorney, Division of Market

Regulation, Commission, on May 16, 2000 (‘‘May 16

Conversation’’)

4 15 U.S.C. 78f(b).

5 15 U.S.C. 78f(b)(4).

6The Phlx represents that the proposed fees

would be charged exclusively to members and not

to public customers. See May 16 Conversion, supra

note 3. The Commission notes that this proposed

rule change is, therefore, properly filed under

Section 19(b)(3)(A)(ii) of the Act. 15 U.S.C.

78s(b)(3)(A)(ii).

7 15 U.S.C. 78s(b)(3)(A)(ii).

8 17 CFR 240.19b–4(f)(2).

(ii) as to which the NASD consents, the

Commission will:

A. By order approve the proposed rule

change, or

B. Institute proceedings to determine

whether the proposed rule chane 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 at

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 File No.

SR–NASD–00–08 and should be

submitted by June 16, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority. 11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–13260 Filed 5–25–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42802; File No. SR–Phlx–

00–42]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Philadelphia Stock Exchange, Inc. To

Adopt a New Transaction Fee of $0.20

Per Trade for Specialists Trading on

the Philadelphia Stock Exchange

Automated Communication System

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 hereby is given that on May 8,

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.3

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 proposes to amend its

schedule of dues, fees, and charges to

initiate a transaction fee of $0.20 per

trade for equity specialists using the

PACE System. The proposed fee would

be effective on June 1, 2000. The

following is the text of the proposed

addition to the Phlx fee schedule:

‘‘EQUITY FLOOR SPECIALIST

TRANSACTION FEE $.20 per trade

for each trade conducted on PACE’’

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

Phlx included statements concerning

the purpose of and basis for the

proposed rule change and discussed any

comments it received regarding the

proposed rule change. The text of these

statements may be examined at the

places specified in Item IV below. the

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 proposed rule change would

amend the Exchange’s fee schedule to

include a transaction fee of $0.20 per

trade for those specialists trading

through the PACE system on the equity

floor of the Exchange. PACE is the

Exchange’s automated order entry,

routing, and execution system. The

purpose of the fee is to generate

revenues for the Exchange that would

strengthen its overall financial and

competitive posture. For example, the

Exchange may continue to incur costs

respecting PACE system development,

such as decimalization efforts and other

planned improvements. Of course, the

Phlx is seeking to raise revenues for

overall Exchange use. The Exchange

believes that the fee is both reasonable

and equitable because Phlx specialists

are not currently charged any Phlx fee

respecting PACE trades.

2. Basis

The Exchange believes that the

proposed rule change is consistent with

Section 6(b) of the Act 4 in general and

Section 6(b)(4) of the Act 5 in particular

in that it is intended to provide for the

equitable allocation of reasonable dues,

fees, and other charges among its

members and other persons using its

facilities.6

B. Self-Regulatory Organization’s

Statement of Burden on Competition

The Phlx does not believe that the

proposed rule change would impose any

inappropriate 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 either

solicited or received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The foregoing rule change establishes

or changes a due, fee, or other charge

imposed by the Exchange and, therefore,

has become effective pursuant to

Section 19(B)(3)(A)(ii) of the Act 7 and

Rule 19b–4(f)(2) 8 thereunder. The

Exchange intends to implement the fee

effective June 1, 2000. At any time

within 60 days of the filing of such

proposed rule change, the Commission

may summarily abrogate such rule

change if it appears to the Commission

that such action is necessary or