35406 Federal Register / Vol. 65, No. 107 / Friday, June 2, 2000 / Notices

Those permitted to intervene become

parties to the proceeding, subject to any

limitations in the order granting leave to

intervene, and have the opportunity to

participate fully in the conduct of the

hearing, including the opportunity to

present evidence and cross-examine

witnesses.

If a hearing is requested, the

Commission will make a final

determination on the issue of no

significant hazards consideration. The

final determination will serve to decide

when the hearing is held.

If the final determination is that the

amendment request involves no

significant hazards consideration, the

Commission may issue the amendment

and make it immediately effective,

notwithstanding the request for a

hearing. Any hearing held would take

place after issuance of the amendment.

If the final determination is that the

amendment request involves a

significant hazards consideration, any

hearing held would take place before

the issuance of any amendment.

A request for a hearing or a petition

for leave to intervene must be filed with

the Secretary of the Commission, U.S.

Nuclear Regulatory Commission,

Washington, DC 20555–0001, Attention:

Rulemakings and Adjudications Staff, or

may be delivered to the Commission’s

Public Document Room, the Gelman

Building, 2120 L Street, NW.,

Washington, DC, by the above date. A

copy of the petition should also be sent

to the Office of the General Counsel,

U.S. Nuclear Regulatory Commission,

Washington, DC 20555–0001, and to

Edward J. Cullen, Jr., PECO Energy

Company, 2301 Market Street (S23–1),

Philadelphia, PA 19103, attorney for the

licensee.

Nontimely filings of petitions for

leave to intervene, amended petitions,

supplemental petitions and/or requests

for hearing will not be entertained

absent a determination by the

Commission, the presiding officer or the

presiding Atomic Safety and Licensing

Board that the petition and/or request

should be granted based upon a

balancing of the factors specified in 10

CFR 2.714(a)(1)(i)–(v) and 2.714(d).

For further details with respect to this

action, see the application for

amendment dated May 22, 2000, which

is available for public inspection at the

Commission’s Public Document Room,

the Gelman Building, 2120 L Street,

NW., Washington, DC, and accessible

electronically through the ADAMS

Public Electronic Reading Room link at

the NRC Web site (http://www.nrc.gov).

Dated at Rockville, Maryland, this 26th day

of May 2000.

For the Nuclear Regulatory Commission.

Timothy G. Colburn,

Senior Project Manager, Section 1, Project

Directorate I, Division of Licensing Project

Management, Office of Nuclear Reactor

Regulation.

[FR Doc. 00–13875 Filed 6–1–00; 8:45 am]

BILLING CODE 7590–01–P

NUCLEAR REGULATORY

COMMISSION

[Docket No. 50–312]

Sacramento Municipal Utility District

(SMUD), Rancho Seco Nuclear

Generating Plant; Notice of Public

Meeting

The NRC will conduct a public

meeting in the Chabolla Community

Center, 630 Chabolla Avenue, Galt,

California, on June 20, 2000, to discuss

SMUD plans to commence

dismantlement and decontamination

activities at the Rancho Seco Nuclear

Generating Station, Herald, California.

The meeting will begin at 7:00 p.m.,

with the doors opening at 6:30 p.m. The

meeting will be chaired by Mr. Don

Notolli, Supervisor, County Supervisory

District 5, County of Sacramento,

California, and will include short

presentations by the NRC staff on the

decommissioning process and NRC

inspection program and by SMUD on its

planned decommissioning activities.

There will be an opportunity for

members of the public to make

comments and question the NRC staff

and SMUD representatives.

On November 4, 1999, SMUD

provided Amendment 2 to its PostShutdown Decommissioning Activities

Report (PSDAR) to the NRC staff. This

revision describes, in part, the licensee’s

plans to forego its initial option of

hardened—SAFSTOR (i.e., long-term

safe storage) for the Rancho Seco facility

to implement an accelerated schedule of

dismantlement and decontamination

that will result in license termination by

2008. This licensee decision was made,

in part, on its success in the incremental

decontamination and dismantlement of

the facility as described in Amendment

1 to its PSDAR dated January 29, 1997.

The NRC staff believes that the

licensee’s decision to change from

hardened-SAFSTOR to full-plant

decontamination and dismantlement is

a significant change to the activities and

schedules identified in the original

PSDAR submitted on March 20, 1997.

As such, the NRC plans to inform the

public of the licensee’s new

decommissioning schedule by

conducting a public meeting at the

Chabolla Community Center which is in

the vicinity of the Rancho Seco facility.

This meeting will also provide a forum

for the public to gather information and

ask questions or make comments.

For more information, contact Paul W.

Harris, Project Directorate IV &

Decommissioning, Office of Nuclear

Reactor Regulation, U.S. Nuclear

Regulatory Commission, Washington,

DC 20555–0001; telephone 301–415–

1169 or email at PWH1@NRC.gov.

The PSDAR is available for public

inspection at the Commission’s Public

Document Room located at the Gelman

Building, 2120 L Street, NW,

Washington, DC, and is accessible

electronically from the ADAMS Public

Library (Amendment 2 Accession No.

ML993160051) component on the NRC

Web site, http://www.nrc.gov (the

Electronic Reading Room).

Dated at Rockville, Maryland, this 26th day

of May 2000.

For the Nuclear Regulatory Commission.

Paul W. Harris,

Project Manager, Decommissioning Section,

Project Directorate IV & Decommissioning,

Division of Licensing Project Management,

Office of Nuclear Reactor Regulation.

[FR Doc. 00–13876 Filed 6–1–00; 8:45 am]

BILLING CODE 7590–01–P

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

24477; 812–11644]

UAM Funds, Inc. et al.; Notice of

Application

May 25, 2000.

AGENCY: Securities and Exchange

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

ACTION: Notice of an application under

section 12(d)(1)(J) of the Investment

Company Act of 1940 (the ‘‘Act’’)

exempting applicants from section

12(d)(1) of the Act, under sections 6(c)

and 17(b) of the Act exempting

applicants from section 17(a) of the Act,

and under section 17(d) of the Act and

rule 17d–1 under the Act to permit

certain joint arrangements.

SUMMARY OF THE APPLICATION: The order

would permit certain registered openend investment companies to use cash

collateral from securities lending

transactions (‘‘Cash Collateral’’) to

purchase shares of affiliated money

market funds or affiliated private

investment companies, to deposit Cash

Collateral in one or more joint accounts,

and to pay fees based on a share of the

revenue generated from securities

lending transactions to an affiliated

lending agent and other affiliated

entities.

Federal Register / Vol. 65, No. 107 / Friday, June 2, 2000 / Notices 35407

1All registered investment companies,

unregistered investment vehicles and investment

advisers that currently intend to rely on the order

are named as applicants. Any Future Lending Fund,

Private Fund, future Investment Adviser, or future

Private Fund Adviser that relies on the requested

relief will do so only in compliance with the terms

and conditions of the application.

2The personnel who will provide day-to-day

lending agency services to the Lending Funds do

not and will not provide investment advisory

services to the Lending Funds, or participate in any

way in the selection of the portfolio securities or

other aspects of the management of the Lending

Funds.

APPLICANTS: UAM Funds, Inc. (‘‘Fund

I’’), UAM Funds, Inc. II (‘‘Fund II’’),

UAM Funds Trust (‘‘Fund III’’) (the

‘‘Lending Funds’’), Acadian Asset

Management LLC, Analytic Investors,

Inc., C.S. McKee & Company, Inc.,

Cambiar Investors, Inc., Chicago Asset

Management Company, Cooke & Bieler,

Inc., Dewey Square Investors Corp.,

Dwight Asset Management Company,

Fiduciary Management Associates, Inc.,

First Pacific Advisors LLC, Hanson

Investment Management Company,

Heitman/PRA Securities Advisors LLC,

Investment Counselors of Maryland,

Inc., JAM Asset Management L.P.,

Murray Johnstone International Ltd.,

NWQ Investment Management

Company, Pacific Financial Research,

Inc., Pell Rudman Trust Company, Rice,

Hall, James & Associates, Sirach Capital

Management, Inc., Sterling Capital

Management Company, Thompson,

Siegel & Walmsley, Inc., Tom Johnson

Investment Management, Inc. and any

entity controlling, controlled by, or

under common control with United

Asset Management Corporation

(‘‘UAM’’) that, in the future, acts as

investment adviser to a Lending Fund or

any other registered open-end

management investment company (the

‘‘Investment Advisers’’), UAM Trust

Company (the ‘‘Trust Company’’), UAM

Global Securities Lending, Inc. (the

‘‘Servicing Agent’’), and UAM Fund

Services, Inc. (the ‘‘Administrator’’).

FILING DATES: The application was filed

on June 4, 1999, and amended on May

24, 2000.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicant with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

June 19, 2000, and should be

accompanied by proof of service on

applicants, in the form of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the writer’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 SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, NW., Washington, DC 20549–

0609. Applicants, 211 Congress Street,

Boston, MA 02110.

FOR FURTHER INFORMATION CONTACT:

Marilyn Mann, Senior Counsel, at (202)

942–0582, or Mary Kay Frech, Branch

Chief, at (202) 942–0564, (Division of

Investment Management, Office of

Investment Company Regulation).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee at the SEC’s

Public Reference Branch, 450 Fifth

Street, NW., Washington, DC 20549–

0102 (tel. 202–942–8090).

Applicants’ Representations

1. Funds I and II are Maryland

corporations registered under the Act as

open-end management investment

companies comprised of multiple series.

Fund III is a Delaware business trust

registered under the Act as an open-end

management investment company

comprised of multiple series.

2. Applicants request that the order

also apply to (a) all other registered

open-end management investment

companies for which the Investment

Advisers may now or in the future act

as investment adviser (the ‘‘Fund

Lending Funds’’); (b) unregistered

investment vehicles relying on section

3(c)(1) or 3(c)(7) of the Act, currently in

existence or proposed to be formed, and

advised by a Private Fund Adviser (the

‘‘Private Funds’’); and (c) any

investment adviser controlling,

controlled by, or under common control

with UAM that, in the future, acts as

investment adviser to a Private Fund

(the ‘‘Private Fund Advisers’’). 1 Either

the Trust Company or the Administrator

may act in the role of ‘‘Lending Agent,’’

as described below. In addition, either

the Trust Company or the Administrator

may act in the role of ‘‘Program

Administrator,’’ as described below.

Existing and future series of the Lending

Funds and the Future Lending Funds

are collectively referred to as the

‘‘Portfolios.’’ Portfolios that hold

themselves out as money market funds

are referred to as the ‘‘Money Market

Portfolios.’’

3. The current Investment Advisers,

except JAM Asset Management L.P., are

wholly-owned subsidiaries of UAM,

which is a holding company

incorporated in Delaware. JAM Asset

Management L.P. is a limited

partnership, of which UAM is the sole

limited partner. Pursuant to an

investment advisory agreement between

the respective Investment Adviser and

the respective Lending Fund, on behalf

of each respective Portfolio, each

Investment Adviser manages one or

more Portfolio’s investments. Each of

the Investment Advisers is registered

under the Investment Advisers Act of

1940 (the ‘‘Advisers Act’’) except Pell

Rudman Trust Company, which is

exempt from registration pursuant to

section 202(a)(11) of the Advisers Act.

4. The Lending Funds have each

entered into a Fund Administration

Agreement with the Administrator,

pursuant to which the Administrator

provides transfer agent, fund accounting

and fund administration services to the

Lending Funds. Chase Manhattan Bank,

N.A. is the custodian of Fund I and

Fund III. First Union National Bank is

the custodian of Fund II. The Trust

Company, a wholly-owned subsidiary of

UAM and a Maryland chartered trust

company, is exempt from registration as

an investment adviser pursuant to

section 202(a)(11) of the Advisers Act.

The Trust Company serves as Private

Fund Adviser to certain Private Funds.

The Servicing Agent is an indirect

wholly-owned subsidiary of UAM.

5. Each Lending Fund has the ability

to increase its income by participating

in a securities lending program (the

‘‘Program’’) under which it may lend

portfolio securities to registered brokerdealers or other institutional investors

deemed by its Investment Adviser to be

of good standing, which meet minimum

criteria established by the board of

directors or trustees (the ‘‘Board’’) of the

Lending Funds (‘‘Borrowers’’). The

agreements governing such loans will

require that the loans be continuously

secured by collateral equal at all times

in value to at least the market value of

the securities loaned. Collateral for such

loans may include cash, securities of the

U.S. Government or its agencies, or any

combination of cash and such securities.

6. Under the Program, the Lending

Agent, Program Administrator,

Administrator and Servicing Agent,

together or individually with

unaffiliated entities, will provide

securities lending services and

administrative services required for the

operation of the Program to the Lending

Funds.2 The Lending Agent will be

responsible for soliciting Borrowers for

each Portfolio’s securities subject to

criteria established by the Board and

guidelines provided by the Investment

Advisers, monitoring daily the value of

the loaned securities and collateral, and

requesting that Borrowers add to the

35408 Federal Register / Vol. 65, No. 107 / Friday, June 2, 2000 / Notices

3The Investing Portfolios will not enter into

‘‘hold-in-custody’’ repurchase agreements in which

the counterparty or one of its affiliated persons may

have possession of, or control over, the collateral

subject to the agreements except in instances when

cash is received very late in the business day or

would otherwise be unavailable for investment.

collateral when required by the loan

arrangements. The Lending Agent will

contract with the Servicing Agent to

provide product development support,

including information about Borrowers

and securities lending market data.

7. In transactions in which the

collateral consists of U.S. Government

securities or letters of credit, the

Lending Agent will negotiate on behalf

of the Lending Fund a lending fee to be

paid by the Borrower to the Lending

Fund. In transactions in which the

collateral consists of cash, the Lending

Fund, instead of receiving a separate

lending fee, receives a portion of the

return earned on the investment of the

Cash Collateral by or under the

direction of the Lending Fund’s

Investment Adviser. Depending on the

arrangements negotiated with the

Borrower by the Lending Agent, a

percentage of the return on the

investment of the Cash Collateral may

be remitted on behalf of the Lending

Fund to the Borrower.

8. Under the Program, it is proposed

that the Lending Funds pay, and that

the Lending Agent, Program

Administrator, Administrator, and

Servicing Agent accept, fees based on a

share of the revenues generated from

securities lending transactions for the

Lending Funds. The Program

Administrator and/or the Administrator

will maintain accounting and financial

records for the Portfolios of the Lending

Funds that participate in the Program,

and assist with communications and

instructions by and among the Lending

Funds, the Investment Advisers,

Borrowers, and the managers and other

personnel of the various investment

vehicles in which the Cash Collateral

will be invested.

9. Each of the Lending Funds will

enter into a Securities Lending Program

Administration Agreement with the

Program Administrator. Services

provided to the Lending Funds under

this agreement include: monitoring the

Program to ensure that loans are effected

in accordance with the instructions of

each Investment Adviser; maintaining

financial and accounting records;

communicating instructions by and

among the Lending Funds, Investment

Advisers and third parties; reviewing

market prices of securities, daily reports

of outstanding loan activity, collateral

reinvestment and month-end security

position reports.

10. The Program Administrator will

enter into a Securities Lending Record

Administration Agreement with the

Administrator, pursuant to which the

Program Administrator delegates certain

of its recordkeeping obligations under

the Securities Lending Program

Administration Agreement to the

Administrator. The Administrator will

be compensated under that agreement

based on a share of the securities

lending program administration fees

received by the Program Administrator

from the Lending Funds.

11. The Lending Agent will enter into

an Administrative Services Agreement

with the Servicing Agent pursuant to

which the Servicing Agent will assist in

identification of prospective Borrowers,

analyzing the creditworthiness of

prospective Borrowers, identifying

strategies for reinvestment of cash

collateral consistent with the

Investment Advisers’ instructions, and

provide research about industry trends

and developments, and analyses of the

economy as it may affect the Program.

Under the applicable agreement, the

Servicing Agent will be compensated

based on a share of the fees received by

the Lending Agent from the Lending

Funds.

12. Applicants proposed that each of

the Portfolios of the Lending Funds (the

‘‘Investing Portfolios’’) use Cash

Collateral to purchase shares of the

Money Market Portfolios. By investing

Cash Collateral in the Money Market

Portfolios, the Investing Portfolios are

expected to reduce their transaction

costs, create more liquidity, enjoy

greater returns and further diversify

their holdings.

13. Applicants also propose that the

Investing Portfolios use Cash Collateral

to purchase shares of beneficial interest,

common stock or other units of

beneficial ownership (‘‘Shares’’) issued

by the Private Funds. An Investment

Adviser or other entity under common

control with an Investment Adviser,

such as the Trust Company, will serve

as the trustee or other manager

(‘‘Trustee’’) of the Private Funds. In

addition, a Private Fund Adviser will

serve as investment adviser to the

Private Funds. An affiliated person of an

Investment Adviser may provide

administrative, accounting, transfer

agent and other services to the Private

Funds. Private Funds utilized in the

Program may operate as a money market

portfolio and comply with the

requirements of rule 2a–7 under the Act.

Private Funds that do not comply with

rule 2a–7 will be short-term fixed

income funds with an average portfolio

maturity of no more than 365 days. Each

Private Fund will offer daily redemption

of Shares at the current net asset value

per share. The Private Funds will not

impose any sales load or redemption or

distribution fees.

14. Applicants also propose to deposit

Cash Collateral in one or more joint

trading accounts or subaccounts (‘‘Joint

Accounts’’) with their custodian bank or

another unaffiliated custodian or subcustodian approved by the Boards of the

Lending Funds (the ‘‘Custodians’’). The

daily balance of the Joint Accounts will

be invested in: (a) Repurchase

agreements ‘‘collateralized fully’’ (as

defined in rule 2a–7 under the Act); R (b)

interest bearing or discounted

commercial paper, including dollar

denominated commercial paper of

foreign issuers; and (c) any other shortterm taxable or tax-exempt money

market instruments, including variable

rate demand notes, that constitute

‘‘Eligible Securities’’ (as defined in rule

2a–7 under the Act) (collectively,

‘‘Short-Term Investments’’).

15. Any repurchase agreements

entered into through a Joint Account

will comply with Investment Company

Act Release No. 13005 (February 2,

1983) and any other existing and future

staff positions taken by the SEC and the

staff by rule, release, letter or otherwise

relating to repurchase agreement

transactions. In the event that the SEC

or the staff sets forth guidelines with

respect to other Short-Term

Investments, all such investments made

through the Joint Accounts will comply

with those guidelines. All purchases

through the Joint Accounts will comply

with all present and future SEC and staff

positions relating to the investment of

Cash Collateral in connection with

securities lending activities.

16. Investing Portfolios will invest

through a Joint Account only to the

extent that, regardless of the Joint

Accounts, they would desire to invest in

short-term liquid investments that are

consistent with their respective

investment objectives, policies and

restrictions. An Investing Portfolio’s

decision to use a Joint Account will be

based on the same factors as its decision

to make any other short-term liquid

investment.

17. The Investment Advisers will be

responsible for providing guidelines to

the Program Administrator or the

Administrator for investing funds held

by the Joint Accounts, and, in

conjunction with the Program

Administrator or the Administrator,

establishing accounting and control

procedures, operating the Joint

Accounts in accordance with the

procedures discussed below, and

ensuring fair treatment of the Investing

Portfolios. The Investment Advisers will

Federal Register / Vol. 65, No. 107 / Friday, June 2, 2000 / Notices 35409

not participate monetarily in the Joint

Accounts.

18. The applicants request relief to

permit: (a) The Investing Portfolios to

use Cash Collateral to purchase and

redeem shares of the Money Market

Portfolios and each Money Market

Portfolio to sell shares to, and redeem

such shares from the Investing

Portfolios; (b) the Investing Portfolios to

use Cash Collateral to purchase and

redeem Shares of the Private Funds and

the Private Funds to sell Shares to the

Investing Portfolios and redeem Shares

from the Investing Portfolios; (c) the

Investing Portfolios to deposit Cash

Collateral in the Joint Accounts; and (d)

the Lending Funds and Future Lending

Funds to pay, and the Lending Agent,

Program Administrator, Administrator

and Servicing Agent to accept, fees

based on a share of the revenue

generated from securities lending

transactions for services provided by the

lending Agent, program Administrator,

Administrator and Servicing Agent.

Applicants’ Legal Analysis

A. Investment of Cash Collateral in

Money Market Portfolios and Private

Funds

1. Section 12(d)(1)(A) of the Act

provides that no registered investment

company may acquire securities of

another investment company

representing more than 3% of the

acquired company’s outstanding voting

stock, more than 5% of the acquiring

company’s total assets, or, together with

the securities of other investment

companies, more than 10% of the

acquiring company’s total assets.

Section 12(d)(1)(B) provides that no

registered open-end investment

company may sell its securities to

another investment company if the sale

will cause the acquiring company to

own more than 3% of the acquired

company’s voting stock, or if the sale

will cause more than 10% of the

acquired company’s voting stock to be

owned by investment companies.

2. Section 12(d)(1)(J) of the Act

provides that the SEC may exempt any

person or transaction from any

provision of section 12(d)(1) if and to

the extent that the exemption is

consistent with the public interest and

the protection of investors.

3. Applicants request an exemption

under section 12(d)(1)(J) to permit each

Investing Portfolio to use Cash

Collateral to acquire shares of a Money

Market Portfolio in excess of the limits

imposed by section 12(d)(1)(A) if the

Act. Applicants’ proposed also would

permit the Money Market Portfolios to

sell their securities to an Investing

Portfolio in excess of the percentage

limitation in section 12(d)(1(B).

Applicants represent that no Money

Market Portfolio will acquire securities

of any other investment company in

excess of the limits contained in section

12(d)(1)(A) of the Act.

4. Applicants state that none of the

abuses meant to be addressed by section

12(d)(1) of the Act is created by the

proposed investment of Cash Collateral

in Money Market Portfolios. Applicants

further state that access to the Money

Market Portfolios will enhance each

Investing Portfolio’s ability to manage

and invest Cash Collateral. Applicants

represent that the proposed arrangement

will not result in an inappropriate

layering of fees because the Money

Market Portfolios will not charge a sales

load, redemption fee, distribution fee

adopted in accordance with rule 12b–1

under the Act or service fee (as defined

in rule 2830(b)(9) of the National

Association of Securities Dealers, Inc.

Conduct Rules (‘‘NASD Conduct

Rules’’)).

5. Sections 17(a)(1) and 17(a)(2) of the

Act prohibit an affiliated person of a

registered investment company, or any

affiliated person of the affiliated person,

acting as principal, from selling any

security to, or purchasing any security

from, the registered investment

company. Section 2(a)(3) of the Act

defines an ‘‘affilated person’’ of another

person to include: Any person directly

or indirectly controlling, controlled by,

or under common control with, the

other person; and, in the case of an

investment company, its investment

adviser. Control is defined in section

2(a)(9) of the Act to mean ‘‘the power to

exercise a controlling influence over the

management of policies of a company,

unless such power is solely the results

of an official position with such

company.’’ Because the Lending Funds

share a common Board, each Portfolio of

the Lending Funds may be deemed to be

under common control with each of the

other Portfolios of the Lending Funds.

In addition, an Investment Adviser

serves as investment adviser to each of

the Investment Portfolios and the

Money Market Portfolios, each such

Investment Adviser could be deemed to

control the Portfolio it advises, and the

Investment Advisers are under common

control. Therefore, the Investing

Portfolios and the Money Market

Portfolios could be deemed to be under

common control and each Investing

Portfolio is an affiliated person of each

Money Market Portfolios. Accordingly,

the sale of shares of the Money Market

Portfolios to the Investing Portfolios,

and redemption of such shares by the

Investing Portfolios, is prohibited under

section 17(a).

6. Because the Trust Company, an

Investment Adviser, an entity under

common control with an Investment

Adviser or a Private Fund Adviser will

serve as Private Fund Adviser or Trustee

to each Private Fund, and each entity

could be deemed to control the Private

Fund, the Private Fund and each

Lending Fund could be deemed to be

under common control. Therefore, the

sale or redemption by a Private Fund of

its Shares to or from the Lending Funds

is prohibited by section 17(a).

7. Section 17(b) of the Act authorizes

the SEC to exempt a transaction from

section 17(a) of the Act if the terms of

the proposed transaction, including the

consideration to be paid or received, are

reasonable and fair and do not involve

overreaching on the part of any person

concerned, and the proposed

transaction is consistent with the policy

of each registered investment company

concerned and with the general

purposes of the Act.

8. Section 6(c) of the Act authorizes

the SEC to exempt any person or

transaction from any provision of the

Act if the exemption is necessary or

appropriate in the public interest and

consistent with the protection of

investors and the purposes fairly

intended by the policy and provisions of

the Act.

9. Applicants request an order under

sections 6(c) and 17(b) of the Act to

permit the Investing Portfolios to use

Cash Collateral to purchase shares of the

Money Market Portfolios and Shares of

the Private Funds and to permit the

redemption of the shares or Shares.

Applicants maintain that the terms of

the proposed transactions are reasonable

and fair because the Investing Portfolios

will be treated like any other investors

in the Money Market Portfolios and

Private Funds, and will purchase and

sell shares of the Money Market

Portfolios and Shares of the Private

Funds on the same terms and on the

same basis as all other shareholders of

the Money Market Portfolios and Private

Funds. Applicants assert that the

proposed transactions comply with each

Portfolio’s investment restrictions and

policies. Applicants state that Cash

Collateral of an Investing Portfolio that

is a Money Market Portfolio will not be

used to acquire Shares of any Private

Fund that does not comply with rule

2a–7 under the Act. Applicants further

sate that the investment of Cash

Collateral will comply with all present

and future SEC and staff positions

concerning securities lending.

Applicants also state that the Private

Funds will comply with the major

35410 Federal Register / Vol. 65, No. 107 / Friday, June 2, 2000 / Notices

substantive provisions of the Act,

including the prohibitions against

affiliated transactions, leveraging and

issuing senior securities, and rights of

redemption.

10. Section 17(d) of the Act and rule

17d–1 under the Act prohibit any

affiliated person or principal

underwriter for a registered investment

company, or any affiliated person of

such a person or principal underwriter,

acting as principle, from effecting any

transaction in connection with any joint

enterprise or other joint arrangement or

profit sharing plan in which the

investment company participates,

without an order of the SEC.

11. Applicants state that the Investing

Portfolios (by purchasing and redeeming

shares of the Money Market Portfolios

and Shares of the Private Funds), the

Investment Advisers (by managing the

assets of the Investing Portfolios

invested in the Money Market Portfolios

and Private Funds and by managing the

assets of the Money Market Portfolios),

the Investment Advisers, Private Fund

Advises, and Trust Company and their

affiliated companies (by managing the

assets of, and providing other services

to, the Private Funds), the Lending

Agent, Program Administrator,

Servicing Agent, and Administrator (by

facilitating the investment of Cash

Collateral of the Investing Portfolios in

the Money Market Portfolios and Private

Funds), an the Money Market Portfolios

(by selling shares to and redeeming

Shares from the Investing Portfolios)

could be deemed to be participants in a

joint enterprise or other joint

arrangement within the meaning of

section 17(d) of the Act and rule 17d–

1 under the Act. Applicants request an

order in accordance with section 17(d)

and rule 17d–1 to permit certain

transactions incident to investments in

the Money Market Portfolios and the

Private Funds.

12. Under rule 17d–1, in passing on

applicants for orders under section

17(d), the SEC considers whether the

company’s participation in the joint

enterprise is consistent with the

provisions, policies, and purposes of the

Act, and the extent to which the

participation is on a basis different from

or less advantageous than that of other

participants. Applicants submit that the

proposed transactions meet these

standards.

13. Applicants state that the

investment by the Investing Portfolios in

shares of the Money Market Portfolios

and Shares of the Private Funds will be

on the same basis and will be

indistinguishable from any other

shareholder account maintained by the

Money Market Portfolios and Private

Funds. Applicants also maintain that, to

the extent any of the Investing Portfolios

invests in the Money Market Portfolios

and Private Funds as proposed, each

Investing Portfolios will participate on a

fair and reasonable basis in the returns

and expenses of the Money Portfolios

and Private Funds.

B. Investments in Joint Trading

Accounts

1. As noted above, section 17(d) and

rule 17d–1 generally prohibit joint

transactions involving registered

investment companies and certain of

their affiliates unless the SEC has

approved the transaction. Applicants

state that the Investing Portfolios may be

considered ‘‘affiliated persons’’ because

they may be deemed to be under the

control of the Investment Advisers,

which are under common control.

Applicants state that the Investing

Portfolios, by participating in the Joint

Accounts, and the Investment Advisers,

Program Administrator and

Administrator, by managing the Joint

Accounts, could be deemed to be ‘‘joint

participants’’ in a transaction within the

meaning of section 17(d). In addition,

applicants state that each Joint Account

could be deemed to be a ‘‘joint

enterprise or other joint arrangement’’

within the meaning of rule 17d–1.

2. Applicants submit that the

proposed Joint Accounts meet the

criteria of rule 17d–1 for issuance of an

order. Applicants assert that no

Investing Portfolio would be in a less

favorable position than any other

Investing Portfolio as a result of

participating in the Joint Accounts. Each

Investing Portfolio’s liability on any

Short-Term Investment will be limited

to its interest in the Short-Term

Investment. Applicants also assert that

the proposed operation of the Joint

Accounts will not result in any conflicts

of interest among any of the Investing

Portfolios, Investment Advisers,

Program Administrator or

Administrator.

3. Applicants state that the operation

of the Joint Accounts could result in

certain benefits to the Investing

Portfolios. The Investing Portfolios may

earn a higher rate of return on

investments through the Joint Accounts

relative to the returns they could earn

individually. Under most market

conditions, applicants assert, it is

possible to negotiate a rate of return on

larger investments that is higher than

the rate available on smaller

investments. In addition, applicants

state that the enhanced purchasing

power available through a Joint Account

may increase the number of dealers

willing to enter into Short-Term

Investments with the Investing

Portfolios and may reduce the

possibility that an Investing Portfolio’s

Cash Collateral would remain

uninvested. Finally, the Joint Accounts

may result in certain administrative

efficiencies and lessen the potential for

error by reducing the number of trade

tickets and cash wires that

counterparties, the Custodian and the

Investment Advisers must process.

C. Payment of Lending Agent Fees to the

Lending Agent, Program Administrator,

Administrator and Servicing Agent

1. Applicants state that each of the

Lending Agent, the Program

Administrator, the Administrator, and

the Servicing Agent, as an entity under

common control with the Investment

Advisers to the Lending Funds, is an

affiliated person of an affiliated person

of the Lending Funds. Applicants

further state that a lending agent

agreement between the Lending Funds

and the Lending Agent, an

administrative services agreement

between the Lending Funds and the

Program Administrator, an

administrative services agreement

between the Program Administrator and

the Administrator, and an

administrative and research services

agreement between the Lending Agent

and the Servicing Agent, under which

compensation is based on a share of the

revenue generated by the Program, may

be a joint enterprise or other joint

arrangement or profit sharing plan

within the meaning of section 17(d) and

rule 17d–1. Consequently, applicants

request an order to permit the Lending

Agent. Program Administrator,

Administrator and Servicing Agent to

receive a portion of the revenue

generated by the Program.

2. Applicants propose that each

Lending Fund adopt the following

procedures to ensure that the proposed

fee arrangement and the other terms

governing the relationship with the

Lending Agent, the Program

Administrator, the Administrator and

the Servicing Agent will meet the

standards of rule 17d–1:

(a) In connection with the approval of

the Lending Agent as lending agent and

the Program Administrator and/or the

Administrator as administrator and the

Servicing Agent as provider of

administrative and research services for

the Program and implementation of the

proposed fee arrangement, a majority of

the Board of the Lending Fund

(including a majority of the directors or

trustees who are not ‘‘interested

persons’’ of the Lending Fund within

the meaning of the Act (the

‘‘disinterested directors’’)) will

Federal Register / Vol. 65, No. 107 / Friday, June 2, 2000 / Notices 35411

determine that: (i) Each of the contracts

between the Lending Funds and the

Lending Agent, between the Lending

Funds and the Program Administrator,

between the Program Administrator and

the Administrator, and between the

Lending Agent and the Servicing Agent

is in the best interests of the Lending

Fund and its shareholders; (ii) the

services to be performed by the Lending

Agent, Program Administrator,

Administrator and the Servicing Agent

are appropriate for the Lending Fund;

(iii) the nature and quality of the

services provided by the Lending Agent,

Program Administrator, Administrator

and Servicing Agent are at least equal to

those provided by others offering the

same or similar services for similar

compensation; and (iv) the fees for the

Lending Agent’s, Program

Administrator’s, Administrator’s and

Servicing Agent’s services are fair and

reasonable in light of the usual and

customary charges imposed by others

for services of the same nature and

quality.

(b) Each Lending Fund’s respective

contract withe the Lending Agent for

lending agent services, the Program

Administrator for program

administration, and the Program

Administrator’s contract with the

Administrator for administrative

services and the Lending Agent’s

contract with the Servicing Agent for

related research and administrative

services, will be reviewed annually and

will be approved for continuation only

if a majority of the Board of the Lending

Fund (including a majority of the

disinterested directors) makes the

findings referred to paragraph (a) above.

(c) In connection with the initial

implementation of an arrangement

whereby the Lending Agent will be

compensated as lending agent, the

Program Administrator and/or the

Administrator will be compensated as

administrator and the Servicing Agent

will be compensated for administrative

and research services based on a

percentage of the revenue generated by

a Lending Fund’s participation in the

Program, the Board will obtain at least

three competing quotes from

independent entities providing Lending

Agent, Program Administrator,

Administrator and Servicing Agent

services as a package, to assist the Board

in making the findings referred to in

paragraph (a) above.

(d) The Board, including a majority of

the disinterested directors, will (i) at

each regular quarterly meeting

determine, on the basis of reports

submitted by the Lending Agent, that

the loan transactions during the prior

quarter were conducted in compliance

with the conditions and procedures set

forth in the application and (ii) review

no less frequently than annually the

conditions and procedures set forth in

the application for continuing

appropriateness.

(e) Each Lending Fund will (i)

maintain and preserve permanently in

an easily accessible place a written copy

of the procedures and conditions (and

modifications thereto) described in the

application or otherwise followed in

connection with lending securities

pursuant to the Program and (ii)

maintain and preserve for a period of

not less than six years from the end of

the fiscal year in which any loan

transaction pursuant to the Program

occurred, the first two years in an easily

accessible place, a written record of

each loan transaction setting forth a

description of the security loaned, the

identity of the person on the other side

of the loan transaction, the terms of the

loan transaction, and the information or

materials upon which a determination

was made that each loan was made in

accordance with the procedures set

forth above and the conditions to the

application.

Applicants’ Conditions

Applicants agree that any order

granting the requested relief will be

subject to the following conditions:

A. General

1. The securities lending program of

each Lending Fund will comply with all

present and future applicable guidelines

of the SEC and its staff regarding

securities lending arrangements.

2. Each Lending Fund, Future

Lending Fund and Private Fund that

relies on the order will be advised by an

Investment Adviser or Private Fund

Adviser controlling, controlled by or

under common control with UAM.

3. Before a Lending Fund may

participate in the Program, a majority of

the Board (including a majority of the

disinterested directors) of the Lending

Fund will approve the Lending Fund’s

participation in the Program. The Board

of each Lending Fund will evaluate the

Program and its results no less

frequently than annually and a majority

of the Board (including a majority of the

disinterested directors) will determine

that investing Cash Collateral in any of

the Money Market Portfolios, the Private

Funds and/or Joint Accounts is in the

best intersts of the shareholders of the

Lending Fund.

B. Private Funds

1. Investment in Shares of a Private

Fund by a particular Lending Fund will

be consistent with the Lending Fund’s

investment objectives and policies.

2. A money market Lending Fund that

complies with rule 2a–7 under the Act

will not invest its Cash Collateral in a

Private Fund that does not comply with

the requirements of rule 2a–7.

3. Shares of a Private Fund will not

be subject to a sales load, redemption

fee or asset-based sales charge or service

fee (as defined in rule 2830(b)(9) of the

NASD Conduct Rules).

4. The Private Funds will comply as

to each investment series with the

requirements of sections 17(a), (d), and

(e), and 18 of the Act as if the Private

Fund were a registered open-end

investment company. With respect to all

redemption requests made by a Lending

Fund, the Private Fund will comply

with section 22(e) of the Act. The

Private Fund Adviser will, subject to

approval by the Trustee, adopt

procedures designed to ensure that the

Private Fund complies with sections

17(a), (d) and (e), 18, and 22(e) of the

Act. The Private Fund Adviser will also

periodically review and periodically

update as appropriate the procedures

and will maintain books and records

describing the procedures, and maintain

the records required by rules 31a–

1(b)(1), 31a–1(b)(2)(ii), and 31a–1(b)(9)

under the Act. All books and records

required to be made pursuant to this

condition will be maintained and

preserved for a period of not less than

six years from the end of the fiscal year

in which any transaction occurred, the

first two years in an easily accessible

place, and will be subject to

examination by the SEC and the staff.

5. The net asset value per share with

respect to Shares of a Private Fund will

be determined separately for each

Private Fund by dividing the value of

the assets belonging to that Private

Fund, less the liabilities of that Private

Fund, by the number of Shares

outstanding with respect to that Private

Fund.

6. Each Lending Fund will purchase

and redeem Shares of a Private Fund as

of the same time and at the same price,

and will receive dividends and bear its

proportionate share of expenses on the

same basis, as other shareholders of a

Private Fund. A separate account will be

established in the shareholder records of

a Private Fund for the account of each

Lending Fund.

7. Private Funds will not acquire

securities of any investment company in

excess of the limits contained in section

12(d)(1)(A) of the Act.

8. Each Private Fund that operates as

a money market portfolio and uses the

amortized cost method of valuation, as

defined in rule 2a–7 under the Act, will

35412 Federal Register / Vol. 65, No. 107 / Friday, June 2, 2000 / Notices

comply with rule 2a–7. Each such

Private Fund will value its shares, as of

the close of business on each business

day, using the amortized cost method to

determine its net asset value per share.

Each such Private Fund will adopt the

monitoring procedures described in rule

2a–7(c)(7) and the Private Fund Adviser

will comply with these procedures and

take any other action as are required to

be taken pursuant to these procedures.

C. Affiliated Money Market Funds

1. Shares of the Money Market

Portfolios sold to and redeemed by the

Investing Portfolios will not be subject

to a sales load, redemption fee,

distribution fee under a plan adopted in

accordance with rule 12b–1 under the

1940 Act, or service fee (as defined in

rule 2830(b)(9) of the NASD Conduct

Rules).

2. Investment of Cash Collateral in

shares of the Money Market Portfolios

will be in accordance with each

Investing Portfolio’s respective

investment restrictions and will be

consistent with each Investing

Portfolio’s policies as set forth in its

prospectus and statement of additional

information.

3. The Money Market Portfolios shall

not acquire securities of any other

investment company in excess of the

limits contained in section 12(d)(1)(A)

of the Act.

D. Joint Accounts

1. One or more Joint Accounts will be

established on behalf of the Lending

Funds as separate cash accounts into

which a Lending Fund may deposit

daily all or a portion of its Cash

Collateral. The Joint Accounts may be

established with one or more

custodians, and more than one Joint

Account may be established with a

custodian. The Joint Accounts will not

be distinguishable from any other

accounts maintained by the Lending

Funds at their custodian except that

monies from the Lending Funds will be

deposited in the Joint Accounts on a

commingled basis. The Joint Accounts

will not have a separate existence and

will not have indicia of a separate legal

entity. The sole function of the Joint

Accounts will be to provide a

convenient way of aggregating

individual transactions that would

otherwise require daily management by

the Investment Advisers of Cash

Collateral.

2. If a Lending Fund wishes to

participate in a Joint Account that will

be maintained by a custodian other than

its regular custodian, the Lending Fund

will appoint that custodian as its subcustodian for the limited purpose of: (a)

Receiving and disbursing cash; (b)

holding any Short-Term Investment

purchased by the Joint account; and (c)

holding any collateral received from a

transaction effected through the Joint

Account. Any Lending Fund that

appoints a sub-custodian will have

taken all necessary actions to authorize

that entity as its legal custodian,

including all actions required under the

Act.

3. Assets in the Joint Accounts will be

invested in one or more of the following

Short-Term Investments, as determined

by the Investment Advisers: (a)

Repurchase agreements ‘‘collateralized

fully’’ (as defined in rule 2a-7 under the

Act); (b) interest-bearing or discounted

commercial paper, including dollardenominated commercial paper of

foreign issuers; and (c) any other shortterm taxable and tax-exempt money

market instruments, including variable

rate demand notes, that constitute

‘‘eligible securities’’ (as defined in rule

2a-7 under the Act). Short-Term

Investments that are repurchase

agreements would have a remaining

maturity of 60 days or less as calculated

in accordance with rule 2a-7 under the

Act. Cash Collateral in a Joint Account

would be invested in Short-Term

Investments that have a remaining

maturity of 397 days or less, as

calculated in accordance with rule 2a-7

under the Act. No Lending Fund will be

permitted to invest in a Joint Account

unless the Short-Term Investments in

that Joint Account will comply with the

investment policies and guidelines of

that Lending Fund.

4. All assets held by the Joint

Accounts will be valued on an

amortized cost basis to the extent

permitted by applicable SEC or staff

releases, rules, letters, or orders.

5. Each participating Lending Fund

valuing its net assets in reliance on rule

2a-7 under the Act will use the average

maturity of the instruments in the Joint

Account in which the Lending Fund has

an interest (determined on a dollarweighted basis) for the purpose of

computing its average portfolio maturity

with respect to its portion of the assets

held in a Joint Account on that day.

6. In order to ensure that there will be

no opportunity for any Lending Fund to

use any part of a balance of a Joint

Account credited to another Lending

Fund, no Lending Fund will be allowed

to create a negative balance in any Joint

Account for any reason. Each Lending

Fund will be permitted to draw down

its entire balance in a Joint Account at

any time, provided that the Investment

Adviser determines that such drawdown will have no significant adverse

impact on any other Lending Fund

participating in that Joint Account. Each

Lending Fund’s decision to invest in a

Joint Account will be solely at its

option, and no Lending Fund will be

obligated to invest in a Joint Account or

to maintain any minimum balance in a

Joint Account. In addition, each

Lending Fund will retain the sole rights

of ownership to any of its assets

invested in a Joint Account, including

interest payable on such assets invested

in the Joint Account.

7. The Investment Advisers will be

responsible for investing funds held by

the Joint Accounts. The Administrator

or Program Administrator will

administer the Joint Accounts in

accordance with the standards and

procedures established by the directors

or trustees of the Lending Funds as part

of its duties under the existing or any

future administrative contract with the

Lending Funds. The Administrator, the

Program Administrator and the

Investment Advisers will not receive

additional or separate fees for advising

or administering the Joint Accounts.

8. The administration of the Joint

Accounts will be within the fidelity

bond coverage required by section 17(g)

of the Act and rule 17g-1 under the Act.

9. The Board of each Lending Fund

will adopt procedures pursuant to

which the Joint Accounts will operate,

which will be reasonably designed to

provide that the requirements of this

application will be met. Each Board will

make and approve such changes as it

deems necessary to ensure that such

procedures are followed. In addition,

the Board of each Lending Fund will

determine, no less frequently than

annually, that the Joint Accounts have

been operated in accordance with the

adopted procedures and will only

permit a Lending Fund to continue to

participate therein if it determines that

there is a reasonable likelihood that the

Lending Fund and its shareholders will

benefit from its continued participation.

10. Each Investing Portfolio of a

lending fund will participate in a Joint

Account on the same basis as any other

Investing Portfolio of a Lending Fund in

conformity with its respective

fundamental investment objectives,

policies, and restrictions. Any Investing

Portfolio of a Future Lending Fund that

participates in a Joint Account will be

required to do so on the same terms and

conditions as the existing Investing

Portfolios of the Lending Funds.

11. Any Short-Term Investments

made through the Joint Accounts will

satisfy the investment criteria of all

Lending Funds participating in that

investment.

12. Each Lending Fund’s investment

in a Joint Account will be documented

Federal Register / Vol. 65, No. 107 / Friday, June 2, 2000 / Notices 35413

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

2PACE is a real time order routing and execution

system.

3The Commission has modified parts of these

statements.

4 15 U.S.C. 78q–1(b)(3)(D).

daily on its books and on the books of

its custodian. The Investment Adviser

and the custodian of each participating

Lending fund will maintain records

documenting, for any given day, each

Lending Fund’s aggregate investment in

a Joint Account and each Lending

Fund’s pro rata share of each investment

made through such Joint Account. The

records for each such Lending Fund

shall be maintained in conformity with

section 31 of the Act and the rules and

regulations thereunder.

13. Every Lending Fund participating

in the Joint Accounts will not

necessarily have its Cash Collateral

invested in every Short-Term

Investment. However, to the extent that

a Lending Fund’s Cash Collateral is

applied to a particular Short-Term

Investment, the Lending Fund will

participate in and own its proportionate

share of such Short-Term Investment,

and any income earned or accrued

thereon, based upon the percentage of

such investment purchased with monies

contributed by the Lending Fund.

14. Short-Term Investments held in a

Joint Account generally will not be sold

prior to maturity unless: (a) The

Investment Adviser believes the

investment no longer presents minimal

credit risk: (b) the investment no longer

satisfies the investment criteria of all

Lending funds participating in the

investment because of a credit

downgrading or otherwise; or (c) in the

case of a repurchase agreement, the

counterpart defaults. The Investment

Adviser may, however, sell any ShortTerm Investment (of a fractional portion

thereof) on behalf of some or all

participating Lending Funds prior to the

maturity of the investment if the cost of

such transactions will be borne solely

by the selling Lending Funds and the

transaction will not adversely affect

other Lending Funds participating in

that Joint Account. In no case will an

early termination by less than all

participating Lending Funds be

permitted if it would reduce the

principal amount or yield received by

other Lending funds in a particular Joint

Account or otherwise adversely affect

the other participating Lending Funds.

Each Fund participating in a Joint

Account will be deemed to have

consented to such sale and partition of

the investments in the Joint Account.

15. Short-Term Investments held

through a Joint Account will a

remaining maturity of more than seven

days, as calculated pursuant to rule 2a–

7 under the Act, will be considered

illiquid and subject to the restriction

that the lending Fund may not invest

more than 15%, or in the case of a

money market fund, more than 10% (or

such other percentage as set forth by the

SEC from time to time) of its net assets

in illiquid securities, if the Investment

Adviser cannot sell the instrument, or

the lending Fund’s fractional interest in

such instruments, pursuant to the

preceding condition.

E. Payment of Fees to the Lending

Agent, Program Administrator,

Administrator and Servicing Agent

1. The approval of each Lending

Fund’s Board, including a majority of

the disinterested directors, shall be

required for: the initial and subsequent

approvals of the Lending Agent’s service

as lending agent; for the Program

Administrator’s and the Administrator’s

services as administrator, and for the

Servicing Agent’s research and other

services, respectively, for each Lending

Fund pursuant to the Program; for the

institution of all procedures relating to

the Program as it relates to each lending

Fund; and for any periodic review of

loan transactions for which the lending

Agent acted as lending agent pursuant

to the program and the Program

Administrator, and/or Administrator

provided services as administrator and

the Servicing Agent provided research

and other services.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–13779 Filed 6–1–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42829; File No. SR–SCCP–

00–03]

Self-Regulatory Organizations; Stock

Clearing Corporation of Philadelphia;

Notice of Filing and Immediate

Effectiveness of a Proposed Rule

Change Providing a Credit to

Specialists

May 25, 2000.

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

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

May 8, 2000, the Stock Clearing

Corporation of Philadelphia (‘‘SCCP’’)

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 primarily by SCCP.

The Commission is publishing this

notice to solicit comments on the

proposed rule change from interested

parties.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The purpose of the proposed rule

change is to provide a credit of $.20 per

trade to specialists trading equities

through the Philadelphia Stock

Exchange Automated Communication

and Execution (‘‘PACE’’) System.2 This

credit will be effective on June 1, 2000.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

In its filing with the Commission,

SCCP included statements concerning

the purpose of and statutory basis for

the proposed rule change. The text of

these statements may be examined at

the places specified in Item IV below.

SCCP has prepared summaries, set forth

in sections (A), (B), and (C) below, of the

most significant aspects of such

statements.3

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

SCCP has exceeded its budgetary

volume projects this year and has thus

generated revenue far in excess of its

budget. SCCP anticipates that this trend

will continue. Thus, in order to address

this situation, the proposed credit

would apply to specialists, who have

generated much of this revenue, that

trade through the PACE System.

Specifically, specialists that clear

through SCCP are the principal client

base upon which SCCP relies to cover

its expenses. For instance, PACE trades

represent approximately 90 percent of

the volume SCCP processes. Therefore,

SCCP proposes to credit $.20 per trade

to specialists using the PACE System.

This credit will be applied to the fees of

specialists trading through the PACE

System and will be effective on June 1,

2000.

SCCP believes that the proposed rule

change is consistent with Section

17A(b)(3)(D) of the Act 4 which requires

that the rules of a registered clearing

agency provide for equitable allocation

of reasonable dues, fees, and other

charges for services which it provides to

its participants.