Federal Register / Vol. 65, No. 113 / Monday, June 12, 2000 / Notices 36859

11 15 U.S.C. 78f(b).

12 15 U.S.C. 78f(b)(5).

13 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3Securities Exchange Act Release No. 42459

(February 25, 2000), 65 FR 11619.

4Securities Exchange Act Release No. 42460

(February 25, 2000), 65 FR 11618 (March 3, 2000)

(File No. SR–Amex–00–05); Securities Exchange

Act Release No. 42458 (February 25, 2000), 65 FR

11628 (March 3, 2000) (File No. SR–Phlx–00–12).

5Securities Exchange Act Release No. 42461

(April 10, 2000), 65 FR 20497 (April 17, 2000) (File

No. SR–BSE–00–02); Securities Exchange Act

Release No. 42660 (April 10, 2000), 65 FR 21052

(April 19, 2000) (File No. SR–PCX–00–11).

6Referring to Securities Exchange Act Release No.

42450 (February 23, 2000), 65 FR 10577 (February

28, 2000) (‘‘NYSE Release’’).

On May 5, 2000, the Commission approved the

New York Stock Exchange’s proposed rule change

rescinding its off-board trading rule, Rule 390.

Securities Exchange Act Release No. 34–42758

(May 5, 2000), 65 FR 30175 (May 10, 2000) (‘‘NYSE

Approval Order’’).

In the NYSE Release, the Commission also

solicited the public’s views on a broad range of

issues related to market fragmentation—the trading

of orders in multiple locations without interaction

of those orders. The period for public comment on

market fragmentation expired on May 12, 2000. The

Commission currently is reviewing the comments

submitted in response to the NYSE Release.

that successful completion of the

Exchange’s Floor Membership

Examination would ensure that clerks

wishing to perform certain functions on

the floor, such as accepting professional

orders, are sufficiently familiar with the

rules and practices of the Exchange’s

trading floor.

2. Statutory Basis

The CHX believes that the proposed

rule change is consistent with Section

6(b) of the Act 11 in general and furthers

the objectives of Section 6(b)(5) 12 in

particular in that it is designed to

promote just and equitable principles of

trade, to remove impediments and to

perfect the mechanism of a free and

open market and a national market

system, and, in general, to protect

investors and the public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed rule change will impose

any burden on competition 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

The Exchange did not solicit or

receive written comments on the

proposed rule change.

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

(ii) as to which the Exchange consents,

the Commission will:

(A) By order approve such proposed

rule change, or

(B) Institute proceedings to determine

whether the proposed rule change

should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposed rule

change is consistent with the Act.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549–0609. Copies of

the submission, all subsequent

amendments, all written statements

with respect to the proposed rule

change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of 5 U.S.C. 552, will be

available for inspection and copying 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 Exchange. All

submissions should refer to File No.

SR–CHX–00–07 and should be

submitted by July 3, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.13

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–14723 Filed 6–9–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42886; File No. SR–CHX–

99–28]

Self-Regulatory Organizations;

Chicago Stock Exchange, Inc.; Order

Approving Proposed Rule Change To

Delete Certain Provisions of Article

VIII, Exchange Rule 9, Prohibiting OffFloor Transactions by Exchange

Members

June 1, 2000.

I. Introduction

On December 27, 1999, the Chicago

Stock Exchange, Inc. (‘‘CHX’’ or

‘‘Exchange’’) filed with the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’), pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’) 1 and Rule 19b–4

thereunder,2 a proposed rule change to

rescind certain provisions of Article

VIII, Exchange Rule 9, the Exchange’s

off-board trading rules. The proposed

rule change was published for comment

in the Federal Register on March 3,

2000.3 Proposed rule changes filed by

the American Stock Exchange and the

Philadelphia Stock Exchange to rescind

their off-board trading rules were

published on the same date as the CHX

proposing release.4 Shortly thereafter,

the Boston Stock Exchange and the

Pacific Exchange filed similar proposed

rule changes.5 The Commission

received no comments on any of these

proposals. Today, in separate orders, the

Commission is approving the proposed

rule changes to rescind off-board trading

rules filed by the exchanges noted

above.

II. Description of the Proposal

Certain provision of Article VIII,

Exchange Rule 9 restricts a member’s

ability to effect transactions in

Exchange-listed securities off a national

securities exchange. In the proposing

release, the Exchange noted that the

New York Stock Exchange, along with

other exchanges, had submitted similar

proposals to rescind their off-board

trading rules,6 and that the Commission

had recently adopted amendments to

the Intermarket Trading System Plan

(‘‘ITS’’) to expand the ITS linkage with

the National Association of Securities

Dealers’ Computer Assisted Execution

System. Thus, ‘‘to confirm the

Exchange’s commitment to the

competitive ideals on which those

actions are based,’’ the Exchange

proposed to rescind certain provisions

of its off-board trading rule, Article VIII,

Exchange Rule 9.

III. Discussion

The Commission finds that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder

applicable to a national securities

exchange. In particular, the Commission

finds the proposed rule change is

consistent with Section 6(b)(5) of the

36860 Federal Register / Vol. 65, No. 113 / Monday, June 12, 2000 / Notices

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

8 15 U.S.C. 78k–1.

9 In approving this proposal, the Commission has

considered its impact on efficiency, competition,

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

10Section 11A(a)(1)(C)(v) of the Act.

11NYSE Approval Order at 30179.

12 15 U.S.C. 78s(b)(2).

13 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3This 19b–4 filing, represents Amendment No. 1

to File No. SR–NASD–99–67.

Act 7 which requires, among other

things, that the rules of an exchange be

designed to promote just and equitable

principles of trade, to remove

impediments to and perfect the

mechanism of a free and open market

and a national market system and, in

general, to protect investors and the

public interest, and Section 6(b)(8),

which requires that the rules of an

exchange not impose any burden on

competition not necessary or

appropriate in furtherance of the Act.

The rescission of the Exchange’s offboard trading restrictions is also

consistent with Section 11A of the Act 8

which sets forth the findings and

objectives that are to guide the

Commission in its oversight of the

national market system. Specifically,

rescinding the off-board trading

restrictions will help further the

national market system objective in

Section 11A(a)(1)(C)(i) to assure the

economically efficient execution of

securities transactions, and in Section

11A(a)(1)(C)(ii) to assure fair

competition between exchange markets

and markets other than exchange

markets.9

As discussed more fully in the NYSE

Approval Order, the existence of offboard trading restrictions can no longer

be justified in an age when advancing

technology and expanding trading

volume are introducing new

competitive challenges for the U.S.

securities markets, both at home and

abroad. Off-board trading rules such as

Articles VIII, Exchange Rule 9 directly

restrict a certain type of market center

competition—competition between

exchange markets and markets other

than exchange markets. Their rescission

today eliminates an inappropriate

regulatory burden on competition that

runs contrary to the objectives set forth

in the Act.

Off-board trading restrictions have

been justified on the basis that they

promote the interaction of investors’

orders without participation by a

dealer—indeed an objective set forth in

the Act.10 The Commission believes,

however, that whatever beneficial effect

off-board trading restrictions such as

Article VIII, Exchange Rule 9 may have

in enhancing the interaction of investors

orders can no longer justify their

anticompetitive nature. To the extent

off-board trading rules enhance order

interaction, they do so in an undesirable

way—by attempting a direct restriction

on competition. Such attempts are never

wholly successful and typically only

distort, rather than eliminate,

competition and introduce unnecessary

costs ultimately borne by investors.

The outcome of competition between

market centers should depend on which

market centers are most able to serve

investors interests by providing the

highest quality trading services at the

lowest possible prices; the

Commission’s regulatory task is

removing unwarranted regulatory

barriers to competition between market

centers. As stated in the NYSE Approval

Order, the rescission of off-board trading

rules is ‘‘intended solely to free the

forces of competition and allow

investors interest to control the success

or failure of individual market

centers.’’ 11 The same rationale and

motivation support the Commission’s

action today.

IV. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,12 that the

proposed rule change (SR–CHX–99–28)

is approved.

For the Commission, by the Division of

Market Regulation, pursuant to

delegated authority.13

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–14727 Filed 6–9–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42885; File No. SR–NASD–

99–67]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change and

Amendment No. 1 Thereto by NASD

Regulation, Inc. Relating to

Amendments to Membership Rules

June 1, 2000.

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

Securities Exchange Act of 1934 (‘‘Act’’

or ‘‘Exchange Act’’),1 and Rule 19b–4

thereunder,2 notice is hereby given that

on November 2, 1999, the National

Association of Securities Dealers, Inc.

(‘‘NASD’’ or ‘‘Association’’), through its

wholly owned 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. On May 1, 2000, the NASD

Regulation filed Amendment No. 1 to

the proposed rule change.3 The

Commission is publishing this notice to

solicit comments on the proposed rule

change, as amended, 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 the Rule 1010 Series, which

concerns member admission. Additions

are italicized; deletions are [bracketed].

1010. Membership Proceedings

1011. Definitions

Unless otherwise provided, terms

used in the Rule 1010 Series shall have

the meaning as defined in Rule 0120.

(a) ‘‘Applicant’’

The term ‘‘Applicant’’ means a person

[or entity] that applies for membership

in the Association under Rule 1013[,] or

a member that files an application [to

remove or modify a restriction under

Rule 1017, or files a notice and

application for continuance in

membership under Rule 1018] for

approval of a change in ownership,

control, or business operations under

Rule 1017. 

(b) ‘‘Associated Person’’

The term ‘‘Associated Person’’ means:

(1) a natural person registered under the

Rules of the Association; or (2) a sole

proprietor, partner, officer, director,

branch manager, or other natural person

occupying a similar status or performing

similar functions who will be or is

anticipated to be associated with the

Applicant, or a natural person engaged

in the investment banking or securities

business who will be or is anticipated

to be directly or indirectly controlling or

controlled by the Applicant, whether or

not any such person is registered or

exempt from registration under the

NASD By-Laws or the Rules of the

Association.

(c) ‘‘Department’’

The term ‘‘Department’’ means the

Department of Member Regulation of

NASD Regulation.

(d) ‘‘Director’’

The term ‘‘Director’’ means a member

of the NASD Regulation Board.

(e) ‘‘district’’

The term ‘‘district’’ means a district

established by the NASD Regulation

Board.

(f) ‘‘district office’’