Federal Register / Vol. 65, No. 113 / Monday, June 12, 2000 / Notices 36855

8See Securities Exchange Act Release No. 41892

(September 21, 1999), 64 FR 52559 (September 29,

1999).

9 15 U.S.C. 78f(b).

10 15 U.S.C. 78f(b)(5).

11 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. 42460

(February 25, 2000), 65 FR 11618.

4Securities Exchange Act Release No. 42459

(February 25, 2000). 65 FR 11619 (March 3, 2000)

(File No. SR–CHX–99–28); 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. 42661

(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).

consecutive trading days; (ii) if the Trust

has fewer than 50,000 receipts issued

and outstanding; (iii) if the market value

of all receipts issued and outstanding is

less than $1,000,000; or, (iv) if such

other event shall occur or condition

exists which in the opinion of the

Exchange, makes further dealings on the

Exchange inadvisable.

In addition, the component securities

represented by the securities in the

portfolio underlying HOLDRs must meet

the following minimum criteria: (1)

Each component security must be

registered under Section 12 of the

Exchange Act; (2) the minimum public

float of each component security

included in the portfolio must be at

least $150 million; (3) each component

security must either be listed on a

national securities exchange or be

traded through the facilities of Nasdaq

and be a reported national market

system security; (4) the average daily

trading volume for each component

security must be at least 100,000 shares

during the preceding sixty-day trading

period; and (5) the average daily dollar

value of the shares traded during the

preceding sixty-day trading period must

be at least $1 million. And lastly, no

component security may initially

represent more than 20% of the overall

value of the receipt.8

The Exchange believes codifying the

abovbe listing criteria for HOLDRs listed

pursuant to Rule 19b–4(e) will ensure

that no security included in the basket

and HOLDRs will be readily susceptible

to manipulation, while permitting

sufficient flexibility in the construction

of various HOLDRs baskets to meet

investors’ needs. Additionally, the

listing criteria will further serve to

ensure sufficient liquidity for those

investors seeking to purchase and

deposit in basket securities with the

trustee to create HOLDRs.

2. Statutory Basis

The proposed rule change is

consistent with Section 6(b) of the Act 9

in general and furthers the objectives of

Section 6(b)(5)10 in particular in that it

is designed to prevent fraudulent and

manipulative acts and practices, to

promote just and equitable principles of

trade, remove impediments to and

perfect the mechanism of a free and

open market and a national market

system, and, in general, 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.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

No written comments were solicited

or received with respect to 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 self-regulatory

organization consents, the Commission

will:

(A) by order approve the 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, as amended, 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–AMEX–00–10 and should be

submitted by July 3, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–14721 Filed 6–9–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42888; File No. SR–Amex–

00–05]

Self-Regulatory Organizations;

American Stock Exchange LLC.; Order

Approving Proposed Rule Change to

Rescind Rules 5 and 6, the Exchange’s

Off-Board Trading Rules, and to Make

Conforming Changes to Rules 25, 317,

900 and 959

June 1, 2000.

I. Introduction

On February 1, 2000, the American

Stock Exchange LLC (‘‘Amex’’ 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 Rules 5 and 6, the Exchange’s

off-board trading rules, and to make

conforming changes to Rules 25, 317,

900 and 959. The proposed rule change

was published for comment in the

Federal Register on March 3, 2000.3

Proposed rule changes filed by thee

Chicago Stock Exchange and the

Philadelphia Stock Exchange to rescind

their off-board trading rules were

published on the same date as the Amex

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

36856 Federal Register / Vol. 65, No. 113 / Monday, June 12, 2000 / Notices

6The New York Stock Exchange was first to

submit a proposed rule change rescinding its offboard trading rule, Rule 390. 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

to rescind Rule 390. Securities Exchange Act

Release 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.

7Commission Rule 19c–3 prohibits a national

securities exchange from imposing off-board trading

restrictions to equity securities listed after April 26,

1979. 17 CFR 240.19c(3).

8 15 U.S.C. 78f(b)(5).

9 15 U.S.C. 78k–1.

10 In approving this proposal, the Commission has

considered its impact on efficiency, competition,

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

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

12NYSE Approval Order at 30179.

13 15 U.S.C. 78s(b)(2).

14 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

rules filed by the exchanges noted

above.6

II. Description of the Proposal

Exchange Rules 5 and 6 restrict a

member’s ability to effect transactions in

Exchange-listed securities (Rule 5) and

bonds (Rule 6) off a national securities

exchange. In the proposing release, the

Exchange explained that these rules

were originally intended to ‘‘centralize

buying and selling interest in listed

securities to ensure the execution of

orders at the best possible prices. Over

time, however, these off-board trading

restrictions came to be viewed by many

as anticompetitive.’’ The Exchange also

noted that Chairman Levitt had recently

called for the elimination of off-board

trading rules.

The Exchange proposed to eliminate

Exchange Rule 5 because the rule is

‘‘largely irrelevant’’ to the trading of

Amex-listed equity securities, given the

applicability of Commission Rule 19c–

3 7 and the fact that most Amex-listed

stocks were listed for trading after April

26, 1979. The Exchange also noted that

Exchange Rule 5 only applies to Amex

members, and that non-member firms

do in fact trade Amex-listed equities off

an exchange. With respect to Exchange

Rule 6, the Exchange stated that the rule

was of ‘‘little practical consequence’’

due to the exceptions in the rule that

permit ‘‘the great bulk of listed bond

transactions to occur over-the counter.’’

Therefore, in light of the ‘‘limited

practical impact of the Exchange’s offboard trading rules and the changing

view on their propriety.’’ the Exchange

proposed to eliminate its off-board

trading restrictions for Amex-listed

equities and bonds.

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

Act 8 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 9

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 11(A)(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.10

As discussed more fully in the NYSE

Approval Order, the existence of offboard trading restricting 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

Exchange Rules 5 and 6 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.11 The Commission believes,

however, that whatever beneficial effect

off-board trading restrictions such as

Exchange Rules 5 and 6 may have in

enhancing the interaction of investor

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

investor 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 investor

interests to control the success or failure

of individual market centers.’’ 12 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,13 that the

proposed rule change (SR-Amex-00–05)

is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–14724 Filed 6–09–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42887; File No. SR–BSE–

00–02]

Self-Regulatory Organizations; Boston

Stock Exchange Inc.; Order Approving

Proposed Rule Change to Rescind

Chapter II, Section 23, the Exchange’s

Off-Board Trading Rule

June 1, 2000.

I. Introduction

On March 9, 2000, the Boston Stock

Exchange, Inc. (‘‘BSE’’ 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