Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Notices 41119

24 15 U.S.C. 78s(b)(2).

25 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

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

4 17 CFR 240.19b–4(f)(6).

5Nasdaq provided written notice to the

Commission on June 8, 2000, that is intended to file

this proposal. The Commission agreed to waive the

5-day pre-filing notice requirement. See Rule 19b–

4(f)(6)(iii). 17 CFR 240.19b–4(f)(6)(iii). 6 17 CFR 240.19b–4(f)(6)(iii).

and fulfilling its self-regulatory

responsibilities.

The Commission also finds that the

current requirement that the Board

consider factors relating to the

qualifications of any shareholder (other

than a broker or dealer or statutorily

disqualified person) before lifting the

voting cap also helps to address the

Commission’s concern that Nasdaq not

be controlled or substantially influenced

by an entity that may promote acts or

practices that would be inimical to the

purposes of the Act.

Two other provisions also act as a

deterrent to a shareholder’s ability to

effect a rapid change in control of

Nasdaq. The classified Board structure

ensures that it will take at least two

shareholder meetings, instead of one, for

majority control of the board to shift. As

discussed previously, the Certificate

also provides that Directors may only be

removed for cause and by a

supermajority vote of the shareholders.

These provisions, together with the

scaled voting provision, help to ensure

that control of Nasdaq will be attained

only in a measured manner and

consistent with the requirements set

forth in the Act.

Finally, the Commission notes that as

currently stated, a person or entity

could own a substantial portion of

Nasdaq and yet be limited in its actual

control of Nasdaq by virtue of the scaled

voting provisions, the classified Board

structure, and the limitations on the

removal of Directors in the By-laws and

Certificate. While these provisions help

ameliorate the Commission’s concern

about the control of Nasdaq, concerns

about the ability of an entity—in

particularly a broker, dealer or

affiliate—to own up to 100 percent of

Nasdaq remain. Thus, further action to

address the ownership of a substantial

portion of Nasdaq by a broker, dealer or

affiliate may be warranted if Nasdaq

registers as a national securities

exchange.

D. Certificate, Article Eleventh

(‘‘Constituency Provision’’)

By its own terms Article Eleventh

applies when Nasdaq achieves ‘‘status

as a self-regulatory organization,’’ and it

therefore will become operative only if

the Commission approves Nasdaq’s

anticipated application to register as a

national securities exchange. The

Commission notes preliminarily,

however, that Article Eleventh balances

the need to ensure that Nasdaq fulfill

the self-regulatory obligations

incumbent upon it if it registers as a

national securities exchange without

unduly hampering Nasdaq’s ability to

consummate major corporate

transactions. Therefore, the Commission

finds that new Article Eleventh of the

Certificate is consistent with Section

15A(b)(6) of the Act and outlines a

legitimate and useful set of criteria that

should be considered by the Board if it

considers major corporate transactions

after exchange registration.

IV. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,24 that the

proposed rule change (SR–NASD–00–

27) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.25

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–16745 Filed 6–30–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42984; File No. SR–NASD–

00–35]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

National Association of Securities

Dealers, Inc. Relating to a Cap on ACT

Risk Management Charges

June 27, 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 June 12,

2000, the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’), through its wholly

owned subsidiary, The Nasdaq Stock

Market, Inc. (‘‘Nasdaq’’) filed with the

Securities and Exchange Commission

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

rule change as described in Items I, II

and III below, which Items have been

prepared by Nasdaq. Nasdaq filed the

proposal pursuant to Section 19(b)(3)(A)

of the Act,3 and Rule 19b–4(f)(6)

thereunder,4 which renders the proposal

effective upon filing with the

Commission.5 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

Nasdaq filed the proposed rule change

to amend NASD Rule 7010, Systems

Services, to establish a cap on the

Automation Confirmation Transaction

Service (‘‘ACT’’) risk management

charge. Nasdaq has designated this

proposal as non-controversial, and

requests that the Commission waive the

30-day pre-operative waiting period

contained in Rule 19b–4(f)(6)(iii) under

the Act,6 to allow the proposal to be

both effective and operative

immediately upon filing with the

Commission. The text of the proposed

rule is below. Proposed new language is

in italics.

* * * * *

Rule 7010. Systems Services

(g) Automated Confirmation

Transaction Service

The following charges shall be paid

by the participant for use of the

Automated Confirmation Transaction

Service (ACT):

Transaction Related Charges:

No change.

Risk Management Charges: $0.035/side

and $17.25/month per correspondent

firm (maximum $10,000/month per

correspondent firm)

* * * * *

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

Nasdaq included statements concerning

the purpose of and basis for its proposal

and discussed any comments it received

regarding the proposal. The text of these

statements may be examined at the

places specified in Item IV below.

Nasdaq 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

ACT is an automated trade reporting

and reconciliation service that speeds

the post-execution steps of price and

volume reporting, comparison, and

clearing of pre-negotiated trades

completed in Nasdaq, OTC Bulletin

41120 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Notices

7See NASD Rule 6150, ACT Risk Management

Functions.

8See Securities Exchange Act Release No. 28583

(October 26, 1990), 55 FR 46120 (November 1,

1990)(SR–NASD–89–25). ACT was implemented for

self-clearing firms in March 1990. See Securities

Exchange Act Release No. 27229 (September 8,

1989), 54 FR 38484 (September 18, 1989)(SR–

NASD–89–25).

9See Securities Exchange Act Release No. 28595

(November 5, 1990), 55 FR 47161 (November 9,

1990)(SR–NASD–90–57).

10 15 U.S.C. 78o–3(b)(6).

11 15 U.S.C. 78o–3(b)(5).

12 15 U.S.C. 78s(b)(3)(A).

13 17 CFR 240.19b–4(f)(6).

14For purposes only of accelerating the operative

date of this proposal, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f).

Board, and other over-the-counter

securities. ACT handles transactions

negotiated over the telephone or

executed through any of Nasdaq’s

automated trading services. It also

manages post-execution procedures for

transactions in exchange-listed

securities that are traded off-board in

the Third Market. Participation in ACT

is mandatory for NASD members that

are members of a clearing agency

registered with the SEC, that have a

clearing arrangement with such a

member, or that participate in any of

Nasdaq’s trading services.

The ACT risk management function

allows firms that clear for other firms to

establish acceptable levels of credit for

their introducing firms. ACT risk

management enables clearing firms to

monitor buy/sell trading activity of their

introducing firms, establish trading

thresholds, allow/inhibit large trades,

add/delete clearing relationships, and

access a real-time database of

correspondent trading activity.7

Clearing firms providing clearing

services to correspondent firms are

assessed risk management charges of

$0.035 per trade and $17.50 per month

per correspondent firm. Self-clearing

firms do not utilize the ACT risk

management function and are not

assessed risk management charges.

The ACT service for clearing firms

and their executing correspondents,

including the risk management

function, was implemented in October

1990.8 The ACT risk management

service charge was implemented in

November 1990.9 The original ACT risk

management charge was calculated to

recoup the development costs for ACT

programming efforts as well as costs

associated with computer and other

hardware purchases to meet the

capacity requirements to run the risk

management system and to reflect the

ongoing costs of operating the risk

management function of the ACT

system. The per trade portion of the

charge was calculated based on trading

volume in 1990, which was

substantially less than it is at the

present. For example, in 1990, Nasdaq

National Market (‘‘NNM’’) securities

average 47,000 trades per day; in

comparison, NNM securities average

1.26 million trades per day in 1999

(with an average of 1.67 million trades

per day in the fourth quarter of 1999).

Because the ACT risk management

charge is based largely on the number of

trades cleared, the expansion in trading

volume since 1990 has required some

firms to pay increasingly large risk

management charges that are

disproportionate to the value they

receive from ACT, particularly firms

that clear for correspondents that

execute a large number of trades.

Nasdaq believes that it is appropriate

to update the pricing model for ACT

risk management charges to reflect

current business practices and trading

patterns and to ensure that the ACT risk

management feature continues to be a

valuable, cost-effective service for

clearing firms. Nasdaq proposes to

revise the ACT service charges and

establish a cap of $10,000 on the

monthly risk management charge that a

clearing firm must pay on behalf of a

correspondent firm. Nasdaq will

implement the cap retroactive to April

1, 2000.

2. Statutory Basis

Nasdaq believes that the proposal is

consistent with the provisions of

Section 15A(b)(6) of the Act 10 in that it

is designed to promote just and

equitable principles of trade and to

remove impediments to and perfect the

mechanism of a national market system,

and, in general, to protect investors and

the public interest. Nasdaq also believes

the proposed rule change is consistent

with Section 15A(b)(5) of the Act 11 in

that it provides for the equitable

allocation of reasonable dues, fees and

other charges among members and

issuers and other persons using any

facility or system which the Association

operates or controls.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

Nasdaq 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

Because the foregoing proposed rule

change does not:

(i) significantly affect the protection of

investors or the public interest;

(ii) impose any significant burden on

competition; and

(iii) become operative for 30 days

from the date on which it was filed, or

such shorter time as the Commission

may designate, it has become effective

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

Act 12 and Rule 19b–4(f)(6)

thereunder.13 At any time within 60

days of the filing of the proposed rule

change, the Commission may summarily

abrogate such rule change if it appears

to the Commission that such action is

necessary or appropriate in the public

interest, for the protection of investors,

or otherwise in furtherance of the

purposes of the Act.

Nasdaq has requested that the

Commission accelerate the operative

date. The Commission finds good cause

to designate the proposal to become

immediately operative upon filing,

because such designation is consistent

with the protection of investors and the

public interest. Acceleration of the

operative date will allow NASD

members to reap the benefits of the cap

on ACT risk management charges

retroactive to April 1, 2000

immediately, rather than having to wait

30 days before implementing the cap.

For these reasons, the Commission finds

good cause to waive the 5-day pre-filing

requirement, and to designate that the

proposal become operative

immediately.14

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposal is

consistent with the Act. Persons making

written submission should file six

copies thereof with the Secretary,

Securities and Exchange Commission,

450 Fifth Street, NW, Washington, DC

20549–0609. Copies of the submission,

all subsequent amendments, all written

statements with respect to the proposed

rule change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Notices 41121

15 17 CFR 200.30–3(a)(12).

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

2The Commission has modified the text of the

summaries prepared by NSCC.

3 15 U.S.C. 78q–1(b)(3)(F).

4 15 U.S.C. 78q–1(b)(3)(F).

5 15 U.S.C. 78s(b)(2).

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 NASD All

submissions should refer to file number

SR–NASD–00–35 and should be

submitted by July 24, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.15

Margaret H. McFarland,

Deputy Secretary

[FR Doc. 00–16747 Filed 6–30–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42982; File No. SR–NSCC–

00–08]

Self-Regulatory Organizations;

National Securities Clearing

Corporation; Notice of Filing and Order

Granting Accelerated Approval of a

Proposed Rule Change Relating to

Dividend Processing of AT&T

Corporation’s When-Issued Trades

June 26, 2000.

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

Securities Exchange Act of 1934

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

June 23, 2000, the National Securities

Clearing Corporation (‘‘NSCC’’) filed

with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I and II below, which items have

been prepared primarily by NSCC. The

Commission is publishing this notice

and order to solicit comments from

interested persons and to grant

accelerated approval of the proposal.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The purpose of the proposed rule

change is facilitate the processing

through NSCC’s continuous net

settlement (‘‘CNS’’) system of a

dividend declared by AT&T Corp.

payable on both its regular way and its

when-issued securities.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

NSCC 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. NSCC has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of such statements.2

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

The purpose of the proposed rule

filing is to facilitate the processing in

NSCC’s CNS system of a dividend

declared by AT&T Corp. to which firms

with both regular way and when-issued

positions as of a certain date are

entitled. NSCC’s procedures for the

processing of the dividend are set forth

in NSCC’s Important Notice dated June

22, 2000, which is attached to this

Notice and Order as Exhibit A.

NSCC believes that the proposed rule

change is consistent with the

requirements of the Act and the rules

and regulations thereunder. In

particular, the proposed rule change is

consistent with Section 17A(b)(3)(F) of

the Act 3 which requires that the rules

of a clearing agency be designed to

promote the prompt and accurate

clearance and settlement of securities

transactions.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

NSCC does not believe that the

proposed rule change will have an

impact on or impose a 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 have been

solicited or received. NSCC will notify

the Commission of any written

comments received by NSCC.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The Commission finds that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder the

particularly with the requirements of

Section 17A(b)(3)(F).4 Section

17A(b)(3)(A)(F) requires that the rules of

a clearing agency be designed to

promote the prompt and accurate

clearance and settlement of securities

transactions. Allowing the dividend

which is payable on both when-issued

and regular way securities to be

processed in the CNS system should

help ensure the dividend will be

promptly and accurately cleared and

settled.

NSCC has requested that the

Commission approve the proposed rule

change prior to the thirtieth day after

publication of the notice of the filing.

The Commission finds good cause for

approving the rule change prior to the

thirtieth day after publication because

such approval will facilitate the

processing in NSCC’s CNS system of a

dividend declared by AT&T Corp.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposed rule

change is consistent with the Act.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 20549–0609. Copies of

the submission, all subsequent

amendments, all written statements

with respect to the proposed rule

change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

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

available for inspection and copying in

the Commission’s Public Reference

Room, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of NSCC. All submissions should

refer to File No. SR–NSCC–00–08 and

should be submitted by July 24, 2000.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,5 that the

proposed rule change (File No. SR–

NSCC–00–08) be and hereby is

approved.