Federal Register / Vol. 62, No. 19 / Wednesday, January 29, 1997 / Notices 4367

1The proposal was originally filed with the

Commission on November 6, 1996. The CHX

subsequently submitted Amendment No. 1 to the

filing. Amendment No. 1 amends Rule 6 of Article

I to change the vote required by the Executive

Committee to approve an applicant to membership.

Currently, CHX rules require the affirmative vote of

not less than two-thirds of the members of the

Executive Committee present at the time of the vote.

Amendment No. 1 changes the requirement to an

affirmative vote of a majority of the Executive

Committee present at the time of the vote. Letter

from David T. Rusoff, Foley & Lardner to Karl J.

Varner, Division of Market Regulation, SEC, dated

December 6, 1996.

2 15 U.S.C. § 78s(b)(1) (1988).

3 17 CFR 240.19b–4 (1993).

4Securities Exchange Act Release No. 38034

(December 6, 1996), 61 FR 66065 (December 16,

1996).

29, 1996. In making the decision to

withdraw the Security from listing on

the Amex, the Company considered the

direct and indirect costs and the

division of the market resulting from

dual listing on the Amex and NYSE.

Any interested person may, on or

before February 13, 1997, submit by

letter to the Secretary of the Securities

and Exchange Commission, 450 Fifth

Street, N.W., Washington, D.C. 20549,

facts bearing upon whether the

application has been made in

accordance with the rules of the

exchanges and what terms, if any,

should be imposed by the Commission

for the protection of investors. The

Commission, based on the information

submitted to it, will issue an order

granting the application after the date

mentioned above, unless the

Commission determines to order a

hearing on the matter.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 97–2203 Filed 1–28–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38187; File No. SR–CHX–

96–29]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change by

the Chicago Stock Exchange,

Incorporated Relating to Approval of

Applicants to Membership

January 21, 1997.

On December 6, 1996,1 the Chicago

Stock Exchange, Incorporated (‘‘CHX’’

or ‘‘Exchange’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’) the proposed rule

change pursuant to Section 19(b)(1) of

the Securities Exchange Act of 1934

(‘‘Act’’) 2 and Rule 19b–4 thereunder.3

The proposed rule change would amend

Article I, Rule 5 and Rule 6 of its rules

relating to approval procedures for

applicants to membership.

Notice of the proposed rule change as

amended, together with the substance of

the proposal, was published in the

Federal Register.4 No comment letters

were received. This order approves the

proposed rule change.

I. Background

Rules 5 and 6 of Article I of the

Exchange’s rules govern the application

and approval process for applicants to

Exchange membership. Once an

application for membership has been

submitted in writing to the Exchange,

the rules require the staff to investigate

the applicant’s qualifications to

determine if such applicant meets the

requirements for membership. If the

staff recommends that the applicant not

be admitted to membership, the

applicant may appeal such staff

recommendation to the Executive

Committee. If the staff recommends that

an applicant be elected to membership,

the applicant then must go through a 10

business day posting period before

membership may be transferred. The

purpose of the 10 business day posting

period is to allow any member to file an

objection to the election of the applicant

to membership. At the expiration of the

posting period, the Executive

Committee then must consider the

applicant and vote upon the applicant

for membership. Transfers of

memberships become effective upon

election to membership.

Because the Act requires the CHX to

approve an applicant to become a

member of the Exchange if such

applicant meets the requirements of the

Act and the Exchange’s rules for

becoming a member, the Executive

Committee has limited discretion in

approving a qualified applicant to

become a member. As a result, the

purpose of the proposed rule change is

to limit the role of the Executive

Committee during the approval process

to situations where an objection is

raised, or material adverse information

is received, during the posting period,

or where the staff does not recommend

an applicant for membership and the

applicant decides to appeal.

II. The Terms of Substance of the

Proposed Rule Change

Under Rules 5 and 6 of Article I, as

proposed to be amended, if the staff

recommends an applicant for

membership and if no objections are

received, and no material adverse

information is received, during the

subsequent posting period, the

membership transfer would become

effective at the beginning of the next

business day following completion of

the posting without any action taken by

the Executive Committee. As with the

existing procedure, the Executive

Committee would hear an appeal if the

staff does not recommend an applicant

for membership. Similarly, the

Executive Committee would either

approve or disapprove the applicant if

an objection or material adverse

information is received during the

posting period.

Finally, the proposed rule change

reduces the affirmative vote required to

elect an applicant to membership from

the current requirement of not less than

two-thirds affirmative votes of the

members of the Executive Committee

present at the time of voting to a

majority of the affirmative votes of the

members.

III. Discussion

The proposed rule change is

consistent with Section 6(b)(7) of the

Act in that the rules of the exchange, in

general, provide a fair procedure for the

denial of membership to any person

seeking membership therein, the barring

of any person from becoming associated

with a member thereof, and the

prohibition or limitation by the

exchange of any person with respect to

access to services offered by the

exchange or a member thereof. The

proposed rule change reduces a possible

obstacle to the election of an applicant

to membership by reducing the

affirmative votes of the members of the

Executive Committee present at the time

of voting required to elect an applicant

to membership from the current not less

than two-thirds to a majority of the

affirmative votes of the members.

Furthermore, the proposed rule

change is consistent with Section 3 of

the Act in that the proposed rule change

will promote efficiency, competition,

and capital formation. The new

procedure would eliminate the

requirement that the Executive

Committee perform the pro forma role of

approving each membership transfer. At

the same time, it would allow the

Executive Committee to make a

determination if there is some

information brought to the Exchange’s

attention during the posting period

which was not known to the staff at the

time of its investigation.

It is therefore ordered, pursuant to

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

proposed rule change, SR–CHX–96–29

be, and hereby is, approved.
4368 Federal Register / Vol. 62, No. 19 / Wednesday, January 29, 1997 / Notices

5 17 CFR 200.30–3(a)(12).

1See letter from Robert E. Aber, Vice President

and General Counsel, Nasdaq, to Katherine A.

England, Assistant Director, SEC, dated January 17,

1997. Amendment No. 1 corrects typographical

errors in the text of the proposed rule change.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.5

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–2100 Filed 1–28–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38196; File No. SR–NASD–

96–51]

Self-Regulatory Organizations; Notice

of Proposed Rule Change by the

National Association of Securities

Dealers, Inc. Amending Rule 11890

Regarding Clearly Erroneous

Transactions

January 22, 1997.

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

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on December 17, 1996,

the National Association of Securities

Dealers, Inc. (‘‘NASD’’ or ‘‘Association’’)

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 the NASD and

The Nasdaq Stock Market, Inc.

(‘‘Nasdaq’’). On January 17, 1997, the

NASD and Nasdaq submitted to the

Commission Amendment No. 1 to the

proposed rule change.1 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

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

Act and Rule 19b–4 thereunder, the

NASD and Nasdaq are submitting this

rule filing to amend Rule 11890, the rule

related to clearly erroneous transactions.

The proposed amended language for

Rule 11890 is set forth below. [new text

is italicized; deleted text is bracketed].

11890. Clearly Erroneous [Trades]

Transactions

(a) Authority to [Declare] Review

Transactions [Void]

(1) [In circumstances in which the

Association deems it necessary to

maintain a fair and orderly market and

to protect investors and the public

interest, the Association may, pursuant

to the procedures set forth in paragraph

(b) below, declare any transaction

arising out of the use or operation of any

automated quotation, execution, or

communication system owned or

operated by the Association or any

subsidiary thereof and approved by the

Commission, null and void on the

grounds that one or more of the terms

of the transaction are clearly erroneous.

(2)] For the purposes of this Rule, the

terms of a transaction are clearly

erroneous when there is an obvious

error in any term, such as price, number

of shares or other unit of trading, or

identification of the security.

(2) Officers of The Nasdaq Stock

Market, Inc. (‘‘Nasdaq’’) designated by

the President of Nasdaq shall, pursuant

to the procedures set forth in paragraph

(b) below, have the authority to review

any transaction arising out of the use or

operation of any automated quotation,

execution, or communication system

owned or operated by Nasdaq and

approved by the Commission. A Nasdaq

officer shall review transactions with a

view toward maintaining a fair and

orderly market and the protection of

investors and the public interest. Based

upon this review, the Officer shall

decline to act upon a disrupted

transaction if the officer believes that

the transaction under dispute is not

clearly erroneous, or, if the officer

determines the transaction in dispute is

clearly erroneous, he or she shall

declare that the transaction is null and

void or modify one or more terms of the

transaction. When adjusting the terms of

a transaction, the Nasdaq officer shall

seek to adjust the price and/or size of

the transaction to achieve an equitable

rectification of the error that would

place the parties to a transaction in the

same position, or as close as possible to

the same position, that they would have

been in had the error not occurred.

Nasdaq shall promptly provide oral

notification of a determination to the

parties involved in a disputed

transaction and thereafter issue a

written confirmation of the

determination.

(b) Procedures for Reviewing [Declaring

a] Transactions [Void]

(1) Any member or person associated

with a member that seeks to have a

transaction reviewed [declared null and

void] pursuant to paragraph (a) hereof,

shall submit a written complaint, via

facsimile or otherwise, to Nasdaq

Market Operations in accordance with

the following time parameters:

(A) for transactions occurring prior to

10:00 a.m., Eastern Time, complaints

must be submitted 10:30 a.m., Eastern

Time; and

(B) for transactions occurring on or

after 10:00 a.m., Eastern Time,

complaints must be submitted within

thirty minutes.

[notify an officer of the Association

designated by the President of the

transaction during Nasdaq operating

hours on the same business day the

transaction occurs, and shall provide

such official all facts and information

necessary for a determination under

paragraph (a). Information

communicated orally shall be confirmed

promptly in writing.]

(2) Once a complaint has been

received in accord with subparagraph

(b)(1) above:

(A) the complainant shall have up to

thirty (30) minutes, or such longer

period as specified by Nasdaq staff, to

submit any supporting written

information concerning the complaint

necessary for a determination under

paragraph (a)(2), via facsimile or

otherwise;

(B) the counterparty to the trade shall

be verbally notified of the complaint by

Nasdaq staff and shall have up to thirty

(30) minutes, or such longer period as

specified by Nasdaq staff, to submit any

supporting written information

concerning the complaint necessary for

a determination under paragraph (a)(2),

via facsimile or otherwise; and

(C) either party to a disputed trade

may request the written information

provided by the other party pursuant to

this subparagraph.

(3) Notwithstanding paragraph (b)(2)

above, once a party to a disputed trade

communicates that it does not intend to

submit any further information

concerning a complaint, the party may

not thereafter provide additional

information unless requested to do so by

Nasdaq staff. If both parties to a

disputed trade indicate that they have

no further information to provide

concerning the complaint before their

respective thirty-minute information

submission period has elapsed, then the

matter may be immediately presented to

a Nasdaq officer for a determination

pursuant to paragraph (a)(2) above.

(4) Each member and/or person

associated with a member involved in

the transaction shall provide the

Association with any information

requested by the Association in order to

resolve the matter on a timely basis

notwithstanding the time parameters set

forth in paragraph (b)(2) above.

(5) Once a party has applied to

Nasdaq for review, the transaction shall

be reviewed and a determination

rendered, unless both parties to the

transaction agree to withdraw the

application for review prior to the time

a decision is rendered pursuant to

paragraph (a)(2).