47078 Federal Register / Vol. 62, No. 172 / Friday, September 5, 1997 / Notices

1 15 U.S.C. § 78s(b)(1).

one to the shareholders of the Funds,

and that it would be in no one’s

interests for the relationship to be

impaired because the Advisers cannot

receive fees for the services they provide

during the Interim Period. In addition,

the fees to be paid during the Interim

Period will be unchanged from the fees

paid under the Existing Advisory

Agreements.

Applicants’ Conditions

Applicants agree as conditions to the

issuance of the exemptive order

requested by the application that:

1. Each New Advisory Agreement will

have the same terms and conditions as

the respective Existing Advisory

Agreements, except for the effective

date, termination date, and escrow

provisions.

2. Advisory fees payable by a Fund to

an Adviser during the Interim Period

will be maintained in an interestbearing escrow account, and amounts in

the account (including interest earned

on such amounts) will be paid: (a) to the

Adviser in accordance with the relevant

New Advisory Agreement, after the

requisite approval is obtained; or (b) to

the Fund, in the absence of such

approval.

3. The Trust will hold a meeting of

shareholders to vote on approval of the

New Advisory Agreements for the

Funds on September 30, 1997, or within

the 60-day period thereafter.

4. None of the Funds will bear the

costs of preparing and filing the

application, or any costs relating to the

solicitation of the shareholder approval

of the Funds’ shareholders necessitated

by the consummation of the Merger.

5. The Advisers will take all

appropriate actions to ensure that the

scope and quality of advisory and other

services provided to the Funds during

the Interim Period will be at least

equivalent, in the judgment of the

Board, including a majority of the

Independent Trustees, to the scope and

quality of services previously provided.

In the event of any material change in

personnel providing services pursuant

to the New Advisory Agreements caused

by the Merger, the Advisers will apprise

and consult with the Board to assure

that the Board, including a majority of

the Independent Trustees, is satisfied

that the services provided will not be

diminished in scope or quality.

6. The Board, including a majority of

the Independent Trustees, will have

approved the escrow provisions of the

New Advisory Agreements in

accordance with the requirements of

section 15(c) of the Act prior to the

termination of the Existing Advisory

Agreements.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 97–23600 Filed 9–4–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–38989; File No. SR–CHX–

97–3]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change,

Amendments Nos. 1, 2 and 3 by The

Chicago Stock Exchange, Inc., and

Order Granting Accelerated Partial

Approval to the Proposed Rule Change

Relating to the Trading of Nasdaq

National Market Securities on the

Chicago Stock Exchange

August 28, 1997.

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

Securities Exchange Act of 1934

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

February 17, 1997, the Chicago Stock

Exchange, Incorporated (‘‘CHX’’ or

‘‘Exchange’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’) a proposed rule change

relating to quotes in the Midwest

Automated Execution System (‘‘Max

system’’) for Nasdaq National Market

(‘‘Nasdaq/NM’’) securities. On May 14,

1997, the Exchange submitted

Amendment No. 1 to the rule filing to

limit the application of the proposed

rule change to 150 Nasdaq/NM

securities. On July 7, 1997, the

Exchange submitted Amendments Nos.

2 and 3 to the rule filing clarifying

which 150 Nasdaq/NM securities would

be subject to a reduced minimum

quotation size. The proposed is

described in Items I, II, and III below,

which Items have been prepared by the

self-regulatory organization. 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

The Exchange proposes to amend

Article XX, Rule 37 relating to the

generation of an autoquote when a

specialist’s quote in a Nasdaq/NM

security is exhausted due to an

automatic execution. Below is the text

of the proposed rule change. Proposed

new text is in italics; deleted text is in

brackets.

Article XX

Rule 37. Guaranteed Execution System

and Midwest Automated Execution

System

(a) Guarantee Executions. The

Exchange’s Guaranteed Execution

System (the BEST System) shall be

available to Exchange member firms

and, where applicable, to members of a

participating exchange who send orders

to the Floor through a linkage pursuant

to Rule 39 of this Article, in all issues

in the specialist system which are

traded in the Dual Trading System and

NASDAQ/NM Securities. System orders

shall be executed pursuant to the

following requirements:

1. Eligible Orders. Specialists must

accept and guarantee execution on all

agency orders in Dual Trading System

Issues from 100 up to and including

2099 shares in accordance with this

rule. Specialists must accept and

execute all agency market orders or

marketable limit orders in NASDAQ/

NM [s]Securities from 100 up to and

including 1000 shares in accordance

with this rule. Specialists must accept

all agency limit orders in NASDAQ/NM

Securities from 100 up to and including

10,000 shares for placement in the limit

order book.

2.–7. No change in text.

(b) Automated Executions. The

Exchange’s Midwest Automated

Execution System (the Max System)

may be used to provide an automated

delivery and execution facility for

orders that are eligible for execution

under the Exchange’s BEST rule (Article

XX, Rule 37(a)) and certain other orders.

In the event that an order that is subject

to the BEST Rule is sent through MAX,

it shall be executed in accordance with

the parameters of the BEST Rule and the

following. In the event that an order that

is not subject to the BEST Rule is sent

through MAX, it shall be executed in

accordance with the parameters of the

following:

(1)–(6). No change in text.

(7) Execution of NASDAQ/NM

[issues] Securities. In NASDAQ/NM

[Issues] Securities, if the specialist is

quoting at the NBBO at the time a MAX

market or marketable limit order is

received, that order shall automatically

be filled at such NBBO (after the same

time delays specified in paragraph 6

above for Dual Trading System issues)

up to the size of the specialist’s bid or

offer (as the case may be). In such case,

the specialist’s bid or offer will be

decremented by the size of the

execution. In the event the specialist’s

bid or offer is exhausted, the system will

generate a quote [1⁄8 point] an increment

away from the NBBO as determined by
Federal Register / Vol. 62, No. 172 / Friday, September 5, 1997 / Notices 47079

2See Securities Exchange Act Release No. 38119

(January 3, 1997), File No. SR–CHX–96–16 (the

‘‘January Order’’).

3The securities are the 150 Nasdaq/NM securities

that became subject to the mandatory obligations of

SEC Rule 11Ac1–4 on or prior to February 24, 1997. 4 15 U.S.C. § 78f(b)(5).

the specialist from time to time, for 1000

shares; provided, however, if the

Nasdaq/NM Security became subject to

mandatory compliance with SEC Rule

11Ac1–4 on or prior to February 24,

1997, the size of the quote that is

generated will be one normal unit of

trading (usually 100 shares). If the

specialist is not quoting at the NBBO at

the time a MAX market or marketable

limit agency order is received, such

order shall be automatically filled at the

NBBO up to the size of the autoexecution threshold if the specialist has

not, within 20 seconds after receipt of

the order, complied with the manual

execution requirement of Rule 43(d) of

this Article.

(8)–(13) No change in text.

II. Self-regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

Exchange included statements

concerning the purpose of, and statutory

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 III below.

The self-regulatory organization 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

On January 3, 1997, the Commission

approved certain Exchange rules

relating to the trading of Nasdaq/NM

securities on the Exchange on a one-year

pilot basis, ending in December, 1997.2

Among other things, the January Order

set the auto-execution threshold at 1000

shares or greater for Nasdaq/NM

securities. Orders for a size less than or

equal to the auto-execution threshold

set by the specialist are automatically

executed if the CHX specialist is quoting

at the National Best Bid or Offer

(‘‘NBBO’’) for the lesser of the size of the

order or the specialist’s quote. The

orders are executed automatically after

a fifteen second delay from the time the

order is entered into MAX. The size of

the specialist’s bid or offer is

automatically decremented by the size

of the execution and, when the

specialist’s quote is exhausted, the

system then generates an autoquote 1⁄8th

point away from the NBBO for 1000

shares.

The purpose of the proposed rule

change is to permit a specialist to

autoquote for 100 shares for certain

Nasdaq/NM securities 3 and to change

the increment by which a specialist can

quote away from the NBBO from 1⁄8th

point away to an increment that will be

determined by the specialist from time

to time. This proposed rule change will

conform the CHX rules for Nasdaq/NM

securities to the CHX rules on minimum

quote size for listed securities.

2. Statutory Basis

The basis under the Act for the

proposed rule change is the requirement

under Section 6(b)(5) that an exchange

have rules that are 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 has neither solicited

nor received written comments on the

proposed rule change.

III. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning the foregoing.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street NW.,

Washington, DC 20549. Copies of the

submissions, 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, 450 Fifth Street NW.,

Washington, DC 20549. 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–97–3

and should be submitted by September

26, 1997.

IV. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

With in 35 days of the date of

publication of this notice in the Federal

Register or within such other 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 remainder of

the proposed rule change, or

(B) Institute proceedings to determine

whether the remainder of the proposed

rule change should be disapproved.

V. Commission’s Findings and Order

Granting Accelerated Partial Approval

of Proposed Rule Change

The Commission finds that the

Exchange’s proposal is consistent with

the requirements of the Act and the

rules and regulations thereunder

applicable to a national securities

exchange. Specifically, the Commission

finds that the proposed rule change is

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

Act,4 which requires that an exchange

have rules that are designed to prevent

fraudulent and manipulative acts and

practices, 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. In addition, the

Commission finds that the rule change

is consistent with the Congressional

objectives for the equity markets, set out

in Section 11A of the Act, of achieving

more efficient and effective market

operations, fair competition among

brokers and dealers, and the

economically efficient execution of

investor orders in the best market.

The Commission believes that the

Exchange’s rule permitting a specialist

to determine the increment at which its

quotation is automatically updated may

lead to improved price competition. In

addition, the constraint that the

increment be set at 1⁄8 is inconsistent

with current initiatives to reduce the

minimum quotation increment and

migrate to decimal pricing in the future.
47080 Federal Register / Vol. 62, No. 172 / Friday, September 5, 1997 / Notices

5The increment used by the specialists for

autoquoting, however, must be an increment that is

available for quotation on the exchange by all

members.

6See Securities Exchange Act Release No. 38156

(January 10, 1997), 62 FR 2415 (January 16, 1997),

order approving reduction in the minimum

quotation size for Nasdaq market makers in fifty

Nasdaq/NM securities (‘‘NASD Pilot’’). A list of the

50 Nasdaq/NM securities is located on the Nasdaq

web site (www.nasdaq.com).

7See Securities Exchange Act Release No. 38851

(July 18, 1997), 62 FR 39565 (July 23, 1997),

approving the extension of the NASD Pilot for a

minimum quotation size of 100 shares in 50

Nasdaq/NM securities until December 31, 1997.

8See Securities Exchange Act Release Nos. 38513

(April 15, 1997), 62 FR 19369 (April 21, 1997);

38872 (July 24, 1997), 62 FR 40879 (July 30, 1997),

(notices of request to expand the number of Nasdaq/

NM securities to 150).

9 15 U.S.C. § 78s(b)(12).

10 17 CFR 200.30-3(a)(12).

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

2 17 CFR 240.19b–4.

3On July 15, 1997, the NASD filed Amendment

No. 1 to the proposed rule change. On July 23, 1997,

the NASD filed Amendment No. 2 to the proposed

rule change. On August 28, 1997, the NASD filed

Amendment No. 3 to the proposed rule change.

Amendment No. 1 made several changes to the

proposed rule language and the rule filing. See

letter from John Ramsay, Deputy General Counsel,

NASD Regulation, Inc. (‘‘NASD Regulation’’) to

Katherine A. England, Assistant Director,

Commission, dated July 11, 1997. The changes

made by Amendment No. 1 are incorporated into

and published in this notice. Amendment No. 2

makes a technical change to Amendment No. 1. See

letter from John Ramsay, NASD Regulation to

Katherine A. England, Commission, dated July 22,

1997. Amendment No. 3 states that the NASD Board

of Governors has reviewed the proposed rule

change and that no other action by the NASD is

necessary for Commission consideration of the rule

proposal. See letter from John Ramsay, NASD

Regulation to Katherine A. England, Commission,

dated August 27, 1997.

The Commission, therefore, has

determined to permanently approve, on

an accelerated basis, the proposed rule

change permitting a CHX specialist to

autoquote in increments as determined

by the specialist from time to time.5

The Commission believes it is

reasonable for the CHX to determine

that for competitive reasons it will not

continue to require its specialists to

maintain a minimum quotation size of

1000 shares in certain Nasdaq/NM

securities when Nasdaq market makers’

in those securities are permitted a

minimum quotation size, for proprietary

quotes, of 100 shares.6 The Commission

notes, however, that it has not approved

the NASD Pilot on a permanent basis

nor has it determined that it should

continue past December 31, 1997.7 The

Commission is, therefore, approving the

CHX proposal on a pilot basis equal to

the limitations of the Nasdaq market

makers; 50 securities and until

December 31, 1997. Because Nasdaq

market makers have been quoting a

minimum of 100 shares for the 50

Nasdaq/NM securities in the NASD

Pilot since January, 1997, the

Commission is approving this part of

the proposal on an accelerated basis to

allow CHX specialists to also reduce the

minimum quotation size in those 50

Nasdaq/NM securities.

The Commission is deferring approval

of the proposal to permit CHX

specialists to reduce the quotation

minimum in an additional 100 Nasdaq/

NM securities until comments on the

proposal are received and the

Commission takes action on the NASD’s

proposal to expand the NASD Pilot by

100 securities.8

For the foregoing reasons, the

Commission finds good cause for

approving the proposed rule change, in

part, prior to the thirtieth day after date

of publication of notice of filing thereof

in the Federal Register.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,9 that the

proposed rule change (SR–CHX–97–3)

be, and hereby is, approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Jonathan G. Katz,

Secretary.

[FR Doc. 97–23601 Filed 9–4–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–38993; File No. SR–NASD–

97–35]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the National Association of Securities

Dealers, Inc. Relating to the Regulation

of Non-Cash Compensation in

Connection With the Sale of

Investment Company Securities and

Variable Contracts

August 29, 1997.

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

Securities Exchange Act of 1934

(‘‘Act’’)1, and Rule 19b–4 2 thereunder,

notice is hereby given that on May 7,

1997,3 the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’) 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

by the self-regulatory organization. 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

The NASD is filing a proposed rule

change to NASD Conduct Rules 2820

and 2830 relating to the regulation of

non-cash compensation in connection

with the sale of investment company

securities and variable contracts. Below

is the text of the proposed rule change.

Proposed new language is italicized;

proposed deletions are in brackets.

Conduct Rules

2820. Variable Contracts of an

Insurance Company

(a) Application.

Unchanged.

(b) Definitions.

(1)–(2) Unchanged.

(3) The terms ‘‘affiliated member,’’

‘‘compensation,’’ ‘‘cash compensation,’’

‘‘non-cash compensation’’ and ‘‘offeror’’

as used in paragraph (h) of this Section

shall have the following meanings:

‘‘Affiliated Member’’ shall mean a

member which, directly or indirectly,

controls, is controlled by, or is under

common control with a non-member

company.

‘‘Compensation’’ shall mean cash

compensation and non-cash

compensation.

‘‘Cash compensation’’ shall mean any

discount, concession, fee, service fee,

commission, asset-based sales charge,

loan, override, or cash employee benefit

received in connection with the sale and

distribution of variable contracts.

‘‘Non-cash compensation’’ shall mean

any form of compensation received in

connection with the sale and

distribution of variable contracts that is

not cash compensation, including but

not limited to merchandise, gifts and

prizes, travel expenses, meals and

lodging.

‘‘Offeror’’ shall mean an insurance

company, a separate account of an

insurance company, an investment

company that funds a separate account,

any adviser to a separate account of an

insurance company or an investment

company that funds a separate account,

a fund administrator, an underwriter

and any affiliated person (as defined in

Section 2(a)(3) of the Investment

Company Act of 1940) of such entities.

(c)–(g).

Unchanged.

(h) Member Compensation.

In connection with the sale and

distribution of variable contracts:

(1) Except as described below, no

associated person of a member shall

accept any compensation from anyone

other than the member with which the

person is associated. This requirement