47712 Federal Register / Vol. 62, No. 175 / Wednesday, September 10, 1997 / Notices

2See Article IV, Section 5 of the New York Stock

Exchange Constitution.

3 15 U.S.C. 78f(b).

4 15 U.S.C. 78f(b)(5).

5 17 CFR 240.19b–4(e)(6). 6 17 CFR 200.30–3(a)(12).

the proposed rule change as described

in Items I, II, and III below, which Items

have been prepared by the selfregulatory 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 is proposing to amend

Article II, Section 2 of the Exchange

Constitution to (i) permit Governors to

attend Board meetings by means of a

conference telephone, and (ii) clarify

that individuals who are employed by

or associated with a member

organization in a senior capacity may be

appointed as Exchange Officials. The

text of these statements may be

examined at the places specified in Item

IV below.

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

self-regulatory organization 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.

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 the

Statutory Basis for, the Proposed Rule

Change

1. Purpose

In order to facilitate the fullest

possible participation in board

meetings, it is proposed that Article II,

Section 2 of the Exchange Constitution

be amended to provide that

participation in a meeting of the Board

of Governors by means of a conference

telephone or similar communications

equipment, which allows all persons

participating in the meeting to hear each

other at the same time, shall constitute

presence in person at a meeting. New

York law permits this procedure, but

only if the appropriate authorization is

contained in the corporate by-laws (in

the case of the Exchange, its

Constitution). It has become common in

corporate America to provide for this

convenience, and the New York Stock

Exchange and most other self-regulatory

organizations permit it as well.2

In addition, it is proposed that Article

II, Section 2 of the Exchange

Constitution be amended to clarify the

description of the pool of individuals

who are qualified to serve as Exchange

Officials. Particularly as upstairs firms

have grown and developed more

complex organizations, the senior

employees who are so well qualified to

serve as Exchange Officials may not

easily be described as ‘‘principal

executive officers’’ or ‘‘control persons.’’

Accordingly, we would expand the

Constitutional qualification to include

individuals who are employed by or

associated with a member organization

in a senior capacity.

2. Statutory Basis

The proposed rule change is

consistent with Section 6(b) of the Act 3

in general and furthers the objectives of

Section 6(b)(5) 4 in particular in that it

is designed to promote just and

equitable principles of trade and protect

the public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The proposed rule change will impose

no 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

Because the foregoing proposed rule

change: (1) Does not significantly affect

the protection of investors or the public

interest; (2) does not impose any

significant burden on competition; and

(3) does not become operative for 30

days from August 20, 1997, the date on

which it was filed, and the Exchange

provided the Commission with written

notice of its intent to file the proposed

rule change at least five business days

prior to the filing date, it has become

operative pursuant to Section

19(b)(3)(A) of the Act and Rule 19b–

4(e)(6) thereunder.5

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.

IV. 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, N.W.,

Washington, D.C. 20549. 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. Copies of the filing will also be

available for inspection and copying at

the principle office of the Amex. All

submissions should refer to the file

number SR–Amex–97–32 and should be

submitted by October 1, 1997.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–23956 Filed 9–9–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39010; File No. SR–CBOE–

97–39]

Self-Regulatory Organizations; Notice

of Filing of and Order Granting

Accelerated Approval to Proposed

Rule Change by the Chicago Board

Options Exchange, Incorporated

Relating to Amendments to the

Exchange’s Telephone Solicitation

Rule

September 3, 1997.

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

Securities Exchange Act of 1934, 15

U.S.C. 78s(b)(1), notice is hereby given

that on August 25, 1997, the Chicago

Board Options Exchange, Incorporated

(‘‘CBOE or Exchange’’) 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
Federal Register / Vol. 62, No. 175 / Wednesday, September 10, 1997 / Notices 47713

1 47 U.S.C. 227.

2Pursuant to the TCPA, the FCC adopted rules in

December 1992 regulating and limiting

telemarketing activities. 57 FR 48333 (codified at 47

CFR 64.1200). With certain limited exceptions, the

FCC Rules apply to all residential telephone

solicitations, including those relating to securities

transactions. Id. The term ‘‘telephone solicitation’’

refers to the initiation of a telephone call or message

for the purpose of encouraging the purchase or

rental of, or investment in, property, goods, or

services, which is transmitted to any person, other

than with the called person’s express invitation or

permission, or to a person with whom the caller has

an established business relationship, or by a taxexempt non-profit organization. Id.

3Securities Exchange Act Release No. 36588

(December 13, 1995), 60 FR 65703 (December 20,

1995); order approving File No. SR–CBOE 95–63.

4 15 U.S.C. 6101–08.

5FTC Rules §§ 310.3–4.

6Id.

7 In response, the National Association of

Securities Dealers (‘‘NASD’’), the Municipal

Securities Rulemaking Board (‘‘MSRB’’), the New

York Stock Exchange (‘‘NYSE’’), the American

Stock Exchange (‘‘Amex’’), and the Philadelphia

Stock Exchange (‘‘Phlx’’) have adopted rules to curb

abusive telemarketing practices. See Securities

Exchange Act Release Nos. 38009 (Dec. 2, 1996), 61

FR 65625 (Dec. 13, 1996) (order approving File No.

SR–NASD–96–28); 38053 (Dec. 16, 1996), 61 FR

68078 (Dec. 26, 1996) (order approving File No. SR–

MSRB–96–06); 38638 (May 14, 1997), 62 FR 27823

(May 21, 1997) (order approving File No. SR–

NYSE–97–07); 38724 (June 6, 1997), 62 FR 32390

(June 13, 1997) (order approving File No. SR–

Amex–97–07); 38724 (June 6, 1997), 62 FR 32390

(June 13, 1997) (order approving File No. SR–

Amex–97–17); and 38875 (July 25, 1997), 62 FR

41983 (August 4, 1997) (order approving file No.

SR–Phlx–97–18).

The Commission has determined that the NASD

Rule, the MSRB Rule, the NYSE Rule, the Amex

Rule and the Phlx Rule, together with the Exchange

Act and the Investment Advisers Act of 1940, the

rules thereunder, and the other rules of the SROs,

satisfy the requirements of the Telemarketing Act,

because the applicable provisions of such laws and

rules are substantially similar to the FTC Rules

except for those FTC Rules that involve areas

already extensively regulated by existing securities

laws or regulations or activities inapplicable to

securities transactions. Securities Exchange Act

Release No. 38480 (Apr. 7, 1997), 62 FR 18666 (Apr.

16, 1996). Accordingly, the Commission has

determined that no additional rulemaking is

required by it under the Telemarketing Act. Id.

Notwithstanding this determination, the

Commission still expects the remaining SROs to file

similar proposals.

prepared by the CBOE. The Commission

is publishing this notice to solicit

comments on the proposed rule change

from interested persons and to grant

accelerated approval to the proposed

rule change.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Chicago Board Options Exchange,

Inc. (‘‘CBOE’’ or the ‘‘Exchange’’)

proposes to amend Exchange Rules 9.21,

Communications to Customers and 9.24,

Telephone Solicitation. The text of the

proposed rule change is available at the

Office of the Secretary, CBOE and at the

Commission.

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

CBOE 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 III below. The CBOE has

prepared summaries, set forth in

sections A, B, and C below, of the most

significant parts of such statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

Purpose

The purpose of the proposed rule

change is to amend Exchange Rules 9.21

relating to communications to

customers and Rule 9.24 pertaining to

the conduct of CBOE members and

persons associated with members

(‘‘associated persons’’) who make

unsolicited telephone calls to sell

securities or related services

(‘‘telemarketing’’ or ‘‘cold-calling’’).

Rule 9.21(e) is being amended to

include telemarketing scripts under the

definition of ‘‘sales literature.’’

In December 1995, pursuant to the

Telephone Consumer Protection Act

(‘‘TCPA’’),1 the CBOE adopted a

‘‘telephone solicitation’’ rule to

implement certain rules of the Federal

Communications Commission (‘‘FCC

Rules’’) 2 that require persons who

engage in telephone solicitations to sell

products and services (‘‘telemarketers’’)

to establish and maintain a list of

persons who have requested that they

not be contacted by the caller (a ‘‘donot-call’’ list).3 Under the Telemarketing

and Consumer Fraud and Abuse

Prevention Act (‘‘Telemarketing Act’’)

which became law in August 1994,4 the

Federal Trade Commission adopted

detailed regulations (‘‘FTC Rules’’) to

prohibit deceptive and abusive

telemarketing acts and practices that

became effective on December 31,

1995.5 The FTC Rules, among other

things, (i) require the maintenance of

‘‘do-not-call’’ lists and procedures, (ii)

prohibit abusive, annoying, or harassing

telemarketing calls, (iii) prohibit

telemarketing calls before 8 a.m. or after

9 p.m., (iv) require a telemarketer to

identify himself, the company for whom

he or she works, and the purpose of the

call, and (v) require express written

authorization or other verifiable

authorization from the customer before

use of negotiable instruments called

‘‘demand drafts.’’ 6

Under the Telemarketing Act, the SEC

is required either to promulgate or to

required the self-regulatory

organizations (‘‘SROs’’) to promulgate

rules substantially similar to the FTC

rules, unless the SEC determines either

that the rules are not necessary or

appropriate for the protection of

investors or the maintenance of orderly

markets, or that existing federal

securities laws or SEC rules already

provide for such protection.7 The

proposed rule change amends CBOE

Rule 9.24 and Interpretations

thereunder in response to the

Commission’s request that major SROs

promulgate rules substantially similar to

applicable provisions of the FTC Rules.

The CBOE believes that the proposed

rule change addresses all relevant

elements of the FTC Rules not already

extensively regulated by existing federal

securities laws and regulations or

inapplicable to securities transactions.

Time Limitations and Disclosure

The proposed rule change amends

Exchange Rule 9.24 by adding

paragraph (a) to prohibit a member or

associated person from making

outbound telephone calls to a member

of the public’s residence for the purpose

of soliciting the purchase of securities or

related services at any time other than

between 8 a.m. and 9 p.m. local time at

the called person’s location without that

person’s prior consent; and by adding

paragraph (b) to require that the member

or associated person promptly disclose

to the called person in a clear and

conspicuous manner the caller’s

identity and firm, the telephone number

or address at which the caller may be

contacted, and that the purpose of the

call is to solicit the purchase of

securities or related services.

Proposed paragraph (c) to Rule 9.24

creates exemptions from the time-of-day

and disclosure requirements of

paragraphs (a) and (b) for telephone

calls by associated persons responsible

for maintaining and servicing accounts

of certain ‘‘existing customers’’ assigned

to or under control of that associated

person. Paragraph (c) defines ‘‘existing

customer’’ as a customer for whom the

broker or dealer, or a clearing broker or

dealer on its behalf, carries an account.

Proposed subparagraph (c)(1) exempts

calls by the associated person to an

existing customer who, within the

preceding twelve months, has effected a

securities transaction in, or made a

deposit of funds or securities into, an
47714 Federal Register / Vol. 62, No. 175 / Wednesday, September 10, 1997 / Notices

8See, CBOE Rule 9.21(b).

9 15 U.S.C. 78f(b)(5).

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

11 In approving this rule, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

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

account under the control of or assigned

to that associated person at the time of

the transaction or deposit. Proposed

subparagraph (c)(2) exempts calls by an

associated person to an existing

customer who, at any time, has effected

a securities transaction in, or made a

deposit of funds or securities into an

account under the control of or assigned

to the associated person at the time of

the transaction or deposit, as long as the

customer’s account has earned interest

or dividend income during the

preceding twelve months. Each of these

exemptions also permits calls by other

associated persons acting at the

direction of an associated person who is

assigned to or controlling the account.

Proposed paragraph (c)(3) exempts

telephone calls to a broker or dealer.

The proposed rule change also expressly

clarifies that the scope of this rule is

limited to the telemarketing calls

described herein; the terms of the Rule

do not otherwise expressly or by

implication impose on members any

additional requirements with respect to

the relationship between a member and

a customer or between an associated

person and a customer.

Demand Draft Authorization and

Recordkeeping

The proposed rule change adds

paragraph (e) to Exchange Rule 9.24 to

prohibit a member or associated person

from obtaining from a customer or

submitting for payment a check, draft,

or other form of negotiable instrument

drawn on a customer’s checking,

savings, share, or similar account

(‘‘demand draft’’) without that person’s

express written authorization (which

may include the customer’s signature on

the instrument), a record of which must

be retained for at least three years. The

proposal also states, however, that this

provision does not require maintenance

of copies of negotiable instruments

signed by customers.

Telemarketing Scripts

The proposed rule change also

amends Exchange Rule 9.21(e) to

include telemarketing scripts under the

definition of ‘‘sales literature.’’

Therefore, telmarketing scripts will be

required to be retained for a period of

three years.8

Statutory Basis

The CBOE believes that the proposed

rule change is consistent with the

provision of Section 6(b)(5) of the Act,9

which requires that the Exchange adopt

and amend its rules to promote just and

equitable principles of trade and

generally provide for the protection of

customers and the public interest, in

that the proposed rule change, by

imposing time restriction and disclosure

requirements, with certain exceptions,

on members’ telmarketing calls, and by

requiring verifiable authorization from a

customer for demand drafts, prevents

members from engaging in certain

deceptive and abusive telemarketing

acts and practices while allowing for

legitimate telemarketing practices. The

CBOE also believes that the proposed

rule change fulfills the mandate that

SRO rules promulgated under the

Telemarketing Act provide protection

from deceptive and abusive

telemarketing practices and are

necessary and appropriate in the public

interest and for the protection of

investors.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

CBOE 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. 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, N.W.,

Washington, D.C. 20549. 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

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the CBOE. All submission

should refer to File No. SR–CBOE–97–

39 and should be submitted by October

1, 1997.

IV. Commission’s Findings and Order

Granting Accelerated Approval of

Proposed Rule Change

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, and, in particular, with

Section 6(b)(5) of the Act 10 which

requires, among other things, that the

rules of the exchange be designed to

prevent fraudulent and manipulative

acts and practices, to promote just and

equitable principles of trade, and, in

general, to protect investors and the

public interest.11 The proposed rule

change is consistent with these

objectives in that it imposes time

restriction and disclosure requirements,

with certain exceptions, on members’

telemarketing calls, requires verifiable

authorization from a customer for

demand drafts, and prevents members

from engaging in certain deceptive and

abusive telemarketing acts and practices

while allowing for legitimate

telemarketing activities.

The Commission believes that the

addition of paragraph (a) to Exchange

Rule 9.24, prohibiting a member or

associated person from making

outbound telephone calls to the

residence of any person for the purpose

of soliciting the purchase of securities or

related services at any time other than

between 8 a.m. and 9 p.m. local time at

the called person’s location, without the

prior consent of the person, is

appropriate. The Commission notes

that, by restricting the times during

which a member or associated person

may call a residence, the proposal

furthers the interest of the public and

provides for the protection of investors

by preventing members and associated

persons from engaging in unacceptable

practices, such as persistently calling

members of the public at unreasonable

hours of the day and night.

The Commission also believes that the

addition of paragraph (b) to Rule 9.24,

requiring a member or associated person

to promptly disclose to the called

person in a clear and conspicuous

manner the caller’s identity and firm,

telephone number or address at which

the caller may be contacted, and that the

purpose of the call is to solicit the

purchase of securities or related

services, is appropriate. By requiring the

caller to identify himself or herself and

the purpose of the call, paragraph (b)
Federal Register / Vol. 62, No. 175 / Wednesday, September 10, 1997 / Notices 47715

12 15 U.S.C. 78f.

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.

assists in the prevention of fraudulent

and manipulative acts and practices by

providing investors with information

necessary to make an informed decision

when purchasing securities. Moreover,

by requiring the associated persons to

identify the firm for which he or she

works and the telephone number or

address at which the caller may be

contacted, the Rule encourages

responsible use of the telephone to

market securities.

The Commission further believes that

the addition of paragraph (c), which

creates exemptions from the time-of-day

disclosure requirements for telephone

calls by associated persons, or other

associated persons acting at the

direction of such persons, to certain

categories of ‘‘existing customer’’ is

appropriate. The Commission believes it

is appropriate to create an exemption for

calls to customers with whom there are

existing relationships in order to

accommodate personal and timely

contact with a broker who can be

presumed to know when it is

convenient for a customer to respond to

telephone calls. Moreover, such an

exemption also may be necessary to

accommodate trading with customers in

multiple time zones across the United

States. The Commission, however,

believes that the exemption from the

time-of-day and disclosure requirements

should be limited to calls to persons

with whom the broker has a minimally

active relationship. In this regard, the

Commission believes that paragraph (c)

achieves an appropriate balance

between providing protection for the

public and the members’ interests in

competing for customers.

Moreover, the Commission believes

that the addition of paragraph (e) to

Rule 9.24, requiring that a member or

associated person obtain from a

customer, and maintain for three years,

express written authorization when

submitting for payment a check, draft,

or other form of negotiable paper drawn

on a customer’s checking, savings, share

or similar account, is appropriate. The

Commission notes that requiring a

member or associated person to obtain

express written authorization from a

customer in the above-mentioned

circumstances assists in the prevention

of fraudulent and manipulative acts in

that it reduces the opportunity for a

member, or associated person to

misappropriate customers’ funds. In

addition, the Commission believes that

by requiring a member or associated

person to retain the authorization for

three years, subparagraph (e) protects

investors and the public interest in that

it provides interested parties with the

ability to acquire information necessary

to ensure that valid authorization was

obtained for the transfer of a customer’s

funds for the purchase of a security.

The Commission believes that the

amendment to paragraph (e) of Rule

9.21, adding telemarketing scripts to the

definition of sales literature thereby

requiring the retention of telemarketing

scripts for a period of three years is

appropriate. By requiring the retention

of telemarketing scripts for three years,

the Rule assists in the prevention of

fraudulent and manipulative acts and

practices and provides for the protection

of the public in that interested parties

will have the ability to acquire copies of

the scripts used to solicit the purchase

of securities to ensure that members and

associated persons are not engaged in

unacceptable telemarketing practices.

Finally, the Commission believes that

the proposed rule achieves a reasonable

balance between the Commission’s

interest in preventing members from

engaging in deceptive and abusive

telemarketing acts and the members’

interests in conducting legitimate

telemarketing practices.

The Commission finds good cause for

approving the proposed rule change,

prior to the thirtieth day after the date

of publication of notice thereof in the

Federal Register. The proposal is

identical to the NASD and MSRB rules,

which were published for comment and,

subsequently, approved by the

Commission. The approval of the

CBOE’s rules provides a consistent

standard across the industry. In that

regard, the Commission believes that

granting accelerated approval to the

proposed rule change is appropriate and

consistent with Section 6 of the Act.12

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act, 13 that the

proposed rule change (SR–CBOE–97–

39) is approved on an accelerated basis.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–23954 Filed 9–9–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39009; File No. SR–NYSE–

96–16]

Self-Regulatory Organizations; New

York Stock Exchange, Inc.; Order

Granting Approval to Proposed Rule

Change Relating to Amendments to

Percentage Order Rules 13 and

123A.30

September 3, 1997.

I. Introduction

On June 28, 1996, the New York Stock

Exchange, Inc. (‘‘NYSE’’ or ‘‘Exchange’’)

submitted to 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

amend its rules relating to percentage

orders.

The proposed rule change was

published for comment in Securities

Exchange Act Release No. 37495 (July

30, 1996), 61 FR 40699 (August 5, 1996).

No comments were received on the

proposal. This order approves the

proposed rule change.

II. Description

NYSE Rule 13 defines a percentage

order as ‘‘a limited price order to buy (or

sell) fifty percent of the volume of a

specified stock after its entry.’’ A

percentage order is essentially a

memorandum entry left with a

specialist, specifying the total number of

shares to be bought or sold and the limit

price, which becomes a ‘‘live’’ order

capable of execution in one of two ways:

(i) all or part of the order can be

‘‘elected’’ as a limit order on the

specialist’s book based on trades in the

market; or (ii) all or part of the order can

be ‘‘converted’’ into a limit order to

make a bid or offer or to participate

directly in a trade.

A. The Election Process

1. Current Practice

Under the election process, as trades

occur at the percentage order’s limit

price or better, an equal number of

shares of the percentage order are

‘‘elected’’ and become a limit order on

the specialist’s book. This limit order

takes its place behind other limit orders

on the specialist’s book at the same

price. The percentage order then is

reduced by the number of elected shares

until the entire order has been satisfied.