Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 64035

5Securities Exchange Act Release No. 35038

(December 1, 1994), 59 FR 63652 (‘‘Concept

Release’’).

6Securities Exchange Act Release No. 37931

(November 7, 1996), 61 FR 58600 [File No. SR–

DTC–96–15].

7According to DTC, a party wishing to be a

‘‘limited participant’’ must: (1) be registered as a

transfer agent with the SEC; (2) participate as a

transfer agent in DTC’s Fast Automated Securities

Transfer (‘‘FAST’’) program; (3) provide ‘‘direct

mail service’’ on transfers; and (4) communicate

with DTC through a computer-to-computer interface

using DTC’s CCF platforms. Id. The Philadelphia

Depository Trust Company has received

Commission approval of similar DRS procedures.

Securities Exchange Act Release No. 37933

(November 8, 1997), 61 FR 59269 [File No. SR–

Philadep–96–14]

8 15 U.S.C. 78o–3(b)(6).

9 17 CFR 200.30–3(a)(12).

1See letter from Jeffrey S. Norris, Manager,

Regulatory Development, PCX, to Heather Seidel,

Attorney, Market Regulation, Commission, dated

November 24, 1997 (‘‘Amendment No. 1’’). The

substance of Amendment No. 1 is incorporated into

the notice.

2See Securities Exchange Act Release No. 38712

(June 3, 1997), 62 FR 17941 (July 8, 1997).

the issuer and to receive a statement of

ownership instead of a certificate.5

Since issuance of the Concept Release,

a basic structure for DRS has been

developed and implemented by a joint

committee of representatives of the

Securities Industry Association, the

Securities Transfer Association, the

Corporate Transfer Agents Association,

and the registered securities

depositories. Using DRS, investors have

a new way, in addition to holding a

certificate or holding in street name at

a broker-dealer, to hold their securities

positions.

A key component of DRS is the

electronic linkage of issuers or their

transfer agents with broker-dealers

through registered securities

depositories. Assuming an issuer and its

transfer agent participate in DRS, this

link allows a broker-dealer to deliver to

a transfer agent on customer’s request

that his purchased securities be

registered on the books of the issuer in

book-entry form. The linkage also

provides for the book-entry movement

between broker-dealers and issuers of

customers’ existing positions.

The Depository Trust Company

(‘‘DTC’’) has received Commission

approval of its procedures

implementing DRS.6 Under DTC’s

procedures, to participate in DRS a

transfer agent needs to become a DRS

‘‘limited participant’’ at DTC.7

Therefore, Nasdaq proposed to amend

NASD’s rules to establish a qualification

requirement for all securities to be

included in Nasdaq that if the issuer

establishes a direct registration program

it shall participate in an electronic link

with a securities depository in order to

facilitate the electronic transfer of

securities held pursuant to the direct

registration program. The electronic link

may be direct or through the issuer’s

transfer agent.

III. Discussion

Section 15A(b)(6) of the Act 8 requires

that the rules of a national securities

association be designed to foster

cooperation with persons engaged in

regulating, clearing, settling, processing

information with respect to, and

facilitating transactions in securities.

The Commission believes that the

proposed rule change is consistent with

Section 15A(b)(6) because it requires

Nasdaq issuers participating in DRS to

establish a link with a registered

securities depository before operating

DRS services. This requirement should

increase cooperation among Nasdaq

issuers, their transfer agents, brokerdealers, and DTC.

IV. Conclusion

On the basis of the foregoing, the

Commission finds that the proposal is

consistent with the requirements of the

Act and in particular with the

requirements of Section 17A of the Act

and the rules and regulations

thereunder.

It is therefore ordered, pursuant to

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

proposed rule change (File No. SR–

NASD–97–51) be, and hereby is,

approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–31684 Filed 12–2–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39358; File No. SR–PCX–

97–43]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Pacific Exchange, Inc. Relating to

an Extension of the Exchange’s

Specialist Evaluation Pilot Program

November 25, 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 November 17,

1997,1 the Pacific Exchange, Inc.

(‘‘PCX’’ 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

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

PCX is proposing to extend its pilot

program regarding the evaluation of its

equity specialists until January 1, 1999.

In addition, the Exchange is proposing

to implement certain changes to the

pilot program.

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

Statutory Basis for, the Proposed Rule

Change

1. Purpose

On June 3, 1997, the Commission

approved a six-month extension of the

pilot program for the evaluation of

equity specialists.2 The reason for the

extension was to allow the PCX more

time to evaluate the impact of the SEC’s

new order handling rules on the

performance criteria and to determine

an appropriate overall passing score and

individual passing scores for each

criterion. The Exchange now is

proposing to extend the pilot program

until January 1, 1999. The PCX has

established an overall passing score and

individual passing scores for each

criterion and has determined when

specialists that do not attain the

minimum passing scores should meet

with the Equity Allocation Committee

(‘‘EAC’’). The Exchange is also

proposing to replace the ‘‘Bettering the

Quote’’ criterion with Price

Improvement and to lower the

weighting of the Specialist Evaluation

Questionnaire from 15% to 10% so that

Price Improvement can be given a

weight of 10%. Since the Bettering the

Quote criterion is now measured against

the NBBO instead of the primary

market, the PCX believes it is no longer
64036 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

3The regional exchanges have agreed to the

following definition for marketable limit orders: A

marketable limit order to buy is priced at or above

the NBBO offer, a marketable limit order to sell is

priced at or below the NBBO bid.

4Preopening market and limit orders were

excluded because all such orders are entered prior

to there being a market that is trading, so there is

no market to improve upon.

a viable criterion. Previously, the

‘‘Bettering the Quote’’ criterion was

measured against the primary market,

which provided opportunities for the

specialist to better the primary market

quote. However, since the NBBO by

definition is the best market, it does not

provide the same opportunities for

specialists to better the quote, especially

when the PCX is the NBBO. The PCX

believes that Price Improvement is a

meaningful criterion that should be

given a 10% weighting, which should

be accomplished by lowering the

Specialist Evaluation Questionnaire

weighting to 10%. This will allow the

Exchange to achieve its goal of

providing its specialists with a more

objective rating system. The description

of the Price Improvement criterion as

well as the overall passing score and

individual passing scores are as follows:

a. Price improvement. ‘‘Price

Improvement’’ measures the number of

trades involving market and marketable

limit orders that improve the NBBO if

the NBBO quote spread at the time the

original order is received is greater than

or equal to two trading differentials, but

less than or equal to eight trading

differentials for that security. The

execution price for stopped market or

marketable limit orders will be

compared with the guaranteed price

(which is the NBBO at the time the

order was received).

Orders completely or partially

executed will be considered for price

improvement. All one-sided market or

marketable limit orders 3 with an NBBO

quote spread greater than 1⁄8 point are

eligible for price improvement. Only

agency orders entered or received by an

exchange are eligible for price

improvement. Orders with time-in-force

designations such as good until

canceled (GTC), good through day of

entry (DAY), immediate or cancel (IOC),

and good until executed will be eligible

for price improvement. In addition,

stocks, rights, warrants, preferred stock,

when issued, and when distributed

equity securities will be eligible for

price improvement.

The following types of orders will not

be considered under the category of

price improvement: all preopening

market and limit orders, limit order

executions out of the limit book (i.e.,

booked orders), electronically entered

limit orders whose price falls in

between the NBBO, non-regular-way

trades (i.e., cash, next day and seller’s

option), negotiated trades or trades

identified as crosses, bonds, orders

designated as possible duplicates (POSS

DUPE) or try to stop (TTS), canceled

orders, odd-lot market and odd-lot limit

orders, orders designated as all or none

(AON), all tick sensitive executions (i.e.,

buy minus, sell plus, sell short, etc.),

market quotations under 200 shares, and

principal and program trade account

types.4

Specialists will be measured on the

percentage of trades that are price

improved. The following table gives the

parameters and corresponding point

values:

Percent of eligible trades improved Points

40 + ................................................... 10

36–39.99 ........................................... 9

32–35.99 ........................................... 8

28–31.99 ........................................... 7

24–27.99 ........................................... 6

20–23.99 ........................................... 5

Limit order executions out of the limit book

(i.e., booked orders) were not included because they are filled as the market moves

toward them, not when they are outside of

the NBBO. Electronically entered limit orders whose price falls in between the

NBBO were excluded because these are

not executable at the time they are entered, unless the specialist chooses to fill

them. Non-regular-way trades (i.e., cash,

next day and seller’s option) and negotiated trades are not included because they

are negotiated and the price does not necessarily depend upon the NBBO. Trades

identified as crosses were excluded because specialists do not participate in

crosses, by definition. Bonds and orders

designated as possible duplicates (POSS

DUPE) were not included because they

are entered manually. Canceled orders

were excluded because orders cannot be

improved upon if they are not allowed to

be executed. Odd-lot market and odd-lot

limit orders were not included because

they are executed automatically in the

background, and the specialist never has

the opportunity to improve upon them. Orders designated as all or none (AON) and

all tick sensitive executions (i.e., buy

minus, sell plus, sell short, etc.) were excluded because they are conditional orders. Market quotations under 200 shares

were not included because they are usually computer generated and the specialists generally have no opportunity to improve them. Principal orders were excluded because they cannot be sent via

PCOAST. Program trades were not included because they involve a large portfolio of stocks and derivative index products, which are not generally routed to a

regional exchange for execution.

16–19.99 ........................................... 4

12–15.99 ........................................... 3

8–11.99 ............................................. 2

Percent of eligible trades improved Points

4–7.99 ............................................... 1

Below 4 ............................................. 0

b. Overall Passing Score. The PCX has

established an overall passing score of

60 as the minimum standard that each

specialist must attain each quarter. A

specialist will have to obtain better than

a passing score in each individual

criterion (see minimum passing scores

shown below) to obtain a minimum

passing score of 60. Any specialist who

falls below the minimum passing score

will have to appear before the EAC and

will be subject to the following

restrictions: no new allocations and no

trading in alternate specialist stocks for

the quarter following the quarter that

the specialist was evaluated. Such

specialists will have the right to request

the lifting of one or more of the

restrictions based upon mitigating

circumstances. Any specialist who does

not attain a passing score in any three

out of four quarters will also be subject

to other restrictions imposed by the

EAC, including reallocation of one or

more stocks. The EAC will evaluate the

effectiveness of the overall passing score

and will adjust it accordingly.

c. Individual Criterion Passing Scores.

The PCX has established individual

passing scores for each individual

criterion based upon third quarter 1997

evaluation results. The third quarter of

1997 was the first evaluation period that

the Trading Between the Quote, Book

Display Time, and Quote Performance

calculations were based upon the NBBO

instead of the primary market. In

addition, the evaluation results in the

third quarter were based upon onesixteenth trading increments instead of

one-eighth increments. As a result of the

NBBO changes and the change to

sixteenths, individual passing scores in

the affected criteria were lower than in

previous quarters. Previous quarter

scores were not used to determine

individual criterion passing scores

because of the aforementioned changes.

The EAC will evaluate the effectiveness

of the individual passing scores and will

adjust them accordingly. The individual

passing scores for each criterion are as

follows:

Evaulation criterion

Passing

score

Turnaround Time .............................. 12.0

Holding Orders Without Action ......... 7.5

Trading Between the Quote ............. 5.0

Executions in Size Greater Than

NBBO ............................................ 2.0

Specialist Evaluation Questionnaire

Survey ........................................... 5.0
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 64037

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

Evaulation criterion

Passing

score

Book Display Time ............................ 10.5

Equal or Better Quote Performance 1.0

Post 1 P.M. Parameters ................... 3.0

Price Improvement ............................ 4.0

Any specialist who does not attain a

minimum passing score in a particular

criterion for two or more consecutive

quarters or more will be subject to the

following:

1. If a specialist does not attain an

overall passing score in any particular

individual criterion for 2 consecutive

quarters, the specialist will have to

appear before the EAC. The EAC will

meet with the specialist with the intent

of helping the specialist to improve the

score.

2. If a specialist does not attain an

overall passing score in any particular

individual criterion for 3 out of 4

consecutive quarters, the specialist will

either not be permitted to trade any

alternate specialist stocks or not be able

to apply for any new stocks for one

quarter. The Equity Allocation

Committee will decide which restriction

will apply.

3. If a specialist does not attain an

overall passing score in any particular

individual criterion for 4 out of 5

consecutive quarters, 5 out of 6 quarters,

etc., the specialist will be subject to both

the alternate specialist and no new stock

restrictions for one quarter. The EAC

may also, at its discretion, impose other

restrictions, including reallocating one

or more of the specialist stocks

The EAC will have the discretion not

to impose any of these restrictions if

there are mitigating circumstances.

The PCX intends to file a rule change

to PCX 5.37 to reflect all of the

aforementioned changes to its Specialist

Evaluation Pilot Program.

The Commission has requested that

the Exchange file a report regarding the

Exchange’s experience with the Pilot,

for the period from April 1, 1997 to

September 30, 1997, and this report has

been filed under separate cover.

2. Statutory Basis

The Exchange believes that the

proposed rule change is consistent with

Section 6(b) of the Act,5 in general, and

Section 6(b)(5) in particular, in that it is

designed to promote just and equitable

principles of trade and to protect

investors and the public.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed rule change will impose

any inappropriate 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 either

solicited or received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the 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.

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 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–PCX–97–43 and should be

submitted by December 24, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–31615 Filed 12–2–97; 8:45 am]

BILLING CODE 8010–01–M

SMALL BUSINESS ADMINISTRATION

Senior Executive Service Performance

Review Board Members

ACTION: Listing of personnel serving as

members of this agency’s Senior

Executive Service Performance Review

Boards.

SUMMARY: Section 4314(c)(4) of Title 5,

U.S.C. requires that Federal agencies

publish notification of the appointment

of individuals who serve as members of

that Agency’s Performance Review

Boards (PRB). The following is a listing

of those individuals currently serving as

members of this Agency’s PRB;

1. Chris Sale, Chief Operating Officer;

2. John Whitmore, Deputy to the

Associate Deputy Administrator for

Government Contracting and Minority

Enterprise Development;

3. Mary K. Swedin, Assistant

Administrator for Congressional and

Legislative Affairs;

4. John Gray, Associate Deputy

Administrator for Economic

Development;

5. Carolyn J. Smith, Assistant

Administrator for Human Resources;

6. Herbert Mitchell, Deputy Associate

Administrator for Disaster Assistance;

7. Mark Stephens, Deputy General

Counsel;

8. John Smith, District Director

(Chicago);

9. Erline Patrick, Assistant

Administrator for Equal Employment

Opportunity and Civil Rights

Compliance;

10. Darryl Dennis, Counselor to the

Administrator;

11. Charles Anderson, District Director

(Miami);

12. Monika Harrison, Associate

Administrator for Business Initiatives;

13. Judith Roussel, Associate

Administrator for Government

Contracting;

14. Mark Quinn, District Director (San

Francisco);

15. Larry Wilson, Chief Financial

Officer;

16. Jeanne Saddler, Counselor to the

Administrator.

Dated: November 24, 1997.

Aida Alvarez,

Administrator.

[FR Doc. 97–31525 Filed 12–2–97; 8:45 am]

BILLING CODE 8025–01–M