Federal Register / Vol. 65, No. 185 / Friday, September 22, 2000 / Notices 57413

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

2 17 CFR 240.19b–4.

3See letter from Jean I. Feeney, Special Advisor

to the President, NASD Dispute Resolution, to

Katherine A. England, Assistant Director, Division

of Market Regulation (‘‘Division’’), Commission,

dated July 27, 2000. In Amendment No. 1, NASD

Regulation clarifies certain portions of the

description of the proposed rule change and makes

technical amendments to the text of the proposed

rule language.

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43291; File No. SR–NASD–

00–34]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the National Association of Securities

Dealers, Inc. Relating to the Authority

of the Director of Arbitration to

Remove Arbitrators for Cause

September 14, 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 13,

2000, the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’), through its wholly

owned subsidiary NASD Dispute

Resolution, Inc. (‘‘NASD Dispute

Resolution’’), 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 NASD Dispute Resolution.

On July 28, 2000, NASD Dispute

Resolution submitted Amendment No. 1

to the proposed rule change.3 The

Commission is publishing this notice of

the rule change, as amended, 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

NASD Dispute Resolution proposes to

amend NASD Rules 10308 and 10312 to

provide authority for the Director of

Arbitration (‘‘Director’’) to remove

arbitrators for cause after hearings have

begun. Below is the text of the proposed

rule change. Proposed new language is

italicized; proposed deletions are in

brackets.

10000. CODE OF ARBITRATION

PROCEDURE

* * * * *

10308. Selection of Arbitrators

(a)–(c) Unchanged.

(d) Disqualification and Removal of

Arbitrator Due to Conflict of Interest or

Bias.

(1) Disqualification by Director

After the appointment of an arbitrator

and prior to the commencement of the

earlier of (A) the first pre-hearing

conference or (B) the first hearing, if the

Director or a party objects to the

continued service of the arbitrator, the

Director shall determine if the arbitrator

should be disqualified. If the Director

sends a notice to the parties that the

arbitrator shall be disqualified, the

arbitrator will be disqualified unless the

parties unanimously agree otherwise in

writing and notify the Director not later

than 15 days after the Director sent the

notice.

(2) [Authority of Director to Disqualify

Ceases] Removal by Director

After the commencement of the

earlier of (A) the first pre-hearing

conference or (B) the first hearing, the

Director[’s authority to] may remove an

arbitrator from an arbitration panel

[ceases] based on information that is

required to be disclosed pursuant to

Rule 10312 and that was not previously

disclosed.

(3) Unchanged.

(e) Unchanged.

* * * * *

10312. Disclosures Required of

Arbitrators and Director’s Authority to

Disqualify

(a) Each arbitrator shall be required to

disclose to the Director of Arbitration

any circumstances which might

preclude such arbitrator form rendering

an objective and impartial

determination. Each arbitrator shall

disclose:

(1) Any direct or indirect financial or

personal interest in the outcome of the

arbitration;

(2) Any existing or past financial,

business, professional, family, [or]

social, or other relationships or

circumstances that are likely to affect

impartiality or might reasonably create

an appearance of partiality or bias.

Persons requested to serve as arbitrators

should disclose any such relationships

or circumstances that they [personally]

have with any party or its counsel, or

with any individual whom they have

been told will be a witness. They should

also disclose any such relationship or

circumstances involving members of

their families or their current

employers, partners, or business

associates.

(b) Persons who are requested to

accept appointment as arbitrators

should make a reasonable effort to

inform themselves of any interest, [or]

relationships or circumstances

described in paragraph (a) above.

(c) The obligation to disclose

interests, relationships, or

circumstances that might preclude an

arbitrator form rendering an objective

and impartial determination described

in paragraph (a) is a continuing duty

that requires a person who accepts

appointment as an arbitrator to disclose,

at any stage of the arbitration, any such

interests, relationships, or

circumstances that arise, or are recalled

or discovered.

(d) Removal by Director

[Prior to the commencement of the

earlier of (1) the first pre-hearing

conference or (2) the first hearing, the]

(1) The Director may remove an

arbitrator based on information that is

required to be disclosed pursuant to this

Rule.

(2) After the commencement of the

earlier of (A) the first pre-hearing

conference or (B) the first hearing, the

Director may remove an arbitrator based

only on information not known to the

parties when the arbitrator was selected.

The Director’s authority under this

subparagraph (2) may be exercised only

by the Director or the President of NASD

Dispute Resolution.

(e) [Prior to the commencement of the

earlier of (1) the first pre-hearing

conference or (2) the first hearing, t]The

Director shall inform the parties to an

arbitration proceeding of any

information disclosed to the Director

under this Rule unless either the

arbitrator who disclosed the information

withdraws voluntarily as soon as the

arbitrator learns of any interest, [or]

relationship, or circumstances described

in paragraph (a) that might preclude the

arbitrator from rendering an objective

and impartial determination in the

proceeding, or the Director removes the

arbitrator.

[(f) After the commencement of the

earlier of (1) the first pre-hearing

conference or (2) the first hearing, the

Director’s authority to remove an

arbitrator from an arbitration panel

ceases. During this period, the Director

shall inform the parties of any

information disclosed by an arbitrator

under this Rule.]

* * * * *

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

NASD Dispute Resolution 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.

NASD Dispute Resolution has prepared

summaries, set forth in Sections A, B,

57414 Federal Register / Vol. 65, No. 185 / Friday, September 22, 2000 / Notices

4The standard for circumstances that would be

considered ‘‘for cause’’ would be the same as the

general disclosure standard contained in Rule

10312: ‘‘any circumstances which might preclude

such arbitrator from rendering an objective and

impartial determination.’’

5Rule 10103 provides that the duties and

functions of the director may be delegated, as

appropriate.

6Rule 10308(d) states that either the Director or

a party may object to the continued service of the

arbitrator, whereas Rule 10312(d) does not indicate

that a specific objection is required.

7 In Commonwealth Coatings Corp. v. Continental

Casualty Co., 393 U.S. 145, 151 (footnote omitted)

(1968), which vacated an award because of an

arbitrator’s failure to disclose a business

relationship with one of the parties, Justices White

and Marshall noted in their concurring opinion:

The arbitration process functions best when an

amicable and trusting atmosphere is preserved and

there is voluntary compliance with the decree,

without need for judicial enforcement. This end is

best served by establishing an atmosphere of

frankness at the outset, through disclosure by the

arbitrator of any financial transactions which he has

had or is negotiating with either of the parties. In

many cases the arbitrator might believe the business

relationship to be so insubstantial that to make a

point of revealing it would suggest he is indeed

easily swayed, and perhaps a partisan of that party.

But if the law requires the disclosure, no such

imputation can arise. And it is far better that the

relationship be disclosed at the outset, when the

parties are free to reject the arbitrator or accept him

with knowledge of the relationship and continuing

faith in his objectivity, than to have the relationship

come to light after the arbitration, when a

suspicious or disgruntled party can seize on it as

a pretext for invalidating the award. The judiciary

should minimize its role in arbitration as judge of

the arbitrator’s impartiality. That role is best

consigned to the parties, who are the architects of

their own arbitration process, and are far better

informed of the prevailing ethical standards and

reputations within their business.

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

The Code of Arbitration Procedure

(‘‘Code’’) presently providezs that the

authority of the Director of Arbitration

to remove an arbitrator for cause ceases

after the earlier of the first pre-hearing

conference or the first hearing. The

proposed rule change would amend the

Code to eliminate this restriction, and to

allow the Director to remove an

arbitrator for sufficient cause shown at

any juncture, where there is a challenge

based on information not known to the

parties at the time of the arbitrator’s

appointment.

2. Background and Discussion

In order to protect the integrity of the

process and to ensure the impartiality of

arbitrators, Rule 10312(a) requires that

arbitrators make full disclosure of

certain enumerated interests,

relationships, and circumstances, as

well as ‘‘any circumstances which might

preclude such arbitrator from rendering

an objective and impartial

determination.’’ Prior to implementation

of the Neutral List Selection System

(‘‘list selection’’) in November 1998, the

Code required the Director to inform the

parties of information disclosed by the

arbitrator at least 15 days before the first

hearing. Parties were allowed one

peremptory challenge and unlimited

challenges for cause under Rule 10311.4

Under the list selection method, Rule

10311 no longer applies. Rather, Rule

10308(b)(6) requires the Director to send

the parties the employment history and

other background information about the

arbitrators on their lists. The parties

may request additional information.

Then, as provided in Rule 10308(c),

they may strike arbitrators from the list

for any reason, and rank those who

remain. The Director (or his staff)5

consolidates the parties’ lists in ranking

order and, if the number of arbitrators

available to serve from the consolidated

list is not sufficient to fill a panel, the

Director uses NLSS to extend the list

and appoints one or more additional

arbitrators to complete the panel. Parties

receive information about any

arbitrators appointed by extending the

list, and have the right to object as

provided in Rule 10308(d)(1), which is

similar to the former challenge for cause

procedure under Rule 10311.

Rule 10308(c)(4)(A) provides that the

Director appoints arbitrators ‘‘subject to

availability and disqualification.’’

‘‘Availability’’ refers to the arbitrator’s

ability to serve on the case in the

desired location during the relevant

time period. ‘‘Disqualification’’ could

occur either when a disqualifying fact is

revealed to the Director after the parties

have completed the striking and ranking

process, or when the Director consults

with a ranked candidate just prior to

appointment and the candidate, upon

hearing more case-specific information,

reveals information that the Director’s

staff determines is a basis for

disqualification. In the latter case, the

Director would either drop the arbitrator

or disclose the information to the

parties.

Under Rule 10312(c), an arbitrator’s

disclosure obligation continues

throughout the arbitration. If a

disqualifying fact comes to light after a

panel has been appointed, Rules

10308(d) and 10312(d) permit the

Director to remove an arbitrator based

on such information before the earlier of

the first pre-hearing conference or the

first hearing.6 Once one of these events

occurs, Rules 10308(d)(2) and 10312(f)

specifically state that the Director’s

authority to remove an arbitrator ceases.

Nevertheless, Rule 10312(f) requires

the Director to inform the parties of any

potentially disqualifying information

disclosed after the first pre-hearing or

hearing session. At that point, however,

a party can no longer use a challenge for

cause to remove the arbitrator. Rather,

the parties can only attempt to resolve

the matter themselves, which can be

difficult in the adversarial setting of an

ongoing arbitration. The parties may

agree that the arbitrator be removed, in

which case the arbitration may continue

with the two remaining arbitrators or a

replacement may be appointed under

Rule 10313. If all the parties do not

agree, a party objecting to the continued

service of the arbitrator may make a

formal request for the arbitrator to

recuse himself or herself; however, the

arbitrator may decline the request. The

Director may suggest that the arbitrator

withdraw voluntarily, but may not

remove the arbitrator.

In summary, when a for-cause

objection is raised after the first prehearing or hearing session, the arbitrator

can only be removed where (1) he or she

agrees to step down, or (2) all the parties

agree that the arbitrator should be

removed. Failing that, an aggrieved

party’s only recourse is to seek judicial

intervention, which increases the

party’s legal expenses, and which could

reduce confidence in the fairness and

efficiency of the arbitration process.7

NASD Dispute Resolution believes

that an alternative dispute resolution

forum should be able to resolve all

issues relating to an arbitration without

forcing the parties to go to court. As

presently written, the Code does not

permit the Director to remove an

arbitrator for cause after the first prehearing or hearing session has

commenced, no matter how egregious

the circumstances. Accordingly, NASD

Dispute Resolution proposes that the

Code be amended to permit the Director

to remove an arbitrator for cause at any

time, if there is a challenge to the

arbitrator based on information not

known to the parties when the arbitrator

was appointed. In addition, NASD

Dispute Resolution proposes certain

minor language changes to clarify that

both relationships and circumstances

must be disclosed if they fit within the

criteria of Rule 10312, and that the Rule

is not limited to personal relationships

and circumstances of the arbitrator, as

described in more detail below.

NASD Dispute Resolution believes

there are four major reasons for the

proposed rule change:

Federal Register / Vol. 65, No. 185 / Friday, September 22, 2000 / Notices 57415

8Section 11 of the Uniform Code of Arbitration,

Disclosures Required by Arbitrations, was revised

to read as follows:

(e) Once the hearings have commenced, the

Director may remove an arbitrator based only on

information required to be disclosed under

subsection (a), not known to the parties when the

arbitrator was selected. The Director’s authority

under this subsection (e) may not be delegated.

9See Exchange Act Release No. 41971 (Sept. 30,

1999) (File No. SR–NASD–99–21), 64 FR 55793

(Oct. 14, 1999), which approved creation of a new

dispute resolution subsidiary, NASD Dispute

Resolution, Inc. That subsidiary began operations

on July 9, 2000.

10The Commercial Dispute Resolution

Procedures of the AAA (January 1, 1999), provides

as follows:

R–19. Disclosure and Challenge Procedure

(a) Any person appointed as a neutral arbitrator

shall disclose to the AAA any circumstance likely

to affect impartiality or independence, including

any bias or any financial or personal interest in the

result of the arbitration or any past or present

relationship with the parties or their

representatives. Upon receipt of such information

from the arbitrator or another source, the AAA shall

communicate the information to the parties and, if

it deems it appropriate to do so, to the arbitrator

and others.

(b) Upon objection of a party to the continued

service of a neutral arbitrator, the AAA shall

determine whether the arbitrator should be

disqualified and shall inform the parties of its

decision, which shall be conclusive.

11The Procedures for Securities Arbitrations

Administered by JAMS Under the Securities

Industry Conference on Arbitration Non-SRO Pilot

Program (Website visited June 1, 2000) http://

www.jamsadr.com/arbitrationrules/

securitiesarab.htm#13. Disclosure, provide:

Section 13. Disclosure and Challenge Procedure

Any person appointed as an arbitrator must

disclose to JAMS any circumstance likely to affect

impartiality, including any bias or any financial or

personal interest in the result of the arbitration or

any past or present relationship with the parties or

their representatives. Upon receipt of such

information from the arbitrator or other source,

JAMS will communicate the information to the

parties and, if it deems it appropriate to do so, to

the arbitrator and others. Upon objection of a party

to the continued service of an arbitrator, JAMS will

determine whether the arbitrator should be

disqualified and will inform the parties of its

decision, which will be conclusive.

12Under the Federal Arbitration Act, courts may

vacate arbitration awards for, among other reasons,

‘‘evident partiality or corruption in the arbitrators.’’

9 U.S.C. Sec. 10(a)(2). See e.g., Wages v. Smith

Barney Harris Upham & Co., 937 P.2d 715 (Ariz. Ct.

App. 1997), in which the court vacated an award

to investors of $950,000 plus costs and fees, where

the chair of an arbitration panel declined to rescue

himself after it was learned that he had represented

claimants in a similar matter against a predecessor

of the respondent firm; the court found that the

arbitrator’s later harsh rulings against respondent

showed evident partiality. See also Schmitz v.

Zilveti et al., 20 F.3d 1043, 1049 (9th Cir. 1994) (‘‘A

finding of evident partiality in one arbitrator

generally requires vacatur of the arbitration

award.’’).

13The deletion of the word ‘‘personally’’ was also

made to the Uniform Code of Arbitration at SICA’s

Continued

The present rule is no longer

necessary. The present rule language

reflects a long-standing policy of the

NASD and all other SROs that

administer securities arbitration, that

the Director may not remove an

arbitrator after the hearings have

commenced. In addition, the Securities

Industry Conference on Arbitration

(SICA) adopted an amendment to the

Uniform Code of Arbitration at its

meeting on March 14, 2000, which is

analogous to this proposed rule change.8

That policy was designed, in part, to

eliminate any perception that member

firms could influence the composition

of the panel after hearings have

commenced. The proposed amendment

reflects the greater acceptance that

arbitration now enjoys. In addition, the

corporate separation of the market and

regulation functions, and the spin-off of

the NASD Regulation Office of Dispute

Resolution as a separate company 9

increase the independence of the

Director and diminish the need for the

present rule.

The present rule is inconsistent with

the concept of administered arbitration.

NASD Dispute Resolution offers an

‘‘administered’’ arbitration system, in

that the parties submit their dispute to

NASD Dispute Resolution for complete

administration of the dispute, from

filing a claim to issuance of an award.

One of the key benefits of administered

arbitration is the ability to have all

ancillary issues relating to the

arbitration—such as removal of

arbitrators for cause—resolved without

recourse to the courts. Moreover, the

present rule is inconsistent with the

approaches of other major dispute

resolution forums, such as the American

Arbitration Association (‘‘AAA’’) 10 and

JAMS,11 whose rules permit the

administering organization to remove an

arbitrator for cause at any time in the

arbitration process.

The present rule invites delay and

administrative disruption. The present

rule invites delays in the process, while

parties wrestle with the issue of forcause challenges to sitting arbitrators,

and perhaps seek judicial intervention.

In the NASD Dispute Resolution forum,

there have been situations in which

viable for-cause challenges were raised

after the Director’s authority to remove

arbitrators ceased. Under current rules,

the Director would be unable to rule on

the merits of such challenges, despite

clear substantive grounds supporting

removal, and the prevailing party would

be subject to the risk of having the

award vacated on grounds of evident

partiality. 12

The arbitrator should not be the only

source of information. Rule 10312 of the

Code can be interpreted to limit the

Director’s authority to challenges based

on information disclosed by the

arbitrator under that rule. This could

prevent the Director from entertaining a

challenge based on information,

obtained from some other source, that

should have been disclosed by the

arbitrator. Consistent with the rules of

other dispute resolution forums, NASD

Dispute Resolution proposes to amend

the Code to permit the Director to

entertain for-cause challenges based on

sources in addition to the arbitrator.

Therefore, the proposed changes would

allow the Director to remove an

arbitrator based on information that is

required to be disclosed pursuant to

Rule 10312 and that was not previously

disclosed.

Some users of the arbitration forum

may be concerned about giving more

power to NASD Dispute Resolution staff

to remove arbitrators who were selected

by the parties. To address that concern,

the proposed rule change provides that

the only persons who can remove

arbitrators under the proposed

amendments will be the Director and

the President (following the spin-off), to

whom he reports. This authority cannot

be delegated. In addition, as discussed

above, removal can only be based on

information that was required to be

disclosed pursuant to Rule 10312 and

that was not known to the parties at the

time the arbitrator was appointed.

b. Description of Proposed Amendments

NASD Dispute Resolution proposes to

amend Rule 10308, the list selection

rule, to provide that the authority of the

Director to disqualify or remove

arbitrator does not end when the first

pre-hearing or hearing session begins.

Rather, proposed Rule 10308(b)(2)

provides that, after that first session, the

Director may remove an arbitrator from

an arbitration panel based on

information that is required to be

disclosed pursuant to Rule 10312 and

that was not previously disclosed.

NASD Dispute Resolution proposes to

amend Rule 10312, the arbitrator

disclosure rule, in several places. NASD

Dispute Resolution proposes to amend

Rule 10312(a)(2) to include any existing

or past financial, business, professional,

family, social, or other relationships or

circumstances that are likely to affect

impartiality or might reasonably create

an appearance of partiality or bias.

NASD Dispute Resolution proposes to

delete the word ‘‘personally’’ from Rule

10312(a)(2), as it might be read too

narrowly, and to add the phrase ‘‘or

circumstances’’ to paragraphs (b) and (e)

of Rule 10312. This will clarify that the

arbitrator is required to disclose any

relationships or circumstances that

might fit under Rule 10312. 13

57416 Federal Register / Vol. 65, No. 185 / Friday, September 22, 2000 / Notices

March 14, 2000 meeting. See supra note 8. The

word ‘‘addition’’ was removed from this sentence

and replaced with the word ‘‘deletion.’’ Telephone

conversation between Jean I. Feeney, Special

Advisor to the President, NASD Dispute Resolution,

and Joseph Corcoran, Attorney, Division,

Commission, on September 14, 2000.

14 Id.

15 15 U.S.C. 78o–3(b)(6). 16 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3 In Amendment No. 1, the Exchange withdrew

the proposed changes to PCX Rule 6.6 because the

changes were previously made and approved in

Securities Exchange Act Release No. 40875

(December 31, 1998), 64 FR 1842 (January 12, 1999).

See letter from Michael D. Pierson, DirectorRegulatory Policy, PCX, to Heather Traeger,

Attorney, Division of Market Regulation, SEC, on

March 27, 2000 (‘‘Amendment No. 1’’).

4Securities Exchange Act Release No. 42590

(March 29, 2000), 65 FR 17690.

5See, e.g., PCX Rule 6.8 Com. .08(a) (‘‘If a firm

desires to facilitate customer orders in the XYZ

option issue * * *.’’); PCX Rule 6.28(a)(9) (‘‘the

permissible size of orders that may be

automaticallay executed’’ may be increased ‘‘in a

particular issue, or for all option issues.* * *’’); PCX

Rule 6.82(e) (‘‘[t]he allocation of option issues to

LMMs shall be effected by the Options Allocation

Committee.* * *’’).

NASD Dispute Resolution also

proposes to amend Rule 10312 to

provide, as in Rule 10308, that the

Director’s authority to remove

arbitrators does not cease with the first

pre-hearing or hearing session. There

are two restrictions on the exercise of

this authority, however, once such

sessions have begun. Proposed Rule

10312(d)(2) provides that, after the

earlier of the first pre-hearing

conference or the first hearing, the

Director may remove an arbitrator based

only on information not known to the

parties when the arbitrator was selected.

This provision is intended to prevent

parties from raising challenges late in

the process which could have been

raised at the outset. Rule 10312(d)(2)

also will provide that the Director’s

authority under this subparagraph may

only be exercised by the Director or by

the President of NASD Dispute

Resolution. 14

Finally, NASD Dispute Resolution

proposes to amend Rule 10312(e)

consistently with the above changes, to

delete language limiting the time within

which the Director may remove

arbitrators for cause; and Rule 10312(f)

is deleted as no longer necessary in light

of the proceeding changes.

2. Statutory Basis

NASD Dispute Resolution believes

that the proposed rule change is

consistent with the provisions of section

15A(b)(6) of the Act,15 which requires,

among other things, that the

Association’s rules must 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. The NASD believes that

the proposed rule change will protect

the public interest by providing a

procedure to remove an arbitrator for

sufficient cause shown at any time in an

arbitration, where the challenge is based

on information not known to the parties

at the time of the arbitrator’s

appointment.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

NASD Dispute Resolution does not

believe that the proposed rule change

will result in any burden on

competition that it 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

Within 35 days of the date of

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 such 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,

including whether the proposed rule 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. Copies of such filing will also be

available for inspection and copying at

the principal office of the NASA. All

submissions should refer to File No.

SR–NASD–00–34 and should be

submitted by October 13, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.16

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–24389 Filed 9–21–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43293; File No. SR–PCX–

99–36]

Self-Regulatory Organizations; Order

Granting Approval to Proposed Rule

Change and Amendment No. 1 by the

Pacific Exchange, Inc. Relating to

Options Trading Rules

September 14, 2000.

I. Introduction

On October 1, 1999, the Pacific

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

submitted to the Securities and

Exchange Commission (‘‘SEC’’ or

‘‘Commissiion’’), 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

modify its options trading rules.

Amendment No. 1 was filed with the

Commission on March 28, 2000.3 The

proposed rule change was published for

comment in the Federal Register on

April 4, 2000.4 No comments were

received on the proposal. This order

approves the proposal, as amended.

II. Description of the Proposal

The proposed rule change would

make the following changes to the text

of the PCX rules on options trading.

A. Definition of Term ‘‘Option Issue’’

The proposal would adopt new Rule

6.1(b)(12) to define the term ‘‘option

issue’’ as ‘‘the option contract overlying

a particular underlying security.’’ The

Exchange notes that the commonly-used

term ‘‘issue’’ appears in several

locations in the PCX Rulels.5 The

Exchange believes that the term ‘‘issue’’

means the same as ‘‘option’’ or ‘‘option

contract’’ when used, for example, as in

PCX Rule 6.65(a), which states:

‘‘Trading on the Exchange in any option

contract shall be halted or suspended