60708 Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Notices

14 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See letter from Jeffrey T. Brown, Vice President,

Regulation, and General Counsel, Exchange, to

Joseph P. Morra, Senior Counsel, Division of Market

Regulation, Commission, dated August 7, 2000

(‘‘Amendment No. 1’’).

4 15 U.S.C. 78s(b)(3)(A).

5See letter form Jeffrey T. Brown, Vice President,

Regulation, and General Counsel, Exchange, to

Joseph P. Morra, Senior Counsel, Division of Market

Regulation, Commission, dated September 22, 2000

(‘‘Amendment No. 2’’).

6 15 U.S.C. 78s(b)(3)(A).

7 17 CFR 240.19b–4(f)(6).

8 In filing its Amendment No. 1, the Exchange

requested that the Commission waive the

requirement that the Exchange provide the

Commission with written notice of its intent to

make such filing, as well as a description of the

proposal, at least five business days prior to the

filing of the proposed rule change with the

Commission. See Rule 19b–4(f)(6)(iii). 17 CFR

240.19b–4(f)(6)(iii). The Commission agrees to

waive such requirement of prior notice.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–26113 Filed 10–11–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43408; File No. SR–CSE–

00–01]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change and

Amendments Nos. 1 and 2 by the

Cincinnati Stock Exchange,

Incorporated, Amending Its Rules To

Accommodate the Implementation of

Decimal Pricing

October 3, 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 February

2, 2000, The Cincinnati Stock Exchange,

Incorporated (‘‘CSE’’ OR ‘‘Exchange’’),

filed with the Securities and Exchange

Commission (‘‘Commission’’) a

proposed rule change to amend its rules

to permit quotations made in decimal

increments in conjunction with the

securities industry’s phased

implementation of decimal pricing

conventions. On August 7, 2000, the

CSE amended the proposed rule

change3 by requesting that the

Commission grant immediate

effectiveness to the proposal pursuant to

Section 19(b)(3)(A) of the Act.4 On

October 2, 2000, the Exchange again

amended the proposed rule change5 by

making minor technical corrections to

the proposed rule text amendments. The

proposal, as amended, is described in

Items I, II, and III below, which Items

have been prepared by the CSE. Because

the CSE filed the amended proposal

pursuant to Section 19(b)(3)(A) of the

Act,6 and Rule 19b–4(f)(6) thereunder,7

it has become effective upon filing with

the Commission.8 The Commission is

publishing this notice to solicit

comments on the proposed rule change,

as amended, from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange proposes to amend its

rules to provide for the implementation

of decimal pricing. The CSE believes the

proposed rule change conforms to the

uniform industry approach to

implementing decimal pricing

contained in the joint submission to the

Commission by the CSE and other

interested parties dated July 24, 2000,

and entitled ‘‘Decimals Implementation

Plan for the Equities and Options

Markets’’ (‘‘Decimals Plan’’). The text of

the proposed rule change is set forth

below. Proposed new language appears

in italic; proposed deletions appear in

brackets.

* * * * *

Chapter XI Trading Rules

Rule 11.3 Price Variations

(a) Bids or offers in stocks traded on

the Exchange at or above $1.00 per share

shall not be made at a smaller variation

than 1⁄8 of $1.00 per share; in stocks

below $1.00 but at or above 1⁄2 of $1.00

per share, at a smaller variation than 1⁄16

of $1.00; in stocks below 1⁄2 of $1.00 per

share, at a smaller variation than 1⁄32 of

$1.00 per share; and in bonds at a

smaller variation than 1⁄8 of 1% of the

principal amount, except in the case of

a dually or multiply-traded security

where the principal exchange shall have

a different rule or when the Board of

Trustees of the Exchange shall provide

otherwise. (Rule 11.3(a) will be

eliminated upon completion of decimal

conversion.)

(b) Bids or offers in stocks traded on

the Exchange shall not be made at a

smaller variation than $.01 per share;

and in bonds at a smaller variation than

1⁄8 of 1% of the principal amount.

(c) Notwithstanding (b) above, bids

and offers in stocks not participating in

the decimal pilot program and not

converted to decimal pricing at or above

$1.00 per share must be made in

fractions at a minimum variation of 1⁄16

per share. The minimum variation of .01

described in (b) above is applicable to

stocks that have been converted to

decimal pricing. (Rule 11.3(c) will be

eliminated upon completion of decimal

conversion.)

* * * * *

Chapter XIV Intermarket Trading

System Plan

Rule 14.3 Pre-Opening Application

(b) * * * The ‘‘applicable price

changes’’ are:

Previous day’s

closing price

Applicable price change

(more than)

Network A:

Under $15 .. 1⁄8 point or for stocks trading

in decimals .10

$15 or

over1 [*].

1⁄4 point or for stocks trading

in decimals .25

Network B:

Under $5 .... 1⁄8 point or for stocks trading

in decimals .10

$5 or over2 1⁄4 point or for stocks trading

in decimals .25

1 [*] If the previous day’s consolidated closing price of [an] a Network A Eligible Security

exceeded $100 and the Security does not underlie an individual stock option contract listed

and currently trading on a national securities

exchange, the ‘‘applicable price change’’ is

[one point] one dollar. 2 If the previous day’s consolidated closing

price of a Network B Eligible Security exceeded $75 and the Security is not a Portfolio Deposit Receipt, Index Fund Share, or Trust

Issued Receipt, or does not underlie an individual stock option contract listed and currently trading on a national securities exchange, the ‘‘applicable price change’’ is one

dollar.

(c) A pre-opening notification shall—

(1) Be designated as a pre-opening

notification (‘‘IND’’)

(2) Identify the Exchange (‘‘C’’), the

inquiring specialist and the security

(‘‘XYZ’’)

(3) Indicate the ‘‘applicable price

range’’ by being formatted as a

standardized pre-opening

administrative message as follows:

IND C/XYZ [RANGE]

The price range shall not exceed the

‘‘applicable price range’’ shown below:

Consolidated

closing price Applicable price range $

Network A:

Under $50 1⁄2 point or for stocks trading

in decimals .50

$50 or

over3 [**]

1 point or for stocks trading

in decimals 1.00

Network B:

Under $10 1⁄2 point or, for stocks trading

in decimals, .50

Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Notices 60709

9See Securities Exchange Act Release No. 42914

(June 8, 2000), 65 FR 38010 (June 19, 2000).

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

11 15 U.S.C. 78s(b)(3)(A).

12 17 CFR 240.19b–4(f)(6).

13The Commission will measure this sixty-day

period from August 7, 2000, the date of Amendment

No. 1, since Amendment No. 2, filed on October 2,

2000, made only minor corrections to the proposal

as previously amended.

14The Decimals Plan provides for minimum price

variations for equities and options of no less than

Continued

Consolidated

closing price Applicable price range $

$10 or over4 1 point or, for stocks trading

in decimals, 1.00

3[**] If the previous day’s closing price of

[an] a Network A Eligible Security exceeded

$100 and the Security does not underlie an individual stock option contract listed and currently trading on a national securities exchange, the ‘‘applicable price change’’ is [two

points] two dollars. 4 If the previous day’s consolidated closing

price of a Network B Eligible Security exceeded $75 and the Security is not a Portfolio Deposit Receipt, Index Fund Share, or Trust

Issued Receipt, or does not underlie and individual stock option contract listed and currently trading on a national securities exchange, the ‘‘applicable price change’’ is two

dollars.

The price range also shall not straddle

the previous day’s closing price,

although it may include it as an

endpoint (e.g., a 1⁄8–5⁄8 or for stocks

trading in decimals 40.15–40.65 price

range would be permissible if the

previous day’s consolidated closing

price were 1⁄8 or 5⁄8 or for stocks trading

in decimals 40.15 or 40.65, but not if the

closing price were 1⁄4, 3⁄8, or 1⁄2 or, for

stocks trading in decimals, within the

price range of 40.16–40.64).

* * * * *

(g) If after sending a pre-opening

notification, * * *

(1) Increase or Decrease in Applicable

Price Range * * *

(2) Shift to within Applicable Price

Change Parameter

(a) The inquiring specialist * * *

(b) Notwithstanding the preceding

sentence, in situations where the price

range in an initial or additional

notification includes price variations

equal to or less than the applicable price

change parameters, the ‘‘cancellation’’

notification signifies that the anticipated

opening price: (1) may or may not be

outside of the price range specified in

the pre-opening notification and (2)

does not represent a change from the

previous day’s consolidated closing

price of more than the applicable price

change.5[*]

5[*]Example: CTA close at 30. Pre-Opening

Notification sent with any one of the

following price ranges: 30–301⁄2; 301⁄8–305⁄8;

or 303⁄4 or for stocks trading in decimals a

price range of 30.10–30.60, etc. It is then

determined that the stock will open at 30,

301⁄8, or 301⁄4 or, for stocks trading in

decimals, a price within the range of 30 to

30.25, the specialist need not re-indicate the

stock pursuant to paragraph (2)(b).

* * * * *

(m) Subject to paragraph (n), * * *

(1) Be designated as a pre-opening

response (‘‘RES’’)

(2) Identify the Exchange (‘‘C’’), the

specialist, and the security (‘‘XYZ’’),

and

(3) Show the specialist’s interest (if

any), both as principal for his own

account (‘‘P’’) and as agent on orders left

with him (‘‘A’’), at each price level

within the price-range indicated in the

pre-opening notification (e.g., 403⁄8 or,

for stocks trading in decimals, 40.40),

reflected on a netted share basis by

being formatted as a standardized preopening administrative message as

follows:

RES C/XYZ BUY {SELL} A–P 403⁄8 (or,

for stocks trading in decimals, 40.40)

The response may also show market

orders separately.

* * * * *

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

CSE 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 CSE 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

The Commission has ordered the

securities exchanges and other

interested parties to implement decimal

pricing in their markets.9 Pursuant to

the Order, the Commission required the

exchanges to submit proposed rule

changes implementing a uniform

decimals phase-in schedule. As

described above, the Exchange is

proposing to amend the following rules

in conjunction with the securities

industry’s conversion of its markets to

decimal pricing which will allow for

minimum price variations of $.01 per

share in quotations for stocks that trade

on the Exchange: Chapter XI, Trading

Rules, Rule 11.3, Price Variations; and

Chapter XIV, Intermarket Trading

System Plan, Rule 14.3, Pre-Opening

Application.

2. Statutory Basis

The CSE believes that the proposal is

consistent with the provisions of

Section 6(b)(5) 10 of the Act 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 foster cooperation and

coordination with persons engaged in

regulating, clearing, settling, processing

information with respect to, and

facilitating transactions in securities, 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.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The CSE 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

Written comments were neither

solicited nor received in connection

with the proposed rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Because the foregoing proposed rule

change does not:

(i) Significantly affect the protection

of investors or the public interest;

(ii) Impose any significant burden on

competition; and

(iii) Become operative for 30 days

from the date on which it was filed, or

such shorter time as the Commission

may designate, it has become effective

pursuant to Section 19(b)(3)(A) of the

Act 11 the Rule 19b–4(f)(6) thereunder.12

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.13

The CSE has requested that the

Commission accelerate the operative

date. The Commission believes that it is

consistent with the protection of

investors and the public interest and

therefore finds good cause to designate

the proposal to become immediately

operative upon filing.14 Acceleration of

60710 Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Notices

one cent. The Commission’s June 8th Order requires

the Participants to submit joint or individuals

studies two months after Full Implementation (as

defined in the Plan) regarding the impact of decimal

pricing on system capacity, liquidity, and trading

behavior, including an analysis of whether there

should be a uniform minimum quoting increment.

If a Participant wishes to move to quoting in an

increment of less than one cent, the Participant

should include in its study a full analysis of the

potential impact of such trading on the Participant’s

market and the markets as a whole. Within thirty

days after submitting the study, and absent

Commission action, the Participants individually

must submit for notice, comment, and Commission

action, proposed rule changes under Section 19(b)

of the Exchange Act to establish their individual

choice of minimum increments by which equities

or options are quoted on their respective markets.

15For purposes only of accelerating the operative

date of this proposal, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

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

16 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3Letter from John Dayton, Assistant Secretary and

Counsel, Phlx, to Nancy Sanow, Assistant Director,

Division of Market Regulation, Commission (August

16, 2000) (‘‘Amendment No. 1’’). Amendment No.

1 made a technical correction to the language of the

proposed rule.

4Securities Exchange Act Release No. 43161

(August 16, 2000), 65 FR 51396 (August 23, 2000).

5Following the adoption of the 1997 Code of

Conduct, the Exchange conformed the language in

Phlx By-Law, Article IV, Section 4–8 to the

language in the 1997 Code of Conduct. See

Securities Exchange Act Release No. 39722 (March

4, 1998), 63 FR 12569 (March 13, 1998).

6The 1999 Code of Conduct and the proposed

amendment to Phlx By-Law Article IV, Section 4–

8 define ‘‘immediate family’’ as a spouse, a parent,

a mother-in-law, a father-in-law, a brother, a sister,

a child, any other person living with the individual

or any person for whom the individual provides at

least 50 percent of that person’s financial support

per year.

7The phrase ‘‘a sub-class of membership’’ refers

to the various categories of Phlx membership.

Examples of sub-classes include: equity members

and options members; on-floor and off-floor

members; and specialists and floor brokers on each

floor. The Exchange represents that many decisions

in Board and committee meetings, such as fees on

equity floor transactions or requirements for

arbitration in customer contracts, apply to only one

or more of these sub-classes and not to others. The

Exchange represents that it does not intend to

disqualify persons from making decisions solely

because they are part of a sub-class, such as market

makers or off-floor members, which will be affected

by the outcome of the decision.

8 15 U.S.C. 78f(b).

9 15 U.S.C. 78f(b)(3).

10 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).

11See e.g., 1999 Code of Conduct (requiring

Covered Persons to make prompt disclosure of any

interest that could reasonably appear to violate the

1999 Code of Conduct( and Phlx By-Law Article X,

the operative date will ensure that the

CSE is able to operate in accordance

with the terms and conditions of the

Decimals Plan. For these reasons, the

Commission finds good cause to

designate that the proposal become

operative immediately upon filing.15

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning the foregoing,

including whether the proposed rule

change is consistent with the Act.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549–0609. 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 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 CSE. All

submissions should refer to file number

SR–CSE–00–01 and should be

submitted by November 2, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.16

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–26112 Filed 10–11–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43406; File No. SR–Phlx–

00–39]

Self Regulatory Organizations; Order

Approving Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

Relating to the Disqualification of

Governors

October 3, 2000.

I. Introduction

On April 14, 2000, the Philadelphia

Stock Exchange, Inc. (‘‘Phlx’’ or

‘‘Exchange’’) filed with the Securities

and Exchange 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 relating to the disqualification of

governors. On August 16, 2000, the Phlx

filed Amendment No. 1 to the

proposals.3 The proposed rule change

was published for comment in the

Federal Register on July 13, 2000.4 No

comments were received on the

proposal. This order approves the

proposed rule change.

II. Description of the Proposal

Phlx By-Law, Article IV, Section 4–8

describes the discussions and decisions

in which members of the Phlx Board of

Governors (‘‘Board Members’’) must

refrain from participation. The

provision further specifies discussions

and decisions that do not require Board

Members to refrain from participation.

The Exchange proposes to amend Phlx

By-Law, Article IV, Section 4–8 to

conform to the new Phlx 1999 Code of

Conduct for Board Members and

Committee Members (‘‘1999 Code of

Conduct’’). The Phlx Code of Conduct,

which was adopted in 1997 (‘‘1997 Code

of Conduct’’), describes, among other

things, the discussions and decisions in

which Covered Persons must refrain

from participation.5 The Phlx Board of

Governors revised the 1997 Code of

Conduct in July 1999, modifying the

language regarding the disqualification

of Covered Persons.

The Phlx’s proposed rule change will

amend its By-Law, Article IV, Section

4–8 to prohibit Covered Persons from

participating in matters in which they or

their immediate family have an

interest.6 The Exchange proposes to

allow participation in matters where the

Covered Person’s interest arises solely

from membership in the Exchange or a

sub-class of membership, unless their

impartiality might reasonably be

questioned.7

III. Discussion

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 the

requirements of Section 6(b) of the Act.8

Specifically, the Commission believes

that the proposal is consistent with the

requirements of Section 6(b)(3) 9 that the

rules of an Exchange be designed to

assure a fair representation of its

members in the administration of the

Exchange’s affairs.10 The Commission

believes that the proposal will prohibit

the discussion and determination of

Exchange matters by Covered Persons or

their immediate family who have an

interest in the matter, unless that

interest is impartial and arises solely

from membership in the Exchange or a

sub-class of membership. The proposal

will also add to the Exchange’s present

framework of conflict of interest

provisions.11