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

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[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

Federal Register / Vol. 65, No. 198 / Thursday, October 12, 2000 / Notices 60711

Section 10–9(b) (authorizing the Exchange’s Audit

Committee to conduct reviews of any alleged

improper conduct and recommend appropriate

action to the Board).

12 15 U.S.C. 78s(b)(2).

13 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

IV. Conclusion

For the reasons discussed above, the

Commission finds that the proposal is

consistent with the Act and the rules

and regulations thereunder.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,12 that the

proposed rule change, SR–Phlx–00–39,

be and hereby is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.13

Margaret H. McFarland,

Depyty Secretary.

[FR Doc. 00–26111 Filed 10–11–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43407; File No. SR–Phlx–

00–072]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

Amending Rules 501, 505, and 506

Regarding Allocation and Specialist

Appointment, as well as Rule 748,

Supervision, To Reflect Current

Circumstances on the Equity Foreign

Currency Option and Option Trading

Floors

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 July 25,

2000, the Philadelphia Stock Exchange,

Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with

the Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’)

the proposed rule change as described

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

have been prepared by the Phlx. 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 Phlx proposes to amend Rules

501, 505, 506, and 748 to require certain

information be provided to the

Allocation, Evaluation and Securities

Committee (‘‘AES Committee’’) for

approval and to require certain

minimum staffing levels for specialist

units. Specifically, the Exchange

proposes to amend Rule 501(b)(4) to

require that option and foreign currency

option specialist units provide detailed

information on their application to

become a specialist unit regarding their

back-up arrangements with regard to

financial and staffing support.

The proposal would add Rule 501(c)

to require that individuals be approved

by the AES Committee prior to acting as

a specialist on behalf of a specialist unit.

In addition, proposed Rule 501(c) would

require that applications for individuals

to act as specialist shall include any

other special requirements that the AES

Committee may require for approval.

Proposed Rule 501(c) would also require

that the AES Committee or its designee

approve an individual prior to that

individual moving from one specialist

unit to another specialist unit.

The proposal would re-designate Rule

501(c) as Rule 501(d), which requires

that to be approved and retain their

specialist privileges, option and foreign

currency option specialists must

maintain the clearing arrangements and

capital structure stated on their

application. In addition, Rule 501(d)

would require that changes regarding

their back-up arrangements must be

submitted to and approved by the AES

Committee. The proposal would also

amend Rule 501(d) to require option

and foreign currency option specialists

to maintain a minimum staffing level for

each quarter turret of space on the

trading floor.

The proposal would add Rule 501(e),

which is similar to Rule 501(d), and

would contain the same staffing

requirements for equity specialists as

are currently contained in Rule

501(c)(2).

The proposal would re-designate Rule

501(d) as Rule 501(f). The proposal

would amend the language of 501(f) to

state that once an applicant is approved

by the AES Committee as a specialist

unit, any material change in the capital

or staff of the unit or any move by the

head or assistant specialist must be

reported in writing to the AES

Committee within two days of the

change.

The proposal would add Rule 501,

Commentary .02, which states that for

purposes of rule 748 on Supervision,

individuals employed or associated

with the back-up specialist will be

considered engaging in a business

activity of the specialist unit that they

are assisting. Rule 748(b) would also be

amended to refer to this situation.

The proposal would amend Rule 505

to require registrant specialist units to

report material changes on the

respective equity, option and foreign

currency option registration forms to the

AES Committee.

The proposal would amend Rule 506

to codify expressly that AES Committee

may require applicant specialist units to

provide other information, including

system order acceptance and execution

levels, and guarantees on the

application for a particular equity or

option. The proposal would require

that, should a specialist be allocated

that equity or option, the specialist

would be immediately required to notify

the Exchange staff and submit for

approval to the AES Committee or its

designee in writing any change to the

respective system acceptance and

execution levels or any other material

changes on that application.

The proposal would replace

references to the Department of

Securities in Rules 505 and 506 with

references to the Exchange staff. The

text of the proposed rule change is

available at the Phlx and the

Commission.

II. Self-Regulatory Organization’s

Statements of the Purpose of, and the

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

Phlx 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 Phlx has prepared

summaries, set forth in section 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

The purpose of the proposed rule

change is to provide the AES Committee

with the appropriate information and a

greater understanding of the specialist

unit’s operation when approving a

prospective specialist unit for trading

privileges, as well as approving the

allocation, reallocation and transfer of

equity, option, and foreign currency

option books to specialist units.

Specifically, proposed amendments to

Rule 501(b)(4) regarding back-up

arrangements for staffing and capital are

intended to help ensure that specialist

books will continue to trade on the floor

in an efficient manner by requiring the

specialist unit have sufficient staff to

handle the high volume in busy markets

and requiring the back-up specialist to