62776 Federal Register / Vol. 65, No. 203 / Thursday, October 19, 2000 / Notices

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

2 17 CFR 240.19b–4.

3 In Amendment No. 1, CBOE amended the text

of the proposed rule change and included a

discussion of the indicator to be used when a book

order is establishing CBOE’s best bid or offer. See

letter from Angelo Evangelou, Attorney, CBOE, to

Joseph Corcoran, Attorney, Division of Market

Regulation, Commission, dated June 20, 2000

(‘‘Amendment No. 1’’).

reduce the brokerage expenses involved

in the Substitutions.

(e) The Contract Owners will not

incur any directly or indirectly related

fees or charges, including brokeragerelated fees or charges, as a result of the

transfer of account value from any Old

Sub-account.

(f) The Substitutions will not alter or

affect the insurance benefits or rights of

Contract Owners or the terms and

obligations of the Skandia Contracts.

(g) The Substitutions are designed to

avoid any adverse effects upon the tax

benefits available to Contract Owners

and are designed not to give rise to any

current Federal income tax to Contract

Owners.

(h) The Substitutions are expected to

confer economic benefit to Contract

Owners as described in the application.

(i) Contract Owners in the new AST

Alger Growth Sub-account and the AST

Alger Mid-Cap Growth Sub-account will

not be subject to any 12b–1 fee, or be

effected by any change in sub-advisor as

a result of AST’s ‘‘manager-ofmanagers’’ exemptive order, unless: (i)

Contract Owners have had a right as

beneficial owners of the AST Portfolios

after the Substitutions to vote to

approve the adoption of a 12b–1 plan or

to approve the ‘‘manager-of-managers’’

order received from the Commission; or

(ii) any Contract Owner allocates his or

her Skandia Contract’s account value to

an AST investment option that has in

effect a 12b–1 fee or ‘‘manager-ofmanagers’’ order.

(j) Other expenses in the new AST

Alger Growth Sub-account and the AST

Alger Mid-Cap Growth Sub-account will

be capped at 0.04% for one year

following the Substitution Date.

Applicant’s Legal Analysis

1. Section 26(b) of the 1940 Act

provides that it shall be unlawful for

any depositor or trustee of a registered

unit investment trust holding the

security of a single issuer to substitute

another security for such security unless

the Commission shall have approved

such substitution; and the Commission

shall issue an order approving such

substitution if the evidence establishes

that it is consistent with the protection

of investors and the purposes fairly

intended by the policy and provisions of

the 1940 Act.

2. Applicants request an order

pursuant to Section 26(b) of the 1940

Act approving the Substitutions.

Applicants assert that the purposes,

terms, and conditions of the

Substitutions are consistent with the

protection for which Section 26(b) was

designed. Applicants assert that the

Substitutions will benefit investors

because they will result in greater

administrative efficiency and enhanced

oversight of the New Portfolios by

ASLAC. Additionally, Applicants assert

that over time, the efficiencies that come

with being part of a large coordinated

fund affiliated with ASLAC will have

resulting benefits to Contract Owners.

3. Additionally, Applicants assert that

the proposed Substitutions and related

transactions will be in the best interests

of Contract Owners in that they will (a)

increase ASLAC’s control over the

administrative aspects of the New

Portfolios; (b) enhance an Old Portfolio

with significant style drift; (c) provide

Contract Owners with a more diverse

number of portfolios within the AST

family; (d) provide a means to gather

significantly more assets; (e) participate

in the value-added manager of managers

platform; (f) reduce conflicts; and (g)

promote administrative efficiencies.

4. Section 17(a)(1) of the 1940 Act

prohibits any affiliated person of a

registered investment company, or any

affiliated person of an affiliated person,

from selling any security or other

property to such registered investment

company. Section 17(a)(2) of the 1940

Act prohibits any such affiliated persons

from purchasing any security or other

property from such registered

investment company.

5. Section 17(b) of the 1940 Act

provides that the Commission may grant

an order exempting a transaction

prohibited by Section 17(a) of the 1940

Act upon application if evidence

establishes that: (a) The terms of the

proposed transaction, including the

consideration to be paid or received, are

reasonable and fair and do not involve

overreaching on the part of any person

concerned; (b) the proposed transaction

is consistent with the investment policy

of each registered investment company

concerned, as recited in its registration

statement and reports filed under the

1940 Act; and (c) the proposed

transaction is consistent with the

general purposes of the 1940 Act.

6. Applicants request an order

pursuant to Sections 6(c) and 17(b) of

the 1940 Act exempting the in-kind

redemptions and purchases from the

provisions of Section 17(a) of the 1940

Act.

7. Applicants assert that the terms of

the Substitutions are reasonable and fair

and do not involve overreaching on the

part of any person concerned.

Applicants represent that the

Substitutions will be effected at the net

asset value and the interests of Contract

Owners will not be diluted. Applicants

represent that in-kind redemptions will

only be used to the extent they are

consistent with the investment

objectives and applicable diversification

requirements of the affected portfolios.

8. Applicants assert that the

Substitutions and the in-kind

redemptions are consistent with the

policies of each investment company

involved and the general purposes of

the 1940 Act, and comply with the

requirements of Section 17(b).

Conclusion

Applicants assert that, for the reasons

summarized above, the requested order

approving the Substitutions and

exempting the in-kind redemptions

should be granted.

For the Commission, by the Division of

Investment Management, pursuant to the

delegated authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 00–26801 Filed 10–18–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43430; File No. SR–CBOE–

00–21]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Board Options Exchange,

Inc. To Amend its Rule Governing the

Operation of Its Automated Book

Priority System To Permit Split-Price

Executions

October 11, 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 May 24,

2000, the Chicago Board Options

Exchange, Inc. (‘‘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 prepared by the Exchange.

On June 22, 2000, CBOE filed

Amendment No. 1 to the proposed rule

change.3 The Commission is publishing

this notice to solicit comments on the

proposed rule change from interested

persons.

Federal Register / Vol. 65, No. 203 / Thursday, October 19, 2000 / Notices 62777

4See Securities Exchange Act Release No. 34–

41995 (October 8, 1999), 64 FR 56547 (October 20,

1999) (File No. SR–CBOE–99–29).

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The CBOE proposes to amend its rules

governing the operation of its Retail

Automatic Execution System (‘‘RAES’’)

to provide for split-price executions

under the Automated Book Priority

system. Below is the text of the

proposed rule change. Proposed new

language is italicized and proposed

deletions are in brackets.

Rule 6.8. RAES Operations

This Rule governs RAES operations in

all classes of options, except to the

extent otherwise expressly provided in

this or other Rules in respect of

specified classes of options.

(a)(1) Firms on the Exchange’s Order

Routing System (‘‘ORS’’) will

automatically be on the Exchange’s

Retail Automatic Execution System

(‘‘RAES’’) for purposes of routing small

public customer market or marketable

limit orders into the RAES system.

Those orders which are eligible for

routing to RAES may be subject to such

contingencies as the appropriate Floor

Procedure Committee (‘‘FPC’’) shall

approve. Public customer orders are

orders for accounts other than accounts

in which a member, non-member

participant in a joint-venture with a

member, or any non-member brokerdealer (including a foreign broker-dealer

as defined in Rule 1.1 (xx)) has an

interest. The appropriate Floor

Procedure Committee (‘‘FPC’’) shall

determine the size of orders eligible for

entry into RAES in accordance with

paragraph (e) of this Rule. For purposes

of determining what a small customer

order is, a customer’s order cannot be

split up such that its parts are eligible

for entry into RAES. Firms on ORS have

the ability to go on and off ORS at will.

Firms not on ORS that wish to

participate will be given access to RAES

from terminals at their booths on the

floor.

(ii) When RAES receives an order, the

system automatically will attach to the

order its execution price, determined by

the prevailing market quote at the time

of the order’s entry to the system, except

as otherwise provided in paragraph (b)

of this Rule in instances where the best

bid or offer on the Exchange’s book

constitutes the prevailing market best

bid or offer, and as otherwise provided

in Interpretation and Policy .02 under

this Rule 6.8 in respect of multipletraded options. A buy order will pay the

offer, a sell order will sell at the bid. A

Market-Maker logged on to participate

in RAES (a ‘‘Participating MarketMaker’’) will be designated as contrabroker on the trade. A trade executed on

RAES at an erroneous quote should be

treated as a trade reported at an

erroneous price and adjusted to reflect

the accurate market after receiving a

Floor Official’s approval.

(ii) This rule shall apply to RAES in

classes handled by DPM’s except that

the MTS Appointments Committee may

make available additional series or raise

the size of eligible orders in a DPM’s

classes pursuant to Rule 8.80.

(b) When the best bid or offer on the

Exchange’s book constitutes the best bid

or offer on the Exchange and is for a

size less than the RAES order eligibility

size for that class, such fact shall be

denoted in the Exchange’s disseminated

quote by a ‘‘Book Indicator’’. It is

possible that the best bid or offer on the

Exchange’s book constitutes the

prevailing market bid or offer [may be

equal to the best bid or offer on the

Exchange’s book]. In those instances, a

RAES order will be executed against the

order in the book. In the event, the order

in the book is for a smaller number of

contracts than the RAES order, the

balance of the RAES order will be

assigned to participating market-makers

at the same price at which the initial

portion [rest] of the order was executed

up to an amount prescribed by the

appropriate Floor Procedure Committee

on a class-by-class basis (the ‘‘Book

Price commitment Quantity’’). Any

remaining balance thereafter shall be (i)

routed to the crowd PAR terminal if

Autoquote is not in effect for that series;

(ii) assigned to participating marketmakers at the Autoquote price if

Autoquote constitutes the new

prevailing market bid or offer; or (iii)

executed against any order in the book

that constitutes the new prevailing

market bid or offer with the balance of

the RAES order being assigned to

participating market-makers at that

price up to the Book Price Commitment

Quantity. Any additional remaining

balance of a RAES order shall be

handled in accordance with (ii) or (iii)

of this paragraph.

(c)–(g) Unchanged.

* * * Interpretations and Policies:

.01–03 Unchanged.

.04 In those option classes where the

Automated Book Priority (‘‘ABP’’)

system is not operational or has not yet

been implemented, if a RAES order

would be executed at the price of one

or more booked orders, the order will be

rerouted on ORS to either the DPM or

to another location pursuant to the

firm’s routing parameters. Under

ordinary circumstances, in those option

classes where the Automated Book

Priority system is not operational or has

not yet been implemented, when one or

more RAES eligible orders in a class of

options is re-routed on ORS as

described (but not in cases when the

orders are routed to the firm’s booth),

the crowd will be obligated to sell (buy)

the rerouted order (or the first order in

any group of rerouted orders at the same

price) up to the number of contracts

represented by the booked order(s), plus

the Book Price Commitment Quantity

(as defined in paragraph (b) of this Rule)

where applicable, [equal to applicable

maximum size of RAES eligible orders

for that class of options] at the offer

(bid) which existed at the time of the

order’s entry into the RAES system.

Because the first such rerouted order

will be entitled to a price that existed

when the order was initially entered

into the RAES system, it is imperative

that such an order be represented by the

floor brokers as quickly as possible.

Orders re-routed to the firm’s booth and

orders rerouted to the trading station

that are not entitled to the above

protection will be entitled to be filled by

the trading crowd at the bid or offer

existing when the Floor Broker

represents the order in open outcry in

the crowd, pursuant to Rule 8.51.

.05–.08 Unchanged.

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 IV below. The CBOE 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 October 8, 1999, the Commission

approved a CBOE rule change

establishing the Exchange’s Automated

Book Priority System (‘‘ABP’’).4 ABP

allows an order entered into RAES to

trade directly with an order on the

Exchange’s customer limit order book in

those cases where the best bid or offer

on the Exchange’s book is equal to the

prevailing market bid or offer. For the

option classes in which ABP has been

62778 Federal Register / Vol. 65, No. 203 / Thursday, October 19, 2000 / Notices

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

implemented, CBOE represents that

ABP has been beneficial to customers by

preserving the priority of booked orders

and preventing RAES orders from being

kicked out to the crowd. Accordingly,

ABP has aided customers using the

RAES system as well as customers

whose orders are in the Exchange’s

book, because both categories of orders

have been executed more quickly than

they would have been executed

otherwise. However, a current feature of

ABP provides that in the event the order

in the book is for a smaller number of

contracts than the RAES order, the

entire balance of the RAES order is

assigned to participating market-makers

at the same price at which the initial

portion of the order was executed

against the book, regardless of the next

prevailing best bid or offer on the

Exchange. Thus, if the book contains an

order for 1 contract that represents the

best bid, an incoming market order to

sell 50 contracts will execute against the

book for 1 contract and then against the

trading crowd for 49 contracts at the

book price, regardless of the trading

crowd’s best bid.

The Exchange now proposes to

enhance the ABP system so that RAES

orders utilizing ABP are executed

against the book price up to the

applicable book volume or a larger

amount as pre-determined by the

appropriate Floor Procedure Committee

(‘‘FPC’’) for the subject option class.

That pre-determined contract amount,

to be called the ‘‘Book Price

Commitment Quantity’’, would be

determined by the FPC, and could be set

from zero contracts up to the maximum

RAES eligible order size for that option

class. The Exchange anticipates that the

FPC will mandate a Book Price

Commitment Quantity that will

generally be uniform amongst option

classes and that, as such, the established

quantity will be widely known to CBOE

customers and other market

participants. Nevertheless, the Exchange

intends to issue a regulatory circular

regarding Book Price Commitment

Quantity parameters established by the

FPC. Further, because the FPC would

have to conduct a meeting to adjust the

Book Price Commitment Quantity, it is

highly unlikely that the Book Price

Commitment Quantity would be

changed intra-day.

Thus, if the book contains an order for

1 contract that represents the best bid,

and the Book Price Commitment

Quantity is set to 40, an incoming

market order to sell 50 contracts, would

execute against the book for 1 contract

and execute against the trading crowd

for 39 contracts on RAES at the book

price. Any remaining balance of a RAES

order would be: (i) Routed to PAR if

Autoquote is not in effect for that series;

(ii) assigned to participating marketmakers at the Autoquote price if

Autoquote represents the best bid or

offer; or (iii) executed against an order

in the book if such order equals or

represents the best bid or offer—with

the balance of the RAES order being

assigned to participating market-makers

at the new book price up to the Book

Price Commitment Quantity. So long as

an order in the book equals or

represents the next best bid or offer (and

Autoquote is in effect for the subject

series), any remaining balance of a

RAES order would be handled pursuant

to (ii) or (iii) above.

A ‘‘Book Indicator’’ will be affixed to

the CBOE disseminated quotation when

an order in the Exchange’s Book

represents the best bid or offer on the

Exchange. This indicator will alert

brokers and the public that the bid, offer

or both are being generated by orders in

the book, not by market maker quotes.

With respect to the Book Indicator, the

Exchange will disseminate an indicator

‘‘B’’ if the bid on the book is better than

the trading crowd bid; ‘‘O’’ if the book

offer is better than the trading crowd

offer; and ‘‘C’’ if both the book bid and

offer are better than the trading crowd

bid and offer. However, the indicator

will not be disseminated if the booked

order is for a size greater than the RAES

order eligibility size for the subject

options class since a split-price

execution would not occur in such

instance. This indicator will be

disseminated in the Special Market

Conditions field that also includes

indicators for, among other things, fast

markets and trading halts. The Book

Indicator will alert brokers and the

public that a trade could be executed at

more than one price in that a part of the

order could be executed at one price

against the book and against the crowd

pursuant to the Book Price Commitment

Quantity, and the remaining part could

be executed at another price (or prices)

against the best market from the book or

crowd. It is anticipated, however, that

the eventual implementation of size

parameters for disseminated options

quotations will obviate the need for the

Book Indicator.

The following example illustrates the

application of the proposed rule: the

Book Price Commitment Quantity is set

at 20 contracts; there are two sell orders

resident in the book priced at 29⁄16 and

25⁄8 respectively—each for one contract;

the crowd’s Autoquote market is 21⁄2–

23⁄4; and the best bid/offer on the

Exchange is 21⁄2–29⁄16 (assume no other

market center has a better bid/offer). An

incoming RAES market order to buy 50

contracts would be executed as follows:

• One contract will be executed at

29⁄16 against the book;

• 19 contracts will be executed at 2 9⁄16 against the RAES wheel;

• The new best bid/offer is 21⁄2–25⁄8

against the book;

• One contract will be executed at

25⁄8 against the book;

• 19 contracts will be executed at 25⁄8

against the RAES wheel;

• The new best bid/offer is 21⁄2–23⁄4;

• The remaining 10 contracts will be

executed against the RAES wheel at 23⁄4.

Currently, ABP has not yet been

implemented for all option classes. SR–

CBOE–00–03 amended CBOE Rule 6.8

Interpretation and Policy .04 to

explicitly provide that there remains an

obligation of the trading crowd, where

ABP is not in place, to execute the first

order rejected from RAES at the price of

the booked order that caused the

kickout. Thus, for those classes where

ABP has not yet been implemented, the

trading crowd must fill the first rejected

order at the price of the booked order

that created the kickout. This was done

to ensure consistency with ABP

requirements in those classes where

ABP is in place. While the Exchange

anticipates that ABP will be fully

implemented for all option classes

traded on the Exchange in the near

future, the Exchange proposes to amend

CBOE Rule 6.8 Interpretation and Policy

.04 to provide that the first order

rejected from RAES (because of a

kickout based on a booked order) be

filled against the book with any

remainder being filled at the book price

up to the Book Price Commitment

Quantity established for that class, thus

providing consistency with the

proposed ABP rule.

Lastly, CBOE proposes to amend Rule

6.8, Interpretation and Policy .04, to

have the Interpretation apply in

instances where ABP is not operational

as a result of system constraints or

pursuant to a fast market situation. The

Exchange also proposes to amend some

of the wording in paragraphs (a) and (b)

of the proposed rule change to better

clarify the application of split-price

executions under the ABP system.

According to the Exchange, these

wording changes do not alter the intent

or application of the proposed rule

change.

2. Statutory Basis

The CBOE believes the proposed rule

change is consistent with and furthers

the objectives of section 6(b)(5) 5 of the

Act in that it is designed to remove

Federal Register / Vol. 65, No. 203 / Thursday, October 19, 2000 / Notices 62779

6 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See Letter to Jack Drogin, Senior Special

Counsel, Division of Market Regulation

(‘‘Division’’), Commission, from Robert E. Aber,

Senior Vice President and General Counsel, Nasdaq,

dated April 7, 2000 (‘‘Amendment No. 1’’).

Amendment No. 1 clarifies that the proposed time

frame for gaining compliance with the continued

inclusion market capitalization standards applies to

issuers listed on both The Nasdaq SmallCap Market

and the Nasdaq National Market. In addition,

Amendment No. 1 clarifies that the method for

regaining compliance with the continued inclusion

requirement for the number of market makers set

forth in Rule 4310(c)(8)(A) applies to issuers listed

on both The Nasdaq SmallCap Market and the

Nasdaq National Market. Finally, Amendment No.

1 makes certain technical corrections to the

proposed rule change.

4See Letter to Jack Drogin, Senior Special

Counsel, Division, Commission, from Robert E.

Aber, Senior Vice President and General Counsel,

Nasdaq, dated April 25, 2000 (‘‘Amendment No.

2’’). Amendment No. 2 clarifies that Rule

4310(c)(8)(C) is being amended to specify time

frames for determining when an issuer is noncompliant or has regained compliance with the

Association’s market capitalization standards.

Amendment No. 2 also clarifies that the NASD’s

Rule 4300 series contains the qualification

requirements for all securities included in The

Nasdaq Stock Market while the Rule 4400 Series

sets forth additional requirements for those

securities designated for the Nasdaq National

Market.

5Securities Exchange Act Release No. 42876 (May

31, 2000), 65 FR 36198.

6See Letter to Jack Drogin, Senior Special

Counsel, Division, Commission, from John

Nachman, Nasdaq, dated October 4, 2000

(‘‘Amendment No. 3’’). Amendment No. 3

withdraws proposed Rule 4200(a)(20), which

defines market capitalization, and renumbers the

remaining provisions of Rule 4200(a) accordingly.

7Although the time frames regarding compliance

with the continued inclusion market capitalization

standards are proposed to be set forth only in Rule

4310(c)(8)(A), these time frames, like those for the

minimum bid price and market value of public

float, are applicable to issuers listed on both The

Continued

impediments to a free and open market

and to protect investors and the public

interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The 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. 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 CBOE. All

submissions should refer to File No.

SR–CBOE–00–21 and should be

submitted by November 9, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Jonathan G. Katz,

Secretary.

[FR Doc. 00–26804 Filed 10–18–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43435; File No. JR–NASA–

99–69]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change and

Notice of Filing and Order Granting

Accelerated Approval of Amendment

No. 3 Thereto by the National

Association of Securities Dealers, Inc.

Amending Certain Listing Standards of

the Nasdaq Stock Market, Inc.

October 11, 2000.

I. Introduction

On November 22, 1999, the National

Association of Securities Dealers, Inc.

(‘‘NASA’’ or ‘‘Association’’), through its

wholly owned subsidiary, The Nasdaq

Stock Market, Inc. (‘‘Nasdaq’’),

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

amending certain Nasdaq listing

standards. The Association submitted

Amendments No. 1 3 and No. 2 4 to the

proposed rule change on April 10, 2000,

and April 27, 2000, respectively. The

proposed rule change was published in

the Federal Register for comment on

June 7, 2000.5 The Association

submitted Amendment No. 3 to the

proposed rule change on October 5,

2000.6 This order approves the

proposed rule change, as amended by

Amendments No. 1 and 2, and grants

accelerated approval to Amendment No.

3.

II. Description of the Proposed Rule

Change

Nasdaq is proposing to amend its

listing standards to: (1) Codify the time

frames for determining compliance with

the continued inclusion requirements

for market capitalization and number of

market makers; (2) clarify the need for

shareholder approval for a transaction

in which the potential issuance of

shares could exceed the applicable

threshold; (3) codify the method used to

determine whether an American

Depository Receipt complies with the

listing standards; (4) clarify that rights

are subject to initial inclusion

standards; (5) clarify that the publicly

held shares, market value of publicly

held shares, and bid price initial

inclusion requirements do not apply to

rights and warrants to be listed on the

Nasdaq National Market.

Compliance With the Continued

Inclusion Requirements for Market

Capitalization and Number of Market

Makers

Rules 4310(c)(2)(B)(ii) and

4450(b)(1)(A) set forth the market

capitalization standards for continued

inclusion on The Nasdaq SmallCap

Market and the Nasdaq National Market,

respectively. These rules, however,

unlike the bid price requirement, do not

provide time frames for determining

when an issuer is non-complaint or

when it has regained compliance with

these standards. Accordingly, Nasdaq

proposes to amend Rule 4310(c)(8)(C) 7