69356 Federal Register / Vol. 65, No. 222 / Thursday, November 16, 2000 / Notices

3 15 U.S.C. 78f(b)(5).

4 17 CFR 200.30–3(a)(12).

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

2Securities Exchange Act Release No. 42961

(June 20, 2000), 65 FR 39456.

3Article IV, Rule 2, Section 9 of MBSCC’s rules,

which governs deposits of letters of credit by

MBSCC’s participants to the participants fund for

margin purposes, provides, among other things, that

MBSCC may approve as the issuer of a letter of

credit any domestic or foreign bank or trust

company meeting the requirements set forth in

procedures adopted by MBSCC.

The rule change also amends Article I, Rule 1 of

MBSCC’s Rules to add a definition of ‘‘affiliate.’’

Affiliate is defined as follows: ‘‘The term an

‘Affiliate’ of, or a person ‘Affiliated’ with, a

specified person, means a person that directly, or

indirectly, through one or more intermediaries,

controls, or is controlled by, or is under common

control with, the person specified. For purposes of

this definition, the term ‘control’ (including the

terms ‘controls,’ ‘controlled by,’ and ‘under

common control with’) means the possession, direct

or indirect, of the power to direct or cause the

direction of the management and policies of a

person, whether through the ownership of voting

securities, by contract, or otherwise.’’

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 Exchange proposes to amend

Article XX, Rule 37(b)(6) to allow a

specialist to elect, on an issue by issue

basis, to either manually or

automatically execute limit orders when

a trade-through occurs in the primary

market. The current rule provides that

agency limit orders (that are not

marketable when entered into the

Exchange’s MAX automatic execution

system) will automatically be filled at

the limit price when there is a price

penetration of the limit price in the

primary market for the subject security.

Under the proposed amended rule,

automatic execution of such limit orders

will no longer be mandated. A CHX

specialist may elect to provide for

automatic execution of agency limit

orders at the limit price when there is

a price penetration of the limit price in

the primary market for the subject

securit(ies). The obligation to fill the

order at the limit price remains the same

under either election. The Exchange

believes that this proposed amendment

reasonably anticipates the impact that

the decimal pricing environment will

have on the national market system,

where the number of small orders

executed at multiple price levels may

increase the number of inadvertent trade

throughs that could otherwise lead to

unwarranted automated executions of

large orders in a CHX specialist’s limit

order book, exposing the specialist to

substantially increased liability in the

decimal pricing environment.

2. Statutory Basis

The Exchange believes that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder that

are applicable to a national securities

exchange. In particular, the Exchange

believes the proposed rule is consistent

with Section 6(b)(5) of the Act 3 in that

it is designed to promote just and

equitable principles of trade, to remove

impediments and to 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 Exchange does not believe that

the proposed rule change will impose

any inappropriate burden on

competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received from

Members, Participants or Others

No written comments were either

solicited or received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the 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 CHX 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

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, 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 CHX. All

submissions should refer to File No.

SR–CHX–00–28 and should be

submitted by December 7, 2000.

For the Commission, by the Division

of Market Regulation, pursuant to

delegated authority.4

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–29353 Filed 11–15–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43505; File No. SR–

MBSCC–00–01]

Self-Regulatory Organizations; MBS

Clearing Corporation; Order Approving

a Proposed Rule Change Relating to

Letters of Credit

November 1, 2000.

On April 11, 2000, the MBS Clearing

Corporation (‘‘MBSCC’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) a proposed rule change

(File No. SR–MBSCC–00–01) pursuant

to Section 19(b)(1) of the Securities

Exchange Act of 1934 (‘‘Act’’).1 On June

13, 2000, MBSCC amended the

proposed rule change. Notice of the

proposal was published in the Federal

Register on June 26, 2000.2 No comment

letters were received. For the reasons

discussed below, the Commission is

approving the proposed rule change.

I. Discussion

The rule change adds subsection (b) to

Article IV, Rule 2, Section 9 of MBSCC’s

rules to prohibit MBSCC from accepting

a letter of credit from a participant that

is issued by that participant or by an

affiliate of that participant.3 This rule

change codifies MBSCC’s historical

practice of requiring that a letter of

credit deposited by a participant to the

Federal Register / Vol. 65, No. 222 / Thursday, November 16, 2000 / Notices 69357

4The proposed rule change also makes a

technical modification to Article III, Rule 5 of

MBSCC’s Rules to correct the reference contained

within such rule from ‘‘Rule 4’’ to ‘‘Rule 5.’’

5 15 U.S.C. 78q–1(b)(3)(F).

6 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4

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

4 17 CFR 240.19b–4(f)(6).

participants fund be issued by an

approved letter of credit other than the

participant or an affiliate of the

participant.4

II. Discussion

Section 17A(b)(3)(F) 5 of the Act

requires that the rules of a clearing

agency be designed to assure the

safeguarding of securities and funds

which are in the custody or control of

the clearing agency or for which it is

responsible. As set forth below, the

Commission believes that MBSCC’s rule

change is consistent with this

obligation.

Letters of credit are used at MBSCC

and at other clearing agencies as

collateral to meet clearing fund

obligations. MBSCC’s clearing fund is

intended to provide liquidity and

protection to MBSCC and its members

in the event a MBSCC member defaults

on its obligation. If a member were

allowed to issue a letter of credit to

itself (or an affiliate of the member to

the member), the letter of credit would

probably not be honored in a default

situation.

Because the rule change will prohibit

a participant from providing a letter of

credit for itself or from an affiliated

entity, the rule change helps ensure that

MBSCC can draw upon a letter of credit

used as clearing fund collateral if

MBSCC ever had the need to do so. This

should assist MBSCC in safeguarding

securities and funds in its possession or

control or for which it is responsible.

III. Conclusion

On the basis of the foregoing, the

Commission finds that the proposal is

consistent with the requirements of the

Act and in particular with the

requirements of Section 17A of the Act

and the rules and regulations

thereunder.

It is therefore ordered, pursuant to

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

proposed rule change (File No. SR–

MBSCC–00–01) be, and hereby is,

approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–29286 Filed 11–15–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43533; File No. SR–NASD–

00–63]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

National Association of Securities

Dealers, Inc. Amending NASD Rule

4611 Relating to Registration As a

Nasdaq Market Maker in a Security

November 8, 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 October

20, 2000, the National Association of

Securities Dealers, Inc. (‘‘NASD’’),

through its wholly-owned subsidiary

The Nasdaq Stock Market, Inc.,

(‘‘Nasdaq’’) 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 Nasdaq. Nasdaq filed the

proposed rule change pursuant to

Section 19(b)(3)(A) of the Act,3 and Rule

19b–4(f)(6) thereunder,4 which renders

the proposal effective upon filing with

the Commission. 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

Nasdaq is proposing to amend NASD

Rule 4611 to allow an application for

registration as a market maker in a

security to become effective on the same

day the application is filed. Nasdaq is

also proposing a corresponding

technical change to Rule 4720 regarding

SOES Participation Registration. Below

is the text of the proposed rule change;

proposed deletions are in brackets and

proposed additions are underlined.

4611. Registration as a Nasdaq Market

Maker

* * * * *

[(c) A Nasdaq market maker may

become registered in a newly authorized

issued by contacting Nasdaq Market

Operations. If registration is requested

within five (5) business days after the

issue is authorized, registration shall

become effective at the time the

registration request is entered.]

[(d)] (c) A Nasdaq market maker may

become registered in an issue [already

included in Nasdaq] by entering a

registration request via a Nasdaq

terminal or other Nasdaq approved

electronic interface with Nasdaq’s

system or by contacting Nasdaq Market

Operations. If [registration is requested

in an issue that has been included in

Nasdaq for more than five (5) days, and]

the requirements of paragraph (b) above

are satisfied, registration shall become

effective on the day [after] the

registration request is entered.

[Provided, however, that same day

registration is permissible for:

(1) a Nasdaq market maker, registered

in a security that is the subject of a

publicly announced merger or

acquisition offer with another Nasdaq

issue, who seeks registration in the

other merger or acquisition issue; and

(2) a manager or co-manger of an

underwriting syndicate for a secondary

offering of a security on the day of the

secondary offering of that security.]

[(e)] (d) A Nasdaq market maker’s

registration in an issue shall be

terminated by the Association if the

market maker fails to enter quotations in

the issue within five (5) business days

after the market maker’s registration in

the issue becomes effective.

[(f)](e) Unless otherwise specified by

the Association, each Nasdaq market

maker that is registered as a market

maker in a Nasdaq National Market

security shall also at all times be

registered as a market maker in the

Small Order Execution System (SOES)

with respect to that security and be

subject to the SOES Rules as set forth in

the Rule 4700 Series.

[(g)](f) In cases where a market

making member has more than one

trading location, a fifth character

geographic indicator shall be appended

to the market marker’s identifier for that

security to identify the branch location

where the security is traded. The fifthcharacter branch indicators are

established by the Association and

published from time to time in the

Nasdaq/CQS symbol directory.

4720. SOES Participant Registration

* * * * *

(b) Pursuant to Rule 4611[(f)],

participation as a SOES Market Maker is

required for any Nasdaq market maker

registered to make a market in an NNM

security.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

Nasdaq included statements concerning

the purpose of and basis for the

proposed rule change and discussed any

comments it received on the proposed