Federal Register / Vol. 65, No. 225 / Tuesday, November 21, 2000 / Notices 69977

4Securities Exchange Act Release No. 43371

(Sept. 27, 2000), 65 FR 59476.

5 In approving this rule change, the Commission

has considered its impact on efficiency,

competition, and capital formation. 15 U.S.C. 78c(f).

6 15 U.S.C. 78f(b)(5).

7 15 U.S.C. 78s(b)(2).

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

2 17 CFR 240.19b–4.

The proposed rule change was

published for comment in the Federal

Register on October 5, 2000.4 No

comments were received. This order

approves the proposed rule change.

II. Description of the Proposal

The Exchange has had a policy of

requiring a company whose securities

are listed on the Exchange (or trade on

the Exchange pursuant to unlisted

trading privileges) to publicly disclose

receipt from the Exchange of a written

delisting notice for failure to comply

with the Exchange’s continued listing

guidelines. The purpose of the proposed

rule change is to codify this policy in

order to protect present and potential

investors in the securities of a company

in receipt of such notice.

In order to provide investors with the

greatest protection possible, the

Exchange believes that a company’s

public announcement of its pending

delisting should disclose not only the

fact of the company’s having received a

written notice from the Exchange, but

also indicate on which of the Amex

continued listing guidelines the

determination to delist has been based.

The Exchange believes that requiring

companies to disclose to investors

which specific listing guideline(s) a

company has failed to meet will better

enable investors to make informed

decisions about whether to make or

maintain investments in the securities

of such company.

The Exchange has proposed that a

company make public its announcement

regarding its pending delisting as

promptly as possible, but not more than

seven calendar days following its

receipt of the written delisting notice

from the Exchange. The Amex believes

that the proposed seven-day time frame

is consistent with its current policy and

that such time frame would provide the

subject company with sufficient

opportunity to prepare its public

announcement and also ensure that

investors receive the information in a

timely manner. If a company should fail

to disclose the receipt of a written

delisting notice under the Exchange’s

proposal, trading of its securities would

be halted until the announcement has

been made, even if the company elects

to appeal the underlying delisting

determination as provided for under

Section 1010 of the Exchange’s Listing

Standards, Policies and Requirements.

The Exchange has also proposed that,

where a company has elected to appeal

the Exchange’s delisting determination

but fails to make the required

announcement before the Adjudicatory

Council issues its decision with regard

to the company’s appeal, such decision

by the Adjudicatory Council whether or

not to delist the company’s securities

may also be based on the company’s

failure to make the required public

announcement.

III. Discussion

After careful review, the Commission

finds that the proposed rule change is

consistent with the Act and the rules

and regulations thereunder governing

national securities exchanges.5 In

particular, the Commission finds that

the proposal is consistent with the

provisions of Section 6(b)(5) of the Act 6

which requires, among other things, that

an exchange have rules that are, in

general, designed to protect investors

and the public interest. The

Commission finds that it is appropriate

for the Amex to codify in its rules its

current policy requiring a listed

company (or a company whose

securities trade on the Exchange

pursuant to unlisted trading privileges)

to promptly disclose to the public that

it has received a written delisting notice

from the Exchange, and to set forth in

its public disclosure the continued

listing guidelines cited by the Exchange

in making its delisting determination.

The proposed rule change will better

enable the Exchange to ensure that

investors in the securities traded on the

Exchange have as much information as

possible about the issuers of such

securities.

It is Therefore Ordered, pursuant to

Section 19(b)(2) of the Act,7 that the

proposed rule change (SR–Amex–00–

43) is hereby approved.

For the Commission, by the Division

of Market Regulation, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–29710 Filed 11–20–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43537; File No. SR–CBOE–

00–43]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Board Options Exchange,

Inc. Relating to Participation Rights in

Crossing Transactions

November 9, 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 August

29, 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.

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 CBOE is proposing certain

changes to provisions of its rule that

governs the participation rights of firms

crossing orders. The text of the

proposed rule change is set forth below.

Additions are italicized and deletions

are bracketed.

* * * * *

Chicago Board Options Exchange, Inc.,

Rules, Chapter VII, Section D: Floor

Brokers, ‘‘Crossing’’ Orders, Rule 6.74

(a)–(c) No change.

(d) Notwithstanding the provisions of

paragraphs (a) and (b) of this Rule, when

a Floor Broker holds an equity option

order of the eligible order size or greater

(‘‘original order’’), the Floor Broker is

entitled to cross a certain percentage of

the order with other [customer] orders

[from the same firm from which the

original order originated (‘‘originating

firm] that he is holding or in the case

of a public customer order with a

facilitation order of the originating firm

(i.e., the firm from which the original

customer order originated). The

appropriate Floor Procedure Committee

may determine, on a class by class basis

the eligible size for an order that may be

transacted pursuant to this paragraph

(d), however, the eligible order size may

not be less than 50 contracts. In

accordance with his responsibilities for

due diligence, a Floor Broker

69978 Federal Register / Vol. 65, No. 225 / Tuesday, November 21, 2000 / Notices

3See Securities Exchange Act Release No. 42835

(May 26, 2000), 65 FR 35683 (June 5, 2000) (File

No. SR–CBOE–99–10).

4The rule applies equally to a case where the

second order is provided by the firm from its own

proprietary account, in which case the second order

is referred to as a ‘‘facilitation order.’’ See id.

5Paragraph (d) of Rule 6.74 states that ‘‘the Floor

Broker is entitled to cross a certain percentage of

the order with other customer orders from the same

firm from which the original order originated

(‘originating firm’) that he is holding or in the case

of a public customer order with a facilitation order

of the originating firm.’’

6Paragraph (d)(vi) states: ‘‘A Floor Broker who is

holding a customer order and either a facilitation

or solicited order and who makes a request for a

market will be deemed to be representing both the

customer order and either the facilitation order or

solicited order, so that the customer order and the

other order will also have priority over all other

orders that were not being represented in the

trading crowd at the time the market was

established.’’

7Letter from Timothy Thompson, DirectorRegulatory Affairs, Legal Department, CBOE, to

Nancy Sanow, Division of Market Regulation

(‘‘Division’’), the Commission, dated April 10, 2000

(Amendment No. 2 to File No. SR–CBOE–99–10)

(‘‘amendment letter’’).

8For instance, as clarified by the proposed rule

change, the participation right would apply equally

when the Floor Broker seeks to cross the original

order with an order solicited from a market maker.

Telephone conversation between Timothy

Thompson, Director-Regulatory Affairs, Legal

Department, CBOE, and Ira L. Brandriss, Attorney,

Division, the Commission, on September 21, 2000.

representing an order of the eligible

order size or greater which he wishes to

cross shall request bids and offer for

such option series and make all persons

in the trading crowd, including the

Order Book Official, aware of his

request.

(i)–(vii) No change.

* * * Interpretations and Policies:

No change.

* * * * *

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 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 Exchange 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

a. Background. The Commission

recently approved a change to Exchange

Rule 6.74 to provide a participation

right that entitles member firms to cross

a certain percentage of each order they

send to the floor.3

Specifically, the rule change provided

that after the Floor Broker representing

an order (‘‘original order’’) has

requested and received a market from

the trading crowd, if the trade takes

place at that market, the Floor Broker is

entitled to cross 20% of the contracts

remaining in the original order with

another order from the same firm from

which the original order originated.4

The participation right applies only

after all public customer orders in the

book and represented in the crowd at

the time the market was established

have been satisfied.

If the trade takes place at a price

between the best bid and offer provided

by the crowd then, after public customer

orders are satisfied, the Floor Broker

will be entitled to cross 40% of the

contracts remaining in the original

order.

b. Proposed Changes. The Exchange is

proposing to make two changes to Rule

6.74(d). The first change would make

clear that the rule includes the situation

where a Floor Broker is seeking to cross

a solicited order against the original

customer order. The second change

would allow the Floor Broker

representing the original customer order

to solicit the order to trade against it

even if that Floor Broker is not a

nominee of the originating firm.

(i) Application of the rule to solicited

orders. The Exchange states that its

recently approved rule governing

participation rights in cross trades was

clearly intended to allow the member

firm to receive its participation right

when seeking to cross either a solicited

order or a facilitation order against the

original customer order.

The Exchange states that this is

indicted by the rule language itself,

which refers to ‘‘other customer orders’’

that a Floor Broker may be seeking to

cross against the original order, in

addition to—and as distinct from—

‘‘facilitation orders.’’ 5 The Exchange

states that there would have been no

reason to distinguish between these

types of orders if the rule was intended

to allow the member firm to receive its

participation right only when

facilitating a customer order. The

Exchange additionally points out that

paragraph (d)(vi) of the rule specifically

indicates that a Floor Broker might be

holding either a solicited or facilitation

order.6

Finally, the CBOE notes that in letter

that amended the original proposal of

Rule 6.74(d), in response to questions

from the Commission’s staff about what

type of entity might be solicited to trade

against the original order pursuant to

the rule, the Exchange stated that the

‘‘member firm may solicit a brokerdealer, a public customer, or any other

source from which the firm expects to

be able to find additional liquidity and

a better price.’’ 7

Nonetheless, the CBOE states, a few

members of the Exchange have

questioned whether the rule was in fact

intended to allow the member firm to

receive a participation right by trading

a solicited order against the original

customer order. These members have

based their uncertainty on the text of

Rule 6.74(d), which states that ‘‘the

Floor Broker is entitled to cross a certain

percentage of the order with other

customer orders from the same firm

from which the original order originated

(‘originating firm’) that he is holding.’’

(emphasis added)

These members believe that the term

‘‘customer’’ could be read to mean

either a public customer (i.e., a nonbroker-dealer) or a client with which the

firm has had a longstanding

relationship. According to the

Exchange, however, the aforementioned

amendment letter demonstrates that the

term ‘‘customer’’ was not intended to be

read so restrictively. Consequently, the

Exchange is now proposing to delete the

term ‘‘customer’’ from this portion of

the rule to make clear that the solicited

order may come from any source.8

(ii) The Floor Broker may solicit the

order. As currently written, the cross

participation rule provides that the

Floor Broker may cross the original

customer order with other ‘‘orders from

the same firm from which the original

order originated (originating firm).’’ As

such, if the Floor Broker who is

representing the order is not a nominee

of the originating firm but works for a

firm that has been given the order to

execute (‘‘executing firm’’), the Floor

Broker or the executing firm would not

be entitled to obtain the cross

participation entitlement with respect to

any order that the Floor Broker or

executing firm had solicited.

After considering the implications of

this restriction, the Exchange has

determined to amend the rule so that

the Floor Broker’s participation

entitlement is not limited to orders from

the originating firm only. The proposed

rule change would permit the Floor

Broker who is not a nominee of the

originating firm to himself solicit orders,

with the aim of expanding the pool of

potential liquidity providers who will

be able to participate in the price

Federal Register / Vol. 65, No. 225 / Tuesday, November 21, 2000 / Notices 69979

9 15 U.S.C. 78f(b)(5).

10 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3Letter from Hassan Abedi, Attorney, Regulatory

Policy, PCX, to Nancy Sanow, Assistant Director,

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

Commission, dated July 31, 2000 (‘‘Amendment No.

1’’). Amendment No. 1 deletes the language of PCX

Rule 6.55 and Commentary .01 thereunder, that sets

forth special reporting requirements for highest bids

and lowest offers comprised of more than 25

options contracts.

4Letter from Hassan Abedi, Attorney, Regulatory

Policy, PCX, to Nancy Sanow, Assistant Director,

Division, Commission, dated September 29, 2000

(‘‘Amendment No. 2’’). Amendment No. 2 revises

Rule 6.55 to clarify that ‘‘immediately’’ means as

soon as practicable after receipt, which under

normal market conditions means no later than 30

seconds. 5See Amendment No. 1, supra note 3.

improvement process that the Exchange

believes is encouraged by this rule.

To permit the Floor Broker who is not

a nominee of the originating firm to

solicit orders that will receive the

benefit of the cross participation

entitlement, the Exchange is proposing

to delete the phrase that states that the

order must be ‘‘from the same firm from

which the original order originated

(‘originating firm’).’’

2. Statutory Basis

The Exchange believes that the

proposed rule change is consistent with

and furthers the objectives of section

6(b)(5) 9 of the Act in that it is designed

to remove impediments to a free and

open market and protecting 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 CBOE 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 the filing will also be

available for inspection and copying at

the principal offices of the CBOE. All

submissions should refer to File No.

SR–CBOE–00–43 and should be

submitted by December 12, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–29707 Filed 11–20–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43550; File No. SR–PCX–

00–15]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change and

Amendments No. 1 and 2 Thereto by

the Pacific Exchange, Inc. To Require

Immediate Display of Options Limit

Orders in the Option Limit Order Book

November 13, 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 14,

2000, the Pacific Exchange, Inc. (‘‘PCX’’

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 Exchange. The PCX

filed Amendment Nos. 1 3 and 2 4 to the

proposed rule change on August 1, 2000

and October 17, 2000, respectively. The

Commission is publishing this notice to

solicit comments on the proposed rule

change and Amendment Nos. 1 and 2

from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The PCX proposes to amend PCX Rule

6.55 to require Order Book Officials to

immediately display options limit

orders in the Options Limit Order Book.

As amended, the PCX proposal requires

Order Book Officials to immediately

display the highest bid and lowest

offers, along with the corresponding

number of options contracts bid or

offered in the book for which that

official acts as the Order Book Official.

Additionally, the proposed rule change

would delete the special requirements

contained in PCX Rule 6.55 and

Commentary .01 thereunder, that apply

to highest bids and lowest offers of more

than 25 options contracts.5

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

PCX 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 PCX 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 purpose of the proposed rule

change is to amend Exchange Rule 6.55

(‘‘Displaying Bids and Offers in the

Book’’) to require the immediate display

of options limit orders by Order Book

Officials. Currently, PCX Rule 6.55

requires an Order Book Official to

continuously display, in a visible

manner, the highest bid and lowest

offer, along with the corresponding

number of options contracts bid or

offered, in his book in each option

contract for which he is the Order Book

Official.

The Exchange represents that limit

orders are routed to an Order Book

Official either manually or

electronically. A manual order is sent to

an Order Book Officials by a floor