Federal Register / Vol. 65, No. 233 / Monday, December 4, 2000 / Notices 75751

5As provided in GSCC’s Rule 46, the use of

borrowing and lending terminology in this

proposed rule change filing and in GSCC’s rules

and agreements shall not be deemed to affect the

intent of members as to their characterization of

their transactions in agreements entered into by the

members with each other or with third parties with

respect to such transactions.

6Rule 3 of MBS Clearing Corporation (‘‘MBSCC’’)

reflects MBS market practice of delivering

comparable securities in an insolvency situation. 7 17 CFR 200.30–3(a)(12).

obligations of securities lenders 5 in GCF

Repo transactions. Under the proposed

rule change, securities lenders will be

permitted to satisfy their collateral

allocation requirements in connection

with their GCF Repo activity with (1)

‘‘comparable securities’’ (i.e., those that

fall within the same generic CUSIP

number), (2) benchmark U.S. Treasury

securities (i.e., bills, notes, or bonds), or

(3) cash. Market participants consider

comparable securities to be acceptable

substitutes because securities that fall

within the same generic CUSIP number

tend to have the same level of liquidity.

U.S. Treasury securities are also

acceptable substitute securities because

of their high level of liquidity.

The second change proposed by GSCC

applies where the securities borrower,

due to reasons beyond its control and

despite exercising best efforts, is not

able to obtain in a timely manner the

securities that were delivered on the day

before by the securities lender. Under

the proposed rule change, the securities

borrower will have the right to return (1)

‘‘comparable securities,’’ (2) benchmark

U.S. Treasury securities, or (3) cash. The

securities borrower will be responsible

for making the securities lender whole

(through GSCC) for any actual damages

directly suffered by the securities lender

as a result of not receiving back the

same securities that were originally lent.

(ii) Insolvency Situation Involving

Mortgage-Backed Securities

The third change proposed by GSCC

relates to clarification of its risk

management procedures associated with

the GCF Repo Service to reflect the

nature of MBS and MBS market

practice. In the event of a securities

borrower’s insolvency, it may be

impractical or even impossible for GSCC

to obtain the identical types of MBS that

were originally lent. Moreover, MBS

market practice is such that in such a

situation, securities lenders in

repurchases transactions involving MBS

would not expect to receive the same

securities back.

The proposed rule change will amend

Rule 22, Section 4 of GSCC’s rules by

giving GSCC the authority in an

insolvency situation, where MBS were

the underlying collateral, to deliver back

to a securities lender ‘‘comparable

securities’’ or benchmark U.S. Treasury

securities.6 Alternatively, the proposed

rule change will permit GSCC to give a

securities lender the right to close out

the transaction by buying ‘‘comparable

securities’’ or U.S. Treasury securities in

return for a cash payment by GSCC

equal to the value of the securities it

bought. However, if GSCC determines

that the price paid by the securities

lender is unreasonably high, GSCC will

be entitled to pay the securities lender

a reasonable price as determined by an

independent third party pricing source

for the ‘‘comparable securities’’ or U.S.

Treasury securities.

GSCC believes that the proposed rule

change is consistent with the

requirements of the Act and the rules

and regulations thereunder applicable to

GSCC and in particular with Section

17A(b)(3)(F) of the Act because it will

enhance the GCF Repo Service by

making it more responsive to the needs

of GSCC’s members and by clarifying

certain of GSCC’s risk management

practices, each in a manner consistent

with market practice.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

GSCC does not believe that the

proposed rule change will have an

impact or impose a burden on

competition.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

Written comments relating to the

proposed rule change have not yet been

solicited or received. GSCC will notify

the Commission of any written

comments received by GSCC.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within thirty-five 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

ninety 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

change is consistent with the Act.

Persons making written submissions

should file six copies of 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

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 Section,

450 Fifth Street, NW., Washington, DC

20549. Copies of such filing also will be

available for inspection and copying at

the principal office of GSCC.

All submissions should refer to File

No. SR–GSCC–00–05 and should be

submitted by December 26, 2000.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–30771 Filed 12–1–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43603; File No. SR–NYSE–

00–36]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change and

Notice of Filing and Order Granting

Accelerated Approval of Amendment

No. 1 to the Proposed Rule Change by

the New York Stock Exchange, Inc.

Extending the Pilot Fee Structure

Governing the Reimbursement of

Member Organizations for Costs

Incurred in the Transmission of Proxy

and Other Shareholder Communication

Materials and Amending the

Components of Coordination Activities

November 21, 2000.

I. Introduction

On August 11, 2000, the New York

Stock Exchange, Inc. (‘‘NYSE’’ or

‘‘Exchange’’) filed with the Securities

and Exchange Commission (‘‘SEC’’ or

75752 Federal Register / Vol. 65, No. 233 / Monday, December 4, 2000 / Notices

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

2 17 CFR 240.19b–4.

3Securities Exchange Act Release No. 43159

(August 16, 2000), 65 FR 51384 (‘‘Proposal’’). 4See letter from T. Peter Townsend, Vice

President, Investor Relations, Secretary, Exxon

Mobil Corp., to Secretary, SEC, dated September 13,

2000.

5See letter from James E. Buck, Senior Vice

President and Secretary, NYSE, to Sharon Lawson,

Senior Special Counsel, Office of Market

Supervision, Division of Market Regulation, SEC,

dated October 18, 2000 (‘‘Amendment No. 1’’). In

Amendment No. 1, the Exchange amended the

language of the nominee coordination fee provision

to more clearly articulate what services an

intermediary is expected to perform to earn the

$20.00 coordination fee.

6The ownership of shares in street name means

that a shareholder, or ‘‘beneficial owner,’’ has

purchased shares through a broker-dealer or bank,

also known as a ‘‘nominee.’’ In contrast to direct

ownership, where the shares are directly registered

in the name of the shareholder, shares held in street

name are registered in the name of the nominee, or

in the nominee name of a depository, such as the

Depository Trust Company.

7See NYSE Rules 451, ‘‘Transmission of Proxy

Material,’’ and 465 ‘‘Transmission of Interim

Reports and other Materials.’’ In addition, the text

of NYSE Rule 451 also is included at Paragraph

402.10(A) of the Exchange’s Listed Company

Manual (collectively ‘‘Rules’’).

8See Securities Exchange Act Release No. 38406

(March 14, 1997), 62 FR 13922 (March 24, 1997).

The Commission originally approved the Pilot Fee

Structure for a one-year period, expiring on May 13,

1998. See note 9 infra for additional extensions and

changes to the original pilot.

9See Securities Exchange Act Release Nos. 39672

(February 17, 1998), 63 FR 9034 (February 23, 1998)

(order extending Pilot Fee Structure through July

31, 1998, and lowering the rate of reimbursement

for mailing each set of initial proxies and annual

reports from $.55 to $.50); 40289 (July 31, 1998), 63

FR 42652 (August 10, 1998) (order extending Pilot

Fee Structure through October 31, 1998); 40621

(October 30, 1998), 63 FR 60036 (November 6, 1998)

(order extending Pilot Fee Structure through

February 12, 1999); 41044 (February 11, 1999), 64

FR 8422 (February 19, 1999) (order extending Pilot

Fee Structure through March 15, 1999); 41177

(March 16, 1999), 64 FR 14294 (March 24, 1999)

(order extending Pilot Fee Structure through August

31, 1999); 41669 (July 29, 1999), 64 FR 43007

(August 6, 1999) (order extending Pilot Fee

Structure through November 1, 1999); 42086

(November 1, 1999), 64 FR 60870 (November 8,

1999) (order extending Pilot Fee Structure through

January 3, 2000); 42304 (December 30, 1999), 65 FR

1212 (January 7, 2000) (order extending Pilot Fee

Structure through February 15, 2000); 42433

(February 16, 2000), 65 FR 10137 (February 25,

2000) (order extending the Pilot Fee Structure

through September 1, 2000); and 43151 (August 14,

2000), 65 FR 51382 (August 23, 2000) (order

extending the Pilot Fee Structure through October

10, 2000).

10See Securities Exchange Act Release No. 43429

(October 10, 2000), 65 FR 62781 (October 19, 2000).

11Securities Act Release No. 4243 (February 16,

2000), 65 FR 10137 (February 25, 2000).

12See letter from Richard J. Daly, Group CoPresident, ADP, to Jonathan G. Katz, Secretary, SEC,

dated June 28, 2000.

13There is some overlap of the functions that an

intermediary needs to perform to collect the proxy

mailing fee and the nominee coordination fee. For

example, under the Commission’s rules, an

intermediary is required to respond to an issuer’s

request for the number of beneficial owners served

by the intermediary and forward issuer proxy

materials to the beneficial owners, even if the

intermediary is not coordinating these functions on

behalf of multiple nominees. Intermediaries also

traditionally have received and tabulated vote

responses from beneficial owners and provided vote

reports to the issuer in return for the proxy mailing

fee. The proposed rule change is not intended to

change existing practices or fee allocation in this

regard. The listed functions are relevant to the

nominee coordination fee only to the extent that an

intermediary performs them on behalf of multiple

nominees.

14 17 CFR 240.14a–13(a)(1)(D).

15The intermediary must provide a vote report,

consolidated across multiple nominee clients no

less than 10 days before the shareholder meeting.

Thereafter, the intermediary must provide updated

consolidated vote reports each day before the

‘‘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 to

extend the pilot fee structure governing

the reimbursement of member

organizations for costs incurred in the

transmission of proxy and other

shareholder communication materials

and to amend the list of coordination

services an intermediary must perform

to collect the $20.00 nominee

coordination fee. The proposed rule

change was published in the Federal

Register on August 23, 2000.3 The

Commission received one comment

letter on the proposed rule change.4 On

October 20, 2000, the Exchange

submitted Amendment No. 1 to the

proposed rule change.5 This order

approves the amended proposed rule

change, including Amendment No. 1 on

an accelerated basis through September

1, 2001. The Commission is also

soliciting comment on Amendment No.

1 to the proposed rule change.

II. Background

NYSE member organizations that hold

securities for beneficial owners in street

name solicit proxies from, and deliver

proxy and issuer communications to,

beneficial owners on behalf of NYSElisted companies.6 For this service,

NYSE issuers reimburse NYSE member

organizations for reasonable out-ofpocket, clerical, postage, and other

expenses incurred in performing such

activities. The reimbursement of NYSE

member organizations by NYSE issuers

is governed by NYSE rules.7 Today,

many NYSE member organizations

outsource their proxy delivery

obligations to proxy distribution

intermediaries. Currently, one

intermediary handles the majority of the

proxy distribution business, Automatic

Data Processing, Inc. (‘‘ADP’’).

Currently, the Exchange has a pilot

fee structure (‘‘Pilot Fee Structure’’) set

forth in its Rules that governs the

reimbursement of expenses by NYSE

issuers to NYSE member organizations

for processing and delivering proxy

materials and other issuer

communications (collectively

‘‘Materials’’) with respect to security

holders whose securities are held in

street name. Among other things, the

Pilot Fee Structure sets certain

guidelines concerning the

reimbursement of fees for the

distribution of Materials, creates

incentive fees to eliminate duplicative

mailings, and establishes a

supplemental fee for intermediaries that

coordinate multiple nominees.8 The

Pilot Fee Structure has been modified

and extended several times,9 most

recently until November 20, 2000.10

In February 2000, the Exchange

proposed extending the Pilot Fee

Structure through September 1, 2000.11

At that time, the Commission requested

that the Exchange and ADP provide the

Commission with descriptions and

analysis of the fees permissible under

the Pilot Fee Structure. In response, the

Exchange submitted the Proposal and

ADP submitted a letter to the

Commission.12

III. Description of the Proposal

In the Proposal, the Exchange has

requested that the Pilot Fee Structure be

extended through September 1, 2001.

In addition, the Proposal would

amend the functions that an

intermediary is expected to perform to

recover the nominee coordination fee.13

Specifically, the Proposal contains

detailed descriptions of the minimum

services that must be provided by an

intermediary that coordinates the

delivery and processing of proxies

across multiple nominees. For example,

the Proposal specifies that an

intermediary must coordinate the search

of nominees and beneficial owners by:

(1) Searching for all nominees that are

clients of the intermediary; (2) obtaining

beneficial ownership lists from nominee

clients; (3) consolidating nominees’

responses to an issuer’s requests for the

number of beneficial owner customers

of the nominee clients; and (4)

providing the names and addresses of

nominee clients when requested by an

issuer pursuant to Rule 14a–13(a)(1)(D)

under the Act.14 In addition,

intermediaries collecting the

coordination fee will be required to (1)

accept issuers’ proxies at a single

location and prepare such proxies

across multiple nominees for

distribution to beneficial owners,

including packaging, if necessary; (2)

transmit issuers’ proxy materials by

making effective use of bulk mail

opportunities; (3) receive and tabulate

vote responses; and (4) provide vote

reports across multiple nominees.15

Federal Register / Vol. 65, No. 233 / Monday, December 4, 2000 / Notices 75753

shareholder meeting. On the day before the

shareholder meeting, the intermediary must provide

two vote reports consolidated across multiple

clients. Finally, on the day of the shareholder

meeting, the intermediary must provide a final vote

report consolidated across multiple nominee

clients.

16 In the Proposal, the Exchange clarified that the

list of coordination activities that an intermediary

must perform was not intended to be exclusive. By

setting forth the list of coordination activities in the

Rules, the Exchange intended to add a level of

specificity to provide both intermediaries and

issuers with notice as to the minimum services that

an intermediary is expected to perform.

17See note 4 supra.

18 15 U.S.C. 78f(b).

19 In approving this proposal, the Commission has

considered its impact on efficiency, competition

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

20 15 U.S.C. 78f(b)(4).

21 15 U.S.C. 78f(b)(5).

22See Securities Exchange Act Release No. 41177

(March 16, 1999), 64 FR 14294 (March 24, 1999) for

a complete description of the Pilot Fee Structure

and the Commission’s basis for approval, which is

incorporated herein.

23See note 4 supra.

24 15 U.S.C. 78f(b)(5).

25 15 U.S.C. 78s(b).

Finally, intermediaries must submit

consolidated invoices to issuers for the

processing of proxies on behalf of

multiple nominees.16

IV. Summary of Comments

The Commission received one

comment letter on the Proposal.17 The

commenter argued that the Pilot Fee

Structure is not competitive and

ultimately is costly to shareholders. The

commenter suggested that the fee for

mailing issuer materials be reduced

from $0.50 to $0.25 per mailing to make

it consistent with similar services for

registered shareholders. The commenter

argued that the current $0.50 mailing fee

does not reflect continued technological

improvements that have lowered costs.

According to the commenter, this

reduction could be recovered in the

$0.50 elimination fee and $20.00

nominee coordination fee. Further, the

commenter requested that

intermediaries be required to provide

annual justification of their costs that

would be subject to an independent

review. Finally, the commenter suggests

the use of a sliding scale based on

volume or a cap on total proxy fees paid

by large issuers. In support of this, the

commenter states that the current flat

fee structure fails to take into account

economies resulting from large

shareholder bases.

V. 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) 18 of the

Act.19 Section 6(b)(4) of the Act 20

requires that exchange rules provide the

equitable allocation of reasonable dues,

fees, and other charges among its

members, issuers, and other persons

using the facilities of an exchange.

Section 6(b)(5) of the Act 21 requires,

among other things, that the rules of an

exchange be designed to promote just

and equitable principles of trade, to

foster cooperation and coordination

with persons engaged in regulating,

clearing, processing information with

respect to, and facilitating transactions

in securities, and in general, to protect

investors and the public interest.

The Commission has decided to

extend the pilot through September 1,

2001. The Commission believes that this

time frame will permit further

consideration by market participants

and the Commission of the proxy fee

structure.22

The Commission also believes that the

components of the nominee

coordination fee are consistent with the

requirements of the Act. Currently, the

Rules only require that an intermediary

provide an issuer with the names and

address of the nominees in response to

the issuer’s request and transmit the

issuer’s proxies to beneficial owners.

The Proposal provides more specific

information as to the services an

intermediary is expected to perform, at

a minimum, in order to collect the

$20.00 nominee coordination fee. The

Commission believes that clarifying the

minimum services to be provided by

intermediaries and specifying these in

the Rules will provide market

participants, including issuers, with

more complete information about the

scope of the fees charged and services

provided by intermediaries.

The Commission notes that, under the

NYSE Proposal, the list of services that

an intermediary is required to provide

for collecting the $20.00 nominee

coordination fee is not exclusive. The

list is considered the minimum services

required to be performed for collection

of the coordination fee and should be

helpful to issuers by providing them

with information on the services being

provided for the fees they are paying.

The Commission also believes that the

additional specificity in the rule on the

minimum requirements to collect the

$20.00 coordination fee should help to

address some of the concerns that have

been raised since the inception of the

Pilot Fee Structure.

As noted above, there is one

intermediary, ADP that provides the

majority of proxy and issuer

communication delivery services. Thus,

there is a lack of competitive market

forces to dictate appropriate fees for

services. The Commission believes that

until an approach can be developed that

would foster competition in the proxy

distribution industry so that market

forces could determine reasonable

expenses for services, that it is

appropriate for the Exchange to specify

rates of reimbursement for NYSE

member organizations that distribute

Materials to beneficial owners on behalf

of NYSE issuers.

The Commission received one

comment letter in response to the

proposed rule change.23 The commenter

argued that the Pilot Fee Structure is not

competitive and ultimately costly to

shareholders and therefore, the

commenter believed that certain mailing

fees should be reduced. The commenter

also raised concerns that the fee

structure does not reflect economies of

scale from issuers with a large

shareholder base.

The Commission, as noted above, also

continues to be concerned about the

lack of competitive forces driving the

fees charged for the delivery and

processing of issuer Materials and that

is one of the main reasons why the

Commission has decided to continue to

approve the Rules on a pilot basis. The

Commission hopes that market

participants will further consider other

more competitive approaches to

establishing reasonable fees for

distributing issuer Materials. The

Commission believes that competitive

market forces would best dictate

reasonable fees. However, in the

absence of such a competitive scheme,

the Commission believes that it is

appropriate for the minimum fees to be

governed by NYSE Rules. The

Commission also will continue to

consider the appropriateness of the fees

over the course of the pilot.

The Commission finds good cause for

approving Amendment No. 1 to the

proposed rule change prior to the

thirtieth day after the date of

publication in the Federal Register. In

Amendment No. 1, the Exchange merely

added clarifying language to the text of

the proposed Rules. The substance of

the minimum services expected to be

provided by an intermediary in order to

earn the nominee coordination fee was

not changed. Therefore, because the

substance of the Rules was not amended

and the Proposal was subject to notice

and comment by interested persons, the

Commission believes that good cause

exists pursuant to Sections 6(b)(5) 24 and

19(b) 25 of the Act to accelerate approval

75754 Federal Register / Vol. 65, No. 233 / Monday, December 4, 2000 / Notices

26 15 U.S.C. 78s(b)(2).

27 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3PCX Constitution, Article II, Section 1(a).

4 15 U.S.C. 78f.

of Amendment No. 1 to the proposed

rule change.

VI. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning Amendment No.

1, including whether Amendment No. 1

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 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 NYSE. All

submissions should refer to File No.

SR–NYSE–00–36 and should be

submitted by December 26, 2000.

VII. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act, 26 that the

proposed rule change (SR–NYSE–00–

36), as amended, is approved through

September 1, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority. 27

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–30721 Filed 12–1–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43619; File No. SR–PCX–

00–44]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Pacific Exchange, Inc. Relating to

Committee Voting Requirements

November 27, 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 November

20, 2000, the Pacific Exchange, Inc.

(‘‘PCX’’ 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 PCX is proposing to amend PCX

Rule 11.2(a) to replace the word

‘‘present’’ with the word ‘‘voting’’ to

allow committee action to be approved

by a majority of those voting at a

meeting at which a quorum has been

established. Below is the complete text

of the proposed rule change. Proposed

new text is in italics. Proposed deletions

are in [brackets].

* * * * *

Pacific Exchange, Inc.

Constitution and Rules

* * * * *

Rule 11

Committees of the Exchange

¶6233 Committee Procedures

Rule 11.2(a). Except as otherwise

provided in the Constitution, the Rules,

or a resolution of the Board, each

committee shall determine its own time

and manner of conducting its meetings.

The vote of a majority of the members

of a committee [present] voting at a

meeting at which a quorum is present

shall be the act of the committee.

Committees may act by written consent

of a majority of the members of the

committee.

(b) 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

Exchange 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

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

Currently, the PCX’s Board of

Governors and the Exchange’s standing

committees operate under different

voting standards. The voting standard

applied to committees is more

restrictive than that applied to the Board

of Governors. The standard for

committee voting is set by PCX Rule

11.2(a) which states that ‘‘the vote of a

majority of the members of a committee

present at a meeting at which a quorum

is present shall be the act of the

committee.’’ This differs from the voting

requirement for the Board of Governors

which may act upon the affirmative vote

of ‘‘not less than a majority of the

Governors voting at a meeting at which

a quorum is present * * *’’ 3 This

section allows the Board of Governors to

act on the majority vote of the

Governors voting, regardless of whether

the number of Governors recusing or

abstaining reduces the number of those

eligible to vote below a quorum, below

a majority of the Governors attending or

below a majority of the total number of

Governors on the Board.

Unlike Section 1(a), PCX Rule 11.2(a)

requires a vote of a majority of

committee members present at the

meeting, rather than a mere majority of

those voting. The PCX believes that Rule

11.2(a) should be amended to make it

consistent with the requirements set

forth for the PCX Board of Governors.

Recent changes in the ownership of, or

capital investment in, many PCX

member firms has increased the number

of instances in which committee

members must abstain or recuse from a

committee vote. This may delay or

preclude a committee from taking

action, thereby reducing the

responsiveness of a committee to

rapidly changing market conditions and

limiting overall committee effectiveness.

The proposed rule change conforms

the committee voting standard to that

applied to the PCX Board of Governors.

The rule change will allow for greater

committee responsiveness, improved

timing for committee actions, and

consistency across the Exchange with

respect to rules of order.

2. Statutory Basis

The Exchange believes that the

proposed rule change is consistent with

Section 6 of the Act, 4 in general, and

furthers the objectives of Section