77056 Federal Register / Vol. 65, No. 237 / Friday, December 8, 2000 / Notices

5While the Exchange will collect data on a daily

basis, the Exchange’s initial sampling will consist

of a review of data collected for two days per

week—the day with the most violations, and the

day with the fewest. Based on the Exchange’s

analysis of this information, the Exchange will

determine if the violations exceed 2% of all eligible

market orders for each calendar quarter. The

Exchange plans eventually to determine violations

based on information collected daily, rather than on

a partial sample, with March 2001 as the proposed

target date. See telephone conversation among

Jeffrey Brown, Vice President, Regulation and

General Counsel, CSE, James Flynn, Staff Attorney,

CSE and Katherine England, Assistant Director,

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

and Joseph Morra, Special Counsel, Division, SEC,

November 30, 2000.

6 In approving this rule, the Commission has

considered its impact on efficiency, competition,

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

7 15 U.S.C. 78f(b)(5).

8 15 U.S.C. 78f(b)(6).

9 15 U.S.C. 78f(b)(7).

10 15 U.S.C. 78f(d)(1).

11 15 U.S.C. 78s(b)(2).

12 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

opportunities, violations of this

Interpretation require sanctions more

rigorous than a series of cautionary

letters prior to formal proceedings.

Under the proposal, Exchange

regulatory staff will review a sampling

of Exchange members’ market orders,

based on appropriate market conditions,

to determine if a threshold of market

order exposure violations has been

exceeded. Violations that exceed 2% of

all eligible market orders of any Member

for any calendar quarter will result in a

$1,000 fine for that quarter. The second

quarterly violation within a rolling 12-

month period will result in a $2,500

fine. A third quarterly violation within

a rolling 12-month period will result in

a CSE Business Conduct Committee

hearing with a staff recommendation of

a $10,000 fine.5

The minor rule violation fine

schedule is merely a recommended

schedule; fines of more or less than the

recommended amount can be imposed

(up to a $2,500 maximum) in

appropriate situations. Also, the

Exchange reserves the right to proceed

with formal disciplinary action when, in

the Exchange’s opinion, circumstances

warrant a more severe level of sanction

or remedial action.

III. Discussion

The Commission has reviewed

carefully the CSE’s proposed rule

change and finds, for the reasons set

forth below, that the proposal is

consistent with the requirements of the

Act and the rules and regulations

thereunder applicable to a national

securities exchange.6 In particular, the

commission finds the proposal is

consistent with sections 6(b)(5),7

6(b)(6),8 6(b)(7),9 and 6(d)(1),10 of the

Act.

Section 6(b)(5) requires that the rules

of an exchange be designed to promote

just and equitable principles of trade

and to remove impediments to and

perfect the mechanism of a free and

open market and a national market

system, and, in general, to protect

investors and the public interest. The

Commission believes the proposal is

consistent with section 6(b)(5) because

it will augment the Exchange’s ability to

police its market, and will allow greater

flexibility in responding to violations of

the Market Order Display Rule.

Section 6(b)(6) requires that the rules

of an exchange provide that its members

and persons associated with its

members shall be appropriately

disciplined for violations of

Commission and Exchange rules.

Including violations of the Market Order

Display Rule in the Program should give

the Exchange the ability to treat

violations of the Rule in a summary

fashion, but retain the flexibility to

address more egregious violations of the

Rule with more severe sanctions where

appropriate.

In addition, the Commission believes

that the proposal provides a reasonable

procedure for the discipline of Members

consistent with sections 6(b)(7) and

6(d)(1) of the Act. Section 6(b)(7)

requires the rules of an eschange to be

in accordance with the provisions

Section 6(d), and, in general, to provide

a fair procedure for the disciplining of

members and persons associated with

members. Section 6(d)(1) requires that,

in any proceeding by an exchange to

determine whether a member should be

disciplined, the exchange must bring

specific charges, notify the member of

those charges, and give the member an

opportunity to defend against the

charges. Because CSE Rule 8.15

provides procedural safeguards to the

Member being fined, and allows the

Member who is disciplined to request

full hearing on the matter, the

Commission believes the proposal is

both reasonable and consistent with

sections 6(b)(7) and 6(d)(1).

The Commission notes that by

allowing the CSE to address violations

of the Market Order Display Rule under

the Program, the Commission in no way

minimizes the importance of

compliance with the Rule, and all other

Rules subject to the imposition of fines

under the Program. The Commission

believes that the violation of any

Exchange and/or Commission Rule is a

serious matter. However, in an effort to

provide the Exchange with greater

flexibility in addressing certain

violations, the Program provides a

reasonable means to address rule

violations that do not rise to the level of

requiring formal disciplinay

proceedings. The Commission expects

that the CSE will continue to conduct

surveillance with due diligence, and

make a determination based on its

findings whether fines of more or less

the recommended amount are

appropriate for violation of the Market

Order Display Rule on a case by case

basis, or if a violation requires formal

disciplinary action.

IV. Conclusion

It is therefore ordered, pursuant to

section 19(b)(2) of the Act, 11 that the

proposed rule change (SR–CSE–00–08)

is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority. 12

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–31297 Filed 12–7–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43659; File No. SR–ISE–

00–14]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of a Proposed Rule Change by the

International Securities Exchange LLC,

Relating to Listing Procedures

December 4, 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

15, 2000, the International Securities

Exchange LLC (‘‘Exchange’’ or ‘‘ISE’’)

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 ISE. 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 ISE is proposing to amend the

procedures by which it lists options to

conform its procedures to those

currently in place at the other options

exchanges. The text of the proposed rule

change is available at the Commission

and the ISE.

Federal Register / Vol. 65, No. 237 / Friday, December 8, 2000 / Notices 77057

3See Securities Exchange Act Release No. 29698

(September 17, 1991), 56 FR 48594 (September 25,

1991).

4See Securities Exchange Act Release No. 42455

(February 24, 2000), 65 FR 11388 (March 2, 2000)

(at note 144 and accompanying text).

5Securities Exchange Act Release No. 43268

(September 11, 2000).

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

7 15 U.S.C. 78s(b)(3)(A).

8 17 CFR 240.19b–4(f)(6).

9For purposes only of accelerating the operative

date of this proposal, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f).

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

ISE 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 ISE 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 ISE proposes to amend its listing

procedures to conform to the procedures

employed by the American Stock

Exchange LLC, the Chicago Board

Options Exchange, Incorporated, the

Pacific Exchange, Inc., and the

Philadelphia Stock Exchange, Inc. These

exchanges long have followed the

uniform listing procedures contained in

the Joint Exchange Options Plan

(‘‘Plan’’), which the Commission has

approved as rules of each of those

exchanges.3 However, the Plan

historically focused on the listing of

new options, not the listing of options

already trading on another exchange.

Among other things, the Plan’s

procedures require an exchange listing

an option to inform The Options

Clearing Corporation (‘‘OCC’’) of the

proposed listing, as well as to provide

notice of the listing to all the other

markets.

The ISE adopted the Plan, with

certain modifications, prior to its launch

of trading. The most significant

modification in the ISE’s version of the

Plan relates to the listing of options

already trading on another exchange

(‘‘multiple-listing procedures’’). While

the other exchanges have followed

informal procedures regarding multiple

listings (primarily the requirement to

provide each other with three days

notice of proposed multiple listings that

have been trading for more than ten

days), the multiple-listing procedures

are not included in the Plan. The ISE

codified the multiple-listing procedures

in its rules, which the Commission

approved as part of the ISE’s

registration.4

The four other options exchanges

recently settled an enforcement action

with the Commission and an antitrust

action with the Department of Justice in

which the government claimed, among

other things, that the Plan contains

anticompetitive elements. The

Commission mandated that the four

exchanges work together, and with the

ISE, to eliminate these anticompetitive

provisions.5 One anticompetitive

provision that the Commission

identified is the requirement that

exchanges provide three-days notice of

a proposed multiple listing. To address

this concern, the other exchanges have

received no-action letters from

Commission staff allowing them to list

a multiply-traded option with one days

notice of the intention to list an option

class to OCC and the other exchanges

listing that option. The ISE must amend

its rules to achieve this same result

because it has codified the three days

notice provision for multiple listings in

its rules. The Proposed rule change will

conform the ISE’s listing procedures to

those of the other exchanges by

providing for one days notice to OCC

and the other listing exchanges of a new

multiple listing.

In addition, the ISE is also proposing

to eliminate the prohibition against any

exchange that was not a selecting or

joining exchange commencing trading

the selected option prior to the eighth

business day following notification by

the selecting and/or joining exchanges

of the intention to certify the option.

The Exchange believes that this change

will conform its listing practices to

those of the other options exchanges.

2. Basis

The Exchange believes the basis for

the proposed rule change is the

requirement under section 6(b)(5) of the

Act 6 that an exchange have rules that

are designed to prevent fraudulent and

manipulative acts and practices, to

promote just and equitable principles of

trade, to foster cooperation and

coordination with persons engaged in

regulating, clearing, settling, processing

information with respect to, and

facilitating transactions in securities, to

remove impediments to and perfect the

mechanism for 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 proposed rule change does not

impose any burden on competition that

is not necessary or appropriate in

furtherance of the purposes of the Act.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

The Exchange has not solicited or

received comments on the proposed

rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Because the foregoing rule change: (1)

Does not significantly affect the

protection of investors or the public

interest; (2) does not impose any

significant burden on competition; (3)

does not become operative for 30 days

from the date of filing; and (4) the

Exchange provided the Commission

with notice of its intent to file the

proposed rule change at least five days

prior to the filing date, the proposed

rule change has become effective

pursuant to section 19(b)(3)(A) of the

act 7 and Rule 19b–4(f)(6) 8 thereunder.

At any time within 60 days of the filing

of the proposed rule change, the

Commission may summarily abrogate

such rule change if it appears to the

commission that such action is

necessary or appropriate in the public

interest, for the protection of investors,

or otherwise in furtherance of the

purposes of the Act.

The ISE has requested that the

Commission accelerate the operative

date of the proposed rule change. The

Commission believes that it is

consistent with the protection of

investors and the public interest and

therefore finds good cause to designate

the proposal to become immediately

operative upon filing. Acceleration of

the operative date will ensure that the

ISE’s listing procedures for multiply

traded options conform to the listing

procedures of the other options

exchanges. For these reasons, the

Commission finds good cause to

designate that the proposal become

immediately operative upon filing.9

77058 Federal Register / Vol. 65, No. 237 / Friday, December 8, 2000 / Notices

10 17 CFR 200.30–3(a)(12).

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

2A copy of the text of OCC’s proposed rule

change and the attached exhibit are available at the

Commission’s Public Reference Section or through

OCC.

3The Commission has modified the text of the

summaries prepared by OCC.

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 ISE. All

submissions should refer to the File No.

SR–ISE–00–14 and should be submitted

by December 29, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–31298 Filed 12–7–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43637; File No. SR–OCC–

00–11]

Self-Regulatory Organizations; The

Options Clearing Corporation; Notice

of Filing and Immediate Effectiveness

of a Proposed Rule Change Relating to

Investment of Excess Funds and to

Procedures Applicable to the

Safeguarding of Such Investments

November 29, 2000.

Pursuant to section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’) 1, notice is hereby given that on

October 5, 2000, the Options Clearing

Corporation (‘‘OCC’’) 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 primarily by OCC. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested parties.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The proposed rule change would

allow OCC to amend its By-Laws to

expand the types of investments that

OCC may make its funds in excess of

those needed for working capital and to

update the procedures applicable to the

safeguarding of such investments.2

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

OCC 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. OCC has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of these statements.3

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

The purpose of this rule change is to

expand the types of investments that

OCC is permitted to make its funds in

excess of those needed for working

capital and to update the procedures

applicable to the safeguarding of such

investments.

Article IX, section 1(a) currently

provides that the board of directors may

invest OCC’s excess funds in

Government securities. The By-Laws are

amended to allow the board or a

committee thereof to approve the

investment of OCC’s funds in other

securities or financial instruments. This

change permits portfolio diversification

and allows OCC to hedge its obligation

under stock-based compensation plans.

The By-Laws are further amended to

explicitly allow OCC to hold securities

in accounts at registered broker-dealers.

Section 1(a) currently provides that one

director (other than the Management

Director) must act jointly with an officer

of OCC to access or withdraw securities

that are the property of OCC. Section

1(a) is being amended to allow

withdrawals by joint action of an officer

of the rank of vice president or above

and the treasurer or an assistant

treasurer.

The proposed rule change is

consistent with the requirements of

section 17A of the Act because it

provides reasonable procedures

governing the investment of OCC funds

in excess of those needed for working

capital and for the safeguarding of such

investments.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

OCC does not believe that the

proposed rule change would impose any

burden on competition.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

Written comments were not and are

not intended to be solicited with respect

to the proposed rule change, and none

have been received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The foregoing rule change has become

effective pursuant to section

19(b)(3)(A)(iii) of the Act and Rule 19b–

4(f)(3) thereunder as it is concerned

solely with the administration of a selfregulatory organization. At any time

within sixty days of the filing of such

proposed rule change, the Commission

may summarily abrogate such rule

change if it appears to the Commission

that such action is necessary or

appropriate in the public interest, for

the protection of investors, or otherwise

in furtherance of the purposes of the

Act.

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, 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 Section,