71166 Federal Register / Vol. 65, No. 230 / Wednesday, November 29, 2000 / Notices

5See Securities Exchange Act Release Nos. 40017

(May 20, 1998), 63 FR 29277 (May 28, 1998)(SR–

CHX–98–9) and 40235 (July 17, 1998), 63 FR 40147

(July 27, 1998), (SR–CHX–98–09)(orders approving

revised SuperMAX and Enhanced SuperMAX

algorithms); 41480 (June 4, 1999), 64 FR 32570

(June 17, 1999)(SR–CHX–99–04)(order approving

revised SuperMAX Plus algorithm); and 42565

(March 22, 2000), 65 FR 16442 (March 28,

2000)(SR–CHX–99–24)(order approving Derivative

SuperMAX algorithm).

6The Exchange anticipates that its existing price

improvement programs, which have been amended

on a pilot basis to include decimal price

increments, would become obsolete once the pilot

expires on February 28, 2001. In accordance with

an Exchange rule approved by the Commission, the

four existing price improvement programs would be

deemed deleted from the Exchange’s rules upon the

completion of the securities industry transition to

a decimal pricing environment. See Article XXB,

Rule 4, which provides, in pertinent part, that all

rule references to fractional price increments shall

be deemed deleted.

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

8 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

price improvement programs on a

permanent basis.5

The Exchange believes that, for it to

remain competitive, its specialists must

be able to swiftly and meaningfully

respond to the price improvement

considerations articulated by the

Exchange’s order sending firms and

their customers. To this end, the

Exchange proposes the following change

to its existing price improvement

program.

Proposal

At present, Exchange specialists may

voluntarily participate, on an issue-byissue basis, in one of the four price

improvement programs referenced

above. Each of the existing price

improvement programs provides for a

fixed amount of price improvement)

when the national BBO spread meets

certain spread parameters (e.g., in

SuperMAX Plus, $.01 on a BBO spread

of $.03 on orders from 100 to 199

shares).

Under the proposed SuperMAX 2000,

customers would be guaranteed the

same minimum amount of price

improvement they would receive under

SuperMAX Plus (i.e., $.01 on a spread

of $.03 on orders of 100 shares) if a

specialist has enabled SuperMAX 2000;

in addition, specialists would be

permitted to provide additional

automated price improvement on an

issue-by-issue basis. This opportunity

for additional price improvement would

exist for all orders of 100 shares or

greater.

The Exchange believes that

SuperMAX 2000 will provide CHX

specialists with the requisite flexibility

to respond to customer price

improvement requirements in a decimal

pricing environment. Significantly, the

proposal contemplates equality among

order-sending firms (and their

customers) by mandating that CHX

specialists provide additional price

improvement on an issue-by-issue basis;

specialists would not be permitted to

distinguish among order-sending firms

when designating price improvement

levels.

The Exchange also believes that

SuperMAX 2000 would simplify the

Exchange’s existing price improvement

framework by eliminating multiple

price improvement programs with

different names, requirements and

results.6 By replacing four existing price

improvement programs with one

comprehensive program that will

incorporate (as a minimum threshold)

the level of price improvement currently

available, the Exchange will afford its

specialists the flexibility to provide a

wide variety of price improvement

alternatives, all of which will be equal

to or more favorable than existing

alternatives.

2. Statutory Basis

The CHX believes the proposed rule

change is consistent with Section 6(b)(5)

of the Act 7 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 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 Exchange 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.

The CHX has requested accelerated

approval of the proposed rule change.

While the Commission is not prepared

to grant accelerated approval at this

time, the Commission will consider

granting accelerated approval of the

proposal at the close of an abbreviated

comment period of 15 days from the

date of publication of the proposal in

the Federal Register.

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, N.W.,

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 filings will also be

available for inspection and copying at

the principal office of the Exchange. All

submissions should refer to file number

SR–CHX–00–37 and should be

submitted by December 14, 2000.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–30379 Filed 11–28–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43565; File No. SR–CHX–

00–36]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by The

Chicago Stock Exchange; Incorporated

Relating to the Trading of Nasdaq/NM

Securities on the CHX

November 15, 2000.

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

Securities Exchange Act of 1934

(‘‘Act’’) 1 and Rule 19b–4 thereunder 2

Federal Register / Vol. 65, No. 230 / Wednesday, November 29, 2000 / Notices 71167

3See Securities Exchange Act Release No. 24424

(May 4, 1987), 52 FR 17868 (May 12, 1987) (order

approving File No. SR–MSE–87–2); see also,

Securities Exchange Act Release Nos. 28146 (June

26, 1990), 55 FR 27917 (July 6, 1990) (order

expanding the number of eligible securities to 100);

36102 (August 14, 1995), 60 FR 43626 (August 22,

1995) (order expanding the number of eligible

securities to 500); 41392 (May 12, 1999), 64 FR

27839 (May 21, 1999) (order expanding the number

of eligible securities to 1000).

4The MAX system may be used to provide an

automated delivery and execution facility for orders

that are eligible for execution under the Exchange’s

BEST Rule and certain other orders. See CHX Rules,

Art. XX, Rule 37(b). A MAX order that fits within

the BEST parameters is executed pursuant to the

BEST Rule via the MAX system. If an order is

outside the BEST parameters, the BEST rule does

not apply, but MAX system handling rules remain

applicable.

5See Securities Exchange Act Release No. 38119

(January 3, 1997), 62 FR 1788 (January 13, 1997).

6See Securities Exchange Act Release No. 39512

(December 31, 1997), 63 FR 1517 (January 9, 1998).

7See Securities Exchange Act Release No. 39823

(March 31, 1998), 63 FR 17246 (April 8, 1998).

8See Securities Exchange Act Release No. 40150

(July 1, 1998), 63 FR 36983 (July 8, 1998).

9See Securities Exchange Act Release No. 40868

(December 31, 1998), 64 FR 1845 (January 12, 1999).

10See Securities Exchange Act Release No. 41586

(June 30, 1999), 64 FR 36938 (July 8, 1999).

11See Securities Exchange Act Release No. 42372

(January 31, 2000), 65 FR 6425 (February 9, 2000).

12See Securities Exchange Act Release No. 42740

(May 1, 2000) 65 FR 26649 (May 8, 2000).

13The term ‘‘agency order’’ means an order for

the account of a customer, but does not include

professional orders, as defined in CHX Rules, Art.

XXX, Rule 2, Interp. and Policy .04. The rule

defines a ‘‘professional order’’ as any order for the

account of a broker-dealer, the account of an

associated person of a broker-dealer, or any account

in which a broker-dealer or an associated person of

a broker-dealer has any direct or indirect interest.

14See Securities Exchange Act Release No. 43443

(October 13, 2000), 65 FR 63660 (October 24, 2000).

notice is hereby given that on November

1, 2000, the Chicago Stock Exchange,

Incorporated (‘‘CHX’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I and II 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 Exchange has requested a oneyear extension of the pilot program

relating to the trading of Nasdaq/NM

securities on the Exchange. Specifically,

the pilot program amended Article XX,

Rule 37 and Article XX, Rule 43 of the

Exchange’s rules. The last pilot expired

on November 1, 2000. The Exchange

proposes that the pilot remain in effect

on a pilot basis through November 1,

2001. The text of the proposed rule is

available at the Exchange and at the

Commission.

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 regarding 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

The Exchange has requested a oneyear extension of the pilot program

relating to the trading of Nasdaq/NM

securities on the Exchange. Specifically,

the pilot program amends Article XX,

Rule 37 and Article XX, Rule 43 of the

Exchange’s Rules. The latest pilot

program expired on November 1, 2000;

the Exchange proposes that the

amendments remain in effect on a pilot

basis through November 1, 2001.

On May 4, 1987, the Commission

approved certain Exchange rules and

procedures relating to the trading of

Nasdaq/NM securities on the

Exchange.3 Among other things, these

rules rendered the Exchange’s BEST

Rule guarantee (Article XX, Rule 37(a))

applicable to Nasdaq/NM securities and

made Nasdaq/NM securities eligible for

the automatic execution feature of the

Exchange’s Midwest Automated

Execution System (the ‘‘MAX’’ system).4

On January 3, 1997, the Commission

approved, on a one year pilot basis, a

program that eliminated the

requirement that CHX specialists

automatically execute orders for

Nasdaq/NM securities when the

specialist is not quoting at the national

best bid or best offer disseminated

pursuant to SEC Rule 11Ac1–1 (the

‘‘NBBO’’).5 When the Commission

approved the program on a pilot basis,

it requested that the Exchange submit a

report to the Commission describing the

Exchange’s experience with the pilot

program. The Commission stated that

the report should include at least six

months of trading data. Due to

programming issues, the pilot program

was not implemented until April, 1997.

Six months of trading data did not

become available until November, 1997.

As a result, the Exchange requested an

additional three month extension to

collect the data and prepare the report

for the Commission.

On December 31, 1997, the

Commission extended the pilot program

for an additional three months, until

March 31, 1998, to give the Exchange

additional time to prepare and submit

the report and to give the Commission

adequate time to review the report prior

to approving the pilot on a permanent

basis.6 The Exchange submitted the

report to the Commission on January 30,

1998. Subsequently, the Exchange

requested another three-month

extension, in order to give the

Commission adequate time to approve

the pilot program on a permanent basis.

On March 31, 1998, the Commission

approved the pilot for an additional

three-month period, until June 30,

1998.7 On July 1, 1998, the Commission

approved the pilot for an additional sixmonth period, until December 31,

1998.8 On December 31, 1998, the

Commission approved the pilot for an

additional six-month period, until June

30, 1999.9 On June 30, 1999, the

Commission approved the pilot for an

additional seven-month period, until

January 31, 2000.10 On January 31,

2000, the Commission approved the

pilot for an additional three-month

period, until May 1, 2000.11 On May 1,

2000, the Commission approved the

pilot for an additional six-month period,

until November 1, 2000.12 The

Exchange now requests another

extension of the current pilot program,

through November 1, 2001.

Under the pilot program, specialists

must continue to accept agency 13

market orders or marketable limit

orders, but only for orders of 100 to

1000 shares in Nasdaq/NM securities

rather than the 2099 share limit

previously in place. This threshold

order acceptance requirement is referred

to as the ‘‘auto acceptance threshold.’’

Specialists, however, must accept all

agency limit orders in Nasdaq/NM

securities from 100 up to and including

10,000 shares for placement in the limit

order book. Specialists are required to

automatically execute Nasdaq/NM

orders in accordance with certain

amendments to the pilot program that

recently were approved by the

Commission in connection with

Exchange submission SR–CHX–00–20.14

The pilot program requires the

specialist to set the MAX auto-execution

threshold at 300 shares or greater for

Nasdaq/NM securities. When a CHX

71168 Federal Register / Vol. 65, No. 230 / Wednesday, November 29, 2000 / Notices

15Specifically, the autoquote is currently for one

normal unit of trading (usually 100 shares) for

issues that became subject to mandatory

compliance with SEC Rule 11Ac1–4 on or prior to

February 24, 1997 and 1000 shares for other issues.

16The ability of an order-sending firm to elect

partial automatic execution of orders for Nasdaq/

NM securities is the result of an amendment to the

Exchange’s pilot program, recently approved by the

Commission in connection with Exchange

submission SR–CHX–00–32. See Securities

Exchange Act Release No. 43444 (October 13, 2000),

65 FR 63273 (October 23, 2000).

17 15 U.S.C. 78f(b).

18 15 U.S.C. 78f(b)(5).

19 15 U.S.C. 78s(b)(3)(A)(i).

20 17 CFR 240.19b–4(f)(6).

21For 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). 22See Securities Exchange Act Release Nos.

42372 (January 31, 2000), 65 FR 6425 (February 9,

2000) (SR–CHX–99–27) and 42740 (May 1, 2000) 65

FR 26649 (May 8, 2000) (SR–CHX–00–11).

23 15 U.S.C. 78f(b)(5).

24 15 U.S.C. 78k–1(a)(1)(C).

25 15 U.S.C. 78k–1(a)(1)(D).

specialist is quoting at the NBBO, orders

for a number of shares less than or equal

to the size of the specialist’s quote are

executed automatically (up to the size of

the specialist’s quote). Orders of a size

greater than the specialist’s quote are

automatically executed up to the size of

the specialist’s quote, with the balance

of the order designated as an open order

in the specialist’s book, to be filled in

accordance with the Exchange’s rules

for manual execution of orders for

Nasdaq/NM securities. Such rules

dictate that the specialist must either

manually execute the order at the NBBO

or a better price or act as agent for the

order in seeking to obtain the best

available price for the order on a

marketplace other than the Exchange. If

the specialist decides to act as agent for

the order, the pilot program requires the

specialist to use order-routing systems

to obtain an execution where

appropriate. Orders for securities quoted

with a spread greater than the minimum

variation are executed automatically

after a fifteen-second delay from the

time the order is entered into MAX. The

size of the specialist’s bid or offer is

then automatically decremented by the

size of the execution. When the

specialist’s quote is exhausted, the

system generates an autoquote at an

increment away from the NBBO, as

determined by the specialist from time

to time, for either 100 or 1000 shares,

depending on the issue.15

When the specialist is not quoting a

Nasdaq/NM security at the NBBO, an

order that is of a size less than or equal

to the auto execution threshold

designated by the specialist will execute

automatically at the NBBO price up to

the size of the auto execution threshold.

Orders of a size greater than the auto

execution threshold will be designated

as open orders in the specialist’s book

and manually executed, unless the

order-sending firm previously has

advised the specialist that it elects

partial automatic execution, in which

event the order will be executed

automatically up to the size of the auto

execution threshold, with the balance of

the order to be designated as an open

order in the specialist’s book.16

Whether the specialist is quoting at

the NBBO or not, ‘‘oversized’’ orders,

i.e., orders that are of a size greater than

the auto acceptance threshold of 1000

shares (or more if designated by the

specialist), are not subject to the

foregoing requirements, and may be

canceled within one minute of being

entered into MAX or designated as an

open order.

2. Statutory Basis

The proposed rule is consistent with

the requirements of the Act and the

rules and regulations thereunder that

are applicable to a national securities

exchange and, in particular, with the

requirements of Section 6(b).17 In

particular, the proposed rule is

consistent with Section 6(b)(5) 18 of the

Act 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

This proposed rule change has been

filed by the Exchange as a ‘‘noncontroversial’’ rule change pursuant to

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

subparagraph (f)(6) of Rule 19b–4

thereunder.20 Consequently, because the

foregoing rule change: (1) Does not

significantly affect the protection of

investors of the public interest; (2) does

not impose any significant burden on

competition; and (3) does not become

operative until thirty days after the date

of filing, or such shorter time as the

Commission may designate if consistent

with the protection of investors and the

public interest, provided that the

Exchange has given the Commission

written notice of its intent to file the

proposed rule change, along with a brief

description and the text of the proposed

rule change, at least five business days

prior to the date of filing of the

proposed rule change, or such shorter

time as designated by the Commission.

The Exchange has requested that the

Commission accelerate the operative

date of the proposal. In addition, the

Exchange provided the Commission

with written notice of its intent to file

the proposed rule change, along with a

brief description and text of the

proposed rule change, more than five

business days prior to the date of the

filing of the proposed rule change. The

Commission finds that it is appropriate

to accelerate the operative date of the

proposal and designate the proposal to

become operative today.21

The Commission notes that in

approving prior extensions of this pilot

program, it has found that the

Exchange’s program is consistent with

the requirements of the Act and the

rules and regulations thereunder

applicable to a national securities

exchange.22 Specifically, the

Commission has found that the

proposed rule change is consistent with

Section 6(b)(5) 23 of the Act, which

requires that an Exchange have rules

designed to prevent fraudulent and

manipulative acts and practices, to

promote just and equitable principles of

trade, 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 has also stated its belief

that the proposal is consistent with

Section 11A(a)(1)(C) 24 and

11A(a)(1)(D) 25 of the Act. The

Commission has found that the proposal

is consistent with Section 11A(a)(1)(C)

in that it seeks to ensure economically

efficient execution of securities

transactions, and with Section

11A(a)(1)(D) in that it attempts to foster

the linking of markets for qualified

securities through communication and

data processing facilities.

The Commission notes, however, that

while the Exchange has been working

toward establishing a linkage,

specialists and OTC market makers do

not yet have an effective method of

routing orders to each other. The

Federal Register / Vol. 65, No. 230 / Wednesday, November 29, 2000 / Notices 71169

26See January 1997 Order, supra note 7.

27 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See letter from Suzanne E. Rothwell, Chief

Counsel, Corporate Financing, NASD Regulation, to

Katherine A. England, Assistant Director, Division

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

dated September 21, 2000 (‘‘Amendment No. 1’’). In

Amendment No. 1, NASD Regulation proposed to

delete NASD Rule 2340(b)(A) and add new

paragraph (b)(4) to NASD Rule 2340. NASD Rule

2340(b)(4) states that, notwithstanding the

requirement in NASD Rule 2340(b)(1)(B), a member

may refrain from including a per share estimated

value for a DPP or REIT security on an account

statement if the member can demonstrate the value

was inaccurate as of the date of the valuation or is

no longer accurate as a result of a material change

in the operations or assets of the program or trust. 4See letter from Suzanne E. Rothwell, Chief

Counsel, Corporate Financing, NASD Regulation, to

Katherine A. England, Assistant Director, Division,

Commission, dated October 27, 2000 (‘‘Amendment

No. 2’’). Amendment No. 2 revised NASD Rule

2340(b)(4) to indicate that a member must refrain

from including a per share estimated value for a

DPP or REIT security on an account statement if the

member can demonstrate the value was inaccurate

as of the date of the valuation or is no longer

accurate as a result of a material change in the

operations or assets of the program. NASD

Regulation noted that the revised provision does

not relieve a member of its obligation to provide an

alternative per share estimated value when the

member’s obligation is triggered by NASD Rule

2340(b)(1)(B). 5See Securities Exchange Act Release No. 42698

(April 18, 2000), 64 FR 24523.

6See letter from Anne Rabbitt, Assistant Vice

President, Director of Investor Services,

Resourcephoenix.com, to the Honorable Arthur

Levitt, Chairman, Commission, dated October 10,

2000 (‘‘Resourcephoenix.com Letter’’); letter from

Larry E. Goff, National Sales Manager, CNL

Investment Company, to the Honorable Arthur

Levitt, Chairman, Commission, dated October 3,

2000 (‘‘CNL Letter’’); letter from Christopher L.

Davis, President, Investment Program Association

(‘‘IPA’’), to Secretary, Commission, dated June 30,

2000 (‘‘IPA letter’’); letter from Anne Julie Ravane,

Vice President and Senior Counsel, Private Client

Counsel, Office of General Counsel, Merrill Lynch

(‘‘Merrill Lynch’’), to Secretary, Commission, dated

June 2, 2000 (‘‘Merrill Lynch I’’); and letter from

Anne Julie Ravane, Vice President and Senior

Counsel, Private client Counsel, Office of General

Counsel, Merrill Lynch, to Secretary, Commission,

dated June 5, 2000 (‘‘Merrill Lynch I’’). Merrill

Lynch withdrew Merrill Lynch I and replaced it

with Merrill Lynch II. See Merrill Lynch II.

Commission expects the Exchange to

continue to work towards establishing a

linkage with the Nasdaq systems as

requested in the January 1997 Order.26

In connection with this effort, the

Commission has requested an update on

the information provided in the

December 21, 1999 report using the

Exchange’s surveillance system. The

Commission requests that the Exchange

supplement the available trading data so

that it can consider issues concerning

the pilot program, including the

circumstances involving orders that are

not automatically executed through

MAX, whether orders are given the

NBBO shown at the time the order is

received or the NBBO posted at the time

the order is executed, and what

explanations are available for price

disimprovement. The Commission is

extending the pilot program for one year

so that the Exchange may continue to

compile this data for the Commission’s

review.

The Commission also requests that

the Exchange continue its effort to

rewrite Article XX, Rule 37 and Article

XX, Rule 43 of the Exchange’s rules so

these rules clearly explain the difference

between how listed (or dually traded)

securities and over-the-counter (or

Nasdaq/NM) securities are routed and

executed by the Exchange, and submit

the new proposed language to the

Commission for review and approval.

Additionally, the Commission requests

that the Exchange include in its rules an

explanation of how the provisions of the

Exchange’s Best Rule interact with the

Exchange’s Rules governing automatic

execution of orders.

The Commission does not want to

interrupt the current operations of the

Exchange while the above-described

issues are being addressed. Therefore,

the Commission finds that it is

appropriate to accelerate the operative

date of the proposed rule change.

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 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, N.W.,

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 in Washington, DC Copies of the

filing will also be available for

inspection and copying at the principal

office of the Exchange. All submissions

should refer to File No. SR–CHX–00–36

and should be submitted by December

20, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.27

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–30384 Filed 11–28–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43601; File No. SR–NASD–

00–13]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change and

Notice of Filing and Order Granting

Accelerated Approval to Amendment

Nos. 1 and 2 to the Proposed Rule

Change by the National Association of

Securities Dealers, Inc., Relating to the

Valuation of Illiquid Direct Participation

Program and Real Estate Investment

Trust Securities on Customer Account

Statements

November 21, 2000.

Introduction

On March 28, 2000, the National

Association of Securities Dealers, Inc.

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

wholly-owned subsidiary, NASD

Regulation, Inc. (‘‘NASD Regulation’’),

submitted to the Securities and

Exchange Commission (‘‘Commission’’

or ‘‘SEC’’), pursuant to Section 19(b)(1)

of the Securities Exchange Act of 1934

(‘‘Act’’),1 and rule 19b–4 thereunder,2 a

proposal to amend its rules to require

general securities members to provide

valuations and disclosures relating to

direct participation program (‘‘DPP’’)

and real estate investment trust

(‘‘REIT’’) securities on customer account

statements under certain circumstances.

NASD Regulation amended its proposal

on September 25, 2000,3 and on October

30, 2000.4

The Proposal was published for

comment in the Federal Register on

April 26, 2000.5 Five comment letters

were received regarding the proposal.6

This order approves the proposed rule

change, as amended. In addition, the

Commission is publishing notice to

solicit comments and is simultaneously

approving, on an accelerated basis,

Amendment Nos. 1 and 2.

II. Background and Description of the

Proposal

A. Background

NASD Rule 2340, ‘‘Customer Account

Statements,’’ requires general securities