Federal Register / Vol. 63, No. 77 /Wednesday, April 22, 1998 / Notices 19991

9 15 U.S.C. 78o(b)(7), 78f(b)(5), and 78f(c)(3)(B)

(1988).

10 15 U.S.C. 78f(b)(5).

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

12 17 CFR 200.30–3(a)(12).

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

2The Commission has modified parts of these

statements.

Interpretation and Policy .02, who must

promptly notify the Exchange that they

have registered to take the Series 7

examination, will have six months from

the date of the CHX’s Notice to Members

to pass the Series 7 examination.

Persons covered by Interpretation and

Policy .02 who become associated with

members after the CHX publishes notice

of the examination requirement in a

Notice to Members must successfully

complete the Series 7 examination

before conducting securities trading

activities for which an examination is

required under the Interpretation and

Policy .02.

III. 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. Specifically, the Commission

finds that the proposal is consistent

with the requirements of Sections

15(b)(7), 6(b)(5), and 6(c)(3)(B) of the

Act.9 Section 15(b)(7) states that a

registered broker or dealer may not

effect any transaction in, or induce the

purchase or sale of, any security unless

the broker or dealer meets certain

standards of operational capability and

all those associated with the broker or

dealer meet certain standards of

training, experience, competence, and

such other qualifications as the

Commission finds necessary or

appropriate in the public interest or for

the protection of investors. Section

6(b)(5) requires, among other things,

that the rules of an exchange be

designed 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.10 Section 6(c)(3)(B)

provides that a national securities

exchange may examine and verify the

qualifications of an applicant to become

a person associated with a member in

accordance with procedures established

by the rules of the exchange, and require

any person associated with a member,

or any class of such persons, to be

registered with the exchange in

accordance with procedures so

established.

Interpretation and Policy .02 will

require off-floor associated persons of

members for which the CHX is the DEA

who execute, make trading decisions

with respect to, or otherwise engage in

proprietary or agency trading of

equities, preferred securities, or

convertible debt securities to

successfully complete the Series 7

examination. The CHX’s rules currently

contain no examination requirement for

persons covered by Interpretation and

Policy .02. Interpretation and Policy .02

is designed to eliminate this gap in

examination requirements and to make

the CHX’s examination requirements

more consistent with the examination

requirements of the other SROs.

The Commission believes that it is

appropriate for the CHX to establish an

examination requirement for associated

persons covered by Interpretation and

Policy .02. Specifically, the Commission

believes that the CHX’s proposal will

help to ensure that only those associated

persons covered by Interpretation and

Policy .02 who have an understanding

of the Act, will be able to solicit,

purchase or sell securities for the

accounts of customers. The Commission

recognizes the importance to investors

of efforts by the SROs to ensure that

associated persons have appropriate

levels of knowledge and expertise

regarding applicable laws and

regulations. By helping to establish this

level of knowledge, the Commission

believes that the CHX’s proposal will

help associated persons covered by

Interpretation and Policy .02 carry out

their responsibilities under the federal

securities laws.

In addition, the Commission believes

that it is reasonable and consistent with

Section 6(c)(3)(B) of the Act for the CHX

to amend CHX Article VI, Rule 3 to state

that the CHX may establish examination

requirements for members and

associated persons.

IV. Conclusion

It is therefore ordered, pursuant to

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

proposed rule change (File No. SR–

CHX–98–04), as amended, is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.12

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–10606 Filed 4–21–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39872; File Nos. SR–MCC–

98–01 and SR–MSTC–98–01]

Self-Regulatory Organizations; the

Midwest Clearing Corporation; the

Midwest Securities Trust Company;

Notice of Filing of Proposed Rule

Changes Relating to the Structure and

Composition of the Board of Directors

April 14, 1998.

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

Securities Exchange Act of 1934

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

February 9, 1998, the Midwest Clearing

Corporation (‘‘MCC’’) and the Midwest

Securities Trust Company (MSTC) filed

with the Securities and Exchange

Commission (‘‘Commission’’) and on

February 25, 1998, amended the

proposed rule changes, as described in

Items I, II, and III below, which items

have been prepared primarily by MCC

and MSTC. The Commission is

publishing this notice to solicit

comments on the proposed rule changes

from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Changes

The proposed rule changes will

amend MCC’s and MSTC’s by-laws

relating to the structure and

composition of their board of directors.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Changes

In their filing with the Commission,

MCC and MSTC included statements

concerning the purpose of and basis for

the proposed rule changes and

discussed any comments they received

on the proposed rule changes. The text

of these statements may be examined at

the places specified in Item IV below.

MCC and MSTC have prepared

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

and (C) below, of the most significant

aspects of such statements.2

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Changes

The proposed rule changes will

amend MCC’s and MSTC’s by-laws in

order to reflect the cessation of their

securities clearing and depository
19992 Federal Register / Vol. 63, No. 77 /Wednesday, April 22, 1998 / Notices

3Securities Exchange Act Release No. 36684

(January 5, 1995), 61 FR 1195 [File Nos. SR–MCC–

95–04, SR–MSTC–95–10] (order approving

proposed rule changes relating to the withdrawal of

the Chicago Stock Exchange, Incorporated [‘‘CHX’’]

from the clearance and settlement and securities

depository businesses, conducted principally

through its subsidiaries, MCC and MSTC).

4Securities Exchange Act Release No. 39603

(January 30, 1998), 63 FR 5982 (order approving a

proposed rule change relating to the structure and

composition of CHX’s board of governors).

Historically, the MCC’s and MSTC’s board of

directors have been the same as the CHX’s board

of governors.

5 In an amendment to the proposed rule changes,

MCC and MSTC reference the definition of

nonindustry as defined by the CHX’s constitution.

Id.

6Class I will consist of seven directors, class II

will consist of seven directors, and class III will

consist of eight directors.

7 15 U.S.C. 78q–1. 8 17 CFR 200.30–3(a)(12).

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

2 17 CFR 200.19b–4.

3See Letter from Alden S. Adkins, Senior Vice

President and General Counsel, NASD Regulation,

to Katherine A. England, Assistant Director,

Commission, dated March 17, 1998 (‘‘Amendment

No. 1’’). Amendment No. 1 shortens the requested

extension by providing for an extension of the pilot

until December 31, 1998, instead of December 31,

1999.

services 3 and to streamline the structure

and composition of their board of

directors in order to remain consistent

with the changes recently made by the

Chicago Stock Exchange, Incorporated

(‘‘CHX’’).4

The proposed rule changes will

reduce the number of directors from 27

to 24 and will realign the classes for

both MCC and MSTC. The directors will

still be divided into three classes, but

the size and composition will be

adjusted as follows. At the 1998 annual

election, class I will be reduced by two

directors. At the 1999 annual election,

class II will be reduced by four

directors. At the 2000 annual election,

class III will be reduced by one director

and class II will be increased by one

director. The board of directors will also

be increased by three additional

nonindustry 5 directors by the 1999

annual election to serve for staggered

terms so as to balance the classes as

determined by the nominating

committee.6 The result of the reduction

of board members and the realignment

of the classes will be fifty percent

representation of nonindustry directors

on MCC’s and MSTC’s board of

directors.

MCC and MSTC believe that the

proposed rule changes are consistent

with Section 17A of the Act because the

changes to the structure and

composition of their board of directors

should promote an enhanced

governance structure and thereby will

help protect investors and the public

interest.7

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

MCC and MSTC do not believe that

the proposed rule changes will have an

impact on or impose a burden on

competition.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Changes Received From

Members, Participants, or Others

No written comments relating to the

proposed rule changes have been

solicited or received.

III. Date of Effectiveness of the

Proposed Rule Changes 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 MCC and MSTC

consent, the Commission will:

(A) By order approve such proposed

rule changes or

(B) Institute proceedings to determine

whether the rule changes 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

changes are 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. Copies of the

submission, all subsequent

amendments, all written statements

with respect to the rule changes that are

filed with the Commission, and all

written communications relating to the

rule changes 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, D.C. Copies of such filings

will also be available for inspection and

copying at the principal office of MCC

and MSTC. All submissions should refer

to the File Nos. SR–MCC–98–01 and

SR–MSTC–98–01 and should be

submitted by May 13, 1998.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–10605 Filed 4–21–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39865; File No. SR–NASD–

98–02]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the National

Association of Securities Dealers, Inc.

Relating to an Extension of the Option

Position Limit Hedge Exemption Pilot

Program

April 14, 1998.

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 January

21, 1998, NASD Regulation, Inc.

(‘‘NASD Regulation’’) 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 self-regulatory organization.

NASD Regulation filed an amendment

to the proposed rule change on March

23, 1998.3 The Commission is

publishing this notice to solicit

comments on the proposed rule change

from interested persons. For the reasons

discussed below, the Commission is

granting accelerated approval of the

proposed rule change, as amended.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

NASD Regulation is proposing to

amend Rule 2860(b)(3)(A)(vii)(c) of the

National Association of Securities

Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’), to extend, until

December 31, 1998, the Association’s

pilot program for exemptions from

equity option position limits for certain

hedged positions (‘‘hedge exemption

pilot program’’). Below is the text of the

proposed rule change. Proposed new

language is in italics; proposed

deletions are in brackets.

Rule 2860. Options

* * * * *

(b)(3)(A)(vii) Equity Option Hedge

Exemption

a. The following positions, where

each option contract is ‘‘hedged’’ by 100