23324 Federal Register / Vol. 63, No. 81 /Tuesday, April 28, 1998 / Notices

7 17 CFR 200.30–3(a)(12).

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

and as to whom the member has an

obligation to provide the information.

The latter provision is designed to

ensure that the rule would apply to

requests from persons as to whom

applicable legal standards require the

disclosure of the information.

Paragraph (b)(2) of the proposed rule

provides that a defending party shall not

be liable for a defamation claim if the

statement was true at the time that the

statement was made. As noted above,

Article V, Section 3 of the NASD ByLaws already requires that the member

notify the NASD, and send a copy to the

registered person, within 30 days if the

member learns of facts or circumstances

causing any information in the prior

notice to become inaccurate or

incomplete.

Paragraph (b)(3) of the proposed rule

contains the basic legal standard found

in federal and state court decisions that

recognize a qualified immunity in

various contexts. The courts do not,

however, consistently define the burden

of proof that a plaintiff must meet in

order to show that a false statement was

made knowingly or recklessly. Some

decisions apply the ‘‘preponderance of

the evidence’’ standard that most

commonly applies to claims and

defenses in civil litigation. Others apply

a stricter ‘‘clear and convincing’’

standard. In some cases, decisions in the

same jurisdiction conflict on this point.

The NASD believes that, because no one

standard is dominant, the standard

applied should be the one that will

reach best the goals to which the

proposed rule is addressed. The NASD

has determined that the ‘‘clear and

convincing’’ standard provides a good

balance, in that it provides some

protection to member firms against

defamation claims for statements they

are required to provide, while still

providing that members are liable for

clear cases of abusive or malicious

disclosure.

NTM 97–77 asked for comment as to

whether NASD Regulation should seek

to provide a mandatory pre-filing or

arbitration procedure to resolve

termination disputes prior to the 30-day

period following termination in which

the Form U–5 is required to be filed.

Most of the comments addressing this

issue suggested that such a procedure

could not effectively resolve disputes

within this time frame. NASD

Regulation has determined that a

mandatory procedure would raise too

many difficult practical and timing

issues to be useful, but will endeavor to

provide mediators on an expedited basis

when both parties are interested in

resolving disputes at an early stage.

The proposed rule would apply for a

pilot period of four years. Prior to the

end of that period, the staff will review

a sample of filings made during the

period of the rule’s effectiveness to

attempt to gauge the nature and quality

of disclosure that has been provided, in

contract with forms filed prior to the

pilot period.

2. Statutory Basis

NASD Regulation believes that the

proposed rule change is consistent with

the provisions of Section 15A(b)(6) of

the Act, which requires, among other

things, that the Association’s rule must

be designed to prevent fraudulent and

manipulative acts and practices, to

promote just and equitable principles of

trade, and, in general, to protect

investors and the public interest. The

NASD believes that the proposed rule

change will encourage fuller disclosure

by member firms of any regulatory

problems concerning a registered

representative and thus provide more

complete information to the investing

public through the Public Disclosure

Program and to other broker/dealers

through the Central Registration

Depository.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

NASD Regulation does not believe

that the proposed rule change will result

in any burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act, as amended.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

The proposed rule change was

published for comment in NASD Notice

to Member 97–77 (November 1977).

Fifty-three comments were received in

response to the Notice.

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 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 for 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, D.C. 20549. 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 NASD. All

submissions should refer to file number

SR–NASD–98–18 and should be

submitted by May 19, 1998,

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–11211 Filed 4–27–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39903; File No. SR–NYSE–

98–13]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the New York Stock Exchange, Inc.

Relating to the Trading of Bonds

April 22, 1998.

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

Securities Exchange Act of 1934

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

April 15, 1998, the New York Stock

Exchange, Inc. (‘‘NYSE’’ 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 NYSE. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.
Federal Register / Vol. 63, No. 81 /Tuesday, April 28, 1998 / Notices 23325

2New Rule 86 specifies that these bond trading

procedures apply only to bonds ‘‘traded through

ABS.’’ The Exchange trades certain bonds, such as

equity-linked securities, on its stock Floor. These

securities are traded pursuant to NYSE equitytrading procedures and are not subject to Rule 86.

See Securities Exchange Act Release No. 32650

(July 16, 1993) 58 FR 39586 (July 23, 1993). 3 17 CFR 200.30–3(a)(12).

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The NYSE is proposing amendments

to its rules and procedures governing

the trading of bonds. The Exchange is

deleting obsolete provisions of its bond

trading rules, streamlining those rules,

and consolidating the bond-trading

rules in new Rule 86. In addition to

adopting new Rule 86, the proposal

includes amendments to the following

Exchange rules: Rule 13; Rule 61; Rule

70; Rule 72; Rule 76; Rule 79A; and

Rule 85.

II. Self-Regulatory Organization’s

Statement of the Proposed of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

NYSE 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 NYSE 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 currently trades nonconvertible bonds in its Automated

Bond System (‘‘ABS’’) and convertible

bonds on its bond Floor. Later this year,

the Exchange will move all bond trading

into ABS. Currently, various Exchange

rules govern the trading of bonds,

particularly Rule 85, governing the

trading of ‘‘cabinet’’ securities. The

proposed rule change will provide for

uniform bond trading procedures and

will consolidate those procedures in

new Rule 86.2 The rule change (i) will

incorporate into new Rule 86 the same

price/time priority matching procedures

as Rule 85, (ii) will establish appropriate

cross references to new Rule 86 in other

NYSE rules and (iii) will eliminate the

rules governing trading on the bond

Floor, which will no longer be

necessary.

A substantive change the Exchange is

proposing involves the crossing of

bonds. Currently, Rule 85 requires that

a member hold a proposed cross for a

‘‘reasonable’’ period of time before

effecting the cross, and that the member

announce the intention to effect the

cross on the bond Floor. For the

purposes of ABS, the Exchange has

interpreted this as requiring a member

to display a proposed cross in ABS for

two minutes prior to effecting the trade.

The Exchange’s experience with these

crossing procedures indicates that they

no longer are needed. There are very

few crosses in ABS (approximately two

to four a day), and those that do take

place are of small size (generally

between two and nine bonds).

Furthermore, most crosses involve

instances where bond brokers receive

matching buy and sell orders from two

different correspondent firms within

two minutes of each other. Also,

members may cross orders of ten bonds

and over off the Exchange, with the

result being that the current rule places

the Exchange at a competitive

disadvantage to off-Exchange markets.

The final change to the bond trading

rules moves the rules governing

transactions at wide variations from

Rule 79A.40 to new Rule 86(g). For nonconvertible bonds, the Exchange is

retaining the requirement that a Floor

Official approve all sales made two

points away from the last sale or more

than 30 days after the last transaction.

The Exchange is not proposing to apply

those requirements to convertible

bonds, since such bonds generally are

priced in relation to the underlying

equity security. However, new Rule

86(g) allows a Floor Governor to impose

the same requirements on the trading of

convertible bonds if market conditions

warrant.

2. Statutory Basis

The basis under the Act for the

proposed rule change is the requirement

under Section 6(b)(5) 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 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.

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, and

does not intend to solicit, comments on

this proposed rule change. The

Exchange has not received any

unsolicited written comments from

members or other interested parties.

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 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 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 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 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 the File No.

SR–NYSE–98–13 and should be

submitted by May 19, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.3
23326 Federal Register / Vol. 63, No. 81 /Tuesday, April 28, 1998 / Notices

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

2The Commission has modified the text of the

summaries prepared by Philadep.

3Telephone conversation between Edith

Hallahan, Counsel, Philadep, and Greg Dumark,

Attorney, Division of Market Regulation,

Commission (April 20, 1998).

4 15 U.S.C. 78q–1(b)(3)(C).

5 John Rudolph, Supervisory Trust Analyst, Board

of Governors of the Federal Reserve Board,

concurred with the Commission’s granting of

accelerated approval per a telephone conversation

on April 21, 1998.

6 15 U.S.C. 78s(b)(2).

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–11210 Filed 4–27–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39898; File No. SR–

Philadep–98–01]

Self-Regulatory Organizations;

Philadelphia Depository Trust

Company; Notice of Filing and Order

Granting Accelerated Approval of

Proposed Rule Change Relating to an

Increase in the Number of Directors

April 21, 1998.

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

Securities Exchange Act of 1934

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

March 31, 1998, the Philadelphia

Depository Trust Company (‘‘Philadep’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’), as

amended on April 21, 1998, the

proposed rule change as described in

Items I and II below, which items have

been prepared primarily by Philadep.

The Commission is publishing this

notice and order to solicit comments

from interested persons and to grant

accelerated approval of the proposed

rule change.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The proposed rule change involves an

amendment to Philadep’s by-laws and

articles of incorporation to increase the

number of directors on board from

between 5 and 9 to between 5 and 23

and to include the president of Philadep

on its board.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

Philadep 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.

Philadep has 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

Change

The proposed rule change will amend

Philadep’s by-laws and articles of

incorporation to increase the permitted

size of the board from between 5 and 9

directors to between 5 and 23 directors

and to include the president of Philadep

on its board. According to Philadep, all

other provisions of the by-laws

prescribing the composition of the board

will remain unchanged. According to

Philadep, the rule change is desirable

due to the interest of the Board of

Governors of the Philadelphia Stock

Exchange (‘‘Phlx’’) to more fully

participate in the operation and control

of Philadep.

Philadep also believes that a larger

board will provide greater diversity and

add policy making expertise to the

process. In addition, Philadep believes

that a Philadep board comprised of

members from Phlx will allow greater

coordination in scheduling meetings

involving members from both the

boards.3

Philadep believes that the proposed

rule change provides for the fair

representation of shareholders and

participants in the selection of

Philadep’s directors and in the

administration of Philadep’s affairs and

therefore that it is consistent with

Section 17A(b)(3)(C) of the Act and the

rules and regulations thereunder

applicable to Philadep.4

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

Philadep 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

Philadep has not solicited and does

not intend to solicit comments on this

proposed rule change. Philadep has not

received any unsolicited written

comments from participants or other

interested parties.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Section 17A(b)(3)(C) provides that the

rules of a clearing agency must provide

for the fair representation of its

shareholders or members and

participants in the selection of directors.

The Commission believes that the

increase in the size of Philadep’s board

is consistent with the Act’s fair

representation requirements because the

resized board should allow the board to

more accurately reflect the controlling

interest of the Phlx and its Board of

Governors while still providing for fair

representation of Philadep’s

participants.

Philadep has required that the

Commission find good cause for

approving the proposed rule change

prior to the thirtieth day after the date

of publication of notice of the filing in

order that this increase be implemented

at the meeting of Phlx’s board of

directors scheduled for April 22, 1998.

The Commission finds good cause for

approving the proposed rule change

prior to the thirtieth day after

publication of notice because such

approval will allow the Phlx to increase

Philadep’s board size at its April 22,

1998, meeting.5

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, D.C. 20549. 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

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing also will be available for

inspection and copying at the principal

office of Philadep. All submissions

should refer to File No. SR–Philadep–

98–01 and should be submitted by May

19, 1998.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,6 that the