Federal Register / Vol. 63, No. 11 / Friday, January 16, 1998 / Notices 2709

4See SEC’s Limit Order Adopting Release.

5See SEC’s Limit Order Adopting Release at note

147.

6 15 U.S.C. § 78f(b)(5).

7 15 U.S.C. § 78s(b)(2).

8 17 CFR 200.30–3(a)(12).

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

2This version of the NASD By-Laws was

approved by the Commission in Securities

Exchange Act Release No. 39326 (Nov. 14, 1997),

62 FR 62385 (Nov. 21, 1997). Additions are

italicized, deletions are bracketed.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

The Exchange has neither solicited

nor received written comments on the

proposed rule change.

III. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 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 at

the Commission’s Public Reference

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the CHX. All

submissions should refer to File No.

SR–CHX–97–26 and should be

submitted by February 6, 1998.

IV. Commission’s Findings and Order

Granting Accelerated Approval of

Proposed Rule Change

The Commission believes that the

Exchange’s proposal to adopt a limit

order display rule is consistent with the

policies behind the Commission’s own

Limit Order Display rule.4 The

Commission recognizes that the

Exchange’s proposal has the additional

requirements that CHX specialists

display all limit orders, not just

customer limit orders, unless a specified

exception exists. In addition, a CHX

specialist, under the Exchange’s

proposal, must increase the size of its

quote upon receipt of a limit order even

if such order creates a de minimis

increase. The Commission recognized,

in adopting the Limit Order Display

Rule, that SRO’s may impose more

stringent standards.5

The Commission finds that the

Exchange’s proposal 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 proposed rule change is

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

Act,6 which requires an exchange to

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 therefore finds good

cause for approving the proposed rule

change (SR–CHX–97–26) prior to the

thirtieth day after date of publication of

notice thereof ion the Federal Register.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,7 that the

proposed rule change be, and hereby is,

approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–1111 Filed 1–15–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39539; File No. SR–NASD–

97–92]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

National Association of Securities

Dealers, Inc. Relating to By-Law

Amendment to Require Members To

Update Firm Contact Information

Electronically, To Maintain Electronic

Mail Account, and for Other Purposes

January 12, 1998.

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

Securities Exchange Act of 1934

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

December 19, 1997, the National

Association of Securities Dealers, Inc.

(‘‘NASD’’ or ‘‘Association’’) 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 NASD. 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 Association is proposing the

following changes to its by-laws, to

require its members to update firm

contact information electronically, to

maintain an electronic mail (e-mail)

address, and to make certain other

technical changes:

By-Laws of the National Association of

Securities Dealers, Inc.2

Article IV—Executive Representative

Sec. 3. Each member shall appoint

and certify to the Secretary of the NASD

one ‘‘executive representative’’ who

shall represent, vote, and act for the

member in all the affairs of the NASD,

except that other executives of a

member may also hold office in the

NASD, serve on the Board or

committees appointed under Article IX,

Section 1 or otherwise take part in the

affairs of the NASD. A member may

change its executive representative

upon giving notice thereof via electronic

process or such other process the NASD

may prescribe to the Secretary, or may,

when necessary, appoint, by notice via

electronic process to the Secretary, a

substitute for its executive

representative. An executive

representative of a member or a

substitute shall be a member of senior

management and registered principal of

the member. Not later than January 1,

1999, each executive representative

shall maintain an Internet electronic

mail account for communication with

the NASD and shall update firm contact

information via the NASD Regulation

Web Site or such other means as

prescribed by the NASD.

* * * * *

Article VII—Board of Governors

* * * * *

Sec. 9. (b) The National Nominating

Committee shall consist of no fewer

than six and no more than nine

members. The number of [Industry]

Non-Industry committee members shall

equal or exceed the number of [NonIndustry] Industry committee members.

If the National Nominating Committee

consists of six members, at least two

shall be Public committee members. If

the National Nominating Committee

consists of seven or more members, at

least three shall be Public committee

members. No officer or employee of the

Association shall serve as a member of
2710 Federal Register / Vol. 63, No. 11 / Friday, January 16, 1998 / Notices

3See Securities Exchange Act Release No. 39326

(Nov. 14, 1997), 62 FR 62385 (Nov. 21, 1997).

4Securities Exchange Act Release No. 37538

(Aug. 8, 1996) (SEC Order Instituting Public

Proceedings Pursuant to Section 19(h)(1) of the

Securities Exchange Act of 1934, Making Findings

and Imposing Remedial Sanctions, In the Matter of

National Association of Securities Dealers, Inc.,

Administrative Proceeding File No. 3–9056).

the National Nominating Committee in

any voting or non-voting capacity. No

more than three of the National

Nominating Committee members and no

more than two of the Industry

committee members shall be current

members of the NASD 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, the

NASD 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 NASD 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

(a) Amendment to Article IV, Section

3. On August 5, 1997, the Membership

Committee of the NASD Regulation, Inc.

(‘‘NASD Regulation’’) Board of Directors

recommended the adoption of an

amendment to the NASD By-Laws to

require each executive representative,

beginning not later than January 1, 1999,

to maintain an Internet electronic mail

account for communication with the

NASD and to update firm contact

information via the NASD Regulation

Web Site. The NASD Regulation Board

approved the recommendation at its

September 23, 1997 meeting. The NASD

Board of Governors approved the

amendment at its December 11, 1997

meeting.

The NASD has long wrestled with

how to collect and administer in an

effective manner the names of members,

executive representatives and other

individuals who hold positions of

significant responsibility within

member firms. This information is used

by the NASD Corporate Secretary for

member balloting. Member Regulation

for compliance purposes, and Corporate

Communications in identifying Key

individuals for use in target mailings.

The current method for acquiring this

information is through the filing of an

NASD form entitled ‘‘NASD Member

Firm Contact Questionnaire’’ (NMFCQ).

The data requested on the NMFCQ is

not required on any other form filing

(e.q., Form BD or U–4). The data is

available in the Central Registration

Depository (‘‘CRD’’), but in a text form

that renders it nearly impossible to

interface to another system. Thus,

members are required to file the

NMFCQ with the CRD, where the

information is data captured into the

Member Profile System, an adjunct to

the existing CRD system. The data is

then viewable throughout the

organization via the Member Profile

System and is interfaced to regulatory

and finance systems as well as the

existing corporate mailing system for

use in distributing publications, reports,

voting ballots, and mail.

A new procedure for collecting

NMFCQ information in the future is

necessary for two reasons. First, the

CRD modernization effort does not

include rebuilding this function, so

another alternative is required. Second,

members are rarely updating these

filings. Because the information

solicited via the form is very important

to support the NASD’s business, the

NASD must have a more efficient means

for firms to update this information,

thereby encouraging them to do so more

regularly.

The proposed By-Law change will

improve the data collection process by

requiring a firm to access its NMFCQ via

the NASD Regulation Web Site and

update it on a periodic basis. (A firm

would be able to access only its own

NMFCQ; the information would be

password-protected to prevent any

public access.) The information then

would be interfaced to the internal

NASD Regulation systems requiring this

set of data. Further, the By-Law also

would require each member to maintain

an Internet electronic mail address on

behalf of its executive representative.

This electronic mail address would be

used proactively to send messages

reminding the member to review and

update its contact information.

There are other reasons the staff is

interested in member Internet access

and electronic mail. Once established, it

opens up many options for timely

communications with members and

associated cost savings. It also can assist

members with timely internal

distribution of NASD information,

notices, and publications. Other

potential initiatives include eliminating

or reducing printed publications,

sending more timely announcements

and notices, and providing value-added

services to members.

The NASD is proposing a one-year

transition period to accommodate small

firms that may not currently have

Internet access or electronic mail

accounts.

(b) Technical Amendment to Article

VII, Section 9(b). The NASD also

proposes a technical amendment to

Article VII, Section 9(b) of the NASD

By-Laws. In Special Notice to Members

97–75, the NASD proposed a

comprehensive revision to its By-Laws

to provide for a more streamlined

corporate structure. The membership

approved these changes on November

13, 1997, and the Securities and

Exchange Commission (‘‘Commission’’)

approved them on November 14, 1997.3

Article VII, Section 9(b) contained a

typographical error that provided that

the number of Industry committee

members on the National Nominating

Committee should equal or exceed the

number of Non-Industry committee

members. The terms ‘‘Industry’’ and

‘‘Non-Industry’’ were transported.

Section 9(b) should provide that the

number of Non-Industry committee

members should equal or exceed the

number of Industry committee

members. The National Nominating

Committee is required to be composed

in such a manner by the Undertakings

agreed to by the NASD on August 8,

1996.4

2. Statutory Basis

The NASD believes the proposed rule

change is consistent with Section

15A(b)(2) in that the proposed rule

change will assist the NASD in carrying

out the purposes of the Act and to

enforce compliance with the Act, the

rules and regulations thereunder, and

the Rules of the Association.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The NASD does not believe 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

Written comments were neither

solicited nor 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
Federal Register / Vol. 63, No. 11 / Friday, January 16, 1998 / Notices 2711

5 17 CFR 200.30–3(a)(12).

1 15 U.S.C. § 78s(b)(1).

2 17 CFR 240.19b–4.

3The MFI is an electronic order delivery and

reporting system that allows member firms to route

orders for execution by the automatic execution

feature of POETS as well as to route limit orders

to the Options Public Limit Order Book. Orders that

do not reach those two destinations are defaulted

to a member firm booth. MFI also provides member

firms with instant confirmation of transactions to

their systems. Member firms may access POETS by

establishing an MFI mainframe-to-mainframe

connection.

4Orders entered via MFI are delivered to one of

three destinations: (a) to Auto-Ex, where they are

automatically executed at the disseminated bid or

offering price; (b) to Auto-Book which maintains

non-marketable limit orders based on limit price

and time of receipt; or (c) to a Member Firm’s

default destination—a particular firm booth or

remote entry site—if the order fails to meet the

eligibility criteria necessary for either Auto-Ex or

Auto-Book or if the Member Firm requests such

default for its orders. See generally Exchange Act

Release No. 27633 (January 18, 1990), 55 FR 2466

(‘‘POETS Approval Order’’).

5 In that regard, the Exchange is proposing to add

a new Rule 6.88(a), which provides: ‘‘Members and

Member Organizations may send orders

electronically through the Exchange’s Member Firm

Interface and route them directly to POETS, to a

Member Firm booth on the Options Floor, to a Floor

Broker Hand-Held Terminal located on the Options

Floor, or to any other location designated by the

Exchange, provided that the Member or Member

Organization has been approved by the Exchange to

do so.’’

6The Exchange notes that there will be no

appreciable delay in order entry due to the

transmission of orders through the Server. The

Exchange also notes that if a Member Firm routes

an order to POETS via MFI for automatic execution

or maintenance in Auto-Book, the order will not be

sent through the Server. Only orders to be

transmitted through the Hand-Held Terminal

system will be sent through the Server.

7The Exchange will submit a separate rule filing

to the Commission to establish these fees.

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 by order approve such proposed

rule change, or institute proceedings to

determine whether the proposed rule

change should be disapproved.

The NASD proposes to make the rule

change effective upon Commission

approval.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing.

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–97–92 and should be

submitted by February 6, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.5

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–1110 Filed 1–15–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39532; File No. SR–PCX–

97–28]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change and

Amendment No. 1 Thereto by the

Pacific Exchange, Inc. Relating to

Exchange-Sponsored Hand-Held

Terminals for Options Floor Brokers

January 9, 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 July 3,

1997 and December 12, 1997,

respectively, the Pacific Exchange, Inc.

(‘‘PCX’’ or ‘‘Exchange’’) filed with the

Securities and Exchange Commission

(‘‘SEC’’ or ‘‘Commission’’) the proposed

rule change and amendment No. 1 to the

proposed rule change as described in

Items I, II, and III below, which Items

have been prepared by the selfregulatory organization. The

Commission is publishing this notice to

solicit comments on the proposed rule

change, as amended, from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange is proposing to adopt a

new program to allow floor brokers on

the Options Floor to use Exchangesponsored hand-held terminals to

receive orders sent electronically by

Member Firms located off the floor. The

proposal will also establish new

procedures for electronic order flow

handling, routing, execution and trade

reporting under the program. The test of

the proposed rule change is available at

the Office of the Secretary, 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

self-regulatory organization 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 test of

these statements may be examined at

the places specified in Item IV below.

The self-regulatory organization 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

General Description. The Exchange’s

Member Firm Interface (‘‘MFI’’) 3

currently permits Exchange Member

Firms to use an electronic link with the

Exchange to send their option orders

directly to the Exchange for delivery to

POETS (Pacific Option Exchange

Trading System).4 Under the proposal,

member firms would be able to use the

MFI connection to route orders directly

to the member firm booth (not by

default) or to a floor broker’s hand-held

terminal located in the trading crowd.5

Under the program, Member Firms

will be permitted to send their orders

electronically to the Exchange via MFI

and route them to one of three

destinations on the trading floor: (a) To

a floor broker standing in the trading

crowd; (b) to a Member Firm booth

location on the trading floor; or (c) to

POETS, where they will be

automatically executed by Auto-Ex or

maintained in Auto-Book. All orders so

transmitted will first be sent through the

Server.6 Orders sent to a Member Firm

booth via the Server may be sent

subsequently either to POETS or to a

floor broker in the trading crowd.

Orders sent via the Server to a floor

broker in the trading crowd may

subsequently be transmitted to a

Member Firm booth, to POETS, or to

another floor broker on the trading floor.

The Exchange intends to furnish

hand-held terminals to be used by floor

brokers under the program. In addition,

the Exchange will supply booth devices

that will have the capability to retrieve

and display all orders that were

submitted through the device. The

Exchange intends to assess users a

monthly rental fee for such use.7