31818 Federal Register / Vol. 63, No. 111 /Wednesday, June 10, 1998 / Notices

14A specialist is not displaying customer limit

orders immediately if the specialist regularly

executes customer limit orders at, for example, the

27th second after receipt. As stated in the Adopting

Release, the requirement that a limit order be

displayed ‘‘immediately’’ means that the limit order

must be displayed as soon as practicable, but no

later than 30 seconds after receipt under normal

market conditions. This 30 seconds is an outer limit

under normal market conditions and is not to be

interpreted as a 30-second safe harbor.

15For example, the Commission expects that the

Exchange would not issue several cautionary letters

before instituting the fines under the Plan or

aggregate multiple violations of the rules before

instituting abbreviated disciplinary procedures

under the Plan or, if necessary, full disciplinary

procedures.

16 15 U.S.C. 78s(b)(2).

17 17 CFR 250.19d–1(c)(2).

18 17 CFR 200.30–3(a)(12).

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

2The Commission has modified the text of the

summaries prepared by DTC.

3For a complete discussion of the admission

criteria, refer to Securities Exchange Act Release

No. 38600, International Release No. 1078 (May 9,

1997), 62 FR 27086–01 [File No. SR–DTC–96–13]

(order temporarily approving a proposed rule

change relating to the admission of non-U.S.

entities as direct depository participants).

surveillance procedures to easily

identify a specialist who fails to display

a customer limit order immediately or is

relying on an automated system that

does not display limit orders

immediately.14 The Commission,

therefore, believes that because certain

violations of the Limit Order Rule are

amenable to efficient and equitable

enforcement they are appropriate for

inclusion in CHX’s Minor Rule Plan.

The Commission expects, however,

because a violation of the Limit Order

Rule amounts to a violation of a federal

securities law, that the Exchange will

err on the side of caution in disposing

of such violations under the Plan.15 The

Commission expects the Exchange to

continue to resolve more serious

violations of rules through the use of

formal disciplinary procedures, as in the

case of an egregious violation or

habitual offender.

IV. Conclusion

For the foregoing reasons, the

Commission believes that the proposed

rule change is consistent with the Act

and the rules and regulations

thereunder applicable to a national

securities exchange, and, in particular,

with Sections 6(b)(1), 6(b)(5), 6(b)(6),

6(b)(7), 6(d)(1) and 19(d) of the Act.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act 16 and Rule

19d–1(c)(2) thereunder,17 that the

proposed rule change (SR–CHX–97–25)

be, and hereby is, approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.18

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–15421 Filed 6–9–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40064; International

Release No. 1138; File No. SR–DTC–98–11]

Self-Regulatory Organizations; The

Depository Trust Company; Notice of

Filing and Order Granting Accelerated

Temporary Approval of a Proposed

Rule Change Relating to the

Admission of Non-U.S. Entities as

Direct Depository Participants

June 3, 1998.

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

Securities Exchange Act of 1934

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

May 29, 1998, The Depository Trust

Company (‘‘DTC’’) 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

primarily by DTC. The Commission is

publishing this notice and order to

solicit comments from interested

persons and to grant accelerated

temporary approval of the proposed rule

change through May 31, 1999.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The purpose of the proposed rule

change is to extend the Commission’s

temporary approval of DTC’s criteria for

entities that are organized in a country

other than the United States (‘‘non-U.S.

entity’’) to become direct DTC

participants.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

DTC 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. DTC 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 purpose of the proposed rule

change is to extend the Commission’s

temporary approval of DTC’s admission

criteria for non-U.S. entities as direct

DTC participants. The Commission

originally granted temporary approval

on May 9, 1997.3 The admission criteria

would permit well-qualified, non-U.S.

entities to obtain direct access to DTC’s

services without requiring the non-U.S.

entities to obtain financial guarantees.

According to DTC, as of May 8, 1998,

it has not admitted any non-U.S. entities

under the non-U.S. entities participation

standards. DTC is currently reviewing

an application from one non-U.S. entity,

has sent an application to another nonU.S. entity, and has received numerous

inquiries from other non-U.S. entities.

DTC expects to admit in 1998 several

non-U.S. entities under these standards.

DTC is seeking an extension of the

temporary approval so it can admit

these non-U.S. entities and can gain

experience with the new admission

standards and with the unique risks

posed by the activities of non-U.S.

entities as direct DTC participants.

DTC believes that the proposed rule

change is consistent with the

requirements of Section 17A(b)(3)(F) of

the Act and the rules and regulations

promulgated because the admissions

criteria takes into account the unique

risks to DTC raised by the admission of

non-U.S. entities while not unfairly

discriminating against foreign entities

seeking admission as participants.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

DTC acknowledges that the additional

admissions criteria applicable to nonU.S. entities may impose some

additional burden. DTC believes that

any such burden is necessary and

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

Written comments were not and are

not intended to be solicited with respect

to the proposed rule change, and none

were received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Section 17A(b)(3)(F) of the Act

requires that the rules of a clearing

agency be designed to assure the

safeguarding of securities and funds

which are in the custody or control of
Federal Register / Vol. 63, No. 111 /Wednesday, June 10, 1998 / Notices 31819

4 15 U.S.C. 78q–1(b)(3)(F).

5The staff of the Board of Governors of the

Federal Reserve System has concurred with the

Commission’s granting of accelerated approval.

Telephone conversation between Kirsten Wells,

Senior Analyst, Division of Reserve Bank

Operations, Board of Governors of the Federal

Reserve System, and Jeffrey Mooney, Special

Counsel, Division of Market Regulation,

Commission (June 3, 1998).

6 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1) (1994).

2 17 CFR 240.19b–4 (1997).

3Amendment 1 revised the last sentence of

proposed new paragraph (c)(4) of Rule 3020. See

Letter from Elliott R. Curzon, Assistant Chief

Counsel, NASD Regulation, to Lisa Henderson,

Attorney SEC, dated May 27, 1998. 4 17 CFR 240.15c3–1 (1997).

the clearing agency or for which it is

responsible.4 The Commission believes

that the rule change is consistent with

this obligation because the admission

criteria should bind non-U.S. entities to

DTC’s rules and procedures in a manner

similar to U.S. domestic participant and

should lesson or eliminate the negative

effects that jurisdictional issues could

have on DTC’s exercise of its rights and

remedies against a non-U.S. entity.

Therefore, the Commission believes that

the admissions criteria will assist DTC

in assuring the safeguarding of

securities and funds which are in its

custody, control, or for which it is

responsible.

DTC has requested that the

Commission find good cause for

approving the proposed rule change

prior to the thirtieth day after

publication of the notice of the filing.

The Commission finds good cause for

approving the proposed rule change

prior to the thirtieth day after

publication of the notice of the filing

because accelerated approval will

permit DTC to continue to use its

admission criteria without

interruption.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 submission

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of the

submissions, 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, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of such

filings will also be available for

inspection and copying at the principal

office of DTC. All submissions should

refer to the file number SR–DTC–98–11

and should be submitted by July 1,

1998.

It is therefore ordered, pursuant to

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

proposed rule change (File No. SR–

DTC–98–11) be, and hereby is,

temporarily approved through May 31,

1999, on an accelerated basis.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–15417 Filed 6–9–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40065; File No. SR–NASD–

98–33]

Self-Regulatory Organizations; Notice

of Proposed Rule Change and

Amendment 1 Thereto by the National

Association of Securities Dealers, Inc.,

Relating to Exemptions From Fidelity

Bonding Requirements

June 3, 1998.

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

Securities Exchange Act of 1934

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

notice is hereby given that on April 20,

1998, the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’), filed with the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’) the proposed rule

change as described in Items I, II, and

III below, which Items have been

prepared by NASD Regulation, Inc.

(‘‘NASD Regulation’’). By letter dated

may 27, 1998, the Association filed

Amendment 1 to the proposal with the

Commission.3 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

NASD Regulation is proposing to

amend rule 3020 of the Conduct Rules

of the NASD to grant to the staff

authority to adjust the fidelity bond

required of a member in certain

circumstances upon a showing of good

cause, either conditionally or

unconditionally. Below is the text of the

proposed rule change. Proposed new

language is in italics.

3020. Fidelity Bonds

* * * * *

(c) Annual Review of Coverage

* * * * *

(4) Any member subject to the

requirements of this paragraph (c) may

apply for an exemption from the

requirements of this paragraph (c). The

application shall be made pursuant to

Rule 9610 of the Code of Procedure. The

exemption may be granted upon a

showing of good cause, including a

substantial change in the circumstances

or nature of the member’s business that

results in a lower net capital

requirement. The NASD may issue an

exemption subject to any condition or

limitation or limitation upon a

member’s bonding coverage that is

deemed necessary to protect the public

and serve the purposes of this Rule.

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. NASD Regulation 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

Rule 3020 specifies that members are

required to maintain fidelity bonds to

insure against certain losses and the

potential effect of such losses on firm

capital. The rule applies to all members

with employees who are required to join

the Securities Investor Protection

Corporation and who are not covered by

the requirements of a national securities

exchange. The amount of coverage a

member is required to maintain is

linked to the member’s net capital

requirements under SEC Rule 15c3–1.4

Under paragraph (c) of Rule 3020,

each member is required to make an

annual review of the adequacy of the

member’s fidelity bond coverage and is

required to maintain coverage that is

adequate to cover the member’s highest