Federal Register / Vol. 66, No. 81 / Thursday, April 26, 2001 / Notices 21033

dealers that use a different clearing bank. Securities

Exchange Act Release No. 41303 (April 16, 1999),

64 FR 20346 (April 26, 1999) [File No. SR–GSCC–

99–01].

4On March 20, 2000, GSCC activated the generic

CUSIP number representing Federal Home Loan

Mortgage Corporation and Federal National

Mortgage Association fixed-rate MBS.

5As provided in GSCC’s Rule 46, the use of

borrowing and lending terminology in this

proposed rule change filing and in GSCC’s rules

and agreements shall not be deemed to affect the

intent of members as to their characterization of

their transactions in agreements entered into by the

members with each other or with third parties with

respect to such transactions.

6 ‘‘Collateral Allocation Obligation’’ is defined in

GSCC’s Rules as ‘‘the obligation of a Netting

Member to allocate securities or cash for the benefit

of the Corporation to secure such Member’s GCF

Net Funds Borrower Position.’’

7 In its Rules, GSCC has defined the term

‘‘Comparable Securities’’ to mean ‘‘a security or

securities that are represented by a particular

Generic CUSIP Number, any other security or

securities that are represented by the same Generic

CUSIP Number.’’ 8 15 U.S.C. 78q–1(b)(3)(F).

9 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

Repo Service allows GSCC’s non-interdealer broker netting members to trade

general collateral repos involving U.S.

Government securities throughout the

day without requiring trade for trade

settlement on a delivery versus payment

basis.

GSCC has been activating the generic

CUSIP numbers representing the

securities that are eligible for GCF Repo

processing in stages. U.S. Treasury

securities with a maturity of ten years or

less and U.S. Treasury securities with a

maturity of thirty years or less were the

first products to be made eligible for

GCF Reprocessing. At the beginning of

this year, GSCC also began accepting

non-mortgage-backed agency securities

for GCF Repo processing and more

recently began accepting mortgagebacked agency securities (‘‘MBS’’) for

GCF Repo processing.4

Having gained the experience of

operating the GCF Repo Service for

more than two years, GSCC is now

enhancing the service in certain ways in

order to make it more responsive to its

members’ needs and to clarify certain

risk management practices, each in a

manner consistent with market practice.

(i) Authority To Deliver Comparable or

U.S. Treasury Securities

The first enhancement by GSCC

applies to the collateral allocation

obligations of securities lenders 5 in GCF

Repo transactions. Securities lenders

will now be permitted to satisfy their

collateral allocation requirements 6 in

connection with their GCF Repo activity

with, in addition to ‘‘comparable

securities’’ 7 and cash, U.S. Treasury

securities (i.e., bills, notes, or bonds).

Market participants consider

comparable securities to be acceptable

substitutes because securities that fall

within the same generic CUSIP number

tend to have the same level of liquidity.

U.S. Treasury securities are also

acceptable substitutes securities because

of their high level of liquidity.

The second enhancement by GSCC

applies where the securities borrower

due to reasons beyond its control and

despite its exercising best efforts is not

able to return in a timely manner the

securities that were delivered on the day

before by the securities lender. In such

a situation, the securities borrower will

now have the right to return (1)

comparable securities, (2) U.S. Treasury

bills, notes, or bonds, or (3) cash. The

securities borrower will be responsible

make the securities lender whole

(through GSCC) for any actual damages

directly suffered by the securities lender

as a result of its not receiving back the

same securities that it originally loaned.

(ii) Insolvency Situation Involving

Mortgage-Backed Securities

The third enhancement by GSCC

clarifies its risk management procedures

associated with the CGF Repo Service to

reflect the nature of MBS and MBS

market practice. In the event of a

securities borrower’s insolvency, it may

be impractical or even impossible for

GSCC to obtain the identical types of

MBS that were originally lent.

Moreover, MBS market practice in such

a situation is that securities lenders in

repurchase transactions would not

expect to receive the same MBS back.

GSCC’s Rule 22, section 4 is being

amended to give GSCC the authority in

an insolvency situation, where MBS

were the underlying collateral, to

delivery back to a securities lender

comparable securities or U.S. Treasury

bills, notes, or bonds. Alternatively, the

rule will permit GSCC to give a

securities lender the right to close out

the transaction by buying comparable

securities or U.S. Treasury bills, notes,

or bonds in return for a cash payment

by GSCC equal to the value of the

securities it bought. However, if GSCC

determines that the price paid by the

securities lender is unreasonably high,

GSCC will be entitled to pay the

securities lender a reasonable price as

determined by an independent third

party pricing source for the comparable

securities or U.S. Treasury bills, notes,

or bonds.

II. Discussion

Section 17A(b)(3)(F) 8 of the Act

requires that the rules of a clearing

agency be designed to promote the

prompt and accurate clearance and

settlement of securities transactions and

to assure the safeguarding of securities

and funds which are in the custody or

control of the clearing agency or for

which it is responsible. The

Commission believes that the proposed

rule change is consistent with these

obligations because it should further

enable GSCC to help facilitate the

prompt and accurate clearance and

settlement of GCF repos involving U.S.

Government securities and to remove

impediments to and help perfect the

mechanism of the national clearance

and settlement system for securities

transactions.

III. Conclusion

On the basis of the foregoing, the

Commission finds that the proposal is

consistent with the requirements of the

Act and in particular with the

requirements of Section 17A of the Act

and the rules and regulations

thereunder.

It is therefore ordered, pursuant to

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

proposed rule change (File No. SR–

GSCC–00–05) be and hereby is

approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–10391 Filed 4–25–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44207; File No. SR–Phlx–

2001–11]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

Relating to the Automatic Display of

Customer Limit Orders

April 20, 2001.

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 February

2, 2001, the Philadelphia Stock

Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change described in Items

I, II, and III 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.

21034 Federal Register / Vol. 66, No. 81 / Thursday, April 26, 2001 / Notices

3Auto-Quote is the Exchange’s electronic options

pricing system, which enables specialists to

automatically monitor and instantly update

quotations, based on incremental changes in the

price of the security underlying the option.

4Currently, Option Floor Procedure Advice

(‘‘OFPA’’) A–1, Responsibility of Displaying Best

bids and Offers, requires a specialist to use due

diligence to ensure that the best available bid and

offer is displayed for those option series in which

he is assigned. The Exchange has filed proposed

rule changes to OFPA A–1 and Exchange Rule 1020,

Registration and Functions of Options Specialists,

that provide that a specialist shall immediately

display customer limit orders, i.e., as soon as

practicable, and under normal market conditions,

no later than 30 seconds after receipt. The proposed

rule change has been published for public comment

and has not yet been approved by the Commission.

See Securities Exchange Act Release No. 43126

(August 7, 2000), 65 FR 49621 (August 14, 2000)

(SR–Phlx–00–34).

5The Exchange acknowledges that the proposed

rule changes to Rule 1020 and OFPA A–1 would

require specialists to display customer limit orders

immediately. The system change is not intended to

relieve specialists from the immediate display

requirement. Rather, the system change is intended

to ensure that customer limit orders would be

displayed within the 30-second time limit set forth

in the proposed rules. The Exchange’s Market

Surveillance Department will enforce the

immediate display requirement, regardless of the

30-second ‘‘window.’’

6Phone call between Rick Rudolph, Counsel,

Phlx, and Sonia Patton, Staff Attorney, Division of

Market Regulation, Commission (April 5, 2001).

7The Exchange will notify all Phlx options

specialists via circular when it is ready to begin

testing and deploying the new Auto-Quote feature.

8 15 U.S.C. 78f(b).

9 15 U.S.C. 78f(b)(5).

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Phlx proposes to amend

Commentary .01 to Exchange Rule 1080

to make modifications to the Exchange’s

Auto-Quote system that would

automatically display booked limit

orders for those options traded by

specialists that use Auto-Quote.3 The

text of the proposed rule change is set

forth below. New text is in italics.

Philadelphia Stock Exchange Automated

Options Market (AUTOM) and Automatic

Execution System (AUTO–X)

Rule 1080. (a)–(j) No change.

Commentary:

.01 Automatic Quotation (Auto-Quote) is

the Exchange’s electronic options pricing

system, which enables specialists to

automatically monitor and instantly updated

quotations.

Auto-Quote will automatically display

booked limit orders for those options traded

by specialists that use the Exchange’s AutoQuote feature.

For Phlx specialist firms using proprietary

systems (called ‘‘Specialized Quote Feeds’’ or

‘‘SQFs’’), rather than the Exchange’s AutoQuote feature, the Exchange, upon the

request of SQF users, will provide SQF users

with real-time order and trade information in

a manner that would enable SQF users

wishing to modify their own systems to

display limit orders automatically.

* * * * *

II. Self-Regulatory Organization’s

Statements of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

Phlx 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 Phlx 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 purpose of the proposed rule

change is to enable Exchange specialists

using Auto-Quote to display limit orders

as soon as practicable, and under

normal market conditions, no later than

30 seconds after receipt.4 The proposed

system change would function as an

automated ‘‘fail-safe’’ feature to assist

specialists in their compliance with the

immediate limit order display

requirement.5

The proposed system change would

enable Auto-Quote to automatically

display limit orders placed on the

specialist’s book that improve the

displayed quote.6 If the specialist is

unable to display a limit order

immediately, the proposed system

change would enable Auto-Quote to

automatically display a customer limit

order within 30 seconds of receipt. In

addition, the proposed system change

would allow specialists, on an issue-byissue basis, to configure the system to

display limit orders within a shorter

time period.

For Phlx specialist firms using

proprietary systems (called ‘‘Specialized

Quote Feeds’’ or ‘‘SQFs’’), rather than

the Exchange’s Auto-Quote feature,

additional systems changes would

enable Exchange staff, upon the request

of SQF users, to provide SQF users with

real-time order receipt and trade

information in a manner that would

enable SQF users to modify their own

systems to display limit orders

automatically should they choose to do

so. This information could be integrated

into the SQF user’s system to enable

them to build a system that would

function similarly to the proposed

automatic display feature of AutoQuote.

The Exchange currently anticipates

deploying the modifications to AutoQuote in the second quarter of 2001.

After the deployment of the Auto-Quote

modifications, the Exchange will

commence assisting SQF users (upon

request) in receiving required

information to upgrade their systems.7

2. Statutory Basis

The Exchange believes that the

proposed rule change is consistent with

section 6(b) of the Act 8 in general, and

furthers the objectives of section

6(b)(5) 9 in particular, in that it is

designed 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, by

enabling specialists to discharge their

obligation to display customer limit

orders.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Phlx 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

The Exchange did not solicit or

receive written comments on the

proposed rule change.

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 Phlx 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, NW.,

Washington, DC 20549–0609. Copies of

Federal Register / Vol. 66, No. 81 / Thursday, April 26, 2001 / Notices 21035

10 17 CFR 200.30–(9)(12).

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

2 17 CFR 240.19b–4.

3A conforming change to the description of the

proposed rule change with the text of the proposal

was made pursuant to a telephone conservation

between Murray L. Ross, Vice President and

Secretary, Phlx, and Marc McKayle, Special

Counsel, Division of Market Regulation,

Commission on April 18, 2001.

4This fee is not eligible for the monthly credit of

up to $1000.00. See Securities Exchange Act

Release No. 43567 (November 15, 2000), 65 FR

71187 (November 29, 2000) (SR-Phlx-00–100).

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

6 15 U.S.C. 78f(b)(4).

7 15 U.S.C. 78s(b)(3)(A).

8 17 CFR 240.19b–4(f)(2).

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 Phlx. All

submissions should refer to the File No.

SR–Phlx–2001–11 and should be

submitted by May 17, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–10390 Filed 4–25–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44198; File No. SR–PHLX–

2001–47]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

To Adopt an Annual Fee of $200 for

Members and Participants Retention

and Renewal of the Print Loose Leaf

Subscription to the Phlx Guide,

Containing the Charter, By-Laws and

Rules of the Exchange

April 18, 2001.

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 April 9,

2001, the Philadelphia Stock Exchange,

Inc. (‘‘Phlx’’ or ‘‘Exchange’’) 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 the Phlx. 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 Phlx proposes to adopt an annual

fee of $200 for members and

participants retention and renewal of

the print loose leaf subscription to the

Phlx Guide, containing the Charter, ByLaws and Rules of the Exchange.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and the

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

Phlx 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 Phlx has prepared

summaries, set forth in sections A, B, C

below, of the most significant aspects of

such statements periods.

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 adopt a fee of $200 for

retention and annual renewal of a print

subscription to the Phlx Guide.3 The

Exchange has had a policy to provide a

subscription at no charge for each

member requesting one for their

member organization. The Exchange is

in the process of offering the

membership free internet access to the

Phlx Guide by establishing a linkage to

click upon the Exchange’s website. The

Exchange will continue to offer those

members and participants that want to

continue to receive the print loose-leaf

subscription to the Phlx Guide for the

charge of $200, a discount from the

costs to the Exchange for this service.

The expenditures to support the

availability to provide free internet

access to the Exchange’s By-Laws and

Rules while maintaining a minimum

number of print loose leaf subscription

to the Phlx Guide requires this modest

annual fee charge of $200 for those

retaining a print subscription to Phlx

Guide. The Exchange will continue to

provide a Phlx Guide print subscription

without charge to new members and

member organizations for the balance of

the year of initial admission to the

Exchange.

This charge is intended to partially

defray the costs associated with

servicing and maintenance of the print

subscription for the loose leaf

subscription to the Phlx Guide.

The Exchange has determined that its

fee for retention and subscription

maintenance services is appropriate and

only reflects partial costs recovery. The

charge of $200 per print subscription is

a discounted price available through the

Exchange to members and participants.

This partial cost recovery will assist the

Exchange in offering the investing

public an opportunity to access the Phlx

Guide at no cost via internet access

linkage at the Phlx web site, Phlx.com.4

For these reasons, the Exchange

believes that its proposal to amend its

schedule of dues, fees and charges to

include a fee of $200 to retain a print

subscription to the Phlx Guide is

consistent with section 6(b) of the Act,5

in general, and furthers the objectives of

section 6(b)(4),6 in particular, in that it

provides for the equitable allocation of

reasonable dues, fees and other charges

among its members and other persons

using its facilities.

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

The foregoing proposed rule change

has been designated as a fee change

pursuant to section 19(b)(3)(A) of the

Act,7 and Rule 19b–4(f)(2) thereunder.8

Accordingly, the proposal will take

effect upon filing with the Commission.

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

purposes of the Act.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and