3624 Federal Register / Vol. 66, No. 10 / Tuesday, January 16, 2001 / Notices

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

2 17 CFR 240.19b–4.

3The ISE filed its proposed rule change on

November 20, 2000. On December 18, 2000, the ISE

field Amendment No. 1 that entirely replaced the

original rule filing.

purposes fairly intended by the policy

and provisions of the Act.

4. applicants request an exemption

under section 6(c) from section

15(f)(1)(A). Applicants submit that the

reconstitution of the Board as

contemplated by the Proxy Statement

would serve no public interest and, in

fact, would not be in the best interests

of the shareholders of the Company.

Applicants state that the resignation of

the Interested Director would deprive

the Company of a director who has

important experience with the Company

and its service providers and also has

important macro-economic insights and

perspective. Applicants also state that

the addition of the two new

Disinterested Directors would entail the

additional expenses of directors’ fees

and potentially increased insurance and

fidelity bond premiums, and the real, if

intangible, costs of integrating two new

board members into the decisional and

operational affairs of the Company.

5. Applicants state that although

directors who are affiliated persons of

broker-dealers may be viewed as

interested persons of NACM, these

directors, and the broker-dealers with

which they are affiliated are not

affiliated persons of any party to the

Transaction. Applicants assert that the

requested exemption is consistent with

the protection of investors. Applicants

state that the Company will continue to

treat the Interested Directors as

interested persons of the Company and

NACM for all purposes other than

section 15(f)(1)(A) of the Act so long as

the directors are ‘‘interested persons’’ as

defined in section 2(a)(19) of the Act

and are not exempted from that

definition by any applicable rules or

orders of the SEC.

6. Applicants also submit that the

requested exemption is consistent with

the purposes fairly intended by the

policies and provisions of the Act.

Applicants assert that the legislative

history of section 15(f) indicates that

Congress intended the SEC to deal

flexibly with situations where the

imposi9tion of the 75 percent

requirement might pose an unnecessary

obstacle or burden on an investment

company. Applicants also state that

section 15(f)(1)(A) was designed

primarily to address the types of biases

and conflicts of interest that might exist

where an investment company’s board

of directors is influenced by a

substantial number of interested

directors to approve a transaction

because the interested directors have an

economic interest in the adviser.

Applicants assert that these

circumstances do not exist in the

present case.

Applicants’ Condition

Applicants agree that the order

granting the requested relief will be

subject to following condition:

If, within three years of the

completion of the Transaction, it

becomes necessary to replace any

director of the Company, that director

will be replaced by a director who is not

an ‘‘interested person’’ of NACM within

the meaning of section 2(a)(19)(B) of the

Act, unless at least 75% of the directors

at that time, after giving effect to the

order granted pursuant to the

application, are not interested persons

of NACM for purposes of section 15(f)

of the Act. This condition will not: (a)

preclude replacement with or addition

of a director who is an interested person

of NACM solely by reason of being an

affiliated person of a broker or dealer,

provided that such broker or dealer is

not an affiliated person of NACM, or (b)

require replacement of a director if a

change in the director’s circumstances

causes him to become an interested

person of NACM solely by reason of

becoming an affiliated person of a

broker or dealer, provided that such

broker or dealer is not an affiliated

person of NACM.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–1191 Filed 1–12–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43803; File No. SR–ISE–

00–20]

Self Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the International Securities Exchange

LLC Relating to Limitations on Orders

January 4, 2001.

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

Securities Exchange Act of 1934

(‘‘Act’’),1 and Rule19b–4 thereunder,2

notice is hereby given that on November

20, 2000, the International Securities

Exchange LLC (‘‘ISE’’ 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 Exchange.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

The Exchange is proposing to amend

Rule 717 to adopt a rule prohibiting the

entry of more than one order for the

same beneficial account within a fifteen

second period and to allow Electronic

Access Members (‘‘EAMs’’) to enter

orders on behalf of another member

other than an order for an ISE market

maker account. Proposed new language

is in italics; proposed deletions are in

brackets.

* * * * *

717. Limitations on Orders

* * * * *

(g) Orders for the Account of Another

Member.

Absent an exemption from an Exchange

official designated by the Board, Electronic

Access Members shall not cause the entry of

orders for [another Member] the account of

an ISE market maker that is exempt from the

provisions of Regulation T of the Board of

Governors of the Federal Reserve System

pursuant to Section 7(c)(2) of the Exchange

Act.

(h) Multiple Orders for Same Beneficial

Account.

Members shall not cause the entry of more

than one order every fifteen (15) seconds for

the account of the same beneficial owner in

options on the same underlying security;

provided, however that this shall not apply

to multiple orders in different series of

options on the same underlying security if

such orders are part of a spread.

* * * * *

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

Exchange 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

Exchange 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

Exchange market makers must be firm

at their quotations for all orders,

although they can set different sizes for

Federal Register / Vol. 66, No. 10 / Tuesday, January 16, 2001 / Notices 3625

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

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

6 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3On December 26, 2000, Nasdaq filed

Amendment No. 1 with the Commission.

Amendment No. 1 noted that Nasdaq’s Board of

Directors approved the proposed rule change at its

meeting on October 4, 2000, and the NASD Board

of Governors reviewed the proposal at its meeting

on October 5, 2000.

customer and broker-dealer orders.

When the sizes of a particular quote is

exhausted, the Exchange’s trading

system automatically moves the quote to

an inferior price according to

parameters preset by the market maker.

However, the system moves only the

quotation in the options series in which

there was a trade, leaving the market

maker exposed to the risk that multiple

orders may be executed nearly

simultaneously in many series of the

same option. This situation increases in

ISE market maker’s ‘‘delta risk’’ (the

amount of underlying stock that would

be necessary to hedge the options

position), due to exposure across

multiple series. This could result in ISE

market makers providing more liquidity

than may be available in the underlying

stock.

The proposed rule change states that

members shall not cause the entry of

more than one order every fifteen

seconds for the account of the same

beneficial owner in options on the same

underlying security. The Exchange

represents that the proposed rule change

is designed to reduce ISE market maker

risk exposure by limiting the ability of

a person to rapidly send in orders in the

same series or multiple series of the

same underlying security. The Exchange

believes that fifteen seconds is sufficient

to allow market makers to move

quotations following an execution,

while at the same time not unduly long

as to place a burden on investors

seeking execution on the Exchange.

The Exchange also proposes to amend

paragraph (g) of ISE Rule 717, which

currently prohibits an EAM from

entering an order for any other member

of the Exchange. The amendment will

limit the scope of ISE Rule 717(g) to

only prohibit EAMs from entering

orders for ISE market maker accounts.

The Exchange believes that this reflects

the original intent of ISE Rule 717(g),

which was to prevent market makers

from entering orders through other

members, thus disguising their trading

in an attempt to avoid the requirements

in ISE Rule 805 that they do a specified

percentage of their volume in their

assigned options classes. The proposed

rule change recognizes that there are

legitimate reasons why a member may

enter orders on the Exchange through an

EAM. These reasons vary. For example,

some EAMs desire a temporary means of

routing orders to the ISE until they are

connected directly to the Exchange. In

addition, a few members have clearing

relationships with EAMs and therefore

route orders through them. The ISE

represents that in its experience to date,

there is no regulatory reason why this

type of order routing should be limited.

2. Statutory Basis

The Exchange believes that the

proposed rule change is consistent with

Section 6(b) of the Act 4 in general, and

furthers the objectives of Section

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

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 for 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 Exchange does not believe that

the proposed rule change will 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 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 Exchange 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, as amended, 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 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 Exchange. All

submissions should refer to File No.

SR–ISE–00–20 and should be submitted

by February 6, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–1152 Filed 1–12–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43815; File No. SR–NASD–

00–81]

Self Regulatory Organizations; Notice

of Filing of a Proposed Rule Change by

the National Association of Securities

Dealers, Inc. Relating to Computer to

Computer Interface Fees For nonNASD Members

January 8, 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 December

26, 2000, the National Association of

Securities Dealers, Inc. (‘‘NASD’’)

through its wholly owned subsidiary,

The Nasdaq Stock Market, Inc.

(‘‘Nasdaq’’) 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 Nasdaq.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

Nasdaq is proposing to amend NASD

Rule 7010 to change the manner in

which fees are assessed on non-NASD