Federal Register / Vol. 66, No. 94 / Tuesday, May 15, 2001 / Notices 26889

14 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3 17 CFR 240.19b(f)(6).

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

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

6 15 U.S.C. 78s(b)(3)(A).

7 17 C.F.R. 240.19b–4(f)(6).

submissions should refer to SR–AMEX–

2001–20 and should be submitted by

June 5, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–12133 Filed 5–14–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44258; File No. SR–CBOE–

2001–20]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Chicago Board Options Exchange,

Incorporated Relating to Prohibition

Against Members Functioning as

Market Makers

May 4, 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 12,

2001, the Chicago Board Options

Exchange, Incorporated (‘‘CBOE’’ 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 CBOE. The Exchange has designated

the proposed rule change as constituting

a ‘‘non-controversial’’ rule change under

paragraph (f)(6) of Rule 19b–4 under the

Act,3 which renders the proposal

effective upon receipt of this filing by

the Commission. 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 CBOE proposes to adopt a new

Rule 6.8C, Prohibition Against Members

Functioning as Market-Makers, which

restricts the entry of certain option limit

orders. The text of the proposed rule

change is available at the Office of the

Secretary, CBOE 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

CBOE 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 CBOE 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, Proposed Rule

Change 

1. Purpose

The Exchange proposes to adopt new

Rule 6.8C, Prohibition Against Members

Functioning as Market-Makers, which

will restrict the entry of certain option

limit orders into the Exchange’s

electronic Order Routing System

(‘‘ORS’’). The proposed new rule

provides that member firms, acting as

either principal or agent, may neither

enter nor permit the entry of orders into

ORS if the orders are limit orders for the

account or accounts of the same

beneficial owners and limit orders are

entered in such a manner that the

beneficial owner(s) effectively is

operating as a market maker by holding

itself out as willing to buy and sell such

securities on a regular or continuous

basis. In determining whether a

beneficial owner effectively is operating

as a market-maker, the Exchange will

consider, among other things, the

simultaneous or near simultaneous

entry of limit orders to buy and sell the

same security; the multiple acquisition

and liquidation of positions in the

security during the same day; and the

entry of multiple limit orders at

different prices in the same security.

The Exchange states that its business

model depends upon Designated

Primary Market-Makers (‘‘DPMs’’) and

market makers for competition and

liquidity. To encourage participation by

these market makers, the Exchange

needs to limit the ability of members

that are not DPMs or market makers to

compete on preferential terms within its

automated systems. In addition, because

customers’ orders are provided with

certain benefits such as automatic

execution, priority of bids and offers

and firm quote guarantees, and

customers should not be allowed to act

as market makers. The proposed rule

will prevent non-DPM/market maker

members and their customers from

reaping the benefits of market making

activities without any of the

concomitant obligations, such as

providing continuous quotations during

all market conditions. The proposed

rule is designed to prevent certain

members and customers from obtaining

an unfair advantage by acting as

unregistered DPMs and market makers

by virtue of their customer status.

Permitting members (other than DPMs

or market makers) or customers to enter

multiple limit orders to such an extent

that they are effectively acting as market

makers in an option, while not requiring

them to fulfill the obligations imposed

upon registered market makers, would

give such members and customers an

inordinate advantage over other market

participants.

2. Statutory Basis

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 foster cooperation and

coordination with persons engaged in

facilitating transactions in securities,

and to remove impediments to and

perfect the mechanism of a free and

open market and a national market

system.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

CBOE 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

No written comments were solicited

or received with respect to the proposed

rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The proposed rule change has been

filed as a ‘‘non-controversial’’ rule

change pursuant to Section 19(b)(3)(A)

of the Act 6 and subparagraph (f)(6) of

Rule 19b–4 thereunder.7 Because the

foregoing rule change: (i) does not

significantly affect the protection of

investors or the public interest; (ii) does

26890 Federal Register / Vol. 66, No. 94 / Tuesday, May 15, 2001 / Notices

8For purposes only of accelerating the operative

date of this proposal, the Commission has

considered the proposed rule’s impact on

efficiency, competititon, and capital formation. 15

U.S.C. 78c(f).

9See Securities Exchange Act Release No. 43938

(February 7, 2001), 66 FR 10539 (February 15, 2001)

(approving SR–Amex–01–03); and Securities

Exchange Act Release No. 42455 (February 24,

2000), 65 FR 11388 (March 2, 2000) (approving

application of ISE for registration as a national

securities exchange).

10 15 U.S.C. 78f(b)(8).

11 17 CFR 200.30–3(a)(12).

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

2 15 CFR 240.19b–4

3 Gramm-Leach-Bliley Act of 1999, Pub. L. No.

106–102, 113 Stat. 1338 (1999).

4See letter from Jeffrey S. Holik, Vice President

and Acting General Counsel, NASD Regulation, to

Katherine A. England, Assistant Director, Division

of Market Regulation (‘‘Division’’), Commission,

dated February 28, 2001 (‘‘Amendment No. 1’’).

Amendment No. 1 was filed to address SEC staff

comments and to make certain clarifications.

5See letter from Gary L. Goldsholle, Associate

General Counsel, NASD Regulation, to Katherine A.

England, Assistant Director, Division, Commission,

dated March 14, 2001 (‘‘Amendment No. 2’’).

Amendment No. 2 was filed to address SEC staff

comments and to make further clarifications.

6See Release No. 34–44091 (March 21, 2001), 66

FR 16964 (March 28, 2001).

not impose any significant burden on

competition; and (iii) by its terms, does

not become operative for 30 days after

the date of the filing, or such shorter

times as the Commission may designate

if consistent with the protection of

investors and the public interest; and

the Exchange has given the Commission

written notice of its intent to file the

proposed rule change at least five

business days prior to the filing date of

the proposed rule change, it has become

effective pursuant to Section 19(b)(3)(A)

of the Act and Rule 19b–4(f)(6).

The Exchange has requested that the

Commission accelerate the operative

date of the proposal. In addition, the

Exchange provide the Commission with

notice of its intent to file the proposed

rule change, along with a brief

description and text of the proposed

rule change, more than five business

days prior to the date of the filing of the

proposed rule change.

The Commission finds that it is

appropriate to accelerate the operative

date of the proposal and designate the

proposal to become effective today.8

The Commission has approved similar

proposals filed by the other options

exchange.9 Approval of this proposal on

an accelerated basis will enable the

Exchange to compete on an equal basis

with these other exchanges and thus is

consistent with Section 6(b)(8) of the

Act.10

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 Act.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning the foregoing,

including whether the proposed rule 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 in

the Commission’s Public Reference

Section. Copies of such filing will also

be available for inspection and copying

at the principal office of CBOE. All

submissions should refer to file number

SR–CBOE–2001–20 and should be

submitted by June 5, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–12135 Filed 5–14–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44281; File No. SR–NASD–

00–69]

Self-Regulatory Organizations;

National Association of Securities

Dealers, Inc.; Order Approving

Proposed Rule Change to Establish a

New Registration Category: Limited

Representative—Private Securities

Offerings (Series 82)

May 8, 2001.

I. Introduction

On November 28, 2000, the National

Association of Securities Dealers, Inc.

(‘‘NASD’’ or ‘‘Association’’), through its

wholly-owned subsidiary, NASD

Regulation, Inc. (‘‘NASD Regulation’’),

filed with the Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’),

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

Securities Exchange Act of 1934

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

proposed rule change seeking to amend

rule 1032 of the NASD to establish a

new registration category, Limited

Representative—Private Securities

Offerings (Series 82). The proposed rule

change was developed to implement

Section 203 of the Gramm-Leach-Bliley

Act of 1999 (‘‘GLBA’’), which becomes

effective on May 12, 2001.3 NASD

Regulation also proposed clerical

changes to rule 1032, essentially

replacing the word ‘‘described’’ for the

word ‘‘prescribed.’’ NASD Regulation

filed Amendment No. 1 to the proposed

rule change on February 28, 2001.4

Amendment No. 1 repalces the

proposed rule change in its entirety. On

March 14, 2001, NASD Regulation filed

Amendment No. 2 to the proposed rule

change.5 Notice of the proposed rule

change appeared in the Federal Register

on March 28, 2001.6 The Commission

received no comments on the proposal.

This order approves the proposed rule

change.

II. Description of the Proposal

NASD Regulation is proposing to

amend Rule 1032 of the NASD to

implement Section 203 of GLBA.

Section 203 adds subsection (j) to

Section 15A of the Act, which requires

that the NASD, as a registered securities

association, create a limited registration

category for any associated person of a

member whose investment banking and

securities business is limited solely to

effecting sales of private securities

offerings. Section 203 also states that

any bank employee who during the sixmonth period prior to the enactment of

GLBA (i.e., from May 12, 1999 to

November 12, 1999) engaged in effecting

such sales shall not be required to pass

a qualification examination in order to

be deemed qualified in the limited

registration category. Section 203

becomes effective on May 12, 2001.

GLBA also establishes functional

regulation, meaning that each industry

segment of a multi-industry

organization will be regulated by the

agency charged by law with the

regulation of that industry. In

connection with functional regulation,

GLBA eliminates the long-standing

general exclusion for banks from the

definitions of ‘‘broker’’ and ‘‘dealer’’

under the Act and instead provides

exclusions for certain bank activities.

With respect to private placement

activity, GLBA permits private

placements to be effected in a bank (that

is not a broker or dealer) where (a) the

bank is not affiliated with a broker or

dealer that is engaged in dealing, market