Federal Register / Vol. 66, No. 94 / Tuesday, May 15, 2001 / Notices 26901

13 15 U.S.C. 78s(b)(2).

14 Id.

15 17 CFR 200.30–2(a)(12).

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

2 17 CFR 240.19b–4.

3See letter from Richard Rudolph, Counsel, Phlx,

to Nancy Sanow, Assistant Director, Division of

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

February 20, 2001 (‘‘Amendment No. 1’’). Among

other things, Amendment No. 1 clarifies that the

Exchange: (i) may consider bona fide business

interests in determining whether to list an option;

(ii) must send letters to members setting forth in

reasonable detail the basis on which a decision not

to list a proposed option was made; and (iii) must

forward its written response within 3 business days

of its determination to deny a proposed listing.

4See letter from Richard Rudolph, Counsel, Phlx,

to Nancy Sanow, Assistant Director, Division,

Commission, dated May 1, 2001 (‘‘Amendment No.

2’’). Amendment No. 2 revises Section (c)(ii) of

proposed Commentary .02 to Phlx Rule 1009 to

clarify that the Exchange must notify the member

in writing if the Exchange determines not to list, or

to place conditions or limitations upon, a proposed

listing. Amendment No. 2 also amends Section (e)

of proposed Commentary .02 to clarify that the

Exchange will maintain a record of any bona fide

business interests supporting a decision not to list,

or to place conditions or limitations upon, a

proposed listing.

Chairman of the Exchange. The

Exchange believes that this will permit

its management, acting with key

members of the Allocation Committee,

to oversee directly the introduction of

the UTP concept to the NYSE. The

Commission believes that it is

appropriate to establish a new allocation

committee for ETFs because of the

unique characteristics of ETFs, which

should be considered in the allocation

process.

The Exchange proposes that member

organizations applying to trade ETFs on

a UTP basis be able to demonstrate

certain abilities in addition to the

current performance and disciplinary

requirements of the allocation

application. For example, the applicant

must have: (a) an understanding of the

trading characteristics of ETFs; (b)

expertise in the trading of derivativelypriced instruments; (c) the ability and

willingness to engage in hedging

activity as appropriate; (d) the

knowledge of other markets in which

the ETF which is to be allocated trades;

and (e) the willingness to provide

financial and other support to relevant

Exchange publicity and educational

initiatives. The Commission finds that

these criteria are suitable for the

Committee to rely on when allocating an

ETF to a particular specialist unit.

In addition, the Exchange proposes to

prohibit a specialist in any component

security of the ETF to function as a

specialist in the ETF in order to avoid

‘‘wash sales.’’ The Exchange, however,

proposes to allow specialists in a

component security of an ETF to use a

separate member organization to

function as an ETF specialist so long as

NYSE Rule 98 information barriers are

established and approved by the

Exchange. The Commission believes

that NYSE Rule 98 information barriers

should prevent the flow of any

privileged and/or nonpublic

information between the related entities

and should reduce the potential for any

concerns regarding ‘‘wash sales’’ in this

context.

Because the proposed rule change, as

amended, institutes a new process for

allocating ETFs to NYSE specialist units

and because the Commission is

adopting the proposal on an accelerated

basis, the Commission believes that the

proposal should be approved on a pilot

basis, for a one-year period ending on

May 7, 2002, to ensure that the process

is effective and fair. The Commission

expects the NYSE to report to the

Commission about its experience with

the new allocation process in any future

proposal it files to extend the

amendment to the Policy or approve it

on a permanent basis.

The Commission, pursuant to Section

19(b)(2) of the Act,13 finds good cause

for approving the proposed rule change

and Amendment No. 1 thereto, on a

one-year pilot basis through May 7,

2002, prior to the thirtieth day after the

date of publication of notice thereof in

the Federal Register. The Commission

notes that granting accelerated approval

to this proposal will allow the NYSE to

immediately implement a process for

allocating ETFs to be traded on the

Exchange on a UTP basis to specialist

units. It is necessary to allocate the ETFs

to specialist units as soon as possible so

that the specialists so appointed will

have ample time to prepare for NYSE’s

upcoming listing and trading of ETFs on

a UTP basis. Amendment No. 1 simply

makes minor technical corrections to

the proposed rule text and clarifies that

approved persons of a specialist must be

granted an exemption from specified

specialist rules pursuant to NYSE Rule

98.

V. Conclusion

It is therefore Ordered, pursuant to

Section 19(b)(2) of the Act,14 that the

proposed rule change (SR–NYSE–2001–

07), as amended, is hereby approved on

an accelerated basis through May 7,

2002.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.15

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–12137 Filed 5–14–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44285; File No. SR–Phlx–

2001–02]

Self-Regulatory Organizations; Notice

of Filing of a Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

Codifying Formal Procedures for

Members To Submit Proposals To List

Option Classes on the Exchange

May 9, 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 January

11, 2001, the Philadelphia Stock

Exchange, Inc. (‘‘Phlx’’ 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 Phlx. The

Phlx filed amendment Nos. 13 and 24 to

the proposed rule change on February

21, 2001 and May 2, 2001, respectively.

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 Phlx proposes to amend

Exchange Rule 1009 to codify and

implement procedures to be carried out

when an Exchange member, member

organization, or other person requests

that the Exchange list options not

currently traded on the Exchange. The

proposed rule change is set forth below.

New text is in italics.

* * * * *

Criteria for Underlying Securities

Rule 1009. (a)–(c) No change.

Commentary

.01 No change

.02 (a) Members, member

organizations or any person proposing

to list any option not currently listed on

the Exchange shall submit a form of

request (a ‘‘Request to List an Option’’),

available from the Exchange’s Business

and Operations Planning Department

(BOP), to BOP staff.

(b) As soon as practicable, but not

later than three (3) business days

following receipt of the Request to List

an Option, BOP staff shall review the

proposed option’s eligibility for listing,

using the objective listing criteria set

forth in Commentary .01 of this Rule. If

BOP staff determines that the proposed

option does not meet the objective

26902 Federal Register / Vol. 66, No. 94 / Tuesday, May 15, 2001 / Notices

5As part of a settlement of an enforcement action

by the Commission, four of the five options

exchanges, including the Phlx, are required to adopt

rules to codify listing procedures to be carried out

when a member or member organization requests

the exchange to list options not currently trading on

the exchange. See Order Instituting Public

Administrative Proceedings Pursuant to Section

19(h)(1) of the Securities Exchange Act of 1934,

Making Findings and Imposing Remedial Sanctions.

Securities Exchange Act Release No. 43268

(September 11, 2000).

6See Securities Exchange Act Release No. 44057

(March 9, 2001), 66 FR 15312 (March 16, 2001) (SR–

Phlx–01–03).

7See Securities Exchange Act Rule 17a–1(b). The

Exchange would be required to maintain these

records for the first two years in an easily accessible

location.

listing criteria set forth in Commentary

.01 of this Rule, BOP staff shall prepare

a responsive form (a ‘‘Notification

Memorandum’’) stating the reason(s)

why the proposed option is not eligible

for listing. BOP staff shall forward the

Notification Memorandum to the

member or member organization that

submitted the Request to List an Option

within three (3) business days of its

determination that the proposed option

does not meet objective listing criteria.

BOP staff shall maintain all Requests to

List an Option and Notification

Memoranda in a central file for a period

of not less than five (5) years.

(c) If BOP staff determines that the

proposed option meets the objective

listing criteria set forth in Commentary

.01 of this Rule, BOP staff shall present

the initial Request to List an Option and

the subsequent review to the Chairman

of the Board of Governors or his

designee, who shall, within ten (10)

business days of receipt of the Request

to List an Option, instruct BOP staff to:

(i) solicit options specialists to submit

applications for specialist privileges in

the option; or

(ii) within three (3) business days,

prepare and forward a letter to the

member or member organization that

submitted the Request to List an Option,

setting forth in reasonable detail the

basis on which the decision not to list,

or to place limitations or conditions

upon, the proposed option was made.

(d) In considering underlying

securities, the Exchange shall ordinarily

rely on information made publicly

available by the issuer and/or the

markets in which the security is traded.

(e) In determining whether to list an

option that otherwise meets objective

listing criteria, the Chairman of the

Board of Governors or his designee may

consider such factors as the Exchange’s

current and projected computer

capacity, and the current and projected

demands for that capacity, including

telecommunications and Option Price

Reporting Authority (‘‘OPRA’’) inbound

and outbound message capacity or

message volume restrictions placed on

the Exchange by OPRA; the projected

likely number of series and open

interest in the option; the projected

likely volatility of the option; the

projected likely liquidity of the option;

name recognition of the option or

underlying security; the projected

volume of trading in the option that is

likely to occur on the Exchange; the

projected share of total trading in the

option that is likely to occur at the

Exchange; whether any intellectual

property right or license thereof exists

with respect to the option; whether the

proposal is consistent with Exchange

rules and/or the Securities Exchange

Act of 1934 and the rules, regulations,

and orders thereunder; whether unusual

or unfavorable market conditions exist

with respect to the option; and whether

it is in the bona fide business interest of

the Exchange to list the option. If, in

denying a request or approving a

request subject to conditions or

limitations, the Exchange relies upon a

factor of other bona fide business

interests, the Exchange shall, in

addition to providing the member with

a written response specifying that the

Exchange has relied upon other bona

fide business interests, maintain a

record of the bona fide business

interests supporting its decision.

.03–.05 No change.

* * * * *

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

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 establish a procedure to be

followed when an Exchange member

requests the Exchange to list options not

currently traded on the Exchange.5 The

proposed changes to Commentary .02 to

Exchange Rule 1009 address member

requests to list options and would apply

to members and member organizations.

In a separate filing, the Exchange also

proposes to include these procedures in

the Exchange’s Codes of Conduct 6 so

that these procedures would be

applicable to, and violations thereof

enforceable against, Exchange officers,

directors, governors, employees,

committee members, or agents.

The proposed rule change would

require members, member organizations

or any person proposing to list any

option not currently listed on the

Exchange to submit a form of request

(‘‘Request to List an Option’’), available

from the Exchange’s Business and

Operations Planning Department

(‘‘BOP’’), to BOP staff. The purpose of

this provision is to provide a uniform

process, format, and record of requests

for the listing of options not currently

listed on the Exchange.

As soon as practicable, but not later

than three business days following

receipt of the Request to List an Option,

BOP staff would be required to review

the proposed option’s eligibility for

listing, using the objective listing

criteria for underlying securities set

forth in Commentary .01 of Phlx Rule

1009 for equity options, and the

objective criteria set forth in Exchange

Rule 1009A for underlying securities for

index options.

The three-day period within which

the BOP staff must review the Request

to List an Option is intended to provide

a reasonably prompt timeframe within

which to determine if the securities

underlying the proposed option meet

the Exchange’s objective listing criteria.

If the BOP staff determines that the

securities underlying the proposed

option do not meet the objective listing

criteria set forth in Commentary .01,

they would be required to prepare a

responsive form (a ‘‘Notification

Memorandum’’) stating the reason(s)

why the requested option is not eligible

for listing. BOP staff would be required

to forward the Notification

Memorandum to the member or member

organization that submitted the Request

to List an Option within three days of

the determination that the requested

option does not meet the objective

listing criteria. This provision is

intended to provide a prompt response

to the requesting member or member

organization of the requested option’s

ineligibility for listing based on the

Phlx’s listing standards. The Exchange

would be required to maintain all

Requests to List an Option and

Notification Memoranda in a central file

for at least five years.7

A determination by the BOP staff that

the securities underlying a proposed

option meet objective listing criteria

Federal Register / Vol. 66, No. 94 / Tuesday, May 15, 2001 / Notices 26903

8Such designee may be a member of the

Exchange’s Board of Governors or a member of the

Exchange’s Senior Staff.

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

10 15 U.S.C. 78f(b)(5). 11 17 CFR 200.30–3(a)(12).

would not require the Exchange to list

the option. The proposed rule

contemplates a variety of legitimate

business reasons why the Exchange

would choose not to list certain

proposed options. If BOP staff

determines that the proposed option

meets the Exchange’s objective listing

criteria set forth in Commentary .01 of

Phlx Rule 1009, BOP staff would be

required to present the proposal to the

Chairman of the Board of Governors or

his designee 8 within ten business days

of the determination. The Chairman or

his designee would be required to

instruct BOP staff either to: (i) Solicit

options specialists to submit

applications for specialist privileges in

the option; or (ii) within three business

days, prepare and forward a letter to the

member that submitted the listing

proposal, setting forth in reasonable

detail the basis on which the decision

not to list, or to place limitations or

conditions upon, the proposed option

was made. These letters would be

maintained in a central file for a period

of not less than five years. If the

Exchange decides to list the requested

option, it would forward a Notification

Memorandum advising the requesting

member that they will be notified when

applications for trading privileges in the

requested option are solicited.

In determining whether to list an

option that otherwise meets objective

listing criteria, the Chairman of the

Board of Governors or his designee

would consider: (i) The Exchange’s

current and projected computer capacity

or message volume restrictions placed

on the Exchange by the Option Price

Reporting Authority (‘‘OPRA’’), and the

current and projected demands for that

capacity, including telecommunications

and OPRA inbound and outbound

message capacity; (ii) the projected

likely number of series and open

interest in the option; (iii) the projected

likely volatility of the option; (iv) the

projected likely liquidity of the option;

(v) name recognition of the option or

underlying security; (vi) the projected

volume of trading in the option that is

likely to occur on the Exchange; (vii) the

projected share of total trading in the

option that is likely to occur on the

Exchange; (viii) whether any intellectual

property right or license thereof exists

or would be required with respect to the

option; (ix) whether the proposal is

consistent with Exchange rules and/or

the Act and the rules, regulations, and

orders thereunder; (x) whether unusual

or unfavorable market conditions exist

with respect to the option; and (xi)

whether it is in the bona fide business

interest of the Exchange to list the

option. If, in denying a request or

approving a request subject to

conditions or limitations, the Exchange

relies upon a factor of other bona fide

business interests, the Exchange would

be required, in addition to providing the

member with a written response

specifying that the Exchange has relied

upon other bona fide business interests,

to maintain a record of the bona fide

business interests supporting its

decision. According to the Phlx, the

proposed provisions codify the list of

legitimate business concerns normally

reviewed when the Exchange makes a

decision about whether to list an option

that otherwise meets its listing criteria.

2. Statutory Basis

The Exchange believes that the

proposed rule change is consistent with

Section 6(b) of the Act 9 in general and

furthers the objectives of Section

6(b)(5) 10 in particular in that it is

designed to promote just and equitable

principles of trade, remove

impediments to a free and open market

and a national market system, and

protect investors and the public interest

by providing a uniform process for

members to submit, and the Exchange to

review, listing proposals.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Phlx does not believe that the

proposed rule change, as amended, will

impose any burden on competition 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 Phlx 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, 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 in

the Commission’s Public Reference

Room. Copies of such filings will be

available for inspection and copying at

the principal office of the Phlx. All

submissions should refer to the File No.

SR–Phlx–2001–02 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. 01–12132 Filed 5–14–01; 8:45 am]

BILLING CODE 8010–01–M

DEPARTMENT OF STATE

[Public Notice 3661]

Shipping Coordinating Committee;

Notice of Meeting

The Shipping Coordinating

Committee will conduct an open

meeting at 9:30 a.m. on Wednesday June

13, 2001, in room 6103, U. S. Coast

Guard Headquarters, 2100 Second

Street, SW., Washington, DC. The

purpose of the meeting is to prepare for

the 47th session of the Subcommittee on

Safety of Navigation (NAV) of the

International Maritime Organization

(IMO) which is scheduled for July 2–6,

2001, at the IMO Headquarters in

London.

Items of principal interest on the

agenda are:

—Routing of ships, ship reporting and

related matters