30968 Federal Register / Vol. 66, No. 111 / Friday, June 8, 2001 / Notices

39See Pilot Approval Order, supra note 12.

40 17 CFR 240.11Ac1–1(c)(2) (emphasis added).

41See Phlx Letter, supra note 13.

42See supra note 30.

43See CBOE Amendment No. 2 and Phlx

Amendment No. 5.

44 15 U.S.C. 78s(b)(2).

45 15 U.S.C. 78s(b)(2).

46 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See letter from Arthur B. Reinstein, Deputy

General Counsel, CBOE, to Sonia Patton, Attorney,

Division of Market Regulation, Commission, dated

May 22, 2001 (‘‘Amendment No. 1’’). Amendment

No. 1 designated the proposed rule change for

submission to the Commission under Section

19(b)(2) of the Act instead of under Section

19(b)(3)(A) of the Act.

upon the execution guarantee

requirement provided by the Phlx.

In the Pilot Approval Order, the

Commission stated its belief that rules

such as CBOE Rule 8.51(b)(3) and Phlx

Rule 1015(a)(v) are inconsistent with the

Quote Rule and cannot be used to

relieve exchange members from their

obligations under the Quote Rule.39 The

Commission noted that those provisions

had been approved prior to the adoption

of amendments to the Quote Rule that

extended its application to the options

market. Generally, the Quote Rule

requires each responsible broker or

dealer to ‘‘execute any order to buy or

sell a subject security * * * at a price

at least as favorable to such buyer or

seller as the responsible broker’s or

dealer’s published bid or offer * * * in

any amount up to its published

quotation size.’’ 40 Further, the Quote

Rule does not expressly provide an

exception for multiple orders submitted

by the same beneficial owner. And, in

fact, the Quote Rule requires, subject to

certain limitations, a responsible broker

or dealer to execute any up to its

published size.

At the same time, the Commission

specifically solicited comment on

whether it would be appropriate for the

Commission to grant an exception from

the requirement of the Quote Rule for

multiple orders submitted by the same

beneficial owner at approximately the

same time. One commenter addressed

this issue, arguing that without

providing an exemption from the Quote

Rule, options market makers would be

subject to unacceptable levels of risk.41

In addition, CBOE submitted a letter to

the Commission requesting exemptive

relief from the requirements of the

Quote Rule that, if granted, would

relieve responsible brokers and dealers

of their obligations under the Quote

Rule in these circumstances,42 The

Commission has determined not to grant

an exemption from the requirements of

the Quote Rule at this time.

Accordingly, the CBOE and Phlx now

propose to eliminate these provisions

from their rules.43

The Commission finds good cause,

consistent with Section 19(b)(2) of the

Exchange Act,44 for granting the

Exchanges’ request for permanent

approval of the Pilot Programs, as

amended, prior to the thirtieth day after

the day of publication of notice of filing

thereof in the Federal Register. The

Commission notes that the Changes’

Pilot Program expire on June 1, 2001.

The Commission believes that granting

accelerated approval to the proposed

amendments will allow the Exchanges

to permanently implement their rules in

compliance with the Quote Rule

without delay. In addition, the

Commission notes that the Exchanges

reported no complaints or problems

with the operation of the rules during

the 60-day pilot period. Finally, the

Commission notes that the proposed

amendments to the Pilot Programs

generally include only non-substantive

revisions and technical corrections to

the Exchanges’ rule text.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Exchange Act,45

the Exchanges’ proposed rule changes

(File Nos. SR–Amex–2001–18, SR–

CBOE–2001–15, SR–ISE–2001–07, SR–

PCX–2001–18, and SR–Phlx–2001–37),

as amended, are approved on a

permanent basis.

For the Commmission, by the Division of

Market Regulation, pursuant to delegated

authority.46

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–14463 Filed 6–7–01; 8:45 am]

BILLING CODE 8080–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44385; File No. SR–CBOE–

2001–17]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the Chicago Board

Options Exchange, Incorporated To

Change the Voting Requirement for

Approval of Membership Applications

and to Clarify a Notice Requirement

Relating to the Exercise of an

Authorization To Sell a Membership

June 1, 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 5,

2001, the Chicago Board Options

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

submitted an amendment to the

proposed rule change on May 22, 2001.3

The Commission is publishing this

notice to solicit comments from

interested persons on the proposed rule

change, as amended, and to approve the

proposal, as amended, on an accelerated

basis.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The CBOE proposes to change the

voting requirement for approval of

CBOE membership applications and to

clarify a notice requirement relating to

the exercise of an Authorization to Sell

a membership. Below is the text of the

proposed rule change. New language is

italicized, and deletions are bracketed.

* * * * *

Chicago Board Options Exchange,

Incorporated Rules

* * * * *

Chapter III—Membership

* * * * *

Application Procedures and Approval

or Disapproval

Rule 3.9.

(a)–(j) Unchanged.

(k) [Approval of an application

requires a vote of the majority of the

members of the Membership Committee

then in office.] Any applicant that is

approved to be a member by the

Membership Committee must be

approved by the Membership

Committee to perform in at least one of

the recognized capacities of a member

as stated in Rule 3.1(b). Written notice

of the action of the Membership

Committee, specifying in the case of

disapproval of an application the

grounds therefore, shall be provided to

the applicant.

* * * * *

Sale and Transfer of Membership

Rule 3.14.

(a)–(c) Unchanged.

(d) Authorizations to Sell. The owner

of a transferable membership may

voluntarily grant to another Exchange

member an Authorization to Sell the

membership. Authorizations to Sell

shall be subject to the following

provisions:

Federal Register / Vol. 66, No. 111 / Friday, June 8, 2001 / Notices 30969

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

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

(i) An Authorization to Sell shall be

effective only if it has been executed on

a form prescribed by the Exchange and

filed with the Membership Department.

(ii) A membership owner may not

grant an Authorization to Sell a

particular membership to more than one

member.

(iii) The grantee of an Authorization

to Sell shall have all of the authority

granted under the Constitution and

Rules relating to the sale of the

membership that would otherwise be

vested in the membership owner,

including the sole authority to

determine whether and when to submit

an offer to sell the membership in

accordance with the provisions of

paragraph (a) of this Rule.

Notwithstanding the foregoing, unless

the following notice requirement is

waived as described below, a grantee of

an Authorization to Sell must (A) notify

the membership owner in writing at

least 3 business days prior to exercising

the grantee’s right to sell the

membership of any decision by the

grantee to exercise that right and (B)

provide the Membership Department

with written verification in a form and

manner prescribed by the Exchange that

the required notice has been provided to

the membership owner. The

membership owner may waive the

foregoing notice requirement in a form

and manner prescribed by the

Exchange.

* * * * *

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 III 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, the Proposed Rule

Change

1. Purpose

The proposed rule change would (i)

change the voting requirement for

approval of CBOE membership

applications by CBOE’s Membership

Committee to the same voting

requirement that applies to other CBOE

committee decisions and (ii) clarify that

a membership owner that grants to

another member an Authorization to

Sell the membership may waive the

requirement that the grantee of the

Authorization to Sell provide at least 3

business days notice to the membership

owner prior to exercising the grantee’s

right to sell the membership.

With respect to the proposed voting

requirement change, CBOE Rule 3.9(k)

currently requires a vote of the majority

of the members of CBOE’s Membership

Committee then in office to approve a

membership application. However,

CBOE Rule 2.1(b) provides that, except

as provided in CBOE’s Constitution,

CBOE’s Rules, or by resolution of

CBOE’s Board of Directors, the vote of

a majority of the members of a

committee present at a meeting at which

a quorum is present will be the act of

the committee. The voting requirement

set forth in CBOE Rule 2.1(b) is

generally applicable to other CBOE

committees and even to votes of the

Membership Committee regarding

issues other than whether to approve a

membership application. In order to

make the Membership Committee voting

requirement for the approval of

membership applications consistent

with the voting requirement for other

CBOE committee decisions, the

Exchange is proposing to delete the

special voting requirement for

membership applications currently

contained in CBOE Rule 3.9(k). by

virtue of this deletion, the voting

requirement contained in CBOE Rule

2.1(b) would apply to the approval of

membership applications.

With respect to waiving the notice

requirement that must be satisfied in

order to exercise an Authorization to

Sell a membership, CBOE Rule 3.14(d)

currently permits an owner of a

transferable membership to voluntarily

grant to another member an

Authorization to Sell the membership.

The grantee of an Authorization to Sell

is vested with all of the authority

provided for under the Exchange’s

Constitution and Rules relating to the

sale of the membership. The grantee of

an Authorization to Sell also has the

right upon the sale of the membership

to submit claims against the

membership owner pursuant to CBOE

Rule 3.15(b), to be satisfied out of the

proceeds of the sale of the membership,

that are related to the membership

owner’s Exchange business activities.

CBOE Rule 3.14(d)(iii) requires a grantee

of an Authorization to Sell a

membership (i) to notify the

membership owner in writing at least 3

business days prior to exercising the

grantee’s right to sell the membership of

any decision by the grantee to exercise

that right, and (ii) to provide the

Membership Department with written

verification in a form and manner

prescribed by the Exchange that the

required notice has been provided to the

membership owner. However, a

membership owner may wish to waive

this notice requirement if the grantee of

the Authorization to Sell is exercising

the grantee’s right to sell the

membership and the membership owner

believes a higher sale price will be

obtained if the membership is sold right

away instead of three business days

later. Because this notice requirement is

for the sole benefit of the membership

owner, the Exchange believes that it is

fairly and reasonably implied that the

membership owner may waive this

notice requirement.

The Exchange is now proposing to

amend CBOE Rule 3.14(d)(iii) to make

explicit that the membership owner may

waive the foregoing notice requirement

in a form and manner prescribed by the

Exchange. The Exchange believes that

this codification would benefit members

and would help to ensure that members

are aware of the ability to waive the

notice requirement.

2. Statutory Basis

The CBOE believes 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

remove impediments to and perfect the

mechanism of a free and open market

and to protect investors and the public

interest by improving the Exchange’s

approval process for membership

applicants and by clarifying the

Exchange’s membership rules.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The CBOE does not believe that the

proposed rule change will result in 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. 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

30970 Federal Register / Vol. 66, No. 111 / Friday, June 8, 2001 / Notices

6 In approving this rule, the Commission has

considered its impact on efficiency, competition,

and capital formation. 15 U.S.C. 78c(f).

7 15 U.S.C. 78f(b)(5).

8 15 U.S.C. 78s(b)(2).

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

10 15 U.S.C. 78s(b)(2).

11 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3 17 CFR 240.10a–1. See also Securities Exchange

Act Release No. 42037 (October 20, 1999), 64 FR

57996 (October 28, 1999) (Concept Release on Short

Sales).

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

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

the Act. Persons making written

submissions should file six copies

thereof with the Secretary, Securities

and Exchange Commission, 450 Fifth

Street, NW., Washington, D.C. 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 filing will also be

available for inspection and copying at

the principal office of the CBOE. All

submissions should refer to file number

SR–CBOE–17 and should be submitted

by June 29, 2001.

IV. Commission’s Findings and Order

Granting Accelerated Approval of

Proposed Rule Change

After careful review, the Commission

finds that the proposed rule change. as

amended, is consistent with the

requirements of the act and the rules

and regulations thereunder applicable to

a national securities exchange 6 and, in

particular, the requirements of Section

6(b)(5) of the Act.7 Specifically, the

Commission finds that the proposed

rule change will make the Exchange’s

approval process for membership

applications consistent with the

Exchange’s generally applicable

committee voting process. In addition,

the Commission believes that clarifying

that membership owners are permitted

to waive the notice requirement relating

to the exercise of an Authorization to

Sell a membership will help ensure that

members are aware of this right.

The Commission finds good cause for

approving the proposed rule change

prior to the thirtieth day after date of

publication of the notice of filing thereof

in the Federal Register pursuant to

Section 19(b)(2) of the Act.8 Accelerated

approval will permit the Exchange to

use its generally applicable committee

voting process in approving

membership applications, and will put

membership owners on notice of their

right to waive the notice requirement

relating to Authorizations to Sell,

without undue delay. Accordingly the

Commission finds that it is consistent

with Section 6(b)(5) of the Act 9 to

approve the proposal on an accelerated

basis.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,10 that the

proposed rule change (SR–CBOE–2001–

17), as amended, is hereby approved on

an accelerated basis.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–14460 Filed 6–7–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44382; File No. SR–Phlx–

2001–55]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Philadelphia Stock Exchange, Inc.

Relating to Short Sales

June 1, 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 May 16,

2001, the Philadelphia Stock Exchange,

Inc. (‘‘Phlx’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’) the proposed rule

change as described in Items I, II, and

III below, which Items the Phlx has

prepared. 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 amend Phlx

Rule 455, Short Sales, by adding new

Supplementary Material .01. The text of

the proposed rule change is below, with

new language in italics.

Rule 455. Short Sales

(a)–(d) No change.

Supplementary Material

.01 This Rule 455 shall not prohibit

any transaction or transactions which

the Commission, upon written request

or upon its motion, exempts, either

unconditionally or on specified terms

and conditions.

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

Rule 10a–1 under the Act 3 addresses

short selling. Subsection (f) of Rule 10a–

1 provides that Rule 10a–1 shall not

prohibit any transaction or transactions

that the Commission, upon written

request or upon its own motion,

exempts, either unconditionally or on

specified terms and conditions.

Phlx Rule 455 also addresses short

selling. proposed Supplementary

Material .01 of Phlx Rule 455 would

track the language of Rule 10a–1(f) to

clarify that nothing in Phlx Rule 455

prohibits any transaction or transactions

that the Commission has exempted from

Rule 10a–1 pursuant to Rule 10a–1(f).

2. Statutory Basis

The Phlx believes the proposed rule

change is consistent with the provisions

of Section 6(b) of the Act 4 and furthers

the objectives of Section 6(b)(5) of the

Act 5 in that it is designed to perfect the

mechanisms of a free and open market

and the national market system, protect

investors and the public interest and

promote just and equitable principles of

trade by clarifying and describing

clearly in the Phlx’s rules that nothing

in Phlx Rule 455 prohibits any

transaction or transactions which the

Commission, upon written request or

upon its own motion, has exempted

pursuant to Rule 10a–1(f).

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed rule change will result in

any burden on competition that is not