31728 Federal Register / Vol. 66, No. 113 / Tuesday, June 12, 2001 / Notices

3 15 U.S.C. 78s(b)(2).

4 17 CFR 200.30–3(a)(12).

1PACE is the Philadelphia Stock Exchange’s

Automatic Communication and Execution System.

It is the Exchange’s order routing, delivery,

execution and reporting system for its equity

trading floor. See Rule 229, Philadelphia Stock

Exchange Guide.

2 15 U.S.C. 78s(b)(1).

3 17 CFR 240.19b–4.

4 17 CFR 240.19b–4(f)(5). 5 15 U.S.C. 78s(b)(4).

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received from

Members, Participants or Others

Written comments from participants

or others have not been solicited or

received on the proposed rule change.

All participants will be informed of the

proposed rule change by an Important

Notice.

III. Date of Effectiveness of Proposed

Rule Change and Timing for

Commission Action

The Commission finds that allowing

DTC to require participants to set up

separate subaccounts solely for the

settlement of Nasdaq Europe trades and

to authorize DTC to provide settlement

information to Nasdaq Europe is

consistent with the requirements of

section 17A of the Act and the rules and

regulations thereunder applicable to

clearing agencies. Specifically, the

Commission believes that the proposal

is consistent with section 17A(b)(3)(F)

because it will facilitate the prompt and

accurate clearance and settlement of

securities transactions by allowing for

the settlement at DTC of Nasdaq Europe

trades in DTC-eligible securities.

The Commission finds good cause for

approving the proposed rule change

prior to the thirtieth day after the date

of publication of notice thereof in the

Federal Register because approval prior

to the thirtieth day of the publication

will allow DTC to settle trades in DTCeligible securities executed on the

Nasdaq Europe when Nasdaq Europe

begins trading such securities, which it

is scheduled to do on Friday, June 8,

2001.

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

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, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of such

filing also will be available for

inspection and copying at the principal

office of DTC. All submissions should

refer to File No. SR–DTC–2001–08 and

should be submitted by July 3, 2001.

It Is Therefore Ordered, pursuant to

Section 19(b)(2) of the Act,3 that the

proposed rule change is hereby

approved on an accelerated basis.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.4

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–14736 Filed 6–11–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44395; File No. SR–Phlx–

2001–46]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Philadelphia Stock Exchange, Inc.

(‘‘Phlx’’), Relating to a Reduction of the

Minimum size of PACE1 Orders that

Must Be Automatically Guaranteed by

Equity Specialists Pursuant to Phlx

Rule 229

June 6, 2001.

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

Securities Exchange Act of 1934

(‘‘Act’’),2 notice is hereby given that on

April 23, 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 Exchange.

The Phlx filed the proposed rule change

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

Act,3 and Rule 19b–4(f)(5) thereunder.4

Pursuant to Rule 19b–4(f)(5), the Phlx

has designated this proposal as one

effecting a change in an existing orderentry or trading system of the Phlx that

does not: (1) Significantly affect the

protection of investors or the public

interest, (2) impose any significant

burden on competition, or (3)

significantly have the effect of limiting

the access to or availability of the

system. As such, the proposed rule

change is immediately effective upon

filing with 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 Phlx, pursuant to Rule 19b–4

under the Act,5 proposes to amend Phlx

Rule 229 to reduce the minimum

automatic execution size of PACE orders

for equity specialists from 599 shares to

299 shares.

The text of the proposed rule change

is as follows.

(Proposed new language is italicized;

proposed deletions are in brackets)

Rule 229, Philadelphia Stock Exchange

Automated Communication and Execution

System (PACE)

Execution of Market Orders

.05 Public Order Exposure System—

Subject to Supplementary Material Section

.07, all round-lot market orders up to 200

[500] shares and PRL market orders up to 299

[599] shares will be stopped at the PACE

Quote at the time of entry into the system

(‘‘Stop Price’’) and be subject to a delay of up

to 30 seconds from being executed in order

to receive an opportunity for price

improvement. If such market order is not

executed within the 30 second window, the

order will be automatically executed at the

Stop Price. If the PACE Quote at the time of

order entry into the system reflects a 1⁄8 point

spread or less (the difference between the

best bid and offer) for equities trading in

fractions, or .05 or less for equities trading in

decimals, pursuant to Rule 134 or 125, that

order will be executed immediately without

the 30 second delay.

Subject to these procedures, the specialist

may voluntarily agree to execute round-lot

market orders of a size greater than 200 [500]

shares and PRL market orders of a size

greater than 299 [599] shares upon entry into

the system. Where the specialist has

voluntarily agreed to execute market orders

greater than 299 [599] shares and the market

order size is greater than 299 [599] shares,

but less than or equal to the size of the PACE

Quote, the order is automatically executable

at the PACE Quote; if such order is greater

than the size of the PACE Quote, the order

shall [manually] receive an execution at the

PACE Quote up to the size of the PACE

Quote, either manually or automatically

(once this feature is implemented) with the

balance of the order receiving a professional

execution, in accordance with

Supplementary material .10(b) below;

provided that the specialist may guarantee an

automatic execution at the PACE quote up to

the entire size of such specialist’s automatic

execution guarantee (regardless of the size of

the PACE Quote).

* * * * *

Federal Register / Vol. 66, No. 113 / Tuesday, June 12, 2001 / Notices 31729

6A partial round-lot order for the purposes of

Rule 229 is a combined round-lot and odd-lot order.

7See Rule 229, Supplementary Material .10(a).

8Following a telephone conversation on May 30,

2001 between Edith Hallahan, Deputy General

Counsel, Exchange, and Heidi Pilpel, Special

Counsel, Commission, the Exchange represented

that the specialist sets his automatic execution

guarantee by filling out an Exchange form to that

effect, effective as of the next business day, except

when unusual circumstances occur, such as a fast

market, in which case the specialist is allowed to

request an immediate change of his automatic

guarantee, upon floor official approval.

9The minimum delivery size is 2,099 shares. See

note 8 above explaining how the specialist sets its

minimum execution guarantee.

.07

(a) Member organizations which enter

market orders after the opening may elect to

have such orders executed

(i) in accordance with the procedures set

forth in Supplementary Material Section .05

or,

(ii) if such execution price would be

outside the New York market high-low range

for the day manually at or within the New

York market high-low range of the day.

(b) Market orders (round-lots of 300 [600]

to 2000 shares or such greater size which the

specialist agrees to accept and PRL’s of 301

[601] to 2099 shares or such greater size

which the specialist agrees to accept) which

are entered after the opening and which the

specialist has not agreed to accept for

automatic execution shall not be subject to

the execution parameters set forth in

Supplementary Material .05 and shall be

executed in accordance with Supplementary

Material .10(b) and other applicable rules of

the Philadelphia Stock Exchange; provided,

however, that the odd-lot portion of PRL’s of

301 [601] or more shares shall be executed

at the same price as the round-lot-portion. In

the case of a PRL order, the round-lot

portion(s) of which is executed at more than

one price, the odd-lot portion shall be

executed at the same price as the first roundlot portion is executed.

(c) Unchanged

* * * * *

Execution of Limit Orders

* * * * *

.10

(a) In the case of stocks for which the PACE

Quote bid is less than $1.00, the provisions

of paragraph .10(b) shall apply.

In the case of stocks for which the PACE

quote bid is $1.00 or more:

(i) Marketable Limit Orders—round-lot

orders up to 200 [599] shares and the roundlot portion of PRL limit orders up to 299

[599] shares which are entered at the PACE

Quote shall be executed at the PACE Quote.

Such orders shall be executed automatically

unless the member organization entering

orders otherwise elects. Specialists may

voluntarily agree to execute marketable limit

orders greater than 299 [599] shares. Where

the specialist has voluntarily agreed to

automatically execute marketable limit

orders greater than 299 [599] shares and the

order size is greater than 299 [599] shares,

but less than or equal to the size of the PACE

Quote, the marketable limit order is

automatically executable at the PACE Quote;

if the order size is greater than 299 [599]

shares and greater than the size of the PACE

Quote, the marketable limit order shall

manually receive an execution at the PACE

Quote up to the size of the PACE Quote, with

the balance of the order receiving a

professional execution, in accordance with

Supplementary Material .10(b) below;

provided that the specialist may guarantee an

automatic execution at the PACE Quote up to

the entire size of such specialist’s automatic

execution guarantee.

(ii)–(iii): Unchanged.

(b)–(c): Unchanged.

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. 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

The purpose of this proposed rule

change is to reduce the equity

specialists’ minimum automatic

execution size for PACE orders, thereby

reducing the amount of orders that

qualify for an automatic execution

guarantee, pursuant to various

provisions of Exchange Rule 229.

According to the Phlx, the proposed

rule change is intended to address the

equity specialist’s hardship in the new

decimal environment. Specialists

indicate that the transition to trading in

decimal increments, rather than in

fractions, has resulted in a wider range

of quoted prices (more ticks), as well as

an increase in small-sized bids and

offers made at a particular price. Such

bids and offers (which can be for as

little as 100 shares) qualify, regardless of

their size, to become the National Best

Bid or Offer (‘‘NBBO’’), also known for

PACE purposes as the ‘‘PACE Quote.’’

PACE provides certain execution

guarantees to eligible orders. Currently,

with respect to market orders, Rule 229,

Supplementary Material .05, provides

that round-lot market orders for up to

500 shares (and partial round-lot

orders 6—‘‘PRLs’’—up to 599 shares) are

automatically entitled to the NBBO

price (‘‘stopped’’) as of the time of entry

into the PACE system. In addition,

Supplementary Material .05 provides

that those orders will be subject to a 30

second delay in execution in order to

allow for the opportunity for manual

price improvement.

A specialist may voluntarily agree to

execute round-lot market orders greater

than 500 shares (and PRL market orders

greater than 599 shares). In addition,

Supplementary Material .05 states that if

a specialist agrees to execute market

orders greater than 599 shares, and the

order size is smaller or equal to the size

of the PACE Quote, the order is

automatically executable at the PACE

Quote. If the order size is greater than

the PACE Quote, the order is manually

handled by the specialist, who executes

it at the PACE Quote up to the portion

equal to the PACE Quote size, with the

balance receiving a professional manual

execution.7 Regardless of the size of the

PACE Quote, however, the specialist

may, under Supplementary Material .05,

choose to guarantee automatic execution

at the PACE Quote up to the entire size

of his automatic execution guarantee.8

Thus, when the specialist’s automatic

execution guarantee is higher than 599

shares, whether an order automatically

executes at the PACE Quote depends on

the size of the PACE Quote. This sizesensitivity is discussed further below.

Supplementary Material .07(b)

currently provides that market orders

consisting of round-lot orders of 600 to

2,000 shares and PRLs of 601 to 2,099

shares (or any greater size which the

specialist agrees to accept), which are

entered after the opening and not

accepted for automatic execution by the

specialist, will be handled manually in

accordance with the requirements of

Supplementary Material .10.

Supplementary Material .07 further

provides that the odd-lot portion of

PRLs of 601 or more shares shall be

executed at the same price as the roundlot portion.

With respect to marketable limit

orders, Rule 229, Supplementary

Material .10(a)(i) provides that round-lot

marketable limit orders up to 500 shares

(and partial round-lot marketable limit

orders up to 599 shares) which are

entered at the PACE Quote shall be

executed at the PACE Quote, and

executed automatically if the member

organization entering the order so elects.

Although the current minimum

automatic execution size (for both

market and marketable limit orders) is

599 shares (meaning all securities on

PACE are subject to an automatic

execution size of at least this amount),

specialists may establish higher sizes.9

Together, these provisions of Rule 229

guaranteeing the NBBO to certain

eligible PACE orders have become more

31730 Federal Register / Vol. 66, No. 113 / Tuesday, June 12, 2001 / Notices

10The Commission notes the Exchange’s

obligation to submit to the Commission

(individually or jointly with other exchanges) a

study regarding the impact of decimal pricing on

systems capacity, liquidity, and trading behavior

(‘‘Decimals Study’’), pursuant to a Commission

Order dated June 8, 2000. See Securities Exchange

Act Release No. 42914 (June 8, 2000); 65 FR 38010

(June 19, 2000), as amended by Securities Exchange

Act Release No. 44336 (May 22, 2001); 66 FR 29368

(May 30, 2001) (extending the deadline to submit

the Decimals Study). The Commission expects the

Exchange to evaluate in the Decimals Study the

effect of amended Rule 229 on equity specialists’

handling of customer limit orders for more than 299

shares.

11 17 CFR 200.30–3(a)(12).

onerous to equity specialists in today’s

marketplace when required to guarantee

a minimum of 599 shares. Specifically,

specialists face situations where bids

and offers as small as 100 shares trigger

the PACE Quote guarantees described

above. Small size quotes, however,

might not necessarily reflect the overall

market price at a given time.

Nevertheless, under the PACE rule, in

certain circumstances it is the

specialist’s duty to give the NBBO price,

regardless of the size of the NBBO.

Particularly, when the specialist’s

guarantee is set at the current minimum

of 599 shares, the size of the PACE

Quote does not affect the price at which

orders up to 599 shares are executed.

Thus, the Exchange hereby proposes

to decrease the minimum automatic

execution size from 599 to 299 shares,

which should decrease the amount of

orders that qualify for the above

automatic price guarantee features; and

should allow the specialist to choose to

handle more orders manually, and

voluntarily, in accordance with

Supplementary Material .05 and .10,

thereby alleviating some of the burdens

of mandatory execution guarantees. In

addition, when an order is greater than

the size of the PACE Quote, the proposal

will offer the specialist the option to

give the order an execution at the PACE

Quote, either manually or automatically,

up to the PACE Quote size. In other

words, the specialist may choose

manual or automatic execution up to the

PACE Quote size portion of his order,

but it remains his choice, just as he may

still choose to guarantee an automatic

execution at the PACE Quote for orders

up to the size of his elected ‘‘automatic

execution guarantee,’’ as stated in

Supplementary Material .05. As such,

the automatic execution guarantee will

be more sensitive to the size of the

PACE Quote.

For these reasons, the Exchange

believes that this proposal is consistent

with section 6(b) of the Act in general,

and furthers the objectives of section

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

promote just and equitable principles of

trade, by fostering fair and orderly

markets while relieving specialists of

the duty to execute certain orders at a

guaranteed price, where that price

would otherwise not be available for the

size that the specialist must guarantee.

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

No written comments were 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 rule effecting

a change in an existing order-entry or

trading system of a self-regulatory

organization, pursuant to section

19(b)(3)(A) of the Act and Rule 19b–

4(f)(5) thereunder. 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

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

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 File No.

SR–Phlx–2001–46 and should be

submitted by July 3, 2001.10

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–14735 Filed 6–11–01; 8:45 am]

BILLING CODE 8010–01–M

SMALL BUSINESS ADMINISTRATION

[Declaration of Disaster #3336]

State of Kansas; Amendment No. 1

In accordance with a notice received

from the Federal Emergency

Management Agency, dated May 1,

2001, the above-numbered Declaration

is hereby amended to establish the

incident period for this disaster as

occurring between April 21, 2001 and

continuing through May 1, 2001. All

other information remains the same, i.e.,

the deadline for filing applications for

physical damage is June 26, 2001 and

for economic injury the deadline is

January 28, 2002.

(Catalog of Federal Domestic Assistance

Program Nos. 59002 and 59008)

Dated: June 6, 2001.

Allan I. Hoberman,

Acting Associate Administrator for Disaster

Assistance.

[FR Doc. 01–14751 Filed 6–11–01; 8:45 am]

BILLING CODE 8025–01–P

SMALL BUSINESS ADMINISTRATION

[Declaration of Disaster #3343]

State of Ohio

Scioto County and the contiguous

counties of Adams, Jackson, Lawrence

and Pike in the State of Ohio; and

Greenup and Lewis Counties in the

Commonwealth of Kentucky constitute

a disaster area due to damages caused

by severe thunderstorms, high winds

and flooding which began on May 17,

2001 and continued through May 26,

2001. Applications for loans for

physical damage may be filed until the

close of business on August 3, 2001 and

for economic injury until the close of

business on March 4, 2002 at the

address listed below or other locally

announced locations:

U.S. Small Business Administration,

Disaster Area 2 Office, One Baltimore

Place, Suite 300, Atlanta, GA 30308

The interest rates are: