Federal Register / Vol. 66, No. 117 / Monday, June 18, 2001 / Notices 32853

10 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3CBOE Rule 18.1, Interpretation and Policy .01

provides, among other things, that former members

and associated persons are subject to Exchange

arbitration proceedings with respect to any dispute

claim or controversy arising out of the Exchange

business of such former member or associated

person that took place while such member or

associated person was still a member or associated

person.

(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 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 Amex. All

submissions should refer to File SR–

Amex–2001–26 and should be

submitted by July 9, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–15221 Filed 6–15–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44408; File No. SR–CBOE–

2001–14]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Board Options Exchange,

Inc. To Amend Its Rules Regarding

Jurisdiction Over Former Members and

Associated Persons for Failure To

Honor an Exchange Arbitration Award

June 11, 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 March 27,

2001, the Chicago Board Options

Exchange, Inc. (‘‘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

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 amend its rules

regarding jurisdiction over former

members and associated persons for

failure to honor an Exchange arbitration

award.

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, the Proposed Rule

Change

1. Purpose

The Exchange proposed to amend its

rules to provide that the failure to honor

a CBOE arbitration award by a former

Exchange member or associated person

would subject such former member or

associated person to the disciplinary

jurisdiction of the Exchange regardless

of the date of termination of

membership.

Chapter 18 of the Exchange’s rules

governs the CBOE’s arbitration process.

CBOE Rule 18.37 provides that any

member or person associated with a

member who fails to honor an Exchange

arbitration award shall be subject to

CBOE disciplinary proceedings.

Furthermore, CBOE Rule 18.1,

Interpretation and Policy .02 states that

it may be deemed conduct inconsistent

with just and equitable principles of

trade to fail to honor a CBOE arbitration

award. Conduct inconsistent with just

and equitable principles of trade is a

violation of Exchange Rule 4.1, and is

thus subject to CBOE disciplinary

proceedings.

Chapter 17 of the Exchange’s rules

governs the CBOE disciplinary process.

Generally, the Exchange maintains

disciplinary jurisdiction over its

members, and persons associated with

its members, with respect to instances

where members or associated persons

are alleged to have violated or aided and

abetted a violation of any provision of

the Act, the rules and regulations

promulgated thereunder, or any

constitutional provisions, by-laws or

rules of the Exchange or any

interpretation thereof or resolution of

the Board of the Exchange regulating the

conduct of business on the Exchange.

Thus, a member or person associated

with a member who fails to honor an

Exchange arbitration award has violated

CBOE Rule 18.37 and CBOE Rule 4.1

and is subject to disciplinary

proceedings under Chapter 17.

Currently, however, such failure to

honor a CBOE arbitration award by a

former member, or former person

associated with a member, may not

always be subject to the Exchange’s

disciplinary jurisdiction.

CBOE Rule 17.1(b) provides that

members (or associated persons) shall

continue to be subject to the

disciplinary jurisdiction of the

Exchange following such member’s

(associated person’s) termination of

membership (association with a

member) with respect to matters that

occurred prior to such termination,

provided that written notice of the

commencement of an inquiry into such

matters is given by the Exchange to such

former member (person) within one year

of the Exchange’s receipt of notice of

such termination. This provision allows

for certain anomalies in the context of

failure to pay arbitration awards. For

example, the following scenario is

possible: A customer is involved in a

trading dispute with a CBOE member.

Months later, the CBOE member

terminates its membership on the

Exchange. Weeks after the membership

termination, the customer files an

arbitration claim with the CBOE

Arbitration Department against the

former member.3 One and one-half years

after the membership termination, the

customer prevails in the arbitration

proceeding, and a monetary award is

32854 Federal Register / Vol. 66, No. 117 / Monday, June 18, 2001 / Notices

4 15 U.S.C. 78f(b)(1).

5 15 U.S.C. 78f(b)(6).

6 15 U.S.C. 78f(d)(1).

7 15 U.S.C. 78s(d). 8 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See letter from Robert P. Pacileo, Senior

Attorney, Regulatory Policy, PCX, to Nancy J.

Sanow, Assistant Director, Division of Market

Regulation (‘‘Division’’), SEC, dated March 22, 2000

(‘‘Amendment No. 1’’).

4Securities Exchange Act Release No. 42861 (May

30, 2000), 65 FR 36489.

5See letter from Hassan Abedi, Attorney,

Regulatory Policy, PCX, to Nancy J. Sanow,

Assistant Director, Division, SEC, dated January 5,

2001 (‘‘Amendment No. 2’’). In Amendment No. 2,

the Exchange made technical changes to the titles

of PCX Rule 6.47(b) and PCX Rule 6.47(c) Also, the

Exchange revised PCX Rule 6.47(b) to indicate that

subsections (4)–(6) had been added to the rule since

the time the proposed rule change was filed. See

Securities Exchange Act Release No. 42848 (May

26, 2000), 65 FR 36206 (June 7, 2000). Next, the

Exchange added ‘‘and Rule 6.73’’ to the last

sentence of PCX Rule 6.47(d). Finally, the Exchange

deleted the last two sentences of Commentary .05

to PCX Rule 6.47.

6The following OFPAs are proposed to be

renumbered as PCX rules: OFPA A–10, Subject:

Broker Responsibility on Print-Throughs, as PCX

Rule 6.46(d). In addition, the Exchange seeks to

imposed against the former member.

Nevertheless, the former member

subsequently fails to honor the

arbitration award. Because more than

one year has lapsed since the former

member’s termination of membership

and the Exchange did not provide

written notice of the commencement of

an inquiry into the failure to pay the

award, the Exchange could not assert

disciplinary jurisdiction over the former

member. The Exchange believes this is

problematic given the fact that the

dispute concerned Exchange-related

business, and that the award was

pursuant to an Exchange arbitration

proceeding.

While the Exchange notes that the

customer in the above example would

be able to seek enforcement of the award

in the court system, the inability of the

Exchange to even potentially take

disciplinary measures undermines the

credibility of the CBOE arbitration

forum. Therefore, the proposed rule

change would essentially eliminate the

notice requirement in Rule 17.1(b)

solely with respect to instances where

the Exchange seeks to take disciplinary

measures with respect to a former

member or person associated with a

member for failure to honor an

arbitration award pursuant to Chapter

18.

2. Statutory Basis

The Exchange believes that the

proposed rule change will strengthen

the Exchange’s arbitration process and

allow the Exchange to take action for

non-compliance with its arbitration

rules. Accordingly, the Exchange

believes that the proposed rule change

is consistent with the requirements of

the Act and the rules and regulations

thereunder applicable to a national

securities exchange, and, in particular,

with the requirements of sections

6(b)(1),4 6(b)(6),5 6(d)(1) 6 and 19(d) of

the Act.7

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange represents that the

proposed rule change will impose no

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 solicited

or received with respect to 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 self-regulatory

organization consents, the Commission

will:

A. by order approve the 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 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–CBOE–2001–14 and should be

submitted by July 9, 2001.

For the Commission, by the Division of

Market Regulations, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–15220 Filed 6–15–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44403; File No. SR–PCX–

99–45]

Self-Regulatory Organizations; Pacific

Exchange, Inc.; Order Granting

Approval of Proposed Rule Change

and Notice of Filing and Order

Granting Accelerated Approval to

Amendment No. 2 Relating to

Housekeeping Amendments to Rules

Governing Floor Brokers

June 8, 2001.

I. Introduction

On November 5, 1999, the pacific

Exchange, Inc. (‘‘PCX’’ or ‘‘Exchange’’)

submitted to the Securities and

Exchange Commission (‘‘Commission’’

or ‘‘SEC’’) 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 making

housekeeping amendments to the

Exchange’s rules governing floor

brokers. On March 23, 2000, the PCX

filed Amendment No. 1 to the proposed

rule change.3 The proposed rule change,

including Amendment No. 1, was

published for comment in the Federal

Register on June 8, 2000.4 On January 8,

2001, the PCX filed Amendment No. 2

to the proposed rule change.5 No

comments were received on the

proposal. This order approves the

proposal, as amended.

II. Description Proposal

In its proposed rule change, the

Exchange seeks to modify its options

floor broker rules by renumbering

certain Options Floor Procedure

Advices (‘‘OFPAs’’),6 clarifying existing