33728 Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Notices

12Rule 11a2–2(T)(a)(2) provides, in brief, that a

member of an exchange ‘‘initiating member’’) may

effect a transaction on the exchange for its own

account, the account of an associated person, on an

account over which it or an associated person

exercises investment discretion of (i) the transaction

is executed on the floor of the exchange or through

its facilities by a member that is not associated with

the initiating member; (ii) the order is transmitted

from off the exchange floor; (iii) neither the

initiating member nor any associated person

participates in the execution of the order after it has

been transmitted; and (iv) in transactions for

accounts over which the member or associated

person exercises investment discretion, neither the

member nor associated person retains

compensation in connection with effecting the

transaction unless expressly provided otherwise in

writing by the person authorized to transact

business for the account. 17 CFR 240.11a2–

2(T)(a)(2).

13See 17 CFR 140.11Ac1–1(c)(2).

14 15 U.S.c. 78s(b)(2).

15See Securities Exchange Act Release No. 44013

(February 28, 2001), 66 FR 13816 (March 7, 2001).

16See. e.g., Securities Exchange Act Release No.

44017 (February 28, 2001), 66 FR 13820 (March 7,

2001) (ordering approving File No. SR–ISE–00–20).

17 15 U.S.C. 78s(b)(2).

18 17 CFR 200.30–3(a)(12)

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

2 17 CFR 240.19b–4.

the course of time it takes to process

orders manually.

Moreover, the Amex proposal will

offer investors an additional benefit by

allowing their orders in many cases to

be executed at better prices than the

NBBO. At the same time, orders

entering the system are protected

against receiving automatic execution at

prices inferior the NBBO. A further

advantage of the proposed system is that

by executing trades automatically, AutoEx will facilitate comparison and

settlement of trades, thereby enhancing

efficiency.

The Commission believes that the

authority granted to the Auto-Ex

Enhancements Committee to change the

minimum and maximum size of AutoEx orders and to adjust the price

improvement increments to be offered

by the system, based on changing

circumstances and variables and the

balancing of various interests as noted

above, is a reasonable means of helping

ensure flexible, fair, and orderly

operation of the system.

As discussed above, the proposed rule

change bars the successive entry of

Auto-Ex orders on behalf of the same

person within a 30-second interval. The

Commission believes that this

restriction should help reduce market

risk exposure and, at the same time,

provide a clear and objective standard

for members and member organizations

with respect to the entry of orders

otherwise eligible for Auto-Ex on Behalf

of the same person.

The Commission further believes that

the proposed methodology for the

allocation of Auto-Ex orders among the

specialist and ROTs fairly assigns the

specialist a certain guaranteed

percentage of each order in recognition

of the specialist’s contribution to the

market and the extra risks and burdens

the specialist assumes. At the same

time, the allocation methodology

preserves a sufficient share of incoming

orders for execution by the ROTs in the

crowd to assure that they can maintain

their competitive presence in the

market.

The Amex represents that a member

that submits an order into Auto-Ex,

including an order for its own account,

will have no control over its execution,

neither when the order is automatically

executed nor when it is routed to the

specialist. The Amex further represents

that the specialist receiving the order

will be unable to tell whether that order

is for the account of a member or a

customer. The Commission thus

believes that transactions effected under

the proposed rule change will meet the

criteria set forth in Rule 1a2–2(T)(a)(2)

under the Act.12

Finally, the Commission notes that

the proposed rule change provides that

Auto-Ex will be unavailable in certain

situations. In approving the proposal,

the Commission notes that in no way

does Amex Rule 128A exempt market

participants from their obligations

under Rule 11Ac1–1(c)(2) (the ‘‘Firm

Quote Rule’’).13

The Amex has requested that the

Commission find good cause pursuant

to Section 19(b)(2) of the Act 14 for

approving the proposed rule change

prior to the 30th day after publication in

Federal Register. The Amex is

concerned that it would be placed at

competitive disadvantage relative to

other market centers—which, it states,

have already, or soon will, offer

automatic execution of ETF orders—if it

is not permitted to promptly begin

offering Auto-Ex for ETFs.

The Commission notes, as the Amex

points out, that the Exchange will be

using the same Auto-Ex system with

which it has long provided automatic

execution for eligible options orders. In

addition, the Commission notes that a

recent rule change to Amex’s Auto-Ex

system for options provides for price

improvement and certain ordereligibility parameters to be determined

by the same Committee that would

decide price improvement and ordereligibility parameters in the ETC

context.15 The Commission also

recently considered the issue of

restricting successive entry of orders by

members of an exchange on behalf of

the same beneficial owner within a

specified time period, and approved

exchange rules that do so.16

The Commission believes that the

proposed rule change extending AutoEx to ETFs and implementing various

other features, including price

improvement and the prohibition on

members submitting orders for the same

person within 30 seconds of each other,

raises no significant new regulatory

issues. Moreover, Amex is proposing

Auto-Ex for ETFs as six-month pilot

program, which will enable the

Exchange and the Commission to

evaluate its operation before the

program can be renewed. The

Commission therefore finds good cause

to accelerate approval of the proposed

rule change prior to the thirtieth day

after the date of publication of notice of

filing thereof in the Federal Register.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,17 that the

proposed rule change (File No. SR–

Amex–2001–29) be, and hereby is,

approved on an accelerated basis as a

pilot program through December 19,

2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.18

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–15850 Filed 6–22–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44443; File No. SR–CBOE–

2001–22]

Self-Regulatory Organizations; Notice

of Proposed Rule Change by the

Chicago Board Options Exchange,

Incorporated Relating to Permanent

Approval of the Pilot Program to

Eliminate Position and Exercise Limits

for OEX, SPX, and DJX Index Options

June 18, 2001.

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

Securities Exchange Act of 1934,1 and

Rule 19b-4 thereunder,2 notice is hereby

given that on May 14, 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 Commission

is publishing this notice to solicit

comments on the proposed rule change

from interested persons.

Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Notices 33729

3See Securities Exchange Act Release No. 40969

(January 22, 1999), 64 FR 49111 (Feb. 1, 1999)

(approving SR–CBOE–99–23) (‘‘Approval Order’’).

4By separate filing, CBOE requested and received

a four-month extension to allow for the

continuation of the Pilot Program while the

Commission considers whether to approve it on a

permanent basis. The Pilot Program now expires on

May 22, 2001. See Exchange Act Release No. 43867

(January 22, 2001), 66 FR 8250 (January 30, 2001)

(approving SR–CBOE–01–01).

5 In the Approval Order, the Commission stated,

‘‘CBOE will provide the Commission with a report

detailing the size and different types of strategies

employed with respect to positions established in

those classes not subject to position limits. In

addition, the report will note whether any problems

resulted due to the no limit approach and any other

information that may be useful in evaluating the

effectiveness of the pilot program. The Commission

expects that CBOE will take prompt action,

including timely communication with the

Commission and other marketplace self-regulatory

organizations responsible for oversight of trading in

component stocks, should any unanticipated

adverse market effects develop.’’ 6Letter from Patricia L. Cerny, Director, Office of

Trading Practices, CBOE, to Elizabeth King,

Division of Market Regulation, Commission, dated

December 21, 2000. 7 15 U.S.C. 78f(b).

8 15 U.S.C. 78f(b)(5).

9 15 U.S.C. 78k–1.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange seeks permanent

approval of the pilot program that

provides for the elimination of position

and exercise limits for OEX, SPX, DJX

index options as well as for FLEX

options overlying these indexes. 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

Exchange 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

Exchange has prepared summaries set

forth in sections A, B, and C below, of

the most significant parts of such

statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

On January 22, 1999, the Commission

approved a two-year pilot program

(‘‘Pilot Program’’) that allowed for the

elimination of position and exercise

limits for options on the S&P 500 Index

(‘‘SPX’’), S&P 100 Index (‘‘OEX’’), and

Dow Jones Industrial Average (‘‘DJX’’) as

well as for FLEX options overlying these

indexes.3 The purpose of this proposed

rule change is to request approval of the

Pilot Program on a permanent basis.4

The Approval Order required the

Exchange to submit a report to the

Commission on the status of the Pilot

Program so that the Commission could

use this information to evaluate any

consequences of the program and to

determine whether to approve the

elimination of position and exercise

limits for these products on a permanent

basis.5 The CBOE submitted the

required report to the Commission on

December 21, 2000.6 The report

indicates that during the review period,

CBOE did not discover any instances

where an account maintained an

unusually large unhedged position. In

fact, the data from the report found that

only 12 accounts established positions

in excess of 10% of the standard limit

applicable to each index at the time the

Pilot Program was approved. These

positions were all in SPX and most were

established by firms and market

makers.; All of the accounts were

hedged, although to different degrees.

Most important, CBOE’s analysis did

not discover any aberrations caused by

large unhedged positions during the life

of the Pilot Program has been positive

and, thus requests that the elimination

of position and exercise limits for the

above-referenced options be approved

on a permanent basis.

2. Statutory Basis

The Exchange believes that the

proposed rule change is consistent with

Section 6(b) of the Act 7 in general and

in particular with Section 6(b)(5) 8 in

that it is designed to promote just and

equitable principles of trade as well as

to protect investors and the public

interest, by allowing for the permanent

approval of a Pilot Program that has

enabled more business to be transacted

on the exchanges that might otherwise

have been transacted in the OTC market

without the benefit of Exchange

transparency and the guarantee of The

Options Clearing Corporation.

The Exchange also believes that the

proposed rule change is consistent with

section 11A of the Act 9 in that it will

enhance competition by allowing the

Exchange to compete better with the

OTC market in options and with entities

not subject to position limit rules.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The CBOE does not believe that the

proposed rule change will impose any

burden on competition not necessary or

appropriate in furtherance of the

purposes of the Exchange 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

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 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 it 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 the File No.

SR–CBOE–2001–22 and should be

submitted by July 16, 2001.

33730 Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Notices

10 17 CFR 200.30–3(12).

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

2 17 CFR 240.19b–4.

3See Securities Exchange Act Release No. 44289

(May 10, 2001), 66 FR 27188.

4 In approving this proposed rule change, the

Commission notes that it has considered the

proposed rule’s impact on efficiency, competition,

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

5 15 U.S.C. 78f.

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

7 15 U.S.C. 78s(b)(2).

8 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3 15 U.S.C. 78f(b).

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

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–15801 Filed 6–22–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44454; File No. SR–CHX–

2001–09]

Self-Regulatory Organizations; The

Chicago Stock Exchange, Inc.; Order

Granting Approval to Proposed Rule

Change To Allow Floor Brokers To

Clear a Specialist’s Post by Telephone

June 20, 2001.

By April 23, 2001, the Chicago Stock

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

filed with the Securities and Exchange

Commission (‘‘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 to permit floor brokers to clear

a specialist’s post by telephone.

The proposed rule change was

published for comment in the Federal

Register on May 16, 2001.3 The

Commission received no comments on

the proposal.

The Commission finds 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 4 and, in particular, the

requirements of Section 6 of the Act 5

and the rules and regulations

thereunder. The Commission finds

specifically that the proposed rule

change is consistent with Section 6(b)(5)

of the Act 6 because it will expand the

ways in which floor brokers may probe

the CHX’s market, allowing for greater

speed and efficiency, while continuing

to satisfy the purpose of CHX Article

XX, Rule 10.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,7 that the

proposed rule change (SR–CHX–2001–

09) be, and it hereby is, approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–15946 Filed 6–22–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44438; File No. SR–ISE–

2001–13]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

International Securities Exchange LLC

Relating to Fee Changes

June 18, 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 15,

2001, the International Securities

Exchange LLC (‘‘ISE’’ 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 Exchange.

The Commission is publishing this

notice to solicit comments on the

proposed rule change from interested

persons.

1. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The ISE is proposing the following

changes to its fee schedule: (i) To extend

its customer fee waiver; (ii) to provide

for waivers of fees for multiple ‘‘Click’’

terminals; (iii) to impose certain

‘‘cabinet’’ and ‘‘router’’ fees; and (iv) to

provide discounts for multiple

‘‘session’’ fees.

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

ISE 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 ISE 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 effect the following changes

in the ISE’s fees.

Customer fee waiver: the ISE currently

waives customer transaction fees. This

waiver is scheduled to expire on May

26, 2001. Because customer fee waivers

continue to be part of the competitive

landscape, the ISE is proposing to

extend this waiver through May 2002.

‘‘Click’’ fee waiver: ‘‘Clicks’’ are ISE

order-entry terminals. The Exchange is

proposing a one-year pilot program

waiving all terminal and related fees for

multiple Click order-entry terminals.

While the ISE has provided multipleterminal discounts for Clicks, it believes

that a more aggressive program of

waiving all fees for the second and

subsequent terminals will help generate

significant incremental order flow and

enhance the Exchange’s competitive

posture.

Cabinet and router fees: The ISE is

proposing: (1) a $2,000 fee to remove

computer cabinets from member firms

and (2) a $500 fee for installing or

removing routers. These fees will

recoup the ISE’s costs.

‘‘Session’’ fees: The ISE currently

charges market makers $1,000 for each

‘‘log-on’’ session. Because some

members now have a high number of

such sessions, it is proposing a

multiple-session discount to $750 for

the 21st to 40th session and $500 per

session thereafter.

2. Statutory Basis

The Exchange believes that its

proposal to amend its fee schedule as

specified above is consistent with

Section 6(b) 3 of the Act, in general, and

Section 6(b)(4) of the Act,4 in particular,

because it provides for the equitable

allocation of reasonable dues, fees and

other charges among its members and

other persons using its facilities.

B. Self-Regulatory Organization’s

Statement of the Burden on Competition

The Exchange does not believe that

the proposed rule change will impose

any burden on competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Written comments were neither

solicited nor received.