Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Notices 33731

5 15 U.S.C. 78s(b)(3)(A).

6 17 CFR 240.19b–4(f)(2).

7 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See Securities Exchange Act Release No. 43290

(February 2, 2001), 66 FR 9613.

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 16 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.

3See Securities Exchange Act Release No. 44033

(March 2, 2001), 66 FR 14239.

4The Commission has requested from the

Exchange an explanation of the surveillance

procedures it intends to implement to ensure that

specialists comply with the proposed rule as

amended. This approval order is contingent upon

the Commission’s finding that such surveillance

procedures are adequate.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Because the foregoing rule change

establishes or changes a due, fee, or

other charge imposed by the Exchange,

it has become effective pursuant to

Section 19(b)(3)(A) 5 of the Act and

subparagraph (f)(2) of Rule 19b-4 6

thereunder. 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 at

the Commission’s Public Reference

Room. Copies of such filing also will be

available for inspection and copying at

the principal office of the ISE. All

submissions should refer to File No.

SR–ISE–2001–13 and should be

submittd by July 16, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–15800 Filed 6–22–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44453; File No. SR–ISE–

01–03]

Self-Regulatory Organizations;

International Securities Exchange,

LLC; Order Granting Approval to

Proposed Rule Change Relating to

Market Maker Block Transactions

June 20, 2001.

On January 12, 2001, the International

Securities Exchange (‘‘ISE’’) 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 market makers to enter

block-size orders into the ISE’s Block

Order mechanism.

The proposed rule change was

published for comment in the Federal

Register on February 8, 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 allows ISE market

makers to participate in the Block Order

Mechanism to the same extent as

Electronic Access Members and thus to

more easily hedge or liquidate positions

resulting from their market making

activities on the ISE.

It is therefore ordered, pursuant to

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

proposed rule change (File No. SR–ISE–

01–03) 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. 01–15945 Filed 6–22–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44450; File No. SR–NYSE–

00–30]

Self-Regulatory Organizations; Order

Granting Approval to Proposed Rule

Change by the New York Stock

Exchange, Inc. Amending NYSE Rule

104

June 19, 2001.

I. Introduction

On June 29, 2000, the New York Stock

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

filed witht he Securities and Exchange

Commission (‘‘SEC’’ or ‘‘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 amend NYSE

Rule 104. On February 21, 2001, the

Exchange filed Amendment No. 1 to the

proposed rule change with the

Commission.

The proposed rule change, as

presented in Amendment No. 1, was

published for comment in the Federal

Register on March 9, 2001.3 No

comments were received on the

proposal. This order approves the

proposal, as amended.4

II. Description of the Proposal

Current, NYSE Rule 104 requires

specialists to obtain Floor Official

approval when purchasing on a direct

plus tick or selling on a direct minus

tick, or when purchasing on a zero plus

tick more than 50% of the stock offered.

These transactions are considered

destabilizing, and therefore require

Floor Official approval to effect. The

Exchange is proposing to amend NYSE

Rule 104.10(7) to permit specialists to

effect these destabilizing transactions,

under certain circumstances, to bring

the price of a listed foreign security into

parity with the price of a foreign

ordinary security.

Specifically, in order for a specialist

to effect a destabilizing transaction

under the proposed rule, the price of the

transaction to bring the security into

parity (a) must be based on the last sale

33732 Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Notices

5The proposed rule states that the home country

market for a security is the principal market.

However, the Exchange clarified in Amendment No.

1 that if a significant volume of the shares traded

in a security takes place outside the home country

market, another market will be considered the home

country market.

6The Exchange represents that currency exchange

rate information is displayed on the Floor of the

Exchange utilizing information from Reuters. While

specialists may also utilize other sources of vendorsupplied exchange rate information, they must keep

a record of the source of the exchange rate

information they utilize.

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

8 In approving this rule, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f).

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

1o 17 CFR 240.11b–1.

11The Commission requires all national securities

exchanges that utilize the services of specialist to

enact rules that require a specialist to engage in a

course of dealings for his own account to assist in

the maintenance of a fair and orderly market. 17

CFR 240.11b–1(a)(2)(ii).

12NYSE-Rule 104.10(1)–(3).

13NYSE Rule 104.10(4).

14See note 4, supra.

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

16See notes 4 and 14 and accompanying text,

supra.

price in the home country market,5 if

that market is open, or (b) if the home

country market is not open, the parity

price must be between the then current

bid and offer in the London (UK)

market, i.e., the London Stock

Exchange, or (c) must be based at any

time on changes in the home country—

U.S. dollar exchange rate.6 A

destabilizing transaction effected to

bring the price of a listed foreign

security into parity with the price of the

foreign ordinary security in any other

market would continue to require Floor

Official approval.

The proposed amendment also

clarifies that the relief afforded from

obtaining Floor Official approval for

destabilizing transactions to bring the

price of a listed foreign security into

parity with the price of the foreign

ordinary security is available only

where the NYSE is not the principal

market for the foreign security. As

previously noted, for purposes of this

rule, the home country market will be

considered the principal market for a

foreign security, unless a significant

volume of the shares traded in that

security take place outside that market.

The proposal also would permit, with

Floor Official approval, a specialist to

effect consecutive direct tick

destabilizing parity trades. The

Exchange’s proposed rule makes clear

that a specialist may not effect

consecutive direct tick destabilizing

trades unless these transactions are

effected to bring the price of a listed

foreign security into parity with the

price of the foreign ordinary security

and a Floor Official has approved the

transaction.

III. Discussion

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, and, in particular the

requirements of Section 6(b)(5) 7 that the

rules of an exchange be designed to

promote just and equitable principles of

trade, to remove impediments to and

perfect the mechanism of a free and

open market and a national market

system and, in general, to protect

investors and the public interest.8 The

Commission also finds that the

proposed rule change is consistent with

Section 11(b) 9 and Rule 11b–1

thereunder 10 in that it preserves a

specialist’s obligation to assist in the

maintenance of a fair and orderly

market.

The Commission believes that the

Exchange’s proposal to amend NYSE

Rule 104.10(7) to faciliate specialist

market making in foreign securities

traded on the NYSE is consistent with

the Act. The Exchange’s proposal is

limited to ‘‘parity’’ transactions on

direct destabilizing ticks to bring the

price of a listed foreign security into

parity with the price of a foreign

ordinary security. Moreover, the only

change being effected by the proposal is

that such transactions will not require

Floor Official approval as currently

mandated by NYSE Rule 104. As

discussed below, the Commission notes

that such transactions must still comply

with all of the other requirements of

NYSE Rule 104.

The Commission believes that it is

appropriate to allow specialists to effect

certain destabilizing transactions

without Floor Official approval because

these transactions can benefit the

market and public investors by

maintaining parity if there is an absence

of public orders on the NYSE while a

stock is active in its home country. The

requirement to secure Floor Official

approval could delay the specialist from

effecting such transactions, during

which time the price of the listed

foreign security could continue to move.

The Commission believes, therefore,

that the proposal is reasonable to

address the above situation.

Furthermore, the Commission

believes that the Exchange’s proposal

requiring a specialist to obtain Floor

Official approval to effect a consecutive

direct tick destabilizing parity trade is

reasonable to ensure that the specialist

does not set the price of a speciality

stock. Specifically, the Commission

expects a specialist to stabilize stock

price movements in the stocks traded by

the specialist unit by buying and selling

from its own account against the

prevailing trend of the market.

Moreover, the Exchange’s proposal

does not relieve specialists from the

general requirement of NYSE Rule 104

that they effect transactions that are

reasonably necessary for them to

maintain a fair and orderly market in

listed foreign securities.11 Specialists in

these securities remain subject to the

specific negative and affirmative

obligations imposed on them by NYSE

Rule 104. Thus, for example, consistent

with the maintenance of a fair and

orderly market, transactions for a

specialist’s own account should be such

that they maintain price continuity with

reasonable depth, and minimize the

effects of temporary disparities between

supply and demand.12 Furthermore, a

specialist’s quotation made for

transactions on his own account should

bear a proper relation to proceeding

transactions and anticipated succeeding

transactions.13

Finally, the Commission expects the

Exchange to issue a memorandum to all

specialists and Floor Officials to explain

the relief afforded by the change to

MTSE Rule 104. This memorandum will

provide specific reference to the

interaction between specialists’

destabilizing parity transactions and

certain Exchange rules, including the

requirement that specialists continue to

comply with NYSE Rule 123A.30 on

percentage orders, NYSE Rule 123A.40

on election of stop orders, NYSE Rule

127 on specialists trading as principal in

parity adjustment situations, and NYSE

Rule 440B on the short sale rule.

Specialists will also be informed that

destabilizing parity trades must be

reported on Form 81. The Commission

believes that the reporting requirement

is appropriate because it will assist the

Exchange in surveiling for violations of

the proposed rule.

As noted above, the Commission has

requested submission of adequate

surveillance procedures to assure

compliance with the rule. This approval

order is contingent on the submission of

such adequate surveillance

procedures.14

IV. Conclusion

IT IS THEREFORE ORDERED,

pursuant to Section 19(b)(2) of the

Act,15 that the proposed rule change

(SR–NYSE–00–30) is approved.16

Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Notices 33733

17 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See letter from Cindy L. Sink, Senior Attorney,

Regulatory Policy, PCX, to Marc F. McKayle,

Special Counsel, Division of Market Regulation,

Commission, dated February 16, 2001

(‘‘Amendment No. 1’’).

4See Securities Exchange Act Release No. 34–

44026 (Feb. 28, 2001), 66 FR 13822.

5See Securities Exchange Act Release No. 34–

43608 (Nov. 21, 2000), 65 FR 78822 (Dec. 15, 2000)

(Notice of File No. SR–PCX–00–25 proposing to

create a new electronic trading facility of the PCXE

called Archipelago Exchange).

6See Amendment No. 1 supra note 3.

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

8 15 U.S.C. 78f(b)(3).

9 15 U.S.C. 78f(b)(3).

10 In approving this rule, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation, 15

U.S.C. 78c(f).

11 15 U.S.C. 78f(b)(3).

12Securities Exchange Act Release No. 34–42759

(May 5, 2000), 65 FR 30654 (May 12, 2000) (‘‘PCXE

Order’’).

13The Commission has previously stated its belief

that the inclusion of public, non-industry

representatives on exchange oversight bodies is

critical to make certain that an exchange activity

works to protect the public interest in the exchange

governance process. The Commission believes that

public directors can provide unique, unbiased

perspectives, which should enhance the ability of

the PCXE Board to address issues in a

nondiscriminatory fashion and foster the integrity

of PCXE. See PCXE Order, supra note 12.

14 15 U.S.C. 78f(b)(3).

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

16 17 CFR 200.30–3(a)(12).

For the Commission, by the Division of

market Regulation, pursuant to delegated

authority.17

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–15851 Filed 6–22–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No 34–44442; File No. SR–PCX–

01–03]

Self-Regulatory Organizations, Pacific

Exchange, Inc.; Order Granting

Approval To Proposed Rule Change To

Permit an Officer or Director of a

Facility of PCX Equities To Serve on

the PCX Equities Board of Directors

June 18, 2001.

I. Introduction

On January 9, 2001, the Pacific

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

filed with 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 to amend the

bylaws of its wholly-owned subsidiary,

PCX Equities, Inc. (‘‘PCXE’’ or

‘‘Corporation’’) to permit an officer or

director of a facility to PCXE to serve on

its Board of Director (‘‘Board’’). On

February 20, 2001, PCX filed

Amendment No. 1 to the proposal.3 The

proposed rule change and Amendment

No. 1 was published for comment in the

Federal Register on March 7, 2001.4 The

Commission received no comments on

the proposal. This order approves the

proposed rule change, as amended.

II. Description of the Proposal

In a related filing, PCX has proposed

to create a new electronic trading

facility of the PCXE called Archipelago

Exchange.5 Under that proposal,

Archipelago Exchange, L.L.C. (‘‘Arca’’),

a subsidiary of Archipelago Holdings.

L.L.C. (‘‘Archipelago’’), would operate

as a facility of the PCXE pursuant to

Commission approval and various

agreements between PCX, PCXE and

Archipelago. In this proposal, the PCX

proposes to amend the PCXE Bylaws to

permit an officer or director of a facility

of PCXE to serve on its Board. The

proposed rule change would permit an

Archipelago officer or director to serve

on the PCXE Board.

Specifically, the proposed

amendment to the bylaw states that

‘‘(a)n officer or director of a facility of

the Corporation may serve on the Board

of Directors.’’ Although the proposal

would permit an officer or director of a

PCXE facility to serve on the PCXE

Board, the proposal will not alter any of

the PCXE Board composition or

nomination requirements.6 The PCXE

Board will continue to be comprised of

fifty percent public directors (i.e., not a

broker or dealer in securities or affiliate

thereof) and at least twenty percent of

the directors (but no fewer than two

directors) will be nominees of the ETP/

Equity ASAP Nomination Committee. In

addition, the PCXE Board will continue

to consist of not less then ten or more

than twelve directors.

III. Discussion

After careful review, 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. The Commission

finds that the proposed rule change is

consistent with section 6(b) of the Act,7

in general, and furthers the objectives of

section 6(b)(3),8 in particular, in that it

is consistent with the fair representation

principles set forth in the Act. Under

section 6(b)(3) of the Act,9 the rules of

an exchange must assure that its

members are fairly represented in the

selection of its directors and in the

administration of its affairs.10 The fair

representation requirement of section

6(b)(3) 11 allows statutory members to

have a voice in an exchange’s use of its

self-regulatory authority. Moreover, this

statutory requirement helps to ensure

that members are protected from unfair,

unfettered actions by an exchange

pursuant to its rule, and that, in general,

an exchange is administered in a way

that is equitable to all those who trade

on its market or through its facilities.

The proposed rule change will allow

an officer or a director of a facility of the

Corporation to be on the PCXE Board,

but will not alter the composition or

nomination requirements for the PCXE

Board that the Commission approved

and found to be consistent with the Act

in the order establishing the PCXE.12

Under the proposal, the PCXE Board

will continue to consist of fifty percent

public directors 13 and at least twenty

percent of the directors (but no fewer

than two directors) will be nominees of

the ETP/Equity ASAP Nomination

Committee. In addition, the PCXE Board

will continue to consist of not less than

ten or more than twelve directors.

Presently, the PCXE Board consists of

ten directors, however, the Exchange

has represented that requirements set

forth by the bylaws, rules and statues

will continue to be met whether the

Board’s size continues to be ten

directors or is expanded to twelve

directors. Thus, the PCXE Board will be

structured in a manner that satisfies

both the fair representation and public

participation requirements of section

6(b)(3) of the Act.14

IV. Conclusion

It is therefore ordered, pursuant to

section 19(b)(2) of the Act,15 that the

proposed rule change (SR–PCX–91–03)

is approved. For the Commission, by the

Division of Market Regulation, pursuant

to delegated authority.16

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–15799 Filed 6–22–01; 8:45 am]

BILLING CODE 8010–01–M