32870 Federal Register / Vol. 61, No. 123 / Tuesday, June 25, 1996 / Notices

10 15 U.S.C. 78s(b)(2) (1988).

11 17 CFR 200.30–3(a)(12) (1995).

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

advises members to consult Exchange

regulatory circulars for procedures

governing the simultaneous presence in

a trading crowd of participants in and

orders for the same joint account.

IV. Conclusion

It is therefore ordered, pursuant to

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

proposed rule change (SR–CBOE–96–

10) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–16067 Filed 6–24–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37327; File No. SR–CHX–

96–15]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Stock Exchange,

Incorporated Relating To Assignment

and Reassignment of NASDAQ/NMS

Issues

June 19, 1996.

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

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

May 16, 1996, the Chicago Stock

Exchange, Inc. (‘‘CHX’’ 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 selfregulatory organization. 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 Exchange proposes to amend

interpretation and policy .01 of Rule 1

of Article XXX relating to assignments

and reassignments of Nasdaq National

Market (‘‘NM’’) securities. Below is the

text of the proposed rule change.

Proposed new language is italicized:

CHICAGO STOCK EXCHANGE RULES

ARTICLE XXX

Specialists

Registration and Appointment

Rule 1.

* * * Interpretations and Policies

.01 Committee on Specialist Assignment

& Evaluation.

Assignment Function

I. Events Leading to Assignment Proceedings

Pursuant to Article XXX, Rules 1 and 8, the

Committee may, when circumstances require,

assign or reassign a security. Seven

circumstances may lead to the need for

assignment or reassignment of a security.

They are:

1. New listing or obtaining unlisted trading

privilege;

2. Specialist request;

3. Corporation request;

4. Split-up and/or merger of specialist

units;

5. Fundamental change of specialist unit;

6. Unsatisfactory performance action; or

7. Disciplinary action.

The following guidelines have been

adopted by the Committee for its use in the

assignment or reassignment of stocks among

specialists and co-specialists. These

guidelines set forth the general policy of the

Committee concerning the posting and

allocation of stocks. They are not, however,

rigid rules to be strictly followed regardless

of unique circumstances. These guidelines

form only the starting point of the

Committee’s deliberations; they will be

applied in light of the facts in each

individual case.

1. New Listing—Unlisted Trading Privilege.

(a) Initial listing of a security or obtaining

unlisted trading privileges from the S.E.C. for

a security will lead automatically to an

assignment proceeding..

(b) Nasdaq/NM Securities—Subsequent

Exchange Listing..

(i) Initial 100 stocks in Nasdaq/NM Pilot.

In the event that one of the initial 100

Nasdaq/NM Securities currently assigned to

a specialist unit under the Exchange’s

Nasdaq/NM Pilot Program becomes a Dual

Trading System issue, the Committee will

utilize the following guidelines in

determining whether the security should be

posted and re-assignment proceedings

should be initiated or whether the specialist

unit should be allowed to continue as the

specialist unit for the security:.

(A) If the specialist unit has designated the

security as a security that the specialist unit

desires to continue to trade as a Dual

Trading System Issue (‘‘Non-Reassignment

Issue’’), the Committee, under normal

circumstances, will not post the security or

initiate re-assignment proceedings. Each

specialist unit may designate five (5) issues

as Non-Reassignment Issues under this

paragraph (A), which designation may be

changed no more than once a year. In the

event that a Non-Reassignment Issue

becomes a Dual Trading System issue, the

total number of stocks that the specialist unit

can designate as a Non-Reassignment Issue

will be decremented. For example, if 2 NonReassignment Issues become Dual Trading

System Issues, the specialist will only be able

to designate a total of three (3) issues as NonReassignment Issues going forward..

(B) If the specialist unit has not designated

the issues as a Non-Reassignment Issue, the

specialist unit can nonetheless designate its

interest to continue to trade the issue as a

Dual Trading System Issue. Such designation

can only be made for one out of every three

Nasdaq/NM issues that the specialist unit

trades that becomes a Dual Trading System

Issue. If such designation is made by the

specialist, the Committee, under normal

circumstances, will not post the issue or

initiate re-assignment proceedings. If no such

designation is made by the specialist, the

Committee will post the issue and initiate reassignment proceedings. In such event, the

specialist unit trading the issue will not be

eligible to apply for the security in such

proceedings. The specialist unit cannot

accumulate the number of stocks for

designation. If the specialist unit does not

make such designation for any of three

consecutive issues that become Dual Trading

System issues, he or she cannot carry forward

the unused designation.

(ii) All other Nasdaq/NM Stocks. In the

event that a Nasdaq/NM Security (other than

a security described in (i) above) currently

assigned to a specialist unit becomes a Dual

Trading System issue within one year of the

date that the specialist unit began trading the

security, the security will be posted and the

Committee will initiate a re-assignment

proceeding for such security. In the event

that such security becomes a Dual Trading

System issue more than one year after the

date the specialist unit began trading the

security, the Committee will utilize the

following guidelines in determining whether

the security should be posted and reassignment proceedings commenced or

whether the specialist unit should be allowed

to continue as the specialist without posting

the security:

(A) If the specialist unit has designated the

security as a Non-Reassignment Issue, the

Committee, under normal circumstances, will

not post the security or initiate re-assignment

proceedings. Each specialist unit may

designate 20% of the Nasdaq/NM securities

(not including the securities described in (i)

above) assigned to such specialist unit as

Non-Reassignment Issues under this

paragraph (A), which designations may be

changed no more than once a year.

(B) If the specialist has not designated the

issue as a Non-Reassignment Issue, the

specialist may nonetheless designate its

interest to continue to trade the issue as a

Dual Trading System issue, and the

procedures set forth in (i)(B) above shall

apply to such issue.

(iii) Nothing contained in this paragraph

1(b) shall be construed to limit or modify the

authority of the Committee pursuant to the

other provisions of this Rule.

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

self-regulatory organization 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 self-regulatory organization has

prepared summaries, set forth in
Federal Register / Vol. 61, No. 123 / Tuesday, June 25, 1996 / Notices 32871

2See Securities Exchange Act Release Nos. 24407

(April 29, 1987), 52 FR 17349 (May 7, 1987) (Order

Approving Proposed Reporting Plan for National

Market System Securities Traded on an Exchange);

24406 (April 29, 1987), 52 FR 17495 (May 8, 1987)

(Order granting Unlisted Trading Privileges

(‘‘UTP’’) in 25 issues).

The Commission notes that prior to the

enactment of the UTP Act of 1994 (‘‘UTP Act’’),

Section 12(f) of the Act required exchanges to apply

to the Commission, and receive Commission

approval of the exchange’s application, before

extending UTP to a particular security. When an

exchange ‘‘extends UTP’’ to a security, the exchange

allows its members to trade the security as if it were

listed on the exchange. The Commission was

required to provide interested parties with at least

ten days notice of the application and the

Commission had to determine whether the

extension of UTP to each security named met

certain criteria. If so, the Commission published an

approval order in the Federal Register.

Accordingly, Exchange Interpretation and Policy

.01 of Rule 1 of Article XXX reflects this statutory

scheme in that it references ‘‘obtaining’’ UTP from

the Commission. The UTP Act, however, removed

the application, notice, and Commission approval

process from Section 12(f) of the Act. For this

reason, the Commission requests that the Exchange

submit a rule proposal that approximately amends

Exchange Interpretation and Policy .01 of Rule 1 to

reflect the current statutory scheme.

In addition, the Commission notes that NASDAQ/

NMS Securities are now known as Nasdaq/NM

Securities and, therefore, requests that the Exchange

submit a rule proposal that amends all appropriate

Exchange Rules and Interpretation to reflect this

new terminology.

3See Securities Exchange Act Release Nos. 28146

(Jun. 26, 1990), 55 FR 27917 (Jul. 6, 1990) (Order

Expanding the Number of Eligible Securities to

100); 36102 (Aug. 14, 1995), 60 FR 43626 (Aug. 22,

1995) (Order Expanding the Number of Eligible

Securities to 500).

4According to the Exchange, Dual Trading

System Issues are issues that are traded on the CHX

and listed on either the New York Stock Exchange

or American Stock Exchange. Telephone

conversation on June 5, 1996 between David T.

Rusoff, Attorney, Foley & Lardner, and George A.

Villasana, Attorney, Division of Market Regulation,

SEC.

Sections A, B, and C below, of the most

significant aspects of these statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

In 1987, the Commission approved

the trading of Nasdaq/NM Securities

(previously known as NASDAQ/NMS

Securities) on the Exchange on a pilot

basis.2 When these stocks were initially

allocated, the Exchange’s Committee on

Specialist Assignment and Evaluation

(‘‘CSAE’’) established certain guidelines

for assignment on Nasdaq/NM stocks.

These guidelines required a firm that

desired to trade these stocks to assign a

separate co-specialist that only trades

Nasdaq/NM stocks. As a result, only a

small number of firms could receive

allocations of Nasdaq/NM stocks. In part

because of this limitation, the CSAE also

determined to re-post any Nasdaq/NM

stocks when they list on an exchange.

Because of the recent expansion 3 of

the number (from 100 to 500) of Nasdaq/

NM securities that are eligible for

trading on the CHX, the Exchange

believes that a more equitable balance is

needed between the ability of the

current specialist firm in the Nasdaq

stock to continue to trade the stock after

it lists on an exchange and other

specialists that desire to trade the stock.

Thus, the purpose of the proposed rule

change is to amend the Exchange’s

allocation policy in order to achieve this

equitable balance.

Under the proposed policy, the 500

Nasdaq/NM stocks that are eligible for

trading on the CHX would be divided

into two groups: the 100 original issues

and the 400 recently added issues.

100 Original Issues

A specialist unit that traded one or

more of the original 100 Nasdaq/NM

issues would be permitted to designate

up to 5 of these issues as ‘‘NonReassignment Issues.’’ In the event that

a Non-Reassignment Issue became

listed, i.e., a Dual Trading System

issues,4 CSAE under normal

circumstances would not post the issue

for reassignment. Instead, the existing

Nasdaq/NM specialist unit would be

permitted to continue to trade the issue

assuming the proposed co-specialist for

the issue is qualified. A specialist unit

could change the issues it designates as

Non-Reassignment Issues once a year.

Every time a Non-Reassignment Issue

becomes a Dual Trading System issue,

however, the total number of stocks that

the specialist unit can designate as a

Non-Reassignment Issue is

decremented.

For all other Nasdaq/NM issues that

are part of the initial 100 issues, a

specialist unit can nonetheless

designate its interest to continue trading

the issue as a Dual Trading System

issue. This designation can only be

made at the time that an issue becomes

a Dual Trading System issue and can

only be made for one out of every three

issues that the specialist unit trades that

becomes a Dual Trading System issue. If

the designation is made, the CSAE,

under normal circumstances, will not

post the issue or initiate reassignment

proceedings. If a designation is not

made, the issue will be posted and

reassignment proceedings will

commence. The specialist unit that

traded the issue will not be eligible to

apply for the security in these

proceedings. Finally, if the specialist

unit does not make this designation for

any of three consecutive issues that

become Dual Trading System issues, he

or she cannot carry forward the unused

designation.

Other Nasdaq/NM Securities

A specialist unit that trades Nasdaq/

NM securities that are not part of the

original 100 issues will be permitted to

designate 20% of the Nasdaq/NM

securities assigned to that specialist unit

(excluding the original 100 Nasdaq/NM

securities) as Non-Reassignment Issues.

For all other Nasdaq/NM securities,

the specialist can designate its interest

to continue trading the issue as a Dual

Trading System issue. This designation

can also only be made at the time an

issue becomes a Dual Trading System

issue and can also only be made for one

out of every three issues that the

specialist unit trades that becomes a

Dual Trading System issue. This

designation will operate in the same

manner as the similar designation

described above for the original 100

issues.

Finally, this proposed rule change

does not limit or modify the authority

of the CSAE granted to the CSAE under

any other provision of Rule 1 of Article

XXX.

2. Statutory Basis

The proposed rule change is

consistent with Section 6(b)(5) of the

Act in that it is designed to promote just

and equitable principles of trade, to

remove impediments and to perfect the

mechanism of a free and open market

and a national market system, and, in

general, to protect investors and the

public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange 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 either

solicited or received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the 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:
32872 Federal Register / Vol. 61, No. 123 / Tuesday, June 25, 1996 / Notices

1See Letter from David T. Rusoff, Foley &

Lardner, to Elisa Metzger, SEC dated March 14,

1996 (‘‘Amendment No. 1’’).

2See Letter from Charles R. Haywood, Foley &

Lardner, to Elisa Metzger, SEC dated April 4, 1996

(’’Amendment No. 2’’).

3See Letter from David Rusoff, Foley & Lardner,

to Elisa Mezger, SEC dated May 31, 1996

(‘‘Amendment No. 3’’).

4The Exchange will use the Series 7A

Examination that was approved in Securities

Exchange Act Release No. 32698 (July 29, 1993), 58

FR 41539 (File No. SR–NYSE–93–10). The

Exchange will use the Series 7B Examination that

was approved in Securities Exchange Act Release

No. 34334 (July 8, 1994) 59 FR 35964 (File No. SR–

NYSE–94–13). The Series 7A and 7B Examinations

for CHX members will be administered by the

National Association of Securities Dealers, Inc.

(‘‘NASD’’).

(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.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549. 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 principle office of the Exchange. All

submissions should refer to File No.

SR–CHX–96–15 and should be

submitted by July 16, 1996.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–16165 Filed 6–24–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37324 File No. SR–CHX–

96–11]

Self-Regulatory Organizations; Notice

of Filing of Amendment No. 3 to

Proposed Rule Change by the Chicago

Stock Exchange, Inc. Relating to

Examinations

June 18, 1996.

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

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on March 6, 1996, the

Chicago Stock Exchange, Inc. (‘‘CHX’’ or

‘‘Exchange’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) the proposed

rule change, on March 18, 1996, filed

Amendment No. 1 to the proposed rule

change,1 and on April 4, 1996, filed

Amendment No. 2 to the proposed rule

change.2 The original filing, as amended

by Amendment No. 1 and Amendment

No. 2, was published for comment in

Securities Exchange Act Release No.

37067 (April 4, 1996), 61 FR 16274

(April 12, 1996). On June 3, 1996, the

Exchange submitted to the Commission

Amendment No. 3 to the proposed rule

change.3 The proposed rule change, as

amended, is described in Items I, II and

III below, which Items have been

prepared by the self-regulatory

organization. The Commission is

publishing this notice to solicit

comments on the proposed rule change,

as amended, from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

In the original filing as amended by

Amendments Nos. 1 and 2, the

Exchange proposed to amend Rules 2

and 3 of Article VI (and the

interpretations and policies thereunder)

to clarify existing rules, adopt a new

Floor Membership Exam, adopt a new

Market Maker Exam, adopt a new CoSpecialist Exam, and adopt

examinations applicable to persons

conducting a customer business from

the CHX trading floor. The Exchange

also proposed to adopt the Content

Outline for the Examination Module for

Floor Members Engaged in a Public

Business with Professional Customers

and the Content Outline for the

Examination Module for Floor Clerks of

Members engaged in a Public Business

with Professional Customers

(collectively, the ‘‘Content Outline’’).4

Finally, the Exchange proposed

technical changes to Rule 2 of Article

VI, Registration and Approval of

Member and Member Organization

Personnel, including a definition of

‘‘control person.’’ Amendment No. 3

clarifies the proposed amendments to

Rule 2 of Article VI.

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

self-regulatory organization 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 self-regulatory organization has

prepared summaries, set forth in Section

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

As amended, the proposed rule

change clarifies current Exchange

requirements for registering personnel

and makes technical changes to the

registration procedure. The proposed

rule change adds a definition of ‘‘control

person’’ to Article VI, Rule 2 and

specifies that all such persons at

members and member organizations

must be acceptable to the Exchange. A

‘‘control person’’ is defined as:

[A] person with the power, directly or

indirectly, to direct the management or

policies of a company whether through

ownership of securities, by contract or

otherwise, and at a minimum, means all

directors, general partners or officers

exercising executive responsibility (or having

similar status or functions), all persons

directly or indirectly having the right to

having the power to sell or direct the sale of

5% or more of a class of voting securities, or

in the case of a partnership, having the right

to received upon dissolution, as having

contributed, 5% or more of the capital.

In the original filing, the proposed

amendment required that all control

persons and certain shareholders be

acceptable to the Exchange. Amendment

No. 3 deleted the reference to ‘‘certain

shareholders’’ and amended the

definition of ‘‘control person’’ to

include those persons who directly or

indirectly have the right to vote or sell

5% or more of a class of voting security,

as opposed to 10% or more of a class of

voting security. Amendment No. 3 also

clarified that in the case of a

partnership, a ‘‘control person’’ would

include those persons who have the

right to receive upon dissolution, as

having contributed 5%, as opposed to

10%, or more of the capital.

Rule 2 of Article VI States that

‘‘[e]very other employee of a member or

member organization must also be