Federal Register / Vol. 66, No. 242 / Monday, December 17, 2001 / Notices 65015

7Notwithstanding the closure of the MBS

Division, DTC will maintain the documents and

records of the MBS Division in accordance with the

regulations promulgated under Section 17(a) of the

Exchange Act, 15 U.S.C. 78q.

8A copy of this notice is attached as Exhibit 2 of

DTC’s filing, which is available through the

Commission’s Public Reference Section or through

DTC.

9Attached as Exhibit 2 of DTC’s filing are the

following DTC Important Notices relating to the

GNMA conversion: Nos. 0057 (June 1, 2000); 1483

(Feb. 15, 2001) (Conversion Plan attached); 1937

(May 24, 2001); 2158 (June 21, 2001); 2159 (June 19,

2001); and 2198 (July 5, 2001). These documents are

available through the Commission’s Public

Reference Section or through DTC.

10 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

participants expressed an interest in

using such a service. In light of the

development costs involved and the

limited interest expressed by its

participants, DTC’s Board of Directors

concluded that DTC’s resources would

be better applied to projects that serve

a wider participant base.

DTC will notify the MBS Division’s

participants and the Commission upon

the completion of the closure of the

MBS Division.7

DTC believes that the proposed rule

change is consistent with the

requirements of section 17(A)(b)(3)(A) of

the Act and the rules and regulations

thereunder applicable to DTC because it

promotes and accurate clearance and

settlement of securities transactions.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

DTC perceives no impact on

competition by reason of the proposed

rule change.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

DTC solicited written comments from

its participants on GNMA’s proposal to

move its securities to Fedwire in DTC

Important Notice No. 0057 dated June 1,

2000.8 Participants responded by

telephone and through discussions at

meetings of the BMA, the GNMA

Settlement Task Force formed under the

auspices of the BMA, and DTC’s

Operations and Planning Committee.

The consensus at these meetings and

discussions was that DTC should

support the proposed conversion to

Fedwire and that GNMA securities

should remain eligible for processing at

DTC to the same extent as are other

Fedwire eligible securities currently

processed at DTC. DTC is a member of

the GNMA Conversion Subcommittee

and has worked closely with the BMA,

GNMA, the Federal Reserve Banks, and

interested industry members to facilitate

the transition to Fedwire. DTC has

issued Important Notices to DTC and

MBS Division participants detailing the

conversion processing flows and testing

procedures.9

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within thirty-five 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

ninety days of such date if it finds such

longer period to be appropriate and

publishes its reasons for so filing 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 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 rue 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. Copies of such filing

will also be available for inspection and

copying at DTC’s principal office. All

submissions should refer to File No.

SR–DTC–2001–14 and should be

submitted by January 7, 2002.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–30958 Filed 12–14–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–45144; File No. SR–PCX–

2001–45]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Pacific Exchange, Inc. Relating to

Inactive Lessors’ Eligibility to Serve on

the Board of Governors

December 10, 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 December

7, 2001, the Pacific Exchange, Inc.

(‘‘PCX’’ of ‘‘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.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The PCX proposes to amend Article

III, Section 2(b) of the PCX Constitution

and PCX rule 1.1(h) to provide for the

eligibility of inactive lessors to serve on

the PCX Board of Governors (‘‘Board’’).

Below is the text of the proposed rule

change. Text in italics indicates material

to be added.

* * * * *

Article III

Eligibility of Governors

SEC. 2(b). Any member, allied

member or person who is an officer or

director of the parent or subsidiary

corporation of a member firm, or a

general partner in a partnership which

owns or is wholly owned by a member

firm, or an officer or director of a

member firm or of a participant firm of

any subsidiary of the Exchange

performing depository or clearing

functions, or an officer, director or

general partner of the parent or a

subsidiary corporation of such clearing

member firm or depository participant

firm, or an inactive lessor or any person

not affiliated with a broker or dealer in

securities is eligible to be elected as a

member of the board of Governors. Of

the governors, in each of the classes

specified in Sec. 2(a), above, at least one

shall be a member of the Exchange, at

least one shall be an office member or

office allied member of the Exchange,

65016 Federal Register / Vol. 66, No. 242 / Monday, December 17, 2001 / Notices

3See PCX Rule 1.1(h).

4The term ‘‘member’’ is defined as ‘‘a natural

person in whose name the membership is held and

who is in good standing.’’ See PCX Constitution,

Article V, Section 3. The term ‘‘floor member’’ is

defined as ‘‘a member of the Exchange, who meets

the qualification requirements for the purpose of

exercising full trading privileges on a floor of the

Exchange on behalf of a member organization.’’ See

PCX Constitution, Article V, Section 8.

5The term ‘‘allied member’’ refers to a nonmember who is one of the following: ‘‘(1) An

employee of a member firm who controls such

member firm, or (2) an employee of a member firm

corporation who is a director or a principal

executive officer of such corporation, or (3) an

employee of a member firm limited liability

company who is a manager or a principal executive

officer of such limited liability company, or (4) a

general partner in member firm partnership; and

who has been approved by the Exechange as an

allied member.’’ See PCX Constitution, Article V,

Section 6.

6 ‘‘Member firm’’ is defined as ‘‘a partnership,

corporation, limited liability company or other

organization in good standing who owns or leases

a membership or upon whom a member has

conferred privileges of membership pursuant to and

in compliance with Article VIII of this

Constitution.’’ See PCX Constitution, Article V,

Section 4 and PCX Rule 1.1(j).

7The PCX states that the proposed language in

PCX Rule 1.1(h) to clarify the role of inactive lessors

on the Board is intended as an interpretation of

Article III, Section 2(b) of the PCX Constitution.

Telephone conversation between Michael D.

Pierson, Vice President, Regulatory Policy, PCX,

and Kelly M. Riley, Senior Special Counsel and

Cyndi N. Nguyen, Attorney, SEC on December 5,

2001.

8See CBOE Constitution, Article VI, Section 6.1.

and at least three shall be

representatives of the public and shall

not be, or be affiliated with, a broker or

dealer in securities. There shall be at

least two floor members on the board at

all times, one of which shall be an

Equity Trading Permit Holder, and

Equity-ASAP Holder or an Allied

Person of an ETP or an Equity ASAP

Holder.

* * * * *

Inactive Lessor

Rule 1.1(h). Inactive Lessor: The term

‘‘inactive lessor’’ shall refer to a natural

person, firm or other such entity as the

Board may approve, who owns or

inherits a membership for the sole

purpose of acting as a lessor. For

purposes of the composition of the

Board of Governors, inactive lessors are

not deemed to be representatives of the

public.

* * * * *

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In the filing with the Commission, the

PCX 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 PCX 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 is proposing to amend

the PCX Constitution and Rules to

clearly establish that PCX inactive

lessors are eligible to serve on the

Exchange’s Board. An inactive lessor is

defined in the PCX Constitution as ‘‘a

natural person, firm or other such entity

as the Board may approve, who owns or

inherits a membership for the sole

purpose of acting as a lessor.’’ 3

Previously, some of the PCX’s inactive

lessors had requested to have their

interests represented on the Board. A

number of these inactive lessors have

presented their names to the PCX’s

Nominating Committee so that they may

be nominated and stand for election to

the Board. The Exchange believes that

permitting these individuals to serve on

the Board is appropriate.

The PCX requirements relating to the

eligibility of persons to serve on the

Board is set forth in Article III, Section

2(b) of the PCX Constitution, which

provides, in part, as follows:

‘‘Any member,4 allied member 5 or

person who is an officer or director of

the parent or subsidiary corporation of

a member firm,6 or a general partner in

a partnership which owns or is wholly

owned by a member firm, or an officer

or director of a member firm or of a

participant firm of any subsidiary of the

Exchange performing depository or

clearing functions, or an officer, director

or general partner of the parent or a

subsidiary corporation of such clearing

member firm or depository participant

firm, or any person not affiliated with a

broker or dealer in securities is eligible

to be elected as a member of the Board

of Governors.’’ (Footnotes added)

Article III, Section 2(a) of the PCX

Constitution provides that the

Exchange’s elected Governors are

divided into three classes, each of

which is composed of seven Governors.

At each Annual Meeting of the PCX, a

new class (consisting of seven

Governors) is elected. Pursuant to

Article III, Section 2(b), of the seven

Governors elected at each Annual

Meeting, at least one must be a member

of the Exchange; at least one must be an

office member or office allied member of

the Exchange; and at least three must be

representatives of the public. This

leaves two slots per class (and a total of

six slots on the Board at any given time)

that may be filled by other qualified

persons. Under the proposal, an inactive

lessor would be qualified to fill one of

these open slots. However, the Exchange

notes that Article III, Section 2(b)

requires that these open slots must

otherwise be filled when necessary to

meet other requirements set forth in

Section 2(b), namely that there must be

at least two floor members on the Board

at all times (one of which must be an

Equity Trading Permit Holder, an

Equity-ASAP Holder or an Allied

Person of an ETP Firm or an Equity

ASAP Holder) and that, beginning in the

year 2001, there must be eleven

representatives of the public on the

Board at all times.

The proposed rule change is not

intended to permit any change to the

number of public representatives

eligible to serve on the PCX’s Board.

The Exchange represents that it will not

place an inactive lessor on the Board in

order to fill a slot designated for a

‘‘representative of the public.’’

According, the Exchange proposes to

amend PCX Rule 1.1(h), which defines

the term ‘‘inactive lessor,’’ to clarify that

for purposes of the composition of the

PCX’s Board, inactivee lessors are not

deemed to be representatives of the

public.7

Inactive lessors have an interest in the

activities of the Exchange because they

have a financial interest in the Exchange

by virtue of owning a membership. The

value of their investments is directly

tied to decisions made by the Board.

The PCX Constitution, Article III,

Section 2(c), states that care should ‘‘be

taken to have the various interest of the

membership represented on the Board

of Governors.’’

Finally, the Exchange notes that the

Constitution of the Chicago Board

Options Exchange (‘‘CBOE’’) has a

similar provision that permits service by

a ‘‘lessor director’’ on its Board of

Directors. Specifically, the CBOE

provision permits service by a member

‘‘who directly or indirectly owns and

controls a membership with respect to

which he acts solely as lessor and who

is not actively engaged in business as a

‘person associated with a broker-dealer’

as those terms are defined in the

Securities Exchange Act of 1034.

***’’ 8

Federal Register / Vol. 66, No. 242 / Monday, December 17, 2001 / Notices 65017

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

10 15 U.S.C. 78f(b)(5).

11 17 CFR 200.30–3(a)(12).

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

2ECNs shall mean any electronic system that

widely disseminates to third parties orders entered

therein by an Exchange market maker or over-thecounter (‘‘OTC’’) market maker, and permits such

orders to be executed against in whole or in part;

except that the term ECN shall not include: any

system that crosses multiple orders at one or more

specified times at a specified price set by the ECN,

algorithm, or by any derivative pricing mechanism

and does not allow orders to be crossed or executed

against directly by participants outside of such

times; or, any system operated by or on behalf of

an OTC market maker or exchange market maker

that executes customer orders primarily against the

account of such market maker as principal, other

than riskless principal.

3Certain provisions of the SCCP Fee Schedule

will not apply to ECNs because they apply to

specialists and/or relate to margin financing, such

as specialist discount, margin account interest, P&L

statements charges, and buy-ins.

4Because this volume requirement only applies

to volume in the twelfth month (meaning to the

thirteenth month’s fee), actually waiving SCCP fees

that month would necessarily require an extension

of the pilot program beyond the initial 12 months.

In the extension, SCCP would address whether the

targets would continue to be monthly.

5The Commission has modified the text of the

summaries prepared by SCCP.

2. Statutory Basis

The Exchange believes that the

proposed rule change is consistent with

Section 6(b) of the Act 9 in general, and

furthers the objectives of Section 6(b)(5)

of the Act 10 in particular, in that it is

designed to promote just and equitable

principals of trade and 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 burden on competition that is not

necessary or appropriate in the

furtherance of the purposes of the 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 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 PCX. All

submissions should refer to File No.

SR–PCX–2001–45 and should be

submitted by January 2, 2002.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–30957 Filed 12–14–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–45145; File No. SR–SCCP–

2001–01]

Self-Regulatory Organizations; Stock

Clearing Corporation of Philadelphia;

Notice of Filing and Immediate

Effectiveness of a Proposed Rule

Change Relating To Adopting a Fee

Schedule for Electronic

Communications Networks

December 10, 2001.

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

Securities Exchange Act of 1934

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

January 23, 2001, the Stock Clearing

Corporation of Philadelphia (‘‘SCCP’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’) and on

June 25, 2001, and November 27, 2001,

amended the proposed rule change as

described in Items I, II, and III, below,

which Items have been prepared by

SCCP. 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

SCCP has adopted a new fee schedule

for SCCP participants for trades

executed on the Philadelphia Stock

Exchange, Inc. (‘‘Phlx’’) for Electronic

Communications Networks (‘‘ECNs’’).2

The new fee schedule will operate as a

pilot program for one year, wherein

SCCP proposes to waive certain dues,

fees and charges, including trade

recording fees, value fees, treasury

transactions charges but not account

fees, research fees, computer

transmission/tapes charges, or

miscellaneous charges on SCCP’s fee

schedule.3

After the initial pilot period, an ECN

will be eligible for the new fee schedule

only if it has achieved average daily

equity volume on the Phlx of at least

5,000 trades and 5,000,000 shares in the

twelfth month after the ECN first

became subject to the ECN fee

schedule.4 If the targeted amount is not

met, the ECN will be subject to the

SCCP fee schedule in effect at that time.

After this pilot program ends in 2002,

SCCP will make another rule filing with

the Commission to establish new fees

based on volume thresholds for ECNs.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

SCCP 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. SCCP has prepared

summaries, set forth in sections A, B,

and C below, of the most significant

aspects of such statements.5

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

The proposed changes to SCCP’s fee

schedule are intended to attract equity

order flow from ECNs to Phlx by

substituting a more competitive fee

schedule tied to high volume targets.

The high volume targets would be

triggered in the twelfth month of the fee.

Should an ECN not meet the targeted

volume numbers described above, it