Federal Register / Vol. 66, No. 26 / Wednesday, February 7, 2001 / Notices 9399

5See Securities Exchange Act Release No. 32264

(May 4, 1993), 58 FR 27760 (May 11, 1993)

(ordering approving File No. SR–NASD–93–07).

6 It is not necessary to obtain a majority interest

in order for a change of control to occur. 7 15 U.S.C. 78o–3(b)(6).

8 17 CFR 200.30–3(a)(12)

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

2 17 CFR 240.19b–4.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

Nasdaq 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. Nasdaq 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 amend NASD Rule 4330(f)

(the ‘‘Rule’’) which provides, in

pertinent part, that a Nasdaq issuer must

comply with all applicable initial

inclusion requirements under Nasdaq

rules in the event that the issuer enters

into a merger, consolidation, or other

type of acquisition with a non-Nasdaq

entity, which results in a change of

control and either a change in business

or a change in the financial structure of

the Nasdaq issuer.

Nasdaq originally adopted the Rule in

1993 to address the trend of non-Nasdaq

entities seeking a ‘‘backdoor listing’’ on

Nasdaq through a business combination

involving a Nasdaq issuer.5 In these

combinations, a non-Nasdaq entity

purchased a Nasdaq issuer in a

transaction that resulted in the nonNasdaq entity obtaining a Nasdaq listing

without qualifying for initial listing or

being subject to the background checks

and scrutiny normally applied to issuers

seeking initial listing.

Some issuers and their counsel have

expressed uncertainty regarding the

exact circumstances under which the

Rule is applicable. Therefore, Nasdaq

proposes to amend the Rule to more

clearly define that it is intended to

apply to business combinations between

a Nasdaq issuer and a non-Nasdaq entity

in which there is a change of control of

the Nasdaq issuer 6 and the potential for

the non-Nasdaq entity to acquire a

Nasdaq listing (for purposes of this rule,

such a transaction is referred to as a

‘‘Reverse Merger’’). To provide further

clarification, the proposed Rule would

also set forth a list of non-exclusive

factors to be considered when

determining whether a Reverse Merger

has occurred. These factors include

changes in the management, board of

directors, voting power, ownership, and

financial structure of the Nasdaq issuer.

The nature of the businesses and the

relative size of the Nasdaq issuer and

non-Nasdaq entity would also constitute

additional factors to be considered.

Nasdaq believes that these proposed

amendments will clarify the Rule for

issuers while continuing to prevent

‘‘backdoor listings’’ on Nasdaq.

Nasdaq also proposes to make

conforming changes to IM–4300,

Interpretive Material Regarding Future

Priced Securities.

2. Statutory Basis

Nasdaq believes that the proposed

rule change is consistent with Section

15A(b)(6) 7 of the Act, in that the

proposal is designed to prevent

fraudulent and manipulative acts and

practices, and to protect investors and

the public interest. As noted above, the

proposed rule change is aimed at

clarifying NASD Rule 4330(f), which

prevents non-Nasdaq entities from

obtaining a ‘‘backdoor listing’’ on

Nasdaq through a business combination

involving a Nasdaq issuer.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

Nasdaq does not believe that the

proposed rule change will result in any

burden on competition that is not

necessary or appropriate in 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 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, N.W.,

Washington, D.C. 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 NASD. All

submissions should refer to File No.

SR–NASD–01–01 and should be

submitted by February 28, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–3113 Filed 2–6–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43911; Filed No. SR–PCX–

00–46]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Pacific Exchange, Inc. Relating to

Prohibition of Harassment

January 31, 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

13, 2000, the Pacific Exchange, Inc.

(‘‘PCX’’ 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

9400 Federal Register / Vol. 66, No. 26 / Wednesday, February 7, 2001 / Notices

3 17 CFR 240.19b–4(f)(6).

4The PCX will revise its Employee Handbook and

Statements of Fiduciary Responsibilities for

Governors and Committee Members to include the

same prohibitions on harassment. The Exchange

must file with the Commission a proposed rule

change incorporating these additional changes.

Telephone call from Geoffrey Pemble, Attorney,

Division of Market Regulation, SEC, to Hassan

Abedi, Attorney, Regulatory Policy, PCX (Janary 30,

2001).

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

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

7 15 U.S.C. 78s(b)(3)(A).

8 17 CFR 240.19b–4(f)(6).

9 15 U.S.C. 78s(b)(3)(A).

10 17 CFR 240.19b–4(f)(6).

11The Exchange provide the Commission with

the five business day notice required by Rule 19b–

4(f)(6) of the Act.

prepared by the Exchange. The

proposed rule change has been filed by

the Phlx as a ‘‘non-controversial’’ rule

change under Rule 19b–4(f)(6) of the

Act.3 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 adopt a new rule

to prohibit harassment, intimidation,

‘‘refusal to deal’’ and retaliation in the

option listing process and to prohibit

harassment of another for ‘‘seeking to

act competitively.’’

The text of the proposed rule change

is available at the Office of the

Secretary, PCX 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

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

Currently PCX Rule 6.2(b) sets forth

prohibitions on certain manner of

conduct on the floor of the Exchange.

Under this rule, a member will be

sanctioned if two Floor Officials or the

Options Floor Trading Committee make

the determination that the member has

acted in a manner that impairs the

maintenance of a fair and orderly

market or the member’s conduct impairs

public confidence in the operations of

the Exchange. The purpose of the

proposed rule is to broaden the scope of

Rule 6.2 to prohibit harassment. The

proposed rule seeks to prevent

harassment and intimidation of

members who act or seek to act

competitively.

The proposed rule would make it

‘‘conduct inconsistent with just and

equitable principles of trade for any

member, member organization or

associated person of a member or

member organization to engage, directly

or indirectly, in any conduct that

threatens, harasses, intimidates,

constitutes a ‘refusal to deal’ or retaliate

against any other member . . .’’ because

such member: (1) Has made a proposal

to any exchange or other market to list

or trade any option issue; (2) has

advocated or made proposals

concerning the listing or trading of an

option issue on any exchange or other

market; (3) has commenced making a

market in or trading any option issue on

any exchange or other market; (4) seeks

to increase the capacity of any options

exchange or the options industry to

disseminate quote or trade data; (5)

seeks to introduce new option products;

or (6) seeks to act competitively.

The PCX believes that the prohibited

conduct discussed above is inconsistent

with the obligation of all members to

their customers, the Exchange, and the

public interest in the operation of fair

and efficient options markets. The PCX

will strictly enforce the requirements of

the proposed rule. Any violations of this

rule will be referred to the Exchange’s

Enforcement Division for appropriate

disciplinary action.4

2. Statutory Basis

The Exchange believes that the

proposed rule change is consistent with

section 6(b) of the Act,5 in general, and

furthers the objectives of section

6(b)(5),6 in particular, in that it is

designed to promote just and equitable

principles of trade, prevent fraudulent

and manipulative acts and practices,

and protect investors and the public

interest by prohibiting harassment in

the listing of options.

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.

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.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The proposed rule change has been

filed by the Exchange as ‘‘noncontroversial’’ rule change pursuant to

section 19(b)(3)(A) of the Act 7 and Rule

19b–4(f)(6) thereunder.8 Because the

foregoing proposed rule change: (1)

Does not significantly affect the

protection of investors or the public

interest, (2) does not impose any

significant burden on competition, and

(3) by its terms does not become

operative for 30 days after the date of

this filing, or such shorter time as the

Commission may designate, it has

become effective pursuant to section

19(b)(3)(A) of the Act 9 and Rule 19b–

4(f)(6) 10 thereunder.11 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 will also be

available for inspection and copying at

the principal office of the Exchange. All

submissions should refer to the File No.

SR–PCX–00–46 and should be

submitted by February 28, 2001.

Federal Register / Vol. 66, No. 26 / Wednesday, February 7, 2001 / Notices 9401

12 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See Letter from Carla Behnfeldt, Director, New

Product Development Group, Phlx, to Nancy

Sanow, Esq., Assistant Director, Division of Market

Regulation (‘‘Division’’), Commission, dated

January 22, 2001 (‘‘Amendment No. 1’’).

Amendment No. 1 adds language to the rule text

and the purpose section of the filing that clarifies

Phlx’s prospectus delivery requirements under the

Securities Act of 1933. In addition, Amendment No.

1 adds representations by the Exchange in the

purpose section of the filing regarding factors

affecting (1) the trading prices of Index Fund

Shares, (2) the minimum number of creation units,

and (3) minimum trading variations. 4See Amendment No. 1, supra note 3.

For the Commission, by the Division

of Market Regulation, pursuant to

delegated authority.12

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–3157 Filed 2–6–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43912; File No. SR-Phlx–

00–91]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the Philadelphia Stock

Exchange, Inc., Relating to Index Fund

Shares

January 31, 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

4, 2000, the Philadelphia Stock

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

filed with the Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’)

the proposed rule change as described

in Items I and III below, which Items

have been prepared by the Phlx. On

January 23, 2001, the Phlx filed an

amendment to the proposed rule

change.3 The Commission is publishing

this notice to solicit comments on the

proposed rule changes from interested

persons and to approve the proposal on

an accelerated basis.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Phlx proposes to adopt listing

standards and trading rules for Index

Fund Shares, including generic listing

standards, which would permit the Phlx

to trade a series of Index Fund Shares

pursuant to Rule 19b–4(e) under the

Act. The text of the proposed rule

change is available at the Phlx or 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

Phlx included statements concerning

the purpose of and basis for the

proposed rule change. The text of these

statements may be examined at the

places specified in Item III below. The

Phlx 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

I. Purpose

a. Listing Requirements for Index

Fund Shares. The Phlx proposes to

adopt new listing and delisting

requirements to accommodate the

trading of Index Fund Shares, securities

issued by an open-end management

investment company (‘‘Fund’’) that seek

to provide investment results that

correspond generally to the price and

yield performance of a specified

underlying index (‘‘Index Fund

Shares’’). The listing standards will

permit the Exchange to trade Index

Fund Shares either by listing or

pursuant to unlisted trading privileges

(‘‘UTP’’).

Index Fund Shares will be issued by

an entity registered with the

Commission as an open-end

management investment company, and

which may be organized as a series fund

providing for the creation of separate

series of securities, each with a portfolio

consisting of some or all of the

component securities of a specified

securities index. Issuances of Index

Fund Shares by a Fund will be made

only in minimum size aggregations or

multiples therof (‘‘Creation Units’’). The

size of the applicable Creation Unit size

aggregation will be set forth in the

Fund’s prospectus, and will vary from

one series of Index Fund Shares to

another, but generally will be of

substantial size (e.g., value in excess of

$450,000 per Creation Unit). It is

expected that a Fund will issue and sell

Index Fund Shares through a principal

underwriter on a continuous basis at the

net asset value per share next

determined after an order to purchase

Index Fund Shares in Creation Unit size

aggregations is received in proper form.

Index Fund Shares will be traded on the

Exchange like other equity securities,

and Phlx equity trading rules will apply

to the trading of Index Fund Shares.

The Phlx expects that Creation Unit

size aggregations of Index Fund Shares

generally will be issued in exchange for

the ‘‘in kind’’ deposit of a specified

portfolio of securities, together with a

cash payment representing, in part, the

amount of dividends accrued up to the

time of issuance. The Phlx anticipates

that such deposits will be made

primarily by institutional investors,

arbitragers, and the Phlx specialist.

Redemption of Index Fund Shares

generally will be made ‘‘in kind,’’ with

a portfolio of securities and or cash

exchanged for Index Fund Shares that

have been tendered for redemption.

Issuances or redemptions also could

occur for cash under specified

circumstances (e.g., if it is not possible

to effect delivery of securities

underlying the specific series in a

particular foreign country) and at other

times in the discretion of the Fund.

The Phlx expects that a Fund will

make available on a daily basis a list of

the names and the required number of

shares of each of the securities to be

deposited in connection with the

issuance of Index Fund Shares of a

particular series in Creation Unit size

aggregations, as well as information

relating to the required cash payment

representing, in part, the amount of

accrued dividends.

A Fund may make periodic

distributions of dividends from net

investment income, including net

foreign currency gains, if any, in an

amount approximately equal to

accumulated dividends on securities

held by the Fund during the applicable

period, net of expenses and liabilities

for such period. A Fund may also

distribute its capital gains, if any. The

Exchange notes that the trading prices of

Index Fund Shares may differ in varying

degrees from their daily NAV and can

be affected by market forces such as

supply and demand, economic

conditions and other factors.4

Index Fund Shares will be registered

in book entry form through The

Depository Trust Company (‘‘DTC’’),

which means no stock certificates will

be issued. Trading in Index Fund Shares

on the Exchange may be effected until

either 4:00 p.m. or 4:15 p.m. each

business day.

Criteria for Initial and Continued

Listing. The Phlx believes that the

listing criteria proposed in its new rule

are generally consisted with the listing

standards for Index Fund Shares

currently used by the American Stock