Federal Register / Vol. 66, No. 28 / Friday, February 9, 2001 / Notices 9737

6 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3 17 CFR 240.15c3–1.

have rules that are designed to promote

just and equitable principles of trade,

and, in general, to protect investors and

the public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The proposed rule change does not

impose any burden on competition 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

The Exchange has not solicited, and

does not intend to solicit, comments on

this proposed rule change. The

Exchange has not received any

unsolicited written comments from

members or other interested parties.

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, 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 abovereferenced self-regulatory organization.

All submissions should refer to File No.

SR–ISE–00–22 and should be submitted

by March 2, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–3340 Filed 2–8–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43928; File No. SR–NASD–

00–77]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

National Association of Securities

Dealers, Inc. Relating to Registration

Requirements for Limited PrincipalsFinancial and Operations and Limited

Principals-Introducing Broker/Dealer

Financial and Operations

February 5, 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

20, 2000, the National Association of

Securities Dealers, Inc. (‘‘NASD’’),

through its subsidiary, NASD

Regulation, Inc. (‘‘NASD Regulation’’)

filed with the Securities and Exchange

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

the proposed rule change as described

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

have been prepared by NASD

Regulation. 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

NASD Regulation proposes to amend

three rules: NASD Rule 1022(b) (Limited

Principal-Financial and Operations

(‘‘FINOP’’)), NASD Rule 1022(c)

(Limited Principal-Introducing Broker/

Dealer Financial and Operations

(‘‘Introducing FINOP’’)), and NASD

Rule 9610 (Procedures for Exemptions).

The proposed amendments to NASD

Rules 1022(b) and 1022(c) would (1)

clarify the applicability of NASD Rules

1022(b) and 1022(c) to members by

making citations in these rules

consistent with Exchange Rule 14c3–1

(the ‘‘Net Capital Rule’’) 3; (2) eliminate

the ability of a member that is subject

to the Net Capital Rule to request an

exemption from the requirement under

NASD Rule 1022(b) to have a FINOP;

and (3) exclude from the requirements

of NASD Rules 1022(b) and 1022(c)

those firms are exempt from or

otherwise not subject to the Net Capital

Rule. The proposed amendments to

NASD Rule 9610(a) would eliminate

NASD Rule 1022 from the list of rules

from which a member may seek

exemptive relief. The proposed

amendments to NASD Rule 9610(a) also

would make a technical change to

clarify that the Rule 9600 Series merely

sets forth procedures for seeking

exemptive relief, and that the type of

relief that may be requested, and the

authority to grant such relief, is found

in the rules listed in NASD Rule

9610(a).

Below is the text of the proposed rule

change. Proposed new language is in

italics; proposed deletions are in

[brackets].

* * * * *

1020. Registration of Principals

* * * * *

1022. Categories of Principal

Registration

(a) No change

(b) Limited Principal-Financial and

Operations

(1) Every member of the Association,

[unless exempted by subparagraph (4),]

that is operating pursuant to the

provisions of SEC Rule 15c3–1 (a)(1)(ii),

(a)(2)(i) or (a)(8), shall designate as

Limited Principal-Financial and

Operations those persons associated

with it, at least one of whom shall be its

chief financial officer, who performs the

duties described in subparagraph [(b)](2)

hereof. Each person associated with a

member who performs such duties shall

be required to register as a Limited

Principal-Financial and Operations with

the Association and shall pass an

appropriate Qualification Examination

before such registration may become

effective.

(2) and (3) No change.

[(4) Pursuant to the Rule 9600 Series,

the Association may exempt a member

or an applicant for membership in the

Association from the requirement to

have a Limited Principal-Financial and

Operations if:]

[(A) it has been expressly exempted

by the Commission from SEC Rule

15c3–1(b)(1)(iii);]

[(B) it is subject to the provisions of

SEC Rule 15c3–1(a)(2) or to Section

402.2(c) of the rules of the Treasury

Department.]

9738 Federal Register / Vol. 66, No. 28 / Friday, February 9, 2001 / Notices

4 17 CFR 240.15c3–1(a)(1)(ii), and (a)(2)(i).

5 17 CFR 240.15c3–1(a)(8).

6Only individuals who qualified as ‘‘Financial

Principals’’ before the establishment of the Series

27 examination were grandfathered as FINOPs and

were not required to take either the Series 27 or

Series 28 examination.

7Telephone conversation between Shirley Weiss,

Attorney, NASD Regulation, and Andrew Shipe,

Attorney, Division of Market Regulation,

Commission, on January 11, 2001.

[(5)] (4) A person registered solely as

a Limited Principal-Financial and

Operations shall not be qualified to

function in a principal capacity with

responsibility over any area of business

activity not described [prescribed] in

subparagraph (2) hereof.

(c) Limited Principal-Introducing

Broker/Dealer Financial and Operations

(1) Every member of the Association,

[which is operating pursuant to the

provisions of SEC Rule 15c3–(a)(2)(i) or

(vi) and to the provisions of SEC Rule

15c3–3(k)(2)(ii),] that is subject to the

requirements of SEC Rule 15c3–1, other

than SEC Rule 15c3–1(a)(1)(ii), (a)(2)(i)

or (a)(8), shall designate as Limited

Principal-Introducing Broker/Dealer

Financial and Operations those persons

associated with it, at least one of whom

shall be its chief financial officer, who

perform the duties described in

[paragraph] subparagraph (2)[,] hereof.

Each person associated with a member

who performs such duties shall be

required to register as a Limited

Principal-Introducing Broker/Dealer

Financial and Operations with the

Association and shall pass an

appropriate Qualification Examination

before such registration may become

effective.

(2) No change.

(3) Except as provided in Rule

1021(c), a person designated pursuant to

the provisions of subparagraph (1)

hereof, shall not be required to take the

Limited Principal-Introducing Broker/

Dealer Financial and Operations

Examination and shall be qualified for

registration as a Limited PrincipalIntroducing Broker/Dealer Financial and

Operations if such a person is qualified

to be registered or is registered as a

Limited Principal-Financial and

Operations [as defined in paragraph 2

hereof.] pursuant to Rule 1022(b).

(4) No change.

(d) through (g) No change.

* * * * *

9600. PROCEDURES FOR

EXEMPTIONS

9610. Application

(a) Where to file

A member seeking [an exemption

from] exemptive relief provided in Rules

1021, [1022,]1070, 2210, 2320, 2340,

2520, 2710, 2720, 2810, 2850, 2851,

2860, Interpretive Material 2860–1,

3010(b)(2), 3020, 3210, 3230, 3350,

8211, 8212, 8213, 11870, or 11900,

Interpretive Material 2110–1, or

Municipal Securities Rulemaking Board

Rule G–37 shall file a written

application with the appropriate

department or staff of the Association

and provide a copy of the application to

the Office of General Counsel of NASD

Regulation.

(b) and (c) No change

* * * * *

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

NASD Regulation 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.

NASD Regulation 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

NASD Rules 1022(b) and 1022(c) set

forth the registration requirements for

FINOPs and Introducing FINOPs.

FINOPs are required to take and pass

the Series 27 Principal Examination.

Introducing FINOPs are required to take

and pass the Series 28 Principal

Examination. The proposed

amendments to NASD Rule 1022(b)

would clarify that every broker or dealer

that is operating pursuant to the

provisions of Exchange Act Rule 15c3–

1(a)(1)(ii) or (a)(2)(i) 4 (both of which

subject brokers or dealers to a minimum

net capital requirement of $250,000), or

(a)(8) 5 (which subjects municipal

securities brokers’ brokers to a

minimum $150,000 net capital

requirement) must have a FINOP. The

proposed amendments to NASD rule

1022(c) would clarify that every broker

or dealer that is subject to the

requirements of the Net Capital Rule,

and is not required to employ a FINOP

pursuant to NASD Rule 1022(b), is

required to have at least one associated

person who has registered as an

Introducing FINOP. The proposed

amendments to NASD Rule 1022(c) also

would clarify that a person qualified as

a Series 27 FINOP is not required to take

the Series 28 Examination if he or she

is employed as an Introducing FINOP.

In addition, the proposed

amendments to NASD Rule 1022(b)

would eliminate the provisions that

allow a broker or dealer that is subject

to the Net Capital Rule to seek an

exemption from the requirement to have

a FINOP. As a procedural matter, NASD

Regulation proposes to amend NASD

Rule 9610(a) to eliminate NASD Rule

1022 from the list of rules for which a

member may file an application to seek

exemptive relief. NASD Regulation

believes that firms that are subject to the

Net Capital Rule should not be

exempted from the requirement to

employ a FINOP or Introducing FINOP.

In the rare instance that a firm believes

that a particular individual should not

be required to take and pass the Series

27 or Series 28 Examination based on

that individual’s experience and

qualifications, the firm may seek an

exam waiver for that individual

pursuant to NASD Rule 1070(e).

The proposed amendments to NASD

1022(b) also would eliminate the ability,

as well as the need, for members that are

exempt from the Net Capital Rule to

seek exemptive relief from the FINOP or

Introducing FINOP requirements. As

noted above, the proposed changes to

both NASD Rule 1022(b) and 1022(c)

would make clear that the requirements

to have a FINOP or Introducing FINOP

apply only to firms that are subject to

the requirements of the Net Capital

Rule. Members that are exempt from or

otherwise not subject to the Net Capital

Rule would no longer be subject to the

requirements of either NASD Rule

1022(b) or NASD Rule 1022(c).

Therefore, under the proposed

amendments, it would no longer be

necessary for such members to seek

exemptive relief from the requirements

of those rules.

The proposed amendments would

have no effect on individuals who are

currently grandfathered for the Series 27

or Series 28 Examination, because these

persons are considered to possess the

license for which they were

grandfathered.6 In addition, NASD

Regulation represents that firms

currently the subject of a FINOP waiver

would not be subject to the proposed

rule amendments.7

Finally, the proposed amendments to

NASD Rule 9610(a) would make a

technical change to clarify that the Rule

9600 Series merely sets forth procedures

for seeking exemptive relief, and that

the type of relief that may be requested,

and the authority to grant such relief, is

Federal Register / Vol. 66, No. 28 / Friday, February 9, 2001 / Notices 9739

8 15 U.S.C. 78o–3(b)(6).

9 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3 In general, FLEX options provide investors with

the ability to customize basic option features

including size, expiration date, exercise style, and

certain exercise prices. See Phlx Rule 1079.

4Currently, the Exchange trades unit investment

trust securities known as Trust Shares. The

Exchange has also just received approval to trade

Index Fund Shares which are issued by an openend management investment company. Trust

Shares and Index Fund Shares are listed on the

Phlx pursuant to Role 803(i) and 803(l),

respectively, and trade like shares of common stock.

The Commission notes that not all Trust Shares or

Index fund shares trading on the Phlx may meet the

standards for options trading approved by this

order.

found in the rules listed in NASD Rule

9610(a).

2. Statutory Basis

NASD Regulation believes that the

proposed rule change is consistent with

the provisions of section 15A(b)(6) of

the Act,8 which requires, among other

things, that the Association’s rules must

be designed to prevent fraudulent and

manipulative acts and practices, to

promote just and equitable principles of

trade, and, in general, to protect

investors and the public interest. NASD

Regulation believes that the proposed

rule change is designed to accomplish

these ends by clarifying the

applicability of NASD Rule 1022(b) and

(c) to members by making the citations

in the rules consistent with the Net

Capital Rule and by eliminating the

ability of brokers or dealers that are

subject to the Net Capital Rule from

operating without a FINOP or

Introducing FINOP. The proposed rule

change also would help members by

clarifying the circumstances under

which a FINOP must have taken and

passed either Series 27 or Series 28

Examination.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

NASD Regulation 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

Written comments were neither

solicited nor received.

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, 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 NASD. All

submissions should refer to File No.

SR–NASD–00–77 and should be

submitted by March 2, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–3361 Filed 2–8–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43921; File No. SR–Phlx–

00–107]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the Philadelphia Stock

Exchange, Inc., Relating to Listing and

Trading of Options on ExchangeTraded Fund Shares

February 2, 2001.

Pursuant to section 19(b)91) of the

Securities Exchange Act of 1934

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on December

21, 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 II below, which Items

have been prepared by the Phlx. 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 amend its rules

to create listing criteria and amend

trading rules to allow the Exchange to

list options on Exchange-Traded Fund

Shares. 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

1. Purpose

The purpose of the proposed rule

change is to provide for the trading of

options and FLEX options on ExchangeTraded Fund Shares.3 As noted above,

Exchange-Traded Fund Shares are

exchange-listed securities representing

interests in open-end unit investment

trusts or open-end management

investment companies (‘‘Funds’’) that

hold securities based on an index or a

portfolio of securities.4 ExchangeTraded Fund Shares are issued in

exchange for an ‘‘in kind’’ deposit of a

specified portfolio of securities, together

with a cash payment, in minimum size

aggregations or multiples thereof

(‘‘Creation Units’’). The size of the

applicable Creation Unit size

aggregation is set forth in the Fund’s

prospectus, and varies from one series