Federal Register / Vol. 66, No. 28 / Friday, February 9, 2001 / Notices 9735

2 17 CFR 240.19b–4.

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

4See Securities Exchange Act Release No. 43778

(December 28, 2000), 66 FR 1164 (January 5, 2001)

(SR–CHX–00–38).

9 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

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 its

membership dues and fees schedule (the

‘‘Schedule’’), retroactive to January 1,

2001, to reinstate a monthly cap on

transaction fees of $.40 per 100 average

monthly gross round lot shares. The text

of the proposed rule change is below.

Proposed new language is in italics.

Membership Dues and Fees

* * * * *

F. Transaction and Order Processing

Fees

4. Transaction Fees

a.–g. No change to text.

h. Effective January 1, 2001, monthly

maximums for fees:

(1) Maximum monthly transaction

fees for orders sent via MAX: $7,000;

(2) Maximum monthly transaction fee

for transactions in NASDAQ/NMS

Securities: $110,000;

(3) Maximum monthly transaction fee

for transactions in Dual Trading System

Securities: $110,000;

(4) Maximum monthly transaction

fees shall not exceed the lesser of that

specified in (1), (2) or (3) above, or $.40

per 100 average monthly gross round lot

shares.

* * * * *

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

Exchange 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

Exchange has prepared summaries, set

forth in Sections A, B, and C below, of

the most significant aspects of such

statements.

A. Self-Regulatory Organizations’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

On December 18, 2000, the Exchange

filed a proposed rule change to amend

the Schedule in several ways.4 Among

other things, the proposal made changes

to the CHX’s transaction fee structure

by: (a) Setting a flat per share fee,

instead of a graduated fee based on the

number of shares traded, for agency

transactions in certain securities that are

executed through a floor broker; (b)

raising the current caps on transaction

fees paid by member firms; and (c)

reorganizing the Schedule to include all

of its transaction fees in the same place.

In the course of making these changes,

the Exchange inadvertently omitted one

of the monthly caps on transaction fees.

The Exchange has instituted several fee

caps, including dollar-valued caps on

transactions sent through the CHX’s

MAX system and on transactions in

both Nasdaq/NMS and Dual Trading

System securities.5 The cap to be

reinstated through this proposal

provides an additional ceiling on those

fees by ensuring that a member’s

maximum monthly transaction fees will

not exceed $.40 per 100 average

monthly gross round lot shares, if this

calculation results in a lower fee

payment.

2. Statutory Basis

The Exchange believes the proposed

rule change is consistent with Section

6(b)(4) of the Act 6 in that it provides for

the equitable allocation of reasonable

dues, fees and other charges among its

members.

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 solicited

or received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The proposed rule change has become

effective pursuant to Section

19(b)(3)(A)(ii) of the Act 7 and

subparagraph (f)(2) of Rule 19b–4

thereunder,8 because it involves a due,

fee, or other charge. At any time within

60 days of the filing of the proposed rule

change, the Commission may summarily

abrogate such 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 proposal 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 Exchange. All

submissions should refer to file number

SR–CHX–01–04, 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. 01–3363 Filed 2–8–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43922; File No. SR–ISE–

00–22]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

International Securities Exchange LLC,

Relating to Market Maker Financial

Requirements

February 2, 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 November

28, 2000, the International Securities

Exchange LLC (‘‘Exchange’’ or ‘‘ISE’’)

filed with the Securities and Exchange

Commission (‘‘SEC’’ or ‘‘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

9736 Federal Register / Vol. 66, No. 28 / Friday, February 9, 2001 / Notices

3Pursuant to Exchange Rule 317(a), a member

cannot be approved to trade in more than two bins

as a PMM.

4See CBOE Rule 8.86, which states that ‘‘[e]ach

DPM shall maintain (i) net liquidating equity in its

DPM account of not less than $100,000, and in

conformity with such guidelines as the MTS

Committee may establish from time to time.’’

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

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

ISE is proposing to amend Exchange

Rule 809 regarding ‘‘Financial

Requirements for Market Makers.’’

Specifically, the proposal would amend

and further define the calculations

necessary to determine the minimum

financial requirements for the

Exchange’s market makers, and specify

certain reporting requirements when a

market maker fails to maintain the

minimum financial requirements. The

text of the proposed rule change

follows. New text is italicized and

deleted text is bracketed.

Rule 809. Financial Requirements for

Market Makers

(a) Primary Market Makers. Every

Primary Market Maker shall maintain [a

cash or liquid asset position equal to the

greater of] net liquidating equity of not

less than $3,250,000 plus $25,000

excess equity for each underlying

security upon which appointed options

are open for trading in excess of the

initial ten (10) underlying securities

[$5,000,000 or an amount sufficient to

assume a position of twenty (20) options

contracts of each class in which such

Primary Market Maker is appointed (as

computed on the basis of that series

within each such class having the

highest current premium)].

(b) Competitive Market Makers. Every

Competitive Market Maker shall

maintain [a cash or liquid asset position

equal to the greater of] net liquidating

equity of not less than $1,000,000 [or an

amount sufficient to assume a position

of ten (10) options contracts in each

class of options to which the

Competitive Market Maker is appointed

(as computed on the basis of that series

within each such class having the

highest current premium)].

(c) Each market maker that makes an

arrangement to finance his transactions

as a market maker must identify to the

Exchange the source of the financing

and its terms. The Exchange must be

informed immediately of the intention

of any party to terminate or change any

such arrangement.

Supplemental Material to Rule 809

.01 For purposes of Rule 809, the term

‘‘net liquidating equity’’ means the sum

of positive cash balances and long

securities positions less negative cash

balances and short securities positions.

.02 Each day that a Member’s net

liquidating equity is less than 120% of

the minimum level required by Rule

809, the Member must notify the

Exchange of its equity level on a daily

basis from the date the net liquidating

equity first comes below this level until

and including three days following the

date that the equity first comes above

this level.

.03 If a Member’s net liquidating

equity falls below the minimum level

required by this Rule, the Member must

immediately notify the Exchange of the

deficiency and must submit within five

(5) business days a business plan for

raising its equity to the appropriate

level. The Exchange may determine to

appoint an interim Primary Market

Maker when, in its discretion, the

Member’s failure to maintain the

minimum level required by this Rule

limits its ability to comply with market

making obligations under the Rules.

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

Exchange 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. ISE

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

Exchange Rule 809 sets forth the

minimum financial requirements for

market makers. Currently, Exchange

Rule 809 provides that every Primary

Market Maker (‘‘PMM’’) maintain a cash

or liquid asset position equal to the

greater of $5,000,000 or an amount

sufficient to assume a position of twenty

(20) options contracts of each class in

which the PMM is appointed. Exchange

Rule 809 similarly provides that every

Competitive Market Maker (‘‘CMM’’)

maintain a cash or liquid asset position

equal to the greater of $1,000,000 or an

amount sufficient to assume a position

of ten (10) options contracts in each

class of options to which the CMM is

appointed.

The Exchange proposes to eliminate

the option position component in

calculating the minimum equity. With

respect to CMMs, the Exchange believes

that the option position component in

the current rule places an unnecessary

burden on its members to make the

variable calculation on a daily basis.

The flat $1 million requirements far

exceeds the minimum equity

requirements for market makers on the

other four options exchanges, and it is

unlikely that the option position

component would exceed $1 million.

With respect to PMMs, the proposed

amendment would require PMMs to

maintain $3.25 million plus $25,000 for

each issue over 10. When the Exchange

phases-in trading in 600 options with

approximately 60 options trading in

each of its 10 groups or ‘‘bins,’’ this

requirement would equal $4.5 million

for PMMs trading in one bin, and $6.0

million for a PMM trading in two bins.3

The Exchange also proposes to update

its rule to replace the phrase ‘‘cash or

liquid asset position’’ with ‘‘net

liquidating equity,’’ and to define the

later term. This will conform our rule to

the Chicago Board Options Exchange’s

(‘‘CBOE’’) rule.4 The proposed

definition of net liquidating equity,

which is the sum of positive cash

balances and long securities positions

less negative cash balances and short

securities positions, is the same as the

CBOE definition of the term in CBOE

Rule 12.3(f)(1)(F).

The Exchange further proposes to

adopt notification requirements. Market

makers would be required to notify the

Exchange if their equity fails to exceed

the minimum requirement by at least 20

percent. This will allow the Exchange to

monitor carefully any firm that might be

experiencing financial difficulties and

to take actions to minimize any

potential risk to the Exchange or

investors. A market maker that falls

below the equity requirement must

immediately notify the Exchange of the

deficiency and submit a plan for raising

its equity to the appropriate level.

Finally, in the case of a PMM with

deficient equity, the Exchange may

determine to appoint an interim PMM.

The Exchange will do so when, in its

discretion, the Member’s failure to

maintain the minimum level limits its

ability to comply with market making

obligations.

2. Statutory Basis

The basis under the Act for this

proposed rule change is the requirement

under section 6(b)(5) 5 that an exchange

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.]