11342 Federal Register / Vol. 66, No. 37 / Friday, February 23, 2001 / Notices

9For purposes only of accelerating the operative

date of this proposal, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f). 10 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4. 3See February 8, 2001 letter from Jeffrey S. Davis

(‘‘Davis’’), Assistant General Counsel, Nasdaq, to

Katherine A. England (‘‘England’’), Assistant

Director, Division of Market Regulation

(‘‘Division’’), SEC (‘‘Amendment No. 1’’). In

Amendment No. 1, Nasdaq converted the proposal

to a non-controversial filing pursuant to Section

19(b)(3)(A) and Rule 19b–4(f)(6). 15 U.S.C.

78s(b)(3)(A) and 17 CFR 240.19b–4(f)(6). Nasdaq

also asked the Commission to waive the 30-day

operative waiting period. The Commission

considers Nasdaq’s original filing as satisfying the

5-day pre-filing notice requirement. See Rule 19b–

4(f)(6)(iii). 17 CFR 240.19b–4(f)(6)(iii). For purposes

of calculating the 60-day abrogation period, the

Commission considers the period to commence as

of February 8, 2001, the date of the last substantive

amendment to the proposal.

4See February 13, 2001 letter from Davis to

England (‘‘Amendment No. 2’’). In Amendment No.

2, Nasdaq completely replaced the original

proposed rule language with new language, to

correct inaccuracies in the text of the proposed rule

as it was originally filed. The new proposed rule

language in Amendment No. 2 does not change the

substance of the proposal, which creates a new

method for accessing ACT, and establishes fees for

using the new method of access. Telephone

conversation between Davis and Joseph Morra,

Special Counsel, Division, SEC, February 13, 2001.

5 15 U.S.C. 78s(b)(3)(A).

6 17 CFR 240.19b–4(f)(6).

it to implement these $0.50 strike price

intervals immediately.

The Commission believes that it is

consistent with the protection of

investors and the public interest that the

proposed rule change become operative

immediately as of January 31, 2001.9 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 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 CBOE. All

submissions should refer to File No.

SR–CBOE–01–02 and should be

submitted by March 16, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–4498 Filed 2–22–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43968; File No. SR–NASD–

01–05]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change and

Amendment Nos. 1 and 2 by the

National Association of Securities

Dealers, Inc. Relating to Access to, and

Fees Assessed for, the Automated

Confirmation and Transaction Service

February 15, 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 January

12, 2001, the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’), through its subsidiary

The Nasdaq Stock Market, Inc.

(‘‘Nasdaq’’), 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 Nasdaq. On February 8,

2001, Nasdaq amended the proposal.3

On February 13, 2001, Nasdaq again

amended the proposal.4 Nasdaq filed

the proposal pursuant to Section

19(b)(3)(A) of the Act,5 and Rule 19b–

4(f)(6) thereunder,6 which renders the

proposal effective upon filing with the

Commission. 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

Nasdaq proposes to amend NASD

Rule 7010(g) to create ‘‘Nasdaq ACT,’’

an internet-based means for member

firms to report trades to the Automated

Confirmation and Transaction (‘‘ACT’’)

Service. Nasdaq also proposes to

establish fees to be assessed for the use

of Nasdaq ACT. The text of the

proposed rule change is below.

Proposed new language is in italics.

Proposed deletions are in brackets.

Rule 7010 System Services

(a)–(f) No Change.

(g) Confirmation Transaction Service (ACT):

Transaction Related Charges:

Comparison ........................... $0.0144/side per 100 shares (minimum 400 shares; maximum 7,500 shares)

Automated Give-Up .............. $0.01/side per 100 shares (minimum 400 shares; maximum 7,500 shares)

Late Report—T+N ................. $0.288/side

Browse/query ........................ $0.288/query 1

Terminal fee .......................... $57.00/month (ACT only terminals)

CTCI fee ................................. $575.00/month

Nasdaq ACT .......................... $300/month (full functionality) or $150/month (up to an average of twenty transactions per

day each month) 2

Service desk .......................... $57.00/month [2] 3

Trade Reporting .................... $.029/side (applicable only to reportable transaction not subject to trade comparison through

ACT) [3] 4

Risk Management Charges ... $.035/side and $17.50/month per correspondent firm

Footnotes

Federal Register / Vol. 66, No. 37 / Friday, February 23, 2001 / Notices 11343

7See NASD Rules 4630, 4640, 4650, 6100, 6400,

6600, and 6700.

8 Id.

9The ACT Service Desk is a phone-based service

that allows firms to report trades over the phone to

Nasdaq Market Operations staff, who in turn input

the trades into the Act system for dissemination to

the tape. See generally, Securities Exchange Act

Release No. 27908 (April 17, 1990), 55 FR 15313

(April 23, 1990) (SR–NASD–90–15) (notice

establishing ACT Service Desk).

10See footnote to NASD Rule 7010(g).

11See footnote to NASD Rule 7010(g). 12 15 U.S.C. 78o–3(b)(6)

1Each ACT query incurs the $0.288 fee; however, the first accept or decline processed for a transaction is free, to insure that no more

than $0.288 is charged per comparison. Subsequent queries for more data on the same security will also be processed free. Any subsequent query on a different security will incur the $0.288 query charge. 2 For the purposes of this service only, a transaction is defined as an original trade entry, either on trade date or as-of transactions per

month. [2] 3The ACT service desk is available to ACT participants that: (1) do not have access to Nasdaq equipment and that average five or

fewer trades per day during the previous calendar quarter; or (2) utilized the Nasdaq Workstation I to report trades as of June 1999, do

not have access to Nasdaq equipment, and average 20 or fewer trades per day during the previous calendar quarter. [3] 4The trade reporting service charge is applicable to those trades input into ACT for reporting purposes only, such as NSCC Qualified

Special Representative reports and reports of internalized transactions.

(h)–(p) 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,

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

Nasdaq proposes to amend NASD

Rule 7010(g) to create Nasdaq ACT, an

internet-based ACT service that will

permit NASD members to report trades

to ACT. Nasdaq ACT will offer

functionality that is identical to that

offered through the current modes of

reporting to ACT, as described below.

Nasdaq also proposes to establish fees to

be assessed for the use of Nasdaq ACT.

ACT is the Nasdaq system used by

members to report and compare trades

for clearance and settlement, and to

transmit trade reports for regulatory

purposes and public dissemination.

After members enter trade information

into ACT (as required by NASD ACT

and trade-reporting rules),7 the system

sends locked-in trades to clearing.

Under current NASD rules, members

must report trades to ACT for certain

transactions executed in the over-thecounter market, including transactions

in Nasdaq National Market securities

(‘‘NNM’’), Nasdaq SmallCap securities

(‘‘SmallCap’’), Over-the-Counter

Bulletin Board (‘‘OTCBB’’) securities,

Nasdaq convertible debt securities,

exchange-listed securities effected in the

over-the-counter market, and securities

traded exclusively in the over-thecounter market (e.g., Pink Sheet

securities).8

There generally are three methods to

report trades to ACT: (1) Ordering a

Nasdaq Workstation II service (‘‘NWII’’);

(2) using the Nasdaq ACT Service Desk;

or (3) having another firm that has

access to ACT through the NWII trade

report (commonly known as a ‘‘give-up’’

relationship). Each mode of trade-report

entry accomplishes the same result, but

they have different characteristics. The

NWII offers the full-range of ACT

functionality, including entry of trade

reports, ACT trade scan, comparison of

trade reports, No/Was trade corrections,

trade statistics, risk management

requests, risk management scan, risk

management alerts, clearing broker scan,

and various clearing alerts. NWII is the

optional delivery mechanism for large

NASD members, many of whom use the

wide-ranging functionality that it offers

in addition to ACT.

The ACT Service Desk was designed

as a cost effective method of trade

reporting for firms that effect very few

transactions in Nasdaq securities or

other securities traded in the over-thecounter market.9 As such, NASD rules

limit participation in the ACT Service

Desk to only those members who do not

have access to Nasdaq equipment and

who have effected an average of five or

fewer trades per day during the previous

calendar quarter.10 If a firm has reported

more than five trades per day during the

previous calendar quarter, the firm must

either order a NWII to report trades or

enter into a give-up arrangement.11

In a ‘‘give-up’’ arrangement, a member

who reports or accepts a trade in ACT

on behalf of another member would

identify in the ACT screen give-up box

the member on whose behalf the trade

was being reported or accepted. Where

the executing broker accepts a trade that

has been reported by another member,

the reporting member would have to

report the trade with the executing

broker as the contra-side and identify

the prime brokerage customer as the

contra-side give-up. The executing

broker may then accept the trade as

presented. This would avoid a second

trade report and ensure that the prime

brokerage customer is identified to the

NASD.

Nasdaq Act will provide the same

basic ACT features and functions

offered through the NWII service. In the

case of Nasdaq ACT, however, clients

that use some but not all ACT

functionality will have the opportunity

to reduce their expenses by purchasing

a scaled-back version of the service.

Specifically, users will be able to

purchase Nasdaq ACT with full ACT

functionality for $300 per month per

terminal. On the other hand, users that

need only the trade entry and trade

query function (and not risk

management) and who enter an average

of 20 or fewer trades per day per month

will be assessed $150 per month per

terminal.

Nasdaq believes that Nasdaq ACT will

be a cost-effective alternative for many

users that are currently accessing ACT.

For instance, clearing firms use ACT to

manage their risk with their clients to

ensure that the clients to not extend

their trading activity beyond their ‘‘cap’’

limits. Back-office personnel use ACT to

compare trades effected on their trading

floors. These users do not take

advantage of the quote engine or the

other execution systems offered on

NWII. In addition, some market

participants may choose to use Nasdaq

ACT to serve as a back-up or

redundancy for their NWII terminals.

2. Statutory Basis

Nasdaq believes the proposed rule

change is consistent with Section

15A(b)(6) of the Act,12 which requires,

among other things, that the

Association’s rules must be designed to

foster cooperation and coordination

with person engaged in regulating,

clearing, settling, processing

information with respect to, and

facilitating transactions in securities, to

remove impediments to and perfect the

mechanism of a free and open market

11344 Federal Register / Vol. 66, No. 37 / Friday, February 23, 2001 / Notices

13 15 U.S.C. 78o–3(b)(5).

14 15 U.S.C. 78s(b)(3)(A).

15 17 CFR 240.19b–4(f)(6).

16The 60-day abrogation period began February

8, 2001. See footnote 3, supra.

17For purposes only of accelerating the operative

date of this proposal, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f).

18 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See letter from Michael D. Pierson, Vice

President, Regulatory Policy, PCX, to Gordon

Fuller, Special Counsel, Division of Market

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

26, 2000 (‘‘Amendment No. 1’’). In Amendment No.

1, the PCX revised some of the text of the proposed

rule change.

4Securities Exchange Act Release No. 43049 (July

18, 2000), 65 FR 45810.

5See letters from David B. Bayless, Morrison &

Foerster LLP (‘‘Morrison & Foerster’’), to Jonathan

G. Katz, Secretary, Commission, dated August 14,

2000 (‘‘Morrison & Foerster Letter’’); David M.

Battan, Vice President and General Counsel,

Interactive Brokers LLC (‘‘Interactive Brokers’’), to

Jonathan G. Katz, Secretary, Commission, dated

August 15, 2000 (‘‘Interactive Brokers Letter’’); Mike

Ianni, to Jonathan G. Katz, Secretary, Commission,

dated August 9, 2000 (‘‘Ianni E-Mail’’); and William

M. Thomas, Member of Congress, forwarding a

letter from Austin Kalb, Chief Executive Officer,

OutSource International Corporation (‘‘OutSource

International’’), to Jonathan G. Katz, Secretary,

Commission, dated August 14, 2000 (‘‘OutSource

International Letter’’).

6See letter from Cindy Sink, Senior Attorney,

Regulatory Policy, PCX, to Sapna Patel, Attorney,

Division, Commission, dated January 17, 2001

and a national market system, and, in

general to protect investors and the

public interest. Nasdaq believes that the

proposed rule change is consistent with

the purposes of the Act in that it will

provide a cost effective and efficient

mechanism to report trades, and

therefore facilitate clearance and

settlement. Additionally, Nasdaq

believes the proposed rule change will

enhance the process by which members

engage in the comparison and clearing

of securities transactions.

Nasdaq believes that the proposed

rule change is consistent with the

provisions of Section 15A(b)(5) of the

Act,13 which requires that the

Association’s rules provide for the

equitable allocation of reasonable dues,

fees and other charges among members

and issuers and other persons using any

facility or system which Nasdaq

operates or controls.

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, as amended.

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

Because the foregoing proposed rule

change does not:

(i) Significantly affect the protection

of investors or the public interest;

(ii) impose any significant burden on

competition; and

(iii) become operative for 30 days

from the date on which it was filed, or

such shorter time as the Commission

may designate, it has become effective

pursuant to Section 19(b)(3)(A) of the

Act 14 and Rule 19b–4(f)(6) 15

thereunder. 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.16

Nasdaq has requested that the

Commission accelerate the operative

date. The Commission finds good cause

to designate the proposal to become

immediately operative upon filing,

because such designation is consistent

with the protection of investors and the

public interest. Acceleration of the

operative date will allow member firms

that wish to report trades to ACT via the

internet to access the service

immediately. The Commission finds no

reason to require NASD members to

wait 30 days before participating in a

service that is designed to be both

efficient and cost-effective. For these

reasons, the Commission finds good

cause to designate that the proposal

become operative upon filing.17

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 NASD. All

submissions should refer to file number

SR–NASD–01–05 and should be

submitted by March 16, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.18

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–4427 Filed 2–22–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43971; File No. SR–PCX–

00–05]

Self-Regulatory Organizations; Order

Granting Partial Approval of Proposed

Rule Change and Notice of Filing and

Order Granting Partial Accelerated

Approval of Amendments No. 2 and 3

to the Proposed Rule Change by the

Pacific Exchange, Inc. Relating to Its

Automatic Execution System

February 15, 2001.

I. Introduction

On March 8, 2000, the Pacific

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

filed with the Securities and Exchange

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

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

Securities Exchange Act of 1934

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

proposed rule change to allow brokerdealer orders to be eligible for automatic

execution through the Exchange’s

Automatic Execution system (‘‘AutoEx’’) on an issue-by-issue basis. The

Exchange also proposed to adopt rules

to establish means of improving

compliance with rules pertaining to the

use of Auto-Ex. On June 27, 2000, the

PCX filed Amendment No. 1 to the

proposed rule change.3 Notice of the

proposed rule change, including

Amendment No. 1, was published for

comment in the Federal Register on July

25, 2000.4 The Commission received

four comment letters with respect to the

proposal.5 On January 18, 2001, the PCX

filed Amendment No. 2 to the proposed

rule change.6 On January 26, 2001, the