11076 Federal Register / Vol. 66, No. 35 / Wednesday, February 21, 2001 / Notices

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

2 17 CFR 240.19b–4.

3See Letter from Thomas P. Moran, Assistant

General Counsel, Nasdaq, to Jack Drogin, Assistant

Director, Division of Market Regulation,

Commission, dated January 30, 2001 (Amendment

No. 1). In Amendment No. 1, the Nasdaq added a

footnote to proposed NASD Rule 4710(b)(1)(D)(3)

requiring the lead underwriter of a secondary

offering to submit a written request to the Nasdaq

Market Operations Department for immediate

processing of executions in secondary offerings. See

infra note 4.

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

EMCC’s input charges for bonds and

warrants are set on a sliding scale based

upon the time the trade is input into

EMCC’s system. The last input time

frame is currently 11 a.m. (New York

time) of SD–2 (or T + 1) and occurs after

EMCC performs the calculation of final

margin payments on that day. EMCC

would prefer that trades received on

SD–2 be received in time to be included

in the margin calculation for that day so

that they can be guaranteed sooner and

thus provide more certainty to members.

The risk system cut-off time for

calculation of final margin is 8 a.m.

(New York time) on SD–2, therefore

EMCC is setting the cut-off time for

incremental fee purposes at 8 a.m. as

well. This change has become effective

on January 1, 2001.

The proposed rule change is

consistent with the requirements of

Section 17A of the Act and the rules and

regulations thereunder applicable to

EMCC because it provides for the

equitable allocation of dues, fees and

other charges among EMCC’s

participants.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

EMCC does not believe that the

proposed rule change will have an

impact on or impose a 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 relating to the

proposed rule change have been

solicited or received. EMCC will notify

the Commission of any written

comments received by EMCC.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The foregoing rule change has become

effective pursuant to Section

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

4(f)(2) thereunder because the proposed

rule change is changing a due, fee, or

charge imposed by the self-regulatory

organization. At any time within sixty

days of the filing of such 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

Section, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of such

filing also will be available for

inspection and copying at the principal

office of EMCC. All submissions should

refer to File No. SR–EMCC–00–9 and

should be submitted by March 14, 2001.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–4260 Filed 2–20–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43958; File No. SR–NASD–

01–03]

Self–Regulatory Organizations: Notice

of Proposed Rule Change and

Amendment No. 1 Thereto by the

National Association of Securities

Dealers, Inc. Relating to the

Elimination of the Interval Delay

Between Executions for Initial Public

Offerings and Secondary Offerings in

the Nasdaq National Market Execution

System

February 13, 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 5,

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 (‘‘SEC’’ or

‘‘Commission’’) the proposed rule

change as described in Items I, II, and

III below, which Items have been

prepared by Nasdaq. On January 31,

2001, the NASD, through Nasdaq, filed

Amendment No. 1 to the proposed rule

change.3 The Commission is publishing

this notice to solicit comments on the

proposed rule change and Amendment

No. 1 from interested persons.

I. Self–Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

Nasdaq is filing a proposed rule

change, on a six-month pilot basis, to

eliminate the interval delay between

executions against the same market

maker at the same price level during the

first day of trading of the securities of

initial public offerings (‘‘IPOs’’) and

secondary offerings in the Nasdaq

National Market Execution System

(‘‘NNMS’’ or ‘‘SuperSOES’’). Below is

the text of the proposed rule change, as

amended. Proposed new language is

italicized.

* * * * *

4710. Participant Obligations in NNMS

(a) No Change.

(b) Market Makers

(1) An NNMS Market Maker in an

NNMS Security shall be subject to the

following requirements:

(A) No change.

(B) No change.

(C) No change.

(D) (1) Except as provided in

subparagraphs (2) and (3) below, after

the NNMS system has executed an order

against a market maker’s displayed

quote and reserve size (if applicable),

that market maker shall not be required

to execute another order at its bid or

offer in the same security until 5

seconds has elapsed from the time the

order was executed, as measured by the

time of execution in the Nasdaq system.

(2) For securities included in the

Nasdaq 100 Index, after the NNMS

system has executed an order against a

market maker’s displayed quote and

reserve size (if applicable), that market

maker shall not be required to execute

another order at its bid or offer in the

same security until 2 seconds has

Federal Register / Vol. 66, No. 35 / Wednesday, February 21, 2001 / Notices 11077

4 In order to obtain immediate processing of

executions in secondary offerings, the lead

underwriter of the secondary offering shall

communicate its request in writing to the Nasdaq

Market Operations Department no later than the

business day immediately prior to the start of the

trading in the secondary offering. Failure to do so

may result in the secondary offering being

processed pursuant to the interval delay time

frames applicable to the currently trading shares of

the issuer. See Amendment No. 1, supra note 3.

5See Securities Exchange Act Release No. 43720

(December 13, 2000), 65 FR 79909 (December 20,

2000) (notice of filing and immediate effectiveness

of File No. SR–NASD–00–67). 6 15 U.S.C. 78o–3(b)(6).

elapsed from the time the order was

executed, as measured by the time of

execution in the Nasdaq system.

(3) For both the fist day of trading of

the securities of initial public offerings

and the first day of trading of the

securities of secondary offerings,4 after

the NNMS system has executed an order

against a market maker’s displayed

quote and reserve size (if applicable),

that market maker shall be required to

execute another order at its posted bid

or offer in that same security as soon as

the NNMS system delivers another order

to that market maker’s quote. After the

first day of trading, subsequent multiple

executions against the same market

maker’s quote at the same price level in

such securities shall be processed

pursuant to subparagraph (D)(2) of this

rule if the security is included in the

Nasdaq 100 Index, or if not included in

that index, multiple executions against

the same market maker’s quote at the

same price level in such securities shall

be processed pursuant to subparagraph

(D)(1) of this rule.

(c) through (e). 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

Currently, the rules governing the

Nasdaq Small Order Execution System

establish a delay of 17 seconds (15

seconds for quote management and two

seconds for system processing) between

executions against the same market

maker in the same security at the same

price level. With the launch of

SuperSOES, this delay will be reduced

to five seconds (plus two seconds

system processing time) for the vast

majority of Nasdaq NMS securities. Due

to market participants’ concerns that

significant order flow could potentially

produce queuing within the system,

Nasdaq recently filed a rule change with

the Commission to further reduce the

interval delay between executions in

Nasdaq securities to two seconds.5

Recently, Nasdaq market participants

have also raised similar queuing

concerns in the context of the rapid flow

of orders accompanying IPOs as well as

secondary offerings. Accordingly,

Nasdaq is making the instant proposal

to reduce from five seconds to zero

seconds (plus system processing time)

the delay between round-lot executions

against the same market participant in

the same security for the first day of

trading of all SuperSOES-eligible IPOs

and secondary offerings. This means

that a market maker will be available for

round-lot executions as quickly as the

system can transmit instructions

between the execution and quote-update

engines, an operation that generally

requires from one to one and one half

seconds.

Under the proposal, Nasdaq will

eliminate, during the first day of trading

of IPOs and secondary offerings, the

NNMS interval delay between

executions taking place against the same

market maker at the same price level.

This proposed rule change will permit

orders in these offerings to be processed

on the first day of trading as fast as the

SuperSOES system will allow. After the

first day of trading, the NNMS interval

delay between executions against the

same market maker at the same price

level for these securities would revert,

and be determined, like all other

NNMS-eligible securities, by whether or

not the securities are part of the Nasdaq

100 Index (‘‘Nasdaq 100’’). If a security

is a part of the Nasdaq 100, the NNMS

interval delay between executions

against the same market maker at the

same price level on subsequent trading

days would be two seconds. If a security

is not a Nasdaq 100 security, the NNMS

interval delay between executions

against the same market maker at the

same price level on subsequent trading

days would be five seconds. Nasdaq

proposes to eliminate the NNMS

interval delay for the first day of trading

of IPOs and secondary offerings on a

six-month pilot basis to commence

when the SuperSOES system becomes

operational. During that time, Nasdaq

will monitor the performance of the

system under the proposed parameters

to determine whether the proposed

measures adequately address the

concerns expressed by market

participants.

In addition, Nasdaq proposes to

continue, for the time being, its current

practice of using the same interval delay

between multiple round-lot executions

against the same market participant for

odd-lot executions of that same security.

For example, if the interval delay in a

particular security were five seconds,

the interval delay after an odd-lot

execution would also be five seconds.

Nasdaq will closely monitor odd-lot

order entry activity in NNMS to ensure

that such activity does not adversely

impact market quality.

Nasdaq believes that reducing the

interval delay between executions of the

first day of trading of NNMS-eligible

IPOs and secondary offerings will

ensure that customer orders for those

securities are processed in the most

expeditious manner possible. In turn,

such processing will improve market

function and aid in the crucial price

discovery process.

2. Statutory Basis

Based on the above, Nasdaq believes

that the proposed rule change, as

amended, is consistent with section

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

proposed rule change is designed to

promote just and equitable principles of

trade, foster cooperation and

coordination with persons engaged in

processing information with respect to

and facilitating transactions in

securities, as well as to remove

impediments to and perfect the

mechanism of a free and open market,

and, in general, to protect investors and

the public interest.

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.

11078 Federal Register / Vol. 66, No. 35 / Wednesday, February 21, 2001 / Notices

7 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See Letter from Charles Falgie, Director of

Enforcement/Counsel, Phlx, to Nancy Sanow,

Assistant Director, Division of Market Regulation

(‘‘Division’’), Commission (Aug. 22, 2000)

(‘‘Amendment No. 1’’). In Amendment No. 1, the

Phlx corrected its rule language and clarified which

language of the rule text was to be added and

deleted. The Phlx also added a paragraph

describing that the proposal would allow the Chair

of the Business Conduct Committee (‘‘Committee’’)

to designate another person to oversee the

Chairperson’s duties pursuant to Phlx rules.

The Phlx indicated that the designee would be a

Business Conduct Committee member. Telephone

conversation between Charles Falgie, Director of

Enforcement/Counsel, Phlx, and Melinda Diller,

Attorney, Division, Commission (Sept. 1, 2000).

4See Letter from Charles Falgie, Director of

Enforcement/Counsel, Phlx, to Nancy Sanow,

Assistant Director, Division, Commission (Nov. 8,

2000) (‘‘Amendment No. 2’’). In Amendment No. 2,

the Phlx changed the text of the rule language and

revised time limits and the manner in which a

Respondent’s request for a hearing is handled.

5See Letter from Charles Falgie, Director of

Enforcement/Counsel, Phlx, to Nancy Sanow,

Assistant Director, Division, Commission (Nov. 20,

2000) (‘‘Amendment No. 3’’). In Amendment No. 3,

the Phlx ‘‘marked’’ the filing and the text of the rule

language to indicate the changes made in

Amendment No. 2, which were not properly

indicated.

6See Letter from Charles Falgie, Director of

Enforcement/Counsel, Phlx, to Nancy Sanow,

Assistant Director, Division, Commission (Dec. 13,

2000) (‘‘Amendment No. 4’’). In Amendment No. 4,

the Phlx made a few technical corrections to the

text of the proposed rule.

7See Securities Exchange Act Release No. 43757

(December 20, 2000), 65 FR 82432.

8See Letter from Charles Falgie, Director of

Enforcement/Counsel, Phlx, to Nancy Sanow,

Assistant Director, Division, Commission (Jan. 11,

2001) (‘‘Amendment No. 5’’). In Amendment No. 5,

the Phlx made a few more technical corrections to

the text of the proposed rule. The Phlx also clarified

that it inadvertently indicated the addition of the

term ‘‘its’’ and the deletion of the term ‘‘their’’

between the terms ‘‘Respondent’’ and ‘‘in’’ in the

first sentence under proposed Rule 960.5(a)(1).

Telehpone conversation between Charles Falgie,

Director of Enforcement/Counsel, Phlx, and Sapna

C. Patel, Attorney, Division, Commission (Jan. 12,

2001). Because Amendment No. 5 only makes

minor technical corrections to the proposed rule

text, the Commission is not required to solicit

comments on it.

9See also Chicago Board Options Exchange, Rule

17.8. Offers of Settlement, Interpretations and

Policies .02 (discussing a similar timing guideline

for scheduling a hearing date).

10See Amendment No. 2, supra note 4; see also

Amendment No. 3, supra note 5. The Phlx

confirmed that Amendment No. 3 incorrectly

indicates that the time periods for scheduling the

hearing date and for providing a transcript of the

hearing to the Hearing Panel members and the

Respondents were initially ten days and later

amended to five days. However, these time periods

have, and will remain, five days throughout the

filing. Telephone conversation between Charles

Falgie, Director of Enforcement/Counsel, Phlx, and

Sapna C. Patel, Law Clerk, Division, Commission

(Nov. 27, 2000).

11See Amendment No. 2, supra note 4; see also

Amendment No. 3, supra note 5.

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, as amended, 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–01–03 and should be

submitted by March 14, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–4259 Filed 2–20–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43952; File No. SR–Phlx–

00–13]

Self-Regulatory Organizations; Order

Granting Approval of the Proposed

Rule Change, as Amended, by the

Philadelphia Stock Exchange, Inc.

Relating to Timing Guidelines for

Application in Disciplinary Hearings

February 12, 2001.

I. Introduction

On July 13, 2000, the Philadelphia

Stock Exchange, Inc. (‘‘Phlx’’ or

‘‘Exchange’’) filed with the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’) 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

amending Phlx Rule 960.5(a), (b), (c),

and (d) to provide timing guidelines for

certain procedures conducted pursuant

to Phlx Rule 960.5. On August 23, 2000,

the Phlx filed Amendment No. 1 to the

proposed rule change.3 On November 9,

2000, the Phlx filed Amendment No. 2

to the proposed rule change.4 On

November 22, 2000, the Phlx filed

Amendment No. 3 to the proposed rule

change.5 On December 13, 2000, the

Phlx filed Amendment No. 4 to the

proposed rule change.6 Notice of the

proposal, as amended, was published in

the Federal Register on December 28,

2000.7 The Commission received no

comments on the proposal. On January

11, 2001, the Phlx filed Amendment No.

5 to the proposed rule change.8 This

order approves the proposal, as

amended.

II. Description of the Proposal

The Phlx proposes to amend Phlx

Rule 960.5 to provide timing guidelines

for certain procedures relating to

disciplinary hearings. Revised Rule

960.5 proposes to adopt a timing

guideline of 120 days for the Chair of

the Committee to schedule a hearing

date after a hearing has been requested

in the written Answer filed by a

Respondent in response to a Statement

of Charges.9 The Phlx also proposes a

five business day timing guideline 10 for

the Chair of the Committee, or its

designee, to schedule a hearing date and

name a Hearing Panel after receiving a

request from Counsel for the Exchange.

If the request for a hearing comes from

the Respondent, Counsel for the

Exchange must request that a hearing

date be set and a Hearing Panel be

named within ten business days of

receiving Respondent’s request.11

Evidence and witness lists must be

exchanged between the parties, as well

as provided to the members of the