12576 Federal Register / Vol. 66, No. 39 / Tuesday, February 27, 2001 / Notices

10The Exchange has represented that it will issue

a regulatory circular informing members of

permitted and prohibited trading activity among

joint accounts.

11 15 U.S.C. 78f(b).

12 15 U.S.C. 78f(b)(5).

13Fulcrum Letter, supra note 9. In addition, the

Exchange represents that its regulatory staff has had

numerous conversations with members since the

Exchange first considered changing its regulatory

policy regarding transactions between accounts

with common ownership.

14 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

The proposed rule change would

enable common participants to trade

between related joint accounts that are

used as financing vehicles without

violating Exchange Rule 8.9. The

Exchange proposes that the following

activity be permitted: (1) Trading

between different market makers or

other broker/dealer accounts that are

financed by the same member where

there is no common control over the

trading activity in those accounts; and

(2) trading between independently

operated subsidiaries (i.e., separate

broker/dealers) of the same parent or

holding company.10

The Exchange represents that it will

continue to prohibit the following

activity: (1) Market makers trading with

their joint account, even though their

percentage of ownership is less than

100% (for instance, market maker ABC

finances market maker XYZ via a joint

account and ABC is a participant in the

joint account. Ownership is 50% and

XYZ makes his own trading decisions.

ABC is still prohibited from trading

directly with the joint account of which

he is a member); (2) nominees of the

same entity trading with each other on

behalf of the entity; (3) firm traders

employed by the same broker/dealer on

different trading desks trading together,

regardless of whether they are separate

profit centers; and (4) spouses trading

together.

The Exchange represents that under

the proposed rule change, transactions

between related joint accounts that are

effected for an improper purpose, such

as trades executed to create a false and

misleading appearance of activity,

would continue to violate Exchange

Rule 4.1 (Just and Equitable Principles

of Trade). The Exchange states that its

Department of Market Regulation will

continue to monitor trading between

accounts with common beneficial

ownership for trading abuses.

2. Statutory Basis

The Exchange represents that the

proposed rule change is consistent with

section 6(b) of the Act,11 in general, and

furthers the objectives of section

6(b)(5),12 in particular, in that it is

designed to promote just and equitable

principles of trade and to protect

investors and the public interest.

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 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

The Exchange received a letter from

Fulcrum urging the Exchange to reevaluate its policy on trading between

joint accounts.13 Fulcrum states that it

is appropriate to allow trading between

joint accounts where control has been

successfully refuted. In addition,

Fulcrum notes that stock exchange

interpretations specifically state that a

trade between a parent and its whollyowned broker-dealer affiliate results in

a change in beneficial ownership subject

to trade reporting, and therefore would

not be considered a wash sale. Fulcrum

urges the Exchange to relax its policy to

permit legitimate trading activity

between joint accounts.

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 Exchange 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 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–CBOE–00–13 and should be

submitted by March 20, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–4755 Filed 2–26–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43983; File No. SR–ISE–

01–02]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the International Securities Exchange

LLC, Relating to Anticipatory Hedging

Activity

February 20, 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 International Securities

Exchange LLC (the ‘‘Exchange’’ or the

‘‘ISE’’) 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 prepared by the Exchange.

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 Exchange is proposing to adopt

Supplementary Material .02 to Rule 400

(Just and Equitable Principals of Trade).

Supplementary Material .02 states that it

may be considered conduct inconsistent

with just and equitable principles of

trade for any member or person

associated with a member, who has

knowledge of all material terms and

conditions of (1) an order and a solicited

Federal Register / Vol. 66, No. 39 / Tuesday, February 27, 2001 / Notices 12577

3 15 U.S.C. 78f(b)(5).

4 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

order, (2) an order being facilitated, or

(3) orders being crossed, the execution

of which are imminent, to enter, based

on such knowledge, an order to buy or

sell an option of the same class as any

option that is the subject of the order,

or an order to buy or sell the security

underlying such class, or an order to

buy or sell any related instrument.

This prohibition of the proposed rule

change would continue until either (1)

all of the terms of the order of which the

member or associated person has

knowledge are disclosed to the trading

crowd, or (2) the trade can no longer

reasonably be considered imminent in

view of the passage of time since the

order was received. The rule specifies

that the terms of an order are

‘‘disclosed’’ to the trading crowd on the

Exchange when the order is entered into

the System or into the Facilitation

Mechanism.

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

ISE 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 Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

The Exchange is proposing to adopt

Supplementary Material .02 to Rule 400

(Just and Equitable Principles of Trade)

to prohibit the use of non-public

information received during the

facilitation and solicitation processes.

ISE Rule 717(d)–(e), in conjunction with

ISE Rule 716(d), required that orders be

displayed to the trading crowd before

being crossed with facilitation orders or

orders that have been solicited. The

purpose of this requirement is to

provide the trading crowd with an

opportunity to participate in the

transaction with the facilitating member

or the solicited party.

The Exchange seeks to codify its

policy prohibiting either a member or a

person associated with a member from

using non-public information for the

member’s benefit by trading in the

underlying stock or in related

instruments prior to exposing the order

to the trading crowd. This policy

prevents members and associated

persons from using undisclosed

information about imminent options

transactions to trade the relevant option

or any closely related instrument in

advance of the trading crowd. Such

action would undermine the ability of

crowd participants to participate in the

execution of the order at equally

favorable terms as the member

representing the order.

2. Statutory Basis

The basis for this proposed rule

change is the requirement under section

6(b)(5) of the Act 3 that an exchange

have rules that are 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.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange believes that the

proposed rule change does not impose

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

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 Act

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 ISE 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 the filing will also be

available for inspection and copying at

the principal offices of the Exchange.

All submissions should refer to File No.

SR–ISE–01–02 and should be submitted

by March 20, 2001.

For the Commission, by the Division

of Market Regulation, pursuant to

delegated authority.4

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–4756 Filed 2–26–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43988; File No. SR–NASD–

00–37]

Self-Regulatory Organizations; Notice

of Withdrawal of Proposed Rule

Change by the National Association of

Securities Dealers, Inc., Relating to

Permanent Approval of the Nasdaq

Application of the OptiMark System

February 20, 2001.

On June 19, 2000, the National

Association of Securities Dealers, Inc.

(‘‘NASD’’), through its subsidiary the

Nasdaq Stock Market, Inc. (‘‘Nasdaq’’),

filed with the Securities and Exchange

Commission (‘‘Commission’’) a

proposed rule change, pursuant to

section 19(b)(1) of the Securities

Exchange Act of 1934 (‘‘Act’’) 1 and Rule

19b–4 thereunder,2 to seek permanent

approval of the Nasdaq Application of

the OptiMark System without any

restrictions on the trading activity to be

conducted through the facility. Notice of

the proposed rule change was published

on August 9, 2000, in the Federal

Register, to solicit comment from