13362 Federal Register / Vol. 66, No. 43 / Monday, March 5, 2001 / Notices

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

2 17 CFR 240.19b–4. 3See Securities Exchange Act Release No. 43906

(January 30, 2001), 66 FR 9115 (February 6, 2001). 4Securities Exchange Act Release No. 43906

(January 30, 2001), 66 FR 9115 (February 6, 2001).

5 In approving this proposal, the Commission has

considered the proposed rule’s impact on

efficiency, competition and capital formation. 15

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

6 15 U.S.C. 78o–3(b)(6).

7See Securities Exchange Act Release No. 43906

(January 30, 2001), 66 FR 9115 (February 6, 2001).

8 15 U.S.C. 78o–3(b)(6)

9 15 U.S.C. 78s(b)(2).

10 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

to Section 19(b)(1) of the Securities

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

19b–4 thereunder,2 a proposed rule

change that would require all open

orders priced in fractions in NASD

member firms’ systems on the evening

before that security is to commence

quoting in decimals to be converted to

decimals. Notice of the proposed rule

change appeared in the Federal Register

on February 6, 2001.3 The Commission

received no comments on the proposed

rule change. This order grants

accelerated approval of the proposed

rule change.

II. Description of the Proposal

Pursuant to the Decimals

Implementation Plan for the Equities

and Options Markets (‘‘Implementation

Plan’’), which was submitted to the

Commission on July 24, 2000, the NASD

is to fully convert the Nasdaq market to

decimal pricing no later than April 9,

2001. Before full implementation,

Nasdaq will begin a decimal pricing

pilot program for 10–15 Nasdaq issues

on March 12, 2001, and add a second

decimal phase-in of approximately 100+

additional Nasdaq securities on March

26, 2001.

Nasdaq’s proposal would adopt a

mandatory conversion rule for all open

orders in Nasdaq securities that are

priced in fractions and reside in the

internal systems of NASD member firms

on the evening prior to the first day a

particular security commences quoting

in decimals. Under the proposal, all

open orders, including those with price

qualifiers such as ‘‘Do Not Reduce’’

(‘‘DNR’’) and ‘‘Do Not Increase’’

(‘‘DNI’’), priced in fractions that reside

in a firm’s internal system on the

evening before the start of decimal

pricing, will be converted as follows: (1)

The price of all open Buy Orders

(including ‘‘Good-til-Canceled’’

(‘‘GTC’’), ‘‘Good-til-Executed’’ (‘‘GTX’’),

and Buy Stop and Buy Stop Limits)

priced in fractions will be converted to

their decimal equivalent and ‘‘rounded

down’’ to the nearest $0.01; and (2) the

price of all open Sell Orders (GTC, GTX,

Sell Stop and Sell Stop Limits) priced

in fractions will be converted to their

decimal equivalent and ‘‘rounded up’’

to the nearest $0.01. Examples of

fractional buy and sell conversions were

provided in the notice for SR–NASD–

01–10.4

Under the proposal, market

participants would be free to accept

decimal-priced orders for any number of

values beyond the decimal point as they

deem appropriate after the conversion to

decimals. Nasdaq will continue to

require that firms round orders to two

decimal places before submitting them

to Nasdaq for display in the quote

montage. Likewise, the Automated

Confirmation Transaction Service

(‘‘ACT’’) will only accept trade reports

up to six places beyond the decimal

point and disseminate decimal priced

transaction reports to four decimal

points to the tape.

III. Discussion

The Commission has reviewed

carefully the proposed rule change, and

finds that it is consistent with the Act

and the rules and regulations

promulgated thereunder.5 Specifically,

the Commission finds that approval of

the proposed rule change is consistent

with section 15A(b)(6) 6 of the Act, in

that it is designed to prevent fraudulent

and manipulative acts and practices, to

promote just and equitable principles of

trade, and to remove impediments to

and perfect the mechanism of a free and

open market and a national market

system, and, in general, to protect

investors and the public interest. The

Commission believes that uniform open

fractional order conversion

methodology may aid in structuring an

orderly transition from fractional to

decimal pricing. The Commission finds

that Nasdaq’s proposal is narrowly

tailored to require only the conversion

of open fractional orders that reside in

the internal systems of NASD member

firms on the evening prior to the first

day a particular security commences

quoting in decimals. After the

conversion, market participants will be

free to accept orders priced in decimals

for any number of values beyond the

decimal point. The Commission

believes Nasdaq’s approach is

reasonable, and that requiring such

conversion may help to reduce investor

confusion, reduce discrepancies in

reconciliation, and in general, provide

for a more orderly transition to decimal

pricing.

The Commission finds good cause for

approving the proposed rule change

prior to the 30th date after the date of

publication of notice of the filing in the

Federal Register. Notice of the proposal

indicated that the Commission would

consider granting accelerated approval

of the proposed rule change after a 15-

day comment period.7 The Commission

received no comments on the proposal.

Given the absence of comments, and

Nasdaq’s resolve to begin decimal

pricing in certain Nasdaq securities on

March 12, 2001, the Commission finds

good cause to approve the proposal on

an accelerated basis to ensure adequate

notice of the rule in advance of March

12, 2001.

IV. Conclusion

For the above reasons, the

Commission finds that the proposed

rule change is consistent with the

provisions of the Act, in general, and

with section 15A(b)(6),8 in particular.

It is Therefore Ordered, pursuant to

section 19(b)(2) of the Act,9 that the

proposed rule change (SR–NASD–01–

10), be and hereby is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–5249 Filed 3–2–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43998; File No. SR–NASD–

01–08]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

National Association of Securities

Dealers, Inc. Relating to Amendments

to Rule 10301 of the Code of

Arbitration Procedure To Prohibit

Terminated, Suspended, Barred or

Otherwise Defunct Firms From

Enforcing Predispute Arbitration

Agreements in the NASD Arbitration

Forum

February 23, 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

25, 2001, the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’), through its wholly

owned subsidiary, NASD Dispute

Resolution, Inc. (‘‘NASD Dispute

Resolution’’) filed with the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’) the proposed rule

change as described in Items I, II, and

Federal Register / Vol. 66, No. 43 / Monday, March 5, 2001 / Notices 13363

3See letter from Laura Leedy Gansler, Counsel,

NASD Dispute Resolution, to Florence Harmon,

Senior Special Counsel, Division of Market

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

February 14, 2001 (‘‘Amendment No. 1’’). In

Amendment No. 1, NASD Dispute Resolution made

changes to the description of the rule change to

more accurately describe its purpose.

4See letter from Laura Leedy Gansler, Counsel,

NASD Dispute Resolution, to Florence Harmon,

Senior Special Counsel, Division, Commission,

dated February 21, 2001 (‘‘Amendment No. 2’’). In

Amendment No. 2, NASD Dispute Resolution made

further changes to the description of the rule change

to more accurately describe its purpose.

III below, which Items have been

prepared by NASD Dispute Resolution,

On February 15, 2001, NASD Dispute

Resolution filed Amendment No. 1 to

the proposal.3 On February 22, 2001,

NASD Dispute Resolution filed

Amendment No. 2 to the proposal.4 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 Dispute Resolution is

proposing to amend Rule 10301 of the

Code of Arbitration of the NASD, to

prohibit a firm that has been terminated,

suspended, or barred from the NASD, or

that is otherwise defunct, from

enforcing a predispute arbitration

agreement against a customer in the

NASD arbitration forum. Below is the

text of the proposed rule change.

Proposed new language is in italics.

* * * * *

10301. Required Submission

(a) Any dispute, claim, or controversy

eligible for submission under the Rule

10100 Series between a customer and an

active member and/or associated person

arising in connection with the business

of such member or in connection with

the activities of such associated persons

shall be arbitrated under this Code, as

provided by any duly executed and

enforceable written agreement or upon

the demand of the customer. A claim

involving a member in the following

categories shall be ineligible for

submission to arbitration under the

Code unless the customer agrees in

writing to arbitrate the claim after it has

arisen:

1. A member whose membership is

terminated, suspended, canceled, or

revoked;

2. A member that has been expelled

from the NASD; or

3. A member that is otherwise

defunct.

(b)–(d) Unchanged.

* * * * *

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 Dispute Resolution 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 Dispute Resolution 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

In October 1998, the Government

Accounting Office (‘‘GAO’’) undertook a

study of the securities industry

arbitration process, focusing on the

number of unpaid arbitration awards. In

its report, Securities Arbitrations:

Actions Needed to Address Problem of

Unpaid Awards (‘‘GAO Report’’), the

GAO found that a significant percentage

of the awards favorable to customers

that were issued in 1998 were unpaid.

The majority of unpaid awards involved

arbitration cases against firms that the

NASD had terminated from membership

for serious violations of the federal

securities laws and NASD rules, or that

had filed for bankruptcy. In fact,

investors collect their awards in well

over 90 percent of the NASD cases

involving active firms.

The GAO noted that the NASD takes

aggressive action to address complaints

about nonpayment of awards. However,

in response to the recommendations in

the GAO Report, NASD Dispute

Resolution has taken the following

additional steps to track and address

non-payment. In NASD Notice to

Members 00–55, published August 10,

2000, NASD Dispute Resolution

introduced a new system of monitoring

and tracking compliance with

arbitration awards by members and

associated persons. On September 18,

2000, NASD Dispute Resolution began

asking Claimants to notify it if a member

or associated person has not paid the

arbitration award within 30 calendar

days of receipt of the award. In addition,

member firms are now required to notify

NASD Dispute Resolution in writing

within 30 days of receipt of an award

that they or their associated persons

have paid or otherwise complied with

the award, or to identify a valid basis for

non-payment. NASD Dispute Resolution

has agreed to provide the Commission

with quarterly reports on the results of

this process. These steps will enable the

NASD to institute suspension

proceedings promptly when

appropriate, and will prevent

unnecessary regulatory effort in cases in

which the award is the subject of a

pending motion to vacate or there is

another valid basis for non-payment.

Even in light of NASD Dispute

Resolution’s vigorous efforts to ensure

payment of awards, the GAO Report

highlighted the fact that customers in

arbitration cases involving terminated or

suspended members face a significantly

higher risk of non-payment than in

cases involving active members. While

non-payment of awards by terminated

or suspended members is beyond the

control of NASD Dispute Resolution,

NASD Dispute Resolution recognizes

that it may be inappropriate to permit

terminated or suspended members to

require customers who have claims

against them to arbitrate such claims in

the NASD forum when an arbitration

award may be unenforceable against the

terminated or suspended member. In

such cases, NASD Dispute Resolution

believes that even customers who have

signed a predispute arbitration

agreement should be able to seek relief

in court, where they could more directly

avail themselves of any judicial

remedies available under state law,

including those that might prevent the

dissipation of assets. Due to the time

required for the appointment of

arbitrators, and the delay inherent in the

process of converting an arbitration

award into an enforceable judgment, the

ability to go directly to court to seek

relief may save customers precious time

in cases in which the dissipation of

assets is a threat.

Therefore, NASD Dispute Resolution

is proposing to amend Rule 10301 of the

Code of Arbitration Procedure to

prohibit a firm that has been terminated,

suspended, or expelled from the NASD,

or that is otherwise defunct, from

enforcing a predispute arbitration

agreement against a customer in the

NASD forum. As a corollary to this rule

change, NASD Dispute Resolution will

advise customers making claims against

a terminated or suspended member of

the member’s status, so that the

customers can decide whether to

proceed in arbitration, to file their claim

in court, or to take no action.

The proposed rule change precludes

terminated, suspended, barred, or

otherwise defunct members from

requiring a customer to arbitrate in the

NASD forum under Rule 10301, unless

the customer agrees in writing to

arbitrate the claim in the NASD forum

13364 Federal Register / Vol. 66, No. 43 / Monday, March 5, 2001 / Notices

5 15 U.S.C. 78o(b)(6).

6 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3Letter from Darla C. Stuckey, Assistant

Secretary, NYSE, to Nancy J. Sanow, Assistant

Director, Division of Market Regulation, SEC, dated

February 12, 2001 (‘‘Amendment No. 1’’). In

Amendment No. 1, the Exchange corrected an error

in the purpose section of the Form 19b–4 filing.

4See Securities Act Release No. 7912 (October 27,

2000), 65 FR 65736 (November 2, 2000)

(‘‘Householding Release’’).

5 Id.

6 17 CFR 240.14b–1.

after the claim has arisen. The proposed

rule change is similar to Rule 10301(d)

of the Code of Arbitration Procedure,

which provides that class actions are

ineligible for arbitration in the NASD

forum. It is also similar in principle to

New York Stock Exchange (‘‘NYSE’’)

Rule 600(f), which makes employment

discrimination claims ineligible for

arbitration in the NYSE forum unless

the parties agree to arbitrate after the

claim has arisen.

2. Statutory Basis

NASD Dispute Resolution believes

that the proposed rule change is

consistent with the provisions of

Section 15A(b)(6) of the Act,5 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. Because terminated,

suspended, barred or otherwise defunct

firms have a significantly higher

incidence of non-payment of arbitration

awards than do active firms, NASD

Dispute Resolution believes that the

proposed rule change will protect

investors and the general public by

giving customers greater flexibility to

seek remedies against such firms.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

NASD Dispute Resolution 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

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 it 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 the file

number in the caption above and should

be submitted by March 26, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–5250 Filed 3–2–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43993; File No. SR–NYSE–

01–03]

Self-Regulatory Organizations: Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the New York Stock

Exchange, Inc. To Amend

Supplementary Material to Rules 451

and 465 Concerning Householding

February 22, 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 February

7, 2001, the New York Stock Exchange,

Inc. (‘‘Exchange’’ or ‘‘NYSE’’) 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 Exchange.

On February 14, 2001, the NYSE

submitted Amendment No. 1 to the

proposed rule change.3 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

Many listed company proxy

statements and annual reports are

mailed to beneficial holders of the

company’s stock by brokerage firms.

The practice of sending only one proxy

statement or annual report to multiple

beneficial holders with a single address

is known as ‘‘householding.’’ A newly

effective Commission rule now permits

householding by implied consent with

certain appropriate safeguards.4 The

Exchange proposes to amend its own

rules to align them with the

Commission’s recent amendments.5 The

NYSE’s proposal would permit

members to household annual reports,

interim reports, proxy statements and

other material so long as they comply

with applicable Commission rules,

including Rule 14b–1 and under the

Act.6

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 III 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

Rules of the Commission and the

Exchange require member organizations