1712 Federal Register / Vol. 66, No. 6 / Tuesday, January 9, 2001 / Notices

5 In approving this rule, 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. 78f.

7 15 U.S.C. 78s(b)(2).

8 17 CFR 200.30–3(a)(12).

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

2The Commission has modified the text of the

summaries prepared by OCC.

3See OCC Rule 805(d)(2).

4Securities Exchange Act Release No. 41089

(February 23, 1999), 64 FR 10051 (March 1, 1999).

conference to resolve discovery disputes

and other preliminary matters under

NYSE Rule 619.

III. Discussion

After careful review, the Commission

finds that the proposed rule change is

consistent with the requirements of the

Act and the rules and regulations

thereunder applicable to a national

securities exchange 5 and, in particular,

the requirements of Section 6 and the

rules and regulations thereunder.6

Specifically, the Commission believes

the proposal is consistent with the

Section 6(b)(5) requirements that the

rules of an exchange be designed to

promote just and equitable principles of

trade, to prevent fraudulent and

manipulative acts, and, in general, to

protect investors and the public interest.

In particular, the Commission believes

that the proposed rule change will

continue to help ensure that NYSE

members, member organizations, and

the public have a fair and impartial

forum for the resolution of their

disputes.

Mediation is a method of dispute

resolution where a mediator attempts to

facilitate a settlement of the dispute.

The Commission believes that it is

reasonable and consistent with the Act

to extend mediation to more cases

because it may result in savings of time

and money for a greater number of

parties. The Commission notes that the

Exchange is amending and extending

this pilot program based on its

evaluation of the effectiveness of the

current pilot program. The Exchange

represents that lowering the threshold to

claims of $250,000 or more and

including cases involving public

customers may lead to more and earlier

settlements. In addition, the Exchange

represents that early settlements reduce

costs and increase party satisfaction.

The Commission believes that it is

consistent with the Act to require an

administrative conference between the

parties and the arbitrators in cases

where the amount of the claim is

$250,000 or more, to expedite the

arbitration process and reduce costs of

the arbitration. An administrative

conference early in the process will

allow the arbitrators to intervene to

establish discovery schedules, resolve

discovery disputes and other

preliminary matters, and to attempt to

narrow the issues in dispute and avoid

costly contests over procedural matters.

The Commission believes that reducing

the threshold for administrative

conferences from $500,000 to $250,000

should provide these benefits to a

greater number of claims. Further, the

procedural amendments to the pilot

program should expedite the process for

conducting administrative conferences.

It is therefore ordered, pursuant to

section 19(b)(2) of the Act,7 that the

proposed rule change (SR–NYSE–00–

39) is approved. The mediation

program, NYSE Rule 638, and the

administrative conference rule, NYSE

Rule 639, are each approved on a twoyear pilot basis through December 30,

2002.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–541 Filed 1–8–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43782; File No. SR–OCC–

00–04]

Self-Regulatory Organizations; The

Options Clearing Corporation; Notice

of Filing of a Proposed Rule Change

Relating to the Definition of Marking

Price and Closing Price

December 29, 2000.

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

Securities Exchange Act of 1934 (‘‘Act’’)

notice is hereby given that on May 2,

2000, The Options Clearing Corporation

(‘‘OCC’’) 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 primarily by OCC.

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 proposed rule change would

amend OCC’s price determination rules

by conforming the definition of

‘‘marking price’’ to the definition of

‘‘closing price.’’ The rule change would

also revise both definitions to clarify

that OCC will normally determine

underlying stock prices based on the

last reported sale price during regular

business hours.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

OCC 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. OCC has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of such statements.2

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

The purpose of the proposed rule

change is to conform the definition of

‘‘marking price’’ in OCC Rule 601 to the

definition of ‘‘closing price’’ in OCC

Rule 805. The rule change would also

revise both definitions to clarify that

OCC will normally determine

underlying stock prices based on the

last reported sale price during regular

business hours.

Background

OCC Rule 805(j) defines the term

‘‘closing price’’ for purposes of OCC’s

exercise by exception procedure. Under

this procedure, unless a clearing

member specifically instructs OCC to

the contrary, expiring equity options in

the clearing member’s accounts are

exercised without any affirmative action

by the clearing member if the ‘‘closing

price’’ of the underlying stock exceeds

(in the case of a call) or is less than (in

the case of a put) the strike price of the

option by a specified interval. That

interval is three-quarters of a point in a

customers’ account and one-quarter of a

point in any other clearing member

account.3

Before February 1999, Rule 805(j)

defined ‘‘closing price’’ to mean the

closing price of an underlying stock ‘‘on

its primary market.’’ In recognition of

the increasing fragmentation of the

equity markets, the rule was amended in

February 1999 to refer instead to the last

reported sale price ‘‘on such national

securities exchange or other domestic

securities market as [OCC] shall

determine.’’ 4 Thus, the rule change gave

OCC the discretion to designate the

market whose closing price will serve as

the benchmark in order to avoid

Federal Register / Vol. 66, No. 6 / Tuesday, January 9, 2001 / Notices 1713

5Assigned short positions are margined at OCC

from the assignment date through the exercise

settlement date (E+3).

6 15 U.S.C. 78q–1.

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 Robert P. Pacileo, Staff Attorney,

Regulatory Policy, PCX, to Richard Strasser,

Assistant Director, Division of Market Regulation

(‘‘Division’’), SEC, dated January 6, 2000

(‘‘Amendment No. 1’’).

4See letter from Robert P. Pacileo, Senior

Attorney, Regulatory Policy, PCX, to Jack Drogin,

Assistant Director, Division, SEC, dated May 24,

2000 (‘‘Amendment No. 2’’).

5Securities Exchange Act Release No. 43149

(August 11, 2000), 65 FR 51392.

6See letter from Peter D. Bloom, Director,

Regulatory Projects, Regulatory Policy, PCX, to

Kelly Riley, Division, SEC, dated December 20,

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

the Exchange made non-substantive reference

changes to proposed PCX Rules 6.51, 6.64 and 6.65

to reflect other amendments made to the rules.

Because the changes in Amendment No. 3 were

non-substantive, notice is not required.

potential disputes as to a stock’s

primary market.

Rule 601 specifies the procedure for

margining short positions in equity

options. Open short positions are

margined based on prices or quotes for

the option itself. Assigned short

positions, however, are margined based

on the difference between the strike

price of the option and the ‘‘marking

price’’ of the underlying stock.5 Unlike

the definition of ‘‘closing price’’ in Rule

805(j), the definition of ‘‘marking price’’

in Rule 601(b)(6) still refers to the

closing price of an underlying stock on

its ‘‘primary market.’’

Discussion

1. Conforming Rule 601(b)(6) to Rule

805(j). OCC believes that the definition

of ‘‘marking price’’ in Rule 601(b)(6) and

the definition of ‘‘closing price’’ in Rule

805(j) should not be materially different.

According to OCC, the two prices are

normally determined in the same

manner and therefore should be defined

in the same way. Therefore, OCC

proposes that the Rule 601 definition of

‘‘marking price’’ conform to Rule 805

because the same concerns that led OCC

to replace the term ‘‘primary market’’ in

Rule 805 apply equally in the context of

Rule 601.

2. Regular Trading Hours. OCC

believes that with the growth of afterhours trading, questions might arise

concerning the time that the ‘‘last

reported sale price’’ of an underlying

stock should be determined for

purposes of fixing both the Rule 805

closing price and the rule 601 marking

price. OCC therefore proposes that Rule

805(j) and 601(b)(6) be amended to refer

to the last reported sale price ‘‘during

regular trading hours (as determined by

the Corporation [OCC]) * * *.’’ This

amendment would allow OCC to avoid

potential disputes by (i) eliminating any

basis for arguing that the closing price

or the marking price should be

determined based on after-hours trading

and (ii) giving OCC discretion to

determine when ‘‘regular trading hours’’

end.

OCC believes that the proposed rule

change is consistent with the purposes

and requirements of Section 17A of the

Act 6 because it promotes the prompt

and accurate clearance and settlement of

equity and index options.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

OCC does not believe that the

proposed rule change would impose any

burden on competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received from

members, Participants or Others

Written comments were not and are

not intended to be solicited with respect

to the proposed rule change and none

have been received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within thirty-five 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

ninety 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 OCC 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

Section, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of OCC. All submissions should

refer to file number SR–OCC–00–04 and

should be submitted by January 30,

2001.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–543 Filed 1–8–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43779; File No. SR–PCX–

99–44]

Self-Regulatory Organizations; Pacific

Exchange Inc.; Order Approving

Proposed Rule Change Relating to

PCX Rule 6, Options Trading, Trading

Practices and Procedures

December 28, 2000.

I. Introduction

On October 29, 1999, the Pacific

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

submitted to 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 to

amend some of its options trading rules.

On January 7, 2000, the PXC submitted

Amendment No. 1 to the proposed rule

change.3 On May 25, 2000, the PCX

submitted Amendment No. 2 to the

proposed rule change.4 The proposed

rule change, as amended by

Amendment Nos. 1 and 2, was

published in the Federal Register on

August 23, 2000.5 On December 22,

2000, the Exchange submitted

Amendment No. 3 to the proposed rule

change.6 The Commission did not

receive any comments on the proposed

rule change. This order approves the

proposal, as amended.