Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change and Amendments No. 1 and 2 Thereto Relating to the Minimum Variation for Nasdaq-100 Shares and Disclaimer of Liability With Respect to the Nasdaq-100 Index

[Federal Register Volume 64, Number 155 (Thursday, August 12, 1999)]
[Notices]
[Pages 44072-44073]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-20849]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41712; File No. SR-PCX-99-26]


Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of 
Filing and Order Granting Accelerated Approval of Proposed Rule Change 
and Amendments No. 1 and 2 Thereto Relating to the Minimum Variation 
for Nasdaq-100 Shares and Disclaimer of Liability With Respect to the 
Nasdaq-100 Index

August 5, 1999.
    Pursuant to Section 19(b) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on July 28, 1999,\3\ the Pacific Exchange, Inc. (``PCX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the self-
regulatory organization. The Exchange subsequently filed Amendment No. 
2 on July 30, 1999.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons, 
and simultaneously is approving the filing.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The proposal was originally submitted on July 21, 1999, but 
was not complete. The Exchange subsequently submitted Amendment No. 
1, which replaced the original filing in its entirety.
    \4\ In Amendment No. 2, the Exchange proposes (1) to add a new 
commentary .03 to PCX Rule 8.300 to state that the Exchange will 
trade, pursuant to unlisted trading privileges, Nasdaq-100 Shares 
that will be based on the Nasdaq-100 Index; and (2) to amend 
proposed PCX Rule 8.300(g) relating to disclaimers of liability of 
the Nasdaq-100 Index. See Letter from Robert P. Pacileo, Attorney, 
PCX, to Michael A. Walinskas, Associate Director, Division of Market 
Regulation, Commission, dated July 29, 1999 (``Amendment No. 2'').
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to amend its rules on trading differentials 
to permit dealings in Nasdaq-100 Shares of the Nasdaq-100 Trust 
(``Nasdaq-100 Shares'') in increments of 1/64th of $1.00, and to amend 
its Portfolio Depositary Receipts rules to include a disclaimer of 
liability with respect to the Nasdaq-100 Index in connection with the 
trading of the Nasdaq-100 Shares.

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 self-regulatory organization 
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 self-regulatory 
organization 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 proposes to amend PCX Rule 5.3(b), on trading 
differentials, to permit dealings in Nasdaq-100 Shares in increments of 
1/64th of $1.00. The Nasdaq-100 Trust is a unit investment trust 
sponsored by Nasdaq-Amex Investment Product Services, Inc. with a 
portfolio based on the component stocks of the Nasdaq-100 Index. The 
Exchange intends to trade the Nasdaq-100 Shares pursuant to unlisted 
trading privileges under the Exchange's Portfolio Depositary Receipts 
Rules 8.300 et seq.\5\ Further, the Exchange proposes to codify 
language in PCX Rule 8.300, Commentary .03, to reflect that the 
Exchange will trade Nasdaq-100 Shares pursuant to unlisted trading 
privileges.\6\ These securities are currently traded on the Amex in 
increments of 1/64th of $1.00,\7\ and thus, the Exchange believes that 
it is appropriate to trade these securities on the Exchange with the 
same minimum increment of 1/64th of $1.00 as well.
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    \5\ The Exchange represents that American Stock Exchange's 
(``Amex'') PDR Rules 1000 through 1003 and the PCX's PDR rules 
8.300(a) through 8.300(f) are substantially the same.
    \6\ See Amendment No. 2, supra note 4.
    \7\ See Securities Exchange Act Release No. 41119 (February 26, 
1999), 64 FR 11510 (March 9, 1999) (SR-Amex-98-34).
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    In connection with the Exchange's licensing agreement with the 
Nasdaq Stock Market (``Nasdaq''), relating to liability for the 
calculation of the Nasdaq-100 Index in connection with the trading of 
the Nasdaq-100 Shares, the Exchange proposes to add PCX Rule 8.300(g) 
to codify a rule governing disclaimers of liability relating to the 
Nasdaq-100 Index. The Exchange represents that proposed PCX Rule 
8.300(g) is consistent with the

[[Page 44073]]

disclaimer of liability language adopted by the Amex in its Rule 
1006.\8\
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    \8\ See Amendment No. 2, supra note 4.
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2. Statutory Basis
    The Exchange believes that this proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Section 
6(b)(5),\10\ in particular, in that it is designed to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, and in general, to protect investors and the public 
interest.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. 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 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 
PCX. All submissions should refer to File No. SR-PCX-99-26 and should 
be submitted by September 2, 1999.

IV. Commission's Findings and Order Granting Accelerated Approval 
of Proposed Rule Change and Amendment Nos. 1 and 2

    The Commission finds that the PCX's proposed rule change and 
Amendment Nos. 1 and 2 are consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to a national 
securities exchange.\11\ Specifically, the Commission believes that the 
proposal is consistent with Section 6(b)(5) of the Act \12\ because it 
will facilitate transactions in securities by permitting the PCX: (1) 
To trade Nasdaq-100 Shares, on a UTP basis, in increments of 1/64th of 
$1.00, and (2) to adopt a disclaimer of liability rule relating to the 
Nasdaq-100 Index, consistent with the license agreement between Nasdaq 
and the Exchange.
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    \11\ In reviewing the proposed rule change, the Commission 
considered its potential impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
    \12\ 15 U.S.C. 78f(b)(5).
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    The Exchange has requested that the Commission find good cause 
pursuant to Section 19(b)(2) of the Act for approving the proposed rule 
change and Amendment Nos. 1 and 2 prior to the thirtieth day after the 
publication of the proposal in the Federal Register. The Commission 
believes that such action is appropriate, in that the proposed rule 
change establishes the same minimum trading variation as the Amex has 
adopted for Nasdaq-100 Shares. Further, the proposed rule relating to 
the disclaimer of liability with respect to the Nasdaq-100 Index (as 
stated in Amendment No. 2 of the proposed rule change) is identical to 
the disclaimer of liability adopted by the Amex.\13\ For the reasons 
set forth above, the Commission does not believe that this proposal 
raises any new regulatory issues. Accordingly, the Commission finds 
that there is good cause for approving the proposed rule change and 
Amendment Nos. 1 and 2 prior to the thirtieth day after the publication 
of the proposal in the Federal Register.
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    \13\ The Amex disclaimer of liability provision was approved in 
Securities Exchange Act Release Nos. 41119 (February 26, 1999), 64 
FR 11510 (March 9, 1999) (SR-Amex-98-34), and 41562 (June 25, 1999), 
64 FR 36057 (July 2, 1999) (SR-Amex-99-22). It was subject to the 
full notice and comment process in Securities Exchange Act Release 
No. 41119 and no comments were received with respect to the 
disclaimer.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change is hereby approved on an 
accelerated basis.

    \14\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-20849 Filed 8-11-99; 8:45 am]
BILLING CODE 8010-01-M