[Federal Register Volume 65, Number 65 (Tuesday, April 4, 2000)]
[Notices]
[Pages 17687-17688]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-8223]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42585; File No. SR-BSE-00-01]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the Boston 
Stock Exchange, Inc. Relating to its Specialist Performance Evaluation 
Program

March 28, 2000.
    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 March 14, 2000, the Boston Stock Exchange, Inc. (``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II 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 and to grant accelerated approval to the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to extend its Specialist Performance 
Evaluation Program (``SPEP'') until March 31, 2001.

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
    The Exchange seeks to extend its SPEP pilot program,\3\ until March 
31, 2001. The current pilot program will expire on March 31, 2000.\4\ 
Under the SPEP pilot program, the Exchange regularly evaluates the 
performance of its specialists by using objective measures, such as 
turnaround time, price improvements, depth and added depth. Generally, 
any specialist who received a deficient score in one or more objective 
measures may be required to attend a meeting with the Performance 
Improvement Action Committee or the Market Performance Committee.
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    \3\ The SPEP pilot program is codified at Section 17 of the 
Rules of Board of Governors of the Exchange.
    \4\ See Securities Exchange Act Release No. 41563 (June 25, 
1999), 64 FR 36058 (July 2, 1999) (extending SPEP pilot program 
until March 31, 2000).
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    At this time, all aspects of the pilot program will remain the 
same. The Exchange believes that the SPEP pilot program is an effective 
tool for measuring specialist performance. However, the Exchange 
represents that it is not seeking permanent approval of the SPEP pilot 
program at this time, because the Exchange would like to review the 
impact of decimal pricing on the SPEP and amend the program, if needed, 
prior to seeking permanent approval.\5\ Thus, the Exchange requests a 
12-month extension of the pilot program at this time.
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    \5\ Telephone conversation between William P. Cummings, Manager 
of Legal and Regulatory Affairs, Exchange, and Terri L. Evans, 
Attorney, Division of Market Regulation, Commission on March 21, 
2000.
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2. Statutory Basis
    The statutory basis for the proposed rule change is Section 6(b)(5) 
of the Act,\6\ 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; 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; and is not designed to 
permit unfair discrimination between customers, issuers, brokers or 
dealers.
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    \6\ 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 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 neither solicited nor received written comments.

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, N.W., Washington, D.C. 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 SR-BSE-00-01 and should be 
submitted by April 25, 2000.

IV. Commission's Findings and Order Granting Accelerated Approval 
of Proposed Rule Change

    The Commission finds that the Exchange's proposal to extend the 
SPEP pilot program until March 31, 2001, is consistent with the 
requirements of the Act and the rules and regulation thereunder. 
Specifically, the Commission finds that the amendment is consistent 
with Section 6(b)(5) of the Act,\7\ which requires that the rules of 
the Exchange be designed to promote just and equitable principles of 
trade, 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 the 
proposed twelve-month extension of the pilot program should allow the 
Exchange to continue to assess specialist performance while allowing 
the Exchange adequate time to consider amending the SPEP program in 
response to decimal pricing.
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    \7\ 15 U.S.C. 78f(b)(5).
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    The Commission expects that during the pilot the Exchange will 
continue to monitor threshold levels and propose adjustments as 
necessary and continue to assess whether each SPEP measure is assigned 
an appropriate weight.\8\ In

[[Page 17688]]

addition, the Exchange should continue to closely monitor the 
conditions for review and should take steps to ensure that all 
specialists whose performance is deficient and/or diverges widely from 
the best units will be subject to meaningful review. Finally, the 
Commission repeats its request that the Exchange incorporate additional 
objective criteria into the SPEP, most importantly, a measure of quote 
performance.\9\ As previously noted, the Commission would have 
difficulty granting permanent approval to a SPEP that did not include a 
satisfactory response to the concerns described above.\10\
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    \8\ See Securities Exchange Act Release No. 39730 (March 6, 
1998), 63 FR 12847 (March 16, 1998) (order approving amendment to 
SPEP pilot program). In Securities Exchange Act Release No. 39730, 
the Commission stated certain terms and conditions for approving the 
SPEP pilot program on a permanent basis, including the need to 
provide a study to the Commission regarding the SPEP pilot program. 
Those terms and conditions are hereby incorporated by reference.
    \9\ Id.
    \10\ Id.
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    The Commission finds good cause for granting the Exchange's request 
for a twelve-month extension of the SPEP pilot prior to the thirtieth 
day after the date of publication of notice of filing thereof in the 
Federal Register. Among the obligations imposed upon specialists by the 
Exchange, and by the Act and the rules promulgated thereunder, is the 
maintenance of fair and orderly markets in their securities. To ensure 
that specialists fulfill these obligations, it is important that the 
Exchange be able to evaluate specialist performance. The Exchange's 
SPEP pilot assists the Exchange in conducting its evaluation and 
accelerated approval of the proposed rule change permits the SPEP pilot 
program to continue on an uninterrupted basis. Therefore, the 
Commission believes good cause exists to approve the extension of the 
pilot program until March 31, 2001, on an accelerated basis. 
Accordingly, the Commission finds that granting accelerated approval of 
the requested extension is appropriate and consistent with Sections 
6(b)(5) and 19(b)(2) of the Act.\11\
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    \11\ 15 U.S.C. 78f(b)(5) and 78s(b)(2).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-BSE-00-01) is hereby 
approved on an accelerated basis through March 31, 2001.
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    \12\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-8223 Filed 4-3-00; 8:45 am]
BILLING CODE 8010-01-M