[Federal Register Volume 66, Number 66 (Thursday, April 5, 2001)]
[Notices]
[Pages 18126-18127]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-8349]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44101; File No. SR-BSE-00-22]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Boston Stock Exchange, Inc. Relating to Minimum Equity 
Requirements for Derivative-Based Products

March 26, 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 3, 2001, the Boston Stock Exchange, Inc. (``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Item 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.
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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 seeks to amend the Interpretations and Policies of 
Section 6, Limitations on Exchange Liability, of Chapter XXIV, 
Portfolio Depositary Receipts, of the Rules of the Board of Governors 
to reduce from $1,000,000 to $200,000 the minimum equity requirement 
for firms trading derivative-based products if the firm arranges to 
clear its trades through another forum and obtains Exchange approval to 
do so. Below is the text of the proposed rule change. New text is in 
italic.
* * * * *
Chapter XXIV

Portfolio Depositary Receipts

Limitation on Exchange Liability
Sec. 6

* * * Interpretation and Policies

    * * * 03  For derivative based trading products, the minimum equity 
requirement, in certain limited circumstances, will be reduced from 
$1,000,000 to $200,000. The limited circumstances under which the 
equity requirement will be reduced must be based on clearing 
arrangements with another forum, through which a BSE member firm will 
settle their derivative product trades executed on the floor of the 
Exchange through a separate, non BSECC-member, clearing center. All 
such arrangements must be fully disclosed to, and approved by, the 
Exchange, prior to the reduction of the equity requirement. The Early 
Warning Alert provisions set forth in Chapter XXII, Sections 2(f)(ii) 
and (iii), and the caretaker provision set forth in Chapter XXII, 
Section 2(f)(iv) shall apply.
* * * * *

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 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 purpose of this proposed rule change is to add Paragraph .03 to 
the Interpretations and Policies of Chapter XXIV, Portfolio Depositary 
Receipts, Section 6, Limitation on Exchange Liability, of the Rules of 
the Board of Governors to reduce from $1,000,000 to $200,000 the 
minimum equity requirement for firms trading derivative based products 
if the firm arranges to clear its derivative based products trades 
through another forum, (``XBSE'') and obtains Exchange approval to do 
so. The rationale for this is that the risk to the Exchange is 
substantially reduced if a member firm arranges pre-approved procedures 
for derivative-based products to settle through another, non-Boston 
Stock Exchange Clearing Corporation clearing institution. This policy 
would only apply in the limited product area of Portfolio Depositary 
Receipts, as is made clear in Section 1 of the relevant Chapter (XXIV), 
entitled ``Applicability,'' which states that ``[t]his Chapter is 
applicable only to Portfolio Depositary Receipts.''
2. Basis
    The statutory basis for the proposed rule change is Section 6(b)(5) 
of the Act,\3\ in that it is designed to foster cooperation and 
coordination with persons engaged in regulating, clearing,

[[Page 18127]]

settling, processing information with respect to, and facilitating 
transactions in securities; and is not designed to permit unfair 
discrimination between customers, issuers, brokers or dealers.
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    \3\ 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

    No written comments were either solicited or 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 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 
Exchange. All submissions should refer to File No. SR-BSE-00-22 and 
should be submitted by April 26, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-8349 Filed 4-4-01; 8:45 am]
BILLING CODE 8010-01-M