[Federal Register Volume 66, Number 128 (Tuesday, July 3, 2001)]
[Notices]
[Pages 35292-35293]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-16637]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44466; File No. SR-BSE-2001-03]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change and Amendment No. 
1 Thereto by the Boston Stock Exchange, Inc. Relating to Its Specialist 
Performance Evaluation Program

June 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 June 7, 2001, the Boston Stock Exchange (``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. On June 15, 2001, the Exchange 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 and to grant accelerated approval 
to the proposed rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange requested to have the one-
year extension of its Specialist Performance Evaluation Pilot 
Program (``SPEP Pilot'') applied retroactively to April 1, 2001. In 
addition, the Exchange added rule text language that sets forth the 
expiration date of the SPEP Pilot. See letter from John A. Boese, 
Assistant Vice President, Rule Development and Market Structure, 
Exchange, to Nancy Sanow, Assistant Director, Division of Market 
Regulation, Commission, dated June 14, 2001 (``Amendment No. 1'').
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I. Self-Regulatory Organizations Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to extend its SPEP Pilot until March 31, 
2002. The text of the proposed rule change follows. New text is 
italicized.

Chapter XV

Specialists
Specialist Performance Evaluation Program
Sec. 17(a)-(e) no change
    (f) This program will expire on March 31, 2002, unless further 
action is taken by the Exchange.

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 have a one-year extension of its SPEP Pilot 
applied retroactively from April 1, 2001, until March 31, 2002.\4\ 
Under the SPEP Pilot program, the Exchange regularly evaluates the 
performance of its specialists by using objective measures, such as 
turnaround time, price improvement, depth, and added depth. Generally, 
any specialist who receives a deficient score in one or more measures 
may be required to attend a meeting with the Performance Improvement 
Action Committee, or the Market Performance Committee.
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    \4\ The SPEP Pilot expired on March 31, 2001. See Securities 
Exchange Act Release No. 42585 (March 28, 2000), 65 FR 17687 (April 
4, 2000); see also Amendment No. 1, supra note 3 (requesting 
retroactive approval).
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    While the Exchange believes that the SPEP Pilot has been a very 
successful and effective tool for measuring specialist performance, it 
realizes that modifications are necessitated as a result of recent 
changes in the industry, particularly decimalization. Accordingly, the 
Exchange is seeking to extend the pilot period of this program so that 
evaluation and modification can be undertaken before permanent approval 
is requested.
2. Statutory Basis
    The statutory basis for the proposed rule change is Section 6(b)(5) 
of the Act,\5\ in that the proposed rule change 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

[[Page 35293]]

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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    \5\ 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

    The Exchange has neither solicited nor received comments on the 
proposed rule change.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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 and Amendment No. 1 thereto, 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-2001-03 and should be submitted by 
July 24, 2001.

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

    The Commission finds that the Exchange's proposal to retroactively 
extend the SPEP Pilot from April 1, 2001 until March 31, 2002 is 
consistent with the requirements of the Act and the rules and 
regulation thereunder. Specifically, the Commission finds that the 
proposed rule change, as amended, is consistent with Section 6(b)(5) of 
the Act,\6\ 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 retroactive extension 
of the SPEP Pilot should allow the Exchange to continue to assess 
specialist performance without interruption, while allowing the 
Exchange adequate time to consider amending the SPEP Pilot program in 
response to decimal pricing.
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    \6\ 15 U.S.C. 78f(b)(5).
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    The Commission expects that during the SPEP 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.\7\ In 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.\8\ 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.\9\
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    \7\ See Securities Exchange Act Release No. 39730 (March 6, 
1998), 63 FR 12847 (March 16, 1998) (order approving amendment to 
SPEP Pilot). 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.
    \8\ Id.
    \9\ 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.\10\ 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 
to continue on an uninterrupted basis. Therefore, the Commission 
believes good cause exists to approve the extension of the SPEP Pilot 
from April 1, 2001 until March 31, 2002, 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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    \10\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
    \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, as amended, (SR-BSE-2001-03) is 
hereby approved on an accelerated basis through March 31, 2002.
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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. 01-16637 Filed 7-2-01; 8:45 am]
BILLING CODE 8010-01-M