[Federal Register Volume 69, Number 69 (Friday, April 9, 2004)]
[Notices]
[Pages 18994-18996]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-8087]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49525; File No. SR-BSE-2004-12]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of a Proposed Rule Change and Amendment 
Nos. 1 and 2 Thereto by the Boston Stock Exchange, Inc. to 
Retroactively Apply and Extend Its Specialist Evaluation Program Pilot

April 2, 2004.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

[[Page 18995]]

(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 23, 2004 the Boston Stock Exchange, Inc. (``BSE'' or 
``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 BSE. On April 1, 2004 and 
April 2, 2004, the Commission received Amendment Nos. 1 \3\ and 2,\4\ 
respectively, to the proposed rule change. The Commission is publishing 
this notice to solicit comments on the proposed rule change, as 
amended, from interested persons and to approve the proposal, on an 
accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from John Boese, Vice President, Legal and 
Compliance, BSE, to Nancy J. Sanow, Assistant Director, Division of 
Market Regulation (``Division''), Commission, dated March 31, 2004 
(``Amendment No. 1''). In Amendment No. 1, BSE requested a two-year 
extension of its Specialist Performance Evaluation Program pilot 
applied retroactively from September 30, 2002 to September 30, 2004 
(the original proposal sought only an extension of the pilot through 
June 30, 2004). In addition, BSE changed the basis of the proposal 
from Section 19(b)(3)(A) of the Act to Section 19(b)(2) of the Act 
and requested accelerated approval.
    \4\ See letter from John Boese, Vice President, Legal and 
Compliance, BSE, to Nancy J. Sanow, Assistant Director, Division, 
Commission, dated April 2, 2004 (``Amendment No. 2''). In Amendment 
No. 2, the BSE conformed its rule text to reflect the extension of 
the pilot until September 30, 2004.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to extend its Specialist Performance 
Evaluation Program (``SPEP'') pilot retroactively from September 30, 
2002 and to renew it prospectively until September 30, 2004.

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 a two-year extension of its SPEP pilot to be 
applied retroactively from September 30, 2002, and prospectively until 
September 30, 2004.\5\
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    \5\ See Securities Exchange Act Release No. 46220 (July 17, 
2002), 67 FR 48236 (July 23, 2002) (extending the SPEP pilot until 
September 30, 2002). See also Amendment No. 1, supra note 3 
(requesting retroactive approval).
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    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.
    While the Exchange believes that the SPEP program has been a very 
successful and effective tool for measuring specialist performance, it 
believes that modifications are necessitated as a result of 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. The Exchange requests accelerated approval of the extension 
of the pilot program so that the Exchange will be able to continue 
evaluating the performance of its specialists without interruption, 
pending approval by the Commission of the Exchange's anticipated 
proposed changes to the program.
2. Statutory Basis
    BSE believes that the statutory basis for the proposed rule change 
is Section 6(b)(5) of the Act,\6\ 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 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.

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, NW., Washington, 
DC 20549-0609. Comments may also be submitted electronically at the 
following e-mail address: [email protected]. All comment letters 
should refer to File No. SR-BSE-2004-12. This file number should be 
included on the subject line if e-mail is used. To help the Commission 
process and review comments more efficiently, comments should be sent 
in hardcopy or by e-mail but not by both methods. Copies of the 
submission, all subsequent amendments, all written statements with 
respect to the proposed rule change, as amended, that are filed with 
the Commission, and all written communications relating to the proposed 
rule change, as amended, 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 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 
number SR-BSE-2004-12 and should be submitted by April 30, 2004.

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

    After careful review, the Commission finds that the Exchange's 
proposal to retroactively extend the SPEP pilot from September 30, 2002 
until September 30, 2004 is consistent with the requirements of the Act 
and rules and regulations thereunder. Specifically, the Commission 
finds that the proposed rule change, as amended, is consistent

[[Page 18996]]

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 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. The Commission believes that the retroactive application of 
the SPEP pilot should allow the Exchange to continue to assess 
specialist performance without interruption, while allowing the 
Exchange adequate time to evaluate the program.
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    \7\ 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. 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.
    The Commission finds good cause for granting the Exchange's request 
for a two-year extension of the SPEP pilot prior to the thirtieth day 
after the date of publication of notice of filing thereof in the 
Federal Register.\8\ Among the obligations imposed upon specialists by 
the Exchange, and by the Act and 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 of 
specialist performance and accelerated approval of the proposed rule 
change would permit 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 September 30, 2002 until September 
30, 2004, 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.\9\
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    \8\ The Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(5) and 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-BSE-2004-12), as amended is 
hereby approved on an accelerated basis until September 30, 2004.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-8087 Filed 4-8-04; 8:45 am]
BILLING CODE 8010-01-P