[Federal Register Volume 59, Number 190 (Monday, October 3, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24302]
[[Page Unknown]]
[Federal Register: October 3, 1994]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34710; File No. SR-PSE-94-25]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change by the Pacific
Stock Exchange, Inc., Relating to the Extension of the Lead Market
Maker System Pilot Program
September 23, 1994.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on
September 9, 1994, the Pacific Stock Exchange, Inc. (``PSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Commentary .01 to PSE Rule 6.82, ``Lead Market Maker Pilot
Program,'' states that the PSE's Lead Market Maker (``LMM'') system
pilot program will expire on September 30, 1994. The PSE proposes to
amend Commentary .01 to extend the Exchange's LMM system pilot program
through September 30, 1995.
The text of the proposed rule change is available at the PSE and at
the Commission.
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 IV 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
(a) Purpose.
On January 17, 1990, the Commission approved the PSE's LMM system
on a pilot basis.\1\ Previously, the Commission has approved Exchange
requests for extension of the pilot program,\2\ which is set to expire
on September 30, 1994.\3\ The PSE submitted pilot program reports to
the Commission on September 18, 1992, and on July 26, 1993. In
addition, on April 20, 1994, the Exchange withdrew several pending rule
filings relating to the LMM program and did so with the intention of
resubmitting a consolidated filing at a later date.\4\ At this time,
the PSE is considering additional rule changes to be included in the
consolidated filing. Therefore, the Exchange proposes to amend its
rules to extend the LMM pilot program through September 30, 1995, in
order to provide additional time for evaluation of the LMM program in
light of any changes that may be approved within the next year.
---------------------------------------------------------------------------
\1\See Securities Exchange Act Release No. 27631 (January 17,
1990), 55 FR 2462 (January 24, 1990).
\2\See Securities Exchange Act Release Nos. 33854 (April 1,
1994), 59 FR 16873 (April 8, 1994) (``April 1994 Pilot Approval
Order''); 31063 (August 21, 1992), 57 FR 39255 (August 28, 1992);
and 31635 (December 22, 1992), 57 FR 62414 (December 30, 1992).
\3\See April 1994 Pilot Approval Order, supra note 3.
\4\See Letter from David P. Semak, Vice President, Regulation,
PSE, to Sharon M. Lawson, Assistant Director, Division of Market
Regulation, Commission, dated April 20, 1994 (withdrawing File Nos.
SR-PSE-91-08, SR-PSE-92-35, SR-PSE-92-36, and SR-PSE-93-16).
---------------------------------------------------------------------------
(b) Basis.
The PSE believes that the proposed rule change is consistent with
Section 6(b) of the Act, in general, and furthers the objectives of
Section 6(b)(5), in particular, in that it will promote just and
equitable principles of trade and contribute to the protection of
investors and the public interest.
(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.
Written comments on the proposed rule change were neither solicited
or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The PSE has requested that the proposed rule change be given
accelerated effectiveness pursuant to Section 19(b)(2) of the Act.
The Commission finds that the proposal to extend the LMM pilot
program through September 30, 1995, is consistent with the requirements
of the Act and the rules and regulations thereunder, and, in
particular, the requirements of Section 6.\5\ The Commission concludes,
as it did in approving the LMM pilot program, that the pilot program
may enhance the market making mechanism on the PSE, thereby improving
the markets for listed options on the Exchange. Specifically, the
Commission believes that the LMM pilot may improve the PSE's market
making capabilities by creating long-term commitments to options
classes. Moreover, the pilot program will continue with adequate due
process safeguards in the LMM selection and termination procedures and
will retain procedures that prevent the misuse of material non-public
LMM information by either an LMM or a broker-dealer affiliated with an
LMM. The Commission notes, however, that before the pilot program can
be approved on a permanent basis, the PSE must provide the Commission
with a report on the operation of the pilot program.
---------------------------------------------------------------------------
\5\15 U.S.C. Sec. 78f(b) (1982).
---------------------------------------------------------------------------
Specifically, before requesting permanent approval or further
extension of the pilot program the PSE must submit a pilot program
report by June 1995 that addresses: (1) whether there have been any
complaints regarding the operation of the pilot; (2) whether the PSE
has taken any disciplinary or performance action against any member due
to the operation of the pilot; (3) the number of LMMs involved in the
pilot; (4) the extent to which the pilot has been used on the PSE; (5)
whether the PSE has terminated or replaced an LMM and the reasons
therefore; (6) the impact of the pilot on the bid/ask spreads, depth
and continuity in PSE options markets; and (7) whether the PSE has
taken any action or there have been any complaints against LMMs or
associated broker-dealers relating to improper activity as a result of
LMM affiliations with upstairs firms.
The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of publication of
notice thereof in the Federal Register because the PSE has not
indicated that there have been any problems associated with the
operation of the LMM system pilot program and because the Commission
has not received any adverse comments concerning the pilot program. In
addition, the Commission believes good cause exists to approve the
extension of the LMM pilot program on an accelerated basis in order to
allow the pilot program to continue uninterrupted. The Commission
believes, therefore, that granting accelerated approval of the proposed
rule change is appropriate and consistent with Section 6 of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street NW., Washington, D.C. 20549.
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
they 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 Section, 450 Fifth Street, N.W.,
Washington, D.C. Copies of such filing will also be available for
inspection and copying at the principal office of the above-mentioned
self-regulatory organization. All submissions should refer to the file
number in the caption above and should be submitted by October 24,
1994.
It is therefore ordered, Pursuant to Section 19(b)(2) of the
Act,\6\ that the proposed rule change (SR-PSE-94-25) is approved on an
accelerated basis, and, accordingly, that the LMM pilot program is
extended until September 30, 1995.
\6\15 U.S.C. Sec. 78s(b)(2) (1982).
---------------------------------------------------------------------------
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\7\
---------------------------------------------------------------------------
\7\17 CFR 200.30-3(a)(12) (1993).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-24302 Filed 9-30-94; 8:45 am]
BILLING CODE 8010-01-M
