[Federal Register Volume 62, Number 29 (Wednesday, February 12, 1997)]
[Notices]
[Pages 6594-6595]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-3429]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38241; File No. SR-PSE-96-36]
Self--Regulatory Organizations; Pacific Stock Exchange, Inc.;
Order Granting Approval to Proposed Rule Change and Notice of Filing
and Order Granting Accelerated Approval of Amendment No. 1 Relating to
a Requirement That all Non-Self-Clearing PSE Floor Brokers Maintain
Error Accounts
February 5, 1997.
I. Introduction
On October 17, 1996, the Pacific Stock Exchange, Incorporated
(``PSE'' or ``Exchange'') submitted to the Securities and Exchange
Commission (``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (``ACT'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend its rules to provide
that each non-self clearing floor broker on the Exchange must establish
and maintain an error account for carrying positions resulting from
errors.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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The proposed rule change, together with the substance of the
proposal, was published for comment in Securities Exchange Act Release
No. 37903 (October 31, 1996), 61 FR 57507 (November 6, 1996). No
comments were received on the proposal. The Exchange filed Amendment
No. 1 with the Commission on February 4, 1997.\3\ This
[[Page 6595]]
order approves the proposed rule change, as amended.
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\3\ Amendment No. 1 was filed with the Commission on February 4,
1997. The amendment changed the numbering of the proposed rule
change from 4.10(c) to 4.21, further explained the Exchange's
purpose for the rule change, and explained why the rule change
distinguishes between non-self-clearing floor brokers and self-
clearing floor brokers. See letter from Michael D. Pierson, PSE, to
Heather Seidel, Attorney, Market Regulation, Commission, dated
February 4, 1997.
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II. Description
The rule change adopts new Rule 4.21 to provide that each member
organization whose principal business is as a floor broker on the
Exchange and who is not self-clearing must establish and maintain an
account with a clearing member of the Exchange, for the sole purpose of
carrying positions resulting from bona fide errors made in the course
of its floor brokerage business. The new rule further provides that
with respect to options floor brokers only, such an account for options
transactions must be maintained with an entity that is also a member of
the Options Clearing Corporation.
The purpose of the proposed rule change is to strengthen the
Exchange's ability to detect and deter rule violations that may occur
in connection with floor brokers' trading errors. The proposed rule
change would assist routine examinations of the floor brokers' trading
by the PSE's Department of Member Examinations. The Exchange notes that
the proposed rule change is consistent with Rule 703(c)(vi) of the
Philadelphia Stock Exchange, Inc. (``PHLX''). The Exchange 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)\4\ in
particular in that it is designed to promote just and equitable
principles of trade and to protect investors and public interest.
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\4\ 15 U.S.C. 78f(b)(5).
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III. Discussion
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange, and, in
particular, with the requirements of Section 6(b).\5\ More
specifically, the Commission believes the proposal is consistent with
the Section 6(b)(5) requirements that the rules of an exchange be
designed to promote just and equitable principles of trade, to prevent
fraudulent and manipulative acts, and, in general, to protect investors
and the public, because the proposed rule change facilitates the
enhanced surveillance of floor brokers' error trades.
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\5\ 15 U.S.C. 78f(b).
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The Commission believes that the proposed rule change may enhance
the Exchange's ability to detect and prevent rule violations committed
by floor brokers that may arise in connection with trading errors, by
facilitating routine surveillance examinations of floor brokers with
regard to error trades. This enhanced surveillance capability results
from the Exchange's ability to more easily review trades designated by
floor brokers as errors by reviewing the required error account for
each floor broker. The Commission notes that the proposed rule change
will conform the treatment of error trades by non-self-clearing floor
brokers with that conducted by self-clearing floor brokers, whose
practice is to have one or more trading accounts in which to segregate
errors.\6\
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\6\ See Amendment No. 1.
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The Commission also notes that the proposed rule change is similar
to rule 703(c)(vi) of the PHLX, previously approved by the Commission,
which requires all non-self-clearing floor brokers to have error
accounts. Accordingly, the Commission believes that the proposed rule
change does not raise any new significant regulatory issues.
The Commission finds good cause for approving Amendment No. 1 on an
accelerated basis prior to the thirtieth day after the date of
publication of notice thereof in the Federal Register. Specifically,
the Commission believes that accelerated approval of Amendment No. 1 is
appropriate because the amendment does not change the substance of the
proposal. Rather, it simply clarifies and explains certain aspects of
the proposed rule change.\7\
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\7\ See supra note 3.
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Accordingly, the Commission believes that it is consistent with
Section 6(b)(5) of the Act to approve Amendment No. 1 on an accelerated
basis.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning Amendment No. 1 to the proposed rule change.
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. Copies of the submission, all subsequent
amendments, all written statements with respect to the proposed rules
change that are filed with the Commission, and all written
communications relating to Amendment No. 1 between the Commission and
any persons, 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 at the principal office of
the Exchange. All submissions should refer to File No. SR-PSE-96-36 and
should be submitted by [insert date 21 days from date of publication].
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (SR-PSE-96-36), as amended, is
approved.
\8\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-3429 Filed 2-11-97; 8:45 am]
BILLING CODE 8010-01-M
