[Federal Register Volume 62, Number 36 (Monday, February 24, 1997)]
[Notices]
[Pages 8286-8287]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4446]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38293; File No. SR-PSE-96-42]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Pacific Stock Exchange Incorporated Relating to an
Amendment to the Minor Rule Plan and the Adoption of a Forum Fee for
Minor Rule Plan Appeals
February 14, 1997.
Pursuant to Section 19(b) (1) of the Securities Exchange Act of
1934 (``Act''),\1\ notice is hereby given that on October 25, 1996, the
Pacific Stock Exchange Incorporated (``PSE'' or ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the self-regulatory organization. On
October 26, 1996, PSE submitted an amendment that clarifies certain
aspects of the proposed rule change.\2\ 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\ Letter from Michael D. Pierson, Senior Attorney, Regulatory
Policy, PSE, to Ivette Lopez, Assistant Director, Division of Market
Regulation, SEC (``Amendment No. 1'').
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposing to amend its rules to adopt a forum fee
that may be imposed when a Member or Member Organization appeals a
finding of a Minor Rule Plan (``MRP'') violation, and the review panel
affirms the initial finding of a violation. The Exchange also is
proposing to amend its MRP to include PSE Rule 6.87(c), which prohibits
the dividing up of an option order to make its parts eligible for entry
into Auto-Ex. The text of the proposed rule change is available at the
Exchange 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
1. Purpose
The Exchange is proposing to adopt a new subsection (5) to PSE Rule
10.11(d) to provide as follows: If, after a hearing or review on the
papers pursuant to subsection (d) of PSE Rule 10.11,\3\ a panel
appointed by the pertinent committee determines that a Member or Member
Organization has violated one or more Exchange rules, as alleged, that
panel: (i) May impose any one or more of the disciplinary sanctions
authorized by the Exchange's Constitution and Rules and (ii) shall
impose a forum fee against the person charged in the amount of two
hundred fifty dollars ($250) if the determination was reached based on
a review of the papers, or in the amount of five hundred dollars ($500)
if a hearing was conducted. In the event that the Panel determines that
a Member or Member Organization has violated one or more Exchange
rules, as alleged, and the sole disciplinary sanction imposed by the
pertinent committee for such rule violation(s) is a fine that is less
than the total fine initially imposed by the Exchange for the subject
violation(s), the Committee has the discretion to waive the imposition
of a forum fee.\4\ The Exchange believes this fee is necessary to,
among other things, help offset the costs associated with certain
appeals involving MRP violations.
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\3\ PSE Rule 10.11, entitled ``Appeal of Floor Citations and
Minor Rule Plan Sanctions,'' sets forth the procedures that apply
when a member or member organization appeals a sanction imposed in
connection with a floor citation or the MRP. See PSE Rules 10.11 and
10.13.
\4\ The provisions of proposed Rule 10.11(d) (5) are essentially
the same as Rule 17.50(d) (2) of the Chicago Board Options Exchange
(``CBOE''), except that the proposed PSE forum fees are higher than
those of the CBOE.
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The Exchange also is proposing to amend its MRP,\5\ which provides
that the Exchange may impose a fine not to exceed $5,000 on any member,
member organization, or person associated with a member organization
for any violation of an Exchange rule that has been deemed to be minor
in nature and approved by the Commission for inclusion in the MRP. PSE
Rule 10.13, subsection (h)-(j), sets forth the specific Exchange rules
deemed to be minor in nature.
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\5\ Rule 19d-1(c) (2) under the Act authorizes national
securities exchanges to adopt minor rule violation plans for the
summary discipline and abbreviated reporting of minor rule
violations by exchange members and member organizations. See
Securities Exchange Act Release No. 21013 (June 1, 1984), 49 FR
23828 (approving amendments to paragraph (c) (2) of Rule 19d-1 under
the Act). The PSE's MRP was approved by the Commission in 1985. See
Securities Exchange Act Release No. 22654 (Nov. 21, 1985), 50 FR
48853 (approving File No. SR-PSE-85-24). In 1993, the Exchange
amended its MRP and adopted detailed procedures relating to the
adjudication of minor rule violations. See Securities Exchange Act
Release No. 32510 (June 24, 1993), 58 FR 35491. Thereafter, the
Exchange has modified its MRP several times. See Securities Exchange
Act Release Nos. 34322 (July 6, 1994), 59 FR 35958; 35144 (Dec. 23,
1994), 59 FR 67743 (Dec. 30, 1994); 36622 (Dec. 21, 1995), 60 FR
67384 (Dec. 29, 1995); 37886 (Oct. 29, 1996), 61 FR 37886 (approving
File No. SR-PSE-96-26). See also Securities Exchange Act Release No.
37799 (Oct. 9, 1996), 61 FR 54479 (publishing File No. SR-PSE-96-30,
proposed additions to the MRP, for comment).
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Specifically, the Exchange is proposing to add the following
violation to the section of the MRP relating to Options Floor Decorum
and Minor Trading Rule Violations: ``Dividing up an order to make its
parts eligible for entry into Auto-Ex (Rule 6.87(c))'' (with
recommended fines of $2,500, $3,750 and $5,000 for first, second, and
third violations). The Exchange believes that violations of Rule
6.87(c) are objective in nature and easily verifiable and, therefore,
appropriate to include this rule in the MRP.\6\ The Exchange also
[[Page 8287]]
notes that the recommended fine levels being proposed are comparable to
the fines that the Exchange has imposed previously for violations of
Rule 6.87(c).
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\6\ For example, an investigation will reveal that a customer's
original order, as represented on an ``upstairs'' trading ticket,
was for a number of option contracts that was greater than ten, but
handwritten notes will indicate that the original order has been
divided up. In addition, the Exchange's time and sales report will
establish that a number of sub-orders occurred sequentially on the
Auto-Ex system during a relatively short period of time.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) \7\ of the Act in general and furthers the objectives of
Section 6(b)(5) \8\ and Section 6(b)(7) \9\ in particular in that it is
designed to promote just and equitable principles of trade, to assure
that members, member organizations, and persons associated with members
and member organizations are appropriately disciplined for violations
of Exchange rules and, in general, to protect investors and the public
interest.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ 15 U.S.C. 78f(b)(7).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes the proposed rule change will impose no
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 written comments.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the 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 the 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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 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
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 Section, 450 Fifth Street, NW.,
Washington, DC 20549. Also, copies of such filing will be available for
inspection and copying at the principal office of the PSE. All
submissions should refer to File No. SR-PSE-96-42 and should be
submitted by March 17, 1997.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-4446 Filed 2-21-97; 8:45 am]
BILLING CODE 8010-01-M
