97-4446. 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  

  • [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
    
    
    

Document Information

Published:
02/24/1997
Department:
Securities and Exchange Commission
Entry Type:
Notice
Document Number:
97-4446
Pages:
8286-8287 (2 pages)
Docket Numbers:
Release No. 34-38293, File No. SR-PSE-96-42
PDF File:
97-4446.pdf