[Federal Register Volume 63, Number 38 (Thursday, February 26, 1998)]
[Notices]
[Pages 9895-9896]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-4856]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39667; File No. SR-PCX-98-01]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc.
Relating to Expansion of the LMM Book Pilot Program To Include Non-
Multiply-Listed Option Issues
February 13, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on January 23, 1998, the Pacific Exchange, Inc. (``PCX'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
PCX.\3\ On February 9, 1998, the PCX filed Amendment No. 1 to the rule
proposed redesignating the proposal as a ``non-controversial'' rule
filing pursuant to Rule 19b-4(e)(6), which constitutes a substantive
change in the proposal.\4\ This redesignation renders the rule proposed
effective upon receipt of Amendment No. 1 by the Commission pursuant to
Section 19(b)(3)(A) of the Act and provides that the rule change become
operative 30 days after the date of the filing or such shorter time as
the Commission may designate if consistent with the protection of
investors and the public interest. The Commission is publishing this
notice to solicit comments on the proposed rule change, as amended,
from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ The PCX filed this proposed rule change pursuant to Rule
19b-4(e)(1), designating the rule change as constituting a stated
policy, practice, or interpretation with respect to the meaning,
administration, or enforcement of an existing rule, and thereby
rendering it effective upon filing pursuant to Section 19(b)(3)(A)
of the Act.
\4\ See letter from Michael D. Pierson, Senior Attorney,
Regulatory Policy, PCX, to Ann L. Vlcek, Office of Market
Supervision, Division, of Market Regulation, Commission, dated
February 6, 1998.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The PCX is proposing to expand its Lead Market Maker (``LMM'') Book
Pilot Program by allowing qualified LMMs to trade non-multiply-listed
option issues under the pilot program.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing the Commission, the PCX 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
Purpose
On October 11, 1996, the Commission approved an Exchange proposal
to adopt a one-year pilot program under which a limited number of LMMs
would be able to assume operational responsibility for the options
public limit order book (``Book'') in certain option issues.\5\ On
September 22, 1997, the Commission approved an Exchange proposed to
extend the program for one year, so that it is currently set to expire
on October 12, 1998.\6\
---------------------------------------------------------------------------
\5\ See Exchange Act Release No. 37810 (October 11, 1996), 61 FR
54481 (October 18, 1996) (approved File NO. SR-PSE-96-09).
\6\ See Exchange Act Release No. 39106 (September 22, 1997), 62
FR 51172 (September 30, 1997) (approving File No. SR-PSE-97-32).
---------------------------------------------------------------------------
Under the pilot program, approved LMMs manage the Book function,
take responsibility for trading disputes and errors, set rates for Book
execution, and pay the Exchange a fee for systems and services.\7\ Only
multiply-listed option issues are currently eligible to be traded under
the pilot program.\8\ Initially, the program was limited by allowing no
more than three LMMs to participate in the program and no more than 40
option symbols to be used. But on April 1, 1997, the Commission
approved an Exchange proposal to expand the program so that up to nine
LMMs may participate and up to 150 option symbols may be used.\9\
---------------------------------------------------------------------------
\7\ See Exchange Act Release No. 37874 (October 28, 1996), 61 FR
56597 (November 1, 1996) (approving File No. SR-PSE-96-38,
establishing a staffing charge for LMMs who participate in the pilot
program).
\8\ See Exchange Act Release No. 38462 (April 1, 1997), 62 FR
16886 (April 8, 1997) (approving File No. SR-PSE-96-45).
\9\ See Exchange Act Release No. 38462, supra.
---------------------------------------------------------------------------
The Exchange is now proposing to expand the program by allowing
LMMs to include non-multiply-listed options within the scope of the
program. This change will give program participants greater flexibility
in setting Book rates for option issues that they trade, and thus will
make the program a better tool for the Exchange to compete with other
exchanges for options order flow by lowering transaction costs to the
customer.
Basis
The Exchange believes that the proposal is consistent with Section
6(b) of the Act, in general, and Section 6(b)(5), in particular, in
that it is designed to facilitate transactions in securities, promote
just and equitable principles of trade, and to protect 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
nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The PCX initially filed the proposed rule change with the
Commission on January 23, 1998, pursuant to Rule 19b-4(e)(1),
designating the proposed rule change as constituting a stated policy,
practice, or interpretation with respect to the meaning,
administration, or enforcement of an existing rule, and rendering the
rule change effective upon filing pursuant to Section 19(b)(3)(A)(i) of
the Act. However, the PCX filed Amendment No. 1 on February 9, 1998
redesignating the proposal as a ``non-
[[Page 9896]]
controversial'' rule filing under Rule 19b-4(e)(6). This redesignation
constituted a substantive change in the proposal, thus rendering the
rule change effective upon filing of Amendment No. 1 and providing that
it become operative 30 days after the date of the filing or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest pursuant to Section
19(b)(3)(A)(iii) of the Act.
Because the foregoing proposed rule change (1) Does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
(3) does not become operative for 30 days from February 9, 1998, the
date on which Amendment No. 1 was filed; and the Exchange provided the
Commission with written notice of its intent to file the proposed rule
change at least five business days prior to the filing date,\10\ the
rule change has become effective pursuant to Section 19(b)(3)(A) of the
Act and Rule 19b-4(e)(6) thereunder. At any time within 60 days of the
filing of such proposed rule change, the Commission may summarily
abrogate such rule change if it appears to the Commission that such
action is necessary or appropriate in the public interest, for the
protection of investors, or otherwise in furtherance of the purposes of
the Act.
---------------------------------------------------------------------------
\10\ The Commission considers the original January 23, 1998 rule
filing to be sufficient written notice of PCX's intent to file the
proposed rule change that was submitted in the form of Amendment No.
1 on February 9, 1998. The date of the January 23, 1998 rule filing
also satisfies the requirement of a minimum prefiling time period of
five business days.
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. 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 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 in the
Commission's Public Reference Room, 450 Fifth Street, N.W., Washington,
D.C. 20549. Copies of such filing will also be available for inspection
and copying at the principal office of the PCX. All submissions should
refer to File No. SR-PCX-98-01 and should be submitted by [insert date
21 days from date of publication].
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
---------------------------------------------------------------------------
\11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-4856 Filed 2-25-98; 8:45 am]
BILLING CODE 8010-01-M
