[Federal Register Volume 61, Number 43 (Monday, March 4, 1996)]
[Notices]
[Pages 8321-8322]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-4885]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36883; File No. SR-PSE-96-01]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Pacific Stock Exchange, Inc. Relating to Its Options Firm
Quote Rule
February 23, 1996.
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 January
16, 1996, the Pacific Stock Exchange, Inc. (``PSE'' of ``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 PSE. 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
The Exchange proposes to amend its Options Firm Quote Rule (Rule
6.86, the ``rule'') in order to codify some related floor policies and
also to clarify certain provisions of the rule.
The text of the proposed rule change is available at the Office of
the Secretary, 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 Exchange 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 PSE 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 modify its Options Firm Quote Rule as
follows:
Order Identification
Subsection (a) of the rule currently provides that members and
member organizations who enter orders for execution on the Options
Floor must ascertain the account origin of such orders and provide a
notation of the account origin on the order ticket. The Exchange is
proposing to modify this provision to provide that such members and
member organizations would be required to communicate such account
information to the executing member organization. Accordingly, the
member or member organization entering the order must indicate to the
executing member organization whether the order is for the account of a
customer, firm or market maker.
The proposal would also set forth the duty of executing floor
brokers to inquire personally as to the account origin of each eligible
order upon receipt thereof or prior to its execution and to note such
information on the order ticket.
Finally, under the proposal, the executing member organization and
the clearing member organization would bear greater responsibility with
respect to the proper identification of orders that are executed on
behalf on non-members of the Exchange.
Commentary .05
Proposed Commentary .05 sets forth certain types of orders that are
subject to the rule and the extent to which the rule applies to such
orders. The rule specifically addresses the treatment of combination
orders, spread orders, straddle orders and contingency orders. With
respect to combination orders, market Makers in a trading crowd would
only be responsible for providing an aggregate of 20 contracts on one
side of the market; however, Market Makers would be required to provide
a depth of twenty contracts on both sides of the market for spread and
straddle orders.
The proposed Commentary also enumerates the types of contingency
orders that are subject to the rule, i.e., ``minimum'' orders of 20
contracts or less and market not-held, limit not-held and delta orders
that can be executed immediately. The types of contingency orders that
are not subject to the rule include: ``minimum'' orders for more than
20 contracts, buy-writes, all-or-none orders for more than 20
contracts, delta orders traded with stock and contingency orders that
have been partly executed.
The proposed Commentary also provides that in executing contingency
orders pursuant to the rule, the order ticket must be time stamped upon
being taken into the trading crowd. The Commentary also states that
such orders are entitled to 20 contracts on the market disseminated at
that time.
Commentary .06
Proposed Commentary .06 provides that Market Makers must be
afforded a ``reasonable'' opportunity to update their disseminated
markets for the execution of consecutive eligible customers orders in
options on the same underlying security. The Commentary further
provides that orders shall be executed on a time priority basis so that
the order with the earliest time stamp will receive a guaranteed fill
of 20 contracts.
Commentary .07
Proposed Commentary .07 provides that a Floor Broker may be held
liable for an entire order if such Floor Broker attempts to solicit a
better price than the limit price stipulated on the order ticket and
such attempt creates a change in the market that does not result in an
immediate execution.
Commentary .08
Proposed Commentary .08 designates those Market Makers to whom the
Order Book Official may, pursuant to current Subsection (d), allocate
the balance of contracts necessary to provide an execution of 20
contracts when the response of the members present at the trading post
is insufficient to provide a depth of 20 contracts. Specifically, such
allocations may be made to Market Makers who: (1) Are present at the
trading post at the time of a call for a
[[Page 8322]]
market; and either (2) hold an appointment in the option classes at the
trading post or (3) regularly effect transactions in person for their
trading accounts at that trading post.
In addition, this proposed Commentary provides that Market Makers
who have logged on to the Automatic Execution system, but who are not
present in the trading crowd will not be eligible for an allocation by
the Order Book Official pursuant to current Subsection (d).
2. Basis
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) in particular, in that it facilitates transactions
in securities and promotes just and equitable principles of trade.
B. Self-Regulatory Organization's Statement on Burden on Competition
The PSE does not believe that the proposed rule change will impose
any inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Within 35 days of the date of 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 such 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, N.W., Washington, D.C. 20459.
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 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 PSE. All
submissions should refer to File No. SR-PSE-96-01 and should be
submitted by March 25, 1996.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\1\
\1\ 17 CFR 200.30-3a(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-4885 Filed 3-1-96; 8:45 am]
BILLING CODE 8010-01-M
