[Federal Register Volume 62, Number 81 (Monday, April 28, 1997)]
[Notices]
[Pages 22988-22989]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-10881]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38530; File No. SR-PSE-97-01]
Self-Regulatory Organizations; Pacific Stock Exchange
Incorporated; Order Granting Approval to Proposed Rule Change, and
Notice of Filing and Order Granting Accelerated Approval to Amendment
No. 1, Relating to the Exchange's Limitation of Liability in Connection
With Indexes on Which Options Are Listed or Traded on the Exchange
April 21, 1997.
On January 13, 1997, 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 clarify the scope of the
Exchange's rule concerning the limitation of liability of the Exchange,
its affiliates, index licensors, and administrators in connection with
indexes on which options are listed or traded on the Exchange.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
The proposed rule change was published for comment in the Federal
Register on February 13, 1997.\3\ No comments were received concerning
the proposal. On February 18, 1997, the PSE submitted Amendment No. 1.
This order approves the proposal as amended.\4\
---------------------------------------------------------------------------
\3\ Securities Exchange Act Release No. 38253 (Feb. 6, 1997), 62
FR 6825.
\4\ Letter from Michael D. Pierson, Senior Attorney, Regulatory
Policy, PSE, to Anthony P. Pecora, Attorney, Division of Market
Regulation, SEC, dated February 13, 1997 (``Amendment No. 1'').
---------------------------------------------------------------------------
PSE Rule 7.13 currently provides that the Exchange shall have no
liability for damages, claims, losses, or expenses caused by any
errors, omissions or delays in calculating or disseminating the index
value. The proposed rule change deletes this rule and replaces it with
one that defines the scope of the Exchange's limited liability more
clearly.\5\ In addition , the proposal extends the limited liability
provisions to any affiliates of the Exchange as well as any ``Index
Licensor'' or ``Administrator.'' \6\ However, in order to conform its
limitation of liability provisions to those of other self-regulatory
organizations (``SROs''), the PSE represented that it will not rely on
this rule to limit its liability for intentional misconduct or for any
violation of the federal securities laws.\7\
---------------------------------------------------------------------------
\5\ Specifically, the proposal provides that neither the
Exchange, any affiliate, nor any Index Licensor or Administrator
shall have any liability for any loss, damages, claim, or expense
arising from or occasioned by any inaccuracy, error, or delay in, or
omission of or from, (i) Any index and basket information or (ii)
the collection, calculation, compilation maintenance, reporting or
dissemination of any index or any index and basket information,
resulting either from any negligent act or omission by the Exchange,
any affiliate or any Index Licensor or Administrator or from any
act, condition or cause beyond the reasonable control of the
Exchange, any affiliate or any Index Licensor or Administrator,
including, but not limited to, flood, extraordinary weather
conditions, earthquake or other act of God, fire, war, insurrection,
riot, labor dispute, accident, action of government, communications
or power failure, or equipment or software malfunction. In addition,
the proposed rule change states that these parties disclaim all
applicable warranties with respect to any basket or stocks or index
traded on the Exchange.
The proposal defines ``Index and basket information'' as (a)
information relating to the inclusion and relative representation of
stocks in any index from which a basket is derived, such an index's
values, a basket's component stocks, the weighted summation of the
bids or offers of a basket's component stocks, and basket and
component stock last sale and quotation information and (b) other
information relating to a basket or its index.
\6\ The proposal defines an ``Index Licensor'' or
``Administrator'' as any person who: (a) licenses to the Exchange
the right to use (i) an index that is the basis for determining the
inclusion and relative representation of a basket's component stocks
or (ii) any trademark or service mark associated with such an index;
(b) collects, calculates, complies, reports and/or maintains such an
index, or index and basket information relating to such an index;
(c) provides facilities for the dissemination of index and basket
information; and/or (d) is responsible for any of the activities
described above.
\7\ Amendment No. 1, supra note 4.
---------------------------------------------------------------------------
The Communication 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).\8\ Specifically, the
Commission believes the proposal is consistent with the Section 6(b)(5)
\9\ requirements that the rules of an exchange be designed to promote
just and equitable principles of trade, to facilitate transactions in
securities, to prevent fraudulent and manipulative acts, and, in
general, to protest investors and the public interest.\10\
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ In approving this rule, the Commission notes that it has
considered the proposal's impact on efficiency, competition, and
capital formation, consistent with Section 3 of the Act. 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
The Commission finds that the proposed limitation of liability
language will provide the PSE with protection that is substantively
similar to protection already afforded other self-regulatory
organizations.\11\
[[Page 22989]]
Additionally, because the PSE represents that the proposed rule change
cannot be used to limit its liability for intentional misconduct or for
any violations of the federal securities laws, the Commission believes
the proposal will protect investors and the public interest, while also
serving to facilitate transactions in securities. For example, by
defining the scope of potential liability more clearly, entities will
not be discouraged from creating new products or calculating and
disseminating settlement values.\12\ Therefore, derivative products,
which provide hedging or other economic functions, should remain
available to investors.
---------------------------------------------------------------------------
\11\ See American Stock Exchange Rules 902C and 1003; Chicago
Board Options Exchange Rule 24.14; New York Stock Exchange Rule
702(b); and Philadelphia Stock Exchange Rule 1057.
\12\ See Securities Exchange Act Release No. 34125 (May 27,
1994), 59 FR 29307 (approving File No. SR-Amex-93-41); Securities
Exchange Act Release No. 38041 (Dec. 11, 1995), 61 FR 66721
(approving File No. SR-Phlx-96-11).
---------------------------------------------------------------------------
The Commission finds good cause for approving Amendment No. 1 prior
to the thirtieth day after the date of publication of notice of filing
thereof. Amendment No. 1 simply clarifies that the Exchange will
interpret its limitation of liability provisions in a manner that is
consistent with other SROs' interpretations of their limited liability
rules. Furthermore, this interpretation has been published in the
Federal Register on several occasions for the full comment period, and
no comments have ever been received. For these reasons, the Commission
finds that accelerating approval of Amendment No. 1 is consistent with
Section 6 and Section 19(b)(2) of the Act.\13\
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f and 78s(b)(2).
---------------------------------------------------------------------------
Interested persons are invited to submit written data, views, and
arguments concerning Amendment No. 1. 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 changes 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. Sec. 552, will be available for inspection and
copying at the Commission's Public Reference Section, 450 Fifth Street,
NW., Washington, DC 20549. Copies of such filing also will be available
for inspection and copying at the principal office of the Pacific Stock
Exchange. All submissions should refer to File No. SR-PSE-97-01 and
should be submitted by May 19, 1997.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\14\ that the proposed rule change (SR-PSE-97-01), as amended, is
approved.
\14\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\15\
---------------------------------------------------------------------------
\15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-10881 Filed 4-25-97; 8:45 am]
BILLING CODE 8010-01-M
