[Federal Register Volume 63, Number 67 (Wednesday, April 8, 1998)]
[Notices]
[Pages 17250-17251]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-9128]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39825; File No. SR-PCX-98-13]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Pacific Exchange, Inc., Relating to a Supervisory
Specialist Pilot Program
April 1, 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 March 3, 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 self-regulatory
organization. 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\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
PCX is proposing to adopt a pilot program, effective for one year,
under which PCX specialist firms may operate two specialist posts based
upon one Exchange membership.\3\ The text of the proposed rule change
is available at the Office of the Secretary, PCX and at the Commission.
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\3\ The Commission approved, on an accelerated basis, the
Exchange's companion filing of a proposed rule change for a
temporary, ninety day, Supervisory Specialist Pilot Program. See
Securities Exchange Act Release No. 34-39787 (March 24, 1998).
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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
In an effort to streamline the way business is conducted on the
Equities Floors of the PCX, and to provide Specialist Firms with
greater control over the management and costs of their operations, the
Exchange is proposing to adopt the Supervisory Specialist Pilot Program
(``Program''). The Exchange's Executive Committee will permit qualified
Specialist Firms to participate in the Program during the pilot, which
is set to expire one year from the date of SEC approval. Throughout the
course of the Program, the Executive Committee will seek to assure an
orderly transition of Specialist Firms into the Program. The Program
will apply to trading on the Equities Floors only and will not apply to
trading on the Options Floor.
Under the Program, a Specialist Firm may operate two specialist
posts based upon one Exchange membership, provided that both posts will
be staffed by Specialists who have been qualified by the Exchange as
Registered Specialists under the rules of the Exchange.\4\ The Program
will permit one specialist post to be staffed by a Member who is
registered as the supervising specialist (the ``Supervisory
Specialist''), while the other post is staffed by an Associated Person
of the Specialist Firm who is otherwise qualified to act as a
Registered Specialist (the ``Associate Specialist''). Under the
Program, the Supervisory Specialist will act as supervising specialist
over the Associate Specialist.
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\4\ See e.g., PCX Rule 5.27.
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Under the Program, both the Supervisory Specialist and the
Associate Specialist will be obligated to pay the dues, fees and
charges as specified in the Exchange's Schedule of Fees and Charges for
Exchange Services.
Specialist Firms may apply to participate in the Program by
submitting an application to the Executive Committee. In determining
whether to approve an application, the Executive Committee will take
into account certain relevant factors including those specified below.
The Executive
[[Page 17251]]
Committee may, at its discretion, approve a Specialist Firm to
participate in the Program based on the following primary factors: the
applicant Specialist Firm's current cost of operating its specialist
posts, including the rental cost (if any) of each seat; whether the
value and revenue stream from existing specialist posts will be
retained if the application is approved; and whether the long-term
viability of the business and trading volume of a specialist post will
be retained if the application is approved. The Executive Committee
will also take into account the following secondary factors in
reviewing an application: the past experience of individuals who are
proposed to serve as Specialists under the Program; recent specialist
performance ratings of individuals who are proposed to serve a
Specialists under the Program (these ratings should include evaluation
scores for the last eight quarters, if they are available); \5\ the
disciplinary history of the Specialist Firm and the individuals who are
proposed to serve as Specialists under the Program; and other relevant
factors that the applicant wishes the Executive Committee to consider.
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\5\ Supervisory and Associate Specialists will be evaluated
pursuant to the criteria set forth in PCX Rule 5.37(a). The five
separate measures of performance are (1) Executions, (2) Specialist
Evaluation Questionnaire Survey, (3) Book Display Time, (4) Post 1
P.M. Parameters and (5) Quote Performance.
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The Executive Committee will oversee the implementation of the
Program and will study the impact of the Program on the quality of
markets at specialist posts operating under the Program. Based on this
study, the Executive Committee may adopt more specific standards and
procedures for operating the Program. The Executive Committee is not
required to approve any number of applicants, and there are no limits
on the number of applicants who may be approved under the Program.
Applicants, however, are restricted to Exchange Members with seats on
the Equity floor, and no more than two specialist posts may be operated
per membership.\6\
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\6\ Telephone conversation between Michael D. Pierson, Senior
Attorney, Regulatory Policy, PCX, and Marc McKayle, Attorney,
Division of Market Regulation, Commission (March 23, 1998).
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Under the Program, a Specialist Firm may operate two trading posts
based upon one membership, provided that the following conditions are
met:
a. The two trading posts must be contiguous.
b. Each post must be operated by a person who meets all of the
qualifications of a Registered Specialist. Specifically, each Associate
Specialist must achieve a passing grade of at least 80% on a written
examination for Registered Specialists prepared by the Exchange. This
is the same examination and the same passing score required for all
Registered Specialists, as provided in PCX Rule 5.27(c)(ii).
c. The Supervisory Specialist must be registered with the Exchange
as a ``Member'' as defined in PCX Rule 1.1(i). The Associate Specialist
must be an ``Associated Person'' of the Specialist Firm as defined in
PCX Rule 1.1(d) and must meet the requirements of PCX Rule 5.27(b)(3)
(``Associate Specialist Defined'').
d. The Supervisory Specialist will act as supervising specialist
over the Associate Specialist.
e. The performance of the Supervising Specialist and the Associate
Specialist will be evaluated individually pursuant to PCX Rule 5.37
(``Evaluation of Specialist Performance'').
Under the Program, an Associate Specialist will be deemed to be a
Registered Specialist for all purposes under the rules of the Exchange,
unless otherwise specified herein.\7\
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\7\ In addition to the Exchange requirements as discussed above,
the Associate Specialist (as well as the Supervisory Specialist)
must comply with all applicable federal securities law requirements.
See e.g., Exchange Act section 15 (requiring broker-dealers to
register with the Commission).
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2. Statutory Basis
The Exchange believes that the proposal is consistent with Section
6(b) \8\ of the Act, in general, and Section 6(b)(5),\9\ in particular,
in that it is designed to facilitate transactions in securities and to
promote just and equitable principles of trade.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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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
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, 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, 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 in the
Commission's Public Reference Room, 450 Fifth Street, NW., Washington,
DC 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-98-13 and should be submitted by April 29,
1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-9128 Filed 4-7-98; 8:45 am]
BILLING CODE 8010-01-M
