[Federal Register Volume 59, Number 83 (Monday, May 2, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10355]
[[Page Unknown]]
[Federal Register: May 2, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33956; File No. SR-PSE-93-31]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change and Amendment No. 1 to Proposed Rule Change by the Pacific Stock
Exchange, Inc. Relating to Amendments to its Minor Rule Plan
April 22, 1994
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 November
30, 1993, the Pacific Stock Exchange, Inc. (``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 PSE.\1\ The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\1\On March 30, 1994, the Exchange filed Amendment No. 1 to the
proposal, which: (1) Eliminated from inclusion in the Exchange's
Minor Rule Plan and the Recommended Fine Schedule violations of
certain rules which are pending before the Commission and have not
yet been approved (See File Nos. SR-PSE-93-10 and SR-PSE-93-26); and
(2) deleted a cross-reference to another rule which also is pending
before the Commission and has not yet been approved (See File No.
SR-PSE-93-19). See Letter from Michael D. Pierson, Senior Attorney,
Market Regulation, PSE, to Thomas N. McManus, Esq., Division of
Market Regulation, SEC, dated March 28, 1994.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposal Rule Change
The Exchange is proposing to amend its Minor Rule Plan (``MRP'') by
adding certain violations to the list of those subject to the expedited
disciplinary procedures set forth in PSE Rule 10.13. The Exchange also
is proposing to amend its recommended fine schedule for MRP violations.
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 PSE 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 section
(A), (B), and (C) below, of the most significant aspects of such
statements.
(A) Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
PSE Rule 10.13(a) provides that the Exchange may impose a fine not
to exceed $5,000 on any member, member organization, or person
associated with a member or member organization for any violation of an
Exchange rule that has been determined to be minor in nature.\2\ The
purpose of Rule 10.13 is to provide for a response to a rule violation
when a meaningful sanction is appropriate but when initiation of a
disciplinary proceeding under PSE Rule 10.3 is not suitable because
such a proceeding would be more costly and time-consuming than would be
warranted given the minor nature of the violation. Rule 10.13 provides
for an appropriate response to minor violations of certain Exchange
rules while preserving the due process rights of the party accused
through specified, required procedures. The list of rules that are
eligible for Rule 10.13 procedures specifies those rule violations that
may be the subject of fines under the rule and also includes a schedule
of fines.
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\2\The Exchange's MRP initially was approved by the Commission
in 1985. See Securities Exchange Act Release No. 22654 (November 21,
1985), 50 FR 48853 (November 27, 1985). On June 24, 1993, the
Commission approved a number of amendments to the MRP, including the
addition of certain rules to the list of MRP violations and
revisions to the Exchange's Recommended Fine Schedule. See
Securities Exchange Act Release No. 32510 (June 24, 1993), 58 FR
35491 (July 1, 1993).
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The Exchange is proposing to amend its MRP by adding the following
violations of Exchange rules and policies to the MRP: (1) Members who
act as Floor Brokers and Market Makers trading in excess of 100
contracts per month as a Market Maker without a Primary Appointment
(PSE Rule 6.38(c)); (2) Failure to request a market to be removed from
the screen when leaving the trading crowd (PSE Rule 6.37, Com. .03; PSE
Rule 6.46, Com. .04); (3) Failure to meet 75% Primary Appointment
requirement (PSE Rule 6.35, Com. .03); (4) Failure to meet 60% in-
person trading requirement (PSE Rule 6.37, Com. .07); (5) Unauthorized
use of telephones located in the options trading post areas; (6) Short
Sale Rules (PSE Rule 5.18(a)-(f));\3\ (7) Inadequate staffing at
specialist post (prior to the opening) (PSE Rule 5.28(c)-(d)); (8)
Failure to furnish in a timely manner books, records, or other
requested information or testimony in connection with an examination of
financial responsibility and/or operational conditions (PSE Rule
2.12(c)); and (9) Failure to notify the Exchange of a change of address
where notices may be served (PSE Rule 1.13).
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\3\See, e.g., NYSE Rule 476A ( 2476A); Amex Rule 590(g)(1).
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The Exchange also is proposing to amend its Recommended Fine
Schedule for MRP violations. The proposed amendments include
recommended fines for first-, second-, and third-time violations for
each of the rule violations proposed to be added to the MRP. The
Exchange also is proposing that certain Options and Equity Floor
Decorum and Minor Trading Rule Violations\4\ be calculated on a running
two-year basis, so that a second violation of the same provision within
two years will be subject to the next highest fine (e.g., the second
violation that occurs within a two-year period will be treated as a
second occurrence). However, the Exchange is specifying that violations
of certain Equity Floor Decorum and Minor Trading Rules be considered
on a running one-year basis consistent with existing provisions to the
effect in the Equity Floor Procedure Advices.
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\4\PSE Rule 10.13(h) and (i), respectively.
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The Exchange believes that violations of the rules contained in
this proposal are either objective or technical in nature, and easily
verifiable, and therefore lend themselves to the use of streamlined
disciplinary procedures and the use of a fine schedule. The Exchange
further believes that the proposal will enhance the Exchange's
enforcement capabilities, will provide effective deterrence, and will
allow for just sanctions for minor violations of the specified rules.
The Exchange notes that, pursuant to Rule 10.13(f), nothing in the MRP
requires the Exchange to impose a fine for a violation of a rule under
the MRP, and if the Exchange determines that any violation is not minor
in nature, the Exchange at its discretion may proceed under Rule 10.3
rather than under the MRP.
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 is designed to promote just
and equitable principles of trade. The Exchange also believes that the
proposed rule change will advance the objectives of section 6(b)(6) of
the Act in that it will provide a procedure whereby members can be
disciplined appropriately in those instances when a violation is minor
in nature, but a sanction more serious than a warning or cautionary
letter is appropriate.
(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, 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 Section 450 Fifth Street, NW.,
Washington, DC. Copies of such filing also will be available for
inspection and copying at the principal office of the PSE. All
submissions should refer to File No. SR-PSE-93-31 and should be
submitted by May 31, 1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\5\
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\5\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-10355 Filed 4-29-94; 8:45 am]
BILLING CODE 8010-01-M
