[Federal Register Volume 62, Number 97 (Tuesday, May 20, 1997)]
[Notices]
[Pages 27640-27641]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13095]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38623; File No. SR-PCX-12]
Self-Regulatory Organizations; The Pacific Exchange, Inc.; Notice
of Filing of Proposed Rule Change Modifying Rules on Disclosure of
Financial Arrangements of Members
May 13, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on April 23, 1997, The
Pacific Exchange, Inc. (``PCX'' 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 primarily by PCX. 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. Sec. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposing to amend its rule on disclosure of
financial arrangements of Members, to expand the scope of such
arrangements that must be disclosed to the Exchange, to eliminate
unnecessary provisions of the rule, and to clarify existing
provisions.\2\
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\2\ The test of the proposed rule change is attached as Exhibit
A to File No. SR-PCX-97-12, and is available for review at the
principal office of PCX and in the Public Reference Room of the
Commission.
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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, 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. PCX 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
The Exchange is proposing to make various changes to PCX Rule 4.18,
``Disclosure of Financial Arrangement of Members.'' First, Rule 4.18,
Subsection (a) Currently provides, in part, that a Market Maker, Floor
Broker, Specialist or Member Organization who enters into a financial
arrangement with any other member shall disclose to the Exchange the
name of such member and the terms of the arrangement. The Exchange is
proposing to replace ``any other member'' with ``any other person or
entity'' and to replace ``the name of such member'' with ``the identity
of such person or entity.'' Accordingly, the amended rule will require
that financial arrangements between Members and Non-Members be
disclosed, while currently, only financial arrangements between Members
must be disclosed. The Exchange believes that this expansion of the
scope of financial arrangements that must be disclosed is appropriate
because the Exchange needs to conduct adequate financial monitoring of
its Members. The Exchange further believes that the distinction in the
current rule between financing provided by Members and financing
provided by Non-Members is unsound.
Second, Subsection (a) Currently defines ``financial arrangement''
for purposes of Rule 4.18 as ``(1) The direct financing of a member's
dealings upon the Exchange; or (2) any direct equity investment or
profit sharing arrangement; or (3) any consideration over the amount of
$5,000.00 that constitutes a gift, loan, salary or bonus.'' The
Exchange is proposing to clarify and expand the third clause to
provide: ``any consideration over the amount of $5,000.00, including,
but not limited to, gifts, loans, annual salaries or bonuses.''
Third, the Exchange is proposing to eliminate Subsection (b), which
currently provides that each Market Maker shall inform the Exchange
immediately of the intention of any party (1) To change any financial
arrangement as defined in this Rule; or (2) to issue a margin call. It
further provides that on a form prescribed by the Exchange, a Market
Maker shall submit to the Exchange a monthly report of his use or
extension of credit pursuant to this Section. The Exchange believes
that these requirements are unnecessary.
Fourth, the Exchange is proposing to eliminate subsection (c),
which provides that the disclosure of financial arrangements pursuant
to this Rule shall be the responsibility of all parties involved. The
Exchange believes this provision is superfluous.
Finally, subsection (d) currently provides that unless otherwise
agreed, the Exchange member shall submit to the Exchange notification
of the initiation or termination of such financial arrangements within
ten business days of the effective date of such arrangements. It
further provides that failure to disclose financial arrangement terms
to the Financial Compliance Department may result in disciplinary
action by the Exchange. The Exchange is proposing to modify subsection
(d) to provide that Exchange Members with financial arrangements must
submit to the Exchange notification of the initiation, modification or
termination of such financial arrangements in a form, time and manner
approved by the Exchange. It further states that failure to disclose
the terms of such financial arrangements to the Exchange may result in
disciplinary action. The Exchange proposes eliminating the stated 10
business day rule in order to add flexibility for situations where an
individual situation requires an immediate response.
The Exchange believes that the proposal is consistent with Section
6(b) of the Act, and Section 6(b)(5) of the Act \3\ in particular, in
that it promotes just and equitable principles of trade and to protect
investors and the public interest.
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\3\ 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.
[[Page 27641]]
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 thirty-five 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 ninety 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 PCX 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. Sec. 552, will be available for inspection and copying in
the Commission's Public Reference Section, 450 Fifth Street NW.,
Washington, DC 20549. Copies of such filing will also be available for
inspection and copying at the principal office of PCX. All submissions
should refer to File No. SR-PCX-97-12 and should be submitted by July
7, 1997.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\4\
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\4\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-13095 Filed 5-19-97; 8:45 am]
BILLING CODE 8010-01-M
