[Federal Register Volume 63, Number 99 (Friday, May 22, 1998)]
[Notices]
[Pages 28432-28433]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-13727]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39995; File No. SR-PCX-98-17]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Pacific Exchange, Inc. Relating to Expansion of the LMM
Book Pilot Program
May 15, 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 April 16, 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.\3\ The Commission is published 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 (1991).
\3\ The Exchange had initially submitted the filing prior to
April 16, 1998, but that submission did not include a signature
page. By letter dated April 14, 1998, the Exchange filed Amendment
No. 1 to the filing, which contained signatures for the filing. See
Letter from Michael D. Pierson, Senior Attorney, Regulatory Policy,
PCX, to Marie D'Aguanno Ito, Special Counsel, Division of Market
Regulation, Commission, dated April 14, 1998.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The PCX is proposing to remove the current cap on the number of
LMMs who may participate in the program.\4\
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\4\ On May 1, 1998, PCX submitted Amendment No. 2 to the filing,
seeking to withdraw the portion of the filing that proposed removing
the limit on the number of option issues that may be included in the
LMM program. The PCX represented in the Amendment that such proposal
would be submitted in a separate filing. See Letter from Michael D.
Pierson, Senior Attorney, Regulatory Policy, to Marie D'Aguanno Ito,
Special Counsel, Division of Market Regulation, Commission, dated
April 30, 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
Purpose
On October 11, 1997, the Commission approved an Exchange proposal
to adopt a one-year pilot program under which a limited number of LMMs
would be able to assume operational responsibility for the options
public limit order book (``Book'') in certain option issues.\5\ On
September 22, 1997, the Commission approved an Exchange proposal to
extend the program for one year, so that it is currently set to expire
on October 12, 1998.\6\
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\5\ See Exchange Act Release No. 37810 (October 11, 1996), 61 FR
54481 (October 18, 1997) (approving File No. SR-PSE-96-09).
\6\ See Exchange Act Release No. 39106 (September 22, 1997), 62
FR 31172 (September 30, 1997).
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Under the pilot program, approved LMMs manage the Book function,
take responsibility for trading disputes and errors, set rates for Book
execution, and pay the Exchange a fee for systems and services.\7\
Currently, both multiply-listed and non-multiply-listed option
[[Page 28433]]
issues are eligible to be traded under the pilot program.\8\ Initially,
the program was limited by allowing no more than three LMMs to
participate in the program and no more than 40 option symbols to be
used. But on April 1, 1997, the Commission approved an Exchange
proposal to expand the program so that up to nine LMMs may participate
and up to 150 option symbols may be used.\9\
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\7\ See Exchange Act Release No. 37874 (October 28, 1996), 61 FR
56597 (November 1, 1996) (approving SR-PSE-96-38, establishing a
staffing charge for LMMs who participate in the pilot program); see
also File No. SR-PCX-98-03 (proposal to modify the LMM Book Pilot
staffing charge).
\8\ See Exchange Act Release No. 38273 (February 12, 1997), 62
FR 7489 (February 19, 1997) (approving File No. SR-PSE-96-45); see
also Exchange Act Release No. 39667 (February 13, 1998), 63 FR 9895
(February 26, 1998) (order approving proposal to allow non-multiply-
listed option issues to be traded under the program).
\9\ See Exchange Act Release No. 38462 (April 1, 1997), 62 FR
16886 (April 8, 1997).
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The Exchange is now proposing to expand the LMM Book Pilot Program
to eliminate the cap on the number of LMMs that may participate in the
program. The Exchange notes that the program has been in operation for
approximately eighteen months and no significant problems have
occurred. The program has been viable and effective, and has resulted
in significant cost savings to customers in Book execution charges. The
Exchange believes that it has adequate systems and operation capacity
to expand the scope of the program beyond its current limits.
The Exchange believes that the proposed change will make the
Exchange LMM Program more competitive because it will provide LMMs with
the same flexibility currently held by options specialists at other
exchanges, and DPMs at the Chicago Board Options Exchange.
Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) \10\ of the Act, in general, and furthers the objectives
of Section 6(b)(5),\11\ in particular, in that it is designed to
facilitate transactions in securities, to promote just and equitable
principles of trade, and to protect investors and the public interest.
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\10\ 15 U.S.c. 78f(b).
\11\ 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, N.W., Washington, D.C. 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, N.W., Washington,
D.C. 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-98-17 and should be submitted by June 12,
1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 98-13727 Filed 5-21-98; 8:45 am]
BILLING CODE 8010-01-M