Message
×
loading..

  98-13727. Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Pacific Exchange, Inc. Relating to Expansion of the LMM Book Pilot Program  

  • [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]
    
    
    -----------------------------------------------------------------------
    
    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.
    ---------------------------------------------------------------------------
    
        \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.
    ---------------------------------------------------------------------------
    
    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\
    ---------------------------------------------------------------------------
    
        \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.
    ---------------------------------------------------------------------------
    
    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\
    ---------------------------------------------------------------------------
    
        \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).
    ---------------------------------------------------------------------------
    
        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\
    ---------------------------------------------------------------------------
    
        \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).
    ---------------------------------------------------------------------------
    
        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.
    ---------------------------------------------------------------------------
    
        \10\ 15 U.S.c. 78f(b).
        \11\ 15 U.S.C. 78f(b)(5).
    ---------------------------------------------------------------------------
    
    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\
    ---------------------------------------------------------------------------
    
        \12\ 17 CFR 200.30-3(a)(12).
    ---------------------------------------------------------------------------
    
    Jonathan G. Katz,
    Secretary.
    [FR Doc. 98-13727 Filed 5-21-98; 8:45 am]
    BILLING CODE 8010-01-M
    
    
    

Document Information

Published:
05/22/1998
Department:
Securities and Exchange Commission
Entry Type:
Notice
Document Number:
98-13727
Pages:
28432-28433 (2 pages)
Docket Numbers:
Release No. 34-39995, File No. SR-PCX-98-17
PDF File:
98-13727.pdf