[Federal Register Volume 61, Number 88 (Monday, May 6, 1996)]
[Notices]
[Page 20304]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-11142]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37148; File No. SR-PSE-96-02]
Self-Regulatory Organizations; Order Approving Proposed Rule
Change by the Pacific Stock Exchange, Inc., Relating to the Composition
of the Exchange's Options Listing Committee
April 29, 1996.
I. Introduction
On January 16, 1996, the Pacific Stock Exchange, Inc. (``PSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposal to amend its rules relating to the
composition of the Options Listing Committee (``OLC''). On March 11,
1996, the PSE amended its approval.\3\
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\1\ 15 U.S.C. 78s(b)(1) (1988).
\2\ 17 CFR 240.19b-4 (1995).
\3\ On March 11, 1996, the PSE provided additional information
concerning the purpose of the proposal. Specifically, the PSE
explained that the proposal is designed to make Commentary .01 to
PSE Rule 11.10(d), ``Options Listing Committee,'' easier to follow
and to prevent legal appeals of Options Listing Committee (``OLC'')
decisions on the technical argument that the OLC was not authorized
to act because its composition did not conform to the rigid
requirements of PSE Rule 11.10(d), Commentary .01. According to the
PSE, such an appeal could be made currently if, for example, a non-
floor broker is placed in one of the floor broker slots on the OLC
because of a shortage of floor brokers willing to serve on the OLC,
or if a floor broker on the OLC becomes a market maker mid-year and
the OLC decides to retain that member on the OLC. The PSE expects
that, under the proposal, the OLC will be composed as specified in
Commentary .01 under virtually all circumstances. The Exchange
represents that it intends to comply with the spirit of the
Commentary and anticipates departures from this general rule only in
exceptionally rare circumstances. See Letter from Michael D.
Pierson, Senior Attorney, Market Regulation, PSE, to Michael
Walinskas, Branch Chief, Options Regulation, Division of Market
Regulation, Commission, dated March 11, 1996 (``Amendment No. 1'').
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The proposed rule change and Amendment No. 1 were published for
comment in the Federal Register on March 25, 1996.\4\ No comments were
received on the proposed rule change.
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\4\ See Securities Exchange Act Release No. 36984 (March 18,
1996), 61 FR 12126.
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II. Description of the Proposal
Currently, Commentary .01 to PSE Rule 11.10(d) provides that the
OLC shall be comprised of (i) four floor brokers; (ii) five market
makers or lead market makers; and (iii) one member of the PSE or a
general partner or officer of a member organization, or any other
person who is considered to be qualified. The PSE proposes to amend PSE
Rule 11.10(d), Commentary .01, to provide that the Exchange will
attempt, but will not be required, to maintain the composition of the
OLC as provided currently under Commentary .01. Specifically, the
Exchange proposes to amend Commentary .01 by eliminating the phrase
``shall be comprised of'' and replacing it with a provision stating
that ``attempts shall be made'' in order for the OLC to have a
composition that includes those currently specified in subsections (i)
through (iii).
The Exchange believes that Commentary .01 is overly restrictive and
that the proposal is appropriate in order to allow for greater
flexibility in the committee selection procedure and the process for
replacing committee members who resign or change their floor status.
The proposal is designed to make Commentary .01 easier to follow and to
prevent members from appealing decisions of the OLC on the grounds that
the OLC was not authorized to act because its composition did not
conform to the requirements of Commentary .01. The PSE represents that
the Exchange will make every effort to ensure that the OLC maintains
the composition specified in Commentary .01. The Exchange expects that,
under the proposal, the composition of the OLC will remain as specified
currently in Commentary .01 in virtually all circumstances.\5\
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\5\ See Amendment No. 1, supra note 3.
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III. Discussion
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange, and, in
particular, with Section 6(b)(3) of the Act, in that the proposal
provides for a fair representation of the Exchange's members in the
administration of its affairs, and also with Section 6(b)(5) of the
Act, in that the proposal is designed to protect investors and the
public interest.\6\
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\6\ 15 U.S.C. Secs. 78f(b)(3) and (b)(5) (1988).
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The Commission believes that the proposal will allow greater
flexibility in the composition of the OLC. Specifically, the proposal
provides that the Exchange will attempt, but will not be required, to
maintain the composition of the OLC as provided currently under PSE
Rule 11.10(d), Commentary .01. The PSE expects that the OLC will
continue to be composed as provided currently in Commentary .01 in
virtually all circumstances, and the PSE represents that the Exchange
will attempt to ensure that the composition of the OLC remains as
specified in Commentary .01.\7\ Accordingly, the Commission believes
that the proposal will provide flexibility in the composition of the
OLC while ensuring that diverse interests are represented on the OLC.
In addition, the proposal should simplify the process of replacing a
member who resigns from the committee and allow the OLC to retain a
member who changes his status (e.g., a floor broker who becomes a
maker) during his service on the committee.
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\7\ See Amendment No. 1, supra note 3.
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (SR-PSE-96-02) is approved.
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\8\ 15 U.S.C. 78s(b)(2) (1988).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12) (1995).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-11142 Filed 5-3-96; 8:45 am]
BILLING CODE 8010-01-M
