[Federal Register Volume 63, Number 124 (Monday, June 29, 1998)]
[Notices]
[Pages 35303-35304]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17233]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40108; File No. SR-PCX-98-14]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval to Amendment No. 2 To Extend the
Supervisory Specialist Pilot Program
June 22, 1998.
I. Background
On March 3, 1998, the Pacific Exchange, Inc. (``PCX'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') a proposed rule change pursuant to Section
19(b)(2) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule
19b-4 thereunder,\2\ to establish a temporary, 90-day, Supervisory
Specialist Pilot Program (``Program'').\3\
[[Page 35304]]
The proposed rule change was published for comment in the Federal
Register on March 31, 1998.\4\ Under the Program, eligible PCX
specialist firms may operate two specialist posts, on the PCX Equities
Floors only, based upon one Exchange membership. On June 18, 1998, the
PCX filed Amendment No. 2, proposing to extend the 90-day pilot, due to
expire on June 22, 1998, for an additional 90 days to give PCX an
adequate opportunity to respond to concerns regarding the filing raised
in comment letters, and to prevent the disruption of specialist firms
already operating under the Program.\5\ For the reasons discussed
below, the Commission is approving the proposed rule change on an
accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Also on March 3, 1998, the PCX filed proposed rule change
SR-PCX-98-13 (``Companion filing''), requesting the Commission to
approve a one-year pilot of the Program. See Securities Exchange Act
Release No. 39825 (April 1, 1998), 63 FR 17250. The Companion filing
originally was to become effective at the expiration of the
temporary, 90-day Program. On March 12, 1998 the PCX filed Amendment
No. 1 to the proposed rule change. See Letter from Michael D.
Pierson, Senior Attorney, Regulatory Policy, PCX, to Marc McKayle,
Attorney, Division of Market Regulation (``Division''), Commission
(``Amendment No. 1''). In Amendment No. 1, the PCX provided a basis
for the accelerated effectiveness of the proposal pursuant to
Section 19(b)(2) of the Act, explaining that the Program was
designed to permit specialist firms greater control over the impact
of sharply escalating seat prices, while preserving the quality of
the Exchange's markets and services to the public and its members.
\4\ Securities Exchange Act Release No. 39784 (March 24, 1998),
63 FR 15472.
\5\ See letter from Michael D. Pierson, Senior Attorney,
Regulatory Policy, PCX, to Richard Strasser, Assistant Director,
Division, Commission (June 18, 1998) (``Amendment No. 2'').
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II. Proposed Rule Change
In an effort to streamline the way business is conducted on the
Exchange's Equities Floors, and to provide Exchange specialist firms
with greater control over the management and costs of their operations,
the Exchange proposed to adopt the Supervisory Specialist Pilot
Program. Under the Program, a specialist firm may operate two
specialist posts based upon one Exchange membership, provided that both
posts will be staffed by Specialists who have been qualified by the
Exchange as Registered Specialists under the rules of the Exchange. The
Program permits one specialist post to be staffed by a Member who is
registered as the supervising specialist (``Supervisory Specialist''),
while the other post is staffed by an Associated Person of the
specialist firm who is otherwise qualified to act as a Registered
Specialist (the ``Associate Specialist''). Under the Program, the
Supervisory Specialist acts as supervising specialist over the
Associate Specialist. Program participants are restricted to Exchange
Members with seats on the Equity floor, and no more than two specialist
posts may be operated per membership.
III. Comments
The Commission has received three comment letters on the proposal.
One comment letter supports the Exchange's rationale for the
Program.\6\ The others oppose the Program. The two opposing letters
claim that the Program will dilute the value of Exchange seats as an
investment property.\7\ Furthermore, the dissenters argue that such a
change to the Exchange's seat operations requires approval by a
majority vote of the PCX Membership, as well as the PCX Board of
Directors, pursuant to the Article V, Section 1 of the PCX
Constitution.
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\6\ See letter from Daniel H. Turner, President, Rubicon
Securities, Inc. to Jonathan G. Katz, Secretary, Office of the
Secretary, Commission (May 12, 1998).
\7\ See letters from Matthew D. Wayne, Counsel to PBL, Inc.,
Vanasco & Wayne, to Jonathan G. Katz, Secretary, Office of the
Secretary, Commission (April 14, 1998), and John A. Brown, Chairman
(retired), M.J.T. Securities, Inc., to Jonathan G. Katz, Secretary,
Office of the Secretary, Commission (June 2, 1998).
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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. In particular, the Commission seeks
comment on whether the proposal is consistent with the PCX
Constitution. 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 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 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-98-14 and should be submitted by July 20, 1998.
V. Commission Findings and Order Granting Accelerated Approval of
Proposed Rule Change
After careful review, the Commission finds that the proposed rule
change is consistent with the Act and the rules and regulations
thereunder applicable to a national securities exchange. In particular,
the Commission believes the proposal is consistent with the Exchange
Act Section 6(b)(5) \8\ requirements that the rules of an exchange be
designed to promote just and equitable principles of trade, to prevent
fraudulent and manipulative acts, and, in general, to protest investors
and the public. In originally approving the program for a 90-day pilot,
the Commission preliminarily found that the Program could enhance
liquidity in equity securities traded on the Exchange members by given
specialist firms the opportunity to become specialists in more stock
without incurring additional membership costs. Since then the
Commission has received comment letters expressing concerns with
certain aspects of the Program. By approving the Program for a further
limited period of time, but without extending it to additional firms,
the Commission will prevent disruption to the firms already enrolled in
the Program while enabling the Commission to determine whether its
preliminary determinations remain correct in light of the comment
letters. Approval of the 90-day extension has no bearing on, and should
not be interpreted to suggest that the Commission ultimately will
approve PCX's Companion filing (SR-PCX-98-13),\9\ requesting approval
of the pilot for one year.
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\8\ U.S.C. 78f(b)(5).
\9\ Securities Exchange Act Release No. 39825 (April 1, 1998) 63
FR 17250.
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The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of publication of
notice thereof in the Federal Register. First, the Commission notes
that the extension is only for 90 days. Second, the approval of the 90-
day extension is granted on the condition that the PCX will not enlist
any additional specialist firms to the Program during this period. As a
result, the extension will merely preserve the status quo to give the
PCX additional time to respond to the comment letters and to give the
Commission time to consider that response.
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-PCX-98-14) is hereby
approved on an accelerated basis through September 21, 1998.
\10\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-17233 Filed 6-26-98; 8:45 am]
BILLING CODE 8010-01-M
