[Federal Register Volume 61, Number 140 (Friday, July 19, 1996)]
[Notices]
[Pages 37785-37787]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18297]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37434; File No. SR-PSE-96-19]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change and Amendment No. 1 Thereto by the Pacific Stock Exchange, Inc.
Relating to Firm Quotes, Automatic Executions and Orders That May Be
Placed in the Options Public Limit Order Book
July 12, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on June 14,
1996, the Pacific Stock Exchange, Inc. (``PSE'' 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 by the PSE. On June 27, 1996, the PSE filed
Amendment No. 1 to the
[[Page 37786]]
proposal.\1\ The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ In Amendment No. 1, the Exchange corrects a technical error
in the numbering of items in the Minor Rule Plan (PSE Rule 10.13)
and Recommended Fine Schedule. See letter from Michael D. Pierson,
Senior Attorney, Regulatory Policy, PSE, to James T. McHale,
Attorney, Office of Market Supervision, Division of Market
Regulation, Commission, dated June 26, 1996 (``Amendment No. 1'').
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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 modify its rules on firm quotes,
automatic executions and orders that may be placed in the Options
Public Limit Order Book (``Book'') in order to clarify the scope of
these rules. The Exchange is also proposing to modify its Minor Rule
Plan and Recommended Fine Schedule in connection with violations of
those rules.
The text of the proposed rule change is available at the Office of
the Secretary, the PSE, and to the Commission.
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 Exchange 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 PSE 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
1. Purpose
PSE Rule 6.86 currently provides that each trading crowd on the
options floor is required to provide a depth of twenty (20) option
contracts for all ``non-broker/dealer customer'' orders, at the bid or
offer that is displayed as the disseminated market quote at the time
such orders are announced or displayed at the trading post designated
for trading the subject option class. The Exchange is proposing to
amend Rule 6.86 to clarify that, for purposes of this rule, the term
``broker/dealer'' includes foreign broker/dealers.
The Exchange is also proposing to amend Rule 6.87 to provide that
only non-broker/dealer customer orders are eligible for execution on
the Exchange's Automatic Execution System (``Auto-Ex''). This change
codifies a long-standing policy of the Exchange to that effect. The
rule change would also provide that, for purposes of Rule 6.87, the
term ``broker/dealer'' includes foreign broker/dealers.
Rule 6.52(a) currently provides that no member shall place, or
permit to be placed, an order with an Order Book Official for an
account in which such member or his organization, any other member or
member organization, or any non-member broker/dealer has an interest.
The Exchange is proposing to replace that provision with one stating
that only non-broker/dealer customer orders may be placed with an Order
Book Official pursuant to Rule 6.52(a). The new text would also provide
that, for purposes of this rule, the term ``broker/dealer'' includes
foreign broker/dealers.
The Exchange is also proposing to amend its Minor Rule Plan so that
it includes the following rule violation: ``Entry of broker/dealer
order for execution on Auto-Ex system. (Rule 6.87(a)).'' The Exchange
believes that violations of Rule 6.87(a) are easily verifiable and,
therefore, are appropriate for inclusion in the Minor Rule Plan.
The Exchange is also proposing to modify its Recommended Fine
Schedule under the Minor Rule Plan as follows: First, the current
recommended fine for a member who fails to honor a guaranteed market is
$250 for a first violation, $500 for a second violation and $750 for a
third violation. The Exchange is proposing to increase these fines to
$550, $1,500 and $3,000 for a first, second or third-time violation,
respectively.\2\
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\2\ Fines for multiple violations of Options Floor Decorum and
Minor Trading Rules are calculated on a running two-year basis. For
a discussion of the Exchange's Recommended Fine Schedule, see
Securities Exchange Act Release No. 34322 (July 6, 1994), 50 FR
35958 (July 14, 1994).
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Second, the recommended fine for a member who fails to identify an
order as for a broker/dealer is currently $250 for a first violation,
$500 for a second violation and $750 for a third violation. The
Exchange is proposing to raise these fines to $500, $1,500 and $3,000
for first, second and third-time violations, respectively.
Third, the exchange is proposing to establish fines of $500, $1,500
and $3,000 for first, second and third-time violations of the
restriction against entering broker/dealer orders for execution on the
Auto-Ex system.
2. Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act, in general, and furthers the objectives
of Section 6(b)(5) in particular, in that it is designed to promote
just and equitable principles of trade, to facilitate transactions in
securities, and to protect investors and the public interest. The
proposal is also consistent with Section 6(b)(6) in that it is designed
to assure that members and persons associated with members are
appropriately disciplined for violations of Exchange rules.
B. Self-Regulatory Organization's Statement on Burden on Competition
The PSE does not believe that the proposed rule change will impose
any inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule change.
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. 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
[[Page 37787]]
available for inspection and copying in the Commission's Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. Copies of
such filing will also be available for inspection and copying at the
principal office of the PSE. All submissions should refer to File No.
SR-PSE-96-19 and should be submitted by August 9, 1996.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\3\
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\3\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-18297 Filed 7-18-96; 8:45 am]
BILLING CODE 8010-01-M
