[Federal Register Volume 63, Number 140 (Wednesday, July 22, 1998)]
[Notices]
[Page 39338]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-19444]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40193; File No. SR-PCX-98-21]
Self-Regulatory Organizations; Pacific Exchange, Inc.; Order
Granting Approval to Proposed Rule Change Relating to Fines for
Disruptive Action on the Options Floor
July 10, 1998.
I. Introduction
On April 16, 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)(1) of the Securities Exchange Act of 1934 (''Act'') \1\ and Rule
19b-4 thereunder \2\ to increase fines for disruptive action involving
physical contact between members while on the options floor. Notice of
the filing was published in the Federal Register on June 10, 1998.\3\
No comments were received. This order approves the proposal.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 40063 (June 3, 1998), 63
FR 31823.
---------------------------------------------------------------------------
II. Description of the Proposal
The Exchange is proposing to increase its recommended fines under
the Minor Rule Plan (``MRP'') \4\ for disruptive action involving
physical contact between members while on the options floor.These fines
are currently set at $500, $1,000 and $2,500 for first, second and
third violations, respectively, during a running two-year period. The
Exchange is proposing to increase these fines to $1,500, $3,000 and
$5,000, respectively.\5\ The purpose of the rule change is to deter
future incidents of disruptive conduct involving physical contact on
the PCX options floor. The Exchange notes that there has been a
moderate increase recently in the number of such cases, and the
Exchange intends for the proposed rule change to reverse that trend.
---------------------------------------------------------------------------
\4\ Rule 19d-1(c)(2) under the Act authorizes national
securities exchanges to adopt minor rule violation plans for the
summary discipline and abbreviated reporting of minor rule
violations by exchange members and member organizations. See
Securities Exchange Act Release No. 21013 (June 1, 1984), 49 FR
23828 (June 8, 1984) (order approving amendments to paragraph
9(c)(2) of Rule 19d-1 under the Act). Pursuant to PCX Rule 10.13,
the Exchange may impose a fine on any member or member organization
for any violation of an Exchange rule that has been deemed to be
minor in nature and approved by the Commission for inclusion in the
MRP. PCX Rule 10.13(h)-(j) sets forth the specific Exchange rules
deemed to be minor in nature.
\5\ As noted in PCX Rule 10.13(e), pursuant to Securities
Exchange Act Release No. 30958, any person or organization found in
violation of a minor rule under the MRP is not required to report
such violation on SEC Form BD, provided that the sanction imposed
consists of a fine not exceeding $2,500 and the sanctioned person or
organization has not sought an adjudication, including a hearing, or
otherwise exhausted the administrative remedies available with
respect to the matter. Accordingly, any fine imposed in excess of
$2,500 will be subject to reporting of SEC Form BD in addition to
the immediate, rather than periodic, reporting a requirement of
Section 19(d)(1) of the Act. See Securities Exchange Act Release No.
30280 (January 22, 1992), 57 FR 3452 (noting that fines in excess of
$2,500, assessed under New York Stock Exchange, Inc. (``NYSE'') Rule
476A, are not considered pursuant to the NYSE's minor rule violation
plan and are thus subject to the current reporting requirements of
Section 19(d)(1) of the Act).
---------------------------------------------------------------------------
III. Discussion
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder, and, in particular with the requirements of Section 6(b)(6)
of the Act.\6\ Section 6(b)(6) of the Act requires that the rules of
the Exchange provide that its members be appropriately disciplined for
violations of the Act, the rules and regulations thereunder, and the
Exchange's rules. The Commission believes that the proposed fines will
serve as a stronger deterrent to disruptive behavior, thereby promoting
fair and orderly markets on the options floor and protecting investors
and the public interest. The Commission also notes that the proposed
fine schedule is graduated to account for repeat offenders and that the
Exchange may commence a formal disciplinary proceeding under Exchange
Rule 10.3 if it determines that a violation otherwise covered by the
MRP is not minor is nature. Accordingly, the Commission believes that
the proposed fines will result in appropriate discipline.
---------------------------------------------------------------------------
\6\ 15 Proposed Rule Change 78f(b)(6).
---------------------------------------------------------------------------
IV. Conclusions
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\7\ that the proposed rule change (SR-PCX-98-21) is approved.
\7\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\4\
---------------------------------------------------------------------------
\8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-19444 Filed 7-21-98; 8:45 am]
BILLING CODE 8010-01-M
