[Federal Register Volume 63, Number 185 (Thursday, September 24, 1998)]
[Notices]
[Pages 51110-51111]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-25490]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40449; File No. SR-PCX-98-46]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc.
Relating to Guidelines for Consolidation of Specialist Posts
September 17, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on September 17, 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 PCX. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
PCX is proposing to adopt formal guidelines to be used by the
Equity Floor Trading Committee (``EFTC'') in determining whether to
allow specialist firms to consolidate their specialist posts. These
standards are intended to give the EFTC greater guidance in exercising
its existing authority to supervise and approve the consolidation of
specialist posts on the Equity Floors of the Exchange.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, PCX 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. PCX 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
The EFTC has been responsible for approving requests of specialist
firms to transfer issues inter-firm or intra-firm, including requests
of specialist firms to consolidate their posts.\2\ Under this long-
standing authority of the EFTC to review intra-firm transfers,
including the consolidation of specialist posts, the EFTC supervises
and approves the transfer of issues on the floor when a member firm has
relinquished one or more of its specialist posts. It has also approved
the intra-firm transfer of stocks, for example, a firm with five posts
may obtain EFTC approval to ``collapse'' one post and redistribute its
stocks to the remaining four posts.\3\
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\2\ See PCX Constitution, Art. IV, Section 6(a), which provides
that the EFTC ``shall be responsible for the general supervision of
the dealings of members on the Equity Floor. It shall make and
recommend to the Board of Governors for adoption such rules as it
may deem necessary for the fair and orderly transaction of business
upon the Equity Trading Floor.'' See also Section 6(b), which
provides in part that ``[it] shall be the duty of the [EFTC] to . .
. supervise the conduct of members on the floor and their use of
floor facilities [and to] recommend to the Board of Governors: (i)
the creation of specialist posts, and (ii) the appointment of
specialists.'' See also PCX Rule 11.4, which provides in part that
``[e]ach committee shall have such other powers and duties as may be
delegated to it by the Board of Governors.''
\3\ Although the EFTC is responsible for overseeing the transfer
of issues in these situations, the Equity Allocation Committee
continues to be responsible for allocating stocks, in general, or
reallocating stocks for performance reasons. See PCX Constitution,
Art. IV, Section 5(b); PCX Rules 5.37(j) and 5.37(s). The Exchange
notes that parallel rules and procedures exist with respect to
Options Floor realignment of Options Market Maker posts on the floor
and the reallocation of option issues on the Options Trading Floor.
See PCX Constitution, Art. IV, Section 8(a)-(c); and PCX Rules
6.82(e)-(f) and 11.10(c).
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The Exchange believes that a number of specialist firms will be
interested in collapsing their posts. In light of several such requests
to collapse posts, the Exchange is now proposing to provide the EFTC
with specific guidelines and procedures to use when considering member
firms' requests to consolidate their specialist posts. Specifically, in
the approval process, the EFTC will consider: (a) whether the firm has
provided the Exchange with economic or business justification for
consolidating its posts; (b) whether the firm has demonstrated to the
EFTC that it will provide adequate staffing and an adequate capital
commitment to handle the merged posts; and (c) whether the firm should
relinquish some of its specialty stocks (or reallocate them among its
remaining posts) to be able to handle the increased market making load
as a precondition of effecting a post consolidation.\4\
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\4\ The Exchange intends to disseminate a Regulatory Bulletin to
notify its Members and Member firms of these new guidelines.
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The Exchange believes that the proposed guidelines take into
account the types of information necessary for the EFTC to review when
considering requests for consolidation of specialist posts.
Specifically, in reviewing particular member firm applications that
provide the relevant information, the EFTC will be in a position to
determine whether, after a post consolidation, a given specialist firm
will have the resources necessary to fulfill its market making
responsibilities, to make deep and liquid markets, and to provide
timely executions of customer orders.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) \5\ of the Act, in general, and furthers the objectives of
Section 6(b)(5),\6\ in particular, because it is designed to facilitate
transactions in securities, promote just and equitable principles of
trade, and to protect investors and the public interest.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78(f)(5).
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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
The foregoing rule change is concerned solely with the
administration of the Exchange and, therefore, has become effective
pursuant to Section 19(b)(3)(A)(iii) \7\ of the Act and subparagraph
(e)(3) of Rule 19b-4
[[Page 51111]]
under the Act.\8\ At any time within 60 days of the filing of the
proposed rule change, the Commission may summarily abrogate such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.\9\
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\7\ 15 U.S.C. 78s(b)(3)(A)(iii).
\8\ 17 CFR 240.19b-4(e)(3).
\9\ In reviewing this proposal, the Commission has considered
the proposal's impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
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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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 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 at the
Commission's Public Reference Room. Copies of such filing also will be
available for inspection and copying at the principal office of PCX.
All submissions should refer to File No. SR-PCX-98-46 and should be
submitted by October 15, 1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 98-25490 Filed 9-23-98; 8:45 am]
BILLING CODE 8010-01-M
