[Federal Register Volume 61, Number 120 (Thursday, June 20, 1996)]
[Notices]
[Pages 31573-31574]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-15664]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37308; File No. SR-BSE-96-05]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Boston Stock Exchange, Inc. Relating to Its Specialist
Performance Evaluation Program
June 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 11,
1996, the Boston Stock Exchange, Inc. (``BSE'' or ``Exchange'') filed
with the Securities Exchange Commission (``Commission'') the proposed
rule change as described in Items I, II, and III below, which Items
have been prepared by the self-regulatory organization. On June 11,
1996 the Exchange submitted to the Commission Amendment No. 1 to the
proposed rule change.\1\ The Commission is publishing this notice to
solicit comments on the proposed rule change and Amendment No. 1
thereto from interested persons.
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\1\ See Letter from Karen Aluise, Assistant Vice President, BSE,
to Sharon Lawson, Senior Special Counsel, SEC, dated June 11, 1996
(``Amendment No. 1''). Amendment No. 1 corrects typographical errors
in the original filing as to the existing and proposed program
weight assigned to the Turnaround Time measure. Amendment No. 1 also
adds a proposal to raise the overall score at which a specialist
will be deemed to have adequately performed from 5.80 to 6.70 in
order to account for the proposed changes to the threshold levels
and weights.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The BSE seeks to amend its Specialist Performance Evaluation
Program (``SPEP'').\2\
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\2\ The SEC initially approved the BSE's SPEP pilot program in
Securities Exchange Act Release No. 22993 (March 10, 1986), 51 FR
8298 (March 14, 1986) (File No. SR-BSE-84-04). The SEC subsequently
extended the pilot program in Securities Exchange Act Release Nos.
26162 (October 6, 1988), 53 FR 40301 (October 14, 1988) (File No.
SR-BSE-87-06); 27656 (January 30, 1990), 55 FR 4296 (February 7,
1990) (File No. SR-BSE-90-01); 28919 (February 26, 1991), 56 FR 9990
(March 8, 1991) (File No. SR-BSE-91-01); and 30401 (February 24,
1992), 57 FR 7413 (March 2, 1992) (File No. SR-BSE-92-01). The BSE
was permitted to incorporate objective measures of specialist
performance into its pilot program in Securities Exchange Act
Release No. 31890 (February 19, 1993), 58 FR 11647 (February 26,
1993) (File No. SR-BSE-92-04), at which point the initial pilot
program ceased to exist as a separate program. The current pilot
program was subsequently extended in Securities Exchange Act Release
Nos. 33341 (December 15, 1993), 58 FR 67875 (December 22, 1993)
(File No. SR-BSE-93-16); 35187 (December 30, 1994), 60 FR 2406
(January 9, 1995) (File No. SR-BSE-94-12); and 36668 (January 2,
1996), 61 FR 672 (January 9, 1996) (File No. SR-BSE-95-16)
(``January 1996 Approval Order''). SEC approval of the current pilot
program expires on December 31, 1996.
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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 self-regulatory organization
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 self-regulatory organization
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 purpose of the proposed rule change is to modify the current
SPEP measures' threshold levels, weights, and review standards.\3\ The
Exchange has been continuously monitoring the performance of its
specialists in relation to the current SPEP standards, and has
determined the following:
\3\ The BSE's SPEP currently consists of five measures of
performance, each accounting for a certain percentage of a
specialist's overall evaluation score: Turnaround Time (15%);
Holding Orders Without Action (15%); Trading Between the Quote
(25%); Executions in Size Greater Than BBO (25%) and Questionnaire
(20%). The Exchange has set thresholds at which a specialist will
have been deemed to have adequately performed overall, and with
regard to each measure, on the SPEP: Overall Evaluation Score--at or
above weighted score of 5.80; Turnaround Time--below 21 seconds (8
points); Holding Orders Without Action--below 21% (7 points);
Trading Between the Quote--at or above 26.0% (5 points); Executions
in Size Greater Than BBO--at or above 76% (6 points); and
Questionnaire--at or above weighted score of 50.0 (4 points). For a
detailed description of each of the measures of performance and the
review standards applicable to specialists performing below the set
thresholds, see January 1996 Approval Order, supra note 2.
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(1) The Trading Between the Quote threshold level, currently at
26.0, should be raised to 31.0;
(2) Executions in Size Greater Than BBO threshold level,
currently at 76.0, should be raised to 81.0;
(3) The Turnaround Time program weight, currently at 15%, should
be increased to 20%;
(4) The Holding Orders Without Action program weight, currently
at 15%, should be decreased to 5%;
(5) The Trading Between the Quote program weight, currently at
25%, should be increased to 35%;
(6) The Executions in Size Greater Than BBO program weight,
currently at 25%, should be increased to 35%;
(7) The Questionnaire program weight, currently at 20%, should
be decreased to 5%;
(8) The standard for Performance Improvement Action Committee
review for
[[Page 31574]]
substandard performance in any one objective measure, currently set
at two out of three consecutive review periods, will be changed to
the first instance of substandard performance;
(9) The standard for Market Performance Committee review for
substandard performance in any one objective measure, currently set
at three out of four consecutive review periods, will be changed to
two out of three consecutive review periods;
(10) The standard for Market Performance Committee review for
substandard performance on the overall program, currently set at two
out of three consecutive review periods, will be changed to the
first instance of substandard performance; and
(11) The Overall Program score, currently at 5.80, should be
increased to 6.70 to account for the proposed changes to the
threshold levels and weights.
The threshold levels for Turnaround Time, Holding Orders Without
Action and the Questionnaire, as well as the staff review standards,
will remain unchanged. The Exchange believes that together, these
modifications will enhance the SPEP by providing:
(A) More appropriate threshold levels when overall performance
has improved beyond the current limits;
(B) More effective measure weightings which reflect the
industry's current market quality focus; and,
(C) A more realistic approach to committee review in view of the
time horizon required to address substandard performance.
In addition, the Exchange is currently reviewing additional market
quality statistics in an effort to develop other measures of
performance for inclusion in the SPEP, and hopes to file for additional
modifications to the program in the near future.
2. Statutory Basis
The basis under the Act for the proposed rule change is Section
6(b)(5) of the Act \4\ in that the SPEP results weigh heavily in stock
allocation decisions and, as a result, specialists are encouraged to
improve their market quality and administrative duties, thereby
promoting just and equitable principles of trade and aiding in the
perfection of a free and open market and a national market system.
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\4\ 15 U.S.C. 78f(b)(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 and 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
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
Within 35 days of the 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 the 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 available for inspection and copying at the
Commission's Public Reference Section, 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 Exchange. All
submissions should refer to File No. SR-BSE-96-05 and should be
submitted by July 11, 1996.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-15664 Filed 6-19-96; 8:45 am]
BILLING CODE 8010-01-M