[Federal Register Volume 62, Number 225 (Friday, November 21, 1997)]
[Notices]
[Pages 62393-62395]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-30628]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39328; File No. SR-PCX-97-44]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Pacific Exchange,
Incorporated Relating to Applicant Specialists on the Exchange
November 14, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\, notice is hereby given that on November 10, 1997, the
Pacific Exchange, Incorporated (``PCX'' or ``Exchange'') filed with the
Securities Exchange Commission (``Commission'' or ``SEC'') the proposed
rule change as described in Items I, II, and III below, which Items
have been prepared by the PCX. The Commission is publishing this notice
to solicit comment 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
The PCX is proposing to make technical changes to its rules on the
procedures relating the approval process for applicant specialists on
the Exchange. The text of the proposed rule changes is available at the
Office of the Secretary, PCX, and in the Public Reference Room at 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 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. The PCX has prepared summaries, set forth in section A,
B, and C below, of the most significant aspects of such statements.
[[Page 62394]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
PCX Rule 5.27(d) currently provides that an applicant for
appointment as a registered specialist (the ``applicant specialist'')
must function in a market making capacity at a specialist post on the
floor of the Exchange for a minimum period of three months, and that
the applicant specialist will be required to perform primary market
making responsibilities in at least one issue throughout this minimum
period. It further provides that the applicant specialists' performance
will be reviewed by the Equity Allocation Committee after the first
thirty days and again after the first seventy-five days. Finally, it
states that the evaluation of the applicant specialist's performance
will be based upon the results of an Applicant Specialist Evaluation
Questionnaire Survey and, where applicable, the National Market System
Quote Performance and P/COAST Limit Order Acceptance Performance.
The Exchange is proposing to eliminate the provision that states
that the applicant specialists' performance will be reviewed after
three months (or seventy-five days). Such reviews currently may be, and
generally are, waived pursuant to Rule 5.27(e). However, as discussed
below, the Exchange is proposing to add a provision to Rule 5.27(e) to
permit a review of an applicant specialist's performance (i.e., a
review after the first thirty-day review) on a case-by-case basis. The
Exchange is also proposing to eliminate superfluous language in Rule
5.25(d) that refers to the Specialist Evaluation that is conducted
pursuant to Rule 5.37(a).\2\ In addition, the Exchange is proposing to
add a cross reference to Rule 5.37(a) in order to clarify the term
``Applicant Specialist Evaluation.''
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\2\ The Commission has recently approved a PCX rule change to
extend its specialist evaluation pilot program for six months and to
make certain changes to the pilot program. See Exchange Act Release
No. 38806 (July 1, 1997) 62 FR 36860 (July 9, 1997).
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PCX Rule 5.27(e) currently states, in part, that the Equity
Allocation Committee will make recommendations with respect to each
applicant specialist to the Joint Equity Floor Trading Committee based
upon its review of the responses contained in the Applicant Specialist
Evaluation Questionnaire Survey, National Market System Quote
Performance, P/COAST Limit Order Acceptance Performance, as well as any
written comments solicited or received from other floor members. The
Exchange is proposing to remove the words ``Questionnaire Survey,
National Market System Quote performance, P/COAST Limit Order
Acceptance Performance'' from this rule because they are superfluous.
In addition, the Exchange is proposing to add a cross reference in Rule
5.27(e) to Rule 5.37(a) in order to clarify the term ``Applicant
Specialist Evaluation.''
PCX Rule 5.27(e) currently states, in part, that in such cases as
the Equity Allocation Committee deems appropriate, the three month
performance evaluation required for an applicant specialist may be
waived, and that such a waiver will be based upon the Equity Allocation
Committee's determination that the applicant specialist has
demonstrated a degree of knowledge and experience which will enable the
Committee to immediately make a favorable recommendation to the Joint
Equity Floor Trading Committee concerning the applicant specialists'
qualifications. The Exchange is proposing to replace those provisions
with the following provisions: ``In such cases as the Equity Allocation
Committee deems appropriate, the thirty-day performance evaluation
required for an applicant specialist may be extended or waived. Such a
waiver or extension will be based upon the Equity Allocation
Committee's determination of whether the applicant specialist has
demonstrated a degree of knowledge and experience that will enable the
Committee to immediately make a favorable recommendation to the Joint
Equity Floor Trading Committee concerning the applicant specialist's
qualification.'' This new provision will allow the Equity Allocation
Committee to continue to require an applicant specialist to be
evaluated more than once before being approved, but it eliminates the
specification of a review after 75 days in such situations.
The Exchange is also proposing to modifying Rule 5.27(d) so that it
will state that applicant specialists must function in a market making
capacity at a specialist post on the floor of the Exchange for a
minimum period of thirty days, unless the Allocation Committee waives
this requirement pursuant to Rule 5.27(e).
The purpose of the proposed rule change is to assure that Rules
5.27 (d) and (e) reflect the Exchange's current practice on approving
an applicant for appointment as a registered specialist. Specifically,
those rules will now reflect the fact that applicants are generally
considered for appointment as registered specialists just one time,
after thirty days. As under the current rule, the Allocation Committee
can require an additional review of the applicant's performance, but
such a review would not need to be conducted after the first 75 days.
Thus, under the rule change, the Committee will have greater
flexibility as to the timing of the second review. In addition, under
the rule change, the Allocation Committee will be permitted to waive
the first performance review (after the first thirty days.\3\
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\3\ The Exchange notes that as a matter of practice, the
Allocation Committee will only waive the first performance review in
situations where a specialist transfers from one post to another,
and has received a performance review at the post from which he or
she has transferred.
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The Exchange believes the proposed rule change is consistent with
Section 6(b) \4\ of the Act in general and furthers the objectives of
Section 6(b)(5) \5\ in particular in that it is designed to promote
just and equitable principles of trade and remove impediments to and
perfect the mechanism of a free and open market by clarifying the rules
and making the rules better reflect how the applicant specialist review
process is generally implemented.
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The PCX does not believe that the proposed rule change will impose
any 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
Because the foregoing rule changes have been designated by the
Exchange as a policy effecting a change solely in the administration of
the Exchange that does not significantly affect the protection of
investors or the public interest and does not impose any significant
burden on competition, it has become effective pursuant to Section
19(b)(3)(A)(iii) \6\ of the Act and Rule 19b-4(e)(3) \7\ thereunder. At
any time within 60 days of the filing of a rule change, the Commission
may summarily abrogate the 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.
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\6\ 15 U.S.C. 78s(b)(3)(A)(iii).
\7\ 17 CFR 240.19b-4(e)(3).
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[[Page 62395]]
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 Room. Copies of such filing will also be
available for inspection and copying at the principal of the PCX. All
submissions should refer to File No. SR-PCX-97-44 and should be
submitted by December 12, 1997.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-30628 Filed 11-20-97; 8:45 am]
BILLING CODE 8010-01-M