44298 Federal Register / Vol. 62, No. 161 / Wednesday, August 20, 1997 / Notices

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3For instance, the proposed provisions mimic

clauses found in the standard form of agreement

that the Exchange and the other CTA Plan

Participants enter into with vendors and

subscribers. The Commission has approved

contracts containing those provisions on several

occasions. See, for example, the form of vendor

contract contained in Exhibit C to the Second

Restatement of the CTA Plan, which the

Commission approved last year. (Release No. 34–

37191; File No. SR–CTA/CQ–96–1; May 9, 1996.)

4See Paragraph (b) of Exchange Rule 702 (Rights

and Obligations of Holders and Writers).

5See Exchange Rule 813 (Limitation of Liability).

6See, for instance, American Stock Exchange

Rules 902C and 1003 and Chicago Board Options

Exchange Rules 6.7, 7.11 and 23.14.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 97–22057 Filed 8–19–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–38930; File No. SR–NYSE–

97–23]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

New York Stock Exchange, Inc.,

Relating to the Regulation of Market

Data Used on the Exchange Floor

August 12, 1997.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on July 1,

1997, the New York Stock Exchange,

Inc. (‘‘NYSE’’ or ‘‘Exchange’’) filed with

the Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’)

the proposed rule change as described

in Items I, II, and III below, which Items

have been prepared by the selfregulatory organization. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange proposes to introduce

new Rule 39 (Market Data Restrictions

and Liability Limitations) into its rules

in order to regulate the receipt and use

of the market data that the Exchange,

with the assistance of various other

parties, makes available on the Floor 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, 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

The Exchange uses its facilities to

make various categories of market

information—including last sale prices,

bids and offers, related sizes and the

like—available on the Exchange Floor

for use by Exchange members in the

course of performing their membership

functions. Typically, the Exchange

enters into arrangements with

traditional vendors of market data

services in order to have the vendors

assist the Exchange in making market

information available on the Floor. The

Exchange proposes to add a new Rule

39 (Market Data Restrictions and

Liability Limitations) to regulate the

provision of market data to the Floor of

the Exchange through Exchange

facilities. The proposed rule seeks to

accomplish three purposes:

1. It would exculpate the Exchange,

market data vendors, market data

sources and others that assist in the

process of making market information

available on the Floor through the

facilities of the Exchange from members’

claims of liability as the result of the

dissemination of inaccurate or delayed

information or the omission of

information. The exculpation applies in

respect of any such party’s negligence or

any cause beyond its reasonable control.

It would not exculpate any party for

gross negligence or willful misconduct.

2. It would clarify that each of the

derivative sources of market data retains

proprietary rights to the market data that

it makes available.

3. It would prohibit members from

redistributing the market data that the

Exchange makes available on the Floor

to any other person, except for the

occasional furnishing of limited

amounts of information in the regular

course of a member’s securities business

on the Floor.

The Exchange considers its members’

easy and complete access to market

information on the Floor of the

Exchange to constitute a singularly

important aspect of the Exchange’s

trading environment. The Exchange

believes such access is essential to the

process of making markets and to the

capital-raising process. By providing

basic protections from liability to

market data vendors, sources of market

data and those that assist in the process

of making market data available, the

proposed rule change will allow each of

those entities to perform their respective

roles. As a result, the Exchange believes

the proposed rule change would greatly

facilitate the Exchange’s ability to enter

into working relationships with those

entities and improve the Exchange’s

ability to place market information in

the hands of its members.

The Exchange believes the proposed

legal protections would act as surrogates

for direct contractual relationships

between the Exchange and/or vendors

on the one hand and Exchange members

that receive access to market data on the

Floor on the other. That is, the Exchange

traditionally requires professional end

users of the market data that is made

available under the CTA Plan and the

CQ Plan to execute contracts. Similarly,

vendors traditionally require each of

their market data service subscribers to

execute contracts. Each such contract

typically contains counterpart

provisions to the ones that the Exchange

is proposing for its new rule.3 By

placing those provisions into an

Exchange rule, the Exchange intends to

obviate the need for those contracts.

In addition, the adoption of rules

designed to protect a securities market’s

agents and contractors and to induce

those agents and contractors to assist the

securities markets in providing its

traditional services is nothing new. For

instance, Exchange rules presently

contain similar exculpatory provisions

for the calculation of index values 4 and

for basket information.5 Other equity

markets have similar protections in their

rules.6

The Exchange believes that Article II,

Section 6 (Use of Exchange Facilities) of

the Exchange Constitution already

exculpates the Exchange from liability

for damages that grow out of the use or

enjoyment of the Exchange’s facilities.

The Exchange has always deemed that

Constitutional provision to implicitly

protect the Exchange’s agents and

contractors in the same manner as it

protects the Exchange and the proposed

rule change is intended to supplement,

not limit, the applicability of that

provision. The Exchange believes the

proposed rule change would merely

codify and expound upon that reading

of the provision and clarify the

Exchange’s interpretation.
Federal Register / Vol. 62, No. 161 / Wednesday, August 20, 1997 / Notices 44299

7 15 U.S.C. 78f(b)(5).

8 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4 (1991).

3The Exchange notes that the existing customer

base for FLEX Equity Options includes both

institutional investors, in particular mutual funds,

money managers and insurance companies, and

high net worth individuals who meet the

‘‘sophisticated investor’’ criteria applied to various

clients by Exchange member firms.

The Exchange believes the proposed

rule change is consistent with the

requirements of Section 6(b)(5) of the

Act 7 that an exchange have rules that

are designed to promote just and

equitable principles of trade, and, in

general, to protect investors and the

public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The proposed rule change does not

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

The Exchange has not solicited, and

does not intend to solicit, comments on

the proposed rule change. The Exchange

has not received any unsolicited written

comments from members or other

interested parties.

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

Interest 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 in

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 NYSE. An submissions

should refer to File No. SR–NYSE–97–

23 and should be submitted by

September 10, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–22058 Filed 8–19–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–38933; File No. SR–PCX–

97–25]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the Pacific Exchange,

Inc. Relating to the Reduction in

Minimum Size for Closing

Transactions in FLEX Equity Options

August 13, 1997.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on July 21,

1997, 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 and

II below, which Items have been

prepared by the PCX. The Commission

is publishing this notice to solicit

comments on the proposed rule change

from interested persons and to grant

accelerated approval to the proposed

rule change.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange proposes to reduce

from 100 contracts to 25 contracts the

minimum value size of closing

transactions in and exercises of FLEX

Equity Options, and to make a

comparable reduction in the minimum

value size of FLEX Equity Quotes in

response to a Request for Quotes. The

text of the proposed rule change is

available at the Office of the Secretary,

PCX and 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 III 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

The purpose of the proposed rule

change is to reduce from 100 contracts

to 25 contracts the minimum value size

of closing transactions in and exercises

of FLEX Equity Options, and to make a

comparable reduction in the minimum

value size of FLEX Equity Quotes in

response to a Request for Quotes.

Currently, Rule 8.102(d)(3) imposes a

100 contract minimum on all

transactions in FLEX Equity Options

unless the transaction is for the entire

remaining position in the account. The

Exchange believes that the current

minimum value size of closing and

exercise transactions in FLEX Equity

Options is too large to accommodate the

needs of certain members firms and

their customers.3 These firms may

purchase 100 or more FLEX Equity

Options in an opening transaction for a

single firm account in which more than

one of the firm’s clients have an interest.

If one of these clients wants to redeem

its investment in the account, the firm

likely will want to engage in a closing

or exercise transaction in order to

reduce the account’s position in those

FLEX Equity Options by the number

being redeemed. Thus, if the redeeming

client’s interest is less than 100 FLEX

Equity Options and does not represent

the total remaining position in the

account, Rule 8.102(d)(3), as it stands

presently, prevents the firm from

closing or exercising positions of this

size.

The Exchange believes that the

proposed rule change would remedy the

situation described above, by permitting

an order to close or exercise as few as