51172 Federal Register / Vol. 62, No. 189 / Tuesday, September 30, 1997 / Notices

7The Commission notes that a failure to extend

the 150% Rule past the October 13, 1997 date

would result in no excess spread standard for

Nasdaq market makers.

8 17 CFR 200.30–3(a)(12).

1 15 U.S.C. § 78s(b)(1).

2 17 CFR 240.19b–4.

3See Exchange Act Release No. 37810 (October

10, 1997), 61 FR 54481 (October 18, 1996) (‘‘Pilot

Program Approval Order’’).

4See Exchange Act Release No. 37874 (October

28, 1996), 61 FR 213 (November 1, 1996).

5See Exchange Act Release No. 38462 (April 1,

1997), 62 FR 16886 (April 8, 1997). Each option

issue typically has only one symbol associated with

it, unless LEAPs are traded on that issue, in which

case there would usually be two additional symbols

related to the issue, or unless a contract adjustment

is necessary due, for example, to a merger or stock

split, in which case one additional symbol would

usually be added. Previously, the pilot program was

limited to allow up to 3 LMMs to participate and

up to 40 option symbols to be used.

6 17 CFR 240.15c–1.

150% Rule could reduce, to some

degree, the Commission’s concerns

regarding the 125% Rule, the

Commission was not convinced that

permanent approval of the 150% rule

would sufficiently address those

concerns. The Commission believes that

the pilot should continue to operate on

a temporary basis through October 13,

1997, while the Nasdaq Board

reconsiders its position on permanent

approval. Consequently an extension

will ensure that the Rule remains in

effect on an uninterrupted basis until

the Nasdaq Board has had an

opportunity to fully evaluate the most

appropriate permanent solution

regarding the excess spread rule.

In addition, the Commission believes

that the temporary rule can remain

limited to National Market securities.

Due to Nasdaq’s current systems

limitations, market makers in Nasdaq

SmallCap securities are unable to

monitor compliance with the Rule.

However, the NASD has stated that it

anticipates that market makers in

Nasdaq SmallCap securities will be

subject to the same excess spread

requirements, if any, as market makers

in Nasdaq National Market securities

when a permanent resolution is

reached.

Accordingly, the Commission finds

that the NASD’s proposal is consistent

with Sections 11A and 15A of the

Exchange Act and the rules and

regulations thereunder applicable to the

NASD and, in particular, Sections

11A(a)(1)(C), 15A(b)(6), 15A(b)(9), and

15A(b)(11). Further, the Commission

finds good cause for approving the

proposed rule change prior to the

thirtieth day after the date of

publication in the Federal Register. In

addition to the reasons discussed above,

the Commission believes that

accelerated approval of the NASD’s

proposal is appropriate given the fact

that the proposal is a temporary

extension of the 150% Rule that has

been in effect since January 1997. An

uninterrupted application of the 150%

Rule for a short period of time should

be less disruptive to market makers

while the Nasdaq Board reconsiders its

permanent approach to the concerns

raised by the Commission regarding the

excess spread rule.7

V. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Exchange Act,

that the proposed rule change (SR–

NASD–97–70) is approved through

October 13, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–25794 Filed 9–29–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39106; File No. SR–PCX–

97–32]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the Pacific Exchange,

Inc. Relating to an Extension of its

LMM Book Pilot Program for One Year

September 22, 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 August 5,

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, II

and III below, which Items have been

prepared by the self-regulatory

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 is proposing to extend

its LMM Book Pilot Program for one

year. 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

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

On October 11, 1996, the Commission

approved an Exchange proposal to

establish its LMM Book Pilot Program,

under which a limited number of Lead

Market Makers (‘‘LMMs’’.) are able to

assume operational responsibility for

the options limit order book (‘‘Book’’) in

certain options issues.3 Subsequently,

on October 28, 1996, the Commission

approved an Exchange proposal to

adopt a new change applicable to LMMs

who participate in the program.4 In

addition on April 1, 1997, the

Commission approved an Exchange

proposal to expand the scope of the

pilot program to allow up to nine LMMs

to participate and up to 150 symbols to

be used.5 The Exchange is now

proposing to extend the pilot program

for one year, to October 12, 1998.

Under the pilot program, the

approved LMMs manage the Book

function, take responsibility for trading

disputes and errors, set rates for Book

execution, and pay the Exchange a fee

for systems and services. The program

allows LMMs to have greater control

over their operations on the Exchange

floor by allowing them, among other

things, to set their own rates for

execution services provided to

customers. The LMMs who participate

during the pilot program are selected by

the Options Floor Trading Committee

based on certain designated factors.

Approved LMMs must maintain

‘‘minimum net capital,’’ as provided in

SEC Rule 15c–1,6 and must also

maintain a cash or liquid asset position

of at least $500,000, plus $25,000 for

each issue over 5 issues for which they

perform the function of an Order Book

Official. Only multiply-traded option

issues are eligible during the pilot

phase.

The Exchange is requesting a one-year

extension to the pilot program so that it
Federal Register / Vol. 62, No. 189 / Tuesday, September 30, 1997 / Notices 51173

7 15 U.S.C. § 78f(b).

8 15 U.S.C. § 78f(b)(5).

9 Id.

10 15 U.S.C. § 78s(b)(2).

11 17 CFR 200.30–3(a)(12).

will have an opportunity to continue

reviewing and evaluating the program

before seeking permanent approval. In

that regard, on May 29, 1997, the

Exchange submitted a report to the

Commission responding to particular

questions set forth in the Pilot Approval

Order. The Exchange believes that the

program is operating successfully and

without any problems, and on that

basis, the Exchange believes that a oneyear extension of the program is

warranted. At this time, the Exchange is

not seeking to modify the pilot program.

Basis

The Exchange believes that the

proposal is consistent with Section 6(b)

of the Act,7 in general, and Section

6(b)(5),8 in particular, in that it is

designed to facilitate transactions in

securities, to promote just and equitable

principles of trade, and to protect

investors and the public interest.

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. Commission’s Findings and Order

Granting Accelerated Approval of

Proposed Rule Change

The Commission has closely reviewed

the proposed LMM Book Pilot program

and has concluded that it should be

extended for another year. The

Commission believes that the pilot

program, whereby the approved LLMs

manager the Book function, take

responsibility for trading disputes and

errors, set rates for Book execution, and

pay the Exchange a fee for systems and

services, is consistent with the Act and

the rules and regulations thereunder. In

particular, the Commission believes that

the proposed rule change is consistent

with Section 6(b)(5) of the Act 9 in that

it is designed to promote just and

equitable principles of trade, to facilitate

transactions in securities, and to remove

impediments to and perfect the

mechanism of a free and open market

and a national market system, and, in

general, to protect investors and the

public interest.

As noted above, the LLM Book Pilot

Program allows LMMs to have greater

control over their operations on the

Exchange floor, and the Commission

agrees with the Exchange that a one-year

extension of the program is warranted to

allow the Exchange to continue its

evaluation of the program.

The Commission finds good cause for

approving the proposed rule change

prior to the thirtieth day after the date

of publication of notice of filing thereof

in order to ensure that PCX officials

have a continuous period to review and

evaluate the program before seeking

permanent approval. The LLM Book

Pilot Program was first established on

October 11, 1996 and, with a few

modest changes, has been operating

continuously since that date. Based on

the representations made by the

Exchange in its 1997 LLM Book Pilot

Program report, the Commission

concludes that the pilot program has

contributed to the Exchange’s ability to

provide fair and orderly markets. Based

on these findings, the Commission

concurs that a one-year extension of the

program is warranted. Because the pilot

program is scheduled to expire October

12, 1997, the Commission believes it is

appropriate to extend the pilot program

before that date to allow the

uninterrupted continuation of the

program.

IV. Solicitation of Comments

Interested person 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

Room, 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 PCX. All submissions

should refer to File No. SR–PCX–97–32

and should be submitted by October 21,

1997.

It is therefore ordered, pursuant to

Section 19(b)(2) 10 of the act, that the

proposed rule change is approved and,

accordingly, the Lead Market Maker

Book Pilot Program is extended until

October 12, 1998.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–25795 Filed 9–29–97; 8:45 am]

BILLING CODE 8010–01–M

OFFICE OF THE UNITED STATES

TRADE REPRESENTATIVE

Technical Corrections to the

Harmonized Tariff Schedule of the

United States

AGENCY: Office of the United States

Trade Representative.

ACTION: Technical corrections to the

Harmonized Tariff Schedule of the

United States (HTSUS); effective date.

SUMMARY: The United States Trade

Representative (USTR) is making

technical corrections to the HTSUS,

pursuant to authority granted to the

President in section 604 of the Trade

Act of 1974 and delegated by the

President to the USTR in Proclamation

6969 (62 FR 4415). These modifications

will correct errors in prior

proclamations, so that the intended

tariff treatment is accorded.

ADDRESSES: Office of the United States

Trade Representative, 600 17th Street,

NW, Washington, D.C. 20508.

FOR FURTHER INFORMATION CONTACT:

Barbara Chattin, Director For Tariff

Affairs, (202) 395–5097, or Catherine

Field, Senior Counsel For Multilateral

Affairs, (202) 395–3432.

CORRECTION: The HTS is modified as set

forth below with respect to goods

entered, or withdrawn from warehouse

for consumption, on or after the

effective dates specified for the

enumerated actions.

BILLING CODE 3190–01–M