[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