65840 Federal Register / Vol. 62, No. 241 / Tuesday, December 16, 1997 / Notices

1 15 U.S.C. § 78s(b)(1).

2 17 CFR 240.19b–4.

3See Letter from Michael D. Pierson, Senior

Attorney, PCX to David S. Sieradzki, Attorney, SEC,

dated October 29, 1997 (‘‘Amendment No. 1’’).

Amendment No. 1 clarifies what types of

transactions the clearing firm must report to the

Exchange under Rule 6.39(b). In addition,

Amendment No. 1 adds language to Rule 6.39(b)

that requires Market Makers to report executed

orders, upon the request of the Exchange, in

instances where the clearing firm does not report

executed orders.

4See letter from Michael D. Pierson, Senior

Attorney, PCX to David S. Sieradzki, Attorney, SEC,

dated November 5, 1997 (‘‘Amendment No. 2’’). In

Amendment No. 2, the Exchange represents that it

will issue a regulatory circular to Members and

Member Firms stating that all of the specific order

information currently contained in Rule 6.39(b) will

continue to be required to be reported pursuant to

the Rule. In addition, the Exchange acknowledges

that if it seeks to eliminate the required reporting

of any specific information, such a change would

require a rule filing pursuant to Section 19(b) of the

Act. Finally, Amendment No. 2 makes a minor,

non-substantive change to the Rule.

5This provision states that the report pertaining

to orders must include the terms of each order,

identification of the brokerage firms through which

the orders were entered, the times of entry or

cancellation, the time report of execution were

received and, if all or part of the order was

executed, the quality and execution price. The

Exchange will continue to require the reporting of

this information, but pursuant to a Regulatory

Circular. See Amendment No. 2, supra note 4.

6 15 U.S.C. § 78f(b)(5).

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39413; File No. SR–PCX–

97–37]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change and Amendment Nos. 1

and 2 Thereto by the Pacific Exchange,

Inc. Relating to Market Maker Outside

Trading Accounts

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

September 9, 1997, the Pacific

Exchange, Inc. (‘‘PCX’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

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

the proposed rule change as described

in Items I and II below, which Items

have been prepared by the selfregulatory organization. On October 31,

1997, the Exchange submitted

Amendment No. 1 3 and on November 6,

1997, the Exchange submitted

Amendment No. 2 4 to the proposed rule

change. 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, as

amended.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange is proposing to amend

its rules to eliminate the current

requirements of routine submission by

Market Makers of information relating to

non-market-maker trading accounts (or

‘‘outside’’ accounts). 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

1. Purpose

The Exchange is proposing to amend

its Rule 6.39, ‘‘Securities Accounts and

Orders of Market Makers.’’ Specifically,

the Exchange is amending Rule 6.39(a)

regarding the identification of accounts,

to eliminate the need for routine

submission by Market Makers of

information on non-market-maker

trading accounts or ‘‘outside accounts.’’

Currently, Exchange Market Makers are

required to identify and report to the

Exchange all accounts in which the

Market Maker may engage in stock,

option and securities trading, directly or

indirectly, or over which it has

investment discretion. The Rule in its

current form is broad enough to require

Market Makers to report professional

trading accounts held at clearing firms,

as well as outside personal accounts

such as brokerage accounts. The rule

change will require Market Makers to

report outside account information only

when requested by the Exchange. The

Exchange also proposes amending Rule

6.39(b) regarding the reporting of Market

Maker orders. Currently, each Market

Maker is required to report to the

Exchange every order entered into by

that Market Maker within the

specifications of the Rule. The Exchange

proposes amending Rule 6.39(b) to

require the clearing firm that maintains

the Market Maker’s trading account,

rather than the Market Maker

personally, to report executed order

information to the Exchange. The

Exchange believes it is appropriate to

limit the required order information to

‘‘executed’’ orders only, based upon its

position that only marginal surveillance

benefits are derived from gathering

unexecuted order information on a

routine basis.

Under the proposal, the Market Maker

will be held responsible for the

reporting requirements only if the

clearing firm is not reporting executed

order information to the Exchange and/

or if the Exchange has requested that the

Market Maker provide the information.

Furthermore, the proposed rule change

will clarify that this reporting

requirement applies to all accounts

carried for Market Makers who are the

subject of a clearing firm Letter of

Guarantee issued to the Exchange

pursuant to Rule 6.36.

The clearing firm thus will be the

primary source for the reporting of

Market Maker-executed order

information to the Exchange. However,

all firms that represent and execute

market-maker orders will continue to be

responsible for maintaining and

retaining executed and unexecuted

order information as required by Rules

17a–3 and 17a–4 under the Act and by

Exchange Rule 6.68.

Finally, in an effort to improve

reporting and move toward electronic

reporting in the future, the Exchange

proposed to eliminate from Rule 6.39(b)

the existing description of specific order

information required to be reported.5

2. Statutory Basis

The basis under the Act for the

proposed rule change is the Section

6(b)(5) 6 requirement that an Exchange

have rules that are designed to promote

just and equitable principles of trade, to

remove impediments to, and perfect the

mechanism of a free and open market

and, in general, to protect investors and

the public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The PCX does not believe that the

proposed rule change will impose any

inappropriate 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.
Federal Register / Vol. 62, No. 241 / Tuesday, December 16, 1997 / Notices 65841

7 15 U.S.C. § 78f(b).

8 15 U.S.C. § 78f(b)(5).

9 In approving this rule change, the Commission

has considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. § 78c(f).

10 17 CFR 240.17a–3.

11 17 CFR 240.17a–4.

12See supra note 5.

13See Amendment No. 2, supra note 4.

14 Id.

15See Securities Exchange Act Release No. 38286

(Feb. 13, 1997), 62 FR 8287 (Feb. 24, 1997) (order

approving File No. SR–CBOE–96–70).

16 15 U.S.C. § 78s(b)(2).

17 17 CFR 200.30–3(a)(12).

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

III. Commission’s Findings and Order

Granting Accelerated Approval of

Proposed Rule Change

The Commission finds that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder

applicable to a national securities

exchange, and, in particular, with the

requirements of Section 6(b) of the Act.7

Specifically, the Commission believes

the proposal is consistent with the

Section 6(b)(5) 8 requirements that the

rules of an exchange be designed to

promote just and equitable principles of

trade, to prevent fraudulent and

manipulative acts, and, in general, to

protect investors and the public

interest.9

The Commission believes that the

PCX’s proposal to allow market-makers

to provide outside account information

upon request by the Exchange rather

than providing such information on a

routine basis is a reasonable revision to

the Exchange’s market-maker account

reporting procedures. This conclusion is

based on the Exchange’s representation

that outside account information

provides little benefit to the Exchange’s

surveillance programs unless special

circumstances exist. The Commission

believes that the ability of the Exchange

to request outside account information

upon request should help preserve the

Exchange’s ability to conduct adequate

surveillance.

The Commission believes that PCX’s

proposal to make a Market Maker’s

clearing firm the primary responsible

source for reporting market-maker

executed order information to the

Exchange is a reasonable means of

streamlining the order reporting

process. Accordingly, the proposed

change should result in more effective

and efficient reporting of market-maker

accounts and executed order

information to the Exchange, thus

promoting just and equitable principles

of trade, perfecting the mechanism of a

free and open national market system,

and furthering investor protection and

the public interest.

The Commission believes it is

appropriate to limit the required

submitted order information to

‘‘executed’’ orders only, based on PCX’s

representation that only minimal

surveillance benefits are gained by

gathering unexecuted order information

on a routine basis. Where the clearing

firm is not reporting the information to

the Exchange and if the Exchange

requests that the market-maker provide

the information, the market-maker will

be responsible for reporting executed

order information. Moreover, while the

clearing firm is the primary source for

the reporting of market-maker executed

order information, the firms

representing and executing marketmaker orders will continue to be

responsible for maintaining and

retaining executed and unexecuted

order information pursuant to Rules

17a–3 10 and 17a–4 11 of the Act and

Exchange Rule 6.68. These provisions

offer further assurance that executed

order information will be reported and

records of executed and unexecuted

orders will be maintained.

The Commission believes that the

PCX’s proposal to eliminate the existing

description of specific order information

required to be reported pursuant to Rule

6.39(b) 12 will provide the Exchange

with greater flexibility in adding

reporting requirements as needed. The

Commission notes that the Exchange

has agreed to issue a regulatory circular

to its members reflecting that all of the

specific order information currently

contained in Rule 6.39(b) will continue

to be required to be reported pursuant

to the Rule.13 If the PCX in the future

seeks to eliminate the required reporting

of any of the specific information, such

a change would require the submission

of a rule filing pursuant to Section 19(b)

of the Act.14

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 the Federal Register. The proposal, as

amended, is virtually identical to a

proposal by the Chicago Board Options

Exchange approved by the Commission

on February 13, 1997, following a full

notice period during which no

comments were received.15

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, NW.,

Washington, DC 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 office of the Exchange. All

submissions should refer to File No.

SR–PCX–97–37 and should be

submitted by January 6, 1998.

V. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,16 that the

proposed rule change (SR–PCX–97–37)

is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.17

Jonathan G. Katz,

Secretary.

[FR Doc. 97–32756 Filed 12–15–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39409; File No. SR–PTC–

97–04]

Self-Regulatory Organizations;

Participating Trust Company; Notice of

Filing and Immediate Effectiveness of

Proposed Rule Change to Conform

PTC’s Rules to the Revised Articles 8

and 9 of the Uniform Commercial Code

of the State of New York

December 5, 1997.

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

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

October 10, 1997, the Participants Trust

Company (‘‘PTC’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change as described in Items I, II, and

III below, which items have been

prepared primarily by PTC. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.