6592 Federal Register / Vol. 62, No. 29 / Wednesday, February 12, 1997 / Notices

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

6 15 U.S.C. 78f(b)(5).

7 In making this finding, the Commission notes

that the proposal should increase efficiency by

eliminating a source of confusion among Amex

members and removing outdated provisions. See 15

U.S.C 78c(f) (noting that it is in the public interest

to consider whether an action will promote

efficiency, competition, or capital formation).

8See, e.g., NYSE Rule 72. NYSE Rule 72 permits

the largest bid (offer) to ‘‘size out’’ other smaller

bids (offers) that are on parity with it. However, all

bids (offers) in ‘‘the book’’ that are on parity with

the larger bids (offers) in the trading crowd are

aggregated for precedence purposes to facilitate the

ability of the book to compete with the trading

crowd for contra side order flow. Moreover, a

specialist may further increase the opportunity for

bids (offers) in the book to size out bids (offers) in

the trading crowd by combining his bid (offer) for

his own account with the bids (offers) in the book,

if he so chooses. NYSE Rule 108.10.

9 15 U.S.C. 78s(b)(2).

10 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1).

percentage of contra side shares allotted

to the specialist’s orders to the number

of competing floor brokers on parity

would divide the specified execution as

equally as possible, while providing an

easy to use formula whose

implementation is not unduly

disruptive to trading. In addition, the

Amex believes this change would

facilitate the ability of the specialist,

who normally represents multiple

customer orders, to compete with floor

brokers in the trading crowd, who

normally only represent one customer

order each.

The final aspect of the proposal

concerns the adjustment of stop limit

orders when a security is quoted exdivided, ex-distribution, ex-rights, or exinterest. When a security is quoted exdivided, ex-distribution, ex-rights, or exinterest (except for stock dividends and

distributions), Amex Rule 132(a)

generally provides that a specialist must

reduce all open orders to buy and open

stop orders to sell by the cash value of

the payment or rights. However, there

occasionally has been some confusion

concerning stop limit orders because the

rule does not specifically provide that

both the limit and the stop price must

be reduced. Therefore, the Exchange

proposes to amend paragraph (a) to

provide such specificity. This change

also will conform Amex Rule 132 to

New York Stock Exchange (‘‘NYSE’’)

Rule 118.

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).5

Specifically, the Commission believes

the proposal is consistent with the

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

rules of an exchange be designed to

prevent fraudulent and manipulative

acts and practices, to promote just and

equitable principles of trade, to facilitate

transactions in securities, and, in

general, to protect investors and the

public interest.7

The Commission supports the Amex’s

efforts to continue to review the form

and substance of its regulations. In this

regard, the Commission agrees with the

Exchange’s assertion that the proposed

to Amex rules 135, 152, 340, 171, 904,

and 950 will eliminate or update

requirements that no longer serve a

meaningful regulatory purpose. In

addition, the Commission believes that

adding Bloomberg Business News to the

Exchange’s list of approved services for

disclosure of material information

should facilitate the dissemination of

important information, thereby

enhancing the quality of the markets.

The Commission also believes the

changes concerning the precedence of

orders are consistent with the Act.

These changes should allow specialists,

who often represent many orders, to

compete more equitably with traders in

the crowd, who often represent only one

order. The Commission believes it is

reasonable for the Exchange to conclude

that the percentages selected should

divide the specified execution in an

equitable manner, while providing an

easy to use formula whose

implementation should not disrupt

trading. Moreover, the Commission

believes this practice serves the function

addressed by procedures in place at

other exchanges that facilitate the

execution of customer limit orders.8

Finally, the Commission believes it is

appropriate to require specialists to

adjust open stop limit orders to sell

when a security is quoted ‘‘ex’’ to

ensure that these orders will continue to

be handled according to the sellers’

original intentions and to preserve the

ability of these orders to obtain the best

price available. Moreover, for the

purposes of Amex Rule 132(a), open

stop limit orders to sell and open stop

orders to sell are essentially the same.

The only difference between these

orders is that a stop limit order to sell

places a floor on an acceptable

execution price whereas a stop order to

sell will accept whatever the current

market price is after a transaction occurs

at or below the stop order’s sell price.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,9 that the

proposed rule change (SR–Amex–96–

39) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–3430 Filed 2–11–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38237; File No. SR–CHX–

97–01]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Chicago Stock Exchange, Incorporated

Relating to Specialist Fees

February 4, 1997.

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

Securities Exchange Act of 1934

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

January 17, 1997, the Chicago Stock

Exchange, Incorporated (‘‘CHX’’ or

‘‘Exchange’’) 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 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, pursuant to Rule 19b–

4 of the Act, submits a proposed rule

change amending the CHX’s Schedule of

Fees relating to specialists effective

February 1, 1997. The text of the

proposed rule change is as follows [new

text is italicized; deleted text is

bracketed]:

Membership Dues and Fees * * *

(b) Registration Fee:

Firm or Corporation—No change in text.

Office (other than principal)—No

change in text.

Officers or Partners—No change in

text.m

Salesmen—No change in text.

[Specialist—Fees will be determined

based upon the monthly round lot

activity of an issue on the MSE, and

shall be paid monthly, according to

the following:

The 300 most active issues shall be

charged at a rate of $400 per year.

All other issues shall be charged at a

rate of $100 per year.]

Specialist Assignment—There shall also

be an assignment fee of $500 per

issue upon the approval by the

Committee on Specialist

Assignment and Evaluation of an

application of a member or member

organization to act as specialist in a
Federal Register / Vol. 62, No. 29 / Wednesday, February 12, 1997 / Notices 6593

2Under the proposal, specialists in listed

securities no longer will pay CUSIP clearing

support fees. Telephone conversation between J.

Craig Long, Attorney, Foley & Lardner, and George

A. Villasana, Attorney, Market Regulation, SEC, on

Feb. 4, 1997.

security. However, this fee shall be

applicable in competitive

assignments only.

Subordinated Loans—No change in text.

Transfer—No change in text.

(4) Specialist Fees:

[25¢ per trade plus 11⁄2¢ per $1,000 of

valuation payable on round lot sales (or

major fraction thereof) as principal

whenever the Specialist makes such sale

as principal on the Exchange.]

Specialists will be assessed a fixed fee

per assigned stock on a monthly basis,

to be calculated as follows:

Fixed Fee Per Stock=$345,000 ×

Percent of Fixed Costs Per Tier × CTA

Trade Volume Per Stock/CTA Trade

Volume Per Tier.

82% of the Fixed Fee Per Stock shall

be designated as a ‘‘Registration Fee,’’

and 18% of such Fee shall be

designated as a ‘‘Clearing Support Fee.’’

‘‘Percent of Fixed Costs Per Tier’’ is

taken from the following table:

Tier Description of tier

Percent

of fixed

costs

per tier

1 ........ 1–25 Most Active Stocks 11

2 ........ 26–100 ............................. 11

3 ........ 101–250 ........................... 12

4 ........ 251–500 ........................... 13

5 ........ 501–1000 ......................... 19

6 ........ 1001–2700+ ..................... 34

Classification of a particular stock for

a particular Tier is based on the total

number of trades reported to the

Consolidated Tape Association in such

stock for a specific month.

‘‘CTA Trade Volume Per Stock’’

means the total number of trades

reported to the Consolidated Tape

Association in a specific stock for a

specific month.

‘‘CTA Trade Volume Per Tier’’ means

the total number of trades reported to

the Consolidated Tape Association in

all stocks classified in a particular Tier

for a specific month.

A specialist’s Fixed Fee Per Stock will

be waived until February 1, 1999, for

any stock unassigned to any specialist

as of December 1, 1996 and assigned to

such specialist without competition by

May 1, 1997.

(o) Clearing Support Fees *

(1) Account Fees, No change in text.

(2) CUSIP Fees:

Specialist OTC CUSIP—$50 per OTC

CUSIP per—

Fee Month

Market Maker CUSIP

Fee.

No change in text.

Odd Lot Dealer

CUSIP Fee.

No change in text.

Fee Month

Floor Broker as Principal.No change in text.

*(minimum clearing support fee is $600 per

month). Discounts

The above Specialist OTC CUSIP Fee

will be subject to the following

discounts:

If between 20 and 200 trades occur in

a particular CUSIP in a given month, the

Specialist OTC CUSIP Fee for that

CUSIP shall be $40 for that month.

If less than 20 trades occur in a

particular CUSIP in a given month, the

Specialist OTC CUSIP Fee for that

CUSIP shall be $20 for that month.

(s) Specialist Credits

Total monthly fees owed by a

specialist to the Exchange (excluding

rebills) will be reduced (but to no less

than zero) by the application of the

following transaction credits:

CHX monthly CTA trade volume percentage by stock

Transaction

credit

(in percent)

<7% ........................................... 18

7%¥12% .................................. 36

>12% ......................................... 54

‘‘Transaction Credit’’ means the

applicable percentage of monthly CHX

tape revenue from the Consolidated

Tape Association generated by a

particular stock. To the extent that CHX

tape revenue is subject to a year end

adjustment, specialist credits may be

adjusted accordingly.

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 purpose of the proposed rule

change is to amend the CHX’s pricing

schedule relating to specialist fees on

listed securities. Currently, specialists

pay usage-based transaction fees which

are variable, based on ‘‘Trade Volume’’

(the number of executed trades) and

‘‘Dollar volume’’ (the value of executed

trades) when acting as principal on the

sell side. Specialists also pay certain

semi-variable fees (issue registration

fees and clearing support fees) which

are tiered based upon Trade Volume.2 In

operating trading floor facilities and

providing services to specialists, the

Exchange incurs primarily fixed

expenses in any given year that is

largely independent of Trade Volume.

The Exchange’s current fee schedule,

therefore, causes those specialists that

have higher trading volumes to pay a

disproportionate portion of the fixed

expenses of the Exchange. The revised

specialist fee schedule provides a more

equitable allocation of the recoupment

of the Exchange’s fixed expenses by

imposing a fixed fee primarily based

upon the Consolidated Market Trade

Volume in each stock. Further, the

revised fee schedule both recognizes the

existence of externally-generated

revenue as an offset to Exchange fixed

expenses and the role of the specialists

in obtaining this revenue, by providing

a transaction credit to specialists as

further described below.

The determination of the fixed fee per

stock will be calculated monthly and

will be based on the Consolidated

Market Trade Volume of each stock. All

stocks in which transactions are

reported to the consolidated tape will be

categorized in one of six tiers monthly,

based upon the Consolidated Tape

Association (‘‘CTA’’) Trade Volume (in

descending order). These six tiers are

described as follows:

Tier Nos. Tier description

1 ................................ 1–25 Highest Trade

Volume Stocks.

2 ................................ 26–100.

3 ................................ 101–250.

4 ................................ 251–500.

5 ................................ 501–1000.

6 ................................ 1001–2700+.

A substantial portion ($345,000 per

month) of the Exchange’s fixed costs

relating to the provision of service to

specialists will be recovered through

this fixed fee. The Exchange will assign

a percentage of this $345,000 to each

tier and a specialist’s monthly fixed fee

per stock will then be calculated as

follows:

Fixed Fee Per Stock=Total CHX Fixed

Fee ($345,000) × Percent of Fixed Costs
6594 Federal Register / Vol. 62, No. 29 / Wednesday, February 12, 1997 / Notices

3The applicable transaction credit percentage is

applied on a marginal basis to the CHX monthly

CTA trade volume percentage by stock. For

example, if the CHX monthly CTA trade volume

percentage for a particular stock is 15%, the

applicable transaction credit rates are 18% for the

first 7% of the trade volume, 36% for the next 5%

of the trade volume, and 54% for the remaining 3%

of the trade volume. Conversation among Lou

Klobuchar, Jr., Executive Vice President, CHX,

George T. Simon, Foley & Lardner, and Howard L.

Kramer, Associate Director, Market Regulation,

SEC, Michael Walinskas, Senior Special Counsel,

Market Regulation, SEC, and George A. Villasana,

Attorney, Market Regulation, SEC, on February 3,

1997.

4 15 U.S.C. 78f(b).

5 15 U.S.C. 78f(b)(4).

6 15 U.S.C. 78s(b)(3)(A).

7 17 CFR 240.19b–4.

8 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3Amendment No. 1 was filed with the

Commission on February 4, 1997. The amendment

changed the numbering of the proposed rule change

from 4.10(c) to 4.21, further explained the

Exchange’s purpose for the rule change, and

explained why the rule change distinguishes

Per Tier × (CTA Trade Volume Per

Stock/CTA Trade Volume Per Tier).

For example, if Stock ABC had 3,000

consolidated market trades and was the

420th most active stock (Tier 4, as

described above) in the month, and

there were a total of 300,000

Consolidated Market trades in the tier,

the specialist’s fixed fee would equal:

Total CHX fixed fee Tier 4 fixed cost percent

Stock ABC CTA volume Tier 4 CTA volume Stock ABC fixed

monthly fee

$345,000 × 13% × (3000 / 300,000) = $448.50

The Exchange will waive the

specialist fixed monthly fee described

above for a period of two years

beginning February 1, 1997 for any

stock unassigned to any specialist as of

December 1, 1996, that is assigned to a

specialist without competition by May

1, 1997.

Specialists’ total monthly fees owed

to the Exchange will be reduced by the

application of certain transaction

credits. The transaction credits will be

based upon a percentage of the

externally-generated CTA tape revenue

obtained in each stock.3 This percentage

will increase as the level of this

externally-generated revenue, that

offsets Exchange fixed costs, also

increases. These credits, however, may

not exceed a specialist’s total monthly

billing invoice (excluding directly

rebilled services).

2. Statutory Basis

The proposed rule change is

consistent with Section 6(b) of the Act 4

in general and furthers the objectives of

Section 6(b)(4) 5 in particular in that it

provides for the equitable allocation of

reasonable dues, fees, and other charges

among the Exchange’s members and

other persons using its facilities.

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 neither solicited

nor received written comments on the

proposed rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The foregoing rule change constitutes

or changes a due, fee, or other charge

imposed by the Exchange and, therefore,

has become effective pursuant to

Section 19(b)(3)(A) of the Act 6 and

subparagraph (e) of Rule 19b–4

thereunder.7

At any time within 60 days of the

filing of the proposed rule change, the

Commission may summarily abrogate

such 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.

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

Section, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of such

filing also will be available for

inspection and copying at the principal

office of The Chicago Stock Exchange.

All submissions should refer to File No.

SR–CHX–97–01 and should be

submitted by March 5, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–3427 Filed 2–11–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38241; File No. SR–PSE–

96–36]

Self—Regulatory Organizations;

Pacific Stock Exchange, Inc.; Order

Granting Approval to Proposed Rule

Change and Notice of Filing and Order

Granting Accelerated Approval of

Amendment No. 1 Relating to a

Requirement That all Non-Self-Clearing

PSE Floor Brokers Maintain Error

Accounts

February 5, 1997.

I. Introduction

On October 17, 1996, the Pacific Stock

Exchange, Incorporated (‘‘PSE’’ or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’), pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘ACT’’) 1 and Rule 19b–4

thereunder,2 a proposed rule change to

amend its rules to provide that each

non-self clearing floor broker on the

Exchange must establish and maintain

an error account for carrying positions

resulting from errors.

The proposed rule change, together

with the substance of the proposal, was

published for comment in Securities

Exchange Act Release No. 37903

(October 31, 1996), 61 FR 57507

(November 6, 1996). No comments were

received on the proposal. The Exchange

filed Amendment No. 1 with the

Commission on February 4, 1997.3 This