[Federal Register Volume 62, Number 36 (Monday, February 24, 1997)]
[Notices]
[Pages 8286-8287]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4446]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38293; File No. SR-PSE-96-42]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Pacific Stock Exchange Incorporated Relating to an 
Amendment to the Minor Rule Plan and the Adoption of a Forum Fee for 
Minor Rule Plan Appeals

February 14, 1997.
    Pursuant to Section 19(b) (1) of the Securities Exchange Act of 
1934 (``Act''),\1\ notice is hereby given that on October 25, 1996, the 
Pacific Stock Exchange Incorporated (``PSE'' 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. On 
October 26, 1996, PSE submitted an amendment that clarifies certain 
aspects of the proposed rule change.\2\ The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b) (1).
    \2\ Letter from Michael D. Pierson, Senior Attorney, Regulatory 
Policy, PSE, to Ivette Lopez, Assistant Director, Division of Market 
Regulation, SEC (``Amendment No. 1'').
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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 adopt a forum fee 
that may be imposed when a Member or Member Organization appeals a 
finding of a Minor Rule Plan (``MRP'') violation, and the review panel 
affirms the initial finding of a violation. The Exchange also is 
proposing to amend its MRP to include PSE Rule 6.87(c), which prohibits 
the dividing up of an option order to make its parts eligible for entry 
into Auto-Ex. The text of the proposed rule change is available at the 
Exchange 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 adopt a new subsection (5) to PSE Rule 
10.11(d) to provide as follows: If, after a hearing or review on the 
papers pursuant to subsection (d) of PSE Rule 10.11,\3\ a panel 
appointed by the pertinent committee determines that a Member or Member 
Organization has violated one or more Exchange rules, as alleged, that 
panel: (i) May impose any one or more of the disciplinary sanctions 
authorized by the Exchange's Constitution and Rules and (ii) shall 
impose a forum fee against the person charged in the amount of two 
hundred fifty dollars ($250) if the determination was reached based on 
a review of the papers, or in the amount of five hundred dollars ($500) 
if a hearing was conducted. In the event that the Panel determines that 
a Member or Member Organization has violated one or more Exchange 
rules, as alleged, and the sole disciplinary sanction imposed by the 
pertinent committee for such rule violation(s) is a fine that is less 
than the total fine initially imposed by the Exchange for the subject 
violation(s), the Committee has the discretion to waive the imposition 
of a forum fee.\4\ The Exchange believes this fee is necessary to, 
among other things, help offset the costs associated with certain 
appeals involving MRP violations.
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    \3\ PSE Rule 10.11, entitled ``Appeal of Floor Citations and 
Minor Rule Plan Sanctions,'' sets forth the procedures that apply 
when a member or member organization appeals a sanction imposed in 
connection with a floor citation or the MRP. See PSE Rules 10.11 and 
10.13.
    \4\ The provisions of proposed Rule 10.11(d) (5) are essentially 
the same as Rule 17.50(d) (2) of the Chicago Board Options Exchange 
(``CBOE''), except that the proposed PSE forum fees are higher than 
those of the CBOE.
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    The Exchange also is proposing to amend its MRP,\5\ which provides 
that the Exchange may impose a fine not to exceed $5,000 on any member, 
member organization, or person associated with a member organization 
for any violation of an Exchange rule that has been deemed to be minor 
in nature and approved by the Commission for inclusion in the MRP. PSE 
Rule 10.13, subsection (h)-(j), sets forth the specific Exchange rules 
deemed to be minor in nature.
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    \5\ Rule 19d-1(c) (2) under the Act authorizes national 
securities exchanges to adopt minor rule violation plans for the 
summary discipline and abbreviated reporting of minor rule 
violations by exchange members and member organizations. See 
Securities Exchange Act Release No. 21013 (June 1, 1984), 49 FR 
23828 (approving amendments to paragraph (c) (2) of Rule 19d-1 under 
the Act). The PSE's MRP was approved by the Commission in 1985. See 
Securities Exchange Act Release No. 22654 (Nov. 21, 1985), 50 FR 
48853 (approving File No. SR-PSE-85-24). In 1993, the Exchange 
amended its MRP and adopted detailed procedures relating to the 
adjudication of minor rule violations. See Securities Exchange Act 
Release No. 32510 (June 24, 1993), 58 FR 35491. Thereafter, the 
Exchange has modified its MRP several times. See Securities Exchange 
Act Release Nos. 34322 (July 6, 1994), 59 FR 35958; 35144 (Dec. 23, 
1994), 59 FR 67743 (Dec. 30, 1994); 36622 (Dec. 21, 1995), 60 FR 
67384 (Dec. 29, 1995); 37886 (Oct. 29, 1996), 61 FR 37886 (approving 
File No. SR-PSE-96-26). See also Securities Exchange Act Release No. 
37799 (Oct. 9, 1996), 61 FR 54479 (publishing File No. SR-PSE-96-30, 
proposed additions to the MRP, for comment).
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    Specifically, the Exchange is proposing to add the following 
violation to the section of the MRP relating to Options Floor Decorum 
and Minor Trading Rule Violations: ``Dividing up an order to make its 
parts eligible for entry into Auto-Ex (Rule 6.87(c))'' (with 
recommended fines of $2,500, $3,750 and $5,000 for first, second, and 
third violations). The Exchange believes that violations of Rule 
6.87(c) are objective in nature and easily verifiable and, therefore, 
appropriate to include this rule in the MRP.\6\ The Exchange also

[[Page 8287]]

notes that the recommended fine levels being proposed are comparable to 
the fines that the Exchange has imposed previously for violations of 
Rule 6.87(c).
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    \6\ For example, an investigation will reveal that a customer's 
original order, as represented on an ``upstairs'' trading ticket, 
was for a number of option contracts that was greater than ten, but 
handwritten notes will indicate that the original order has been 
divided up. In addition, the Exchange's time and sales report will 
establish that a number of sub-orders occurred sequentially on the 
Auto-Ex system during a relatively short period of time.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) \7\ of the Act in general and furthers the objectives of 
Section 6(b)(5) \8\ and Section 6(b)(7) \9\ in particular in that it is 
designed to promote just and equitable principles of trade, to assure 
that members, member organizations, and persons associated with members 
and member organizations are appropriately disciplined for violations 
of Exchange rules and, in general, to protect investors and the public 
interest.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ 15 U.S.C. 78f(b)(7).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the proposed rule change will impose no 
burden on competition.

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.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the 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 the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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. Also, copies of such filing will be available for 
inspection and copying at the principal office of the PSE. All 
submissions should refer to File No. SR-PSE-96-42 and should be 
submitted by March 17, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-4446 Filed 2-21-97; 8:45 am]
BILLING CODE 8010-01-M