Federal Register / Vol. 63, No. 11 / Friday, January 16, 1998 / Notices 2711

5 17 CFR 200.30–3(a)(12).

1 15 U.S.C. § 78s(b)(1).

2 17 CFR 240.19b–4.

3The MFI is an electronic order delivery and

reporting system that allows member firms to route

orders for execution by the automatic execution

feature of POETS as well as to route limit orders

to the Options Public Limit Order Book. Orders that

do not reach those two destinations are defaulted

to a member firm booth. MFI also provides member

firms with instant confirmation of transactions to

their systems. Member firms may access POETS by

establishing an MFI mainframe-to-mainframe

connection.

4Orders entered via MFI are delivered to one of

three destinations: (a) to Auto-Ex, where they are

automatically executed at the disseminated bid or

offering price; (b) to Auto-Book which maintains

non-marketable limit orders based on limit price

and time of receipt; or (c) to a Member Firm’s

default destination—a particular firm booth or

remote entry site—if the order fails to meet the

eligibility criteria necessary for either Auto-Ex or

Auto-Book or if the Member Firm requests such

default for its orders. See generally Exchange Act

Release No. 27633 (January 18, 1990), 55 FR 2466

(‘‘POETS Approval Order’’).

5 In that regard, the Exchange is proposing to add

a new Rule 6.88(a), which provides: ‘‘Members and

Member Organizations may send orders

electronically through the Exchange’s Member Firm

Interface and route them directly to POETS, to a

Member Firm booth on the Options Floor, to a Floor

Broker Hand-Held Terminal located on the Options

Floor, or to any other location designated by the

Exchange, provided that the Member or Member

Organization has been approved by the Exchange to

do so.’’

6The Exchange notes that there will be no

appreciable delay in order entry due to the

transmission of orders through the Server. The

Exchange also notes that if a Member Firm routes

an order to POETS via MFI for automatic execution

or maintenance in Auto-Book, the order will not be

sent through the Server. Only orders to be

transmitted through the Hand-Held Terminal

system will be sent through the Server.

7The Exchange will submit a separate rule filing

to the Commission to establish these fees.

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 by order approve such proposed

rule change, or institute proceedings to

determine whether the proposed rule

change should be disapproved.

The NASD proposes to make the rule

change effective upon Commission

approval.

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 in

the Commission’s Public Reference

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to file number

SR–NASD–97–92 and should be

submitted by February 6, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.5

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–1110 Filed 1–15–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39532; File No. SR–PCX–

97–28]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change and

Amendment No. 1 Thereto by the

Pacific Exchange, Inc. Relating to

Exchange-Sponsored Hand-Held

Terminals for Options Floor Brokers

January 9, 1998.

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 July 3,

1997 and December 12, 1997,

respectively, the Pacific Exchange, Inc.

(‘‘PCX’’ or ‘‘Exchange’’) filed with the

Securities and Exchange Commission

(‘‘SEC’’ or ‘‘Commission’’) the proposed

rule change and amendment No. 1 to the

proposed rule change as described in

Items I, II, and III below, which Items

have been prepared by the selfregulatory organization. The

Commission is publishing this notice to

solicit comments on the proposed rule

change, as amended, from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange is proposing to adopt a

new program to allow floor brokers on

the Options Floor to use Exchangesponsored hand-held terminals to

receive orders sent electronically by

Member Firms located off the floor. The

proposal will also establish new

procedures for electronic order flow

handling, routing, execution and trade

reporting under the program. The test of

the proposed rule change is available at

the Office of the Secretary, 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 test 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

General Description. The Exchange’s

Member Firm Interface (‘‘MFI’’) 3

currently permits Exchange Member

Firms to use an electronic link with the

Exchange to send their option orders

directly to the Exchange for delivery to

POETS (Pacific Option Exchange

Trading System).4 Under the proposal,

member firms would be able to use the

MFI connection to route orders directly

to the member firm booth (not by

default) or to a floor broker’s hand-held

terminal located in the trading crowd.5

Under the program, Member Firms

will be permitted to send their orders

electronically to the Exchange via MFI

and route them to one of three

destinations on the trading floor: (a) To

a floor broker standing in the trading

crowd; (b) to a Member Firm booth

location on the trading floor; or (c) to

POETS, where they will be

automatically executed by Auto-Ex or

maintained in Auto-Book. All orders so

transmitted will first be sent through the

Server.6 Orders sent to a Member Firm

booth via the Server may be sent

subsequently either to POETS or to a

floor broker in the trading crowd.

Orders sent via the Server to a floor

broker in the trading crowd may

subsequently be transmitted to a

Member Firm booth, to POETS, or to

another floor broker on the trading floor.

The Exchange intends to furnish

hand-held terminals to be used by floor

brokers under the program. In addition,

the Exchange will supply booth devices

that will have the capability to retrieve

and display all orders that were

submitted through the device. The

Exchange intends to assess users a

monthly rental fee for such use.7
2712 Federal Register / Vol. 63, No. 11 / Friday, January 16, 1998 / Notices

8See, e.g., PCX Rules 5.1(e), 6.43–6.48 and

Options Floor Procedure Advices A–1–A–11 and

G–1–G12.

9See PCX Rule 6.69.

10The Exchange notes that the Commission has

previously approved rule change proposals that

prohibit the use of floor-broker hand-held terminals

from performing a market maker function. See, eg.,

Securities Exchange Act Release No. 38054 (Dec.

16, 1996), 61 FR 67365 (Dec. 20, 1996) (Order

Approving SR–CBOE–95–48). The PCX has filed a

similar proposal, which is currently pending with

the Commission. See Securities Exchange Act

Release No. 38270 (Feb. 11, 1997), 62 FR 7286 (Feb.

18, 1997) (Notice of filing of SR–PSE–97–02).

11Factors will include the nature of order flow

(retail or institutional), the nature of the issue

(lightly-traded or heavily-traded), nature of the floor

brokerage operation, time of application, limitations

in the number of participants who may participate,

and other such factors.

12The term ‘‘qualified Floor Member or off-floor

Member’’ refers to the requirement that all floor

brokers and order flow providers who participate in

the program must be approved by the Exchange to

do so. Floor brokers are eligible to participate if

they are registered with the Exchange as floor

brokers pursuant to Rule 6.44 and have arranged

with a member firm to receive order flow through

the system. Member firms are eligible to participate

in the program if they have made arrangements

with a floor broker for the transmission and

execution of orders. Moreover, program participants

will be required to pay the Exchange a fee in an

amount to be specified in a rule change proposal

to be filed with the Commission.

13The Exchange notes that a rule filing to permit

Exchange floor brokers to use proprietary order

routing terminals on the Options Trading Floor is

currently pending before the Commission. See

Securities Exchange Act Release No. 38270 (Feb. 11,

1997), 62 FR 7286 (Feb. 18, 1997) (Notice of filing

of SR–PSE–97–02).

14The term ‘‘interfere’’ refers to electronic

interference that may occur between a member’s

proprietary device and another electronic system or

piece of equipment on the Trading Floor. For

example, if the use of a proprietary device on the

floor caused the POETS automatic execution to halt,

or if it disrupted telephonic communications on the

floor, or if it prevented another member firm from

being able to receive electronic orders through

another order-routing system, then the device

causing the interference could not be used on the

floor until it was rendered compatible with the

order electronic systems in use.

15 15 U.S.C. § 78f(b).

16 15 U.S.C. § 78f(b)(5).

Exchange rules on order

representation and order execution will

generally be unchanged under the

program.8 However, the Exchange is

proposing to modify its rules on orders

to provide that an order sent

electronically through MFI will be

deemed to be a ‘‘written order’’ for

purposes of Rule 6.67. The order

information that must be reported to the

Exchange in connection with each

transaction that is executed on the

trading floor will be also unchanged

under the program.9

Prohibition of Market Making

Function. The Exchange is proposing to

adopt new Rule 6.88(b) providing that

no Floor Broker may knowingly use a

Floor Broker Hand-Held Terminal, on a

regular and continuous basis, to

simultaneously represent orders to buy

and sell options contracts in the same

series for the account of the same

beneficial holder. The rule further

provides that if the Exchange

determines that a person or entity has

been sending, on a regular and

continuous basis, orders to

simultaneously buy and sell option

contracts in the same series for the

account of the same beneficial holder,

the Exchange may prohibit orders for

the account of such person or entity

from being sent through the Exchange’s

Member Firm Interface for such period

of time as the Exchange deems

appropriate.10

Implementation. The Exchange is

proposing a two-phase approach to

integrating the new hand-held

technology into the floor environment.

In Phase I, the Exchange will allow

limited implementation of the program

to evaluate the use of hand-held

terminals and to identify and correct

any problems that may arise. In this

regard, the Exchange will select a

representative cross-section of floor

members and off-floor members for the

execution of various types of order flow

in both lightly-traded and heavilytraded issues. Phase I will last for about

four months. It will involve

approximately two off-floor Member

Firms, two Member Firm booth devices

and 12 floor broker hand-held terminals.

The Exchange, in conjunction with its

Options Floor Trading Committee, will

select Members and Member Firms to

participate in Phase I on an objective

basis.11 During Phase I, floor brokers

will not be permitted to transmit orders

to other floor brokers (they will be

limited to transmitting orders either to

POETS or to a Member Firm booth).

In Phase II, the Exchange will roll out

the program on a floor-wide basis,

allowing any qualified Floor Member or

off-floor Member who wishes to

participate in the program to do so.12

Order Tickets. Under the proposal,

initially, floor brokers using terminals

will not need to write up order tickets

because the trade-related floor broker

terminal information will be passed

electronically to POETS and then to

POPS (Pacific Options Processing

Information) for clearing purposes. Yet

the party on the other side of the trade,

if it is executed by a market maker of a

floor broker not using a terminal, will

have to submit a paper order ticket to

the Exchange for processing. Later,

when advancements in technology

allow for it, no paper tickets will be

required because all market makers and

floor brokers will be able to interface

with each other through hand-held

terminals—but that change will be the

subject of another filing. With regard to

proprietary hand held terminals, the

order ticket requirement would be the

same as with the Exchange-sponsored

terminals, i.e., if the trade information is

not sent to the Exchange electronically,

it will have to be conveyed by means of

a written order ticket.

Clearing and Trade Reporting. Once

an order has been executed, the HandHeld Terminal system will route trade

information to POETS, which, in turn,

will route the information to a computer

for trade match and clearing purposes.

At the same time, the Exchange will

send a trade report to the Member Firm

that entered the order. In addition, the

Exchange will transmit trade

information to OCC, OPRA and certain

vendors.

Audit Trail. Order information sent

through the Hand-Held Terminal system

will become audit trail information that

is available to the Exchange for

regulatory purposes. However, if an

order is routed to the Member Firm

booth by telephone or wire, and not

through MFI, and the order is then sent

to POETS or to a floor broker in the

crowd, the audit trail information will

commence when the order is sent from

the booth. An audit trail of all actions

taken by the hand-held terminal that

result in an interaction with the Server

will be maintained. Upon receipt of an

order in the Server from POETS or a

booth device, the order will be time

stamped and retained in the Server’s

database. When orders are executed at a

hand-held device, they will be time

stamped upon receipt by the Server. The

Exchange believes that the audit trail

information will be more accurate than

current information, which is recorded

manually on order tickets.

System Capacity. The Exchange

believes, based upon extensive analysis

and testing, that implementation of the

program will not adversely affect

POETS system capacity or functionality.

Use of Other Hand-Held Terminal

Devices. The Exchange will not prohibit

floor brokers from using proprietary

hand-held terminals 13 for order entry

on the Options Floor as long as they do

not interfere with any Exchangesponsored hand-held terminals, with

POETS or with other equipment on the

floor.14

2. Statutory Basis

The Exchange represents that the

proposal is consistent with Section 6(b)

of the Act,15 in general, and Section

6(b)(5) of the Act,16 in particular, is that

it is designed to promote just and

equitable principles of trade; to foster
Federal Register / Vol. 63, No. 11 / Friday, January 16, 1998 / Notices 2713

17 17 CFR 200.30–3(a)(12).

cooperation and coordination with

persons engaged in regulating,

processing information with respect to,

and facilitating transactions in

securities; to remove impediments to

and perfect the mechanism of free and

open market and a national market

system; to protect investors and the

public interest; and is not designed to

permit unfair discrimination between

customer, issuers, brokers or dealers.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange 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 either

solicited or received.

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, 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 office of the Exchange. All

submissions should refer to File No. SRPCX–97–28 and should be submitted by

February 6, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.17

Jonathan G. Katz,

Secretary.

[FR Doc. 98–1112 Filed 1–15–98; 8:45 am]

BILLING CODE 8010–01–M

DEPARTMENT OF TRANSPORTATION

Aviation Proceedings, Agreements

Filed During the Week Ending January

9, 1998

The following Agreements were filed

with the Department of Transportation

under the provisions of 49 U.S.C. 412

and 414. Answers may be filed within

21 days of date of filing.

Docket Number: OST–98–3300.

Date Filed: January 5, 1998.

Parties: Members of the International

Air Transport Association.

Subject: PTC3 Telex Mail Vote 904,

Korea-Japan/China fares, Intended

effective date: February 1, 1998.

Docket Number: OST–98–3301.

Date Filed: January 5, 1998.

Parties: Members of the International

Air Transport Association.

Subject: PTC1 Telex Mail Vote 905,

Chile-Brazil PEX fares, Intended

effective date: January 15, 1998.

Docket Number: OST–98–3302.

Date Filed: January 5, 1998.

Parties: Members of the International

Air Transport Association.

Subject: PTC23 AFR–TC3 0028 dated

December 5, 1997, Africa TC3 Resos r1–

40, Minutes—PTC23 AFR–TC3 0029,

dated December 23, 1997, Tables—

PTC23 AFR–TC3 Fares 0012, dated

December 19, 1997, Intended effective

date: April 1, 1998.

Docket Number: OST–98–3315.

Date Filed: January 7, 1998.

Parties: Members of the International

Air Transport Association.

Subject: PTC3 Telex Mail Vote 906,

Japan-China fares, Intended effective

date: January 15, 1998.

Docket Number: OST–98–3316.

Date Filed: January 7, 1998.

Parties: Members of the International

Air Transport Association.

Subject: PSC/Reso/090 dated

December 1, 1997, Finally Adopted

Resolutions r1–r52, Minutes—PSC/

Minutes/004 dated December 1, 1997,

Intended effective date: June 1, 1998.

Docket Number: OST–98–3320.

Date Filed: January 9, 1998.

Parties: Members of the International

Air Transport Association.

Subject: PTC12 NMS–ME 0036 dated

December 19, 1997, r1–17, PTC12 NMS–

ME 0037 dated December 19, 1997, r18–

r35, Minutes—PTC NMS–ME 0035

dated December 19, 1997, Table—

PTC12 NMS–ME Fares 0016 dated

January 6, 1998, Intended effective date:

April 1, 1998.

Paulette V. Twine,

Documentary Services.

[FR Doc. 98–1166 Filed 1–15–98; 8:45 am]

BILLING CODE 4910–62–P

DEPARTMENT OF TRANSPORTATION

Notice of Application for Certificates of

Public Convenience and Necessity and

Foreign Air Carrier Permits Filed Under

Subpart Q During the Week Ending

January 9, 1998

The following Applications for

Certificates of Public Convenience and

Necessity and Foreign Air Carrier

Permits were filed under Subpart Q of

the Department of Transportation’s

Procedural Regulations (see 14 CFR

302.1701 et seq.). The due date for

Answers, Conforming Applications, or

Motions to Modify Scope are set forth

below for each Application. Following

the Answer period DOT may process the

application by expedited procedures.

Such procedures may consist of the

adoption of a show-cause order, a

tentative order, or, in appropriate cases,

a final order without further

proceedings.

Docket Number: OST–95–495.

Date Filed: January 7, 1998.

Due Date for Answers, Conforming

Applications, or Motion to Modify

Scope: February 4, 1998.

Description: Amendment No. 2 to the

Application of United Air Lines, Inc.

pursuant to 49 U.S.C. Section 40103 and

Subpart Q of the Rules (14 CFR

302.1701, et seq.) to realign Segment 1

of its Certificate of Public Convenience

and Necessity for Route 632 by adding

to the route the following coterminal

points in South America: Colombia (to

be substituted for Barranquilla,

Colombia), Ecuador, Peru, Bolivia, and

Paraguay.

Paulette V. Twine,

Documentary Services.

[FR Doc. 98–1165 Filed 1–15–98; 8:45 am]

BILLING CODE 4910–62–P