[Federal Register Volume 63, Number 107 (Thursday, June 4, 1998)]
[Notices]
[Pages 30548-30549]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-14828]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40044; File No. SR-PCX-98-24]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. 
Relating to the Elimination of Suffixes Designating Tier II Equity 
Securities

May 29, 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 May 11, 1998, the Pacific Exchange, Inc. (``PCX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'' or 
``SEC'') the proposed rule change as described in Items I and II below, 
which Items have been prepared by the Exchange. 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\ 17 CFR 240.19b-4.
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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 eliminate its current practice of affixing 
a suffix to the ticker symbol for certain PCX equity securities. This 
practice is currently performed for the purpose of designating equity 
securities that are listed pursuant to the Exchange's Tier II 
requirements.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, 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. PCX 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
    On July 22, 1994, the Commission approved an Exchange proposal to 
modify its equity listing and maintenance criteria by adopting a ``two-
tiered'' structure. While the creation of two tiers resulted in a new 
higher tier (Tier I), the Exchange did not change its existing listing 
standards (which became Tier II) or otherwise create a lower tier of 
listing standards. In its approval order, the Commission reiterated a 
statement from the Exchange's filing regarding Tier II securities 
(i.e., securities of smaller companies with limited commercial 
operations, lower capitalization, and a lack of demonstrated earnings 
history) that:

    ``Transactions in Tier II [securities] will be identified by a 
special suffix to the ticker symbol so that these securities can be 
distinguished from other securities traded on the Exchange. The 
suffix will not be applied, however, to a security listed on either 
the NYSE, Amex, or NASDAQ/NMS even though it is designated by the 
Exchange as a Tier II security.'' (Exchange Act Release No. 34429 
(July 22, 1994), 59 FR 38998, 38999 (August 1, 1994).

    The Exchange currently complies with this requirement by 
disseminating a ticker symbol with a ``TT'' suffix for Tier II 
securities. This is sent to vendors so that they can identify quotes 
and transactions in Tier II securities. But the Exchange now believes 
that it would be appropriate and expedient to discontinue this practice 
and to eliminate the use of the ``TT'' suffix for Tier II securities 
for the following reasons:
    <bullet> Different data vendors are currently using different 
practices in displaying the Exchange's ``TT'' suffix. Some display them 
in reporting quotes and trades. Others include them only in their 
symbol books, and do not include

[[Page 30549]]

them in reporting quotes and trades. Thus, for example, if ``XYZ'' were 
traded only on the PCX, it might appear to an investor accessing 
information from different vendors that ``XYZ'' and ``XYZTT'' were two 
different securities.
    <bullet> Use of the suffix can also lead to investor confusion over 
the correct symbol for the same security traded on two exchanges. For 
example, if the PCX trades a Tier II security designated as ``XYZTT'' 
and another exchange trades the same issues as ``XYZ'' (or ``XYZT2''), 
vendors and other organizations will generally include both symbols in 
their databases as if they were different securities. Most vendors 
segregate symbols based on difference in the characters comprising the 
trading symbol. This causes bifurcation of quote and trade information, 
and consequently, investors received inaccurate information on quotes 
and trades.
    <bullet> The use of the suffix is cumbersome, particular for PCX 
floor members (specialists and floor brokers), who have requested 
relief from what they believe to be an unnecessarily complicated 
designation that fails to serve a useful purpose.
    <bullet> Investors may also incorrectly assume that the ``TT'' 
suffix designates a related, secondary security, such as preferred 
stock of the same company, if quotes and trades of two related symbols 
(such ``XYZ'' and ``XYZTT'') are being disseminated either by different 
vendors or disseminated as separate issues by the same vendor.
    <bullet> The current method of identifying PCX second-tier 
securities places the Exchange at a competitive disadvantage. 
Currently, when issues are listed on both a regional exchange and 
Nasdaq, different symbols must be used for each marketplace. Adding a 
suffix to a regional exchange's symbol creates the potential for 
investor confusion and quote fragmentation.
    <bullet> A better alternative to the ``TT'' suffix is available. 
Second tier securities can be specifically identified by the vendors. 
Additionally, second tier securities can be designated in vendors' 
quote displays with a special indicator next to the figure for volume 
traded (or other location on the screen). Investors will see the 
indicator when they display quote or trade information. The Exchange is 
aware that one vendor uses this method for distinguishing between 
Nasdaq SmallCap securities (designated with an ``S'') and Nasdaq NM 
securities (designated with a ``Q'') in its symbol book. The Exchange 
also believes, based on discussions with several data vendors, that 
this practice (or a similar one) could be employed by all data vendors.
    The Exchange believes that the proposed solution is far superior to 
the current practice of adding a ``TT'' suffix to every Tier II 
security. To implement this solution, the Exchange would simply notify 
vendors of those securities that are Tier II equity securities. Nasdaq 
currently uses a similar method to distinguish between National Market 
securities and SmallCap securities. Vendors already have systems and 
codes in place for processing, disseminating, and displaying 
information on the specific sub-marketplace of an issue at the listing 
exchange or association.
    The Exchange originally intended the use of ``TT'' suffix to be 
educational to investors, broker-dealers, vendors, and others. But now, 
after over three years of diligently using the suffix, it appears that 
its informative value is minimal and, in many instances, is likely to 
lead to confusion, errors and dissemination of inconsistent 
information.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
provisions of Section 6(b) \3\ of the Act, in general, and Section 
6(b)(5),\4\ in particular, in that it is designed to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, and to promote just and equitable 
principles of trade.
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    \3\ 15 U.S.C. 78f(b).
    \4\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any 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 comments on the 
proposed rule change.

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

    Because the foregoing proposed rule change: (1) does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
(3) does not become operative for 30 days from May 11, 1998, the date 
on which it was filed, and the Exchange provided the Commission with 
written notice of its intent to file the proposed rule change at least 
five business days prior to the filing date, it has become effective 
pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(e)(6) 
thereunder.\5\ At any time within 60 days of the filing of such 
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, 
otherwise in furtherance of the purposes of the Act.\6\
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    \5\ 15 U.S.C. 78s(b)(3)(A) and 17 CFR 240.19b-4(e)(6).
    \6\ In reviewing the proposal, the Commission has considered the 
proposal's impact on efficiency, competition, and capital formation. 
See 15 U.S.C. 78c(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. 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 persons, 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, 450 Fifth Street, NW, Washington, 
DC 20549. Copies of such filing will also be available for inspection 
and copying at the principal office of the PCX. All submissions should 
refer to File No. SR-PCX-98-24 and should be submitted by June 25, 
1998.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-14828 Filed 6-3-98; 8:45 am]
BILLING CODE 8010-01-M