30548 Federal Register / Vol. 63, No. 107 /Thursday, June 4, 1998 / Notices

11 15 U.S.C. 78q-1.

12 17 CAR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

Act11 and the rules and regulations

thereunder. In addition, OCC believes

that the hedge program reduces

exposure to counterparty default by

allowing for the substitution of OCC’s

AAA credit rating for that of each stock

loan counterparty, by using increased

payment netting, by reducing

duplicative collateralization

requirements, and by applying

advanced clearing and risk management

systems to the stock loan market. OCC

therefore believes that the proposed

changes are consistent with the

purposes and requirements of the Act.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

OCC does not believe that the

proposed rule change would impose any

burden on competition.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

Written comments were not and are

not intended to be solicited with respect

to the proposed rule change, and none

have been received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within thirty-five days of the date of

publication of this notice in the Federal

Register or within such longer period (i)

as the Commission may designate up to

ninety 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 OCC consents, the

Commission will:

(A) By order approve such 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,

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, N.W.,

Washington, D.C. 20549. Copies of the

submission, all subsequent

amendments, all written statements

with respect to the proposed rule

change that bare 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

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing also will be available for

inspection and copying at the principal

office of OCC. All submissions should

refer to File No. SR–OCC–98–03 and

should be submitted by June 25, 1998.

For the Commission by the Division of

Market Regulations, pursuant to delegated

authority.12

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–14830 Filed 6–3–98; 8:45 am]

BILLING CODE 8010–01–M

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.

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:

• 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
Federal Register / Vol. 63, No. 107 /Thursday, June 4, 1998 / Notices 30549

3 15 U.S.C. 78f(b).

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

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).

7 17 CFR 200.30–3(a)(12).

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.

• 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.

• 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.

• 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.

• 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.

• 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 submarketplace 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.

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

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

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–14828 Filed 6–3–98; 8:45 am]

BILLING CODE 8010–01–M