34676 Federal Register / Vol. 63, No. 122 /Thursday, June 25, 1998 / Notices

7 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See Exchange Act Release No. 39649 (February

11, 1998), 63 FR 9276.

4Letter from Michael D. Pierson, Senior Attorney,

Regulatory Policy, PCX to Ann L. Vlcek, Division

of Market Regulation, Commission, dated June 1,

1998.

5See Exchange Act Release No. 34426 (July 21,

1994), 59 FR 38497 (July 28, 1994) (order approving

SR–PSE–92–14).

6See PCX Rules 6.52(a) and 6.75.

7See PCX Rule 6.86(a).

8Rule 6.66(b) states: ‘‘A Floor Broker holding an

order for the account of a Market Maker shall

verbally identify the order as such prior to

consummating a transaction, and shall, after

effecting the trade, supply the name of the Market

Maker concerned, by public outcry, upon the

request of any member or members in the trading

crowd.’’

9Specifically, the Exchange proposes to move

Commentary .05 from Rule 6.2 to Rule 6.77 and

renumber it as Commentary .01. The existing

subparagraphs will then be relettered and a new

subparagraph, (f), added to address violations of

Rule 6.66(c) as amended.

10See PCX Rule 6.37(d) and Rule 6.37,

Commentary .05 (Market Makers are required to

make a market for, at a minimum, one contract for

broker-dealer orders; they must also lower their

bids or raise their offers if they do not satisfy an

order in its entirety).

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, located at the above address.

Copies of such filing also will be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to File No.

SR–NASD–98–39 and should be

submitted by July 16, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–16951 Filed 6–24–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40097; File No. SR–PCX–

98–04]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change and

Notice of Filing and Order Granting

Accelerated Approval of Amendment

No. 1 Thereto by the Pacific Exchange,

Inc. Relating to the Identification of

Broker-Dealer Orders on the Options

Floor

June 17, 1998.

I. Introduction

On January 23, 1998, the Pacific

Exchange, Inc. (‘‘PCX’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’ or ‘‘SEC’’),

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

Securities Exchange Act of 1934

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

proposed rule changes to amend PCX

Rule 6.66(c), Rule 6.2, and Rule 6.77 to

require the broker-dealer status of an

order to be identified by public outcry

to the trading crowd prior to execution,

regardless of whether the order is to be

executed at the trading crowd’s

dissemiated bid or offering price, and to

add certain violations of Rule 6.66(c) as

amended to the list of those violations

that may cause a transaction to be

nullified or adjusted. Notice of the

proposal was published for comment

and appeared in the Federal Register on

February 24, 1998.3 Not comment letters

were received on the proposal. On June

1, 1998, the PCX filed an amendment to

the proposed rule change (‘‘Amendment

No. 1’’).4 This order approves the

Exchange’s proposal. In addition, the

Commission hereby publishes notice to

solicit comments from interested

persons on Amendment No. 1 on the

proposal and approves that amendment

to an accelerated basis.

II. Description of the Proposal

PCX is proposing to amend its rules

on the identification of broker-dealer

orders by requiring that, if an order is

for an account in which a broker-dealer

has an interest, the broker-dealer status

of the order must be disclosed to the

trading crowd prior to execution,

regardless of whether the order is to be

executed at the trading crowd’s

disseminated bid or offering price.

On July 21, 1994, the Commission

approved an Exchange proposal to

adopt new Rule 6.66(c), which currently

states: ‘‘Prior to executing an order in

which a broker-dealer has an interest, a

member must indicate by public outcry

that such order is for a broker-dealer if

the order is to be executed at the trading

crowd’s disseminated bid or offering

price. This rule applies regardless of

whether such broker-dealer is an

Exchange member.’’ 5 The Exchange is

now proposing to expand the scope of

Rule 6.66(c) by striking the words ‘‘if

the order is to be executed at the trading

crowd’s disseminated bid or offering

price’’ from the text of Rule 6.66(c).

Accordingly, under the amended rule,

prior to executing an order in which a

broker-dealer has an interest, a Floor

Broker would be required to indicate by

public outcry that the order is for a

broker-dealer.

The proposal is intended to facilitate

transactions in option contracts by

making the member in the trading

crowd and the Order Book Official staff

aware of the nature of orders being

represented on the Floor, thereby

assuring that broker-dealer orders will

not be represented inadvertently as

public customer orders. In that regard,

the Exchange notes that only nonbroker-dealer orders are entitled to be

placed in the public limit order book

and to be given priority over brokerdealer orders under certain

circumstances.6 The Exchange further

notes that only non-broker-dealers are

entitled to receive a guaranteed

minimum of 20 contracts at the

disseminated bid or offering price.7

The Exchange believes their proposal

will make the existing rule less

complicated and easier to follow by

removing the distinction between

broker-dealer orders to be executed at

the bid or offering price, and those that

are not. In that regard, the Exchange

notes that there is no such distinction

applicable to Market Maker orders, the

identification of which is governed by

Rule 6.66(b), which requires Floor

Brokers to verbally identify Market

Maker orders as such prior to their

execution.8 Thus, removing the subject

distinction from Rule 6.66(c) will make

the Exchange’s option rule disclosure

rules uniform, consistent, and easier to

follow.

The Exchange is also proposing to

amend Rules 6.2 and 6.77 by adding

certain violations of Rule 6.66(c) as

amended to the list of those violations

that may give rise to a circumstance in

which two Floor Officials may nullify a

transaction or adjust its terms.9

Specifically, such action could be taken

if a Floor Broker failed to identify a

broker-dealer order for 20 contracts or

less. The reason for the limitation on the

number of contracts is that, under Rule

6.86, only non-broker-dealer orders are

eligible for a guaranteed execution of 20

contracts at the displayed price. If a

Floor Broker does not disclosure that an

order for 20 contracts or less is for a

broker-dealer (under the proposed rule),

the members in the trading crowd may

incorrectly assume that the order is for

a public customer and provide an

execution at the displayed price,

without having an opportunity to

update their quotes.10 The Exchange

believes that adding this provision is

simply a logical extension of the

existing Commentary .05(v) to Rule 6.2,

which permits two Floor Officials to

nullify, or adjust the terms of, any order
Federal Register / Vol. 63, No. 122 /Thursday, June 25, 1998 / Notices 34677

11 15 U.S.C. 78f(b)(5).

12 In approving this rule change, the Commission

has considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f).

13 15 U.S.C. 78s(b)(2).

14 17 CFR 200.30–3(a)(12).

executed in violation for Rule 6.86,

which states that only non-broker-dealer

orders are eligible for a guarantee of up

to 20 option contracts at the

disseminated market price.

III. Discussion

The Commission finds that the

proposed rule changes are 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)11 in that

they are designed to facilitate

transactions in securities, promote just

and equitable principles of trade, and

protect investors and the public

interest.12

Specifically, the Commission believes

that the proposal will facilitate

transactions in option contracts and

afford greater protection of investors

and the public interest by making the

members in the trading crowd and the

Order Book Official staff aware of the

nature of the orders being represented

on the Floor, thereby assuring that

broker-dealer orders will not be

represented inadvertently as public

customer orders. The Commission notes

that only non-broker-dealer orders are

entitled to be placed in the Exchange’s

public limit order book and to be given

priority over broker-dealer orders under

certain circumstances, and that only

non-broker-dealers are entitled to

receive a guaranteed minimum of 20

contracts at the disseminated bid or

offering price. In view of these existing

constraints upon broker-dealer orders

and of the added protection afforded

public customers by the proposal, the

Commission does not believe that

requiring all broker-dealer orders to be

identified as such public outcry will

cause any unnecessary burden upon a

member.

The Commission agrees with the

Exchange that the proposal will make

the existing rule less complicated and

easier to follow by removing the

distinction between broker-dealer orders

to be executed at the bid or offering

price, and those that are not. The

Commission notes that there is no such

distinction applicable to Market Maker

orders, which must be verbally

identified as such prior to their

execution. Thus, the Commission

believes that removing the subject

distinction from Rule 6.66(c) will

facilitate transactions in option

contracts by making the Exchange’s

option order disclosure rules uniform,

consistent, and easier to follow.

The Commission also believes that it

is appropriate for the Exchange to

amend Rule 6.2 by deleting

Commentary .05 from that rule, which

relates to the member’s overall conduct

and manner of dress on the options

trading floor, and adding it as

Commentary .01 to Rule 6.77, which

relates to the issue of when bids and

offers constitute binding contracts. In

view of the proposed amendment of

Rule 6.66(c), the Commission believes it

appropriate for the Exchange to add a

new subparagraph (f) to this

Commentary, which would add certain

violations of Rule 6.66(c) as amended to

the list of those violations that may rise

to a circumstance in which two Floor

Officials may nullify a transaction or

adjust its terms. Specifically, such

action could be taken if a Floor Broker

failed to identify a broker-dealer order

for 20 contracts or less. The Commission

agrees with the Exchange that adding

this provision is simply a logical

extension of the existing Commentary

.05(v) of Rule 6.2, which permits two

Floor Officials to nullify, or adjust the

terms of, any order executed in violation

of Rule 6.86, which states that only nonbroker-dealer orders are eligible for a

guarantee of up to 20 option contracts

at the disseminated market price. The

Commission believes that enabling

Floor Officials to nullify or adjust the

terms of a transaction that would violate

Rule 6.66(c) as amended will afford

greater protection of investors and the

public interest.

For the foregoing reasons, the

Commission finds that PCX’s proposal

to require the broker-dealer status of an

order to be identified by public outcry

to the trading crowd prior to execution,

regardless of whether the order is to be

executed at the trading crowd’s

disseminated bid or offering price, and

to add certain violations of rule 6.66(c)

as amended to the list of those

violations that may cause a transaction

to be nullified or adjusted, is consistent

with the requirements of the Act and

with the rules and regulations

thereunder.

In addition, the Commission finds

good cause consistent with the Act for

approving Amendment No. 1 to the

proposed rule change prior to the

thirtieth day after the date of

publication of notice of filing thereof in

the Federal Register. Specifically,

Amendment No. 1 simply corrects

certain typographical errors in the text

of the rule proposal and repharases the

new subparagraph (f) being added to

Commentary .01 of Rule 6.77. The

amendment does not substantively

change the proposal as originally filed.

Accordingly, the Commission approves

Amendment No. 1 on an accelerated

basis.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments, including whether the

submission is consistent with the Act,

concerning Amendment No. 1. 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 PCX. All

submissions should refer to File No.

SR–PCX–98–04 and should be

submitted by July 14, 1998.

V. Conclusion

It is therefore Ordered, pursuant to

Section 19(b)(2) of the Act,13 that the

proposed rule change (SR–PCX 98–04),

as amended, is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–16952 Filed 6–24–98; 8:45 am]

BILLING CODE 8010–01–M

SMALL BUSINESS ADMINISTRATION

Data Collection Available for Public

Comments and Recommendations

ACTION: Notice and request for

comments.

SUMMARY: In accordance with the

Paperwork Reduction Act of 1995, this

notice announces the Small Business

Administration’s intentions to request

approval on a new, and/or currently

approved information collection.

DATES: Comments should be submitted

on or before August 24, 1998.

FOR FURTHER INFORMATION CONTACT:

Curtis B. Rich, Management Analyst,