38222 Federal Register / Vol. 63, No. 135 /Wednesday, July 15, 1998 / Notices

5Conversation between Jeffrey T. Waddle,

Associate Counsel, DTC, and Theodore R. Lazo,

Attorney-Adviser, Division of Market Regulation,

Commission (June 17, 1998).

6 15 U.S.C. 78q–1(b)(3)(F).

7 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1) (1982).

2 17 CFR 240.19b–4 (1991).

3For a description of the PCX Application of the

OptiMark System, see Securities Exchange Act

Release No. 39086 (Sept. 17, 1997), 62 FR 50036

(Sept. 24, 1997) (Commission order granting

approval for the PCX Application).

4Securities Exchange Act Release No. 39818

(Mar. 30, 1998), 63 FR 17252 (Apr. 8, 1998).

will begin offering its New York

Window Services on July 13, 1998.5

II. Discussion

Section 17A(b)(3)(F) of the Act 6

requires that the rules of a clearing

agency be designed to promote the

prompt and accurate clearance and

settlement of securities transactions and

to assure the safeguarding of securities

and funds which are in the custody or

control of the clearing agency or for

which it is responsible. The

Commission believes that the proposed

rule changes are consistent with DTC’s

and NSCC’s obligations under Section

17A(b)(3)(F). The Commission believes

that the arrangements between DTC and

NSCC should ensure that securities

transactions that are currently processed

through Direct Clearing and the

Window will be processed efficiently

through DTC’s New York Window

Services. In addition, the Commission

believes that DTC’s procedures for its

New York Window services, which are

similar to those the Commission

previously approved for NSCC, should

assure the safeguarding of securities and

funds which are in its custody or

control or for which it is responsible.

III. Conclusion

On the basis of the foregoing, the

Commission finds that the proposals are

consistent with the requirements of the

Act and in particular with the

requirements of Section 17A of the Act

and the rules and regulations

thereunder.

It is therefore ordered, pursuant to

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

proposed rule changes (File Nos. SR–

DTC–98–09 and SR–NSCC–98–05) be

and hereby are approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–18764 Filed 7–14–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40182; File No. SR–PCX–

98–12]

Self-Regulatory Organizations; Pacific

Exchange, Inc.; Order Approving

Proposed Rule Change Relating to the

Treatment of PMP Orders Generated

Through the Matching of Profiles by

the PCX Application of the OptiMark

System

July 9, 1998.

I. Introduction

On March 2, 1998, the Pacific

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

with the Securities and Exchange

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

the proposed rule change pursuant to

Section 19(b)(1) of the Securities

Exchange Act of 1934 (‘‘Exchange Act’’

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

to amend its interpretation of Rule

5.32(a) ‘‘PMP-Only’’ of its Rules of

Board of Governors so that it will clarify

how PMP orders will be treated when

generated from the matching of Profiles

through the PCX Application of the

OptiMark System (‘‘PCX Application’’).3

Notice of the proposed rule change

was published in the Federal Register.4

The Commission received no comment

letters in response to the notice of the

proposed rule change.

II. Description of the Proposal

PCX has proposed to amend its

interpretation of Rule 5.32(a) ‘‘PMPOnly’’ of its Rules of Board of Governors

so that it will clarify how PMP orders

will be treated when generated from the

matching of Profiles through the PCX

Application. A new commentary has

been added to Rule 5.32(a).

PCX will modify the interpretation of

its Rule 5.32(a) so that executions

resulting from the operation of the PCX

Application would be considered as a

part of the ‘‘primary market’’ for the

purposes of execution of orders marked

‘‘PMP.’’ The purpose of the proposed

interpretation of the rule is to respond

to the SEC staff’s request to clarify the

meaning of Rule 5.32(a) ‘‘PMP Only.’’

Through the addition of proposed

Commentary .01, Rule 5.32(a) would be

interpreted as meaning that during

regular ‘‘primary’’ market trading hours,

an order specifically marked ‘‘PMP’’

would receive primary market

protection, which would include not

only the traditional primary markets

(e.g., New York markets) but also

matches resulting from the PCX

Application. Accordingly, executions

resulting from the PCX Application may

trigger the execution of an order marked

‘‘PMP Only,’’ even if the primary

markets have not traded at that price.

Similarly, a PMP order reflected into the

PCX Application as a Profile, which is

matched in the PCX Application and

results in an execution, would require

that such PMP limit order be filled, even

if the price is out of range from an

otherwise existing ‘‘primary’’ market,

however defined. This would then be

consistent with the overall premise that

under no circumstance can a specialist

accept an execution arising out of orders

generated from a cycle of the PCX

Application, without also executing any

eligible booked orders that were put in

the book before the cycle began.

III. Discussion

The Commission believes that

proposed rule change is consistent with

the provisions of Section 6(b)(5) of the

Exchange Act, which provides, among

other things, that the rules of an

exchange be designed to promote just

and equitable principles of trade and to

protect investors and the public interest,

and not designed to permit unfair

discrimination between customers,

issuers, brokers or dealers. The

Commission believes that by including

PMP orders in the PCX Application, and

giving those orders not only traditional

primary market protection, but also the

potentially improved pricing that may

result from inclusion in the PCX

Application, the PCX is seeking to

protect the interests of investors and to

promote just and equitable principles of

trade, while striving to prevent unfair

discrimination between customers,

brokers, and dealers. This effort should

also help to remove impediments to,

and perfect the mechanism of, a free and

open market, consistent with the

purpose of Section 6(b)(5) of the Act.

In addition, the Commission believes

that the proposed rule change is

consistent with the provisions of

Section 11A(a)(1)(B) of the Exchange

Act, which states that new data

processing and communications

techniques create the opportunity for

more efficient and effective market

operations. By employing the facility of

the PCX Application, an advanced data

processing and communications system,

to process PMP orders and to give

potentially improved pricing to those

orders or otherwise to fill more
Federal Register / Vol. 63, No. 135 /Wednesday, July 15, 1998 / Notices 38223

5 15 U.S.C. 78s(b)(2).

6 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See Letter from Murray L. Ross, Esq., Vice

President and Secretary, Phlx, to Michael

Walinskas, Esq., Deputy Associate Director,

Division of Market Regulation, Commission, dated

June 6,1998 (‘‘Amendment No. 1’’). In Amendment

No. 1, the Phlx consents to have the proposed rule

change published for notice and comment and

treated pursuant to Section 19(b)(2) of the Act. In

addition, in Amendment No. 1 the Phlx proposes

to adopt Commentary .01 to Phlx Rule 931 which

will require approved lessors to update Form U–4,

submitted pursuant to Phlx Rule 931(d), within

thirty days of learning that the information

contained in Form U–4 has become incomplete or

inaccurate. Where an amendment to Form U–4

involves a statutory disqualification as defined in

Sections 3(a)(39) and 15(b)(4) of the Act,

Commentary .01 will require that the amended

Form U–4 be submitted not later than ten (10) days

after the statutory disqualification occurs.

4 15 U.S.C. 78f.

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

expeditiously PMP limit orders, the PCX

is furthering the purposes of Section

11A(a)(1)(B) of the Act.

IV. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,5 that the

proposed rule change (SR–PCX–98–12)

is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–18843 Filed 7–14–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40180; File No. SR–Phlx–

98–22]

July 8, 1998.

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.,

and Amendment No. 1 Thereto

Relating to Amendments to Phlx Rule

931 Regarding Approved Lessors

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 18,

1998, the Philadelphia Stock Exchange,

Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with

the Securities and Exchange

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

the proposed rule change as described

in Items I, II, and III below, which Items

have been prepared by the Phlx. On

June 8, 1998, the Phlx filed an

amendment to the proposal.3 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 Phlx seeks to amend Phlx Rule

931, ‘‘Approved Lessor.’’ The text of the

proposed rule change is available at the

Office of the Secretary, the Phlx, and at

the Commission.

II. Self-Regulatory Organization’s

Statements Regarding the Proposed

Rule Change

In its filing with the Commission, the

Phlx 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 Phlx 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

The Phlx proposes to amend Phlx

Rule 931 to substitute the word

‘‘Exchange’’ for the word ‘‘Corporation’’

throughout the rule and to require

disclosure on an initial and periodic

(quarterly) basis of lists of limited

partners, limited liability organization

members and shareholders of corporate

entities of approved lessors. Phlx Rule

931(d), as amended, will require a lessor

who is a natural person to file with the

Exchange an attestation in a form

prescribed by the Exchange as to the

source of funds used to purchase the

membership in addition to a completed

Form U–4. For a lessor who is not a

natural person, Phlx Rule 931(d) will

require that a statement of assets,

liabilities and net work and (1) if a

partnership, an executed partnership

agreement along with executed Form U–

4 for all partners who are natural

persons; (2) if a limited liability entity

other than a corporation, an executed

copy of the operating agreement along

with accompanying Form U–4 for all

such members who are natural persons;

or (3) if a corporation, the corporate

articles of incorporation, corporate bylaws, a listing of all officers, directors

and shareholders along with

accompanying Form U–4s. For a lessor

who is not a natural person, Phlx Rule

931(e) will require periodic reports to be

submitted to the Exchange within

seventeen business days after the

conclusion of the reporting period, in a

form prescribed by the Exchange,

including but not limited to the

following information: (i) As of the last

business day of each calendar quarter, a

list of all limited partners if the lessor

is a limited partnership, a membership

list if the lessor is a limited liability

entity other than a corporation along

with any new subscription agreements

and shareholder list if the lessor is a

corporation, and (ii) any material

change in the corporate or organizations

structure within ten days of the change

in the structure.

According to the Phlx, the proposed

amended rule codifies existing practices

of the Exchange’s Office of the Secretary

and Examinations Department

respecting processing of applications for

approval as an approved lessor of the

Phlx. The proposal will allow the

Exchange to monitor any changes in the

ownership interest respecting the

membership or memberships held by

approved lessors. The proposal will also

allow the Exchange to monitor for any

potential statutory disqualifications

respecting shareholders, partners and

members of limited liability entities by

requiring the filing of Form U–4 and

amendments to Form U–4 for natural

persons as well as various corporate,

organizational agreements or

partnership interest disclosures for

other entities.

The Phlx believes that the proposed

rule change is consistent with Section 6

of the Act,4 in general, and Section

6(b)(5),5 in particular, in that it is

designed to promote just and equitable

principles of trade, prevent fraudulent

and manipulative acts and practices, to

foster cooperation and coordination

with persons engaged in regulating,

clearing, settling, processing

information with respect to, and

facilitating transactions in securities, to

remove impediments to and perfect the

mechanism of a free and open market

and a national market system, as well as

to protect investors and the public

interest.

B. Self-Regulatory Organization’s

Statement on Burden Competition

The Phlx does not believe that the

proposed rule change will impose any

inappropriate burden on competition.

C. Self-Regulation Organization’s

Statement on Comments on the

Proposed Rule Change Received from

Members, Participants or Others

No written comments were either

solicited or received.