Federal Register / Vol. 66, No. 10 / Tuesday, January 16, 2001 / Notices 3633

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

2 17 CFR 240.19b–4.

3 In Amendment No. 1, the Exchange made

several technical changes to the proposed rule text

to correct the numbering and lettering of certain

sections of the rule text. See Letter to Heather L.

Traeger, Attorney, Division of Market Regulation,

SEC, from Cindy Sink, Senior Attorney, Regulatory

Policy, PCX, dated October 10, 2000 (‘‘Amendment

No. 1’’).

4PCX rule 6.86 is the Exchange’s ‘‘firm quote’’

rule for non-broker dealer customer orders.

5PCX rule 6.37(f), to be amended as follows in

a pending PCX filing with the Commission states

that: ‘‘The following rule applies if rule 6.86 does

not apply because an order is for a broker-dealer,

a fast market has been declared or rule 6.86 has

otherwise been suspended. Whenever a Floor

Broker enters a trading crowd and calls for a market

in any class and series at that post, each Market

Maker present at the post where the option is traded

is obligated, at a minimum, to make a market for

one contract on each Market Maker’s quoted price

or ‘implied’ price (e.g., if a Market Maker provides

a bid but not an offer, the Market Maker’s offering

price will be implied by the bid price plus the

maximum bid/ask spread differential specified in

rule 6.37(b)(1)). In the event a Floor Broker is

unable to satisfy an order from bids and offers given

in the crowd, the Order Book Official may assign

one contract to every Market Maker present within

the trading crowd to assist the Floor Broker in

satisfying the order. If a Market Maker at the post

either bids lower or offers higher than the

established market, such, Market Maker will be

obligated to trade one contract at the price quoted

by the Market Maker. If a Market Maker at the post

fails to provide a bid or offer after having a

reasonable opportunity to do so, the Market Maker

will be obligated to trade one contract at the best

price quoted in the crowd, or if there are no prices

quoted, at the disseminated price.’’ See Securities

Exchange Act Release No. 42035 (October 19, 1999),

64 FR 57681 (October 26, 1999) (File No. SR–PCX–

99–13).

6See Securities Exchange Act Release No. 40852

(December 28, 1998), 64 FR 1058 (January 7, 1999)

(File No. SR–PCX–98–16).

7See supra note 5.

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43823; File No. SF–PCX–

99–48]

Self-Regulatory Organizations; Notice

of Filing of a Proposed Rule Change

and Amendment No. 1 by the Pacific

Exchange, Inc. Relating to

Miscellaneous House-Keeping

Amendments to Options Trading Rules

January 9, 2001.

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 November

5, 1999, the Pacific Exchange, Inc.

(‘‘PCX’’ 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 Exchange. Amendment

No. 1 was filed on October 11, 2000.3

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 proposes to modify its rules

on options trading by clarifying existing

provisions, eliminating superfluous

provisions, codifying current policies

and procedures, and renumbering

certain Option Floor Procedure Advices

(‘‘OPFAs’’). The text of the proposed

rule change is available at the Office of

the Secretary, the PCX, and at the

Commission.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In this filing with the Commission,

the Exchange 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

Exchange 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

The Exchange is proposing to make

several changes to the text of the PCX

rules on options trading. First, the

Exchange proposes to amend its rule

6.86 4 by providing a cross-reference to

rule 6.37(f).5 The Exchange proposes

that, when rule 6.86 does not apply

because an order is for a broker/dealer;

a fast market has been declared; or rule

6.86 has been suspended, then rule

6.37(f) will apply. The Exchange

proposes this rule change to protect

investors and to emphasize the

obligations of Market Makers on the

Options Floor.

In addition, the Exchange proposes to

define and clarify the terms ‘‘executed’’

and ‘‘filled’’ in rule 6.86, Commentary

.09. Specifically, the Exchange proposes

that an order is considered ‘‘executed’’

and ‘‘filled’’ at the price that was agreed

upon when the trade was consummated,

i.e., when ‘‘buy’’ or ‘‘sell’’ was vocalized

in response to a request for a market and

disclosure was made of the price and

the quantity of the order.

Second, the Exchange is proposing

that rule 7.3(a)(6) references to

subparagraphs (d) and (e) be changed to

correctly reference subparagraphs (4)

and (5).

Third, the Exchange proposes to

renumber OFPA B–13, Subject:

Evaluation of Options Trading Crowd

Performance as rule 6.100. The

Exchange proposes to renumber OFPA

B–13 to centralize specific obligations,

responsibilities and procedures of the

Options Allocation Committee with

respect to the evaluation of Lead Market

Makers (‘‘LMM’’) and trading crowds.

Specifically, the Exchange proposes to

require that all procedures applicable to

the Options Allocation Committee

(‘‘OAC’’) for review of LMM or trading

crowd performance pursuant to OFPA

B–13 be renumbered and incorporated,

verbatim, as rule 6.100.

Fourth, the Exchange proposes to

eliminate the statement in rule 10.13(g)

which states that ‘‘[e]except as provided

in rule 10.14 (Summary Sanction

Procedures), the circumstances

underlying the issuance of each floor

citation shall be reviewed by a

designated committee for a

determination of whether the evidence

is sufficient to find a violation of

Exchange rules.’’ The Exchange notes

that this provision is inconsistent with

rule 10.13(c), which provides, in part,

that Exchange Regulatory Staff

designated by the Exchange has the

authority to impose a fine pursuant to

rule 10.13.

Fifth, the Exchange proposes to adopt

new rules 10.13(h)(13) and

10.13(k)(i)(13) to incorporate new rule

4.23 into the Minor Rule Plan and

Recommend Fine Schedule.6 Rule 4.23

states that a member or member

organization must obtain Exchange

approval in order to Exchange or

maintain a telephonic or electronic

communication between the Floor and

another location, or between locations

on the Floor. The proposed

recommended fines, pursuant to

proposed rule 10.13(k)(i)(13) of this rule

are $250, $750 and $1,500 for first,

second and third time violations,

respectively.

Sixth, the Exchange proposes to adopt

rule 10.13(h)(35) and 10.13(k)(i)(35) to

incorporate new rule 6.35(d) into the

Minor Rule Plan and Recommended

Fine Schedule.7 Rule 6.35(d) states that

newly registered Market Makers have a

grace period (60 days from the

commencement of trading), during

which time they may have, but are not

required to have, a Primary

Appointment Zone. At the completion

of the grace period, the Market Maker

must select a Primary Appointment

Zone. Market Makers who fail to select

a Primary Appointment Zone prior to

the expiration of their grace periods will

3634 Federal Register / Vol. 66, No. 10 / Tuesday, January 16, 2001 / Notices

8See Securities Exchange Act Release No. 42035

(October 19, 1999), 64 FR 57681 (October 26, 1999)

(File No. SR–PCX–99–13); Release No. 43293

(September 14, 2000) 65 FR 57416 (September 22,

2000) (File No. SR–PCX–99–36); Release No. 43025

(July 12, 2000), 65 FR 44559 (July 18, 2000) (File

No. SR–PCX–99–40); Release No. 43149 (August 11,

2000), 65 FR 51392 (August 23, 2000) (File No. SR–

PCX 99–44); and Release No. 42861 (May 30, 2000),

65 FR 36489 (June 8, 2000) (File No. SR–PCX–99–

45).

9 15 U.S.C. 78f(b)(5). 10 15 U.S.C. 78f(b)(6).

11 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See Letter from Hassan Abedi, Attorney,

Regulatory Policy, PCX, to Nancy J. Sanow,

Assistant Director, Division of Market Regulation

(‘‘Division’’), Commission (December 28, 2000)

(‘‘Amendment No. 1’’). Amendment No. 1 corrected

typographical errors that appeared in the proposed

rule text.

4See Letter from Hassan Abedi, Attorney,

Regulatory Policy, PCX, to Nancy J. Sanow,

Assistant Director, Division, Commission (January

5, 2001) (‘‘Amendment No. 2’’). Amendment No. 2

further corrected typographical errors that appeared

in the proposed rule text.

5 15 U.S.C. 78s(b)(3)(A).

6 17 CFR 240.19b–4(f)(6).

be subject to disciplinary action

pursuant to rule 10.13. The proposed

recommended fines, pursuant to

proposed rule 10.13(k)(i)(35) of this rule

are $500, $1000 and $1,500 for first,

second and third time violations,

respectively.

Seventh, the Exchange proposes to

amend the text specifying the

recommended fines for violations of the

position limit rules pursuant to rule

10.13(k)(i)(21) of the Minor Rule Plan

Recommended Fine Schedule. The

Exchange proposes that position and

exercise limit violations be the greater of

$250.00 or $1 per contract over 5% of

the applicable limit. The Exchange

proposes this change so that it is

obvious that the imposition of a

monetary fine is recommended

regardless of whether the applicable

number of contracts is less than 5% over

the designated position or exercise

limit.

Eighth, the Exchange proposes to

amend the text specifying the

recommended fines for violations of the

exercise limit rules pursuant to rule

10.13(k)(i)(22) of the Minor Rule Plan

Recommended Fine Schedule. The

Exchange proposes that position and

exercise limit violations be the greater of

$250.00 or $1 per contract over 5% of

the applicable limit. The Exchange

proposes this change so that it is

obvious that the imposition of a

monetary fine is recommended

regardless of whether the applicable

number of contracts is less than 5% over

the designated position or exercise

limit.

Ninth, the Exchange proposes to

delete all references to OFPAs in rule

10.13(h) and (k), pertaining to the PCX

Minor Rule Plan and to replace those

references with the current rules. The

Exchange proposes this change because

it intends to renumber and incorporate

all OFPAs pertaining to Options trading

into the text of Rule 6.8

2. Statutory Basis

The Exchange believes that the

proposal is consistent with Section

6(b)(5) of the Act 9 because it is designed

to promote just and equitable principles

of trade, to foster cooperation and

coordination with persons engaged in

regulating, clearing, settling, processing

information with respect to, and

facilitating transactions in securities,

and in general, to protest investors and

the public interest. The proposal is also

consistent with Section 6(b)(6),10 which

requires that members and persons

associated with members be

appropriately disciplined for violations

of Exchange Rules.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed rule change will impose

any burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received from

Members, Participants or Others

Written comments were not solicited

or received with respect to the proposed

rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 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

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,

including whether the proposed rule

change, as amended, 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–

0609. 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.

SR–PCX–99–48 and should be

submitted by February 6, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–1192 Filed 1–12–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43816; File No. SR–PCX–

00–42]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Pacific Exchange, Inc. Relating to

Supervisory Procedures

January 8, 2001.

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 December

1, 2000, 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, II

and III below, which Items have been

prepared by the Exchange. On December

28, 2000, the Exchange filed

Amendment No. 1 to the proposed rule

change.3 On January 5, 2001, the

Exchange filed Amendment No. 2 to the

proposed rule change.4 The proposed

rule change, as amended, has become

effective on filing pursuant to section

19(b)(3)(A) of the Act 5 and rule 19b–

4(f)(6) thereunder.6 The Commission is

publishing this notice to solicit