32854 Federal Register / Vol. 66, No. 117 / Monday, June 18, 2001 / Notices

4 15 U.S.C. 78f(b)(1).

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

6 15 U.S.C. 78f(d)(1).

7 15 U.S.C. 78s(d). 8 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See letter from Robert P. Pacileo, Senior

Attorney, Regulatory Policy, PCX, to Nancy J.

Sanow, Assistant Director, Division of Market

Regulation (‘‘Division’’), SEC, dated March 22, 2000

(‘‘Amendment No. 1’’).

4Securities Exchange Act Release No. 42861 (May

30, 2000), 65 FR 36489.

5See letter from Hassan Abedi, Attorney,

Regulatory Policy, PCX, to Nancy J. Sanow,

Assistant Director, Division, SEC, dated January 5,

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

the Exchange made technical changes to the titles

of PCX Rule 6.47(b) and PCX Rule 6.47(c) Also, the

Exchange revised PCX Rule 6.47(b) to indicate that

subsections (4)–(6) had been added to the rule since

the time the proposed rule change was filed. See

Securities Exchange Act Release No. 42848 (May

26, 2000), 65 FR 36206 (June 7, 2000). Next, the

Exchange added ‘‘and Rule 6.73’’ to the last

sentence of PCX Rule 6.47(d). Finally, the Exchange

deleted the last two sentences of Commentary .05

to PCX Rule 6.47.

6The following OFPAs are proposed to be

renumbered as PCX rules: OFPA A–10, Subject:

Broker Responsibility on Print-Throughs, as PCX

Rule 6.46(d). In addition, the Exchange seeks to

imposed against the former member.

Nevertheless, the former member

subsequently fails to honor the

arbitration award. Because more than

one year has lapsed since the former

member’s termination of membership

and the Exchange did not provide

written notice of the commencement of

an inquiry into the failure to pay the

award, the Exchange could not assert

disciplinary jurisdiction over the former

member. The Exchange believes this is

problematic given the fact that the

dispute concerned Exchange-related

business, and that the award was

pursuant to an Exchange arbitration

proceeding.

While the Exchange notes that the

customer in the above example would

be able to seek enforcement of the award

in the court system, the inability of the

Exchange to even potentially take

disciplinary measures undermines the

credibility of the CBOE arbitration

forum. Therefore, the proposed rule

change would essentially eliminate the

notice requirement in Rule 17.1(b)

solely with respect to instances where

the Exchange seeks to take disciplinary

measures with respect to a former

member or person associated with a

member for failure to honor an

arbitration award pursuant to Chapter

18.

2. Statutory Basis

The Exchange believes that the

proposed rule change will strengthen

the Exchange’s arbitration process and

allow the Exchange to take action for

non-compliance with its arbitration

rules. Accordingly, the Exchange

believes that the proposed rule change

is 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 sections

6(b)(1),4 6(b)(6),5 6(d)(1) 6 and 19(d) of

the Act.7

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange represents that the

proposed rule change will impose no

burden on competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

No written comments were 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 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–CBOE–2001–14 and should be

submitted by July 9, 2001.

For the Commission, by the Division of

Market Regulations, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–15220 Filed 6–15–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44403; File No. SR–PCX–

99–45]

Self-Regulatory Organizations; Pacific

Exchange, Inc.; Order Granting

Approval of Proposed Rule Change

and Notice of Filing and Order

Granting Accelerated Approval to

Amendment No. 2 Relating to

Housekeeping Amendments to Rules

Governing Floor Brokers

June 8, 2001.

I. Introduction

On November 5, 1999, the pacific

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

submitted to 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 a

proposed rule change making

housekeeping amendments to the

Exchange’s rules governing floor

brokers. On March 23, 2000, the PCX

filed Amendment No. 1 to the proposed

rule change.3 The proposed rule change,

including Amendment No. 1, was

published for comment in the Federal

Register on June 8, 2000.4 On January 8,

2001, the PCX filed Amendment No. 2

to the proposed rule change.5 No

comments were received on the

proposal. This order approves the

proposal, as amended.

II. Description Proposal

In its proposed rule change, the

Exchange seeks to modify its options

floor broker rules by renumbering

certain Options Floor Procedure

Advices (‘‘OFPAs’’),6 clarifying existing

Federal Register / Vol. 66, No. 117 / Monday, June 18, 2001 / Notices 32855

eliminate superfluous language currently contained

in the OFPA. OFPA A–11, Subject: Broker

Responsibility to Cancel Best Bid or Offer, as PCX

Rule 6.46(e); OFPA D–4 Subject: Use of Orders

Which Specify More than One Contract, as PCX

Rule 6.46(f); OFPA A–6, Subject: Responsibility of

Floor Brokers in Effecting a Cross Transaction, as

PCX Rules 6.47(d), (e) and (f); OFPA A–9, Subject:

Discretionary Transactions (Floor Brokers), as PCX

Rule 6.48(b); OFPA B–10, Subject: Discretionary

Transactions by Market Makers, as PCX Rule

6.48(c); OFPA A–2, Subject: Floor Broker Acting As

Both Principal and Agent in the Same Transaction,

as PCX Rule 6.50.

7Similar changes are proposed for registration of

market makers under PCX Rule 6.33. See Securities

Exchange Act Release No. 42035 (Oct. 19, 1999), 64

FR 57681 (Oct. 26, 1999) (File No. SR–PCX–99–13).

8 In approving this proposal, the Commission has

considered its impact on efficiency, competition

and capital formation. 15 U.S.C. 78c(f).

9 15 U.S.C. 78f(b).

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

11See PCX Rule 6.44(a).

provisions, eliminating superfluous

provisions, and incorporating current

policies and procedures into the text of

PCX Rule 6.

Specifically, the Exchange proposes to

change PCX Rule 6.44 governing the

registration of floor brokers. As

proposed, the Exchange will post, for at

least 10 days on the bulletin board

located on the Exchange floor, the name

of each applicant for registration as a

floor broker that has successfully passed

the prescribed floor broker

examination.7

The Exchange also proposes to add a

provision to PCX Rule 6.45 requiring

floor brokers that act as such in respect

of FLEX Options contracts to have one

or more Letter(s) of Authorization on

behalf of such Floor Brokers issued by

a Clearing Member in accordance with

Rule 8.115(b).

The Exchange also proposes to clarify

the types of orders referred to in OFPA

D–4, which is proposed to be

renumbered as PCX Rule 6.46(f).

Specifically, where floor brokers may

accept orders that bid for or offer a

specified number of contracts and no

less, the Exchange proposes to codify

that these orders include orders

designated as ‘‘fill or kill,’’ ‘‘all or

none,’’ or ‘‘immediate or cancel,’’

(including such orders specifying that

any unfilled portion of a multiple order

is to be immediately canceled).

However, floor brokers must assure that

all such orders (including the

contingency) are vocalized in the

trading crowd, and that the bid or offer

is not disseminated.

Next, the Exchange proposes to

change PCX Rule 6.46, Commentary .02.

Currently, the Commentary states that a

floor broker’s use of diligence requires

that he make all persons in the trading

crowd aware of his request for a

quotation. The PCX proposes to require

that a floor broker make only reasonable

attempts to make all persons in the

crowd aware of each request for a quote.

The Exchange proposes to add PCX

Rule 6.47(c)(5), relating to crossing of

solicited orders, to permit a floor broker

to step out of a trading crowd to solicit

interest after announcing an order, and

then return to the crowd without reannouncing the order if he remained

within hearing distance while outside

the crowd.

Finally, the Exchange proposes to

adopt PCX Rule 6.49(a) to provide that

floor brokers who are required to

establish and maintain error accounts

pursuant to PCX Rule 4.21 may only use

such accounts for the purpose of

correcting bona fide errors.

III. Discussion

The Commission finds that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder

applicable to a national securities

exchange,8 and, in particular, with the

requirements of section 6(b) of the Act.9

The proposal would modify certain

rules relating to floor brokers by

clarifying existing provisions,

eliminating unnecessary provisions, and

codifying current policies and

procedures. By clarifying and updating

its rules and obligations for its members,

the Commission believes the proposal

will promote just and equitable

principles of trade in accordance with

section 6(b)(5) of the Act.10

The Commission believes that the

Exchange’s proposal to eliminate the

current requirement that the Option

Floor Trading Commission review and

approve each floor broker application,

and instead require only that an

applicant’s name be posted on the

bulletin board for an extended ten

calendar day period is appropriate and

consistent with the Act. The

Commission believes that posting each

applicant’s name on the floor of the

Exchange for ten days will provide

ample opportunity for members to bring

any concerns they have regarding an

applicant to the attention of the

Exchange’s Membership Committee

before the floor broker’s application for

membership becomes effective. Further,

the Commission notes that the

Exchange’s rule governing registration

of floor brokers continues to require that

all applicants pass an examination

prescribed by the Exchange, thus

imposing an objective standard that

must be met for registration as a floor

broker.11

The Commission also finds that the

Exchange’s proposal to eliminate the

current requirement that floor brokers

make all persons in the trading crowd

aware of each request for a quote is

consistent with the Act. The Exchange

represented that the current rule is not

feasible for floor brokers dealing with

large, active trading crowds. Thus, the

Exchange proposed to require floor

brokers to make reasonable attempts to

notify all persons in the crowd of such

requests. The Commission recognizes

that it can be difficult to ensure that in

fact every person in a large, active

crowd is in a position to hear requests

for quotes, and finds that it is

appropriate and consistent with the Act

to allow floor brokers to meet their

obligation by making reasonable

attempts to make all persons in the

crowd aware of requests for quotes.

However, the Commission expects that

the Exchange will monitor actions taken

by floor brokers under this rule to

ensure that good faith and reasonable

efforts are made to reach all persons in

the crowd regardless of the size of the

crowd. Further, floor brokers remain

obligated under PCX Rule 6.46 to use

due diligence in executing orders at the

best price or prices available, which

includes ascertaining whether a better

price than that which is displayed at the

time is being quoted by another floor

broker or market maker.

The Commission finds that the

Exchange’s proposed rule that would

allow a floor broker, when crossing

solicited orders, to step out of a crowd

to solicit interest after announcing an

order, and then return to the crowd

without re-announcing the order if he

remained within hearing distance of the

crowd is consistent with the Act. If

there is no expressed interest within the

trading crowd for an order, this rule will

allow floor brokers to attempt to solicit

interest from outside the crowd, i.e., via

telephone, without requiring the floor

broker to re-announce the order if he

remained within hearing distance. The

Commission believes that this may

facilitate the execution of orders in a

more efficient manner.

The Exchange proposed a new rule to

require that floor brokers that are

required to establish error accounts only

use such accounts for the purpose of

correcting bona fide errors. The

Commission finds that this new rule

should prevent manipulative acts and

practices because it prohibits all other

types of transactions from being

executed in these account. Floor brokers

are limited in the types of transactions

that they may execute. Thus, this rule

should add another level of oversight to

ensure that floor brokers do not engage

in improper transactions.

32856 Federal Register / Vol. 66, No. 117 / Monday, June 18, 2001 / Notices

12 15 U.S.C. 78s(b)(2).

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

14 17 U.S.C. 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3The Exchange notes that when it imposes a

sanction in excess of $2,500, it must comply with

Rule 19d–1 under the Act. 17 CFR 240.19d–1.

Telephone conversation between Cindy Sink,

Senior Attorney, Regulatory Policy, PCX, and

Jennifer Colihan, Special Counsel, Division of

Market Regulation, Commission, on June 8, 2001.

Finally, by consolidating rules

affecting floor brokers in one section of

the PCX rules, the Commission believes

that PCX members and other interested

parties will have easier access to

relevant information. The Commission

believes that the rule consolidation will

assist floor brokers in understanding

their obligations, and thus facilitate

their compliance with the rules.

IV. Amendment No. 2

The Commission finds good cause for

approving Amendment No. 2 prior to

the thirtieth day after the date of

publication of notice in the Federal

Register. Amendment No. 2 makes

technical, non-substantive changes to

the proposal, such as changing the titles

of two subparagraphs of PCX Rule 6.47

to better reflect their purpose; reflecting

that additional subparagraphs were

added to PCX Rule 6.47(b); and deleting

language in a commentary that

duplicates language proposed in PCX

Rule 6.47(d).

The Commission finds that PCX’s

proposed changes in Amendment No. 2

clarify the proposed rule change and

raises no new regulatory issues. Further,

the Commission believes that

Amendment No. 2 does not significantly

alter the original proposal, which was

subject to a full notice and comment

period. Therefore, the Commission finds

that granting accelerated approval to

Amendment No. 2 is appropriate and

consistent with section 19(b)(2) of the

Act.12

V. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning Amendment No.

2, including whether Amendment No. 2

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–99–45 and should be

submitted by July 9, 2001.

VI. Conclusion

It Is Therefore Ordered, pursuant to

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

proposed rule change (SR–PCX–99–45),

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. 01–15218 Filed 6–15–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44402; File No. SR–PCX–

2001–19]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Pacific Exchange, Inc. Relating to

Exchange Rules Under the Minor Rule

Plan

June 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 April 4,

2001, 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 self-regulatory

organization. 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 Exchange proposes to increase

the fines imposed on ETP Holders, ETP

Firms or associated persons of an ETP

Firm of its wholly-owned subsidiary,

PCX Equities, Inc. (‘‘PCXE’’ or

‘‘Cooperation’’) for violating the

Exchange rules under the Minor Rule

Plan.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its 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 proposes to amend

PCXE’s rules governing Minor Rule Plan

violations to increase most fines because

the Exchange believes that: (1) the

current fines are too low to deter

violations of PCXE rules; and (2) an

increase in the current fines will more

adequately sanction violations of the

PCXE’s order-handling and investigating

rules. Many of these violations are

processed under the Minor Rule Plan.3

Disruptive conduct on the quality

floor is currently not fined for a first

violation, fined $250 for a second

violation and $500 for a third. Multiple

violations are calculated on a running

two-year basis. Under the proposed

increases, these fines will be $500 for a

first violation, $2,000 for a second and

$3,500 for a third calculated on the

same two-year basis.

More serious violations such as a

member’s failure to cooperate with a

PCX examination of its financial

responsibility or operational condition,

will be fined $2,000 for a first violation,

$4,000 for a second violation, and

$5,000 for a third violation. A member

that impedes or fails to cooperate in an

Exchange investigation will be fined

$3,500 for a first violation, $4,000 for a

second and $5,000 for a third. Less

serious violations such as fines or

improper dress under the PCXE dress

code remains the same at $100 for the

first violation, $250 for the second and

$500 for the third. Under the proposed

rule, the Enforcement Department

would continue to exercise its

discretion under PCXE Rule 10.12(j) and

takes cases out of the Minor Rule Plan

to pursue them as formal disciplinary

matters if the facts or circumstances

warrant such action. The Exchange’s

proposal also includes amendments to

PCXE’s Equity Floor Procedure Advices