[Federal Register Volume 59, Number 48 (Friday, March 11, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-5678]
[[Page Unknown]]
[Federal Register: March 11, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33721; File No. SR-PSE-94-05]
Self Regulatory Organizations; Pacific Stock Exchange, Inc.;
Filing and Order Granting Temporary Accelerated Approval to Proposed
Rule Change Relating to Listing of Municipal Securities.
March 7, 1994.
Pursuant to section 19(b)(1) of the Securities Exchange Act of
1934,\1\ and rule 19b-4 thereunder,\2\ notice is hereby given that on
February 15, 1994, the Pacific Stock Exchange Incorporated (``PSE'') 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. Subsequently, the PSE amended its rule filing to comport the
numbering of the proposed rules with the Rules of the Exchange that are
currently in effect.\3\ The PSE is requesting accelerated approval of
the proposed rule change as certain municipal securities the Exchange
may wish to list are likely to be issued prior to the thirtieth day
following publication of notice of the proposed rule change in the
Federal Register. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons and is
simultaneously approving the proposal for an interim period through
July 5, 1994.
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\1\15 U.S.C. 78s(b)(1) (1982).
\2\17 CFR 240.19b-4 (1991).
\3\See letter from Michael Pierson, Senior Attorney, Market
Regulation, Pacific Stock Exchange, Inc. to Scott C. Kursman,
Attorney, Division of Market Regulation, Commission (March 2, 1994).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposing to amend rules 3.2 and 3.5 to provide
listing and delisting guidelines applicable to municipal securities.
New rule 5.13(i) would provide that all aspects of the trade
reconciliation process, including comparison, settlement, and clearing,
will be governed by the applicable requirements of the Municipal
Securities Rulemaking Board (``MSRB''). The proposed rule change would
also create an exemption from the PSE's off-board trading rules for
municipal securities.
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 PSE included statements
concerning the purpose of and basis for the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The PSE 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to amend its rule 3.2 to provide that
municipal securities, as defined in section 3(a)(29) of the Act, are
eligible for listing on the Exchange.
To be eligible for listing, a municipal security must be rated as
investment grade by at least one nationally recognized rating service,
and satisfy the Exchange's distribution criteria for bonds of issuers
whose corporate securities are not listed on the Exchange, i.e., the
size of the issue must be at least $20 million principal amount/
aggregate market value, with at least 100 holders. In addition, the
Exchange may consider such other information as it deems necessary to
evaluate the appropriateness of the issue for exchange trading,
including the financing structure and/or arrangement of the issuer.
The Exchange is proposing that any municipal securities that it
lists be assigned to a specialist and traded in accordance with all PSE
regulations otherwise applicable to the trading of securities listed on
the Exchange. As with corporate bonds, trade reports and quotation
information will be disseminated over Network B. However, to ensure
uniformity of practice within the securities industry, proposed rule
5.13(i) provides that all aspects of the trade reconciliation process,
including comparison, settlement, and clearing, will be governed by the
applicable requirements of the MSRB.\4\
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\4\MSRB rule G-3 provides specific qualification requirements
for municipal securities principals and representatives. In light of
the PSE's qualification requirements for specialists, the Exchange
believes it is appropriate solely for purposes of this temporary
120-day approval period for the PSE to rely on this requirement for
its specialists in lieu of the rule G-3 standards. It is important,
however, that any specialist selected by the PSE for a listed
municipal security be familiar with the characteristics of municipal
securities.
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The proposed rule change will also amend PSE Rule 5.46 to specify
that any purchase or sale of a municipal security shall be exempt from
the provisions of the Exchange's off-board trading rules.
Further, the proposed rule change is not intended to otherwise
alter the existing regulatory framework and oversight applicable to
municipal securities trading.\5\
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\5\The National Association of Securities Dealers (``NASD'') has
the authority to enforce the MSRB rules. The Exchange notes that it
will also be responsible for enforcing MSRB rules for the listed
municipal securities. The PSE's enforcement in this regard will not
preempt or limit in any manner the NASD's authority to act in this
area.
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Finally the Exchange is proposing to amend its delisting guidelines
(rule 3.5) to provide that a municipal security would be subject to
delisting in the event it were no longer rated as investment grade by a
nationally recognized rating service.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act, in general, and furthers the objectives
of section 6(b)(5) in particular, in that it is designed to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling and
processing information with respect to, and facilitating transactions
in, securities, and, in general, to protect investors and the public
interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
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
The PSE requests that the Commission find good cause, pursuant to
section 19(b)(2) of the Act, for approving the proposed rule change on
an accelerated basis for an interim period through July 5, 1994. During
this period, PSE would be able to list qualifying municipal securities.
Also, during this period, PSE will file a proposed rule change
requesting permanent approval of the listing of municipal securities
that would be subject to full notice and comment.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing. 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 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
PSE. All submissions should refer to the file number in the caption
above and should be submitted by April 1, 1994.
V. Commission's Findings and Order Granting Accelerated Approval
The Commission finds that the proposed rule change is consistent
with the requirements of section 6(b) of the Act, in general and
furthers the objectives of section 6(b)(5), in particular, in that it
is designed to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling and processing information with respect to, and
facilitating transactions in, securities, and, in general, to protect
investors and the public interest.
Only municipal bond issuers that qualify under PSE's proposed non-
listed corporate issuer distribution criteria will be considered for
listing on the Exchange. These criteria, along with any other
information relevant to determine whether the issue is appropriate for
exchange trading, should ensure that only municipal bond issues that
can support a liquid trading market will be listed on the Exchange.
Moreover, the regulatory scheme in place for municipal securities now
would continue to apply to PSE-listed municipal securities, with the
additional coverage of the PSE surveillance program to the trading of
the listed municipal securities.
The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of publishing notice
of the filing thereof. Temporary accelerated approval of the PSE's
proposal is appropriate because certain municipal securities the
exchange may wish to list are likely to be issued prior to the
thirtieth day following publication of notice of the proposed rule
change and it is necessary to inform prospective issuers that their
securities are eligible for listing and that the Exchange has in place
guidelines and procedures applicable to such securities. Moreover,
municipal securities are not a new product and indeed are comparable in
all material respects to other municipal securities that are currently
traded in other established and regulated markets. Finally, PSE-listed
municipal securities will be traded like other PSE-listed bonds and
will be subject to applicable MSRB rules.
It is therefore ordered, pursuant to section 19(b)(2) of the Act,
that the proposed rule change (SR-PSE-94-05) be, and hereby is,
approved for an interim period of 120 days through July 5, 1994.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority, 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-5678 Filed 3-10-94; 8:45 am]
BILLING CODE 8010-01-M