[Federal Register Volume 59, Number 76 (Wednesday, April 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-9444]


[[Page Unknown]]

[Federal Register: April 20, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33904; File No. SR-PSE-93-08]

 

Self-Regulatory Organizations; Pacific Stock Exchange; Notice of 
Filing of Amendment No. 1 to a Proposed Rule Change Relating to 
Amendment to its Rules Governing Competing Specialists

April 13, 1994.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on April 8, 
1994, the Pacific Stock Exchange, Inc. (``PSE'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') Amendment 
No. 1 as described in Items I, II and III below. The proposed rule 
change was published for comment in Securities Exchange Act Release No. 
32651 (July 16, 1993), 58 FR 40679 (July 29, 1993). No comments were 
received on the proposal. The Commission is publishing this notice to 
solicit comments on the Amendment from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The PSE is proposing to adopt procedures for its proposed competing 
specialist program. The Amendment extends the PSE's official policies 
relating to circuit breakers, previously approved by the Commission,\1\ 
to Competing Specialists. The Amendment also outlines the procedures 
for registration, withdrawal, and participation in the competing 
specialist program. The text of this portion of the proposed Amendment 
is as follows:
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    \1\Securities Exchange Act Release No. 26368 (December 16, 
1988), 53 FR 51942. See also Securities Exchange Act Release No. 
27370 (October 23, 1989), 54 FR 43881, at n.5.
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Pacific Stock Exchange, Inc.; Procedures for Competing Specialists
    The following are procedures for the Competing Specialist Pilot 
Program.
    1. Registered Specialists are not eligible to act as Competing 
Specialists.
    2. Applications to compete must be directed to the Equity Floor 
Trading Committee in writing and must list in order of preference the 
stock(s) in which the applicant intends to compete. The Equity Floor 
Trading Committee will consider the following in reviewing an 
application:
     financial capability
     adequacy of staffing on the Floor
     existence of adequate Chinese Wall Procedures at the 
applicant firm
     agreement of both Registered Specialists to allow trading 
of specific issues by a Competing Specialist
    3. All applicants must be registered as members with the Exchange 
and must meet the net capital requirements pursuant to SEC Rule 15c3-1 
(effective April 1, 1994) and capital requirements set forth in Rule 
2.2(b) of the Rules of the Exchange, and conform to all other 
performance requirements and standards set forth in the Rules of the 
Exchange. All applicants who control, are controlled by, or are under 
common control with another person engaged in a securities or related 
business shall have and maintain appropriate Chinese Wall procedures as 
approved by a self-regulatory organization. A competing specialist will 
be subject to all the rules and policies applicable to a regular 
specialist, unless otherwise indicated.\2\
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    \2\The PSE has submitted a Chinese Wall filing for Competing 
Specialists which is currently under review (SR-PSE-93-36).
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    4. All applicant organizations, existing or newly created, must 
satisfy the Equity Floor Trading Committee that they have sufficient 
staffing to enable them to fulfill the functions of a specialist in all 
of the stocks in which the applicant will be registered as a Competing 
Specialist.
    5. Order flow not specifically designated for a Competing 
Specialist must be routed to either Registered Specialist. Competing 
Specialists shall not make any payment for order flow that is traded on 
the PSE on a Competing Specialist basis.
    6. In a competitive situation, if the Competing Specialist 
organization that received approval to compete with the Registered 
Specialist desires to terminate the competition by requesting that it 
be relieved of the stock that is the subject of the competition, it 
should so notify the Equity Floor Trading Committee at least 3 business 
days prior to the desired effective date of such withdrawal, except in 
those situations when such notice is not practicable.
    7. Any Competing Specialist who withdraws his/her registration in a 
stock will be barred from applying to compete in that same stock for a 
period of ninety (90) days following the effective date of withdrawal.
    8. Notwithstanding the existence of Competing Specialist 
situations, there is only one Exchange market in a security subject to 
competition. The Registered Specialist (ITS Coordinator) will be 
responsible for updating quotations; thus all competitors must 
communicate their markets to the ITS Coordinator and be responsible for 
their portion of the disseminated bid and/or offer. Also, competitors 
must cooperate with the Registered Specialist regarding openings and 
reopenings to ensure that they are unitary.
    9. Limit orders entrusted to the Competing Specialist are to be 
represented and executed strictly according to time priority as to 
receipt of the order in accordance with the Exchange rules.
    10. Competing Specialists must keep the Registered Specialists 
informed about the full size of any executable ``all or none'' orders 
in their possession since all-or-none orders cannot be represented in 
the disseminated quote. The Competing Specialist is expected to 
represent such orders on a ``best efforts'' basis to ensure the 
execution of the entire order at a single price or prices, or not at 
all.
    11. The registration of any Competing Specialist may be suspended 
or terminated by the Equity Floor Trading Committee upon a 
determination of any substantial or continued failure by such Competing 
Specialist to engage in dealing in accordance with the Constitution and 
Rules of the Exchange.
    12. The Exchange shall establish an effective date for competition 
to commence for a one-year pilot program. Since the Exchange cannot 
know what the impact of competition will be on its marketplace, it will 
limit competition during the pilot phase as follows:
    a. The total number of stocks in which competition will be 
permitted shall initially be limited to ten per applicant firm, or as 
determined by the Board of Governors.
    b. No applicant firm will have more than one Competing Specialist.
    c. The number of Competing Specialists will be limited to two on 
each Equity Floor.
    d. The number of competitors in any given stock will be limited to 
three (two Registered Specialists and one Competing Specialist).
    e. During the pilot there will be a quarterly review of the 
program, or upon request by a Registered Specialist in a specific 
Competing Specialist issue.

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 self-regulatory organization 
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 self-regulatory organization 
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 purpose of the proposed Amendment is to supplement the initial 
Competing Specialists filing with specific procedures and guidelines, 
as requested by the Commission staff.
2. Statutory Basis
    The proposed Amendment 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 and to protect investors and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed Amendment 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 on the proposed Amendment were neither solicited 
nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the 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. 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 at the 
Commission's Public Reference Section, 450 Fifth Street NW., 
Washington, DC 20549. Copies of such filing will also be available for 
inspection and copying at the principal office of the PSE. All 
submissions should refer to File No. SR-PSE-93-08 and should be 
submitted by May 11, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-9444 Filed 4-19-94; 8:45 am]
BILLING CODE 8010-01-M