[Federal Register Volume 59, Number 83 (Monday, May 2, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10355]


[[Page Unknown]]

[Federal Register: May 2, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33956; File No. SR-PSE-93-31]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 to Proposed Rule Change by the Pacific Stock 
Exchange, Inc. Relating to Amendments to its Minor Rule Plan

April 22, 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 November 
30, 1993, the Pacific Stock Exchange, Inc. (``PSE'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the PSE.\1\ The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\On March 30, 1994, the Exchange filed Amendment No. 1 to the 
proposal, which: (1) Eliminated from inclusion in the Exchange's 
Minor Rule Plan and the Recommended Fine Schedule violations of 
certain rules which are pending before the Commission and have not 
yet been approved (See File Nos. SR-PSE-93-10 and SR-PSE-93-26); and 
(2) deleted a cross-reference to another rule which also is pending 
before the Commission and has not yet been approved (See File No. 
SR-PSE-93-19). See Letter from Michael D. Pierson, Senior Attorney, 
Market Regulation, PSE, to Thomas N. McManus, Esq., Division of 
Market Regulation, SEC, dated March 28, 1994.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposal Rule Change

    The Exchange is proposing to amend its Minor Rule Plan (``MRP'') by 
adding certain violations to the list of those subject to the expedited 
disciplinary procedures set forth in PSE Rule 10.13. The Exchange also 
is proposing to amend its recommended fine schedule for MRP violations. 
The text of the proposed rule change is available at the Office of the 
Secretary, the PSE, and at the Commission.

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 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 PSE has prepared summaries, set forth in section 
(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

    PSE Rule 10.13(a) provides that the Exchange may impose a fine not 
to exceed $5,000 on any member, member organization, or person 
associated with a member or member organization for any violation of an 
Exchange rule that has been determined to be minor in nature.\2\ The 
purpose of Rule 10.13 is to provide for a response to a rule violation 
when a meaningful sanction is appropriate but when initiation of a 
disciplinary proceeding under PSE Rule 10.3 is not suitable because 
such a proceeding would be more costly and time-consuming than would be 
warranted given the minor nature of the violation. Rule 10.13 provides 
for an appropriate response to minor violations of certain Exchange 
rules while preserving the due process rights of the party accused 
through specified, required procedures. The list of rules that are 
eligible for Rule 10.13 procedures specifies those rule violations that 
may be the subject of fines under the rule and also includes a schedule 
of fines.
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    \2\The Exchange's MRP initially was approved by the Commission 
in 1985. See Securities Exchange Act Release No. 22654 (November 21, 
1985), 50 FR 48853 (November 27, 1985). On June 24, 1993, the 
Commission approved a number of amendments to the MRP, including the 
addition of certain rules to the list of MRP violations and 
revisions to the Exchange's Recommended Fine Schedule. See 
Securities Exchange Act Release No. 32510 (June 24, 1993), 58 FR 
35491 (July 1, 1993).
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    The Exchange is proposing to amend its MRP by adding the following 
violations of Exchange rules and policies to the MRP: (1) Members who 
act as Floor Brokers and Market Makers trading in excess of 100 
contracts per month as a Market Maker without a Primary Appointment 
(PSE Rule 6.38(c)); (2) Failure to request a market to be removed from 
the screen when leaving the trading crowd (PSE Rule 6.37, Com. .03; PSE 
Rule 6.46, Com. .04); (3) Failure to meet 75% Primary Appointment 
requirement (PSE Rule 6.35, Com. .03); (4) Failure to meet 60% in-
person trading requirement (PSE Rule 6.37, Com. .07); (5) Unauthorized 
use of telephones located in the options trading post areas; (6) Short 
Sale Rules (PSE Rule 5.18(a)-(f));\3\ (7) Inadequate staffing at 
specialist post (prior to the opening) (PSE Rule 5.28(c)-(d)); (8) 
Failure to furnish in a timely manner books, records, or other 
requested information or testimony in connection with an examination of 
financial responsibility and/or operational conditions (PSE Rule 
2.12(c)); and (9) Failure to notify the Exchange of a change of address 
where notices may be served (PSE Rule 1.13).
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    \3\See, e.g., NYSE Rule 476A ( 2476A); Amex Rule 590(g)(1).
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    The Exchange also is proposing to amend its Recommended Fine 
Schedule for MRP violations. The proposed amendments include 
recommended fines for first-, second-, and third-time violations for 
each of the rule violations proposed to be added to the MRP. The 
Exchange also is proposing that certain Options and Equity Floor 
Decorum and Minor Trading Rule Violations\4\ be calculated on a running 
two-year basis, so that a second violation of the same provision within 
two years will be subject to the next highest fine (e.g., the second 
violation that occurs within a two-year period will be treated as a 
second occurrence). However, the Exchange is specifying that violations 
of certain Equity Floor Decorum and Minor Trading Rules be considered 
on a running one-year basis consistent with existing provisions to the 
effect in the Equity Floor Procedure Advices.
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    \4\PSE Rule 10.13(h) and (i), respectively.
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    The Exchange believes that violations of the rules contained in 
this proposal are either objective or technical in nature, and easily 
verifiable, and therefore lend themselves to the use of streamlined 
disciplinary procedures and the use of a fine schedule. The Exchange 
further believes that the proposal will enhance the Exchange's 
enforcement capabilities, will provide effective deterrence, and will 
allow for just sanctions for minor violations of the specified rules. 
The Exchange notes that, pursuant to Rule 10.13(f), nothing in the MRP 
requires the Exchange to impose a fine for a violation of a rule under 
the MRP, and if the Exchange determines that any violation is not minor 
in nature, the Exchange at its discretion may proceed under Rule 10.3 
rather than under the MRP.
    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. The Exchange also believes that the 
proposed rule change will advance the objectives of section 6(b)(6) of 
the Act in that it will provide a procedure whereby members can be 
disciplined appropriately in those instances when a violation is minor 
in nature, but a sanction more serious than a warning or cautionary 
letter is appropriate.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The PSE does not believe that the proposed rule change will impose 
any inappropriate 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 such 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 in the 
Commission's Public Reference Section 450 Fifth Street, NW., 
Washington, DC. Copies of such filing also will be available for 
inspection and copying at the principal office of the PSE. All 
submissions should refer to File No. SR-PSE-93-31 and should be 
submitted by May 31, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-10355 Filed 4-29-94; 8:45 am]
BILLING CODE 8010-01-M