[Federal Register Volume 59, Number 144 (Thursday, July 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-18437]
[Federal Register: July 28, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34426; File No. SR-PSE-92-14]
Self-Regulatory Organizations; Pacific Stock Exchange, Inc.;
Order Approving and Notice of Filing and Order Granting Accelerated
Approval to Amendment No. 1 to a Proposed Rule Change Relating to the
Identification of Broker-Dealer Orders
July 21, 1994.
On April 13, 1992, the Pacific Stock Exchange, Inc. (``PSE'' or
``Exchange''), pursuant to Section 19(b)(1) of the Securities Exchange
Act of 1934 (``Act'')\1\ and Rule 19b-4 thereunder,\2\ filed with the
Securities and Exchange Commission (``SEC'' or ``Commission'') a
proposal to require that broker-dealer orders be identified as such
before being executed at the disseminated bid or offer price. On May
19, 1992, the PSE amended the filing to eliminate duplicative language
from Rule 6.85(c) by substituting a cross reference to proposed Rule
6.66(b) (``Amendment No. 1'').\3\
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\1\15 U.S.C. 78S(b)(1) (1982).
\2\17 CFR 240.19b-4 (1989).
\3\See Letter from Michael Pierson, Staff Attorney, PSE, to
Thomas Gira, Branch Chief, Division of Market Regulation,
Commission, dated May 12, 1992.
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The proposed rule change was published for comment in the Federal
Register on May 21, 1992.\4\ No comments were received on the proposed
rule change. This order approves the PSE's proposal, as amended.
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\4\See Securities Exchange Act Release No. 30704 (May 14, 1992),
57 FR 21687 (May 21, 1992).
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The Exchange states that the purpose of the proposed rule change is
to facilitate efficient options trading on the PSE floor by requiring
the identification of broker-dealer orders to the trading crowd so that
market makers will be aware of whether orders represented in the
trading crowds are for public customers or broker-dealers. Under PSE
Rule 6.86, the ``Ten-Up Rule,'' floor brokers are required, prior to
executing a ten-up order, to ascertain and note on the subject order
ticket whether any given order is for the account of a broker-dealer.
Therefore, the PSE believes that no additional burdens would be placed
on floor brokers in executing orders under the proposed rule. The PSE
also believes that requiring broker-dealer orders to be identified as
such will result in an improvement in the quality of the Exchange's
options markets and help to encourage trading crowds to provide greater
volume guarantees to public customers than the minimum ten-up amount.
Existing PSE Rules 6.66 and 6.85, and Options Floor Procedure
Advice (``OFPA'') D-9 currently require account information to be
identified for the trading crowd in connection with the execution of
orders on the floor. Rule 6.66(a) requires members participating in
transactions to immediately give up the name of the clearing member
through whom the transaction will be cleared. Rule 6.85(c) requires
that orders for the account of a market maker be verbally identified as
such prior to the consummation of a transaction. Finally, OFPA D-9
provides that, if a floor broker requests a market quotation and also
requests the size of the market, the floor broker must indicate with
his request the name of the member organization for whom he is acting.
Under the proposal, if an order is for the account of a broker-
dealer, a member must indicate by public outcry that such order is for
a broker-dealer if it is to be executed at the trading crowd's
disseminated bid or offer price. Proposed PSE Rule 6.66(b) and existing
Rule 6.85(c) place identical obligations on floor brokers with respect
to orders executed for market makers. Under Amendment No. 1 to the
proposal, Rule 6.85(c) would be amended to eliminate duplicative
language and replaced with a cross reference to 6.66(b). Although OFPA
D-9 will be deleted, the substance of it is being consolidated into
Rule 6.66(b).
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, and, in
particular, with the requirements of Section 6(b)(5)\5\ in that the
proposal is designed to promote just and equitable principles of trade
and to protect investors and the public interest.
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\5\15 U.S.C. 78f(b)(5) (1982).
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The Commission concludes that the PSE's proposal requiring members
to identify broker-dealer orders to the trading crowd will enhance the
market-making mechanism on the PSE, thereby improving the markets for
listed options on the Exchange. Specifically, the Commission believes
unnecessary delays in trading occasioned by the market maker's need to
inquire as to the account status of orders represented on the floor
will be reduced or minimized.
Furthermore, under the PSE's current ``Ten-Up Rule,'' floor brokers
are required to ascertain whether a given order is for the account of a
broker-dealer. Requiring a floor broker to verbally identify prior to
consummation that an order is undertaken on behalf of a broker-dealer
should improve the quality of the PSE's options markets and enhance
market depth because trading crowd participants may be more inclined to
provide greater volume guarantees to public customers than the minimum
ten-up amount. Finally, as the Commission has not received any negative
comments from broker-dealers or market makers potentially affected by
the proposal, the Commission has no reason to believe that the
identification requirement will be particularly burdensome on them.\6\
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\6\This proposed rule change does not affect the definition of
``public customer,'' which is the subject of a separate PSE
proposal, SR-PSE-93-10.
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The Commission finds good cause for approving Amendment No. 1 prior
to the thirtieth day after the date of publication of notice of filing
thereof in the Federal Register. Accelerating approval will allow the
Exchange to implement the complete rule change without delay. Further,
the purpose of the amendment is non-substantive, limited to amending
Rule 6.85(c) so that it will cross-reference Rule 6.66(b), and,
moreover, the substance of both Rules was fully described in the
original filing.
Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning Amendment No. 1 to the Exchange's proposal.
Persons making written submissions should file six copies thereof with
the Secretary, Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, D.C. 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, N.W., Washington, D.C. 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-92-14 and should be submitted by August 18, 1994.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\7\ that the proposed rule change (File No. SR-PSE-92-14), as
amended, is approved.
\7\15 U.S.C. 78s(b)(2) (1988).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
(FR Doc. 94-18437 Filed 7-27-94; 8:45 am]
BILLING CODE 8010-01-M