[Federal Register Volume 59, Number 218 (Monday, November 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-27933]


[[Page Unknown]]

[Federal Register: November 14, 1994]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34944; File No. SR-PSE-94-29]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Pacific Stock Exchange, Inc. Relating to Amendment of its 
Minor Rule Plan and Recommended Fine Schedule With Respect to Options 
Floor Decorum and Other Minor Trading Rule Violations

November 4, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 14, 1994, the 
Pacific Stock Exchange (``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 self-regulatory organization. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The PSE proposes to amend Rule 10.13(h) of its Minor Rule Plan 
(``MRP''): Options Floor Decorum and Other Minor Trading Rule 
Violations. The PSE also proposes to revise its Recommended Fine 
Schedule pursuant to PSE Rule 10.13(h) relating to Options Floor 
Decorum and Minor Trading Rule Violations.

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

    The Exchange proposes to make three changes to the MRP. First, the 
Exchange proposes to eliminate references in Rules 10.13(h) (10) and 
(11) to ``ten-up'' and ``Ten-Up Rule,'' because such references are 
currently inaccurate in light of a recently approved rule change, as 
well as a pending proposed rule change.\2\ Second, the Exchange 
proposes to add a reference to the MRP that addresses violations of 
Rule 6.82(c)(2) (which requires Lead Market Makers to honor their 
guaranteed markets). The Exchange believes that violations of Rule 
6.82(c)(2) are already provided for in the MRP by implication (due to a 
cross reference) and that this proposed change will merely eliminate an 
ambiguity. Third, the Exchange proposes to amend the MRP to add a 
reference to new Rule 6.66(c), which provides for the identification of 
broker-dealer orders on the Options Floor.\3\ The Exchange believes 
that the rule is similar in nature to the disclosure requirements of 
Rule 6.86, also referred to in the MRP.
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    \2\See Securities Exchange Act Release Nos. 34891 (October 25, 
1994), 59 FR 54653 (approving 20-up rule); and 34702 (September 22, 
1994), 59 FR 49729 (proposal to expand Auto-Ex system capacity to 20 
contracts).
    \3\See Securities Exchange Act Release No. 34426 (July 21, 
1994), 59 FR 38497 (approving Rule 6.66(c)).
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    The Exchange also proposes to increase the recommended fines in the 
Recommended Fine Schedule for Option Floor Decorum and Minor Trading 
Rule Violations. These infractions are currently listed in the 
Exchange's MRP, which is codified at PSE Rule 10.13. Specifically, the 
Exchange proposes to increase the recommended fines for the violations 
specified in the following rules: 10.13 (h) (2)-(4), (h) (7)-(9), 
(h)(11), (h) (13)-(23), and (h)(26).\4\ The Commission has previously 
approved these rules for inclusion in the MRP.\5\
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    \4\These rules denote the following Exchange Rule violations 
with respect to options trading: failing to properly record the time 
of receipt, change in limit, or increase in size of an order 
[(h)(2)]; improper execution of a cross transaction [(h)(3)]; 
violation of procedures concerning a Market Maker's use of a Floor 
Broker to effect transactions [(h)(4)]; failure to give up the name 
of a clearing member by public outcry when requesting a quote and 
size of the market or after effecting a trade [(h)(7)]; 
inadvertently placing a non-public order in the book [(h)(8)]; 
failing to remain for a specified amount of time after trade 
processing [(h)(9)]; failure to honor a guaranteed market [(h)(10)]; 
failure to identify an order as for a broker-dealer [(h)(11)]; 
improper communication by use of hand signals or other means or 
devices [(h)(12)]; improper vocalization of a trade [(h)(13)]; 
violating a standard of conduct or dress [(h)(14)]; disruptive 
action [(h)(15)]; disruptive action involving physical contact 
[(h)(15)]; disruptive action involving physical contact [(h)(16)]; 
failing to act in a professional manner [(h)(17)]; use of abusive 
language [(h)(18)]; time stamping [(h)(19)]; position and exercise 
limit violations [(h) (20)-(21)]; acting as both Floor Broker and 
Market Maker and trading in excess of 100 contracts per month as a 
Market Maker [(h)(22)]; failing to request a market to be removed 
from the screen when leaving a trading crowd [(h)(23)]; and 
unauthorized use of telephones in trading post areas [(h)(26)].
    \5\See Securities Exchange Act Release Nos. 22654 (November 21, 
1985), 50 FR 48853; 32510 (June 24, 1993), 58 FR 35491; and 34322 
(July 6, 1994), 59 FR 35958.
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    The Exchange proposes to increase the current fine levels for such 
violations. As a result, the lowest fine on the schedule would be $100 
and the highest fine would be $2,500.\6\ With respect to most of the 
proposed fine increases, the Exchange is increasing the fine levels 
from $100, $250, and $500, for first-, second-, and third-time 
violations,\7\ respectively, to $250, $500, and $750, respectively, for 
such violations. In addition, the Exchange is proposing to increase the 
minimum fine for position and exercise limit violations as follows: for 
between one and three violations (during a running two-year period), 
the minimum fine would be increased from $100 to $250;\8\ for between 
four and six violations during such period, the minimum fine would be 
increased from $100 to $500; and for seven or more violations during 
such period, the minimum fine would be increased from $100 to $750.
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    \6\Pursuant to the MRP, 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. See PSE Rule 
10.13(a). In appropriate circumstances (e.g., where aggravating or 
mitigating circumstances are present), the Exchange may impose a 
higher or lower fine than that set forth in the Recommended Fine 
Schedule. In addition, the Exchange may, at its discretion, proceed 
with formal disciplinary action if it determines that a given 
violation is not minor in nature. See PSE Rule 10.13(f).
    \7\Fines for multiple violations of Options Floor Decorum and 
Minor Trading Rules are calculated on a running two-year basis. See 
PSE MRP Recommended Fine Schedule.
    \8\In addition, the provision for an informal letter of caution 
for such violations is being eliminated.
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    The Exchange believes that the proposed changes will enhance its 
ability to enforce compliance with Exchange Rules and that the fine 
levels proposed will result in appropriate discipline of members and 
member organizations, in a manner that is proportionate to the minor 
nature of such violations. The Exchange believes that the proposed 
additions to the MRP are either objective or technical in nature and 
are easily verifiable, thereby lending themselves to the use of 
expedited proceedings. Finally, the Exchange notes that it will 
continue to circulate a copy of its Recommended Fine Schedule to its 
membership on a regular basis (approximately yearly pursuant to PSE 
Rule 10.13(f).
    The Exchange believes that the proposal is consistent with section 
6(b) of the Act in general. In particular, the Exchange believes that 
the proposal is consistent with Section 6(b)(5), in that it is designed 
to promote just and equitable principles of trade, and with Section 
6(b)(7) in that it is designed to provide a fair procedure for the 
disciplining of members and persons associated with members.

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

    The Exchange does not believe that the proposed rule change 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 rule change were neither solicited 
nor received.

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, 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 in the 
Commission's Public Reference Section, 450 Fifth Street, N.W., 
Washington, D.C. Copies of such filing will also be available for 
inspection and copying at the principal office of the above-mentioned 
self-regulatory organization. All submissions should refer to File No. 
SR-PSE-94-29 and should be submitted by December 5, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-27933 Filed 11-10-94; 8:45 am]
BILLING CODE 8010-01-M