[Federal Register Volume 60, Number 114 (Wednesday, June 14, 1995)]
[Notices]
[Pages 31333-31334]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14537]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-35777; File No. SR-PSE-95-10]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 to Proposed Rule Change by the Pacific Stock 
Exchange, Incorporated, Relating to its Procedure for Evaluating 
Options Trading Crowd Performance

May 30, 1995.
    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 7, 
1995, the Pacific Stock Exchange, Incorporated (``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 Exchange. The 
Exchange subsequently filed Amendment No. 1 on May 25, 1995.\1\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change and Amendment No. 1 from interested persons.

    \1\In Amendment No. 1, the Exchange proposes to amend Rule 
6.82(b)(4)(i) to provide that the Lead Market Maker (``LMM'') 
Appointment Committee shall review LMM appointments at least semi-
annually. The rule currently provides that the LMM Appointment 
Committee must review LMM appointments at least quarterly. See 
Letter from Michael D. Pierson, Senior Attorney, Market Regulation, 
PSE, to James McHale, Attorney, Division of Market Regulation, 
Commission, dated May 23, 1995 (``Amendment No. 1'').
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The PSE is proposing to change its procedure for evaluating options 
trading crowd performance by specifying that floor broker 
questionnaires will be distributed semi-annually rather than 
quarterly.\2\ The text of the proposed rule change is available at the 
Office of the Secretary, PSE and at the Commission.

    \2\While PSE's Options Floor Procedure Advice B-13 currently 
requires the trading crowd evaluation questionnaire to be 
distributed to and completed by the floor brokers on a three-month 
periodic basis, the Commission staff understands that the Exchange 
began distributing the questionnaire on a semi-annual basis, 
beginning with the questionnaire dated October 17, 1994, covering 
the six (6) month period between April and September 1994. Telephone 
conversation between Michael D. Pierson, Senior Attorney, Market 
Regulation, PSE, and James T. McHale, Staff Attorney, Division of 
Market Regulation, Commission, on May 9, 1995.
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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
    Options Floor Procedure Advice (``OFPA'') B-13 requires the Options 
Allocation Committee (``Committee'') of the Exchange to evaluate 
periodically the options trading crowds\3\ to determine whether each 
has fulfilled performance standards relating to, among other things, 
quality of markets, competition among market makers, observance of 
ethical standards, and administrative factors.\4\ In conducting its 
evaluation, the Committee may consider any relevant information, 
including but not limited to, the results of a trading crowd evaluation 
questionnaire. The questionnaires are distributed to and completed by 
floor brokers on the Options Trading Floor on 

[[Page 31334]]
a ``three-month periodic basis'' pursuant to OFPA B-13.

    \3\Pursuant to Rule 6.82, the program is also used to conduct 
evaluations of LMMs on the Options Trading Floor. The Exchange, 
through Amendment No. 1, also proposes to amend Rule 6.82(b)(4)(i) 
to require the LMM Appointment Committee to review LMM appointments 
on a semi-annual basis. See Amendment No. 1, supra note 1.
    \4\The Commission approved the Exchange's Options Trading Crowd 
Performance Evaluation Pilot Program on a permanent basis on 
December 30, 1993. See Exchange Act Release No. 33407, 59 FR 1043 
(January 7, 1994).
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    The Exchange is proposing to amend OFPA B-13 to provide that 
trading crowds will be evaluated by questionnaire semi-annually rather 
than quarterly. At this time, the Exchange believes that floor brokers 
who respond to the surveys will pay greater attention and care in 
responding if the evaluation were conducted on a semi-annual basis. 
This is based on the Exchange's belief that quarterly evaluations are 
overly repetitive. Consequently, the Exchange believes that the 
proposed change would result in better measurements of trading crowd 
and Lead Market Maker performance. The Exchange further believes that 
the proposed change would result in a better allocation of Exchange 
resources, and that it will serve to enhance the Options Trading Crowd 
Evaluation Program.
2. Statutory Basis
    The Exchange believes 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 prevent 
fraudulent and manipulative acts and practices and to promote just and 
equitable principles of trade, and is not designed to permit unfair 
discrimination between customers, issuers, brokers and dealers.

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

    The Exchange believes 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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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, 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-95-10 and should be 
submitted by July 5, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\

    \5\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-14537 Filed 6-13-95; 8:45 am]
BILLING CODE 8010-01-M