[Federal Register Volume 60, Number 137 (Tuesday, July 18, 1995)]
[Notices]
[Pages 36849-36851]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17581]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35959; File No. SR-PSE-95-16]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Pacific Stock Exchange Incorporated Relating to 
Violations of the Intermarket Trading System Rules

July 12, 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 June 8, 
1995, the Pacific Stock Exchange Incorporated (``PSE'' or ``Exchange'') 
filed with the 

[[Page 36850]]
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. On June 26, 1995, 
the Exchange submitted to the Commission Amendment No. 1 to the 
proposed rule change.\1\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.

    \1\ See letter from Michael Pierson, Senior Attorney, PSE, to 
Jennifer S. Choi, Attorney, SEC, dated June 23, 1995. Amendment No. 
1 withdraws the proposed changes to the Equity Floor Procedure 
Advice 2-B because these changes have been approved already by the 
Commission. See Securities Exchange Act Release No. 34760 (Sept. 30, 
1994), 59 FR 50950 (Oct. 6, 1994) (approving File No. SR-PSE-94-13).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend its Minor Rule Plan so that it 
includes violations of the Intermarket Trading System (``ITS'') rules, 
which are set forth in PSE Rules 5.20-5.23. The text of the proposed 
rule change is as follows [new text is italicized]:
para. 6133  Minor Rule Plan
    Rule 10.13(a)-(h)--No change.
    (i) Minor Rule Plan: Equity Floor Decorum and Minor Trading Rule 
Violations
    (i)(1)-(i)(8)--No change.
    (i)(9) Failure to follow the provisions of the rules and 
regulations governing the use of the Intermarket Trading System (ITS) 
(Rules 5.20-5.23)
* * * * *
Minor Rule Plan
Recommended Fine Schedule
(Pursuant to Rule 10.13(f))
Rule 10.13(i)
Equity Floor Decorum and Minor
    Trading Rule Violations

------------------------------------------------------------------------
                                            1st        2nd        3rd   
                                         violation  violation  violation
------------------------------------------------------------------------
1-8--No change.                                                         
9--Failure to follow the provisions of                                  
 the rules and regulations governing                                    
 the use of the Intermarket Trading                                     
 System (ITS) (Rules 5.20-5.23)........       $500     $1,000     $2,000
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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
    The Exchange's Minor Rule Plan (``MRP''),\2\ set forth in PSE Rule 
10.13, 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 deemed to be minor in nature and approved by the 
Commission for inclusion in the MRP. Rule 10.13, subsections (h)-(j), 
set forth the specific Exchange rules deemed to be minor in nature.

    \2\ The MRP was initially approved by the Commission in 1985. 
See Securities Exchange Act Release No. 22654 (Nov. 21, 1985), 50 FR 
48853 (Nov. 27, 1985). Since 1985, the MRP has been amended several 
times. See, e.g., Securities Exchange Act Release No. 34322 (July 6, 
1994), 59 FR 35958 (July 14, 1994).
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    The Exchange is proposing to add the following provision to the MRP 
as Rule 10.13(i)(9): ``Failure to follow the provisions of the rules 
and regulations governing the use of the Intermarket Trading System 
(ITS) (PSE Rules 5.20-5.23).'' The Exchange is also proposing to amend 
its Recommended Fine Schedule to establish the following recommended 
fines (on a running two-year basis) for violations of the ITS rules and 
regulations: $500 for a first-time violation; $1,000 for a second-time 
violation; and $2,000 for a third-time violation.\3\

    \3\ For a discussion of the Exchange's Recommended Fine 
Schedule, see Securities Exchange Act Release No. 34322 (July 6, 
1994), 59 FR 35958 (July 14, 1994).
    The Exchange believes that the ITS rules proposed to be added to 
the MRP are either objective or technical in nature and are easily 
verifiable, thereby lending themselves to the use of expedited 
proceedings. The Exchange further believes that violations of the ITS 
rules may require sanctions more severe than a warning or cautionary 
letter, but that full disciplinary proceedings (pursuant to Rule 10.3) 
would, in general, be unsuitable because they would be costly and time 
consuming in view of the minor nature of the violations. Nevertheless, 
the Exchange notes that if a violation of an ITS rule is particularly 
egregious or if the individual situation warrants such action, the 
Exchange may proceed with formal disciplinary action pursuant to Rule 
10.3, rather than with the MRP procedures under Rule 10.13. The 
Exchange further notes that the Commission has recommended that the 
Exchange add ITS violations to the PSE Minor Rule Plan.\4\ Finally, the 
Exchange notes that the addition of the ITS rules to the MRP would be 
consistent with the rules of the New York Stock Exchange.\5\

    \4\ See Inspection Report on the Operation of the Intermarket 
Trading System 3 (Nov. 18, 1994).
    \5\ See NYSE Rule 476A (Supplementary Material).
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act, in general, and Sections 6(b)(5) and 6(b)(6), in particular, in 
that it is designed to promote just and equitable principles of trade, 
to protect investors and the public interest, and to provide that 
members of the Exchange are appropriately disciplined for violations of 
Exchange rules.

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

    The Exchange does not believe that the proposed rule change will 
impose any inappropriate burden on competition.

[[Page 36851]]


C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or 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 other 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. Sec. 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 Exchange. All 
submissions should refer to File No. SR-PSE-95-16 and should be 
submitted by August 8, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-17581 Filed 7-17-95; 8:45 am]
BILLING CODE 8010-01-M