[Federal Register Volume 60, Number 193 (Thursday, October 5, 1995)]
[Notices]
[Pages 52242-52244]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-24793]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36293; File No. SR-PSE-95-20]
Self-Regulatory Organizations; Pacific Stock Exchange
Incorporated; Notice of Filing and Order Granting Accelerated Approval
of a Proposed Rule Change Relating to the Extension of the Lead Market
Maker Pilot Program
September 28, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on August 25, 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 and II below, which Items
have been prepared by the PSE. The Commission is publishing this notice
to solicit comments on the proposed rule change from interested
persons.
\1\ 15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Commentary .01 to PSE Rule 6.82, ``Lead Market Maker Pilot
Program,'' states that the PSE's Lead Market Maker (``LMM'') system
pilot program will expire on September 30, 1995. The PSE proposes to
amend Commentary .01 to extend the Exchange's LMM system pilot program
through September 30, 1996.
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 Sections
(A), (B),
[[Page 52243]]
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
On January 17, 1990, the Commission approved the Exchange's LMM
System on a pilot program basis.\2\ Since that time, the Commission has
approved extensions to the pilot program.\3\ The pilot program is
currently set to expire on September 30, 1995.
\2\ See Securities Exchange Act Release No. 27631 (January 17,
1990), 55 FR 2462.
\3\ See Securities Exchange Act Release Nos. 31063 (August 21,
1992), 57 FR 39255; 31635 (December 22, 1992), 57 FR 62414; 33854
(April 1, 1994), 59 FR 16873; and 34710 (September 23, 1994), 59 FR
50306. See also File No. SR-PSE-93-16 (requesting permanent approval
of the pilot program) and Amendment Nos. 1-3 thereto (requesting
pilot program extensions while the request for permanent approval
was pending). On April 20, 1994, the Exchange withdrew File No. SR-
PSE-93-16 pursuant to the Commission's request. See letter from
David P. Semak, Vice President, Regulation, PSE, to Sharon M.
Lawson, Assistant Director, Division of Market Regulation,
Commission, dated April 20, 1994.
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In its filing with the Commission, the Exchange included a pilot
program report for the period July 1993 to August 1995.\4\ In its
report, the Exchange indicates that it believes, based on the pilot's
performance, that the LMM System is viable and effective and that
continuation of the pilot program is warranted based on the importance
of maintaining the quality, efficiency, and competitiveness of the
Exchange's markets in a multiple trading environment.
\4\ The Exchange has previously submitted pilot program reports
to the Commission dated September 18, 1992 and July 26, 1993. See
Securities Exchange Act Release No. 31635, and File No. SR-PSE-93-16
(withdrawn), supra note 3.
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The Exchange notes that, at this time, it is considering
substantive changes to the rules governing the LMM program. Therefore,
the Exchange proposes to extent the pilot program for one year to allow
additional time to evaluate the LMM program in light of any changes
that may be approved within the next year. Moreover, if the Commission
approves an extension of the program to September 30, 1996, the
Exchange expects that it will seek permanent approval of the program
(rather than an additional extension) prior to the expiration of the
pilot extension.
The Exchange believes that its proposal is consistent with Section
6(b) of the Act in general, and Section 6(b)(5) in particular, in that
it is designed to promote just and equitable principles of trade and to
protect investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The PSE does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The PSE has requested that the Commission find good cause that the
proposed rule change be given accelerated effectiveness pursuant to
Section 19(b)(2) of the Act.
The Commission finds that the proposal to extend the LMM pilot
program through September 30, 1996 is consistent with the requirements
of the Act and the rules and regulations thereunder, and, in
particular, the requirements of Sections 6(b)(5).\5\ The Commission
concludes, as it did in approving the LMM pilot program, that the pilot
program may enhance the market making mechanism on the PSE, thereby
improving the markets for listed options on the Exchange. Specifically,
the Commission believes that the LMM pilot may improve the PSE's market
making capabilities by creating long-term commitments to options
classes. Moreover, the pilot program will continue with adequate due
process safeguards in the LMM selection and termination procedures and
will retain procedures that prevent the misuse of material non-public
LMM information by either an LMM or a broker-dealer affiliated with an
LMM. The Commission notes, however, that before the pilot program can
be approved on a permanent basis, or further extended, the PSE must
provide the Commission with an updated report on the operation of the
pilot program.
\5\ 15 U.S.C. Sec. 78f(b)(5) (1988).
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Specifically, before requesting permanent approval, or further
extension, of the pilot program, the PSE must submit an update pilot
program report by June 1996 that addresses: (1) Whether there have been
any complaints regarding the operation of the pilot; (2) whether the
PSE has taken any disciplinary or performance action against any member
due to the operation of the pilot; (3) the number of LMMs involved in
the pilot; (4) the extent to which the pilot has been used on the PSE;
(5) whether the PSE has terminated or replaced an LMM and the reasons
thereof; (6) the impact of the pilot on the bid/ask spreads, depth and
continuity in PSE options markets; and (7) whether the PSE has taken
any actions or there have been any complaints against LMMs or
associated broker-dealers relating to improper activity as a result of
LMM affiliations with upstairs firms.
The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of publication of
notice of filing thereof in the Federal Register because the PSE has
not indicated that there have been any problems associated with the
operation of the LMM system pilot program and because the Commission
has not received any adverse comments concerning the pilot program. In
addition, the Commission believes good cause exists to approve the
extension of the LMM pilot program on an accelerated basis to allow the
pilot program to continue uninterrupted. The Commission believes,
therefore, that granting accelerated approval of the proposed rule
change is appropriate and consistent with Section 6 of the Act.
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 submissions, 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 Room. Copies of such filing will also be
available for inspection and copying at the principal office of the
PSE. All submissions should refer to the file number in the caption
above and should be submitted by October 26, 1995.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\6\ that the proposed rule change (SR-PSE-95-20) is approved on an
accelerated basis, and, accordingly, that the LMM pilot
[[Page 52244]]
program is extended until September 30, 1996.
\6\ 15 U.S.C. Sec. 78s(b)(2) (1988).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\7\
\7\ 17 CFR 200.30-3(a)(12) (1994).
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Jonathan G. Katz,
Secretary.
[FR Doc. 95-24793 Filed 10-4-95; 8:45 am]
BILLING CODE 8010-01-M