[Federal Register Volume 61, Number 221 (Thursday, November 14, 1996)]
[Notices]
[Pages 58434-58435]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-29149]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37920; File No. SR-PSE-96-41]
November 4, 1996.


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Pacific Stock Exchange Incorporated Relating to the 
Closing Time for Trading of Equity Options

    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. Sec. 78s(b)(1), notice is hereby given that on 
October 25, 1996, 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 self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Pacific Stock Exchange Incorporated (``PSE'' or ``Exchange'') 
is proposing to amend its rules to change its closing time for options 
trading from 1:10 p.m. Pacific Time \1\ to 1:02 p.m. for equity 
options. The Exchange is also proposing to change certain related rules 
on closing rotations and the submission of exercise notices for index 
options.
---------------------------------------------------------------------------

    \1\ All times referred to in this filing are Pacific Time.
---------------------------------------------------------------------------

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 III below. The self-regulatory 
organization has prepared summaries, set forth in

[[Page 58435]]

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
    PSE Rule 4.2, Commentary .01 currently provides that the Board of 
Governors has resolved that transactions may be effected on the Options 
Floor of the Exchange until 1:10 p.m. for equity options and until 1:15 
p.m. for index options each business day, at which time no further 
transactions may be made. The Exchange is proposing to change the 1:10 
p.m. closing time for equity options to 1:02 p.m.
    The Exchange is proposing this modification so that the closing 
time for options trading will be closer to the closing time for trading 
in the securities underlying those options. The extended trading 
session for options initially was intended to ensure that options 
traders would be able to respond to the tape ``runoff'' in the equity 
markets--i.e., prints of stock trades that occurred just before the 
closing bell, but that were not reported over the tape until several 
minutes after the close of trading. If such a trade resulted in a 
closing price that was materially different from the price at which the 
stock had been trading previously, the extended options trading session 
allowed options traders the opportunity to bring their options quotes 
into line with the closing price in the underlying security. However, 
because of improvements to the processing of transactions at the equity 
markets, there is no longer any significant tape runoff.
    PSE Rule 6.64, Commentary .01(b) currently provides that 
transactions may be effected in a class of options after 1:10 p.m. if 
they occur during a trading rotation. The rule states that such a 
trading rotation may be employed in connection with the opening or 
reopening of trading in the underlying security after 12:30 p.m. or due 
to the declaration of a ``fast market'' pursuant to Options Floor 
Procedure Advice G-9. The Rule further provides that the decision to 
employ a trading rotation after 12:30 p.m. shall be publicly announced 
on the trading floor prior to the commencement of such rotation, and 
that no more than one trading rotation may be commenced after 1:10 p.m. 
Further, the Rule states that if a trading rotation is in progress and 
Floor Officials determine that a final trading rotation is needed to 
assure a fair and orderly close, the rotation in progress shall be 
halted and a final rotation begun as promptly as possible after 1:10 
p.m. Finally, the Rules states that any trading rotation conducted 
after 1:10 p.m. may not begin until ten minutes after news of such 
rotation is disseminated. The Exchange is proposing to change all 
references to 1:10 p.m. in this Commentary to 1:02 p.m.
    PSE Rule 7.15 currently specifies a cut-off time of 1:20 p.m. or a 
time designated to be five minutes after the close, for preparing or 
submitting either a memorandum to exercise or an ``exercise advice'' 
for the exercise of index option contracts. The Exchange is proposing 
to eliminate the references to 1:20 p.m. so that under the amended rule 
such memoranda and advices will have to be submitted no later than five 
minutes after the close of index option trading.\2\
---------------------------------------------------------------------------

    \2\ The Exchange is not proposing to change the related rule on 
equity options, PSE Rule 6.24, which provides for an exercise cut-
off time of 2:30 p.m. PT.
---------------------------------------------------------------------------

    Finally, the Exchange is proposing to change two references to 
``San Francisco time'' in Rule 6.64, Commentary .01(b) to ``Pacific 
Time'' in order to make that rule consistent with other Exchange rules.
2. Statutory Basis
    The Exchange believes that the 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.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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 approved 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. Sec. 552, will be available for inspection and copying at 
the Commission's Public Reference Room. 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-96-41 and 
should be submitted by December 5, 1996.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\3\
---------------------------------------------------------------------------

    \3\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-29149 Filed 11-13-96; 8:45 am]
BILLING CODE 8010-01-M