[Federal Register Volume 63, Number 38 (Thursday, February 26, 1998)] [Notices] [Pages 9895-9896] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 98-4856] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-39667; File No. SR-PCX-98-01] Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Pacific Exchange, Inc. Relating to Expansion of the LMM Book Pilot Program To Include Non- Multiply-Listed Option Issues February 13, 1998. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on January 23, 1998, the Pacific Exchange, Inc. (``PCX'' or ``Exchange'') filed with the Securities and Exchange Commission (``Commission'' or ``SEC'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the PCX.\3\ On February 9, 1998, the PCX filed Amendment No. 1 to the rule proposed redesignating the proposal as a ``non-controversial'' rule filing pursuant to Rule 19b-4(e)(6), which constitutes a substantive change in the proposal.\4\ This redesignation renders the rule proposed effective upon receipt of Amendment No. 1 by the Commission pursuant to Section 19(b)(3)(A) of the Act and provides that the rule change become operative 30 days after the date of the filing or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ The PCX filed this proposed rule change pursuant to Rule 19b-4(e)(1), designating the rule change as constituting a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule, and thereby rendering it effective upon filing pursuant to Section 19(b)(3)(A) of the Act. \4\ See letter from Michael D. Pierson, Senior Attorney, Regulatory Policy, PCX, to Ann L. Vlcek, Office of Market Supervision, Division, of Market Regulation, Commission, dated February 6, 1998. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The PCX is proposing to expand its Lead Market Maker (``LMM'') Book Pilot Program by allowing qualified LMMs to trade non-multiply-listed option issues under the pilot program. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing the Commission, the PCX 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 Purpose On October 11, 1996, the Commission approved an Exchange proposal to adopt a one-year pilot program under which a limited number of LMMs would be able to assume operational responsibility for the options public limit order book (``Book'') in certain option issues.\5\ On September 22, 1997, the Commission approved an Exchange proposed to extend the program for one year, so that it is currently set to expire on October 12, 1998.\6\ --------------------------------------------------------------------------- \5\ See Exchange Act Release No. 37810 (October 11, 1996), 61 FR 54481 (October 18, 1996) (approved File NO. SR-PSE-96-09). \6\ See Exchange Act Release No. 39106 (September 22, 1997), 62 FR 51172 (September 30, 1997) (approving File No. SR-PSE-97-32). --------------------------------------------------------------------------- Under the pilot program, approved LMMs manage the Book function, take responsibility for trading disputes and errors, set rates for Book execution, and pay the Exchange a fee for systems and services.\7\ Only multiply-listed option issues are currently eligible to be traded under the pilot program.\8\ Initially, the program was limited by allowing no more than three LMMs to participate in the program and no more than 40 option symbols to be used. But on April 1, 1997, the Commission approved an Exchange proposal to expand the program so that up to nine LMMs may participate and up to 150 option symbols may be used.\9\ --------------------------------------------------------------------------- \7\ See Exchange Act Release No. 37874 (October 28, 1996), 61 FR 56597 (November 1, 1996) (approving File No. SR-PSE-96-38, establishing a staffing charge for LMMs who participate in the pilot program). \8\ See Exchange Act Release No. 38462 (April 1, 1997), 62 FR 16886 (April 8, 1997) (approving File No. SR-PSE-96-45). \9\ See Exchange Act Release No. 38462, supra. --------------------------------------------------------------------------- The Exchange is now proposing to expand the program by allowing LMMs to include non-multiply-listed options within the scope of the program. This change will give program participants greater flexibility in setting Book rates for option issues that they trade, and thus will make the program a better tool for the Exchange to compete with other exchanges for options order flow by lowering transaction costs to the customer. 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 facilitate transactions in securities, 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 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 The PCX initially filed the proposed rule change with the Commission on January 23, 1998, pursuant to Rule 19b-4(e)(1), designating the proposed rule change as constituting a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule, and rendering the rule change effective upon filing pursuant to Section 19(b)(3)(A)(i) of the Act. However, the PCX filed Amendment No. 1 on February 9, 1998 redesignating the proposal as a ``non- [[Page 9896]] controversial'' rule filing under Rule 19b-4(e)(6). This redesignation constituted a substantive change in the proposal, thus rendering the rule change effective upon filing of Amendment No. 1 and providing that it become operative 30 days after the date of the filing or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest pursuant to Section 19(b)(3)(A)(iii) of the Act. Because the foregoing proposed rule change (1) Does not significantly affect the protection of investors or the public interest; (2) does not impose any significant burden on competition; (3) does not become operative for 30 days from February 9, 1998, the date on which Amendment No. 1 was filed; and the Exchange provided the Commission with written notice of its intent to file the proposed rule change at least five business days prior to the filing date,\10\ the rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(e)(6) thereunder. At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. --------------------------------------------------------------------------- \10\ The Commission considers the original January 23, 1998 rule filing to be sufficient written notice of PCX's intent to file the proposed rule change that was submitted in the form of Amendment No. 1 on February 9, 1998. The date of the January 23, 1998 rule filing also satisfies the requirement of a minimum prefiling time period of five business days. --------------------------------------------------------------------------- IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. 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 Room, 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 PCX. All submissions should refer to File No. SR-PCX-98-01 and should be submitted by [insert date 21 days from date of publication]. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\11\ --------------------------------------------------------------------------- \11\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Margaret H. McFarland, Deputy Secretary. [FR Doc. 98-4856 Filed 2-25-98; 8:45 am] BILLING CODE 8010-01-M